Sitting of 9 December 1986

Preamble
The House met at half-past Two o'clock
PRAYERS
[MR. SPEAKER in the Chair]
PRIVATE BUSINESS

  LONDON DOCKLANDS RAILWAY (CITY EXTENSION) BILL
  Lords amendments agreed to.
  BRITISH RAILWAYS (STANSTED) BILL
  To be considered on Thursday.
  MERSEY DOCKS AND HARBOUR BILL [Lords]
  RIVER HUMBER (BURCOM OUTFALL) BILL [LORDS]
  Considered; to be read the Third time.
  GAIRLOCH HARBOUR ORDER CONFIRMATION BILL
  SHETLAND ISLANDS COUNCIL (HAM VOE, FOULA) ORDER CONFIRMATION BILL
  Considered; to be read the Third time tomorrow.

Oral Answers to Questions
  DEFENCE

    Nimrod
    Mr. Flanneryasked the Secretary of State for Defence what representations he has received from trades unions about his impending decision on the Nimrod airborne early warning project; and if he will make a statement.
    Mr. Dykesasked the Secretary of State for Defence what is his assessment of the number of jobs which would be secured in the United Kingdom by the purchase of the General Electric Company Avionics Nimrod airborne early warning system.
    The Parliamentary Under-Secretary of State for Defence Procurement (Mr. Archie Hamilton): The only recent representatives that we have received have been from the Confederation of Shipbuilding and Engineering Unions. My noble Friend the Minister of State for Defence Procurement met a delegation from that body on 28 November. It is for the companies concerned to decide how many people to employ on Nimrod AEW work.
    Mr. Flannery: I understand that we want the very best that we can get for the Royal Air Force, but will the
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    Minister take into account the fact that many skilled British jobs are in jeopardy and that our defence system throughout the world will be watched very closely as a result of this decision? British electronics exports are also involved. It is an important problem, we are all watching it closely, and I hope that Ministers are doing much the same.
    Mr. Hamilton: I very much take on board what the hon. Gentleman has said, but I point out to him that we are in the final stages of this competition and I should prefer not to comment today upon the relative merits of the two remaining contenders.
    Mr. Dykes: I understand my hon. Friend's reticence, but does he not agree that Nimrod is overwhelmingly better for British jobs, better on cost, and better for British exports and that it is also better for European procurement? Does he not realise the gravity of the decision that is being taken?
    Mr. Hamilton: I think that my hon. Friend is trying to draw me on my original comments. All I would say is that my right hon. Friend the Secretary of State for Defence hopes to make an announcement before the House rises for the Christmas recess.
    Mr. Wallace: I appreciate that the Minister does not wish to comment on the merits of the systems, but I wish to elicit some factual information from him. It is said that Boeing has offered a 130 per cent. offset. What would be the quality of those jobs? Would they be involved in high technology?
    Mr. Hamilton: The quality of the offset that is being offered by Boeing is something into which we are looking very closely.
    Mr. Colvin: Is my hon. Friend able to reassure the House that the 130 per cent. offset that has been offered by Boeing is more than just opportunities to tender and represents real contracts, and that the work involved would be high technology work, not just tin bashing?
    Mr. Hamilton: I have already said that we are looking very much into the quality of what has been offered by Boeing. This is part of our consideration.
    Mr. Hoyle: Will the Minister take into account the fact that many press reports have said that the Government have already made up their mind to buy Boeing? Will he bear in mind that the Boeing system is old-fashioned, and that if we buy Nimrod we will be buying not only British jobs but a system for the future which has export potential as well?
    Mr. Hamilton: I beg the hon. Gentleman not to believe what he reads in the papers. No final decision on this has yet been made.
    Mr. Sackville: Does my hon. Friend agree that unless there are some clear and insoluable operational problems with the Nimrod system, it would be madness to give away British industry's lead in this important defence technology, and crazy to give the Boeing Aircraft Company a monopoly in yet another sector of aerospace?
    Mr. Hamilton: We have to take into account the requirements of the RAF and value for money, and, as I say, no final decision has yet been made.
    Mr. Carter-Jones: Outside the publicity and propaganda, will the Minister take it from me that the

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    problem of clutter in receiving by this aircraft has now gone and that it can now clearly identify each target? Will he ask his right hon. Friend to make a statement to the House about the success of the mission that he went on in Nimrod?
    Mr. Hamilton: I am sure that my right hon. Friend will refer to these matters when he makes an announcement to the House before the Christmas recess.
    Mr. Nicholas Winterton: Is my hon. Friend aware that many of his right hon. and hon. Friends very much support Nimrod and GEC Avionics? Before a final decision is made will he ensure that his right hon. Friend is aware of the high technology of the latest GEC mark Nimrod, that many jobs are involved, and that the future of British technology in aerospace and in avionics is very much at stake and is based on the decision which he and his colleagues are to take?
    Mr. Hamilton: I am sure that my right hon. Friend has heard every word that my hon. Friend has said and will take these matters into account before making a final decision.
    Mr. Denzil Davies: We appreciate that the Under-Secretary dare not comment on the merits of the two systems, but will he confirm that his right hon. Friend has commented, because on 5 December, on the "News at Ten" programme, he said that both systems, that is the British Nimrod and the American AWACs, now work? Does it not follow from that that there is no case for buying American, and every good and valid case for buying British?
    Mr. Hamilton: That does not follow. What does follow is that we still have many different assessments to make of the different tenders, and no final decision has yet been made.

    Falklands War Play
    Mr. Holtasked the Secretary of State for Defence what discussions are recorded between Mr. Ian Curteis and his Department concerning the factual accuracy of his Falklands war play.
    The Minister of State for the Armed Forces (Mr. John Stanley): Mr. Ian Curteis visited the Ministry of Defence on 5 March and discussed the commission that he had from the BBC to write a play on the Falklands war. On 3 April he visited the headquarters of the Commander-in-Chief, Fleet at Northwood, where he was shown around the headquarters and the operations room used during the war.
    Mr. Holt: I thank my right hon. Friend for that answer. Does he agree, or will he confirm, that the BBC made no efforts to ascertain the accuracy or lack of it of Mr. Curteis's play, and that in banning it the BBC has shown itself to be hypocritical, in that it allows various things to go out which are true or untrue, and has said that if Mr. Curteis had been accurate and gone to the Ministry of Defence and checked the facts it would not have banned the play? The BBC would would have allowed the play to go out if he had altered and falsified the facts. In those circumstances, will my right hon. Friend say whether he will still make available to the BBC all the facts appertaining to Mr. Curteis's play, so that it can go out on schedule?
    Mr. Stanley: There were two very limited contacts between Mr. Ian Curteis and my Department. I am not privy to the totality of what passed between Mr. Curteis and the BBC, and for that reason I am not able to comment further on that.
    Mr. Lilley: Can my right hon. Friend say whether any of the authors or producers of the innumberable other plays and programmes which have been produced denigrating the British performance in the Falklands took the trouble to visit the Ministry of Defence and check their facts? Will he also comment on the fact that they were not banned?
    Mr. Stanley: I note what my hon. Friend has said. I think that there were other occasions on which people writing about the Falklands war consulted my Department. I also note that other producers of television material, and that sort of thing, have found a way of getting access to the television media. My hon. Friend will be aware that although the BBC has apparently banned this play, Anglia Television has expressed interest in it and many of us will be happy to see that play being made public on Anglia Television.

    Royal Dockyards
    Mr. Hicksasked the Secretary of State for Defence what is the present position regarding his proposals to introduce commercial management into the royal dockyards; and if he will make a statement.
    Mr. Wallaceasked the Secretary of State for Defence what recent consultations have taken place with the relevant trade unions concerning the Government's plan for commercial management of the dockyards.
    The Secretary of State for Defence (Mr. George Younger): As I announced on 4 December, we have begun the final stages of consultation over the future management arrangements for the royal dockyards. To this end, we have released details for the contract which could be signed with our preferred contractor, Babcock Thorn, and responded in full to the trade union paper which I received on 24 November. I have placed a copy of my paper in the Library.
    I have asked the unions to let me have their views on the way ahead for Rosyth before Christmas so that I can come to a final judgment early in the new year, if necessary after another meeting with the trade unions. Contract negotiations are continuing with the three bidders for Devonport, and I hope to be able to announce the preferred contractor there shortly to enable consultation for that dockyard to be completed early in the new year.
    Mr. Hicks: Will my right hon. Friend confirm that he is prepared genuinely to consider the possibility of the alternative options for Devonport, such as either a trading fund or a Government-owned plc, in his consultations with the trade unions, so that the consulations will not be confined to details relating to his predecessor's preferred option of agency management?
    Mr. Younger: I appreciate what my hon. Friend has said. I assure him that I intend the consultation process to be as full as it possibly can be. Of course, it is open to the unions to raise with me any aspect of the matter at any point in the consultations.
    Mr. Wallace: Does the Secretary of State not accept that, by making an announcement with regard to Babcock

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    Thorn, he has acted with the utmost insensitivity and doubtful legality? If, by doing that, he has excluded some of the options for Rosyth, which the hon. Member for Cornwall, South-East (Mr. Hicks) has mentioned, what substance does he think will be given to any future consulations that he has with trade unionists from Rosyth?
    Mr. Younger: The hon. Gentleman has got this matter wrong. The other side of the coin, when we have maximum consultation, is that all those concerned require maximum information in order to give their views and to be properly consulted. I would rightly have been criticised if I had seen the consultation process as continuing without giving the unions an opportunity to comment on what is, I think, our preferred solution. I have made it clear to them that I have not taken a final decision and that all their views will be taken into account before I do.
    Mr. Gordon Brown: What is the point of promising to consult the work force of Rosyth when Babcock Thorn, the preferred contractor, says that it has already agreed what amounts to a 1,000-page contract with the Ministry of Defence? Will the Secretary of State tell us the truth? How many compulsory redundancies have been discussed with Babcok Thorn? Will he deny the extraordinary statement by Babcok Thorn this morning that not just HMS Conqueror but all hunter-killer work is to be moved from Rosyth, with hundreds more jobs at risk?
    Mr. Younger: Again, I am not sure whether the hon. Gentleman has properly read the statements that have been made. He expects his friends in the trade unions concerned to consult me. If I do not give them information as to what the preferred course might be, I do not know how they could consult about somthing when they would not know what they were consulting about. The hon. Gentleman would be the first to take me to task if I had not done that. He would have accused me of keeping them in the dark.
    Redundancies are common to any solution, including no change. Redundancies are caused by the fact that the work load that is in prospect for the dockyards, and indeed the possible contractorisation of these yards, offer a new prospect for these yards by getting outside civilian work to add to their work load. I should have thought that the hon. Gentleman would welcome that.
    Dr. Owen: Is the Secretary of State, by saying that he hopes to announce the third contractor shortly for Devonport dockyard, merely saying that he is no longer open to persuasion about a Government-owned plc or a trading fund, that there is no genuine consultation and that the consultation has been a sham throughout the last few years?
    Mr. Younger: I am surprised at the right hon. Gentleman's question, because what he and his hon. Friends are now suggesting is that the consultation process would be better if I were to withold some of the relevant information from the trade unions before I consult them. That is not a sensible proposition. It surprises me that the right hon. Gentleman should espouse that idea.
    Mr. O'Neill: The House is aware that the Secretary of State has not denied the substance of the Babcock Thorn statement. What is more, it is now common knowledge that the man who is to run the dockyard for Babcock and Thorn has been replaced by Babcock Power in Scotland. Is not this whole strategy and the failure to make any
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    honest commitment to the House or confirm the numbers of redundancies evidence that the contractorisation strategy is in ruins and that the Navy is once again being made to pay for defence cuts?
    Mr. Younger: The hon. Gentleman is going a bit over the top. I have not seen the statement that was made by Babcock today, so I cannot comment upon whatever it is. With regard to the submarine refit programme, I assure the hon. Gentleman that there is nothing new and nothing surprising in the announcement about HMS Conqueror. It was a perfectly normal adjustment of programme to make sure that the work goes to the most appropriate place in the dockyard system where there is the capacity to deal with it. The question of jobs, one way or another, is not affected plus or minus by the contractorisation process. What it is affected by is the work load, and that is common to all solutions.

    Ethnic Monitoring
    Mr. Dubsasked the Secretary of State for Defence if he will make a statement on progress with the introduction of ethnic monitoring in the Army.
    The Parliamentary Under-Secretary of State for the Armed Forces (Mr. Roger Freeman): Arrangements are well in hand for the Army, in common with the other services, to introduce ethnic monitoring as outlined in the answer to my hon. Friend the Member for Bexhill and Battle (Mr. Wardle) on 5 November, at column 434.
    Mr. Dubs: I welcome the decision to introduce monitoring next April, but how does the Minister answer the criticism that it will not cover possible discrimination against black soldiers as regards promotion? Secondly, will it cover instances when potential soldiers apply, for example, to the Brigade of Guards, and are diverted by the Army recruiting office to another regiment? Under which regiment will they then be recorded?
    Mr. Freeman: Promotion of those in the armed services is, as the hon. Gentleman knows, on the basis of merit, aptitude and motivation. There are two reasons why monitoring is not to be introduced for those in service. First, it is considered unnecessary, because no examples are known to the Ministry of Defence of racial discrimination. If there are, I hope that the hon. Gentleman will draw them to our attention. Secondly, we consider it inappropriate, because the introduction of monitoring in the armed services for those in service would be divisive.
    Mr. Conway: Does my hon. Friend accept that the basis for promotion in the armed forces must continue to be ability, success rate on military courses, and so on, and that in no way should the armed forces be seen to discriminate in favour of black people against those who are most able and worthy of promotion?
    Mr. Freeman: I am grateful to my hon. Friend. I agree very much with him. Indeed, I believe that black members of the armed forces would very much resent any implication that their promotion was other than by merit alone.
    Mr. Ron Brown: Some members of the ethnic minorities serving in the SAS helped to organise the shipment of submarine lifting gear from Scotland to Libya. Will the

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    Minister explain their role? Was that to make amends for the bombing of Libyan cities, or will the hon. Gentleman say simply that it is a state secret?
    Mr. Speaker: Order. That is a bit wide of ethnic monitoring.
    Mr. Wilkinson: Will my hon. Friend monitor carefully the excellent performance of the Gurkha Rifles and assure the House that there will be no reduction in the number of Gurkha battalions, which have provided such an excellent service to the Crown over the years?
    Mr. Freeman: I agree very much with my hon. Friend in paying tribute to the Gurkha forces currently serving in Hong Kong and elsewhere. I assure him that the Gurkhas have a long-term and secure future in the British Army.
    Mr. McNamara: Can the Under-Secretary inform the House how many commissioned officers in the forces are of African, Caribbean or Asian origin? Why are people of that origin in the British Army assumed to lack merit, aptitude and motivation, because there are so few of them in the commissiond ranks? Does the hon. Gentleman accept that many people in the minority communities will not feel that they are fully accepted as British citizens until they are given a commensurate place in the protection of these islands, on merit, aptitude and motivation, and not on the ground of discrimination, from which many feel they suffer?
    Mr. Freeman: I am sure the hon. Gentleman is aware that the Commission for Racial Equality has recommended that the only correct way to monitor those of different ethnic backgrounds in the armed services is on the basis of self-classification, and not by myself or anyone else in the Ministry of Defence going out and counting members of individual units. I have said that we have no intention of introducing ethnic monitoring for those in service.

    Falkland Islands
    Mr. McCrindleasked the Secretary of State for Defence what is the cost of maintaining a military presence in the south Atlantic; and if he anticipates further reducing forces on the Falkland Islands.
    Mr. Stanley: In the last financial year, the additional cost to the defence budget of establishing and maintaining the Falklands garrison is estimated to have been £397 million. The planned provision for 1986-87 amounts to £234 million and that for 1987–88 is £140 million. Force levels in the Falklands, now and in the future, reflect the continuing need for a military presence sufficient to deter aggression and to defend the islands against attack.
    Mr. McCrindle: I accept in particular the second point to which my right hon. Friend drew attention, but does he agree that the recent development of the air strip, with its attendant possibility of reinforcing the garrison from the United Kingdom rather more quickly than was the case before, might lead to the possibility of our having to maintain a smaller garrison? Does he have any thoughts on whether that is likely in the near future, and if so, can he tell us whether there is the possibility of a reduction in costs?
    Mr. Stanley: I am grateful to my hon. Friend. We have always said that giving ourselves a very much greater ability to reinforce the Falkland Islands quickly enabled
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    us to take a more flexible view of the garrison levels. We do not, for reasons which I am sure he and the rest of the House will understand, go into details about the garrison levels, but my hon. Friend will agree that the figures that I mentioned in my answer to him make it clear that we will achieve the discharge of our defence responsibilities to the Falklands during the next few years at significantly less cost than hitherto.
    Mr. Dalyell: Will the Ministry of Defence participate in preparations for a royal visit to the Falklands in the spring of 1987?
    Mr. Stanley: I have no comment to make on any royal visit to the Falklands.
    Sir John Biggs-Davison: Does my right hon. Friend's reply not show that there will be a rapid, progressive and gratifying fall in costs, and does the Ministry of Defence know of any better all-services training area than the Falkland Islands?
    Mr. Stanley: My hon. Friend is entirely right. The Falkland Islands provide some very good training opportunities. I am sure that he and the rest of the House will welcome the fact that the additional financial cost of the Falklands will halve over the next three years.
    Mr. Foulkes: Will the Minister say what assessment has been made, and what plans have been laid, for the reported Argentine nuclear capability?
    Mr. Stanley: I have no comments to make on that.
    Sir John Farr: Is my right hon. Friend aware that, whatever the costs may be, they are well worth it, because there is an important point of principle at stake?
    Mr. Stanley: I entirely agree with my hon. Friend. The construction of the airfield has been a very cost-effective use of taxpayers' money for defence purposes.

    Frigates
    Mr. Duffyasked the Secretary of State for Defence when he expects to arrive at a decision on the size and timing of further orders for follow-on type 23 frigates.
    Mr. O'Neillasked the Secretary of State for Defence if he will make a statement on future frigate orders.
    Mr. Younger: Orders for three follow-on type 23 frigates were placed earlier this year. Decisions on orders for further follow-on type 23 frigates will be taken when appropriate.
    Mr. Duffy: The Secretary of State must be aware that the orders that he has mentioned relate to last year rather than to this. Is he not aware that if further orders await priorities and availability of resources, Conservative Members will need to know, as my colleagues certainly know, that if the Nott tendency still lingers in the Ministry of Defence, the Secretary of State will not fulfil his objective of a proper age structure for a 50-ship surface fleet by the 1990s, which is only three years away?
    Mr. Younger: As the hon. Gentleman knows, this year we have already placed three orders for frigates. It remains my intention to maintain a force level of about 50 frigates and destroyers, but the number of frigates to be ordered in any one year will continue to depend upon the resources available.
    Mr. O'Neill: Does the Secretary of State recognise that the appropriate time is now? We need those orders now to go into the 1990s with a 50-warship Navy. The constant procrastination by the Ministry of Defence is not good enough when workers are ready to build the ships and seamen are waiting for the opportunity to sail in them. The time is now.
    Mr. Younger: I should have thought that the hon. Gentleman would be more grateful than that for the three large orders that we have placed this year. The hon. Gentleman welcomed them when they were placed. As for keeping the 50-frigate Navy going and the new orders required to do that, we must weigh up the life of the frigates and the refit cycle and all the rest of it. That must be done in the context of the availability of resources at the time.
    Mr. Hill: My right hon. Friend will realise that Vosper Thornycroft in Southampton, which for many years has been a loyal servant to the Government in warship construction, is in desperate plight. As it has recently been privatised, can my right hon. Friend say whether any orders may come to Vosper Thornycroft in the dim and distant future? I am thinking not only of type 23 but of the single role minehunter.
    Mr. Younger: Some time ago I met some of the management of Vosper Thornycroft to discuss the company's problems. I assure my hon. Friend that this is an important defence contractor. It is the lead yard for single-role minehunters, and we shall watch its problems carefully.
    Mr. Holt: Will my right hon. Friend take on board the fact that Harland and Wolff will be given additional subsidies which Swan Hunter will not receive and that this must be borne in mind when making decisions to place orders for type 23s?
    Mr. Younger: I very much take my hon. Friend's point. I assure him that the extra auditing and monitoring procedures which my right hon. Friend the Secretary of State for Northern Ireland announced when the order for the first AOR was placed at Harland and Wolff will be carefully adhered to, so that when comparisons are made between Harland and Wolff or any other nationalised concern and the private sector it can be done on a fair basis.
    Mr. Nicholas Brown: Will the Secretary of State admit to being economical with the truth? Would not a more candid reply be that the order for the type 23 02 has been placed with Swan Hunter, that 03 and 05 have been placed with Yarrow, that type 23 04, 06 and 07 have been dropped from the programme altogether, and that there will be no frigate orders next year?
    Mr. Younger: The hon. Gentleman of all people should be more pleased than he appears to be—[HON. MEMBERS: "Answer the question."]—because Swan Hunter in his constituency has been given a special non-competitive order for type 23 02 and has also been given the offer of bidding for the second AOR ship when that comes along. Many other shipyards in the United Kingdom would like to be as well treated as Swan Hunter has been, and the hon. Gentleman should have said that.
    Mr. Hirst: Will my right hon. Friend bear in mind the fact that Yarrow on Clydeside, where much of the type 23
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    frigate development work has been undertaken, is one of the most modern and efficient yards in the world? Will he take this opportunity to remind the House that, following his announcement in the summer of two frigates for Yarrow, it has engaged in a multi-million pound covered development at the yard to build frigates on a more competitive and productive basis?
    Mr. Younger: I entirely agree with my hon. Friend. Yarrow is a very important defence contractor. It is the lead yard for type 23 frigates, which will be the backbone of the 50-frigate Navy that we intend to keep.
    Dr. Godman: What is the likelihood of one type 23 frigate being deployed in support of the two fishing vessels which will police the Falkland Islands fishery conservation zone? Does the right hon. Gentleman agree that those two aging stern trawlers will have to be replaced by fisheries protection vessels of the sort employed in United Kingdom waters?
    Mr. Younger: We do not normally comment on operational matters, but I can safely say that whatever tasks the Royal Navy is asked to perform in the Falklands, we shall try to use the most suitable ships available for the task. The hon. Gentleman will realise that, as tasks develop, we may have to change the equipment available to deal with them, but we are ready to do that if necessary.

    Helicopters
    Mr. Marlowasked the Secretary of State for Defence if he will make a statement on his assessment of the effectiveness of helicopters as tank-killers in the 1990s.
    Mr. Archie Hamilton: We believe that the attack helicopter will continue to constitute an essential component of a balanced anti-armour capability in the 1990s.
    Mr. Marlow: Given the speed of concentration of helicopters, their ability to operate over their own territory, modern techniques of surveillance and the power and accuracy of modern missiles, is not the concept of the use of the tank in the offensive role really a romantic reject that should go out with the concept of using horses?
    Mr. Hamilton: There are many different weapons systems that can be used in an anti-tank capability and the helicopter is merely one of them.
    Mr. Ashdown: Has the Minister seen the study that states that British forces on the central front in Europe are about 100 helicopters light of their requirements in terms of attack tank killing and the deployment of reserves? Is he aware of the special role that the helicopter has to play in terms of a force multiplier, given the disposal of forces on the central front? Does he realise that further delay or fudging of the decision on helicopter procurement will not only cause terrible damage to Westland but will weaken our forces?
    Mr. Hamilton: The Ministry is giving serious consideration to our future requirements for helicopters and will be making an announcement on that in the new year.
    Mr. Wiggin: Is my hon. Friend aware that the Army—and it is the Army that is mainly at issue here—has revised its view about helicopters within the past 18

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    months? As helicopters have been in service since the last world war, will Ministers oversee any advice that they receive with good common sense?
    Mr. Hamilton: The Army very properly wanted to be sure that the requirements stated would satisfy its needs in the light of an emerging threat. It would have been improper to proceed with the old requirements when new information had come to light.

    Trident
    Mr. Willie W. Hamiltonasked the Secretary of State for Defence what is the latest estimated total cost of Trident; and what progress is being made in Scotland in the provision of facilities for this weapons system.
    Mr. Archie Hamilton: As my right hon. Friend the Secretary of State said on 11 March 1986, the latest estimate for Trident is £9,869 million at average 1985–86 prices. Satisfactory progress is being maintained by all elements of the Trident programme for its introduction into service in the mid-1990s.
    Mr. Hamilton: Is the Minister aware that there is an enormous amount of opposition to the programme, particularly in Scotland? How can the Minister or his right hon. Friend claim that Trident is an independent British nuclear deterrent when the Prime Minister has to go crawling to America to ask a doddering President whether he will promise to deliver—and that lame duck President can deliver nothing?
    Mr. Hamilton: I am surprised to hear from the hon. Gentleman that there is so much opposition to the Trident programme in Scotland, because it is providing a large number of jobs. Our independent deterrent is providing, at present, about 4,500 jobs in maintenance, and construction work on the Clyde involves 2,000 to 2,500 jobs, half of which are filled by residents from the Dumbarton district. If we consider the whole of north England and Scotland, the effect of the programme on employment is very dramatic. I have the feeling that the Opposition are rather cavalier in their attitude to employment in those areas, yet we are always being told about the high unemployment levels there.
    Mr. Franks: When does my hon. Friend expect to be able to sign the contract for Trident 2? Can he also give us some idea of the number of jobs that that will secure?
    Mr. Hamilton: The manufacture of HMS Vanguard is securing 4,000 jobs at Barrow and 5,000 jobs elsewhere. We envisage that that employment level will rise considerably. In response to my hon. Friend's question about placing the contract for the next Trident, I can say that we will do that some time early next year.
    Mr. Strang: Will the Minister spare us the hypocrisy about Trident jobs and recognise that every £1 million spent on Trident facilities on Clydeside would create many more jobs if it was invested in socially useful jobs in the construction industry, the Health Service or education? Will he also recognise that thousands of millions of pounds are being spent on American technology and American jobs, instead of being spent in this country?
    Mr. Hamilton: There is no doubt that the prime purpose of the Trident programme is not to create jobs. On the other hand, I wonder whether the people who are
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    in jobs affected by the Trident programme have been consulted by Opposition Members, who are so keen to abolish their jobs.
    Mr. Spencer: Will my hon. Friend confirm the simple truth that, without Trident, there is no effective defence of the nation?
    Mr. Hamilton: There is no doubt whatever in my mind that our independent nuclear deterrent must form the backbone of our defence, and it is critical that we have it.
    Mr. Denzil Davies: A Government who have trebled unemployment since 1979 have no business to talk about other people being cavalier about jobs—[interruption]
    Mr. Speaker: Order. These are defence questions.
    Mr. Davies: I thank the House for that reception. It is deeply gratifying. As for the estimate of the cost of Trident, can the Under-Secretary of State confirm again that about £4.5 billion out of the £9.8 billion will be spent in the United States and, no doubt, create jobs in the American armaments industry? Can he also confirm that for every 1 cent that the pound falls against the dollar, another £25 million goes on the cost of Trident?
    Mr. Dickens: And the other way around.
    Mr. Davies: It will not be the other way around.
    Mr. Dicks: The right hon. Gentleman is just as daft as his right hon. Friend the Leader of the Opposition.
    Mr. Speaker: Order. This takes a lot of time out of questions.
    Mr. Davies: Does the arrangement with the United States Government contain an exchange rate protection clause, or is it an open-ended commitment in respect of the value of the pound and the dollar?
    Mr. Hamilton: I am sure the hon. Gentleman knows that the exchange rate that is applicable to calculating the cost of Trident is taken at the end of June of the previous year, so we are operating on an exchange rate of $1·28 to the pound. When it is revalued, as we expect in the new year, it will be $1·50, which was the rate at the end of June this year.
    Mr. Neale: Does my hon. Friend agree that it is carrying naiveté to the point of gross irresponsibility for the Leader of the Opposition to try to square his commitment to the cancellation of Trident and removal of American bases from Britain with his assertion that that need not affect the Americans' commitment to NATO?
    Mr. Hamilton: Like my hon. Friend, I believe that the right hon. Gentleman is threatening the cornerstone of the NATO Alliance by getting rid of our independent deterrent. That stance holds great dangers for the future of the country's defence.

    Iran
    Mr. Altonasked the Secretary of State for Defence what contacts his Department has had with Iranian officials in the past three years concerning infrastructure contracts and military spare parts.
    Mr. Archie Hamilton: A number of meetings took place in 1984. There have been none since then.
    Mr. Alton: As meetings took place on 20 and 31 October this year between representatives of International Military Sales, a company which is wholly owned by the

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    Ministry of Defence, and Iranian officials, how does that fact square with the Minister's answer and the Prime Minister's statement that a no arms sales policy had been pursued scrupulously and consistently? Will the Minister say what took place during those meetings on 20 and 31 October?
    Mr. Hamilton: The hon. Gentleman's question asked about contacts that my Department had with Iranian officials. IMS is controlled by the Department, but it operates independently. It has been concerned merely with contracts that existed before the revolution. It has been negotiating about them. It has conducted no arms sales since the revolution.
    Mr. Latham: Can my hon. Friend confirm—I hope he can—that the contacts have not led to any arms sales to Iran in contravention of our policies, especially if we are not prepared to sell to the Israelis defensive clothing against chemical weapons?
    Mr. Hamilton: My hon. Friend is absolutely right. There have been no new sales of equipment by IMS. It has been concerned only with existing contracts and deliveries in respect of them.
    Mr. McNamara: What has been delivered, even in retrospective contracts? Does it not break the spirit of what the Prime Minister said, if not the facts of the situation? We should have stopped all deliveries, whether or not the contracts were pre-Shah.
    Mr. Hamilton: Under the existing contracts, anything sold has been of a non-lethal nature.

    Royal Military School of Music
    Mr. Jesselasked the Secretary of State for Defence if he will indicate when he expects to be in a position to make a statement on the long-term future of the Royal Military School of Music, Kneller Hall, Twickenham.
    Mr. Freeman: My right hon. Friend expects to make a decision soon.
    Mr. Jessel: Is my hon. Friend aware that the finest Army bands, whose high standards of excellence are the envy of the world, are trained at the Royal Military School of Music at Kneller Hall, Twickenham? Will my hon. Friend confirm that the Government intend to take fully into account not only the views of the 164 right hon. and hon. Friends who have signed the early-day motion, but the opinion of the other place, the Army, the arts world and the 18,679 people who have signed petitions?
    Mr. Freeman: Yes, I can confirm that the Government will take those into account.
    Mr. Speaker: Order. Before I call upon the Lord Privy seal to answer Prime Minister's Questons, may I remind the House that the questions must be related to the Prime Minister's responsibilities.

  PRIME MINISTER

    Engagements
    Ql. Dr. Michael Clarkasked the Prime Minister if she will list her official engagements for Tuesday 9 December.
    The Lord Privy Seal and Leader of the House of Commons (Mr. John Biffen): I have been asked to reply.
    174
    My right hon. Friend is today reporting to the European Parliament in Strasbourg.
    Dr. Clark: During the course of his busy day will my right hon. Friend convey to my right hon. Friend the Prime Minister and my right hon. Friend the Secretary of State for Energy our congratulations on the successful privatisation of British Gas, which has brought about a most welcome extension of share ownership in Britain? I also ask my right hon. Friend to ask my right hon. Friend the Prime Minister to reflect upon the fact that the percentage of people in this country who now own British Gas shares is considerably higher than the percentage of people in America who know the name of the Leader of the Opposition.
    Mr. Biffen: I will certainly convey the second point raised by my hon. Friend. With regard to his point of substance, I shall certainly convey that to my right hon. Friend. I agree with him that the remarkably successful flotation of British Gas and the premium it has secured demonstrates not only the confidence of the British people in the future of gas but their belief that British Gas has an assured future within private ownership.
    Mr. Kinnock: May I first invite the right hon. Gentleman to join me in condemning the attempt in the European Parliament this morning to impair free speech, especially as the individual concerned has ample opportunity to make his case in two Parliaments?
    May I ask the right hon. Gentleman whether, in the light of the European Community agreement on anti-terrorism policies, and in view of common necessity, the Government are now taking measures to insure against London being used as a location for making arms deals similar to those made between the United States Administration and Iran?
    Mr. Biffen: I have no reason to believe that the right hon. Gentleman, whose return I very much welcome, is aware of a situation that validates his anxieties. On his first point, I am sure he will speak for the entire House in regretting the way in which my right hon. Friend the Prime Minister was treated at Strasbourg this morning.
    Mr. Kinnock: I am grateful for that reply. In view of the frequency of meetings apparently required for the arms deal with the Iranians, does the right hon. Gentleman find it strange that no measure was taken by the Government or knowledge received by them from any source that such a deal was being made?
    Mr. Biffen: I have no reason to believe that there was any laxity on the part of the Government, but I take note of what the right hon. Gentleman has said.
    Sir William Clark: Given that this is a period of goodwill, will my right hon. Friend congratulate the Leader of the Opposition on commanding an audience that did not come in from out of the rain?
    Mr. Biffen: I think that we might have just an interlude of good-natured exchanges on these matters, and to that extent I agree with my hon. Friend, but the right hon. Member for Islwyn (Mr. Kinnock) will know perfectly well that he comes back from the United States to fairly well-charged political situations. I could not—[Interruption.]
    Mr. Speaker: Order. It is just that sort of question that causes difficulties.
    Mr. J. Enoch Powell: When the Prime Minister is back, will the Leader of the House find out from her whether she knows why the Anglo-Irish Conference yesterday was attended by representatives of the United States Government?
    Mr. Biffen: I cannot comment authoritively on that point, but I shall certainly convey it to my right hon. Friend.
    Mr. Amessasked the Prime Minister if she will list her official engagements for Tuesday 9 December.
    Mr. Biffen: I have been asked to reply.
    I refer my hon. Friend to the reply that I gave some moments ago.
    Mr. Amess: Will my right hon. Friend ask the Prime Minister to restate the Government's policy of multilateral, rather than unilateral, disarmament? Will he also ask her quickly to repair the damage done by statements made in America giving the impression that we will abandon our allies and renege on our NATO commitments?
    Mr. Biffen: I shall most certainly convey the first point to my right hon. Friend the Prime Minister. On the second point, it must be a matter of judgment for the House to assess just how influential was the visit of the right hon. Member for Islwyn (Mr. Kinnock). These are fair points in the political debate that commences now and will continue until the general election. We are happy that the Labour party set out its non-nuclear defence policies in the United States, as it has done in this country, because we believe that the popular judgment will lie with us.
    Mr. Winnick: Does the Leader of the House accept that if it is true that some officials within MI5 mounted a political operation against Lord Wilson when he was Prime Minister, a full parliamentary inquiry is certainly needed? Does he further accept that if there remains within the MI5 service some criminal and subversive elements who were responsible for what happened in 1974, they should no longer be in the service?
    Mr. Biffen: Those points all relate to matters which are being argued directly or indirectly in a court in New South Wales and it would not be appropriate for me to make any further comment.
    Mr. Nicholas Baker: Does my right hon. Friend agree that there is a world of difference between a decision whether to take proceedings in respect of a book by an independent journalist, such as Chapman Pincher, which some of us believe to be the code name of the hon. Member for Workington (Mr. Campbell-Savours), and a decision concerning ex-employees of the service, who propose to tell their all for money, in breach of their undertaking and contract? Does he further agree that the right hon. Member for Islwyn (Mr. Kinnock), who manages to do down the country over defence policy while he is in America—[interruption]
    Mr. Speaker: Order. One question at a time.
    Mr. Biffen: My hon. Friend will find that there was an answer yesterday from my right hon. and learned Friend the Attorney-General which relates to his first point. I am afraid that I could not hear the second point.
    Mr. Steel: Will the Leader of the House give the House an assurance that the decision whether to order AWACs
    176
    or Nimrod for the Royal Air Force will be made by the Cabinet as a whole? Does he recognise that failure to proceed with Nimrod would be seen as an act of industrial surrender and would undermine Britain's efforts to remain at the forefront of high technology?
    Mr. Biffen: The right hon. Gentleman will not expect me to comment on the second part of his question. On the first part, the Liberal party is some distance from Cabinet Government, but I assure him that a decision of this magnitude would necessitate the proper consideration of the Government.
    Dr. Hampson: Will my right hon. Friend convey to the Prime Minister that there would be deep concern on both sides of the House should a decision be made not to buy Nimrod, because already £800 million has been spent and through its design it is doing a wider job than the AWAC, which will cost £1 billion more and will lose the country core technology for ever?
    Mr. Biffen: I shall certainly comply with that request, but I suspect that my hon. Friend has already made it on his own behalf.
    Mr. Hoyleasked the Prime Minister if she will list her official engagements for Tuesday 9 December.
    Mr. Biffen: I have been asked to reply.
    I refer the hon. Gentleman to the reply that I gave some moments ago.
    Mr. Hoyle: On Nimrod, did the Leader of the House see in The Observer last Sunday the report that the Prime Minister is firmly in the Boeing camp? As a decision is shortly to be made on the airborne early warning system, and as many jobs and the future of the high-tech industry are at risk, will the right hon. Gentleman ask the Prime Minister, when she finally returns, whether she will make a statement making it clear whether she is batting for Britain or for Boeing?
    Mr. Biffen: That is an allegation of partiality which I completely reject. This is a major decision affecting the defence and industrial consequence for the United Kingdom, and it will be taken in the appropriate detached fashion.
    Mr. Adleyasked the Prime Minister if she will list her official engagements for Tuesday 9 December.
    Mr. Biffen: I have been asked to reply.
    I refer my hon. Friend to the reply that I gave some moments ago.
    Mr. Adley: Contrary to the view being propagated in some quarters, will my right hon. Friend confirm that Her Majesty's Government are more than happy for the House and the country to spend as much time as they like debating defence and the nation's security? Are the public not right to be wary about the possibility of a party which wants to leave NATO having anything to do with Britain's defence? [Interruption.]
    Mr. Speaker: Order. The Lord Privy Seal.
    Mr. Biffen: I do not wish to deny the pleasures of my hon. Friend or the House, but I must say that there can be no question of there being as much time as would be liked in the debating of such matters, given all the other commitments in the Queen's Speech. None the less, I agree with my hon. Friend that defence will be a central feature

    177
    at the forthcoming election. We know perfectly well what a non-nuclear policy in the hands of Labour Members implies. We know perfectly well the extent to which it is a retreat from the Socialism of Aneurin Bevan, and we know perfectly well that the defendable alternative that we offer will be decisive in the outcome of that election.
    Mr. James Hamiltonasked the Prime Minister if she will list her official engagements for Tuesday 9 December.
    Mr. Biffen: I have been asked to reply.
    I refer the hon. Gentleman to the reply that I gave some moments ago.
    Mr. Hamilton: Will the Leader of the House find time today to inform the Prime Minister that thousands of people are now finding it difficult to purchase their house on mortgage because of high interest charges and redundancy? Is he aware that many of those people who go to their local authorities are now finding themselves homeless because of the Government's policy on public sector housebuilding? What do the Government intend to do about that?
    Mr. Biffen: I do not deny for one moment the significance of high interest rates mentioned by the hon. Gentleman, but the most important thing that the Government can undertake in that context is to ensure fiscal and budgetary policies which avoid heavy borrowing.
    Mr. Cashasked the Prime Minister if she will list her official engagements for Tuesday 9 December.
    Mr. Biffen: I have been asked to reply.
    I refer my hon. Friend to the reply that I gave some moments ago.
    Mr. Cash: Has my right hon. Friend noticed that the latest nuclear-free missile which the Leader of the Opposition is about to launch on the nation tommorrow—[HON. MEMBERS: "Order."]
    Mr. Speaker: Order. The question must be related to the Prime Minister.
    Mr. Cash: Has my right hon. Friend noticed that the Leader of the Opposition—[Interruption.]
    Mr. Speaker: Order. One more try.
    Mr. Cash: Has my right hon. Friend noticed that the Government have a policy of ensuring that Britain is properly protected, unlike the sort of policies that the Leader of the Opposition has been propagating in Australia and the United States and from the Opposition Front Bench?
    Mr. Biffen: I am sure that the Government have such a policy, and I am sure that it is one that commends itself to their formal treaty allies. In my busy day, I have not yet had the chance to open all incoming mail to see whether I have an invitation to the launch of the Labour defence policy tomorrow, but I shall be interested to see whether there is a single senior United States figure there to endorse it
    Mr. Madden: Why has it taken the Attorney-General six years to contemplate prosecuting Mr. Chapman Pincher under the Official Secrets Act, whereas he has taken much less time to charge Mr. John Lee, a reporter on the Croydon Midweek Post, your local newspaper, Mr. Speaker, under section 2 of the Official Secrets Act?
    Mr. Speaker: Order. I do not know anything about this case, but I hope that it is not sub judice.
    Mr. Biffen: I was about to say that I do not think that it would be appropriate for me to comment.

    Amphibious Capability
    The following Question stood upon the Order Paper:
    Mr. Cyril D. Townsendasked the Secretary of State for Defence if he will make a statement on the United Kingdom's future military amphibious capability.
    3.31 pm
    The Secretary of State for Defence (Mr. George Younger): I am very pleased to inform the House that the Government have decided to retain an amphibious capability in the longer term.
    At present, the Royal Navy's amphibious lift is centred on the assault ships HMS Fearless and HMS Intrepid. As a first procurement step, we have today placed a contract with Swan Hunter for a feasibility study into extending the life of these ships. At the same time, we are inviting industry to participate in feasibility studies for a new design option for their replacement by building new ships. In parallel with this work, we shall address the means of providing helicopter lift, including the concept of an aviation support ship.
    I know that this decision will be very well received both in the House and by our NATO partners, who attach considerable importance to the contribution of our amphibious capability. The steps that I am announcing today will secure its future.
    Mr. Townsend: The House will be grateful to my right hon. Friend, as will those who have responsibilities for the northern flank. I hope that the study that my right hon. Friend mentioned will take place as speedily as possible. Will he confirm that the landing at San Carlos in 1982 would never have taken place if we had not had assault landing ships? Does my right hon. Friend agree that if Britain is to have a strong conventional capability it must include a proper assault ship capacity?
    Mr. Younger: I entirely agree with my hon. Friend and I share his appreciation of the great importance of amphibious capability for our defence posture and our NATO contributions. This step will be a major reassurance that we intend to continue this capability.
    Dr. David Owen: I warmly welcome this decision. For how long is it possible to extend the life of Fearless and Intrepid? On the new ship designs, is this to be a much cheaper ship, will it have an amphibious lift capacity, with a flat top? What design is envisaged?
    Mr. Younger: The study into the life of Intrepid and Fearless will be looking into the economics and feasibility of extending their life, should that be the preferred option. Calculations of the cost and feasibility will be relevant in making that decision. As to the alternative of possible new vessels, the feasibility study will be looking into the most effective way of making a new vessel to fulfil this role.
    Sir Antony Buck: Does my right hon. Friend agree that many on both sides of the House are devoted to the concept of our maintaining a substantial

    179
    amphibious capability? Will he assure us that the life of the old ships will be retained until the new ships are ready to take their place?
    Mr. Younger: Yes, I can give my hon. and learned Friend that assurance. The expected life of Intrepid and Fearless stretches into the mid-1990s. This should give us ample time, following today's decision, to work out the best method of replacing them.
    Mr. Ted Garrett: The decision will be welcomed nowhere more than on Tyneside. I would like to ask the Minister to ensure that, when the feasibility study is completed, Swan Hunter will be paid, because in the past, when it has done feasibility studies, there has been grave doubt as to whether it got full value for the money, time and effort spent on such studies.
    I should like to extend an invitation to the Secretary of State to come to Wallsend on Saturday when, for the first time in 100 years, he will see the launch of one of Her Majesty's ships, HMS Galahad. It is an amphibious craft. It has been redesigned and has a new structure, and its launch will be watched with immense interest.
    There is a tremendous amount of work to be undertaken on the feasibility study. I should like to see, not the extension of the life of the two vessels, but completely new ones built. I think that when the study is completed two new modern ships will be ordered. Will the Secretary of State give consideration to those orders being brought to Tyneside?
    Mr. Younger: I note the hon. Gentleman's last point. He will appreciate that I will not want to make a determination on that until I have had the results of the study. I am as pleased as he is that Swan Hunter competed for the feasibility study contract and that it now has the contract. I can assure him that it will be paid for its work in accordance with the contract terms.
    Sir Patrick Wall: Is my right hon. Friend aware that these matters have been under discussion for some time and, therefore, feasibility studies are not very satisfactory? Is he also aware that the Royal Marines have lost the use of HMS Centaur and HMS Bulwark? It is essential to have two aircraft support ships in this package. How long will the study take? The ships are aging very rapidly and modern assaults are carried out by helicopter and not by landing craft?
    Mr. Younger: I appreciate my hon. and gallant Friend's concern about the time scale. I assure him that this is a case in which the Ministry of Defence is taking the appropriate step to decide how best the capability should be continued in plenty of time to ensure that whatever replacement is decided upon will be ready when Intrepid and Fearless, as they are at present in service, come to the end of their useful lives. I agree entirely with the views expressed about the need for helicopter platforms in addition and I have made it clear in my statement that that too remains under consideration.
    Mr. A. E. P. Duffy: May I follow the remarks of the Secretary of State and his hon. Friend the Member for Beverley (Sir P. Wall) and stress the importance of preserving this package? When does the Secretary of State expect to be in a position to place an order?
    Mr. Younger: Obviously I shall make a decision on placing an order when I have the results of the feasibility
    180
    study, which I hope will be available some time towards the end of next year. We will then be able to make a decision in good time, so that the resulting new ships or extended life ships will be available and ready when Intrepid and Fearless reach the end of their lives.
    Miss Janet Fookes: I welcome the statement—which, I might add, is long overdue—and its importance for the future of the Royal Marines. May I press the Secretary of State a little more closely on the time scale? When we have stripped it of all the nice language, in what year can we expect the new ships?
    Mr. Younger: It is our intention that the new ships or refurbished present ships, according to the decision, will be ready by the mid-1990s, when the present ships will reach the end of their useful lives. That is sensible planning and the House will applaud it.
    Mr. Nicholas Brown: Since
    "consience doth made cowards of us all",
    I welcome the placement of the feasibility study at Swan Hunter. Swan Hunter, as the Secretary of State will recall, had the feasibility study for the auxiliary oiler replenishment vessel and was treated pretty shabbily by his Department afterwards. What guarantee does Tyneside have that history will not repeat itself and that expediency will not cut across rational decision-making in the Ministry of Defence?
    Mr. Younger: It is a refreshing change for the hon. Gentleman to welcome something for Swan Hunter. He has not done that for a long time. I take some exception to his suggestion that Swan Hunter, of all yards, has not been well treated over the auxiliary oiler replenishment vessel. May I remind him that, although Swan Hunter was not successful in the competition for AOR 1, it was given special preferential treatment in being offered an inside track for AOR 2. I hope that he will not cavil at that or be ungrateful for it, because he will not be in tune with the workers at Swan Hunter if he does.
    Mr. John Ward: My right hon. Friend has gauged the welcome given to his announcement by both sides of the House, especially in so far as it affects the Royal Marines. However, he will understand the nervousness that some of us feel lest, judging from experience, this becomes a discussion exercise. Will my right hon. Friend undertake to do two things? First, will he report to the House from time to time on the progress of the replacements? Secondly, and more important, will he personally impose a programme on the feasibility studies and on any subsequent work? It is vital that this amphibious capability is kept in train all the time.
    Mr. Younger: I appreciate what my hon. Friend says. The announcement ensures that there will be a long-term continuation of the amphibious capability. That is good news for those who are concerned about the future of the Royal Marines as well as of the Royal Navy. I assure the House again—this point needs to be explained—that this is intended to be a process that will end in a replacement of the two ships, Intrepid and Fearless, in time following the end of their useful life. There cannot be better planning than that. If the process works out that way, today's announcement will be seen to have been very timely.
    Mr. James Wallace: The announcement by the Secretary of State of the continuing commitment to an amphibious capability is very much welcomed by the alliance, but many hon. Members have made it clear that there is considerable concern about the delay in making the announcement and about the further delay that is implicit in the right hon. Gentleman's statement. Should the right hon. Gentleman not have grasped the nettle now in respect of ordering new ships? Is it not the case that, stripped of the florid language and the right hon. Gentleman's accustomed sweet reason, this is a delayed decision which is directly due to the impact of Trident expenditure on the defence budget?
    Mr. Younger: I very much appreciate the hon. Gentleman's first remarks, which were sensible and balanced. In the second part of his question, he suggested that we should build a replacement for Intrepid and Fearless before the useful lives of those vessels was over. That would be profligate and very unwise. This plan should ensure that a replacement will be ready just at the end of the useful lives of the present vessels. If the Liberal party thinks that that is unwise, it surprises me.
    Sir Geoffrey Johnson Smith: Can my right hon. Friend assure the House that the Government intend to ensure that our amphibious capability will continue to be able to operate efficiently within the NATO area and worldwide?
    Mr. Younger: Yes, it is intended that this amphibious capability will continue, as now, to be primarily dedicated to NATO tasks, especially on the northern flank, and to be available in the normal way for any other out-of-area activities that require an amphibious capability.
    Mr. Churchill: I congratulate my right hon. Friend on his commitment, on the Government's behalf, to maintaining the amphibious assault capability of the Royal Marines. Will he confirm that Exercise Saifsareea, which took place two weeks ago in Oman and involved an assault landing by members of 44 Royal Marine Commando from Intrepid, would not have been possible if that commitment had been done away with, nor would maintenance of the Royal Marines' commitment to the defence of the northern flank?
    Mr. Younger: I am grateful to my hon. Friend, who is absolutely correct. My announcement shows that the Government believe that we need to maintain this type of amphibious capability. I hope that we can proceed from that base to decide precisely how this capability should be carried on.
    Dr. Norman A. Godman: I welcome today's announcement, but what is the likelihood of one of the orders coming to the lower Clyde?
    Mr. Younger: I appreciate the hon. Gentleman's concern. No doubt, when the time comes to put contracts out to tender, the hon. Gentleman's constituents will tender, if they wish to do so. I hope that if they get the order the hon. Gentleman will be a little more grateful for that than the hon. Member for Newcastle upon Tyne, East (Mr. Brown), who represents Swan Hunter, is for all the extra help that we give him.
    Sir John Farr: I congratulate my right hon. Friend on his welcome decisions. In relation to the replacement vessels, will he ask his advisers to look at the design procedures to ascertain whether costs can be saved in the long term, perhaps by getting away from the traditional design of these types of vessels and using some form of innovation?
    Mr. Younger: I welcome very much what my hon. Friend has said. In the case of all new ship design, we are looking very much for innovation in everything that we do. An example of that would be the immense changes in the Royal Navy's capabilities and its commitment to refits, and so on, for the new type 23 frigate, which is an immense improvement on its predecessors.
    Mr. Jerry Wiggin: May I commend my right hon. Friend for including in his statement a study into the use of helicopters for amphibious purposes? Will he record the fact that helicopters and more general purpose ships can provide much greater flexibility both for amphibious landings and for any other unforeseen possibilities that might arise?
    Mr. Younger: I agree with my hon. Friend. The ability to use helicopters is a central part of the amphibious capability.
    Mr. Martin J. O'Neill: May I first thank you, Mr. Speaker, for extending Question Time in the way that you have? Initially, we intended to complain about the use of this device, but when we heard the Minister's answer we realised why he used this device instead of making a statement. As for gratitude, the Opposition can raise only a small cheer, because this is a wholly unsatisfactory statement. It extends only to the promise of a feasibility study, the terms of which we hope the Minster will be prepared to put into the Library so that they can be studied more closely. We are not sure about the exact nature of this type of craft, or about its timing. Will it appear in the 1988-89 Estimates, or in those of 1989-90 or 1990-91? We need to know the answer to this question so that shipbuilding jobs can be protected. We also need to know how long these people will have to wait before they get the kind of jobs that they are so well equipped to fill.
    Mr. Younger: It seems to be extraordinarily easy to muddle the hon. Gentleman. It is a clear and welcome statement. It provides a firm future for the amphibious capability. The time scale that we are offering should enable that capability to be continued at precisely the moment when it will be needed. I have already said several times that the present ships, Intrepid and Fearless, will come to the end of their useful lives in about the middle 1990s. We hope to have replacements of one sort or another ready for them then. I hope that the hon. Gentleman feels that that is a satisfactory outcome. As for his first remark, it is somewhat unparliamentary of him to object to a device unless the content of the wording used is favourable. As a parliamentarian, I should have thought that he would be glad to have additional information, whether or not he approves of it.

Points of Order
Several Hon. Members rose—
3.48 pm
Mr. Richard Alexander: On a point of order, Mr. Speaker.
Mr. Speaker: Is it a point of order arising out of questions?
Mr. Alexander: Yes, Sir. During the questions which were answered this afternoon by the Leader of the House, almost all hon. Members heard two Opposition Members refer to my hon. Friend the Member for Christchurch (Mr. Adley) as telling lies—
Mr. Speaker: Order. I must pre-empt the hon. Member. I heard all kinds of noise at that point, but I did not hear any specific Member being called a liar. We should moderate our language in this place. What was said did not, I believe, touch upon the integrity of the hon. Member concerned. I do not know who it was, anyway.
Mr. Tam Dalyell: On a point of order, Mr. Speaker. Could we know whether you have been able to make any progress in your inquiries into the allegations of interference with Members' phones?
Mr. Speaker: I have written to the hon. Member about that matter. I am surprised that he has not received my letter.

Public Expenditure (Scotland)
3.49 pm
The Secretary of State for Scotland (Mr. Malcolm Rifkind): With permission, Mr. Speaker, I wish to make a statement about the allocation of my public expenditure provision in the next three years.
Total expenditure on the programmes within my responsibility will be £7,957 million in 1987–88, which is £390 million or 5·1 per cent. above provision for this year, and some £540 million higher than the plans for 1987–88, published in the public expenditure White Paper last January. An annotated table giving the allocations for each service is available in the Vote Office and I am arranging for it to be published in the Official Report.
I have given high priority to the Health Service to enable it to meet growing demand for health care over the next three years. Spending on the health programme will be increased by £130 million, which is 2·5 per cent. more than forecast inflation, to £2,216 million in 1987–88. For hospital and community health services next year there will be £1,540 million, some £87 million or 6 per cent. more than for this year. I propose to hold a small amount of this extra cash in hand for specific service developments. Allocations to health boards will allow a further movement towards parity under the SHARE formula. In addition, boards will be able to retain resources released within their budgets through efficiency and economy measures.
Capital investment in the Health Service will be about £370 million over the next three years, and will maintain the programme of major hospital projects, continue the upgrading of the NHS estate, and allow for spending on new technology and computer hardware. Provision for local authority capital spending on social work has also been increased.
To meet fully the needs of law and order services, my plans provide £625 million in 1987–88. This includes sufficient for a modest increase over the present police establishment, and for increased costs of the prison service, including recruitment of an additional 126 prison officers next year. Capital expenditure within this programme over the three years will be nearly £150 million and will provide for a new prison at Peterhead and for new or improved courthouses.
There will be a total increase in education in 1987ߝ88 of £214 million, which is 12 per cent. over provision for the current year. This includes the extra resources that we have said we will make available for an acceptable deal on pay and conditions of service for schoolteachers; and the £50 million unallocated education margin which I have already announced, as well as £6 million for additional non-teaching costs associated with standard grade and action plan. Capital expenditure on local authority education projects is planned to rise by £5 milion in 1987–88 to cover priority building work and equipment for science and technology subjects.
Mr. Dennis Skinner: When is this election?
Mr. Rifkind: The latter will be of special help in meeting the needs of standard grade. Centrally funded work on curricular reform in schools and further education is to be maintained and Scottish PICKUP extended. The importance of higher education has also been fully

185
recognised. An additional £6·1 million is being provided for the central institutions and the colleges of education. [Interruption.]
Central Government expenditure on the arts is being increased by £1·1 million or 5·5 per cent. I have authorised a start to the planning of the second phase of the new building for the National Library of Scotland and Causewayside; I am providing maintenance for the buildings of the three Scottish national institutions; and I am continuing to back staffing improvements at the Royal Museum of Scotland.
There will be an increase of £25 million or 10·8 per cent. in our provision for industry in 1987–99 compared with the plans published last year. The increase will go almost entirely to direct grants to industry to meet a continued upsurge in demand which brings valuable jobs and investment to Scotland. This follows a recent increase of £40 million in the amount available this year for such grants, mainly to provide for higher than expected investment during the transitional period for payment of old regional development grant.
My plans will permit consolidation of our policy of developing cost-effective agriculture and fishing industries with particular regard to supporting the rural economy. In response to representations from the agricultural community, I have made available an additional sum of £750,000 in each of 1987–88 and 1988–89 for the advisory services in Scotland.
For housing in 1987–88, total net provision will be £696 million, an increase of £51 million over provision for the

£ million

1986–87

1987–88

1988–893

1989–903

Cmnd. 9702-II1 Provision

Estimated Outturn

Cmnd. 9702-II1 Provision

Revised Provision 2

Cmnd. 9702-II1 Provision

Revised Provision2

Provision2

Agriculture

188

189

183

186

190

190

190

Industry

304

344

232

257

240

240

250

Tourism

13

13

13

13

10

10

10

Transport

587

582

595

601

600

620

630

Housing

645

637

673

696

700

700

730

Other environmental services

588

616

596

609

600

630

650

Law, order and protective services

563

566

577

625

580

650

660

Education

1,792

1,945

1,796

1,956

1,800

2,040

2,090

Arts and Libraries

75

75

75

82

70

80

90

Health and Social Work

2,443

2,464

2,535

2,605

2,620

2,710

2,830

Other public services

112

112

114

118

120

120

120

All current expenditure not allocated to services

19

0

19

124

20

130

130

Nationalised Industries external financing

239

239

1

87

-120

-20

-170

7,567

7,783

7,409

7,957

7,430

8,110

8,220

1 White Paper (Cmnd. 9702-II) figures adjusted for pre-survey changes.

2 Figures reflect survey changes. Some figures may be subject to detailed technical amendment.

3 Figures for 1988–89 and 1989–90 are rounded to the nearest £10 million. Due to rounding, individual figures may not sum to totals.

Mr. Donald Dewar: The right hon. and learned Gentleman has produced his statement with pride, but it is not a pride that can be justified. I fear that my hon. Friend the Member for Bolsover (Mr. Skinner) was characteristically too generous with his interventions during the past few minutes.
The Secretary of State said that there is to be an increase of £390 million, or 5·1 per cent., over planned provision for this year. Of course, if we consider the outturn, the Government expect to spend £7,783 million
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current year, and £23 million higher than the previously planned provision for 1987–88. It remains my intention to concentrate resources on investment in particular, to meet the needs identified in local authorities' own stock and to accelerate the payment of private sector improvement grant claims which have already been approved. I have therefore increased net capital provision by 20 per cent., which is £90 million, to £548 million. for 1987–88 compared with 1986–87. I expect this to take up some 79 per cent. of the total housing programme compared to 72 per cent. this year.
When investment financed by net capital receipts is taken into account, the programme will allow for gross capital investment next year of £720 million, which is an increase of £82 million over the planned level of £638 million in 1986–87. I have made significant extra provision available for the Housing Corporation, the Scottish Special Housing Association and the new towns. I am also pleased to be able to recognise in a tangible way the importance of preserving our heritage by increasing the resources available for historic building grants by 80 per cent. next year and by even more thereafter. [Interruption.]
The fact that the Government have been able to announce these substantial increases while continuing to reduce public spending as a proportion of national income is a tribute to the success of our control of the economy since we came to office.
Following are the allocations:
in 1986–87. If we apply the inflation factor, we need £8,079 million to stand still. We are getting £7,957 million. The shortfall in real terms is £122 million [Interruption.] Hon. Gentlemen opposite mock. I ask whether it is not perfectly reasonable to look at what the Government say will be spent in 1986–87. If we look at what they offer for 1987–88, we will see, applying the Government's own inflation factor, that there is to be a cut of £122 million.
Does the Secretary of State accept that we have done very badly compared with certain other Departments,

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particularly territorial Departments? According to the autumn statement figures, Wales got plus £15 million in real terms. Northern Ireland got plus £110 million, and we have this shortfall. I ask the Secretary of State to confirm to me what I think he said on television in my presence, that the reason for that is that he deliberately under-claimed on local authority expenditure in the coming year and that he regards the differential in the figures in favour of Wales as justifiable, because he supports it as a means of closing the gap between public spending in Wales and in Scotland. That is what he said. I should like him to confirm it in the House.
I shall briefly refer to the mixed news on individual spending totals. Some is not so good, some is bad and some is downright awful. In regard to the Health Service, the right hon. and learned Gentleman said that there is a 2·5 per cent. increase over inflation. It is difficult for me to comment on that statement because, in the annotated figures that he produced, he has put health and social work together. He has not given separate figures. That is unfortunate. In any event, the increase in real terms in the health and social work budget is £47 million, according to my calculations. Although I welcome that increase, it is less than 2 per cent. I predict that it will be inadequate in Health Service terms when we consider what happened to the hospital prices index over the past few years.
The Secretary of State said that there will be an increase of £214 million on education. I repeat the calculation I made. If we take the expected outturn figure for 1986–87, it is £1,945 million. Next year, he will give £1,956 million, a cash increase of only £11 million. To stand still, he would have had to give another £63 million.
Of course, there is an additional complicating factor. If the rejected teachers' pay package offered by the Secretary of State is implemented, it will involve another £60 million of local authority expenditure in 1987–88. The shortfall is £123 million. There is certainly no comfort for parents, who properly are worried and anxious about the decline in educational standards under this Government.
One important area is industry. It is brave to talk about a £25 million increase or an increase of 10·8 per cent. My heart rose when I saw that figure. Then I looked at the actual figures. We must use a translation code. We have an estimated outturn figure for 1986–87 of £344 million, and the 10·8 per cent. increase means that the Government will spend £257 million, a drop in cash terms from £344 million.
Will the Secretary of State confirm that the increase is merely a reduction in an expenditure cut that he previously predicted? It is little consolation to be told that it was planned to cut industry to £232 million. There has been some remission. The new total of £257 million is still well below what was spent for this year—£344 million. Applying the inflator, that is a reduction of £100 million in real terms. That shows how much special pleading and presentation has gone into the matter.
Will the Secretary of State comment on housing? I welcome an increase in real terms of £38 million but, as the statement itself says, some of it—I am told about £23 million—is going towards meeting the home improvement backlog, which is already a legal commitment of local authorities. This is the important point. The commentary that the Secretary of State's own Department produced in February this year shows, from 1980–81 to
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1986–87, a decline in housing expenditure from £1,005 million in real terms to £588 million. Today's announcement, when measured against the scale of the crisis created by the right hon. and learned Gentleman's own Government, is totally and hopelessly inadequate.
Mr. Rifkind: The hon. Gentleman compares unfavourably with Oliver Twist. Oliver Twist asked only for more. The hon. Gentleman implies that today he has not even heard about the substantial increases in expenditure in the areas to which I referred. The hon. Gentleman has sought to give one of the most misleading presentations that I have heard from him for a long time. He began by implying that the figures announced represented £122 million less than would have been required to maintain publicexpenditure—
Mr. Dewar: On outturn.
Mr. Rifkind: Indeed. I refer the hon. Gentleman to outturn figures, which are not necessarily the correct base, because we do not know what the outturn for 1987–88 will be. But, even on outturn figures, the Scottish block will be 6 per cent. higher next year than on outturn for 1986–87, and in real terms that is still an increase of 2·3 per cent. What the hon. Gentleman was trying to do was mislead, because he did not take into account, or was totally unaware of, the fact that one of the reductions in the figures announced today is a reduction in the external financing limit for the electricity boards because Torness is completed. It may surprise the hon. Gentleman, but we shall not need to spend a further £150 million on Torness when the matter has been dealt with already.
The hon. Gentleman tried to compare Scottish expenditure with that of other territorial Departments. The figures that I announced today should confirm, if any confirmation is required, that the provision made available for Scotland is fully in line with the formula that has been applied over the years, with one qualification, which has been announced already, and the hon. Gentleman is well aware of it. I deliberately did not seek to apply the full local authority current expenditure provision because, if I had done so, not only would that have enabled local authorities to spend far more in Scotland than in England but it would have been an additional burden on Scottish ratepayers. Therefore, in no way do I wish to apologise for that. However, in every other respect the announcement made today follows the full formula entitlement.
The hon. Gentleman made a comparison with Wales, which gave us an astonishing example of the new egalitarian Socialist spirit in the Labour party. As the hon. Gentleman is aware, the fact is that public expenditure in Scotland now is £2,210 per head, compared with £1,927 per head in Wales. If the hon. Gentleman is objecting to the fact that the Welsh are seeking to move towards a level of public expenditure comparable with that in Scotland, he shows a meanness of spirit of which I did not believe him capable.
On health expenditure, the hon. Gentleman again was carping and critical in his comments. I have to say to him that, irrespective of the social work aspect, the health programme will have resources that are 2·5 per cent. above inflation. That represents real growth in the health budget, which the hon. Gentleman should welcome rather than comment on as he did.
Likewise on education and housing, there are major increases in expenditure, which I announced. The hon.

189
Gentleman knows that the increase in capital that I announced for housing expenditure next year—which, indeed, follows similar increases last year—compares favourably with the massive cuts in housing capital that the Labour Government announced in their latter term in office.
One of the saddest comments by the hon. Gentleman was about the industry programme, because he is approximately one year out of date. He chooses to forget the fact that the industry programme resources were announced a year ago, for the likely level of expenditure in 1987–88. Today I have announced an increase of some £25 million compared with what was previously planned for industry expenditure in 1987–88. That will be used for regional development grants. Once again, the hon. Gentleman finds himself unable to accept or welcome increases, and chooses to misrepresent what the announcements will achieve in Scotland in the next 12 months.
Sir Hector Monro: May I ask my right hon. and learned Friend to buy the hon. Member for Glasgow, Garscadden (Mr. Dewar) a box of matches to help him with his calculations? May I warmly congratulate my right hon. and learned Friend on the additional expenditure, particularly in health, education and local authority capital expenditure? Will he confirm that, within the expenditure announced today, there are adequate resources to complete the scheduled improvements to the A75 from Gretna to Stranraer?
Mr. Rifkind: I thank my hon. Friend for his comments. I can confirm that the improvements to the A75 remain a high priority for the Government. Those projects will be going ahead.
Sir Russell Johnston: Is the Secretary of State aware that more is certainly better than less, but also definitely not enough? May I specifically ask him whether he considered meeting the Main proposals on teachers' salaries within his budget, as there appears to have been enough money to do so, or was that decision not within his responsibility, but made in the Department of Education and Science? Does the extra cash for service development in the Health Service mean that there will be more provision to meet the AIDS crisis, despite the Victorian—or perhaps it should be described as pre-Christian—morality of the former Minister responsible for health, the hon. Member for Argyll and Bute (Mr. MacKay)? What is the logic in the Secretary of State providing extra money to produce more jobs and simultaneously cutting the budget of the Highlands and Islands Development Board?
Mr. Rifkind: On the last point, I am not sure what the hon. Gentleman refers to. No announcements have been made today about the budget of the HIDB. Those discussions are continuing at present. However, I expect that the gross spending ability of the HIDB next year will be greater than this year, so the hon. Gentleman should not jump to conclusions.
The Government's position on the Main committee is well known. I took the view, as did my colleagues, that it would be inappropriate, when an increase of 16·4 per cent. was being offered—given that it was four times the current rate of inflation—that the increase should be
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other than phased, comparable to phasing that has been accepted by other groups in the community, which are receiving smaller increases in their salaries.
Discussions on AIDS are taking place at present. It is not possible to identify what expenditure may be appropriate in either the social work or health spheres, but the hon. Gentleman can be assured that the Government attach considerable priority to dealing with that problem. That will be borne in mind when conclusions are reached.
Mr. Alex Fletcher: I congratulate my right hon. and learned Friend on this positive contribution to public services in Scotland. Is he aware that, among other things, my constituents will warmly welcome the increased housing allocation, but will he bear it in mind that Edinburgh district council does not give top priority to clearing the backlog of housing improvement grants—a matter raised by the hon. Member for Glasgow, Garscadden (Mr. Dewar)? Will my right hon. and learned Friend use every power available to him to direct Edinburgh district council to use the money to clear up the backlog of housing improvement grants?
Mr. Rifkind: I appreciate the point made by my hon. Friend. In determining a very substantial increase in non-RHA allocation for housing expenditure, the Government have been conscious of the need to deal with the serious backlog of improvement grants that exists in Edinburgh and elsewhere. My hon. Friend can be assured that when individual allocations are determined for specific local authorities, we shall give consideration to ensuring that the resources provided will be used for the purposes intended.
Mr. Bruce Milan: The Secretary of State said that the figure for public expenditure total for 1987–88 would be £7,957 million. He made a comparison between that and the figure for 1986–87 which was in the original public expenditure White Paper. Is not the real comparison with the estimated outturn for 1986–87? According to the Government's autumn statement, published only about a fortnight ago, the figure for 1986–87 will be £7,810 million. That gives an increase next year on these figures of £147 million, which is less than 2 per cent. in cash terms and therefore a reduction in real terms. Those are the Government's figures. I am quoting from today's statement and from the autumn statement. Are those figures accurate?
Mr. Rifkind: The right hon. Gentleman makes the same mistake as the hon. Member for Glasgow, Garscadden (Mr. Dewar). He is not dealing with a real basis of comparison. I must repeat what I said to the hon. Member for Glasgow, Garscadden: if one wishes to compare outturn, the provision I announced today for the Scottish block is 6 per cent. higher in cash terms and 2·3 per cent. higher in real terms. If we make a comparison with the Scottish block provision announced last year, it is an 8·7 per cent. increase in cash and a 5 per cent. increase in real terms. Those are the figures and the House should be aware of them.
Mr. John Corrie: I warmly congratulate my right hon. and learned Friend on his statement. I welcome especially the extra expenditure for the National Health Service. Will it cover the refurbishing of older hospitals as well as new build? I also welcome the £750,000 for the agricultural advisory services, which will

191
be extremely welcome in agricultural areas. How does my right hon. and learned Friend see his statement helping in the rural areas?
Mr. Rifkind: I thank my hon. Friend. On capital investment in the National Health Service, we have seen the completion of 44 major new hospital developments since 1979. In future, I intend to keep capital spending at about the same cash level as this year. That should enable us to complete a further 36 major developments now under construction or in the course of being commissioned. They will provide more than 6,000 new beds. That will be a major impact of the sort that my hon. Friend has called for.
On the agricultural advisory services, my hon. Friend will be aware that there was anxiety that the transitional arrangements were placing too high a burden on them. The Government have responded to representations from the agricultural community by making available in each of the next three years an additional £750,000 for that purpose.
Mr. Norman Hogg: Does the Secretary of State appreciate that the additional allocations for housebuilding in the new towns is woefully inadequate and represents about 1,400 houses spread over five new towns in the next three years? Those figures fall far short of the figures which were supplied to the Under-Secretary of State for Scotland, the hon. Member for Galloway and Upper Nithsdale (Mr. Lang), by the Scottish Local Authorities with New Towns Forum? Will he pay attention to the people who run the new towns and act on the proper information he gets from them and not listen to his civil servants, who seem to be filling his head with nonsense?
Mr. Rifkind: The hon. Gentleman is usually an Opposition Member who is slightly more courteous and responsive when he hears good news. He will be aware that the new towns have been asking for a lift on the moratorium on general needs housebuilding. I have announced such an ending to the moratorium and I have also made provision for the new towns that will enable them to complete a proportion of the general needs housing that they require. I should have thought that the hon. Gentleman might at least have thanked me for that.
Mr. Nicholas Fairbairn: Does my right hon. and learned Friend appreciate the gratitude expressed by myself on behalf of the people of Scotland for this munificent enlargement of the budget of Scotland for the coming year? Does he also appreciate that when the hon. Member for Glasgow, Garscadden (Mr. Dewar), who never stops asking for bread, is given cake, he describes it as stone? Does he appreciate that at this time of Christmas the Labour party would describe the birth of Christ as a breach of the Licensed Inn Holders Act? Does he accept that the huge funds that he obtained, especially for agriculture and for the increase in the restoration of our buildings and heritage, will do much to enhance what the Government have already done for Scotland in that direction?
Mr. Rifkind: I am grateful to my hon. and learned Friend. The increase for the Historic Buildings Council for Scotland represents a substantial improvement of
192
approximately £2·7 million in the resources that will be available to it. We wish to make a major contribution towards ensuring that Scotland's built heritage is properly maintained and restored, as it is clearly in the interests of the Scottish community as a whole that that should be achieved.
Mr. Gordon Wilson: Surely the Secretary of State is aware that the Scottish people will not be deceived by his latest piece of creative accounting? Is it not the usual Scottish Office statement—long on figures but short on cash? Will the Secretary of State tell the House why he was beaten in Cabinet once more and was unable to get the same amount of money in broad terms as is available to the Secretaries of State for Wales and for Northern Ireland? On independence, which is the only solution for Scotland, will he say that unemployment is now so serious that the amount of money produced by the Secretary of State under the statement is insufficient to deal with the problem?
Mr. Rifkind: The hon. Gentleman must make up his mind. He knows perfectly well that expenditure per head of the Scottish population is substantially higher than expenditure in England or Wales. Yet at the same time he chooses to carp and complain at the amount that is provided. What I have announced today is not cosmetic or playing with figures. It will allow the housing associations, the Health Service and educational provision in Scotland to improve in a real and substantive form. The hon. Gentleman can comment if he likes on whether the increases are large enough or insufficiently large. What he cannot question, if he wishes to be honest to the House, is that what I have announced today represents substantial improvements in each of the areas on which I have commented.
Mr. Allan Stewart: I congratulate my right hon. and learned Friend on rejecting the desperate and despairing criticisms — the scrabbling around for criticisms — that we have heard from Opposition Members. What he said in relation to police establishments will be warmly welcomed by law-abiding citizens in Eastwood and no doubt elsewhere. Is he aware that in the past the Labour group on Strathclyde regional council has pursued a policy of keeping police establishments below authorised establishments? Would it not be an outrage if the new provision that he has announced was not used for law and order in Strathclyde?
Mr. Rifkind: Yes, indeed. I agree with my hon. Friend. If the new provision is not used for law and order in Strathclyde, the regional council, as the police authority, would have to take responsibility for it. With regard to the attitude of the Opposition on overall public expenditure, I say to my hon. Friend that if I had announced a doubling of public expenditure, the hon. Member for Glasgow, Garscadden (Mr. Dewar) would have described it as a concealed cut.
Mr. William McKelvey: I almost greeted those figures with joy. I was about to congratulate the Minister until his figures were exposed by my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) and my right hon. Friend the Member for Glasgow, Govan (Mr. Milian). However, that does not stop me from congratulating the Secretary of State for

193
Scotland on taking a step in the right direction. I congratulate him on taking some of the advice that I have been offering him during the past few years.
I understand that six local authorities will receive additional rate funds. I do not know which six, but I know that Kilmarnock and Loudoun is not among them. I wonder why, when one considers its genuine efforts to keep its expenditure to a reasonable level while at the same time maintaining necessary services. Will the Secretary of State reconsider the plight of Kilmarnock and Loudoun and perhaps add it to the six?
Mr. Rifkind: We examined carefully the representations from each of the local authorities. Naturally, if any new matters are put before us that we have not previously considered, they will be taken into account. I welcome very much the hon. Gentleman's opening comments and look forward to the day when he will be shadow Secretary of State for Scotland.
Several Hon. Members rose—
Mr. Speaker: Order. I remind the House that we have an important Scottish Bill after this statement and that many of the hon. Members who wish to speak now will also wish to take part in that debate. I ask for brief questions.
Mr. Albert McQuarrie: I congratulate my right hon. and learned Friend on the extra £750,000 that will be given to the advisory services in 1987, 1988 and 1989. It will certainly be welcomed in rural areas. Is it his intention to encourage local authorities in rural areas to give some of the extra money to the sheltered installation projects for the elderly and infirm? There are many such projects in my constituency and others which should be developed.
Finally, may I welcome my right hon. and learned Friend's statement that 126 new prison officers will be recruited next year, and about the provision of the new prison at Peterhead? Is it still his intention to ensure that work on the new Peterhead prison commences in March 1987, which would be greatly welcomed by the prison officers in my constituency?
Mr. Rifkind: We certainly hope to make maximum progress with the improvements at Peterhead. The resources that I announced today will help us to achieve that. I thank my hon. Friend for his other comments. On housing, I greatly appreciate the strong welcome that was given to our proposal by the Scottish Federation of Housing Associations, which acknowledges that the increases being given to housing associations in Scotland meet the requirements that they have identified.
Mr. Gavin Strang: I listened to what the Secretary of State said about AIDS. Does he recognise that Edinburgh has a tragic and unique problem and that within a year we shall be confronted with up to 100 cases? Will he assure the House that we shall have an early announcement of an additional allocation for Lothian health board to deal with the problem?
Mr. Rifkind: Naturally, the provision that I have announced today represents a substantial increase in the overall resources for health boards in Scotland. The individual allocations will be determined subsequently and the SHARE formula will be applied as it has been applied
194
in the past. I have no doubt that Lothian health board will receive a full proportion of the increased resources available.
Mr. Barry Henderson: Will my right hon. and learned Friend put into perspective the gripes of Labour Members? The Labour Government who claimed to care cut the hospital building programme in Scotland by 30 per cent. when they were in office. Will he accept my congratulations on introducing proposals that will benefit several areas of Scottish life, especially health, education and housing? Does he recognise that perhaps the most valuable encouragement lies in the figures which he gave for support for industry? They suggest that investment in Scottish private industry is extremely buoyant. That is where the money will come from to pay for all these good things.
Mr. Rifkind: I am grateful to my hon. Friend. During the next three years, capital expenditure in the Health Service will total about £370 million. That will enable us to maintain a full progammme of improvements.
Mr. Charles Kennedy: Will the Secretary of State give us his working estimate of how many new jobs will be created in the Scottish economy by the effects of his statement? In which areas of employment will those jobs appear?
Mr. Rifkind: It is impossible to give a precise calculation, but the substantial increases in housing and health expenditure are bound to have some implications for employment. We do not believe that expenditure by itself can solve the problems of unemployment. They will be resolved in other ways. We have tried to identify areas of the Scottish economy where improvements must be made. They can be identified in the Health Service, housing and the other areas that I mentioned. The general growth in the economy has enabled us to increase public expenditure while the overall proportion of the national income that goes towards public expenditure nevertheless continues to decline. That is a satisfactory outcome, which would not have been possible without a robust economic policy during the past few years.
Mr. Michael Forsyth: Will my right hon. and learned Friend confirm that average incomes in Scotland are the highest in the United Kingdom, with the exception of the south-east of England, and that public expenditure on roads, housing and health is 25 per cent. to 30 per cent. more per head than the United Kingdom average? Does that not nail the lie from Labour Members that the Government do not give priority to Scotland? Will he confirm that this arises from a formula? How does he think the formula for funding would be affected if we had a Scottish Assembly?
Mr. Rifkind: There is no doubt that a Scottish Assembly with additional tax-raising powers, as proposed by the Opposition, would mean that Scotland was the most heavily taxed part of the United Kingdom. That would be an enormous disincentive to industry contemplating investment in Scotland.
I agree with my hon. Friend that Scotland has received a higher proportion of public expenditure. We should realise that there are powerful arguments as to why that is appropriate. Although Scotland has only 10 per cent. of the population, it has about 40 per cent. of the land area, so the provision of roads, transport, schools, hospitals and

195
other facilities must take into account those major geographical problems as well as the island communities and sparsley populated rural communities. Scotland has substantially greater needs, but my hon. Friend is correct to say that the Government have fully identified and responded to those needs.
Mr. Tam Dalyell: Does the Secretary of State recollect the representations that he received from me, my hon. Friend the Member for Livingston (Mr. Cook), West Lothian district health council and Lothian health board on the difficult problems of phase 2 of the new general hospital at Livingston? When he refers to 36 projects, does this mean that phase 2 is on time? When he talks about the upgrading of the NHS estate, can he say whether some of those funds will be made available for the existing Bangour hospital, which is likely to be used for many years but where repairs are creating great problems?
Mr. Rifkind: I understand that we have just approved phase 2 of the project. The hon. Gentleman's other points are more detailed matters with which the health board will deal.
Mr. Eric Forth: My right hon. and learned Friend confirmed several times that public expenditure per head in Scotland is far in excess of that in England. He will also confirm that the increases announced today will widen the gap even further? He has tried to explain the reasons for it, but will he give me an undertaking that he will fight in Cabinet to bring the expenditure figures in the west midlands close to those in Scotland?
Mr. Rifkind: The increased provision that I announced today follows directly from the application of the formula that has been used for many years in determining the Scottish proportion of expenditure as compared with that of England. There will be no widening of any gap. The formula has not been changed in either direction. Some parts of the United Kingdom clearly have needs which are greater than those of other parts. It must be for my hon. Friend to argue the case for the west midlands, which I am sure he will do eloquently.
Dr. Norman A. Godman: In the light of the huge number of redundancies announced a few days ago by Scott Lithgow, will the Secretary of State sanction increased financial support to the Inverclyde initiative, which is proceeding slowly? Will he give assistance to solve the serious housing needs in Inverclyde? Will he meet Sir Simpson Stevenson, the provost of Inverclyde, in the next few days?
Mr. Rifkind: At present, I am not likely to meet Sir Simpson Stevenson. The allocations to housing authorities are yet to be determined, but the overall resources available for housing have been increased significantly. The Government strongly support the Inverclyde initiative. The increased jobs which it is seeking to identify are likely to be achieved on the basis of the programme that it has put forward. It has already identified projects that would meet about half the target number of jobs that was identified when the project began.
Mr. Michael Hirst: Does my right hon. and learned Friend agree that his announcement of extra public spending, without
196
associated extra taxation and borrowing, arises because of the success of the Government's economic policy in recent years? Will he confirm that the most welcome increase in industrial investment reflects expected higher industrial investment and that there will be no compensating adjustment in industrial support to the Scottish Development Agency and the Highlands and Islands Development Board?
Mr. Rifkind: These matters are still under consideration but I would not expect any problems of the kind to which my hon. Friend referred.
Mr. John Home Robertson: How many Scots will still be waiting for houses and how many Scots will still be out of work during the period covered by the statement? Has the Secretary of State paid any heed to the exhortation of the Moderator of the General Assembly of the Church of Scotland last week, when he called on the Government to make Scotland into one nation again?
Mr. Rifkind: The hon. Gentleman must be aware that, as his political party's whole ideology is based on a class concept of society, he should not be lecturing others about the need to achieve one nation.
Mr. Alexander Pollock: I would like to give a particular welcome to the extra funding that is being made available to the work of the Housing Corporation in Scotland. Can my right hon. and learned Friend confirm that the corporation makes a significant contribution to resolving the problem of Scotland's homeless, in many cases giving 100 per cent. funding to the work of local housing associations in my constituency? Does he agree that today's news will be of particular benefit and help to the elderly and single homeless, for whom the housing association work offers the only realistic prospect, in the foreseeable future, of rehousing?
Mr. Rifkind: I could not agree more with my hon. Friend. Ever since we came into office in 1979, the Government have given an enormous priority to the housing association movement. The figures announced by my hon. Friend the Under-Secretary of State on Friday reveal a provision for the housing association movement in Scotland of £123 million, and the federation itself has paid a glowing tribute to my hon. Friend's announcement.
Mr. George Foulkes: Will not the Secretary of State confess that he let the cat out of the bag at the end of his statement, when he claimed that on the one hand he was increasing money spent on public services and at the same time cutting public expenditure? Was not the whole of the right hon. and learned Gentleman's presentation today a conjuring trick and an illusion?
Let us test the Secretary of State. Will the urban aid cuts be restored? Will the cuts in provision to the children's panels be restored? Will the staff at Auchincruive college, currently being laid off, be given their jobs back? Will the factories that the people in Cumnock and Doon Valley wish to be built in the area actually be built? That will be the test of who is telling the truth.
Mr. Rifkind: The hon. Gentleman's grasp of economics is almost as profound as his grasp of international relations.
Mr. Foulkes: Thank you. I take that as a compliment.
Mr. Rilkind: It is precisely because the economy is growing under this Government that we are able to increase public expenditure while seeing public expenditure represent a smaller proportion of national income.
Mr. Michael Fallon rose—
Mr. Speaker: Order. I will call the hon. Member for Darlington if he was present at the beginning of the statement.
Mr. Fallon indicated dissent.

STATUTORY INSTRUMENTS, &c.
Ordered,
That the draft Welfare of Livestock (Prohibited Operations) (Amendment) Regulations 1986 be referred to a Standing Committee on Statutory Instruments, &c.—[Mr. Peter Lloyd.]

EUROPEAN COMMUNITY DOCUMENTS
Ordered,
That the draft proposal by the Commission of the European Communities for a Council Regulation on the granting of financial support to transport infrastructure projects set out in the Department of Transport's unnumbered Explanatory Memorandum of 1st December 1986 be referred to a Standing Committee on European Community Documents.—[Mr. Peter Lloyd.]

State Security
4.32 pm
Mr. D. M. Campbell-Savours: On a point of order, Mr. Speaker. I want to raise a point of order about questions, and this is a legitimate point of order.
During the course of the proceedings in New South Wales about the Wright case, Sir Robert Armstrong, in the course of giving evidence, said that there were aspects of Mr. Chapman Pincher's book that breached security. You will remember, Mr. Speaker, that there were a number of comments from either side of the House about whether it was in the national interest that those inclusions should be in the book.
During an interview this morning on Radio 4, Mr. Chapman Pincher said—
Mr. Speaker: Order. I have no connection with Radio 4. I must have a question that I can answer.
Mr. Campbell-Savours: Absolutely, Mr. Speaker. During the course of the interview, Mr. Pincher said that he had been authorised to write his book—
Mr. Speaker: Order. These are legitimate questions to ask of a Minister or of the Prime Minister, but not to ask of me. I have no knowledge of these matters. I am here to ensure that Standing Orders are complied with. I do not think that this point of order has anything to do with Standing Orders.
Mr. Campbell-Savours: May I say, Mr. Speaker, that as a Member of this House, one must be allowed in all fairness, very briefly, to develop a point of order. If you were to say that I was wrong to do so before I had even reached the point of order itself—
Mr. Speaker: Order. The hon. Member knows the rules as well as I. I can rule only on matters for which I have responsibility. I have no responsibility for the case that is going on, or for what is said on Radio 4.
Mr. Campbell-Savours: There is a question that has been answered today. I tabled a question to the Attorney-General, asking—
Mr. Speaker: Order. I am sorry, but I cannot deal with a point of order on that matter.
Mr. Tam Dalyell: Further to that point of order, Mr. Speaker.
Mr. Speaker: Order. This is a legitimate matter for debate, but it is not a legitimate matter of order. I am sorry, but I cannot hear the hon. Gentleman any further on this matter.
Mr. Campbell-Savours: On a point of order, Mr. Speaker.
Mr. Speaker: No, I am not taking it.
Mr. Campbell-Savours: On a point of order, Mr. Speaker. Surely the question is—
Mr. Speaker: Order. [Interruption.] Order.
Mr. Dalyell: On a point of order, Mr. Speaker. I want to ask for the protection of the Chair. It may be within your recollection, Mr. Speaker, that I was the late Dick Crossman's Parliamentary Private Secretary. It is a matter of great concern as to why on earth everything should be

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made public in that court other than the points referring to the actions against the late Dick Crossman and the Prime Minister whom I served. How is it—
Mr. Speaker: Order. Again, I must tell the hon. Gentleman that I have no responsibility for what is happening in that court. I am responsible only for matters of order in this House. These are perfectly legitimate points to raise in debate. There are plenty of opportunities to do that, but the matter should not be raised through me.
The Clerk will now proceed to read the Orders of the Day.
The Secretary of State for Scotland (Mr. Malcolm Rifkind)rose—
Mr. Max Madden: On a point of order, Mr. Speaker. I am sorry to pursue a matter that I raised at Prime Minister's questions concerning the case of Mr. John Lee, a reporter on the Croydon Midweek Post, who has been charged under section 2 of the Official Secrets Act 1911.
Mr. Speaker: Order. The hon. Gentleman cannot pursue that now. First, it is a continuation of Question Time and not a matter for me. Even if the gentleman in question were a constituent of mine, it would not be a matter for me.
Mr. Madden: Further to that point of order, Mr. Speaker.
Mr. Speaker: Order. No, I cannot take it. It is unfair on those waiting to take part in the debate.
Mr. Campbell-Savours: You do not know what the point of order is, Mr. Speaker.
Mr. Speaker: It is unfair to seek to continue Question Time through the Chair. There is no conceivable point of order for me on this matter. The hon. Gentleman raised the matter at Question Time and received an answer from the Lord Privy Seal. That, as far as I am concerned, is the end of it.
Mr. Madden: Further to my point of order—
Mr. Speaker: I will give the hon. Gentleman one final chance to raise a point of order for me; otherwise he must desist.
Mr. Madden: I am seeking your guidance, Mr. Speaker, and I make it clear that the Gentleman in question is not a constituent of yours. When I put my question at Prime Minister's Question Time, you interjected, Mr. Speaker, and asked whether the matter was sub judice. I am seeking your guidance now on whether the matter is sub judice. I understand that Mr. Lee has been charged, so the matter is not sub judice. However, I would appreciate it if you could make inquiries and give guidance to the House, as I am sure that many hon. Members may wish to pursue the matter by question and other means and we would appreciate your advice on whether that is permissible.
Mr. Speaker: That is hypothetical at the moment. If the matter is raised, I shall judge whether it is sub judice. [Interruption.] Mr. Rifkind.

Orders of the Day

  Abolition of Domestic Rates Etc. (Scotland) Bill
  Order for Second Reading read.
  4.39 pm
  The Secretary of State for Scotland (Mr. Malcolm Rifkind): I beg to move, That the Bill be now read a Second time.
  The Bill is a radical and reforming measure which will abolish a discredited and unpopular local tax. It is well known why the domestic rating system has become completely discredited, and I shall not go into that in detail. One can sum up by saying that the unpopularity and unacceptability of domestic rates in Scotland stems from their unfairness and unaccountability, and the arbitrary and capricious way in which they apply.
  One needs only a short time to see the force of such an argument. The unfairness of the rating sustem has existed for years, but it has become more profound as the size of rates bills has increased, and one sees the illogicality of a system of local taxation which excludes such a substantial proportion of the adult population.
  If we exclude spouses of ratepayers, who can be said to be influenced by local authorities' rates decisions, Scotland is left with an estimated three quarters of a million adults who, because they are neither the owners nor the tenants of residential property, are not liable under the system of local taxation. That figure represents some 20 per cent. of all adults in Scotland. I have yet to hear from the Opposition, or any other quarter, a logical or rational reason why such a substantial proportion of the adult population should be excluded from the sole system of local taxation in Scotland.
  We should imagine the likely reaction of the Opposition to my introducing a Bill which would set in place a tax in Scotland which excluded ab initio 20 per cent. of the adult population, not because they are unable to pay, not because they do not benefit from the services for which the tax is being raised or for any other rational or logical reason, but simply because they happen not to own or rent domestic residential property. I would be accused on all sides of introducing a system which is grossly unfair, totally unacceptable, does not relate to ability to pay and arbitrarily excludes large numbers of the adult community.
  Mr. Robert Maclennan: If that is so, why did the Government twice back rates so clearly, and why did the Secretary of State subscribe rates?
  Mr. Rifkind: Like many others, we have spent several years looking for an ideal alternative which would command the enthusiastic support of the whole population, including the hon. Gentleman. He should be aware that in the real world the question to ask is whether the existing system is tolerable. If it is not, it is necessary to replace it.
  My criticism of domestic rates—that it excludes a substantial proportion of the adult community—also applies to the alliance's preference of a local income tax. It, too, would exclude a large section of the adult community and be equally as unacceptable as the present system for that reason.

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  I have to tell the hon. Member for Glasgow, Garscadden (Mr. Dewar) in particular that if, as he doubtless will, he criticises the Government's proposals, he will have to do slightly better than he has in the past when defending his support for the existing rating system—a system which continues to exclude some 20 per cent. of the adult population on no rational or logical basis.
  Mr. Donald Dewar: For the sake of the record, will the Secretary of State tell us what proportion of the adult population in Scotland do not pay income tax?
  Mr. Rifkind: The hon. Gentleman anticipates what I was about to say next. I have demonstrated why I believe that the existing system is unfair, but there is a second consideration, and that is its profound lack of accountability with regard to the relationship between the adult population and local authorities.
  The hon. Member for Garscadden made a comparison with income tax. I shall answer that point explicitly and specifically. He is aware that the whole of the adult population pay through their taxes to meet the requirements of central Government. The whole population pay value added tax and other indirect taxes, and a substantial proportion pay income tax. There is no adult in the land who is exempt from both direct and indirect taxes, and the Government's decisions on expenditure have to be financed through the taxation system by direct and indirect taxes.
  A system of accountability exists with regard to central Government because the whole of the adult population, by direct or indirect means, or, in many cases, by both, fund the Government's expenditure requirements. With local taxation, however, because rates are the sole source of local authority taxation, a substantial proportion of the adult population make no contribution at all, so there is a profound lack of accountability.
  Mr. Willie W. Hamilton: The right hon. and learned Gentleman is contradicting himself. The people who are not paying rates now pay direct or indirect taxes which go to the local authority, so they all pay, directly or indirectly, to the local council.
  Mr. Rifkind: The hon. Gentleman has made a profound but entirely irrelevant observation. We are trying to identify whether, when a local authority reaches its decisions on expenditure, those whom it asks for a democratic mandate or the introduction of those expenditure measures are those who will fund the measures, either in part or in whole. The hon. Gentleman knows perfectly well that, while such a principle applies with regard to central Government expenditure, it does not apply with regard to a substantial proportion of the adult population and the decisions of local authorities.
  The present system is profoundly unfair, lacks accountability and applies arbitrarily and capriciously. I say that not simply because of the well documented evidence of individuals in one property who pay the same as many adults who live in a comparable property, which is a well-known anomaly and injustice which the Opposition seem happy to tolerate indefinitely, but because there are other ways in which the system is arbitrary and capricious.
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  The system is a profound disincentive to the improvement of homes. Even relatively modest improvements incur an increase in tax. It is extraordinary that whereas when a growing family needs larger accommodation the rest of the tax system provides tax advantages to help cope with the additional expenditure, the rating system imposes an additional tax burden if people move to larger accommodation.
  Mr. John Mark Taylor: Does my right hon. and learned Friend agree that there are many of us in England who would very much like his colleagues to be prevailed upon to provide for England a system similar to that which he is proposing for Scotland?
  Mr. Rifkind: I am happy to tell my hon. Friend that his wish will be granted, because my right hon. Friend the Secretary of State for the Environment and the rest of the Government are as enthusiastic about the proposals for England and Wales as they are about those for Scotland.
  Mr. Robin Squire: I am stunned into intervening by the comment of my hon. Friend the Member for Solihull (Mr. Taylor). Is my right hon. and learned Friend aware that it is precisely because these proposals are being trailed as a pilot for England and Wales that some of us are most unhappy and cannot find ourselves able to support the Bill?
  Mr. Rifkind: My hon. Friend is misinformed. As my right hon. Friend the Secretary of State for the Environment has made clear, similar legislation in respect of Wales and Scotland is to be proposed. It will not depend on the implementation of the Scottish proposals, because the Scottish proposals will come into effect only from 1989, by which time English legislation will have been put to the House for its approval.
  Mr. Jim Craigen: One feature of income tax and VAT is that they apply equally in Scotland, England and Wales. How can the Secretary of State justify introducing a half-baked scheme which does not in any way guarantee that Scottish ratepayers will be better off, and doing nothing about the non-domestic sector in Scotland, England or Wales?
  Mr. Rifkind: The hon. Gentleman has not read our proposals. That criticism is pretty rich coming from a Scottish Labour Member of Parliament who subscribes to the proposal that a Scottish Assembly should have the power to levy an additional tax on top of income tax and other taxes paid by the Scottish public.
  We have an existing system that is unfair, unaccountable, capricious and arbitrary in its application. Therefore, on that basis we are entitled to compare the existing structure with what the Government propose. I do not believe that it can seriously be doubted that a universal community charge of the kind proposed by the Government will ensure a level of accountability that is fundamental to any democratic system.
  From a very early stage we have made it clear that we have accepted as right and proper that those who are on the lowest incomes should be protected from the full effect of the community charge. The Bill makes it clear that a rebate system will apply, and that will ensure that those who are on the lowest incomes will not be expected to pay the full community charge. I shall come to the detail later in my comments, and I simply wish to put forward the basic points now.

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  The Opposition's argument that under our proposals all will pay the same is not only profoundly wrong, but entirely misleading about their effect on those who listen to such observations. The hon. Member for Garscadden knows perfectly well that all will not pay the same and that those on the lowest incomes will be protected from the full effects of the community charge. In many cases a large proportion of the community charge will not be paid by those whose incomes do not justify its payment.
  I wish to go through the details of the Bill and discuss its main proposals.
  Mr. James Wallace: The right hon. and learned Gentleman will recall that in the Green Paper, "Paying for Local Government", he said that special consideration would be given to the two island councils in my constituency with regard to the new proposals. I have gone through the Bill, and I cannot see where the special considerations are catered for. Perhaps the right hon. and learned Gentleman will say what they are and, when he goes through the Bill, give some indication of them?
  Mr. Rifkind: I understand that one of the main concerns of the island councils is the implication of a national non-domestic rate of the kind proposed as the ultimate objective of the Government. If the hon. Gentleman has studied the Bill, he will be aware that it simply proposes the indexing of the non-domestic sector. That does not in any way produce the kind of difficulty which the island councils have identified. Therefore, for the reasons that I have stated, the Bill ought to be acceptable to them.
  The first three clauses of part I provide for the abolition of domestic rates. A firm and clear timetable is set out. The process will begin on 1 April 1989, by which time all domestic subjects will have been identified in the valuation roll. The Bill provides a mechanism for sharply reducing the rate poundage to be applied to these subjects in the three years beginning on 1 April 1989, and domestic rates will have gone entirely by 1 April 1992. That, above all, is what the Bill offers the people of Scotland, and the Opposition will challenge it at their peril.
  Clause 4 provides important safeguards for non-domestic ratepayers. No longer will they be subject to sudden sharp increases in their rate bills—something which has been very damaging to business of all sizes in Scotland. Instead, the Bill provides a ceiling to be calculated each year from 1989–90 onwards, pegged to the rate of inflation, within which local authorities must set their non-domestic rate. This provision has been widely welcomed by representatives of industry and commerce in Scotland. Indeed, only yesterday the Scottish chambers of commerce, representing many thousands of small businesses, repeated their total support for the Government's proposals.
  Concern has been expressed that local authorities might take action to raise artificially the starting point for the process of determing the non-domestic ceiling as set out in clause 4. There would be no purpose in this. Under the provisions of the clause the Secretary of State would be empowered to prescribe the base rate rather than using the actual 1988–89 figure, and this would be done in circumstances where it was clear that a distortion had been made for example, through the abnormal use of balances.
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  In view of the existence of this provision, I doubt whether local authorities in Scotland will act in the manner suggested. In the long term we will be aiming to seek harmonisation of the valuation systems north and south of the border, as a preliminary to moving to a uniform business rate.
  Mr. Michael Forsyth: I wonder whether my right hon. and learned Friend can explain to the House why, given the extent of the distortions that have been caused in the commercial sector, and also for organisations such as sports clubs and other bodies, it is necessary to wait before going ahead with ensuring that the valuation methods used in Scotland broadly reflect those in England?
  Mr. Rifkind: Talks are already taking place at a professional level among those involved in valuation matters north and south of the border. It is clearly desirable to achieve progress towards a common valuation, for the reasons identified by my hon. Friend. The Government are committed to it, and I know that my hon. Friend will welcome that commitment.
  Mr. Bruce Millan: Will the uniform business rate be uniform within Scotland, or uniform within Great Britain?
  Mr. Rifkind: These matters are not covered in the Bill because, at this stage, we are simply introducing the index of non-domestic rates. They are matters that must be identified and dealt with when proposals of that kind are put before the House.
  Part II creates the new system of community charges and the associated arrangements for registration and collection. Clause 9 introduces the charges, which are to replace rates as the means of meeting local authority expenses net of other sources of income. The focal point of the new system is the personal community charge, imposed under clause 10. This is the means by which the new system will provide its essential element of accountability, since the personal community charge is to be payable by everyone aged 18 or over with their sole or main residence in each local authority area. There will be only very limited exemptions—those who are still receiving child benefit, and those who are resident in prisons or hospitals. Otherwise, it is intended that the charge should be for practical purposes a universal obligation on the adult population, although there will of course be a rebate scheme to protect those for whom payment of the full amount would be too heavy a burden. I shall return to this when I deal with the provisions of part IV.
  Clause 10 does not attempt to provide a statutory definition of what is meant by the concept of sole or main residence. Much has been heard from critics of our proposals about the difficulty of defining this. We should not lose sight of the fact that for the vast bulk of people who live in one place at one time there will be no room for any reasonable doubts. For many others, for example with second homes or pieds-a-terre, there would similarly be no doubt about what constitutes their main residence. All the examples of the difficult cases which have been quoted show that no simple rule, such as a minimum period for residence or counting the number of days in a year spent in each place, would always give the right answer. Quite

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  simply, a body of case law will have to be allowed to build up, just as has happened for electoral registration and mortgage tax relief.
  There is one case, however, where a simple rule does seem sensible. It is our intention that students should be liable for the community charge and that they should be registered throughout their course of study at their term-time address. The alternative would be that they should register and de-register several times a year, which would be an unnecessary complication.
  Mr. Malcolm Bruce: Does the Secretary of State acknowledge that the consequence of what he has just said is that students who are normally resident in England but are pursuing a course at a Scottish university will be required to pay the community charge? The consequence of that will be that Scottish universities will find it difficult to compete in attracting students, because English local authorities will not provide the difference for the community charge. As rector of Dundee university, I can say that the Scottish universities are concerned about the Bill's implications.
  Mr. Rifkind: There are a good number of students who pay rates at the moment. They are not exempt because they come from south of the border. We have made it clear that students eligible for grant will receive a flat rate increase to help them to meet their community charge liability. That will be available to all those who are eligible for grant, even where the present parental contribution means that they receive no payment. That helps to meet the point made by the hon. Gentleman.
  Clause 12 provides for a standard community charge which is payable on houses which cease to be liable for domestic rates, but where there is no registered resident paying the personal community charge. The charge will thus be payable in respect of second homes, as proposed in the Green Paper. The owners of these will thereby continue to make a contribution towards the costs of local services in the area of their second home. The standard community charge will also be payable on other empty houses, although we envisage using the powers of the clause to provide exemption for empty houses which are uninhabitable and to provide a period of grace after a house becomes empty before the charge is liable to be paid in respect of it. The amount of the charge will be determined by each local authority, as a multiplier set for the whole of its area of between one and two units of the personal community charge.
  As I have explained, the personal community charge will be as near as possible to a universal obligation on all adult residents. We have to recognise, however, that some individuals may be very mobile and that it would be unreasonable to seek to keep track of them through the registration system. The large majority of individuals in this category live in various forms of communal establishment, such as hostels. Clause 13, therefore, makes provision for a collective community charge to be imposed in such circumstances. This will be payable by the landlord, who will be empowered to recover contributions from individual residents, limited to the amount they would have been due to pay in any period had they been liable for the personal community charge. I stress that I do not envisage widespread use being made of the collective community charge in Scotland, and in the guidance to be
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  given to registration officers I intend that the importance of achieving individual registration wherever possible should he stressed.
  Mr. Michael J. Martin: Does the Secretary of State accept that we have hostels for working men and women in Glasgow and all our major cities? As I understand it, he is suggesting that the owners of those buildings will be required daily to calculate what a resident owes. Will that not mean that increased burdens will be imposed on the single adult homeless in our cities?
  Mr. Rifkind: It does not mean anything of the sort. I notice that the Scottish Council for the Single Homeless has said that it would prefer a personal community charge to a collective one. Naturally, my hon. Friends and I will wish to give detailed consideration to that point to see whether it would be administratively preferable. The objective is to ensure that the individuals concerned pay the equivalent sum irrespective of whether it is calculated on a personal basis or through a collective system. There will be no opportunity for an additional burden, such as the hon. Gentleman appears to fear.
  The rest of part II deals with procedures for registration and collection of the community charge. Clause 14 provides that the assessor should be the community charge registration officer. This will be a statutory post, with the same degree of statutory independence as the assessor enjoys at present. Clause 14 requires local authorities to provide sufficient resources to enable the task of registration to he carried out properly. The reason for giving these duties to the assessor is that they relate closely to his existing work in a number of respects. There will be an important interface between the valuation system and the provisions which govern liability for the community charge, and assessors have considerable experience of the operation of the electoral registration system, the techniques of which are in some respects similar to community charge registration, although the two systems will be entirely distinct.
  Clause 16 provides for the initial establishment of the register. The timetable we have in mind is that by early summer 1988 the registration officer should be in a position to start the first canvass. He will then prepare the register, which will come into force at a date to be prescribed in the autumn of 1988. Clause 16 provides that at that stage every individual who is registered should receive a personal notification which will include details of the contents of his entry and of his rights of appeal. We have decided to have a rolling register, kept continuously up to date, and the provisions designed to achieve this will come into force at this stage. Clause 17 provides for amendments to be made to the register and for those affected to be notified, once again with information about their rights of appeal.
  Clause 18 confers rights of appeal in relation to registration. Initially, as with electoral registration, appeals may be made to the registration officer and rules will be prescribed governing how he is to deal with these. Anyone dissatisfied with this decision can appeal to the sheriff. Detailed provisions are made to deal with cases where someone is appealing simultaneously about registration in two difference areas. I am satisfied that, overall, these provisions will ensure prompt and fair treatment for those in dispute about their registration and

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  that, as I have explained ealier, a body of case law to enable difficult questions to be decided will swiftly build up.
  Mr. Allen McKay: As the Secretary of State knows, the electoral register is 7 per cent. wrong when it is printed and the person responsible for filling in the form is the head of the household. Will the head of the household be responsible for filling in the new form? How will the Secretary of State attempt to overcome the 7 per cent. fault in the system at present?
  Mr. Rifkind: That is a perfectly fair question. The hon. Gentleman will be aware that the electoral register is filled in only once a year, so anything in it that is incorrect because of the movement of population cannot be corrected until 12 months later. It is intended that the community charge register should be a rolling register, precisely to deal with the type of problem that the hon. Gentleman has identified. I shall deal directly with the question of the individual who will be responsible for filling in the register.
  Adequate flows of information will be the key to establishing and maintaining a satisfactory register, and clauses 19 and 20 provide for this. The registration officer will have access to information about those, using other local authority services to check whether they are registered, though the Bill contains power to place certain information "off limits". I envisage that this will be used to ensure that police records and certain information in the social work domain is not used in the registration process.
  One of the most important sources of information will be canvassing, and clause 19 introduces the concept of a responsible person at each address who will be under a duty to provide information to the registration officer, either in response to general canvasses or particular inquiries. The concept of a responsible person, simply defined as the owner or tenant in the majority of cases, has been introduced in response to criticisms that the earlier concept of a "head of household" was outmoded and might prove to be undefinable. There will be a system of civil penalties, imposed by the registration officer, on responsible persons who fail to provide information or who give false information. We have adopted this approach in preference to the earlier proposal that failure to provide information or the provision of false inforation should be a criminal offence. The provisions now contained in the Bill have been generally welcomed. [HON. MEMBERS: "By whom?"] I am referring to the proposals in the clauses with which I am dealing.
  As I have explained, the community charge will be for practical purposes a universal liability, and I therefore consider it reasonable that individuals should be under an obligation to take steps to ensure that they meet that liability. Clause 20 therefore requires individuals who become liable to pay the personal or standard community charge or whose circumstances change to notify the registration officer. No specific offence is associated with failure to comply with this duty, but the clause provides that any individual who is identified as having avoided registration shall be liable to pay the amount of the charge due from the date when his residence began, together with interest. If he has avoided liability for three months or more he will also be subject to a surcharge of 30 per cent. of the amount due, subject to a minimum of £50. These
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  provisions are similar to the civil penalties associated with other forms of tax evasion, for example in relation to VAT. Overall, I am satisfied that the provisions that we now propose for setting up and maintaining the register and for enforcing registration are capable of operating satisfactorily, producing good coverage, without imposing undue burdens on individuals.
  Sir Russell Johnston: What will happen if an individual persists in non-payment?
  Mr. Rifkind: Exactly the same will happen as happens at present. We are told that there have been 25,000 applications for debt recovery of non-payment of rates in Strathclyde alone. Therefore, the non-payment of one's local tax will not be a new problem. There are well recognised debt recovery procedures for those who do not pay their community charge.
  Mr. Martin: What about l8-year-olds?
  Mr. Rifkind: Many such individuals are at present ratepayers. If they fail to pay their rates, they are subject to exactly the same debt recovery measures as will be appropriate in future for non-payment of community charge.
  Mr. Martin: This legislation will cover a great many people under the age of 21. What property will debt collectors be able to get back from them if they evade tax? Guitars? Hi-Fi? Various other pieces of equipment? In houses which I know of with teenagers, those are their only belongings.
  Mr. Rifkind: We should be clear about what we are discussing. If we are discussing an 18 or 19-year-old who is in employment—
  Mr. Martin: Most of them are out of work.
  Mr. Rifkind: If the hon. Gentleman will contain himself for a moment, I shall answer him. If he is referring to young adults who are in employment, he knows perfectly well that they should not be treated any differently from anyone else who is in employment. If he is referring to young adults who are unemployed, why should the rules that apply to a single unemployed person aged 19 be different from those that apply to a single unemployed person aged 35, 45 or 55? The hon. Gentleman knows perfectly well that a person who is unemployed may be entitled to a significant rebate, which will depend on his total income at any given moment. However, the hon. Gentleman also knows that an 18-year-old is likely to have far fewer commitments than a person several years older. If the hon. Gentleman is really concerned about such matters, he will be aware that people in that age group expect to be treated as adults in every other respect. Therefore, to suggest that they should somehow be exempted from local taxation to which the rest of the community are liable is not only profoundly illogical, but entirely meaningless.
  Mr. Archy Kirkwood: I listened carefully to the Secretary of State when he spoke about the enforcement procedures for non-payment of rates or the community charge. Does he accept that when he brings in the new 20 per cent. contribution for those who claim benefit, he will be asking local authorities to pursue much smaller sums of money? At present local authorities may find it worth while to pursue somebody

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  for non-payment of a year's annual rate, but they will not find it economic to pursue somebody through the courts for sums of less than £50.
  Mr. Rifkind: The hon. Gentleman is referring to the social security legislation which the House has already approved. It is not appropriate for me to comment further on that at present.
  Clause 21 provides that every individual will be able to inspect all the register entries relating to him at any time. Otherwise, only a list of addresses and names, like the electoral register, will be available for public inspection. That will safeguard private information—for example, whether a particular address is somebody's second home.
  Clause 23 and schedule 2 make provision for the levying and collection of community charges which in many respects will be similar to the present arrangements for rates, although the Bill envisages a pattern of 12 monthly instalments rather than 10. District councils, new town development corporations and the Scottish Special Housing Association will collect community charges from people living in houses which they let, on a similar basis to their involvement in rate collection at present. This will ensure that the administrative burden is spread and that the maximum advantage is taken of existing resources and expertise in operating the new system.
  Clause 26 makes provision for a community charge rebate scheme. Rate rebates will, of course, also be payable during the three-year transitional period.
  The community charge rebate scheme will be based on the reformed scheme of housing benefit for rates, to be introduced on 1 April 1988. Under this scheme, each individual will be required to make a minimum contribution, and, as the Green Paper made clear, the illustrations of the overall effects of such a scheme in annex J of the Green Paper were based on a minimum figure of 20 per cent. The limited sample size of the data on which the figures are based means that a fully detailed analysis such as that contained in annex J can be provided only at the Great Britain level.
  As I have made clear, however, we are confident that the Great Britain figures present an accurate pictue of the situation in Scotland, and an analysis that we have recently been able to carry out on the limited Scottish data available confirms this. For example, it is estimated that 90 per cent. of single pensioner households and 85 per cent. of other single adult households, including one-parent families, would gain in Scotland. The numbers of gainers and losers overall would be approximately equal.
  A rebate scheme in this form will provide protection for those most in need of it, including many on whom the present rating system places particularly unfair burdens. The pattern of gainers and losers which the analysis shows gives the lie to Opposition claims that it is a measure which is simply aimed at helping the rich at the expense of the poor. What we seek is a fairer deal for all sectors of society.
  I make no apology for the fact that the Bill does not contain details of the rebate scheme. It would be totally unrealistic to set out the necessary level of detail in primary legislation, and no detailed social security scheme is set out in that way. It would also be impossible, as the precise details of the scheme can only be settled once the reformed housing benefit scheme has been worked out in detail by my right hon. Friend the Secretary of State for Social Services. That is still the subject of extensive consultations with the local authority associations and others.
  Mr. Dewar: I am grateful to the Secretary of State for giving way. I understand what he said about the details, but will he confirm that it is the Government's intention that everybody should pay at least 20 per cent. of whatever form of local taxation is in being in April 1988? There have been rumours that that is being reconsidered. Will the right hon. and learned Gentleman tell us where the authority for that will appear? Will it be in the form of regulations, or will there be further primary legislation? As yet, that authority does not appear anywhere.
  Mr. Rifkind: The provision is permissible under the social security legislation which the House recently approved. Under that legislation, it will be appropriate for orders to be presented to the House to define the specific levels of rebate, either under the existing rating system or with regard to any future system of community charge. The precise figures that will apply will be announced when such an order is presented to the House. For illustrative purposes we have used the figure of 20 per cent. to suggest the likely level of minimum payment that would be expected from those liable for the community charge.
  Mr. Hugh Brown: The Secretary of State has been very generous in giving way, and I appreciate that, as I am sure does the whole House. However, he must be more specific. His example was not simply illustrative. Many people now pay no rent or rates, but the assumption is that they will pay at least 20 per cent. of the community charge. As that will be added expenditure for them, the Secretary of State must clarify his point.
  Mr. Rifkind: The hon. Gentleman will appreciate that the provision in the Social Security Act 1986 will come into effect in 1988 under the existing rating system in Scotland and in England and Wales. Therefore, the matter is neither directly nor indirectly dependent on the legislation that I am introducing to the House. It will come into effect in Scotland while the rating system applies 100 per cent. for existing ratepayers. Questions on that are perfectly understandable, but they do not relate to the Bill that I am introducing. Therefore, I must ask the hon. Gentleman to raise his perfectly legitimate point in a different forum.
  We intend—and we have made it clear—to introduce a rebate system comparable to that which is available under the domestic rating structure. Precise details of that will be announced at the appropriate time.
  Let me deal now with the water and sewerage provisions of the Bill—clause 27 and schedule 5. I know that the House has been awaiting them for some time. We shall discuss them thoroughly at the appropriate stage of the Bill, and I shall not take up the time of the House now in going through them in detail. However, there are three points that I would emphasise.
  First, we have aimed not to change the present system of charging except where that is necessary to meet the principles of the Bill. As at present, domestic consumers and occupiers of industrial and commercial premises who do not get their water by meter will pay an identifiable charge in respect of their water supply. Therefore, the difference is that, whereas at present the charge relates only to the premises—so that, no matter how many people live in a house, the water rate is the same—in future there will be a community water charge payable by every adult living in a house connected to a public water supply.
  Mr. Dewar: I wish to raise a matter of detail, but one that is also of general interest. Traditionally, in Scotland, the water rate has been part of the overall rate poundage in terms of payment. Why is there to be a separate water community charge?
  Mr. Rifkind: I advise the hon. Gentleman to look at his rates demand when he gets home. If he does so, he will see that the sum that he pays for water is specifically identified. We propose no substantive change in that arrangement, other than what is essential as a result of the community charge principle.
  Mr. Nicholas Fairbairn: I do not know what is happening in Garscadden, but I can assure my right hon. and learned Friend that in Fife one is charged for water on a separate bill, even if one has one's own supply, which is thoroughly unfair. What my right hon. and learned Friend is introducing in the community charge is the standard charge that we pay for telephones, cars, television and everything else, and that is fair.
  Mr. Rifkind: I thank my hon. and learned Friend. Under our new proposals he may consume as much water as he chooses without his water charge increasing, so in that respect it is not exactly comparable to electricity and telephone charges. Our proposals will be a better reflection of water use than the present system, because, clearly a household which has several persons living in it is likely to consume far more water than one with a single person living in it. That is a valid proposition. At present prices, it is estimated that the community charge will average about £17 a year for each qualifying adult.
  A second way in which the new system of charges will be fairer than that which applies at present is in the sewerage charges for non-domestic premises. This will be payable only for those premises which are connected to public sewers, whereas at present non-domestic ratepayers are liable to pay this charge whether or not they are connected.
  Thirdly, we are taking steps to require local authorities to charge fair rates to all categories of those who use water and sewerage services and to make it clear to all those paying for the services how the rates are arrived at.
  This legislation is, of course, primarily about the local taxpayers' contribution to local authority expenditure, but under the new arrangements the Government will continue to pay their share of the cost of local services, from national tax revenues. The arrangements for paying a revenue support grant, set out in schedule 4, are similar to, but simpler than, the present arrangements for distributing rate support grant. The greater accountability that will arise from the introduction of community charges allows us to dispense with grant penalties, and I am sure that all hon. Members will welcome this. It is, however, essential that we continue to protect the community charge payer from the vagaries of the few extreme and irresponsible councils, and we are therefore proposing a reserve power to secure reductions in personal community charge where that may be necessary. The detail of that is in schedule 3.
  I have dealt with the details of the Bill at some length—
  Mr. Milian: The right hon. and learned Gentleman has said nothing about the safety net arrangement.
  Mr. Rifkind: I am happy to confirm that we propose a safety net arrangement to ensure that the system of
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  revenue support grant that will be paid to the local authorities will not place undue burdens upon those local authorities with regard to the level of community charge that they will have to impose upon their local community. It is desirable to ensure a degree of stability and predictability for local authorities, and that is why there will be the safety net arrangements.
  Hon. Members who wish a fuller explanation of any particular points in the Bill may find helpful the commentary that I have made available in the Library.
  I have described the Bill and the Government's proposals for the abolition of domestic rates at some length. I think that the hon. Member for Garscadden will concede that, far from the Bill being the framework measure which he prophesied some weeks ago, it is a substantial piece of legislation which illustrates the enormous amount of work and careful thought that has gone into the Government's basic proposals.
  I hope that the hon. Gentleman will have some opportunity today to give us the Opposition's views on the necessary improvements that they would wish to make in the present system. We know that at the moment the Labour party is the only political party in Scotland which wishes to keep domestic rates. However, it has made it clear in the past that it does not believe that the present domestic rating system is perfect.
  The hon. Gentleman has said that he wishes to see improvements. Councillor Fagan, the president of the Convention of Scottish Local Authorities, has said that he wishes to see improvements, as do other Labour local authorities, but there has been complete silence over exactly what improvements they wish to propose. We have spent the last year preparing detailed proposals which are now put forward in legislative form so that the Scottish public are aware of the alternative to domestic rates that the Government propose. There have been no proposals from the Labour party on what it would do about the present system.
  I should, perhaps, make one qualification. The hon. Member for Garscadden has put forward one change to the rating system, and that is to impose, for the first time, a rating on agricultural land and holdings. That appears to be the sole act of creativity that the past few months have produced in the thinking of the Labour party. He must know perfectly well that that is simply not good enough. If he wants the public to believe that the Labour party accepts that domestic rates need to be changed, the public will expect him today, from the Dispatch Box, to explain and to expand on the reforms which the Labour party, if it ever had the opportunity, would wish to implement. I await with interest, but without any great expectation, what the hon. Gentleman has to say.
  The Government have put forward proposals which will at long last abolish a descredited system and replace it with a system which is not only fairer, more accountable, less capricious and arbitrary than domestic rates, but a system which will ensure that the public in Scotland have a system of local finance which will be suitable for the years to come.
  Mr. Deputy Speaker (Sir Paul Dean): I should inform the House that Mr. Speaker has not selected the amendment in the name of the leader of the Liberal party.
  5.25 pm
  Mr. Donald Dewar: The Government are bravely living down their reputation for

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  consistency and principle. These days they are showing a remarkable flexibility. The new pragmatism is rampant. They will jump through almost any hoop if they have to.
  We know that the Conservative party has been flirting with reform of the rating system since the early 1970s, but in recent years it set in hand, properly and fairly, an inquiry and an investigation which came, as the House knows, to a measured and considered conclusion that was announced in a White Paper in August 1983.
  The House also knows that that White Paper specifically dismissed the preferred solution that we are now being asked to consider. It came to the conclusion that it wanted to defend the rating system which is now so reviled. Therefore, it is a remarkable conversion—almost a revolution—that we find ourselves now confronted with that rejected proposal in the form of the Bill that we are discussing. That conversion has nothing to do with social justice or democracy and it has everything to do with imagined political advantage.
  What is being offered is a poll-tax—so much per skull across the board. According to the Green Paper, 52 per cent. of Scottish households will lose and 48 per cent. gain. I stress the word "households" because a Scottish Office press release, with which the Secretary of State will he familiar, said:
  "How many people will be liable to pay the community charge? About 3·85 million adults aged 18 and over will be liable to pay the charge. What percentage would gain and what percentage would lose? The Green Paper indicated that in broad terms about half would be better off."
  It actually said that 52 per cent. of households would be worse off, but I suppose that that might be defended as about half, although that is a rather odd way of putting it. However, as almost all—a large proportion—of those households will contain an above-average number of adults, I suspect that a much larger percentage of the electorate will be faced with a debit balance. That is a hard and unpalatable fact with which some of the enthusiasts behind the Secretary of State will have to live in the months and years that lie ahead.
  The essence of our case is equity and who are the losers and who are the gainers. It is brutally clear that the areas that will lose are the deprived housing schemes on the limits of cities and the battered inner-city areas—the areas that are already disadvantaged. This is essentially regressive legislation—regressive even when it is compared with the present rating system. The reason for that is self-evident. There is, I concede, a rough and imperfect correlation between what is paid under the rates and one's personal income. By and large, wealthy people live in up-market housing with high rateable values and pay more.
  I see the hon. Member for Renfrew, West and Inverclyde (Mrs. McCurley) expressing her dissent. Let me give her a quotation which she may find of interest, because it puts my case fairly and succinctly. It says:
  "A poll tax is assumed to be levied on all adults in the household irrespective of income … the lower-income households would pay a higer proportion of their income in tax than the higher-income households. Moreover, since domestic rate payments tend to increase with income—though less than proportionately—replacing rates by a poll tax will mean that higher-income households gain more or lose less … than the lower-income households of the same type."
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  That is exactly what I have been saying, and it is a quotation from the Government's Green Paper on the alternatives to the rating system. On that occasion they were right, and now they are wrong.
  Mr. Michael Forsyth: I refer the hon. Gentleman to figure 11 in the Green Paper, which shows clearly that households on net incomes of less than £75 a week will pay a smaller proportion of their income in community charge than in rates.
  Mr. Dewar: I am delighted to deal with that point because it illustrates the hypocrisy of the exercise. For a start, we have been unable to discover how many households have such a low household income. I suspect that it is comparatively few. Moreover, under the present rating system, almost all of them would be paying nothing. That figure is based on the assumption that for many, particularly single people, 20 per cent. of community charge is less than 20 per cent. of the rates. However, if it were not for the so-called Fowler review and the recent Social Security Act, those people would be in a neutral state because they would be paying nothing. That illustrates the sham of the statistics produced in the Green Paper.
  Let me develop the point about equity and who will lose. The hon. Member for Renfrew, West and Inverclyde is a Glaswegian by birth and is familiar with the city. If she takes the Glasgow wards and, using the Government's figures, examines the present rates income from the areas, and considers what would result from a community charge on a like-with-like basis, she will discover that there will be enormous shifts between wards within the city of Glasgow.
  Let me take the constituency of my hon. Friend the Member for Glasgow, Cathcart (Mr. Maxton). Using the Government's figures, the take for Castlemilk under the community charge will increase by 25 per cent. The take for Newlands, down the road, will fall by 24 per cent. Who will tell me that that has anything to do with equity or justice? The take for Kelvindale, where I live, will drop by 29 per cent. and for Drumchapel, a deprived scheme in my constituency, by 25 per cent. Anderston, a battered inner-city area, will pay 48 per cent. more. These figures show the indefensible shape of things to come.
  The Parliamentary Under-Secretary of State for Scotland (Mr. Michael Ancram): What about rebates?
  Mr. Dewar: The figures may be altered to some extent by the rebate situation.
  Mr. Rifkind rose—
  Mr. Dewar: The Secretary of State would be in a better position if he had produced the rebate figures, which would have allowed us to make the calculations. We would then have listened to him with more patience.
  Mr. Rifkind: The hon. Gentleman is suggesting—it was clear from his remarks—that additional hardship would be imposed on certain areas of his constituency, or elsewhere in Glasgow, to the benefit of other areas. He did not point out, nor admit until it was dragged out of him, that he was not taking account of rebates and the fact that people living in these areas, if they are as deprived as the hon. Gentleman has suggested, will be unlikely to pay the community charge. The rebate will not be paid by them and the amount of revenue raised from these areas will be infinitely less than the hon. Gentleman has suggested.
  Mr. Dewar: The proof of the pudding, as the Secretary of State will recognise, will come if we get to the point where, unfortunately, the system is introduced. I understand, and am advised by people more expert in municipal finance than I am, that such shifts will appear.
  Let me give another example, one that is perhaps more limited but might be of interest to the Secretary of State. I admit that it is extreme to make the point, but my calculations show that in the West Granton area of Pilton, with the switch to community charge, each household will be paying about £105 a year more and in Spylow Park, Colinton, £1,052 less. That is the key to this matter.
  I am sure that the Secretary of State will not suggest and maintain, because I believe that he has some honesty about these matters, that the effect of the introduction of the community charge will be a substantial shift between areas. He may argue about the scale but he will not admit that there will be a substantial shift of the kind that I have described. If he looks at the areas in Edinburgh which will do badly out of the shift—wards such as Haymarket, Harbour, Lorne, Dalry or St. Giles—he will find that there is an extraordinary correlation between the level of unemployment and the areas that will do badly in the switch to the poll tax. The case is there for anybody to see. What I am saying fairly and honestly represents the shifts with which we shall be faced.
  Mr. Rifkind: Will the hon. Gentleman acknowledge that the Government's illustrations in their Green Paper are based on illustrations taking account of the housing benefit system? If he wishes to make alternative comparisons, he should also take into account the implications if rebates are paid on a basis comparable to that described by the Green Paper. He knows that he has not done that, but sought simply to make an emotional contribution.
  Mr. Dewar: I asked some parliamentary questions intended to obtain these figures, but the Secretary of State said that he could not answer them. He is not making a convincing charge. There is no doubt that there will be the shift that I have described. The Secretary of State is not able to, and will not, deny that. This is a charter for prosperous suburbia and the only end product will be a thin and ragged cheer from the beleaguered Scottish Conservative party.
  Mr. Barry Henderson: Is the hon. Gentleman not arguing against the existing system of domestic rates? He is postulating the idea of two people living in the same kind of house in different parts of the city who, although they have substantially different means, pay substantially different amounts for identical services, so that the better off pays less and the poorer pays more.
  Mr. Dewar: I recognise that point and I recognise that there is a case which no doubt the hon. Gentleman will deploy. As I understand it, the defence for this measure is that certain categories of people will do well, particularly single people of modest means living alone. It is pointed out that it tackles the problem of multiple incomes next door to somebody with a single salary coming into the household. I recognise that that case can be made, but if we are worried about the person on low income who is suffering, we must examine the adequacy of our rebate system. Surely the hon. Gentleman understands that one
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  should not say that there are problems about the existing system and then introduce another system that creates inequalities and injustices on a far wider scale. There is no doubt about that.
  The other day, I got a letter from someone in the city of Perth living in a basement flat with low rateable value, because of low amenity. Two large flats above him, each occupied by a single person, have high rateable values because of the value of the house and its amenity. Suddenly, as a result of the community charge, the person in the basement flat will be paying twice as much. The equity of that is not clear to that individual, and I can understand his feelings.
  This is not just an inner-city problem. I am interested in rural areas as well, as the Secretary of State knows. There is no doubt, as COSLA has pointed out, that there is little point in paying the same community charge in Tiree as in Oban, or the same regional community charge in Mull as in Bearsden. When I put this to the Under-Secretary in a radio programme the other day, he said that it costs more to deliver services in remote areas, so that was fair. I found that answer a litle lacking in sympathy.
  It seems that the already disadvantaged will be further oppressed and, if I can use the terminology of popular capitalism, areas which already have cash flow problems will be asked to bear a greater burden. I shall give the House an example. I shall name my source immediately. The quotation comes from the Child Poverty Action Group, but it makes the case from an impartial source. It asks the Government to reconsider their proposals which
  "owe more to a perceived need to be seen to be doing something about rates than to clarity of vision. We find it difficult to believe that a proposal which so blatantly favours the rich over the poor can be given serious consideration in a Green Paper which purports to be concerned about fairness."
  The other major point that has been made by the Secretary of State is accountability. That features prominently in the case for the defence.
  Mr. Rifkind: Does the hon. Gentleman mean prosecution?
  Mr. Dewar: No, in the right hon. and learned Gentleman's case it features in the defence of the measure.
  I have been reading what has been said by Conservative Members up and down the country. Many of the speeches pay tribute to their loyal endeavour but not necessarily to their understanding of what has been happening. A quotation from the hon. Member for Cunninghame, North (Mr. Corrie) appeared in the Ardrossan and Saltcoats Herald of Friday 5 December. He gave us a succinct and no doubt well-thought-out defence of the community charge. He said, all in one sentence:
  "On the domestic front the community charge will not only give councillors the right to determine their own levels of spending, it will remove the unfairness and illogicality of the present system of demand whilst injecting into the democratic process a real degree of interest come district and regional election time with financial accountability becoming a live issue."
  It is deathless prose. All I can say is that if the hon. Member for Cunninghame, North, believes that the measure gives councillors the right to determine their own levels of spending, he has not read schedule 3 where the whole excessive and unreasonable expenditure provision is imported by the back door.
  The strengthening of local democracy is a nonsense of an argument. What will happen—I am sure that the

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  House appreciates this—is that the buoyancy in local revenue will be confined entirely to the domestic sector. Perhaps 20 per cent. will be subject to local control, but all the rest will be frozen by central Government or will be controlled directly by central Government in terms of the grant system. It does not seem that reducing local initiative to 20 per cent. of the spend is a great leap forward for local control and local democracy.
  I shall not spend a lot of time on this, but I recognise the attraction of the freeze for the non-domestic ratepayer in terms of industrial problems. However, I must say to the Secretary of State that there will be much debate in Committee about the indicator he has chosen for the retail price index. We shall want to know a great deal more about what is in store in terms of the revaluation in 1990.
  There is no doubt that if the entire Government package is implemented, not just in this Bill but ultimately with the standard national business rate distributed per capita, it will be an enormous blow to local democracy. I assume that the Secretary of State has read the memorandum of the Confederation of British Industry. It says that the uniform business rate
  "will remove the element of local accountability inherent in the present system."
  The CBI is right. It will be the death of local accountability and local democracy, although that is something the Secretary of State is praying in aid in defence of this measure.
  What is even more worrying is that if only the domestic sector will bear the burden of any increased expenditure, clearly one is building in an escalator that will have serious consequences. Let us assume that in future years the revenue support grant is cut and that we get, for example, a settlement comparable to the teachers' settlement—there will be other settlements in other years. A large proportion of that has to be raised by an increase in local income. All of that will now fall upon the people paying the community charge, the old domestic ratepaying sector. It will not be spread across the board, because all the rest is frozen or controlled by central Government. The result is that, on COSLA's figures, if one has to find another 6 per cent. of income, there will be an 18 per cent. increase in the community charge. It is an extraordinary argument to say that one is doing that to defend and protect the equivalent of the ratepayer, that is the person in the domestic sector, when one is building that sort of escalator into the system.
  Mr. Steve Norris: Does the hon. Gentleman agree that one of the great virtues of the system will be that if a Government choose to reduce the proportion of total expenditure provided by grant, it will be perfectly obvious to all that that is what has been done? Local authorities will not be able to hide behind a cloud of obfuscation, spending money as if it is going out of fashion and then blaming the Government's complex grant system for the conclusion. Surely, that is the effect of the proposals.
  Mr. Dewar: The hon. Gentleman may be talking about confusion and difficulties in England. In Scotland most people know—this explains the local election results over the past year or two—where the fault lies in that respect.
  Another remarkable argument—I paraphrase but I think that I do it fairly—is that the Secretary of State is saying that if one does not contribute to local taxation one
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  should not be allowed to vote in local elections, or, alternatively—I put the best complexion on it from his point of view—if one does not contribute in that way one cannot be trusted to exercise a vote responsibly. That means that one cannot be trusted to vote in the way the Secretary of State would like. That is extraordinary.
  Admittedly, the Secretary of State has a problem. He has to find some explanation for the fact that of all the district councils in Scotland, the Tories now control only one, Eastwood. No doubt that has driven him to this rather cynical assumption about family life in Scotland. Apparently he assumes that a wife has no concern about how the rates are paid. Presumably adult children do not contribute under the present system in the normal Scottish household. I would have thought that they did. The argument advanced by the Secretary of State is totally undermined by the fact that in his Green Paper he assumes that husband and wife spouses will be jointly and severally liable for the payment of their respective poll taxes.
  Mr. Rilkind: Leaving spouses aside, I think that the House is entitled to know the Labour party's position. Does it defend the fact and wish to continue the system under which 20 per cent. of adults in Scotland make no contribution through local tax finance to the cost of local government? Will the hon. Gentleman clarify that?
  Mr. Willie W. Hamilton: They all contribute.
  Mr. Dewar: I agree with my hon. Friend the Member for Fife, Central (Mr. Hamilton) that all those people through taxation, direct or indirect, are making a contribution. I am told that only 50 per cent. of people do not pay income tax in this country and that does not raise the ire or fluster the calm of the Secretary of State. The truth, and he knows it, is that at the back of this whole thing there is a rather unpleasant political aim to build into the system an incentive for people to vote for low-spending authorities. As I said earlier, local government results and the opinion polls have shown that people are not interested in that sort of local government parsimony.
  Mr. Fairbairn rose—
  Mr. Dewar: I shall not give way at the moment.
  There is anger in Scotland about that. I know that there is anger on Conservative Benches when we refer to a poll tax. It is perfectly fair to refer to it as a poll tax because a poll tax is so much per head. Anyone who has a respect for the English language knows that that is fair.
  Another point involved in the argument of accountability is that the Green Paper and operational documents all assume, as the House knows, that one way in which we shall decide whether the register for community charge purposes is accurate is by cross-referencing and crosschecking with the electoral register. If people wish to avoid paying their poll tax, clearly there is an incentive not to register their vote. It may be an indirect link, but it is one that the House should not take lightly.
  I accept that many right hon. and hon. Members want to speak in the debate, but I must spend some time on the administrative problems, because they can soberly be described as enormous.
  Mr. Fairbairn: The hon. Gentleman suggests that this is a system in which one can vote only for a low-spending authority. Surely the abominable nature of the present

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  system is that people can vote for a high-spending authority without having to contribute to that high expenditure.
  Mr. Dewar: The hon. Gentleman is overstating what I said. I said that there was a political attempt to build in an incentive to support low-spending policies. I do not think that that will work because I know what has happened in local elections in almost every part of Scotland because I have looked at the poll evidence. I take the rather simple view that the system should be neutral in that respect and that people should vote acording to their principles and what they want. The Government are looking for political advantage from these reforms.
  Enormous administrative problems will arise. The Scottish Consumers Council has issued a carefully researched substantial paper which has been on the desk of the Secretary of State for some time. It states:
  "The problems of the community charge proposals are insuperable. The Government should think again."
  The right hon. and learned Gentleman should heed that short comment.
  We are told that there is to be a register—a bargain at an estimated cost of £9 million. But people move about. As we know from parliamentary answers, the turnover of names on an electoral register can be as high as 20 or 25 per cent. a year. There will be formidable problems in tracing people, in apportioning poll tax liability, perhaps between different electoral areas, and in collecting the tax. I know that mobility is common because there is a great deal of passage between Garscadden and Clydebank. A young man may live at Drumchapel in Garscadden, move to Clydebank to live with grandparents and move back to Garscadden, all within a year. The 12 monthly payments—they will all be equal, except for the first—will have to be apportioned. A person may have to be pursued in more than one electoral area if he has not paid. It is a nightmare. The problems of enforcement will be baffling.
  Another Scottish Office press notice on the enforcement of payments and penalties seems to fall into the head-in-the-sand school of politics. It states:
  "In the relatively rare cases where arrears are built up the tried and tested procedures for rates recovery will be adapted for community charge recovery".
  I do not know what that means but no doubt we shall find out in Committee. The Society of Messengers-at-Arms and Sheriff Officers reckons that in Strathclyde alone, excluding the sheriffdom of Glasgow and Strathkelvin, 25,000 summary warrants were issued for arrears of rates in one rating year. It is not a new problem. The sheriffs' society believes—this is only its professional judgment, but it must be taken seriously—that the enormous increase in the number of people coming into the net with the introduction of the community charge and the possible increase in the number of people at the bottom end of the income scale who may find it difficult to meet their liabilities may result in a fourfold minimum increase in the number of warrants issued. We should think about that. In the society's view, the system is unworkable, despite the buttressing mass of civil penalties and surcharges which is being introduced.
  I shall cite some examples, to which, no doubt, we shall return in Committee. The Society of Messengers-at-Arms and Sheriff Officers says that it will not have a right to enter premises when the debtor is not the householder. To
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  recover from people who are not householders, the society believes that it must have that right. Will it get that right from the Government? The society says that there are no means of identifying the goods of a young, perhaps single, man living in his father's house. What will be the means of identifying those goods so that they can be pinded and sold? The society says that it will be impossible to arrest wages because it will not be possible to trace the pay packet position of young single men living perhaps in their parents' house. It suggests seriously that the register should contain the national insurance number of everyone who is liable to pay the community charge so that it can trace where people work in order to arrest their wages and recover arrears. I presume that that is not a reasonable proposition in the minds of Ministers. If it is not, they must answer the practical question: how will the system work? It is no exaggeration to say that the system is a nightmare. Cool assessment suggests that it is inadequate and impractical. The answer is simple—we would not introduce a system with so many obvious faults.
  The Solicitor-General for Scotland (Mr. Peter Fraser): What would the Labour party do?
  Mr. Dewar: We shall come to that.
  What about the problem of rebates? The region will collect and calculate the rebate on the community charge. The district will collect and calculate the rebate on the rent. During the transitional period, another system will be running in tandem. This is a recipe for an appalling problem. I have been told that, once the Bill is implemented, there will be no fewer than 13 different charges.
  There will be chaos in respect of students and communal establishments. The Scottish Assessors Association—not a body that we would normally pray in aid—said, in respect of the arrangements for communal establishments, that it has
  "a multitude of problems and in our opinion major, continuing and difficult litigation seems inevitable."
  I see no point in introducing a system that inevitably brings in its wake continuing and difficult litigation. I am in favour of people paying any form of taxation that they are due and liable to pay, and I do not want any mistake to be made about that. But in a recent radio programme the Under-Secretary of State advanced the view that there was no need to worry because we were a law-abiding race. That is an optimistic assumption which is illustrated by our experience of vehicle excise licences and television licences which provides depressing precedents.
  Our fears are widely shared. The Society of Messengers-at-Arms and Sheriff Officers stated:
  "The net effect of this unenforceability against a large section of the population will produce the opposite effect envisaged by the Scottish Law Commission in their Report on Diligence … as it becomes common knowledge that more and more defaulters are not being forced to pay their Community Charge, greater numbers will try to avoid payment."
  The Scottish Consumers Council said:
  "In the absence of effective methods of collection and enforcement, default will he widespread."
  If that is not impartial, perhaps the Secretary of State will listen to the Law Society of Scotland, which has commented not specifically on the principle of the Bill but on the operational issues raised by the right hon. and learned Gentleman. Its working party concluded:
  "The Working Party therefore doubts whether the proposed system meets the 3 main tests which, according to … the Green Paper, a local tax should satisfy—i.e.

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  technical adequacy, fairness and the encouragement of local democratic accountability."
  The working party went on to say that the proposed system did not meet those tests. That is the Law Society's view, having looked at the problems that will be thrown up.
  I recognise the fact that the Secretary of State has said in the past that we are devoted to the rating system, this led to what he is pleased to call a "corrupt" system, largely because of political advantage. That is a ludicrous charge, and I think that the right hon. and learned Gentleman knows it. It is a desperate counter-attack to divert attention from his difficulties and, given those difficulties, I am not surprised. He has said consistently that the rating system is in trouble, but he has not drawn attention to the fact that it is in trouble because it is bearing a burden for which it was never designed and because the central Government contribution has been ruthlessly cut as the Treasury has shifted responsibility for funding local services to the ratepayer. If we could do something about that, we would be in a much better position.
  This debate is on the Government's specific proposals. The Secretary of State has not convinced me that there is a case for abandoning a system, which in August 1983 his predecessor—the right hon. and learned Gentleman as a member of the Government assented to it—described as basically sound, for something infinitely worse. The attack on the poll tax is well founded and formidable and has been mounted on almost every front. Local government north and south of the border has united on this issue. Even the Association of District Councils which, as the Secretary of State knows, is under Tory control, has asked for this measure to be stopped so that there can be further consideration of the options.
  Mr. Ancram: This is an important point. I understand that the right hon. Gentleman is saying that there is nothing wrong with the rating system at the moment and that the Labour party would not tamper with it. In that case, I put this point to him. On 17 November, the hon. Member for Copeland (Dr. Cunningham) said:
  "we shall certainly reform the rating system, but we shall keep a property-based tax."
  Will the hon. Gentleman explain precisely what is meant by that totally incomprehensible statement?
  Mr. Dewar: It is totally comprehensible. The hon. Gentleman's comment does not prove very much. I repeat that in 1983 the Government described the rating system, which they now revile, as basically sound. To abandon that system and in its place to put the nightmarish capacity for chaos that is built into the Government's plans would be imprudent and not in the public interest.
  Of course the Secretary of State is right that all taxes are unpopular, but the Government are encouraging criticism of the rating system for very obvious and cynical reasons. They are banking on the fact that nobody will appreciate the consequences of their proposals. They are telling just half the story. What is even more disreputable is that they are backing up just half the story, the story of abolition, by half-truths, which they know are half-truths. Their tactics are legislation without implementation.
  It is a curious and unique experiment. No other country in western Europe or anywhere else has introduced a poll tax. They know that it is inherently weak and that it breeds injustice and inequality. Therefore, they have all rejected
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  it. Only the Secretary of State who, to be fair, inherited it from his predecessor believes that it is necessary to defend the poll tax.
  Mr. Rifkind: I must repeat to the hon. Gentleman the question that my hon. Friend the Under-Secretary of State for Scotland asked him, because he has not answered it. His hon. Friend the Member for Copeland (Dr. Cunningham) said:
  "we shall certainly reform the rating system."—[Official Report, 17 November 1986; Vol. 105, c. 350.]
  Will the hon. Gentleman explain what the Labour party proposes to do about reforming the rating system?
  Mr. Dewar: The right hon. and learned Gentleman is, understandably, not anxious to discuss his own Bill. However, if he is interested, we shall do something about the shift in resources to which I have already referred. Furthermore, suggestions about capital values and a number of other matters are being canvassed. When the Labour party forms the next Government after the general election, no doubt the right hon. and learned Gentleman and his motley crew will have an opportunity, from these Benches, of commenting on them.
  We are being asked to introduce a local taxation system which, according to the explanatory and financial memorandum, will cost between £17 million and £22 million a year in additional administrative costs. For what purpose are we being asked to bear those additional administrative costs? We are being asked to bear them because the Government are determined to lumber us with and penalise us by a scheme that is without friends or supporters in Scotland. It is misconceived in principle, regressive in impact and unworkable in practice. None of us wants anything to do with it.
  6.2 pm
  Mr. Alex Fletcher: I congratulate my right hon. and learned Friend the Secretary of State upon introducing the Bill. I congratulate also my hon. Friend the Member for Edinburgh, South (Mr. Ancram) who worked hard during the last few months on preparing this legislation. I hope, Mr. Deputy Speaker, that my hon. Friend the Member for Stirling (Mr. Forsyth) will catch your eye, because he campaigned effectively earlier this year for a tax of this kind.
  My right hon. and learned Friend made a clear and unanswerable case for the Bill. I say "unanswerable", having listened to the speech of the hon. Member for Glasgow, Garscadden (Mr. Dewar). I mean in no way to insult the hon. Gentleman. If anybody could have found an answer to my right hon. and learned Friend's proposition, I believe that the hon. Member for Garscadden would have found it. One of his difficulties is that he is not sure whether he is speaking for the prosecution or for the defence. However, he is very much on the defensive about the Scottish rating system.
  I start from the premise that there is no such thing as a good tax or an absolutely fair tax. This Bill, which provides for a community charge, is no exception to that premise. However, there is such a thing as a bad tax—indeed, a penal tax, as anyone who pays domestic rates in Scotland knows. That is how most people would describe the present Scottish domestic rating system. Only the Labour party believes that a tax on people's homes—which is increased when they improve the quality of their

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  homes by using their savings, or by borrowing, or by do-it-yourself—should not be abolished. However, a Labour Government would have maintained the ancient tax on windows and then would have complained bitterly about the number of unemployed window cleaners.
  The Labour party clings to the view that domestic rates redistribute wealth and that the rich should be soaked to help the poor. If that is so, the rich in my constituency are pensioners on fixed incomes, teachers, tradesmen, bank and insurance clerks, secretaries and civil servants. Those are the people whom I represent in Edinburgh, Central. Those are the people who have to pay the bills for the increased spending by Lothian regional council and Edinburgh district council.
  That applies also to the Labour party's plans for a Scottish Assembly with so-called full economic powers. How I welcome that commitment in the Labour party's election programme. As has already been said, one of the apparent attractions of the proposed Assembly is the power to adjust the rate of income tax in Scotland. That is bound to lead to people dancing with joy in the streets of Edinburgh, Glasgow and elsewhere. But we note the word "adjust". It means that the Labour party's Assembly would do to income tax what Labour local authorities do to the rates. It would keep putting them up. What an exciting prospect for Scotland after the next general election. Clearly, the Labour party's policy is to make Scotland the highest rated and the highest taxed country in Europe. That is its programme and its policy after the next general election. With opposition of that kind, I relish the prospect of the next general election campaign.
  The Labour party has made it known that my constituency, Edinburgh, Central, is one of the seats that they will target at the next election. The man on the Tynecastle omnibus could be excused for believing that if the Labour party is successful this will be good for Edinburgh. However, the only good thing about being the holder of a targeted seat is that I and my constituents in both the Old Town and the New Town, and in places like Shandon, Tollcross and Stockbridge, will have the benefit of Labour activists from all over Scotland telling us why we should pay higher rates and taxes than ever before—and why we should pay more for the 4,500 empty council houses and the half-empty schools in Edinburgh.
  The Liberal party—very much depleted at present on the Liberal Bench—has as big a problem with this Bill as it has with its defence policy. The more it studies the problem, the more it realises that the Government have got it about right. It cannot possibly justify the bureaucracy of a local taxation system to collect just 13 per cent. of local authority income, the contribution made by domestic rates. The best advice that I can give the Liberal and the Social Democratic parties is that they should hold another special conference—this time, I suggest, at the East Kilbride centre 1 tax office, where they would learn about just the kind of bureaucracy that would be needed if they were ever given the opportunity to implement their local income tax plans in Scotland.
  I listened to what was said by the hon. Member for Garscadden about schedule 3 to the Bill. However, after all that the Government have said about ensuring that this legislation will provide better local accountability and better local democracy, I am surprised to find that the Bill introduces another kind of rate-capping procedure. I do
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  not see the need for it. If people vote with a sense of responsibility for the taxes that are to be levied on them, and if those who elect a spendthrift Labour authority then find that the community charge is £500 or £600, so be it. That is what they have voted for. I suggest to my hon. Friends that there is no way in which they should intervene with any kind of rate-capping procedure. I hope that that will be reconsidered. Perhaps my hon. Friend who will reply to the debate might reconsider it now and tell us at 9 o'clock that he takes my point.
  This Bill has consequences for the rest of the United Kingdom. I hope that the Government and the Opposition will not be too parochial or narrow about this debate or about the Committee stage. I hope that some English hon. Members in all parts of the House will have an opportunity to speak in the debate and an opportunity to serve on the Committee. I am perfectly willing to give my place in the Committee to my hon. Friend the Member for Oxford, East (Mr. Norris). I have served with him on Committees before and I highly recommend him to any Minister who is looking for a chap who will scrutinise carefully and participate well in a Committee debate. This is not just an important piece of Scottish legislation: it is a breakthrough in the whole system of local taxation in the United Kingdom. That is the way it should be debated in the House and in Committee and that is the way that it will be judged.
  6.10 pm
  Mr. Donald Stewart: The hon. Member for Edinburgh, Central (Mr. Fletcher) says that there is no such thing as a good tax. If by that he means that no tax can be devised that will not cause howls of anguish from somebody, the House would agree with him, but on this side of the House there is little agreement on much else of what the hon. Gentleman said.
  In Scotland the Bill is recognised as a panic measure. The revolt of the Government's own supporters at the idea of a second revaluation in Scotland when England has not had one since 1973 frightened the Government into instant solutions. Like many ill-thought-out solutions, the remedy looks like being worse than the disease. I do not defend the system of domestic rates. My party has argued for many years that they should be entirely abolished and that major changes should be made to commercial and industrial ratings. However, unfair as it is and riddled as it is with anomalies, the present system of property values bears some relationship to the ability to pay, crude rule of thumb though it is.
  The per capita poll tax that we are discussing is even worse than the existing system. It hits hardest the low paid, even if there are rebates or exemptions for the unemployed. It is also highly impractical. How do the Government plan to take care of exemptions for periodic unemployment? How will registration be enforced without an army of officials, and how will payment be recovered from non-payers? The Scottish Council for Voluntary Services says:
  "The new charge will be more regressive than rates, with those on low to moderate incomes losing most. Those on high incomes will be the biggest gainers."
  The council says that the illustrative example of a single pensioner compared to a family of four adults is true but untypical. Only 9 per cent. of households are headed by single pensioners and only 8 per cent. of households have more than three working adults in them.

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  My party's option is for a local income tax because this appears to us to be the best way to raise local revenue. It is progressive, spreads the burden more widely and fairly and is the only option that varies according to the ability to pay. I gather that the Government or Scottish Office supporters pretend that this is not practical because of restrictions on computerisation in the Inland Revenue. I have checked with the Inland Revenue and I have found that the system will be ready in time. It is already prepared for schedule E and is under way for schedule D, where there is no problem. The bulk of computerisation of pay-as-you-earn will be finished in 1988 and the last office will be finished in April 1989. Any argument on that basis against a local income tax falls to the ground.
  Mr. Ancram: I should like to understand the proposals by the hon. Gentleman's party. What does he propose to do about those who do not pay tax through PAYE?
  Mr. Stewart: Those people will be covered by schedule D. In any case, the Government will bring in exemptions for people who do not pay under PAYE.
  Mr. Norris: Will the right hon. Gentleman give way on this specific point?
  Mr. Stewart: No.
  I mentioned the number of revaluations in Scotland compared to the number in England. I should like to draw attention to the enormous discrepancies between rates paid on similar properties in both countries. There are glaring amomalies and injustices in the rating of similar properties in Scotland and England. Richard Shops, in Sauchiehall street, Glasgow, has a rateable value of £67,000. The same company's shop in Birmingham city centre is rated at £17,263. For obvious reasons, the Glasgow shop is now closed. The Albany hotel in Glasgow has a rateable value of £413,500 but its sister hotel in Birmingham is rated at £56,638.
  The story of sports clubs is similar. The Ardrossan indoor bowling club pays £18,000 in rates, but the same type of club in Darlington pays £5,500. Scottish chemical plants, rated on what is called the contractor's principle, pay on average 2·5 times the amount paid by similar English and Welsh plants. Stirling university's rates for 1984–85 were £13·58 per sq m compared to £3·96 per sq m for the university of East Anglia. Both universities are about the same age and the same size.
  Mr. Craigen: The Bill will not redress that disparity. Does the right hon. Gentleman agree that the Secretary of State made it clear that the Government have not begun to think about the implications of the uniform business rate in sorting out these disparities?
  Mr. Stewart: The hon. Gentleman's point is totally valid and it is one that I was proposing to develop. I have numerous other examples but I shall not take up the time of the House by relating them. In short, the gross injustice should worry the Government. This Bill will bring no relief on that point.
  I should now like to draw attention to a matter arising from the Bill which will affect the crofting counties. The Valuation and Rating (Scotland) Act 1956 gave crofters a 50 per cent. reduction from gross to net in the valuation of their housing. Neither the local authority nor other ratepayers lost anything by this reduction. The reasons which induced the Government of the day to make this
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  concession were higher unemployment, higher prices, higher transport costs and lower wages. Generally, those reasons are still valid in the crofting areas.
  The concession has been agreed and accepted by all Governments for 30 years and if it was a fair and reasonable benefit for deprived areas during that time, it must be maintained in some form under this legislation. Apart from the financial implications, the social implications are serious. There will be an exodus from the remoter parts to the nearest towns because crofters will lose not only the reduction in valuation but the reduction in rating that they got for the remoteness of their dwelling houses.
  Mr. Michael Forsyth: Can the right hon. Gentleman explain how those crofters will be helped by his party's proposal for a local income tax? They live in an area where the income base is small and where the level of local income tax would be extremely high. For those reasons, they would be much worse off under his proposals—unless he destroyed accountability by redistributing income.
  Mr. Stewart: Our point about the tax is that it would be based on an ability to pay. If people have the ability to pay they will do so, and if they do not have that ability they will not pay. That is quite simple.
  Another matter about which I should like to speak is commercial and industrial rating. My party believes that this should continue as a contribution to the services from which commercial firms benefit. It has been suggested that company turnovers should be taken into account. There is a need for major reform to avoid repeating the recent scandal when thousands of small businesses were in danger of closure due to the massive overnight increase in rates which brought about the Bill.
  The rates crisis has been exacerbated by cuts in rate support grant. Over the years, functions and services have been foisted on to local authorities by decisions made by various Governments. There was no question about it. They were accepted while they were adequately funded. There was no problem. The Government have been reducing the rate support grant. As a proportion of council budgets, it was 75 per cent. in 1975–76, and is 56·6 per cent. in the current financial year. These grants should be restored to local authorities. Education takes 41 per cent. of total council spending. Surely this matter ought to be a national responsibility. My constituency sends more students to university per head of population than any other part of the United Kingdom. In other words, a poor community is footing the bill for the benefit of wealthier societies and, often, other countries.
  The Scottish Office pretends that the legislation will give some kind of gift to Scotland which is denied to our friends south of the border. Everyone knows that we are laboratory guinea pigs. Even the English Association of Metropolitan Authorities has taken the unusual step of issuing a brief on a purely Scottish Bill. That association knows what is coming. It knows that the Bill lacks fairness and democratic accountability and that it is technically inadequate. It takes Scotland's finance out of the frying pan and puts it into the fire.
  6.21 pm
  Sir Hector Monro: The speeches made by the hon. Member for Glasgow, Garscadden (Mr. Dewar)

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  and the right hon. Member for Western Isles (Mr. Donald Stewart), for the Scottish National party, were singularly disappointing. They did not give one idea about the direction in which they wished to go regarding rates in the future. The right hon. Gentleman talked about local income tax and about panic measures. It has been a mighty long panic for the past 25 years. Every political party in the House has been trying to find an alternative. The right hon. Gentleman is absolutely right: at long last, the Government have decided to take action about domestic rates. Today no one in his senses would try to introduce the present system of rating from scratch. The subject has grown like Topsy for about 100 years. It is high time that we had something that was not only fairer but easier to understand.
  Conservative Members, despite the prompting from the Government Front Bench, have noted that the Labour party has been singularly coy about saying anything about agricultural ratings. Rating agricultural land is a serious issue in the countryside, which the hon. Member for Glasgow, Garscadden attempted to represent at the end of his speech. He dodged the issue of rating agricultural land and buildings. It would have a catastrophic effect on agriculture in Scotland and, indeed, throughout the United Kingdom.
  There have been endless inquiries and discussions about how to improve the rating system. There have been debates, the Layfield report, White Papers and Green Papers. It is right that, with this legislation we should come to a conclusion on domestic rates. We note that other political parties have failed to come forward with any concrete suggestions that could satisfactorily be implemented in future.
  Mr. Gordon Wilson: Local income tax.
  Sir Hector Monro: The hon. Gentleman is scoffing about wanting to bring in local income tax. Of course, it often boils down to the crucial question whether it is to be a local income tax or a community charge. In Scotland alone, a local income tax can be astonishingly difficult to implement. There are 56 rating authorities.
  Mr. John Maxton: Fifty-six different community charges.
  Sir Hector Monro: Not necessarily: a register of where people work as well as where they are to be paid. In Scotland, where many districts are relatively small, people may live and work in different districts. Where will the Government charge their local income tax—where they live or where they work? This includes the Border when it comes to working in south Scotland or the north of England. A local income tax will make only about 60 per cent. of residents liable to pay locally, and that will reduce accountability. It is an important part of the policy of the Bill.
  Mr. Maxton: Is the hon. Gentleman aware that it is equally true that, at a national level, only 50 per cent. of adults who are eligible to vote pay income tax? Why is that not considered to be a lack of accountability?
  Sir Hector Monro: There is VAT.
  Mr. Maxton: On the point of VAT, since the hon. Gentleman wishes to raise it at the same time, the poorest
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  in our community do not pay income tax or rates and pay little in VAT because, quite rightly, no Government has been prepared to put VAT on basic commodities.
  Sir Hector Monro: The hon. Gentleman made an intervention and answered it himself. Everyone in the country pays indirect taxes one way or another. I do not think the hon. Gentleman's point is valid. It has been right to adopt the community charge as the best option. It is disappointing that the Labour party in particular has not been able to put forward any alternative. [Interruption.] If Opposition Members think that the present system is so wonderful, why is there such an outcry in Scotland about the rating system generally and the wish for change?
  There is a host of reasons why we should proceed towards a community charge. It will get rid of the great issue of revaluation of domestic properties. One will be able to improve or extend one's house without having to have it revalued and without paying any further towards rates. It will certainly help single householders, and particularly pensioners who live alone. That will be welcomed.
  Certainly, it will be much fairer for households in which more than one wage packet come in. Some households have three or four wage packets coming in. I am glad that my right hon. and learned Friend the Secretary of State has brought in systems for rebates for the less well off and, I hope, the unemployed. That is to be through the housing benfit system and will be advantageous. Arrangements will be brought in especially for students. It is important to note that families with perhaps two to four children can move to a bigger house without paying increased rates. The Bill will help those families in particular. The increase in non-domestic rates, being pegged, will be limited to inflation. When the time comes, it will he clearer to the business community how much they will have to pay. They will realise that rates will he increased only by inflation.
  Of course one appreciates the concern of local authorities that the scheme will be difficult to operate. Many schemes have been brought in by way of Government legislation and local government administration. I remind hon. Members of the great brouhaha when the Labour party brought in the selective employment tax. The House went into orbit. Yet, in a thoroughly unfair way, that tax operated for some while until it was repealed. I can think of other administrative difficulties in local government, which have been overcome by the skill of officials. After hiccups to begin with, the difficulties have settled down. In 10 years, we shall wonder what all the fuss was about in 1986.
  The key thing is that officials must remember that the change is in the interest of ratepayers, not for the administrative convenience of local authorities. If the ratepayers feel that they are getting a fairer and better system, it is absolutely right that it should be implemented as soon as possible.
  The Bill contains many Committee points. It is full of issues that will have to be thrashed out in detail in Committee—for example, the scheme for second homes, which I am glad the Government have introduced, caravans, holiday lets and so on. All those issues will be important. I believe that we shall find reasonable solutions in Committee. Some of the issues raised by the Scottish Council for Voluntary Organisations will be Committee

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  points—for example, more than one single family living in one house, and how that problem will be resolved in the long run.
  Another issue was touched on by the right hon. Member for Western Isles which is probably outwith the details of the Bill. That is the unfair valuation of sports grounds, on which we thought we had made substantial progress in the Rating and Valuation (Amendment.) (Scotland) Act 1984. Mr. Alex Kilgour and Mr. William Mann have campaigned well in Scotland and highlighted the importance of mandatory rate relief for sporting facilities. I hope that what they have started will grow.
  The only point that I make to the House and to my hon. Friend the Under-Secretary of State, who has been intimately involved, is that that is nothing new. I looked up the debate on the Finance Bill on 19 November 1966, when I moved an amendment to bring in mandatory derating of 50 per cent. for sports grounds. It was thrown out by the then Labour Government. So there is nothing new under the sun. I hope that there will be a move by authorities to give mandatory relief whenever possible. I hope, too, that my hon. Friend the Minister will think again about the problem that is facing an important part of Scottish economic life, with regard to sporting lets. Tourists and others come to hotels in the countryside but they are being severely penalised because sporting rates are so much higher in Scotland than in England and Wales.
  I say to my hon. Friend the Under-Secretary and to my right hon. and learned Friend the Secretary of State that the Bill is a welcome measure. I hope that as it proceeds through Committee the anomalies that some hon. Members have highlighted will be removed and that by the time the Act is implemented in years to come, it will be welcomed, particularly by householders who are now paying rates that are far too high and who will be much better off under the community charge system.
  6.32 pm
  Mr. William McKelvey: When I looked at the Bill, I must confess—perhaps this will stun the Minister—that I thought I might have been prepared to support clause 1 had it been a one-clause Bill. However, I could not in any way support clauses 2 to 32. Having read most of the Bill—it is long-drawn-out and badly written—I must ask who the author of the new system is.
  I deplore the fashion in which the Bill has been introduced. In a way, it is a protective measure. It has been introduced so that the Government can protect that rare and disappearing species up in Scotland called the Conservative politician. Because, after revaluation, there was such a squeal of anguish from Conservative politicians north of the border who were terrified that they would lose their seats, Labour Members are being hustled into what we consider to be a lousy, unfair, cumbersome and uncaring piece of legislation, possibly the worst that has ever come from the Government, and that is saying something when one thinks of some of the regressive legislation that the Government have put through the House.
  We must ask who made up the Bill. I imagine that it was a case of co-authorship. There are bits of Hans Christian Andersen that I recognise in the middle. There is certainly a good piece of Dennis Wheatley. The piece that intrigues me might have been injected by the hon. Member for
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  Stirling (Mr. Forsyth)—who is busy writing his notes or cheques at the moment—and is probably from the St. Andrews think tank.
  I do not often quote, because I always misquote. On this occasion I shall misquote again. This "quotation" comes from another William. This is Willie Shakespeare, I believe:

  "Oh what a tangled web we weave,

  In trying domestic rates to relieve.

  The Government will be sorry that they ever embarked on this road. Let us look at some of the people who do not support the Bill and have not been mentioned so far. I should mention the Chartered Institute of Public Finance and Accountancy, only because it celebrated its centenary last year. That august body, which is certainly no bastion of Socialism, has deplored the Bill and said that there is nothing at all about it that it likes. The Scottish Council for Voluntary Organisations has similar beliefs. In the Convention of Scottish Local Authorities, 53 local authorities are against and three are for.
  So where is the support for the measure coming from? If we were fair, and if we were to say, "Hands up those parliamentarians who will gain financially from this piece of legislation," precious few could not put up their hands. I am not being unfair, but it just so happens that I have some valuations taken at random from the Edinburgh roll. It would not be fair to mention names, so I shall not do so, but I shall tell the House the area in which the people live, and if people's faces go red, we shall know who they are. I mention first Duddingston Village. Current rates are £1,511 multiplied by 58·8p, giving rates payable of £888·47. For two adults on the electoral roll, the community charge of £229 multiplied by two is £458. If we subtract that from £888·47, we have a rebate of £430·47, or £8·28 a week. That is not bad. That is a fair and equitable system. We are shifting the burden. People on Members of Parliament's salaries will get a rebate by and large, although I understand that some Labour Members, for example my hon. Friend the Member for Dundee, West (Mr. Ross), will pay substantially more.
  I have another example from Edinburgh. I shall not give the address because I have no intention of embarrassing individual Members. The house is approximately in Ainslie Place and between numbers four and eight. Current rates are £2,044, multiplied by 58.8p, giving rates payable of £1,201·87. For two adults on the electoral roll, the community charge, being £229 multiplied by two, is £458. That gives a grand saving of £743·87 or £14·31 a week. Some teenagers are forced to live on less than that sum.
  Mr. Henderson: Is not one of the attractive possibilities that might emerge from the community charge the fact that fairly high-spending local authorities, such as Edinburgh now, and Lothian not so long ago, will exercise a more responsible role than in the past? All ratepayers in Edinburgh are likely to benefit, not just those whose addresses the hon. Gentleman refrained from giving.
  Mr. McKelvey: The hon. Gentleman knows that I have said in the past that people get the councillors they vote for and the councillors they deserve. If they continue to vote for councillors, they will support the policies that they carry out in office. That is democracy, and there is nothing unfair about it.
  I shall mention two matters which the Bill does not touch upon which create serious problems for people

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  north of the border. One is the chemical industry and the difficulties that it has met in paying rates through the contractor's principle; this has already been mentioned. No one would argue that our rating system was devised by the appliance of science. At worst it is a guesstimate, and at best it is someone's attitude, guesswork, balance of payments or a way of drawing in money. The system is not based on any science, but the contractor's principle and the opportunities that it has given for assessors north of the border to operate in the chemical industry puts that industry at a tremendous disadvantage vis-á-vis similar plants south of the border.
  The system reveals some ridiculous examples. For example, immediately a pipeline crosses the border at Carlisle or Gretna, 50 per cent. more must be paid in rates in Scotland for the same pipeline carrying the same solution than in England. That is ludicrous and crazy.
  When the Government speak of a evaluation and an equalisation, does that mean that Scottish rates will go down to those of England? Or is it more likely, since England has not had a recent revaluation, that the opposite will happen? If we introduced a revaluation in England now, the squeal of anguish that we heard in Scotland at the revaluation there would be drowned in an absolute roar of anguish from those who would have to pay those rates south of the border.
  Another example illustrates my point even more dramatically. A large petrochemical plant which was recently built in Fife and provides jobs for people there now pays eight times what it would have paid if it had been built in England. It is impossible to reconcile the two figures. As its rates bill in Scotland is almost £10 million, as against £1·8 million in England, if there was any threat of closure of one of of the two plants, there would be an advantage of £8·5 million from closing the Scottish plant. That is a further threat to continued employment in Scotland.
  Mr. Michael Forsyth: I have considerable sympathy with the hon. Gentleman's points about the inequity of the contractor's principle, but does he accept that it is a valuation system based on capital values, which is what the hon. Member for Glasgow, Garscadden (Mr. Dewar) said the Labour party was considering as an alternative?
  Mr. McKelvey: Theoretically, the hon. Gentleman may think that it is based on those values, but as there are no comparisons, in many cases, it is a stab in the dark. It is no more scientific than that. I could evaluate those properties just as well as the assessors are doing at present and take their fee.
  We have already heard about the difficulties of some of our sporting clubs and racecourses because of the differences between north and south of the border. Again, the Government should move on equalisation. It is no good their saying that they have legislated for that and that if a racecourse north of the border can find a similar or identical racecourse in the south and make a comparison the assessors will take that into consideration and sort out the problem. So far, thousands of appeals have taken place and not one equalisation has been made. That does not encourage appellants to go through the process. We still eagerly await someone breaking tha mould so that we can apply it to other places. That formula will not work.
  Mr. David Lambie: How can one compare a racecourse in Scotland which was revalued two years ago with a similar racecourse in England or Wales which has not been revalued since 1973? There is no comparison. We are comparing 1973 figures with 1985 figures. It is a sham.
  Mr. McKelvey: Of course, my hon. Friend is correct. For some years, he and my hon. Friend the Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes) have been meeting organisations which have this growing difficulty. We knew and forecast exactly what would happen on the last revaluation and of course that has come to pass.
  I am mainly worried about short measure reforms that we can use to save the lives and existences of amateur sports clubs. On Friday I was present at a well-attended meeting in Kilmarnock. The Secretary of State for Defence was in attendance, not as a Defence Minister, although he had to defend some Government policies, but as a Member of Parliament for that area. He was there to discuss sports clubs with the 90 people, representing 28 different sports clubs, many of which are at the point of bankruptcy, who made up the audience. If there is no cash injection to those clubs by way of rates relief, they will go under. When they go under, the facilities that they provide for hundreds, nay thousands, of young children will end. What will happen on terms of human misery, apart from the cost, if we cast those boys and girls out on to the streets? Vandalism will increase, they will be encouraged to roam about in gangs, there will be increases in glue sniffing and all the other anti-social things which I am sure all of us would try to prevent.
  I know that the Minister will say that the Government have legislated so that regional authorities can, by law, derate any of those clubs. I make two appeals—one to the regional authorities. I understand, as do all Opposition Members, why they are nervous about derating for any specific group, because whenever that is done and a barrier is drawn up, a group on the other side of the barrier pushes forward and tries to get its derating. One example is the voluntary groups, which do much excellent work. Over the years, because central Government have been clobbering the regional authorities for money, they are nervous about moving in that direction. I ask them—even considering that and the dangers that are involved in taking such a step—to save those sports clubs by inviting applications for derating from all those clubs. Those that are needy, deserving and due to go under could be saved by immediate derating.
  If the Secretary of State for Scotland is genuine—he appeared to be in generous mood when he made his statement—he should promote that generosity and consider paying pound for pound with local authorities. I am not asking him to pay for the difference in rates that would be lost through the derating of the sports clubs, but if he is genuine and as interested in sports clubs, the welfare of young people and the hundreds of unemployed people who take advantage of the sports clubs and all the people who work voluntarily to support them as he says he is, and if he genuinely believes that he should help them, he can do so by telling the regions that for every club that they derate he will give them half the money that has been lost. That would show the regions that he is serious about

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  giving immediate assistance to a pressing problem, and would assure us that he is genuine in what he says about rates.
  I shall volunteer to serve on the Committee that will consider the Bill, although I realise that I shall be inflicting punishment on myself. I warn the Minister and Conservative Members that there will be no easy passage for the Bill. We will fight tooth and nail on every sentence and every clause, and we will table thousands of amendments. Perhaps our first amendment should be to clause 1. It would probably solve the entire problem. We should take out the words "1st April" and insert, "the 12th of never".
  6.50 pm
  Mr. Barry Henderson: It was entertaining to listen to the hon. Member for Kilmarnock and Loudoun (Mr. McKelvey). As he worried about the effect on Scotland of fewer Conservative Members than there were when we had more than half the votes of the Scottish people, I could not help but reflect that since the hon. Member for Glasgow, Garscadden (Mr. Dewar) sat down there has been no Labour Member in the Chamber who comes nearer to my constituency than Glasgow—
  Mr. Alfred Morris: What about Manchester?
  Mr. Henderson: Manchester is even further away.
  The hon. Member for Kilmarnock and Loudoun spoke of the difficulties of valuation. I should have thought that that would be a benefit of the Bill. The sudden changes that valuation can create in the amount that people must pay towards local government is one reason why many people want to have the rating reform offered in the Bill. The hon. Gentleman said that Moss Morran paid more in rates than if it had been built in the south. I remind him that the Labour Front Bench put a Whip on his party to vote to ensure that Moss Morran would pay even more than it is paying now. It is to the credit of Labour Members of Parliament in Fife that they supported the Government and ensured that Moss Morran would not have the higher rates bill that other Labour Members sought.
  I congratulate my right hon. and learned Friend the Secretary of State and my hon. Friend the Under-Secretary of State, the hon. Member for Edinburgh, South (Mr. Ancram), on having delivered a workable scheme to replace the discredited system of domestic rates.
  Mr. Maxton: Why is it discredited?
  Mr. Henderson: I do not wish to take up too much time going over ground that has been gone over well, especially by the hon. Member for Cunninghame, South (Mr. Lambie), who, in every debate until this one—I have not seen him trying to catch your eye, Mr. Deputy Speaker—
  Mr. Lambie: The hon. Gentleman knows that there are three Labour Members for Ayrshire constituencies and that we take it in turn to speak. My hon. Friend the Member for Kilmarnock and Loudoun (Mr. McKelvey) spoke for us tonight. The hon. Gentleman would not wish us to hog the debate all the time.
  I have been making my rates speech in the House since 1970. Everyone knows it and I do not wish to repeat it. All I can say is that I have been the only person who has been consistent since 1970 in wishing to abolish local rates and
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  introduce a national tax. I believe that there should be a 100 per cent. Government grant for local services and that local rates should be abolished. If the Secretary of State for Scotland had supported that view during the past four or five years, we would not be wasting our time with this debate tonight.
  Mr. Henderson: I am glad that I gave way to the hon. Gentleman. Since I came to the House in 1974, I have heard him make that speech. It is a good speech. He was much more eloquent than I could hope to be in explaining why the rating system is discredited. The hon. Gentleman has said it consistently and with great passion year in and year out. He has gained the respect of hon. Members on both sides of the House for the firmness of his convictions on the matter. I am sorry that he has decided not to speak on the Second Reading of this Bill.
  Conservative Members agree with the hon. Gentleman that the domestic rates system is discredited and should be replaced, although I acknowledge that this method of replacement is not the one that he has favoured until now. His view has been creditable. At one stage I was so determined to see the end of the rating system that I was prepared to accept his extremely radical solution and go for 100 per cent. block grant. However, over the years, I have shifted my position. The hon. Gentleman has not. He has been conservative and consistent in his view. I changed my view because I thought it important to have a clearly defined basis that recognised local control over local events and to make a clear distinction in the relationship between local expenditure and local taxation. That is why, on balance, I favour the solution in the Bill.
  The Bill will be much more just than the present system. If I had known that the right hon. Member for Western Isles (Mr. Stewart) would not he in his place, I would have told him that I planned to mention his speech. On behalf of the Scottish National party, he appeared to favour a local income tax as a way of getting rid of domestic rates. Has he calculated the cost to his constituents or to the constituents of any hon. Members who support a local income tax? I have not done the arithmetic because I do not know enough to do the calculation off the top of my head, but I should be surprised if the income of people in the Western Isles was sufficient, even at 100 per cent. income tax, to meet the costs of local government in the Western Isles.
  The right hon. Gentleman said in answer to an intervention that at least people would be paying according to their ability because it was related to income, but that would not apply if the rate of income tax was confiscatory in nature. I hope that my hon. Friend the Under-Secretary of State, who has more information than I have, will give us a more accurate view on what might be the effect of a local income tax in constituencies such as the Western Isles and others represented by hon. Members who support the idea. At first sight, but only at first sight, a local income tax has some attractions. The more one examines it, the more one sees that it has all the disadvantages and few of the advantages of the existing system.
  People believe that rates are an extraordinary burden upon them, but domestic ratepayers in Scotland contribute only 13 per cent. of local government expenditure. That is at the root of the problem and the sense of injustice with the rating system, but it is also a reason why the charge of regressive taxation made by the

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  hon. Member for Garscadden does not wash. We shall ask the community charge to meet 13 per cent. of local government expenditure. The rest will be paid by business or by central Government on behalf of the national taxpayer. That balances the interests of the better-off and the less well-off.
  The hon. Member for Kilmarnock and Loudoun mentioned sports grounds. As I advised those in Fife who were worried about the rating of sports grounds, the present system contains the means by which amateur sports grounds can be relieved of rates. A decision of Fife regional council proved that point. On the question of professional sports grounds, I was glad to hear the hon. Member for Cunninghame, South point out the differences in valuation between Scotland and England. It is an important factor. Another factor is the expenditure policies of local authorities north and south of the border. That also plays an important part in making the valuation. Professional sports clubs regularly came to the House to lobby and draw attention to the problems of the high rates that they are paying in comparison to their equivalents in England. I calculated what a major Glasgow sports club would pay if it was based in Aberdeen—not south of the border, simply in Aberdeen. There would be a difference of more than £20,000 a year simply by shifting the club from Glasgow to Aberdeen. Of course, the difference would be even greater now.
  Mr. McKelvey: I do not follow the hon. Gentleman's argument. If the valuations were equalised for the football clubs and race courses with the poundage paid in England, they would pay more rates. Are there no authorities in England which you would describe as high spenders? Are there high spenders only among Scottish authorities? The hon. Gentleman's equation does not balance.
  Mr. Henderson: The hon. Gentleman appeared by his use of the word "you" to refer to Mr. Deputy Speaker, but I do not want to bring Mr. Deputy Speaker into my equation.
  The hon. Gentleman misunderstands me. I did not say that there is no inequality between Scottish and English sports grounds, because there is. However, my point is that there are also inequalities within Scotland. It is not just a question of inequalities north and south of the border; inequalities also exist in Scotland. The inequalities are most severely felt by Scottish businesses which are competing with businesses in other parts of the United Kingdom. That specifically applies to tourist facilities. I have heard from people who run caravan parks, and to some extent a caravan park in Fife is competing for business with a caravan park in Cornwall. It is a scandal that there are such immense differences in ratings.
  There are other facilities where there is competition between a firm in Scotland and a firm down south, and where the combination of the spending of the local authority and the valuation system places an unfair burden on the Scottish firm and reduces its capacity to compete effectively.
  The most important consequence of the Bill becoming law will be the way in which it will improve accountable democracy in Scotland. Everyone will have a vested interest in examining the costs and benefits provided by the local authority. In other words, we will all be interested in the value for money provided by the authority. That is
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  an accountability that does not exist at present, and to that extent democracy is weakened. That is the most important part that the Bill will play in making life more just and fairer in Scotland. The Bill will make Scotland a more truly democratic country than it is at present.
  Of course, there will be gainers and losers. No one has ever concealed that. No Conservative Member has ever concealed the fact that there will be gainers and losers.
  Mr. McKelvey: That is because Conservative Members are all gainers.
  Mr. Henderson: The hon. Gentleman has just asked who will be the gainers. Three quarters of households will be gainers, or at least will be no more than £1 a week worse off. That is the overall effect of gainers and losers.
  As I said earlier in an intervention, I believe that everyone will benefit from better local government which has a greater concern to provide better value for money. At the end of the day, the expenditure policies of local authorities will determine the total cost of local government. Fife regional council has been Labour controlled since the reorganisation of local government. That council has taken us from the lowest to the highest rated area in Scotland in just 10 years. No excuses can alter the fact that the expenditure policies of the council have brought that about.
  Mr. Milian: Nonsense.
  Mr. Henderson: It is not nonsense, it is a fact. If the right hon. Gentleman can recall the time when he was Secretary of State for Scotland, he will remember that Fife regional council then was a lot more responsible, yet he chopped a lot more of its budget than any Secretary of State for Scotland has done under this Government. He will remember the 6,000 fewer staff in Scottish local government—the number that he slashed from local government in one year. We do not need to hear about cuts from the right hon. Gentleman, who knows more about that than anyone else. He introduced cuts more sharply, more harshly and more unreasonably than anyone else.
  To that extent, I accept that in 1979 the expenditures of Fife regional council were a good deal less than they are now. That was partly due to the work of the right hon. Member for Glasgow, Govan (Mr. Millan) in screwing down the expenditure of Scottish local authorities. I acknowledge that. However, since then Fife has continued, regardless of help from central Government, and regardless of the wishes of the majority of ratepayers, to increase its expenditure every year. The council has gone to the limit of what it thought it could get away with before it was hit by the Government for gross over-expenditure. The council has done a great disservice to the people of Fife, who must bear the burden, and to the business community, which provides the jobs that are much needed at the moment.
  Even Fife regional council, which I have severely criticised for its expenditure policies over the years and its lack of sense of priorities in expenditure, acknowledges that in north-east Fife and in my constituency the people will be significantly better off as a result of the community charge. On that basis, I am prepared to accept the judgment of Fife regional council. I support the Bill because I believe that it will improve matters for my constituents, and because it will produce a more just system.
  7.6 pm
  Mr. Bruce Milian: The reasons given by the Secretary of State this afternoon for the introduction of the Bill had nothing to do with the real genesis of this legislation. The Bill is another manifestation of the breakdown in the relationship between central and local government. That is the direct responsibility of the way in which the Government have behaved over the seven years since 1979. The Government have attempted to screw down local government expenditure and to control it by one device or another. They have tried to impose penalties when local authorities have not behaved in a way that is considered acceptable to the Scottish Office. The Government have behaved in a thoroughly authoritarian manner towards local authorities and they have accompanied that approach with considerable reductions in the amount of assistance from central Government to local government.
  The rate support grant percentage for the current year is 56 per cent. whereas the Government inherited an RSG percentage of 68.5 per cent. in Scotland. They have made these grants on relevant expenditures that have been consistently understated and unrealistic. The result is that, with an extremely modest real increase in expenditure by local authorities in Scotland, there has been considerable increase in the rates burden. In 1978–79 the average domestic rates in Scotland were £132. In 1985–86 that figure had risen to £392; almost three times the 1978 figure, and, of course, the rates have increased again in the current year. That is the real crisis in local government finance. It has nothing to do with the rating system per se, it has more to do with the way in which the Government have treated local authorities over the past seven years.
  Any tax, whether it is rates, local taxation or central taxation, that has too much burden placed upon it, will eventually give under the strain. That is true of local taxation and local rates and also about income tax, VAT and any other form of local or central taxation. The crisis came in 1985 because of the Government's mishandling of the 1985 revaluation in Scotland. The Bill was born out of the panic that was generated by the effects of that revaluation. It has nothing to do with providing greater accountability, fairness or getting rid of unsatisfactory features of the domestic rating system. Scotland is now bearing the first of the burdens of the 1985 revaluation and is getting legislation first.
  There is no ideal tax. The Secretary of State mentioned an ideal alternative. I agree that there is none, and the Bill certainly does not provide it. I am not maintaining that the rating system is ideal, but I have no difficulty defending it, because it has many virtues and advantages. It is cheap and easy to administer and, with a sensible system of Government support through the rate support grant, it has considerable flexibility. Scotland has had industrial and agricultural derating. We have had domestic rate relief and special relief through special legislation to deal with some of the worst consequences of the 1985 revaluation.
  A few years ago, when there were special burdens on certain local authorities because of the oil boom, special adjustments were written into RSG. We have a system of specific and general grants and a system of distribution—RSG—which is subject to adjustment. One could say, if one wanted to be pejorative, that it is open to manipulation — which it has been under the present Government — but it can be used to change the
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  distribution pattern between local authorities. That feature is retained in the Bill, so if there is a problem with manipulation, the Bill will not remove it.
  With domestic rates, it must be emphasised that, with housing benefit, the burden can be related considerably to the ability to pay. It is nonsense to talk about rates and to fail to take housing benefit into account. The Government's complaint about housing benefit is not that it does not work but that it works too well—it excludes some ratepayers from paying any rates. The Government are here ensuring that everybody contributes to local expenditure.
  There is no need to defend the rating system, however, because the Government are retaining it for non-domestic ratepayers. The odd thing about that is that many of the complaints and anomalies have nothing to do with domestic rates. The hon. Member for Fife, North-East (Mr. Henderson) spoke about sports clubs, but they will not be affected in the slightest by the Bill. The chemical industry and the contractor's principle also has nothing to do with domestic rates. There are anomalies and injustices, but the Bill does not tackle them. The Bill is no great deal for industrial ratepayers.
  All we are given in the Bill is a temporary freeze at the existing level, which non-domestic ratepayers consider is too high. Like other ratepayers, they have suffered from the drastic reduction in grants of the past seven years. Increasing the valuation according to the retail price index in the transitional years is not appropriate. Besides, I oppose in principle anything in taxation legislation which protects one group of taxpayers for the future. No Government can bind a successor in that respect, so the idea that industry is getting some great favour in the shape of the freeze is a nonsense.
  If the non-domestic sector wants to see what is in store for it, it should look beyond 1990, when there will be another revaluation which will cover England as well. I understand that the idea is to get valuation practices, procedures, bases and legislation uniform by 1990 so that revaluations can be uniform and there can be a uniform business rate. I asked the Secretary of State earlier today whether that would be uniform in Scotland or throughout Britain, and he replied that that had not been decided. That decision is crucial for businesses in Scotland because a uniform business rate throughout Britain would be much more favourable to Scottish businesses than a uniform business rate throughout Scotland.
  Mr. Michael Forsyth: Why?
  Mr. Milian: There are several reasons. The Secretary of State cannot answer that absolutely basic point—whether the rate will be uniform throughout Britain or throughout Scotland.
  When we have the revaluation in 1990, whereas the difference for Scotland will represent the five years between 1985 and 1990, the difference for England will represent the 17 years from 1973 to 1990. I do not what the effect of the revaluation will be, but we should bear in mind the consequences of a five-year revaluation. The Government speak of protecting business from dramatic changes, but there will be a considerable problem for businesses on both sides of the border in 1990, but presumably especially so in the south.
  There will be winners and losers among business and among local authorities. If there is a uniform rate which

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  is redistributed on a per capita basis, businesses in rural Scotland will pay more rates because they are at present rated below average, but local authorities will gain because redistribution of the business rate will give them more as rural local authorities, on average, have less industry than local authorities in urban areas such as Glasgow, Dundee and Aberdeen.
  There will be a wholesale upset in 1990, and the Bill does not deal with that. When we ask the Government how they will tackle that upset, they have no answers. The Government dodge the questions, but the consequences that I have outlined are part and parcel of the proposals in the Green Paper and the results of the Government's intentions. There will be havoc in 1990 such as will make the 1985 revaluation in Scotland look like a minor hiccup.
  Mr. Henderson: I am not quite sure whether the right hon. Gentleman is advocating a revaluation in England or whether he is saying that there should not be one because it would be so awful.
  Mr. Milian: There should have been a revaluation in England long before now but the Government have dodged it. I introduced a revaluation in 1978 because I believed it was the honest thing to do. I do not criticise the previous Secretary of State for Scotland for having the revaluation in 1985, but I criticise him for not anticipating the results of that revaluation. The Government were caught by surprise when the results became available. It is quite wrong to go 17 years without a revaluation.
  The Government are not being frank in the Bill, nor with the House or with business generally about the possible consequences in 1990. We should bear in mind the basic point that, although we discuss the burden of rates on business such rates are tax deductible. Whether corporation tax or income tax is paid it is deductible and therefore there is a reduction of the burden on businesses.
  I shall not go on any longer about non domestic rates as I wish to draw attention to some of the consequences that the Government have not thought through, or, if they have, about which, they are not telling us their thoughts. The immediate issue is domestic rating. I agree with my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) that the property that one occupies to some extent reflects one's ability to pay. Obviously, there is not a 100 per cent. correlation, but I do not find many people who are earning reasonable incomes living in the worst properties in my constituency. At least two Conservative Members live in my constituency, and they certainly do not live in the worst properties there. That is sensible.
  Mr. Norris: This is the second time that the question of whether incomes are broadly related to property values has arisen. The Green Paper made quite clear that 10 per cent. of those earning £300 a week or more lived in property in the bottom quartile of rateable value while 7 per cent. of those earning £50 a week or more lived in property in the top quartile of rateable values. Surely the truth is that there is an insufficient link between income and property value. That makes a nonsense of the concept of capital value assessment.
  Mr. Milian: That 7 per cent. who earn less than £50 a week and who live in the best kind of property are not paying rates because the whole of the rates will be paid
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  through housing benefits. At that level, housing benefits take care of many such anomalies, including people living in property which is beyond their means.
  I find the accountability argument sinister. Such an argument could be applied to central as well as local taxation. There are many pensioners who are not contributing in any way to the community. There are others on supplementary benefit. It is no use saying that they are all paying VAT. Of course, they may be paying VAT but when one is on supplementary benefit the VAT paid is only giving back to the Exchequer money which one has already received by way of supplementary benefit. Unfortunately, there are millions in our country who, because of unemployment, are not making a taxation contribution to the economy. Are we to deprive them of the vote? Will it be argued that, unless such people pay a certain amount of income tax or other charge, regardless of their income, there is no accountability at central Government level.
  The accountability argument is phoney and in any case grossly exaggerates the numbers who are concerned. For example, if one takes into account married couples that reduces the numbers considerably. Other young people are temporarily not ratepayers but as soon as they get a house of their own they become ratepayers. Those young people lucky enough to be in a job and still living at home are likely to be heavy contributors to general taxation in terms of smoking, drinking and other entertainments which are, at the moment, heavily taxed.
  When one sets aside all the arguments, the reality is that under this system a greater burden will be placed upon the poorer people, and a lesser burden on the better off. If that is not the position I do not know what the dickens we are doing having the Bill in the first place. If the Bill does not redistribute the burden in some way what is the purpose of the exercise? The purpose of the exercise is to put more of a burden on people less able to pay.
  The comparisons made in the Green Paper are thoroughly dishonest—nearly as dishonest as the Secretary of State's public expenditure statement this afternoon. The Comparisons have always been done on the basis that the 20 per cent. minimum contribution to rates under the present system will happen in any case. The imposition of the 20 per cent. minimum contribution is part of the process of putting more of the burden on the poorer sections of the community and taking it off the better off.
  One problem concerning the future has not been dealt with by the Secretary of State. I asked the right hon. and learned Gentleman a question about it but he gave an extremely inadequate answer. It concerns the safety net. If the new system is introduced at the same time as the redistributed grant—many Conservative members do not seem to understand that it is not just a question of changing the basis of local domestic taxation; there is also a change in the grant distribution—it will have a detrimental effect on the areas of Scotland that most need Government help, including my city of Glasgow.
  If all these changes happened at once one would not be talking about a community charge in Glasgow, for example, of £262; it would be £314. I do not know how the safety net will operate. The Secretary of State could not tell us this afternoon. It will he self financing, however. I have news for the hon. Member for Fife, North East (Mr. Henderson) and other Conservative Members. If one takes the examples of Dumfries and Annandale and Eskdale

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  their figure for the community charge, without the safety net, could go down to £108, but with the safety net they will be paying £172. They do not regard it as a safety net.
  The redistribution is temporary and is only shielding the full effects of the system from those areas which will be worst affected. The Secretary of State did not mention any of this. I asked him a question but he gave an answer in general terms which did not explain the reality of the situation. Comparing the present system with the new proposals it is clear that, for many areas, the situation will get worse—it is not static—once the new grant system and the poll tax take effect.
  As my hon. Friend the Member for Garscadden said, the poll tax is an administrative nightmare. Property does not move but people do. It is often difficult to keep track of people. We do not carry identity cards in this country and it is possible to move from Glasgow to Edinburgh or from Edinburgh to Aberdeen. One does not have to tell anyone about it—even, presumably, one's wife. That may be the idea of the move in the first place.
  Under the new system one is under an obligation, as soon as one moves from Glasgow to Edinburgh, to tell the registration officer that one is resident in Edinburgh. If that is not done one is committing an offence. I am glad to say it is not a criminal offence. The administrative costs of the new system are more expensive than the present system. It will give rise to all sorts of difficulties. The Government have paid absolutely no attention to representations on this matter from COSLA and the Chartered Institute of Public Finance and Accountancy and all the people who must administer the system.
  Basically the Government think that they will get away with the new tax because it will be phased in over a period, because there will be a safety net and because it will be complicated and people will not know what is happening. It will not immediately hit those who will suffer under it so everything will be all right. The Government made the same miscalculation about the cuts in rate support grant and the penalties for local authorities. In the first year it was not too bad, but eventually it hit people and the Government, and the 1985 revaluation was the last straw that broke the camel's back. The same will happen here.
  Leaving aside all the details, the essential feature of the system is that 80 per cent. of local government expenditure will be centrally controlled, and only 20 per cent. will be in the control of local authorities. They will have to make expenditure decisions, knowing that if they want to spend more, the burden will be placed on only one sector of local taxpayers, namely the domestic sector. As soon as the domestic sector understands what is happening, the opposition that has already been expressed against the Bill, will become greater.
  This is all unnecessary because the reasons for the crisis have arisen not from fundamental difficiencies in the rating system, but from the way in which the Government have dealt with the rating system and local authorities during the past seven years.
  If I were asked how I would reform the system, my first, biggest, simplest reform would be to increase the amount of central Government support for local authorities to restore some of the money that has been taken away from local authorities, leaving ratepayers to bear the burden. In other words, I would stop punishing ratepayers. That would do a tremendous amount to reform the local government system. I would not introduce the new
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  proposals on housing benefit which, again, will hit the poorest members of the community, and I would do something about revaluation.
  At one time we had, not periodical revaluation, but continuous revaluation. Even with periodic revaluation there is no reason why there should not be transitional arrangements, so that the whole burden of a revaluation does not take effect at once. Those simple reforms are always in the hands of any Government who genuinely want to give a fair deal to local authorities and ratepayers.
  I have never seen local income tax as a substitute for rates, but it could be an important supplement to them. Even then, I am not particularly enthusiastic about local income tax. I would prefer to see it used for a Scottish assembly than for local authority taxation.
  The idea that because the Government have introduced this iniquitous Bill the rest of us must run about and produce all sorts of fanciful proposals for reforming the rating system is absurd. If one is hitting one's head against a brick wall, the first step is to stop. The trouble is that the Government have been hitting the heads of local authorities and ratepayers against a brick wall and first we need them to stop doing that.
  This is an iniquitous Bill and it will not prove popular, although the Government mistakenly believe it will. Their idea of what is popular in Scotland is demonstrated by their performance at public opinion polls and district and regional elections. We shall oppose these proposals and if the Bill, unfortunately, is passed, it should be repealed and replaced by a system which provides much more sensible relationships between local and central Government.
  7.33 pm
  Mr. Michael Forsyth: I am grateful for the opportunity to follow the right hon. Member for Glasgow, Govan (Mr. Millan). I shall not follow all the highways and byways of the various options to which he treated us, but I must dispute his central theme, which was that the community charge would not enhance accountability.
  The right hon. Gentleman seemed to argue that the rate support grant was the principal source of the problem. He quoted some likely figures for a community charge, and we have seen them published by the Scottish Office in The Scotsman and the Glasgow Herald. I am a little puzzled, because the community charge figures at district level for this financial year are £81 for Stirling district council, but £48 for Falkirk district council and £47 for Clackmannan district council. Yet all three authorities have similar problems—indeed, if anything, those faced by Falkirk and Clackmannan are greater and all three are Labour controlled.
  In Stirling the extreme Left is in power, spending as if money has gone out of fashion. That accounts for the cost of local government on a community charge basis almost doubling. For most of my constituents the news that the district council is costing them nearly twice as much as those in Falkirk and Clackmannan would come as a great surprise. What is wrong with the present system is that when the excessive bill drops through the letter box, my constituents have no way of knowing that. The community charge will draw that into sharp relief. To show that I am impartial in my views on this matter, and to give all parties an opportunity, I should say that the community charge in Perth and Kinross would be £42.
  We have not yet heard what the alliance parties have to say, and I am a little puzzled why Liberal Members in

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  particular and, indeed, SDP Members who represent Scottish constituencies, should be so opposed to the Bill. After all, their constituents will benefit considerably. At district level and for the community charge as a whole their constituencies would have the lowest figures. For example, in Tweeddale the figure would be £30, in Gordon it would be £25, and in Inverness it would be £32, compared with Stirling's £81. There are special circumstances in Shetland, but the total community charge there would be £101 compared with Stirling's £223. Therefore, why are the alliance parties so determined to inflict considerably higher costs on their constituents by opposing the Bill? That is the reality of the impact of the community charge on their areas.
  Mr. Henderson: Does my hon. Friend agree that there is a slight similarity between the position of Liberal Members on this issue and their position on council housing? They seem to be in favour of council house sales in principle, but not in practice, and here they seem to be in favour in principle of getting rid of domestic rates, but they produce an impossible method in practice.
  Mr. Forsyth: Yes. I accept my hon. Friend's point. To be fair to Liberal Members, there is a distinction. With the sale of council houses only a proportion of their constituents could benefit, and by their weasel position on that perhaps they are disadvantaging only a section of their electorate, but in this case they are disadvantaging every elector in the area.
  Mr. Wallace: The hon. Gentleman said that every constituent would be disadvantaged because of our opposition to the Bill. Has he tried to work out the rateable values and the rates paid by some of my constituents? Even the figure that he has given for a possible community charge in Shetland would seriously disadvantage many of my constituents.
  Mr. Forsyth: As I understand it—it is always difficult to divine Liberal policy—the hon. Gentleman's policy is against both the rating system and the Government's proposals. Therefore, it is a disingenuous attempt to argue that some people who are paying rates now will be worse off under the community charge at the same time as arguing against the rating system. Instead, the hon. Gentleman proposes a local income tax. In his constituency few people earn high salaries and the base from which the revenue would have to be drawn is narrow. His constituents would be among those who the Green Paper says would have to pay an additional 11p on the basic rate of tax, so his constituents, whom he pretends to defend, and who are currently paying income tax at 29p in the pound, would pay it at 40p in the pound on low wage levels.
  The right hon. Member for Western Isles (Mr. Stewart) is not present, but he is in a similar position. His community charge would be £110 and he, too, has a narrow income base in his constituency. Therefore, he would be condemning his constituents to paying 40p in the pound. When I put that point to him, he said that it was nonsense and that the whole point about local income tax is that it reflects the ability to pay.
  The right hon. Gentleman appears to be on the point of recognising the importance of rates of tax. He might
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  even join us in the Lobby in future and vote for cutting the basic rate of tax, because, like every Member of the Liberal and Social Democratic parties, he is condemning his constituents to paying high rates of tax, especially those who are least able to pay. I notice that the right hon. Member for Tweeddale, Ettrick and Lauderdale (Mr. Steel) is leaving the Chamber, unable to answer my point. Let us hear less about fairness from that neck of the woods.
  The right hon. Member for Glasgow, Govan (Mr. Milan) began by being sympathetic to business and then observed that, of course, rates are tax deductible. I have news for him, because the high spending of councils such as Stirling and others that are run by his party has resulted in many businesses being unable to make profits. If they do not make profits, they cannot claim the tax deductions. That is why areas of Glasgow and other parts of Scotland have been blighted and businesses destroyed. In turn, when a revaluation is performed, the assessors say, "There are no businesses, this is a deprived area. Mark down the rateable value." However, they mark them up in my constituency and in others, thus spreading the canker of deprivation and destruction that high rates have produced in Scotland.
  The right hon. Member for Govan admitted that a uniform United Kingdom business rate would be of considerable advantage to Scotland. I asked him why, and he said that it was because of revaluation. However, revaluation has nothing whatever to do with the overall aggregate levels of rates that are paid by businesses. Scotland would benefit considerably from a UK-wide business rate poundage because many Scottish councils are controlled by his party and are, therefore, committed to extravagant policies and to levying high rates.
  The hon. Member for Kilmarnock and Loudoun (Mr. McKelvey) discussed the contractor's principle. I advise my hon. Friend the Minister that I am disappointed that we have not taken the opportunity in the Bill to deal with the problems that arise from valuation methods in Scotland. I am sorry that the hon. Member for Kilmarnock and Loudoun is not in the Chamber. However, it was evident from his remarks that he did not understand the contractor's principle.
  Sports clubs and other organisations are in difficulties as a result of valuations performed on the contractor's principle, because it operates on the basis of capital valuation. That was dragged out by force from the hon. Member for Glasgow, Garscadden (Mr. Dewar) as being his party's thought on what it might do. It is ludicrous to look at the capital value of a sports club that can be used for only part of the year, take a proportion of that and call it the rateable value.
  In England, the revenue principle is more dominant. It considers the revenue that could be raised and assesses the rateable value on that basis. Although the sympathy of Labour Members for sports clubs is welcome and predictable, their intellectual commitment is suspect and, once again, they have nothing to offer in terms of a coherent policy.
  I am surprised that the hon. Member for Kilmarnock and Loudoun should have gone to such lengths to suggest to the Government that they might have a pound-forpound basis to help with rating relief for sports clubs, because we have substantially increased the rate support

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  grant for Scottish local authorities, giving them more than adequate mileage to use their discretionary powers to give total relief, if they wish, to sports clubs.
  The costs are very small and are much less than Labour authorities have squandered in the not too distant past on grants to striking miners and other causes that are dear to their hearts. Indeed, what Fife paid to the striking miners would almost cover the cost of giving complete relief to every sports club in Scotland. [Interruption] I advise the hon. Member for Glasgow, Cathcart (Mr. Maxton) that the only clubs that enjoy mandatory relief by statute are the miners' welfare clubs in Scotland. There may be a lesson in that, and one can predict why it came about.
  The debate has been most revealing. Once again the Liberal and Social Democratic parties have a policy which will not work and which is different from everybody else's. The Labour party has come out as the reactionary party. It is the party for the status quo and without a new idea. I congratulate my right hon. and learned Friend the Secretary of State on the Bill, which is radical, and which is a real attempt to deal with a problem which has dogged successive Governments.
  The Labour party is defending a system that is a legacy from a time when land was the sole measure of wealth. It is defending a system that penalises the pensioner, although year after year we hear speeches from Opposition Members saying that we should do more for the single pensioner and the widowed pensioner, and that is quite right. However, the hon. Member for Garscadden has brushed aside single pensioners as representing a mere 9 per cent. of the electorate—
  Mr. Maxton: Perhaps the hon. Gentleman would tell us how many single pensioners and widows pay rates under the present system. May we have those figures? I asked the Minister to provide those figures because the whole case seems to be based on them, but he was unable to tell us.
  Mr. Forsyth: I am grateful to the hon. Gentleman, but if he had been listening to the speech of his hon. Friend the Member for Garscadden he would have heard him say 9 per cent.
  Mr. Maxton: That is different.
  Mr. Forsyth: It is an odd argument that considers single pensioners—many of whom pay income tax—not in terms of the justice of helping them when they are perhaps stuck in family homes and facing huge rate bills on small incomes, but on the basis of what percentage of the population they represent. That is especially odd when it comes from the party which accuses us of being the accountancy regime in politics.—[Interruption.] The Labour party cares only about perpetuating a system in which the minority of people have to pay for the extravagances of the party in power. If the Labour party itself had designed the rating system it could not be more perfect, but what has gone wrong with the system is that not only has it become unfair, but that it has encouraged irresponsibility in our councils. That is why there is politics on the rates, and why, up and down the country, including Scotland, the conventions of local government have broken down.
  There is a fundamental flaw in an argument that seeks to fund local government solely by a redistributive tax. There should be an element of charge, because local
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  government does, after all, provide services. If the unfairness of the present system is that rates are levied regardless of ability to pay, it is also unfair that the rates that are levied bear no relation to the services that are received.
  The right hon. Member for Govan, who has now left the Chamber, was honest enough to say that he fully supported the revaluation. I have to confess that I do not remember his saying so in the Chamber at the time. However, we are grateful for his support on that matter.
  I wish that the hon. Member for Garscadden would clearly tell the Scottish people that the Labour party supports the revaluation and future revaluations of the domestic scene. If one supports the rating system and claims to be concerned about fairness, implicit in that is a belief in regular revaluations. We have not heard that from the hon. Member for Garscadden, but perhaps we shall hear it later in the debate.
  Let me spend a little time talking about local income tax, which seems to be the only alternative that we hear from the Opposition Benches. I have already made the point that it would have the effect of crippling rural areas in Scotland, crippling constituencies which are represented by Liberal and Social Democratic Members and crippling constituencies represented by at least one Member of the Scottish National party.
  I am surprised that hon. Members have not made the point that the interesting thing about the local income tax proposal is that when one makes the point about the narrowness of the tax base the vague assertion is made that there could be some sort of grant to redistribute the money. [Interruption.] I shall gladly give way to the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) if he can explain to me how that would work.
  Mr. Kirkwood: I shall make my own speech in my own time.
  Mr. Forsyth: The hon. Gentleman does not know. We have been given no clear idea of how that would work. however, perhaps I can assist him.
  One way would be simply to say that all local government finance will be funded by a local income tax which will be the same in every area—4·5p in the pound—and the money will be dished out by the Government, but that would introduce central funding of local government. That would not be a local income tax. A lot of money could be spent to set up a bureaucracy to collect the money at local level, and in doing so the Liberals would give us that ultimate freedom of information—the ability for local government officers and councillors to find out how much each and every one of us earns. Not many of their constituents would want that.
  If we go back to the idea that money would be collected centrally, which is more sensible, the Liberals, and Scottish nationalists and others who support local income tax would have destroyed local government and the very local accountability about which they talk. Local income tax would not be perceptible to those who are paying it. It would be taken from their pay packets and people would not know how much had gone to central Government, how much to local government or how much in national insurance and other stoppages.
  Mr. Norris: I agree with my hon. Friend's points. Will he consider what might happen given that at present one pays income tax in relation to the place of one's

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  employment, but presumably one would pay local income tax in relation to one's place of residence? As the two are frequently different, how, even from a technical point of view, could they be reconciled?
  Mr. Forsyth: My hon. Friend makes a good point. At the moment, as I understand it, the Inland Revenue operates on the basis of people's place of work address. A new register would have to be drawn up. Yet we are being attacked because it is said that it would be impracticable to set up a register to collect a community charge.
  Hon. Members on both sides of the House have had experience of constituents who write to us because their mortgage relief has not caught up with the fact that they moved house three years ago. The Inland Revenue deals expeditiously with such matters, but such problems add a burden. Imagine the effects on local businesses having to deal with 56 different levels of local income tax in Scotland alone, all varying from year to year. They would have to take account of the fact that Joe Bloggs had moved, and inform the Inland Revenue each time. That is a recipe for complete chaos. It would be bureaucracy gone mad. Yet that is put forward on the basis that our system is too complicated and difficult to administer.
  Mr. Maxton: I accept the point made by the hon. Member for Oxford, East (Mr. Norris) about the present situation, but if the hon. Member for Stirling (Mr. Forsyth), has talked to any Treasury Ministers he will be aware that the Inland Revenue is presently undertaking the computerisation of the system. I have been to a seminar on that with Treasury Ministers, and it is they who claim that such problems will eventually be overcome. If the hon. Gentleman were to deal with other objections to local income tax, he would get on much better.
  Mr. Forsyth: I am grateful to the hon. Gentleman. He makes a fair point about the computerisation of the Inland Revenue. I can only say that I recently computerised my constituency casework and it has taken me a year to make the system work properly. A computer is only a tool. It does not change the fundamentals of the situation with which one must deal. There would be 65 different rates of tax. All that is different from the point of view of the register is that, instead of local government having to make up the register, control and police it, the Liberals, Scottish nationalists and others who advocate local income tax are passing the burden on to small businesses. That is from a party which tells us that it is concerned about the burden on small businesses.
  Mr. Michael Hirst: Does my hon. Friend agree that there is a further patent disadvantage about a system of local income tax, and that is that it would result in disproportionately severe tax burdens upon people who, be they print workers or successful entrepreneurs, have high incomes and who would be bled white to contribute to local government services?
  Mr. Forsyth: That is true. That brings me to the point that was fairly made by the hon. Member for Garscadden, when he tried to imply that there should be some equity in local government and that the amount that people pay towards services should be based on their ability to pay. What he did not take into account was my hon. Friend's
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  point that the vast amount of local authority income comes from the Government, the bulk of which is from taxation, so that those people are already contributing through their income tax to the cost of local government. Therefore, there is a progressive element. The community charge, to which Opposition Members object because they say it is regressive—
  Mr. John Home Robertson: The poll tax.
  Mr. Forsyth:—or the poll tax—is less than one sixth of total revenue.
  It is interesting that the hon. Gentleman tries to get us to call it a poll tax rather than a community charge. Opposition Members are so bankrupt of arguments that they are reduced to trying to give it a name which implies some threat to the right to vote. They cannot argue against it on the basis of what it is. Therefore, they insist upon using the term "poll tax", which, I freely admit, I have used in the past to advocate such a system, but it is misguided, because it implies that the right to vote is somehow connected with it, which it is not.
  Even if the advocates of local income tax had managed to get their administrative act together, there is still one good local government reason for it being a bad system for funding local authorities—the highly buoyant nature of local income tax as a source of revenue. Even a small increment in local income tax will produce extremely large sums of money for local authorities. I think that it is true that for most local authorities a ½p local income tax would account for almost 10 per cent. of their total revenues. That means that efficient councils would not be able to demonstrate to their local income tax payers their efficiency by cutting the rate of income tax. If they did make savings, they would have to be at least 10 per cent. in order to make a ½p cut, which the Inland Revenue, even with its computers, says is the smallest sum with which it could consider dealing. Equally, it means that if they put ½p or 1p on local income tax, a huge increase in revenues will occur, and who doubts that most local authorities would find the means to spend that money? It would be an accelerator for high spending by local authorities and make them less accountable.
  Mr. Henderson: I have been following closely my hon. Friend's argument, and clearly he is extremely knowledgeable. However, has he not underestimated the problem of collecting local income tax from small business men? Presumably, the party advocating local income tax envisages it for the whole of the United Kingdom, so there will be not just the 56 local authorities in Scotland, but the 400-odd in England and Wales with which the employer must keep in touch.
  Mr. Forsyth: The hon. Member for Cathcart is keen on computers and implied that he is interested in the idea of local income tax.
  Mr. Maxton indicated dissent.
  Mr. Forsyth: Well, those who are interested in the idea can treat us to an account of how those who have computerised payroll systems on a United Kingdom basis will programme their computers to deal with the varying changes. My hon. Friend the Member for Fife, North-East (Mr. Henderson) is right.
  We have heard rather a lot about White Papers and Layfield and all the reports on the funding of local government. Layfield pointed out that a local income tax

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  could not be levied at district level because the local authority is too small. That means that one has to levy at regional level in Scotland, which means that there has to be something else to raise the revenue for the district. We look forward to hearing from the hon. Member for Cathcart what that something else will be, and how it will work.
  I appreciate that I have gone on for some time, and we are all looking forward to hearing how alliance Members will deal with local income tax. However, is it possible for my hon. Friend the Minister to consider putting certain aspects before the Committee? Is there not a case for putting in a requirement to force local authorities to take some action about sports grounds and perhaps introduce some element of mandatory derating? If it is possible to do that, perhaps we can go a little further and consider the possibility of harmonising methods of valuation.
  I am worried about enforcement. I am disappointed that it will not be a criminal offence not to pay the community charge. I wonder whether we should consider people having a community charge number, which would be required for them to claim benefits or receive other services. I see no objection to that in principle, any more than there is objection to people having a national insurance number before they take up employment.
  Could we not improve the Bill so that, instead of saying that when people move they have to apportion the amounts payable in each area, we could opt for a system rather like the census? Where someone is resident on a given day should be regarded as determining his obligation for a community charge, and on a swings and roundabouts basis authorities would gain and loose equally and there would be no disadvantage. This would simplify administration.
  Opposition Members have made great play of the fact that we have rejected particular methods in the past and not tackled the problems for 10 years. My right hon. and learned Friend the Secretary of State is to be congratulated on grasping the nettle, for holding it fast and for introducing a system which is politically brave. I believe that when the people of Scotland see that the Opposition parties have nothing to offer but the status quo, which has long since been discredited, they will support us at the polls, whether they are gainers or losers.
  8.3 pm
  Mr. Robert Maclennan: It is perhaps not surprising that the hon. Member for Stirling (Mr. Forsyth) devoted the larger part of a long speech to shadow boxing about local income tax. It was somewhat galling that he had to rely on misinterpretations of the proposals of the two alliance parties on this subject because there had been no contribution to the debate for three and a half hours from any alliance Member and he had to go on suppositions and interventions to make his point.
  The hon. Member for Fife, North-East (Mr. Henderson) said that the speech of the hon. Member for Stirling was informed, but it was not. Had it been, he would have known that it is not a novel suggestion to finance local government by local income tax, and that it is a tax employed by many democracies, notably in 13 states in the United States of America. If he had come to grips with the reality of local income tax, instead of creating fantastic opposition to it, he would have realised
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  that if one lived and worked in the city of New York, one would pay income tax to the city, to the state and to the federal Government.
  It has never been argued, not even by this Government, who are opposed to local income tax, that it is not possible to introduce it. It has always been accepted, from Layfield on, that it would be possible to introduce it, and to do so by the latter part of this decade, when the process of computerisation by the Inland Revenue will be complete. The Government chose to reject this, not on the grounds of inoperability, but because they prefer a form of taxation that will allow them much greater control over local authority spending, because they do not choose to strengthen local authority accountability and because they wish to reduce the freedom of local government to spend.
  The system of taxation advocated by the hon. Member for Stirling, which the Government are proposing in the Bill, is not, by contrast to local income tax, known in any civilised country. It is a bizarre, inequitable, and extremely burdensome tax. It will be impossible to collect. It will lead to the greatest discontent in Scotland when its incidence is felt.
  It is not entirely surprising that the Government should have spent so little time discussing the merits of their case, because it is not possible to present the community charge, as they choose to call it, as the culmination of a careful process of reviewing local government finance options and the alternatives to domestic rates. The Government were bound to domestic rates from the day they took office back in 1979 until there was an uproar at the Conservative party conference last year. The Government set their face against the criticism made about local rates by the two parties of the alliance.
  Mr. Norris: I am amazed that the hon. Gentleman should draw the conclusion that community charges are unknown. In a great many areas, not only in this country but in Europe, it is well known for local services to be provided on the basis of a specific charge. That is the basis of the community charge proposal.
  Mr. Maclennan: That is obviously an illustration of the hon. Gentleman's total failure to understand that a community charge is not for specific services provided. It is a compulsory tax imposed on everyone. That is different from payment for specific charges and neither the hon. Gentleman nor any member of the Government can produce a single example of a community charge as they define it in operation in any other country.
  Mr. Michael Forsyth: Japan.
  Mr. Maclennan: The hon. Gentleman did not find time to put that example into his half-hour speech. Even in Japan, it is so varied according to income that it is much closer to a local income tax than a poll tax.
  The reality is that the Government have not once, but twice, professed their commitment to domestic rates. They did so in their 1981 Green Paper on the alternative to rates and in their White Paper of August 1983 they described local domestic rates as the "best of the options". The sudden conversion is not really a systematic thinking through of the problems. It is to deal with a rather acute little political problem that the Conservative party in Scotland has faced and which is making certain hon. Members, such as the hon. Member for Strathkelvin and

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  Bearsden (Mr. Hirst), who looks ever more precarious in his constituency, feel uncomfortable. The Government stated in their White Paper of August 1983 that they
  "have concluded and announced to Parliament that rates should remain for the foreseeable future the main source of local revenue for local Government."
  What is the background to this extraordinary volte-face?
  Mr. Michael Hirst: What about the hon. Gentleman's party?
  Mr. Maclennan: I shall come to my party's proposal, but I now intend to deal with what is before the House tonight, which is the Government's retrogressive and burdensome attack on local government and the poorer people in this country.
  Three factors have led our sinuous Secretary of State to bring forward this deceptive Bill. The first is the desire of the Government to continue their war against the freedom of local authorities to determine their own levels of expenditure. Almost every Session in this Parliament, as the right hon. Member for Glasgow, Govan (Mr. Milian) pointed out, has seen the Government introducing a new twist of the screw by some legislative means or some cut in the rate support grant to reduce the scope of local authorities to deliver the services that Parliament has entrusted to them. The Government have tried to pretend that local authorities have been profligate in their rating policy. Certainly some have been more spendthrift than the majority. The reality is that in local authorities throughout the length and breadth of Scotland service provision is being cut back by the deliberate action of the Government.
  The next factor to account for the Bill is what I think could properly be described as the Perth revolt.
  Mr. Hirst rose—
  Mr. Maclennan: I will not give way. I have had to wait for three and a half hours to participate in the debate and I propose to develop my argument before I give way. I do not see why I should keep out other hon. Members who have also been waiting.
  The cornered and angry Conservative activists confronted the Government in Perth with the need to do something to wipe out the recollection of the injustices wrought by rates revaluation. If necessary, Ministers would have to incur the acute indigestion caused by eating their own words. Despite their repeated earlier defence of the rating system, which, in their words, was "highly perceptible well understood, cheap to collect and difficult to evade", they were prepared to do that.
  No one doubts that the Secretary of State for Scotland is a smart chap. His improvisation on the theme of local government irresponsibility today, however, bears little relationship to what he and his colleagues have been saying and doing for six years. He hopes that his bravura in introducing this Bill in the dying Session of this Parliament will serve to distract his audience from what has gone before.
  The next factor that the Secretary of State regards as favourable to his proposals is their timing. The Scottish electors are being asked to buy now and pay later. The hon. Member for Kilmarnock and Loudoun (Mr. McKelvey) threatened to introduce 1,000 amendments to the Bill. I think that it is fair to predict that that would
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  result only in the Government introducing the guillotine and leaving the details of the Bill largely undebated. It is a fair guess that an election will be interposed before the implementation of the Bill and its full and nasty impact is felt by the suffering Scottish electors.
  I was interested to read in the Local Government Chronicle an analysis of the impact of the proposed poll tax on Durham. The analysis has been carried out for local government in that area by the John Gibson Consultative Group. It is an important analysis, because it is the first one that attempts to put flesh upon what the Government are proposing. It points out that the Government decided to move on this matter in Scotland because 100,000 Scottish households—about 5·26 per cent. of the total—had experienced an increase in their rates of more than one third following revaluation. The Durham study shows that the Government's criterion of the unacceptable is far exceeded by the imposition of the poll tax. It shows that in the eight different districts of the Durham county council the percentage of households with bill increases of more than 20 per cent. will be, on average, about 50 per cent. One goes as high as 69·56 per cent. In fact, according to the study, it is bound to result in every local authority in England, Scotland and Wales suffering an extraordinary increase in their total tax under the Government's proposals. I commend the study to the House.
  As I said earlier, it is not the Government who have been consistently drawing attention over the years to the unsatisfactory and arbitrary nature of the rating system. Unlike the Labour party, the two parties of the alliance are not bound to the rating system. We see that it has certain attractions and a certain sort of rough justice about it. The possession of real property offers some rough measurement of the wealth of the ratepayer but there are too many anomalies and the system has become too complex for the ratepayer to perceive that what he is being asked to pay is just. I do not think that the right hon. Member for Govan's defence of the rating system on the grounds of flexibility is good enough. Almost every year it had become necessary to introduce changes in the calculation of the rate support grant to reflect changed perceptions of need and to bring new reliefs from the burden of rates. That led to a system of such complexity that perhaps only the right hon. Member for Govan fully understood how it operated. That complexity was a sufficient reason, in my judgment, for looking carefully at the continuance of the rate system.
  Mr. Peter Lilley: Would the hon. Gentleman explain whether the system that his party proposes to introduce, if he is going to mention it at all, would contain a needs element and, if so, how it would be calculated if not by the present system?
  Mr. Maclennan: I shall turn, more quickly if I do not give way to interventions, to the question of a local income tax which the alliance parties favour. In drawing attention to the inadequacies of the rating system, we had rather better authority in the form of the Layfield committee on local government finance. We have consistently advocated a move to a form of local taxation that we believe will be much more popular with the Scottish people—a local income tax. Our views about its popularity are fortified by opinion polls which show that it is overwhelmingly the most popular system of taxation for local government. A February Gallup poll was the last full poll on the subject

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  that I have been able to find. It found that the public favoured local income tax by a majority of two to one over any of the alternative systems proposed.
  The Secretary of State sought to dress up the Bill as an attempt to increase the accountability of local authorities. The Bill's true intent is to extend the sway of the Government's economic dogmas to the local sphere. It is more concerned to control the quantity of services and the manner in which local government provides them than to strengthen local government accountability.
  The Bill is a centralising measure. By making local government dependent for 87 per cent. of its funds on central Government, the Bill will ensure that local government has to accept central Government priorities and policies. That figure was given in a parliamentary answer by the Under-Secretary of State for Scotland—the hon. Member for Edinburgh, South (Mr. Ancram). If he believed in true local accountability, he would not be sucking into the centre control over local spending. He would be seeking to create local authorities that were genuinely accountable and answerable to their electors, and would be giving them genuine control.
  It was always accepted, until the Conservative party came to power, that local authorities, although bound by legal framework setting out their duties, were not governed by the policies of central Government. However, the Government are determined that local government must be submissive to their policy framework. That is a novel constitutional doctrine, but it was set out by the Government in their reply to the House of Lords Select Committee on Science and Technology in House of Lords paper No. 243.
  There is little point in having local authorities, councillors and elections if they have to follow the policies of central Government. The obligation of those authorities is to accept the law and within the law to make their policies. That may be extremely inconvenient to central Government, although I believe that it does not have an impact on the macro-economic management of the economy if local government seeks to finance its additional expenditure from taxation raised by its own hand, provided local authorities' borrowing powers are controlled. Such a policy may be unpopular with the local electors, but the remedy lies not in drawing financial controls ever tighter but in instituting an electoral system which ensures that the views of the electors are fairly and proportionately reflected in local government.
  The Conservative Administration has firmly set its face against this. If they were seriously interested in promoting local accountability, they would easily dispose of the extremists in local government by introducing a fair electoral system. But they will not do that. It would rather sustain this great gulf between itself and the Opposition than bring the voices of moderation and sense into local government.
  Mr. Norris: Will the hon. Gentleman give way on this point?
  Mr. Maclennan: No, I shall not. The hon. Gentleman's interventions have punctuated every hon. Member's speech.
  The essence of the Government's justification for this wretched Bill is that it will ensure that locally raised revenue is drawn from the population at large and not just from the 30 per cent. of the electorate who pay domestic
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  rates. The Government make much of the proposal whereby non-domestic rates should ultimately be pooled nationally and distributed on a per capita basis. That is a bizarre suggestion, because non-domestic rates will be unrelated not only to the ability of businesses to pay—businesses, even more than the individual ratepayer, caused the Government embarrassment in Perth—but to the consumption by businesses of local services. There may be a reduction in the extent to which the responsible authority—central Government—will be accountable for the tax of those who pay.
  In Scotland, no less than 62 per cent. of rate income is raised from non-domestic ratepayers who do not have a local vote. The Government are doing precious little about that. They are just index-linking the payment of the non-domestic rate until they can bring about this pool system over which local government will have no control. It is only two years since the Government introduced an arrangement whereby at least businesses had a right of consultation with local authorities. When these powers are transferred to central Government, what right of consultation will businesses have? Once again, the Secretary of State is shrouding behind a smokescreen his intention of depriving local authorities of the ability to respond to business needs.
  If the Government proceed to pool the non-domestic rate, it will have a considerable impact on local authorities resources. The Public Finance Foundation—a wholly independent source—found that some local authorities drawing on that pool would receive more than they would require to carry their total rate-borne expenditure.
  Mr. Hirst: Will the hon. Gentleman tell us in straightforward terms whether the alliance supports indexing for non-domestic ratepayers? Many small business men in Scotland eagerly await what the alliance will do.
  Mr. Maclennan: They are right to be eager, because they can be sure that they will get a better deal than they are getting from the Government.
  Mr. Hirst: Answer the question.
  Mr. Maclennan: Indexing, of course, is an interim measure. It is perfectly acceptable, but it does not go nearly far enough to protect local business from the vagaries of the existing system. It will not equalise the rates imposed on local businesses in Scotland. It will not do anything to protect local businesses from the depredations of profligate local authorities. The hon. Member for Strathkelvin and Bearsden (Mr. Hirst) should not try to deceive the small businesses in his constituency, implying that they are receiving a great bounty from the Government, when the reverse is true.
  Pooling the non-domestic rate would result in a sharp increase in the local taxation of businesses. Nineteen authorities, including Caithness and Sutherland, would have to pay no community charge at all. What sort of local accountability will my constituents have if, as a result of the redistribution of the pooled non-domestic rate, they are not required to pay any local taxation? It is the reductio ad absurdum of local finance when local government becomes 100 per cent. dependent on central Government spending. That will happen if the Government's proposals are accepted.
  If one accepts the Government's figures on the changing burden of funding local services, one sees that

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  there are some spectacular gainers and losers. I have looked at the figures that concern my constituency, before the pooling of the non-domestic rate. If domestic rate relief is phased out, as seems highly likely—indeed, this conforms with the Government's present policy—the increase in individual tax per adult per year will be £26 in Caithness and £28 in Sutherland.
  The Bill is indeed most unacceptable in its impact on the individual elector. The term "community charge" is entirely bogus, for the reasons that I gave to the hon. Member for Oxford, East (Mr. Norris). It does not relate to the amount of service used and it involves no choice over the use of the service that the word "charge" implies. It is precisely those people who will have to pay the community charge, and who are not at present paying rates as householders, who make least use of local government services—that is, mainly young adults aged 18 to 24.
  The main categories of expenditure are directed towards young people and the elderly. If the local tax were indeed a charge, families with children at school and persons aged 75 and over would be required to pay higher local taxes than working adults without children. At the level of the individual taxpayer, the community charge paid will no more reflect the services taken up than do rates at present. In truth, the so-called charge is a compulsory charge, and it is properly called a poll tax. It will he much more regressive than the present system. Pensioner couples and young, non-householder unemployed adults will be particularly badly affected.
  The Government have concealed their impact of their proposals on individuals but, again to quote the Public Finance Foundation, it has been explained thus:
  "While it is difficult to quote precise figures given the almost deliberate attempt of the 1986 Green Paper to mislead the reader, it is clear that the totality of reform makes households with net actual incomes below £200 a week considerably worse off whilst those over £200 per week are considerably better off."
  That is precisely the point. The poll tax is not related to ability to pay. It is designed to be unpopular from the start. It is intended to taint local government. Its purpose is to act as a disincentive to increased spending and taxation.
  Due to its gearing effect, a local authority spending 10 per cent. above average would need a tax rate three times that for expenditure 10 per cent. below the average, while at 20 per cent. below, there would be no need to levy a tax at all. With high grant, quite small increases in local spending require much greater increases in tax rates. It is those percentage increases alone which the public could control at local level. In the Government's view, local accountability is satisfied by controlling this marginal expenditure borne by local electors. It is a narrow and flawed concept of local accountability.
  Turning to administration—I shall cut my remarks short, although I must draw attention to the fact that, in opening the debate the Minister spoke for three quarters of an hour, that the Front Bench spokesman for the Labour party also spoke for about three quarters of an hour and that this is the first intervention by an alliance speaker in the debate—the administration of this tax has been criticised by those who will have responsibility for it. It has been dismissed by the Convention of Scottish Local Authorities, by the Chartered Institute of Public
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  Finance and Accountancy, by the Law Society of Scotland, by the sheriffs' officers and by anybody who has any knowledge of these matters.
  According to the explanatory and financial memorandum, the cost of introducing the system has been set at roughly what it would cost to introduce an Assembly for Scotland. Let the Government, soon to be the Opposition, not criticise the cost of establishing a Scottish Assembly when they so lightly embark upon an increase in the cost of levying local taxation. The problem of evasion is huge. The Government argue that it can be minimised by crosschecks with the electoral roll, by canvassing households, by checks on those using local services and by a number of other snooper techniques. The reality is that it will not be enforced and that it will be brought into disrepute.
  The Government ought to have used these seven lean years of government to introduce a worked-out system of local income tax which would have given genuine local accountability to local government and have helped to reduce the tied nature of local government spending. The existing criticism that may be made of local government finance is that it is so heavily dependent upon central Government grant that it induces irresponsibility. It is important that that should be changed.
  Our view is that a local income tax system—which would not be a wholly new tax, because at present income tax is paid to central Government and then returns in the form of grant to local authorities—would result in a link between the provision of services and the paying for services. It is the true argument that the Government are abusing to justify the introduction of the poll tax.
  On average, under our proposed system, householders would end up paying the same amount of local, Scottish and national income tax together as they pay at present in rates and national income tax combined. The changes would not mean an additional taxation burden.
  We recommend that non-domestic rates should become part of national taxation but, unlike the Government's proposal, that taxation would be used to finance the equalisation of local authority resources. It would be the best means of ensuring that local authorities have the means to meet the service needs of their communities.
  It has been dismaying to watch this Government's approach to local finance unroll over seven years and finally to unravel with the introduction of a tax that led to the peasant's revolt in England in 1381. It has not been reconsidered since, and for good reason. When the opportunity comes to vote against the Bill, we shall take it, and we shall take our case against it to the country. And in the election we shall win the argument.
  8.36 pm
  Mr. Michael Hirst: Spectators of Scottish debates must sense a certain predictability about their course. Today's debate has been no different from previous debates. It has been predictable the range of arguments deployed on both sides. Once in again the Secretary of State for Scotland has bested the hon. Member for Glasgow, Garscadden (Mr. Dewar) at the Dispatch Box. It has also been predictable, in that there was a 33-minute speech by the hon. Member for Caithness and Sutherland (Mr. Maclennan) which contained nothing about the alliance policy. I was slightly amused to hear the hon. Member for Caithness and Sutherland say that he would take the alliance case to the

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  people at the next election. I just hope that the people of Caithness and Sutherland have the time to listen to him, if they have not fallen asleep.
  Today the Opposition have dwelt strongly upon fairness. Fairness, or the lack of fairness, has characterised all their arguments. I do not recall that there has ever been a cheep from them about the unfairness of 750,000 people in Scotland who have incomes not contributing to local government costs. I was amazed to hear Opposition speakers refer to young people having to contribute to the community charge although they make no use of local government services. When I visit my local sports centre and use its club and swimming facilities, I am the old man there. Most of the other people there are youngsters—those whom the Opposition think do not use local government services.
  It is offensive to hear members of the Opposition parties scoffing about little old ladies living on their own who, by being thrifty, have made savings and whose income means that they do not qualify for any relief or rebate. Yet the rates bill represents their largest single outgoing in the year. I am amazed that they are unaware that elderly people and single-parent families have had to sell the family home and move to a smaller house because they cannot afford the rates burden. The hon. Member for Western Isles (Mr. Stewart) was very dismissive about little old ladies. Nevertheless, rates bear heavily on them. We heard the alliance talking about rough justice. It is rough justice and one of the things that delights me about this measure is the justice that it will bring to the elderly, the widows, the single-parent families—all those people who for too long have been the victims of injustice and unfairness.
  In considering unfairness we must stop and think about the people who do the desirable thing of improving their properties. Having put in central heating or built an extension they discover that the rates bill goes up. That is unfair. It seems mad to encourage people to become owners of property and to keep their housing stock in good condition and at the same time to penalise them with higher rates hills when they improve those properties.
  Mr. Wallace: I, too, have used that argument against the rating system. Is the increase in rates for someone improving his property as the hon. Member describes greater than the value added tax imposed by the Government on people who carry out such repairs?
  Mr. Hirst: The hon. Gentleman much espouses the concept of Europe and he knows that VAT on major property improvements or extensions operates throughout the Community. Of course they will pay more VAT, but at the end of the day they will have a substantive capital asset. My complaint is that income outgoing in a higher rates bill year after year is unfair. [Interruption.] The hon. Gentleman should be careful about running down that line. When we talk about fairness we should be thinking about fairness for the non-domestic ratepayers, the people who have no opportunity to exercise their rights at the ballot box. No one in the Opposition has taken the trouble to think about the effect of unfairness on small businesses which, year by year, have suffered rates increases substantially beyond the rate of inflation.
  The Edinburgh chamber of commerce says it all. The veritable forest of "To Let" boards in Princes street speaks volumes for the fact that high rates drive out business. I
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  welcome the efforts that the Bill will make to protect the business sector until such time as there is a national revaluation followed by a simplification and standardisation of valuation procedures. There is no reason why there cannnot be consensus in the House on the matter, because every hon. Member must know of an example from his constituency of a business which, endeavouring to compete in Scotland, faces rates bills substanially higher than those of its potential competitors in other parts of Britain. I have an example of a constituent who owns a cold store. His rates bill is £130,000 per annum. A cold store of comparable size in Manchester pays £39,000. How can that man run a business, make a profit, provide employment and create wealth when he has to operate with such a severe disadvantage?
  My hon. Friend the Member for Fife, North-East (Mr. Henderson) was right to speak of the unfair burden on the Scottish business ratepayer. That burden must be lifted. The small business man in Scotland is acutely worried about his rates bill and I hope that he will watch carefully as the Labour party and probably the alliance oppose the various provisions within this Bill that would bring relief to such businessmen.
  I listened carefully to the speech by the hon. Member for Garscadden who expressed the views of his party about how it would tackle rates. When pressed again and again by my colleagues on the Front Bench about what the Labour party would do about rates, he wriggled and squirmed and was evasive. Finally, he was taxed about the speech made by the hon. Member for Copeland (Dr. Cunningham) who, we understand, speaks for the Labour party on rating matters, and the hon. Member for Garscadden said, "We could think about capital values." Capital values would be severely injurious to people. What about somebody who lives in a small house in a rundown area that has suddenly become gentrified? That person would suddenly discover that the capital value of his property had increased, but at the same time so would his annual rates bill. If the Labour party goes down the road of capital values, it will encounter massive hostility and objections.
  The hon. Member for Garscadden raised one point that is worth greater examination and I should be grateful if my hon. Friend the Minister would address it in his winding-up speech. The hon. Gentleman spoke about non-domestic rates. When they become index-linked, a local authority will be faced with a substantial amount of additional expenditure—perhaps because of a national settlement or some other factor outwith its control. If it cannot look to the non-domestic sector to make a contribution to those extra costs, they will fall disproportionately severely on the domestic ratepayer or the community charge payers. Can the Minister tell us what the Government intend to do in such cases? Would they increase the needs allowance to avoid the impact falling too severely on the domestic ratepayer, or would some other arrangement be made?
  We saw no sign from the Opposition of any real alternative to the present rating system. I hope that people in Scotland will recognise that there is only one party, the party in government, which is prepared to tackle the nettle of domestic rates in the way that the Government are doing. I recall the vehemence with which the hon. Member for Garscadden and some of his hon. Friends have said they intend to oppose the Bill root and branch. I hope that the people of Scotland will remember that the Labour party opposed root and branch tenants' rights to buy their

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  council homes and the right of an employee to have a secret ballot before taking strike action. In time, just as those things are now accepted and welcomed by the public at large, people will see that the community charge is a much fairer way of financing local government.
  Why is there opposition to the Bill? Accountability must surely be one of the features that we seek in the new arrangements. At the moment, one of the primary weaknesses of the rating system is that it does not confer accountability. The people who have to pay rates are not necessarily in a position to influence the spending policies of local authorities. By this Bill accountability is enhanced, and that is why the Labour party is running scared of it.
  The hon. Member for Glasgow, Springburn (Mr. Martin) protested strongly about young people being expected to make a contribution to the community charge, albeit on a fully rebated basis. He said that it was quite impracticable and unreasonable to expect them to make any payment and that they might well seek to evade it. There are some interesting statistics about the number of young people in Scotland who take on credit sale arrangements for hi-fi sets and things like that. If the hon. Member for Springburn bothered to look at the statistics, he would discover that young people in Scotland have the best record in the country for honouring their debts under credit sale agreements. It is grossly insulting to suggest that they would seek to evade their appropriate share of the cost of local government. To say that they are irresponsible is a gross calumny on them, and the hon. Gentleman ought to be ashamed.
  There is one final point that I should like the Minister to address. We have had a limited discussion on the impact of the community charges on a collective basis. Can the Minister tell me what will happen when a property is let out in rooms to students or other people who pay rent to the owner of the property? That rent includes a proportionate share of the rates. As I read the Bill, it does not appear that that sort of property would be covered by a collective community charge. I know that there is some anxiety over this matter, because people have made representations to me, and it would be helpful if the Minister could give me a substantive answer or write to me about it. I listened carefully to the speeches by the proponents of local income tax, the alternative which the SNP and the alliance pretend is the great way to sort out this whole matter.
  Frankly, I was staggered by the way in which the right hon. Member for Western Isles skated over the problem of schedule D taxpayers and seemed to assume that they could be brought into the computer net in the same way as any employee. I remind Opposition Members that centre 1 has operated for the past 16 years. If Opposition Members' constituents do not bring them problems about their notice of coding or their tax affairs at centre 1, their surgeries are not well publicised, or their constituents are remarkably lucky. With 56 rates of local income tax, it is clear that better-off people, who would be subject to a higher charge, will swarm out of the higher rated areas into lower rated areas.
  It must be a proven fact that areas with a high, strong income base would have a low local income tax. Correspondingly, comparatively lower income areas would have a much higher local income tax. If the proposal is merely to collect the whole lot and spread it out
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  again, local government accountability will go right out of the window. How is it possible to overlook the fact that the largest proportion of costs and the largest amount of local government income come, and will continue to come, from the Exchequer, to which all people in the country pay according to their ability?
  I must conclude my remarks because I know that other hon. Members wish to contribute to the debate. I ask my right hon. and hon. Friends on the Government Front Bench, in the weeks and months ahead when we consider the Bill, to be prepared to take account of the representations made by responsible people. It is surely in the interests of everybody in Scotland that we get the most workable, practicable and fair alternative to the rating system.
  8.51 pm
  Mr. Michael J. Martin: I know that it is not always in your power, Mr. Deputy Speaker, to curtail the length of hon. Members' speeches, but it is deplorable that, in a debate such as this, the SDP spokesman, the hon. Member for Caithness and Sutherland (Mr. Maclennan) took half an hour to speak. I know that you, Mr. Deputy Speaker, have to be fair to hon. Members in minority parties, but they should return that fairness by ensuring that they do not speak for too long. It is unfair when other hon. Members wish to participate in the debate.
  The hon. Member for Strathkelvin and Bearsden (Mr. Hirst) stated that young Scottish people have a good record in repaying their debts. He is a chartered accountant. He will be used to dealing with people who pay debts. He knows all about statements, bank accounts, and so on. He will know that a young Scottish person aged 18 to 21 very seldom will get into debt unless his or her parents, who are householders, are prepared to act as guarantors. Many young people, who are fortunate enough to be able to acquire debt at that age, have the restraining hands of their parents to make sure that they pay on time. This is a different situation. It means that debt is to be imposed on young people whether they like it or not.
  The Secretary of State said that people have the legal right to vote and, therefore, have to take the disadvantages along with it. A person who, at the age of 18, sets up a home, runs a house and incurs debts, has to take the same responsibility as someone my age and someone else in the community who is a householder. But if a young perosn decides to remain in the home into which he or she was born, there is no reason in the world why they should have certain penalties imposed upon them.
  I have a teenage family. My son and daughter have a commitment to put something into the household. I can assure the House that that money is put in on Friday, and by Monday they look for funds from their mother to go to the disco or to do something else. It is not fair to put a burden of responsibility of that nature on to young people of that age.
  The Secretary of State said that the community tax would be fair. The hon. Member for Strathkelvin and Bearsden knows full well that the area that will gain from the passage of the Bill is the Bearsden area in his constituency. The people in that area will pay about 13 per cent. above the Scottish average, yet, in a city such as Glasgow, they will pay 18 per cent. above the average, with all the problems of poverty and deprivation that that city

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  has. We all want to see the inner cities repopulated. There have been successful attempts in the cities of Edinburgh and Glasgow to get housing into the city centres. We all know that if rateable values or community charges go down in outer and suburban areas of our cities, property prices will go up. The trend will be reversed, and we have been trying to avoid that for many years. We are working towards bringing people into city centres.
  The hon. Member for Strathkelvin and Bearsden suggested that this will be a simpler scheme. I cannot see how it will be simpler. The Secretary of State and other hon. Members have hidden the fact that, in the early years of the scheme, we shall still have about 13 different rate charges. We shall still have domestic rates. They will exist for a number of years to come. We shall still have non-domestic charges for water and the services. We shall have charges for the non-domestic ratepayer for region and district. There are personal community charges for region and district. The standard community charge will be for the region and district. There is also a collective community charge.
  The Secretary of State for Scotland is a legal advocate. He can say things with a straight face—that is part of his legal training—but I do not know how he can stand at the Dispatch Box and, with a straight face, say that this will be a simple method of paying local taxes. That is nonsense. It is not borne out by the facts.
  I understand from the director of finance at Glasgow district council that, at the moment, a pensioner with an income of £40·60 does not need to pay anything in rates. If the Bill is passed, that person will have to find 1·20 a week. It does not appear to be fair to pensioners at the moment.
  Students have been mentioned. The Secretary of State said that it was nonsense to argue that students would be paying more. My understanding is that the Scottish Office intends to make arrangements whereby students will receive about 80 per cent. of the Scottish average charge in their grant. If Glasgow is to be 18 per cent. above the Scottish average, students in Glasgow will be at a disadvantage, and that could discourage students from coming to the university in Glasgow, and perhaps to Edinburgh and other cities. It could prevent them coming north of the border.
  I am not happy with what the Secretary of State said about lodging houses and hostels. He stated that there would not be an extra charge for people living in that accommodation, yet according to the Scottish Office's proposals, those who are in charge of the hostels—not always charitable institutions—will be required to make allowances or calculations on a daily basis. That will mean extra administration for those establishments. I am sure that those who are in charge of the hostels will not say that they will bear the cost of the extra administration. That cost will be put on to people who are in less fortunate circumstances than most people in the community. I do not see how it can be said that that section of the community will be helped.
  Sheriffs' warrants will be served on more young people than at present. Instead of a decrease in the number of debts collected under that unfortunate method, there could be an increase. I heard the Secretary of State say that if bills were not paid timeously, a surcharge would be put on the individuals, amounting to about one third of the outstanding debt.
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  In the community in which I was brought up, I remember seeing the sheriff's officers come to some of the households. It was not a very nice sight to see furniture pointed in preparation for warrant sales, when sheriffs' officers marked household items. Even if the person against whom the action was taken stated that the item of furniture did not belong to him, but belonged to a friend or relative, it was still pointed.
  How will the Secretary of State collect debt that has been incurred by a young person in the household of someone who has no responsibility for paying the debt? In my home, my son owns a hi-fi set. Some of the records that he plays on the set might belong to me, his sister or his mother. How will the sheriff's officer ensure that he repossesses only those goods that belong to the individual who incurred the debt'? That will be an impossible task. The hon. Member for Strathkelvin and Bearsden bleats on about us not paying due regard to the needs of an elderly person. An elderly mother with a family of three or four could be harassed several times during the year because of young people not paying debts.
  The new grant system to local government apparently will be such that the Secretary of State will not need to take cognisance of pay, price increases and population change. No instructions are to be given to the Secretary of State on how to introduce or calculate that grant. That puts us in a worse position than at present, when at least the Secretary of State has to do those things. Therefore, I seriously urge the Government to reconsider what they are doing. They will impose a great deal of hardship throughout Scotland.
  Mr. Deputy Speaker (Mr. Ernest Armstrong): I am grateful for the hon. Gentleman's brevity.
  9.4 pm
  Mr. Steve Norris: I endorse that, Mr. Deputy Speaker. I am equally grateful for the brevity of the hon. Member for Glasgow, Springburn (Mr. Martin). It has been a privilege for someone from south of the border to listen to the debate. There is great interest in this subject south of the border. I regard our Scottish colleagues as trail blazers rather than as guinea pigs in one of the most important developments, if not the most important, in local government this century.
  I am also pleased that I can return to my right hon. Friend the Secretary of State for the Environment and tell him that, if the sum total of the arguments advanced against his proposals are those that we have heard tonight, he will have little to fear when the proposals for England come before the House.
  In the short time available, I shall make one or two observations which perhaps can be taken on board during the passage of the Bill. The first is on enforcement. Ironically, the matter was raised by the hon. Member for Springburn. Rita Hale from CIPFA talked about the national Wham! record collection that might emerge if a local authority were to try to proceed against young people, many of whose only assets might be a ghetto blaster and a collection of Wham! records. That is an uninviting spectacle and one that no serious-minded Administration could contemplate.
  A radical proposal such as the community charge demands a radical solution. That must be found in the concept of attachment to benefits. As hon. Members will know, there is a clear arrangement whereby recalcitrant or

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  involuntary contributors to divorce settlements contribute via an attachment to earnings order. That is a perfectly straightforward practice which states that, if they are not prepared to pay voluntarily, the court will attach their earnings. All hon. Members probably have constituents who get into difficulties with statutory undertakers and must have the bills paid direct by deduction from DHSS benefits until the individual is back on par, at which point there will be a debate as to whether it would be helpful to him to pay his bills quarterly, or whether he should continue with a system of direct contribution. If we are to overcome the problems of enforcement, we must do so by a radical re-examination of the entire principle of attachment of benefits.
  Secondly, I shall stress something that has not emerged from the discussion—what the poverty trap is. There has been much talk about the poor not benefiting from these proposals. That ignores the fact that the rebate system enforced at present will continue under the new proposals and the fact that the 20 per cent. contribution contained in the Social Security Act 1986 could perfectly well be adjusted by an equal adjustment in the rates of supplementary or unemployment benefit.
  On that basis, it is evident that those who have no income are no better or worse off. But the crucial factor which has been studiously ignored by all Opposition Members who have spoken is the fact that it is especially the widow who lives in a poverty trap, where she has just enough income to put her over the level at which she would receive any supplementary benefit and/or allowances and benefits, including rate relief, who would be one of the greatest beneficiaries of the welcome measure which the Government seek to introduce.
  It is extraordinary that a party which has its social conscience firmly sewn on to its sleeve, can ignore a great number of people who would be substantial beneficiaries of the new system. I say to Opposition Members that the correlation between that poverty trap and single occupancy is far too inconvenient for them to ignore. It is far too great a correlation.
  My third point goes to the heart of what we see as the role of local government. In a Fabian Society article, Alan Alexander linked the politicisation of local government to the cynicism among young Labour voters over the betrayal, as they saw it, of the Wilson years. Perhaps it was, but my local authority has long since ceased to remember its true role as a provider of services and a body that will simply get on with the job of sweeping the streets, cleaning the bins, keeping the lights on and doing all the other jobs that I wish to see it do as a provider of services.
  It is a fundamental misconception to see this charge as a poll tax. If a poll tax was a primary form of taxation, it would be regressive. The community charge reflects our fundamental desire to return accountability to local government and to ensure that it reflects a charge for services.
  Earlier in the debate, my hon. Friend the Member for Edinburgh, Central (Mr. Fletcher) invited me to participate in these proceedings. I am pleased to have had this brief opportunity to do so. Having listened to the entire debate, I shall have to spurn his further invitation to join the Committee. None the less, I am convinced, having heard all the arguments for and against, that the
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  measure will find the greatest favour with the House. I look forward to its introduction in England and Wales, where it will be greeted with equal enthusiasm.
  9.10 pm
  Mr. John Maxton: I would welcome the hon. Member for Oxford, East (Mr. Norris) on to the Committee if the rules of the House allowed it — there is some doubt about whether an English Member can serve on a Committee that is discussing a Bill for Scotland—especially as he comes from an area where I used to live. The hon. Gentleman was wrong to say that those who receive rebates now will automatically receive rebates under the new scheme. First, we do not know what the new rebate system will be, and, secondly, the existing rebates will be changed dramatically in 1988 by the Social Security Act 1986, under which many people will be taken off housing benefit and, therefore, will get no rates rebate or relief. Young people are not covered by the scheme, and we are not sure how they will be covered in the future.
  The Green Paper made it clear that a youngster aged 18, 19 or 20 on unemployment benefit was unlikely to get a rebate. That must be made clear. Many youngsters should be aware that that is the case.
  Why are we discussing the Bill at all? Despite all the fine words from Conservative Members and from the Secretary of State in a recent article in the Glasgow Evening Times, the Tory party has no manifesto commitment to the abolition of rates. The 1983 manifesto did not include rates. The 1979 manifesto did not include a commitment to abolish rates.
  The last Conservative manifesto to suggest the abolition of rates was the 1974 manifesto. The Under-Secretary of State, the hon. Member for Argyll and Bute (Mr. MacKay), might be interested in this in view of the troubles that he is having with teachers. It also suggested transferring expenditure on teachers' salaries directly to the Exchequer to relieve the burden. It stated that the Conservatives would replace the domestic rating system by taxes more broadly based and related to people's ability to pay. Even now, they have not fulfilled their manifesto commitment, because they are introducing a tax that has nothing to do with people's ability to pay.
  The hon. Member for Edinburgh, Central (Mr. Fletcher) spent some time attacking the Labour party about the Assembly, but the manifesto which committed the Conservatives to the abolition of rates also committed them to the establishment of a Scottish Assembly with revenue-raising powers. He seems to have forgotten that, although he remembers other matters.
  Mr. Fletcher: The difference between the two parties is that we learn from experience but the Labour party does not.
  Mr. Maxton: It is fairly obvious from the Bill that the Conservative party has learnt nothing about the abolition of rates.
  We must examine the way in which the Government have handled the matter. Conservative Members are hiding behind widows' skirts. Practically the only argument that we have consistently heard from Tory Members during the debate is contained in their attack on the ground that there are widows in Scotland living in large houses, with small incomes and paying large amounts in rates.
  Mr. Rifkind: Small houses.
  Mr. Maxton: The Secretary of State says, small houses. If they are living in small houses, they are not paying especially large amounts in rates. However, we have no idea how many widows are so affected. The Government keep throwing these widows up as an emotional smokescreen to hide behind. I specifically asked the Minister how many single householders in Scotland pay rates and he could not tell me because he does not know. We do not know the facts upon which the Government base their case.
  It may be that only 2 or 3 per cent. of householders are widows. However, it comes very hard from the Government to accuse the Opposition of not caring for widows' interests when the Government have ensured that there are fewer home helps in Scotland today than there were in 1979 and that fewer meals on wheels are served today than in 1979; and by cutting rate support grant the Government have pushed up the rates tremendously for widows.
  The Secretary of State is up to his usual tricks. He is having his little private jokes and his laughs on the side. He never takes anything very seriously, as we well know. However, the fact remains that the people whom the Government continue to call in aid were present in 1981 when the Green Paper was published. However, in the Scottish White Paper in 1983 the Government claimed:
  "There is little point in replacing rates with an untried and unfamiliar system having little support from the outset. The Government have therefore decided to make reforms to the rating system which is basically sound but needs improvement."
  In the English and Welsh White Paper the Government said:
  "The Government recognise that rates are far from being an ideal or popular tax. But they do have advantages … They are well understood, cheap to collect and very difficult to evade. They act as an incentive to the most efficient use of property. No property tax can be directly related to the ability to pay; but rate rebates, now incorporated in housing benefit, together with Supplementary Benefit, have been designed to reduce hardship. The Government have concluded and announced to Parliament that rates should remain"—
  this is the important point—
  "for the forseeable future the main source of local revenue for local government."
  Yet in the news release produced in connection with the Bill, the Government ignore the 1983 White Paper and refer to the 1981 Green Paper and state:
  "Like others before it, the Government proceeded to make minor improvements to the system but always in the firm knowledge that the days of the domestic rating system were, in reality, numbered."
  In other words, the Government have said that they knew in 1983 that the days of rates were numbered and that they would be done away with. There is a massive contradiction between what the Government said in 1983 and what they are saying now.
  Mr. Craigen: Does my hon. Friend think that it is even more significant that as early as January 1984 the former Secretary of State for the Environment, the right hon. Member for Wanstead and Woodford (Mr. Jenkin), told the House that the poll tax suffered from fatal defects?
  Mr. Maxton: My hon. Friend is quite right; and the White Paper claims that the poll tax suffered from defects. It is worth while stressing that the Green Paper suggested the poll tax only as an addition to rates. It never suggested that it should totally replace rates. The Government have
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  changed their mind dramatically. It is not the widow living on her own who is the problem, because she existed before the Government got the fright of their lives when they introduced revaluation in Scotland.
  There is nothing basically wrong with revaluation but, in combination with massive cuts in rate support grant, a dramatic increase in rates is inevitable. That is precisely what happened. The Tory faithful started to scream, the Government's standing in the opinion polls, already low, plummeted even lower, and they looked desperately for some solution which would not necessarily help the widow, as she could have been helped by a much better rebate system. They came up with a system which was designed primarily to relieve the tax burden on those whom they perceived as their voters and to put it on to those whom they perceived as our voters. That is the simple political fact behind the poll tax. The Government are shifting the burden from the wealthy to the poor.
  If the Secretary of State doubts my assertion, I shall give him an example drawn from the constituency of my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar), just as he drew examples from mine. An employed couple living in Kinfaun drive in Drumchapel who are not getting any rebates pay £377.50 in rates. They will pay £446.25 in poll tax. That is a low estimate of what poll tax will be in Glasgow. Those people who know Glasgow will know that Wittingham drive is a smart part of the city. Perhaps the Government Whip lives there, although he represents Aberdeen.
  Mr. Gerald Malone: Close by.
  Mr. Maxton: Close by. The average rates per house are £1,007 in that street, and the average rate bill per head is £416.52. The average poll tax per head will be £245. The person in Wittingham drive who lives in an expensive house and is earning a good income will pay less in tax than less well-off people in Drumchapel. Nobody can claim that that is a fair system of taxation. It is extremely regressive. Such examples can be found time and again throughout Scotland.
  The Secretary of State has tried desperately to put all of my constituents in Castlemilk on the dole, and therefore make them eligible for rebate, but he has not quite succeeded. There are some who are in employment, and they will pay more tax than people in better-off parts of my constituency.
  Mr. Barry Porter: I am much obliged to the hon. Gentleman for speaking in his native Oxfordshire accent so that those of us who are English can understand what is going on. I do not believe that a poll tax is an appropriate way in which to deal with local taxation, but it is equally clear that, despite the Government's resistence to the various alterations that the hon. Gentleman has mentioned, the Bill appears to be the most appropriate way in which to deal with the fairness argument. The hon. Gentleman has not yet persuaded me what the Labour party would do in regard to rates. He will have to face this issue next year after we have won the general election.
  Mr. Maxton: One of the themes throughout this debate is that the Government have put up a scheme because they were in desperate straits in Scotland. They have proposed an unfair, unworkable and undemocratic scheme. Conservative Members then turn round and ask us what we would do about rates.

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  I believe that there is considerable merit in what the Government said about rates in 1983. They made perfectly fair points. They believed it then. Why should we disbelieve those arguments now? We are prepared to examine alternatives, but in the short term we would return to a rating system. It cannot be right to replace one tax which is considered to be unfair and put in its place one that is even more unfair and unjust. It would be easier to continue the present rating system until we have time to consider alternatives rather than to introduce something new.
  The Government have no logical argument in terms of the community charge of the poll tax and they simply keep on saying to the Opposition, "What would you do?" The only thing that I like about that is the admission that they think we might form the next Government and will therefore be in a position to do something about it.
  The Government are introducing an unfair and regressive tax. It is also an undemocratic tax—
  Mr. Porter: Why?
  Mr. Maxton: If the hon. Gentleman cares to listen, I shall tell him.
  The tax is undemocratic because it is based on a principle which I thought we had done away with at the beginning of this century when we said that there should be universal suffrage. Then the property qualifications for voting were abolished completely. However, the Secretary of State, throughout his speech, said that there must be some relationship between people paying taxes at a local level and their right to vote. The right hon. and learned Gentleman has said that to achieve accountability, there must be a relationship between the payment of taxes and the right to vote.
  The principle of the argument is undemocratic. The undemocratic nature of a poll tax is recognised in many parts of the United States where it is unconstitutional to introduce it because it is considered that it will interfere with the democratic process.
  Let us take the example of what will happen to students as a result of the Bill. The Secretary of State made it quite clear that students must register for the poll tax at their place of study. They must register not at home but where they study. Therefore, students will consider how they can get themselves off the register at home.
  There will be a major disincentive for students to register for electoral purposes at their home address. If they are on the electoral register at their home address it is inevitable that, when the assessor is drawing up the register for the poll tax, he will make a comparison—in fact, he is obliged by the Bill to make such a comparison. He will see a name on the electoral register at such-andsuch an address and he will therefore put that name on the register for the poll tax. It will then be up to the student to get himself off that register. If he does not he will find himself paying two poll taxes. [HON. MEMBERS: "Rubbish".] Unless students get themselves off the register, of course they will have to pay two poll taxes.
  Mr. Nicholas Soames: Has the hon. Gentleman read the Bill?
  Mr. Maxton: I have read the Bill. The fact is that students will have to go through a complicated procedure
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  to get themselves off the register. [Laughter.] As usual the Secretary of State fails to take anything seriously. He thinks that his inane giggling is an answer to every debate. Students will find it difficult to get themselves off the second register and to avoid paying two poll taxes. That is undemocratic.
  Others may think it is easier to evade the tax by staying off the electoral register, which will be the major point of comparison.
  Mr. Norris: The hon. Gentleman is presenting a travesty of the Government's proposals in suggesting that students will be denied their democratic rights simply because the Bill lays down clear arrangements about what students should do and where they should register for the community charge. It is a complete scaremongering exercise. The hon. Gentleman should be worthy of better than that.
  Mr. Maxton: It is not a scaremongering exercise to suggest that the assessor will use the electoral register as his major point of comparison for his register. He will draw people from the electoral register for poll tax. There are dangers that people will not register in order to avoid paying poll tax or paying it twice.
  My hon. Friend the Member for Garscadden spoke about rebates and said that today's circumstances were different. The Under-Secretary of State suggested that that was history and in the past. I accept that the Act of Parliament is past and there may be nothing at this stage that we can do about it, but it must be remembered that the Social Security Act 1986 is not in force. When the Secretary of State gives figures for rebates, he talks about the present rebate system, not the one that will be in force when the poll tax comes into existence. He talks about the same people receiving rebates who are receiving them now. Obviously, many people will be taken out of housing benefit by the Social Security Act, many will receive considerably less benefit as a result of it and rebates will be assessed in a completely different way.
  The Secretary of State failed to give a straight answer to the question whether everybody would have to pay the 20 per cent. that is in the Social Security Act. He was careful never to say that anybody would get a complete rebate. He was always careful to say that most people would receive a rebate on some of the poll tax.
  Some people will have to pay the 20 per cent. for example, the young unemployed man to whom my hon. Friend the Member for Glasgow, Springburn (Mr. Martin) referred will have a debt of £50 or £60. The Secretary of State said that the payment would be £1 a week. If he does not pay it—
  Mr. Rilkind: Should he pay it?
  Mr. Maxton: Of course he should pay it. [Laughter.] How clever. The Secretary of State is surely not suggesting that a Labour Member, and in particular me, should suggest non-payment? Does the Secretary of State believe that the citizens of Strathclyde who own cars, most of whom are considerably wealthier than me—the young unemployed—should pay the parking fines left on their cars? I assume he would say, "Yes, of course." The fact is that 50 per cent. of them do not. The idea suggested by the Minister on the radio recently that the people of Scotland are so honest that they will pay their community charge

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  is not borne out by the good citizens of Glasgow paying parking tickets—many of whom probably come from Strathkelvin and Bearsden.
  Some youngsters will evade the tax and then we shall have to go through the complicated legal procedure of trying to get £50 from them. It is not worth a local authority beginning the process of law to obtain £50 from young unemployed people. They may be registered in Castlemilk or Drumchapel, but they may have taken the advice of the Chancellor of the Duchy of Lancaster and got on their bikes to look for work in the south of England. Are we to go through a complicated procedure to trace them? When they are traced, what will they have? It is optimistic to think that they will have various items of stereo equipment. They are more likely to have only a small Walkman. Are we to go through a complicated procedure to take such an item off them to pay their debts? That is nonsense.
  This is a had Bill. It will not work, it is unfair, and it will distort the democratic process. I urge my hon. Friends to vote against it tonight.
  9.35 pm
  The Parliamentary Under-Secretary of State for Scotland (Mr. Michael Ancram): The Bill enacts one of the most fundamental reforms of local government finance in Scotland for a generation or more. It is therefore hardly surprising that it has given rise to a debate of strong feelings and genuine concerns. In a major and radical reform of this kind that is inevitable. I hope to be able to respond to those concerns, if not tonight, in Committee.
  Above all, the Bill abolishes a discredited and outdated system of raising local finance—the domestic rates. It replaces that system with a new source of revenue, the community charge, which is simpler, fairer and more democratic. It further makes provision to protect commercial and business ratepayers from the swingeing increases which have been so damaging to them and the jobs that they provided in the past. I am grateful to my hon. Friends for the welcome that they have given it. They speak for the ratepayers of Scotland, who have been burdened unfairly for too long and too hard. I also pay tribute to my hon. Friend the Member for Oxford, East (Mr. Norris) who sat through the debate and made a valuable contribution at the end.
  One might have thought that the need to reform the rating system was common ground in the House tonight. It almost is, with the remarkable exception of the main Opposition party, but there were not many Opposition Members here this afternoon, and perhaps some of those who were not here might have supported our measures.
  Until the hon. Member for Glasgow, Cathcart (Mr. Maxton) sat down, I had some lingering hopes that we might hear the Labour party's view on the rating system. I thought that we might have had a definite and positive statement of its position, not on what it did not want, but on what it did—either a robust defence of the present rating system, or a cogent and comprehensive alternative to it. We have had neither—the first because the present system is no longer defensible in any rational or democratic terms, and the second because, quite simply, it has no alternative and it knows that there is no workable or acceptable system other than that which we propose in the Bill.
  We have had a demonstration of doublespeak, of spinning in ever-decreasing circles, and of desperately
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  hoping that the Scottish people will not notice that the Opposition have no policy other than the system that we have, which can no longer be defended. I hope that the message that reaches the people of Scotland from today's debate is that under Labour the Scottish ratepayer will continue to suffer, with the certainty of a domestic revaluation in 1990. If that is the Labour party's position at the next election, the Scottish people will have something to say about it.
  Let us look at the rating system which, according to the hon. Member for Glasgow, Garscadden (Mr. Dewar), the Labour party is defending, and which it uses to compare our proposals and to find them unfair. If it is justified in making the comparisons that it has made in the debate, it must argue that the present system is fair enough in order to make such comparisons against it.
  In democratic terms, it is inconceivable that anyone can defend as fair a system of local taxation in which only 39 per cent. of the electorate pay anything, and only 29 per cent. pay in full for their share of the benefits that they receive. It is even harder to defend the fairness of a system where no account is taken of the numbers of people involved in receiving benefits or paying for them.
  The hon. Member for Cathcart may be relieved to hear that I shall not talk about the person to whom he dismissively referred as the small widow, but on radio the other day the hon. Member for Garscadden and I were faced with a call from a retired teacher, living alone, who had saved all his life to buy his own house and who lived next door to a family of four earners. He rightly resented the fact that his contribution to local government services was the same as theirs together. To give him his due, the hon. Member for Garscadden did not try to defend that situation. He merely avoided answering the question because he knew that there was no answer to it.
  More fundamental, however, is the illogicality of domestic rates as a way of paying for local government. It is a property tax which bears little relation to local government spending or the benefit that the local taxpayer gets from it. It is a tax where the shape of the home, the extent of insulation in it, or even whether the garage can take two cars side by side or end on, dictates what one pays towards local government services, although there is no relationship between the two. Added to that is the necessary concomitant of a rating system—revaluations. Revaluations, as we know too well in Scotland, are hardly conducive to stability. Without any action on the part of local government or the ratepayer, they can almost overnight massively increase the bill which the ratepayer has to pay.
  All in all, it is a system which cannot be justified or continued. It is neither democratic nor fair, but it is against that system that Opposition Members compare the community charge and pronounce it unfair. As a comparator, its credibility is shot through and their conclusions are invalid, and even if they were not, the fact that they have not taken into account the rebate would make their comparison unacceptable.
  Mr. Lambie: The hon. Gentleman said that there would be no revaluation in Scotland in 1990. Will he confirm that revaluation will still take place in 1990 in Scotland for industrial properties? Will he also confirm that no revaluation will take place of domestic or non-domestic properties in England in 1990?
  Mr. Ancram: The intention with regard to non-domestic properties is that there will be simultaneous revaluations in England and in Scotland in 1990. If the hon. Gentleman supports this legislation there will be no domestic revaluation in Scotland in 1990, and he will be able to prove finally to the ratepayers of Troon, about whom he has spoken so often, that he cares for their interests.
  We have also been accused tonight of introducing a system that takes no account of ability to pay. At the lower end of the incomes scale, I reject that. The rebate scheme that we have outlined, both in the debate and in the commentary, makes it clear that those on low incomes will be protected, even if—I confirm this to the hon. Member for Cathcart—everyone, rightly, has to contribute something. The hon. Gentleman has not read the Social Security Act carefully. It does not mention a percentage, and I am sure he will agree that the rebate system that we impose on houses should be the same system as we impose on the community charge, otherwise two different systems will create the confusion and concern that he outlined.
  Ability to pay is a factor in the community charge. The hon. Member for Fife, Central (Mr. Hamilton), who is not in the Chamber at the moment, fairly put his finger on the point. He said that 60 per cent. of local government spending in Scotland is paid for by the central taxpayer, where ability to pay is inherent, not only through income tax, but through VAT and excise duties. Including the community charge, the top tenth of households in terms of income will contribute 19 times as much as the bottom tenth, and the average of that top tenth is way below the level at which the Leader of the Opposition believes they should be taxed. That system is right and it will continue.
  Only 13 per cent. of local government expenditure in Scotland is covered by the domestic rate and will be covered by the community charge. It is only there that democratic accountability can be created, and it is only right that in that small sector each adult, rebates apart, should pay the same.
  The ability to pay has at least brought one clear statement of policy from the Opposition Benches. The spokesman for the alliance, the hon. Member for Caithness and Sutherland (Mr. Maclennan), and the right hon. Member for Western Isles (Mr. Stewart) have come out clearly in favour of local income tax. That was the only clear thing said by the hon. Member for Caithness and Sutherland. The policy was unclear. Indeed, if one blinked, one missed it.
  In the processes leading to the Bill some of us were attracted to the concept of LIT until we looked at it in detail. I have to say that it failed on almost every count. Many of the reasons for that were put excellently by my hon. Friends the Members for Stirling (Mr. Forsyth) and for Dumfries (Sir H. Monro) and I do not want to reiterate them. The spokesman for the alliance said that effectively the system would be run through PAYE—[Interruption.] I apologise if that was said by the right hon. Member for Western Isles. I sometimes find it difficult to distinguish the parties. If it was done through PAYE, it would become one of many deductions above the bottom line. I ask the House to consider seriously how many people would notice it. Those not on PAYE would not feel the effect of a particular rate of LIT for up to 18 months, during which time the rate of that tax might have changed.
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  Let us start with the hypothesis that a local income tax is to be introduced. Those who propose it argue that it would be less onerous on the less well off than the community charge. That point was raised by my hon. Friend the Member for Fife, North-East (Mr. Henderson) and my hon. Friend the Member for Stirling. They asked me to provide figures to show whether that was true. I shall give some examples based on 1985–86 figures.
  If we assume—I am again taking the points raised by the spokesman for the alliance and the right hon. Member for Western Isles—an equalised local income tax system with the yield of Ip in the pound of local income tax, the same per adult in all areas—that is a formal equalising system—we find that a single man on the average manual worker's wage would pay between £266 and £399 in the regions of Scotland, depending on which region he was in. That is an average of £361. Under the community charge, he would pay between £153 and £229, an average of £207. Therefore, on average under LIT he would be £154 worse off. In fact, every manual worker who is single with an income of over £112 a week would be worse off.
  When I tell the House that 80 per cent. of manual workers in full-time employment had an income in excess of that figure in 1985–86, the implications of local income tax become even clearer. I must say to alliance Members and to Members of the Scottish National party, if they disagree with the figures, why do they not put their own figures before us? We have called upon them for many months to do so. The fact that they have not done that makes me believe that they have not worked it out properly. I want to tell them what their system would do.
  Young adults in employment living with their parents are another sector about which there has been a good deal of concern. In 1985–86, 70 per cent. of full-time male manual workers in the age group 21 to 24 had an income in excess of £112 a week, which is a measure of the proportion of those in that age group living at home who would be worse of under a local income tax system. It is for that reason that we believe that the system proposed in the Bill is not only right but fairer than any other system that has been suggested tonight.
  Mr. Maclennan rose—
  Mr. Ancram: The hon. Gentleman has had time to state his policy. He did not do it and he will now have to wait for another occasion.
  I am prepared to concede that no scheme of local taxation can be perfect. I appreciate some of the concerns raised tonight.
  Mr. McKelvey rose—
  Mr. Ancram: The hon. Member for Cathcart asked how many single pensioners and single parents there are. Those two categories together form about 20 per cent. of all tax units. For him to say that the benefits that would adhere to those should be disregarded leads me to question the concern that the hon. Gentleman and his party have for vulnerable groups within our society.
  Mr. Maxton: That is not the question. The question is, how many of those single households, in the present circumstances of rebates, actually pay rates?
  Mr. Ancram: The hon. Gentleman has seen the Green Paper and the calculations. I have waited for him to say that he believes that it was right that, under any system, those people should gain, but he has ignored them. He has

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  effectively said that they are a small minority and that we need not bother about them. That is certainly not the Government's view.
  We heard a fascinating suggestion, which, in a sense, came from the hon. Member for Garscadden and from the hon. Member for Caithness and Sutherland, that, in some way, the Bill was less democratic in terms of local government because the Government would be directly funding a greater proportion of total local government expenditure. That is a fascinating argument after years of hearing, every time rate support grant was reduced, that we were loosening control over local government by removing some of the central control that we had through the grant system.
  The hon. Member for Garscadden referred to the number of summary warrants. The summary warrants system for rates is an effective system of diligence, because it leads to the recovery of money due. Only a relatively small number of summary warrants for rates lead to further diligence, and only a tiny number lead to warrant sales which, as the Scottish Law Commission's report on diligence and debtor protection pointed out, are almost unknown in rates cases. The system, especially when it is reformed this year, will be perfectly capable of dealing with that type of problem.
  My hon. Friend the Member for Stirling asked whether registration should be based on residence at a qualifying date. The weight of the views on consultation was in favour of a rolling register rather than a fixed one such as the electoral register. My right hon. and learned Friend the Secretary of State said that a rolling register would maximise accuracy and efficiency in the system.
  My hon. Friend the Member for Edinburgh, Central (Mr. Fletcher) asked why we were retaining the basis of selective action in the Bill to limit the community charge. The Bill abolishes two of the three present mechanisms of control. It gets rid of grant penalties and general rate capping, and I hope that my hon. Friend welcomes that. We believe that it is important to have a power in reserve,—which we would hope not to use—in case we find particularly at the start of a four-year period, that a council is prepared to behave irresponsibly, to the severe detriment of those who are paying the community charge. My right hon. and learned Friend the Secretary of State believes that this power should be used only sparingly, and he would hope not to have to use it at all.
  My hon. Friend the Member for Dumfries asked about shooting rates. [Laughter.] The Government will be asking the working party of the Scottish Assessors Association and the Inland Revenue valuation office to examine present Scottish and English law and practice on the valuation of shooting rights and to make recommendations for a necessary change in legislation to ensure that the situation is treated equitably north and south of the border. The Opposition may laugh, but on the Labour front Bench there is an hon. Member who, I recollect, once tabled an amendment in connection with the matter that my hon. Friend the Member for Dumfries raised.
  My hon. Friend the Member for Stirling asked about sports clubs. Local authorities are empowered to give relief of up to 100 per cent. if those clubs meet the required criteria. We believe that it is right that local authorities should have that discretion, because they are the only bodies which can see in each case whether that discretion is merited. We will ask the working party of the Scottish Assessors Association and the Inland Revenue valuation
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  office to examine present Scottish and English practice and to make recommendations for necessary change, which I hope will be implemented in time for the 1990 revaluations. I appreciate that one of the major concerns is the different levels of rates paid by sports clubs north and south of the border.
  Towards the end of his speech the hon. Member for Garscadden was forced to admit that if he had to suggest some reform of the rating system he would look at a system of capital values. He should return to the Layfield report and see what the committee had to say about that. Although Layfield did not say that such a system was impossible, he had a number of severe reservations about it which, were they to occur in practice, would create a situation which was no better and very little different from that which we had under the rating system in the past, whose time, we believe, has come and gone.
  The hon. Member for Cathcart suggested that this was a panic measure, and he referred to various manifesto commitments. It is a strange argument that although we took one view at one stage and revised that view later, we are not entitled to do so. One of the failings of the hon. Gentleman's party is that it is so doctrinaire that once it has stated a policy we have to wait for generations before it realises that that policy no longer applies and that it must be changed.
  There has been opposition to the proposed system throughout the debate. We have been told that the community charge system will create unacceptable financial burdens for those who pay little or nothing to local government. I do not for a moment deny that payments of up to £5 a week in the highest charge areas are significant, nor do I suggest that the payment, by those on full rebate, of £1 a week, again in the highest charge areas, will be difficult to find, even though it is only just over the price of a pint of beer. That is precisely why the system is being phased in over three years. Of course sums of that kind matter. Accountability would hardly be created if they did not matter. However, the level of charge will be much lower in those areas where authorities do not spend more than they need to spend.
  I find it hard to accept the attitude of Opposition Members that these are cruel and unacceptable burdens to place on the poorer members of society, and I shall put the matter into perspective. During the last few months the Labour party has made official promises to the electorate. We are now able to cost those promises. If we believe them—and it is a big "if"—and if we accept that the Labour party would raise direct taxes only on those who earn over £27,000 a year, the cost of its programme would result in a VAT increase of 43 per cent. According to our calculations, it would mean that the lowest tenth of households, in income terms, would have to find an additional £351 a year for VAT—nearly £7 a week—and that they would still have to find the money to pay for the rates. Compared with our proposals, it is extraordinary that the Opposition should make such a point about that.
  If we do not believe the Labour party's direct tax increase restriction, and if it took that road rather than increasing VAT, income tax would be increased to 53p in the pound. For the average male manual worker that would mean an increase of £23·50 a week if he was married, or £29 a week if he was single. Or it might be a combination of both, or it might be that the Opposition

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  do not expect to be called upon to fulfil their promises. If ever there was a case of crocodile tears, that is what we have had tonight from Opposition Members.
  The Bill is no short-term stop gap. It is no hurried or temporary expedient. It is a well considered and well worked out reform which sets up a new and viable system for financing local government for generations to come. It creates a new balance, a new fairness and a strengthening of local democracy and accountability which will stand the test of time. No wonder that the Opposition hate it. It means the end of a system that has underwritten their profligacy at local level, which has drained ratepayers, which has milked businesses and destroyed jobs, but which has been the bedrock of their local government survival. The ratepayers of Scotland have waited long for this Bill, and I call on my hon. Friends to support it.
  Question put, That the Bill be now read a Second time:—
  The House divided: Ayes 258, Noes 204.

  Division No. 24]

  [9.59 pm

  AYES

  Adley, Robert

  Clark, Sir W. (Croydon S)

  Aitken, Jonathan

  Clarke, Rt Hon K. (Rushcliffe)

  Alexander, Richard

  Cockeram, Eric

  Amess, David

  Colvin, Michael

  Ancram, Michael

  Conway, Derek

  Arnold, Tom

  Coombs, Simon

  Ashby, David

  Cope, John

  Aspinwall, Jack

  Corrie, John

  Atkins, Robert (South Ribble)

  Couchman, James

  Atkinson, David (B'm'th E)

  Crouch, David

  Baker, Nicholas (Dorset N)

  Currie, Mrs Edwina

  Baldry, Tony

  Dickens, Geoffrey

  Banks, Robert (Harrogate)

  Dicks, Terry

  Batiste, Spencer

  Dorrell, Stephen

  Bellingham, Henry

  Douglas-Hamilton, Lord J.

  Bendall, Vivian

  Dover, Den

  Bevan, David Gilroy

  Dunn, Robert

  Biffen, Rt Hon John

  Durant, Tony

  Biggs-Davison, Sir John

  Dykes, Hugh

  Blackburn, John

  Eggar, Tim

  Blaker, Rt Hon Sir Peter

  Evennett, David

  Body, Sir Richard

  Eyre, Sir Reginald

  Bonsor, Sir Nicholas

  Fairbairn, Nicholas

  Boscawen, Hon Robert

  Fallon, Michael

  Bottomley, Peter

  Favell, Anthony

  Bottomley, Mrs Virginia

  Finsberg, Sir Geoffrey

  Bowden, A. (Brighton K'to'n)

  Fletcher, Alexander

  Bowden, Gerald (Dulwich)

  Fookes, Miss Janet

  Boyson, Dr Rhodes

  Forman, Nigel

  Braine, Rt Hon Sir Bernard

  Forsyth, Michael (Stirling)

  Brandon-Bravo, Martin

  Forth, Eric

  Bright, Graham

  Fox, Sir Marcus

  Brinton, Tim

  Franks, Cecil

  Brown, M. (Brigg & Cl'thpes)

  Fraser, Peter (Angus East)

  Browne, John

  Freeman, Roger

  Bruinvels, Peter

  Fry, Peter

  Buchanan-Smith, Rt Hon A.

  Gale, Roger

  Buck, Sir Antony

  Galley, Roy

  Bulmer, Esmond

  Gardiner, George (Reigate)

  Burt, Alistair

  Gardner, Sir Edward (Fylde)

  Butcher, John

  Garel-Jones, Tristan

  Butler, Rt Hon Sir Adam

  Glyn, Dr Alan

  Butterfill, John

  Goodhart, Sir Philip

  Carlisle, John (Luton N)

  Goodlad, Alastair

  Carlisle, Kenneth (Lincoln)

  Gow, Ian

  Carttiss, Michael

  Gower, Sir Raymond

  Cash, William

  Grant, Sir Anthony

  Channon, Rt Hon Paul

  Greenway, Harry

  Churchill, W. S.

  Gregory, Conal

  Clark, Hon A. (Plym'th S'n)

  Griffiths, Peter (Portsm'th N)

  Clark, Dr Michael (Rochford)

  Ground, Patrick

  276

  Grylls, Michael

  Powley, John

  Hamilton, Hon A. (Epsom)

  Rhodes James, Robert

  Hamilton, Neil (Tatton)

  Rifkind, Rt Hon Malcolm

  Hampson, Dr Keith

  Roberts, Wyn (Conwy)

  Hanley, Jeremy

  Robinson, Mark (N'port W)

  Hannam, John

  Roe, Mrs Marion

  Hargreaves, Kenneth

  Rossi, Sir Hugh

  Harris, David

  Rost, Peter

  Harvey, Robert

  Rowe, Andrew

  Haselhurst, Alan

  Rumbold, Mrs Angela

  Havers, Rt Hon Sir Michael

  Sackville, Hon Thomas

  Hawkins, C. (High Peak)

  Sainsbury, Hon Timothy

  Hayes, J.

  St. John-Stevas, Rt Hon N.

  Hayhoe, Rt Hon Barney

  Sayeed, Jonathan

  Hayward, Robert

  Scott, Nicholas

  Heathcoat-Amory, David

  Shaw, Giles (Pudsey)

  Heddle, John

  Shaw, Sir Michael (Scarb')

  Henderson, Barry

  Shelton, William (Streatham)

  Heseltine, Rt Hon Michael

  Shepherd, Colin (Hereford)

  Hickmet, Richard

  Shersby, Michael

  Hicks, Robert

  Silvester, Fred

  Higgins, Rt Hon Terence L.

  Sims, Roger

  Hill, James

  Smith, Tim (Beaconsfield)

  Hirst, Michael

  Soames, Hon Nicholas

  Hogg, Hon Douglas (Gr'th'm)

  Spencer, Derek

  Holland, Sir Philip (Gedling)

  Spicer, Michael (S Worcs)

  Holt, Richard

  Stanbrook, Ivor

  Hordern, Sir Peter

  Stanley, Rt Hon John

  Howard, Michael

  Steen, Anthony

  Howarth, Gerald (Cannock)

  Stern, Michael

  Howell, Rt Hon D. (G'ldford)

  Stevens, Lewis (Nuneaton)

  Hubbard-Miles, Peter

  Stewart, Allan (Eastwood)

  Hunt, David (Wirral W)

  Stewart, Andrew (Sherwood)

  Hunt, John (Ravensbourne)

  Stewart, Ian (Hertf'dshire N)

  Hunter, Andrew

  Stradling Thomas, Sir John

  Irving, Charles

  Sumberg, David

  Jenkin, Rt Hon Patrick

  Taylor, John (Solihull)

  Jessel, Toby

  Taylor, Teddy (S'end E)

  Johnson Smith, Sir Geoffrey

  Temple-Morris, Peter

  Jones, Gwilym (Cardiff N)

  Terlezki, Stefan

  Jones, Robert (Herts W)

  Thompson, Donald (Calder V)

  Kellett-Bowman, Mrs Elaine

  Thompson, Patrick (N'ich N)

  Key, Robert

  Thornton, Malcolm

  King, Roger (B'ham N'field)

  Thurnham, Peter

  Knight, Greg (Derby N)

  Townend, John (Bridlington)

  Knight, Dame Jill (Edgbaston)

  Townsend, Cyril D. (B'heath)

  Knowles, Michael

  Tracey, Richard

  Knox, David

  Trippier, David

  Lamont, Rt Hon Norman

  Trotter, Neville

  Lang, Ian

  Twinn, Dr Ian

  Latham, Michael

  van Straubenzee, Sir W.

  Lawler, Geoffrey

  Vaughan, Sir Gerard

  Lee, John (Pendle)

  Viggers, Peter

  Lennox-Boyd, Hon Mark

  Waddington, David

  Lloyd, Sir Ian (Havant)

  Wakeham, Rt Hon John

  Lloyd, Peter (Fareham)

  Waldegrave, Hon William

  McCurley, Mrs Anna

  Walden, George

  MacKay, John (Argyll & Bute)

  Walker, Rt Hon P. (W'cester)

  Maclean, David John

  Waller, Gary

  McLoughlin, Patrick

  Walters, Dennis

  Major, John

  Ward, John

  Maude, Hon Francis

  Wardle, C. (Bexhill)

  Maxwell-Hyslop, Robin

  Warren, Kenneth

  Merchant, Piers

  Watson, John

  Mitchell, David (Hants NW)

  Watts, John

  Monro, Sir Hector

  Wells, Sir John (Maidstone)

  Montgomery, Sir Fergus

  Wheeler, John

  Neale, Gerrard

  Whitfield, John

  Neubert, Michael

  Wiggin, Jerry

  Nicholls, Patrick

  Wilkinson, John

  Norris, Steven

  Winterton, Nicholas

  Onslow, Cranley

  Wolfson, Mark

  Osborn, Sir John

  Wood, Timothy

  Page, Sir John (Harrow W)

  Woodcock, Michael

  Patten, Christopher (Bath)

  Young, Sir George (Acton)

  Peacock, Mrs Elizabeth

  Younger, Pt Hon George

  Percival, Rt Hon Sir Ian

  Pollock, Alexander

  Tellers for the Ayes:

  Porter, Barry

  Mr. Gerald Malone and

  Portillo, Michael

  Mr. David Lightbown.

  277

  NOES

  Abse, Leo

  Flannery, Martin

  Alton, David

  Foot, Rt Hon Michael

  Anderson, Donald

  Foster, Derek

  Archer, Rt Hon Peter

  Foulkes, George

  Ashdown, Paddy

  Fraser, J. (Norwood)

  Ashley, Rt Hon Jack

  Freeson, Rt Hon Reginald

  Atkinson, N. (Tottenham)

  Freud, Clement

  Bagier, Gordon A. T.

  Garrett, W. E.

  Banks, Tony (Newham NW)

  Godman, Dr Norman

  Barnett, Guy

  Golding, Mrs Llin

  Barren, Kevin

  Gould, Bryan

  Beckett, Mrs Margaret

  Gourlay, Harry

  Beith, A. J.

  Hamilton, W. W. (Fife Central)

  Bell, Stuart

  Hardy, Peter

  Benn, Rt Hon Tony

  Harrison, Rt Hon Walter

  Bennett, A. (Dent'n & Red'sh)

  Hart, Rt Hon Dame Judith

  Bermingham, Gerald

  Haynes, Frank

  Bidwell, Sydney

  Healey, Rt Hon Denis

  Blair, Anthony

  Heffer, Eric S.

  Boothroyd, Miss Betty

  Hogg, N. (C'nauld & Kilsyth)

  Boyes, Roland

  Holland, Stuart (Vauxhall)

  Bray, Dr Jeremy

  Home Robertson, John

  Brown, Gordon (D'f'mline E)

  Howarth, George (Knowsley, N)

  Brown, Hugh D. (Provan)

  Howell, Rt Hon D. (S'heath)

  Brown, N. (N'c'tle-u-Tyne E)

  Howells, Geraint

  Bruce, Malcolm

  Hoyle, Douglas

  Caborn, Richard

  Hughes, Robert (Aberdeen N)

  Callaghan, Jim (Heyw'd & M)

  Hughes, Roy (Newport East)

  Campbell, Ian

  Hughes, Simon (Southwark)

  Campbell-Savours, Dale

  Janner, Hon Greville

  Carlile, Alexander (Montg'y)

  Jenkins, Rt Hon Roy (Hillh'd)

  Carter-Jones, Lewis

  John, Brynmor

  Cartwright, John

  Johnston, Sir Russell

  Clark, Dr David (S Shields)

  Jones, Barry (Alyn & Deeside)

  Clarke, Thomas

  Kaufman, Rt Hon Gerald

  Clay, Robert

  Kennedy, Charles

  Clelland, David Gordon

  Kinnock, Rt Hon Neil

  Clwyd, Mrs Ann

  Kirkwood, Archy

  Cocks, Rt Hon M. (Bristol S)

  Lambie, David

  Cohen, Harry

  Lamond, James

  Coleman, Donald

  Leadbitter, Ted

  Conlan, Bernard

  Leighton, Ronald

  Cook, Frank (Stockton North)

  Lewis, Ron (Carlisle)

  Cook, Robin F. (Livingston)

  Lewis, Terence (Worsley)

  Corbett, Robin

  Litherland, Robert

  Corbyn, Jeremy

  Livsey, Richard

  Cox, Thomas (Tooting)

  Lloyd, Tony (Stretford)

  Craigen, J. M.

  Lofthouse, Geoffrey

  Crowther, Stan

  McCartney, Hugh

  Cunliffe, Lawrence

  McGuire, Michael

  Cunningham, Dr John

  McKay, Allen (Penistone)

  Dalyell, Tam

  McKelvey, William

  Davies, Rt Hon Denzil (L'lli)

  MacKenzie, Rt Hon Gregor

  Davies, Ronald (Caerphilly)

  Maclennan, Robert

  Davis, Terry (B'ham, H'ge H'l)

  McNamara, Kevin

  Dewar, Donald

  McTaggart, Robert

  Dixon, Donald

  Madden, Max

  Dobson, Frank

  Marek, Dr John

  Dormand, Jack

  Marshall, David (Shettleston)

  Dubs, Alfred

  Martin, Michael

  Duffy, A. E. P.

  Maxton, John

  Dunwoody, Hon Mrs G.

  Meacher, Michael

  Eadie, Alex

  Meadowcroft, Michael

  Eastham, Ken

  Michie, William

  Edwards, Bob (W'h'mpt'n SE)

  Mikardo, Ian

  Evans, John (St. Helens N)

  Millan, Rt Hon Bruce

  Fatchett, Derek

  Miller, Dr M. S. (E Kilbride)

  Field, Frank (Birkenhead)

  Mitchell, Austin (G't Grimsby)

  Fields, T. (L'pool Broad Gn)

  Morris, Rt Hon A. (W'shawe)

  Fisher, Mark

  Morris, Rt Hon J. (Aberavon)

  278

  Nellist, David

  Silkin, Rt Hon J.

  Oakes, Rt Hon Gordon

  Skinner, Dennis

  O'Brien, William

  Smith, C.(Isl'ton S & F'bury)

  O'Neill, Martin

  Smith, Rt Hon J. (M'ds E)

  Orme, Rt Hon Stanley

  Snape, Peter

  Owen, Rt Hon Dr David

  Soley, Clive

  Park, George

  Spearing, Nigel

  Parry, Robert

  Steel, Rt Hon David

  Pavitt, Laurie

  Stewart, Rt Hon D. (W Isles)

  Pendry, Tom

  Stott, Roger

  Penhaligon, David

  Strang, Gavin

  Pike, Peter

  Straw, Jack

  Powell, Rt Hon J. E.

  Thomas, Dafydd (Merioneth)

  Powell, Raymond (Ogmore)

  Thomas, Dr R. (Carmarthen)

  Prescott, John

  Thompson, J. (Wansbeck)

  Radice, Giles

  Thorne, Stan (Preston)

  Raynsford, Nick

  Tinn, James

  Redmond, Martin

  Torney, Tom

  Rees, Rt Hon M. (Leeds S)

  Wainwright, R.

  Richardson, Ms Jo

  Wallace, James

  Roberts, Ernest (Hackney N)

  Wardell, Gareth (Gower)

  Robertson, George

  Wareing, Robert

  Robinson, G. (Coventry NW)

  Weetch, Ken

  Rogers, Allan

  White, James

  Rooker, J. W.

  Wigley, Dafydd

  Ross, Ernest (Dundee W)

  Williams, Rt Hon A.

  Ross, Stephen (Isle of Wight)

  Wilson, Gordon

  Rowlands, Ted

  Winnick, David

  Sedgemore, Brian

  Wrigglesworth, Ian

  Sheldon, Rt Hon R.

  Young, David (Bolton SE)

  Shields, Mrs Elizabeth

  Shore, Rt Hon Peter

  Tellers for the Noes:

  Short, Ms Clare (Ladywood)

  Mr. James Hamilton and

  Short, Mrs R.(W'hampt'n NE)

  Mr. Allen Adams.

  Question accordingly agreed to.
  Bill read a Second time and committed to a Standing Committee pursuant to Standing Order No. 61 (Committal of Bills).

  ABOLITION OF DOMESTIC RATES ETC. (SCOTLAND) [MONEY]
  Queen's Recommendation having been signified—
  Resolved,
  That, for the purposes of any Act resulting from the Abolition of Domestic Rates Etc. (Scotland) Bill, it is expedient to authorise the payment out of money provided by Parliament of—

  (a) grants to local authorities for the financial year 1989–90 and each subsequent such year equal to the aggregate amount which the Secretary of State estimates is to be available for that year for the payment by him out of such money of grants (other than housing subsidies) to local authorities, under deduction of the portion of that amount which he estimates will be allocated to grants in respect of such services as he may determine;

  (b) payments to local authorities of subsidies relating to the making by these authorities of rebates in respect of community charges and calculated by reference to such factors as are specified in or under the Social Security Act 1986 as modified by regulations made by the Secretary of State; and

  (c) any increase attributable to the provisions of the said resultant Act in the sums payable under any other Act out of money provided by Parliament.—[Mr. Neubert.]

Food Aid
10.13 pm
The Minister for Overseas Development (Mr. Chris Patten): I beg to move,
That this House takes note of European Community Document No. 8705/86 on food aid policy and food aid management and the supplementary Explanatory Memorandum from the Overseas Development Administration of November 1986; endorses the view that reform of the European Community's food aid programme is necessary; and welcomes the United Kingdom's endeavours to ensure that food aid is better integrated with other forms of development assistance and is provided in ways that are primarily intended to meet the needs of recipient countries.
I begin by welcoming the Scrutiny Committee's recommendation that the House should discuss these documents. The debate is extremely timely. Experience during the past four years since the existing framework regulation for Community food aid was introduced clearly shows the need for a further thorough review of its policy and management. Since the Commission submitted its formal proposal for a new framework regulation in July this year it has been possible, under the United Kingdom presidency, to make rapid and substantial progress towards the adoption of a text which, although not perfect, will I am confident, provide the basis for a great improvement in the future.
There are two documents for debate tonight; the original Commission proposal, and, attached to a supplementary explanatory memorandum dated November 1986, a revised text agreed at the Council of Development Ministers on 11 November. Before I deal with these, however, it may be helpful to the House if I briefly sketch in the background.
The Community food aid programme began in a small way in the mid-1960s, very much as an adjunct to the management of the common agricultural policy. It has grown steadily until, in 1985, its cost to the aid chapter of the European Community budget was some £333 million. The United Kingdom share, which is attributed to the British aid programme, was £77 million. Additional costs in the form of export restitution payments are met from the European agricultural guidance and guarantee fund. It is second only to the food aid programme of the United States in size and represents about one third of the Community's total expenditure on overseas aid. But it has not been easy to shed the influence of its origins. A high proportion of the programme has always been in the form of food for resale by the Governments of recipient countries, where it is especially difficult to protect the interests of local producers. Procurement procedures, tied to the operations of the common agricultural policy, have been slow and cumbersome.
At the time of its adoption in 1982 it was hoped that the previous regulation would go a long way towards meeting these criticisms, but that did not happen. Nor did a resolution passed by the Development Council in 1983, much of which was incorporated in the third Lomé convention signed the following year, have much effect. The European Court of Auditors produced a series of harshly critical reports focusing on slow deliveries and poor quality control. The famine in Africa in 1984–85 showed up the deficiencies of the present system, especially on the procurement side. The Community institutions
280
found it very difficult to react with the speed and flexibility then required. This was recognised by the Select Committee on Foreign Affairs in its report "Famine in Africa", which also supported the Government's broad approach on food aid policy. So it is clear that reform has been needed urgently.
I turn now to the documents before the House. The Commission's proposals are set out in document 8705/86. This was submitted to the Council and to the European Parliament in July this year. The stated aims of the Commission were, first, to link food aid more closely to other forms of European Community development aid; secondly, to deal with certain institutional problems concerning the 1982 regulation which have never been resolved with the European Parliament; thirdly, to base food aid on the part of the treaty of Rome concerned with the external relations of the Community, deleting the present reference to article 43, which governs the common agricultural policy; and fourthly, to strengthen the Commission's powers of implementation.
In practical terms, the main changes proposed by the Commission were to allow more triangular transactions, or the purchase of food in developing countries with surpluses rather than in the Community; to introduce a new procurement and transport procedure for food aid under the direct responsibility of the Commission; to change the form of the Food Aid Committee which considers individual allocations of food aid; and to remove from the Council the power to fix annual quantities.
The Government carefully considered those proposals, which were the outcome of a major effort of review and discussion within the Commission. As explained in our initial explanatory memorandum, we fully supported the objectives set by the Commission for the new regulation. However, we felt that the detailed proposals did not go far enough towards improving the developmental effectiveness of food aid, and the solutions put forward by the Commission to the institutional problems gave rise to some concern.
For those reasons, when detailed discussion of the text began in Brussels in September, the United Kingdom introduced a series of amendments aimed at broadly maintaining the status quo on institutional questions; at laying down clear operational guidelines on the developmental significance of food aid; at giving clear priority to emergency operations; at emphasising the financial implications for donors and recipients of food aid; and at liberalising further the possibility of purchase from outside the Community where this is cost effective.
Discussion on those amendments and on the amendments proposed by other member states continued during October and the early part of November. At the same time, the European Parliament played its part by producing its opinion on the Commission's draft with commendable rapidity and thoroughness, proposing 14 amendments. Almost all of them, except on the institutional issues to which I will refer later, have been accepted in part or entirely by the Council. The outcome of the deliberations is reflected in the text which is attached to the supplementary explanatory memorandum. This text was approved as a common position at the Development Council which I chaired on 11 November following several discussions with other EC Development Ministers. On two issues, the setting of annual quantities and the form of the Food Aid Committee, the Council's view differs from that

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of the European Parliament which has, therefore, invoked the conciliation procedure, about which I will have more to say later.
First, I wish to explain briefly the main differences between the text on which the Council reached agreement and the original Commission proposal. These are set out in more detail in paragraph 2 of the supplementary explanatory memorandum but can be summarised as follows: the references to the need to ensure that food aid is better integrated with development policy have been strengthened throughout the text; the proposed limit on the overall level of triangular transactions has been dropped; major improvements have been made in article 6 dealing with emergencies; regular evaluation of significant food aid operations is provided for; it is proposed that the Council should continue to set annual quantities, although there was general agreement that these should be in conformity with budget appropriations, and that the present form of the Food Aid Committee should be maintained.
Mr. Stuart Holland: The Minister refers to the Council of Ministers. Does he mean Development Ministers? Is there not a meeting on Monday concerning this document and, therefore, is not its status only provisional? Will he clarify the matter for the House?
Mr. Patten: I shall come to next Monday and Tuesday's meeting of the Foreign Affairs Council. I am referring to a meeting of Development Ministers of the EC, at which I am pleased to say that we reached a common position on the text of the regulation. But, as the hon. Gentleman suggests, there is still a hurdle to clear next Monday and Tuesday.
The new text goes a long way towards meeting United Kingdom concerns. Of course it is not perfect. Other member states have different attitudes and different priorities. For example, we would have liked a cleaner break between food aid procurement and the common agricultural policy and even more clear-cut arrangements for purchase in developing countries. But we have made more progress than we expected in the relatively short time since the issue of the original Commission proposal—more progress than anyone seemed to think was possible a few months ago. I might add that it took nearly three and a half years rather than three and a half months to reach the corresponding position during the preparation of the 1982 regulation, which most hon. Members would regard as less than wholly satisfactory or adequate. It is important now that the momentum is maintained so that the new regulation can be adopted in time for the new policies and procedures to apply to the 1987 programme.
It is our intention—I come to the point made by the hon. Member for Vauxhall (Mr. Holland)—that conciliation with the Parliament on the two outstanding institutional issues should take place at the Foreign Affairs Council on 15 and 16 December, and I hope that the new regulation will be formally approved either at that meeting or as soon as possible afterwards. To do this would, of course, require good will and understanding from the European Parliament, from other member states and from the Commission. However, I am encouraged by the positive attitude and sense of urgency which has been shown so far by all parties, without which it would not have been possible to move so far so quickly.
The outstanding issues are of course important and complex. The main United Kingdom aim is to obtain early
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agreement so that the new rules can come into force. The existing arrangements for aid committees, including the Food Aid Committee, are spelt out in more detail in a memorandum on European Community aid published by the Select Committee on Foreign Affairs earlier this year. We believe that, while it is important that the Commission should be given the necessary authority to manage the food aid programme effectively, it is equally important that member states should continue to be able to influence policy in an effective manner.
I conclude by repeating a point I made at the beginning of this speech. Everyone agrees that a new framework regulation for food aid is needed. The text before the House is not in every detail the text I would have drafted myself, but it is, I believe, a very considerable improvement on the 1982 regulation which it will replace. I am also sure that it can provide the basis for a better targeted, more relevant, more effective Community food aid programme in the future. The successful passage of this new regulation will be good news for the European Community but, above all, good news for the developing countries. It is a positive response to public pressures and concerns within Europe and to the anxieties expressed by some of the recipients. The progress that we have made can, without hyperbole, be properly regarded as one of the principal successes of our presidency of the Community.
10.26 pm
Mr. Stuart Holland: The Minister was right to draw attention to the fact that these are potentially major reforms. However, they are still not firmly in place. As he has made plain, the EEC Council of Ministers has yet to approve the measures.
The Minister did not underline the extent to which the Council and the European Assembly disagree on two main points—which institution should have the power to set the actual quantities of food aid to be allocated, and the role of the Food Aid Committee of member states' representatives that examines individual food aid proposals from the EEC development directorate. Although these two issues are important in principle, we do not believe that they should be allowed to delay the adoption of the new food aid bill. However, they are important issues and the House will want to watch them carefully.
The European Assembly wants the Food Aid Committee to be an advisory committee. The Council wanted to have a veto on the lines of the procedures set out in article 8. That means that if any member state should challenge the proposal on the Council it could mean a delay of up to two months unless the aid was designated as emergency food aid. That very much qualifies the otherwise forward-looking provision that a 48-hour consultation procedure by telex should take place between Governments under the emergency food aid provision. Although under the measure food aid policy should be dissociated from the common agricultural policy and given more of a development emphasis, it by no means resolves all the fundamental problems in relation to food aid policy or food aid distribution. Several of these problems are unlikely to be solved by the new provision, even if it is adopted on Monday. Inasmuch as they cut the formal policy links with the CAP and increase the scope for purchases of food aid in the developing world, the changes are to be welcomed. The provision also emphasises the need to use food aid to promote food

283
production in the developing world rather than as a substitute for local production. But in practice, the issues are difficult.
Food aid should be used to help the hungry who cannot afford food, and for disaster relief. At present, only 10 per cent. of EEC aid is reserved for use in emergencies. The remaining 90 per cent. is divided into programme food aid that is often used by developing Governments to generate income by sales on the internal market through counterpart funds. It is also used in project food aid such as food-for-work schemes and nutritional feeding.
Much food aid therefore finds its way into sale on international markets. It clearly does not reach the destitute who need it, and it depresses food prices and therefore discourages local food production. Food aid is often inappropriate. Dairy products are the best example of that. Hon. Members do not need to be told about the hazards of milk powder, but a clean water supply is needed for the reconstitution of butter oil and milk powder, and that is rarely available in the developing world.
Food aid in such circumstances can be dangerous, especially to children. In spite of that, however, the EEC is committed to spending £163 million this year on dairy food aid. That is one third of the food aid budget. I stand to be corrected, but, as far as we can see, dairy food aid is not covered by the measure. I am sure that the House agrees that milk powder sales to the Third world should be stopped.
Food aid is almost always less effective than other forms of development aid. There is a strong case for saying that non-emergency food aid should be phased down rather than out, to be replaced by an equivalent amount of development aid to smallholder food production, which is the bread basket of much of the developing world.
The Minister spoke of seeking the support of the Select Committee on Foreign Affairs. In its report on famine in Africa, it stressed smallholder production. It is not clear that the EEC is proposing to phase out dairy or non-emergency food aid. Perhaps the Minister will say that he will fight that case. If so, we welcome that. Article 2(2) states that the Community's food aid shall be integrated as thoroughly as possible into the development policies and food strategies of the countries concerned. The EEC is laying great emphasis on the food strategy approach which as the Minister said, has been incorporated in the third Lomé convention under the heading of food security. Yet how food aid has inhibited development strategy is illustrated by the case of Mali, which has had a food aid agreement with the EEC since 1982. Food aid in Mali has been sold to generate counterpart funds, which have been used to increase cereals prices to local producers. The EEC appears to consider this an ideal example of the developmental use of food aid, but the food aid was supposed to be used only for a transitional period. In reality, Mali is the largest recipient of food aid in the Sahel, the increase having come only since the cereals policy was started in 1982. Food aid has risen from some 26,000 tonnes in 1981–82 to 90,000 tonnes in 1984–85.
I am not sure whether the Minister has had the opportunity to visit Mali, and I am sure that he would like to make that one of his first priorities. I had the opportunity to visit Mali. It is one of the poorest economies and societies in the world. It is situated on the edge of the Sahara and literally on the margins of survival.
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I am sure that he would not wish to interpret my remarks as suggesting that we are claiming that, pending the development of greater economic viability in Malian agriculture, food aid should be stopped. But there is a grave dilemma, and the reality is that Mali also suffers from the cash crop syndrome. Food which has been produced for local consumption by smallholders has been diverted. The World Bank counts it as a success that Mali should be a food exporter. The reality is that Mali has debts like those of Chad, Niger or Burkina Faso, and that is the real problem. That debt could be written off from an accounting error of the World Bank and if that were pursued Mali would be in a much stronger position to pursue an effective food policy.
We are not saying that food aid should be removed in any circumstances, nor that food aid policy necessarily harms food production. Inversely, however, the planned withdrawal of food aid does not necessarily harm a food development programme.
In the mid 1960s the United States cut off cereal aid to India, but since then India has greatly increased cereal production so that imports are now unnecessary.
Mr. Chris Patten: Market prices.
Mr. Holland: It is interesting that the Minister should take that up. It is not market prices which have had this effect. In India there is a minimal price support scheme which guarantees income for farmers. I am glad that the Minister made that point, because it is something to which I wish to address further remarks.
If one simply uses the market mechanism in rural development, one cannot guarantee a minimum income to farmers who are on the margins of existence. If one applies to farmers the principles of income support of the type that we have had in Britain, directly under the deficiency payment scheme and now indirectly, through the CAP, self-sufficiency in food production in many developing countries could be achieved.
I have cited two countries that are entirely different in scale, size, and organisational abilities—one of the most powerful countries in the developing world, India, and one of the weakest. But the principles are relevant to both. If there is to be a policy of increasing local sufficiency, one needs a policy of income support for farmers.
We display double standards when we say that there should be market forces at work in areas like sub-Saharan Africa, yet we do not expose our farmers to the rigours of market forces. A minimum price level should be supported in some of these developing countries. But they are not strong enough to do that. Therefore, either price support policies or income support for specified categories of farmers especially in the marginal dry areas, is the strategy which the EEC, with its considerable collective resources, should be adopting in its policies towards developing countries.
That would make much more sense of the regulations before the House. It would give a context and strategy for a transition to a different policy and make it feasible to consider phasing out non-emergency food aid over the longer term.
In balance of payment terms, non-emergency food aid is open to use or abuse as a political instrument, going far beyond conditionality or conditionality with a human face—to use the felicitous terms used earlier today. There are countries—it is not necessary to name them or to go

285
through the pack drill—where that has been the case. It is doubly damaging because it undermines the feasibility of sustained indigenous agriculture—including some medium-sized states in the Third world, not simply Mali and the sub-Sahara—and because it does nothing to remedy the underlying problems which are both agricultural production and debt.
The World Bank figures for debt in sub-Saharan Africa are about $85 billion, and others estimate that the real figure is about $120 billion to $130 billion. That needs tackling. It should not simply be a matter of development Ministers being responsible for development food aid policy or of food aid in relation to development. Finance Ministers should consider issues of the global debt crisis not only in terms of the costs and risks to British, United States or other banks in relation to developing countries, but also the terms of development.
The Minister has done well with the measure. He has been active, gone abroad and campaigned on it. We welcome that and congratulate him on it. But if he wants a real fight, he should carry the issues of debt and underdevelopment onto the agends of his colleagues in government and ensure that in foreign policy terms we can see a long-term relation between restructuring debt and enabling many of these countries to restructure their agriculture, rather than to continue with a food aid policy which is a back-door form of balance of payments support.
Certainly the above cases illustrate some problems that are likely to continue despite the new regulations. The real answer is, not only a long-term phasing out of non-emergency food aid, but new dimensions to development policy. If one pursues a rural development policy in, for example, sub-Saharan Africa, one is also pursuing a regional development policy. If one wants to ensure that out-reach agriculture and support systems reach those who otherwise come off the land into the capital cities, one needs a policy which encourages Governments willing to do it to ensure that skilled personnel are prepared to live in the out-reach centres and towns. That implies an education policy for those who are qualified to work there, support policies, and a development package in which agricultural development relates to regional development. Those are the types of policy that those countries need.
I am tempted to refer to the Foreign Secretary's speech in May in New York in which he referred to fitter and leaner administration and the cutting of public expenditure. I am happy to have fitter administrations and, certainly, if necessary, leaner administrations, but none of those countries in desperate food crisis in sub-Saharan Africa can pursue wide rural development policies by cutting public expenditure.
In that respect food aid policy should certainly be part of and not a substitute for development policy, and I am sure that this is something with which both sides of the House will concur.
10.43 pm
Sir Philip Goodhart: The distribution of food aid should be one of the EC's strongest points. In fact, it is an issue on which the Community in recent years has too often seemed to be mean and inept. Over the years, there have too often been physical and administrative delays in getting food to famine areas and in the end it always seems to be the Russian consumer who gets the biggest help from our food mountains.
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I suspect that one reason for that paradox is that much greater attention is paid to the problem of how to try to stop our agricultural surpluses from accumulating in Europe than to thinking of sensible ways of distributing those surpluses.
Will the new proposals help to inject more vigour and imagination into our food aid programme? I share my hon. Friend the Minister's hope that that will be so and I congratulate him on bringing the policy forward.
One area in which the Community's food aid endeavours should be expanded is the provision of food aid to refugees. The Community should underwrite most of the food requirements of the United Nations High Commissioner for Refugees. So far this year, I am told, the Community has given £20 million in food aid to the High Commissioner, of which about £17 million has been allocated to help Afghan refugees.
That sounds like quite a lot of money, but it is not when one considers that there are 3 million Afghan refugees, so our food aid works out at just £5 per year per head, and that the £l7 million pays for only about one week of storing our residual food mountains. That £17 million is also very much less than the food subsidy that we give the Russians who are bombing the Afghans.
Article 6 of the document, which deals with emergencies, refers to food aid for refugees and our scope for giving food aid to the refugees seems to be hedged around with qualifications. Will the new Food Aid Committee even have the power to recommend that the Community programme of food aid for refugees should be much increased?
Will the new Food Aid Committee have the power to look at schemes for food aid for our people? Once upon a time the Community operated schemes which subsidised the sale of butter out of intervention stocks to some European consumers at Christmas. There was also a beef token scheme some years ago. But all those schemes were held to he uneconomic. Perhaps they were, but I note in passing that in 1987 the United States will spend some $17 billion on its food aid programme, through food stamps, for its own population. The new European Food Aid Committee will primarily be a management committee, but will it be empowered to try to work out a scheme for cut-price food for our own hospitals, nursing homes and pensioners at Christmas?
Mr. Andrew Rowe: My hon. Friend is pursuing an interesting line of thought. One of the questions which he prompts in me is whether, as in America, he foresees a switch, as happens in some states, from direct cash benefit to people receiving benefits to a proportion spent on providing in kind, or is that too dangerous a path to tread?
Sir P. Goodhart: Not only is it a dangerous path but I should be out of order in treading it in this debate. Suffice it to say that I see it only as a bonus at Christmas and that we should work out longer-term programmes for assisting our hospitals and nursing homes.
Meanwhile, I continue to resent the absurd fact that the inhabitants of Moscow get more direct benefit from these food mountains than do my constituents. I only wish I was more confident that this instrument would help to put things right.
10.50 pm
Mr. A. J. Beith: We broadly welcome the instrument and particularly the Government's efforts to improve it. It is much better than it was, and the Government deserve credit for knocking it into a shape which more reflects views held in all parts of the House about the food aid programme.
There are great dangers in the assumption, which is widespread—particularly among those who are not aware of some of the difficulties involved—that dumping large quantities of EC surplus food in very poor countries will save a situation when in reality it can make it much worse.
When I refer to the instrument having been improved, one must realise, to get that sense of improvement, what it was like before. It still contains, for example, references to "triangular operations," in which food is bought in a poor country to supply to another poor country, rather than supplying direct from the Community's food surplus.
An essential condition for making use of this opportunity of triangular operations is that it should be kept within limits which do not jeopardise the basic principle of mobilising on the Community market the products to be used for food aid. In other words, we must still make sure that they eat our surplus and not anything that they buy from, or which is produced in, another poor country. Having seen the earlier document, one appreciates that this provision is a piece of elegant backpedalling in an attempt to save face on the broad principle. However, the document has made an important concession, which we welcome.
The problem that underlies our debate is the fact that food aid frequently represents the supply of food—designed mainly to ease our surplus problems—into areas which would be helped more if they were encouraged to produce food and given a reasonable price at which to sell it.
In many cases, the value of the food being provided to a poor country would be better spent on improving facilities in that country. It must be galling for people in some countries to realise that the value of what is being given to them, if given in cash, could be spent more effectively on internal transportation and food production which would overcome their food problems for a much longer period.
Sometimes the food provided is inappropriate to local diet and need, especially when dealing with undernourished children, or it creates future diet expectations which the local economy cannot, and should not be attempting to, satisfy. It can also produce a dependence on food imports which is inimical to the development of the local agricultural economy. The views which I have expressed so far are firmly held within the ODA, which has expressed them on many occasions.
Food aid has a valuable part to play in emergencies, disasters and crises where a short-term benefit is sought. But such emergency aid must be provided efficiently, and several hon. Members have pointed out that the record on that is not all that good either. Food has not got to where it has been needed quickly and efficiently enough.
The hon. Member for Beckenham (Sir P. Goodhart) referred to Afghan refugees. Whereas in that and similar situations it is legitimate to use our food surplus to good
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effect, we must not allow our aid policy to be distorted as the by-product of an agricultural policy which is going deeper into chaos.
The root of the problem is that we have a common agricultural policy that is producing large surpluses. It is no part of our development aid policy merely to devise a means of getting rid of the embarrassment that the surpluses are causing. We must not let an important aspect of development policy simply become a means of concealing that embarrassment; that is what this is really all about. Unless 12 nations and different political parties within those nations face up to that problem and deal with it, there is no way in which development needs can overcome their difficulties for them or provide them with a way out of these difficulties.
There is a legitimate case for having some surplus food within the European community in order to deal with possible disasters or harvest failures. There is no argument against having limited food surpluses and there are uses to which such surpluses can be put in emergencies or disasters. However, the generation of surpluses is so large that we look round in desperation to see what to do with them. That cannot be morally justified. It leads us to the absurdity of selling surpluses off cheaply to the Soviet Union or allowing the food to be stored and to rot and degrade while in store. That is clearly what has happened to intervention beef. That cannot be justified.
Mr. Richard Livsey: Hear, hear.
Mr. Beith: I am glad that my hon. Friend the Member for Brecon and Radnor (Mr. Livsey), who speaks for the alliance on agriculture, is here, sharing our concern.
Clearly, when we are looking at what to do with the surpluses, we must look at some of the means available to use them within our own economy, not as an act of selfishness against people in under-developed countries, but because there are some circumstances in which we can usefully make butter available to pensioners, hospitals and schools in our country. There are limits to that, especially at a time when most health authorities are trying to encourage patients to eat less fat and to wean them off the eating of large quantities of butter. We are now dealing with surpluses for which there is no appropriate use in our economy or anybody elses.
At the same time the CAP, which is giving us the surpluses we are trying to get rid of, is directly affecting the economies of the countries to which the food aid is directed. It is affecting the prices they can obtain for their own foodstuffs—the market price of the basic commodities they produce and their ability to sell in our markets, which is traditionally how they earn their living. The classic example of that is sugar; we all know the history of what happened to the main sugar producers.
The root of the problem, as I have said, is the common agricultural policy. We would not be discussing the food aid programme tonight if it had not been devised as a means of getting rid of the surplus by-products of the CAP. We would no doubt be engaged in other debates such as looking at whether Europe could meet certain disaster needs. We would not be looking for ways of offloading in various parts of the world surpluses which have been created by a process which is, in part, harmful to economies of the Third world. That problem must be tackled by any and all of the Governments of Europe. The food aid activities in which Europe engages must be

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assessed for their value as a development aid and must never become subordinate to the despair which is indicated throughout Europe by the present state of the CAP.
10.58 pm
Sir John Osborn: I was a member of the European Parliament's Committee on Development and Co-operation some 10 years ago. I operated Lomé 1 and was involved in renegotiating Lomé 2. I have perused the working documents, especially A2-201/85 published on 14 January, and the work of the Committee. I have noted the names of the people who supported it. I have also perused the document before us. Article 2 is very strong. It states that the objective shall be
"to raise the standard of nutrition of the recipient population, to help in emergencies".
Paragraph 4 states:
"The grant of food aid shall, if necessary, be conditional on the implementation of annual or multiannual development projects".
I have heard my hon. Friend the Minister make speeches on this subject. I have no hesitation in supporting the motion. I should like to know how it will strengthen his hand.
I welcome the decision on 11 November by the European Community's Development Ministers to change the way in which Common Market development aid is administered. I, too, welcome the leading role played by my hon. Friend the Minister. I shall watch with interest what happens at the Foreign Minister's meeting next week. That food aid should be given in a controlled way, together with other development aid, to enable the Third world countries to use their resources in the best possible way to develop their agricultural economies is a great advance. As has been said, it should not be used as a means of disposing of food surpluses as a result of the common agricultural policy.
This spring, Sir Henry Plumb took part in a Council of Europe seminar in Switzerland on the subject "Agriculture 2000". I have looked at the report of the summit meeting of the Organisation of African Unity which took place in July. Bodies such as the OAU, the Economic Commission for Africa and the African Development Bank have acknowledged that many of the problems encountered by African Governments have been of their own making. They admit to extensive corruption, inefficiently run state enterprises, depressed performance in agriculture and the lack of incentives to the private sector. The summit meeting expressd a determination for self-sufficiency—a point that was touched on when my right hon. and learned Friend the Foreign Secretary was in New York. These are all issues in which the Community is providing a part of the necessary help.
I am chairman of the sub-committee of the Council of Europe's Economic Affairs and Development Committee which has been working on these matters and called "North and South Europe's Role". It has been responsible for setting up a public awareness campaign which will run in 1988. The campaign's themes are, broadly, interdependence and solidarity and will apply between all developed and developing countries, but especially Europe and Africa. The European Parliament's Committee on Development and Co-operation is assisting in the campaign.
The motion refers to this country's
"endeavours to ensure that food aid is better integrated in other forms of development assistance".
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One such form of assistance could be the fostering of the private sector in Third world countries so that they can better help themselves. My hon. Friend the Minister for Overseas Development, the hon. Member for Vauxhall (Mr. Holland) and I attended a few weeks ago in London a meeting of the Committee on Development and Co-operation of the European Parliament. Sir Henry Plumb had expressed his views on our aims. We are all striving for the same object. We realise that Europe working together can achieve more than it will if there is disorientation. One suggestion—to direct some of the funds that are spend on aid programmes not into indebtedness but into investment—has been put forward by the World Bank, and I welcome the fact that encouraging investment featured in the Queen's Speech. I hope that we shall move forward.
I could say much more, but this is a short debate. The motion is positive. I hope that the outcome will be a positive European contribution in an area that must be the responsibility of all developing Countries. The work of the Council of Europe leads me to look to the World Bank, the DAC and the Organisation for Economic Co-operation and development. I hope that my hon. Friend the Minister will feel that his hand has been strengthened by the resolution of the House.
11.4 pm
Mr. Stephen Dorrell: I join the chorus of approbation of my hon. Friend the Minister for Overseas Development. He is to be congratulated for having cajoled or charmed his colleagues in the European Community's Council of Ministers into agreeing this draft regulation much more quickly than any of his predecessors were able to do. The intention that emerged from a meeting of the European Community's Development Ministers reflects major improvements in the Community's food aid programme. They include the divorce of food aid from its link with the common agricultural policy, the commitment to integrate food aid more clearly with the development programmes of the recipient countries, the commitment to better administration, the freeing of triangular deals and the commitment to make the system more flexible and more closely attuned to the development requirements of the recipient countries. Those improvements are long overdue and very welcome.
My purpose in rising to speak is to ask my hon. Friend to suggest that his colleagues in the Council of Ministers should take the initiative, or he should take the initiative himself and follow through the logic of all that. It is not enough to say that food aid should not be regarded simply as the disposal of CAP surpluses. We should ask ourselves what developmental purpose can properly be served by food aid. The Community has not yet addressed the answer to that question with sufficient honesty.
All of us agree that food aid has an important part to play in disaster relief. However, as the hon. Member for Vauxhall (Mr. Holland) pointed out, food aid constitutes only 10 per cent. of the Community's food aid programme—roughly £35 million. The Community is still spending £300 million on food aid that has nothing whatever to do with disasters or refugees. It is surely legitimate to ask what that money is being spent on, or what is the guiding principle that we are trying to establish by spending that money.

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Anybody who looks, even in the most cursory way, at food aid must conclude that it is a very dangerous commodity. It is rather like a drug. It is too easily seen in Europe as a quick fix to sort out some of the CAP's problems. Much more seriously, it induces in developing countries a dependency upon imports either from rich countries or from other poor countries that are financed by rich countries, a dependency that developing countries cannot, by any stretch of the imagination, afford. If that is the danger of food aid, and if we are conscious of the fact that that is the danger, however well intentioned, it has potentially very dangerous consequences for the economic and social structure of the recipient countries.
The Community owes it both to the electorate who are paying for this £300 million programme, divorced from disaster relief, and to the recipient country to make clear what integrating food aid into a clear development plan means. Anybody who examines development must accept that any sound development programme has to concentrate, among other things, on the promotion of local production of agricultural products and on the promotion of an agriculturally based development programme. That must mean, within the relatively short term, phasing down the food aid programme and using the money for more specific developmental functions within the recipient countries.
The hon. Member for Vauxhall addressed this issue but was anxious to stress that he did not think that food aid should be removed overnight. If food aid is potentially dangerous and induces a state of dependency, we have to recognise that the discipline of withdrawing food aid in certain cases, although it may not be an easy or a particularly attractive option, may have a role to play.
Mr. Stuart Holland: I said twice that I thought food aid ought to be phased down in relation to development policies for agriculture, especially in marginal areas. I said that quite clearly and I would not wish to be misunderstood. I said that I did not recommend that it should be phased out, because if one takes somebody off drugs overnight the result may be disastrous.
Mr. Dorrell: I am grateful to the hon. Gentleman for clarifying what he said, but that still does not invalidate the gloss that I sought to put on what he said, that we must recognise that the commitment to phase out food aid may well be a discipline to be imposed on the recipient country within a time scale in which it is entirely reasonable to expect that country to increase its own domestic production.
One of the great fallacies that many of our electorates believe is that recipient countries of food aid, developing countries, are in some sense unable to feed themselves. With proper development programmes they would be well able to feed themselves and some of the countries that run the biggest deficits are well endowed by nature and well able to to provide for their own food needs in the forseeable future.
Perhaps my hon. Friend will address his mind to the role that food aid plays in his development policy. I should like to draw his attention to an article that he wrote in The Sunday Times on 9 November, in which he said:
"We also believe that food aid proposals, outside famine emergencies, should be thoroughly examined so that they make financial and developmental sense."
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That is absolutely right. He went on to say:
"They should help, not hinder, local producers."
How does he see food imports—because that is what we are talking about—helping rather than hindering local producers of food? That is the guts of my question.
Like the hon. Member for Vauxhall I do not argue for the immediate withdrawal of food aid, but we need to see a structured programme for its reduction. Still less do I argue for a reduction of European Community development assistance in total. I am arguing that we spend £300 million on this programme and in general it is not well spent. We need to think about how it could be better spent.
11.12 pm
Mr. Chris Patten: I have had the pleasure today of listening twice to the hon. Member for Vauxhall (Mr. Holland). I hope that it will not worry him too much if I say that once again I found myself in agreement with a great deal of what he said.
Mr. Holland: The hon. Gentleman should not let it worry him.
Mr. Patten: I hope that reselection is out of the way.
Perhaps I should clarify the position in which we now find ourselves. The Community has settled its food aid policy. However, there are two institutional questions that remain to be resolved. I do not underestimate the difficulty of trying to resolve them, but I hope that it proves possible to reach a satisfactory conclusion next week and to engage in a process of conciliation with the European Parliament that will produce the results to which we all hope conciliation will lead.
The hon. Member for Vauxhall gave an admirable criticism of the way in which food aid is sometimes operated, and his speech contained much with which I am in agreement. I have said much the same things myself from time to time in a number of widely unreported speeches. I have no doubt that the result of the regulation on which the Council arrived at a common position last month will lead to greater integration of food aid development policy.
The hon. Gentleman asked about two specific issues. He inquired whether dairy food was covered. I assure him that it is, and that under the regulation the same criteria will have to apply to dairy food aid as applies to other products. The hon. Gentleman eloquently posed the Mali dilemma. I am glad to say that in 1986 the European Community decided, with our strong support, to provide cash from its food aid budget to stimulate local food production rather than flood developing countries with European surplus products.
My hon. Friend the Member for Beckenham (Sir P. Goodhart) made an interesting contribution to the debate. I should point out that the regulation is about the contribution to developing countries. Thanks to the economic policies pursued by the Government over the past seven years, we have not continued our descent to developing country status. My hon. Friend asked whether the new proposals would inject new vigour into the emergency distribution of food aid. I can assure him that they will. He asked also about food aid for refugees. The European Community annually provides substantial quantities of food to the United Nations High

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Commissioner for Refugees as well as cash from a European Community budget line specifically for aid to refugees.
I also recently approved an allocation of nearly £3 million in British food aid to help the UNHCR's programme in the Sudan. We have chosen to help Afghan refugees largely with cash. So far, we have contributed about £40 million to Afghan refugees. When I was in Peshawar two weeks ago, I announced the contribution of a further £3·5 million to the UNHCR. I commend everything that my hon. Friend said about Afghan refugees. I hope that in the next months and years we shall be able to demonstrate that we are alive to our international obligations towards the 3 million refugees who have been driven from their country by Soviet weapons. In addition to cash aid to Afghan refugees, we also provide substantial quantities of food aid through the UNHCR.
The hon. Member for Berwick-upon-Tweed (Mr. Beith), like the hon. Member for Vauxhall, set out a number of criticisms of existing food aid policies. I am in substantial agreement. Of course I accept—I have said as much—that we should not allow food aid to provide a spurious moral justification for the creation of surpluses in the United States or in Europe. I have made that point again and again, not only in this country, but in meetings with my colleagues, the Development Ministers from other countries, but the problem of surpluses and the adequate use of food aid are different matters. They require different solutions. To some extent, the fact that they have been linked so often in discussions has prevented the clarity of view that is necessary to solve the problem of surpluses.
Mr. Stuart Holland: I am sure that the House will welcome a counter-soporific intervention at this stage of the debate. How does the Minister argue that point? Surely it is clear that when there are surpluses on so sizeable a scale there is pressure for their disposal rather than destruction? It serves the farm lobby in Europe well for there to be this PR exercise, in that there is food aid to developing countries rather than butter being sold at 3p a pound to the Soviet Union, or food being destroyed. If the Minister cannot grant that fact now, will he go deeper into the undergrowth of the farm lobby? It is a widely held view. I am sorry to find that he does not share it.
Mr. Patten: I was not aware that I made that point. I assure that hon. Gentleman that, on this issue, I speak with all the courage of an hon. Member who has two farms in his constituency. I thought I had just said that we should not allow food aid policy to provide a spurious, specious moral justification for running up surpluses. Food aid policy has to some extent disguised what we need to do to reduce those surpluses. I find wholly convincing the arguments which the World Bank advanced about the cost to developed and developing countries of illiberal agricultural trading policies and substantial state aids, which all too often disfigure our policies in Europe and North America. I am extremely pleased that on that issue this Government and this country have been so substantially on the side of the angels.
Mr. Beith: Speaking as one who has many farmers in his constituency, I hope the Minister will accept that
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farmers are well aware of the dangers posed by the policy. It is certainly not any part of the lobbying done by farmers in this country to argue that it is a good thing to maintain food surpluses because one could always give them away to the Third world. On the contrary, farmers in this country and their representative body, the National Farmers Union, are actively looking for ways of ending the production of surpluses.
Mr. Patten: I said that I was pleased that this Government and this country are, on the whole, on the side of the angels. I am delighted to have confirmation from the hon. Gentleman that the farmers are positively angelic as well.
My hon. Friend the Member for Sheffield, Hallam (Sir J. Osborn) said several kind things, for which I am extremely grateful. I know that his knowledge of these matters begins more or less where mine ends, and that he has laboured in this vineyard for several years. I shall be as interested as he said he would be in what happens at the Foreign Affairs Council next Monday and Tuesday. I also agree with what he said about the importance of encouraging the private sector. I hope that shortly we shall be able to announce ways in which we can do that in Nigeria, for the agriculture industry there. I trust that in future we shall be able to do it in other countries, where we have bilateral programmes.
My hon. Friend the Member for Loughborough (Mr. Dorrell), in the final speech of this short but interesting debate, said a few kind things about me as well. He and I ran some joint charm campaigns in the past, in which, alas, we were not as successful as both of us might have liked. Nevertheless, we both survived, in a manner of speaking. I hope that, having survived, I shall be able to respond to my hon. Friend's challenge and articulate more explicitly the developmental objectives of food aid.
I endorse the point made by my hon. Friend, that food aid can be a dangerous drug on which both donors and recipients get hooked. I remind him that the European Community agreed about two years ago, following persuasion by my distinguished predecessor, a regulation allowing substitution actions, that is, providing cash from the food aid budget instead of food at the request of the recipient country. If one looks at our bilateral food aid programme, one sees several examples of food aid being used in a sensible developmental way. That is happening with the export of 7,000 tonnes of Kenyan maize to Ethiopia, and with the 7,000 tonnes of Zimbabwean maize that is at present going to Mozambique.
With the approbation of the House ringing in our ears, for a change, we shall set off with due humility to Brussels next week, and to the next round of this important battle.
Question put and agreed to.
Resolved,
That this House takes note of European Community Document No. 8705/86 on food aid policy and food aid management and the supplementary Explanatory Memorandum from the Overseas Development Administration of November 1986; endorses the view that reform of the European Community's food aid programme is necessary; and welcomes the United Kingdom's endeavours to ensure that food aid is better integrated with other forms of development assistance and is provided in ways that are primarily intended to meet the needs of recipient countries.

Air Transport
11.24 pm
The Parliamentary Under-Secretary of State for Transport (Mr. Michael Spicer): I beg to move,
That this House takes note of European Community Documents Nos. 5938/84, 7932/1/86, 8324/86, 8109/86 and 9132/86, on the liberalisation of air transport in Europe, and fully supports the Government's determination to press for such liberalisation in the context of the 1992 deadline for the completion of the Community's internal market.
The Government very much welcome the decision by the Scrutiny Committee that the latest Commission proposals on liberalisation of air transport should be debated. The proposals, produced just before the summer break, form an important element in the current negotiations. They update the Commission's original policy paper, which is called memorandum No. 2, on which there is also an outstanding commitment to a debate. It is clearly sensible to take the old and new Commission proposals at the same time, and also to take the proposal for amending the 1983 Community directive on regional air services, which to a large extent forms part of the package now under consideration.
This debate comes at a crucial moment. We are approaching the conclusion of the British presidency, in which one of our main aims has been to try to make worthwhile progress with liberalisation. That means cheaper fares, more competition on routes, greater commercial freedom to mount capacity, and application of the Community's competition rules.
Those elements must be taken together as a package. Liberalisation will not, in practice, have much effect unless all the elements of the package are in place. Of course, at first sight, fares appear to be the most important aspect, but cheaper fares will not come about simply by relaxing fares regulation. They will come about only if it is possible for airlines to compete on routes and on the level of services. Under our presidency, we have been trying to secure agreement in Europe to a package covering all those elements, so that after far too long—that is our view and, I suspect, the view of many hon. Members—Europe can begin to have the air services that it needs.
Our campaign goes back to 1979, but the development that first allowed us to put real pressure on other Community countries was the publication in 1984 of the Commission's second memorandum. The Commission proposed that, for the first time, airlines should be free to propose fares without first consulting the other carriers on the route. It proposed that fares should be automatically approved, provided that they met certain criteria, and it proposed that, up to a limit of a 75–25 split of the capacity in the market between two countries, airlines should be free to mount what capacity they thought commercially justified. Finally, it proposed that, if such liberalisation could be agreed, airlines would be given wide-ranging exemptions from the application of the treaty's rules on competition.
That approach was broadly acceptable to the Government, with one proviso: the Commission failed completely to include proposals for opening entry to the market so that new airlines could start services competing with the carriers and so that new routes could be started. That omission was a fatal flaw which we said at the time would have to be put right. From 1984 until this year, progress on those proposals was desperately slow. Only
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Britain, the Dutch and the Commission were seriously interested in applying the principles of the treaty to air transport, and we faced intense opposition from other member states and their airlines.
The position began to change only as a result of three things. First, the success of our bilaterally negotiated agreements with the Dutch and, later, the Belgian, Luxembourg and West German Governments established a new climate for discussions in the Community. Secondly, the succession of the Dutch and British presidencies this year created a major window of opportunity which, in the enlarged Community, will not occur again for five years. Thirdly, the important European Court judgment in the now famous Nouvelles Frontieres case earlier this year confirmed that the competition rules apply in principle to air transport, and enabled the Commission to take the first steps towards applying them in practice.
Those developments brought considerable pressure to bear on the negotiations, and during the first few months of this year it became clear that some amendments were needed to the Commission's proposals in memorandum No. 2. Therefore, the Commission produced the further proposals which are the immediate cause of this debate. More specifically, it proposed some technical additions and changes to its proposals for group exemptions; revised ideas on fares designed to take up the concept of fares zones, which are favoured by most member states, but with a more flexible approach to the conditions attached to fares; and it proposed introducing new safeguards within the maximum 75–25 per cent. capacity sharing range. It also, separately, introduced amendments to remove most of the restrictions in the 1983 regional services directive, and to widen its scope to cover routes between category I and category II airports.
Before the Commission's new ideas were generally available, however, the Dutch presidency was able to secure unanimous acceptance, at its final Transport Council, that the agreed 1992 target date for completion of the internal market applies to air transport, and that, in order to achieve that target, which must mean full liberalisation. A first step should be taken quickly. The Dutch secured agreement that the first step should last for three years. Taking us to 1989, and leaving three further years for a more radical second stage.
May I now consider the developments under our own presidency which have taken us to the point at which it may at last be possible, given a further effort by other countries, to agree on a first step which will bring real and quick benefits to travellers and to airlines.
The Government decided, having considered the Commission's proposals, and having established the attitude of other countries, that it would be necessary to put forward our own package, based to a large extent on what the Commission had suggested, but adding the substantial and vital ingredient of market access. My right hon. Friend the Secretary of State for Transport therefore put our presidency proposals to an informal meeting of Transport Ministers, here in London, in early October.
On fares, we envisaged provision for airlines to make unilateral fares proposals, without having to agree them with other airlines, combined with a new, fast arbitration procedure for circumstances where one Government or airline seeks to block the fares proposed by another. Equally important, we have proposed that, for cheap fares, airlines should, within wide ranges, have complete commercial freedom in terms of prices, and should be

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allowed to offer such fares with far less restrictive conditions than has been the case up to now. In particular, the nonsensical requirement that to make use of a cheap ticket one has to stay either six nights or a Saturday night would be swept away, and airlines would be able to price their tickets on the basis of time of day—the so-called peak or off-peak pricing.
This of course, is the concept which British Caledonian has experimented with on the few routes where other European Governments have allowed them to do so. As the House knows, the experiments have shown the existence of hitherto untapped markets, and it has given passengers an attractive choice of fare types with some markedly lower prices.
Our objective for fares remains unchanged—the removal of all restrictions on conditions, and full commercial competition—but, as a first step, our proposals would represent a major advance towards that.
Sir John Osborn: My hon. Friend knows of my interest in these matters. I welcome the fact that he is referring to the Community documents here and he knows that I have had conversation with members of the European Civil Airline Conference and the European Airline Passengers Association. However, the Council of Europe deals with other airlines outside the Community. Can my hon. Friend tell us to what extent the proposals will affect airlines outside the Community rather than those airlines inside the Community?
Mr. Spicer: I will certainly do that when I conclude. I will consider the implications of greater liberalisation within the Community for real relations outside and the competitive advance of European airlines against other airlines. If I may, I will leave that point until the end of my remarks.
On capacity, we have proposed that, by the third year of a first step, shares of total capacity could, where airlines judge it sensible, be able to vary within a range of 60 per cent. to 40 per cent. This not only represents a significant step towards the Commission's eventual target of 75 per cent. to 25 per cent.; it will in fact allow as much growth as our airlines are likely to be capable of using within the period, and will create room for new carriers on all the major routes where capacity restrictions bite at present. Clearly we shall insist on going beyond this, and on to full freedom, by 1992. However, as a first step, our 60 per cent. to 40 per cent. proposal would remove all the serious immediate constraints.
Mr. Anthony Steen: Why are we waiting until 1992? That is a long time to wait. Will my hon. Friend also say something about the French?
Mr. Spicer: My hon. Friend may know that 1992 was the date agreed by the Heads of Government for the full internal market. The great breakthrough was achieved this year when the 1992 arrangement—it had been in doubt—was agreed to. It was a major step forward. It determines the impact that our own package will make because that can be seen as a step in that direction. That is important and fundamental.
I am not sure what my hon. Friend wants me to say about the French. Perhaps he will be more specific.
Mr. Steen: My hon. Friend the Minister will correct me if I am wrong, but, whereas all the other European countries have been happy to discuss liberalisation with
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him, the French have been extremely tardy. I am even advised that they may not be prepared to see my hon. Friend. Will he tell us about that?
Mr. Spicer: France is one of the six countries which have not seen fit to go along with the arrangement on fares, but the relationship with the new French Government, in particular, has been cordial. I cannot speak for the French, but I sense that they are becoming increasingly persuaded to accept some of our arguments. We shall be seeing the French Minister before the Council meets on Monday morning.
In addition to the proposals on fares and capacity, we decided that to produce a balanced package we must go further than the Commission has suggested on market access. We have, therefore, taken up the Commission's limited ideas for liberalising routes from regional to "hub", but have said that market entry on these routes should be liberalised for all aircraft and not only for those up to 70 seats. We have gone on to say that, while aircraft with more than 70 seats should be counted within the overall capacity range that has been agreed, smaller aircraft should be freed from all capacity control.
Perhaps most important of all, we have included proposals for ensuring that there can be head-on competition between as many airlines as each country separately wants on all Europe's major trunk routes. Multiple designation is fundamental to competition, and is the first and most vital step to getting the passenger a better deal. The Government have never understood the Commission's failure to produce proposals on this, but we have now taken steps to put this right.
Taken together, these ideas on market access amount to a major step forward, which would sweep up the most important ideas in the Commission's proposals for amending the regional services directive and add the major missing feature. If our proposals are accepted, we envisage that exemptions from the competition rules could be granted, but only for the three years of the first step, not for the seven years originally proposed by the Commission.
How have these ideas been received? That is what lies behind the questions of my hon. Friend the Member for South Hams (Mr. Steen). The Transport Council met in Brussels last month, 11–12 November, and had the most extensive and detailed discussion of air transport in its history. It did not come to an agreement, and the press and, I suspect, the hon. Member for West Bromwich, East (Mr. Snape), who is laughing from a sedentary position, saw this as a failure. That certainly applies to the press. We were able, however, to secure the support of 10 countries—every one except Greece and Denmark—for our proposals on capacity, and that of nine countries for those on market access, where Greece and Denmark were joined by Spain in dissenting. The House will recognise, given the previous hostility in Europe to any changes, that these figures represent a major shift in the position of restrictionist countries.
Only on fares were we left with apparent deadlock. The Council was evenly divided over our proposals, and it became clear that we would have to work very hard, in bilateral discussions, to persuade those concerned that we were right.
The Government see the issue of fares as crucial to the argument. There can be no further concessions on our part. It is for the countries that are doubting us on this

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matter to think again about their positions. If they are unable to do so, there cannot be an agreement this year, and the procedures which the Commission has started to apply in introducing the competition rules will inevitably be carried through to completion. The House will recall that the Government have made it clear that, in the absence of agreement, we would have to try to apply the competition rules unilaterally, under article 88 of the treaty, although that would be an unprecedented step that would take time to implement.
Since the last Council, my right hon. Friend the Secretary of State and I have seen the Ministers of almost all the countries which had previously opposed our ideas on fares, and those few which have difficulties on capacity and market access. It is becoming clearer by the day that there is a real desire on the part of most of them for agreement, and a growing recognition that agreement must be on our terms.
Against this background, the Government have decided to provide further time for discussion of this issue at next week's Transport Council to see whether the positions have changed. If we can secure support for all aspects of our proposals, it will represent a major step forward, making the 1992 goal achievable, and bringing early benefits to travellers and to airlines.
I ought to add that we have throughout our campaign had the fullest support of our airlines. They have fought battles in parallel with their European competitors. That has been of great help to us. Next week's Council presents us with a chance—some might say a hope—of success. We cannot guarantee it, because our ideas still go further than most countries would really like, but there is a chance.
Our success in opening up European air routes to greater competition will be to the lasting benefit of the travelling public and of those airlines which attract more business and to the European aviation industry as a whole, which will be better placed than it is today to face the competitive pressures not from inside Europe, but from the United States and the far east. For that reason, the timing of this debate is ideal, and I ask the House to support the Government's strategy.
11.41 pm
Mr. Peter Snape: I was struck, listening to the Minister, who made a bravura and eloquent speech, by the parallel with the return of the Kaiser's army to Germany in 1918. They might have had holes in their socks and empty ammunition pouches, but the band was playing and the flags were flying. Does anyone think that if there had been the great triumph to which the Minister referred, we would be here at dead of night in a comparatively thinly attended House to hear about it? It would have been trumpeted from the rooftops and the Prime Minister, who referred to herself this afternoon as the leader of the pack, would have been boasting of her Ministers' achievements.
There are, of course, no real achievements to point to, and not even the eloquence of the Minister can convince us otherwise. I remember listening to the Minister's brave words when, on 22 October, he said that the aim of our presidency is to devise a specific package for the first three-year step towards full liberalisation. On that litmus test, the Minister has managed eloquently to gloss over the
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failure even to move towards that objective. As he implied, on 11 and 12 November, the Government devoted the entire EEC Ministers meeting to air fares. We awaited the results of that meeting with bated breath. I fear that the results were sparse enough not to merit comment in the Minister's speech.
As the Minister said, in June, the European Court of Justice ruled that fare fixing broke the treaty of Rome and was illegal. One would have thought that that would have provided the United Kingdom with the ideal chance to move ahead. We were building on the previous six-month presidency of the Dutch who, the Minister said, have also pressed for liberalisation. Why the failure? Let us not shirk that word because, regrettably, it was a failure. In part, the Government have had to change course because they must safeguard their top priority, the flotation of British Airways. No brave words from the Minister could be allowed to prejudice that flotation.
Notwithstanding the difficulties which the Minister referred to earlier, I understand that on 3 October, his right hon. Friend the Secretary of State, at an informal meeting of EEC Ministers, suggested that he would tone down his demands for liberalisation. Is it true that, instead of ensuring that 75 per cent. of any route was open to competition, within three years, according to my information, that 75 per cent. was to be replaced by 55 per cent. and then moved back up to 60 per cent.? Is it true that that was the compromise put forward by the Secretary of State? Is it also true that the right hon. Gentleman's Dutch equivalent—if the newspaper article was correct—said that there was too much water with the wine in those proposals?
The Government, when they set off on the road to liberalisation, made continual reference to the great success of deregulation in the United States. There is less talk about deregulation now because in the United States and elsewhere it is not perceived to be the great success that it at first appeared. Deregulation has become liberalisation. The Government say that they believe in the fullest possible deregulation. The Department of Transport has pursued that policy with regard to bus services outside London. But the Government cannot expect to be taken seriously if they change policy in order to sell off British Airways. The present stance taken by the Department of Transport in the aviation world is that nothing must be allowed to prejudice the great flotation when it occurs.
The lessons of deregulation in the United States provide us with warning signals. It is true that, in the early part of the 1980s, it appeared that deregulation was a great success. New carriers came into existence, lower fares were offered and there was extra competition which largely benefited the air traveller. Things have gone somewhat sour in recent years.
It appears that seven United States companies now control about 80 per cent. of passenger journeys within the United States. When we compare deregulation in United States and liberalisation in Europe we are not comparing like with like. The Minister should learn something from the American experience and not damage one of the few industries within the United Kingdom which is still expanding, despite Government activities over the past seven years.

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To embark on the road to complete liberalisation—the Government have not done so; they have only talked about it—would have serious effects on the profitability of many British airlines.
The proof given to justify the United States example, at least until recently, was that EEC fares are much higher than they should be and could be brought down to the price levels in the United States if the policies which the Government profess to advocate were implemented.
First, let us dispose of one fallacy. Most of the policies of liberalisation which the Government advocate will not come about, because there is no legislation that the House can pass and no directives that emanate from the Council of Ministers which will make the Italians take any action that will prejudice the future prospects of Air Italia or the French co-operate in a way which they perceive to be against French interests.
That might be distressing for a liberaliser such as the Minister, but we should not allow his obvious distress to blind us to the truth. No legislation emanating from anywhere can or would compel other European Governments to act against their perceived national interests, especially when that national interest has to do with the profitability of the national airline.
Mr. Rob Hayward: Is the hon. Gentleman suggesting that we should not make the effort to act on behalf of consumers?
Mr. Snape: No, I am not making any such suggestion. If the hon. Gentleman will contain himself for a few moments, I shall in my customary tentative fashion make some suggestions which may meet the requirements of British consumers and his sentiments. But first, we should dispose of the propaganda that has emanated from the Department of Transport in recent months that we are on the brink of an enormous breakthrough and that on the morrow will come this bright new dawn of liberalisation, because it will not.
Nevertheless, I agree with the hon. Gentleman that there are certainly routes within the European Community and elsewhere where the fares charged are much higher than those of United States equivalents. We are not comparing like with like because, unlike the United States, Europe has a large and comparatively cheap charter market. Indeed, 60 per cent. of all travel within Europe is on charter flights. For most people who fly once a year on holiday, the only time they use an aeroplane is on such a charter flight. It would help them enormously if the charter anomalies, which I hope the hon. Gentleman agrees exist, were dealt with, but the Government are set on cutting scheduled fares and, in the words of the Minister, on having no restrictions to competition on scheduled routes.
If that is the Government's policy, the obvious question is: who will pay? Somebody must pay for the extra capacity which fare cutting is hoped to generate, but that is normally ignored. In the United States the result of widespread deregulation has been to cut expenditure on matters such as safety. Not that I would suggest that what has taken place there, with heavy fines levied by the Federal Aviation Authority on airlines that have cut routine safety matters, would he repeated in Europe. In a fully deregulated or liberalised market the pressure on airlines, especially the small ones, to cut what may be seen as non-essential maintenance is undoubtedly enormous.
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I do not know whether the hon. Member for Crawley (Mr. Soames) will be participating in the debate. He is showing some unusual signs of restiveness for this time of the night. I have not taken up nearly as much time as his hon. Friend.
Mr. Nicholas Soames: He is a Minister.
Mr. Snape: Of course he is a Minister. The hon. Gentleman, with his traditional loyalty, would never criticise a Minister. After all, he hopes, whether by a chartered airline or a cut-price route, to sit there himself at some time in the future. If the hon. Gentleman will bear with me for a moment or two, I promise not to keep him too long.
We shall no doubt hear from the hon. Member for South Hams (Mr. Steen), who diligently represents the interests of British Midland Airways, to name but one. Mr. Michael Bishop and his colleagues at British Midland are desperately anxious to see the fullest liberalisation of scheduled air carryings within the EEC.
If Mr. Bishop and the hon. Gentleman were told that that great liberalisation would come overnight, I am not sure what the hon. Gentleman's reaction would be, because he is fairly unpredictable, but I dare say that Mr. Bishop would blanch somewhat at the prospect.
Whatever their public pronouncements, the management of Britain's airlines worry particularly about two things, first, they worry about the future once British Airways is privatised, if privatised it is going to be, because, although they all profess to be in favour of that privatisation, it does not stop them writing to hon. Members on both sides of the House to say that, once the privatisation has taken place, we must regulate a privatised British Airways to see that it does not behave in a predatory fashion towards other airlines and their routes. One can understand that view, somewhat illogical though it might be. Secondly, as business men, they do not want the precarious existence that a fully liberalised regime would bring about. They want some long-term guarantees of the security of the market in which they operate.
Despite the Minister's brave words earlier, there was not a great deal of content in what he had to say. We understand the Government's avowed intention to move towards this great liberalisation, but we do not really feel—[Interruption.] I am not sure whether the strange noise that I can hear is coming from the watch of the hon. Member for Crawley or some other piece of equipment, but I shall regard it as the final whistle and urge the hon. Gentleman, unlike his hon. Friend the Minister, to exercise a little realism on liberalisation.
The Government's brave words have not been translated into deeds and the Opposition's forecast, without defending some of the high fares that are prevalent on many routes, is that they will remain as brave words and there will be comparatively few brave deeds to follow.
11.58 pm
Mr. Kenneth Warren: I follow the hon. Member for West Bromwich, East (Mr. Shape) with a little more hope than he expressed. I am rather sad that he should be so sour even at this late hour. It would be nice to know that he thought it was a good thing that we should be making progress on a measure that we have not thought it worth while debating in the House for years because it was a waste of time debating the possibility of lower air fares when no progress was being made.

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I pay tribute to my hon. Friend and the Government for the fact that they have exercised initiatives which we have been waiting for over a decade to hear. I hope that they will go on exercising those initiatives and carrying them into action beyond the present.
The volume of paper does not decline the older the EC becomes. We are supposed to attend to six colossal thick documents in order to debate the matter. If there is anything that my hon. Friend can do to cut down the amount of paper that floods in from the EC, he will be rendering us a singular service. I say that because, while I would not pretend to have gone all through the documents, it is extraordinary how few times the person, the passenger, is mentioned. We learn only of regulations. As usual, the European Community is missing the trick.
When I served on the Council of Europe some 10 years ago, we had endless debates about the need to reduce air fares and give passengers a better chance of flying Europe. Everyone attending the Assembly in Strasbourg agreed and all voted in favour of resolutions to that effect—even those I moved—but when next the subject came up we found that nothing had been achieved.
I am concerned about the pace that the EEC has set itself to achieve this unbelievable competitiveness that has eluded Europe so far. Can it be achieved in six years? While 1992 may seem a long time hence, looking back six years does not seem to take us back far. The fact that document 7932 has taken two and a half years to arrive in this House, let alone in other Parliaments in the Community, makes me feel that not much will happen and I hope that the Minister will kick the other members of the Community—
Mr. Steen: Very hard.
Mr. Warren: I agree, particularly the French—to make sure that they get on and achieve by 1992 the task that their citizens expect them to achieve by then.
Hon. Members will welcome the chance to move towards an open market, but may be told, on the question of air fares, whether the airlines are required to consult—for example, in this country the Civil Aviation Authority or the Government—before introducing new fares?
While we want to see the cost of flying reduced, that should not occur at the expense of any diminution of the air safety standards which we accept as normal and which in this country are of the highest in the world. A provision on air safety standards should he written in to give that assurance.
I hope that the cost of flying in Europe as well as inside the United Kingdom will be seen in terms of the cost that it imposes on our trade competitiveness in dealing with our competitors in the United States who are trying to fulfil the same trade task.
Document 7932 troubles me in capacity terms in view of differences in paragraphs 3 and 6 of the helpful memorandum produced by the Department. Paragraph 3 says:
"either country in a bilateral relationship would be allowed to vary"
its capacity, but paragraph 6 says:
"The proposals, if adopted, would override the UK's air services agreements".
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If we are to override such agreements I shall be delighted, because they have worked actively against the interests of the passenger since they were introduced in Europe. It would be helpful to know whether this proposal overrides
"the UK's bilateral air service agreements."
Are we to understand from the explanatory memorandum that new airlines will be allowed to enter and leave routes? How will they be able to do that? The Minister may not be able to answer these questions in detail tonight. It would be helpful if, in due course, attention were paid to these issues before we lose the presidency. After all, paragraph 3 states:
"any country should, as a safeguard, be able to intervene in the market".
What will such intervention mean? Will any country be able to freeze out any airline or other country from operating on a particular route?
The Minister has had correspondence with Mr. Alastair Tucker, a well-known aviation consultant, about document 9132. I wish to register the concern that is felt in the air transport industry about other problems, such as the question of computer reservation systems, which reside within this determination to give liberalisation.
At the moment, it is very much the right of particular airlines to allow others to enter or not to enter their computer reservation systems. As a consequence, passengers do not have the freedom to book on other airlines if they cannot get satisfaction within one airline's computer system.
We must ensure that the competition directorate in the EEC provides what is required and what is stated in explanation document 9132/86, where it says:
"The Government is aiming to secure agreement during the present UK Presidency on a general community regime for civil aviation covering fares; capacity; application of competition rules".
These competition rules should cover the protection of passengers so that they know that if they want to get a reservation they will not be restricted to particlar airlines by the computer reservation systems in the Community and that they will fly with the airline with which they are booked. There are some rather hairy situations in the German reservation system, where one can book on Lufthansa and end up on another airline.
I make a plea to my hon. Friend. After the many years of trying to get deregulation and cheaper flight regimes in Europe, which we would all welcome, can we ensure that the wheel is not invented yet again? The hon. Member for West Bromwich, East spoke with some disparagement, I have no doubt from personal experience, about what he believes to be the lack of success of the deregulation system in the United States. In fact, in general it is considered that deregulation has been a success in the United States.
What is wanted—and this is where the Americans have erred—is information for Europeans about the route patterns that will be available to passengers, and the frequency of services, so that we can achieve customer satisfaction, which, as I said earlier, is not mentioned in the documents.
My hon. Friend the Minister said that the ideas that we put forward from this country are more numerous than most countries in the Community would like. So be it. I think that we should be the pace setter in this matter. We have always been proud to be a leader in aerospace. I ask the House and the European Community to remember

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that we are supposed to be representing the citizens' interests in travel, and that should shine out more strongly in our declarations.
12.7 am
Mr. Stephen Ross: The hon. Member for Hastings and Rye (Mr. Warren) is an expert on this subject. I am certainly not an expert, so I am somewhat encouraged to learn from his speech that he does not entirely understand all the documents, or even the Minister's explanation. Therefore, I feel slightly more confident about asking one or two questions than I did a few moments ago.
I am in favour of liberalisation but not of total deregulation. I think that the Government will learn a lesson on deregulation with the buses and perhaps they will be able to apply it to the air transport industry. I believe that what has happened in the United States with People's Express airline going bust and other things cannot really be a very good story. It may be that the seven major companies that are now left are competing well with each other and fares may have fallen, but there have been some disastrous job losses in the interim.
I have no doubt that the Minister's heart is in the right place and that he has tried very hard. Despite our presidency of the Council of Ministers, we have not, in all honesty, made as much progress as we would have liked. However, I wish the Minister well next week. In the brief to document 7932 we are told that the
"Commission now hopes to facilitate early agreement on a first step towards full liberalisation by the target date of 1992".
The Minister hailed that as a breakthrough; therefore, I shall accept it as that. However, there are nearly six years to go and in the mean time fares to most member states are grossly over-priced. I travel to the Western European Union, which meets in Paris, and I am staggered by some of the fares. The explanatory memorandum can only report that the Government will aim
"to secure agreement to a worthwhile 'first step".
There is less than a month to go before the Belgians take over the presidency, so next Monday's meeting obviously is important.
Document No. 8324, to which the Under-Secretary of State referred, applies to the position of companies such as British Caledonian, which has had an agreement with other airlines in Europe. Is the exemption to be permitted only for a limited period—three years? One has some sympathy with British Caledonian which has had a pretty lean summer. I am sure that its actions have been in the best interests of the airline and of the consumer.
Document No. 424 makes a minor concession, to which the Under-Secretary of State referred, to regional Community airports and aeroplanes with fewer than 70 seats. The hon. Gentleman said that more wide-ranging proposals had been submitted by us, and presumably they will be discussed on Monday. Does that limited agreement mean that when the docklands airport comes into operation aeroplanes with fewer than 70 seats will be able to operate from the docklands STOLport into the main city airports of Europe, or will they have to operate from regional airports? That is a vital question. I support the docklands STOLport and think that it has a great future if aeroplanes flying from it can fly to the main cities of Europe.
The Under-Secretary of State did not refer tonight, although he may have done in the past, to the report last
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January by the National Consumer Council in which it made 29 recommendations to the Government. May I take it that the recommendations are generally approved of by the hon. Gentleman and that they have all been taken fully on board?
I wish the Under-Secretary of State well on Monday. I hope that he makes progress. I congratulate him on what he has done, but I wish that he could have done a bit more.
12.11 am
Mr. Nicholas Soames: I endorse the charitable instincts of the hon. Member for Isle of Wight (Mr. Ross), who regularly acts in that manner on these occasions. I am afraid that the same cannot be said of the hon. Member for West Bromwich, East (Mr. Snape), who suffers from a serious deficiency in his party—he is not only clever but sensible. In the words of the Daily Telegraph sketch writer today in respect of another of the hon. Gentleman's colleagues, in the Labour party that is about as much use as a vulture with a glass eye.
This is an important debate as far as I am concerned, because I have a substantial constituency interest in these matters. Gatwick airport is in my constituency and a number of the airlines affected by these directives are based at Gatwick.
As predicted by the hon. Member for West Bromwich, East, I want to congratulate my hon. Friend the Under-Secretary of State and my right hon. Friend the Secretary of State on the progress that they have made in the past few months. Much of the criticism directed at their progress has been entirely the fault of their Department. There is too much talk in Government generally about breakthroughs, achievements, triumphs and God knows what else in the relentless quest for satisfactory presentation of propaganda, but we all know that these are very complex arrangements that require detailed and careful negotiation between a large number of countries and that there will not be achievements overnight on anything like the scale that we would like. I hope that we will not continue to raise the temperature of expectation but will continue with the estimable, satisfactory and good progress that the Government have made in the Community in the past few years.
In the spirit of the comments of the hon. Member for Isle of Wight, I wish my hon. Friend the Under-Secretary of State and his colleagues every success in the European Council in a difficult and important negotiation. To doubt the Government's commitment to liberalisation is absurd, because, self-evidently, just from reading the documents and knowing a little about what is happening, the Government have already created a firm framework for reform.
Air transport has proved to be a fantastic generator of jobs. The hon. Member for West Bromwich, East and I know that a healthy aviation industry is of great benefit to this country. The hon. Gentleman knows that, apart from the creation of an enormous number of jobs in the aviation industry, it results in many jobs in the tourist industry—not just seasonal jobs but, to an increasing extent, long-term jobs. It is important for all our airlines that there should be a satisfactory outcome to the negotiations.
As for document 9132, I hope that my hon. Friend will attach particular importance to the development of regional airports and to the job creation opportunities that should be provided in the more remote parts of the United

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Kingdom that do not enjoy the benefits that are to be found in the south of the country and in London. No single reform could do more to put flesh on the bones of a people's Europe than the liberalisation of air transport. The advances in air transport have done more than practically anything else to promote the concept of a wider and a more united Europe. I hope that my hon. Friend will use that argument to good effect.
I am convinced that the Government's fares policy is right. All the evidence, particularly that of British Caledonian in my constituency with its issue of "timeflyer" fares, suggests that the concept of off-peak pricing in aviation works satisfactorily. It strengthens the commercial position of those airlines which use it and it provides a product that is highly attractive to customers. There is a very long history of much publicised cheap fares which turn out to be almost unavailable to the public because of the restrictive conditions that are imposed. It clearly makes sense, as a first step, to put this right in the way that my hon. Friend has proposed. The Government should also make it irrevocably clear that they intend to give airlines full commercial freedom regarding conditions at the earliest possible opportunity. It would be wrong to leave that until 1992. It should be implemented as a second step.
It is also important to bear in mind the role that is played by the smaller airlines in introducing real competition in the market, provided that they are allowed in. Head-on competition is healthy on those routes that can sustain it. It is also valuable to have easier market entrance on secondary routes. It allows new markets to be developed and new comparisons between airlines to be made. I urge the Government to be resolute and firm and to insist that their suggestions about market access are accepted by the Council as part of the current package.
There has been talk of unilateral action by the United Kingdom. I urge my hon. Friend to be extremely cautious and not to be pushed into adopting what could be a simplistic approach. The airline industry depends upon international co-operation. Airlines are highly vulnerable, as British Caledonian can testify, to rows between Governments. If the disruption is severe, with adverse consequences for basic forms of co-operation, the traveller as well as the airline undoubtedly suffers. It is right that the Government should have a "bottom line", but they should do eveything possible to secure a negotiated settlement in Brussels at the earliest opportunity.
I ask my hon. Friend to attend to one very important matter—the absolutely chaotic conditions that prevail in the cargo market. My hon. Friend's officials were extremely helpful over a cargo airline that phoned me the other day. It was having dramatic difficulties. It was literally within six or seven hours of having to undertake a contract that it might not have been able to fulfil. I am happy to furnish the details to my hon. Friend, but I know he will agree that it is extremely important that not only people but also goods should have great ease of entry to these enlarged markets. I congratulate my hon. Friend on the progress that he has made and wish him every success in the Council.
12.20 am
Mr. Rob Hayward: I apologise to the Minister for not being present at the start of his speech.
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I was unavoidably detained elsewhere, and I hope that in my speech I will not cover ground that he has already covered.
To be confronted with a great mound of Euro jargon and to wade through it paragraph by paragraph has proved extremely difficult, if not impossible. I tried to find references to the role of airports in terms of the provision of capacity and flexibility. It is important that one should bear that in mind, especially when some airport authorities say that their runways and terminals are at, or in some cases above, capacity. They are probably more capable than the Government in periods of liberalisation to influence the way that airlines operate, because operation is determined by the provision of services.
I share the disappointment expressed by my hon. Friend the Member for Crawley (Mr. Soames) and by other hon. Members that the hon. Member for West Bromwich, East (Mr. Snape) failed to make proper reference to consumers and their interests, and set about denigrating the changes that have taken place in the United States. If one looks at safety in the United States contained in, I think, the McGill university study carried out in the mid 1970s, one sees that air safety was higher in the United States than anywhere else in the world.
Mr. Snape: That was before deregulation.
Mr. Hayward: The hon. Gentleman says that that was before deregulation. The point I was about to make is that there is no evidence to show that since deregulation those safety standards have fallen.
Mr. Snape: The Federal Aviation Authority's Donald D. Engen has linked
"the heated competition spurred by deregulation of the airline industry to a falloff in spending on critical airplane maintenance … "
The FAA inspectors discovered 78,000 safety violations and fined the airlines a total of 9·5 million dollars since deregulation. That does not square with what the hon. Gentleman is saying.
Mr. Hayward: The hon. Gentleman has not chosen to refer himself to the safety violations that occurred during the period of deregulation. His choice of quotations is astute. The hon. Gentleman should provide comparable figures for the position before and after deregulation, because they would be much more relevant. It is worth emphasising that the CAA has found those violations despite deregulation. In other words, the system still works.
The hon. Gentleman said that a series of mergers and takeovers had taken place in recent months in the United States. In 1986—
Mr. Deputy Speaker (Mr. Harold Walker): Order. Let us return to air transport policy within the EEC. That is what the debate is about.
Mr. Hayward: I apologise, Mr. Deputy Speaker. In relation to liberalisation, the opportunity to compete on different routes is important and there is a United States parallel that one must bear in mind. In terms of price levels and the opportunity for different airlines to operate within Europe, when liberalisation goes ahead we will find that in Europe as in the United States, after a transition period the number of airline services available—whether from London to Milan or any other service in Europe—will

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rise. The number of airlines offering the service will increase, as has been the case in the United States—even after the transition period.
I should like to make one or two observations about the documents. In document No. 7932 I welcome the section on capacity at paragraphs 9, 10 and 11. I am somewhat worried that the countries about which the hon. Member for West Bromwich, East spoke will choose to use paragraph 12 excessively, because it gives them an opportunity to,
"reach agreements to apply greater restrictions on their right to intervene …"
I ask the Minister to concentrate on such a paragraph when dealing with matters of capacity and, if possible, to water it down. It gives excessive opportunity to states to intervene, and I know why it is there.
The hon. Member for Isle of Wight (Mr. Ross) and the hon. Member for Crawley referred to document No. 8324. I welcome a joint operation between different airlines if it provides a facility to operate from two different, relatively small locations to a location in other parts of Europe or other parts of the world. We should not have to use the main airlines in the main cities for every single major route that we wish to follow. It is important that people in provinces in countries throughout Europe should have the opportunity to twin with provinces in other countries and then fly on from there to capital cities rather than be forced to use London or, as is increasingly the case, Manchester, which I welcome.
I welcome the operation into which British Caledonian and Sabena have entered. I hope that that example will be used by other airlines in other parts of Europe, as and when these documents are approved, in the way that will best suit British airlines. There is no doubt that British airlines are in the best position today to cope with a more liberalised system of air transport. Therefore, this is yet another example of British industry being in a position to compete well with European airlines if it is given the opportunity.
12.25 am
Mr. Anthony Steen: I congratulate my hon. Friend the Member for Kingswood (Mr. Hayward) on his measured speech, to which the House listened with great interest. I also congratulate my hon. Friend the Member for Crawley (Mr. Soames) on his fervent and enthusiastic speech. He is always worth listening to.
It is regrettable that the Members on the Labour Front Bench are always so sour. We realise that the hon. Member for West Bromwich, East (Mr. Snape) has a job to do, but it is painful, at this hour of night, to hear his siren voice complaining hour after hour about whatever the Government have done. Not a debate goes by without the hon. Gentleman complaining that whatever the Government do is wrong. It is probably worth examining Hansard to see when he has ever said anything decent or nice about the Government's initiatives.
Mr. Stephen Ross: The hon. Gentleman may not be on the Channel Tunnel Bill Committee, but if he reads some of the speeches of the hon. Member for West Bromwich, East (Mr. Snape) he may be surprised.
Mr. Steen: I should be surprised. We will not be drawn into a discussion about the hon. Member for West Bromwich, East. He has attracted enough attention this evening. We all enjoy listening to him, but this evening he let us down badly. Not only was he sour; he was boring.
Mr. Snape rose—
Mr. Steen: The hon. Gentleman should resume his seat. I remember when, on another occasion, I wanted him to give way to correct a mistake that he had made, and he refused. The best place for the hon. Gentleman is a sedentary position.
I wish to make a short speech. At this time of night the House does not want to hear too much more on these complicated documents. It must be right that airlines should compete freely. It must be wrong that a Government should distort market forces. It is quite wrong that a European Government or this Government should say where airlines should fly and at what price. It must be obvious that an airline should be able to fly wherever it likes, and at whatever price it likes, provided there is space to do so and it considers that it can do it at a profit.
It is equally wrong that cartels should allow British Airways and Lufthansa, for example, to carve up one route to the exclusion of all other airlines and to make profits that avoid any real competition. Whether Lufthansa makes the profit, or British Airways makes the profit, does not matter. They share the journeys and they share the profits and losses. That is not competition, and it works against the consumer. That is obvious. I am sure that all hon. Members welcome competition, and should welcome competition, if it brings down the cost to the consumer. There is no better example than what happened on the Amsterdam service.
At this stage, I willingly declare an interest in British Midland Airways. If I do not declare my interest at an early stage of my speeches, the hon. Member for West Bromwich, East mentions it every time. It is well known that I am interested in and represent the interests of—
Mr. Snape: The hon. Gentleman is doing very well.
Mr. Soames: My hon. Friend is doing very well.
Mr. Steen: I am grateful for the interventions of my hon. Friend and the hon. Gentleman. I try to do my best. It is a first-rate airline, and it has brought competition into this country. If any hon. Member had wanted to fly to Amsterdam a year ago, he would have had to pay twice as much as the price now being offered by British Midland. A single fare costs £39. That must be great progress in liberalisation and free competition.
It is no good having competition if airlines cannot fly into the airports of their choice. I welcome the inquiry that the Minister has set up in the past few months. I think that this is right. Some of the principal airlines, the Civil Aviation Authority and the British Airports Authority are looking at ways in which more airlines can go to Gatwick and Heathrow and whether more space can be made there. The Minister must realise that, regardless of the sterling work that the Government and he personally are doing to liberalise that area and allow planes to fly in and out of whatever country they like, the BAA must also play a part in encouraging competition. If my hon. Friend is way ahead in the market place in getting airlines to fly anywhere in Europe, it does no good if the BAA discriminates against the independent airline approach so that airlines cannot get into Heathrow or Gatwick and are forced to fly elsewhere.
The Minister must consider the problems that arise for the smaller airlines if they cannot fly to Heathrow or

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Gatwick because the costs that the BAA is imposing on them discriminate against them and they have to go to Stansted, Luton or elsewhere. The Minister must lean heavily on the BAA to see that it provides a fair service and does not take a hostile attitude towards the independent sector. He must realise that whatever good work he may do in Europe, the BAA could put paid to the concept of liberalisation if it did not help put that into practice.
The Minister has come here to give us a short report. He has come here because he feels that the House wants to know what he is up to. We all know that he is doing a first-rate job. We congratulate him, and we look forward to another debate early in the new year, so that we can hear about the progress that he is bound to make.
Mr. Deputy Speaker: Does the Minister want to speak again?
Mr. Michael Spicer rose—
Mr. Deputy Speaker: Mr. Michael Spicer.
12.32 am
Mr. Michael Spicer: That is a lukewarm invitation, Mr. Deputy Speaker. I shall try to respond quickly. Perhaps I will be allowed two or three minutes to try to answer one or two points, because it has been an interesting, short debate. Hon. Members on both sides of the House might like me to comment briefly on one or two matters.
The hon. Member for West Bromwich, East (Mr. Snape) chided us for not doing enough about competition. That was a remarkable event in itself. He then spoiled his speech by seeming to argue against lower fares in Europe. If our proposals were not worth having, they would not be opposed as vigorously as they are by the restrictive countries.
My hon. Friend the Member for Hastings and Rye (Mr. Warren) referred to consultation. It is our proposal that automatic approval should be given for new types of fares, so there would be no element of consultation. Air safety standards came up in my hon. Friend's speech and others. There is no question of them being affected. The CAA remains in charge, and the standards will be rigorously applied by the CAA. If we reach agreement, it will override air service agreements in the way suggested by my hon. Friend.
I was most grateful for the comments of the hon. Member for Isle of Wight (Mr. Ross). Sometimes it is not easy to praise people across the Floor of the House, but it is extremely useful as we go into negotiations next week to have had his support. But I do not wish to embarrass the hon. Gentleman, so I shall not continue. I assure him that, under our proposals, the competition exemptions will last for three years. I share entirely his interest in and enthusiasm for the Docklands airport. Whether it will be a category I or category II airport will be a matter for negotiation, since it is a London airport, but if it is a category I airport, as we believe it should be, under our regional proposals—my hon. Friend the Member for Crawley (Mr. Soames) said that it was important to press on with them—the traffic that it could accept and
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distribute would be greatly liberalised. I assure him that we are completely in favour of the National Consumer Council report.
My hon. Friend the Member for Crawley asked us not to raise expectations too high. That is wise advice. It is extremely difficult to obtain the agreement of 11 other countries, some of which—until recently the majority of which—believed that it was in the interests of their countries and their airlines to be highly restrictive. On most issues, persuading 10 out of the 12 to come our way has been a great struggle and a tremendous achievement. To persuade the others, especially on fares, will be a great problem. I agree that we should not raise expectations. Nor should we give up on the struggle.
I agree with my hon. Friend the Member for Crawley that it would be far preferable to have a negotiated settlement. His argument that a settlement would be highly critical to the development of a wider and stronger Europe, especially as it faces competition in aviation from outside, is absolutely right. It will best be achieved through negotiation and agreement. Of course, if it cannot be negotiated, the Commission has already made it clear that the relevant articles applying the competition rules would begin to apply. But I agree that that would cause difficulties. Those who argue that this is a simple way through underestimate the difficulties involved.
I should tell my hon. Friend the Member for Kingswood (Mr. Hayward) that the strength of British Airways is undoubtedly a factor in negotiations. But there are 52 airlines in Britain, some of which are among the best in the world, let alone in Europe. I was not sure whether my hon. Friend was referring to co-operative operations between airlines or linking different airports, especially regional airports, but we shall need some of both.
My hon. Friend the Member for South Hams (Mr. Steen) made an important point. Some say that there has not yet been an effect on air fares, but he gave the perfect example of the Amsterdam route, which is becoming much more liberal. The effect on air fares is becoming considerable. He asked me to bear in mind, in the liberalisation programme, the fact that we must have access and capacity at our airports, especially the London airports. That is why we decided to progress with Stansted, and why we retained traffic distribution powers at Heathrow.
It is a disgrace that the principles of the treaty of Rome have not yet been applied to air services as they have been applied for a long time to manufacturing products. The Government's goal remains to put that right as quickly as possible so that consumers can get a better deal from air services, and so that our airlines, which are among the strongest and most efficient in Europe, can compete properly and win the traffic and markets that they deserve.
Question put and agreed to.
Resolved,
That this House takes note of European Community Documents Nos. 5938/84, 7932/1/86, 8324/86, 8109/86 and 9132/86, on the liberalisation of air transport in Europe, and fully supports the Government's determination to press for such liberalisation in the context of the 1992 deadline for the completion of the Community's internal market.

Wolverhampton Group of Steel Companies
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Lightbown]
12.38 am
Mr. Paddy Ashdown: I am grateful for the opportunity to raise this matter on the Adjournment and to the Under-Secretary of State for Trade and Industry for appearing at such a late hour to answer the debate.
I raise this matter tonight because it must be one of the last chances to right a 40-year-old wrong suffered by a citizen of our nation at the hands of the British Government. I raise it here because I believe that one cannot eradicate an injustice through the passage of time. I raise it because, no matter how long after the event, it is the function of the House to ensure that that wrong is righted.
This is not just a story about the abuse of power. It is also the story of a British citizen who has been brave enough to pursue an issue, not just for himself or his companies, but as a matter of principle for the rest of us. Once wealthy, he is now a ruined man.
In 1944, there was a group of five interlinked steel companies known as the Wolverhampton group. They were independent steel producers and were both profitable and vital to the war effort. Their managing director was Mr. Simon Peel Fletcher. Within a year, both he and the group would be ruined and the Government, far from aiding the war effort, would lose a useful source of supply.
The start of that ruin came on 6 November 1943 when Mr. Fletcher's reserved occupation status was abruptly cancelled and he was called up to the army. Four months later, on 24 February 1944, under the Emergency Powers (Defence) Act 1939, the Government took control of Mr. Fletcher's group and installed their own agent to run the business.
Before the war, steel making in Britain had been controlled by a powerful cartel known as "Big Steel". During the war, with steel a vital product, the Government placed the Ministry of Supply in overall charge of steel production into which cartel members from Big Steel had been conveniently co-opted. The Minister at the time, the Right Hon. Sir Andrew Duncan, was formerly the chairman of the cartel's trade body, the British Iron and Steel Federation. His subordinates included Mr. Spens, accountant general to the Ministry of Supply, who was himself a director of one of the big steel companies.
Mr. Spens had the power to recommend the controlling agent to run Mr. Fletcher's companies. The man he chose was Mr. John Adamson whose name will crop up again during the story and who was another former director of one of the big steel companies. All three men had conflicting interests which should have barred them from becoming involved, but it did not. Given the events that were to follow, we must ask why, four years into the war, it suddenly became imperative that the Government should take control of Mr. Fletcher's operation.
The answer to that may lie in the fact that Mr. Fletcher had just received official permission to install a continuous steel rolling mill—then only the second such mill in the United Kingdom. That would cut his costs dramatically and, come the end of the war, put him in a strong position to undercut the cartel prices. He was doing, in effect, what
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this Government profess to believe in—making his plant leaner and more efficient. However, that efficiency posed a threat to the cartel—a cartel that was of course protected by its own members in the Government.
Within three months of one arm of the Ministry of Supply agreeing to the continuous steel rolling mill, its other arm—controlled by Mr. Fletcher's rivals—had snatched control of the business that would have run the mill. The Ministry and Mr. John Adamson took over the Wolverhampton group under the emergency powers at the time. That legislation allowed them to control the undertaking, that is to say, to control the day-to-day business of the group. It did not allow them either to pledge the company's credit or to take its stocks without paying for them. Yet that was precisely what Mr. Adamson and his masters proceeded to do.
Within just nine months, the Wolverhampton group had been run into the ground. Its stocks, including £90,000 worth of steel from one company alone, had been entirely consumed but never paid for. The group's credit had been cancelled, its bank balances destroyed and the continuous mill was never built. Worse still, Mr. Adamson ordered the wrong type of steel—incidentally, conveniently offloaded from the Big Steel cartel—and made sure that the Wolverhampton group was stuck with it even though it was useless to the group.
Having created that chaos, what did the Ministry do? It set about burying its own mistakes. First, the Ministry loaded the companies in the group with debts that were not really their own and then bought one of the bogus debts, quickly pulled out its agents and sued for the money. Not surprisingly, given the Ministry's appalling stewardship, the companies had no cash to meet the claim. The Ministry had sold the stocks, kept the money and destroyed the credit.
Of course, the Ministry had totally exceeded its powers. From that day onward, compensation was owed for the stocks and for damage to the companies, their shareholders and the directors. That compensation is still owing today. Mr. Fletcher then applied for leave of absence from the Army to rescue the group's finances. He was refused. Next, the Ministry encouraged suppliers to sue the now rudderless companies for debts which the Ministry's agent had run up. Many were reluctant to do that. Others, including the British Iron and Steel Corporation, were only too keen. Such indecent haste is perhaps not altogether surprising, bearing in mind that the company's political wing was the British Iron and Steel Federation. The former chairman of the federation was the Rt. Hon. Sir Andrew Duncan, the then Minister of Supply.
On 13 December 1944, only 13 days after the Ministry withdrew its controlling agent, the first salvo was fired in the final stage of the campaign to destroy the Wolverhampton group. The British Iron and Steel Company sued one of Mr. Fletcher's companies for payment for steel supplied to, but never paid for by, the Ministry's agent. It demanded the winding up of that company.
Three weeks later, on 9 January 1945, the Ministry itself sued for the £29,000 worth of debts that it had bought. These were debts of its own creation. Captain Fletcher, as a result of excellent service, responded. He was still in the Army, where he refused leave of absence. He filed affidavits opposing the winding-up petition, and claiming

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—understandably, in my view—a conspiracy between the Minister of Supply and Messrs. Spens, Adamson and the cartel "Big Steel".
The Iron and Steel Corporation winding-up petition came before Mr. Justice Vaisey on 26 January 1945. He granted it, but fiercely attacked the Ministry's controller, John Adamson, for passing on the confidential information of the Fletcher group to the Iron and Steel Company, which used it to crucify Mr. Fletcher's companies. Mr. Justice Vaisey said—I use his words precisely—
"I do not like the look of it."
Nor should he have, for within the space of one year the directors and allies of a powerful cartel had used and abused the Government's emergency powers to take over a man's business, pay him no compensation, appropriate its assets, run it into the ground and then wind it up for debts that they had created, some would say for their own benefit. All five companies in the Wolverhampton group were involved in the liquidation, but let us remember that their insolvency had been brought about by Adamson and the Ministryof Supply. Before the Government stepped in, all five companies had shown healthy profits. In the 10 months prior to its demise, for example, one company in the group had shown a clear profit of £56,000. At today's prices, that would be a six or seven figure sum.
By the end of 1944, all of Mr. Fletcher's steel companies were in the hands of the official receiver. What did the official receiver do with them? First, he appointed a special manager to run the companies in the interim and prepare them for sale. The man he chose, Mr. Deputy Speaker—and you may find this as hard to believe as I do—was once again Mr. John Adamson, the very man who had destroyed the companies by his actions as controller. It was probably the first time in history anywhere that a man who wielded the knife was appointed as the official undertaker. He was shortly to add to his interest by taking on the role of body snatcher.
Perhaps not surprisingly, Mr. Fletcher was beginning to smell a rat. He therefore awaited Adamson's first report and accounts with some interest. It was a long, long wait. John Adamson, chartered accountant and Government appointee, failed to file any reports or accounts for any of the five steel companies for 12 years. Let me repeat that to ensure that it is understood. For 12 years, Mr. Fletcher, his fellow directors and shareholders were deliberately denied information about their former companies. For 12 years the requirements of various Companies Acts were not complied with by an experienced chartered accountant and Government appointed specialist. It is scarcely credible.
So why did it happen? It was not until much later, in circumstances which we shall come to shortly, that it was made clear that a special dispensation had been given by the then President of the Board of Trade for no accounts or reports to be filed. I must ask the Minister, if he does nothing else, for an account of how such a dispensation —a suspension of company law, as I understand it—came to be made. Was it asked for by Mr. Adamson? Or was it offered by the Board of Trade to the official receiver? Will the Government place in the Library all papers relating to the dispensation?
Mr. Fletcher knew by now that some of his companies' assets had been sold—almost instantly—to members of
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the steel cartel or to agents of the Minister of Supply. What he could not know, because he was denied the accounts of his own companies, was for how much, or rather, as we shall see, for how little. He knew also that his own career was in ruins. Not content with stealing his steel companies, the Government had, in 1948, contrived the winding-up of Carlton Greig Ltd., his merchant bank that had been linked to the steel group. Nor did it stop there. In December 1950, the official receiver issued summonses alleging misfeasance by Mr. Fletcher and another director of one of his steel companies. It was a hopeless action and was subsequently dismissed. But within a year a new way had been found to get rid of the troublesome Mr. Fletcher. He was adjudicated bankrupt, and once again the circumstances were suspicious in the extreme. He was declared bankrupt on the basis of a two-year-old assessment by the Inland Revenue that he owed more than £250,000 in tax.
A bankrupt cannot go to court. That was useful, as Mr. Fletcher had previously instituted a misfeasance action of his own against John Adamson. That action was therefore promptly struck out, and yet, by the time that he obtained his release from bankruptcy, the Revenue admitted that he owed only £1,978—one 200th part of the sum that it originally claimed and a sum that he would easily have been able to pay to start with. This makes a mockery of the grounds for the official receiver's application for his bankruptcy, which were those of
"general desirability and public policy",
unless the "general desirability" was that of covering Mr. Adamson's tracks and "public money" had become merely a vehicle for the official suspension of the law.
What of the official receiver and the accounts and reports that he was so anxious not to file? When Mr. Fletcher finally forced their publication, they showed fraud on a grand scale. I shall detail but one of the rip-offs. One of the Wolverhampton group of companies was sold in 1945 to the big steel cartel for £38,881—a fraction of its operating worth, to say nothing of its substantial assets, and an auditor's report shows how gross was the fraud. This was indeed the sale of the century, and the man who auctioned it was, once again, John Adamson.
The Government have made great play of their desire to stamp out fraudulent liquidations, and yet they have refused even to examine the books of this fraud—a crime for which, as with the original abuse of power, compensation is still owing. Mr. John Adamson was released from his duties as liquidator of the Wolverhampton group in 1957. From that day onwards, Mr. Fletcher has attempted to bring this issue before the courts. In each of his scores of appearances, he has been opposed by the Attorney-General of the day or by a representative of the Board of Trade. It is incredible that, on each and every occasion, our judges have been prepared to strike out his action without hearing any of the evidence. It has been enough for the Government counsel simply to ask that the case be dismissed for the courts to close their doors to Mr. Fletcher.
I should like to drive home that astounding fact by reading the words of Mr. Justice Nourse in 1981. Of Mr. Fletcher he said:
"He has never succeeded in getting those allegations tried. On every occasion his proceedings have been dismissed or struck out before trial … Mr. Fletcher says that the very important evidence which he filed, exhibiting accounts and so forth, was never read or considered by any of the courts. I accept that as being correct."

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The Government claim that they have been consistent. They say that it was all a long time ago and that they have no responsibility for the actions of John Adamson and his masters. Compensation is still due and owed by the Crown to Mr. Fletcher's companies for the theft of their assets and for the fraud of their liquidations. Of course, Mr. Fletcher has been, in a sense, an easy target. He has fought the case alone as a litigant in person, as he has no money to instruct counsel. It is a situation of which the present Government, in particular, have taken grateful advantage. Successive governments, including the present one, have acted to perpetuate the abuse of power and to cover up the sordid history of governmental conspiracy and fraud.
I remind the Minister that, in 1983, the Attorney-General applied for an order which declared Mr. Fletcher a vexatious litigant—which effectively slammed the doors of the courts on his pleas. The order was subsequently overturned. I remind him that, after a BBC radio investigation in 1984, the hon. Member for Calder Valley (Mr. Thompson) who I see in his place and who is Mr. Fletcher's Member of Parliament, began negotiations about compensation with the Attorney-General and the Department of Trade and Industry. I remind him that, according to the hon. Member for Calder Valley, the Department of Trade and Industry and the Attorney-General refused to have anything to do with Mr. Fletcher, except shortly afterwards to have reinstated the vexatious litigant order. I remind him that compensation for the damage suffered is an obligation required by the Emergency Powers (Defence) Act 1939, which is not statute barred because its terms prevent it from being so. It is still due and owing now. If the Government refuse to meet their debt, and if this House allow them to do so, the country will say, with justification, that we no longer care to implement our laws when we find them inconvenient.
I ask the Minister to give two assurances: first, that he will place before this House a copy of Mr. Adamson's original and still secret report that led to the control orders being made, together with all the papers relating to his stewardship; secondly, that at the very least, he will order a full and searching inquiry to be conducted with a view to determining how much and how quickly compensation should be paid to the directors and members of the Wolverhampton group and Carlton Greig.
Throughout the past 43 years, successive Governments have either ignored Mr. Fletcher or abused the law of the land. Parliament has refused to help him and the courts have refused to hear him. Yet he has been right throughout. There has been a monstrous abuse of executive power. It is time for that abuse to be put right and for Mr. Peel Fletcher to receive the justice which he has been so long denied.
12.55 am
The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Michael Howard): The matter which has been raised by the hon. Member for Yeovil (Mr. Ashdown) has, over the years, attracted the interest of a number of other hon. Members. I shall have a little more to say about that in due course, but I believe that it is right that I should give the House a detailed account of the events surrounding the failure of the Wolverhampton Group of Steel Companies and the subsequent consideration given to Mr. Fletcher's claims by the courts and others.
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In December 1943, the Ministry of Supply became concerned with the low output of steel by a group of five companies—Wolverhampton Rolling Mills Ltd., Shropshire Iron Company Ltd., Monmore Green Rolling Mills Company (1924) Ltd., Wolverhampton Steel and Iron Company Ltd. and Haybridge Steel Works Ltd.
They were known as the Wolverhampton Group, and were under the control of Mr. Fletcher. Production of the group was affected by the shortage of raw materials which suppliers were threatening to withhold through non-payment of accounts. Output, especially by Wolverhampton Steel and Iron Co. Ltd., was urgently needed for the war effort. In January 1944, the Ministry of Supply (Iron and Steel Control) appointed Mr. John Adamson—a well-known chartered accountant with experience of the steel industry—to investigate the financial affairs of the group. In February 1944 he reported an unsatisfactory state of affairs and a shortage of working capital. Moreover, when the companies knew that the Ministry of Supply was considering placing nominees on the hoards of the operating companies, funds of the companies held with a finance house controlled by Mr. Fletcher were put on deposit for a fixed term of 12 months, which exacerbated their liquidity position.
Following the liquidation of the finance house it was found that the major part of the funds deposited with it had been invested in the purchase of shares in the various steel companies. Mr. Adamson also ascertained that Mr. Fletcher had arranged finance for the companies in the group by the creation of a revolving credit. This was granted by merchant bankers in favour of Wolverhampton Rolling Mills with an upper limit of £80,000 and was guaranteed by the other four companies in the group. The security for the credit was the earmarking of steel billets held under letters of trust at the four producing works.
In the light of the report received from Mr. Adamson, the Ministry of Supply made control orders in February 1944 in respect of all the companies in the Wolverhampton group under regulation 55(4) of the Defence Regulations 1939. The orders were deemed necessary for the efficient prosecution of the war and the maintenance of supplies. Mr. Adamson was appointed controller of each of the companies. Immediately afterwards, a demand was made by Mr. Adamson on the finance house for repayment of all the moneys on deposit with them, but there was no compliance with this demand. Mr. Adamson found that no system of earmarking the billets held as security was being carried out at the producing works; in fact, he regarded such an operation as impracticable. Furthermore, stocks had fallen sharply and were of less value than the amount due to the merchant bankers. Mr. Adamson therefore regarded the security which was intended to be provided to them as illusory and he notified them accordingly. After discussions, the Ministry of Supply paid the debt of some £80,000 due to the merchant bankers and the guarantees were assigned to the Crown. Late in 1944 Iron and Steel Control decided that it no longer needed production from the Wolverhampton group and accordingly the control orders were withdrawn.
Following this, things happened very quickly. The British Iron and Steel Corporation, on an unsatisfied judgment obtained by it, petitioned for the winding-up of Wolverhampton Steel and Iron and a winding-up order was made in March 1945. In the course of these proceedings serious allegations of conspiracy and dishonesty were made against Mr. Adamson and others,

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including Ministry of Supply officials. It is these allegations that have since been repeated over the years by Mr. Fletcher. That court hearing was the appropriate time for the allegations to have been ventilated and, if appropriate, substantiated, but, far from seeking to substantiate them at that time, they were in fact unreservedly withdrawn in open court on behalf of the company and Mr. Fletcher, at whose instigation they were originally made.
Shortly after that, the Attorney-General, on behalf of the Ministry of Supply, obtained judgment against the remaining companies in the Wolverhampton group for the sum of £80,000 and in July 1945 these companies were wound up on the petition of the Crown.
In February 1948, the finance house was wound up on the petition of the official receiver as liquidator of Wolverhampton Steel and Monmore Green whose claims with two other unsecured creditors amounted to £248,000. In October 1954, a receiving order in bankruptcy was made against Mr. Fletcher on the petition of a bank for £13,000. His appeal against the order of adjudication on the ground that the bankruptcy rule under which the application for adjudication had been made was ultra vires was dismissed.
Prior thereto, Mr. Fletcher and his late father had started misfeasance proceedings against Mr. Adamson. But as a result of the death of Mr. Fletcher's father and the adjudication of Mr. Fletcher no order was made except as to costs.
In July 1959, Mr. Fletcher's application to be discharged from his bankruptcy was granted, subject to a 12 months suspension, but his request for a certificate of misfortune was refused. The liabilities to unsecured creditors exceeded £85,000, to whom no dividend was paid.
The main complaints which Mr. Fletcher has made over the many years may be summarised as follows. First, the controller's powers were limited to acting on behalf of the Crown and in contracting on behalf of the companies he acted without authority. Secondly, the controller neglected to claim from the Ministry of Supply funds to enable him to discharge the liabilities of the companies arising from the contracts he had made. Thirdly, the judgments obtained against the companies by the Attorney-General for the Ministry were, in such circumstances, oppressive. Fourthly, the billets held under letters of trust were used in the business of the companies whilst under the control of Mr. Adamson without payment therefore by the Crown and the £80,000 paid to the merchant bankers to discharge their claim was wrongly treated as a loan. Fifthly, the liquidator of the Wolverhampton group of companies was wrong in admitting a proof by the Ministry for £80,000 against any of the companies. Sixthly, there was undue influence in the choice of Mr. Adamson as special manager of Shropshire Iron Company to assist the liquidator. Seventhly, the assets of the companies were sold for totally inadequate considerations. These allegations have been the subject of persistent complaints by Mr. Fletcher which have been ventilated in various quarters and in the courts.
The courts have consistently held that there was no evidence that anyone in the Ministry of Supply or the Board of Trade during or since the war was actuated by improper motives and that there was no evidence to
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support the claims of Mr. Fletcher—claims which the courts held were without justification and an abuse of the process of the courts.
Mr. Ashdown: Will the Minister give way?
Mr. Howard: The hon. Gentleman took far more than his time and I have a good deal of material to get through.
In 1962, the Master of the Rolls, Lord Denning, said there was no evidence of a prima facie case and that the allegation that the controller had acted in excess of authority could not be substantiated.
In 1964, Lord Justice Sellers remarked that Mr. Fletcher's claim was without justification and that there was no evidence of intention on the part of the defendants to injure Mr. Fletcher. The defendants in this action included Mr. Adamson and officials of the Ministry of Supply, the official receiver's department and the Treasury Solicitor's department, all of whom were accused by Mr. Fletcher of conspiracy. Lord Justice Davies in the same case said that the case was a hopeless one and an abuse of the process of the courts.
In 1966, Mr. Fletcher presented a petition to the European Commission for the Protection of Human Rights which, too, was not accepted. Mr. Fletcher has sought to have the Parliamentary Commissioner inquire into alleged maladministration. The Parliamentary Commissioner declined to exercise his jurisdiction and the matter was taken to the House of Lords. That application was refused by the House of Lords.
In all, 20 actions have been launched by Mr. Fletcher between 1955 and 1982 in relation to the companies and his related bankruptcy. Those matters have been considered in the greatest detail over the whole range of issues raised by him—by the courts of first instance and on appeal to the Court of Appeal and the House of Lords. He has had some limited success on points of law, but at the end of the day, the courts have not been persuaded that he has a claim for compensation.
The hon. Gentleman quoted from the judgment of Mr. Justice Nourse in 1981. I am bound to say that his method of doing so was quite extraordinary. He sought to combine in his quotation two quite separate paragraphs in the judgment, separated indeed by some three pages of transcript. He ended his quotation in the middle of a sentence, not only without saying that he was doing so, but suggesting that the learned judge had concluded that passage at that point.
After accepting that Mr. Fletcher's evidence had not been considered, Mr. Justice Nourse went on to say:
"But I cannot see that it helps Mr. Fletcher. All courts right up to the House of Lords dismissed his application saying (in effect) that the proceedings, whatever their merits might once have been, would not succeed and could not then be instituted."
In more recent judicial proceedings Lord Justice Lawton is on record as saying:
"whatever the rights or wrongs of Mr. Fletcher's many claims arising out of events which happened as long ago as 1944, they have been investigated by the court on a number of occasions and the court has decided against him."
Mr. Fletcher has also sought the support of hon. Members. In 1955 he petitioned through the Home Office for the recall of the Great Seal. No commands were issued.
In 1965 a petition was presented to this House on his behalf to which the then Minister of Power replied that all

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the matters raised in this petition were properly considered by the courts, and it appeared that all the matters had already been before the courts.
Over the years there have been exchanges with several hon. Members who have expressed concern. I believe that those concerns were satisfied. I should just like particularly to draw to the attention of the House the efforts made by Mr. Fletcher's own Member of Parliament, my hon. Friend the Member for Calder Valley (Mr. Thompson). To say that my hon. Friend was assiduous in this matter would be a gross understatement. He has taken the matter up with Ministers in the Treasury, with my right hon. and learned Friend the Attorney-General, my right hon. Friend the Chancellor of the Duchy of Lancaster, who was at that time Secretary of State for Trade and Industry, and with my predecessor, my hon. Friend the Member for Edinburgh, Central (Mr. Fletcher).
My hon. Friend the Member for Calder Valley was entitled to assume that everything that could have been done for his constituent had been done. By contrast, the hon. Member for Yeovil has asked one written question
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on the matter. But has never written to the Department, and has never sought an interview with me or any other Minister in the Department. In those circumstances, it would be unwise of me to express any confidence that what I have said during the debate would meet the concern of the hon. Gentleman.
Nevertheless, I hope that what I have said will have reassured the House tonight that the matter has been fully and carefully considered on many previous occasions—by the courts, by Ministers in this and other administrations and by others who have an interest in seeing that justice, not only has been done, but is seen to be done. Mr. Fletcher has argued his case with great skill, eloquence and commitment in the courts and elsewhere, but that cannot be a substitute for a well-founded case. On that, the courts have not been persuaded of its merits,nor have my predecessors, and I have not heard anything in the House this evening to suggest that I should take a different view of this matter.
Question put and agreed to.
Adjourned accordingly at eight minutes past One o'clock.

ATTORNEY-GENERAL
  State Security
  State Security
  Public Record Office
  Public Record Office
ENVIRONMENT
  Marine Nature Reserves
  Marine Nature Reserves
  Pollution
  Pollution
  International Year of Shelter for the Homeless
  International Year of Shelter for the Homeless
  Urban Economic Development
  Urban Economic Development
  Public Record Office, Kew
  Public Record Office, Kew
  Advisory Committees
  Advisory Committees
  "Paying for Local Government"
  "Paying for Local Government"
  Housing Corporation Development Programme
  Housing Corporation Development Programme
  Portsmouth Councillor (Telephone Call)
  Portsmouth Councillor (Telephone Call)
  "Faith in the City"
  "Faith in the City"
  Council Estates (Demolition)
  Council Estates (Demolition)
  Housing (Portsmouth)
  Housing (Portsmouth)
  Council House Waiting Lists
  Council House Waiting Lists
TRADE AND INDUSTRY
  Arms Sales
  Arms Sales
  Motor Industry
  Motor Industry
  Pirate Radio, London
  Pirate Radio, London
  Radio Interference Service
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  Nightwear
  Nightwear
  Channel Tunnel
  Channel Tunnel
  Advisory Committees
  Advisory Committees
  Standard Chartered Bank
  Standard Chartered Bank
  Trade Descriptions Act 1972
  Trade Descriptions Act 1972
  Shipbuilders (International Comparisons)
  Shipbuilders (International Comparisons)
  Tiles
  Tiles
HOUSE OF COMMONS
  Police Accommodation
  Police Accommodation
EDUCATION AND SCIENCE
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  Listed Buildings
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HOME DEPARTMENT
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  Prison Statistics
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NORTHERN IRELAND
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WALES
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OVERSEAS DEVELOPMENT
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AGRICULTURE, FISHERIES AND FOOD
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  Advisory Committee on Salmon Stocks
  Advisory Committee on Salmon Stocks
  Common Agricultural Policy
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ENERGYM
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PRIME MINISTER
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EMPLOYMENT
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FOREIGN AND COMMONWEALTH AFFAIRS
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  Immigration
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SOCIAL SERVICES
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TRANSPORT
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SCOTLAND
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NATIONAL FINANCE
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  Local Authorities (Capital Projects)
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DEFENCE
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  European Fighter Aircraft
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  Bramley Camp, Basingstoke
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  Arms Sales
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  Territorial Army
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  Petty Officer John Black
  Petty Officer John Black
  Crown Proceedings Act 1947
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  Single Role Mine Hunter
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  Defence Vote
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  Exports
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  Excercise Monkfish
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  Hong Kong (Gurkha Troops)
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  Submarines
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  Amphibious Capability
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  Defence Contracts
  Defence Contracts
  Cleveland
  Cleveland
  Chemical Agents and Munitions
  Chemical Agents and Munitions
  Married Quarters
  Married Quarters
  Naval, General and Air Staff Target 1236
  Naval, General and Air Staff Target 1236
  RAF Tornado Squadrons
  RAF Tornado Squadrons
  SP-70 Howitzer
  SP-70 Howitzer
  Harrier GR5
  Harrier GR5
  Nuclear Tests
  Nuclear Tests
  Tomahawk Sea-launched Cruise Missile
  Tomahawk Sea-launched Cruise Missile
  Warsaw Pact (Nuclear Weapons)
  Warsaw Pact (Nuclear Weapons)
  NATO Infrastructure Programme
  NATO Infrastructure Programme
  Binary Chemical Weapons
  Binary Chemical Weapons
  RAF Welford
  RAF Welford
  US Weapons (Deployment)
  US Weapons (Deployment)

Preamble
The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of
Rochester.

Education: Quality of Service in Brent
Lord Harris of Greenwich: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether the Secretary of State for Education and Science is satisfied with the quality of the education service of the London Borough of Brent.
Baroness Hooper: My Lords, no. The Government are most concerned about the quality of the education service provided by the London Borough of Brent. Consequently, my right honourable friend the Secretary of State for Education and Science has caused a special inspection to take place in accordance with his duty under Section 77 of the Education Act 1944. He will give careful consideration to the position in the light of HMI advice and will follow it up as appropriate.
Lord Harris of Greenwich: My Lords, is the noble Baroness aware that many of us are grateful to her for that profoundly satisfactory Answer? Is she further aware that, with regard to the position of Miss McGoldrick, she is now being proceeded against by the local authority by way of some form of disciplinary action, despite the fact that counsel for the local authority undertook to the Master of the Rolls that it would not dismiss her? Is she also aware of the case of Mr. Gwyn Powell, head of a department at Willesden College of Technology, who again is being proceeded against by the local authority and faces precisely the same charge as Miss McGoldrick? Is she aware that many of us regard this as no less than a shabby farce and the sooner the Secretary of State takes vigorous action to deal with that abuse of power by a local authority, the happier we shall all be?
Baroness Hooper: Yes, indeed, my Lords. In connection with Miss McGoldrick, my right honourable friend was not satisfied with the authority's initial statement of its reasons for holding a disciplinary hearing. He asked the authority to provide immediately a more detailed explanation, which has now been received. He is considering whether further action would be appropriate. With regard to the case of Mr. Gwyn Powell, my right honourable friend is concerned about press reports, which, if accurate, paint a most deplorable picture. Officials in his department have asked the authority for the facts of the case, and that matter in turn will be pursued.
Lord McIntosh of Haringey: My Lords, is the noble Baroness aware that the Opposition welcome the Answer she gave to the main Question, welcome the special inspection which she has announced and agree with what has been said about the abuse of power by the council of the London Borough of Brent?
Baroness Hooper: My Lords, I thank the noble Lord for his question. The speed with which the inspection programme has been mounted is clear evidence of the Government's concern. We acknowledge that the Labour Party, in the shape of its Leader, of its spokesman for education and of its spokesman for local government, has expressed its grave doubts over the McGoldrick affair.
Baroness Cox: My Lords, is my noble friend aware that there is currently an acute shortage of teachers in Brent but that Brent is refusing to advertise those posts in The Times Educational Supplement but is advertising them in Marxism Today, which is the journal of the Communist Party of Great Britain? Does she think that that method of advertising posts is likely to produce the best teachers for our schools in Brent?
Baroness Hooper: My Lords, we are aware of the position. Authorities are free to advertise where they want, but Brent's refusal to advertise in a widely read publication because of its political stance on an unrelated dispute is to be condemned. It is placing dogma before the needs of children. The recent Education (No. 2) Act gives increased powers to governing bodies on the recruitment of teachers, and we hope that they will use them.
Lord Taylor of Blackburn: My Lords, is the noble Baroness aware that there are 104 education authorities in England and Wales and that the majority are good, first-class authorities, doing a splendid job under difficult circumstances?
Baroness Hooper: Yes, my Lords, but that is a little away from the main Question.
Lord Renton: My Lords, is my noble friend aware that this local authority has policies which are calculated to destabilise our society, with very serious effects for the rising generations? Although I greatly welcome the steps which the Government propose to take, can she give us some idea of when we are likely to see the outcome of those steps?
Baroness Hooper: Yes, my Lords. The programme of inspections began in mid-November. Her Majesty's Inspectorate is talking, among others, to advisers, teachers, parents and community groups, formally and informally, collectively and individually. This will continue until February, when it is expected that the report will shortly follow.
Lord Somers: My Lords, in view of the very large increase in salary which the council has recommended for the said professor, as well as back payments, can the noble Baroness say where the money is coming from? Is it coming from the local ratepayers?
Baroness Hooper: My Lords, I am not sure that I entirely take the noble Lord's point. If he is asking about the salaries of teachers, the financing comes from the local authority.
Lord Orr-Ewing: My Lords, is my noble friend aware that Willesden College was at the edge of my constituency and has—
Noble Lords: Order!
Lord Orr-Ewing: My Lords, I said "was", not "is". Is my noble friend further aware that the college has had a high reputation for a long time and that Mr. Powell, with his 11 years of service there, has made a notable contribution to that reputation? Is she also aware that the habit of hard Left councils taking such action is spreading and has recently occurred in Nottingham? In view of an education Bill coming before this House after it has been through another place, is there a possibility that a provision could be added to it to discourage and prevent such occurrences?
Baroness Hooper: My Lords, the last part of my noble friend's supplementary question is indeed a new point. I hesitate to commit the Government but I shall certainly pass on those remarks to my right honourable friend the Secretary of State. I can, of course, assure my noble friend that we are well aware of the situation at Willesden College of Technology, as well as the other incidents to which he referred.
Lord Harris of Greenwich: My Lords, will the noble Baroness undertake in respect of the case of Mr. Powell, which is causing widespread concern, to ask her right honourable friend to do his best to ensure that a Statement about this case is made before both Houses rise for the Christmas Recess?
Baroness Hooper: My Lords, I shall certainly convey the noble Lord's request to my right honourable friend, but, as I said, so far the department has only press reports to go on and the time between now and the recess is short.
Lord Alexander of Potterhill: My Lords, does not the noble Baroness agree that the tragedy for the education service started roughly 15 years ago? For 25 years, following the Education Act 1944, there were no party politics in education and the service made great progress. The tragedy now is that party politics seems to be more important than the education of our children.
Baroness Hooper: My Lords, as I said, the question of placing dogma before the needs of children is extremely reprehensible.

Building Industry: Black Economy Report
2.45 p.m.
Lord Graham of Edmonton: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
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The Question was as follows:
To ask Her Majesty's Government whether they have any observations to make on the report by the Federation of Master Builders entitled The Rise and Rise of the Black Economy.
The Parliamentary Under-Secretary of State, Department of Transport (Lord Brabazon of Tara): My Lords, the Government have received a copy of the report by the Federation of Master Builders and have noted its recommendations.
Lord Graham of Edmonton: My Lords, I am grateful to the Minister for at least noting the recommendations. Will he accept that among the strongest opponents of the black economy are bodies like the Federation of Master Builders, which object very strongly on behalf of their tax-paying members? Will the Minister recognise that a modest easement of the tax regime, including VAT being paid on essential repairs and maintenance, could act as a stimulus to the whole building industry? Does not the Minister further agree that, more importantly, it could lead to greater employment and to greater training facilities in the building industry?
Lord Brabazon of Tara: My Lords, I am glad that the Federation of Master Builders is opposed to the black economy. So, too, are the Government. As to any easing of the VAT regime, that is of course a matter for my right honourable friend the Chancellor of the Exchequer. I am sure that he will have studied this aspect but we have no plans at this stage to make changes.
Lord Dean of Beswick: My Lords, I too am grateful for the Answer. However, is not the Minister aware that this is only one of many reports indicating the situation in the building industry? Builders termed "cowboys" are totally abrogating their responsibilities —responsibilities which have to be legally carried by registered builders. Is the Minister aware that in the report which is the subject of this Question it is calculated that the Treasury is losing £7 billion a year by that type of builder evading all forms of tax—corporation tax, income tax—and any other form of payment to the Government? Bearing in mind that both the building industry in total, including private builders and trade unions, are wholly opposed to that, there must be some urgency in dealing with the situation.
Lord Brabazon of Tara: My Lords, the Government are attempting to deal with the situation. Extra Revenue staff will be redeployed to tackle evasion. We plan an increase of around 1,500 in that sphere. We have recently announced plans to deploy an additional 240 officers for VAT control and investigation duties. That brings the total additional staff deployed over the past four years to more than 800, so the Government do take this matter seriously.
Earl Ferrers: My Lords, can my noble friend say how the inspectors who are to be appointed can chase up VAT evaders when such people are paid in cash?
Lord Brabazon of Tara: My Lords, if a person is paid in cash, that of course is difficult to check on. However, in that situation, I should point out that, where a person buys supplies from shops, if he is not registered for VAT the VAT is, in fact, collected.
Lord Mellish: My Lords, is the noble Lord aware that master builders are few and far between in this industry which is famous for the man, the boy and a bucket? That is why any question of state ownership for the industry is absolutely ridiculous.
Lord Brabazon of Tara: My Lords, I think we agree with the noble Lord that this is a difficult problem to tackle.
Lord Gibson-Watt: My Lords, is my noble friend aware that so far as grants for the renovation of houses are concerned, the Government might do well to look into the methods by which the local authorities are not empowered to insist that the tender submitted is carried out by the original builder? This is a sphere where the Government might be able to help.
Lord Brabazon of Tara: My Lords, I am grateful to my noble friend. That is a point I had not appreciated. I will certainly draw the attention of my right honourable friend to that aspect.
Lord Winstanley: My Lords, is it not time that we looked again at the disregard figure in relation to supplementary benefit and other benefits so that some people could do a small amount of work and earn a little money without infringing the law?
Lord Brabazon of Tara: My Lords, that suggestion goes a little wider than the Question on the Order Paper. It certainly goes a little wider than the brief I have been given this afternoon. However, I will certainly bear it in mind.
Lord Graham of Edmonton: My Lords, if the Government accept the premise upon which this report has been prepared—that the Treasury is being deprived of an estimated £7 billion—can the Minister indicate that the Government will urgently discuss with building employers (although it is not restricted only to building) what ideas they have to eliminate this drain upon the national purse?
Lord Brabazon of Tara: My Lords, I am not necessarily able to accept the figure of £7 billion that has been quoted. Obviously, the fact that it is the black economy about which we are talking makes it very difficult to give any kind of figure. Estimates vary from as high as 144½ per cent. down to as little as 3½ per cent. of the gross domestic product. However, as I said in my original Answer, we have received the report to which reference has been made and we have noted its recommendations.
The Earl of Onslow: My Lords, is the black economy not incredibly encouraged by the fact that the lowest rate of tax and national insurance in this country is 50 per cent. higher than the highest rate in the United States? If a tax regime produces numbers of that kind, it is bound to produce a black economy
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should we not get our tax regime right before we start worrying about the black economy?
Lord Brabazon of Tara: My Lords, certainly, all of us on this side of the house wish to get the rate of taxation down.

Telephone Coin Boxes: Vandalism
2.50 p.m.
Lord Campbell of Croy: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will encourage the police to co-operate more closely with British Telecom in detecting and apprehending thieves who attempt to break open the coin boxes of public telephones.
The Minister of State, Home Office (The Earl of Caithness): My Lords, police forces already work closely with British Telecom to detect and apprehend those who seek to steal from the cash boxes of public payphones. In the first six months of 1986, 500 prosecutions were brought against persons alleged to have committed offences involving theft from or damage to public payphones.
Lord Campbell of Croy: My Lords, I am grateful to my noble friend for that welcome reply. Is he aware that telephones in rural areas are tempting to thieves and vandals but that these are the telephones which more than most are needed by local communities?
The Earl of Caithness: My Lords, equally, inner-city telephones have proved to be a temptation to vandals. One of the factors that British Telecom is trying to emphasise at the moment is the value of the public payphone system to the local community.
Lord Parry: My Lords, has the Minister ever considered siting these telephones not in isolated boxes but in public utility buildings which are paid for already by the taxpayers and accessible to them?
The Earl of Caithness: My Lords, I am sure that British Telecom considered that point, but I shall make sure it is made aware of the noble Lord's comments.
Lord Airedale: My Lords, is part of the answer to this problem an extension of the cashless society through the phonecard system which is being urged upon us by British Telecom and in which no coins are involved?
The Earl of Caithness: My Lords, I wish that the answer was as simple as that. However, I am able to tell the House that the number of phonecard telephones which have no cash boxes is increasing steadily and currently stands at some 5,000.
Lord Mishcon: My Lords, will the noble Earl tell us whether he is aware of any research that is taking place in order to make the pay boxes much more secure than

1075
they are now? Does he agree that at present they are a temptation to those who perpetrate these crimes and break into them? Is there room for research into this?
The Earl of Caithness: My Lords, I understand that considerable research has taken place, and the results are appearing in the building of booths in a new style and the introduction of equipment that is more resistant to vandalism. Important new features of payphones are improved lighting, open plan design, tough construction materials and telephones which report automatically when cash boxes need to be emptied. The research is paying dividends.
Lord Mishcon: My Lords, will the noble Earl note that he has embarrassed me totally by his reply.
Lord Campbell of Croy: My Lords, further to the question put by the noble Lord, Lord Mishcon, is my noble friend aware of a case in point, which is the phone box near my home in a rural area of Northern Scotland that clearly had been attacked with nothing less than a crowbar and the whole coin box removed?
The Earl of Caithness: My Lords, the amount of vandalism varies from area to area and from person to person.

Metropolitan Police Band
2.53 p.m.
Baroness Sharples: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether the Metropolitan Police Band is to be disbanded.
The Earl of Caithness: No, my Lords. Following a recent scrutiny of the band, the commissioner has decided that it should remain in being but that changes should be made to its organisation, use and staffing, with the aim of improving value for money.
Baroness Sharples: My Lords, I thank my noble friend for that encouraging Answer. Am I to understand that the band will eventually consist entirely of civilians, and if so will they be in mufti or in uniform? Morever, will there be sufficient publicity generated by the band to encourage members of the ethnic minorities to join the police force?
The Earl of Caithness: My Lords, the band will be in uniform. I am sure that the Metropolitan Police will make sure that the positions in the band are widely advertised so that ethnic minorities and others can take part.
Lord Elwyn-Jones: My Lords, can the noble Earl say what new use is contemplated for the Metropolitan Police Band?
The Earl of Caithness: My Lords, it will concentrate more on community events and will spend less time on commercial engagements.
Lord Mishcon: My Lords, may I take the opportunity to ask whether the band is occasionally heard by schools so that the pupils learn to respect the police and like them, as they should do?
The Earl of Caithness: My Lords, I am extremely grateful to the noble Lord for that question because at the moment the band plays at community events, schools and charity concerts, as well as on ceremonial occasions. We wish to encourage that side of the use of the band. As the noble Lord rightly said, it is important that our children become used to the police and see them in all their forms. This is a particularly good PR exercise for them.
Lord Sandys: My Lords, although I recognise the merits of the Government's proposals in saving police manpower, can the Minister say whether it is intended that membership of the band will entail being a member of Equity in the future, and will that create problems?
The Earl of Caithness: At the moment, my Lords, I cannot answer my noble friend but I shall write to him once I have looked into the matter.
Lord Annan: My Lords, when the noble Earl says that it is moving toward becoming more of a community band does he mean that it will no longer be an oompah band but a steel band?
The Earl of Caithness: My Lords, I am sure that that strain in music will also be played by the police band.

Business of the House
The Lord President of the Council (Viscount Whitelaw): My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, that Standing Order 38 (Arrangement of the Order Paper) be dispensed with on Thursday 18th December to enable the Motion in the name of the Lord Nathan to be taken before the Second Reading of the Local Government Act 1986 (Amendment) Bill.—(Viscount Whitelaw.)
On Question, Motion agreed to.

Family Law Reform Bill [H.L.]
The Lord Chancellor (Lord Hailsham of Saint Marylebone): My Lords, I rise to move the Motion standing in my name on the Order Paper. The purpose is to take Schedule 2 before Schedule 1 and the reason is that Schedule 1 is a Keeling Schedule and any changes in Schedule 2 will have to reflect themselves in Schedule 1.
Moved, That it be an instruction to the Committee of the Whole House to whom the Family Law Reform Bill has been committeed that they consider the Bill in the following order—

Clauses 1–34,

Schedule 2,

Schedule 1,

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Schedule 3,

Schedule 4,—(The Lord Chancellor.)

On Question, Motion agreed to.

Criminal Justice (Scotland) Bill [H.L.]
2.57 p.m.
The Minister of State, Scottish Office (Lord Glenarthur): My Lords, I beg to move that this Bill be now read a second time.
It was last spring that my right honourable friend the Secretary of State for Scotland gave a public undertaking that measures similar to those introduced in England and Wales in the Drug Trafficking Offences Act 1986 would also be introduced for Scotland. I was conscious when I introduced that Bill to your Lordships that it received unanimous support; and I am grateful for that. My right honourable friend's announcement drew similar approval, both from those dealing with the consequences of drug abuse and from those with an interest in criminal justice. I am glad to be able to bring this Bill before your Lordships at this early stage in the Session. Although the Drug Trafficking Offences Act does have limited application to Scotland, this Bill fulfils our promise to act after thorough consideration of the sometimes complex provisions needed to deal with these issues in the context of Scots law.
The most substantial and important feature of the Bill is the part enabling the courts to confiscate the assets of convicted drug traffickers. The Bill also includes a new provision to help Customs officers detect drug smugglers. Ever since the enactment of the 1986 Act earlier this year we have seen an alarming new development in the techniques used by drug smugglers. I am referring to the techniques of concealing drugs within their bodies. This has forced us to consider how best to counteract the bizarre lengths to which smugglers will go. This Bill demonstrates that our determination to act on drugs is undiminished. We have also taken the chance to make a limited number of more minor but positive reforms of criminal procedure.
Your Lordships have rightly been much preoccupied in recent years with the drugs issue. We have had to consider a range of demands presented both by our need to pursue effectively those who trade in drugs and to educate, particularly the young, about the awful harm which they may do to themselves by drug abuse. As parents, many of us have worried about how our own children might respond to the availability or offer of drugs. We are all sadly too familiar with the appallingly destructive effects which drugs can have on families, where despite all their love and care, parents find their children being drawn into drug experimentation without understanding the enormous risks they take. What some young people might think of as a lighthearted frolic can lead to disaster, degradation and death.
As I said, we all found common cause and a most encouraging spirit of common concern when we debated the 1986 Act last Session. Those debates revealed a powerful desire on all sides of your Lordships' House to see that the powers available to
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the courts in sentencing drug dealers would demonstrate unequivocally that those evil men could never hope to gain from such criminal activities. I hope that the same spirit of mutual concern will underlie debates on this Scottish Bill.
In Scotland, it is generally thought that drugs are first an urban problem; but the extent to which drugs offences now occur throughout the country is a measure of the spread of the dealer networks which this Bill is designed to combat. In 1985, 3,047 persons were proceeded against for drugs offences in Scotland with cases occurring in every single district and islands authority except Orkney. For every person proceeded against in the four main cities, Edinburgh, Glasgow, Dundee, Aberdeen, there was another elsewhere in Scotland. But, if we look more closely at the figures of those against whom proceedings were taken for supplying drugs or for possession with intent to supply, we find a different picture. These offences, covered by Sections 4(3) and 5(3) of the Misuse of Drugs Act 1971, are very heavily concentrated in certain areas. The four cities, taken with Renfrew and Stirling, accounted for just under 70 per cent. of the 302 such cases in 1985. It is natural that these dealers will be found in greatest numbers nearest to the largest concentrations of people. It is in such areas that there are a greater number of opportunities to launder the proceeds of crime. They provide many more outlets for recirculation of the money into businesses, property, leisure projects and other investments.
This Bill will make such personal assets of whatever nature and wherever situated liable to confiscation by the courts on conviction. It is my hope and belief that the major dealers will be much less likely to pursue their trade once they realise that the consequence of being caught includes not only a lengthy prison sentence, but the forfeiture of everything they have gained from their trafficking.
Government action in the longer term has been concerned to reduce demand for drugs. This requires the co-operation of a whole range of agencies—police, Customs and Excise, teachers and those in the health services. As well as reducing the total demand for drugs, by making the consequences of using drugs clear to all through education, we must do all we can to choke off the supply.
Through their judgments on drugs cases in recent years the Scottish Judiciary has shown equal concern over drug dealing. They have viewed such charges as among the most serious with which they have to deal. Of the 234 persons convicted on supplying charges in 1985, 172 received a custodial sentence, 67 were sentenced to five years or more. Such severe sentences are a reflection of the widespread concern about drug trafficking. They mirror society's outrage at those who seek to exploit for personal gain the cruel dependency on drugs which these people carefully foster. This Bill will add considerably to the sentencing options available to the High Court of Justiciary when determining a convicted drug trafficker's fate.
While it forms the major part of the Bill, I think I have said enough in general terms about the problems of drug traffickers and I should now like to deal with the major elements of the Bill itself.

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The core of the Bill lies in Clauses 1 to 7 which deal with confiscation orders. The High Court, on the motion of the prosecutor, is to be empowered when sentencing a drug trafficker to order the confiscation of the proceeds of his crimes in addition to whatever other sentence it considers appropriate in the case. There is a statutory presumption that the convicted person's whole estate and everything that has passed through his hands in the past six years represents the proceeds of trafficking. The onus of proving that this is not so rests on the accused. Any sales or transfers of property to relatives or friends at less than full value will fall to be considered by the court. This power should make it even more clear to drug traffickers that they will find it very hard to protect their illgotten gains.
The Court of Session will have the power to appoint and direct the work of an administrator who will manage and realise the offender's property to fulfil the terms of the confiscation order. These are functions given to the receiver under the 1986 Act; but as there is no common law on receivers in Scotland it is necessary to spell out the administrator's powers on the Bill.
Clauses 8 to 12 anticipate the obvious reaction of a drug trafficker to being charged by allowing the prosecution to apply to the Court of Session for a restraint order. Such an order will freeze the trafficker's assets until the whole proceedings have been completed, and so prevent him from putting any of his assets beyond the reach of any confiscation order which may be made as part of the sentence. The restraint order is a very necessary pre-emptive device.
Two specific new criminal offences are created by the Bill. Both are designed to ensure that those who associate themselves with this heinous trade even in an ancilliary capacity will find themselves open to severe punishment. Clause 38 makes it an offence to prejudice any drug trafficking investigation; for example, by tipping someone off that he is under investigation. Such complicity will be punishable by up to five years' imprisonment. An even more unforgivable crime is committed by those who use their professional skills to aid a drugs dealer to hold on to the proceeds of his crimes. The prospect of a prison sentence of up to 14 years provided for by Clause 39 should make all such persons stop and think before they offer any such help.
Where a confiscation order is made but not met in full by an offender, he will be liable to an additional term of imprisonment in default. This term will be served consecutively to any other sentence imposed and could be as long as 10 years for default on a sum of over £1 million. The drug dealer therefore faces the prospect of a very long period behind bars and the loss of everything he had—a harsh but well-deserved fate.
Indeed, when taken together the measures which apply against drugs dealers represent probably the most severe range of sentencing options for statutory offences in Scots law. This is right and proper. The threat to the wellbeing of Scottish society posed by the activities of drugs dealers is deadly serious. We intend to meet that threat with a full and rigorous response.
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Part II of the Bill deals with a number of miscellaneous matters. First, it provides Customs officers with powers to detain those suspected of certain Customs offences. Two separate powers are involved—a general six hours detention power and a specific power designed to enable Customs officers to meet the particular problems associated with the investigation of those suspected of smuggling drugs concealed in their bodies. The general power follows a recommendation of the Keith Committee in its report on the enforcement powers of the revenue departments. An inadvertent consequence of an amendment to the terminology of existing Customs legislation, made in the Police and Criminal Evidence Act 1984, left Customs officers in Scotland without the power of detention. Clauses 44 and 45 will remedy this. More importantly, Customs officers have a key role to play in preventing and detecting the importation of illegal drugs. In a country such as Scotland, with a long coastline and a well developed and growing network of international air routes, there is a great need for the specialist skills and intelligence network of the Customs and Excise.
The detention power proposed in Clause 46 of the Bill deals with those who seek to smuggle drugs into the country by swallowing small quantities of controlled drugs in containers such as condoms or by concealment in their body orifices. The Bill provides that those suspected of smuggling drugs in this way can be detained for 24 hours on the authority of a senior Customs officer and for up to a further seven days on the authority of a sheriff. This should allow time in most cases for evidence of internally smuggled drugs to become available which would enable a suspect to be charged.
Of the remaining items in Part II of the Bill, there are two which I should perhaps explain. Clause 47 simplifies the procedure for arranging sittings of the High Court and abolishes the concept of High Court "circuits." I say abolishes the "concept" because there is no intention to alter the practice of the court of hearing cases outwith Edinburgh, only to remove the limitations on the court's jurisdiction when it is sitting outwith Edinburgh. There have been occasions when a particular sitting on circuit has not been fully used and this at a time when High Court sittings in other towns, geographically near at hand, are severely congested.
The provision in the Bill allows more flexibility in indicting cases to sittings in the first place, and, where unforeseen difficulties arise, makes it possible for the prosecution to apply for cases to be reallocated to other sittings of the High Court, subject, of course, to the judge giving both parties an opportunity to be heard. The measure will not significantly affect the workload of the courts. It will, however, introduce a greater flexibility and efficiency into the conduct of High Court business and a speedier disposal for those cases which benefit.
Clause 49 is designed to afford a remedy in cases where the defence agent cites the procurator fiscal as a witness in a trial, thereby preventing his attendance in court until after his evidence is given. This has resulted in fiscals having to spend an entire trial outside the court but on hand to give evidence without ever being called. The clause provides discretion for the court to allow the fiscal, or other witnesses, to be present.

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The other items in Part II of the Bill will, I trust, also be welcomed as minor but constructive improvements in criminal law and procedure. For a Bill of this length—55 clauses—the two schedules are commendably short and. I think, and hope, uncontroversial. I should like to draw your Lordships' attention, however, to one item in Schedule 1 which I think will be particularly welcomed on all sides. That is the proposal to reduce to six months from one year the minimum length of a probation order. This will allow the courts greater flexibility in the use of probation orders and provide a further disposal appropriate to less serious offences.
I should touch, I think, on something not yet in the Bill, which I propose to bring forward at Committee stage by way of government amendment. We have decided, in the light of our consideration of the relevance to Scotland of the Roskill Report on Fraud Trials, that my noble and learned friend the Lord Advocate should be given new general investigative powers on the lines of those proposed in the Home Office Criminal Justice Bill for the Serious Fraud Office in its investigations into fraud cases. We are clearly anxious to pre-empt the possibility that criminals operating in England and Wales might simply transfer the locus of their activities to Scotland to avoid the effects of new Home Office legislation. I should add that there may be other amendments, depending on the outcome of consultation. I am afraid that I am not yet in a position to give details.
The Government believe that effective law and order depends for its success on public co-operation. That is in part secured by ensuring that the public's expectations of criminal justice are fulfilled. In this process it is essential to ensure that Parliament can preserve that vital balance which weighs the detection and conviction of the guilty against interference with the rights of the innocent individual and the public at large. It is sometimes necessary to tilt the balance against the suspect when the crimes are of a particularly destructive nature. Parliament, in such circumstances, acts consciously in favour of the victim and innocent people generally. Few would deny that Parliament has a fundamental duty to protect the community and particularly our young people from one of the greatest evils of our time, and those who promote it.
This Bill should be seen as part of a much larger picture, one which requires the integration of a whole range of legislative and practical initiatives. This single element in that picture shows our resolve to pursue ruthlessly those responsible for creating and feeding demand for a wholly obnoxious product. Those who profit from the misery of broken families and the ruined health of young people must understand that they face loss of liberty and the loss of everything which their wicked trade has enabled them to obtain and enjoy. I urge your Lordships to support it, and beg to move.
Moved, That the Bill be now read a second time.—Lord Glenarthur.)
3.16 p.m.
Lord Morton of Shuna: My Lords, in general, the provisions of this Bill are wholly acceptable to the
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Opposition. We are, of course, wholly in favour of any measures that will cut down drug trafficking and the use of drugs in the country. In so far as the Bill gives additional powers to investigate and to confiscate the profits of drug trafficking, we are wholly in favour of it. The only word of warning I would give is a fairly minor one. If we increase the penalty of imprisonment too much, it may reach the stage where it is difficult to obtain a conviction when juries say, "We know that this person is going away for so long", the burden of proof somehow seems to go up. We have not yet reached that stage with drugs, but I think it appropriate to give the warning.
It is interesting to note that the Government intend to bring in powers in relation to fraud trials, and subject, of course, to seeing them, we welcome that. However, it raises a difficulty, because the Bill will run parallel with the Criminal Justice Bill in another place. The fraud provisions of the Criminal Justice Bill are in Committee in another place. How will we ensure that they link up with the fraud provisions coming into this Bill and that they do not clash at some point?
The Government's attitude in this regard is shown by what has happened. To my recollection, we started dealing with the problem of confiscation or penalising of drug traffickers' profits in the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985. That was obviously a holding measure. In debate, I suggested that there was no reason why confiscation should be restricted to drug trafficking. It could relate to highly profitable crimes as well, because people who engage in drug trafficking frequently have other interests, such as robbery, fraud and all sorts of serious criminal activities. Instead of that, the Government produced the Drug Trafficking Offences Bill which became an Act in July of this year. That Act applies to England and Wales and contains provisions to enable property to be followed to Scotland and confiscated.
This Bill broadly provides for Scotland what the Drug Trafficking Offences Act provided for England and Wales. However, it is far from clear in this Bill that there is power to follow and catch up with the Scottish drug trafficker, if I may use that expression, and his property in England. It is not clear that there is complete reciprocity between the Drug Trafficking Offences Act and this Bill, and there should be. The Criminal Justice Bill, which is under consideration in another place, takes the confiscation of criminals' profits a stage further. It deals with confiscation of profits of highly profitable crimes. But that will not apply to Scotland. Why not? Is it not appropriate that the penalties we are imposing on offences should run together and not leapfrog each other in this way?
The Criminal Justice Bill—as opposed to the Bill we are discussing—has 128 clauses of which 44 apply to Scotland. It is far from clear that the easiest and most convenient way to proceed is to have a Criminal Justice (Scotland) Bill and a Criminal Justice Bill going through the Houses of Parliament at the same time if the Criminal Justice Bill is not purely an English Bill but also a Scottish Bill. I am far from clear why the Government consider it wrong to make provision for the power at this stage to take the assets of bank robbers in the same way that we take the assets of drug traffickers. If it is right to do that in England, why is it wrong in Scotland? Should we not take the

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opportunity of providing Scotland with the same powers to take profits either from drug trafficking or other crimes, to put all these powers in one Bill and to obtain the same result? Otherwise, I suspect that this House will have a Criminal Justice (Scotland) (No. 2) Bill in six months' time making provisions to take the profits of profitable crime following the measures in the Criminal Justice (England) Bill—if I may so refer to it. It is surely not beyond the power of the draftsman to add to the references to drugs the words "highly profitable crime".
We are told, rightly, that the Criminal Justice (Scotland) Bill follows the Drug Trafficking Offences Act. Section 35—the section relating to investigations—gives power to investigate with a warrant from the sheriff, which applies only to Scotland. Section 27 of the Drug Trafficking Offences Act begins,
"A constable or, in Scotland, the procurator fiscal may, for the purpose of investigation into drug trafficking, apply to a Circuit judge or, in Scotland, the sheriff".
The Scottish investigators—the Customs and Excise, the police or the procurator fiscal—apparently are to be given no power to go to an English judge to ask for a warrant. Is it really suggested that Scottish drug traffickers do not go over the Border and that there is no way of dealing with this?
The noble Lord the Minister referred to Clause 38 of the Bill in relation to prejudicing offences. It states,
"Where, in relation to an investigation … an order has been made or has been applied for … a person who, knowing or suspecting that the investigation is taking place, does anything which is likely to prejudice the investigation".
What is meant by "does anything"? Section 31 of the Drug Trafficking Offences Act does not use the words "does anything" but refers to "makes any disclosure". Presumably—but perhaps this is not an irrebuttable presumption—there is some purpose in the change. It is one thing to make a disclosure which prejudices—to "tip somebody off" in the Minister's words. One would want to penalise that kind of activity. However, the words "does anything" are so vague that almost anything might be prejudicing an investigation.
I can recall a case where the Crown relied very strongly on a very reluctant witness who married the suspect. Will she be prosecuted under this Bill for marriage, because certainly marriage "does something". It certainly prejudiced the investigation because she became an incompetent witness for the Crown. Under Clause 38 one would appear to be able to prosecute for that.
If one compares this Bill with the Criminal Justice Bill, quite apart from the question of fraud trials and the penalties on the profits of non-drug offences, there are other aspects which seem peculiar should changes made in England not be applied to Scotland. For example, Clause 71 of the Criminal Justice Bill changes the aspects of compensation orders and, quite rightly in my view, enables a court in a suitable case to make compensation orders for payment of funeral expenses in respect of a death arising from the offences. That was previously prohibited. It is not being provided for Scotland. Why not? Why should there not be similar powers in relation to compensation orders in certain circumstances connected with road traffic offences?
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It appears to me that if the Government took a closer look at their two Bills, they could fit them together and produce a better Bill for Scotland which we should welcome.
On the minor changes in the circuits and sittings of the High Court, I would wholly agree that the concept of circuits is totally out of date and should be dropped. But a caveat must be added. It would be possible under Clause 47 to have any crime tried at any place. One would require an assurance, or possibly an amendment, to suggest that it must be convenient as regards the place of the crime or convenient to the accused. One can see a situation where, if the Crown were not getting convictions for one reason or another. say, in Glasgow, they might want to take all their High Court trials in Wick. That might discourage some people from giving evidence. I would suggest that it is a highly important part of the jury trial system that the jury should be drawn from people who are resident in the area where the main crime has been committed. It is important that if there are to be switches of trials at the last minute this is done in a way that does not cause prejudice to the accused by forcing a change of his counsel or solicitor. If it is right that a prosecutor can apply to transfer a case to another place, as is to be provided under these measures—with which I agree—I suggest that there should also be a right for an accused to apply to the court for the case to be transferred. There are rare cases where he or she may feel for some reason that it is grossly inappropriate that the case should be tried where the Crown is suggesting.
The need for the provision is the lack of courtrooms in Glasgow. Glasgow High Court has existed for well over 100 years. It has two courts. It has for the past 10 years needed five or six courts. I understand that there are now proposals to divide the court horizontally to produce four courts. There is space behind the building that will not exist for ever, but at present it seems to be available space on which to build where additional courts could be built without doing anything to damage the building, which has a good facade. If the Government do not act now we may be in a position where, in five or ten years' time, we have made changes in the High Court building in Glasgow and there is no space to expand further.
I urge the Government—I hope that when the Lord Advocate comes to speak he can do this—to assure us that they will make adequate provision of courts, because to have only four courts, which I understand is the proposal, simply will not be enough.
On the whole, therefore, with the criticism of lack of provision and of the way that England and Scotland appear not to march together but have to march out of step, I welcome the Bill as far as it goes. I regret only that it does not go further.
3.32 p.m.
Lord Wilson of Langside: My Lords, although I share the concern of the noble Lord, Lord Morton of Shuna, for the health of the law of Scotland, I do not propose today to follow him into the more detailed criticisms of some aspects of the Bill and some of the problems of legislating for Scotland. I express the hope that in particular the Lord Advocate and the many lawyers in and around the Scottish Office will give due weight to these criticisms.

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To some extent I think it has to be said that some of the problems that arise are inherent in the treaty into which we entered in 1707, but that is another story. We on these Benches welcome the Bill, and we are indebted to the Minister for the careful and clear presentation of its provisions and terms. I will not add to the torrent of rhetoric on the subject of the problem of drug trafficking, into which many in the Palace of Westminster are occasionally tempted to enter whenever the subject arises. It is generally accepted that it is one of our major national problems, along with much of the rest of the world.
I think that it is also generally accepted that one of the principal ways in which the machinery of law enforcement can make an impact on this problem is by getting at the pushers. This is part of the conventional wisdom. One of the most effective ways—again I think that it is part of the conventional wisdom—in which one can get at the pushers is by getting at their pockets and making sure, so far as it is possible to do so, that they do not benefit from their ill-gotten gains in the trade. While there are many problems to be dealt with in this context on the demand side, in terms of supply I think it is generally accepted that effective provisions for the confiscation of their illgotten gains are a good thing.
One of the principal questions that has arisen as this dreadful problem has grown over quite a number of years is whether the response of the government machine under successive Governments has measured up to the nature of the growth of the problem. The point is that this is an international problem. In this context, I should like to ask the Minister this question. Is the co-operation between the law enforcement agencies of different countries adequate to the problem, and, if not, do the Government propose to improve matters in that direction?
This question was in part inspired by two reports—I am sure that the Minister has been referred to this—in the Observer of last Sunday, which throws some light on the inadequacy of the measures that are taken to deal with the problem internationally. The headline on the front page of that edition of the newspaper states:
"Unmasked: Drug baron who got away".
The front page article opens with this observation:
"The Observer can today identify one of Britain's biggest drugs traffickers".
The article then names him and continues:
"who is at large and living in Surrey".
The heading on the centre page is:
"Heroin trail to the squash club".
The first paragraph states:
"To the lawyers and accountants who frequent the West Surrey Squash Club in Walton-on-Thames, in the stockbroker belt of Surrey. John Humphries is just another player, albeit one of the club stars".
It goes on to say:
"he … has been one of Britain's biggest traffickers in the drug".
I dislike as much as anyone else the business of trial by newspaper, but this is a very detailed and disturbing report. In the course of the report—this is what prompts my question to the Minister—it is stated:
"But now the DEA"—
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that is, the American Drugs Enforcement Agency
"believing that he has been alerted to its operation, is discussing with British Customs and Excise the possibility of his extradition".
As I say, I dislike the business of trial by newspaper, but this is a quite remarkable report. If it is substantially true I should like to know—and we are entitled to know—why it has taken so long for the American department and our own Customs and Excise to proceed further in the business of extradition when newspapers can uncover this kind of situation.
The next question I ask is: if this kind of thing can happen without effective action taken, will the provisions of the Bill be sufficiently effective to claw back the French chateau, Krugerrands and gold bars in the Swiss vaults, being the articles with which the court was concerned in Operation Julie in 1978?
I do not say this in any party sense at all, but because of the failure of successive governments to face up to the real and international nature of this drug trafficking problem, I am concerned with whether the proposals in this Bill, while we welcome them, will be adequate to deal with the situation. I wonder whether the Minister can reassure us as to the vigour with which the Government will monitor and pursue, and ensure the pursuance of, the new powers which are being given to the law enforcement agencies. That is all that I want to say on the matter. Beyond that we welcome the other provisions in the Bill.
There is one question I should like to ask the noble and learned Lord the Lord Advocate when he replies. The Customs and Excise in Scotland are being given additional powers. How does their strength today compare with what it has been in the past? Has the strength of the Customs and Excise been increased to cope with the growth of this problem? It would be very interesting to know the answer to that because it would help to convince us that the Government are serious about making a real impact on the problem of drug trafficking.
3.44 p.m.
Lord Ross of Marnock: My Lords, the Government are to be congratulated on bringing this Bill forward. There will be no question of battling with the noble and learned Lord the Lord Advocate in respect of this Bill. It will be a matter for joint concern to ensure the Bill is right in relation to the importance of the subject. Let us not underestimate the importance of the subject.
We are spending so much money, and we congratulate the Government on what they have been doing in relation to education—that is, bringing it home to people that drugs kill. We are dealing with people who have actually been caught, tried and convicted. We are dealing with the merchants of misery. We know what they are, and we know how the public look on them. If anything, we in this House and those in the other House are behind public opinion in this respect: the public are way ahead of us. I should not be at all surprised it' any ordinary member of the public on looking at the Bill and reading the first 46 clauses was amazed that it takes so much complex legislation to do what the public would say in one sentence. In the old Scottish way of legislation it would probably comprise about one paragraph: take the money from them; let them not profit from the misery and ill-health that

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they create. It is amazing that in this Bill we have 46 clauses designed purely to do that and to do it right. I hope that we have it right. I was amazed when my noble friend Lord Morton of Shuna told me that they are now applying the same 46 clauses and more to taking back from people who profited from serious crime—bank robbers, those who commit fraud, train robbers and the like—the profits from their enterprises. We have not done it in Scotland, and it is practically the same kind of thing.
The draftsmen in Scotland have been busy working with those in England to ensure that what they are doing is successful if those people move the proceeds. or the fruit of their labours, from England into Scotland. I think there are 128 clauses in the English Bill and 44 of them apply to Scotland. Could they not at the same time have drafted the Scottish Bill to do the same thing, and then we would have had a real Criminal Justice (Scotland) Bill? The Criminal Justice part of it amounts to very little; it is really the Misuse of Drugs (Scotland) Bill. With the saving of the time of the civil servants, the draftsmen and of this House and the other House, we could have been marching with England in relation to that aspect of it as well.
Setting aside the failures of the Government properly to organise the legislation and to do the right thing at the right time and coming down to the actual Bill, I do not think that we have much cause for complaint.
I am a simple man and am not like my noble and learned friend a lawyer. I read Clause 6 and see words like this:
"(2) For the purposes of subsection (1) above, the circumstances in which a person is to be treated as making a gift shall include those where he transfers an interest in property to another person, directly or indirectly, for a consideration significantly less (in this subsection referred to as 'consideration A') than the value of that interest at the time of transfer (such value being in this subsection referred to as 'consideration B'); and section 5 of this Act shall in such a case apply as if the value of the gift when received were the amount by which consideration A is exceeded by consideration B and as if the value referred to in sub-paragraph (ii) of subsection (5)(b) of that section were determined in accordance with
the formula—
C(B-A)/B
There we have a little bit of algebra. C has never been mentioned. I presume the horizontal line means that (B-A) is divided by B. Then we see that A is consideration A—we never thought of that! B is consideration B. That is real insight! C is described as "what the value so referred to would be had the gift been an outright gift". They should have told us that at the start and we should all have understood what the formula was.
Surely to goodness we could have left that to the court to decide instead of including an incomprehensible formula at this point in the Bill?
It is those kinds of matters that make me wonder whether anyone other than a lawyer in the Scottish Office reads through these provisions before they come here. I am sure that the noble Lord, Lord Glenarthur, is the inventor of the provision, although he never mentioned it. I thought that this prize piece of legislation came straight from him as the new wind rushing through the Scottish Office. However, if it did not come from him—and I think that he rather agrees with what I have said about it—then let us square the
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matter and get rid of this kind of nonsense in Scottish legislation. The Scottish draftsman has been listening too much to the English.
The noble Lord, Lord Glenarthur, did not mention confiscation. I know that it will be difficult; but we are dealing with people who have been convicted of drug trafficking. I worry more than slightly about the question of implicative gifts—gifts out of the proceeds to friends or relatives. In other words, they can protect themselves. We shall need to be very careful about the matter now that they know that the provisions will apply in Scotland as well as in England, because they will take the opportunity to get rid of their proceeds.
I point out to the noble and learned Lord, Lord Wilson. that I do not think we are dealing with small pushers, although they are included in the legislation. Some of them may be wealthy or have amassed wealth out of these activities. However, we are dealing with people who do the illegal importing and exporting. We are dealing not only with the people who produce the stuff, but also with the people who supply the stuff. We are dealing with people who may be part of a conspiracy—a whole ring. That is the important aspect. Therefore, we must be careful that we take all the powers necessary to get at the money in Great Britain and also, if possible, outside Great Britain.
I should like to ask about cash which is hidden in external places. Do we have any proper coverage in respect of that matter? We must remember that we shall not spend all that much money on it. We do not expect great success. We shall spend £500,000 and we expect to get back £300,000.
I heard mention today of supplying over 1,000 more inspectors for the Inland Revenue to deal with VAT and people engaged in the black economy. My noble friend Lord Graham of Edmonton will remember the Question that he raised. In my view, the black criminal activity merits a little more than £500,000. I hope that success in getting at the proceeds which those involved have been using over the past six years or more will amount to more than £300,000. We are speaking of a handful of people. It will be a very considerable job for the Crown office, for the police and certainly for the Customs. In my view we should deal with the matter properly.
When a gift is made to a person for charitable purposes, it must not he pursued. It cannot be brought back. However, I do not like Clause 6(4) which says:
"In subsection (3) above, 'charitable purpose' means any charitable, benevolent or philanthropic purpose whether or not it is charitable within the meaning of any rule of law".
That could provide scope for escape from the intentions of Parliament. It is difficult in Scotland because we do not have the Charity Commission. We do not have the same definitions and it has caused trouble in the past. Is that the reason for the wording that has been used? We shall need to ask the Government whether they are sure that the provision cannot be a loophole for very clever people who are dealing, and spending, in millions to protect themselves.
Another matter which was not mentioned by the noble Lord, Lord Glenarthur, concerns restraint orders. We must have restraint orders. Otherwise, there would be an invitation for people to get rid of

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their money and hide it. A restraint order can be made,
"at any point from 28 days before the Procurator Fiscal applies for a warrant in respect of a suspected drug trafficker until the conclusion of the proceedings".
This refers to a person who has not been charged. All the other provisions in the Bill deal with people who have been convicted. However, as regards this provision, we are dealing with someone who is only suspected. Before he is arrested and before he is tried, a restraint order can be made, freezing his business. One can put a stop to his business or to his dealings in cash through the banks and everything else. It is a very dangerous provision.
We shall be taking up in Committee the question of what happens if the person is eventually not proved to be a drug trafficker. A great deal of damage can be done to a person's business if his assets are frozen for the whole length of a trial and probably for some time afterwards. I gather however that the suggestion is that there should be compensation only if there is negligence on the part of an officer of the law. Presumably the noble and learned Lord the Lord Advocate will be responsible for the trial and so on. It will probably be worth looking at that point.
There is one other matter about which I am more than slightly worried. It concerns Clauses 38 and 39 which deal with offences. Clause 38 is entitled "Offence of prejudicing investigation". Subsection (3) says:
"A person guilty of an offence …

(a) on conviction on indictment, to imprisonment for a term not exceeding five years …

(b) on summary conviction, to imprisonment for a term not exceeding six months".

There is fair rein in those provisions. The matter can be left at that: five years for conviction on indictment and six months for summary conviction. However, we must remember that the procurator fiscal has decided whether the matter will go for summary trial or to the High Court.
Clause 39 is entitled "Offence of assisting another to retain the proceeds of drug trafficking." Subsection (5) says:
"A person guilty of an offence … shall be liable—

(a) on conviction on indictment, to imprisonment for a term not exceeding fourteen years …

(b) on summary conviction, to imprisonment for a term not exceeding six months".

That does not ring true, does it? I know that there are limitations upon summary sentences. However, I do not think that that provision is right. If someone goes for summary conviction, he will be liable to imprisonment for a term not exceeding six months but if he is convicted on indictment he is liable to imprisonment for a term not exceeding 14 years. Indeed, I am reinforced in that view especially when, under the previous clause on conviction on indictment, he is liable to a term not exceeding five years and on summary conviction to a term of imprisonment not exceeding six months. We shall have to look at that matter.
I have also looked at Clause 49 of the Bill which deals with procedure. I was surprised that nothing was said about it. It says,
"The court may, on an application by any party to the proceedings, permit a witness to be in court during the proceedings".
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That is not usual in Scotland. It is a very considerable departure from Scottish procedure. Indeed, it was generally accepted that a witness could be completely discounted and not heard if, by any chance, he had been present at trials and heard other witnesses and other proceedings in the court. What is the reason for this? If there is a decision by the court that the witness could be appearing in court before he or she has given evidence, what is the reason for this departure from this long-accepted rule of Scottish law?
On the whole I do not think that we disagree with the Bill. Certainly we do not disagree with its purpose. But let us not overrate the Bill. The real matter that will stop these people is the surety that they will be caught. We only do this after they are caught. We only do this after they are convicted. We have to stop them before they get that far. The surety that they will be caught means building up the police force, building up our Customs forces, and I entirely agree with the powers that were given there, though I think there is a slight mistake in the Bill at one point.
I always like to leave the Scottish Office to look for their mistakes. I always like to leave them one. It makes them read the Bill again if I say there is a case of omission in respect of the powers of the Customs officers. I am not going to say what it is. Read it. The one way to guarantee that the civil servants will read the Bill is for me or somebody else to say that there is a mistake in it. I want them to read the Bill and I want the Ministers to read the Bill, particularly the clause I quoted.
We are dealing severely with the consequences of being caught. But the Minister spoke of the bizarre lengths to which people will go to smuggle drugs. What is that related to? It is because there is so much money in the misery they create. They are not concerned about the misery. They are concerned about the money. This is the market theory: there is money to be made; let us supply what is wanted. This is one of the unacceptable faces of the market economy. From that point of view we should also look at the whole question of strengthening the police force as well, and those parts of the police force which have the awful job of trying to catch these people, so that with this Bill we can then deal with them.
4.4 p.m.
The Lord Advocate (Lord Cameron of Lochbroom): My Lords, I am extremely grateful to the three noble Lords who have spoken on this matter, and for the obvious warmth of the welcome they have given to the Bill in general. From the matters that they have raised, I look forward to an interesting Committee stage on the Bill.
Perhaps I may deal first with the points made by the noble Lord, Lord Morton of Shuna. Obviously I take note of what he has said about the effect that too great penalties may have on the discovery of crime, but I was glad to note that he accepted that in this Bill we have not gone beyond the limit. In parenthesis, while dealing with the question of offences, I assure noble Lords that the offences of what I might term "laundering" and "prejudice", the ones to which the noble Lord, Lord Ross of Marnock, has just referred, are in fact a mirror of the provisions in the English Bill

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in the sense that the penalties provided for there will be likewise found in this Bill.
The next point to which the noble Lord, Lord Morton, referred was the question of the amendment that my noble friend indicated he would be bringing forward in due course with regard to the Roskill Committee powers which are to be found in the Home Office Bill. Certainly there should be no problem of a clash with the Home Office on their provisions for implementation of those provisions of the Roskill report. Clause 2 of the English Bill applies to Scotland to enable the serious fraud office to pursue English investigations in Scotland. Our amendments to this Bill will extend, as necessary, to England and Wales to enable the Lord Advocate to pursue Scottish investigations in England where that is necessary.
The next point that the noble Lord opposite raised was in regard to confiscation of profits; that is, profits generally. I have to say that it is not the intention of the Government to include in the Bill an extension of the confiscation procedures as is to be found in the current English Bill. Your Lordships may recollect that some little time ago the matter of the general question of the confiscation of proceeds of crime was remitted to the Scottish Law Commission by my right honourable friend who is now the Secretary of State for Defence.
That remit came to a halt when the provision under the Law Reform (Miscellaneous Provisions) Bill were brought forward. My right honourable friend the Secretary of State in fact intends to refer the whole question of confiscation of proceeds of crime again to the Scottish Law Commission to enable full consideration to be given to the issues in the light, first of all, of some experience of the operation of the Drug Trafficking Offences Act 1986, and indeed of the operation of this Bill, before determining whether, and in what form, legislation may be required. I think your Lordships understand that we have separate systems. The way in which we have to go about matters is necessarily different, and that is clearly demonstrated by the terms of the Bill before the House today.
Another point that the noble Lord put to me was in regard to what he said were 44 clauses of the Home Office Bill which apply to Scotland. It is always with a certain degree of hesitation that I correct the noble Lord. It is true that there are clauses in that Bill which apply throughout the United Kingdom. That means that they apply to Scotland as well as to other parts of England and Wales.
Those clauses deal with two principal matters: first of all, extradition. The provisions on extradition in the Bill presently in another place are to apply in both Scottish and English jurisdictions. But it would be extremely wasteful to have the same provisions in both Bills. Furthermore, there is a more practical point. Foreign governments are used to what is called the one-door approach in dealing exclusively with the Foreign and Commonwealth Office on extradition questions. The new provisions in the Bill will merely continue this long-accepted system of handling extradition questions.
Another part of the Bill will deal with the Criminal Injuries Compensation Scheme. That again of course operates on a Great Britain basis, and has done since
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its inception. As I think the noble Lord opposite well knows, it draws its membership from both sides of the Border, and the scheme takes full account of the law of Scotland, for instance, in relation to civil law damages actions and the level of awards made in Scotland.
The essential elements of the present arrangement, which is non-statutory, are retained in the new statutory scheme. Clearly any separate Scottish scheme would have to duplicate the provisions of the Bill (which I suggest would be pointless) or, if it did not, would lead to differences in scope, operation or administration which could result in unfairness to claimants. Accordingly we concluded that there was no justification for the inclusion of separate provisions in a separate Scottish Bill.
The only other part of the Bill which is at present in another place that is common to England, Wales and Scotland is that which deals with the increase of maximum penalties for certain firearms offences. Again the view has been taken that since the statutes which create the offences extend to both sides of the border, the changes which increase the maximum penalties would more appropriately be found in that statute rather than having the matter rehearsed again in the present Bill.
The next point that the noble Lord put to me related to investigations. That was in regard to Section 27 of the Drug Offences Act 1986. I think perhaps the answer to that might be found in Schedule 2 to the present Bill, where noble Lords will find that there are certain words to be repealed because the provisions have been taken into this Bill. Obviously the noble Lord may wish to consider this more appropriately at Committee stage.
I note what the noble Lord said about compensation orders and the terms of Clause 38. The noble Lord, Lord Ross of Marnock, made remarks about the phraseology of the legislation. In particular he pointed to Clause 6. Obviously these are matters we shall return to in Committee. I certainly look forward to the debate at that time, as no doubt the noble Lord opposite does as well.
The noble Lord, Lord Morton, also raised a question about the enforcement of Scottish orders in England and Wales. The position is that this is to be covered in the Bill which is presently in another place and will be added by way of government amendments. The reason the provision is not in the present print of the Bill before another place is that that Bill was introduced before this Bill and therefore could not provide for enforcement of provisions which had not yet been laid before Parliament. I assure noble Lords that there is no question of any gaps in the cross-Border enforcement provisions in either direction.
The last point which the noble Lord. Lord Morton, made was in relation to circuits. I want to make it clear that we are not departing, as my noble friend said at the start, from the very important principle that has always been behind prosecution and trial in Scotland—that it is to take place before a local jury. The noble Lord will know that there are provisions which allow an accused in certain circumstances to secure removal of a trial from one place—I think it is to Edinburgh, which has been regarded as the home of the High Court—where there is prejudice. I shall be

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interested in any matter which may be raised on this at Committee stage.
The noble and learned Lord, Lord Wilson of Langside, made some general points about the importance of international co-operation in dealing with drug trafficking. I say from personal knowledge that within the Commonwealth there is an acceptance of the necessary mutuality of co-operation to bring this trade to an end, and that, as the noble and learned Lord will know, is extended into the international field generally. I assure your Lordships that the Bill is just one instance of the vigour and clear intention of the Government to pursue this wicked trade and to eradicate it.
One indication of the importance that we set by international co-operation is to be found in Clause 29, which provides for enforcement within the United Kingdom of external orders:
"made for the purpose of recovering payments or other rewards received in connection with drug trafficking or their value".
Noble Lords will understand that so far as this Bill is concerned it can only be contained within the jurisdiction of Scotland, but I assure your Lordships that it is an earnest of our intention that there should be the fullest mutual co-operation between states to secure that these wicked men do not profit from their trade.
So far as the matter which the noble and learned Lord asked me about—namely, the newspaper report—obviously I have no knowledge of this and I should therefore be extremely cautious about making any more than a general comment, which is that extradition depends on a request by a foreign government and thereafter on the tracing and apprehension of the alleged offender, leaving aside the question of the provision of the necessary documentation. What the noble and learned Lord said in the debate will be noted by those who are intimately concerned with the matter.
The noble and learned Lord also asked me specifically a question in relation to the strength of Customs and Excise personnel in Scotland. On 30th November of this year some 2,018 staff were deployed in Scotland. Of these 508 were employed on Customs work—that is to say, working at airports, ports or inland—and concerned with the control of passengers and the import and export of freight. I cannot specify the proportion of such staff whose duties include the detection of drug smuggling, I am advised by Her Majesty's Customs and Excise. That indicates clearly the importance that is placed on this work within the Government.
I now turn to the helpful remarks made by the noble Lord, Lord Ross of Marnock, in relation to charity. Obviously we want to discuss this at Committee. I take the point that he made; it is perfectly valid. Equally we want to consider the point he made—again I respect the force of it—in relation to what is called the suspected drug trafficker. No doubt noble Lords will want to consider the equivalent provisions in English legislation.
The noble Lord also raised a point about Clause 49; that is to say, dealing with witnesses remaining in court. I think that my noble friend gave an explanation as to why that was. There has been a practice of the defence citing the procurator fiscal as a defence witness
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and not calling him. The result is that he has to remain outside the courtroom and is simply wasted. There is a very considerable supposition that it is done specifically for that reason.
This is a general provision. It may be applied both to the Crown and to the defence. If the court is satisfied on cause shown—and that can be done in the civil courts, as the noble Lord, Lord Morton, knows—the person who has been cited as a witness may remain in court during the course of evidence. I do not anticipate that this would be any more than exceptional.
I am grateful to noble Lords for their reception of this Bill. There is one point which before I resume my place I should deal with, because the noble Lord, Lord Morton, raised it this afternoon. I am aware that he raised it last night on another matter and that I did not reply at that time. My right honourable friend the Secretary of State is considering proposals for the justiciary buildings. Obviously, work has been done on the original proposals and they have been amended. All that I can say is that discussions have been held with interested parties and further consideration at present is being given as to how best to improve the facilities available to the High Court in Glasgow. I note what the noble Lord said today and yesterday evening.
I again join with my noble friends in supporting this Bill.
On Question, Bill read a second time, and committed to a Committee of the Whole House.

Restrictive Trade Practices (Services) (Amendment) Order 1986
4.22 p.m.
The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Lucas of Chilworth)The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Lucas of Chilworth) rose to move, That the draft order laid before the House on 18th November be approved. [2nd Report from the Joint Committee.]
The noble Lord said: My Lords, this order withdraws the exemption from the Restrictive Trade Practices Act of certain agreements to which the parties are building societies or building societies together with the Treasury. The agreements concerned are those relating to the raising of funds or the making of loans or to the rates of interest charged to borrowers or to be paid to shareholders or depositors.
The main practical effect of the order will be to require that existing and future restrictive agreements between building societies about the rates of interest charged or to be paid to borrowers or investors must be furnished to the Office of Fair Trading and entered upon a register. The Director General of Fair Trading will then consider whether the restrictions in those agreements are of such significance as to call for investigation by the Restrictive Practices Court. If there are no significant restrictions, the Secretary of State, acting on a representation from the Director General, can give a direction that the agreement need not be referred to the court. Otherwise, unless the agreement is terminated or the restriction in it is abandoned, it must be referred to the court for judgment as to whether or not the restrictions are contrary to the public interest.
The Restrictive Trade Practices Act has applied in this way to interest rate agreements between banks in Great Britain since services generally were brought within the scope of the Act in 1976. The Act was extended to Northern Ireland banks at the end of 1985. The decision not to apply similar rules to interest rate agreements between building societies was taken in 1976 when building society lending was subject to a system of guidelines. These guidelines were agreed between the Government and the Building Societies Association and they were implemented through agreements between the societies.
With the discontinuation of the guidelines system in 1980, the original justification for the building societies exemption ceased to apply. The Government therefore indicated in 1984 in their Green Paper on the building societies that they proposed to withdraw the exemption when their new general legislation for building societies took effect. This in practice was the Building Societies Act 1986, which comes into force in January 1987. As the parallel exemption for agreements between the societies and the Treasury also has its origins in the discontinued guidelines system, it too has ceased to serve a useful purpose and can he withdrawn.
The Government believe that it is wholly appropriate that these exemptions from the Restrictive Trade Practices Act should be withdrawn at this time. The building societies in recent years have faced widespread competition from banks in the mortgage market, and the 1986 Building Societies Act, to which I have referred, will ensure that within certain constraints and subject to careful prudential supervision, the societies can return this competitive challenge in the field of unsecured lending.
It is appropriate therefore that the banks and the building societies in future should be subject to the same competition disciplines. Indeed, faced with an increasingly competitive environment, the building societies have already moved gradually from their traditional method of establishing interest rates. In 1983 the societies' association abandoned its longstanding practice of recommending interest rates in favour of a system of advisory rates. By 1985, the association had also ceased to publish advisory rates, and more recently it has agreed that the practice of collective discussion on interest rates followed by an agreed statement of intent should also be discontinued.
I might add that this order is not likely to result in any substantial change in the way that the building societies currently determine interest rates. It is a modest measure which will do no more than add the weight of restrictive trade practices legislation to the moves away from collective decision-making on interest rates which, I should add, the building societies have already made.
It will also help to ensure that building societies continue to set interest rates competitively to the advantage of consumers and it will place the building societies and the banks on an equal footing under existing legislation. As I say, it is a modest piece of legislation which undoubtedly will be of benefit to consumers. I beg to move.
Moved, That the draft order laid before the House on 18th November be approved. [2nd Report from the Joint Committee.]—(Lord Lucas of Chilworth.)
4.30 p.m.
Lord McIntosh of Haringey: My Lords, I must confess that my deepest suspicions are aroused when a Government Minister says that something is a modest measure. So often have we found in the past that modest measures carry within them unexpressed or unexplained disadvantages. It is therefore necessary to go behind the very lucid explanation (for which we are most grateful) given by the noble Lord.
I had some difficulty in doing this because the Fifth Standing Committee on Statutory Instruments which considered the order reported to another place on 4th December but the minutes of the proceedings of the committee have not yet been printed. It may be my inexperience in these matters, but I should have thought that it would be desirable for the minutes of the Standing Committee to be available to Members of your Lordships' House if we are going to consider these matters with the seriousness that they deserve.
However, in the absence of that it has been necessary for me to go back to the 1976 order, to look back then at the Restrictive Trade Practices Act 1976 and to look at the Fair Trading Act 1973. I confess that I did not go back so far as the Restrictive Trade Practices Act 1956. I take from all these the lesson that our economy is moving from a manufacturing economy of goods, which is what was provided for in the 1973 Act, to very substantially a service economy, which is what was provided for in the 1976 order.
I take the point the noble Lord makes about the specific reasons which no longer apply for the exemption of building societies. I also accept his assurances that this is now necessary and desirable in order to put the building societies on the same footing as the banks, with whom, since the enactment of the Building Societies Act 1986, they are now competing. In other words, the order proposed appears to be in line with the views of those of us on this side of the House who take an interest in these matters, and we welcome it wholeheartedly.
Lord Lucas of Chilworth: My Lords, I am most grateful to the noble Lord, Lord McIntosh of Haringey. He will appreciate of course that minutes of Standing Committee proceedings are completely outside any area of influence that I might have, and I resist the temptation to enter into the wider debate that he just momentarily invited me to enter. I very much welcome the noble Lord's acceptance of the order as being helpful and beneficial to consumers.
On Question, Motion agreed to.

Rehabilitation of Offenders Act 1974 (Exceptions) (Amendment No.2) Order 1986
4.32 p.m.
Lord Beaverbrook: My Lords, I beg to move that the draft Rehabilitation of Offenders Act 1974 (Exceptions) (Amendment No. 2) Order 1986, which was laid before the House on 25th November and

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which has been considered by the Joint Committee on Statutory Instruments, be approved.
This order disapplies certain provisions of the Rehabilitation of Offenders Act in relation to the senior management of building societies. Both the Financial Services Act and the Banking Bill currently in Parliament contain similar provisions. It was first planned to introduce these provisions by amendment to the Building Societies Bill which Parliament approved in the previous Session. In view of the pressure of time on the Bill, however, it was decided to take the alternative course of making the disapplication by an order under the 1974 Act.
The order will make it possible for building societies and their supervisory body, the Building Societies Commission, to inquire about and take into account spent convictions for certain offences in assessing the suitability of an individual to hold a senior position in a building society. Such information can then be relied upon in any decision by the Building Societies Commission to impose conditions on the authorisation of a society or to revoke or to refuse to grant such authorisation. It may also be relied on in the grounds for a society's decision not to appoint or to dismiss an officer of the society; and it would be admissible evidence in any appeal against such decisions.
The order is fairly complex because in framing the disapplication we have carefully balanced two obligations. It is important that regulatory bodies charged by statute with maintaining high standards of probity in the City should have the power to carry out effective scrutiny of the fitness of senior executives. It is equally important, however, that this should not go so far as to run counter to the fundamental intentions of Parliament in passing the Rehabilitation of Offenders Act. The disapplication has therefore been restricted in its scope so that it affects only individuals in the upper echelons of building societies, and then only where certain types of offenders are concerned.
The order relates only to individuals who are directors or officers of a building society. The term "officer" is defined in the Building Societies Act 1986 and means any director, chief executive, secretary or manager of a society. The term "manager", too, is defined in the Building Societies Act as an individual employed by the society who is under the immediate authority of a director or a chief executive. In concentrating on the senior management of societies we have followed the approach taken in the Banking Act 1979 and also in the Financial Services Act. To extend the disapplication to less senior employees would deprive an unreasonably large number of people of the protection they enjoy under the Rehabilitation of Offenders Act and, as their activities would be properly supervised by senior staff, we do not think this is justified.
The order will enable questions about spent convictions to be put by the Building Societies Commission as the supervisory authority for building societies and by societies themselves. But only spent convictions for "relevant offences" would need to be disclosed. These are defined as offences of fraud or other dishonesty and offences under legislation relating to building societies and other commercial
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institutions. These are the types of spent conviction which may be material to judgments about an individual's suitability to be involved in the running of a building society. Other offences which are not so relevant to maintaining confidence in financial institutions would be outside the scope of this order, and ex-offenders would continue to have the protection of the Rehabilitation of Offenders Act. Again, this restriction is in line with the one which applies in the Financial Services Act and is to be found in the present draft of the Banking Bill which is now before Parliament.
The House will see, therefore, that the order has been drafted so as to strike a proper balance between the need to protect investors in building societies by strengthening regulation and the need to maintain the integrity of the Rehabilitation of Offenders Act by protecting rehabilitated persons from unreasonable prejudice. The provisions of the order are analogous to those which apply to banks under the Banking Act to be amended by the Banking Bill and to other financial institutions which fall within the terms of the Financial Services Act. I commend it to the House on that basis.
Moved, That the draft order laid before the House on 25th November be approved.—(Lord Beaverbrook.)
Lord Mishcon: My Lords, I am so glad, and I believe that your Lordships will be as well, that the Minister took such care in explaining the draft order to us. Incidentally, I wonder whether the noble Lord would kindly check whether he is right or whether my note is right. I believe he said that the order was laid on 25th November, whereas I have a note before me which says that it was laid on 2nd December. Although this matter is not of great moment, I think the record at least ought to be correct.
I said that I was glad, and indeed grateful to the noble Lord, that he took such care in explaining the order because Parliament debated long and hard when the Rehabilitation of Offenders Bill (which became an Act in 1974) came before this House and another place. It was revolutionary. It decided that there should be spent convictions. It decided that in order to enable people to rehabilitate themselves after they had paid their penalty for their wrong doing they should, with certain very limited exceptions, be enabled to do so.
The House may remember that one of those exceptions was that if on a conviction there was a custodial sentence in excess of 30 months. That was an exception, and indeed any subsequent conviction after any such custodial sentence was inflicted upon somebody also was an exception to the Act. But it was a broad general policy of great humanity and great common sense in the work of endeavouring to rehabilitate those who had erred but had paid their penalty.
When we come to consider the building society legislation and the financial services legislation, we shall be dealing with people who are in charge in many cases of the lifelong savings of citizens of this country. A duty falls upon Parliament to ensure with the greatest caution that, in all the regulatory processes that are now obligatory in regard to building societies and financial institutions covered by the Financial

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Services Act, people in authority—I underline the words "people in authority"—are properly vetted before appointments are made and before authorisations of a vital nature are given.
The noble Lord the Minister said very properly that one had to deal with balances in this matter. Here we are with the principle of the Rehabilitation of Offenders Act 1974 and our duty to the public. I believe that the Government have that balance about right because they have limited the exceptions to ones of fraud and other dishonesty and offences very relevant to and connected with both building societies and financial institutions. They are limited, too, to those who are in senior positions supervising the funds involved. This exception does not cover the minor employees in those institutions.
I think that this is a correct order. I believe that we shall always want to watch with great attention the exceptions that are made to the policy that Parliament so wisely and so humanely enacted in 1974. We shall be doing our duty both to that Act and to the public if we give this order a safe passage.
Lord Harris of Greenwich: My Lords, I join the noble Lord, Lord Mishcon, in saying that the House will obviously approve of this order. It is right to look from time to time at this question of disapplication. I speak only because I was involved as Minister when the Rehabilitation of Offenders Act came forward as a Private Member's Bill in 1974. It is always a temptation to follow the noble Lord, Lord Mishcon, down Memory Lane on this matter. I am bound to say that it was one of the worst drafted Private Member's Bills that it has been the misfortune of this House to consider. The principle behind the measure had been approved by the previous Conservative Government and was approved by the incoming Labour Government.
I think everybody sees the enormous advantage of doing everything possible to rehabilitate the offender and to avoid damage to him in subsequent years by the disclosure of some minor conviction many years before. But there are problems about it. One of them was addressed by the noble and learned Lord, Lord Diplock, as soon as the Bill arrived here. As the Bill was then drafted newspapers would not have been able to disclose that people who were trying to obtain substantial sums of money from the public were convicted fraudsters. The Bill was substantially amended in this House. As a result, it is a far more worthwhile piece of legislation.
I join the noble Lord, Lord Mishcon, in saying that we have constantly to ask ourselves whether we are satisfied that people doing work of a sensitive character have their antecedents scrupulously examined. As we all know, there have been a number of occasions when, inadvertently, this legislation has had damaging consequences. There have been changes as a result, but there is no point in assuming that the Act has had entirely beneficial consequences. It has not. Nevertheless, the central purpose of the 1974 Act was admirable. However, I repeat the point that it is necessary for us constantly to ask ourselves whether from time to time we should proceed by way of further disapplication procedures. This is such an occasion,
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and I think that the order should be supported by the House.
Lord Beaverbrook: My Lords, I am most grateful to the noble Lords, Lord Mishcon and Lord Harris. I am especially grateful to the noble Lord, Lord Mishcon, because, as is often the case, I find that he is correct and that I am incorrect. By way of explanation I should say that the order was withdrawn on 25th November and laid again on 2nd December.
As I have explained, it is inevitable that there will be a conflict between the need to ensure high standards of probity in building societies and the need to maintain the protection conferred on ex-offenders by the 1974 Act. I believe that we have found the right balance on a difficult matter. I beg to move.
On Question, Motion agreed to.

Misuse of Drugs Act 1971 (Modification) Order 1986
4.45 p.m.
Lord Beaverbrook Lord Beaverbrook rose to move, That the draft order laid before the House on 13th November be approved. [2nd Report from the Joint Committee.]
The noble Lord said: My Lords, your Lordships will know that the Misuse of Drugs Act 1971 is the means by which the production and supply of dangerous drugs is prohibited except to those properly authorised. From time to time it is necessary to have an order such as the one we are considering today, in order to modify—usually by adding to—the list of "controlled drugs" as they are called in the Act. This need may arise either in order to prevent particular drugs from being misused in this country or to enable the United Kingdom to meet certain international obligations. The present order proposes that several new drugs or groups of drugs should become controlled drugs. The order has been laid with the full agreement of the Advisory Council on the Misuse of Drugs and following consultations with the relevant trade and professional organisations. Some of the new drugs would be controlled for domestic reasons while others would be controlled in order to fulfil international obligations.
On the domestic side, many of your Lordships will be aware that one of the risks to this country arises from a relatively new and especially dangerous group of drugs which has been identified in the United States. I refer to the so-called "designer drugs", a term associated with uncontrolled chemical derivatives of the controlled drugs fentanyl and pethidine. Unscrupulous chemists in the United States of America found they could easily and cheaply manufacture drugs which fell outside the definition of any controlled drug in United States legislation but were every bit as liable to abuse as heroin, the drug they were designed as substitutes for. In some cases these designer drugs may be anything up to 2,000 or even 3,000 times as potent as heroin. Some addicts are reported to have died from unintentional overdoses of these drugs, thinking they were taking a form of heroin, and others have developed the symptoms of Parkinson's Disease owing to the presence of toxic by-products in the manufacturing process.
I am pleased to be able to say that so far these drugs are not a problem in this country. But they could all too easily become one. If that were to happen, the consequences for drug misusers and society as a whole could be disastrous. Although the parent drugs, fentanyl and pethidine, are themselves controlled drugs here, many of their dangerous derivatives are not, and the advisory council has, quite sensibly, recommended their control as a precautionary measure.
There are too many of these derivatives to name individually, so we have been advised instead to include broad chemical definitions of them in the Act. However, two particular fentanyl derivatives, carfentanil and lofentanil, are individally named in the order, so that we can allow for their legitimate therapeutic use in related statutory instruments which would be laid later on. In view of the extremely dangerous nature of the designer drugs, we propose to include them in Class A in the Act which is the strictest of three available classifications. As a result, persons convicted of serious offences would face sentences up to and including life imprisonment.
The proposal to control the other nine drugs contained in the order arises from the United Kingdom's obligations as a party to the United Nations 1971 Convention on Psychotropic Substances. To fulfil our international obligations and to promote international co-operation, which is so vital in the fight against drugs, we need to provide controls which correspond to those which the convention applied to these drugs earlier this year. Although these drugs are abused elsewhere, they are not a problem in the UK and, since they are far less dangerous than the designer drugs, the advisory council has recommended their inclusion in the Act as Class C drugs.
I shall say just a few words about each of them. Cathinone and cathine are stimulant drugs found in the leaves and stems of the khat plant which grows in some East African and Middle Eastern countries and is widely chewed to produce a euphoric sensation. Fenethylline and fencamfamin are also stimulants, which are available for therapeutic use.
Fenproporex, mefenorex and propylhexedrine are all anti-obesity drugs and, in addition, the inhalant form of propylhexedrine is used as a nasal decongestant. Pyrovalerone has a number of medical applications including the treatment of asthma. Finally, I am pleased to say, there is N-ethylamphetamine, another stimulant, about whose therapeutic uses we know little.
Subject to the completion of certain statutory procedures, the measures I have outlined today would come into operation on 1st April 1987. We shall ensure that those concerned with controlled drug manufacture, sale, prescribing and dispensing are fully advised as to the implications of the new controls well before the operative date. I commend the changes proposed in the draft order to your Lordships. I beg to move.
Moved, That the draft order laid before the House on 13th November be approved. [2nd Report from the Joint Committee.]—(Lord Beaverbrook.)
Lord Mishcon: My Lords, I congratulate the noble Lord on his learned exposition of this order. I thought he showed an expertise which many of us greeted with some surprise. It was a very deep expertise on a very difficult matter. As I said, we are grateful to him.
I suppose that the introduction of this order, with the explanation we have had, is a little frightening. It is a reminder that drugs which have been a blessing in so many cases can also be the reverse of that and have some very frightening by-products. It is a factor which not only doctors and chemists have to bear in mind but, equally, the lay patient when he receives, too easily perhaps on some occasions, the advice that it would be rather useful if he or she took a drug.
I repeat, the benefits of medicine are manifold and we are grateful to those who dispense it, but one should bear in mind some of the things we have heard this afternoon with a view to ensuring that we do not believe that drugs are necessarily a total blessing. They should be looked at with some amount of caution.
There is not the slightest doubt, having heard the explanation given by the Minister, that these drugs are dangerous and ought to be put into the categories to which he referred. I am sure it is right to say that this order should receive the sanction of this House.
Lord Beaverbrook: My Lords, I am most grateful to the noble Lord. We are continuing to give the highest priority to measures to tackle drug misuse. As I said, our strategy involves action on a number of fronts aimed at reducing both the supply of and the demand for all drugs. This order extends the number of drugs that are covered by legislation.
On Question, Motion agreed to.

European Assembly Elections Regulations 1986
4.54 p.m.
The Earl of Caithness The Earl of Caithness rose to move, That the draft order laid before the House on 18th November be approved. [2nd Report from the Joint Committee.]
The noble Earl said: My Lords, the regulations have been considered by the Joint Committee on Statutory Instruments, which made no comment.
They are intended to replace the European Assembly Elections Regulations 1984, which apply the provisions in the Representation of the People Act 1983 and subordinate legislation to assembly elections in Great Britain, with or without modifications. If the regulations are approved by your Lordships tonight, the Home Secretary will make them in the middle of this month so that they can come into force on 1st January next year, subject to the exceptions listed in paragraphs 2 to 5 of Regulation 2. After that date electors will be able to apply for an absent vote under the new law for any European Assembly election which is due to be held on or after 16th February 1987. The need for these regulations stems from the Representation of the People Act 1985, which amended the 1983 Act.
Perhaps I may speak to some of the regulations in a little more detail. Regulation 5(1) applies the provisions of the Representation of the People Acts

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1983 and 1985 listed in Schedule 1. Of the many changes made, perhaps the most significant is the application of sections of the 1985 Act which will enable the new absent voting provisions in those sections to apply to assembly elections. This means that overseas electors, and people who cannot reasonably be expected to vote in person at the polling station at a particular election, will now be able to qualify for absent votes at such elections under these provisions.
Regulation 5(1) and Schedule 1 will also increase the deposit at assembly elections from £600 to £750. This was fixed at its present level in 1979 and would have to be increased to £1,080 to restore it to its former value. However, we have decided to make a more modest increase to avoid causing the minority parties any unnecessary financial hardship, while maintaining the principle of raising the deposit periodically to preserve its effect.
Regulations 5(2) applies the provisions of the Representation of the People and the Representation of the People (Scotland) Regulations 1986 listed in Schedule 2. These prescribe, inter alia, the requirements to be fulfilled by applicants for absent votes and the closing date for applications. Regulations 5(4) and 5(5) and Schedule 3 are based on similar provisions in the parliamentary regulations made in June and provide for the conduct of any assembly election which is combined with a parliamentary or local government election. Regulations 5(11), 6 and Schedule 4 to these regulations enable the same form to be used for the appointment of a proxy at assembly, parliamentary and local government elections.
A reasoned amendment has been tabled by the noble Lord, Lord Banks, seeking an undertaking from the Government on a uniform system of election. The amendment is very much wider than the scope of these regulations, since under Section 3 of the European Assembly Elections Act 1978 the method of election provided by the regulations has to be by simple majority. Therefore the 1978 Act would have to be amended before any change could be made. As to the possibilities of change, your Lordships may already be aware that the Council of Ministers resolved in 1984 that efforts should be renewed to reach agreement on a unified electoral procedure in time for the 1989 general election. We hope that agreement can be reached. However, the initiative rests with the European Parliament, which still has to submit proposals for a uniform procedure to the Council of Ministers. The Government will rightly decide on their attitude when they have proposals to consider.
These regulations make essential changes to take account of the 1985 Act and will enable holidaymakers and overseas electors to qualify for an absent vote at the next assembly elections in June 1989. I beg to move.
Moved, That the draft order laid before the House on 18th November be approved. [2nd Report from the Joint Committee.]—(The Earl of Caithness.)
5 p.m.
Lord Banks Lord Banks rose to move, as an amendment to the above Motion, at the end to insert ("but that this
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House calls on Her Majesty's Government to give an undertaking that when the European Parliament have agreed a uniform system of elections and presented it to the Council of Ministers, they will support such a system in principle and not veto the specific proposal on the grounds that it provides for representation on a proportional basis.").
The noble Lord said: My Lords, we on these Benches support the regulations in general. As we have been told by the noble Earl, these regulations apply the provisions of the Representation of the People Act 1985 to elections to the European Parliament. However, we regret that the reference to Rule 17 on page 19 of the regulations indicates no change for the moment in the electoral system, and nor did the introductory remarks of the noble Earl.
On page 38, where the regulations deal with the ballot paper, the phrase is used,
"Vote for one candidate only".
That would appear to rule out the adoption of any preferential system of voting where electors mark their ballot paper in order of preference for the various candidates. Of course it would not rule out all proportional systems since some only require one party or candidate to be voted for.
However, the explanatory note on page 49 of the regulations, referring to elections to the European Parliament—and indeed the noble Earl also said this—states:
"Such elections are conducted in accordance with the simple majority system of elections".
So the Government appear to be proceeding on the assumption that there will be no change. I hope that when the noble Earl comes to reply he will assure us that the Government make no such assumption—I do not think that was clear from his introductory remarks—and that they have an open mind about the possibility of change in the electoral system. If the noble Earl can give us that assurance, at least it will be one step in the right direction so far as we are concerned.
The House will be aware that we on these Benches believe that the case for change is very strong indeed. In March 1977, which is nine and a half years ago, I had the privilege of introducing into this House a Bill that was designed to ensure that elections to the European Parliament from the United Kingdom should be by proportional representation with a single transferable vote, as is the case in Northern Ireland. The House gave a Second Reading to that Bill but did not proceed further with it.
In the course of that Second Reading debate I pointed out that, because of the large constituencies that are inevitable in the elections to the European Parliament, with the first-past-the-post system of elections it would be possible for the party leading in the opinion polls to obtain a grossly disproportionate share of the seats; and of course that is what happened in 1979 when the Conservatives, with 50 per cent. of the votes, took 77 per cent. of the seats, receiving a bonus of more than 50 per cent.
In 1984, although it was by no means representative of the way in which the votes were cast, the result was more balanced and closer for the Conservative and

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Labour parties. If that result is broken down into regions one finds, for example, that in Home Counties North, Home Counties South and the South-West the Conservative Party had 100 per cent. of the seats although their vote in each region was little more than 50 per cent.
In the debate which took place over nine years ago I also said that a minority party using the first-past-the-post system for elections to a European Assembly could poll a significant number of votes and obtain no representation at all, and of course that happened both in 1979 and in 1984. In 1979 the Liberals polled 13.1 per cent. of the votes but achieved no seats in the European Parliament, whereas in the same election the Free Democratic Party in Germany, under a proportional system, with half that number of votes obtained four seats in the European Parliament. In 1984 the Alliance polled 19.5 per cent. of the votes and obtained no seats in the European Parliament—one-fifth of the votes but no seats in Parliament as a consequence.
Clearly, that is grossly unfair to some 2½ million voters in this country and I cannot understand how anyone can justify a system which produces such a result. Proportional representation has been adopted in Northern Ireland where it is felt essential in order that substantial minority opinion should be represented. I believe that in the interests of democratic government it is every bit as important that substantial minority opinion should also be represented adequately in England, Wales and Scotland. I believe that could be achieved by the adoption of a proportional system for the whole of the United Kingdom. Indeed, had my Bill become the law of the land nine and a half years ago, the anomalies to which I have referred would not have arisen.
All our partners in the European Community have a proportional system and it is noteworthy that the turnout for European elections both in 1979 and in 1984 was markedly higher in those countries than in the United Kingdom, with the exception of Northern Ireland where a proportional system is in operation. That is true even of Denmark where enthusiasm for the EC has been more limited. The argument often advanced against proportional representation for Westminster elections—(and incidentally it is an argument with which I do not for one moment agree) that proportional representation will not provide a satisfactory basis for strong government does not arise so far as concerns European elections because no government is formed from the European Parliament.
One further point which I think is very important indeed is that distortion of the result from Britain distorts the balance of parties in the European Parliament with many consequences for the Members of that Parliament. The electoral system that we have in the United Kingdom is a matter of concern to other Members of the Parliament as well as to voters in this country. Article 138 of the Treaty of Rome states:
"The Assembly shall draw up proposals for elections by direct universal suffrage in accordance with a uniform procedure in all Member States.
"The Council shall, acting unanimously, lay down the appropriate provisions, which it shall recommend to Member States.".
I understand that at the moment the position is that a committee of the Parliament on which all parties are
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represented is likely to agree a set of proposals in the near future. It will then put those proposals to the Parliament and if the Parliament agrees they will be presented to the Council of Ministers.
We know that the Parliament will eventually present proposals to the Council and it seems that this may happen in the fairly near future; so although these regulations proceed on the basis of no change, before very long the Council of Ministers is likely to be presented with proposals for a uniform system. The strong likelihood is that the proposals will involve a proportional system, which in turn will involve change if adopted in the United Kingdom.
This amendment does not oppose the regulations. The passing of the amendment would not prevent the regulations from coming into force. The amendment does not bind the Government to anything; but the passing of the amendment would call on the Government positively to support the concept of a uniform system of election while not being committed to any particular uniform system. It would call on the Government not to oppose proportional representation in principle while not committing them to any particular system of proportional representation.
The House will realise that we on these Benches would like to go much further than that; but we feel that if the House makes these modest demands and the Government accept them—in other words, if they were to decide to support a uniform system in principle and make it clear that they were not opposed in principle to proportional representation—a sane and sensible step would have been taken toward a fairer system of representation for British electors in what is likely to become an increasingly important forum. I beg to move.
Moved, as an amendment to the Motion, at the end to insert ("but that this House calls on Her Majesty's Government to give an undertaking that when the European Parliament have agreed a uniform system of elections and presented it to the Council of Ministers, they will support such a system in principle and not veto the specific proposal on the grounds that it provides for representation on a proportional basis.")—(Lord Banks.)
The Deputy Speaker (Lord Wells-Pestell): My Lords, the original Motion was that the draft European Assembly Elections Regulations 1986 laid before the House on the 18th November be approved; since when an amendment to the Motion has been moved in the terms set out on the Order Paper. Therefore the Question I now have to put is, That this amendment be agreed to.
5.9 p.m.
Lord Maude of Stratford-upon-Avon: My Lords, since I do not wish to tread on more toes than I need to this afternoon, for the purposes of this debate I am prepared to suspend my suspicion that this discussion is all rather irrelevant and a waste of time, not only for the reasons which were hinted at by my noble friend Lord Caithness but also in order to make the large assumption that in fact it really matters who is elected to the European Assembly. If one makes that assumption, presumably it is also important how the Members are elected.

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What is at issue in the debate on this amendment is not how Members get elected to the European Assembly; it is a propaganda exercise and a trial balloon to secure a precedent for the introduction of some form of preferential or proportional representation into the electoral system of Great Britain. Perhaps it is the only hope which may one day enable a Liberal politician to get into a Cabinet and one which the Liberal Party feels might enable it to secure a balance of power in the long term and to be a part of every government for a long time to come.
Such an assumption would be overoptimistic because the Liberal Party should study with care the fate of the German liberals. If a party has been a member of a coalition of both major parties for long enough, that party would become associated with everything unpopular that governments of either party have done for many years. The German liberals have suffered the results of such a coalition.
The obvious aim of the amendment, if it is carried and if its proposals are brought into effect, is to produce a precedent which may introduce a preferential or proportional element into the electoral proceedings for another place in this country. The reasons against that have been rehearsed over and over again.
We have heard a great deal about the principle of fairness; namely, that it is fair that a party which obtains, for example, 20 per cent. of the votes should get something like 20 per cent. of the seats. However, fairness is a highly subjective concept. What appears to be fair to one group of people may appear unfair to another group. Furthermore, fairness has nothing to do with the need to produce a sound and stable government. The purpose of any successful electoral system is that it should produce sound and stable governments and not weak and fluctuating coalitions which vary with every wind of change at every election.
The arguments against preferential or proportional representation are quite strong. They are rendered even stronger by the fact that their advocates can never agree on exactly what system they want to adopt. As Cromwell once said when asked how he would like to reform the English Church:
"Sirs, I know what I would not have, but not what I would".
This has always been the argument of those who support some form of proportional or preferential representation in elections to the British Parliament. It will be difficult to make this case convincing until agreement is reached on what actually is wanted.
From time to time some agreement appears to be reached—for example on a modification of the German list system. That problem with list systems is that in the last resort it is not a question of democratic selection and election by people of this country but a fiddle in the headquarters by managers of party machines in drawing up the lists and virtually deciding who shall be elected and who shall continue to be elected; and this virtually abolishes the necessity for by-elections. The list system would not appeal to the people of this country.
We have heard about opinion polls which say that people do not think it is fair that this or that should
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happen. It is possible to get the answer one wants from an opinion poll according to the phraseology of the question. If the British people were to be asked whether they wanted an electoral system which may result in us having to wait more than six months after an election before a government could be formed, as happened in Holland some years ago, or whether they wanted a situation where there would be some 40 governments over a period of 20 years, as it was in Italy, they would certainly indicate that that was not what they wanted.
Looking at the history of the electoral system in this country and the experiences of other countries, one finds that our system of direct representation produces fewer hung Parliaments and more periods of sound and stable government than any alternative system that has been in use anywhere else. Therefore, the onus is definitely on the advocates of electoral change to prove that what they are proposing could not—not just "might not", my Lords—make things worse and also that it definitely would—not just "might"—improve the situation. They have never been able to prove this fact convincingly, nor do I believe that they ever will.
I do not believe that it matters greatly who gets elected to the European Parliament. I believe that this exercise is simply a trial balloon to get the idea of proportional representation in our own elections off the ground. We should not waste too much time on it. I hope that your Lordships will reject the amendment moved by the noble Lord, Lord Banks, and move to more interesting and important business.
5.19 p.m.
Lord Gladwyn: My Lords, as a former Member of the European Parliament and as one of the presidents of the European Movement, I feel that I ought to put my personal views on record. It appears to me extraordinary that a Government who profess to be "European" in outlook should, in effect, decline to accept in advance any proposals for universal suffrage in the European Parliament in accordance with a uniform procedure in all member states if such proposals should include election by some form of proportional representation.
As my noble friend Lord Banks pointed out, the European Parliament still has ample time before the next elections to agree on such a procedure and to submit its proposals to the Council of Ministers for approval, in accordance with the established practice. The Government should now consider what their attitude will be if, as may be confidently predicted, this procedure embodies some kind of proportional representation. Unless the Government change their view, the next elections to the European Parliament in 1989 will in any case be held by some kind of proportional representation in every single one of the member states of the Community with, it would appear, the exception of the United Kingdom, minus Northern Ireland.
So I trust that the House will now go on record as condemning the continued intention of Her Majesty's Government to exclude from representation in Strasbourg 20 per cent., it might even be 30 per cent., of the voters of this country, which is what will happen if present policies prevail.

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As we know from the results of the vote in the other place in 1977, to which my noble friend Lord Banks referred, a large number of Members of Parliament in the two larger parties, including some seven members of the present Tory Administration, voted in favour of proportional representation for European elections. Presumably they have not changed their views since then. Now, therefore, is surely the time to urge the Government to change their own attitude and thereby to take seriously the European Parliament as a body which should represent all shades of opinion in the Community.
I seem to recall that in 1977 one reason given for not agreeing to proportional representation in the United Kingdom for the European elections—a point referred to by the noble Lord, Lord Maude—was the fear that if it were accepted for the EC, it would inevitably, one day, be adopted for elections to the Westminster Parliament. That may well still be a fear.
A large number of people, perhaps a majority, in this country wish proportional representation to prevail in Great Britain despite the arguments advanced against it by the noble Lord, Lord Maude. But it is absurd to maintain that the one would be a precedent for the other. The political set-up in Strasbourg is totally different from that which prevails at Westminster. Strasbourg is primarily a debating chamber with limited powers. It is in no way designed, as is the other place, to have the final say on political matters.
Consequently, we can only assume that Her Majesty's Government's continuing opposition to proportional representation for European elections is proof of the basically anti-European nature of the present Administration. I am sorry to say that, but it is what I think. It is all very well to be in favour, as they always proclaim, of the emergence of some kind of economic entity thus facilitating freedom of trade. We are all in favour of that. But it is only one objective, doubtfully realisable in default of the emergence of some kind of political entity—not, of course, a federation in the normal sense of the word but rather a body which will stand on its own feet in what is now a dangerous world.
I repeat therefore my hopes that your Lordships will urge the Government to rethink their present policy on proportional representation, thus encouraging our many friends in Europe to believe that the Government are at last taking the "European Idea" seriously and are no longer, in effect, contending that Britain is a large offshore island with a rather special position as a leading member of the Commonwealth and is not therefore the exact equivalent of the larger democracies across the Channel whose individual wealth per person and whose gross domestic product generally are now, alas, considerably greater than our own. With that final thought, I recommend the adoption of the amendment moved by my noble friend Lord Banks.
5.24 p.m.
Lord Harris of Greenwich: My Lords, I think that it is a common ground that these amendments are unobjectionable. There is an increase in the level of
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deposit, referred to by the noble Earl, Lord Caithness, and the extension of the franchise to overseas electors, as provided in the main legislation, the Representation of the People Act 1985. So far there is common ground.
In another respect, the regulations are deeply objectionable. Page 49 of the explanatory memorandum which relates to the regulation states:
"Such elections are conducted in accordance with the simple majority system of elections".
That applies to elections in England, Wales and Scotland but not in Northern Ireland. Curiously, the noble Lord, Lord Maude of Stratford-upon-Avon, glossed over Northern Ireland. If it is so dangerous to create a precedent, as he made out, how surprising it is that we have a completely different electoral system in Northern Ireland for the assembly elections.
Lord Maude of Stratford-Upon-Avon: My Lords, the answer is simple. It all goes back to a piece of chicanery carried out by Lloyd George in 1916 to defeat the pretensions of Sinn Fein.
Lord Harris of Greenwich: My Lords, that answer may satisfy the noble Lord, but I suspect that it satisfies no one else. We all know why we have a separate electoral system in Northern Ireland, and so does the noble Lord. We have it because of the serious public order situation that has arisen there. The moral is therefore clear. If there are widespread disturbances and substantial loss of life, the Government are prepared to devise an electoral system that ensures that the minority is represented, but if there is civil tranquility in no way are they prepared to ensure that we have a fair electoral system. As my noble friend Lord Gladwyn pointed out, many members of the Conservative Party take a view strongly different from that of the noble Lord.
In 1977, the other place voted on the regional list system, and the number of members of the present Government who voted for it is interesting. We have Mr. Peter Walker, Mr. George Younger, Mr. Kenneth Baker, Mr. Heath of course, as we would no doubt have expected, Mrs. Chalker and Mr. Rifkind, the Secretary of State for Scotland. Of course Mr. Hurd, the Secretary of State for the Home Department, has made clear his position on electoral reform on a substantial number of occasions. On that occasion Mr. Hurd said that the first-past-the-post system should apply to the first set of elections and that we should then move on to proportional representation. His words were:
"as one who actually favours electoral reform in this Kingdom and who has spoken and voted for it accordingly".—[Official Report, Commons,1 3/12/77; col. 318.]
Despite those admirable words, the Home Secretary has been unable to persuade the majority of his colleagues to favour the policy which he advocated on that occasion and others. As he, with his firm support for British membership of the European Community knows, we are not at the moment fulfilling, and do not in my view intend to fulfil, our obligations under the Treaty of Rome.

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As my noble friend Lord Banks pointed out a few moments ago, Article 138 of the treaty, to which we adhere, makes the position wholly clear:
"The Assembly shall draw up proposals for elections by direct universal suffrage in accordance with a uniform procedure in all member states. The Council shall, acting unanimously, lay down the appropriate provisions which it shall recommend to member states.".
Until now of course movement on that has been blocked. We know who has blocked it. It has been blocked by the present British Government. We know that a committee of the European Parliament is likely to recommend a form of election based on proportional representation. Again, the British Government show no sign of changing their position, and nothing said by the noble Earl, Lord Caithness, earlier suggests that they have had any change of heart on that matter.
As a country we must ask ourselves how great a price we are prepared to pay for continuing to oppose a fair electoral system in this country. I know the strength of feeling of many who oppose proportional representation for election to the House of Commons. The noble Lord, Lord Maude, made his position on that matter quite clear.
However, we are not talking tonight about a system of election to the House of Commons, where it is necessary, as he has argued, for governments to attempt to achieve a stable working parliamentary majority. We are talking about the European Parliament, where there is no government, and therefore this central argument against proportional representation falls to the ground. The Government therefore have to find a new case in some way to justify their position. We have not yet heard any compelling argument to suggest why we should on this occasion once again totally ignore the solemn treaty obligation that we are under.
Let us remind ourselves what happened the last time we had elections for the European Parliament. The Conservative Party had the support of approximately 41 per cent. of the vote and obtained 45 seats in the Parliament. The 41 per cent. of the vote secured just 58 per cent. of the seats in the European Parliament. The Labour Party obtained 36 per cent. of the vote and 41 per cent. of the seats. The Alliance obtained approximately 20 per cent. of the vote and not a single seat. I believe that this is a caricature of representative democracy.
However, the main Act which has led to the changes that we are discussing tonight is called the Representation of the People Act. Representation of the people?—I should have thought that is precisely what it is not. The two Front Benches will of course go cheerfully into the Division Lobbies tonight arm in arm because they agree on this matter. The old monopoly of the two Front Benches has a great deal of interest in this matter. Yet it is the cause of decent and honest democratic representation that I believe is damaged by conduct of this kind.
On a number of occasions abuses have occurred because of the foolish distortions created by our present electoral system in this country. Noble Lords opposite have been quick, and on many occasions right to denounce this when they have seen the abuse
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of power by unrepresentative minorities in local government. We have had this situation in the case of the Inner London Education Authority, where this House voted against proportional representative. The two Front Benches of course once again voted together. What was the result? It was a wholly unrepresentative massive Labour majority, despite the fact that they secured the support of the minority of people of London on that occasion.
The noble Lord, Lord Maude, tonight talked about the need for sound and stable government. That is an admirable principle. I wonder whether he applies that to the London Borough of Brent. We have a stable majority there. I am not quite sure that it is too sound, but it is stable. The abuses of power which are taking place in local authority after local authority in this country are caused by a situation where either a majority on the council has minority support or where the majority is grossly inflated by our electoral system. One sees the McGoldrick case in Brent and a whole range of other cases of this kind in local government.
Many people outside this House—despite the scepticism of the noble Lord, Lord Maude, about public opinion polls—believe there is something wrong about an electoral system that creates such a result. That belief no doubt motivated this House to support the Bill of the noble Lord, Lord Blake, last Session, when the Government discovered that they would not be able to oppose it successfully in this House. Therefore they did not oppose it but simply blocked it when it reached the House of Commons.
Tonight, I believe we have the opportunity to register our vote in favour of a fair and honest system for the European Assembly. I very much hope that the House will take the opportunity of so doing.
Viscount Massereene and Ferrard: My Lords, I was under the impression when we passed the European Communities (Amendment) Bill during the last session, which brought in the Single European Act, that as we have now debased our sovereignty we have no power. If the Council of Ministers decides the system of election that all countries in the EC will have, surely no British Government will have the power to block what the EC now decides on choosing a system of election.
Lord Harris of Greenwich: My Lords, the noble Viscount will find the noble Earl, Lord Caithness, eager to reply to this point. The fact is that it requires the support of the British Government in the Council of Ministers if there is to be a change in the electoral system. It is as simple as that.
5.37 p.m.
Lord Mishcon: My Lords, on the list of speakers your Lordships will see the name of the noble Lord, Lord Underhill. I ask for the indulgence of the House to speak in his place. I should explain that the noble Lord was extremely anxious to participate in this debate. However, he is a member of the Standing Committee on the Pilotage Bill. Your Lordships will remember that that is an experiment in convenience for the House. Possibly this afternoon noble Lords will have seen how convenient it is, at least for certain Members of your Lordships House, and possibly how

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disturbing it may be. That may be a factor that we shall weigh up on our judgment on this experiment in due course.
I want to make quite clear at the very outset that we on these Benches support the regulations and, as the noble Lord, Lord Harris, seems to have anticipated, we oppose the amendment. I was very interested in the consistency on proportional representation when I noted, on looking at the list of speakers, that there were seven speakers and the Alliance—so implicit is their belief in the justice of proportional representation—had put three out of the seven speakers into their own ranks.
Lord Harris of Greenwich: My Lords, why not?
Lord Mishcon: My Lords, why not? It merely accentuates the fact that some people, in putting their point of view, wish to represent it three times out of seven. That is not my idea of proportional representation, but I may be absolutely wrong.
Lord Diamond: My Lords, will the noble Lord give way? Will he explain what there is to prevent 70 people putting their names down to speak on this Motion if they wish? How is one to know in advance what the total speakers' list will be?
Lord Mishcon: My Lords, I thought it was on grounds of humanity that 70 speakers did not put their names down to speak in this debate.
The noble Lord, Lord Harris, was as usual extremely frank with the House. He started off by saying that he was talking only about representation in the European Parliament and that nobody had any idea, if there were proportional representation there, of invoking that as a precedent for our own elections in this country to our own Parliament. If the noble Lord had finished his speech there, I am so much an admirer of his sincerity that I should have taken that for granted. He then went on bitterly to attack the lack of proportional representation in our local authorities and at Westminster. I thought that possibly the validity of the point he was making previously was a little lost on me. If he wants to talk about local authorities and local government, something in which I was privileged to take part for over 20 years in London government, I should say to him—and I say it frankly to your Lordships—that if local authorities were given the powers that they ought to have and the means to carry out those powers, and attracted the type of person whom we used to attract in order to carry out the proper membership of those local authorities, maybe the polls at local elections would be greater, and maybe that is the way in which undesirable management of certain local authorities—I mention no names—might in fact be unseated.
Having said that, I intend to be very brief. There is no doubt that, should the amendment be passed, it is from the point of view of the Alliance—who I am sure believe in its validity—merely a precedent, merely the thin end of the wedge. I say that and I say it quite frankly, looking straight at the Alliance Benches, which I observe are full for the first time that I can remember for many a long day, even on important
1114
issues nationally. I remember the noble Earl, Lord Caithness, expressing his regret only the other day when we were debating a matter of terrorism and I rose from these Benches in order to support the Government on what I thought was an important national issue. We both looked at those Benches and found them completely empty. There was not one person there to speak on that urgent matter, and I regretted it.
But I say—and it seems to me to be extraordinary—that I can remember the noble Lord, Lord Diamond—the very able, if I may so, and much respected leader of the Social Democrats—gracing the Benches of the Labour Party. I can remember the noble Lord, Lord Harris of Greenwich, a Minister who certainly had the great respect of this House, sitting on these Benches, and the noble Lord, Lord Mayhew, having ministerial office in the Labour Party. They spoke in Parliament very often and attended annual conferences of the Labour Party where discussion is free and resolutions are many—some of us think all too many. I will sit down immediately to be corrected if any one of those three noble Lords, who spoke so eloquently from the Alliance Benches this afternoon, can tell me that I am wrong in thinking that not on one occasion were they ever heard to speak about the virtues of proportional representation when they were members of the party to which I am privileged to belong.
Lord Harris of Greenwich: My Lords, the noble Lord is obviously not aware that the Labour Government actually proposed a regional list system, and Ministers voted for it in the House of Commons. He appears not to understand what happened when this legislation came before Parliament.
Lord Mishcon: My Lords, I was not talking about regional representation; I was talking about proportional representation either at Westminster or in the EC. If I find that any one of the noble Lords whom I mentioned spoke in Parliament—
Lord Tordoff: My Lords, I think that the noble Lord is under a misapprehension. The regional system, which was discussed before the European Parliament, is a form of proportional representation.
Lord Mishcon: My Lords, it may very well be a form of proportional representation. It certainly is not the form of proportional representation that I understood was being advocated this afternoon.
Baroness Seear: My Lords, we have explicitly said that we are not advocating any particular form this afternoon.
Lord Mishcon: My Lords, something tells me that I ought to move on to my next point!
There remain the following two issues. I shall be brief, and then I shall sit down. It seems that I have the support of the Alliance Benches at least on one aspect of my speech. The first—and it has already been mentioned—is that stable government is the sort of government that the people of this country want. They do not want a wishy-washy compromise (as it always

1115
is) mixture of parties, which is the inevitable result of proportional representation. If people, apart from quoting what happens in other countries in Europe, will merely look at the history of those countries that have proportional representation, they will indeed envy the people of this country the system that they have. I equally say that it is for a British Parliament to decide on the way in which British elections will be held.
It is on both those grounds that I hope the House will oppose the amendment.
5.46 p.m.
The Earl of Caithness: My Lords, I am grateful to the noble Lords, Lord Harris of Greenwich and Lord Mishcon, for welcoming the draft order before your Lordships. The fact that those were the only comments made on it leads me to agree very firmly with my noble friend Lord Maude of Straford-upon-Avon who said that the reasoned amendment is nothing but a balloon that is raised at every opportunity by the Liberal Party and that it will do that given any opportunity. But we must learn to tolerate that.
If I may comment further on the reasoned amendment, as I said in my opening speech, the initiative in providing a uniform electoral procedure rests with the European Parliament, which must submit proposals for such a procedure to the Council of Ministers. The present position is that the Political Affairs Committee of the Parliament produced a report last year, but it has never been debated by the Parliament. Our understanding is that the text of the report is still under consideration, and we do not know when it will be debated.
The traditional method of voting in this country is the simple majority system. It is well understood and has many advantages, which my noble friend Lord Maude elucidated and on which I do not intend to elaborate in this debate. The noble Lord, Lord Banks, said that all other countries in the Community had proportional representation. Indeed, other countries use various methods of proportional representation. However, I must draw your Lordships' attention to the fact that it would be a mistake to think that, just because they all use some sort of proportional representation, there is no obstacle to a uniform system except our attachment to simple majority elections.
Other countries have their own difficulties. There are particularly strong differences of view among other member states on whether the franchise should be given in the country in which a person is resident or in the country in which he is a national. The noble Lord, Lord Harris of Greenwich, says that the United Kingdom Government blocked the progress towards uniform elections. The proposals were submitted by the European Parliament in 1982 and discussion in the Council of Ministers took place in 1983 to 1984.
The discussions in the Council of Ministers are confidential, and I am not going to confirm or deny whether we were the country that blocked it. I would only draw your Lordships' attention to the remarks that I made about the difficulties that other countries
1116
are having in agreeing a uniform system. We will play our part, as doubtless will the other countries, in looking at any proposals that may be submitted to the Council when they are submitted. The noble Lord, Lord Banks, asked whether there will be the possibility of change. Of course, when a government are as tolerant, as caring and as considerate as this Government there is always the possibility of change.
My noble friend Lord Massereene and Ferrard queried whether, now that the Single European Act has been enacted, this has changed the position and whether unanimous decision was still needed or majority voting should take place. Unanimous decision is required by the Council of Ministers in this instance under the Treaty of Rome.
I am grateful to all noble Lords who have taken part in the debate. I welcome the short tribute paid to the draft order before us and I am grateful for the welcome that it received. With regard to the balloon raised by the Liberal Party, and in particular by the noble Lord, Lord Banks, I fear it has fizzled out.
5.50 p.m.
Lord Banks: My Lords, the noble Lords, Lord Gladwyn and Lord Harris of Greenwich, have amplified my opening remarks with a wealth of argument and therefore I can be brief. I regret that the Government do not see their way to supporting this amendment. However, it does not bind the Government to anything. They could heed the amendment if it were passed or they could resist it, as they please. I believe that if it were passed it would be an important expression of opinion by this House.
The noble Lord, Lord Maude, made an interesting speech. I do not know how far we should take it seriously. There was a good deal of knock-about political stuff in it but not much about proportional representation for Europe or a uniform system of election for Europe. There was a good deal about the dangers of PR for Westmister and that seemed to be what was causing the noble Lord a good deal of concern. Indeed, it was also causing the noble Lord, Lord Mishcon, a good deal of concern.
I do not understand the argument that if a case is proven in a particular instance it somehow or other may become the thin end of the wedge for something else, and therefore must be resisted, however powerful the arguments in its favour. Why should there be any extension beyond PR for Europe unless it was wanted? If it proved so successful and if it worked so well that people felt it ought to be brought into the rest of the system, surely noble Lords would not wish to resist that. There is no reason at all, if Parliament is set against it, why it should be translated from Europe to our internal elections.
The noble Lord, Lord Maude, spoke about fairness. Of course we are concerned about fairness. I emphasise that it is not just fairness for parties, although I think that is quite important; it is fairness for electors, and that is far more important. People are denied representation because of the way in which the system works at the present time. They are denied any representation. That is a serious point and I hope noble Lords are fully seized of it.

1117
The noble Lord, Lord Maude, said we cannot agree on a system. We are agreed on a system on these Benches. We should like, if we could have our way, to have proportional representation by the single transferable vote, as already operates for Europe and in part of the United Kingdom—Northern Ireland. We are prepared to give and take with our Community partners in seeking to arrive at a proportional system which all can support. It might not be precisely what we would prefer but we certainly know what we would prefer.
The noble Lord, Lord Maude, said that we must move on to more important matters. I thought that that was an illuminating statement. It revealed a rather strange set of priorities. There are apparently more important matters in a democracy than ensuring that there is proper representation for the people who vote. I should have thought that that was the basic issue and the one about which we should be more concerned than anything else. To talk about more important matters seems to me to be a very strange set of priorities indeed.
The noble Lord, Lord Mishcon, raised the question of stable government. I am not sure whether the noble Lord was clear as to precisely what we are discussing this evening. No government would be formed from the European Parliament. The noble Lord also thought that we were advocating this evening in our amendment a particular form of PR. Of course we are not.
The noble Earl, Lord Caithness, in what I must say I thought was a rather pompous phrase, spoke about the balloon which I was supposed to have sent up. However, I thought he mixed his metaphors a little when describing its fate. Why should this matter not be raised? What is there so apparently disreputable in raising a matter which involves great issues of principle and which deals with the fundamental principle on which our democracy is based—that people should be represented, that there should be no taxation without representation and that that what goes on in Parliament should be based on the votes of the people? What is the point of holding elections if at the end, after going through all the bother of it and counting the votes, the result does not bear any very clear relation to the way in which people have voted? There seems to be no sense in that all.
The amendment calls on the Government to do two things: first, to support a uniform procedure in principle, as laid down by the Treaty of Rome; secondly, to declare that they are not opposed to PR in principle. I was glad that the noble Earl, Lord Caithness, spoke about the possibility of change. I hope that even now the Government may change their mind, display the flexibility about which he spoke and see that it is right that a declaration along those lines should be made by the Government, stating that they want a uniform procedure and are not opposed to PR in principle. 1 very much hope that the House will support the amendment.
5.56 p.m.
The Deputy Speaker (Lord Wells-Pestell): My Lords, the original Motion was that the draft European Assembly Election Regulations 1986 laid
1118
before the House on 13th November be approved, since when an amendment has been moved in the terms set out on the Order Paper. The Question I now have to put is that the amendment be agreed to.
5.57 p.m.
On Question, Whether the said amendment shall be agreed to?
Their Lordships divided: Contents, 51; Not-Contents, 154.

DIVISION NO. 1

CONTENTS

Airedale, L.

Hylton, L.

Amherst, E.

Kennet, L.

Annan, L.

Kilmarnock, L.

Avebury, L.

Lauderdale, E.

Aylestone, L.

Lloyd of Kilgerran, L.

Banks, L.

McGregor of Durris, L.

Bessborough, E.

McNair, L.

Blake, L.

Mayhew, L.

Bonham-Carter, L.

Monson, L.

Buckmaster, V.

Ogmore, L.

Craigavon, V.

Reay, L.

Darcy (de Knayth), B.

Ritchie of Dundee, L.

Diamond, L.

Robson of Kiddington, B.

Donaldson of Kingsbridge, L.

Rochester, Bp.

Esher, V.

Rochester, L.

Ezra, L.

Rugby, L.

Falkland, V.

Seear, B.

Foot, L.

Simon, V.

Gladwyn, L.

Stedman, B. [Teller.]

Grey, E.

Tordoff, L. [Teller.]

Grimond, L.

Vernon, L.

Hampton, L.

Walston, L.

Hanworth, V.

Whaddon, L.

Harris of Greenwich, L.

Winstanley, L.

Henderson of Brompton, L.

Winterbottom, L.

Hooson, L.

NOT-CONTENTS

Abinger, L.

Denham, L. [Teller.]

Aldington, L.

Derwent, L.

Alexander of Tunis, E.

Dundee, E.

Allerton, L.

Elliott of Morpeth, L.

Arran, E.

Elwyn-Jones, L.

Beaverbrook, L.

Faithfull, B.

Belhaven and Stenton, L.

Fanshawe of Richmond, L.

Beloff, L.

Ferrers, E.

Belstead, L.

Forbes, L.

Birdwood, L.

Fortescue, E.

Blease, L.

Fraser of Kilmorack, L.

Blyth, L.

Gallacher, L.

Boston of Faversham, L.

Galpern, L.

Brabazon of Tara, L.

Gibson-Watt, L.

Briginshaw, L.

Gisborough, L.

Brooks of Tremorfa, L.

Glanamara, L.

Broxbourne, L.

Glenarthur, L.

Butterworth, L.

Graham of Edmonton, L.

Buxton of Alsa, L.

Gray of Contin, L.

Caithness, E.

Greenway, L.

Cameron of Lochbroom, L.

Gridley, L.

Campbell of Alloway, L.

Grimston of Westbury, L.

Carmichael of Kelvingrove, L.

Hanson, L.

Carnegy of Lour, B.

Harmar-Nicholls, L.

Carnock, L.

Harvington, L.

Cathcart, E.

Hemphill, L.

Colville of Culross, V.

Hesketh, L.

Constantine of Stanmore, L.

Heycock, L.

Cork and Orrery, E.

Hives, L.

Cox, B.

Home of the Hirsel, L.

Crawford and Balcarres, E.

Hylton-Foster, B.

Cullen of Ashbourne, L.

Inglewood, L.

David, B.

Ingrow, L.

Davidson, V. [Teller.]

Irving of Dartford, L.

Dean of Beswick, L.

Jeger, B.

1119

Kaberry of Adel, L.

Renton, L.

Kinloss, Ly.

Rhodes, L.

Kinnaird, L.

Rodney, L.

Lane-Fox, B.

Ross of Marnock, L.

Lawrence, L.

Russell of Liverpool, L.

Layton, L.

St. Davids, V.

Llewelyn-Davies of Hastoe, B.

Salisbury, M.

Lloyd of Hampstead, L.

Saltoun of Abernethy, Ly.

Long, V.

Sanderson of Bowden, L.

Lucas of Chilworth, L.

Sandford, L.

McAlpine of Moffat, L.

Scanlon, L.

McFadzean, L.

Selkirk, E.

Macleod of Borve, B.

Sempill, Ly.

Manchester, D.

Serota, B.

Mancroft, L.

Shannon, E.

Marley, L.

Skelmersdale, L.

Massereene and Ferrard,V.

Somers, L.

Maude of Stratford-upon-

Stoddart of Swindon, L.

Avon, L.

Strabolgi, L.

Merrivale, L.

Strathclyde, L.

Mersey, V.

Strathcona and Mount Royal,

Mishcon, L.

L.

Molson, L.

Sudeley, L.

Morton of Shuna, L.

Swinfen, L.

Mottistone, L.

Teynham, L.

Mountevans, L.

Thorneycroft, L.

Mowbray and Stourton,L.

Torrington, V.

Moyne, L.

Tranmire, L.

Murton of Lindisfarne, L.

Trefgarne, L.

Napier and Ettrick, L.

Trumpington, B.

Newall, L.

Tryon, L.

Nicol, B.

Underhill, L.

Oram, L.

Vaux of Harrowden, L.

Orkney, E.

Vickers, B.

Orr-Ewing, L.

Vivian, L.

Parry, L.

Wells-Pestell, L.

Penrhyn, L.

Westbury, L.

Phillips, B.

Whitelaw, V.

Polwarth, L.

Williams of Elvel, L.

Ponsonby of Shulbrede, L.

Wolfson, L.

Prys-Davies, L.

Young, B.

Rankeillour, L.

Ypres, E.

Reigate, L.

Zouche of Haryngworth, L.

6.5 p.m.
Resolved in the negative, and amendment disagreed to accordingly.
On Question, Motion agreed to.

European Assembly Elections (Northern Ireland) Regulations 1986
6.6 p.m.
The Earl of Caithness: My Lords, I beg to move that the European Assembly Elections (Northern Ireland) Regulations 1986, a draft of which was laid before the House on 19th November, be approved.
Moved, That the draft order laid before the House on 19th November be approved. [2nd Report from the Joint Committee.]—(The Earl of Caithness.)
Lord Diamond: My Lords, before these regulations are passed without a word, will the Minister be good enough to explain to people such as myself who do not fully understand what is happening, what kind of voting is proposed for Northern Ireland in the Motion that he is putting before the House?
The Earl of Caithness: My Lords, in view of the knowledge that the noble Lord possesses I am surprised he does not know, because the matter was discussed at some length by his noble friend Lord
1120
Harris of Greenwich earlier this afternoon. The regulations that we are now discussing are similar to the ones that we have just discussed and voted on conclusively.
The European Assembly Elections Act 1978 provided for Northern Ireland a form of single constituency, returning three representatives under the single transferable vote system of proportional representation. Therefore the Northern Ireland regulations differ from the Great Britain regulations in respect of the provisions dealing with the procedures for voting and for the count.
On Question, Motion agreed to.

Parliamentary Constituencies (Wales) (Miscellaneous Changes) Order 1986
6.8 p.m.
Lord Beaverbrook Lord Beaverbrook rose to move, That the draft order laid before the House on 16th July be approved. [31st Report from the Joint Committee.]
The noble Lord said: As your Lordships know, the parliamentary boundary commissions have powers to conduct reviews of constituency in the years between their major reviews of all the constituencies in the country. Since the last general review of constituency boundaries, which was implemented in 1983, the local government boundary commissions have been making changes to local authority boundaries. As the parliamentary boundary commissions use ward boundaries as their building blocks for creating constituencies, this has meant that in some places local government boundaries and parliamentary constituency boundaries are now different, causing inconvenience and confusion to electors, returning officers and political organisations alike.
The Parliamentary Boundary Commission for Wales has accordingly reviewed the boundaries of nine constituencies in north and mid-Wales, and has recommended changes which will bring the separate local government and constituency boundaries into alignment. Except in one case, the commission decided to make the minimum change necessary to align the boundaries. The exception concerns the community ward, Eglwysbach, which is presently divided between two constituencies with a small part lying in Meirionnydd Nant Conwy and the larger part in Conwy. The commission considered that Eglwysbach had stronger ties with Meirionnydd Nant Conwy than with Conwy and therefore recommended that the larger part of the community ward, 1,018 electors in total, should be transferred to Melrionnydd Nant Conwy.
The commission published its draft recommendations in the summer of 1985, and five representations were received. One resulted in a local inquiry being held about the transfer of Eglwysbach. The assistant commissioner who held the inquiry decided that the commission had judged the situation rightly and upheld its proposals. Another four representations were received, three of which supported the proposals although one suggested a change of name for one constituency. The fourth suggested much more wide-ranging changes in the Wrexham area which the

1121
commission rejected. The commission published its final proposals on 16th July, and no representations have been received by the Home Secretary.
The form of the order before your Lordships' House is similar to the two English interim review orders approved in the past year. Article 2 substitutes the constituencies in the schedule for the existing constituencies created by the Parliamentary Constituencies (Wales) Order 1983. Article 1(2) provides for the order to come into operation 14 days after it is made, and for the new boundaries to take effect at the next general election. Any by-election held in the meantime will be held on the existing boundaries. I commend this draft order for implementing the commission's recommendations in full.
Moved, That the draft order laid before the House on 16th July he approved. [31st Report from the Joint Committee.]—(Lord Beaverbrook.)
Lord Mishcon: My Lords, my only comment is that I am deeply grateful that the Leader of the Opposition and my noble and learned friend Lord Elwyn-Jones were not present during the pronunciation of some of the parts of Wales.
Lord Beaverbrook: My Lords, I would not be inclined to disagree with that view.
On Question, Motion agreed to.

Medicines: Parallel Imports Policy
6.12 p.m.
Lord Northfield Lord Northfield rose to ask Her Majesty's Government what further action they propose to protect patients from the potential dangers of parallel-imported medicines; and what action they will take to recover windfall profits being made by pharmacists on such medicines and to protect the United Kingdom industry from erosion or returns on its successful products.
The noble Lord said: My Lords, in putting this Question this evening I again declare an interest as an adviser in the pharmaceutical industry. So called parallel importing occurs mainly because medicine prices are held artificially low by direct state control in some EC member states. Trade across boundaries, profiting from the ability to buy in some countries at these low prices, has mushroomed in recent years and has been legitimised by a rather curious ruling of the European Court of Justice. A new breed of traders thus sells these imports over here to wholesalers and pharmacists at prices below those which apply here under the United Kingdom price regulation scheme—the PPRS, as it is called.
In order to reduce dangers arising from this trade the Government have introduced a regulating system based on registration of companies engaged in it, together with a system of product licensing, the aim being to make sure that such parallel imports have no clinically significant differences from the medicine that is authorised for sale in the United Kingdom. Problems, however, arise, and dangers too; and I have given notice to the Minister of the issues I want to raise under the three headings in my Question.
Let us take first dangers to patients. Parliamentary Answers given to me in the summer filled me with considerable alarm. I was told that 28 companies hold parallel-import licences. I was told that two companies, I think mainly wholesalers, were being prosecuted for infringements; another eight were being considered for prosecution; and no fewer than 16 more were being investigated or considered for prosecution. This suggests that there may be some less than reputable elements at work in this trade. I hope that the Minister for a start this evening will tell us the up-to-date position and comment on the figures as well.
I suspect that the selling of unlicensed imports—that is, the ones which have not had a licence under the United Kingdom regulation system—accounts for a substantial proportion of these possible infringements leading to prosecution. I have seen market research findings by a reputable organisation and they estimate that as much as one-quarter—one-quarter, my Lords—of parallel imports sold to pharmacists may be unlicensed. Is the Minister able to confirm this alarming figure?
Again, and referring these companies, how can we be certain that if—as sometimes proves necessary—there is need to recall a batch of a particular medicine, the companies are well enough run and regulated for their records to indicate where particular batches have been sold? If, as is quite likely, some of these companies go out of business as quickly as they have mushroomed, particularly if price changes abroad, or exchange rates, suddenly make the trade unprofitable, how in heaven's name will batch recall be able to work in respect of stocks still on the shelves if the firms and the records have all disappeared? This holds considerable dangers for patients.
I am bound to say that the inspection system used to check on infringements is woefully inadequate, and I hope that the Minister is going to announce tonight some strengthening of it. The DHSS does not even have its own inspectorate. It has to rely on inspectors of the Pharmaceutical Society, and I understand that they are mainly responding to complaints from the public, or infringements uncovered by United Kingdom pharmaceutical manufacturers, rather than making any systematic inspections.
Can the Minister say how many are engaged on this work—I gather it is only a handful—and whether I am right in saying that most pharmacists will not be regularly inspected, given the numbers involved? Inspectors of the Ministry of Agriculture, Fisheries and Food are the ones actually used to draw up cases when infringements are suspected. They have to interview the companies concerned. Can they really do this adequately when they have the whole normal range of their duties to perform for MAFF? I repeat that the system is patently and dangerously inadequate—a handful of inspectors—with consequent dangers to patients.
Patients are being put at risk by this trade. Repackaging, for example, when the parallel imports have been brought in can and does lead to vital information being left off the package after translation from a foreign language. In a letter of 16th October the Department of Health itself has warned that some

1123
importers are tempting pharmacists and wholesalers to take incompletely labelled packs by offers of extra discount. This shows that a great deal of less than reputable activity is going on.
Again, the bio-availability—that is, the medical effects—differs in the case of some products from the product normally on sale in the United Kingdom. Patients have had epileptic control altered by substitution of an unlicensed product. Erroneous information supplied with inhalers has led patients to believe that a product was suitable for acute asthmatic attacks when the product was only prophylactic. Imported tablets of the wrong strength have been dispensed. Leaflets in foreign languages have been found with packs of pills. Batch numbers on the blister strips of pills—they are the ones inside the pack—do not match the batch number of the outside of the pack.
I have here three letters from one pharmaceutical company alone giving information about infringements in respect of a product sold in such diverse areas as the Wirral, Wigan and Maidstone, and all constituting a potential hazard for the patient. Counterfeiting of outside packaging has been found, and I am left wondering whether there is also a counterfeiting of drugs or, at least, a dispensing of substitutes that are not actually authorised. Do we have to wait for something dreadful to happen to patients before all this danger is cleared up?
Finally, there is the whole area of product liability, on which I hope the Minister will comment. How is the patient going to be protected if, in the case of a claim of harmful effects of some product, the manufacturer can show that the product was not manufactured for or authorised for sale here in the United Kingdom? What is the remedy for the patient? This raises considerable concern in my mind.
I see that the Association of Pharmaceutical Importers—those are the parallel importers—are seeking a judicial review hoping that a substitution of products can be authorised where the same product under a different name can be dispensed. I hope the Government will resist this in the courts with all their power. This is the thin edge of a very big wedge, going right against the detailed safeguards in the United Kingdom system. The sanctity of doctor-prescribing would be undermined in one blow and goodness knows where that would lead.
I turn now to the second part of my Question. I hope the Minister will confirm that at present this trade at low prices confers no benefit on the National Health Service because it results in no savings of NHS costs. This is because the pharmacist is reimbursed for the ingredient cost of a prescription at the United Kingdom, and not at the parallel-imported, price of the preparation. There is no adjustment downwards for the cheapness of his purchase. He can save 30 per cent. or so by using parallel imports and make a windfall profit at the expense of the taxpaper. This scandal must be stopped.
The Government have had one major method of stopping the abuse outlawed by the courts. Can we please be assured that another method is imminent? After all, the figures are substantial, for the importers concentrate on the most dispensed products. Let me
1124
put some figures to this. Has not the global excess reimbursement been of the order of £100 million plus in the last few years; namely, about £20 or £30 million per annum being made as windfall profits illicitly out of the National Health Service? Is that not the sort of figure that equals, for example, the net capital expenditure of a health authority? Do we not need to think of what better use this money could be put to if this shocking abuse were stopped? I am surprised that it has not attracted more attention. It is a pure, flagrant waste of government funds.
Per pharmacist the figure is also significant. I know that only about a quarter of pharmacists use parallel imports and most pharmacists are reputable. But the average per pharmacy is some thousands of pounds per annum and those dealing in parallel imports in the last four years may have benefited to the extent of £40,000 or £50,000, depending on the size of their businesses, all in windfall profits.
Some scheme reflecting accurate reimbursement must be found. I hope the Minister will confirm that the DHSS will not meet this problem by reducing average reimbursement across the board on all prescriptions, for that would push more and more pharmacists into using parallel imports to cheapen the supply, reduce the costs and hold their profits. Hitting everybody to entrap a few cannot in any circumstances be justified.
I turn finally to the effects upon the United Kingdom pharmaceutical industry of this parallel importing. The countries which keep medicines at artificially low prices, and are thus the source of parallel imports into the United Kingdom, are in the main France, Belgium, Italy and Greece. Generally their price controls, in contrast to prices regulated in the UK under the price regulation scheme (the PPRS), make little or no allowance for research and development costs of a product. That is why the prices are held low in those countries. Parallel importers concentrate on the fastest selling, highest value medicines.
It is generally accepted that this small number of really large selling medicines form the principal economic framework to support the R&D expenditure of the major companies. Parallel imports therefore threaten the life blood of a successful research-based company by depriving it of necessary funds to support R&D. Purchasing these products manufactured on the Continent transfers manufacturing capacity and jobs from the United Kingdom to those low priced countries. Manufacturing to a total of £80 million to £90 million per annum is being lost to the United Kingdom by these means.
The European Commission is trying to face up to the problem. It has published a draft directive on transparency of pricing, aiming to force countries to show how controlled prices are arrived at. It has also published a memorandum from which I quote. It states:
"Although at the present time there is little evidence that parallel imports pose a significant threat to the research-based industry, there is a risk that in the long-term, the policies of those member states who wish to encourage the development of the pharmaceutical industry will be undermined by large-scale parallel importing".
It is clear whose side the Commission is on. But it goes on to suggest that countries generally in Europe should adopt a price regulation scheme, rather like our own, concentrating on profits rather than the control of the prices of medicines, and also that the price control system should give adequate support to research and development costs. I hope that that has been taken fully on board by the Government.
I hope that the Minister will assure us that the Government support the Commission in putting open pressure on other member states to apply realistic pricing. This is in no way similar to the trade in motor cars; the situation in which buyers can sometimes buy cars more cheaply in Belgium and import them over here. There is no price control on motor cars. It is a free market. But the parallel import system in medicine arises because there is price control in some countries.
The quixotic ruling in favour of the trade by the European Court of Justice results, as the NEDO working party on pharmaceuticals has just reported in its paragraph 89, in endorsement not simply of free circulation of goods,
"but also free circulation of (potentially) illegal pricing methodologies".
I hope the Minister will agree with this stricture of NEDO and the views of the Commission.
Finally, in all the circumstances I was deeply surprised to see that in a recent speech the Parliamentary Under-Secretary to the Department of Health and Social Security, the noble Baroness, Lady Trumpington, said:
"Licensing has ensured the acceptable safety of the trade"—
a highly doubtful statement in the light of what I have been revealing this evening. She went on to say that parallel importing is,
"a part of life in the European Community".
Such a statement, virtually encouraging the trade, should not have been made, in my submission. What is needed instead is firm support for the Commission in its efforts to get realistic and fair price controls (where price controls exist) so that the trade ceases, with relief from all the problems I have outlined today.
The United Kingdom's pharmaceutical industry has a very good record. Its exports give an annual surplus of £850 million to our balance of trade. It employs 70,000 to 80,000 people. It spends some £500 million per annum on research and development. It deserves support to get rid of this basically piratical trade, and not, as we have heard from the noble Baroness, Lady Trumpington, acceptance that the trade must continue.
6.29 p.m.
Lord Prys-Davies: My Lords, my noble friend Lord Northfield returns tonight to a basic issue raised during the Committee Stage of the Patents, Designs and Marks Bill last April. The House must be grateful to my noble friend for the series of detailed questions he has addressed to the Government. I shall deal in turn with each of the three separate parts of the main Question. First, there is the issue of what further action the Government propose to take to protect patients from the potential risks to health from parallel-imported medicines. I will not traverse the ground
1126
again. We have been adequately reminded by my noble friend of the numerous circumstances in which patients can be exposed to considerable danger from imported medicines. The control over the importation of medicine and the safety of medicine are basically provided for in the Medicines Act 1968. Section 7 of that Act provides that no person shall import any medicinal product except in accordance with a product licence. The Government, in recent years, have introduced a product licence (parallel-import) which has to be obtained in relation to the importation of medicines.
The necessity for control having been recognised, we want to know how the department has been coping with the scheme of product licensing. How effectively is the scheme being implemented? My noble friend has asked a number of questions, and I should like to pose a few additional questions of my own. Does the department know how many medicinal products are known to be imported to this country without a product licence? Is that known?
Will the Minister tell the House how many applications for a product licence are currently being considered by the department and are awaiting a decision? Can the Minister go further? Can he tell us how thoroughly scrutinised is an application for a product licence? I ask that question because there is an impression that an application for a licence in practice is treated as if it were a licence. Is there any ground at all for that impression?
Will the Minister also tell the House how many complaints have been received by the DHSS since 1982 about alleged unlawful manufacture or sale of medicine that should have been subject to the product-licence scheme? My noble friend has mentioned the number of companies which have been prosecuted for importing medicine without a licence. Will the Minister confirm that those figures are correct?
I turn now to the second part of the Unstarred Question, namely, what action the Government propose to take to recover the windfall profits made by pharmacists from parallel imported medicine. My noble friend has described how windfall profits arise if a pharmacist dispenses the cheaper parallel imported product but claims reimbursement from the DHSS on the basis that he has dispensed the more expensive UK product. The price differential is of the order of 25 per cent. to 50 per cent. That should not happen.
The price differential is substantial. My noble friend has indicated that the imported drug costs from about 25 per cent. to 50 per cent. less than the UK brands. Is my noble friend's estimate correct that the NHS has overpaid retail pharmacists dispensing parallel imports the sum of £100 million to £120 million since 1982. And is my noble friend correct in estimating that some phamacists who are dealing in parallel imports may have benefited over the last four years by as much as £40,000 or £50,000.
If these figures are correct—we believe that they approximate to the true position—it is difficult to see how a pharmacist can innocently claim reimbursement at the higher level. One would have thought that such activity almost certainly constitutes a criminal offence of obtaining money by deception, fraud or

1127
forgery. There is only one answer to that problem. The pharamacists who claim reimbursement at the higher level should be detected and prosecuted.
Again, I should like to put come questions to the Minister. Will the Minister inform the House how many prosecutions there have been since 1982 for deception, fraud or forgery? Can he also inform the House how many cases there have been where the department has been able to recover windfall profits and what was the total amount recovered? If a substantial part of this £100 million to £120 million overpayment has not been recovered—we suspect that it has not—that is a sad neglect of the department's obligation to the NHS. Of course, if the department pleads that it is without the resources to check the validity of the claims, that is a sad commentary on Government manpower policies.
I come to the last part of the Unstarred Question, namely, what action the Government will take to protect the UK industry from the erosion of returns on its successful products. I found this to be more complex. It is a controversial issue. Specifically, it is about the degree of protection which would be given, not to all pre-1978 patents, but to a group of pre-1978 patents which were given an extension of four years by the Patents Act 1977, from the sixteenth year to the twentieth year of their lives. At the same time this was recognised to be a compromise solution. I have found it to be a complex issue, and I well recall the noble Lord, Lord Hunter of Newington, with his great experience and authority, asking in the course of a debate in your Lordships' House on 20th February 1985 whether we had too many research-based companies in the UK and whether we did not require high-quality companies that confine their business to generic drugs.
The noble Lord, Lord Hunter, did not offer an answer to the questions which he had posed. But it was his judgment, and I pay it great respect, that this area should be examined and that it should be planned. My noble friend Lord Northfield has developed a robust case for giving the relevant pre-1978 patents full protection until the end of the twentieth year or if (by implication, I suppose) such protection is not available from the Government, then of making it lawful for the Comptroller of Patents to impose whatever limitations he thinks fit on the licences of right when granting the licence.
It is fair to point out that the extent of the Comptroller's discretion to impose limitations on the licence are still uncertain. My noble friend has not referred to the case of Gist-Brocades v. Generics which came before the Judicial Committee of your Lordships' House fairly recently. Two noble and learned Lords considered that he could impose whatever terms he thought fit in the circumstances. One noble and learned Lord disagreed with that view, while two noble and learned Lords reserved their judgment. So there is uncertainty about the discretion which is vested in the Comptroller of Patents.
My noble friend Lord Northfield considers the licence of right, which can be granted during this four-year extension, to be a mischief—an enormous mischief—which puts the British pharmaceutical
1128
industry at a disadvantage compared with the industries of competitive countries, depriving it of adequate remuneration to fund research which can lead to the development of new and successful drugs of benefit to mankind.
That, briefly and in essence, is the case advanced by my noble friend and also by the Association of the British Pharmaceutical Industry. But there is another side to the case. There is an opposing view, which remains unconvinced that additional patent protection is required during the four-year period with which we are concerned tonight. That opposing view naturally is being advanced by the Association of Pharmaceutical Importers who want to keep the licence of right and also want the minimum of limitations to be imposed upon an individual licence. It would argue that there is no guarantee that greater patent protection will necessarily mean that a patent-holder will plough back the profits into research and development in the United Kingdom, or indeed at all. That will depend very much upon the individual company.
It also argues that, in the national interests of the United Kingdom, the National Health Service should have access to cheaper drugs and medicines which are available, or which could be available, by virtue of the licence of right. It further argues that we in this country require highly qualified companies, which will confine their business to generic drugs, as well as the research-based companies. I should also remind the House that an Early. Day Motion, tabled in the other place a few days ago, is critical of what it describes as excessive profits at the expense of the nation's health.
Those are basically the opposing arguments. We are in sympathy with the broad principle that home-based industry should receive an adequate return in relation to its products in order to ensure continuity of research. Indeed, my noble friend Lord Ennals has often made that point in your Lordships' House. Britain needs a strong pharmaceutical industry. We do not want to kill that goose. But it is also in the public interest—and this I assert as a health spokesman on this Bench and also as a taxpayer—that drugs and medicines supplied for the national health should be supplied at reasonable prices. So there could be a conflict of interest here. One has to balance the benefit to the patent-holder of pharmaceutical products against any detriment to the National Health Service as the purchaser of drugs and medicines.
I go back almost to where I began. During discussion at the Committee stage of the Patents, Designs and Marks Bill last April, the noble Lord, Lord Lucas of Chilworth, said that the Government were prepared to introduce legislation to protect what he described as "useful patent life". If that remains the Government's view, will the Government, as the custodians of the National Health Service, also bear in mind the need to safeguard the interests of the National Health Service?
Perhaps I might draw the attention of the Minister to a possible helpful provision to be found in Section 41 of the Patents and Designs Act 1949—that Act having been repealed by the Act of 1977. That section placed on the Comptroler of Patents a duty to ensure, among other matters, that medicines, were available

1129
to the public at the lowest price consistent with the patentees deriving a reasonable advantage from their patent right. The proposed patents protection legislation, if it is to be introduced, should also contain a safeguard for the National Health Service possibly along the lines of section 41, if that is allowed by Community law. It appears to us that that is the only means whereby we can reconcile the different national interests to which I have referred.
6.46 p.m.
Lord Hesketh: My Lords, I should like to thank the noble Lord, Lord Northfield, for opening this short debate. A number of important questions have been raised and I hope that in passing on some of my very newly-acquired knowledge I may be able to put minds at rest. I arrived armed with a veritable array of confetti for the debate today and before dealing with my speech proper, I should like to deal with some specific points that were raised during the debate that are not contained in my speaking notes. The subject is complicated enough as it is, without making it more difficult for your Lordships to understand.
However, before covering those points I should like to say two things which I feel are relevant. First, I heard the phrase, "piratical trade" I think that is a little strong. A free market in Europe by definition means that products of all kinds (including medicines) are going to cross borders. Another point of which I took note was hearing efficient purchasing described as "fraud". Again, I think that is a little rich.
I shall now move to the other points that have been raised and then I shall deal with the speech itself. The noble Lord, Lord Northfield, pointed out certain cases, in particular I believe he was referring to an anti-epileptic drug and its application. We know that on certain occasions there have been errors; but it is also true to say that parallel imports have been blamed where in fact they are not to blame and the complications were due to reasons which had nothing to do with them.
There is the policy of reimbursing the pharmacists. I am informed that there are certain pharmacists who on principle have not used parallel imports. It is felt that they should not suffer as against those who have used such imports. As many of your Lordships will be aware, parallel imports are in fact a phenomenon of the 1980s, and in the 1970s we were actually parallel exporters. At this moment a new survey is being conducted in order that we can respond to this problem. The results of that survey are just about to reach the Government and therefore there will be a new basis on which we might hope to resolve this problem.
The noble Lord, Lord Northfield made a point concerning counterfeiting. We have evidence, and I shall come to it later, with regard to counterfeiting of cartons and leaflets, but we have no evidence with regard to the product. I think possibly the noble Lord was referring to the Ventolin saga, which concerned the counterfeiting of the packaging but not of the product itself.
Lord Northfield: My Lords, I did not say that it was the packaging.
Lord Hesketh: My apologies, my Lords.
It was said that a quarter of all parallel imports are unlicensed. There is no basis on which to confirm or deny this figure, but 80 per cent. of applications are now dealt with, and all allegations of unlicensed trading are investigated.
The noble Lord, Lord Prys-Davies, referred to the number of applications that had been received and to the licences granted and refused. The figures are that since May 1984, 3,155 applications have been received; 1,500 licences have been granted and 722 refused. Applications returned or withdrawn numbered 312. The balance outstanding is 571. We are now getting on top of the problem.
Lord Prys-Davies: My Lords, was there a backlog of applications?
Lord Hesketh: My Lords, perhaps I may move on to the next point on applications treated. Importers have been warned that an application is not a licence. They will be pursued if they make that foolish error.
Finally. I was asked how many complaints we have received about parallel imports. We have investigated 38 allegations of unlicensed trading in 1986. That can include multiple complaints involving the same product.
As far as licensed parallel imports are concerned there should be no question of danger to patients. These are all medicines which have been licensed in other European Community states in accordance with EC requirements. I shall be saying more about the action we are taking to stamp out the trade in unlicensed medicines, but in general the safeguard is that we would expect pharmacists to ensure that they only dispense UK licensed products.
We must put this into context. Parallel importers are concerned with a nucleus of a small number of the most frequently prescribed and generally more profitable products, perhaps some 200 out of a total product range of more than 10,000. The trade in parallel imports is difficult to quantify but figures that have been suggested put it at substantially less than £100 million per year. This should be compared with some £2,600 million for the UK pharmaceutical industry output as a whole. I shall also explain the efforts that are being made to deal with the remuneration for retail pharmacists in relation to the discounts offered by parallel importers. Finally, I shall have a few words to say about the effect on the UK pharmaceutical industry.
As noble Lords are aware, parallel importing of medicinal products occurs when medicines are purchased at a relatively low price in one country for sale in another. They compete with identical, or virtually identical, products already being marketed there, often by the same manufacturer. Products are cheaper in the exporting country usually because of local price regulation systems and currency fluctuations. In the 1970s the UK was a parallel exporter.
By the early 1980s, medicinal products were being parallel imported into the United Kingdom on a substantial scale and without adequate controls. The Government therefore decided to introduce a scheme,

1131
based on the EC recommendations, for the licensing of parallel-imported medicinal products. The scheme took effect on 16th May 1984 and required that a parallel import product licence should be held by anyone marketing medicinal products in the United Kingdom after that date. The scheme is kept under review and various changes have been made since it came into operation. For example, the accession of Spain and Portugal to the European Community from 1st January 1986 brought further problems especially in relation to certain UK patented products where the UK patent holder could seek to prevent imports. We have co-operated with the Association of the British Pharmaceutical Industry to produce lists of the patented products and their Spanish and Portuguese names which have been circulated to parallel import licence holders.
Parallel import product licence applications cover a very small number of products, but there are multiple applications involved, as each importer wishes to handle the same basic range of high volume products. Once the initial decision has been made that an import is acceptable, subsequent applications can be processed on a mirror image basis. There are, however, still some applications outstanding from the start of the scheme. A relatively small number of officials in the licensing authority is concerned with parallel imports—basically one medical assessor, two pharmaceutical assessors and a small administrative section—but none of these is devoted exclusively to parallel import work. There are 250 staff in the medicines division of the department and 20 medicine inspectors under the department's control. Parallel import applications are not given preference to UK company applications.
As the regulatory authority under the Medicines Act, the health Ministers are concerned to ensure the safety, quality and efficacy of all medicines sold or supplied in the United Kingdom; and subject to that proviso, they are neither for nor against parallel importing. They are, of course, bound by EC regulations to facilitate the free movement of goods between member states. The position therefore is that the great majority of parallel-imported products available to UK pharmacists should be licensed products. As such they should present no health hazard as they have been licensed on the basis of information supplied by other regulatory authorities and/or manufacturers as to their equivalence to the UK licensed product. Products come mainly from France and Belgium and to a lesser extent from Italy, Greece, Denmark and Holland. Labelling and patient information must be in English.
It would also be wrong to suggest that licensed parallel imports are inferior in quality. All Community member states are required to follow a common procedure in marketing authorisations for medicines. Overseas manufacturers of pharmaceutical products intended for the UK market must in general comply with conditions which equate to those applicable to UK manufacturers. We have ensured that community pharmacists have up-to-date information available to them as to the products which have been granted licences. Monthly lists of such products have been published throughout this year. For the future we
1132
would suggest that the presence of a product licence number indicates the product's status; if no number is quoted it can be assumed that it is.unlicensed and should therefore be reported to the department for consideration of prosecution. When I say "community pharmacists", I am referring to what could also be known as the local chemist, in case anyone thought it was something to do with Europe-wide pharmacists.
Currently we are investigating 20 parallel importers for various offences mostly involving trading in unlicensed products and labelling or assembly irregularities. Two parallel importers have been prosecuted and convicted. Other prosecutions are pending. There is difficulty in securing evidence strong enough to support a criminal prosecution. A recent encouraging trend is a tendency for the more responsible parallel importers to complain to the department and supply evidence as to the activities of other importers.
Lord Northfield: My Lords, is that not alarming? There are only 28 registered parallel importers and the noble Lord has just said that more than 20 of them are being investigated for possible infringements and possible prosecution.
Lord Hesketh: My Lords, the number of importers is 31 rather than 28. As I said earlier, the vast number of cases concern irregularities to do with packaging or labelling. It could be said that we are doing a very good job in pursuing so many.
Controls over unlicensed products entering the country would require a check on all incoming vehicles. This is not practicable. In any case it is not an offence to import from the European Community and hold in store medicines licensed in a Community country. Close liaison is maintained between the enforcement branch of the department, medicines inspectors and inspectors of the Pharmaceutical Society and investigation officers of the Ministry of Agriculture, Fisheries and Food and Customs and Excise.
Both the UK pharmaceutical industry and parallel importers have at various times been critical of the handling of parallel-imported medicines. On the one hand, the UK industry has suggested that there was no need to set up a scheme and the UK could have invoked the provisions of Article 36 of the EC Treaty to avoid this. They also argue that licences should not have been issued for products bearing certain UK trade names and that the scheme has been too liberal and favours parallel imports at the expense of UK products.
Our scheme is based on the European Commission's recommendations and we have taken great pains to ensure that licences are only granted where the information available to us suggests that the parallel-imported products are equivalent to their UK licensed counterparts. As for product names on licences, the department's guidance to parallel importers states that it is for the applicant to ensure that he is entitled to use any name applied for. As to favouring parallel imports, the scheme has been modified in the light of revised advice from the European Commission and 53 appeals against refusals of licences.

1133
On the other hand, the Association of Pharmaceutical Importers has been equally critical of the department's apparent tardiness in dealing with applications, the unnecessary restrictions inherent in the licensing scheme, and unwarranted zeal in enforcement action. It is also at this time seeking judicial review action in respect of the department's instructions to pharmacists which it is alleged discriminate against the dispensing of parallel imports. If somebody is criticised by both sides it suggests to me that broadly the system is operating fairly. I have already said that the UK licensing authority is neither for nor against parallel importing.
I now turn to the question of what the noble Lord, Lord Northfield, refers to as windfall profits being made by some retail pharmacists. He will be aware that when this problem first came to light in 1983–84, the Government introduced a scheme designed to complement the existing reimbursement arrangements by taking into account the very high discounts which had become available in the market. This was the high discount endorsement scheme. Unfortunately this scheme was found to be in breach of Article 30 of the EC Treaty by both the High Court and the Appeal Court.
Since that time, the department's legal advisers have been considering the full implications of that judgment on the existing arrangements for reimbursing retail pharmacists. One thing that is certain is that any new scheme which may be introduced in the future must be seen by all to be fair and must be seen to be fully meeting our legal obligations in both Europe and the United Kingdom. I can assure noble Lords that no decisions have yet been taken on any new scheme.
One of the major problems facing us is that despite the fact that parallel imports have been with us for some time—and, before that, parallel exports were the problem—very little factual information on the extent of their usage exists. Let us be quite clear that not all pharmacists use parallel-imported medicines in their NHS dispensing. It is necessary, I think, to put the problem in perspective. Various estimates have put the value of the trade at between £40 million and £100 million. This has to be compared with a total drugs bill in the region of £1,800 million. That is not to say that the Government are being complacent. The results of inquiries are expected shortly. Once they are available, the Government will be considering as a matter of some urgency what action may be taken to curb any excess profits being made by pharmacists under the existing reimbursement arrangements.
We have been discussing this evening a problem affecting the pharmaceutical industry in this country. In doing so, I believe it is important that we should remind ourselves that this is a successful industry—successful both in terms of the quality of its products and in terms of the industry's economic success. Of the £1,800 million NHS spending on medicines, some £1,200 million was for medicines supplied by UK-based pharmaceutical companies who also exported medicines in 1985 to the value of £1,440 million. Those figures surely speak for themselves. In 1985, the pharmaceutical industry in the UK produced total medicine sales, home and abroad, of more than £2,600 million, with a positive
1134
balance of trade of very nearly £850 million. Noble Lords will surely agree that this is indeed a success story.
One does not of course wish to dismiss or minimise the effects of parallel imports for the UK pharmaceutical industry. But I believe it is important that we should keep this question in perspective, and I hope the figures which I have quoted will help us to do that. The cost of research and development figures prominently in the cost of the pharmaceutical industry. The UK industry's current spending on R&D is more than £500 million per annum. The importance of this element is taken into account in the prices of medicines supplied to the NHS, which have built into them a specific provision for R&D support currently running at more than £300 million a year.
In conclusion, I would emphasise that it is wrong to suggest that patients are at risk from licensed parallel-imported medicines. In some cases these are made in the same factories as supply the UK products; in others from sister companies to the same formulae. The UK licensing authority has devised a licensing scheme to control parallel imports, and now that it has absorbed the initial flood of applications I would suggest it is well on the way to ensuring that only licensed products are marketed in this way. The department will follow up all allegations of unlicensed trading and will consider prosecution action where the evidence warrants this.
As for the effect on the UK pharmaceutical industry, I know it would have preferred us not to set up a parallel-import scheme. We had, however, to honour our obligations as an EC member state. As for windfall profits by some pharmacists, I have indicated the action in hand to deal with this.
I am grateful to the noble Lord, Lord Northfield, for raising this subject today. It has been an interesting and well-informed debate. I also thank the noble Lord, Lord Prys-Davies, for his most valuable contribution. If, in the interests of brevity, I have failed to answer all the points raised I hope that noble Lords will forgive me. I shall of course write to noble Lords to correct the situation.
Lord Hacking: My Lords, before the noble Lord sits down perhaps he will allow me to intervene because I believe there is a weakness in one of his arguments. If I understood the noble Lord the Minister correctly, he said that both the customer and the industry would be protected from some of the consequences of the matters on which the noble Lord, Lord Northfield, addressed us by the adoption of a common procedure for the marketing of medicinal products.
However, does this not focus into a problem which exists not only in this country but in other countries within the EC? I refer to the abridged application procedure. Before panic sets upon the Minister because he cannot find a tab in his brief headed "abridged application procedure", may I tell him briefly that this is a procedure under which second applicants for a product licence are relieved, in part or in whole, from producing with their application experimental and biological studies or preclinical, clinical and laboratory studies in support of their application. The result of that is that a second

1135
applicant can pick up a canister of pills from the chemist, break down the constituents of it, and possibly without even having to produce comparative data, then make his application for a product licence either in this country or the EC. If that is right—
Baroness Nicol: My Lords, will the noble Lord give way? I think it is the custom of the House that when intervening in an unscheduled manner, the intervention should be kept short. I am sure the noble Lord will bear that in mind.
Lord Hacking: My Lords, I am sorry if I am making a rather long intervention. I apologise to the House and to the noble Lord, Lord Northfield, for not being able to make my intervention at an earlier stage in the proceedings.
All I put to the Minister, which arises out of one of the points he was making in his submission, is that a weakness lies in this proposed "common procedure" that he is speaking about because of the use in this country and in other EC countries of the abridged application procedure. If it would be easier for the Minister to reply to me in writing, I shall be happy to receive his reply in that way.
I therefore direct two questions on the abridged procedure. Is reference made to the original applicant's clinical and other data when considering the second application, and, if so, to what degree? If the Minister could reply in writing, it would certainly assist.
Lord Hesketh: My Lords, I am sure that it will come as no surprise to the noble Lord that I shall be writing to him rather than answering him at this time.
Lord Northfield: My Lords, before the noble Lord finally sits down, I wonder whether I may ask him to be sure to write to me about the points I raised about the EC; namely, that the EC Commission needs support in pressing through its view that research and development expenditure should be included in the pricing of pharmaceuticals by other countries and that some order should be brought into the whole system of comparative pricing so that, one hopes, parallel importing will fade away. I should be grateful if he would write to me about that.
Lord Hesketh: My Lords, the noble Lord's point is taken, and I shall be writing to him.
House adjourned at eleven minutes past seven o'clock.

  TREE PRESERVATION ORDERS
  TREE PRESERVATION ORDERS
  "TREE": DEFINITION
  "TREE": DEFINITION
  PUBLIC INQUIRIES: AVAILABILITY OF PROOFS OF EVIDENCE
  PUBLIC INQUIRIES: AVAILABILITY OF PROOFS OF EVIDENCE
  SSSIs: SELECTION CRITERIA
  SSSIs: SELECTION CRITERIA
  THE GREATER LONDON ECOLOGY UNIT
  THE GREATER LONDON ECOLOGY UNIT
  PRISON CONSTRUCTION 1958–85
  PRISON CONSTRUCTION 1958–85
  THE GREISS TEST
  THE GREISS TEST
  MR. JOHN STALKER: LEGAL EXPENSES
  MR. JOHN STALKER: LEGAL EXPENSES
  DR. FRANCIS BERTRAND
  DR. FRANCIS BERTRAND
  GRENADIAN CITIZENS: DETENTION
  GRENADIAN CITIZENS: DETENTION
  INTERNATIONAL DEBT NEGOTIATION PARAMETERS
  INTERNATIONAL DEBT NEGOTIATION PARAMETERS
  BRITISH-MADE WEAPONS: DEPLOYMENT BY US
  BRITISH-MADE WEAPONS: DEPLOYMENT BY US
  SOUTH WEST ATLANTIC FISHING RIGHTS
  SOUTH WEST ATLANTIC FISHING RIGHTS
  CAP TOBACCO REGIME
  CAP TOBACCO REGIME
  INTERNATIONAL TRANSIT OF LIVE ANIMALS: RSPCA COMPLAINT
  INTERNATIONAL TRANSIT OF LIVE ANIMALS: RSPCA COMPLAINT
  CROWN PROCEEDING ACT: SECTION 10 REVIEW
  CROWN PROCEEDING ACT: SECTION 10 REVIEW