Sitting of 17 December 1986

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

  TRADE
  Resolved,
  That an humble Address be presented to Her Majesty, That she will be graciously pleased to give directions that there be laid before this House a Return of Statistics relating to Overseas Trade of the United Kingdom for the year 1987 and for each month during 1987.—[Mr. Durant.]

Oral Answers to Questions
  ENVIRONMENT

    "UK 2000"
    Mr. Colvinasked the Secretary of State for the Environment what representations he has received from local authorities about his Department's document on the environment entitled "UK 2000."
    The Minister for Environment, Countryside and Planning (Mr. William Waldegrave): We have received 22 letters from local authorities and one from a local authority association.
    Mr. Colvin: I am sure my hon. Friend will welcome the fact that local authorities have been among the first to welcome the initiative for tidying up Britain. I am sure also that the House will congratulate my hon. Friend on putting up £750,000 of Government money to help fund the scheme and welcome the fact that business has responded with a further £400,000, but, under the present financial restrictions placed on local government, will it be able to come in with its share of funding of a scheme which, if it is not based on plural funding, will probably not succeed?
    Mr. Waldegrave: I agree with my hon. Friend. The initiative has got off to a good start with £400,000 coming from the private sector before any appeal has been launched, which bodes well for the future. Local authorities already carry an enormous burden of work in this area. I agree that they should be seeking co-operative schemes with the private and voluntary sectors and that "UK 2000" is a good way of doing that. They are already taking advantage of the increased provision that we have made for training with the help of the Keep Britain Tidy Group.
    Mrs. Clwyd: Since some demolition work may be involved in "UK 2000" projects, will the Minister look at ways of tightening up the safety laws governing demolition when asbestos dust is present in view of the Appeal Court's ruling yesterday showing loopholes in the law?
    Mr. Waldegrave: I saw the reports this morning, which I think deal with matters under the health and safety at
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    work legislation and potential defects in that. I shall discuss that matter with my hon. Friend who is responsible for those matters.
    Mr. Chapman: As one of the objectives of "UK 2000" is to green our cities, will my hon. Friend confirm that with imagination physical improvement can be brought about, particularly in our inner city areas, at relatively little cost? Will he encourage competitions to find schemes which will contribute to that objective and cost relatively little?
    Mr. Waldegrave: My hon. Friend is right. The combination of private sector money, local authority skills and volunteers can often do a great deal with little funding. My hon. Friend also makes the point that "UK 2000" goes much wider than a litter initiative. It is the first time that the seven principal voluntary organisations, ranging from Friends of the Earth to the Civic Trust, have sat down together to try to work out a strategy to cover schemes such as the rehabilitation of Tynemouth station.
    Mr. Straw: Does the Minister recognise that much of the untidiness in Britain has been caused directly by other Government policies? Why have the Government cut 10 per cent. in real terms from the grant for refuse collection? I see the Secretary of State smiling. Perhaps he will explain why in April this year, as Secretary of State for Transport, he issued a circular saying that all litter bins should be removed from all trunk road laybys. How did that policy contribute to tidying up Britain?
    Mr. Waldegrave: It is well known that the existence of those litter bins often turned out to be a source of fly tipping and dumping, making the situation worse. The truth, as the hon. Gentleman should know, because, unhappily for him, he has been stuck in his present job for a long time—
    Dr. Cunningham: Listen to who is talking.
    Mr. Waldegrave: I shall be delighted to remain in my job for several years more. However, the hon. Gentleman knows that if the worst and most inefficient local authorities came up just to the average on litter collection, more than that 10 per cent. could be saved.

    Vandalism and Graffiti
    Mr. Nichollsasked the Secretary of State for the Environment what was the cost of vandalism and graffiti to local authority buildings and those for which his Department has responsibility during 1985; and if he will make a statement.
    The Parliamentary Under-Secretary of State for the Environment (Mr. Christopher Chope): No central statistics are held by my Department on the cost of damage caused by vandalism and graffiti to local authority and Government buildings.
    Mr. Nicholls: Does my hon. Friend accept that, even if there is no central information, the problem is considerable? Is he aware that a number of existing techniques could be used to great effect? Is he satisfied that the local authorities which might be able to benefit by the use of those techniques even know about them, and does he think that his Department could have a role to play in disseminating that sort of information?
    Mr. Chope: I am not satisfied that all the techniques are well known to local authorities, but I understand that a

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    firm in my hon. Friend's constituency called Graffiti Management Ltd. is keen to evaluate existing ways of removing graffiti and to test new ones. I wish it success.
    Mr. Cartwright: Will the Minister accept evidence from constituencies such as mine that the incidence of vandalism, on council estates in particular, can be substantially reduced by effective neighbourhood watch schemes? If that is so, is it not monstrous that some local authorities should deliberately obstruct the development of those schemes? Will he encourage them to see the error of their ways?
    Mr. Chope: I wholeheartedly agree with the hon. Gentleman.
    Mr. Heddle: Can my hon. Friend confirm that some Labour authorities are refusing to remove certain graffiti, on the ground that it is sexist or racist? More seriously, will my hon. Friend confirm that the more people who buy flats in local authority owned blocks, the more pride they will have in their own environment and, furthermore, the more that tenants become involved in the government of their own environment the greater respect they will have for the common parts, such as the lift or the staircase?
    Mr. Chope: I agree with my hon. Friend. I understand that Camden council, for example, discriminates against certain sorts of graffiti. A ratepayer telephoned recently to ask for the removal of the slogan, "Kilroy was here." He was told that it would not be possible to have that removed. He then inquired further and was told that if the graffiti had said, "Kilroy was queer" the council would remove it.
    Mr. Dubs: Does the Minister recall that on 24 November his Department issued a press release announcing certain improvement grants to tackle graffiti and other matters? Is he aware that a grant of £105,000 was in that package for Wandsworth Plain estate in Wandsworth? Was he aware when the press release was issued that Wandsworth council had already disposed of that estate?
    Mr. Chope: I do not have the detailed information on that. However, one thing is certain: the quality of the Wandsworth Plain estate is much higher than it has ever been.
    Mr. Squire: Does my hon. Friend have any information to suggest that there has been an improvement in either the grammar or the spelling of graffiti since the Government came to office? In particular, can he draw any distinctions between graffiti in Labour education authority and Conservative education authority areas?
    Mr. Chope: We shall have to consider seriously making inquiries and gathering statistics on that. Ultimately it depends on the quality of the local education authority.
    Mr. John Fraser: When will the Minister raise his standards above that of the graffiti artist? Bearing in mind how much money is spent on things such as early warning systems and so on, how much money are the Government spending to find a simple antidote to the aerosol can and the felt tipped pen which disfigure so much of our public property and public transport, and much of which is abusive in racial and sexist terms to the general public? What are the Government spending on that which is an affront to many right-minded people?
    Mr. Chope: When looking around the country, particularly in Southampton, some of the most offensive graffiti just says, 'Militant." As I understand it, that is something that Labour Members are prepared to support.

    Marine Nature Reserves
    Mr. Harrisasked the Secretary of State for the Environment when he last met members of the Nature Conservancy Council to discuss marine nature reserves.
    Mr. Waldegrave: I met the chairman of the Nature Conservancy Council and council members at their 100th meeting in Peterborough on 2 December. The council expressed its pleasure at the designation by my right hon. Friend on 21 November of the first marine nature reserve at Lundy.
    Mr. Harris: Now that the first marine nature reserve has been designated around Lundy, has my hon. Friend any plans for further designations? When considering any possible further reserves, will he ensure that the livelihood of fishermen is one of the factors taken seriously into account?
    Mr. Waldegrave: Yes, Sir. The chairman of the NCC has written to me about Skomer, and there are about five more reserves in the pipeline. Time was taken in negotiating the first marine nature reserve largely because we tried to reassure the local fishermen. Now that Lundy has been established and we have shown that reserves can be established without endangering fishermen's livelihoods, I hope that we shall be able to proceed faster and perhaps with fewer suspicions.
    Sir Hector Monro: Does my hon. Friend agree that time was taken to produce the first marine nature reserve because there was full consultation with recreation, fishing and other interests? Now that the pattern has been established, more reserves will be designated much more quickly.
    Mr. Waldegrave: My hon. Friend has a record of distinguished service on the NCC council. I agree that it has been worth proceeding slowly and carefully. That having been done, I hope that we can accelerate progress.

    Common Land
    Mrs. Shieldsasked the Secretary of State for the Environment when he will publish the Green Paper on reform of common land legislation.
    The Secretary of State for the Environment (Mr. Nicholas Ridley): Yes Sir; as soon as possible.
    Mrs. Shields: What proportion of common land does the Secretary of State think is likely to be deregistered when the Government introduce legislation on this matter?
    Mr. Ridley: A consultation paper will be published early in the new year and legislation will follow as soon as it is possible for the Government to find time to bring it forward. I can assure the hon. Lady that the legislation will be high in our programme, but I cannot speak for the Opposition.
    Mr. Colvin: Is my right hon. Friend aware of the difficulty that has been experienced by commoners this year in evicting hippy convoys from common land? Will

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    he ensure that at least one section of the Green Paper deals with this problem, which may be a recurring one, especially in my constituency?
    Mr. Ridley: I am aware of these problems because I have such a common in my constituency. I think that my hon. Friend will be reassured by the action taken under the Public Order Act 1986 to deal with the problem. I hope that that action will be satisfactory.
    Mr. Barron: Is the Secretary of State aware that over 30 years ago a Royal Commission said that when dealing with common land, the ownership of the soil, the boundaries of the land and the common rights should be on the public record? Past legislation has failed grossly to meet those criteria, especially in respect of ownership. Will the right hon. Gentleman give an assurance that any new legislation will include provisions to enable the public to check the ownership of common land claimed by individuals?
    Mr. Ridley: Under the chairmanship of the Countryside Commission, the Common Land Forum has produced a nearly unanimous report on what new legislation should contain. That is such an achievement that the House would be wise not to suggest deviations from what is recommended, without good reason. I hope that the consultative paper will be met with the same nearly unanimous reception.
    Dr. David Clark: When does the Secretary of State intend to publish the consultative paper? Secondly, will he be more explicit about when he expects to be able to draw conclusions from it? I think that there is accord on both sides of the House that the work of the Common Land Forum—covering the views of the National Farmers Union, the Country Landowners Association and all the amenity bodies—is a worthy basis for legislation, and we expect early proposals from the Government.
    Mr. Ridley: I am grateful for the hon. Gentleman's welcome. I have said that we hope to publish the consultative paper early in the new year. It has not been possible to do that before the House rises for the Christmas recess. Consultation will take place for several months and we look forward to hearing what the public think. I am grateful for the hon. Gentleman's support.

    Local Government Finance
    Mr. Allan Robertsasked the Secretary of State for the Environment when he next proposes to meet the Consultative Council on Local Government Finance to discuss local government finance and the 1987–88 rate support grant settlement.
    The Minister for Local Government (Dr. Rhodes Boyson): The Secretary of State and I have no proposals to meet the Consultative Council on Local Government Finance to discuss further the 1987–88 rate support grant settlement.
    Mr. Roberts: Will the Minister admit that the Secretary of State and his predecessors have been breaking the law since 1980, because of political interference in the drafting of that legislation, which was urged by Tory local authority associations to enable those authorities to increase rents and to make profits on housing revenue accounts that could be deducted from their total expenditure so that they could obtain extra grant? Was not
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    that political interference with the legislation, which has made the Government behave illegally for the past seven years, a scandal?
    Dr. Boyson: The simple answer is no. Obviously, amendments will be made shortly to the 1980 Act. However, that legislation was introduced at the request of the local authorities—
    Mr. Roberts: Tory local authorities—
    Dr. Boyson: In 1980, presumably at least one local authority was labour-controlled, even if one needed a magnifying glass to find it. The hon. Gentleman's reaction shows the danger that arises when a Government become over-reasonable in dealing with people.
    Mr. Holt: When my hon. Friend holds his discussions, will he take up the question of rent arrears from council tenants, as the figures are now astronomical? In Middlesbrough, in my rate-capped constituency, £1 million of arrears is an utter disgrace.
    Dr. Boyson: I entirely agree with my hon. Friend. If there were a league table, I think that Brent would be even higher, since about 60 per cent. of council house rents and rates are not collected each year. I share my hon. Friend's view, and I am aware that the councils that shout loudest for more money would not need it if they collected the rents and rates due to them.
    Mr. Simon Hughes: In the light of yesterday's farcical statement on local government finance, can the Minister say how he will deal with rate-capped authorities? As the Government have now taken responsibility for determining the finances—there was one sentence in yesterday's statement—may we at least have a guarantee that authorities will be considered separately and that each authority's finances will be given due and proper consideration?
    Dr. Boyson: I do not think that yesterday's statement was farcical—[Interruption.] A Government of a different hue would not have acted on the information, and that would have been farcical. I understand the hon. Gentleman's concern about rate-capped authorities. However, my right hon. Friend the Secretary of State said yesterday that the rate-capped authorities would know what their spending limit was, as that would appear on the face of the Bill. We have been seeing people regularly before making up our minds. Indeed, we shall continue to do so until this Friday. There is a longer queue of people wanting to see us than would be found in any dentist's surgery, but in this case they want to take extractions instead of giving them. However, the figures will be on the face of the Bill.
    Mr. John Mark Taylor: Does my hon. Friend believe that the rating environment would be considerably improved if local authorities confined themselves to their statutory responsibilities, desisted from social engineering, and got rid of unnecessary landholdings?
    Dr. Boyson: I have not heard a better or shorter speech in the House today. If Opposition Members adopted that as a new year resolution, the world would be a better place next year.
    Mr. Madden: How can the Minister be surprised that his Department is besieged by people wanting to see him, when he and his ministerial colleagues keep doing daft

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    thinks and keep robbing ratepayers of money? I assure him that his Department's reputation does not ride high in Bradford, which has suffered the second biggest cut in rate support grant of any metropolitan district in the country. Recently we had to take the Department to court, as we again challenged the rate support grant figures.
    Will the Minister give an undertaking that there will be an urgent review of the rate support grant settlement for Bradford, especially given yesterday's lamentable statement, which clearly shows that yet again his Department has broken the law more often than any Department in living memory?
    Dr. Boyson: I shall try to remember at least some of the points made by the hon. Gentleman in his speech. He said that more money was needed for Bradford. Bradford football club should get more money, because it is in a higher division. I should like to mention to the hon. Gentleman, in fairness to my right hon. Friend the Secretary of State and myself, that long before the events of yesterday unfolded themselves in the House people were beating a path to see my right hon. Friend and myself, which is a recognition of our reasonableness in dealing with people and the attractiveness of our conversation.
    Mr. Watts: As it has proved necessary to find legislative time to plug a few loopholes in the 1980 legislation, will my hon. Friend consider whether it might make better sense to make use of that time to scrap the present unsatisfactory and unfair system and introduce a fairer and simpler system such as that set out in the Government's Green Paper? May I assure my hon. Friend that such an approach would be extremely welcome in my county of Berkshire, and, I suspect, in many other areas?
    Dr. Boyson: I welcome my hon. Friend's comments. I know that throughout the country thousands, indeed millions of people are awaiting the introduction of what we proposed in the Green Paper. Most people want legislation immediately, but they will have to wait a little longer. We have promised that legislation, at the latest, in the first Session of the next Parliament. [HON. MEMBERS: "Now."] Hon. Members may say, "Now", but they must wait. One cannot have all the goodies at once. Father Christmas does not go everywhere in one day.
    Dr. Cunningham: Why is it that we have just the understudy in today's matinee performance of this Whitehall pantomime? The Minister is now forced to admit that he knew of this fiasco in October. Why has the Secretary of State for the Environment gone through the charade of issuing two more consultation documents on rate support grant without being frank and candid with the House and with the local authority associations about the desperate situation in which he finds himself? Would it not have saved weeks of time, and would it not have eliminated several months of delay, if the Secretary of State had began immediately, as soon as he found out the problem, to discuss solutions with the local authority associations—all of them? Why was the right hon. Gentleman not able to do that? Surely that would be not only the quickest and best way, but the most honest way of resolving the problem?
    Dr. Boyson: We are running three plays simultaneously. We have a recycling Bill, a local government Bill—the goodies are coming all the time—and now we have this Bill, so we need a heavier cast. One cannot run all three
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    plays with the same cast. Let me answer the hon. Gentleman's question. My right hon. Friend the Secretary of State made it clear yesterday that, if he had come to the House at the end of October when the information came into his hands and said, "We have a problem. We do not know what to do about it," Opposition Members would have been the first to object. Instead, my right hon. Friend had to take careful legal advice, having once been slightly misled by taking the advice of the local authority associations. It would have been a disappointment to hon. Members if we had not taken legal advice before we came to the House.

    Sellafield
    Mr. Geraint Howellsasked the Secretary of State for the Environment what recent representations have been received from the Irish Government about discharges to the environment from Sellafield.
    Mr. Ridley: I am aware that the Dail passed a resolution on 3 December calling for the closure of Sellafield. In view of the improvements that have taken place at the plant since 1979, to which the recent safety audit by the Health and Safety Executive has drawn attention, I regard the Dail's resolution as misconceived. British Nuclear Fuels Ltd. is undertaking a multi-million pound capital programme at Sellafield, which has already reduced discharges to the environment to one sixth of the level in 1979, and further reductions should be achievable in the 1990s.
    Mr. Howells: Now that the Secretary of State has confirmed that the Irish Government want the Sellafield reprocessing plant to be closed due to the threat to health, the environment and the fishing industry, what are his views?
    Mr. Ridley: That is not what I said. The hon. Gentleman has got it wrong. The Dail is not the Government. He might as well equate the House of Commons with the Government of this country, but I would not expect him to make such a mistake. In fact, 99·8 per cent. of the radioactivity in the Irish sea is natural radiation. Most of the remaining 0·2 per cent. comes from fallout from past nuclear weapons tests. There is no appreciable evidence that the Irish sea has suffered from Sellafield.
    Mr. Forth: When considering the representations on this issue, has my right hon. Friend put them alongside those from other Governments about emissions from coal-fired power stations—for example, concerning acid rain—or about oil leaks caused by extracting oil from the earth? Can he put all these matters together and weigh up the fact that all sources of energy have their hazards? We must not get the impression that any one source of energy is necessarily more dangerous or hazardous than any other.
    Mr. Ridley: We seem to be getting a great deal of advice on energy policy from many other countries. It is right that the Government should continue to provide the cheapest energy possible for industrial and domestic consumers compatible with the highest levels of safety and environmental purity.
    Mr. John David Taylor: Is the Minister aware of the concern on the Isle of Man and in Northern Ireland about

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    Sellafield? Does he intend to approve any further nuclear plants that will discharge nuclear waste into the Irish sea? Should not the present recommended safety measures be carried out at Sellafield within the next 12 months? Will he consider the closure of Sellafield?
    Mr. Ridley: The right hon. Gentleman will be reassured to know that an expert committee commissioned by the Irish Department of Health published a report last month that demonstrates clearly that Sellafield has had no observable environmental impact on the incidence of childhood leukaemia along the east coast of Ireland since the study started in 1977. That is not a British Government but an Irish Government view. I am sure that the right hon. Gentleman will be reassured by that.
    Mr. John Mark Taylor: Does my right hon. Friend accept that, despite all the excitement that is sometimes generated about Sellafield, the plant operates comfortably within any known international safety tolerance? Is not nuclear-generated electricity the cheapest in the world? Is not this country now beginning to import it from France?
    Mr. Ridley: My hon. Friend is absolutely right. It is time that we took credit for the enormous improvements that have taken place at Sellafield. It now has a very high record on operating safety, as was recently endorsed by the HSE audit. I congratulate Sellafield on behalf of the House on that massive achievement.
    Dr. Cunningham: While no hon. Member should defend policies concerning past discharges into the Irish sea, will the right hon. Gentleman ask the Government of the Republic of Ireland what scientific or medical evidence they can provide to support their position and whether they will publish any such evidence?
    Will the right hon. Gentleman ensure that the Health and Safety Executive's audit is provided in the Vote Office? Hon. Members and others have asked for the report and it should be available to the House. Will he ensure that the management of British Nuclear Fuels complies with the directions of the Health and Safety Executive within the 12-month time scale envisaged? Will he—[Interruption.]—right hon. and hon. Members have a lot to say about these matters—[HON. MEMBERS: "Get on with it."] I am sorry that these matters, which are of crucial importance, are treated with such scant regard by Tory Members. Will the Secretary of State ensure that there is the necessary investment by British Nuclear Fuels at Sellafield to eliminate discharges to the Irish sea?
    Mr. Ridley: I congratulate the hon. Member on having the wisdom to ask that question rather than leaving it to the hon. Member for South Shields (Dr. Clark), who is responsible for these matters on the Opposition Front Bench. His good sense as a constituency Member with the interest of his constituents at heart and his sound attitude to these matters puts the hon. Member for South Shields right into the shade. We now know where power resides on the Opposition Front Bench and we are very pleased to know it. [Interruption.] I am trying to praise the hon. Gentleman.
    I entirely endorse the hon. Gentleman's point that it would be a very good idea if the Irish Government would produce any scientific evidence that they may have of pollution of the Irish sea arising from Sellafield. I shall make immediate inquiries to ensure that the Health and Safety Executive audit is available in the Vote Office. By
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    law, Sellafield must comply with the report within a year. My right hon. Friend the Secretary of State for Energy will ensure that adequate resources are available to BNFL to carry out the necessary investment in years to come. Massive investment is already taking place and will continue.

    Sulphur Emissions
    Mr. Wigleyasked the Secretary of State for the Environment when he expects the United Kingdom to have reduced sulphur emissions to 70 per cent. of their 1980 level.
    Mr. Waldegrave: By the end of the 1990s, if not before.
    Mr. Wigley: Is the Minister aware that more than 200 lakes in Wales are now devoid of fish life due to growing acidification and that a survey in Scotland has shown that a reduction in emissions of more than 50 per cent. is required to abate the acidification level? As the Government's programme will achieve a reduction of only 14 per cent., will the Minister consider a further programme of investment, with particular regard to Aberthaw power station in Wales?
    Mr. Waldegrave: I am well aware of the Welsh situation, but in referring to it the hon. Gentleman reminds us of the other issues involved. A good deal of the Welsh acidification has probably been caused by forestry. The programme announced by the Government will achieve a 14 per cent. reduction in addition to cuts already in train. We shall have achieved a reduction of perhaps 55 per cent. from peak by the mid-1990s. Few countries will have done better than that.
    Mr. McCrindle: Can my hon. Friend tell us anything about mercury emissions and whether there are any plans for a reclamation programme for the millions of batteries jettisoned by people in this country every year?
    Mr. Waldegrave: That is a serious matter, on which the European Community is preparing a directive. There has been contact with manufacturers in recent years to secure a reduction in the amount of mercury in batteries, but further action may be required.
    Mr. Alton: Is the Minister aware that his replies have not changed since January, despite the Prime Minister's much-vaunted visit to Norway, and that nothing has been done to take this country into the 30 per cent. club of nations or to incorporate fluidised bed combustion units in our power stations to reduce emissions of sulphur dioxide, of which 300,000 tonnes continue to fall on the people of Norway every year from our coal-burning power stations?
    Mr. Waldegrave: An excellent article in this week's New Scientist shows a shift in scientific consensus towards nitrogren as being responsible for the damage.
    Mr. Allan Roberts: It is tree damage.
    Mr. Waldegrave: As the hon. Gentleman says, it is tree damage. These matters are always changing. Another change since the hon. Member for Caernarfon (Mr. Wigley) asked about this in January has been the commitment of £600 million of electricity consumers' money to improve the situation further.

    Council House Sales
    Mr. Colin Shepherdasked the Secretary of State for the Environment when he expects to publicise the new discounts for council flats under the Housing and Planning Act.
    The Minister for Housing, Urban Affairs and Construction (Mr. John Patten): The new discount scale will be brought into operation from 7 January. An information campaign to draw the attention of tenants of flats to the new scale and other changes in the right to buy will be launched early next year.
    Mr. Shepherd: I welcome my hon. Friend's announcement, but can he give a little more detail about the publicity? Will it be sent to all council flat tenants personally, and will those who have already bought their homes be informed of the new discount claw-back periods?
    Mr. Patten: We are doing everything that we possibly can to meet the second of my hon. Friend's requests. As for the first, we shall endeavour, with the co-operation of local authorities, to ensure that every flat dweller in England receives publicity about his or her new rights. I am happy to report that many local authorities, of all political colours, are co-operating freely with us. Only 40,000 of the 1 million public sector houses that have been sold thus far have been flats. We must improve that, and we must improve it fast.
    Mr. Tony Banks: Does the Minister agree that, rather than put out more incentives to sell off council accommodation, it would be better to allow local authorities to spend the estimated £7 billion of accumulated capital receipts from earlier sales of council property? Newham has more than 100 tower blocks, which one could not even give away, let alone sell. People do not want them. We want to build houses and low-rise accommodation. Why will the Minister not let the local authority spend the money that it has in the bank just earning interest?
    Mr. Patten: The hon. Gentleman is right. It is sometimes easy to give away the family silver, but I suspect that it is also quite easy sometimes to give away tower blocks to people who want to develop them. The hon. Gentleman has put his finger on it. There are 100 tower blocks in his constituency. They are the mistakes that we all made collectively in the 1950s, 1960s and 1970s. The Government believe that one way in which to improve the environment of those tower blocks is to vary the tenure. That is why we are making certain that all tenants know their rights.
    Mr. McLoughlin: Will my hon. Friend consider extending the scheme to enable all council houses that are empty for more than 12 months to be sold on a homesteading basis to people who live in the district, thus giving them the opportunity to improve those houses and the council housing stock?
    Mr. Patten: That is a tempting suggestion. As I speak, there are 115,000 empty publicly owned flats and houses in England.
    Mr. Loyden: When can we expect the Minister to extend his generosity to rented housing in the private sector and offer tenants of privately rented flats the discount that he is making available to council tenants?
    Mr. Patten: The Government have a twin track approach to improving the lot of tenants of flats. In the public sector we are giving them a radically increased discount and incentives and, in a Bill which is to be introduced after Christmas, we shall do all that we can to help the condition of tenants in private sector blocks of flats following the recommendations of the committee chaired by Mr. Edward Nugee, QC.

    Water Rate
    Mr Hicksasked the Secretary of State for the Environment what representations he has received from water authorities about the 1987-88 water rate; and if he will make a statement.
    Mr. Ridley: I have now received responses from the chairmen of most authorities. The overall reaction is that the settlement is reasonably fair.
    Mr. Hicks: As the external financing limits of water authorities have been increased by some £14 million nationally, why has the provisional figure of £1 million for the South West water authority been withdrawn, with the probable effect of water rate increases of 5 per cent. rather than less than 4 per cent.?
    Mr. Ridley: The settlement for the South West water authority allows it an average increase of 9 per cent. in investment, with only average increases in charges of under 6 per cent. It has the highest operation cost rises among those that are planned for next year. If it could hold its operating costs to something near the rate of inflation, it would be able to have higher investment or lower charges, or both.
    Mr. Boyes: Nevertheless, the Secretary of State must be aware that some chairmen of water authorities are expressing concern. For example, in a letter to my right hon. Friend the Member for Bristol, South (Mr. Cocks) the chairman of Wessex Water says that the large reduction in borrowing imposed by the Government leaves the authority with a dilemma—either to increase charges to a level which the authority regrets, or to postpone capital work to the detriment of present standards of service. Because, since 1978–79, water authority charges have increased by a staggering 143 per cent., is it any wonder that Mr. Anson, Mr. Watts, the Confederation of British Industry and others are expressing concern about the Government's attitude to the water industry?
    Mr. Ridley: The hon. Gentleman must know of the massive increase in investment in water, but I question the extent to which that should be described as investment. It is largely a matter of replacing worn-out capacity and renewing the capital stock of the water authorities. It is an overhead and an on-cost which should properly be paid for from charges, which is why the charges have increased. It would be wrong to borrow to replace normal assets.

    Sport (Sponsorship)
    Mr. John Carlisleasked the Secretary of State for the Environment what recent discussions he has had with members of the tobacco industry regarding the sponsorship of sport; and if he will make a statement.
    The Parliamentary Under-Secretary of State for the Environment (Mr. Richard Tracey): I am now coming to

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    the end of detailed negotiations leading to a new voluntary agreement. I hope to make a statement early in the new year.
    Mr. Carlisle: Many people in the sports world will be somewhat disappointed that my hon. Friend has not reached a conclusion with the tobacco companies. At this late hour, will he remember that sport has benefited enormously from the tobacco industry? In further negotiations will he remember that that money will not be easily replaced? Will he give the House a categorical assurance this afternoon that the Government will not go down the road that the Labour party has followed and outlaw tobacco sponsorship in sport?
    Mr. Tracey: As I made clear in the House on 21 February, I have always believed that a voluntary agreement is the right way. Indeed, a considerable contribution has been made to sport through sponsorship, although as a proportion of the whole of sport sponsorship the tobacco contribution is declining.
    Mr. Freud: Will the Minister also remember that an increasing number of young children are now smoking and that it is absolutely essential to remove the glamour element of tobacco sponsorship in sport? Does he agree that while it is possible for children to ascribe their smoking habits to television sports programmes which are sponsored by tobacco companies, such sponsorship is not of service to the country?
    Mr. Tracey: That is one of the points that we have considered carefully in our negotiations with the tobacco companies. The voluntary system was first adopted in 1972. Now 36 per cent. of men and 32 per cent. of women smoke, compared with 52 per cent. and 41 per cent. in 1972. That is an improvement and it is continuing.
    Mr. Robert Atkins: Does my hon. Friend agree that cigarette companies in particular have done an amazing job in supporting the great game of cricket both here and in Australia? Does he further agree that this obsession with doing away with an organisation's support for great games, such as cricket, does those associated with the move no great credit? Does he agree that the sooner we lay off it and concentrate on the real issues the better it will be for all concerned?
    Mr. Tracey: When we began the negotiations leading to the new voluntary agreement we began consultations with all interested parties. It is right to say that tobacco sponsorship has made a contribution to cricket, although that contribution is now declining, as it is in other sports.
    Mr. Robert C. Brown: When will the Minister face up to the fact that, having banned direct tobacco advertising on television, to allow sponsorship of major contests, such as snooker championships, which many young people watch, is a direct incentive to youngsters to start smoking?
    Mr. Tracey: As I said earlier, that is one of the points which we have taken into consideration during the negotiations, leading to a voluntary agreement.
    Mr. Nicholas Winterton: Does my hon. Friend accept that the very parties in this House which preach libertarianism stand against people doing what they want to do, for example smoking? Will he assure the House that until the Government or any other organisation can provide sport with the resources currently provided by
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    tobacco companies, he will not take any penal action against the tobacco industry sponsoring what people want to do in sport?
    Mr. Tracey: As I have said, and as I made clear as long ago as 21 February, the Conservative party believes that a voluntary agreement is the best way of dealing with sports sponsorship by tobacco companies. Tobacco sponsorship of sport now amounts to just short of £10 million, whereas the overall sponsorship of sports runs at £150 million a year.
    Mr. Denis Howell: While welcoming the fact that the Minister is progressing with a voluntary agreement first started by a previous Labour Government, and declaring an interest in the Howell report on sports sponsorship conducted on behalf of the Central Council for Physical Recreation, may I ask what attention he is giving to sport, and what negotiations he is having with those involved as distinct from the tobacco industry?
    Mr. Tracey: As I said, from the beginning we have invited consultation from sport and, of course, from the Tobacco Advisory Council as well as from others. I am perplexed by the right hon. Gentleman's attitude, because he seems to take a different view from that of the hon. Member for Holborn and St. Pancras (Mr. Dobson), the shadow spokesman for health, who said on 21 February:
    "It is now and has been since 1982 the policy of the Labour party that we wish to stop the sponsorship of sport by tobacco companies."—[Official Report, 21 February 1986; Vol. 92, c. 638.]

    Planning Appeals
    Mr. Simsasked the Secretary of State for the Environment what guidance he gives to his inspectors as to the weight they should give to local representations in respect of planning appeals.
    Mr. Tracey: In the light of the Department's published guidance on policy, it is for the inspector to decide, in each case, what weight should be given to matters about which representations are made to him.
    Mr. Sims: Has my hon. Friend seen press reports suggesting that, in the past year or two, there has been a substantial increase in the proportion of appeals allowed by local inspectors? Certainly that is confirmed in the borough of Bromley, where, in 1983, 27 per cent. of the appeals were allowed. This year, so far, 46 per cent. of the appeals have been allowed. While I accept the desirability of some sort of appeals system, does my hon. Friend nevertheless not think that, generally speaking, local authorities are the best bodies to judge on planning matters and that to have their decisions overturned to this extent undermines the whole point of planning?
    Mr. Tracey: The views of local people and local interests are always given considerable weight in planning matters. Sometimes the publicity given to planning matters gives an incorrect impression. In fact, 98·64 per cent. of local decisions stand.
    Mr. Andrew MacKay: Is my hon. Friend aware that there is grave concern that in recent planning appeals insufficient weight has been given to local decisions and that his answers so far will not satisfy my constituents?
    Mr. Tracey: I am well aware that my hon. Friend makes strong representations on behalf of his constituents in

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    Berkshire. Local planning authorities and inspectors must, by law, have regard to all material considerations. One of these is, of course, the representations of the local people.
    Mr. Meadowcroft: Is there not a particular problem where a local authority is applying to itself for planning permission in relation to a large development, such as that at Leeds market, in that if it grants permission it disallows local opinion the possibility of objecting to the development thereafter? Why does the Minister not have more regard to calling in such applications rather than simply relying on the local authority to give planning permission to itself?
    Mr. Tracey: I am well aware that this point was raised with the Select Committee on the Environment. We are considering the matter, but normally a call-in is applied by my right hon. Friend the Secretary of State in matters of overriding national or regional interest.

    Acid Rain
    Mr. Lordasked the Secretary of State for the Environment whether he will make a statement on the results of his latest discussions about acid rain with his colleagues in the European Council of Environment Ministers.
    Mr. Waldegrave: As the President of the Council, I tabled compromise proposals aimed at securing progress on acid rain. Sadly, some countres found our proposals too onerous for them.
    Mr. Lord: Will my hon. Friend confirm that it is now not the United Kingdom that is hindering progress on this issue? Which countries are still dragging their feet?
    Mr. Waldegrave: My hon. Friend is right. The Commissioner, Mr. Stanley Davis, made it clear after that Council meeting that Britain, as the presidency, had made genuine efforts to take matters forward. The countries that had most difficulty at the previous Council were Spain and the Republic of Ireland, but several other countries, such as Portugal, also face problems.
    Mr. Chris Smith: Instead of always seeking compromise proposals which preserve Britain's status as one of the major world producers of sulphur dioxide pollutant, why do the Government not implement the recommendations of the report from the Select Committee on the Environment, which was produced more than two years ago?
    Mr. Waldegrave: Because it is the judgment of the Government that to spend so much money in such a short time would produce no benefits worth the expenditure. The hon. Gentleman is a little out of date in constantly harping on about the problems, as he sees it, from the British Government's point of view. Some European countries, including the big polluting countries, such as Spain, have far greater problems.
    Dr. David Clark: Will the Minister stop deluding himself into believing that Britain is no longer regarded as the bad neighbour of Europe when it comes to acidic emissions? Will he assure the House that the Government will press ahead with the commitment to retrofit three power stations, beginning next year?
    Mr. Waldegrave: On the latter point, yes. On the former point, if Britain has a worse image than it deserves, which
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    is the truth, it is not a little because of our adversarial system of politics, whereby nearly half the Members here spend their time saying that everything done in this country is wrong.

    Council House Sales
    Mr. Knoxasked the Secretary of State for the Environment how many council houses have been sold to sitting tenants in England in each of the last three years.
    Mr. John Patten: In the financial years 1983-84 to 1985-86 respectively, 117,000, 89,000 and 80,000 tenants bought their council homes. Since this Government came to power in 1979, nearly 750,000 council tenants have bought their homes in England. The figure for the entire country has passed 1 million and, this year, right-to-buy applications are running at the highest rate since they reached their peak in 1982–83.
    Mr. Knox: What percentage of the council house stock has been sold to sitting tenants? What is my hon. Friend's assessment of the potential for future sales?
    Mr. Patten: I am not very good at percentages, but 4·5 million council tenants are still living in council flats and houses. Of those, we estimate that about 500,000—perhaps 600,000—still have the resources to buy. Those people being encouraged to exercise their right to buy will take home ownership in Britain to about 75 per cent. by the year 2000.
    Mr. Ashton: Why will the Minister not allow local councils to use the cash from home sales, especially in coalmining areas? British Coal will be selling 16,000 houses by auction and by tender in the next few months, almost all of which are inhabited by elderly tenants and pensioners who are too old to get mortgages and who could not take one on at their time of life. Many councils wish to buy those houses, and they have cash in the bank from the sale of council houses. Will he allow them to use that cash to buy those British Coal properties?
    Mr. Patten: I realise the strong feelings on this issue and the anxieties in the coalfield communities about the sale of some of those houses. I am engaged in discussions with my right hon. Friend the Secretary of State for Energy and his colleagues in that Department and, through them, with British Coal.

    Housing Grants
    Mr. McCrindleasked the Secretary of State for the Environment what steps he has taken to ensure that the range of grants aimed at repairing and maintaining houses is sufficient to preserve the housing stock.
    Mr. Tracey: Yes, Sir. However, the repair and maintenance of housing is primarily the responsibility of the owners.
    Mr. McCrindle: Does my hon. Friend accept that without an adequate range of grants some property owners will be unwilling or unable to maintain the standard of their properties? In those circumstances, and with a thought to the maintenance of the standard of the housing stock, will my hon. Friend take steps to ensure that the level and the number of grants are adequate in the national interest, as distinct from the interests of the individual owners?
    Mr. Tracey: The Government are well aware of the value of grants available for improvement, repair work and loft installation. My hon. Friend will be interested to know that under this Government over £3,000 million has been spent on home improvement grants, 1 million grants have been given by local authorities since 1979, and 3 million grants have been given under the homes insulation scheme.
    Mr. Rooker: Will the Minister confirm that the latest information available to his Department shows that there are over 501,000 dwellings that are fit but lacking basic amenities? Notwithstanding the massive amount of money that has been spent on home improvement, would it not
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    be possible for the Government to say to those 500,000 families, 400,000 of whom are in the private sector, that the fact that they lack a bath, hot and cold water or an inside toilet or washhand basin is an obscenity in the late 1980s? Should we not at least have a crash programme to offer people the installation of basic amenities within at least a couple of years?
    Mr. Tracey: It is interesting to hear what the hon. Gentleman has to say, but I must point out that the public sector renovations this year are likely to be the highest since 1973, and the inside conditions of houses in this country are the highest in western Europe.

Foreign Affairs Council
3.31 pm
The Secretary of State for Foreign and Commonwealth Affairs (Sir Geoffrey Howe): With permission, Mr. Speaker, I should like to make a statement on the meeting of the Foreign Affairs Council which I chaired in Brussels on the 15th and 16th of this month. My hon. Friend the Member for Wallasey (Mrs. Chalker) represented the United Kingdom.
Foreign Ministers confirmed the re-appointment for a further two-year term of the President of the Commission and the Vice-Presidents.
The Council noted that a solution had not yet been reached in the negotiations with the United States concerning the accession to the Community of Spain and Portugal. Ministers emphasised the need to reach a settlement as soon as possible, and confirmed the decision of the April and June Councils that in the event of unilateral United States action, the Community would take equivalent action to defend its interests.
The Council approved a negotiating mandate for a trade and economic co-operation agreement between the Community and Romania.
The Council expressed its concern about the considerable number of current trade problems with Canada, and invited the Commission to pursue these matters vigorously and firmly with Canada.
The Council discussed the guidelines for the 1987 Asia and Latin America aid programme, and an export stabilisation scheme for least developed countries not party to the Lomé Convention.
The Council discussed two important procedural consequences of the Single European Act concerning the powers of the Commission and the Council's own rules of procedure. I am glad to say that on the latter point, a satisfactory agreement was reached.
The Council also discussed social measures in the coal and steel industries, and held a conciliation meeting with a delegation from the European Parliament on the new regulation on food aid policy and management on which the Development Council agreed a common position on 11 November. The regulation, the United Kingdom presidency initiative, was then formally adopted.
An Association Council at ministerial level was held with Cyprus. Both sides agreed on the importance of bringing the current customs union negotiations to an early conclusion.
Mr. George Robertson: I thank the Foreign Secretary for making his statement at the end of the British presidency of the Community. At the end of June, the Foreign Secretary told journalists:
"This is the last time I will appear before you as a mere Foreign Secretary. From now on I shall have added lustre".
Can he confirm that as December ends, we have the same old lack lustre Foreign Secretary back before us?
We welcome the resolute nature of the Council's response to American unilateralism on grain exports, although, to quote Commissioner De Clercq, the "unreasonable and undefensible" demands by the Americans are not simply being postponed, and the trade war with the United States still awaits. Like so many problems, has not this crisis simply been sidestepped under the British presidency and passed on to the Belgians to deal with next year?
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It is worth remembering today what the Government's objective was during their presidency of the Community. In June the Foreign Secretary said that it was to make
"a real contribution to the lives of ordinary people."
In this aim, as in so many others, we have seen a miserable failure, and nowhere has that failure been more marked than in foreign affairs. In July, a united political stance on apartheid was sabotaged by the spoiling tactics of this Government, which led to the feeble and half-baked stance that was eventually adopted against South Africa. Was that not the root cause of the paralysis in October in response to Syrian terrorism in Britain? Can the Foreign Secretary tell us of the reaction in the Foreign Affairs Council this week to Britian's high-minded and oft-repeated rhetoric about united action on terrorism, in the light of the increasing evidence of, first, our own arms-related exports to both Libya and Iran and, secondly, our acquiescence in the American arms fiasco over Iran? Did not our partners in the Community see through the brazen hypocrisy of the British Government demanding sanctions against these countries, as we simultaneously sell submarine syncro-lift machininery to Libya and send Chieftain tank parts and now £240 million-worth of military radar to Iran? Does this open bending of the Government's rules not debase our own position in uniting the Community against terrorist states?
Is there not something symbolically important in the fact that the European nations could not even agree on one candidate to put forward for the position of managing director of the International Monetary Fund, a position that is being voted upon today when the Governments of the world have to choose between two separate and distinct European candidates? The lustre that we had never noticed has gone from the Foreign Secretary. He, and we, will have to admit that his grand designs for the British presidency have produced precious little for the ordinary people of the Community. For that failure alone, his presidency will be memorable.
Sir Geoffrey Howe: I must say that the hon. Gentleman's intervention will itself be memorable for its almost total lack of connection with the subject under discussion. He has embarked upon a discussion of the sale of arms to Iran and Libya, neither of which was under discussion at the meeting of the Foreign Affairs Council, upon which I am reporting—
Mr. George Robertson: Why not?
Sir Geoffrey Howe: Because not one of my European colleagues dwells anywhere near the land filled with fantasy which the Opposition Front Bench occupies. The reality of co-operation on foreign affairs matters in Europe in the last six months has been more effective co-operation than ever before over the development, under British leadership of a policy against terrorism, and more effective co-operation than ever before over the development of a common policy in relation to drugs, terrorism and crime throughout Europe.
To turn to the point at which the hon. Gentleman entered the subject, he was kind enough to commence his otherwise somewhat rambling intervention by congratulating us upon the firmness with which the Community had faced up to the United States' trade negotiating policy. In relation to the successful launch of the GATT round, the reality is that the Community has

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been firm under British leadership. On the solution of American-European Community trade disputes, throughout the early autumn the Community was firm under British leadership and effective agreements have been reached on steel, pasta and citrus fruits, for example. [Laughter.] Hon. Members may laugh, but the threat of United States action could destroy more than £500 million-worth of exports from the European Community, affecting such vital products as whisky, about which the hon. Gentleman may not be prepared to laugh so lightly. In all these respects the Community has taken firm action. I know that the right hon. Member for Leeds, East (Mr. Healey) is interested in the IMF post. I am sorry that we were not able to put forward his name, but two good candidates from Europe were put forward for a job in which the right hon. Gentleman has always had a powerful interest because it was one of his mentors during his tragic time as Chancellor of the Exchequer.
Mr. Denis Healey: There are two candidates for the rest to choose from.
Sir Geoffrey Howe: A most effective pattern of decisions was taken during the British presidency and that presidency set a record for decisions agreed and adopted on the internal market. We agreed on more help than at any time before for small businesses, on an action programme for employment, total co-operation on illegal immigration, visas, terrorism and crime. Yesterday, a series of decisions on the common agricultural policy went further than anyone could have imagined on the most fundamental reforms ever agreed to that policy. Those things were all undertaken under the British presidency during the second half of the year. The hon. Member for Hamilton (Mr. Robertson) should re-examine his assessment of these matters and be prepared to pay generous tribute to a dramatic series of successes.
Sir Anthony Kershaw: Is it not clear that, while agreements on things like citrus and the like may be a matter for mockery by the Opposition, they mean the difference between prosperity and poverty for the people who produce them? Is it not also clear that the hon. Member for Hamilton (Mr. Robertson) must have been talking about a different meeting? I congratulate my right hon. and learned Friend on the lustre that he has given to Europe during the last six months. The British presidency has laid the foundation for a Europe that works properly and which will be able to contribute to peace and prosperity throughout the world.
Sir Geoffrey Howe: I am grateful to my hon. Friend for his kind tribute and for underlining the realities that the work being undertaken by the Community is about the jobs of people in Britain and in Europe, about which the Opposition seem to care not at all.
Sir Russell Johnston: Will the Foreign Secretary enlarge on his rather delphic reference to the Single European Act? Who conceded what to whom, and to what effect? Can he tell us whether, in the last Council that he chaired, any advance consideration was given to the matter of a common electoral system for the European Parliament, given that the Political Committee of that Parliament has, as he knows, now reached an agreement? Does he agree that the existing electoral system in Britain is clearly unfair to the electors and distorts the position in the European Parliament? Can
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we be sure that, even though we did not have a change by 1984, as the Home Secretary hoped we would, we will get one by 1989?
Sir Geoffrey Howe: I am sorry to disappoint the hon. Gentleman, but no suggestion was made by any member of the Council that the electoral rules, a matter dear to his heart, ought to be considered. The two matters discussed yesterday in connection with the Single European Act were the powers that are to be granted to the Commission to enable it to implement decisions taken by the Council. We also considered a proposal already considered by the House Scrutiny Committee, but not recommended here for debate, which will enable us to specify more clearly the way in which the Commission will exercise its powers to implement decisions. That was not brought to a conclusion, but we were able to agree changes in the Council rules of procedure which form the other part of the Single European Act.
Those changes do not affect the Luxembourg compromise or the basic provisions about whether or not a decision can be taken by unanimity or by majority, but they make it easier to take decisions where majority voting applies and enable the presidency to call a vote on its own initiative or when a majority of Council members are in favour of so doing. It was a considerable achievement to reach agreement on those important procedural changes.
Sir Ian Lloyd: I congratulate my right hon. and learned Friend on the determined and constructive resistance that he has offered to those who advocate protectionist solutions to the present problems that exist between Europe and the United States? Is it not necessary to remind those who advocate such solutions that the worst depression that the world has ever seen was the result of the reciprocal influence of the Hawley-Smoot tariff and imperial preference, whereas the most massive prosperity that the world has ever enjoyed has been the result of the enforcement of the General Agreement on Tariffs and Trade.
Sir Geoffrey Howe: I am grateful to my hon. Friend for drawing upon his formidable knowledge of these matters and reminding us of the central principles. It is right to say that the Commission, working jointly with the Council under our presidency, has stood robustly in favour of liberal trading agreements. For that reason, we have made clear our desire if possible to bring the article XXIV (6) negotiations with the United States to an early and agreed conclusion. But, in order to sustain the strength of our negotiating position, we have also agreed that, if unilateral measures are introduced by the United States, the Community will take equivalent action to defend its interests as already agreed. That is the right balance of robustness and pursuit of the right principles.
Mr. Reg Freeson: Considering that three of the world's six leading arms traders are Germany, France and Britain, and that that massive trade is a major cause of poverty, which was referred to earlier, as well as a cause of major leakage into terrorist hands of weapons of destruction, why was the international arms trade and the control and reduction of that trade not a subject of major discussion at the meeting?
Sir Geoffrey Howe: Because it was not on the agenda.
Mr. Freeson: Why not?
Mr. Ian Gow: Does my right hon. and learned Friend recall the journey which he made to Hillsborough on 15 November 1985 when the Irish Government committed themselves to accede as soon as possible to the European convention on the suppression of terrorism? How does my right hon. and learned Friend explain the decision of the Irish Minister of Justice yesterday that the Irish Government would not now be proceeding with the Bill to accede to the European convention on the suppression of terrorism?
Sir Geoffrey Howe: That matter was not on the agenda of the European Council yesterday, nor was it discussed in any other forum on that day. My hon. Friend must understand, because he attaches so much importance to it, the difficulty of securing the enactment of such matters in many legislatures around the world. The Irish Government have committed themselves to that objective, and it remains, no doubt, an important one.
Mr. John David Taylor: Can the EEC Ministers really be serious about a customs union between the Community and Cyprus or do they, in practice, simply mean a customs union between the Community and southern Cyprus? If not, how can there be a customs union with an island which is effectively divided by a customs barrier?
Sir Geoffrey Howe: The discussion that we had with the Cyprus Foreign Minister made it clear that we attach importance to the independence, sovereignty and unity of Cyprus. Our customs union is intended to be compatible with that. The policy so far pursued is consistent with article 5 of the association agreement, which states:
"trade shall not give rise to discrimination between … nationals of Cyprus."
That remains the objective.
Mr. Tony Marlow: As the Community is committed to strong action against terrorism, what action has been taken to establish how Mr. Mordechai Vanunu was removed, first from London, and then, apparently, from Paris, against his will?
Sir Geoffrey Howe: That matter has not been raised within the Community. It was the subject of an Adjournment debate in the House about a fortnight ago.
Mr. Nigel Spearing: In view of the serious financial situation in the EEC, was next year's budget discussed or was it not on the agenda? Is there a danger and a likelihood of the 12th arrangement being adopted next year? In view of the Prime Minister's statement to the House last week, is it not now a fact that the only way in which we can protect our rebate mechanism is to pay subscriptions in excess of the 1·4 per cent. VAT formula?
Sir Geoffrey Howe: The budgetary position was a formidable part of the discussion to which the Agriculture Ministers were addressing themselves yesterday. We also discussed the way in which the Commission is likely to be producing its ex novo report for consideration by the Commission and the Council during the course of the next year. On the budget, the hon. Gentleman will know that the Council reached its conclusions within the maximum rate. So far, the Parliament has not reached the same conclusion. In those circumstances, the provisional 12th
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arrangement is likely to apply in the immediate future. That is not an arrangement with which the United Kingdom has any difficulties.
Mr. Ivor Stanbrook: What progress has been achieved towards a common extradition policy with regard to terrorists in the European Community? After all, there are many terrorists in the Republic of Ireland who are wanted by the United Kingdom at this moment? If we cannot get any of them because of the obstinacy and refusal of the Irish Government to co-operate in this matter, what hope is there of getting a common European policy?
Sir Geoffrey Howe: My hon. Friend will recollect that, in a number of respects, there have been some remarkable successes in securing the extradition of criminals from a variety of Community countries during the past 12 months. There have also been agreements entered into between ourselves and Spain replacing a void that previously existed. In all those respects, matters are advancing. They would not be moving so fast were it not for the framework of European Community co-operation.
Mr. Tony Banks: One wonders what past Foreign Secretaries such as Palmerston, Halifax or Bevin would have made of a Foreign Secretary telling us about pasta, even with a lustrous topping. Aid for Latin America was on the agenda. Will the right hon. and learned Gentleman tell us what was decided about the level of aid for Nicaragua? In connection with terrorism, what statement was made or was intended to be made later, about the international terrorism of the United States, with their support for the Contras?
Sir Geoffrey Howe: The Council did not raise the last topic mentioned by the hon. Gentleman because it takes a different view from him. On the subject of aid, there was a discussion about the likely distribution of aid as between Third world countries and Latin American countries, but it was not possible to bring that to a conclusion yesterday.
Mr. Stefan Terlezki: I wish to congratulate my right hon. and learned Friend on his presidency of the European Community and on the fact that he has fought so vigorously on the subject of human rights in the Soviet Union. I should like to ask him most sincerely to continue fighting and speaking about human rights in the Soviet Union and the satellite states, so that the Soviet Union will recognise and implement the Helsinki human rights agreement.
Sir Geoffrey Howe: I am grateful to my hon. Friend. That matter is under discussion at the follow-up meeting of the Conference on Security and Co-operation in Europe and the countries of the Twelve are taking a strong and united position, precisely as my hon. Friend would wish.
Several Hon. Members rose—
Mr. Speaker: Order. I shall endeavour to call before 4 o'clock all the hon. Members who are standing, so I ask them to be brief.
Mr. Tom Clarke: Does the agreement on steel to which the right hon. and learned Gentleman referred mean that we can expect quotas that will smother Ravenscraig in the same way as the present quotas led to the suffocation of Gartcosh?
Sir Geoffrey Howe: The agreement on steel that was arrived at during the negotiations in the late part of the

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summer and early autumn secured the removal of threatened restrictions by the United States and the United States market as one of several restrictions which would have threatened severe damage to jobs throughout the Community.
Mr. Andrew Faulds: Does the right hon. and learned Gentleman appreciate that the House, with its charitable disposition, does not blame him too much for his lacklustre presidency because it realises that the Prime Minister is growing increasingly unpopular in Europe, for good reason? Specifically on the Hindawi case, does the right hon. and learned Gentleman not realise that there is a fallacy central to his argument in that there is now greater awareness, certainly among European leaders and probably among most European parliamentarians, that in the specific Hindawi case, it was a rigged situation which conned the British court because it was created by Mossad in co-operation with MI5?
Sir Geoffrey Howe: The hon. Gentleman strays a long way beyond the scope of any conceivable agenda. There is no evidence to support his approach to the matter.
Mr. Faulds: Every bit of evidence.
Sir Geoffrey Howe: The entire Community supported the action taken against the Syrian Government on the basis of evidence presented to the Community as a result of the decision of a British court.
Mr. Stuart Randall: Will the Foreign Secretary tell the House what the social measures for steel and coal mean for Britain?
Sir Geoffrey Howe: The social measures under discussion involved a transfer from the Community budget to the Coal and Steel Community budget which was not acceptable to the majority of countries taking part in the discussion, especially Britain. It would have involved a large distribution in favour of steel and little in the direction of coal. It has been decided that the Commission should give further consideration to these matters when it considers the improved co-ordination of structural funds, which is part of the agenda for the new year.
Mr. Tony Lloyd: The Foreign Secretary cannot face both ways on the issue of trade with the United States, claiming great success in terms of lemons and spaghetti while indulging in a little sabre-rattling in his statement about potential American action. Six months ago, when the right hon. and learned Gentleman began his presidency, he was optimistic about trade talks, and we now face the serious possibility of a trade war. Can he tell us what went wrong during his presidency?
Sir Geoffrey Howe: Nothing in that respect at all. We started the summer with three specific anxieties between the Community and the United States. The first was whether we should get the next GATT round going as a result of forthcoming talks at Punta del Este. We did so as a result of Britian's successful leadership of the Community delegation. The second was, should we resolve the then current disputes about pasta, lemons and steel, which when taken together were of importance to jobs in the European Community? The answer is that that dispute was resolved satisfactorily. Jobs in steel, about which Opposition Members were concerned, were safeguarded.
The third anxiety was, should we be able to bring to an end the dispute following the enlargement of the European
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Community, with America claiming the right to impose discrimination against us? That dispute has not yet been resolved, but we have decided that it would be sensible to allow one further month for negotiation. As the hon. Gentleman says it is much better to avoid a trade war rather than run into one. If that is not possible, the Community is armed to take firm, robust measures against the United States on an exactly matching basis. That is the sensible way to conduct these matters.
Mr. Ernie Ross: Will the Foreign Secretary tell us in what activity Foreign Council Ministers have engaged in attempting to resolve the problem in the middle east, especially the Arab-Israeli conflict? Did they take any specific action following the use of live ammunition by the Israeli defence forces on the west bank in Gaza over the past few weeks? What progress has been made by the European Council of Ministers in gaining access for produce from the west bank in Gaza to the Common Market?
Sir Geoffrey Howe: The Arab-Israeli dispute has been addressed a number of times during our presidency. 1t is because of the importance of the subject that Britain initiated and put in place the policy for Community aid and Community trade access to be extended to the people of the west bank and those in Gaza. That is an important response to the issue raised by the hon. Gentleman and it arises directly from Britian'as initiative in the Community.
The use of live ammunition in incidents in Israel over the past week or so has been the subject of active consideration, in which Britain supported the relevant resolution at the United Nations together with all other Community Members on the Security Council.
Mr. Tam Dalyell: In response to my hon Friend the Member for Hamilton (Mr. Robertson), the Foreign Secretary talked of total co-operation on crime. Can he assure his European colleagues in the House that the complaints by Mr. Sandy Grant of break-ins to and fires at the premises of Heinemann in Australia have nothing to do with the British Government or British Government agencies?
Sir Geoffrey Howe: I cannot give any kind of assurance on that matter, about which the hon. Gentleman has given no notice.
Mr. David Winnick: I recognise what the Foreign Secretary has said about pasta, lemons and the rest of it, but why were the latest police state restrictions in South Africa not placed on the agenda? Does he not recognise that the latest restrictions demonstrate once again that there is no solution in South Africa while the present authorities remain in office? It is all the more unfortunate that the Foreign Secretary, despite what he says, is undoubtedly a party to appeasement in what is happening in South Africa.
Sir Geoffrey Howe: I do not accept the hon. Gentleman's view, which he presses upon the House at every opportunity. South Africa was discussed yesterday and the Twelve are planning to make high-level representations in Pretoria on human rights generally. We have already taken action on the part of the United Kingdom Government and made it plain, in words that will commend themselves to the hon. Gentleman, that

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muzzling the press and locking up one's political opponents is not the answer to the problems of South Africa. Our position is absolutely clear.
Mr. Peter Pike: Does the right hon. and learned Gentleman not regret the fact that, during Britain's presidency of the European Council, it has been Britain that has held Europe back from taking more positive steps and from putting pressure on the South African Government to take this last opportunity to end apartheid by peaceful means? As the South African Government are moving, if anything, in the wrong direction, should not Britain's role be reviewed and even further pressure be exerted than that outlined a moment ago?
Sir Geoffrey Howe: The hon. Gentleman is wrong in his basic analysis. The countries that have, in the past few days, declined to put in place trade measures in relation to coal are Germany and Portugal. The United Kingdom, in line with the position that it adopted in London in August, would have been willing to accept those measures as part of the general Community package. We feel no sense of dismay in not having gone further down the road of sanctions, because all the evidence suggests that the consolidation of opinion behind the authoritarian measures being taken by the South African Government is the result of actions taken by the outside world rather than of the balance that we have tried to pursue. Therefore, there is no reason for me to be apologetic to the hon. Gentleman in that respect.
Mr. Dalyell: On a point of order, Mr. Speaker, arising directly on this statement. Courtesy is important in the
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House. The Foreign Secretary said that he had been given no notice about Mr. Sandy Grant. However, I wrote to his office this morning —[Interruption.]
Mr. Speaker: Order. That is not a point of order for me.
Mr. George Foulkes: Have not the six months of the United Kingdom's presidency, which will go down in history as the pasta presidency, been an abject failure? As it is the President who sets the agenda for meetings, does not responsibility for avoiding all the major issues in the Community rest fairly and squarely on the Foreign Secretary's shoulders? At the end of his presidency, we have a growing trade war with the United States, institutions at loggerheads and the budget out of control. Even Jacques Delors, the President of the Commission, in his usual diplomatic way, describes it as disappointing. Does that not mean in reality that it has been disastrous?
Sir Geoffrey Howe: The hon. Gentleman can hardly be faulted for lack of originality. He has returned to the same point as the Opposition Front Bench started from. His remarks have no foundation. We have been successful in launching a new GATT round, in defusing the main trade dispute with the United States, in reforming the food aid programme, in uniting the Community against terrorism, in taking more measures to liberalise the internal market than any other presidency, in establishing the first wide-ranging action programme on unemployment and in ensuring the most important measure of CAP reform ever achieved. That is a presidency of formidable achievement, and it is only the hon. Gentleman who does not recognise that.

Agriculture Council
4.3 pm
The Minister of State, Ministry of Agriculture, Fisheries and Food (Mr. John Selwyn Gummer): With permission, I will make a statement on the outcome of the meeting in Brussels of the Council of Agriculture Ministers, which covered 90 hours of negotiations, including two all-night sessions, and ended yesterday afternoon. My right hon. Friend the Minister chaired this meeting and I represented the United Kingdom.
Important decisions were made which involved major reforms to the milk and beef sectors. On milk, the agreement will result in a reduction in production of 9·5 per cent. over the next two years. This is to be achieved first by the permanent reductions in milk quotas of 2 per cent. for 1987 and a further 1 per cent. in 1988 as agreed last April; secondly, by a temporary suspension of quota by 4 per cent. in 1987 and a further 1·5 per cent. in 1988; and finally by a further 1 per cent. reduction which results from a tightening up in the operation of the quota system. I insisted throughout the negotiations that the necessary reductions in production had to apply to all member states, and that was agreed.
Our aim will be to achieve as much of the permanent reduction as possible in the United Kingdom by the voluntary outgoers scheme. I am pleased to say that the maximum rate of Community compensation under the scheme will be increased by 50 per cent. from 2·6p per litre a year to 3·9p per litre a year over seven years.
Compensation from FEOGA for the temporary suspensions of quota will be paid at 6·5p per litre per year, and this rate is guaranteed for two years.
Changes are to be made next year in the arrangements for implementing the supplementary levy in order to make it more effective in discouraging production in excess of national quotas. We succeeded in our aim of retaining formula B and article 4a, which contribute to ensuring the flexible operation of the quota arrangements within the United Kingdom.
As part of the arrangement, changes are to be made in the intervention arrangements. They are designed to prevent excessive recourse to intervention, which has been noticeable in the Community particularly over the past year.
The Council took note of a Commission paper which sets out its plans for a major disposal of existing intervention stock, designed to reduce it to more manageable levels by 1989. The cost of this programme of disposals will be financed over the four years beginning in 1989.
On beef, the Council agreed substantial reforms in the intervention system. They are designed to reduce both the cost and the volume of intervention buying. They involve a reduction in the price levels at which intervention buying will operate. It will take place only when the average price in the Community is below 91 per cent. of the intervention price and when at the same time the average price in a particular member state or region is below 87 per cent. of the intervention price.
Alongside those changes in intervention, various premium arrangements were agreed. They include a new premium worth £16 per head payable on male animals only on specialised beef enterprises up to a limit of 50 head
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per farm. This particular premium was totally unacceptable to the United Kingdom, and we shall not be applying it here. Instead we succeeded in retaining our existing variable premium arrangements on the existing terms, which are much more favourable. The maximum rate payable averages at about £45 per head and covers heifers as well as steers and young bulls. Moreover, the 50 head limit does not apply to it. In addition, the rate of Community funding for the suckler cow premium is being increased. It will be possible in 1987 to pay up to a maximum of £33 per head. The decision on the actual rate will be taken later.
Those changes to the beef system represent a major shift away from dependence on intervention towards a more market-oriented policy. This is in line with the approach which we have followed in the United Kingdom under our variable premium system. The beef arrangements have, moreover, been agreed until the end of 1988. They will therefore provide an important element of stability for beef producers during a period when the adjustments to milk production, and the effects of that on the beef market, will be felt.
In response to the request that we made last September, the Council agreed to devaluation in our green rate of 6 points for beef and 3·2 points for sheep. Those changes, which take effect on 5 January, will result in support prices in those two sectors being increased by around 5 per cent. and 1·5 per cent respectively. That will be worth an additional £50 million to farmers in a full year. The devaluation will also help towards restoring our meat traders' position relative to Ireland.
Other green rate devaluations were agreed at the same time: for France in the same two sectors; and for Greece. Portugal and Spain in the sheep sector alone. The Council broadly approved in outline a package of socio-structural measures and agreed that detailed decisions on them would be reached by the end of February.
One major aim of the arrangements is to help tackle the surplus problem. Member states will be required to offer aid for the extensification of production and conversion to non-surplus output, and also to operate an early retirement scheme for farmers who want to abandon production on their farms. These schemes will be able to cover afforestation as well as fallowing. Member states will have a wide measure of discretion on how they will be applied.
The measures will help the southern countries in the Community to restructure their farms. There is provision for Community-funded schemes for environmentally sensitive areas. This is, of course, an important concept which has been introduced into Community legislation as a result of the pressure from the United Kingdom, and in particular from my right hon. Friend the Minister.
The Commission originally proposed a limit on the financial contribution to compensatory allowances for livestock, which would have severely discriminated against some farmers in this country. I succeeded in securing a form of words in the final document that is acceptable to us and to them.
The changes, particularly in the milk sector, will, of course, cause serious problems of adjustment for many individual farmers, but they will be sizeably compensated. But the package agreed at the Council on milk and beef fits in well with the best interests of the United Kingdom industry. [Interruption.] Hon. Members who care about

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the farming industry might listen to what comes next because it matters to farmers. In particular, the cut in milk production will be applied across the Community and we have retained flexibility in the system; we have kept the beef variable premium and an improved suckler cow premium; and we have secured the green rate changes, which will greatly benefit our livestock sector.
The Agriculture Council has, I believe, under the British presidency, taken an historic step forward in tackling the problems of surpluses, which will bring substantial savings to the Community budget. Twelve nations have together found the way forward in agriculture—despite differences so big that once they could have caused wars—[Laughter.] Is it not marvellous how Opposition Members will not give credit to the Common Market when it brings home the bacon? It is in the interests of all of us, farmers, consumers and taxpayers alike, that decisions have been taken that put the common agricultural policy on the right road for the future.
Mr. Brynmor John: I am grateful to the Minister of State for making his statement and, in particular, avoiding any temptation to go into hyperbole about what was achieved. However, the agreement is complicated and the House will want further clarification of what the right hon. Gentleman has just said.
I welcome the three points on which I believe both sides of the House were united in a recent debate on this subject. First is the retention of the B formula, which I presume will have its system of setting off deficits and surpluses unchanged. Second is the retention and extension of the beef variable premium. I am glad to see that other countries now appreciate the value of some such premium. I hope that, whatever standardisation occurs in future, we shall insist that the dual benefits to both the producer and the consumer are retained. Third is the improvement of the milk outgoers scheme. Will the Minister tell the House what thought has been given by the Council to the use of any outgoers money for entry into the beef or sheep sector?
On surpluses, the Minister has announced measures which, if they work, will represent a sizeable step towards reducing surpluses in one of the most notorious areas of surplus, the dairy sector. When does the right hon. Gentleman estimate that, with the benefit of the scheme, production and consumption will be matched? As no less than 5·5 per cent. out of the 9·5 per cent. saving is to be achieved by a two-year temporary set-aside scheme, what will happen to such production after the two years have elapsed? Does the land come back into dairy production, or will it be a permanent loss, based on what was originally a temporary basis?
Will the Minister confirm three points about the green pound? First, the effect of lower intervention prices for beef, even when the 6 per cent. devaluation is taken into account, is to lower beef intervention prices by 8 per cent. net, and United Kingdom farmers will not have the advantage of headage payments to set off against that. What effect will that have on the smaller specialist beef producer?
Secondly, will the 6 per cent. devaluation eliminate, rather than work towards restoring, the advantage that the Irish farmers had recently over their British counterparts, to avoid the incident that occurred recently in Wales?
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Thirdly, with the United Kingdom and French devaluation for sheepmeat, is there a guarantee that our perfectly legitimate trade in lamb will not be disrupted by French farmers in future?
I revert to the dairy sector. It is clear that some producers will come out of the sector, and I should welcome the right hon. Gentleman's estimate of the number. However, the point was put to him forcibly, again by both sides of the House in the recent debate, that others will be forced out of that sector by the reduction—farm and creamery workers will be displaced by the structural change. Yet there is no word of them in the statement. And is there not yet time for the Government to secure a better deal for those who, unavoidably and through no fault of their own will find themselves without a job?
The chief area about which I am unhappy concerns the importance of not overstating what has been achieved. For example, even if the dairy problem is conquered, that is merely the most notorious of several surplus regimes. There is no mention of cereals in the agreement, for example. Tackling the problem on the basis of a bit at a time, as we have done in the Agriculture Council, does the Minister accept that in other sectors, most notably beef, if outgoers use their money to set up in that sector, by the killing of dairy cows, estimated at 1 million or more in Europe, they are depressing beef prices and building up the 600,000-tonne beef mountain?
Does the Minister further accept that a number of acres—[HON. MEMBERS: "Too long."] No! Conservative Members may be satisfied with the hype in the Daily Telegraph but the House is entitled to ask legitimate questions about the agreement. When we are chastised for not taking an interest in agriculture, let the farmers note that the impatient ones are Conservative Members who just want to hurry through the statement so that they can go to their social functions.
Does the Minister further accept that a number of acres—perhaps he will tell us how many—will be left idle by the disappearance of dairy herds? Will not the temptation be to put sheep on them, thus accelerating the time when sheepmeat moves into surplus? The right hon. Gentleman will know that many sheep farmers do not have the luxury of switching, and they need protection to be kept in the sheep farming. Will they get it? Chief, however, among the lessons is that the impetus now created must not be lost. The Agriculture Ministers must not let events back them against the wall before they act on the common agricultural policy. Once started, the House should now insist that we look comprehensively at the CAP so that the policy may be reformed thoroughly in all spheres.
Mr. Gummer: I am sure that the hon. Gentleman is right in his final words. However, he must agree that it would hardly be right to suggest that the agreement is doing things merely a bit at a time. There were those who suggested that we should stick with dairying. If we could manage to do that, it would be a huge achievement. Others said that we must concentrate on beef, and others said that we should content ourselves with the special work on the structures package, which was particularly helpful at the beginning of the set-aside scheme for cereals. That would pave the way for the others.
The fact is that Britain went for all three together. Most European countries thought that it was impossible, but we achieved it. This is the largest package that we have

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achieved together. In recognition of what the hon. Gentleman rightly says, farming is indivisible, and if one does not make the changes across the board, one pushes some of the problems on to other sectors. But one cannot do more than what is humanly possible in the period available to deal with the matter. I am pleased that no one suggested that we should cover anything else in the marathon that we went through.
We must take the hon. Gentleman's point about impetus. I agree with him that it is important. One cannot overstate how important this part of it is. The agreement is important because it is a major change in the way in which the Community deals with agriculture. If we build on that, we can make a difference. However, the hon. Gentleman is right about the B formula. Its mechanism is unchanged. What has changed is that those who overproduce after the mechanism has operated will receive a considerably greater penalty. That must be sensible because otherwise it is not fair on those who keep within the production targets.
I am glad that the rest of the Community is to learn the benefits of premiums. I have always believed that, once one has a premium system, farmers will understand how successful it is and it will be much more difficult to get rid of it. That is why it has been resisted so stoutly by those who believe in intervention as the only system. If one deals with surpluses on the system that we have used, of course the hon. Gentleman is right. We have called the system a temporary cessation of the quota. However, I think that he will agree that it is likely that that amount will continue thereafter. We were not prepared to support a fixed amount of compensation, which would go on into the distance. It seemed to us that a digressive system was more sensible, because one's initial costs are particularly high as it is then that one is likely to be restricting the number of animals that one has.
I do believe in having a temporary system because we have to get other dairy producers in the world to reduce their production in a similar fashion so that the world dairy market returns to a sensible basis. We want to be in the business of exporting on a reasonable instead of a highly subsidised basis. That means that we must all make reductions. It is not fair to ask British and other European farmers to reduce their production if other countries do not do the same.
In relation to the green pound, we never sought a greater benefit than that which the Irish had been given through the reduction of their green punt. Britain does not believe in changes in the green pound between price-fixings. We were so angry about that decision because it was taken on behalf of one nation on grounds that clearly applied absolutely in the same way to the neighbouring nation. That is why we felt that it was wrong that it had been held up for so long. We still believe that this is a welcome, if late, decision. It will not remove all the advantage from Irish farmers because some of that arises from other currency movements not affected by the decision.
I have a real concern about the problems faced by creamery workers and I was part of the United Kingdom delegation that raised that point with the Commission. The Commissioners have still not given us an answer on how to consider the matter.
Sir Richard Body: Has my right hon. Friend made any estimates of how many dairy farmers in this country may have to go out of business as a result of the decision?
Mr. Gummer: That sort of estimate is difficult to calculate. The truth of the matter is that, when quotas came into operation, it was thought that more dairy farmers would have to go out of business than happens year by year. That turned out not to be the case. I do not believe that the changes will mean that dairy farmers will have to go out of business. We will give those who wish to go out of business the opportunity to do so and those who do not wish to do that will be properly compensated for the fact that they perform an important job in producing the nation's food and conserving the countryside.
Mr. Richard Livsey: Although I welcome the retention of beef variable premiums and the green pound devaluation, will the right hon. Gentleman press for further green pound devaluations at the next negotiations, which I regard as absolutely essential? What effect will the settlement have on the income of the average-sized dairy farm in the United Kingdom? What plans does he have should the market valuation of quota exceed the value set for the outgoers scheme? What will he do if that happens?
Mr. Gummer: It would not be proper now to decide what our arguments and balance should be within the price-fixing arrangements that have still to come. However, the hon. Gentleman will know that, in the past, the United Kingdom has secured proper changes in the green pound that must be balanced against the extra cost to the Community budget. There is a mix to achieve and we must consider other arrangements before we can make a decision.
With regard to dairy farmers income, there is no doubt that compensation for the cut in quota of the temporary scheme is such that it should replace the profit that would otherwise have come from producing that milk—and, indeed, should more than replace that profit. There is, in the package, sufficient to support British dairy farmers without producing a product that cannot be sold. Even those of us with large numbers of farming constituents know that farmers do not want to produce food that is destroyed or sold at impossibly low prices. They want to do a proper job. They want a restriction on the amount that they can produce rather than to continue packing it into butter and then destroying it at the end of the day.
Mr. Colin Shepherd: Does my right hon. Friend agree that eventually he will be commended by the agricultural industry for coming to terms with and forcing his colleagues in the Council to accept the underlying instability of agriculture?
Does my right hon. Friend accept that one sector of British agriculture that is feeling particularly squeezed and nervous is the small stock farmer in the hills? Can he spell out how that sector can be reassured by the negotiations in which he has been involved during the past week? Finally, can my right hon. Friend comment on the figures of a loss of £50 to £60 per head of beef animal that have been quoted in the national press?
Mr. Gummer: The reasons for the United Kingdom presidency being so determined that we should deal with

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dairying and beef production together were exactly as my hon. Friend explained. It is impossible to exclude one from the other, as there is a knock-on effect on the number of cows in the market.
The package helps very considerably. First, there is more than 400 million ecu put aside to get further exports of beef as the cows come on to the market. That will reduce the number of cows in the market.
Secondly, the introduction of premium generally in Europe should have a lowering effect on the price of beef in the rest of Europe, which should be a direct help to consumers. That should mean greater consumption in Europe and a knock-on effect on stocks elsewhere.
The increase in suckler cow premium goes directly to the specialist beef producer. The retention of beef variable premium for this year and next means that the producer has real confidence to a point at which we would expect the major effect of extra beef coming to the market to be a reduction in price. There are no grounds whatsoever for the figures that have been circulating. It is impossible to calculate such figures. There is no way of estimating how the market will operate with the change in intervention. I am sorry that people take an excessively gloomy view when it is such an extremely good deal.
Mr. Eric Deakins: By how much will CAP expenditure be reduced in 1987 and 1988 as a result of the measures that have been taken? Will the temporary suspension of quotas automatically end after two years?
Mr. Gummer: The answer to the second part of the hon. Gentleman's question is no, they will not end automatically. The only thing that has been fixed for two years is the exact amount of compensation. The milk package will save the Community about £1,200 million over three years and the beef arrangements will save £120 million. That package has taken into account the extra money that is to be paid out.
Sir Hector Monro: I welcome this agreement. Few people thought it possible to achieve an agreement of such magnitude and importance in Europe, and all credit should go to my right hon. Friend. Is he aware that, in the light of surpluses, his agreements on milk, the green pound and the reduction in beef premium are very good indeed? Will the increase in suckler cow subsidies be adequate to increase incomes in the beef sector?
Mr. Gummer: There is no doubt that there is an argument that the suckler cow subsidy is the way in which we can most properly direct help to the specialist beef sector. I still believe that it is a reasonable increase, although it is certainly not as big as some would have liked. Taken with the other measures, the beef producer must accept that this is a much more satisfactory agreement than anyone would have thought possible. Those who read the comments of the National Farmers Union must understand that the agreement achieves very much more than the NFU expected and meets all of its priorities.
Dr. Roger Thomas: What advice has the Minister about diversification for all the ex-dairy farmers who will exist in south-west Wales in the next two or three years?
Mr. Gummer: I do not believe that there will be those ex-dairy farmers. The arrangements that have been produced mean that those who have to reduce quota will be very properly compensated for that reduction. It will be the same kind of contribution to their income as they might have expected elsewhere. The hon. Gentleman knows that I am on record as having proposed a whole range of examples of diversification to assist the part of the country about which both he and I care.
Mr. Eric Cockeram: Has my right hon. Friend considered paying part of the compensation under the outgoers scheme to landlords in view of their reversionary interest in the cancelled quota?
Mr. Gummer: The arrangements have been discussed and negotiated throughout Europe. I do not think that anyone regards the present structure as unreasonable. We have protected the landlords' capital interest in the arrangements for outgoers, but when there is a temporary cessation of this kind, we believe that the money should go to the people who actually suffer the cut in milk production.
Mr. John David Taylor: As the net result of the arrangements announced by the Minister will be terrifying for farmers in the United Kingdom and will lead to a reduction in farm incomes, more bankruptcies and certainly more unemployment in rural areas, how can the Minister defend a policy that sacrifices British farmers because of surpluses produced in other countries?
Mr. Gummer: The hon. Gentleman has got it entirely wrong. This country put the second largest amount of butter—98,000 tonnes—into intervention last year, so it is quite wrong to suggest that we should not share the burden of surpluses. We have achieved a fair deal across the board. The hon. Gentleman would do the Province more good by fighting for the package rather than attacking it.
Sir Paul Hawkins: Only hours before the settlement was reached, I was with Sir Henry Plumb and the president of the National Farmers Union, who had never believed that such a good settlement could be obtained. I congratulate my right hon. Friend and the Minister on their stamina and on the tremendous success of the presidency, which I hope will be promulgated throughout the country. People in Great Britain are always denigrating their own country. The agreement is a whole-hearted success for both consumer and producer. Will my right hon. Friend ensure that the true story is put over to the British people?
Mr. Gummer: I am sure that it will help a great deal to know that my hon. Friend, with his long experience of farming, shares our view that the settlement is a good one. Sir Henry Plumb, who is certainly a good judge, regards it as a success that no one could have expected. The way to inform the people of this country is to give them just the facts rather than the scare stories being put about by people who have no interest in the future of agriculture.
Mrs. Gwyneth Dunwoody: How does the Minister intend to convince creamery workers who are to lose their jobs in January that this is a good package? How can he simply say that the Commission has not given a reply? When will he do something for people who are losing their employment now?
Mr. Gummer: There is a real problem when people are producing something that no one wants to buy. It may therefore be necessary to reduce the number of creameries. Sometimes the reason is simply that they are out of date and need replacement. The arrangements for workers who are made redundant are more generous than the national scheme. The hon. Lady knows that I take an interest in this, and I shall continue to do so.
Mr. Robin Maxwell-Hyslop: Will my hon. Friend, representing the Government rather than just his own Department, see that creamery workers who are made redundant by these quota arrangements receive the same sort of redundancy payments that steel workers received when they were made redundant owing to steel quotas imposed by the EEC? Secondly, will Britain be paying next year the optional 1·6p per litre on 4 per cent of the quota reduction or will she not?
Mr. Gummer: The arrangements as to the optional matters—those that are national decisions—are made by the Government as a whole. There has not yet been time for the Government to reflect on the matter and to make a decision. No doubt my hon. Friend will be among the first to know when the decision has been made. As for the creamery workers, my hon. Friend is quite right that comparisons could be made with the steel industry, but comparisons could also be made with the textile industry, in which no extra help was given. The answer that I gave to the hon. Member for Crewe and Nantwich (Mrs. Dunwoody) is as far as I can go at present.
Mr. Robert Maclennan: Does the Minister accept that this extensive and major package shows that common agricultural policy techniques are more variable than opponents of the policy sometimes suggest? To enable us to take a more balanced view of the impact of the package on those affected by it, will the Minister be a little more specific about the milk quota compensation arrangements and say whether he believes that they will be equivalent to less or more than the value of the quota? Secondly, how do the Government intend to exercise their discretion with regard to the socio-economic structural package? In particular, what order of magnitude do the Goverment have in mind for the cash to be made available under the scheme for farmers cutting their farming commitment?
Mr. Gummer: The hon. Gentleman is right to draw attention to the socio-economic package which, despite its unfortunate name, contains some important measures aimed at the poorest farmers, not just in southern Europe but in the Highlands, in Wales and in other difficult areas of this country. We have not yet reached the stage of detailed discussions about the money that will be available. One reason for that was simply time. We made the essential political decisions, so there is clear guidance as to what the package will contain. We hope that the package itself will be worked out before the end of February. This is a major change and I shall certainly ensure that our policies and principles, which were partly behind the Agriculture Act which introduced the environmentally sensitive areas and other elements, will be shot through the scheme. Much of the pressure for it has come through new ideas from the United Kingdom, which is taking the lead in farm diversification.
As for dairy farmers' income, it is much more difficult to measure this according to the value of quotas, because
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the figures given for the value of quotas vary considerably. However, the pence per litre compensation for the reduction in quota in the temporary cessation system is rather more than the profit that the farmer could expect to make if he produced that litre of liquid milk, so the arrangements defend the farmer's income.
Mrs. Elaine Kellett-Bowman: is my right hon. Friend aware that my farmers will be especially pleased at the retention of the beef variable premium for two years and the intention to try for the 6 per cent. devaluation of the green pound, which our right hon. Friend the Minister announced in my constituency on 29 September? Does my right hon. Friend agree that, taken together, these measures will go a long way towards restoring the stability of the beef market which has been lacking in our part of the world in recent months?
Mr. Gummer: My hon. Friend has not allowed the Ministry to forget the needs of her beef farmers and I am sure that she is very pleased at the success of the policy that she has supported.
Mr. Dennis Skinner: Is the Minister aware that some Tory newspapers today have forecast that, as a result of this great marathon success story, which has turned out a little flat the more questions the Minister has answered about it, beef and milk prices will fall? When does the Minister expect those prices to fall, and by how much?
Mr. Gummer: I think that the hon. Gentleman is probably wrong in his assessment of the way in which the package has turned out the more people have learned about it. I believe that as people have learned more about it they have found it more satisfactory than they had thought. I cannot be responsible for statements in newspapers, but it is certainly true that in most EEC countries which did not previously have the premium the price of beef will fall because the premium will have that effect. We already had the premium. That is why beef prices in this country are lower than in the rest of Europe anyway.
Mr. Richard Shepherd: Following these negotiations, will the common agricultural policy cost less in 1987 than in 1986?
Mr. Gummer: As I have said, the cost of the agricultural part of the CAP will be substantially reduced in successive years as a result of the negotiations.
Mr. Dafydd Wigley: Is the right hon. Gentleman aware that a recent survey showed that, in west Wales, one in four dairy farmers are teetering on the brink of bankruptcy and that this package will only make their worries even worse because their responsibilities are long term and the two years will not be enough to bail them out? When the United Kingdom is importing substantial quantities of dairy products, they cannot understand the Minister selling them down the river in this way.
Mr. Gummer: I am sorry, but the hon. Gentleman cannot say that with any truth. We import Danish and New Zealand butter, for example, because the British housewife wants to buy those butters and chooses not to buy British butter. New Zealand and Denmark have access to our market but we do not guarantee them a market. I believe that the British housewife ought to have a choice. I hope that the hon. Gentleman is not suggesting that

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Welsh housewives should be forced to buy Welsh butter. I think that Welsh butter is extremely good and always buy it when I do not buy English butter. The hon. Gentleman cannot complain about Britain taking some of the cost of reducing—
Mr. Wigley: You should tell my farmers that.
Mr. Gummer: I would tell them that, because I would tell them the truth. If the hon. Gentleman does not tell them that, he will not be telling them the truth.
Mr. Patrick McLoughlin: My right hon. Friend is right when he says that farmers do not like money to be spent on food that is being put into intervention. What reassurance can he give small dairy farmers in the 200,000–litre category today, who will be especially hard hit by any reduction in quota? Has his attention been drawn to early-day motion 310, which deals with that point?
Mr. Gummer: I hope that we have met my hon. Friend's reasonable concern for the small dairy farmer. The compensation for suspension will be paid at the rate of 6·5p per litre per year, whereas the average profit on milk is between 3p and 4p per litre. That will mean that there is a margin to cover the increase in cost which arises when there is a lower throughput. It is about the right amount to ensure that my hon. Friend's dairy farmers have some guaranteed support for their income, which is especially necessary in his part of the world, where dairying is perhaps the only thing which farmers can do effectively. That is true of other areas, but it is especially true of my hon. Friend's constituency, which I have known well.
Mr. James Lamond: Although we must all be grateful to the Minister for his efforts to prevent another war in Europe by these negotiations, even if he murdered the English language to tell us about it, why has he mentioned the consumer so little today? Can the consumer look forward, now that there is such a large surplus of dairy products, to an early reduction in the price of milk, rather than the continual increases that they have experienced—or has the law of supply and demand been completely repealed in favour of farming?
Mr. Gummer: The hon. Gentleman ought to remember that the rise in food prices under the present Government has been less than the average rise in inflation. That is noticeably different from what happened when Labour were in government, when food prices rose very much faster. The hon. Gentleman might remember that, as he is a member of the Labour party, he should be on the side of those who do a good day's work getting a reasonable return for their Work. I am anxious to support farmers to ensure that they have a reasonable living.
We have always fought for changes in the system which are directed at the consumer. Therefore, we have the beef variable premium for a further two years, which is of direct help to the consumer. We also have a premium throughout Europe which is of direct help to European consumers. The Government have supported such policies, which favour the consumer directly. As for dairy products, almost every consumer in Britain is a taxpayer, whether directly or indirectly, and the fact that the tax bill will be so hugely changed must affect all consumers.
Mr. Alexander Pollock: I congratulate my right hon. Friend, and especially welcome the devaluation of the green pound, which will improve the trading climate for beef, not least in relation to the unfair Irish price differential. I urge my right hon. Friend to keep the slaughter premium at a realistic price to ensure that there is continuity of confidence in the beef sector, especially when there is an added threat in the shape of the cull of the national dairy herd.
Mr. Gummer: I am sure that my hon. Friend is right. The beef producer will not have the easiest time for the next two years while the dairy herd contracts. Thereafter, as he knows, the indications are that the beef market will become much more stable as supply and demand come much more into line. The Government have tried to be careful with the needs of beef farmers during the next two years.
Mr. David Penhaligon: Will the Minister confirm that, even when we include New Zealand in our production levels, Britain is no more than just in surplus in dairy products? We consume as much dairy produce as we produce. Can the Minister therefore explain to the counties of Devon and Cornwall which have today seen one tenth of one of their prime industries close down why the height of the Ministry's ambition was to cut our production by the same percentage as that by which other countries are in phenomenal surplus? What intentions, if any, does he have to skew this arrangement to the advantage of small farmers? That is within his power if he chooses to do it, but he has not mentioned it so far.
Mr. Gummer: The hon. Gentleman, who is, after all, a member of a party which supports our membership of the European Community, ought to remember that these arrangements are made fairly across the whole of Europe. We are all taking the same burden. Last year, we put 98,000 tonnes of butter into intervention. We imported considerably less than that—
Mr. Nicholas Winterton: No, we did not. We imported 135,000 tonnes.
Mr. Gummer: My hon. Friend need not be too upset, because, if I have got the figures wrong, I shall apologise to him. There is no need to be upset about it.
Mr. Skinner: You are just a wart on Thatcher's nose.
Mr. Gummer: The hon. Gentleman made that joke last week and it was not funny then.
Mr. Skinner: It will be in Hansard now. I have been trying to get it in for two months.
Mr. Speaker: Order. I did not call the hon. Member for Macclesfield (Mr. Winterton).
Mr. Gummer: It is quite impossible to ask the rest of the Community that we should take a smaller cut while we are costing the whole Community the price of putting 98,000 tonnes of butter into intervention. The hon. Gentleman must tell his constituents that as well.
Several Hon. Members rose—
Mr. Speaker: I will now call Mr. Winterton.
Mr. Winterton: My right hon. Friend is aware that I have strongly opposed and deplored the way in which the Government have treated British dairy farmers, bearing in

1225
mind the fact that they do not contribute year in, year out, to the surplus in Europe of liquid milk or dairy products. We imported 135,000 tonnes of dairy products last year. We are a net importer. Does my right hon. Friend accept from me, as a critic of the Government, that I warmly support the package that he has announced today? It is far better than could ever have been expected by me, as a strong opponent of the Government on dairy matters.
Does my right hon. Friend agree that he does his cause no good by giving the type of abrasive answer that he gave the right hon. Member for Strangford (Mr. Taylor)? Will he direct his attention to perhaps the most important thing in agriculture today—how the small dairy farmers of Macclesfield, east Cheshire, west Derbyshire and north Staffordshire are to look to their future? In what way, will the Government advise, should farmers and others in agriculture manage and fund land which, to date, has been funded by producing food, but which will in future not be used for that purpose because dairy products and liquid milk, which are their only products, can no longer be produced?
Mr. Gummer: I must say to my hon. Friend that it is not the Government who have imported those milk products; it is the housewife who has chosen to buy them. We in the agriculture industry must accept that, if we are to compete, we must enable people to want to buy our products. So long as we cost the whole Community large sums through intervention butter and considerable over-production of cereal products compared with our needs—
Mr. Penhaligon: Ah.
Mr. Gummer: —we cannot suggest that we should be excluded from fair cuts across the board in milk products. We are putting milk products into intervention.
I hope that my hon. Friend will agree that when one makes any announcement on agriculture, part of the House says, "Why on earth should farmers receive this help?", and another part says, "Should not the farmers have some more?". Therefore, my hon. Friend should say to his farmers, "We have tried to create more confidence in the market by ensuring that there are long-term dates so that people know of even a temporary cessation over two years and, again, there is a beef variable premium over two years. We have gradually enabled future planning, so that people can make their decisions." He can tell his farmers that every one of them will be compensated for the compulsory cuts and that that is more than they could have expected to gain in profit on the pints of milk that they produce.
In the long term, this is the only European Government who are taking as a basic part of their policy a programme of set-aside. That will enable us to bring production more closely into line with demand, if we can do it on a European basis.
Mr. Tony Banks: Does the Minister recall that, when Opposition Members have suggested that the beef and butter mountains should be distributed free to our pensioners, we have been told that, because of the arrangements, it would merely result in more beef and butter being brought into intervention? Since we understand that "vigorous" steps will be taken to reduce the intervention stores, is it not time for the Government to say that, if the new system will work, beef
1226
and butter stores will now be given free to our pensioners? What better time to announce that than immediately before Christmas?
Mr. Gummer: The hon. Gentleman must accept that he would not want us to distribute a good deal of the butter in intervention to our pensioners because it has been in intervention for a long time. If we distributed the butter that he might wish us to distribute, those who normally buy butter would not buy butter. It is no good pretending otherwise, because we had a Christmas butter scheme which showed that.
Therefore, the butter that those people would have bought will go into intervention. We would spend large sums spreading free butter round the country and taking more butter into intervention in its place. That is not sensible. If we could find a way of increasing the market for butter and of helping the least advantaged, we would follow it. I am committed to that, but I have not yet found a way of doing it.
Several Hon. Members rose—
Mr. Speaker: Order. I shall call those hon. Members who have been standing, but I ask for brief questions.
Mr. Andy Stewart: There is much to be commended in my right hon. Friend's statement. However, the beef package is causing grave concern among beef producers, especially as informed sources are saying that it will cost about £50 per head in reduced subsidies. That is because wholesale butchers have based their bidding price on the present intervention price. If that is reduced by 13 per cent., it will reduce the subsidies by the sum I mentioned. If that fear is founded, will my right hon. Friend take steps to correct it?
Mr. Gummer: My hon. Friend should accept that those figures cannot reasonably be held in the circumstances of our action. They do not take into account our action to stop the full effect of the calf and dairy cows coming on to the market. Nor do they take properly into account the effect of the continuation of the various premiums. Moreover, with the growing firmness of the beef market, we shall be able to see that beef producers pass through these two years more effectively than they suggest. But none of us can be sure, and I am not suggesting that the position will not be tougher than we anticipate.
With this package we have addressed ourselves to the problem in a way which we think will be successful, but obviously we shall keep a close eye on its effect on beef farmers.
Mr. Michael Fallon: May I welcome what is obviously a significant step down a long road? Has there been an improvement in the arrangements for securing and policing quota compliance by other member states?
Mr. Gummer: My hon. Friend is right that there is no point in having quotas if we do not ensure that they are adhered to. Several things happened during the discussions which have ensured that that will happen. By the changes and tightening in the arrangements for formulas A and B and their supervision by the Community, countries which have not been as tough on quotas as others—others have been as good as we have been on that—will find it much more difficult to evade the rules.
Mr. Robert Hicks: Has my right hon. Friend made any assessment of the impact that

1227
the introduction of these measures will have on the structure of the countryside, given that farm incomes form the basis of the economic and social well-being of rural areas?
Mr. Gummer: My hon. Friend has put his finger on the area with which we are most concerned. That impact is the reason why we insisted on proceeding as far as we could with the structural measures in the Community discussions. There were those at home who suggested that Britain should be concerned only with beef and dairy, but we felt that it was right also to deal with the structures measure. My hon. Friend is right—that, as the production ability of British and European farmers increases, so the amount of land needed for food decreases. The whole structure of the countryside, dependent as it is on agriculture incomes, becomes much more fragile. Therefore, we are anxious to accompany these measures with changes such as we have often outlined previously, especially in the set-aside area, which will enable us to ensure that there is a proper basis for a thriving rural economy.
Mr. Nicholas Budgen: Will my right hon. Friend be generous with the truth in describing the reduction in the cost of the CAP? If he is right, as he hopes us to understand, there will be no need for any increase in contribution from VAT—
Mr. Teddy Taylor: No supplementary budget.
Mr. Budgen: —and no supplementary budget to the EEC. If, however, we have misunderstood my right hon. Friend's words, we shall be deeply disappointed in future.
Mr. Gummer: My hon. Friend knows that I am careful never to be economic with the truth. [Interruption.] Therefore, I have given him the exact figures. They are that the changes in dairying will mean a reduction in the budget of £1,200 million over the next three years and in beef of £120 million. We have not finished yet. First, the continuing effect of that will be even greater savings and, secondly, the United Kingdom Government are determined now to reduce the cost in other areas.
Mr. David Heathcoat-Amory: I congratulate my right hon. Friend on this first stage in the reform programme. The overall package will be welcomed generally in Somerset, which is the second biggest milk county. The farming community recognises that the continuing surpluses are doing great damage to the image of British farming and are a monstrous imposition on European taxpayers. Will he give an assurance that the changes in the milk regime will be enforced equally throughout the Community? There has been evidence that in the past the West German Government have allocated more milk quota than was allowed under the rules.
Mr. Gummer: I am sure that my hon. Friend is perfectly right about that. That is why I resisted strongly the West
1228
German Government's proposal to change the rules about the suspension of quota and the operation of formulas A and B, which could have legitimised a practice that is clearly illegitimate. We stopped that, with the help of our other Community partners.
Mr. Teddy Taylor: As, sadly, previous Common Market agreements have not always worked exactly as planned, will my hon. Friend publish in the Official Report before Christmas the detailed figures showing how, despite the additional subsidies, pensions and premiums, the planned CAP spending will be cut by £1,200 million in 1987? Does national flexibility on disposal, which he mentioned, mean that there will be any transfer of the cash responsibility for disposal froth the Common Market to national Governments? Does he not think that it is an appropriate time to publish a report showing what went wrong with the previous quota scheme, which was designed to curb mountains and spending but actually increased both?
Mr. Gummer: The previous quota scheme was never sufficient to solve the problem and it was not sufficient to solve the problem of the growing ability to produce. We have two problems. One is the amount that we can produce at present and the other is a tendency to increase productivity and for the population to decrease its consumption of milk products. These two problems work in opposite directions from the aims of the quota. That is why I am so keen about the very large change that we have made, although it has hurt many of my hon. Friends' constituencies. It would have been much better and much easier if we could have made the change over a longer period. The British Government have always been opposed to the fact that we did not make these decisions earlier and more forcefully, when they would have been more to the benefit of the farmer.
I shall be happy to publish clear breakdowns of the figures, which my hon. Friend can then work over.
Mr. Tony Marlow: Given all the difficulties that my right hon. Friend has faced, may I unreservedly congratulate him on courageously and effectively grasping some particularly awkward nettles? Could my right hon. Friend tell the House that, after the cutbacks in milk, we will still be secure in our liquid milk market?
Mr. Gummer: My hon. Friend is most kind to make those comments, because I know that he perhaps starts considering these matters from a different angle from me. The liquid milk production is as important to his non-farming constituents as to the farmers who produce it. Liquid milk production is easily covered by the large amount of butter that goes into intervention. Even if all the milk came out of butter production, there would still be more butter going into intervention unless we could improve our proportion of the market. I am keen that we should sell more of our butter and cheese on the British market against foreign competition.

Airborne Early Warning System
5.3 pm
Mr. Frank Cook: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 20, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
"the imminent award by this Government of defence procurement contracts for an airborne early warning system, probably to a foreign supplier, the possible acquisition of the entire British technological alternative package by a European competitor and the consequent forfeiture of export market potential of national economic benefit."
The matter is specific in that it relates to two possible options. One is British, custom-made to Ministry of Defence requirements and modified at ever-increasing cost to the taxpayer as the prospective purchasers upgraded their demands and specifications. The other option is American. It is admittedly a comprehensive system, but it is much more expensive. It is available almost off the shelf. It could have been purchased more than five years ago and it could have provided us with an early warning system much earlier if the need had been as pressing as the Prime Minister would now have us believe—so pressing that we may squander the fruit of British brain power before Christmas.
The matter is important in that the level of taxpayers' investment in this project—a project specific to changing Ministry of Defence requirements—has been colossal. That investment may now prove a loss to Britain and, ironically, a major gain to France. We know that French representatives have been present at all recent technical evaluations of Nimrod at the invitation of the Ministry of Defence. Could it be that the French investor might acquire the GEC package lock, stock and barrel, so reaping the fruit of our investment and probably cornering the considerable export potential that is available?
The matter is urgent, and needs urgent attention, as it is generally thought that a statement on the Government's decision may be made tomorrow. A debate after that announcement would be little more than a self-indulgent display of emasculating exhibitionism. This House must be afforded the opportunity to debate the issues in full before the decision is finalised, rather than afterwards. The House must be allowed to express a view and then vote upon the issue. I appeal to you, Mr. Speaker, to put the matter to the House this afternoon.
Mr. Speaker: The hon. Gentleman asks leave to move the Adjournment of the House, under Standing Order No. 20, for the purpose of discussing a specific and important matter that he believes should have urgent consideration, namely,
"the imminent award by this Government of defence procurement contracts for an airborne early warning system, probably to a foreign supplier, the possible acquisition of the entire British technological alternative package by a European competitor and the consequent forfeiture of export market potential of national economic benefit."
I have listened with care to what the hon. Gentleman said, as I listened yesterday to the submission by the right hon. Member for Llanelli (Mr. Davies). I regret that I have to give him the same answer as I gave yesterday. I am bound by the criteria laid down under Standing Order No. 20 and I cannot, therefore, submit his application to the House.

Wright Case (Court Proceedings)
5.6 pm
Mr. Tony Marlow: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 20, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
"the difficulties encountered by those responsible for stating the Government's position in proceedings in the Wright case."
You will have heard this morning, Mr. Speaker, that Mr. Malcolm Turnbull, an Australian lawyer, has been making scurrilous allegations against distinguished British public servants. That will not surprise you, Mr. Speaker, as Mr. Turnbull is partisan, and as he has a reputation for brash arrogance and as a publicity monger.
What will have surprised and, I imagine, appalled you, Mr. Speaker, is Mr. Turnbull's assertion that the successful pursuit of his case against the British Crown was dependent upon actions by the Leader of the Opposition in this House. In other words, the Leader of the Opposition was creating difficulties for the Crown by using, or more accurately abusing, the procedures of this House for the benefit of Mr. Turnbull. We know that the Leader of the Opposition is naive and inexperienced. What we did not know until today was the extent of his involvement in this case.
In his letter to you, the right hon. Gentleman spoke of several telephone calls, the last five of which came from Australia. The most likely construction that can now be placed on those last exchanges is that the right hon. Gentleman, a Privy Councillor, was receiving his instructions which, if carried out, would—and some may say did—create difficulties for the Crown. No man should be condemned unheard. It is only fair to the right hon. Gentleman that there should be an immediate debate so that the difficulties faced by the Crown's representatives, and the role of the Leader of the Opposition in those difficulties, can be speedily and closely investigated.
Mr. Speaker: The hon. Member asked leave to move the Adjournment of the House, under Standing Order No. 20, for the purpose of discussing a specific and important matter that he believes should have urgent consideration, namely,
"the difficulties encountered by those responsible for stating the Government's position in proceedings in the Wright case."
I have listened to what the hon. Gentleman said, but I regret that I do not consider that the matter that he has raised is appropriate for discussion under Standing Order No. 20 and I cannot, therefore, submit his application to the House.
Mr. Neil Kinnock: On a point of order, Mr. Speaker. Reference has just been made to me by a Conservative Member. Were it not for the fact that he is one of the most contemptible Members in the House I would be asking you simply to treat his remarks as being as stupid as they are scurrilous, but I take this opportunity to say that he would not dare, in any shape or form, to accuse me outside this place of taking orders from anyone about anything. It is only the protection of this place that affords him the opportunity to be both ridiculous and—if I may use the phrase—extremely ungentlemanly, as well as lacking any form of courage.
Later—
Mr. Richard Hickmet: On a point of order, Mr. Speaker, and further to the point of order raised by the right hon. Member for Islwyn (Mr. Kinnock). Would you rule whether it is in order for one hon. Member to call another "contemptible"? If that is the language that is to be tolerated in this place—
Mr. Speaker: Order. It is a word that I have heard used frequently in this place. May I say to the whole House that it is very important that we treat each other with civility.
Mr. Willie W. Hamilton: Further to that point of order, Mr. Speaker. I draw your attention to an early edition of The London Evening Standard, referring to Mr. Turnbull in Australia.
Mr. Speaker: Is there a point of order in this for me?
Mr. Hamilton: Yes, certainly. There are scurrilous words in Mr. Turnbull's remarks implying perfidy and treachery in this House and in the Government. He says:
"Sir Robert"—
the head of our Civil Service—
"is the classical fall guy"—
Mr. Speaker: Order. Will the hon. Gentleman come immediately to his point of order for me? I am not responsible for anything that Mr. Turnbull may have said.
Mr. Hamilton: During his speech to the court Mr. Turnbull has accused the head of the British Civil Service, the Attorney-General and the Prime Minister of lying. That is a very serious charge, and we are anxious to preserve the integrity of those right hon. Members—
Mr. Speaker: Order. The hon. Gentleman knows that Mr. Turnbull did not do that in this place. I am not responsible for anything that is said to an Australian court. Will he come immediately to the point of order for me? He has been here for a very long time and he knows the rules.
Mr. Hamilton: You preceded me by a few seconds, Mr. Speaker. The integrity of the House and the Government is being challenged in that court. What can you do to protect that integrity from outside sources?
Mr. Speaker: I am responsible for the integrity of the statements by hon. Members inside this House. I cannot be responsible for everything that might be said about it outside.

Members' Telephone Calls
5.17 pm
Mr. Tam Dalyell: On a point of order, Mr. Speaker. It will be within your recollection that, as reported in c. 1076 of Hansard for yesterday, you said that you would consider referring to the Privileges Committee a letter from a telephone engineer which I outlined in detail in my speech on the security debate and which was further referred to yesterday by my hon. Friend the Member for Warley, East (Mr. Faulds). Do you have any timetable in mind for action on your part?
Mr. Speaker: I told the hon. Member for Warley, East (Mr. Faulds) that I would consider any letter that came to me. It came to me only this morning and I am considering it.

Point of Order
5.18 pm
Mr. Frank Cook: On a point of order, Mr. Speaker.
Mr. Speaker: I have just dealt with the hon. Gentleman's application under Standing Order No. 20.
Mr. Cook: It is a different point of order.
Mr. Speaker: I ask the hon. Gentleman to sit down.

BILL PRESENTED

  PRIVATE SECURITY
  Mr. Don Dixon, supported by Mr. Robert C. Brown, Mr. Giles Radice, Dr. John Cunningham, Miss Betty Boothroyd, Mr. Jack Ashley, Mr. A. E. P. Duffy, Mr. Gerald Kaufman, Mr. John Smith, Mr. George Robertson and Mr. Michael Cocks, presented a Bill to provide for and in connection with the regulation of the private security industry: And the same was read the First time; and ordered to be read a Second time upon Friday 20 February and to be printed. [Bill. 40].
  5.19 pm
  Mr. Frank Cook: On a point of order, Mr. Speaker.
  Mr. Speaker: I will take the point of order if it is my responsibility and if it does not refer to the hon. Gentleman's application under Standing Order No. 20.
  Mr. Cook: I am most grateful to you, Sir. I must confess that I am genuinely at a loss. In no way do I challenge your ruling on my application under Standing Order No. 20, but I need your guidance.
  Mr. Speaker: I do not think I can give it because, as the hon. Gentleman knows, I am bound under Standing Order No. 20 not to give reasons for my decision.
  Mr. Cook: But I do not see the reason—
  Mr. Speaker: Order. I am bound by the Standing Order. I cannot help the hon. Gentleman.
  Mr. Cook: I need guidance, Sir.
  Mr. Speaker: I cannot help the hon. Gentleman.

Orders of the Day

  Autumn Statement
  Mr. Speaker: I must announce to the House that I have selected the amendment on the Order Paper.
  5.15 pm
  The Chancellor of the Exchequer (Mr. Nigel Lawson): I beg to move,
  That this House approves the Autumn Statement presented by Mr. Chancellor of the Exchequer on 6th November; welcomes the prospect of continuing low inflation and steady growth as the basis for maintaining the trend of rising employment; and congratulates Her Majesty's Government on the continuing reduction in the share of national income pre-empted by public expenditure.
  Before I begin my remarks, may I apologise to the House for the fact that, since this debate has started unnaturally late, I may have to leave the Chamber at a rather early stage in the proceedings for reasons which I have explained to the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley).
  Mr. Roy Hattersley: The Chancellor of the Exchequer will confirm, on reflection, that he was courteous enough to send me a message saying that he would be leaving the debate early long before anyone knew the time at which the debate would begin. But putting aside that little slip, will he take it from me that it is wholly unacceptable that when the House has on the agenda the principles of the Government's economic policy, for which he is wholly and personally responsible, and on which the Treasury and Civil Service Select Committee has adjudicated and in many particulars found the Chancellor wanting, he should not remain in the Chamber to hear the House's criticism of his conduct?
  Mr. Lawson: As to the right hon. Gentleman's first point, I was well aware when my office telephoned his office that there would be an agriculture statement and that you, Mr. Speaker, would let that run for quite a long time because it was a very important statement and many right hon. and hon. Members would have wished to take part. But I have listened to what the right hon. Gentleman said. I have conflicting obligations. I will, of course, consider his request—
  Mr. Hattersley: So that the apology, which I repeat is wholly unacceptable to the Opposition, might have a little more grace, will the Chancellor tell us whether he is now going to a meeting to validate the decision on AWAC which the Prime Minister announced yesterday afternoon?
  Mr. Lawson: The right hon. Gentleman should know that that decision can be taken only by the Cabinet and that the Cabinet does not meet this afternoon.
  Mr. Ian Wrigglesworth: On a point of order, Mr. Deputy Speaker. Is it not a fact that the call of the House to Ministers is paramount and must be heeded before any outside demands? Is not the Chancellor simply following his precedent in previous economic debates, when he has treated the House with contempt by listening to almost none of the speeches by hon. Members?
  Mr. Deputy Speaker (Sir Paul Dean): Order. The hon. Gentleman knows that that is an expression of opinion. It is not a matter for the Chair.
  Mr. Willie W. Hamilton: Further to that point of order, Mr. Deputy Speaker. The Chair is responsible for safeguarding the interests of Back-Bench Members in these matters. As the hon. Member for Stockton, South (Mr. Wrigglesworth) said, Ministers' first duty is to the House. Especially with such a major debate, the Chancellor should know that, whatever his commitments outside, the House must take priority. He has not yet explained to us which engagement is more important than listening to the debate. But whatever it is, the House is far more important. If he does not stop treating the House with contempt, the country will reserve its judgment on him. Will he now say that he is cancelling all outside appointments and devoting all his attention to the debate?
  Mr. Lawson: I shall stay as long as I can, but I have to say that this is not assisted by the time-wasting tactics of certain hon. Members opposite.
  Mr. David Winnick: Where is he going?
  Mr. Lawson: I see that hon. Members are not the slightest bit interested in this debate or the economy, and that goes for right hon. Members, so I fail to see why they should make a fuss—[Interruption.]
  Mr. Deputy Speaker: Order. I am sure the House wishes to hear the Chancellor.
  Mr. Alan Williams: On a point of order, Mr. Deputy Speaker. As you will recollect, last Thursday the House approved the business programme for this week. That programme was drawn up by the Government's business managers after consultation with Ministers. They then presented to the House their programme for this week's debates, and many of my hon. Friends have come here so that the Chancellor can hear what they have to say in this most important debate.
  Surely it is not enough for the Chancellor to make a last minute phone call, although he has known for a week when the debate was to be, to my right hon. Friend the Member for Birmimgham, Sparkbrook (Mr. Hattersley) to say, "I am sorry but I am going to slide out when I have said my bit." Surely he should make a full statement to the House about what has taken him away from his prime responsibility.
  Mr. Deputy Speaker: That point has been made already. I hope that we can get on with the debate.
  Several Hon. Members rose—
  Mr. Lawson: This is time wasting, and it is an abuse of the House and totally undermines every single point that the Opposition have sought to make—
  Mr. Stuart Bell: On a point of order, Mr. Deputy Speaker. You will recall that some two years ago the Chancellor of the Exchequer was so late for the winding up speeches that he did not come in for them. This was drawn to the attention of Mr. Speaker, who issued a statement saying that it was the duty of the Ministers of the Crown to put the House before other commitments. That was written into Hansard. We are looking to you for reiteration of that statement, Mr. Deputy Speaker.
  Mr. Deputy Speaker: The Chair has no control over the movements of Ministers. I hope, now hon. Members have expressed their view, that we can get on with the debate.
  Mr. Tam Dalyell: Further to that point of order, Mr. Deputy Speaker. You have said that the Chair has no control over the movements of Ministers. It will be within your recollection that, faced with similar problems, Mr. Speaker Selwyn Lloyd issued what might generally be assumed as guidance to Ministers, stating that the needs and the requirements of the House of Commons were paramount. Is the attitude now being taken different from that of a distinguished Conservative former occupant of your Chair? Has there been a change of policy?
  Mr. Deputy Speaker: The hon. Gentleman knows very well that Ministers must be judges in these matters.
  Mr. Peter Shore: Further to that point of order, Mr. Deputy Speaker. The Chancellor is treating the House of Commons in an extremely unsatisfactory way. If the Chancellor cannot be brought to cancel his engagements and treat the House with the respect that it deserves, will you consider whether it would be possible to suspend the proceedings until the Chancellor is free to come back, face the House and attend the debate in the proper way?
  Mr. Deputy Speaker: I say again that time is running out. The debate started late for reasons that we all understand. This is an important debate and I hope that we can get on with it.
  Mr. Lawson: I have to say, Mr. Deputy Speaker, that I have learned one lesson from this farcical charade, that in future I shall not make the mistake of affording the right hon. Member for Sparkbrook the courtesy of giving him advance warning.
  Mr. Hattersley: Has the Chancellor still not understood that his offence is not against me—that does not matter —but against the House? Until he understands that, he is not worthy to address the House this afternoon.
  Mr. Lawson: I understand fully well that it is the House that comes first and that is why I began with an apology to the House, but I also understand that the right hon. Gentleman and hon. Members opposite are wasting the time of the House deliberately.
  Several Hon. Members rose—
  Mr. Deputy Speaker: Order. I hope that we shall not have more points of order on the same point. I have already dealt with it and I suggest that it is in the interest of all of us to get on with the debate.
  Mr. Laurie Pavitt: On a point of order, Mr. Deputy Speaker. The whole House has sympathy with Mr. Deputy Speaker when he faces a difficulty. However, I wish to make a suggestion based on precedent. As you can see, the House is a little turbulent. Perhaps Mr. Speaker could be sent for so that the rest of our proceedings can be orderly. I am not decrying your responsibility, Mr. Deputy Speaker. We know well the way that you conduct our business and have no criticism. However, this is a difficult situation. Therefore, I suggest you consider the possibility of asking Mr. Speaker to resume the Chair.
  Mr. Winnick: Further to that point of order, Mr. Deputy Speaker. We have rightly complained that the Chancellor has said he is going somewhere else without giving any further explanation. However, in the past few minutes the right hon. Gentleman has aggravated his
  1236
  offence by telling my right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) that in future he will not bother to give notice that he will not be here. Does not what the Chancellor is doing show a complete contempt for the House? Instead of trying to correct what he said earlier, he is saying that in future he will not bother to give notification that he will not be here. The least that he can do is to explain why he will not be here. If he is not willing to do so, we shall continue to raise the point.
  Several Hon. Members rose—
  Mr. Deputy Speaker: Order. I hope that the Chancellor will now have the opportunity to say what he wants to say.
  Mr. Dalyell: Further to that point of order, Mr. Deputy Speaker. As one who has been asked to withdraw from the House because of his use of language, may I be forgiven for being particular about the use of language? The Chancellor of the Exchequer referred in the hearing of all of us to the House of Commons as a "farcical charade". Is that parliamentary language and is that acceptable? What is sauce for the goose must be sauce for the gander.
  Mr. Deputy Speaker: It will be much better to allow the Chancellor of the Exchequer to explain himself.
  Mr. Lawson: This is the now traditional debate on the autumn statement, and it is a relatively recent tradition. This is only the fifth autumn statement that we have had. The first was the invention of my predecessor, my right hon. and learned Friend the present Foreign Secretary, in 1982, and I have been responsible for the subsequent four, but the tradition is none the worse for its recent origin. This year, however, and unusually, we have already had our debate on the autumn statement by courtesy of the Opposition on the day of the oral statement. That does not mean that this debate has to go over the same ground as the first. It gives the House the opportunity to consider for the first time the report on the autumn statement produced by the Treasury and Civil Service Select Committee, under the distinguished Chairmanship of my right hon. Friend the Member for Worthing (Mr. Higgins). Certainly, I feel compelled to do so, for who could not fail to be moved by the Committee's sole recommendation—namely that I should make any statements on what it calls macro-economic policy in the House and not outside it, as I did with my lengthy exegesis of the Government's fiscal and, in particular, monetary policy to the Lombard Association earlier this year? Moreover, the right hon. Member the Leader of the Opposition referred approvingly to this recommendation only last week.
  Some of us may be a little surprised to discover that the Leader of the Opposition has developed a taste for this sort of thing, given the manifest inadequacy of his understanding of it. But I suppose the same could be said of his recent excursions into the field of strategic defence.
  Be that as it may, I see little practical alternative to continuing as I have begun during my first three and a half years as Chancellor—and, indeed, as my predecessors have before me—making some speeches, such as the Budget, in the House and others, such as the annual speech to the Lord Mayor's Mansion House banquet, outside it.
  I readily concede that some may feel—[Interruption.] I am afraid that it is abundantly clear, Mr. Deputy Speaker, that the Opposition's pretence that they wish to debate the economy is just that— a complete pretence, because there is no attempt to listen to what I have to say.
  Mr. Bell: On a point of order, Mr. Deputy Speaker. The Chancellor of the Exchequer has referred to his Mansion House speech. On the last occasion that he made a speech to the House on the same subject, he repeated the speech that he gave at the Mansion House. May we have your guidance that this is a different speech from that which the Chancellor made at the Mansion House earlier this year?
  Mr. Deputy Speaker: That is not a point of order for the Chair. [Interruption.] I appeal to the House to give a fair hearing to the Chancellor of the Exchequer.
  Mr. Lawson: I readily concede that some may feel a sense of deprivation in the fact that this Government have reverted to the old-fashioned practice of having only one Budget a year, unlike the previous Labour Government, who were forced to have them every few months. But I am not altogether sure that this sense of deprivation is shared throughout the House. When, in this year's Budget speech, towards the conclusion of a relatively brief passage, I uttered the words
  "I will say no more about monetary policy"
  the reaction was scarcely one of profound disappointment. Indeed, Hansard records hon. Members as having interjected
  "Hear, hear."—[Official Report. 18 March 1986: Vol. 94, c. 170]
  None the less—[Interruption.] I may say, Mr. Deputy Speaker, that this is, in particular, an insult to the Select Committee. What I propose to do is to deal with the points that the Select Committee has made in its report.
  Mr. Hattersley: Sharing the Chancellor's desire to pay proper respect to the Select Committee, will he assure the House that he will be here when the Chairman of the Select Committee makes his speech?
  Mr. Lawson: I have already discussed the matter with my right hon. Friend the Member for Worthing.
  Sir Paul Bryan: On a point of order, Mr. Deputy Speaker. Is it not absolutely obvious that this is organised barracking?
  Mr. Richard Hickmet: Further to that point of order, Mr. Deputy Speaker. If the Opposition wish to cover the confusion of the Leader of the Opposition because of his failure to come to the House to make a statement explaining his behaviour in the Wright case, it does not serve their case to bring this Chamber into disrepute by rubbishing my right hon. Friend's statement.
  Mr. Hattersley: Further to that point of order, Mr. Deputy Speaker. I asked the Chancellor of the Exchequer a very serious question about the relationship between the Government and the Select Committee. I am anxious that these interventions should not prevent the Chancellor from telling us whether he is or is not staying for the speech of the Chairman of the Select Committee.
  Mr. Lawson: Let me say to the right hon. Member for Sparkbrook that I shall stay to hear what he has to say. —[HON. MEMBERS: "Oh."] I hope that now we can get on with the debate in a civilised manner and that the Opposition will not create the bear garden that they have been creating.
  This is clearly the occasion to respond to the Select Committee's report. Since I shall have one or two critical observations to make, let me hasten to add that I do not blame the members of the Committee for their report—
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  [Interruption.] Hon. Members should wait. It is clear that they had little time to alter what had in effect already been published by their specialist advisers.
  The report levels two main charges. The first is that, and I quote—
  Sir Kenneth Lewis: In terms of the Select Committee of this House, professional advisers are there to advise. The report is the Committee's report. It must not be other than the Committee's report. I do not think that my right hon. Friend should leave on the record the fact that specialist advice is reflected in the opinions that are contained in the report.
  Mr. Lawson: I would say in reply to my hon. Friend that of course the report is the Committee's report. And this speech is my speech.—[Interruption.]
  Mr. Ray Powell: On a point of order, Mr. Deputy Speaker. Some hon. Members have come to the House today to listen to the Chancellor of the Exchequer's speech on the autumn statement. It has been suggested that the Opposition are organising these points of order. I notice that you have accepted quite a number of points of order from Conservative Members. I want to hear the Government's response to the Select Committee's report. I am concerned about what was said about the Select Committee's report. I am even more concerned about the Chancellor's contempt not only for the Select Committee but for this House.
  I wonder whether you would reflect upon the suggestion by my hon. Friend the Member for Brent, South (Mr. Pavitt) that Mr. Speaker should be called and that the sitting should be suspended so that he can examine what has already transpired since the Chancellor was called to speak.
  Mr. Deputy Speaker: I am not prepared to suspend the sitting. I hope that the House will listen to the Chancellor of the Exchequer.
  Mr. Austin Mitchell: On a point of order, Mr. Speaker. The Chancellor has already said that he will not stay to hear the speech of the Chairman of the Select Committee. He then attacked the Opposition Members of the sub-committee and said that its report is effectively the work of our advisers. That is a slur on the sub-committee. Is the Chancellor going to withdraw what he said?
  Mr. Deputy Speaker: Order. Interventions in the guise of points of order are an abuse of the procedures of the House. We must get on with the debate.
  Mr. Lawson: May I, Mr. Deputy Speaker—[Interruption.]
  Mr. Austin Mitchell: On a point of order, Mr. Deputy Speaker.
  Mr. Deputy Speaker: Order. I have already heard the hon. Gentleman.
  Mr. Austin Mitchell: May I have a ruling on that point of order, Mr. Deputy Speaker?
  Mr. Deputy Speaker: I have listened to the hon. Gentleman. He knows very well that the point he raised is a legitimate matter for debate or intervenion, but that it is not a point of order for the Chair. The Chancellor of the Exchequer.
  Mr. Austin Mitchell: I have not finished my point of order, Mr. Deputy Speaker. The Chancellor has made a quite deliberate slur on the Select Committee on the Treasury and Civil Service. Will he withdraw that slur?
  Mr. Deputy Speaker: It is for the Chancellor of the Exchequer to make his own speech.
  Mr. Lawson: The report—[Interruption.]—levels two main charges. The first is that:
  "The operation of monetary policy has become increasingly obscure."
  The second is that in a number of areas, to quote the report's concluding paragraph which was contributed by that dispassionate seeker after truth, the hon. Member for Great Grimsby (Mr. Mitchell),
  "There has been a substantial change of policy."
  I will discuss each charge in turn.
  The first can be quickly dismissed. As Mr. Gordon Pepper, who has forgotten more about monetary policy than most of the Committee's specialist advisers have ever understood, put it in a talk to the FOREX Association of London earlier this month, and I quote:
  "Mr. Lawson has gone out of his way to explain how monetary policy is being operated in practice, and how it has evolved, probably more so than any previous Chancellor."
  As I have time and again made clear, the central task of monetary policy is to create monetary conditions that, over time, will bring steady downward pressure on the rate of growth of money GDP, and hence on inflation. The principal indicators of monetary conditions are the rate of growth of both narrow and broad money, and the behaviour of the exchange rate. In present circumstances, when the behaviour of broad money has been particularly difficult to interpret, it is the behaviour of narrow money—most conveniently measured by MO—and the exchange rate that have assumed greatest importance. And the essential instrument of monetary policy is the level of short-term interest rates. The Committee appears to suggest that monetary policy is uncertain because the Government are unwilling to raise interest rates when it is necessary to do so. If that were true, it is difficult to understand how interest rates have come to stand at the level they do today.
  I now turn to the Committee's second charge—that is, that there has been a substantial change of Government policy. It is important to be clear on what is in question here. The Committee allows that our central objective has been the same since 1979—to reduce inflation and to create the conditions for sustainable growth—and it also accepts that economic policy has always had two essential elements—firm control of monetary conditions and the reduction of public borrowing. What the Committee—and some others—claim to have found are changes in the way in which we have pursued an unchanging objective. Looking first at monetary policy, let me start with what has not changed, and come on to what has.
  There has been no change whatever in this Government's view that monetary policy is the key to controlling inflation, and there has been no change either in our view that interest rates are, and must be, the essential instrument of that policy. And there has been no change either in our view that a sound monetary policy needs to be accompanied by a prudent fiscal policy, by which I mean a low budget deficit.
  The Committee suggests in its report that what it calls "the enhanced role" for interest rates is new. But that is surely exaggerated, to say the least. Monetary policy,
  1240
  everywhere and always, has to operate through interest rates, for the simple reason that interest rates are the price of money. Even as far back as 1980, in the Green Paper on monetary control, it was explicitly acknowledged that, alongside fiscal policy, the main instrument for controlling monetary growth was interest rates.
  I readily concede, though, that in the implementation of policy, a number of things have changed.
  First, interest rates have come to bear more weight in restraining money and credit because we have, quite rightly, swept away a whole apparatus of controls. When we took office, we inherited a corset for the banks, foreign exchange controls for everyone, and mortgage rationing for those buying houses. Such controls have increasingly become unworkable, as the financial system becomes more sophisticated. This inevitably puts more immediate weight on interest rates as the instrument of policy.
  Secondly, we did for a while come to use systematic overfunding—the practice of selling more gilts than needed to fund the PSBR—as a way of reducing the recorded growth of sterling M3. This led to undesirable distortions in financial markets, which also made policy harder to operate, and so we concluded that the practice could not be justified—a point made forcefully in the past, as I recall, by the Select Committee itself—and I explained that fully in last year's Mansion House speech.
  Thirdly, I accept that in setting interest rates it has become harder to use as a guide the particular measure known as sterling M3. But this is in no sense a bolt from the blue. The 1980 Green Paper said that, and I quote:
  "no single statistical measure of the money supply can be expected fully to encapsulate monetary conditions".
  That was what we said in 1980. In 1980, it did, nevertheless, make sense to have only one target aggregate, and one with which the markets were already familiar, because it had been the target aggregate chosen by the previous Labour Chancellor, the right hon. Member for Leeds, East (Mr. Healey), and it was clearly important then to give a simple indication of our commitment to financial discipline. But in the day-to-day operation of monetary policy, we recognised, to quote the 1980 Green Paper again—and I do quote—that
  "It is insufficient to rely on one measure alone".
  That was in 1980.
  We also recognised that the definition used and the choice of target aggregates might need to be adjusted, again in the words of the Green Paper, and I quote from the 1980 Green Paper:
  "as circumstances change"
  and
  "in the face of long term changes in the institutional structure".
  And, of course, that is precisely what has happened. Circumstances have changed, and the institutional structure has altered, with the result that the behaviour of sterling M3 has become increasingly hard to interpret.
  In what attempts to be a serious discussion of monetary policy, the Committee's report makes hardly any mention at all of these developments. It is even more extraordinary that there is no reference at all to experience overseas, for the experience in this country has been similar to that of other major countries, most of which, including Germany, have found their monetary targets overshooting this year, while inflation has unambiguously come down.
  We cannot and we do not ignore the continued rapid growth of sterling M3 and other measures of broad

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  money, but for a long period now this growth has proved consistent with downward pressure on inflation, so it must be looked at in conjunction with the evidence of other indicators. Principal among these is M0, the broad monetary base, which has proved a reliable indicator with a stable trend in velocity. This is why, throughout my time as Chancellor, I have chosen to set targets for narrow money in terms of M0.
  The Select Committee says that it is not convinced that M0 is a useful indicator of monetary conditions. It does not say why. It is clearly absurd to imply that all narrow aggregates are misleading because the behaviour of M1 in the early 1970s did not foreshadow the subsequent inflation. It did not, but had the Committee looked at the behaviour of M0 in the early 1970s instead, it would have seen that it did, indeed, warn of the coming inflation.
  In operating and formulating monetary policy, the exchange rate is clearly very important both as a transmission mechanism and as an indicator of monetary conditions. In this country, as in the other major economies, it has come to play a more prominent policy role in recent years, as institutional developments have made the monetary aggregates more difficult to interpret. But as long ago as 1980 and early 1981, interest rates were reduced because the exchange rate was clearly indicating that conditions were tight, despite the fact that at that time there was a monetary overshoot, measured by sterling M3. The 1982 medium term financial strategy explained that, and I quote once again, from the 1982 medium term financial strategy this time:
  "The behaviour of the exchange rate can help in the interpretation of monetary conditions, particularly when the different aggregates are known to be distorted … the Government considers it appropriate to look at the exchange rate in monitoring domestic monetary conditions and in taking decisions about policy".
  —[Interruption.] I have to tell the House, and, in particular, the Opposition, that I am responding directly to the sole recommendation of the Select Committee which was that statements on monetary policy should be made in the House, and that is what I am doing.
  So there should be no surprise about an inevitable and, many would say, desirable development in the appraisal of monetary conditions. Nor, incidentally, as the date of the quotation that I have just read shows, is there anything particularly recent about this evolutionary change.
  Let me now turn to fiscal policy. The Committee's complaint here is not that the Government's policy has changed, but rather that it is the same. Specifically, it is unhappy that the autumn statement reaffirmed the Government's commitment to the same fiscal stance as was set out in the 1986 MTFS.
  I find the reasoning in this part of the report obscure, to say the least. In places the report appears to be hankering after a return to the old neo-Keynesian fine tuning of the PSBR, against which this Government have set their face—indeed that is part of the very essence of .the MTFS. But at the same time, spurred on no doubt by its advisers, the Committee appears to have decided after all these years to abandon the PSBR as the measure of the fiscal stance. No reasons are given for this change of mind other than the fact that the PSBR can be measured either inclusive or exclusive of privatisation proceeds.
  The Committee then goes on to argue that the public sector financial deficit—which is calculated not on a real-life cash basis, but on an estimated accruals basis—is a more "relevant and useful figure". This might be
  1242
  slightly more impressive were it not for table 1 of the Committee's report, which sets out what purport to be the public sector financial deficits for each of the past seven years, together with estimates for this year and next year. For four out of the past seven years, the figures in the report's table are wrong, with an average error of approximately £1 billion. For this year, the Committee's PSFD estimate is a perfectly reasonable one, but its estimate for next year, which, after all, is a matter of some importance, is wholly incompatible, by a very wide margin, with the PSBR figure to which I have already unequivocally committed myself, and which at the same time is incongruously placed alongside it in its own table.
  But much more important than that, on the central issue of fiscal policy, the Committee has no advice whatever to offer the House. It questions vaguely whether the PSBR should be held to 1·75 per cent of GDP next year. But it expresses no view al all as to what would be the appropriate level at which to set either the PSBR or the PSFD. It cannot say whether the Government's current and prospective fiscal stance is too loose, or too tight, or just about right.
  This deficiency, though inexcusable, is perhaps understandable. I recall that last year one of the Committee's specialist advisers was urging a PSBR of £16 billion this year and £17 billion next year—something he may well wish to forget. But I find it very hard indeed to understand the justification for the doubt which the Committee attempts to cast on the Government's commitment to hold the PSBR next year to 1·75 per cent of GDP.
  The reason given in the report for this—that any forecast of the PSBR is uncertain and subject to a margin of error—is beside the point, and reveals something of a misconception. When the Chancellor of the Exchequer on Budget day sets the borrowing requirement at a particular figure, he is not simply making a forecast. He is above all making a judgment about the appropriate fiscal stance and sets tax rates accordingly. And this judgment is an essential counterpart to monetary policy in the Government's overall economic strategy.
  Clearly, the PSBR set at the time of the Budget has to be validated by events. But let us have a look at the record. I have so far introduced three Budgets—in 1984, 1985, and 1986. In 1984–85 the PSBR did indeed overrun, but that was because of the cost of successfully resisting the coal strike—an exceptional event which it was clearly right to take on the PSBR.
  Last year, 1985–86, the PSBR undershot the figure I had set at the time of the Budget. And this year, 1986–87, the PSBR is clearly well on track. Indeed, as the figures for the first eight months published yesterday show, if anything it is more likely to undershoot than overshoot the figure that I set at the time of the Budget of £7 billion. So the Committee's implication that any figure set in the Budget is likely to be exceeded can be seen to be wholly without foundation.
  We have set out to reduce the level of the PSBR, and that is what we have done. At an estimated 1¾ per cent of GDP, this year's PSBR is low by any reckoning, below the general levels of recent years, below the OECD average, and far below the grossly excessive levels from 1974 to 1979, when it averaged nearly 7 per cent of GDP or over £20 billion at today's prices. Moreover, this would still be true had there been no privatisation proceeds at all.

  1243
  I do, of course, take account of the estimated proceeds of privatisation in setting fiscal policy. But, as I have always made clear, privatisation is a policy that is fully justified on its own merits. It is emphatically not a policy undertaken to massage the PSBR. Just ask the 5 million successful subscribers to British Gas.
  Like other commentators, the Treasury and Civil Service Committee has speculated about the outlook for tax cuts. I decided last year no longer to publish a projection for the fiscal adjustment in the autumn statement so as to discourage the pointless and misleading calculations which are regularly made at this time of year. Subsequent events last winter proved that that judgment was right, but speculation nevertheless persists.
  Let there be no mistake about this. As I have said repeatedly, a pound used in additional expenditure is a pound which is not available for reductions in taxation, unless borrowing increases, and I have categorically ruled out higher borrowing.
  The House should therefore be in no doubt that the sizeable increase in next year's public spending plans, which I announced in the autumn statement, means that, despite the current buoyancy of the revenues, I very much doubt whether there will be much scope for reductions in taxation in next year's Budget.
  On public expenditure, the Committee has again engaged in a textual critique worthy of Shakespearean scholars to try to demonstrate a major change of direction. The true position is very simple. We have long maintained that the state takes too much of the nation's income and its share should be reduced. This formulation can be traced back not only to the 1979 manifesto, but even before that to our policy document "The Right Approach to the Economy". And we have pursued this objective consistently.
  It is true that some of the targets we have set ourselves have in the event proved too ambitious. And I have already explained to the House that we thought it right to increase the planning totals this year. But it is better to attempt to meet demanding targets than to have the complete absence of financial discipline to which the Labour party is committed.
  The progress that we have made is considerable. As I explained at the time of my autumn statement, the rate of increase of public spending in real terms, even excluding privatisation proceeds, has come down from 3 per cent in the decade to 1978–79 to 2¼ per cent in the last Parliament and to 1¾ per cent a year so far in the present one. Our latest plans continue this improvement.
  We have also reversed the trend of public spending as a proportion of GDP. Until 1982–83, the previous long-term growth pattern continued, mainly as a result of the severe world recession. But in the four years since then, the proportion of public expenditure has fallen progressively. Our present plans mean that this downward trend will continue so that by the end of the 1980s public spending as a proportion of national income will be back to levels last seen in the early 1970s.
  I have set out the policy in terms of general Government expenditure. I had hoped that the Committee would welcome this approach, because for some time it has criticised me for focusing on the planning total and so ignoring debt interest. Yet this year, when I have based my
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  presentation on an aggregate which includes debt interest I note it now seems to want me to go back to the planning total.
  To sum up, as I said in my Lombard Association speech in April,
  "The policy we are pursuing today is identifiably the same as that which we embarked on seven years ago. But it has clearly evolved—in terms both of presentation and of substance."
  Indeed, it would be extraordinary had it not evolved. Since 1979, there have been enormous changes in world economic conditions, in the position of the United Kingdom, in technology, and in the operation of the financial markets. The Select Committee, the House, and indeed the country would be rightly concerned if Government policy had not evolved in the light of these developments. But to depict this evolution as
  "a substantial change of policy"
  is absurd.
  If the Committee needs to be reminded of what a real shift of policy is, it need look no further than the last Labour Government—pre and post the flight to the International Monetary Fund.
  Indeed, if ever there was a year in which I might have been expected to change policy, it would have been this year, 1986, with the halving of the oil price. Many people duly advised me to make such a change. I rejected that advice, and maintained the same course, and there has been no crisis. Inflation has fallen to levels not seen for almost 20 years. After a short pause, growth has continued steadily. The number of people in work has continued to rise, and unemployment now looks to be firmly on a downward trend.
  The way that both the private sector and the public finances have withstood the fall in the oil price is remarkable. That is the best possible vindication of the economic policy which we have pursued since 1979, a policy which has brought five years of steady growth, low inflation, and a million new jobs since 1983.
  For 1987, I foresee a continuation of this pattern, with growth slightly faster than this year, and inflation staying low. The figures that have been released since the autumn statement confirm that picture. Output and exports have both picked up, with industrial production and exports in the three months to October both 1½per cent higher than in the previous three months and manufacturing output up 3 per cent since the beginning of the year. And the latest estimate that the surplus on invisibles was some £750 million a month in the third quarter of this year, with a still larger surplus likely in the fourth quarter, puts into perspective the advice confidently given to the Select Committee by one of its specialist advisers that the earlier projection of £600 million a month was "particularly optimistic".
  Seasonally adjusted unemployment fell by 25,000 in October, making a total fall of 56,000 over the last three months, the best performance for 13 years. While the inflation rate did rise last month, chiefly as a result of the rise in the mortgage rate, the underlying inflation rate remained broadly stable.
  The outlook for the British economy will, as ever, be critically affected by developments in the wider world economy. One clear danger, which is more acute now following the recent Congressional elections in the United States, is that world trade will become much less free. A retreat into protectionism would be a disastrous step

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  backwards. Following the agreement on a new GATT round, it would be tragic if unilateral action were to undermine this progress. The United States would do well to recognise that multilateral negotiation and moderation where disputes arise are in all our interests.
  The past year or so has seen substantial changes and discontinuities—the halving of the oil price, sharp falls in other commodity prices, and the major realignment of exchange rates following the Plaza agreement. The world economy is adjusting to all this, with, so far, merely a pause in the growth of world trade. In part at least, this is because the major countries have co-operated in pursuing soundly based policies. The world outlook for 1987, at the present time, like our own, is good; and it is crucial that we do not lose our way through a retreat into protectionism.
  1986 has also been a notable year in the annals of the Labour party. It is the year in which it has reassembled carefully all the economic policies that have failed before, and been rejected by the electorate before. It is the year too in which it has broken with the traditions of previous Labour Governments by abandoning the effective defence of this nation. But I had better be careful, because if I am too critical of the right hon. Member for Sparkbrook he may cancel his reply, just as he refused to speak to the Confederation of British Industry last week because it criticised his policies. We have sought in vain for clarity about how he would run either monetary policy or fiscal policy. Even on public spending, his views are—shall we say—less than entirely clear. Ever since my right hon. Friend the Chief Secretary and I costed Labour's programme at some £28 billion—and that was before we had heard about the £6 billion training levy—the right hon. Gentleman has consistently failed to explain how he would finance it, whether by taxation or by borrowing, or by both. If he intends to drop any of the pledges, he should say very clearly which.
  Mr. Alan Howarth rose—
  Mr. Lawson: I am coming to the end.
  I have, of necessity, Mr. Speaker, ranged widely in my speech, and I hope that this has helped the House in its consideration of the autumn statement, even though it is clear that the Opposition are not the slightest bit interested in the economy or in the report by the Select Committee.
  In conclusion, let me come back to the autumn statement itself. The forecast it contains offers the prospects of another year of low inflation and steady growth. It sets out public expenditure plans which make increases in spending in priority areas, within a framework in which public expenditure in total continues to fall as a proportion of national output. It is the latest step in a firm economic strategy which has been pursued consistently since 1979, and I commend it to the House.
  Mr. Alan HowarthOn a point of order, Mr. Deputy Speaker. Is it not a gross abuse of the House—
  Mr. Michael Forsyth: On a point of order, Mr. Deputy Speaker. Is it not a gross abuse of the House —[Laughter.]
  Mr. Deputy Speaker: I shall take the hon. Member for Stirling (Mr. Forsyth).
  Mr. Forsyth: I suspect that it may be the same point of order as my hon. Friend the Member for Stratford-on-Avon (Mr. Howarth) was going to make. Is it not a gross
  1246
  abuse of the House that throughout the Chancellor's speech many Conservative Members who wanted to listen were unable to hear because of the organised barracking led by Opposition Front Bench Members and the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) who has abused the Chancellor's courtesy in telling him that he had to leave the Chamber? Surely Conservative Members have a right to hear the Chancellor and not be subject to such juvenile tactics.
  Mr. Patrick Nicholls: Further to that point of order, Mr. Deputy Speaker. It cannot have escaped your notice that over the past hour there has been a systematic attempt to break up the speech that was being delivered by my right hon. Friend the Chancellor. I appreciate that there is nothing that you can do about the yobbo tendency on the Opposition Benches if the Opposition choose to conduct themselves in that way. However, is there nothing that you can do to ensure that such behaviour is not egged on and actively abetted by the Leader of the Opposition? Is there nothing that you can do to make it clear to him that the standards that are acceptable on a Saturday night at a rugby club hop are not acceptable in the House of Commons?
  Mr. Frank Cook: Further to that point of order, Mr. Deputy Speaker. Is it not preposterous for Conservative Members to make such protestations about the level of noise from Opposition Members when some of the few who have been in their places throughout the speech of the Chancellor of the Exchequer have been visibly slumbering?
  Mr. Deputy Speaker: Order. Hon. Members having got things off their chests, perhaps we can get on with the debate.
  6.11 pm
  Mr. Roy Hattersley: I wish to make it clear, in response to the point of order raised by the hon. Member for Stirling (Mr. Forsyth), that at no time during the speech of the Chancellor of the Exchequer did I abuse him. I propose to start doing that now.
  I am sure that the Chancellor of the Exchequer will recall that when last he addressed the House one British newspaper of some distinction described him as having turned in a "tawdry" performance. I have no doubt that even now the pencils are being sharpened in the Press Gallery. Let me tell the right hon. Gentleman that his performance matched unbridled arrogance with stupefying complacency. During the Conservative party conference it was put about by his advisers that he was being helped in the preparation of his oratorical efforts by one of the scriptwriters for "Yes Minister". I doubted that at the time, but I do not doubt it now.
  Apart from the absurdities at the beginning of the right hon. Gentleman's speech—absurdities that underline the boneheaded insensitivity that marks so much that he does—there was an extraordinary attack on the Select Committee on the Treasury and Civil Service. It was one of the most unexpected attacks that any of us in the House have ever heard. I remind the Chancellor of the Exchequer of the composition of the Select Committee. It comprises seven Conservative Members, three Labour Members and a Conservative Chairman of great distinction, an ex-Treasury Minister, who is, I believe, respected on both sides of the House. Under his chairmanship a

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  Conservative majority turned in a unanimous report. It happened to be a report which criticised the Chancellor of the Exchequer, but to justify an attack on the Committee and its advisers —
  Mr. Nicholas Budgen: Will the right hon. Gentleman give way?
  Mr. Hattersley: No. I should make it clear—
  Mr. Budgen rose—
  Mr. Deputy Speaker (Mr. Ernest Armstrong): Order. It seems clear that the right hon. Gentleman is not giving way.
  Mr. Hattersley: If I give way, I shall postpone the opportunity for the Chancellor of the Exchequer to leave to sabotage the British aircraft industry. I tell the hon. Member for Wolverhampton, South-West (Mr. Budgen) —
  Mr. Budgen rose—
  Mr. Hattersley: I tell the hon. Gentleman and the House that, with the exception of the Chancellor of the Exchequer and that of the Chairman of the Select Committee, the right hon. Member for Worthing (Mr. Higgins), I do not propose to give way to anyone. I take that view because we should be examining—this is what I intend to do—the Government's economic strategy and the commentary upon it which the Select Committee provided. What we should be doing, and what the Chancellor of the Exchequer prevented us from doing in a proper fashion by his earlier behaviour, is taking the opportunity that these debates provide to examine the principles upon which the Government's economic policy is based.
  In the recent past—I believe for seven years—we have at least agreed on what comprised the Government's policy, for the principles of the Government's economic policies were set out in the medium-term financial strategy. We knew what the principles were and we argued about their values and merits. We noted that the monetary targets on which the policies were based were consistently and constantly missed. We knew what the policy and strategy were even as we observed their practical results. These included the highest unemployment level in our history, the highest real interest rates in our history, the worst balance of payments in our history and the lowest sterling value in our history. We have known the results of the policies as we have heard the boasts that have been made about them. We have known also of the money that has been spent in an attempt to ensure their success.
  The medium-term financial strategy can be compared only with the Chelsea football club. Each week the Chancellor announces that he is certain to win the next match. If we take account of history, however, we note that our performance is worse than that of our competitors. We note that our performance is much worse than it was before the medium-term financial strategy was put in place. For years the Chancellor assured us that as long as the Government kept their nerve and adhered to their strategy, eventually interest rates would fall, sterling would appreciate, the balance of payments would produce a surplus and there would be a real and sustained reduction in unemployment. Up to now none of those things has happened, yet on all the evidence, which was
  1248
  documented carefully by the Select Committee, which is the offence which resulted in the abuse that has been heaped upon it, the medium-term financial strategy has, in truth and reality, been abandoned.
  As the strategy has been abandoned, the question I ask, which the House asks, and which the country will ask, is how the Government can possibly justify all the waste and suffering which was inherent in the strategy over the past seven years. If the strategy has been abandoned, for what purpose did we cut public expenditure, close hospital wards, reduce pensions, end local authority housebuilding, increase rate bills and persist with the petty but mean cuts such as the reduction in mortgage interest that is eligible for reimbursement through supplementary benefit payments to the unemployed?
  Mr. Michael Forsyth rose—
  Mr. Nicholls: Will the right hon. Gentleman give way?
  Mr. Hattersley: No. I have made it clear that I do not propose to give way.
  Mr. Nicholls rose—
  Mr. Deputy Speaker: Order. The right hon. Gentleman is saying that he is not giving way.
  Mr. Hattersley: I have no doubt that weak-minded Government Back Benchers will argue that the medium-term financial strategy has achieved its crucial objective of lower inflation. Some, in an excess of loyalty, may even assert—
  Mr. James Couchman: On a point of order, Mr. Deputy Speaker. Is it in order for the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) to refer to Conservative Back Benchers as weak-minded?
  Mr. Deputy Speaker: Order. Various exchanges take place and I am sure that "weak-minded" is not an unparliamentary term.
  Mr. Hattersley: Those who believe that the medium-term financial strategy is still in place and alive and well should consider some of the passages in the Select Committee's report which the Chancellor of the Exchequer did not deal with when addressing the House. I am sure that he omitted to do so only because he was hurried. I repeat that the Select Committee came to a unanimous judgment with a Tory majority under a Tory Chairman. Explicitly on the Government's inflation record, it stated:
  "since its first term in office, the rate of inflation has remained broadly unchanged, and has declined in 1986 mainly because of the steep fall in oil and other commodity prices. Domestic symptoms of inflation have been not greatly affected."
  I remind the Chancellor of the Exchequer of the figures on which that assertion its based. In June 1983, the retail prices index was 3·7 per cent. This month it is 3·5 per cent. It is forecast on the Government figures that it will rise to 3·75 per cent by the end of this Parliament.
  Mr. Alan Howarth rose—
  Mr. Hattersley: No. I shall not give way. More objective predictions suggest—
  Mr. Howarth rose—
  Mr. Deputy Speaker: Order. The hon. Gentleman should know that the right hon. Gentleman has said he is not giving way.
  Mr. Hattersley: I do not want the House to miss the figures, so, because of interruptions, I shall repeat them. In 1983 the retail prices index was 3·7 per cent. —
  Mr. Michael Brown: On a point of order, Mr. Deputy Speaker. The right hon. Gentleman has referred to a Select Committee, and you will recall that a recent Select Committee on Procedure suggested that one of the problems about our debates was that right hon. and hon. Members did not indulge in the old-fashioned practice of giving way, thus ensuring that there was not proper debate. Will you remind the right hon. Gentleman of the findings in that Select Committee's recent report?
  Mr. Deputy Speaker: As the hon. Gentleman knows, that is not a point of order for me.
  Mr. Hattersley: I shall try a third time. In 1983 the RPI was 3·7 per cent. It is 3·5 per cent. this month and rising, and it will be 3·75 per cent. by the end of the year, on the Treasury's own estimates. On a more honest and objective analysis, it will be over 4 per cent.
  Sir William Clark: Will the right hon. Gentleman give way?
  Mr. Hattersley: No.
  In the debate on the economy on 6 November the Chancellor was absolutely explicit about how the Government should be judged. He said that the Government must be judged by what has happened since 1983. Does the right hon. Gentleman accept that criterion, which is his own, for the inflation rate? If so, the Government have not only failed to hold down inflation during this Parliament's lifetime, but will have presided over a period during which inflation has risen.
  I suspect that the Chancellor will shift his ground, as he usually does, and will say that the inflation rate has to be measured from 1980; that being the time when the Government, having inherited an inflation rate just below 10 per cent. and having pushed it up to more than 21 per cent., began to bring it down again. As the Chancellor is arguing with me about the base date, I shall ask him—and I have said that I shall give way to him—to tell us the date from which he believes that the Government's economic record should be judged.
  In a single speech, in one and a half columns of Hansard, the Prime Minister chose five different base years as the basis for her phoney statistics: 1979 for manufacturing productivity; 1981 for economic growth: 1982 for public spending; 1983 for manufacturing output; and 1985 for manufacturing investment. The Prime Minister talks as though the Government came to power bit by bit, when really they are disintegrating bit by bit. The country will want to judge the Government on all their seven years in office. Let me remind the Chancellor of what they involve. Two million full-time jobs have been lost, unemployment has increased by 2 million, manufacturing output is down by 7·5 per cent. and manufacturing investment is down by 17 per cent. Moreover, our manufacturing balance of trade has been turned from a £4 billion surplus into a £4 billion deficit.
  One could go on and on listing the failures of the past seven years. The point is that the failures of the past have all been justified on the promise that as long as we stick to the medium-term financial strategy, everything will come out right in the end. But we now conclude that the
  1250
  medium-term financial strategy has lost its purpose, its heart and its central core. In the words of the Select Committee, the Government
  "lacks a coherent strategy for the setting of fiscal strategy".
  The Select Committee went on to say, in another point that the Chancellor did not deal with, that it
  "notes the disappearance of the Treasury's former claim that the MTFS would damp down inflationary expectations."
  If the Chancellor wants to argue with that, I shall certainly give way to him. Even the promises on public expenditure, the commitments that so excited those new, hard-faced Conservatives who have done well out of privatisation, have been broken. Whether or not the Chancellor likes it, the Select Committee is explicit and precise in describing his change of stance and position.
  The Chancellor's first intention was a reduction in public expenditure. His second intention was to hold it constant in real terms. Now, the best that he promises, or the worst in terms of public services, is that it should be held steady as a percentage of gross domestic product. The truth is that he has constantly failed to hit his targets on spending and on money supply, and now he has left that whole policy to disintegrate.
  The medium-term financial strategy has disintegrated partly because of the Government's hope that they can now suddenly pretend to be enthusiasts for public expenditure, and enthusiastic about the public services that that expenditure provides. But the real reason for the collapse of the medium-term financial strategy is its own internal contradictions.
  In the real world, the medium-term financial strategy could never have worked. It is now dead, and it is being kept from putrefaction by the one firm item of economic policy that the Government possess and the one firm item of economic policy that the Select Committee identified: the commitment to historically high interest rates, which are very much higher than those found in our competitor countries and in our more successful industrial neighbours. The Select Committee quoted the Chancellor's extraordinary words, when he said:
  "the guiding principle of policy is to maintain … a level of short term interest rates that will deliver the monetary conditions needed to reduce inflation."
  The Chancellor made some references to Shakespearean scholars. As he seems to be in a textual and semantic mood, I shall ask him when short term turns into long term. After all, we have had historically high short term interest rates for longer than ever before. He has maintained interest rates at such a high level that manufacturing industry has been unable to afford the new investment that would enable it to expand output and exports, and to drag our balance of payments back into surplus. It is, of course, the Chancellor's interest rate policy that has increased the RPI this month. It was his interest rate policy that pushed mortgage rates to record heights.
  Our real interest rate now stands at 8 per cent., and that uniquely high interest rate is the crutch on which the ailing pound now leans. But it is the policy of high interest rates that has put the pound under pressure, and that has done the damage to sterling from which we now suffer. We all know why there has been pressure on the pound and when it will reappear. International opinion has judged that we cannot pay our way in the world and that without oil we shall become a debtor nation. Those countries have seen oil income fall and they know that it is running out. They

  1251
  have also witnessed the Chancellor's complacency in the face of that. Three months ago he told us that we had lost half of our oil income in 25 weeks and had survived.
  We have survived but at the price of a balance of payments that has moved from surplus into deficit, and at the price of interest rates that penalise home owners and incapacitate industry. That is why, in the long term, high interest rates are putting such pressure on sterling. They have undermined our capacity to export, because they have prevented manufacturing industry from expanding, held back investment, and made it impossible for manufacturing industry to fill the gap left in our balance of payments by the reduction in oil revenues.
  We have survived, as the Chancellor said, at the cost of creating a vicious spiral. The monthly announcement of balance of payments deficits undermines sterling. Interest rates are then increased to prop up sterling. The interest rate increases themselves debilitate industry, making it impossible for it to export, and further undermining our balance of payments. The idea that the Chancellor should think that high interest rates are an unequivocal boon when they are destroying manufacturing industry, destroying our export potential, undermining our balance of payments and therefore bringing fundamental pressure on the pound, answers many of the questions about which international opinion now ponders and wonders.
  Because of industry's inability to invest, to produce and export, last month we had the brief and crude statistical deception to obscure the balance of payments record during the three months in early autumn. That record was a disaster in August, a catastrophe in September and just plain bad in October. It is against that background that the Chancellor says in his more expansive moods, hoping that he can win a few tawdry votes, that public expenditure is increasing.
  As is clear after an analysis of the autumn statement, the real increases in public expenditure that it entails have been very much exaggerated. When the increase is genuine, it is more often than not the result of mistakes rather than intentions. The increase in the social services budget is largely the product of unemployment and therefore higher unemployment benefits. I give the Government credit for that not being their intention when last year's plans were set. On present economic policies, the current level of public expenditure cannot be sustained, for it is being financed by a combination of short-term expediency and long-term profligacy. It is being financed by the sale of public sector capital assets—
  Mr. Nicholls: Will the right hon. Gentleman give way?
  Mr. Hattersley: When I talk about profligacy, I talk about the sale of valuable national assets, badly underpriced so that the Tory party's friends in the City can get them at bargain prices. If that is not profligacy, I do not know what is. Current public expenditure is being financed by tax income, which has come from the boom in credit and consumption.
  Mr. Couchman: Will the right hon. Gentleman give way?
  Mr. Hattersley: That boom is sucking in imports and making certain that our balance of payments is in deficit. That extra tax income—
  Mr. Ian Gow: Will the right hon. Gentleman give way?
  Mr. Hattersley: That extra tax income—what the Chancellor coyly calls buoyant tax receipts—is the direct result of earnings outstripping the inflation rate—levels of wage settlements which he used to condemn—so I ask the Chancellor again, for I am more than willing to give way to him—[HON. MEMBERS: "Come on."] I ask the Chancellor again, for I am more than willing to give way to him, does he still condemn wage settlements that are moving forward faster than the rate of inflation, and if he does not condemn them—[Interruption.]
  Mr. Deputy Speaker: Order. The right hon. Gentleman must not persist in asking the Chancellor of the Exchequer to intervene—
  Mr. Budgen: On point of order, Mr. Deputy Speaker. Is not the attitude of the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) an insult to the House? He is not here to have a private conversation with the Chancellor of the Exchequer. He is here to address the whole House. It is no less than an insult to all of us if he gives way only to the Chancellor of the Exchequer.
  Mr. Deputy Speaker: Order. Fortunately, it is not my job to determine the attitudes of right hon. or hon. Members. It is my duty to uphold the rules of the House. That was not a point of order.
  Mr. Gow: Further to that point of order, Mr. Deputy Speaker. Is it not your duty to ensure that Members of the House can follow what is being said from the Opposition Front Bench? It is extremely difficult to follow what the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) is saying. His speech is so full of inconsistencies—
  Mr. Deputy Speaker: Order. [Interruption.] Order. It is, indeed, difficult to follow the right hon. Gentleman because of the noise from the House. We believe in hearing every point of view, and the House would get on much better if there were not so many interruptions from a sedentary position.
  Mr. Nicholls: Further to that point of order Mr. Deputy Speaker. May I ask for clarification of the ruling that you have just made? As I understand it, you said that because the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersely) has refused to give way, on any new points that arise, he cannot be asked to give way on them. Why is the right hon. Gentleman under your personal protection, Mr. Deputy Speaker, and why can we not ask—[HON. MEMBERS: "Withdraw."]
  Mr. Deputy Speaker: Order. I did not hear what the hon. Gentleman said. It is in order for any hon. Member to try to intervene. It is not in order for him to persist when it is obvious that the Member who has the Floor does not intend to give way.
  Mr. Hattersley: I shall ask the Chancellor my question again. For some years he has condemned wage increases running ahead of the inflation rate. For some years he has attempted to exhort British industry to hold down those increases. It is that disparity between inflation and earnings that has produced the buoyant economy on which he now relies to meet his tax bills.
  Mr. Lawson: Nonsense.
  Mr. Hattersely: If the right hon. Gentleman is saying "Nonsense" while sitting down, will he get up and tell us where the new buoyancy is coming from?. Which of the taxes, VAT or otherwise, is providing the extra revenue? Is it the result of the disparity between earnings and prices? Answer came there none. What the Chancellor knows, and why he is wise not to speculate on those matters, is that the expedient on which he relies for paying his temporary bills cannot last for ever. Sooner or later there will be no more national assets to sell off. I describe that policy as profligacy again. Sooner or later the export—import imbalance will be so great that the right hon. Gentleman will not be able to continue in his present vein. The election tactic that the Government now operate is to pray that they can win the race between a general election and a sterling crisis, and in the meantime spend now in the hope that they will be able to make the country pay later.
  Sir William Clark: Will the right hon. Gentleman give way?
  Mr. Hattersley: No.
  The tax cuts that I confidently predict will come in the next Budget, generally financed out of asset sales, cannot be sustained. Were the Tories to win the election, their victory would he followed by a massive increase in taxation—
  Mrs. Elaine Kellett-Bowman: Like the last time.
  Mr. Hattersley: The hon. Lady is absolutely right. They did it last time. They did it in 1979. I was about to make the point, and I am grateful to her for making it for me, but I shall repeat it. An election victory would be followed by a massive increase in taxation, as it was in 1979. More essential services would be jeopardised by privatisation. There would be more public expenditure cuts. Lord Young's manipulation of Government statistics would be abandoned and even the official unemployment total would begin to rise again.
  That leads me to my one criticism of the Select Committee. It seemed surprised as well as offended that the Chancellor chose to make his policy speeches outside the House to carefully selected audiences of bankers and stockbrokers. They like his policy. His policy has pampered them at the expense of manufacturing industry. They like his policy because it has made them rich while it has increased poverty and unemployment. Outside the charmed circle of his own choosing, the Chancellor relies on bogus statistics and fraudulent forecasts. He may care to comment on this, or tell the Minister of State to do so. He is, after all, the Chancellor who dare not publish his own Department's report on the economic effect of income tax cuts. The truth is that the Chancellor has been rumbled. What made him in such a savage temper today is the fact that he was rumbled by a Select Committee with a Tory majority. That Committee proved—and the country knows it—that the Chancellor lives on arrogance, faked figures and borrowed time. That is why we will vote against his autumn statement tonight.
  6.40 pm
  Mr. Terence Higgins: I greatly welcome the positive response of my right hon. Friend the Chancellor of the Exchequer to the report of the Treasury and Civil Service Committee. Its task is to monitor the operation of his Department and to report to the House on the basis
  1254
  of the evidence that it has received. I believe that it has carried out that duty and provided a better foundation for debate than would otherwise have been the case.
  Before I consider some of the technical matters to which reference has already been made, I should comment on one or two of the remarks made by my right hon. Friend. If I recall correctly, he sought to say that he did not blame the Committee for its report. I am sure that I speak on behalf of every member of the Committee when I state that we accept full responsibility for what was said in the report and that we reported on a unanimous basis. Of course, we take advice from those who have kindly agreed to give us advice, but the analysis and the report are entirely the responsibility of Committee members who have thought out matters for themselves. The report is based on a Chairman's draft, which I prepared. Indeed, I have done little else for the past three weeks or so except prepare drafts for one Committee or another.
  It is wrong of my right hon. Friend to suggest that the report is not the responsibility of the Committee or, as he preferred to put it, that he did not blame the Committee for what was said in the report. Those from outside who advise Committees do so for a pittance compared with what they usually earn. They provide us with expect advice across a wide range of opinion. They are not taken from one or other part of the political spectrum.
  There is a more fundamental point. It is a recognised practice in the House that one does not attack the Government's advisers. The reason for that is sound—they are unable to defend themselves. It is unfortunate, therefore, that my right hon. Friend has sought to ascribe blame—
  Mr. Lawson: They can defend themselves.
  Mr. Higgins: Perhaps they can, but not in the House. However, with respect to the Chancellor, it is not a question of their advice being the Committee's report. That is totally and utterly wrong. The report is that of the Committee. My colleagues on the Committee have developed considerable expertise in the light of the numerous inquiries that have been made.
  I should also mention that the Committee has a wide spectrum of members ranging from the hon. Member for Hackney, South and Shoreditch (Mr. Sedgemore) to my hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen). That is a wide spectrum, and there is much opinion in between.
  Mr. Budgen rose—
  Mr. Higgins: With respect, I should like to finish.
  As economic policy changes, so, of course, the Committee's angle of attack when taking evidence from the Chancellor is also inclined to change. None the less, the report was the unanimous report of the Committee.
  Mr. Budgen: My right hon. Friend seems somewhat offended by the Chancellor's attack upon the Committee. We made a vigorous attack upon some parts of the Government's economic policy. It would have been rude and patronising if the Chancellor had not dealt with such criticism as vigorously as we attacked the Government's policy. There need be no collective sense of irritation because the Chancellor has taken the opportunity to criticise our report with the same vigour as we criticised his policies.
  Mr. Higgins: I cannot agree more. I began my remarks by saying that I greatly welcomed the Chancellor's positive response. On one side of the fence is the business of the Select Committee and on the other side is the Chancellor. It is our task to monitor his actions.
  I want to quote from the report because that is the nub of the Chancellor's concern. Paragraph 4 states:
  "In previous reports we have drawn attention to the fact that, although the Government has been successful in achieving a number of its economic ends, the manner in which these have been achieved has differed from that originally propounded in successive versions of the Medium Term Financial Strategy. It is important that economic policy should be flexible, and able to deal with circumstances not originally foreseen, but we think it would be more appropriate, when policy has obviously changed, for the Chancellor to admit it. Otherwise it is more difficult for us to learn lessons from past experience or indeed to ascertain what present policy really is."
  We drew attention to a number of changes that have taken place. In reply, the Chancellor has stressed that the objectives of economic policy have remained the same. We do not dispute that. Indeed, we emphasise that that is so. However, it is absolutely clear that once we have the objectives—which may be common on both sides of the House—the policy that is adopted to implement those objectives may vary greatly. I do not think that it can be seriously argued, in the light of the clear quotations that we made from previous Budget and autumn statements, that the policy has not changed. We have explained in great detail how it has changed, and I do not understand why the Chancellor objects to admitting that it has changed. No one will complain if the Government show flexibility in these matters.
  It is right that we should acknowledge the Government's achievements, not least in controlling inflation. That is very important if we are ever to combat the basic problem of unemployment. We should also recognise the extent to which employment has been increasing and the rate of economic growth.
  It would be extraordinary if any Select Committee came out with the view that everything that the Government were doing was marvellous. That is not our function. Inevitably, the Chancellor must recognise that Committees tend to be critical, and to a large extent that is their proper function.
  I want to spend a moment or two detailing some of the changes, the most obvious of which has occurred in connection with public expenditure. The Government started off by saying that they were going to cut public expenditure in real terms. Then they gradually moved to a different position and said that it would be held roughly constant in real terms and would decline as a percentage of GNP. That is a radical change in policy, and for many Conservative Members it is a considerable disappointment. The Chancellor must recognise that change. I do not see how it can sensibly be argued that that is not the case.
  The report details the change in the use of monetary indicators. We complain not that the Chancellor has been flexible, but that he insists that he has not been flexible. A similiar observation was made about the exchange rate.
  I want to consider a technical point made by the Chancellor. We say in the report that the public sector financial deficit is a better guide than the public sector borrowing requirement to what is really happening. That is entirely consistent with a point that the Committee has stressed—that the PSBR is not a good guide when the receipts from privatisation are treated as a reduction in
  1256
  public expenditure. We have consistently argued that that is an absurd way of looking at it. We make the constructive suggestion that the public sector financial deficit is a better guide.
  In his speech, the Chancellor objected to the figures that were quoted. He said that some were out by as much as £1 billion. However, if one were to look higher up the page, one would see that the PSBR is subject to a margin of error of something like £2·5 billion. That may be so. We are perfectly happy for the Chancellor to correct the figures if we have got them wrong. After all, he has more advisers than we have and I would not criticise those advisers whatever they came up with. We are perfectly happy to accept the figures that the Chancellor puts forward, but we believe that the concept that we have advanced in what we hope is a practical suggestion is a better guide than that previously advanced. We appreciate that there is a certain convenience about the public sector borrowing requirement—everyone is used to it and to the problems that go with it—but to argue that it is an ideal measure is, in our view, a mistake.
  Mr. Lawson: I have listened carefully to what my right hon. Friend has said. If he wishes—I quite understand this and I have made this point on many, many occasions —if he wishes to look at what the PSBR would be if privatisation proceeds were added back in, in other words, if they were not counted as negative expenditure, it is a perfectly reasonable thing to do. But that is no case for looking at the public sector financial deficit, which is a different aggregate, done on an accruals basis with an accruals adjustment in it, on an estimated basis, and fluctuates in a very unpredictable way and which has no relation whatsoever to underlying conditions. What he has not explained is why, if his problem is privatisation proceeds, he does not simply look at the PSBR with privatisation proceeds added on top and why he goes to the PSFD. That is what I do not understand.
  Mr. Higgins: I fear that I do not have time to deliver the Chancellor a lecture on the subject, but there are substantial arguments—quite apart from the point about privatisation proceeds—in favour of the public sector financial deficit. Indeed, I have argued consistently that the whole thing should be examined in a balance sheet context as well, because that is very important. The Chancellor says that the public sector financial deficit is subject to random fluctuation, but he knows perfectly well that the public sector borrowing requirement does not distinguish between intended changes in borrowing and changes resulting from subsequent external events, so the same argument applies equally to the PSBR. I hope that we can have a debate about this. One of our recommendations—indeed, our only recommendation, as the Chancellor rightly pointed out—is that these matters should be debated on the Floor of the House, not outside. I therefore welcome his intervention and hope that we shall be able to pursue this matter.
  I am anxious not to take up too much time because much has already been wasted, but I should like to deal with two further points. With regard to exchange rates and interest rates, I commend paragraph 19 of our report to the House. In that paragraph we state our belief that at present monetary policy is uncertain because the Government wish to prevent interest rates from rising and the exchange rate from falling. As this relates to changes

  1257
  in policy, I feel bound to point out in parentheses that, although there has been a reduction in the PSBR which I welcome, there has not been the corresponding fall in interest rates that was envisaged when the policy was originally put forward. As we point out in our report, that is because the exchange rate has been given greater emphasis than before and essentially we now have an interest/exchange rate policy.
  The Opposition will he less happy about my next point. I have no doubt at all that if there is any possibility—I do not myself recognise it—of a hung Parliament or a Labour Government there will inevitably be downward pressure on the exchange rate as the election approaches due to fears aroused by Opposition policy. If the Chancellor does not want the exchange rate any lower, as he has stated, there will be upward pressure on interest rates—but he does not want that either. Therefore, as our report points out, there is a real dilemma that the Chancellor has not spelt out in detail and that he did not deal with today.
  Having said all that, I think that in many ways the Chancellor is not over-optimistic. I do not share the concern expressed by some about the balance of payments. I think we are very fortunate that exchange rates have moved as they have, with no great change in relation to the dollar but a substantial reduction in relation to the deutschmark. To the extent that we buy in dollars and sell in deutschmarks, that is a good thing. Given the so-called J-curve effect, we may reasonably hope that the balance of payments will remain secure. Therefore, I do not share the concern expressed by the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley).
  Finally, one of the functions of the Select Committee is to warn of impending problems. We regard that as an important function and we have expressed concern about what the Governor of the Bank of England, in evidence to us last year, described as the overhanging glacier of liquidity. It is a matter for conjecture to what extent comparison of the present situation with the period 1972 to 1974 produces a sense of déja vu. The Chancellor made a point about MO in his speech today. Nevertheless, the Committee is concerned about the increase in liquidity. It is, indeed, an overhanging glacier, but it is largely frozen at the moment due to a combination of interest rates and expectations about inflation. Like my right hon. Friend the Chancellor, I believe that inflation will remain at a very low level—a better level, as he rightly points out, than we have known for 20 years or more. Nevertheless, there is a difficult situation and we should expect the Chancellor, in the light of our recommendation, to analyse it in the House, not just outside. If an important statement is to be made on monetary policy, it is right that it should be made in this House.
  I have spoken for longer than I expected because my speech was not precisely as I expected. We have pointed out the disappearance of rational expectations from the Government's economic policy, and no one in this place should have rational expectations about what is going to happen next. Having said that, I believe that ours is a constructive report and that our comments are fair. The report is part of a continuing debate, and it is a function of the House of Commons to debate these matters in a serious way. Only if we do that can we fulfil the obligation placed upon us by the electorate to ensure that the economy is managed as effectively as we can arrange. I believe that the Select Committee, having produced a
  1258
  unanimous report on this matter, has made a contribution to the debate—no more, no less. We may be shown to be right or we may be shown to be wrong, but the level of debate and the extent to which policy is examined is far greater than it was before the Select Committee system was set up. I believe that that is an advantage to democracy.
  6.57 pm
  Mr. David Penhaligon: I beg to move, to leave out from "House" to the end of the Question, and to add instead thereof,
  "rejects the Autumn Statement presented by Mr. Chancellor of the Exchequer on 6th November, noting that after seven and a half years of the Conservative Government both long-term unemployment and real interest rates are at record levels; further notes that inflation is once again on a rising trend, that earnings are being allowed to increase far ahead of productivity, and that the current account of the balance of payments is moving into rapidly worsening deficit; and therefore calls on Her Majesty's Government to strengthen investment in manufacturing industry, the infrastructure, and training, to negotiate entry into the exchange rate mechanism of the European Monetary System at a competitive rate and to introduce an incomes strategy to reduce the increase in unit labour costs to the level of the United Kingdom's major competitors."
  I congratulate the right hon. Member for Worthing (Mr. Higgins) on opening the debate, as there was very little debate before. The Chancellor's pressing engagement was apparently less pressing than he made out. [HON. MEMBERS: "He has just gone."] I did not expect his patience to stretch so far as to listen to what the alliance had to say. He has never listened before, but he will discover what we have to say when the election comes. [HON. MEMBERS: "Where are your friends?"] There is a higher proportion of alliance Members here than of any other arty. [HON. MEMBERS: "An alliance of one."]
  The Select Committee report makes the obvious point that what were thought to be the all-important guides have been dropped. I tried to intervene to ask the Chancellor exactly what were the distortions of M3 to which he referred. I suspect that there is some truth in his claim that M3 does not accurately record for the nation's interest all that it was thought to record. Some of us never thought that it did. Nevertheless, I should have liked to ask the Chancellor exactly what had allowed M3 to reach 20 per cent in real terms but 23 per cent in absolute monetary terms. Unfortunately, he did not want to reply.
  It is clear from the Select Committee report and from the comments of the Opposition spokesman that there is general recognition that interest rates are the Chancellor's chief weapon today. High interest rates have become endemic in the economy. Few hon. Members are prepared to argue through the reason why the Chancellor is pursuing high interest rates and to outline an alternative.
  The Chancellor has admitted once or twice why he is pursuing high interest rates. I believe that he is pursuing high interest rates because he knows that, with such conditions, the pound is likely to sustain a higher value. Not many would argue with that. It is a deliberate ploy to make exports dearer and imports cheaper. Manufacturing industry therefore has difficulty selling abroad and at home. The Chancellor pursues that policy because he wants to put maximum pressure on what he believes to be the engine of pay settlements that are above what he considers a tolerable level.
  I am willing to continue the argument through, whereas the right hon. Member for Birmingham, Sparkbrook (Mr.

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  Hattersley) is not. I believe that pay settlements during the past several years have been higher than is in the nation's interests. If we want to restore our manufacturing strength and to give some of our young people a real chance in productive employment, we have to do something about pay settlements. As the amendment says, I and my party believe that the method lies with an income strategy which, if announced and discussed during a general election campaign, would command much support, bearing in mind the fact that the alternative is how the Government are running the economy now. High interest rates are destructive. I understand the reason for the Chancellor keeping them high, but there is a less destructive way in which to tackle the problem.
  I am not surprised that the debate has drifted somewhat wide of the autumn statement—we have to discuss the general trend and what policies are being pursued. I am deeply disturbed by several things. It is said with increasing optimism by Conservative Members that we might be entering a period in which the number of registered unemployed people declines. That may well be true, but it is worth remembering why. There are four principal reasons. First, we have had 18 recalculations of the number of unemployed. Secondly, we have the restart interview. My constituency was one of the trial areas, so I have some knowledge of restart, and I am not impressed. Thirdly, there has been a credit boom which is generating employment in shops. Fourthly, the Government have an enormous special measures programme.
  The jobs involved, which are real for the people who have them, fall a long way short of the self-sustaining real employment that we heard so much about in 1979. I do not believe that even that which we have is sustainable for long. We now have 1·2 million people who have been unemployed for more than one year, a manufacturing surplus of £5·5 billion has fallen to a deficit of more than £3 billion and interest rates are the highest in the western industrial world. They are probably 8·5 per cent. in Britain, which is three or four points higher than elsewhere.
  The irony of the autumn statement is that the Chancellor has presented figures which, within his limited ambitions, balance the books, but he has managed to balance the books only because his policies are failing. The Government are near to balancing the books and might be able to make tax cuts, but it is not because their policies have been a success. Consumer credit has increased from 45 per cent. of average annual disposable income in 1979 to 70 per cent. today. We have overtaken the United States in consumer credit during the past 18 months. Pay rises are too high.
  Mr. Alan Howarth: If the hon. Gentleman is concerned about the increase in consumer credit, does he believe that the remedy is higher interest rates?
  Mr. Penhaligon: I did not accuse the Chancellor—[HON. MEMBERS: "Answer."] I do not claim to know the answer to everything but, unlike other hon. Members, I am stupid enough to have a try.
  I did not argue that the Chancellor pursues high interest rates to reduce consumer credit. Consumer credit is out of hand because of its availability and we will have to develop some method of controlling it. We will have to revert to artificial controls such as we had several years ago. I
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  remember, when I was first interested in politics, that Budgets were dominated by charts which said that we could borrow 25 per cent. as opposed to 30 per cent. of the price of a television. If the House applied its mind to the consumer credit boom, it might make progress. I am not arguing that interest rates are the solution—the Chancellor has demonstrated that they are not.
  The Chancellor's programme might be able to deliver tax cuts, but only because of the failure of his policies. He gets a tax break on the consumer credit boom in the shape of VAT and corporation tax. Most of the money seems to be going on consumer goods, and the Chancellor gets a 15 per cent. cut. The vendor gets a profit—at least, I hope he does—and the Chancellor gets a break on that as well.
  As the Chancellor has said, he has had an unexpected tax break from the consumer boom. He also gets a break from the pay rises which he and I believe are too high. He has also gained from public asset sales.
  I shall not argue the economic merits of that, but the fact remains that all those forms of income cannot be sustained. The credit boom cannot continue for ever and we cannot continue to sell public assets. I hope that high pay rises will end too, because they are a self-destruct mechanism. The three pillars of the Chancellor's fortunate position are unsustainable or self-destruct mechanisms. His position can be sustained for one quarter of one third of a Parliament at best, but no long-term recovery for Britain is built in.
  The only alternative that has been proposed today is the alliance amendment. We are drawing near to a general election. We do not know when it will be, but we will be nearer to it tomorrow than we were yesterday. It is amazing that, in a major economic debate, there is no official Opposition amendment saying what they would do.
  We make it clear what our fears are and what we believe is an alternative. We must start to invest in manufacturing industry, infrastructure and training. We must negotiate entry into the exchange rate mechanism of the European monetary system at a competitive rate and introduce an incomes strategy to reduce the increase in unit labour costs to the level of our major competitors.
  Some hon. Members, when trying to be elected to Parliament, are afraid to say, "Elect us to power and we shall keep your wages down." They are right that that does not sound like a ringing phrase which, when delivered to the nation, will cause it to vote for them. At the general election this Bench will explain to the British people why, without an incomes strategy, there is no alternative to the way in which the country is at present run, no hope for young people and no re-establishment of our manufacturing base. Without that ingredient, at best we carry on as we are and at worst have a Government who not only have no incomes policy but who spend money as if it grows on trees. Therefore, we shall vote for our amendment, believing that it makes a useful contribution to the debate.
  7.10 pm
  Mrs. Marion Roe: I welcome the autumn statement and its reaffirmation of the Government's determination to achieve the conditions in which this country can flourish. In particular, the statement emphasised two key points: first, that rigorous control of public expenditure will always be vital to the economy,

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  and, secondly, that that has been the base of economic growth which has allowed for increased resources for priority programmes.
  I shall concentrate on the provision for local government and taxation policy. Local government receives the largest increase in the changes that have been outlined. It continues to have a significant effect on public expenditure, and the increase for 1987–88 alone is some £4 billion. In a single year, taxpayers will contribute through aggregate Exchequer grant an additional £1·5 billion.
  In theory, that should keep rate rises low—at worst, in line with inflation. Yet we are already hearing rumours of large rate rises planned in some authorities, particularly in the London boroughs. At the same time the Audit Commission has reported that the financial behaviour of some authorities is heaping up trouble for the future. Some authorities have entered into financial arrangements with city institutions, apparently in the belief that they will be bailed out in future. That is alarming.
  According to the Audit Commission, in London some £600 million has been borrowed and in Sheffield the figure is £110 million. When repayments start, the citizens of Sheffield and taxpayers will be repaying at a rate of £25 million a year for seven years. That is about 10 per cent of Sheffield's total budget.
  What implications will that have for future public expenditure control? Are these sums included within PSBR figures? 'There is nothing illegal about these arrangements; either future rates will have to take them into account, or some solution will have to be found by the Exchequer.
  We have already heard that Opposition Front-Bench Members have decided to bury their heads in the sand about the activities of those Labour councils. A responsible Government cannot do that. Within the next three years, the problem will have to be solved. It remains to be seen whether the sensible introduction of the community charge will be enough to bring proper accountability to Labour councils. Let us all hope so. With local authority current spending up 9 per cent this year, the thought of these irresponsibly financed borrowings adding to that is greatly disturbing. We need to hear louder condemnation from the Opposition. Otherwise, ratepayers will begin to realise that they are as unfitted for government as some of their councillors are for local office.
  On the tax side, the statement was encouraging. The buoyancy of non-oil revenues would appear to indicate a strong level of underlying economic activity. I congratulate the Government on their achievement of a PSBR unchanged from the Budget forecast, despite the huge drop in oil revenues.
  That raises an interesting point. We have heard that the Opposition plan to include in their manifesto for the next election a pledge to raise £3·5 billion by excess taxation of people whom they describe as very rich. Once again, their thinking seems to be set in old, failed policy.
  A recent conference organised by the Adam Smith Institute concluded that there was increasing evidence to suggest that reductions in income tax would lead to a greater overall revenue for the Treasury. The consequences of that should be examined, particularly in relation to the boost it would provide to economic activity and entrepreneurial flair. At a time when our major
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  economic competitors, regardless of political persuasion, are cutting tax, we need to examine as carefully as possible the feasibility of extensive reductions in rates.
  Finally, I should like to congratulate the Government on their resolve to pursue the reform of personal taxation, in particular through the mechanism of transferable allowances.
  7.16 pm
  Mr. Robert Sheldon: We heard a distinguished contribution from the right hon. Member for Worthing (Mr. Higgins). He stated the case, not only for the Treasury and Civil Service Select Committee, distinguished and important though it is, but for all Select Committees when he pointed out that the Government rubbished his Committee's report. That is utterly wrong.
  Select Committee members are chosen by the House. Their task is to report to the House and inform us of the views of several individuals, acting together largely, but not always, in a non-partisan way. The Treasury and Civil Service Select Committee has met the finest standards that we have known in that regard. When we look at its work and advisers, it is clear that to diminish them is wrong.
  Some years ago, when I was a member of that Committee, I was pleased and surprised that we could pick the best advisers that we could name. We chose them ourselves. In those days we had a rule that, if more than one hon. Member wanted a specialist adviser, that specialist adviser could be selected to help the Committee. We had five specialist advisers and they were the best advisers that we could think of. They all agreed immediately, despite the pittance that they were paid. To abuse them after they have given their distinguished services is utterly wrong, and the Treasury Bench should be aware of that.
  Over time, the expertise of the Committee has increased. It does not act over the whole range of responsibilities of the Chancellor of the Exchequer. It does not have to attend Cabinet Committees and perform the many other tasks which the Chancellor must do. Therefore, in the areas for which the Committee has responsibility and in which it has an interest, it becomes extremely expert. Together with its expert advisers, it can question policy in a way that the Chancellor of the Exchequer, however able and well-served he is, cannot question it.
  The Committee sees people who are at a much lower level than the people whom the Chancellor would normally see. The members of the Committee see the people who initiated a policy, not those who consider its consequences. They question their assistant secretaries and under-secretaries and find out how the policy came to be adopted in the first place. Then, rightly—continuing the practice that was introduced when I was a member of that Committee—they see the permanent secretary or perhaps the special adviser to the Chancellor and then continue the investigation, bearing in mind the knowledge that they have gained from the people who formulated the policy. They see how the policy was adapted.
  Finally, the Committee meets the Chancellor of the Exchequer. I have known Committee members who knew more about a matter than the Chancellor. They used to smile indulgently and the Chancellor looked a bit sheepish. Everyone knew that the Chancellor had got it wrong and that the Committee had got it right. They did not make much of that. It is normal for that to happen when a Select

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  Committee with good advisers and good members decides to investigate a matter in which it has an interest. I am delighted to see that tradition exemplified by the character, demeanour, behaviour, interest and concern of the right hon. Member for Worthing, who shows his value not only in that Committee but in the Liaison Committee of which I have the privilege to be a member.
  I say to the members of the Committee, "Carry on your work." It is clearly wrong for Ministers to show disdain for such a distinguished Committee. Ministers are servants of the House, as indeed is the Select Committee, which also acts on our behalf.
  I agree with the comments of the right hon. Member for Worthing and the hon. Member for Truro (Mr. Penhaligon) on the autumn statement. The amount of money in the economy is a worry to us all. I see from the latest figures that, in October, £2·8 billion of new credit was advanced by finance houses, other specialist creditor guarantors, retailers and bank credit cards. The sums involved are substantial, because house prices have increased enormously.
  The hon. Member for Stratford-on-Avon (Mr. Howarth) asked the hon. Member for Truro whether he wished interest rates to rise. We must go further back than that. We must understand why house prices rose so enormously. A person with a £40,000 house probably bought it some years ago for £20,000. He may have a mortgage of £10,000 on it and he has £30,000 of collateral. When he walks into a finance house or a bank he is welcomed with open arms. Millions of such people are welcomed with open arms in a way they would never have been years ago. They have collateral that only a few people used to have.
  We must ask why house prices have risen. One reason was mortgage interest relief. It makes economic sense, not for the nation—heaven forbid—but for the individual to overhouse himself. As soon as he has managed to reach some equilibrium in the purchase of a house, he sensibly looks to the purchase of a larger and more expensive house to make use of some of his available money. In the rush for these bigger and better houses, prices go up. As the prices rise, the collateral goes up, and as the collateral goes up so, too, does the credit advance. That is one of our major problems.
  The north-south divide is causing me increasing anxiety. I am an ex-officio director of the Manchester Chamber of Commerce and Industry. Many of my friends have been associated with it for 20 or 30 years. A claim that I make on their behalf is that they tell things as they are. I always tell them, "I know that you are not all Socialists, but for heaven's sake when you see Ministers please do not get involved in questions of money supply and the public sector borrowing requirement. There are clever people in Government who know all about that sort of thing, but you know what they do not know. You know something about orders, expansion and exports. You go there and you feel that they are cleverer than you. You are wrong. In your area, no one knows more than you." So it was with great pleasure and great delight that, on Thursday of last week, I heard the president of the Manchester Chamber of Commerce and Industry telling it as it is.
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  We need a wider understanding of his comments, made in the presence of the Prime Minister. The Prime Minister changed her speech either because she knew what he was going to say or as a consequence of what he said.
  The president repeated the claims made by the chairman of the Conservative party:.
  "The north of England has only itself to blame for its problems. He said we suffer from self inflicted wounds which were listed as appalling industrial relations, failure to adopt new technology, left wing councils, and doom merchants. He said that the people in the north are complaining that they are not getting a fair share of the nation's resources."
  The president discussed those points one by one at a splendid dinner in the heart of Manchester. He said:
  "It seems as though we have been giving out some unclear messages. After Tebbit's blast for the North, here is Morris's retort from the regions. Let me take Mr. Tebbit's points one by one. First, industrial relations in Manchester have been traditionally excellent. This is fitting in the city which gave birth to the Trades Union Congress."
  I cannot remember a strike taking place in my constituency. The firms are small, largely engineering; they are owned by the person who is there on the shop floor and problems are settled immediately. The trouble is that not as many of those firms exist as existed seven years ago. Just over a third of them are left. They are the small firms that are supposed to have been given encouragement. They are small, medium-tech, highly skilled engineering firms. They should always have a place in any country, whether it is Japan, the United States, France, Germany or wherever. Traditionally, our industrial relations have been excellent.
  The president of the Manchester Chamber of Commerce and Industry mentioned the Tory party chairman's second criticism of the north—its failure to adopt new technology—and said:
  "What an inappropriate criticism for the cradle of the world's first programmable computer, headquarters of the National Computing Centre, ICL and Ferranti, and home of Europe's biggest university campus which is heavily biased towards technical innovation."
  The president then mentioned his third attack, on Left-wing councils. I remind the House that that chamber of commerce is not a Socialist grouping. He said:
  "They are not peculiar to the north west. But frankly we in the business community are making a far better job of partnership with local government than Westminister seems able to do."
  The president also said that certain campaigns were a notable example of local business and local authorities working together.
  We do not give local government sufficient credit. It is much more efficient than central Government. The advantage of local government is that councillors and employees and anyone connected with it pass by the problems every day on their way to work or on their way home. What do the people in Whitehall see of these problems? They read about them, if they are lucky. No one doubts that there are some silly councils, but there are also some silly civil servants. We must not forget that, nor the fact that there are some useless Ministers, too. We must not assume that the solutions lie in Whitehall, remote from where the problems exist.
  We see how the criticisms of the chairman of the Tory party were counterblasted by the president of Manchester chamber of commerce. He said enough to demonstrate his positive belief in and practical commitment to the economic potential of the region. He stated:
  "We do have a problem and we do believe a change in central Government policy is needed to help us put it right. It is a problem which, if allowed to get worse, will not just

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  prevent the north west from exploiting its potential but will strangle our national growth. This problem is known … as the north/south divide but it is actually much more specific than that. It is the escalating concentration of the nation's wealth and resources in the south east. To illustrate the problem consider the wealth of the average English person. It is made up of income and capital. Let us take income first, or to use the jargon of official statistics 'personal disposable income per head'. Income in every single region other than the south east is less than the national average."
  That is the predominant statistic.
  The president continued:
  "What about the Englishman's capital? The most valuable item most people ever possess is their house … In every other region house values were below the national average."
  In the south-east, they are well above the national average. He continued:
  "We all know that the south east is the richest region. But how many realise that the excess wealth in the south east is now sufficient to balance the deficit in wealth of all the other regions put together?"
  That is the price we pay for a policy that is geared and motivated towards the City of London, which produces enormous advantages to those who deal with finance and enormous disadvantages to those who deal with the production of manufactured goods.
  The problem was analysed 60 years ago by Winston Churchill when he was Chancellor of the Exchequer. Everyone knows about the problems. The trouble is that the City of London appears daily on the Chancellor's doorstep, whereas the remote regions are visited by the Prime Minister and by other Ministers only now and again.
  Mr. Alan Howarth: Does the right hon. Gentleman recall that, during the Labour Government of which he was a distinguished member, when regional policy was in its heyday, the northern regions prospered relative to the south and south-east?
  Mr. Sheldon: All that I know is that, during the past seven years, my constituency has lost 35 per cent of its manufacturing companies. All that I know is that, seven years ago, pay was higher than the national average, whereas it is now lower. Our unemployment was lower than the national average, and now it is higher. That has happened because of the changes in regional policy.
  The president of the chamber of commerce went on to mention the implications of the serious gap between north and south. The House is largely divided between north and south, more's the pity. We used to have the enormous advantage of being a united country. Things that happened in one part of the country tended to happen in another, and people's views in one part of the country tended to be similar to views in other areas. The president said:
  "The implications of this widening gap for the national economy are serious. We now have severe skill shortages and labour shortages in the south east with high unemployment everywhere else … Now we have a growing inability by executives and technical staff to move between the south east and the regions."
  The problem is the price of houses.
  The president pointed out to the Prime Minister that, in Manchester,
  "we search in vain for some indication that Government is adapting its policies to take account of the problem."
  There was a time when we addressed ourselves to problems and said that there was nothing insuperable in a problem as important as unemployment. We said, "We cannot be considered as an effective Government unless we can solve
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  those problems." The Government are not dealing with the problem. They are dealing with the unemployment figures, but not with the problems of unemployment, and their failure in that regard is one of the most severe accusations that can be made against them.
  The president mentioned the Government's failure to decentralise the Civil Service and commented on the massive public investment in infrastructure to serve the Channel tunnel and to complete the M25. There is some anger about the fact that all the giant projects tend to be in the south of England. He also mentioned the expansion of London's three airports and said that those projects
  "will fuel the south east furnace for a generation."
  The president went on to say to the Prime Minister:
  "The reason you and your colleagues hear so many complaints outside London … is because frankly we do not see a willingness to address this problem."
  Finally, he quoted from
  "an illuminating letter from the Parliamentary UnderSecretary of State for Industry … stating the Government's view that London offers the best professional and legal expertise, communications, living and leisure facilities. With that kind of bias, there is no wonder Government is ignoring the vastly superior investment potential of the regions."
  It is useless to talk about a population movement given the housing market. When I was a young man and I went to a new town to get a job. I could walk down the street and get lodgings easily. One cannot do that today. There was much more mobility of labour in those days than there is now. There will be an increasing division in the country. Not just its economic implications but its political implications alarm me. Of course, we will get a few more Labour seats in the north, but that is not the most important thing— [Interruption.] Please do not smile at this. This is one of the most serious problems facing us. When I get out of the train in Manchester, I can sense the deprivation there. When I get out of the train in London, I can sense the affluence here. I may be wrong. Millions of people in the north may be wrong. But the Government must take note of the strength of feeling that exists and must do something about it.
  7.36 pm
  Mr. Michael Fallon: One aspect of the Select Committee's report that cannot be faulted is its analysis of public expenditure. I only wish that the Select Committee had been as ruthless in its examination of the reality of public spending as it was in its examination of the rhetoric used by the Government to explain it.
  If the autumn statement was the U-turn that it has been painted, I would have welcomed it. On the contrary, all that it seemed to signal was what we already know: that public spending is increasing and, to confirm what we already fear, that public spending will continue to increase. Between 1979 and 1989, the average annual increase in public spending will be about 1·3 per cent. Under the Labour Government, the average annual increase in public spending was only 1 per cent. Indeed, if we exclude receipts from privatisation and the sales of houses and of land, under this Government average annual public spending has grown by about 1·6 per cent a year as against a reduction in public spending of just under 1 per cent during the five years of the Labour Government. The continuing growth in public spending leads me to doubt the Government's new objective of reducing the proportion of gross domestic product consumed by public spending.

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  I enter three caveats on the Government's objective. First, we have not yet reduced the proportion in relation to the figure that we inherited. When we came into office in 1979, it was 43·3 per cent of GDP; today it is 44·5 per cent. Secondly, the target expressed in the autumn statement is the fairly minimal one of 42·75 per cent by March 1989, or a reduction of only 0·55 per cent over 10 years of Conservative government. Thirdly, it is only a relative target. If GDP growth has been averaging 3 per cent a year since the end of the recession in 1981, the Treasury might ask itself why we cannot expect public expenditure to fall in absolute terms from the total that we inherited in 1979.
  There are several reasons for this. First, public expenditure continues to be dominated by public sector pay. We all know that pay and pensions in the public service take a huge slice of public expenditure. What is fascinating, looking back over the past seven years, is that despite all the privatisation that we have achieved, despite the cuts in Civil Service staff, pay restraints across the public sector and the freeze on town hall recruiting, wages and salaries in central and local government consume roughly 27·8 per cent of central and local government spending—almost the same proportion as when we came into office in 1979. In some individual programmes, the percentage is very much higher: 70 per cent of the law and order programme, 60 per cent of the education budget and half of the cost of the National Health Service. We have not yet succeeded in reducing the proportion of public spending consumed by public sector pay.
  It should be obvious to all of us that either we impose more central control over the pay arrangements of public service workers, teachers, police, and so on, or we delegate that function to responsible local bodies that can truly reflect the realities of regional labour markets. The middle way—such as we have seen recently with teachers' remuneration and other public sector groups—simply leaves public spending as a whole at the mercy of indirect pressures that Ministers cannot control.
  The second reason why we have not succeeded in controlling public expenditure is that so much of it is constructed on the basis of political entitlement rather than continuing need. There are sectional interests, to which reference has already been made. One is the demand for mortgage interest relief on second, third, fourth and fifth mortgages taken out by families. Another is the payment of three quarters of the amount spent on child benefit to people in receipt of no other payment, and thus the payment of a fairly meagre sum to those who need it. The addition of both those sectional interests and their removal could allow a reduction of income tax to 20 per cent—far beyond my right hon. Friend the Chancellor's target of 25 per cent.
  As well as the sectional interests, there are important geographical interests. Most dramatically, there is the consistent and continuing over-provision in Scottish spending. The territorial analysis of the outturn for the year 1985–86 shows that spending per head in Scotland is now £2,362 compared with £1,838 in England. That is a discrepancy between England and Scotland of over 20 per cent., and in some programme areas the difference is very much wider. There is 80 per cent higher spending on industrial support in Scotland than in the regions of the
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  north-east and north-west directly across the border. There is 94 per cent higher spending per capita on housing in Scotland than in England.
  As well as over-provision of public spending in Scotland—the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) should particularly note this point—there is also a continuing subsidy not to the poorest regions in England but to the wealthiest region. I refer to the subsidies to London and south-east commuters through the £300 million a year subsidy to British Rail and its south-east services and the £275 million a year subsidy to London Regional Transport. It is nonsense that the most prosperous area of the United Kingdom should be in that part of the railway network that is most heavily subsidised.
  Thirdly, public spending is still dominated by the demand-led pressures that have been all too familiar from the early years of the Government—agriculture and social security. The containing of such pressures cannot be left to departmental Ministers alone and cannot be dealt with in the annual Public Expenditure Survey Committee round. We need a more concerted attack, combining more than one Department, if we are to get to grips with pressures in both of those sectors.
  If I have emphasised the need for continuing restraints on public spending, it is because I wish to seek much further scope for reductions in the burden of direct taxation. I say that because, by my calculations, 7 million people earn less than £7,000 a year. From next year, they will pay a higher rate of income tax than top earners in the United States. We cannot substantially increase their standard of living in any other way than by reducing the tax burden upon them. If they are in the public sector, given low inflation and continuing pressure on public spending, we cannot expect pay awards to be high. If they are in the private sector, given the surplus of labour and the need to keep down our unit labour costs and improve our competitiveness against our European partners, we cannot expect substantial pay awards. The only way in which we can raise the living standards of low-paid people is by deep cuts in personal taxation.
  I am certain that only this Government can provide the necessary cuts in taxation to improve the living standards of the low-paid. The Opposition parties cannot help. They can only suggest nominally increasing their wages by printing more money or borrowing it and leaving them to the mercy of higher inflation. Only this Government, by substantially reducing the burden of direct taxation, can improve the living standards of low-paid people. It is a profound disappointment to me that I am not as sure now that we are on the road to meeting that target as I was before the autumn statement.
  7.47 pm
  Mr. Austin Mitchell: I hope that the hon. Member for Darlington (Mr. Fallon) will forgive me if I do not follow his argument, because it is one that both time and the Government have passed by. It was an interesting argument, and probably relevant in 1979 and to Government policy in 1980, but now it is best relegated to the deep freeze of history. The hon. Gentleman should carry his own glass case around with him if he continues to put such an argument to a Government like this.
  I shall not even deal, as I was going to in my immediate anger, with the Chancellor's vicious and rather silly attack on the Treasury and Civil Service Select Committee,

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  because the right hon. Member for Worthing (Mr. Higgins) has well and effectively put the Chancellor in his place. It is best to treat these things dismissively. It was an unnecessary, cheap, petty, vicious and silly attack, and it was entirely in character. All that we can do is to be dismissive of it. I am afraid that this is the way that the Chancellor is beginning to behave before the Committee, and he treated it with contempt in his personal appearances. That is a measure of the man—the fun Chancellor, lightweight in everything but physical shape. If he wishes to act in that fashion, we shall have to judge him on that basis.
  A major change has taken place in Government policy. For example, in 1980 we were told that the exchange rate was a mere residual. Clearly, the exchange rate is now central to Government policy and a central technique of management. In many respects, in managing the economy through interest rates being high and exchange rates being kept as high as possible, the Government have reverted to the norms of previous Governments since the late 1950s, even Labour Governments, except that, unlike previous Governments, they do not have the incomes policy that most previous Governments had to deal with the situation.
  The Government have reverted to the depressing norm of British economic policy. However, there has been a major change. If the Chancellor were to look at the Labour party's economic policy in 1983, he would find that he has implemented most of our major recommendations. We urged a 30 per cent. devaluation. There has been a 30 per cent. devaluation since the change in the exchange rate at the end of 1982, and it has not been accompanied by the inflationary consequences that the Chancellor predicted. We urged that public spending should be increased and referred to a public sector borrowing requirement—it should have been called a public sector financial deficit because of the Government's privatisation programme—of about £15 billion. Next year we shall have that, too.
  We referred to getting rid of monetary targets like M3. The Chancellor is getting rid of them. It is no wonder that he is getting rid of monetary targets like M3, because he has been unable to control them, as the Government said they would control them when they came into office in 1979. Up to the end of September, M3 had been increasing at an annual rate of 18·2 per cent. Because of the increase in M3, inflation should increase substantially on their terms. Since 1979, M3 has increased by 165 per cent., yet prices have increased by only 65 per cent.
  What, then, about the connection that the Government told us would be central to their policy of proper control of the money supply leading to control of inflation? The Government have not controlled money supply, but inflation has not increased as it ought to have done, according to their theories.
  The Labour party's manifesto of 1983 stated that the balance should be shifted. We said that there ought to be, not tax cuts but Government spending to help jobs. The autumn statement does exactly that. We wanted more jobs to be created through public spending. Those jobs are now being phased in, in an attempt to get unemployment, on the Government's cooked figures, below 3 million before the general election.
  In 1983 the Government said that all those policies were impossible, but they have now become a central element of the Government's policy. They are too little and too late, but now they are there. In 1983, however, we were
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  told that our plans were irresponsible. I welcome the Government's conversion, but the Chancellor has much further to go on the learning curve upon which he has now embarked.
  Either the lady is for turning, or we should redefine the word "turning". These are major turns in the Government's policy. Government policy is now like "Dallas". There was a certain episode in "Dallas" when the curtain was pulled apart, there was Bobby in the shower, and Bobby was alive, after all. We realised that all the preceding episodes were a dream. Likewise, we realise that all the policies that the Government have implemented since 1979 are a dream. Unfortunately, the nightmare consequences of those policies remain. The fact is that 4 million people remain unemployed, manufacturing capacity has been reduced by 30 per cent., and employment in manufacturing industries has been slashed by 28 per cent. The fact also remains that this country is now a net importer of manufactured goods.
  Those are the consequences of policies which now, apparently, are a dream and unnecessary. The economics of incompetence have now been replaced by the economics of electioneering. The Government have wasted the oil by investing the revenue from oil in the productive capacity of our overseas competitors so that those revenues will be dribbled back in rentier dividends to keep up the value of the pound and to destroy and weaken manufacturing—just as happened in the Victorian era when the Tory Government paid similar rentier dividends.
  The Government have used the oil revenues to bring in imports, thus destroying jobs in this country. They have wasted the growth which we could have had, which would have improved the quality of life for our people. Since 1979 the growth rate has averaged 1·2 per cent. It is pathetic. It is the lowest growth rate in British history since the war. Because of their incompetent and irresponsible management, that is the achievement of this Government. The Government have thrown away the additional growth that this country could have enjoyed.
  What is more important, they have wasted the greatest opportunity in British history to expand. Our oil revenues would have allowed us to ride out the balance of payments problems and to invest in manufacturing industry. It was starved of investment. We have wasted that great opportunity. It will never return. The irresponsible economics of this Government have led to the wasting of that great opportunity. They have taken us back to the balance of payments trap in which previous Governments have wallowed. We are sliding back into the balance of payments trap, haplessly and helplessly, but now we are weaker than we were before the interlude of Tory irresponsibility.
  There is under-investment in industry, the work force is under-trained and under-skilled and productivity is still too low. It is lower than the productivity of our competitors. All that the Government have done to improve productivity is to take the advice that I give to the Yorkshire county cricket club: to improve its batting average by shooting the last four batsman. The Government have used that technique to fiddle the increase in the productivity figures.
  Labour costs are rising far too rapidly and imports are rising far too rapidly. All that is keeping the economy going is a consumer boom. The Government have helped to generate that consumer boom, but it is financed by credit. It will suck in more imports, which will result in a

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  rapid deterioration next year in the balance of payments. The Government make noises and preach sermons about wage increases, but they do not want them to stop. They are helping to sustain the consumer boom upon which they pin their election prospects next year.
  I emphasise what was said by my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) about the growing gap between the north and the south. The credit boom is widening the gap between the north and the south. Asset speculation is being fuelled by house prices. Our society is based on the continuous creation of collateral. House prices are increasing, the lending institutions are prepared to lend more money on increased house prices, and the increase in lending on the increased house prices increases the house prices even further, thus making them worthy of more credit. This North sea bubble will burst at some point. It threatens the economic health of the country and it creates a wide gulf between the north and the south. Paper millionaires are being created by house prices in the south. My dog kennel or my garage in London is now worth more than my house in Grimsby. The gulf has now widened to the extent that people cannot move from the north to take jobs in the south simply because they cannot afford to bring their families with them.
  The balance of payments problems will cause a major threat to sterling next year. The Chancellor's policy, in the face of that crisis as he described it to the Treasury and Civil Service Select Committee in his usual dismissive fashion, is one of non-accommodation. He says that he will force industry to keep down its labour costs by keeping interest rates high, thus keeping sterling high. Industry will be punished by cheap imports. Sterling will be kept high by interest rates. The markets, if left to themselves—and the Government believe in market forces more than I do—will bring down sterling. The market will be defied only on this question of the exchange rate. It will be defied by the prop of high interest rates. That is the discipline on industry. That is the logic of the Chancellor's thinking. To punish industry, and to stop it increasing its labour costs, he will keep interest and exchange rates high.
  That is the policy of non-accommodation and reveals that the Government do not understand industry. They do not understand its dynamics, its organic nature or the painful effort of investing, building business, winning markets and trying to hold and expand those markets. They do not understand how industry is threatened by the crude tactics of high interest rates, higher than those of any of our competitors, and by an exchange rate which threatens the markets which industry is desperately trying to retain.
  The Government may understand money and fiddled figures like MO and M3, but they do not understand industry as an organic being. Indeed, they treat it rather like an exercise horse, pummelling and jumping on it, but they never try to encourage it or help to make its way easier in the same way as our competitors help their industries. There is no logic in punishing industry in this way. It is being asked to do what it cannot do. Industry cannot control most of the increases in wage costs that are now taking place. How can it? What is it to do—interrupt production and lose its markets?
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  Because of the skill bottlenecks, industry will have to pay to attract the skills that it needs. Is it to deny itself those skills? How will it survive unless it goes along with the trend of escalating wage costs? The engine of inflation is no longer industry. The inflation that we have now is not goods inflation; it is asset inflation, and its engine is the rich and not industry. The engine is the financial sector, the City, the company directors who are paying themselves more. The engine is the escalation of asset prices in the south-east, and industry is being punished because the Government will do nothing about all those things. All they do is preach sermons while their friends feather their own nests and get fatter at the expense of the country. The Government then punish industry for the consequences of their action. What kind of logic is that, and what understanding does it betray of the dynamics of industry?
  The front line of the economy is the internationally traded sector. We are asking that sector to run in a fierce competition with a ball and chain on each leg. On one leg it has high interest rates, which penalise investment and stop industry making improvements in productivity and research and design and all the other improvements that it has to make to the quality of its products, and on the other leg industry has an exchange rate which prices its goods at an uncompetitive level. The exchange rate subsidises imports and taxes exports. That is how it works, and the Government use that quite deliberately to make a section of society better off through cheap imports. They do that in the hope of winning the next election.
  We must divert resources to the emerging balance of payments problem if we are to survive and pay our way in the world. The only way to divert resources to the balance of payments is by a competitive currency channelling investment into industry. The Government are creating a once-and-for-all increase in the standard of living. As my right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) said, that is being done particularly in the south-east, because it certainly does not have much effect in Grimsby or in any of the huge areas in the north, the heartland areas of Britain.
  The Government are creating that once-and-for-all effect through wage inflation and cheap imports, and as a result they are producing all the classic consequences of over-valuation for sterling and consequent harm to industry and its ability to survive in the world. The Government's policy is essentially a holding operation. The Chancellor is trying to bamboozle the electorate with tricks which he cannot repeat and policies which he cannot sustain in order to keep a rickety show on the road until after the election. He is standing in front of the curtain with that marvellous dead-pan Buster Keaton expression at which he is so good and is trying to keep the electorate amused by unsustainable policies in order to distract attention from the disasters behind the curtain. Those disasters are 4 million unemployed, a rising rate of inflation, national decline, an increasingly shabby society and the growing needs of the Health Service and education and all sectors where public spending is important.
  The Chancellor's conjuring tricks are a little more public spending and perhaps tax cuts in the Budget, and he will do that until the election comes along. All the auguries are that the election must now be early rather than late, because of the unsustainable nature of the Chancellor's economics. If the Government win the election, the Chancellor plans deflation, still higher

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  interest rates, a further squeeze and eventual tax increases, because he will have to increase taxes. He will do all those things because they fit the logic of his policy. He will have to increase taxes to replace the revenues that privatised industries are no longer bringing to the Government. Those things will not provide a solution; they are not the way out. They are a holding operation, and that is a disgraceful, irresponsible waste of Britain's time, economic effort, industry and employment.
  The Government's policies have manifestly failed, and that is why they are changing them and getting out of policies which are discredited, unacceptable or unworkable. When we form the Government, we will expand the economy. Central to that expansion must be the exchange rate. Since 1968, we have lost 4 million jobs in production industries because we have lost markets at home and overseas. The prime reason for losing those markets is a non-competitive exchange rate. We cannot regain those jobs and begin the work of expansion until we have a competitive exchange rate.
  We must regain competitiveness, and we cannot do that by squeeze, freeze and deflation, which is what the Government have been doing, because that penalises investment, reduces confidence and creates the downward spiral that we have had for the past seven years. We can do it only by having a competitive currency and by expansion.
  At the end of 1976 we pledged ourselves to the IMF to maintain the competitive position of our manufacturing industries at home and abroad. That is one of the pledges the Government would prefer to forget, but compared to that time in terms of relative export prices the pound is still nearly 20 per cent overvalued against the deutschmark. In terms of the relative export prices in 1976, we would now need an exchange rate of DM 2·40 to the pound in order to be competitive. No wonder we have a £12 billion trade deficit in manufactured goods with the EEC, central to which is our manufactured goods trade deficit with West Germany. Britain is being reduced to an economic colony of West Germany. Our advantage against the dollar, thanks to its overvaluation, has now gone. We are now overvalued even against the dollar. The dollar markets are currently our biggest markets, and because of that change in our relativities our exports will be threatened. That will have disastrous consequences for large sections of our industry.
  The pound will come down next year—it may even tumble. It is held up now, not by market forces, a healthy balance of payments, competitive industry, or a naturally dynamic productive economy, but simply by what my right hon. Friend the Member for Sparkbrook rightly described as the crutch of high interest rates. That is the only thing keeping the pound at its present level, and industry of being penalised by that.
  It is important that we lift our gaze, not to the next election, on which the Chancellor's gaze is obviously fixed, but to the looming disaster beyond the next election, to the problems that lie ahead in the 1990s. We are hardly surviving now. We have squandered the oil. How will our economy survive in the 1990s as the crisis closes in? Industry is not paying our way in the world now and cannot provide jobs for our people or generate the surplus for public spending, even at the present low and tawdry level.
  Once the oil contribution which has kept the Government going fades away, how will we survive? That
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  is the question. That is the perspective on which we must focus, beyond the Government, with their irresponsible conjuring tricks, trying to dazzle our eyes and win support for the next election, to the looming problem of the 1990s. We must begin the work of rebuilding British industry, of re-expanding and reconstructing our economy before then. To do that we must get rid of the tawdry, fiddling flogging irresponsible opportunism which has replaced the discredited doctrines of monetarism as the Government's central strategy.
  8.10 pm
  Mr. Alan Howarth: I have been impatient that we should make more rapid progress towards stable prices. I have been impatient that we should make more rapid progress towards the full employment which I believe is achievable but only in the context of stable prices. But I have also been impatient that we should make more rapid progress towards the fulfilment of other aspirations of our society—that we should move more rapidly towards a better education system; that we should have better health care; that we should invest more resources in dealing with the problems of law and order.
  The political process always has to be a process of the accommodation of competing claims and interests. My right hon. Friends the Chancellor and the Chief Secretary are two voices in the Cabinet. The Cabinet is a much larger body and the Cabinet has a duty to represent and implement the aspirations of a society of 56 million people with all their multifarious demands, with all the differentiated pressures of public opinion and of the institutions of a plural society. It is the particular virtue of this autumn statement that it recognises that reality more fully than ever before.
  The autumn statement has been criticised. It was criticised earlier this afternoon by the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley). The right hon. Gentleman does at least have the virtue of consistency. In 1975, under the Government of which he was a member, the PSBR was £12 billion. That was 10 per cent of GDP. In today's money terms, 10 per cent of GDP would be £35 billion. If one adds to the £7 billion' PSBR which is envisaged for this year the £28 billion of additional public expenditure which the Labour party envisages, one would return to a PSBR of £35 billion, unless the right hon. Gentleman proposes to raise taxes massively. The right hon. Gentleman is at least consistent, but against that background I cannot derive much enlightenment from the criticisms that he had to offer of the autumn statement.
  I was more surprised by the rather plaintive tone of the criticisms advanced by the Select Committee. The gravamen of its charge was twofold. It complained that the Chancellor was not sufficiently exact in monetary policy where exactitude is, I think most would agree, impossible to achieve. It railed at him somewhat for his refusal to admit that he has changed policy when, in the essentials of policy, he has not changed. The policy has been consistent in its essential purposes—to bear down steadily on inflation; to create a monetary framework which will tend to reduce inflation; to create a wider framework of economic conditions which will encourage efficiency and profitability and the private sector to take a greater share in our economy.
  The critical question has not been about techniques of policy, or the objectives of policy, which have been

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  consistent; the critical question has always been about the pace at which we should move towards our constant objectives.
  There is an economic theory which used to be taught, and possibly still is, in Chicago and Vienna, which says that the process of financial stabilisation could be achieved almost instantly by drastic reductions in public expenditure and by a draconian approach to monetary policy. If the term had not already found a more familiar use elsewhere, I would describe that as the economics of the big bang. I suppose that, in some academic world, the economics of the big bang might produce financial stability, but they would certainly produce political instability. They would produce a kind of economic nuclear winter that not even the most zealous of my hon. Friends have ever desired. My right hon. Friends are politicians and they have recognised, rightly, the need to move gradually.
  A number of economic commentators, for whom the holy grail of economic policy is an ever-rising gilts market, have been critical of the autumn statement. They have looked at the various items in public expenditure which have overrun the intended totals. But if one looks at those items of public expenditure which have outrun their originally planned totals, or where the plans have been increased for future years, one sees in every case that the increase in expenditure was effectively inevitable, and, in a great many cases, desirable.
  My right hon. Friends have proposed that we should spend an additional £300 million a year on the Health Service. With the availability of new but expensive techniques in health care, with the demands on the Health Service of an aging population, it would be an obsessively narrow view of policy which begrudged such an increase. Indeed, we should all take satisfaction from the fact that there are now 70,000 more doctors and nurses working in the Health Service and 4,500,000 more patients being treated in the Health Service every year than there were in 1979, and that 380 new hospital projects are under way.
  My right hon. Friends have been justified in observing that their prudent economic policies have led to the sixth successive year of steady growth and they have been justified in saying that a share of that growth should be allocated to improving the nation's health care. But they have not said that the sky is the limit and they have not shrunk from the arbitrary and difficult necessity of making a judgment, of drawing a line, and saying that we can afford to spend this much more, but there we must set a limit.
  There is no use, and there is no decency, in complaining that an extra £1·75 billion is to be spent on the social services. The Government have been right to insist that the British economy must adjust itself to the exigencies of earning our living in the contemporary world. But those necessary transitions carry with them social costs. People have suffered in the process. Again, the only humane and responsible policy is to ensure that we find the resources to take adequate care of people who, through no fault of their own, are hurt in the necessary process of economic restructuring.
  Who is to say that the Government have been wrong to commit more resources to law and order? Hardly the Labour party, which in recent months has found it expedient to try to extract political advantage from
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  castigating the Government for not doing enough on law and order. The reality is that in every western urbanised society the rate of recorded crime has been increasing by 5 to 7 per cent a year over a generation. It is a bedrock duty of Government to provide the resources that are needed to preserve law and order. Therefore, the Government have been entirely right to provide resources for an additional 300 policemen in London and a further 500 in the provinces, to add two extra prisons to the prison building programme, and to find more money for the campaign against drugs and for victim support schemes.
  I shall not elaborate the case for investing more resources in our schools and universities, in our housing and on our roads. The case for improvement in all those areas is self-evident.
  I congratulate the Government on tackling the areas of overrun in public expenditure where there can have been no reasonable justification. I congratulate the Government on their achievement in negotiating improvements in the common agricultural policy which will provide a greater discipline on the excesses of the CAP than any negotiation that I can recall.
  I congratulate them too on their willingness to address at a fundamental level the problems of local authority expenditure. Local government current expenditure has been running at 9 per cent above the planned total. In that area of policy, my right hon. Friend the Chancellor has been a prisoner of an ill-designed system. Every device of bureaucratic ingenuity that can be mustered has been brought to bear to try to restrain local government spending. However, the appetite of local authorities to spend more than we can afford in terms of our national economy remains insatiable and the only remedy is to make local authorities far more extensively and effectively accountable to local electors paying the bills for their expenditure. Therefore, I welcome the Government's commitment to introduce the community charge and to standardise the business rate.
  Mr. Penhaligon: The hon. Gentleman is obviously keen on the community charge. One listens to what he says and we can argue the merits of that at some time. However, will he tell the House how he understands the way in which the charge for water and sewerage will be levied in England and Wales when the community charge is introduced?
  Mr. Howarth: That would be a diversion from the main theme of my argument. I would rather not be side-tracked into a technical discussion of the alternative methods that might be contemplated for charging for sewerage. The hon. Gentleman offers a sporting diversion but I refuse to rise to the bait.
  Mr. Steve Norris: I am sure that my hon. Friend will agree that, if the hon. Member for Truro (Mr. Penhaligon) had taken the trouble to read the Abolition of Domestic Rates Etc. (Scotland) Bill, he would have seen in the preamble specific proposals for how to deal with water rates. They are simple and no doubt as commendable in themselves as the proposals for the community charge.
  M r. Penhaligon: The water authorities in Scotland are financed by the local councils.
  Mr. Howarth: Cornwall is a long way from Scotland, but even a Cornishman may be willing to acknowledge that lessons can be learned from John O'Groats.

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  By what criterion should the autumn statement be judged? It should not be judged by reference to some facile definition of monetary policy or monetary conditions. Any such definition would be arbitrary and all too rapidly obsolescent, given the pace of innovation in financial markets and of institutional change. Adherence to any such definition would run the risk of sacrificing the real economy to a totem. I draw assurance and confidence for the future from my right hon. Friend the Chancellor's demonstrable and courageous willingness to increase interest rates when it becomes apparent that monetary conditions have eased too much. Since he raised the basic rate of interest in October, we have duly seen a stabilisation of sterling and a stabilisation of house prices, which are sensitive indicators of monetary conditions.
  Mr. Budgen: Would my hon. Friend indicate to the House, in the way that the Chancellor did not, the various items that he would regard as being good indications of monetary and credit conditions being too lax? Since we do not know what the Chancellor regards as his indicators, but my hon. Friend is obviously a party to the Chancellor's thoughts, perhaps he would be good enough to tell us what he regards as important.
  Mr. Howarth: The tolerance of the House might soon become exhausted if I were to regale the House with the sort of disquisition that I would be happy to give to my hon. Friend in the Tea Room a little later.
  A number of hon. Members have referred to a boom in credit. I respect the point that was made by the hon. Member for Truro (Mr. Penhaligon). There is a problem and we do not know what the proper answer should be. There are difficulties about the controls that the hon. Gentleman advocated—difficulties which I think he recognised. Clearly, it is not an exaggeration to talk of an explosion in consumer credit. That is one indicator that causes me some anxiety—the depreciation of sterling. The surge in house prices—
  Mr. Budgen: It should not be disregarded, then.
  Mr. Howarth: Perhaps my hon. Friend was not following the thrust of my argument as closely as I might have hoped. I was commending my right hon. Friend the Chancellor for having responded to the symptoms of relative monetary laxity by raising interest rates in the autumn, and I think that we have seen signs that the economy is responding as he and my hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen) would wish.
  I draw assurance, as I hope will my hon. Friend the Member for Wolverhampton, South-West, from the Chancellor's firm commitment to maintain the PSBR at 1·75 per cent of GDP in 1987–88. That is a sanction he has given against any collapse into a laxity that would run the risk of a serious deterioration in the inflationary position.
  We should not judge the autumn statement by reference to whether old techniques of policy have been retained in altered circumstances, which seems to be a complaint of the Select Committee. Nor do I think it is appropriate to measure performance on the basis of whether or not previously published targets have been precisely met. The targets set out in public expenditure White Papers are not tablets of stone. They are inevitably, to a degree, negotiating positions. They are cautionary signals to the market. They are also, of course, objectives that the Government should genuinely pursue.
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  However, given the variables and the genuine unpredictability of economic circumstances and activity, it is absurd to complain if all the targets are not exactly met. I believe that the proper criterion for judgment of the autumn statement is whether the whole configuration of policy tends systematically to reduce public expenditure as a proportion of GDP. By that criterion the autumn statement is vindicated.
  It is true that departmental expenditure in 1986–87 has been rising at a more rapid rate than in previous years. However, we heard my right hon. Friend the Chancellor say again today that taking the position over a period of years between 1982–83 and 1988–89 we will see a significant reduction in public expenditure as a proportion of G DP. It is true that the pressures in the later years for public expenditure once again to exceed the targets that have been set will be real and formidable; certainly, there is never a respite in the battle to control inflation and discipline public spending.
  It is true that, in the later years, when the Government will receive less assistance in their financing from the proceeds of privatisation, and perhaps eventually no assistance at all, a higher level of expenditure than was originally envisaged will have to be financed. But it would have been absurd not to take advantage of the opportunities offered by privatisation. The merits of privatisation are not simply the merits of offering a relatively easy windfall way of financing public expenditure. As my right hon. Friend explained earlier, the real validity of the privatisation programme is to ensure that those national assets are deployed in the context of market discipline in which they can be most effectively used in the interest of the nation. The Select Committee, in a manner somewhat inconsistent with the generally censorious tone of its report, praised my right hon. Friend the Chancellor for taking advantage of privatisation to redeploy resources in other areas of constructive investment such as capital expenditure, which is raised in the autumn statement by £1 billion a year.
  It is encouraging to see that tax revenue is as buoyant as it is and it is perfectly reasonable for my right hon. Friend to assume that, as a result of the growth that his policies are generating, the tax base will be sufficiently buoyant later on to finance the level of expenditure that we shall have.
  My right hon. Friend the Chancellor observed in his speech that, by the end of the 1980s, the ratio of public expenditure to national output will be back to the level at the beginning of the 1970s. Progress is slow and hard won. We shall certainly need to go further. We shall need to progress towards the sort of ratio we experienced in the early 1960s, before the Conservative Government left office in 1964, when public expenditure was more like one third than two fifths of GDP. We need to move towards a balanced Budget, by a reasonable definition of the term. We need to move towards radically simpler and lower taxes, towards stable money and towards a situtation in which the private sector takes a far larger share of resources and in its expansion moves us back to full employment.
  All these desirable objectives can be achieved, but they will all take time. It is no good not recognising that it was over generations that public policy moved away from the objectives which I have described. Too violent and too hasty a reversal would be damaging and would not be politically tolerable. It is always tempting to see my right

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  hon. Friend the Chancellor of the Exchequer as Achilles, but he has not overlooked the fact that it was the tortoise which won the race.
  8.30 pm
  Mr. Ken Weetch: I begin my short contribution to the debate by saying that it is becoming a more common observation among the public that very few things in politics are what they seem. So it is with the Chancellor's autumn statement. At the end of the day the statement was nothing to do with economics. Instead, it was a good deal to do with political adventurism at a critical time.
  I shall quote from the Financial Times—a newspaper which I am never sure I should be reading. The editorial in the financial section reads:
  "The Chancellor does not do things by halves … he has responded to the prospect of an election with some blatant pump priming."
  That was the editorial comment on the autumn statement.
  A vast edifice of complex "economic" argument has been built on the autumn statement, and much of it is not economic; it is blatantly political. The statement was a strong commitment to the Government's determination to pump money into the economy to create a favourable climate to fight a general election. If we take the statement at face value, something can be said on economic grounds. Again, the financial section of the Financial Times summed up the statement:
  "We are back to the bad old days."
  What was the position in those days? First, there was a worsening balance of payments—and the balance of payments will be a real constraint on the economy next year. There was a time when the most important criterion in economic debates was the monthly balance of payments figures. It then disappeared from our debates and it has not been a factor for a long time, but it seems that it is re-emerging. It will be a real constraint, however, in 1987.
  When the Minister replies, I hope that he will explain to me the serious deficit on manufacturing account that is now prevalent in the balance of payments. In 1983, for the first time, we had a deficit on manufacturing account in the structure of the balance of payments. The European side of the account is the worst part of the deficit. I hope that the Minister will explain the benefit that the Economic Community has brought to British manufacturing industry. I shall be pleased to hear the explanation, and I shall be listening carefully.
  We have a consumer boom that is based on plastic money. It is doing nothing to halt the serious decline in manufacturing industry. On the other hand, it is doing a world of good for the import of foreign manufactures. With between 3 million and 4 million unemployed, a greater proportion of the work force will be absorbed into the service sector of the economy. In parts of East Anglia we are thankful to get jobs even in the service sector, but the serious point—
  Mrs. Kellett-Bowman: The hon. Gentleman said "even in the service sector." In some places it is regarded as being extremely important and is relied upon as a growth area of employment. That is the position in places such as Morecambe and Lancaster, the latter being a category A tourist centre. I would not have used the word "even".
  Mr. Weetch: The hon. Lady interrupted me at the wrong moment. I was about to say that if we earn our living by providing services as opposed to manufacturing, the service sector can be regarded in a favourable light. The trend is moving too far, however, and many people are being locked into service employment that is low-paid and dead-ended.
  One of the serious features of our economy has been the decline in some industries of a highly technical nature. That is a serious phenomenon. An interesting ITV programme is the one that reports job losses and gains. It is notable that jobs are being lost in manufacturing, often in highly skilled sectors, while jobs are being gained in warehousing and in all sorts of odds and ends. It is not that we are ungrateful in these days for jobs in any sector in which they can be found, but the present structural development in our economy is not one of which we can be proud.
  Mr. Norris: The hon. Gentleman has spoken about the new balance which is emerging between manufacturing and non-manufacturing employment. Does he agree that, whatever shade of Government we have and almost regardless of the financial policies that are employed, it is inevitable that the technological advancement of the second industrial revolution means that fewer people will be involved in manufacturing and that more will therefore turn their individual attention to other areas of endeavour instead of spending their days sweating in factories? Does he regard that trend in the long-term as an extremely desirable development?
  Mr. Weetch: I would agree with that to the extent that productive manufacturing industry will have to support a greater number of employees in the service sector. When I talk to industrial opinion in East Anglia I am told that the trend has gone too far and that we need the political will to put more backbone into manufacturing industry through interventionist polices.
  I shall now address the financial part of the autumn statement, which is said to involve a shift in strategy with tax cuts being superseded by increases in public spending. It is being suggesting in today's financial press that we may have both. It is stated that we may have tax cuts in the Budget to come along with public spending increases. I make no further comment about that because we are talking about futures.
  When I read the Select Committee's report, the arithmetic suggested that £4·5 billion to £5 billion would be available if public expenditure targets were met. If that money had been directed to producing tax concessions, it would have been enough to bring the standard rate of income tax down to 25p in the pound. It was suggested, however, that £4 billion would be directed to increased public expenditure in the next financial year, which left about £1 billion for tax relief purposes—a smaller sum than was expected.
  It is argued that a wise move was made in that tax increases would augment the consumption of foreign imports to the detriment of the balance of payments. It was an odd financial package. Ever since 1979, the Government, with a great degree of self-righteousness, have been preaching financial rectitude. Suddenly financial rectitude goes out of the window, and we can afford all those things previously said to be beyond the pale of public policy. Suddenly we learn that we can have

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  public expenditure increases of £4·75 billion in 1987–88, and £5·5 billion in 1988–89. That new-found largesse is dismissed or explained by saying that the Government can afford it, and they may even have the money for basic rate tax cuts as well. Given the Government's financial policies since 1979, it is no wonder that people are cynical when they hear, in the autumn statement, that public expenditure increases can be conjured out of nowhere just before the run-up to a general election.
  Whenever the Chancellor makes a statement, it must be judged by the contribution that it makes to the long-term soundness of our economy. The Government have not achieved what every Government since the war have aimed at—full employment with a reasonable rate of growth, while at the same time avoiding the evils of inflation. At one point after the war there was relatively full employment but high inflation. We now have low inflation but high unemployment.
  We have never been able to achieve the equilibrium of relatively full employment with sound money, an active balance of payments and competitive British industry. We still have not achieved that. The acid test of Government policy will come when the economy is reflated, because we may then once again run into the problem that has arisen so often—inflation. An increase in the rate of inflation is on the horizon now. Hon. Members should make no mistake about it—we shall run into it. There will also be a deficit in our balance of payments. That will take us back to the position decades ago, with no solution in sight.
  Despite all the shot and shell and all the suffering that we have been through, we shall have turned full circle and will be back where we started. The Chancellor of the Exchequer plays for high stakes and takes big risks. The City gives the Chancellor of the Exchequer and his antics the benefit of the doubt, because it believes that he will win the next election. If he wins it, the City will be pacified, because the Chancellor will return to the deflation needed to counteract the present attitude of letting things rip.
  I am sorry to say that the Chancellor is creating a fast food and ice cream economy that has much froth but no substance. He has encouraged people to run into debt, because our economy is based on plastic money to fuel a spending spree that will create the illusion of prosperity. That economy reminds me of a man with a high temperature whose feverish activity is no guide to his underlying strength.
  The Chancellor talks about income restraint. All my life I have supported incomes policies, despite their disadvantages. I know all the arguments against such policies, but in principle it has always been essential somehow to equate the growth in incomes with the real wealth produced by the economy. It is no use the Chancellor preaching restraint to working people while people in the City can earn six-figure salaries for shuffling paper and advising on takeover deals. The Government's economy is one of live now and pay later. The problem is that we shall pay with the continuing decline of the British economy, and that is sad, because we have seen it all before.
  8.45 pm
  Mr. Steve Norris: It is always a great pleasure to speak after the hon. Member for Ipswich (Mr. Weetch), whose opinions I generally respect and listen to with interest. However, I shall try to concentrate on some of the basic, underlying economic facts of life from which
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  we cannot escape no matter how much we may talk in high economic terms. The autumn statement and the remarks of the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) might lead us into some sort of fantasy land unless we remember some basic assumptions. In the interest of brevity, I shall list just three.
  I shall start with an assumption which, if I recall correctly, was originally uttered by Abraham Lincoln. I am not sure in which of his famous speeches it appeared, but I am thinking of the aphorism that the poor are not made richer by making the rich poorer. My second proposition is that one cannot discuss the distribution of wealth in any technical detail unless one first concerns oneself with the concept of wealth creation. Opposition Members, in particular, should remember that.
  My third proposition is that money cannot be spent on the basis of desirability, unless one has the resources for that. At budget time, the various political parties on the county council of which I was a member used to debate the options. The opposition's arguments for more expenditure were based almost entirely on the concept of desirability. They argued that we should have, and vote for, more day centres, home helps, care in the community, expenditure on education, and so on. The justification for that was that it was desirable. It always seemed rather misguided of some of my Conservative colleagues to try somehow to deny that desirability. That was a foolish way to proceed. Of course such developments would have been desirable, but they should be considered in the context of the ability of the individual, community or country to pay. That is the third maxim that we must keep steadfastly before us.
  My hon. Friend the Member for Stratford-on-Avon (Mr. Howarth) was interesting and spoke to the point when he discussed how my right hon. Friend the Chancellor has been able to expand expenditure in various areas. The points that he made were well taken, at least by Conservative Members. However, the hon. Member for Ipswich described that increase in expenditure as being profligate. He would be right, and my hon. Friend the Member for Stratford-on-Avon would be wrong, were it not for the most salient factor in the equation, which, as my hon. Friend pointed out, is that increased expenditure is as a smaller proportion of GDP. In other words, we are not squandering resources that we do not have. Instead, we are following the most beneficial of all economic rules, which is that public expenditure can follow in its most desirable forms—which is not to deny the virtues of constant attention to value for money and to prudent economic management—as the tax burden that supports it is capable of being reduced. All the economic benefits of that flow through to industry and to consumers alike.
  Let us examine the extraordinary proposition that seems to be at the heart of Labour's economic thinking, that one makes the poor richer by making the rich poorer. The other day I heard the most extraordinary point in a debate, when an Opposition spokesman claimed that this country was suffering from an appalling brain drain. I think that my right hon. Friend the Secretary of State for Education and Science was at the Dispatch Box at the time. The Opposition spokesman said that that brain drain was due to the appalling record of investment on research, or on higher education facilities—I forget the exact nature of the appalling failure to invest of which the

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  Government were accused, setting aside the logic of the totals, which prove that we are investing more than ever before.
  It seemed to have totally escaped the Opposition Member that the real brain drain is likely to be occasioned when more of those with brains engage them on the assumption that the basic top rate of tax in the United States this year will be 28 per cent and the basic bottom rate of tax paid by people in this country will be 29 per cent. Top rates on earnings are still at a penal level of 65 per cent. Those with brains, initiative, enterprise and enthusiasm, who are capable of generating real wealth and real jobs, are most likely to say, "This is a ludicrous environment in which to operate. I am a person capable of generating wealth, and the minute I begin to create that wealth, and particularly the minute I begin to benefit from that enterprise, initiative and risk," as anyone in private business knows, "I am faced with a putative Government who say that now that I have made it, now that I have created those jobs, they want to control my company through worker councils and increased powers for trade unions, and they want to take away my incentive to create jobs." It is the economics of the madhouse and, worse than that, the most primitive form of pandering to the politics of envy—something with which no respectable Opposition Member should be associated.
  Mr. Bryan Gould: In the light of the point that the hon. Gentleman is making, no doubt he is as interested as I am in the publication of the Treasury report, which tends to argue against the conclusions that he has enunciated. Will he urge his right hon. and hon. Friends to make sure that the report is published so that we can all judge the truth of the matter?
  Mr. Norris: The hon. Gentleman has an advantage over me. It would be dishonest of me to claim that I was as familiar with the report to which the hon. Gentleman refers as he is. Suffice it to say that I am reminded of the fact that it is said that when tax rates on incomes were as high as 98 per cent the tax take was lower than it now is on a lower top rate of tax. Whether or not that is entirely germane to the point that the hon. Gentleman was seeking to elucidate, I work on the primitive basis of the logic of someone who started his own company, largely thanks to the kindness of a major clearing bank, which I had better not name. My heirs and assigns are likely to be eternally grateful to it. At the time, I remember my wife saying to me, "What happens if this all goes wrong?" I said that we had a wonderful Labour council in Oxford, and no doubt it would be able to do something for us.
  One of the few incentives to go into business is that when one has created something, it is something that one will own and can keep and, dare I say it—is it so awful? —something that one can enjoy. If the hon. Member for Dagenham (Mr. Gould) or any other hon. Member who has been through the same experience expects me to put in the hours, the effort and the risk in making money to create real jobs for love, I doubt whether my love extends that far. I got hold of two companies, both of which were on the verge of bankruptcy, and they are now thriving businesses employing people.
  I should like to refer to the concept of wealth creation and the Opposition's spending plans. I remember the right hon. Member for Sparkbrook getting frightfully agitated
  1284
  when the Chief Secretary to the Treasury produced a Treasury estimate of Opposition spending plans. I do not know whether the current figure is £28 billion or £35 billion or whether it is likely to be over £40 billion by the time of the general election. However, I know that while the right hon. Gentleman has denied the precise calculations and attempted to dismiss the exercise as merely a political gesture, he has never denied the essential truth that Opposition plans will simply burden the taxpayer through direct tax, borrowing and the printing of money. All those three—the only origins of resource to which a Chancellor has access—will damage businesses and individuals alike.
  There may be the argument that that massive increase in public spending will reduce unemployment. To believe that is fundamentally wrong and misguided. Analysing it briefly, surely current unemployment is caused by two main factors. One is demography—that is, the large numbers of young people coming on to the job register compared with relatively small numbers of elderly people coming off the register. The second cause is the second industrial revolution, the process to which I referred in an intervention in the speech of the hon. Member for Ipswich. Under Governments of whatever colour, and at whatever time in their development, fewer people will be employed in manufacturing industry as technology inevitably takes over.
  It has always appalled me that the Labour party appears to relish the preservation of those appalling hell holes, such as the great factories that developed after the war, through the 1950s, the 1960s and 1970s, where a man went in in darkness and re-emerged in darkness, having worked in Stygian conditions. Surely all that we want to do is to embrace the opportunity that new technology gives us, to take men out of such an appalling environment. We want to give them the opportunity to work in an infinitely more creative and progressive environment. It is one of the most salient achievements of the Government that since 1983 they have created over 1 million net new jobs in British industry, very few of which involve returning people to the conditions of work to which, it seems to me, Opposition Members wish to return them.
  It is a fiction that the unemployed can simply be mopped up by public spending plans, which would make them all net taxpayers. The logic does not work, first, because that false employment places a huge burden on those who are creating real jobs by investing in their own businesses; and, secondly, because there is the combination of trade union nationally agreed rates and extra costs attendant upon creating artificial jobs—the costs of providing the materials that go with the labour. The idea is that one can suddenly fuel a wonderfully vibrant economy by using the national taxation resource to put everyone into a job and make everyone a taxpayer, but it would simply increase massively the burden of tax that each taxpayer would be forced to pay. The equation does not balance.
  I believe that the only way to keep the economy moving and to create more real jobs is that outlined in the autumn statement—keeping inflation down and spending within the present proportion of GDP, and lowering it from that level, keeping interest rates as low as possible, rather lower than they are at present, and keeping taxation down because of the burden that that represents for the individual and for businesses. In that respect the

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  Government have been, until now, extraordinarily successful. I commend my right hon. Friend on his autumn statement, which I believe is a sign of even greater achievements to come.
  8.59 pm
  Mr. Tam Dalyell: In four minutes, I want to ask four questions, to which I hope the Treasury will reply in writing.
  First, it is monstrous that the receipts from privatisation should be seen as a reduction in PSBR. What has happened to the shares in the radiochemical laboratory in Amersham? I have been told that they have been mostly dispersed to big institutions and that they have not remained invested on the wide basis that was first intended.
  Secondly, the Select Committee and the autumn statement referred to the oil surplus. That has greatly affected those constituencies close to the North sea and there is an expected decline of £500,000. What estimate has the Treasury made of this reduction in oil-related industries on the east coast of Scotland and the north-east?
  Thirdly, paragraph 2.09 of the statement contains the defence savings that the Government claim will be made in the Falklands. Politicians should not sit on green Benches and promise reductions when our forces—through the Government's commitment; it is not their fault—are in some jeopardy. We know that Argentina has re-armed. In quantifiable terms, what saving will the Government make?
  Fourthly, where in the statement is there provision for money to cover the security services? A record 13·6 per cent rise has been earmarked for the official budget of Britain's intelligence and security services in the new financial year, according to the figures published by the Treasury Supply Estimates on 19 March. The £11 million increase means that the budgets of the services will rise by £32 million. According to The Times of 20 March 1986,
  "this figure may only represent the cost of salaries and other staff expenditure rather than the global figure for Britain's espionage, counter-espionage and security operations.
  The increase could mean pay rises with MI5 and MI6 plus extra staff through reorganisation prompted by Security Commission reports on the services. The budget is described as 'for Her Majesty's foreign and other secret services. The Cabinet office will account for this vote' in the estimates."
  Where do these figures appear in the Estimates? Do they appear under the budget of £110 million for other Departments, the Home Office, or the Foreign and Commonwealth diplomatic wing? I am referring to pages 28 and 29 of the autumn statement. I would be grateful to learn, by letter, where those figures arise.
  Finally, has the Treasury any control over the competence of the security services? I want to refer to pages 235–238 of the "Pencourt File" by Barrie Penrose, which outlines in detail the muck-up in the mid-1970s when the security services confused the name of my right hon. Friend the Member for Clydesdale (Dame J. Hart) with Mrs. Tudor Hart. Tomorrow, the Treasury will receive a letter from me giving the full details of that mix-up. I have reason to believe that there has been massive incompetence in other cases.
  I want to know about value for money in the security services. I have kept to my bargain and spoken for four minutes. My speech was necessarily truncated, but the Treasury has some interest in the matter of security.
  9.4 pm
  Mr. Ian Wrigglesworth: I am grateful to the hon. Member for Linlithgow (Mr. Dalyell) for truncating his remarks. I too will be brief. I want to comment primarily on the two major defects in the Government's economic strategy contained in the autumn statement. However, first I want to say a few words about the Chancellor's speech and conduct.
  The right hon. Gentleman revealed a deplorable lack of respect for the House at the beginning of the debate, and not for the first time. That is why there were protests from the alliance Benches. Today was one of a number of occasions when, during major economic debates, the Chancellor has not paid the attention to the debate that many hon. Members believe he should. His attitude to the House was borne out in his snide remarks about the Select Committee and his attack upon its members. That was entirely unjustified and unworthy. A bigger man would not have stooped to those depths. If he wanted to attack the Select Committee, he should have attacked the arguments and not brushed off the report as the product of the advisers to the Committee. That was deplorable, and I hope that the Chancellor will desist from such action in future.
  There are two major defects in the autumn statement, both of which relate to the one subject to which the Chancellor paid hardly any attention—unemployment. It is amazing that, in a major debate on economic policy, the Chancellor's opening remarks showed virtually no anxiety about the continuing high level of unemployment. More than 3 million people are now unemployed and it is the job of those of us with high levels of unemployment in our areas constantly to remind the House that there are levels of 40 per cent and 50 per cent unemployment in many wards in the constituencies of Members on both sides of the House. The prime target of the economic policies of any Government should be to ensure that the misery and waste of resources represented by those figures is overcome. It is deplorable that the Chancellor paid virtually no attention to that in his speech.
  The first major defect in the Government's policy is in the nature of the demand within the economy that they are stimulating. We have a public sector financial deficit of £14·5 billion.
  Mr. Lawson: Rubbish.
  Mr. Wrigglesworth: It is not rubbish. It is the forecast in the autumn statement and in the Select Committee report, and it is borne out by many other forecasts. Moreover, it is entirely to be expected.
  My point relates not so much to the quantity as to the nature of the demand within the economy. What is wrong is that the Chancellor and the Government are stimulating a short-term consumer boom by allowing wages to plough ahead of inflation and having a very lax monetary policy which is stimulating consumer demand without creating the jobs and wealth in the British economy that we all want to see.
  More importantly, the Government are undermining the industrial and economic foundations of this country for short-term political ends. By selective extracts from previous medium-term financial strategies, the Chancellor tries to maintain that he has not changed his economic tune, but anyone who examines the statements and records of Ministers since 1979 knows that a dramatic change in

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  attitude has been forced on the Government by political expediency and the approaching general election. The hon. Member for Wolverhampton, South-West (Mr. Budgen), who still sticks steadfastly to his monetarist principles, knows that as well as the Opposition and the City do. It is a general election strategy, not a serious economic strategy, and it is undermining the long-term interests of the economy and of British industry.
  Mr. Patrick Thompson: Will the hon. Gentleman give way?
  Mr. Wrigglesworth: No, I do not have time; the winding up speeches will have to begin shortly.
  The second major defect is in the Government exchange rate policy. As our amendment makes clear, and as we have explained on many occasions, we believe that it would help British industry, the British economy and, indeed, the whole of the Western economy if the Government would only do what all their principal Economics Ministers apparently want to do, and certainly what the Confederation of British Industry and the Governor of the Bank of England want to do—that is, to join the exchange rate mechanism of the European monetary system. There has been overwhelming support for that from all sections of industry and commerce, but it has apparently been prevented by the Prime Minister. That is amazing. We are told that the Chancellor himself wants to do it, and it is a sad reflection on his position in the Government that such a major item of economic policy that he wishes to pursue should be rejected by the Prime Minister.
  We believe that joining the exchange rate mechanism would mean much greater stability in our exchange rate. It would not enable us to overcome all the pressures on exchange rates—clearly, we should sometimes have to defend the rate at which we joined by increasing interest rates—but we are currently paying a premium in interest rates for the present lack of confidence in our economy. One of the reasons why our interest rates are, on average, 4 per cent above those of our European partners, which is crippling sections of British industry, is that international markets have no confidence in the pound. Confidence would be maintained to a far greater extent if we were full members of the EMS and it is deplorable that the Chancellor has not been able to pursue that course when he apparently wants to.
  There is overwhelming evidence that the Government are pursuing a general election strategy rather than an economic strategy. There is a staggering example of that in my constituency. The Government are proposing to set up an urban development corporation to help create jobs and growth in the area, but they then take away the equivalent of 18p on the rates through the rate support grant settlement to provide relief for places such as North Yorkshire, Hambledon and Richmond.
  That is entirely a strategy for votes. It has nothing to do with jobs or the economic revival of my area. The same is true for other urban areas. The Government are undermining large sections of British industry because of their short-term general election interests rather than those of the British economy.
  9.11 pm
  Mr. Bryan Gould: Nobody can approach this debate without feeling a sense of obligation to the Treasury and Civil Service Committee and its Chairman. I say nobody, but I must immediately make an exception for the Chancellor of the Exchequer.
  The right hon. Member for Worthing (Mr. Higgins) and his Committee deserve to be congratulated on their report and the dignified yet stinging rebuke that they delivered to the Chancellor for his ill-considered remarks. In a sober and restrained way, the Committee produced a conclusion which we, and, I believe, many Conservative Members, are happy to endorse. It concluded that Government economic policy has changed, that, for their own reasons, the Government have chosen to deny that change and that both the change and the denial leave current and future economic policy in an utterly uncertain state.
  The Committee's first point is that the obscurity of the autumn statement makes it extraordinarily difficult to treat it as a satisfactory basis for assessing the Government's economic policy. Changes are made but they are neither acknowledged nor explained. That is not an accident. The right hon. Member for Worthing was characteristically generous to the Government on this. I believe that it is not an accident, but part of a general approach to these matters which is perhaps summed up best, in what has become a time-honoured phrase, as being economical with the truth.
  The Chancellor and his ministerial team have undertaken a deliberate attempt to muddy the waters and to cover their tracks because they do not want the full extent of their changed policy to be detected by the British people. So far as one can disentangle the changes from the autumn statement and other evidence, in what respect has the policy changed and why does it matter?
  The Select Committee provides an excellent guide to the answer to the first question. It makes it quite clear that what has changed is the whole basis, technique and existence of monetary policy. If, for example, sterling M3—so long the favourite broad money measure of the Chancellor and his predecessor—were still the basis of economic policy, as it has risen by 18·2 per cent in the 12 months to September, we should now face an inflation rate of 18 per cent in the forthcoming year or two. I assume that that is not now the Chancellor's prediction.
  That rise in sterling M3 is not being responded to with any rise in interest rates, contrary to the policy options taken earlier by the Chancellor and his predecessor. [Interruption.] We have listened to the speeches. I am simply making the point—the Chancellor cannot dispute this—that in earlier days a rise of 18·2 per cent in sterling M3—well beyond the target range—would have been met with a rise in interest rates.
  The role of interest rates is another respect in which economic policy has changed. The point of trying to control public spending, on which the Chancellor laid such emphasis in his autumn statement, is to keep interest rates down. That was spelt out in the original medium-term financial strategy. As the Committee points out, the original MTFS states:
  "It is not the intention to achieve the reduction in monetary growth by excessive reliance on interest rates."

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  Yet we have had record interest rates without any real impact on the rate of monetary growth. Therefore, the Chancellor can claim consistency neither in his original policy nor in his abandonment of it.
  The Committee details a range of other changes, such as changes in levels of public spending, monetary targets, public spending targets, exchange rate policy and even in such arcane matters as rational expectations. It my be perfectly clear why some of those changes took place. There may be good reasons—indeed, I believe there are excellent reasons—for abandoning many of those aspects of the Government's economic policy. But it is a mystery why other aspects have changed.
  Why has the Chancellor for the first time announced a planned increase in the real level of public spending? That is what the autumn statement says, but there seems no reason why the previous position should have been changed. The forecast for economic growth is lower than it was earlier in the year. Perhaps, surprisingly, the forecast for prices is also lower. Therefore, a given quantity of public spending should have secured a greater volume of services and inputs. Despite both those factors, the Chancellor has deemed it wise and prudent to increase public spending.
  No explanation is offered in the autumn statement of any change that has occurred to justify the change in policy. Therefore, we must be forgiven for providing our own explanation, which is that the Chancellor has simply lost control of events. He has been compelled to accept increases not merely in public spending, against which he had set his face, but in public spending of the least acceptable sort—the very sort castigated repeatedly by him—namely, increases in public spending largely gobbled up by increases in public sector wage settlements. That is what the Chancellor has had to yield to, and now he seeks to make a political virtue of that necessity.
  The Chancellor is trying to pretend that what has taken place is not a change of policy and technique, but, miraculously, a change of substance which will change the course of the economy. He implied no change in the Government's policy, but the reverse is true. As the Select Committee report makes clear, the Chancellor and the Government have changed their policy, techniques and instruments of control. What is missing is any real change in substance of the volume and scale required to meet the needs of the economy. [Interruption.] The Chancellor invented and proclaimed his adherence to techniques, instruments, measures and controls. Now they have been abandoned and he is trying to pretend that that abandonment will somehow benefit the economy on a major scale. That is an illusion and the reverse of the truth.
  The Chancellor has abandoned his monetarism in the face of political reality. He has no choice. He has abandoned it for reasons not entirely unconnected with the imminence of the general election. We are forced to conclude that, whereas we used to regard the Chancellor as just a simple-minded monetarist, now we must recognise that the monetarist part of that label is no longer appropriate.
  Why does all this matter? Why can we not let the Chancellor off the hook and let him say, as perhaps many politicians before him have said, "We all learn from our mistakes. Now we know that we are wrong and we are making an intelligent adjustment to circumstances as we
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  now see them."? But the very essence of the medium-term financial strategy has always been characterised by its apparent certainty and simplicity.
  It is worth recalling just how attractively simple the doctrine was. First, one selected an appropriate measure of the money supply. Then one controlled it. There was no problem about that. One controlled the money supply by fixing a rate of growth at whatever level one chose. Since that fed immediately and automatically through into prices, why not choose zero growth? One then obtained zero inflation. With zero inflation, the economy would suddenly miraculously prosper of its own accord.
  That was the simple theory. It was not only simple and certain—here is the real nub of the case—it was immutable. Having set the course and laid down the medium-term financial strategy, the Chancellor, unlike all his wicked and weak-willed predecessors, was going to stick to it come what may. He was not going to be rid of it. That is where slogans such as "There is no alternative" and "The lady is not for turning" came from. The right hon. Lady's reputation is at issue here. Her reputation for inflexibility must be defended. That is why the Chancellor is so unwilling to concede that he has fundamentally shifted course as was well detailed by the Treasury and Civil Service Committee.
  In the name of this immutability, simplicity and certainty, immense damage was inflicted on the economy. Another Government and another Chancellor would have realised that the course they had set was doing unacceptable damage, but this Government and this Chancellor persevered. They ploughed on. As manufacturing output and investment fell and 1·3 million jobs in manufacturing industry were lost, as the balance of trade deteriorated and as bankruptcies reached record levels, the Chancellor said, "No, we will stick to our chosen course."
  Mr. Budgen: The hon. Gentleman is unfair to the Labour party. Conservative Members sometimes falsely claim that we were the original monetarists. The right hon. Member for Glasgow, Hillhead (Mr. Jenkins), who then represented a Birmingham constituency, was the original monetarist when he was Chancellor of the Exchequer in 1968 and in 1976. The first overt monetarist was the right hon. Member for Leeds, East (Mr. Healey), the present shadow spokesman on foreign affairs.
  Mr. Gould: As my right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) said, the Prime Minister, in almost a single column of Hansard, has been known to use five different base dates and starting dates for monetarist policy. It is novel to have yet two more added, going as far back as 1968 and 1976, as I understand the hon. Gentleman's rather convoluted remarks.
  For all those reasons, and for the reason that the Chancellor proclaimed—the immutability of his policy—and the fact that, in the name of that immutability, he did, and thought he was worth doing, such damage to the economy, he is now—
  Mr. Peter Lilley (St. Albans): Give us quotations.
  Mr. Gould: I shall not disappoint the hon. Gentleman. He shall have quotations.
  For all those reasons, the Chancellor is unwilling to concede that there has been a change. He knows that if he did, he would have to concede that all the damage has been in vain and the whole basis of his policy has been swept

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  away. It has been replaced by nothing comprehensible or intelligible. It has not yet even been replaced by a new mistake to replace the old ones.
  As the basis of the Chancellor's policy has disappeared, even the one achievement claimed for monetarism must now be suspect. It can no longer be chalked up to the Government's credit. The Government claim that their policies have produced a reduction in inflation, yet the policies that were set to produce that reduction have never been applied and have been abandoned as a mistake, as a forlorn hope and as something that could never be put in place. It is difficult for the Government to argue that their policies produced the fall in inflation. That is borne out by the fact that, since 1979, our record on inflation has been worse than the average of the leading OECD countries. In 1979, our inflation rate was 117 per cent of the average for the seven OECD countries. Today it is 144 per cent., and rising.
  Mr. Lawson: Quote the figures.
  Mr. Gould: I am quoting figures. The Chancellor does not like it because they show that the fall in inflation owes everything to the world recession and the slump in commodity prices, as the Select Committee said. It owes almost nothing—I would say absolutely nothing—to the failed policies of the Government in whose name so much damage has been done.
  If, in the light of those facts, the Chancellor still denies that there has been a change, let me try to smoke him out. Let me take as a text the locus classicus—or one of them—of monetarist policy: the speech that he delivered in Zurich on 14 January 1981—the hon. Member for St. Albans (Mr. Lilley), the Chancellor's parliamentary private secretary, asked for some quotations—when he was Financial Secretary to the Treasury. Perhaps he wishes to disown or disavow that part of his career, but we shall give him some quotations. He said:
  "The heart of our economic policy is the steady deceleration in the rate of monetary growth over a four-year period."
  The right hon. Gentleman may not wish to stick to sterling M3, which has increased by 18·2 per cent during the past 12 months. In that case, on former theories, we would be looking at an inflation rate of 18 per cent. What would he like to do? Does he wish to place emphasis on PSL1, on which he was especially keen at the time, although I have not heard him mention it much recently—I should be interested to hear whether he wishes to take that measure—or would he prefer one of the narrow money measures? Would he prefer MO or Ml? The latter was a favourite for a time. How would that square with what he said, which was that broad money is the most useful guide? Do we detect a change there?
  Does the Chancellor still believe that this is
  "a highly complex matter, but that is no reason for getting it wrong, still less for abandoning the task."?
  Is that still his position? What is the present basis of his monetary policy? What is the assumed connection between any monetary measure the Chancellor cares to select—I am not fussy about which one he selects—and the assumed or predicted rate of inflation? Unless we know that, we cannot know what has happened to what he said in 1981 was,
  "the heart of our economic policy".
  1292
  The Chancellor said in that speech that the fall in monetary growth was to be achieved by a
  "steady reduction in the real level of total Government spending."
  When was that target abandoned? Why was it abandoned? Why should anyone believe the Government's plans for public spending in the light of the Chancellor's statement in that speech that there was
  "a steadily declining trend, until by 1982–83 it will be 4 per cent lower than in 1979–80."?
  Was not the whole point of reducing Government spending the hope that interest rates would be kept down and that there would be no crowding out? Why do we have record real interest rates—the highest in our history and among the highest in the advanced world—and why are our real interest rates twice as high as those of West Germany? Why are we lumbering our industry with such a ridiculous burden? Will the Chancellor give us an answer? He must know.
  Let us try another quotation about the exchange rate. In 1981, the Chancellor said:
  "The Government has no exchange rate policy as such."
  Is that still the case, in view of his repeated statement that he would now resist any further fall in exchange rates and what one assumes to be his preference for joining the EMS although, clearly, he cannot carry his Prime Minister with him? If so, when did the change take place? Is that another change? Can the Chancellor be happy with the situation when the pound is now, as my right hon. Friend the Member for Sparkbrook said, at its lowest level in the trade weighted index, can only be held at that level on the basis of a severely deflated economy—the classic definition of a weaker currency—is bolstered by record borrowing from the reserves, part of which has been spent, has nevertheless produced a rapidly deteriorating balance of trade and is now, as the Prime Minister concedes, too weak to be taken into the EMS and is, above all else, supported by record real interest rates? Is that what the Chancellor believes is an acceptable outcome of seven years of a Government dedicated to what is laughingly called sound money? Is that the apotheosis that the Chancellor so ardently desired?
  The Chancellor went on to say that as a result of what had then been done in the name of monetarism—those who remember 1981 and have seen the graphs and the Chancellor's unwillingness to look at any period of government before 1981 will find this a rich irony—
  "British companies are becoming more efficient, leaner, tauter, fitter, and more productive."
  That is a remarkable statement. Much could have been forgiven if it were in any real sense true. How can it be true when manufacturing output is 7 per cent lower than it was in 1979, when hundreds of thousands of jobs are lost and investment is down?
  Let us be fair to the Chancellor. He may want to avoid looking at the economy in the round; he may want to look at companies as individual entities. Will he nominate those of our main industrial rivals against which we have made up ground in terms of productivity, efficiency, unit labour costs and competitiveness? I do not dispute that he may be able to find some, but I wonder whether he would find them among the ranks of our important rivals such as Japan, Germany and the United States. Where would such examples lie?
  Let me give the Chancellor a wide choice. Will he choose just one of the various indices of competitiveness that the Treasury sometimes uses and publishes? I do not

  1293
  mind which it is—relative export prices, relative import prices, terms of trade, or relative labour costs. Which of any one of those shows an improvement in our competitiveness since the first quarter of 1979? I challenge him to nominate one. If he cannot—and I know that he cannot—I hope that we shall hear no more of that canard trotted out repeatedly and erroneously by Ministers and other Government spokesmen.
  It is significant that we have no answers from the Chancellor or the Chief Secretary. It may be that they are adhering to the policy of being economic with the truth. It may be that they are too busy and that their minds are filled with fantasies and inventions about our spending plans. Those fantasies have been totally discredited by the Institute of Fiscal Studies and Phillips and Drew, which have castigated back-of-the-envelope figures. However, this is a debate about the autumn statement, although I would not be surprised if the Chancellor would dearly like to shift the focus.
  The real reason why there is silence on the Government Benches is that they are holding their breath. They know and fear that the simplest gust of wind will bring the whole structure, the whole card house, down. The Chancellor knows that sooner or later it will all collapse because, with his abdication from monetarism, he now runs an economic policy that has no visible means of support.
  The Chancellor has one last shot in his locker, if he is to ward off nemesis in the form of a sterling crisis, or a balance of payments crisis, or the blowing up of the consumer boom. That one last, desperate throw is tax cuts. Today the Chancellor affected a pose of fiscal rectitude, but I would lay money on there being some tax cuts in the next Budget, which would go some way towards redeeming the promise that has been made every year for seven years that tax cuts are on their way.
  Tax cuts might reverse to some small degree the increased tax burden for the overwhelming majority of families, but they would further stimulate the consumer boom and worsen the balance of payments without doing anything for unemployment, and they would be completely unsustainable for more than a few months. If the Conservatives won the next election, they would have to be reversed as soon as the general election was out of the way. Tax cuts could be made only at the price of further violence to the very policies that the Chancellor has paraded for so long as being at the heart of his economic policy. Tax cuts would be the last desperate throw of a Government who know that the game is up and know, as they go into an election year with more than 3 million people unemployed, that they do not, in the words of the chairman of the Tory party, deserve to be re-elected. They will not be re-elected.
  9.36 pm
  The Chief Secretary to the Treasury (Mr. John MacGregor): I congratulate the hon. Member for Dagenham (Mr. Gould) on his appointment to his new post and welcome him to our debates. I shall have a word to say later about his speech and about what he has said elsewhere. As this is my first opportunity since the autumn statement to speak about it in the House, I shall concentrate my opening remarks on the area for which I have particular responsibility, public expenditure.
  The hon. Member for Great Grimsby (Mr. Mitchell) accused the Government of major turns in Government policy and of increasing public spending. He described it
  1294
  as the economics of electioneering. On the other hand, my hon. Friend the Member for Darlington (Mr. Fallon) emphasised the need for continuing restraint and regretted that we had not made more progress. I should like to begin by reassuring my hon. Friend and disabusing the hon. Gentleman of his notions.
  In his speech my right hon. Friend the Chancellor of the Exchequer said that our consistent view has been that the state takes too much of the nation's income and that our consistent objective is that public expenditure, as a percentage of GDP, should be reduced. My right hon. Friend conceded that some of the targets that we have set have, in the event, proved to be too ambitious.
  To reverse public spending trends to achieve the objectives that we have set ourselves requires a constant and firm determination to turn back the inexorable pressures of the 1970s towards higher public spending. Some of them are demand-led pressures, as my hon. Friend the Member for Darlington pointed out. He referred to agriculture and social security. My hon. Friend will be aware that in agriculture the real demand-led area is the common agricultural policy, not the domestic agricultural programme. He will know of the strenuous efforts of my right hon. Friend the Minister of Agriculture, Fisheries and Food—capped with great success during this week, in very difficult circumstances—to restrain the growth of the CAP. I shall deal later with social security.
  I have two points to make about public expenditure as a whole. The trends show that we are succeeding. They also show that the Opposition are a constant reminder that without the disciplines that we have continuously imposed both the total and the proportion of the gross domestic product would very rapidly shoot up again.
  The right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) never likes to be reminded that when his party formed the Government they increased expenditure, in real terms, by 12 per cent in one year. With its £28 billion pledge, the Labour party looks as though it will repeat precisely that mistake if ever again it is given the chance to form a Government. With programmes of that sort, it will certainly not form another Government.
  If it were the case, as the hon. Member for Great Grimsby contends, that the Government's public expenditure policy has changed this year, one would expect to be able to detect a break in trend—or example, expenditure rising, instead of falling, as a proportion of the gross domestic product or the growth rate accelerating after it had been decelerating. That is not what one finds. As my right hon. Friend explained at the time of the autumn statement, and again today, the rate of increase in public spending, in real terms, as measured by the combined spending of central and local government—including, as the Select Committee on the Treasury and Civil Service would wish, debt interest but excluding the proceeds of privatisation—shows that progressively the rate of increase has been coming down.
  It is worth repeating the figures, because the constant hubbub from the Opposition when my right hon. Friend the Chancellor was making his speech probably meant that most of my hon. Friends did not hear all that he said. The figures are quite clear. They went from 3 per cent in the decade to 1978–79 to 2¼per cent in the last Parliament, and to 1¾ per cent so far in the present Parliament. Far from reversing that trend to slower growth, our plans seek to extend it.
  Mr. Fallon: Will my right hon. Friend give way?
  Mr. MacGregor: I have a lot to say in response to the debate and a short time in which to say it, so I hope that my hon. Friend will not mind if I do not give way.
  If one looks for a break in the trend one can find it, but it was in 1982–83 that the rise in public spending as a proportion of GDP came to an end. I concede that it rose up to that period for a whole variety of reasons which I do not have time to go into now, but in the four years since then the proportion has progressively fallen.
  With spending planned to grow significantly more slowly than the economy as a whole, the downward trend will continue, so that by 1989–90 public spending as a proportion of national income will, as my right hon. Friend said, be back to levels last seen in the early 1970s. We have succeeded in making a break with the past and reversing the trend. In the 1970s public spending grew faster than the economy, but now the reverse is true, and this autumn statement accelerates that process.
  Some Opposition Members have extended their search for the non-existent U-turn into the detailed programmes. That search will be equally unproductive. Certainly the autumn statement makes additional resources available for priority programmes such as education, health and roads, but these are hardly new priorities.
  One advantage of this steady commitment on public spending coupled with a rigorous search for economies is that we have been able to increase spending in the areas to which we attach the greatest priority, while at the same time ensuring that public expenditure has never regained the stranglehold that it once had on our economic life. It is important to look at some of the examples. Looking at our record over the past six years, we see that in education spending per pupil is now at an all-time high and that the proportion of 18 and 19-year-olds entering higher education and the number of graduates are also at record levels.
  Spending on the National Health Service has risen by over 24 per cent in real terms since 1978–79, and capital spending on the NHS has risen over 30 per cent. On law and order programmes, spending has risen by nearly 40 per cent in real terms since 1978–79. Capital spending on housing renovation has risen by nearly 40 per cent., and local authorities and new towns improved and converted nearly 100,000 dwellings last year. Over 600 miles of motorways and trunk roads have been completed since we took office and spending on them has risen by more than 25 per cent.
  These are all programmes to which we have given priority in the autumn statement and the figures that I have just given demonstrate that we have been consistent throughout and that public spending as a proportion of national income has been coming down. This autumn statement continues the emphasis on those priorities. We are substantially increasing provision for education and, as the House knows, we have made a generous offer of £½ billion next year for teachers' pay. That offer was made in order to get value for money and is offered in return for the right terms, conditions of service and a salary structure in the teaching profession. Spending on hospital and community health services will be up by 2¼ per cent in real terms next year.
  The hon. Member for Great Grimsby said that this was an election spending spree, but that increase in real terms is exactly the same as the increase that we planned for this
  1296
  year. We will spend over £700 million more on the police in each of the next two years. By 1987–88 the number of uniformed police will have risen by 10,000 since we took office in 1979. This is not a pre-election spending spree. It is consistent with our progress in the past.
  One point to which the Select Committee on the Treasury and Civil Service has drawn attention in the past, but to which it did not draw attention this year, is the balance between capital and current spending. Perhaps this year the Committee did not focus so much on that because it noticed that here again we have been consistent and that our contrast with the Labour record is marked. Since we came to office public sector spending has remained broadly level in real terms, despite our deliberate decision to switch the emphasis from the public to the private sector in the provision of new housing.
  The autumn statement shows that we are planning to increase capital expenditure by nearly £1 billion over our previous plans in each of the next two years on roads and prisons, and, despite the switch of emphasis in housing provision, we are making an extra £450 million available next year. We have a £3 billion building programme for the NHS, covering more than 380 major schemes, 110 of which should be completed by 1990.
  The interesting point is the contrast between our record on that basis, despite all the attacks that we hear from the Opposition from time to time, on capital spending and on the infrastructure, and theirs. Despite the growth of expenditure under the last Administration, they had to cut capital spending in key areas. Within our restrained totals we have almost identically increased capital spending in the key areas by the same percentage.
  The right hon. Member for Sparkbrook referred to the increase in social security spending, which is a marked feature of the autumn statement, and described that as a product of unemployment. [Interruption] It is typical of the right hon. Gentleman to raise a point and then to carry on talking when it is answered. He does not want to hear the answer.
  The usual full analysis of expenditure by benefit and type of claimant will be published in the public expenditure White Paper, but it is worth noting that the major factors for the increase that we have announced are an increase in take-up of means test benefits among the long-term sick and disabled and single parents. Average amounts paid in housing benefit to people in and out of work are also increasing, as is spending on family benefits, reflecting among other things a higher birth rate and more children staying on at school after 16.
  There is also a continuing increase in the level of take-up of benefits among the existing unemployed. When the right hon. Gentleman puts the burden of the increased expenditure on the unemployed factor, it is worth remembering that most of the social security budget is spent on the elderly, the sick and disabled and on families. Only about one sixth of the social security programme is spent on benefits for unemployed people. As my right hon. Friend the Secretary of State for Social Services has pointed out clearly, our record on increases in benefits since 1979 is good. We have had to take into account the demographic trends and the fact that many people live longer and need such benefits.
  If I had had time, I would have spent a few moments on the speech of the hon. Member for Truro (Mr. Penhaligon). I want to contrast our responsible spending with the programmes of other parties. The hon.

  1297
  Gentleman was on his own when he rose to speak and he missed a rare opportunity. He could have said what he liked about the alliance's spending plans without fear of contradiction or of being muzzled. He missed that opportunity, but not all his colleagues have done the same.
  According to The Independent last month, the Social Democratic and Liberal parties have been costing and revising what 1 have to describe as a pledge-heavy document, "Partnership for Progress". The right hon. Member for Plymouth, Devonport (Dr. Owen) has, we are told, been laying down the law. I noticed that even while "Partnership for Progress" is at the printers, some of the hon. Friends of the hon. Member for Truro have been blowing a hole in the Social Democratic party's plans and have added, on its own estimate, £.1·5 billion in a pledge to increase pay in the NHS. We shall look forward to seeing continuing disputes between the two parties as they try to grapple with the problem of responsible public spending.
  The hon. Gentleman made one fair point. At least the Liberals and Social Democrats have put down an amendment tonight. The hon. Gentleman drew attention to the fact that the official Opposition have not. No wonder. They are terrified of' a focus on their policies.
  My right hon. Friend the Member for Worthing (Mr. Higgins) urged strongly, both in the Treasury and Civil Service Committee's report and in the debate, that the matters relating to monetary policy in particular should be discussed on the Floor of the House. I agree. That is precisely what my right hon. Friend the Chancellor was endeavouring to do this afternoon in giving a detailed response to the Committee's report. It was, of course, a strong rebuttal in places, but my right hon. Friend the Member for Worthing is a fair man and I am sure that he will recognise that, as the report criticises the Chancellor, the Chancellor has every right to give his response. His was a detailed response, because he wanted to take the report seriously and argue it point by point.
  If my right hon. Friend and the House study the reply, they will find it a fair, reasonable and persuasive response, but they will have to read it, because of the shameful behaviour of the Opposition, led by the Opposition Front Bench. Every observer outside the Chamber must have concluded that theirs was kindergarten behaviour, except that would be unfair to kindergartens. The Opposition did not focus on a single serious issue for one moment during my right hon. Friend's speech. They treated the key economic policy matters as frivolously in this debate as they do in their own internal party discussions on economic matters.
  It is fairly clear that the hon. Member for Dagenham wrote his speech before the Chancellor spoke or, alternatively, he could not have heard the Chancellor, because he concentrated on the frivolous aspects of the matter, as did his hon. Friends. He totally failed to see that the Chancellor had responded to his speech in full before he made it—[Interruption.] That is what observers will have seen.
  I find the Opposition's attack on these matters extraordinarily hypocritical and schizophrenic. They cannot make up their mind whether the modest increases in spending that we have announced are reckless and a sign of a pre-election spending spree or whether they are totally insufficient. On looking at the Opposition's plans, one must conclude that they would spend a great deal more. They criticise the level of interest rates and inflation. The
  1298
  hon. Member for Dagenham said that we had benefited on inflation this year from oil and falling commodity prices. It is important to look comparatively at the record of inflation over a period of time.
  If one compares the record of the last Labour Government and the record since 1979 to the present day, not just in absolute terms, but relative to either the major seven competitors or the rest of the EEC, one finds that under the Labour Government the difference between their inflation level and the average of the major seven was 6·9 per cent., compared with 2·1 per cent under this Government. Even more strikingly, when compared with our European competitors the average was 4·5 per cent during the Labour Government compared with 0·1 per cent now. That is a clear indication of how our policies on interest rates and monetary policy have made a big difference, comparatively, to all that we saw under the Labour Government.
  Mr. Gould: I feel justified in intervening, since the inflation rate is the sole achievement that the Government can claim in their economic policy. Does the right hon. Gentleman dispute that our inflation rate today is higher as a proportion of the OECD seven average than it was in 1979 when the Government took office? Does he dispute that, yes or no?
  Mr. MacGregor: What matters is the difference that I have just been describing. I utterly reject the hon. Gentleman's statement that inflation, although a key achievement of the Government, is the only one.
  The hon. Member for Dagenham wrote a fascinating article in The Times last year. He said:
  "To say that the Labour party's decline might be terminal has become a commonplace … To lay this bare is not to hasten the decline. A proper understanding of what is happening offers the only chance of doing something to halt a possibly fatal process. Within our geographical and ideological laager a kind of siege mentality prevails. Thus, it is seriously asserted that the obstacle to majority support in the country is that we are not Left-wing enough. It is believed that one day the scales will drop from the eyes of the masses and that a demonstration on the Floor of the Commons will bring the triumph of Socialism closer."
  It is not really a question whether the debate in the Labour party needs to be fought out in that increasingly isolationist way. If it were, it would not matter to the rest of the country. However, we are seeing that that laager-type mentality is being operated in practice in Labour-controlled authorities involving a not inconsiderable proportion of total local authority spending. The hon. Member for Dagenham knows perfectly well that he was putting his finger on that sort of approach, because he was aware that it could cause increasing unpopularity for the Labour party in the country, but, much more serious, those are the sorts of policies that would be operated if the Labour party ever got the opportunity to return to government.
  Labour authority leaders must be worrying the right hon. Member for Sparkbrook enormously. He knows that his colleagues are locked in private discussions. At least, that is what we are told in the press. He must be aware of the irresponsible approach of Labour councillors to public spending. They are piling up commitments for future ratepayers by their creative accounting. Labour controlled authorities continue to spend in the most frivolous fashion, and the right hon. Gentleman must know that the approach that is being adopted by Labour councillors

  1299
  justifies entirely our attack when we say that in practice a Labour Government would not be able to control public spending.
  The figure now in circulation is £28 billion, and it has not been challenged seriously. That is the sum to which a Labour Government would be committed, and other commitments are being added to it. That figure destroys the credibility of any attack by the Opposition on the Government's policies on interest rates and inflation, and all the policies that are set out in the autumn statement.
  Mr. Gould: As the Minister has been prepared to range so widely to avoid scrutiny of the Government's policy, perhaps I should have foreseen that he would introduce Labour spending yet again. Has the right hon. Gentleman read the study of our programme by the Institute for Fiscal Studies? Does he know what conclusion the institute reached, and does he accept it? Its conclusion is that he has invented figures, or that they are nothing more than back-of-envelope figures.
  Mr. MacGregor: I have read the study in full and that which the hon. Gentleman asserts is not what it states. The study makes it clear that the Government's costing is entirely accurate and is not based on back-of-envelope figures. Secondly, it says that some of Labour's commitments are not absolutely clear. On many occasions I have offered the right hon. Member for Sparkbrook the opportunity to tell us which commitments he will take off the list. Some signs were given in a previous debate that commitments that are dear to the hearts of Labour Back Benchers are now being dropped.
  The hon. Member for Kingston upon Hull, East (Mr. Prescott), who is the Opposition's employment spokesman, has said that there are commitments that are not "fully there" of £6·6 billion, which he said should be removed from the overall commitment. That statement was negated by the hon. Member for Oldham, West (Mr. Meacher), the Opposition's spokesman on social security matters, who added more than an equivalent sum to the figures that do not come within the commitment of £28 billion.
  If we consider what is being done by Labour councils, it is no wonder that Opposition Members are so sensitive. The hon. Member for Dagenham stated that inflation was the Government's one achievement for which we could claim credit. Accordingly, I turn to the record for the past five years, which the autumn statement will continue. Since 1981, growth has averaged 3 per cent., manufacturing investment has averaged 4 per cent. and take-home pay for a married man on average earnings has increased by 17 per cent. compared with a drop of nearly 1 per cent. under the previous Labour Government.
  As has been said, the Government's record on inflation is a major achievement. The hon. Gentleman talks about interest rates, but he should recognise that there are other factors that are extremely important to companies. The rate of return for all industrial and commercial companies rose to 12 per cent. in 1985, the highest since 1964, and treble the rate in 1975. The rate of return on manufacturing in 1985 was 7 per cent., the highest percentage since 1973. Companies' liquidity and profitability are returning to the levels that we all want to see. These elements can be set against the impact of inflation.
  1300
  The autumn statement is consistent with what we have done in the past, which has made possible the achievements to which I have referred. It will enable us to secure balanced growth again next year. It is in the most remarkable contrast with the policies of the Opposition, which is why they will never get the opportunity to implement them.
  Question put, That the amendment be made:—
  The House divided: Ayes 22, Noes 268.

  Division No. 44]

  [9.59 pm

  AYES

  Ashdown, Paddy

  Owen, Rt Hon Dr David

  Beith, A. J.

  Penhaligon, David

  Bruce, Malcolm

  Ross, Stephen (Isle of Wight)

  Hancock, Michael

  Shields, Mrs Elizabeth

  Howells, Geraint

  Steel, Rt Hon David

  Hughes, Simon (Southwark)

  Thomas, Dafydd (Merioneth)

  Johnston, Sir Russell

  Wallace, James

  Kennedy, Charles

  Wigley, Dafydd

  Kirkwood, Archy

  Wrigglesworth, Ian

  Livsey, Richard

  Maclennan, Robert

  Tellers for the Ayes:

  Mallon, Seamus

  Mr. David Alton and

  Meadowcroft, Michael

  Mr. John Cartwright.

  NOES

  Aitken, Jonathan

  Fraser, Peter (Angus East)

  Alison, Rt Hon Michael

  Freeman, Roger

  Ancram, Michael

  Gale, Roger

  Arnold, Tom

  Galley, Roy

  Aspinwall, Jack

  Gardiner, George (Reigate)

  Atkins, Robert (South Ribble)

  Gardner, Sir Edward (Fylde)

  Baker, Rt Hon K. (Mole Vall'y)

  Garel-Jones, Tristan

  Baker, Nicholas (Dorset N)

  Gilmour, Rt Hon Sir Ian

  Batiste, Spencer

  Glyn, Dr Alan

  Beaumont-Dark, Anthony

  Goodhart, Sir Philip

  Bellingham, Henry

  Goodlad, Alastair

  Benyon, William

  Gorst, John

  Best, Keith

  Gow, Ian

  Boscawen, Hon Robert

  Grant, Sir Anthony

  Bottomley, Mrs Virginia

  Greenway, Harry

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

  Gregory, Conal

  Brooke, Hon Peter

  Griffiths, Sir Eldon

  Brown, M. (Brigg & Cl'thpes)

  Griffiths, Peter (Portsm'th N)

  Browne, John

  Grist, Ian

  Buchanan-Smith, Rt Hon A.

  Ground, Patrick

  Buck, Sir Antony

  Grylls, Michael

  Budgen, Nick

  Hamilton, Hon A. (Epsom)

  Carlisle, Rt Hon M. (W'ton S)

  Hamilton, Neil (Tatton)

  Cash, William

  Hampson, Dr Keith

  Chapman, Sydney

  Hanley, Jeremy

  Chope, Christopher

  Hannam, John

  Churchill, W. S.

  Harris, David

  Clark, Sir W. (Croydon S)

  Harvey, Robert

  Cockeram, Eric

  Havers, Rt Hon Sir Michael

  Colvin, Michael

  Hawkins, Sir Paul (N'folk SW)

  Conway, Derek

  Hayhoe, Rt Hon Barney

  Coombs, Simon

  Hayward, Robert

  Cope, John

  Heddle, John

  Cormack, Patrick

  Henderson, Barry

  Cranborne, Viscount

  Heseltine, Rt Hon Michael

  Crouch, David

  Hickmet, Richard

  Dorrell, Stephen

  Hicks, Robert

  Douglas-Hamilton, Lord J.

  Higgins, Rt Hon Terence L.

  Dunn, Robert

  Hind, Kenneth

  Durant, Tony

  Hirst, Michael

  Dykes, Hugh

  Holt, Richard

  Eyre, Sir Reginald

  Hordern, Sir Peter

  Fallon, Michael

  Howard, Michael

  Favell, Anthony

  Howarth, Alan (Stratf'd-on-A)

  Fenner, Dame Peggy

  Howarth, Gerald (Cannock)

  Fookes, Miss Janet

  Howell, Ralph (Norfolk, N)

  Forman, Nigel

  Hubbard-Miles, Peter

  Forsyth, Michael (Stirling)

  Hunt, David (Wirral W)

  Forth, Eric

  Hunt, John (Ravensbourne)

  Fox, Sir Marcus

  Hunter, Andrew

  Franks, Cecil

  Jackson, Robert

  1301

  Jenkin, Rt Hon Patrick

  Price, Sir David

  Jessel, Toby

  Prior, Rt Hon James

  Johnson Smith, Sir Geoffrey

  Proctor, K. Harvey

  Jones, Gwilym (Cardiff N)

  Raffan, Keith

  Jones, Robert (Herts W)

  Raison, Rt Hon Timothy

  Joseph, Rt Hon Sir Keith

  Rathbone, Tim

  Kellett-Bowman, Mrs Elaine

  Rees, Rt Hon Peter (Dover)

  Key, Robert

  Rhodes James, Robert

  King, Rt Hon Tom

  Ridsdale, Sir Julian

  Knight, Greg (Derby N)

  Rifkind, Rt Hon Malcolm

  Knight, Dame Jill (Edgbaston)

  Rippon, Rt Hon Geoffrey

  Knowles, Michael

  Roberts, Wyn (Conwy)

  Knox, David

  Robinson, Mark (N'port W)

  Lamont, Rt Hon Norman

  Roe, Mrs Marion

  Lang, Ian

  Rossi, Sir Hugh

  Latham, Michael

  Rost, Peter

  Lawler, Geoffrey

  Rowe, Andrew

  Lawrence, Ivan

  Rumbold, Mrs Angela

  Lawson, Rt Hon Nigel

  Sackville, Hon Thomas

  Lee, John (Pendle)

  Sainsbury, Hon Timothy

  Leigh, Edward (Gainsbor'gh)

  Sayeed, Jonathan

  Lester, Jim

  Scott, Nicholas

  Lewis, Sir Kenneth (Stamf'd)

  Shaw, Giles (Pudsey)

  Lilley, Peter

  Shaw, Sir Michael (Scarb')

  Lloyd, Sir Ian (Havant)

  Shelton, William (Streatham)

  Lloyd, Peter (Fareham)

  Shepherd, Colin (Hereford)

  Lord, Michael

  Shepherd, Richard (Aldridge)

  Lyell, Nicholas

  Silvester, Fred

  McCrindle, Robert

  Sims, Roger

  McCurley, Mrs Anna

  Skeet, Sir Trevor

  MacGregor, Rt Hon John

  Smith, Sir Dudley (Warwick)

  MacKay, Andrew (Berkshire)

  Soames, Hon Nicholas

  MacIean, David John

  Speed, Keith

  McLoughlin, Patrick

  Speller, Tony

  McNair-Wilson, M. (N'bury)

  Spicer, Jim (Dorset W)

  McQuarrie, Albert

  Spicer, Michael (S Worcs)

  Madel, David

  Squire, Robin

  Major, John

  Stanbrook, Ivor

  Malins, Humfrey

  Stanley, Rt Hon John

  Marlow, Antony

  Steen, Anthony

  Marshall, Michael (Arundel)

  Stern, Michael

  Mates, Michael

  Stevens, Lewis (Nuneaton)

  Mather, Carol

  Stewart, Allan (Eastwood)

  Maude, Hon Francis

  Stewart, Andrew (Sherwood)

  Maxwell-Hyslop, Robin

  Stewart, Ian (Hertf'dshire N)

  Mayhew, Sir Patrick

  Sumberg, David

  Merchant, Piers

  Taylor, John (Solihull)

  Meyer, Sir Anthony

  Taylor, Teddy (S'end E)

  Miller, Hal (B'grove)

  Temple-Morris, Peter

  Mills, Iain (Meriden)

  Terlezki, Stefan

  Miscampbell, Norman

  Thatcher, Rt Hon Mrs M.

  Mitchell, David (Hants NW)

  Thomas, Rt Hon Peter

  Moate, Roger

  Thompson, Donald (Calder V)

  Monro, Sir Hector

  Thompson, Patrick (N'ich N)

  Montgomery, Sir Fergus

  Thorne, Neil (Ilford S)

  Morris, M. (N'hampton S)

  Thurnham, Peter

  Morrison, Hon C. (Devizes)

  Townend, John (Bridlington)

  Morrison, Hon P. (Chester)

  Townsend, Cyril D. (B'heath)

  Moynihan, Hon C.

  Tracey, Richard

  Needham, Richard

  Trippier, David

  Nelson, Anthony

  Trotter, Neville

  Neubert, Michael

  Twinn, Dr Ian

  Newton, Tony

  van Straubenzee, Sir W.

  Nicholls, Patrick

  Vaughan, Sir Gerard

  Normanton, Tom

  Viggers, Peter

  Norris, Steven

  Waddington, David

  Oppenheim, Phillip

  Waldegrave, Hon William

  Osborn, Sir John

  Walden, George

  Ottaway, Richard

  Wall, Sir Patrick

  Page, Sir John (Harrow W)

  Waller, Gary

  Page, Richard (Herts SW)

  Ward, John

  Parkinson, Rt Hon Cecil

  Wardle, C. (Bexhill)

  Patten, Christopher (Bath)

  Warren, Kenneth

  Patten, J. (Oxf W & Abgdn)

  Watson, John

  Peacock, Mrs Elizabeth

  Watts, John

  Percival, Rt Hon Sir Ian

  Wells, Bowen (Hertford)

  Pollock, Alexander

  Wheeler, John

  Portillo, Michael

  Whitfield, John

  Powell, William (Corby)

  Whitney, Raymond

  Powley, John

  Wiggin, Jerry

  1302

  Wilkinson, John

  Younger, Rt Hon George

  Wolfson, Mark

  Wood, Timothy

  Tellers for the Noes:

  Woodcock, Michael

  Mr. Mark Lennox-Boyd and

  Yeo, Tim

  Mr. Gerald Malone.

  Question accordingly negatived.
  Main Question put:—
  The House divided: Ayes 268, Noes 204.

  Division No. 45]

  [10.13 pm

  AYES

  Aitken, Jonathan

  Griffiths, Sir Eldon

  Alison, Rt Hon Michael

  Griffiths, Peter (Portsm'th N)

  Ancram, Michael

  Grist, Ian

  Arnold, Tom

  Ground, Patrick

  Aspinwall, Jack

  Grylls, Michael

  Atkins, Robert (South Ribble)

  Hamilton, Hon A. (Epsom)

  Baker, Rt Hon K. (Mole Vall'y)

  Hamilton, Neil (Tatton)

  Baker, Nicholas (Dorset N)

  Hampson, Dr Keith

  Batiste, Spencer

  Hanley, Jeremy

  Beaumont-Dark, Anthony

  Hannam, John

  Bellingham, Henry

  Harris, David

  Benyon, William

  Harvey, Robert

  Best, Keith

  Havers, Rt Hon Sir Michael

  Boscawen, Hon Robert

  Hawkins, Sir Paul (N'folk SW)

  Bottomley, Mrs Virginia

  Hayhoe, Rt Hon Barney

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

  Hayward, Robert

  Brooke, Hon Peter

  Heddle, John

  Brown, M. (Brigg & Cl'thpes)

  Henderson, Barry

  Browne, John

  Heseltine, Rt Hon Michael

  Buchanan-Smith, Rt Hon A.

  Hickmet, Richard

  Buck, Sir Antony

  Hicks, Robert

  Budgen, Nick

  Higgins, Rt Hon Terence L.

  Carlisle, Rt Hon M. (W'ton S)

  Hind, Kenneth

  Cash, William

  Hirst, Michael

  Chapman, Sydney

  Holt, Richard

  Chope, Christopher

  Hordern, Sir Peter

  Churchill, W. S.

  Howard, Michael

  Clark, Sir W. (Croydon S)

  Howarth, Alan (Stratf'd-on-A)

  Cockeram, Eric

  Howarth, Gerald (Cannock)

  Colvin, Michael

  Howell, Ralph (Norfolk, N)

  Conway, Derek

  Hubbard-Miles, Peter

  Coombs, Simon

  Hunt, David (Wirral W)

  Cope, John

  Hunt, John (Ravensbourne)

  Cormack, Patrick

  Hunter, Andrew

  Cranborne, Viscount

  Jackson, Robert

  Crouch, David

  Jenkin, Rt Hon Patrick

  Dorrell, Stephen

  Jessel, Toby

  Douglas-Hamilton, Lord J.

  Johnson Smith, Sir Geoffrey

  Dunn, Robert

  Jones, Gwilym (Cardiff N)

  Durant, Tony

  Jones, Robert (Herts W)

  Dykes, Hugh

  Joseph, Rt Hon Sir Keith

  Eyre, Sir Reginald

  Kellett-Bowman, Mrs Elaine

  Fallon, Michael

  Key, Robert

  Favell, Anthony

  King, Rt Hon Tom

  Fenner, Dame Peggy

  Knight, Greg (Derby N)

  Fookes, Miss Janet

  Knight, Dame Jill (Edgbaston)

  Forman, Nigel

  Knowles, Michael

  Forsyth, Michael (Stirling)

  Knox, David

  Forth, Eric

  Lamont, Rt Hon Norman

  Fox, Sir Marcus

  Lang, Ian

  Franks, Cecil

  Latham, Michael

  Fraser, Peter (Angus East)

  Lawler, Geoffrey

  Freeman, Roger

  Lawrence, Ivan

  Gale, Roger

  Lawson, Rt Hon Nigel

  Galley, Roy

  Lee, John (Pendle)

  Gardiner, George (Reigate)

  Leigh, Edward (Gainsbor'gh)

  Gardner, Sir Edward (Fylde)

  Lennox-Boyd, Hon Mark

  Garel-Jones, Tristan

  Lester, Jim

  Gilmour, Rt Hon Sir Ian

  Lewis, Sir Kenneth (Stamf'd)

  Glyn, Dr Alan

  Lilley, Peter

  Goodhart, Sir Philip

  Lloyd, Sir Ian (Havant)

  Goodlad, Alastair

  Lloyd, Peter (Fareham)

  Gorst, John

  Lord, Michael

  Gow, Ian

  Lyell, Nicholas

  Grant, Sir Anthony

  McCrindle, Robert

  Greenway, Harry

  McCurley, Mrs Anna

  Gregory, Conal

  MacGregor, Rt Hon John

  1303

  MacKay, Andrew (Berkshire)

  Shaw, Giles (Pudsey)

  MacIean, David John

  Shaw, Sir Michael (Scarb')

  McLoughlin, Patrick

  Shelton, William (Streatham)

  McNair-Wilson, M. (N'bury)

  Shepherd, Colin (Hereford)

  McQuarrie, Albert

  Shepherd, Richard (Aldridge)

  Madel, David

  Silvester, Fred

  Major, John

  Sims, Roger

  Malins, Humfrey

  Skeet, Sir Trevor

  Marlow, Antony

  Smith, Sir Dudley (Warwick)

  Marshall, Michael (Arundel)

  Soames, Hon Nicholas

  Mates, Michael

  Speed, Keith

  Mather, Carol

  Speller, Tony

  Maxwell-Hyslop, Robin

  Spicer, Jim (Dorset W)

  Mayhew, Sir Patrick

  Spicer, Michael (S Worcs)

  Merchant, Piers

  Squire, Robin

  Meyer, Sir Anthony

  Stanbrook, Ivor

  Miller, Hal (B'grove)

  Stanley, Rt Hon John

  Mills, Iain (Meriden)

  Steen, Anthony

  Miscampbell, Norman

  Stern, Michael

  Mitchell, David (Hants NW)

  Stevens, Lewis (Nuneaton)

  Moate, Roger

  Stewart, Allan (Eastwood)

  Monro, Sir Hector

  Stewart, Andrew (Sherwood)

  Montgomery, Sir Fergus

  Stewart, Ian (Hertf'dshire N)

  Morris, M. (N'hampton S)

  Sumberg, David

  Morrison, Hon C. (Devizes)

  Taylor, John (Solihull)

  Morrison, Hon P. (Chester)

  Taylor, Teddy (S'end E)

  Moynihan, Hon C.

  Temple-Morris, Peter

  Needham, Richard

  Terlezki, Stefan

  Nelson, Anthony

  Thatcher, Rt Hon Mrs M.

  Neubert, Michael

  Thomas, Rt Hon Peter

  Newton, Tony

  Thompson, Donald (Calder V)

  Nicholls, Patrick

  Thompson, Patrick (N'ich N)

  Normanton, Tom

  Thorne, Neil (Ilford S)

  Norris, Steven

  Thurnham, Peter

  Oppenheim, Phillip

  Townend, John (Bridlington)

  Osborn, Sir John

  Townsend, Cyril D. (B'heath)

  Ottaway, Richard

  Tracey, Richard

  Page, Sir John (Harrow W)

  Trippier, David

  Page, Richard (Herts SW)

  Trotter, Neville

  Parkinson, Rt Hon Cecil

  Twinn, Dr Ian

  Patten, Christopher (Bath)

  van Straubenzee, Sir W.

  Patten, J. (Oxf W & Abgdn)

  Vaughan, Sir Gerard

  Peacock, Mrs Elizabeth

  Viggers, Peter

  Percival, Rt Hon Sir Ian

  Waddington, David

  Pollock, Alexander

  Wakeham, Rt Hon John

  Portillo, Michael

  Waldegrave, Hon William

  Powell, William (Corby)

  Walden, George

  Powley, John

  Wall, Sir Patrick

  Price, Sir David

  Waller, Gary

  Proctor, K. Harvey

  Ward, John

  Raffan, Keith

  Wardle, C. (Bexhill)

  Raison, Rt Hon Timothy

  Warren, Kenneth

  Rathbone, Tim

  Watson, John

  Rees, Rt Hon Peter (Dover)

  Watts, John

  Rhodes James, Robert

  Wells, Bowen (Hertford)

  Ridsdale, Sir Julian

  Wheeler, John

  Rifkind, Rt Hon Malcolm

  Whitfield, John

  Rippon, Rt Hon Geoffrey

  Whitney, Raymond

  Roberts, Wyn (Conwy)

  Wiggin, Jerry

  Robinson, Mark (N'port W)

  Wilkinson, John

  Roe, Mrs Marion

  Wolfson, Mark

  Rossi, Sir Hugh

  Wood, Timothy

  Rost, Peter

  Woodcock, Michael

  Rowe, Andrew

  Yeo, Tim

  Rumbold, Mrs Angela

  Younger, Rt Hon George

  Sackville, Hon Thomas

  Sainsbury, Hon Timothy

  Tellers for the Ayes:

  Sayeed, Jonathan

  Mr. Francis Maude and

  Scott, Nicholas

  Mr. Gerald Malone.

  NOES

  Abse, Leo

  Barron, Kevin

  Adams, Allen (Paisley N)

  Beckett, Mrs Margaret

  Alton, David

  Beith, A. J.

  Archer, Rt Hon Peter

  Bell, Stuart

  Ashdown, Paddy

  Benn, Rt Hon Tony

  Ashley, Rt Hon Jack

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

  Ashton, Joe

  Bermingham, Gerald

  Atkinson, N. (Tottenham)

  Bidwell, Sydney

  Banks, Tony (Newham NW)

  Blair, Anthony

  1304

  Boothroyd, Miss Betty

  Hughes, Dr Mark (Durham)

  Boyes, Roland

  Hughes, Robert (Aberdeen N)

  Brown, Gordon (D'f'mline E)

  Hughes, Roy (Newport East)

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

  Hughes, Simon (Southwark)

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

  Janner, Hon Greville

  Brown, Ron (E'burgh, Leith)

  John, Brynmor

  Bruce, Malcolm

  Johnston, Sir Russell

  Buchan, Norman

  Jones, Barry (Alyn & Deeside)

  Caborn, Richard

  Kaufman, Rt Hon Gerald

  Callaghan, Jim (Heyw'd & M)

  Kennedy, Charles

  Campbell, Ian

  Kinnock, Rt Hon Neil

  Campbell-Savours, Dale

  Kirkwood, Archy

  Canavan, Dennis

  Lamond, James

  Carter-Jones, Lewis

  Leadbitter, Ted

  Cartwright, John

  Leighton, Ronald

  Clark, Dr David (S Shields)

  Lewis, Ron (Carlisle)

  Clarke, Thomas

  Lewis, Terence (Worsley)

  Clay, Robert

  Litherland, Robert

  Clelland, David Gordon

  Livsey, Richard

  Clwyd, Mrs Ann

  Lloyd, Tony (Stretford)

  Cocks, Rt Hon M. (Bristol S)

  Lofthouse, Geoffrey

  Cohen, Harry

  Loyden, Edward

  Coleman, Donald

  McCartney, Hugh

  Cook, Frank (Stockton North)

  McDonald, Dr Oonagh

  Cook, Robin F. (Livingston)

  McGuire, Michael

  Corbett, Robin

  McKay, Allen (Penistone)

  Corbyn, Jeremy

  McKelvey, William

  Cox, Thomas (Tooting)

  MacKenzie, Rt Hon Gregor

  Craigen, J. M.

  MacIennan, Robert

  Crowther, Stan

  McNamara, Kevin

  Cunliffe, Lawrence

  McTaggart, Robert

  Cunningham, Dr John

  McWilliam, John

  Dalyell, Tam

  Madden, Max

  Davies, Rt Hon Denzil (L'lli)

  Marek, Dr John

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

  Martin, Michael

  Deakins, Eric

  Mason, Rt Hon Roy

  Dewar, Donald

  Maxton, John

  Dixon, Donald

  Maynard, Miss Joan

  Dobson, Frank

  Meacher, Michael

  Dormand, Jack

  Meadowcroft, Michael

  Douglas, Dick

  Michie, William

  Dubs, Alfred

  Millan, Rt Hon Bruce

  Duffy, A. E. P.

  Mitchell, Austin (G't Grimsby)

  Dunwoody, Hon Mrs G.

  Morris, Rt Hon A. (W'shawe)

  Eadie, Alex

  Morris, Rt Hon J. (Aberavon)

  Eastham, Ken

  Nellist, David

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

  O'Brien, William

  Evans, John (St. Helens N)

  O'Neill, Martin

  Fatchett, Derek

  Owen, Rt Hon Dr David

  Faulds, Andrew

  Park, George

  Field, Frank (Birkenhead)

  Parry, Robert

  Fields, T. (L'pool Broad Gn)

  Patchett, Terry

  Fisher, Mark

  Pavitt, Laurie

  Flannery, Martin

  Pendry, Tom

  Foot, Rt Hon Michael

  Penhaligon, David

  Forrester, John

  Pike, Peter

  Foster, Derek

  Powell, Raymond (Ogmore)

  Foulkes, George

  Prescott, John

  Fraser, J. (Norwood)

  Radice, Giles

  Freeson, Rt Hon Reginald

  Randall, Stuart

  Garrett, W. E.

  Raynsford, Nick

  George, Bruce

  Redmond, Martin

  Godman, Dr Norman

  Rees, Rt Hon M. (Leeds S)

  Golding, Mrs Llin

  Richardson, Ms Jo

  Gould, Bryan

  Roberts, Ernest (Hackney N)

  Gourlay, Harry

  Robertson, George

  Hamilton, James (M'well N)

  Rogers, Allan

  Hamilton, W. W. (Fife Central)

  Rooker, J. W.

  Hancock, Michael

  Ross, Ernest (Dundee W)

  Harrison, Rt Hon Walter

  Ross, Stephen (Isle of Wight)

  Hart, Rt Hon Dame Judith

  Rowlands, Ted

  Hattersley, Rt Hon Roy

  Sedgemore, Brian

  Heffer, Eric S.

  Sheerman, Barry

  Hogg, N. (C'nauld & Kilsyth)

  Sheldon, Rt Hon R.

  Holland, Stuart (Vauxhall)

  Shields, Mrs Elizabeth

  Home Robertson, John

  Shore, Rt Hon Peter

  Howarth, George (Knowsley, N)

  Short, Ms Clare (Ladywood)

  Howell, Rt Hon D. (S'heath)

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

  Howells, Geraint

  Silkin, Rt Hon J.

  Hoyle, Douglas

  Skinner, Dennis

  1305

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

  Thorne, Stan (Preston)

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

  Wallace, James

  Snape, Peter

  Wardell, Gareth (Gower)

  Soley, Clive

  Wareing, Robert

  Spearing, Nigel

  Weetch, Ken

  Steel, Rt Hon David

  Welsh, Michael

  Stott, Roger

  White, James

  Straw, Jack

  Wigley, Dafydd

  Taylor, Rt Hon John David

  Williams, Rt Hon A.

  Thomas, Dafydd (Merioneth)

  Wilson, Gordon

  Thomas, Dr R. (Carmarthen)

  Winnick, David

  Thompson, J. (Wansbeck)

  Woodall, Alec

  1306

  Wrigglesworth, Ian

  Tellers for the Noes:

  Young, David (Bolton SE)

  Mr. Ron Davies and

  Mr. Sean Hughes.

  Question accordingly agreed to.
  Resolved,
  That this House approves the Autumn Statement presented by Mr. Chancellor of the Exchequer on 6th November; welcomes the prospect of continuing low inflation and steady growth as the basis for maintaining the trend of rising employment; and congratulates Her Majesty's Government on the continuing reduction in the share of national income pre-empted by public expenditure.

  Water Authorities (Return on Assets)
  10.26 pm
  Mr. Roland Boyes: I beg to move,
  That an humble Address be presented to Her Majesty, praying that the Water Authorities (Return on Assets) Order 1986 (S.I., 1986, No. 1952), dated 18th November 1986, a copy of which was laid before this House on 24th November, be annulled.
  The purpose of the order is to increase the price of water to its users. We in the Labour party do not accept that it is appropriate to calculate the rate of return on a false valuation of the industry's assets.
  My hon. Friends the Members for Birmingham, Perry Barr (Mr. Rooker) on 2 February 1985 and for South Shields (Dr. Clark) on 17 December 1985 discussed the technicality of using the current cost accounting procedure in their speeches on the orders S.I., 1984, No. 1995 and S.I., 1985, No. 1805. My hon. Friend the Member for South Shields said:
  "To adopt the current cost accounting procedure as the valuation is a false and incorrect way to handle the issue." —[Official Report,17 December 1985; Vol. 89, c. 257.]
  My hon. Friend the Member for Perry Barr discussed the issued at some length and I do not wish to take time rehearsing the arguments again. However, I wish to consider the implications of the order, which are serious for the people whom my hon. Friends and I represent. There is a clear connection between the return on assets and the level of charges to customers.
  An analysis of the figures reveals a number of facts, two of which I wish to highlight. First, since 1984–85 the target rate of return has increased for all water authorities and, secondly, a comparison of the range of rates of return with the previous two years reveals a widening gap. Last year, for example, the range was 1·5 per cent to 1·73 per cent., whereas this year it is 1·7 per cent to 2·1 per cent. Why is that happening, when the Government's initial intention was to move to a common rate of return for all authorities?
  I am sure that the Minister will have had sight of a document from the Confederation of British Industry about the order, entitled "CBI: the Industrial View", which states:
  "it is reasonable to assume that next year's targets are being set to even out price increases rather than encourage effective management with the authorities."
  The price to the average householder is increasing dramatically, as a few figures will illustrate. Between 1978–79 and 1986–87, the increase in prices to all water authorities averaged a staggering 143 per cent., ranging from 123 per cent for South-West Water to 163 per cent for Northumbrian Water. The average price increase for the past two years was 11·7 per cent in 1985–86, when all water authorities except one increased prices by double figures. For 1986–87, the average is 8 per cent—still more than double the inflation rate.
  Those increases resulted in extraordinary profits. Northumbrian Water increased its profits seven times and Thames by £45 million from £105 million to £150 million. Clearly, this is completely unacceptable. However, the same customers must accept further increases in 1987–88, which could be as high as 10 per cent. It is certain that they will be well above inflation, which suggests another question to the Minister. In the White Paper on
  1308
  privatisation, price controls of retail price index minus X were proposed. Why are today's customers facing an increase of RPI times X? Not only householders are affected by price increases. Business customers are, too, and the CBI is rightly worried that, after a series of increases exceeding inflation, businesses will have difficulty in keeping down operational costs and remaining competitive. That will have serious implications for jobs, which concerns my hon. Friends.
  The water authorities have no option but to increase prices. The Government are slashing their borrowing powers by £100 million; that means that the only alternative is to cut capital spending which, with the current state of the industry, is not a serious option. Mr. Roy Watts, chairman of the Thames water authority, is so worried that he has written to all London Members. In his letter, he says:
  "It seems as if we shall once again be asked to substantially increase our repayment of long term debt in the coming year … We shall be entirely debt-free within three years, which amounts to a very poor deal for today's customers."
  Mr. Malcolm Anson, chairman of Wessex water authority, wrote in a letter to my right hon. Friend the Member for Bristol, South (Mr. Cocks) on 10 December that the effect of the Government's policies could only be to the
  "detriment of our present standards of service."
  As a result of price increases and of reductions in the external financing limit—the borrowing powers of the water authorities—Richard Evans wrote in an article in the Financial Times on 17 July 1986:
  "The authorities have become much more financially attractive since the prospect of privatisation was first raised 18 months ago."
  It appears that the Government are still committed to privatising the water authorities. Or are they? From previous announcements, one cannot be sure of the Government's thinking on the industry. On 19 December 1984, the former Under-Secretary of State for the Environment, the hon. Member for Sutton and Cheam (Mr. Macfarlane), said:
  "We have absolutely no intention of privatising the water industry. The Government have no plans to urge that upon the water authorities. There has been some press speculation about it in the past, but there is no intention to do so." —[Official Report, 19 December 1984; Vol. 70, c. 457.]
  Just over a month later, on 31 January 1985, in a written answer, the Prime Minister said:
  "The Government would welcome new ideas on privatisation. However, the water authorities are natural monopolies for many of their functions and we need to be particularly careful when considering replacing a public monopoly by a private one."—[Official Report, 31 January 1985; Vol. 72, c. 292.]
  On 5 February 1986, all had become clear. The Secretary of State for the Environment, now the Secretary of State for Education and Science, said:
  "The Government have now decided to transfer the 10 water authorities in England and Wales to private ownership." —[Official Report, 5 February 1986; Vol. 91, c. 287.]
  The position was confirmed by the Minister for Housing, Urban Affairs and Construction when he moved an amendment to a motion of the hon. Member for Southwark and Bermondsey (Mr. Hughes) on 23 June 1986 which
  "welcomes the Government's proposals for the privatisation of the water authorities."—[Official Report, 23 June 1986; Vol. 100, c. 36.]
  But that is not the end of the story. On 3 July—just over a week after the Minister had spoken—the

  1309
  Secretary of State for the Environment was forced by my hon. Friend the Member for Copeland (Dr. Cunningham) to come before the House at 10 pm to make what my hon. Friend described as
  a pathetic and inadequate statement."
  In that statement, the Secretary of State withdrew the Government's privatisation proposals. However, he said:
  "I reaffirm the Government's intention to proceed with water privatisation as soon as practicable."—[Official Report, 3 July 1986: Vol. 100, c. 1261.]
  I will not ask the Minister to make a statement today. He must realise that this is a bit of a minefield. However, I have a serious comment to make about his Department's water legislation division. In 1985–86, costs other than staff were £103,000. In the first half of 1986–87, the costs had reached a colossal £1·3 million. On what is that money being spent? Should the Government bring back their proposals to privatise the water authorities, I assure the House that they will be opposed as vigorously as they were before.
  My hon. Friends and I condemn any proposal to privatise a basic necessity of life. We believe that the water industry should be kept in the public sector, the integrated river basin management retained, and until a regional tier of government is introduced, regional water authorities should continue. However, there will be changes to democratise the boards, as we cannot allow a small group of people meeting in secret to determine policy. We shall invest in the industry to clean up beaches and improve the quality of drinking water. We shall not ask water authorities to become what Roy Watts described as "covert tax collectors" for the Government. Under a Labour Government, water authorities will be able to use profit to improve both quality of service and water to the consumer.
  This week, a report by the Nitrate Co-ordination Group, "Nitrates in Water", describes how nitrate levels in some areas are above EEC limits and there is a danger that heavy nitrate concentrations could cause serious health hazards. The Government are also concerned about the state of beaches in the United Kingdom. It is incredible that only 27 beaches in the United Kingdom are designated as possessing bathing water meeting EEC quality standards.
  To satisfy the requirements of both the nitrate and bathing beach problems would cost about £600 million. Some £200 million is estimated as being needed to solve the nitrate problem, and £400 million for the bathing beach problem. Ian Hill, the chairman of South-West Water, in The Independent on 13 December is reported as saying that the Minister's announcement on bathing beaches is
  "incompatible with financial restrictions currently being imposed by the DOE … It is just not good enough to order these costly monitoring and improvement works while ignoring the financial implications."
  Will the Minister be producing hard cash for the water authorities to carry out these tasks, particularly the £400 million for the short term and urgent need to clean up the beaches?
  The CBI, in the note already cited, states:
  "The increases in charges expected next year will add between £80 million to £100 million to business and industry's costs … The signs are that where large water users discharge effluent to public sewage works it is becoming increasingly attractive for them to instal their own treatment plants."
  The writer of the note correctly points out that this will lead to unused and unusable plant in the hands of the
  1310
  water authorities, and consequently, the opportunity for investment in the productive areas that could create employment.
  I should be glad to have the Minister's comments on this matter, along with answers to the other questions that I have raised. This is a shabby, unacceptable order. I urge the Minister not to press ahead with it but to take it away and come back with a more acceptable proposal. Unlike Conservative Members, my hon. Friends and I care about the water industry.
  10.38 pm
  The Minister for Housing, Urban Affairs and Construction (Mr. John Patten): I am afraid that I must disappoint the hon. Member for Houghton and Washington (Mr. Boyes) after his excellent speech, which contained some penetrating questions. We shall be pressing ahead with the order, and we have every reason to be proud of our record of investment in the water industry since 1979, as I shall be able to demonstrate.
  I remind the House of our policy, which I outlined a year ago when the previous order was debated. This is exactly the same policy as that announced in 1984 by my distinguished predecessor, my hon. Friend the Member for Eastbourne (Mr. Gow), who I see here tonight. Two years ago we were seeking convergence as much as possible, in answer to the hon. Gentleman's first question. [Interruption.] I do not know what the hon. Member for Copeland (Dr. Cunningham) finds so funny about this. I am trying to answer the questions put to me by the hon. Member for Houghton and Washington.
  Dr. John Cunningham: It was a compliment.
  Mr. Patten: If that is a compliment, I shall give way gladly.
  Dr. Cunningham: Not to the hon. Gentleman.
  Mr. Patten: In that case, I shall not. I thought that, as it is Christmas time, I might get a compliment from the hon. Gentleman, but, alas, I shall not.
  I agree with the hon. Member for Houghton and Washington that there has been some divergence, but this divergence reflects the financing needs of the authorities. Anglian has the highest target, reflecting its heavy investment requirements and its need to reduce the heavy burden of interest.
  We have asked water authorities steadily to improve the rate of return that they earn on their capital assets. The previous figure of approximately 1 per cent was an inadequate return on the considerable investment in the water industry. In 1984 the target announced for 1987–88 by my hon. Friend the Member for Eastbourne was an average of 1·9 per cent. The average figure in the order that was laid on 24 November is close to that figure, but at 1·875 per cent it is not quite so tough.
  The hon. Member for Houghton and Washington was a little unfair about the Government's record since 1979. In 1986–87, water authorities' capital expenditure, excluding expenditure on the tricky subject of land drainage, is £925 million, about 40 per cent of revenue. That is not bad. It represents an increase of 35 per cent., in volume terms, since 1980–81. In some areas the increases, in volume terms, are even higher—70 per cent in the South-West, 74 per cent in the North-West and 110 per cent in Wessex. I do not see any Members

  1311
  from Wessex constituencies here; clearly they are very satisfied with the volume of investment in their area. It is more than the 70 per cent increase in the South-West, where the volume of investment is considerably above the national average.
  Mr. Robin Maxwell-Hyslop: Of course the Wessex Members of Parliament are satisfied. They obtain a great deal of their water from a new reservoir, paid for out of capital, in the South-West water authority's area.
  Mr. Patten: The South-West will have its own splendid reservoir when Roadford reservoir is constructed.
  In 1974, virtually all the investment by the water authorities was funded by borrowing. Inevitably, that placed a burden on public expenditure. By 1980–81, 40 per cent of the investment was funded by borrowing. In 1987–88 the industry will pay for virtually all its investment. That has been achieved while the burden on public expenditure has been reduced.
  The water authorities deserve praise for their efficiency. They have reduced their total operating costs by 6 per cent., in real terms, since 1980. Efficiency in most water authorities has improved year by year. Unfortunately, it has slipped back in recent years in a few authorities. Operating and management expenditure per head has been reduced for all major services. Standards of service have been maintained or improved, although a few water authorities could do better. On the whole, though water authorities are doing more work for less expenditure. That is an impressive record.
  Mr. Simon Hughes: Does the Minister know of any public sector body from which the Government have required such a large pay back of borrowed money in the last three years?
  Mr. Patten: There is nothing wrong with a businesslike rate of return of 1 to 2 per cent on water industry assets. Any business would expect to earn considerably more. I can tell the official spokesman for the alliance, its representative here today, that water authority debt stands at about £5 billion and interest charges take no less than one quarter of the whole of the revenue from water authority customers. That is too much, hence the policy laid down by my predecessor, my hon. Friend the Member for Eastbourne.
  Amidst all the understandable concern about bathing beaches and the quality of river water, which the hon. Member for Houghton and Washington did not mention, let us remember that 99 per cent of Britain's households are connected to mains water and 95 per cent are connected to sewerage. Those are the highest percentages in Europe.
  Mr. Nigel Spearing: Thanks to public enterprise.
  Mr. Patten: Thanks to public and private enterprise over the best part of 200 years. Every year, service standards to maintain these improvements are monitored through the process of the corporate plans produced by water authorities.
  Mr. Spearing: Will the hon. Gentleman give way?
  Mr. Patten: Perhaps the hon. Gentleman will forgive me if I do not. This is a short debate and I must make
  1312
  progress. The number of customers experiencing inadequate water pressure has fallen considerably. In every area the quality of drinking water has improved, and I am happy to report to the House that the number of properties affected by sewage flooding is low and has fallen in most authority areas. The reductions in operating costs achieved by most authorities have not been at the cost of a reduction in service standards. That is a tribute to the publicly owned water authorities and, where appropriate, to the excellent record of the privately owned water companies. I am pleased to see my hon. Friend the Member for Harrow, West (Sir J. Page) in his place.
  Mr. Maxwell-Hyslop: They do not dispose of sewage.
  Mr. Patten: They do not; I am well aware of that. However, they supply water and have a good record for supplying potable water at a good cost. The underlying gains in efficiency are better than steady and, even after all these service improvements, there has been a 6 per cent reduction in operating costs.
  Despite the evidence of improving levels of service, we still hear frequent complaints about the state of the water industry's assets. That is a bit of a myth, because asset condition is now reported annually in the corporate plans of water authorities, and we discuss those with the authorities, as I have done this year with every water authority in England and as my hon. Friend the Member for Newport, West (Mr. Robinson) the Parliamentary Under-Secretary of State for Wales, has done with the chairman of the Welsh water authority.
  Thanks to the independent-minded work of the Water Research Centre, the water industry now has manuals describing the best way of conducting and interpreting surveys on the condition of assets. All authorities are making considerable progress with these surveys.
  The record shows increased investment and lower operating costs. There have been improvements in service standards, certainly an improved knowledge of asset condition, and a reduction in the burden of public expenditure, which I applaud. The present order continues that policy. It is a great contrast to the policy which led to declining investment for which some right hon. Gentlemen on the Opposition Front Bench were responsible in the Labour Government before 1979.
  In 1979 we saw declining investment and seemingly bottomless deficit financing of the water industry. That was the picture that faced the Government when we took power in 1979. It was not a happy picture, and the progress that has been made since 1979 is a remarkable tribute to the efficiency of the water authorities and to the Government for the substantial sums of money invested in the industry.
  Mr. Jeremy Corbyn: How many jobs have been lost?
  Mr. Patten: About 20 per cent. Of course, aspirations must go on rising and I share those aspirations, as does my right hon. Friend the Secretary of State for the Environment. As scientific understanding and environmental awareness develop, and as general living standards continue to rise for most of—though not all—our citizens we will have to apply ever-higher standards. We are not trying to measure our achievements in the water industry against one benchmark. The water authorities have been brought to a much stronger financial position

  1313
  from which they can face the problems. Their corporate plans show that they recognise the problems and have the will to tackle them.
  The order continues the Government's progress before privatisation, to which the Government remain committed, in discharging their responsibility to ensure that the water authorities operate in an effective and businesslike way.
  It is a long time now since the water industry was the poor relation of local government, which it was for too long. The Government can rightly claim that we have created the conditions of sound finance and commercial flair which now, more than ever before, permeate most water authorities and reflect what their customers expect. That is why we intend to press the order home tonight.
  Several Hon. Members rose—
  Mr. Deputy Speaker (Mr. Ernest Armstrong): Order. I remind the House that the debate must finish at 11.30 pm and the Front bench spokesmen are hoping to catch my eye at 11.20 pm.
  10.51 pm
  Mr. William O'Brien: The debate has been initiated because of the impact of the Government's financial policy on water authorities' charges next year. Current signs are that the charges for most water authorities will increase by between 8 and 10 per cent., with the majority being at the 10 per cent mark. That follows an increase in excess of 10 per cent for the current year. Therefore, there is little comfort in what the Minister has offered tonight to water consumers throughout the length and breadth of Britain.
  If there is one Minister in the Government who has his head in the sand, it is the Minister who is responsible for water charges. The Government's policies have meant high prices, well above the rate of inflation, and, in most cases, a reduction in services. If consumers had the choice, would they go for a rise in water charges in order to receive a higher level of services? We often hear that question posed in the water industry.
  Mr. John Patten: Will the hon. Gentleman give way?
  Mr. O'Brien: The Minister was the first to say that this was a short debate, yet after two minutes he asks me to give way. I am afraid that I must refuse the Minister on this occasion. The Minister refused to give way to me once in Committee because he wanted an apology. I shall not give way to the Minister.
  In Yorkshire, charges have been increased, yet we are still suffering from discoloured water, soil collapse and flooding. If the Minister comes to Yorkshire he will see how higher charges are reflected in the services provided for the people there. He did not mention Yorkshire.
  It is politically impossible for the Government to rate-cap local authorities to fight inflation and then to increase charges to water consumers by an average of 10 per cent. It is also an unnecessary burden to increase charges for industry, particularly the big water users, such as the food processing, chemical, pharmaceuticals, textiles, brewing and paper industries. I believe it is an attack on job opportunities in the large water-consuming industries. The object of the 1983 reorganisation was to ensure that the water authorities were run as highly efficient businesses. The way in which the Minister has described the order
  1314
  tonight suggests that they are just turning water authorities into tax collectors because the order is nothing more than a tax increase on water charges.
  I should like to raise the question of the water authorities opening their meetings to the public and the press. We are talking about water charge increases which will affect all water consumers, especially in Yorkshire, yet there is no opportunity for members of the public or consumers to try to find out how decisions are reached.
  Earlier this month the Yorkshire water authority at a board meeting, revealed:
  "the increase would have been nearly 2 per cent higher if it had not been for two factors: the welcome relaxation by the Government of financial controls which permit more borrowing".
  If to "permit more borrowing" is the criterion for reducing charges, why do the Government not allow that to continue? That is the Yorkshire water authority's suggestion to keep charges down.
  On behalf of the Yorkshire water authority, I must say that if we are to be reasonable to consumers we should allow more borrowing to take place, as has been described by that authority, in order to keep prices down. I hope that we will reject the order.
  10.56 pm
  Mr. Robin Maxwell-Hyslop: There are many defects in the argument that my hon. Friend the Minister put forward. If he had been listening at Question Time, he would have heard his right hon. Friend the Secretary of State say that he regarded borrowings not as debt but in the nature of an overhead. If that is the case, it is nonsense to talk about return on capital. The Minister cannot call it capital for one argument and for another call it overhead. He should make his mind up which it is, instead of trying to ride both horses or they will split him down the middle because they are going in different directions.
  The Government are trying, we understand, to control inflation. Therefore, what possible reason can there be to bring in orders the effect of which is to increase the water rates by more than the rate of inflation? Water is the tool of the trade of many industries—for example, the paper industry. It must be remembered that retirement pensions increase only as function of the retail price index and, moreover, they are not subject to abatement, unlike rates. Those are two good reasons for keeping water charges below the rate of inflation and not allowing them to go above it.
  The other major point I want to make is that the Department of the Environement is supposed to be a coherent Department of State. There are many reasons for believing that that is a false assumption. It is simply not coherent to have one Minister exhorting water authorities to spend immense sums of money on new sewerage works to process sewage, instead of what is politely known as macerating it and then releasing it into the sea—that may be commendable—and then to have a zero external financing limit imposed on the water authority that has the longest coastline of any per head of population and whose population increased by a tremendous factor in the summer—it has approximately on quarter of the tourist activity in Britain—when water flows are at a minimum.
  The use of capital expenditure for the purpose of cleaning up the beaches is not compatible with the order against which the prayer has been laid. I shall be voting for the prayer because the order does not contain a

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  coherent and sensible policy and because it is not compatible with what the autumn statement has to say about inflation.
  11 pm
  Mr. Dafydd Wigley: This issue of water charges in Wales has been a contentious one for a long time and it has become more contentious in recent years because of the substantial increase in the cost of water under the Government's policies. Welsh water rate payers have to pay £4 million more a year in water rates as a result of a deliberate act of policy by the Government when they did away with the Water Equalisation Act 1977. There has been a historic high level of water charges in Wales, which for the most of the time have been at the top of the league table of charges in England and Wales, and in the past couple of years there have been forced increases in water charges arising from the requirement to have a set return on the capital base.
  Water rates in Wales will increase next year between twice and three times the rate of inflation as a result of the order against which we are praying. The charge for water will increase by 6 per cent., 7 per cent or 8 per cent compared with the going rate of inflation, which is 3 per cent. That will hit those who can ill afford to pay such charges.
  Why are we being forced to increase water charges in Wales in this way? Increased charges are being imposed to finance the capital expenditure programme, which I agree is necessary in Wales. I understand that the capital expenditure programme next year will include about £68 million for the Welsh water authority. A substantial part of the programme will be directed to improving beaches in Wales, and no one would dispute the need to improve their standard. We contend, however, that the cost of undertaking the necessary work should be borne by the taxpayer in general and not only by the ratepayer in Wales. The beaches of Wales are for the benefit of people from all parts of these islands and the cost of improving them should not be incurred only by water rate payers in Wales. The cost of cleaning the beaches of Wales should be met by Treasury grant instead of increasing the return on capital. The order will require a 1·95 per cent. return on capital base, which is higher than the average. I believe that the Minister said that the average is 1·875 per cent. As I have said, charges in Wales are already high.
  The proposed increase will realise an additional £7·5 million a year. That is the increased profit that is required to be funded by Welsh water rate payers to finance the Government's back-door taxation. The logic of the Government's position suggests that there is a move towards privatisation. The Welsh water authority has a capital base of £1,600 million and if there were to be a reasonable return in financial terms on that base we would be looking for 10 per cent., which would be £160 million a year. The profit of the authority has been about £24 million a year, and that will increase to about £30 million as a result of the change that the Government propose. That is nothing like the return that will be required if the authority is to be privatised.
  If there is to be privatisation, there will have to be a massive increase in the cost of water or the assets of the authority will have to be given away at about a fifth or a quarter of the cost of their construction. That would be a
  1316
  nonsensical public policy. The dogmatic privatisation which the Government insist on pursuing is the reason why Welsh water rate payers are being required to pay 6 per cent., 7 per cent or 8 per cent more for their water next year.
  As I have said, the extra charge will hit home extremely hard. If the authority is privatised, the increased capital expenditure which is being justified by the Government will not be directed to capital expenditure. It will be given in the form of a dividend to those who have put money in. In other words, it is an excuse to say that we need to fund capital expenditure by increasing the return. The Government want the return to be high enough to be attractive to those who may put money in. There is no way in which privatisation of this basic public service can be justified, as the Government insist, and the poor water rate payer will have to bear the cost.
  11.5 pm
  Mr. Ian Gow: I rise to congratulate my hon. Friend the Minister on the way in which he has presented the Government's case, and to say that I hope that my hon. Friends will vote against the Opposition's prayer.
  I very much welcome my hon. Friend's reaffirmation of the Government's commitment to the privatisation of the water industry. That privatisation is long overdue, and I hope that it will be included in one of the first Bills in the next Parliament. When that privatisation has been accomplished, it will no longer be necessary for us to debate such orders late at night although reference has been made to the remarks of my right hon. Friend the Prime Minister, it is emphatically the case that the water industry is capable of responding to a new impetus and to the fresh ideas which will come from private ownership.
  My hon. Friend the Minister is continuing with the Government's sensible economic policy in seeking a proper return on the water authorities' assets. There has been a slight modification of the policy. The return on assets sought in the order is slightly less than was envisaged two years ago. Nevertheless, requiring a higher and more appropriate return on assets moves the water authorities in the right direction.
  There is one specific point that I wish to put to my hon. Friend the Minister, and I hope that he has had more success than I had when I held his responsibilities. It was my experience that the nine water authorities in England were extremely reluctant to dispose of land that was not required for operational purposes. There was a misunderstanding, or myth, that it was necessary for the water authority requiring a catchment area to own the freehold.
  I hope that my hon. Friend will persevere strenuously and urgently with the policy of requiring the water authorities to dispose of land that is not required for operational purposes. Such a disposal of assets would diminish the cost to the customer and would affect the way in which my hon. Friend presents any further orders, if there are any. I urge on my hon. friend the truth of the proposition that it is possible to safeguard the purity of supply from a catchment area without the water authority owning the land involved.
  I congratulate my hon. Friend, and I hope that the Opposition's prayer will be soundly defeated.
  11.8 pm
  Mr. Simon Hughes: We will wholeheartedly support the prayer, because the Government have persisted in the same illogical economic policy and ignored the consumer.
  It is illogical to say that over a very short period of time the borrowing necessary for the water industry must be paid off by the consumers of last year, this year and next year. That is not the way that public finance should work, and it is not the way that it wórks anywhere else. One should add to that, as the hon. Member for Tiverton (Mr. Maxwell-Hyslop) said, the completely contradictory statement of Government policy that was adumbrated only hours ago by the Chancellor of the Exchequer when asking the House to approve his autumn statement. In chapter I, "Economic prospects for 1987", the Chancellor makes it clear that the Government still regard the containment of inflation to about 3 per cent as one of the cornerstones of their economic policy. Yet the Government persist—the hon. Member for Eastbourne (Mr. Gow) started the policy when he was Minister with responsibility for the water industry—in telling the industry that it must repay money and make such charges as will inevitably cause the consumers to pay substantially more than the rate of inflation, which they regard as unacceptable. It is not acceptable in terms of economic logic or in terms of who should bear the cost burden of the water industry. Above all, it is not acceptable to the consumer.
  The Minister referred to many points, some of which we do not disagree with—for example, the need for investment. There is clearly a substantial need for investment and greater efficiency. However, he did not-explain that the policy will substantially increase the price of water for people in Tory-held constituencies in the Thames region and elsewhere. The Government must accept the responsibility for that.
  The Minister knows that in October the chairman of the Thames water authority wrote to all hon. Members representing constituencies in the Thames water authority region—all 148 Members, the majority of whom are Conservatives, including the Prime Minister and the Minister responsible for the water industry—stating that if the policy were pursued there would be an increase of about 10 per cent in the forthcoming year. One high-ranking Government source—who appears unnamed at the relevant time—made it clear that that was an entirely unacceptable way for the chairman of the Thames water authority to behave and that he would not be reappointed.
  It is unacceptable for someone who is appointed by the Government to run a quango to be criticised when he tries this year, for the third year running, to say that the authority does not want or need the increase. The authority does not regard the increase as reasonable or appropriate because it is doing perfectly well and should be left to its own devices.
  It is unacceptable that, for the third year in a row, we have an order before us requiring a return on assets that has not been asked for by the authorities. The rate of return is higher than ever before. It increased from 1·4 per cent three years ago to an average of 1·62 per cent last year, and the average is 1·88 per cent this year.
  The debate will again reflect anger at the Government's failure to comprehend. They have chosen the wrong
  1318
  criteria for calculating the way in which historical and actual costs should be financed. They have neglected the fact that if they did not require the money to be paid back to the Treasury, it could be invested in infrastructure. They have also neglected the enormous environmental demands and requirements that proper investment could allow to proceed.
  The Government have become hooked on an economic policy that is nonsense. They want to make the fatted calf ripe for slaughter when they privatise the industry. I do not believe that they will privatise it. If they put privatisation up front in their election shop window, their natural supporters will claim that privatising the water industry and the environment is unacceptable. In the same way this increase in water charges is unacceptable. It will remain unacceptable every time the Government try this con on the country. They could avoid it if they only had the guts to do so.
  11.13 pm
  Mr. Tony Speller: The hon. Member for Southwark and Bermondsey (Mr. Hughes) made an interesting speech. It appears that the Liberal party has made a good economic case for privatisation. That is not the point that I seek to make. The test must be whether the order fulfils the wishes of the consumers—the users of water, the residents of the area. I must say to the Minister that, frankly, the order does not meet their wishes.
  The water authorities are inevitably the least popular authorities of all unpopular bodies. That will always be the case as their responsibilities are so vast and their areas so huge. It is no accident that there is a triangle of colleagues in the Chamber representing constituencies in the South-West water authority region. We all suffer from old mains, over-developed rural areas, low pressure and everything that is costly and where improvement is inevitable. Therefore, anything that we allow our authorities to invest in the mains and the infrastructure must be welcome. I do not go as far as the hon. Member for Southwark and Bermondsey because it is also inevitable that we must turn to the idea of privatisation to give the consumer that which he wishes to have.
  I do not put that forward as an argument for voting against the order. My fear is, quite simply, that someone in the Department thought of an acceptable figure—5 per cent or 7 per cent—about which people would not complain. I find that an unacceptable and unreasonable way of conducting matters.
  My hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) spoke about one area where the sewage is macerated before being put into the estuary of two most beautiful rivers, the Taw and the Torridge. Someone somewhere has to permit water authorities to spend their money on things that we must have, such as clean, pollution-free water.
  I am entirely in favour of privatising what might be called a water company, but there is no way in which we can privatise and put on the meter the cost for coastal protection, prevention of urban and rural pollution and the riparian interests. We must think a great deal harder and a great deal further ahead before we bring any water body to the marketplace. I am not against the marketplace. I believe in it, and I was fascinated to hear the argument in favour of a market operation. However, I could never support an operation that meant saying to the business man or the farmer with a meter, "It is your

  1319
  job to pay for every bit of water pollution, recreation and coastal defence." That would be illogical, and we must not follow that road.
  Having said that, I congratulate my hon. Friend the Minister, who has given long and hard consideration, under some very hard pounding—
  Mr. John Patten: And long pounding.
  Mr. Speller: Indeed, and especially from the west country. That pounding will continue. It will be as the water breaking on the breakwater, until the ministerial breakwater gives way.
  1.17 pm
  Mrs. Ann Clwyd: The old-age pensioners and the low-paid workers who come to my surgery clutching their water bills from the Welsh water authority despair when those bills arrive in their post because they know that they will not obtain any help towards payment. That means a fall in their already poor standard of living. They live in an area of low income, high unemployment and rotten housing. The incredibly high water bills are yet another injustice perpetuated by this Government.
  There is an abundance of water in Wales. Water charges and standards of service have been emotive and keenly debated issues in Wales for a long time. Customers of the water services in Wales have many reasons for feeling that they are at a disadvantage compared with people in many areas of England. The average water rates bill in Wales of £110 is the third highest in the country and £34 higher than in the Severn-Trent area, where much of the water comes from Welsh reservoirs. Indeed, more than 20,000 Welsh ratepayers have withheld payment of their water bills in protest at what they see as discrimination in water charges.
  Two years ago, the Welsh Affairs Select Committee put forward important proposals to deal with water rates. The two key proposals—that there should be a system of partial equalisation of water rates and a water rates rebate system to ease the burden on Welsh water ratepayers—were rejected, of course, by this Government. The Secretary of State for Wales derided the idea of an equalisation system, saying that it could be achieved only if a national water authority for the United Kingdom was created with
  "all the penalties in terms of inefficiency and lack of local sensitivity, which would probably be the price of such a large organisation."—[Official Report, Welsh Grand Committee, 21 March 1984; c. 11.]
  What could be more insensitive to local feelings than the imposition of these higher water charges on the people of Wales which the Government are trying to enforce tonight?
  The Government are proposing to hit the people of Wales again. They are ignoring the sense of grievance over the water issue. Since 1979 the overall increase in Welsh water rates has been 132 per cent in cash and 40 per cent in real terms. That is wholly unacceptable to the people of Wales. I assure the Government that they will make their displeasure known in no uncertain terms.
  11.19 pm
  Mr. Roy Hughes: The order lays down the return on assets for water authorities in England and
  1320
  Wales. The figures look modest, but with the arcane system of accountancy they constitute a considerable burden, as my hon. Friend the Member for Houghton and Washington (Mr. Boyes) made clear. The figure for Wales has risen from 1·45 per cent in 1985–86 to 1·7 per cent in 1986–87 and will rise to 1·95 per cent in 1987–88.
  The Government's policy towards the water industry has been spawned over a number of years. What was essentially a local government service has been taken over. By 1981 our water authorities were committed to current cost accounting, a system most unsuitable for that industry. Reservoirs and sewage installations are built to last a hundred years. Why should people living today bear the whole cost of installations that will serve people not yet born? These are essentially long-term investments and should be financed accordingly.
  We know of the Government's obsession with the public sector borrowing requirement, but the fundamental reason for their approach is the pursuit of privatisation. Juicy profits make water installations a rosier prospect for the market place. Water is big business today. The 10 water authorities of England and Wales spend more than £2,000 million per year and employ more than 50,000 people. A great sell-off of those undertakings would certainly enrich the Government's coffers.
  Meanwhile, consumers suffer. In Wales we have become accustomed to a standard seasonal announcement. The columns of our newspapers regularly blurt out the message, "Water to cost more next year", but many of the increases are entirely unnecessary. As my hon. Friend the Member for Normanton (Mr. O'Brien) pointed out, there is a contradiction in the Government's policy. Water charges are based on rateable value. The Government are leaning on local authorities to keep rates down, but they are actively striving to drive water charges up. Water is a basic and essential commodity, and in Wales we have an abundant supply, yet further increases of up to 10 per cent are expected in the new year. That is more than double the rate of inflation. It will increase the average Welsh water bill to £124 and make Welsh water the most expensive in the country. It is no wonder that water in Wales is an emotive subject.
  The Government are responsible for that preposterous situation. The price of water is being driven up to absurd levels because of their policies. The Secretary of State for Wales sits in the Cabinet and allows these things to happen. A couple of days ago he announced that he would not be standing at the next general election, so he will be little more than a lame duck until then. His staying on is understandable, given the paucity of talent on the Tory Benches.
  Yesterday, that most authoritative journal, the Financial Times, in an article by Peter Riddell, considered who would be the next Welsh Secretary.
  Mr. John Patten: My hon. Friend the Member for Watford (Mr. Garel-Jones).
  Mr. Hughes: The caption to the photograph said that the Secretary of State was "leaving the bridge uncrossed". The headline proclaimed:
  "Tories scour Wales in the search for Edwards' successor."
  The article ran in the form of an advertisement and said:
  "WANTED: A Welsh-born Tory MP with some administrative and political talent and potential to become a Cabinet minister."
  The article said that the existing Under-Secretaries of State were inadequate and that

  1321
  "The other 10 MPs consist mainly of a mixture of those nearing the end of their careers, perpetual undistinguished backbenchers, the unpromotable and the inexperienced."
  Mr. Deputy Speaker: Order. I hope that we can get back to the prayer.
  Mr. Hughes: What a party claiming to represent Wales! All I can say is that there is no problem for the Tory party, because after the next general election the Secretary of State for Wales will he my hon. Friend the Member for Alyn and Deeside (Mr. Jones).
  11.26 pm
  The Parliamentary Under-Secretary of State for Wales (Mr. Mark Robinson): It is a great pity that the hon. Member for Newport, East (Mr. Hughes) chose the opportunity of what has otherwise been a serious debate to indulge in a personal attack on my right hon. Friend the Member for Pembroke (Mr. Edwards), and to have the discourtesy to do it when my right hon. Friend is not in the chamber to defend himself.
  Mr. Roy Hughes: It was not an attack.
  Mr. Robinson: My right hon. Friend has done a superb job as Secretary of State for Wales and will continue to do so as long as he is in this House.
  Many Opposition Members, while extolling the virtues of increased investment in the water industry, failed to acknowledge that that can be achieved only in the context of authorities being efficient and effective. I entirely agree with my hon. Friend the Member for Eastbourne (Mr. Gow) about the benefits that will be derived from water privatisation. I assure my hon. Friend that it remains our policy that water authorities should sell off land that is surplus to their requirements.
  Privatisation will give the water industry freedom to operate in the capital markets and render the need for a debate such as this completely unnecessary. We have heard some alarmist and fictional figures for the likely rise in water charges, including charges in Wales. I am assured that Yorkshire Water charges will go up by only about 5·5 per cent., which I am sure is welcome news to the hon. Member for Normanton (Mr. O'Brien).
  Mr. Boyes: Does that include inflation?
  Mr. Robinson: Yes.
  We expect charges to rise in a band of between 4·5 per cent and 7 per cent. On the basis of my conversation with the chairman of the Welsh water authority, I expect its rise to be within that band rather than the alarmist 10 per cent which the hon. Member for Newport, East mentioned. I do not know where he got that figure from. He is clearly not living in the real world.
  Contrary to what the hon. Member for Newport, East said, we have improved the efficiency with which the water industry is run and provided the basis on which we have been able to improve the infrastructure through which water is provided. We have also set out, through such investment, to improve water quality.
  The success of the Government's financial policy for the water authorities is clear. Investment has increased by more than 55 per cent., or about 35 per cent in volume terms, after taking account of inflation in construction prices. At the same time, the Government have taken a grip on the legacy of water authority borrowing. Water authorities' operating costs have also been substantially
  1322
  reduced. There can be no turning back on this policy. Therefore, I commend the f
  order to the House and urge hon. Members to vote against the prayer.
  Question put:—
  The House divided: Ayes 110, Noes 160.

  Division No. 46]

  [11.30 pm

  AYES

  Adams, Allen (Paisley N)

  Lamond, James

  Alton, David

  Lewis, Ron (Carlisle)

  Archer, Rt Hon Peter

  Lewis, Terence (Worsley)

  Ashdown, Paddy

  Livsey, Richard

  Atkinson, N. (Tottenham)

  Lloyd, Tony (Stretford)

  Banks, Tony (Newham NW)

  Lofthouse, Geoffrey

  Beckett, Mrs Margaret

  Loyden, Edward

  Beith, A. J.

  McCartney, Hugh

  Bell, Stuart

  McDonald, Dr Oonagh

  Benn, Rt Hon Tony

  McGuire, Michael

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

  McKay, Allen (Penistone)

  Bermingham, Gerald

  MacKenzie, Rt Hon Gregor

  Blair, Anthony

  McWilliam, John

  Boyes, Roland

  Madden, Max

  Brown, Gordon (D'f'mline E)

  Mallon, Seamus

  Callaghan, Jim (Heyw'd & M)

  Marek, Dr John

  Canavan, Dennis

  Martin, Michael

  Clark, Dr David (S Shields)

  Maxton, John

  Clay, Robert

  Maxwell-Hyslop, Robin

  Clelland, David Gordon

  Meadowcroft, Michael

  Clwyd, Mrs Ann

  Michie, William

  Cocks, Rt Hon M. (Bristol S)

  Nellist, David

  Cook, Robin F. (Livingston)

  O'Brien, William

  Corbyn, Jeremy

  Owen, Rt Hon Dr David

  Craigen, J. M.

  Park, George

  Cunliffe, Lawrence

  Patchett, Terry

  Cunningham, Dr John

  Pendry, Tom

  Dalyell, Tam

  Penhaligon, David

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

  Pike, Peter

  Dixon, Donald

  Powell, Raymond (Ogmore)

  Dobson, Frank

  Raynsford, Nick

  Dormand, Jack

  Redmond, Martin

  Dubs, Alfred

  Robertson, George

  Duffy, A. E. P.

  Rooker, J. W.

  Dunwoody, Hon Mrs G.

  Rowlands, Ted

  Eadie, Alex

  Shields, Mrs Elizabeth

  Eastham, Ken

  Skinner, Dennis

  Fatchett, Derek

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

  Fields, T. (L'pool Broad Gn)

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

  Fisher, Mark

  Snape, Peter

  Foster, Derek

  Spearing, Nigel

  George, Bruce

  Steel, Rt Hon David

  Godman, Dr Norman

  Stott, Roger

  Hamilton, James (M'well N)

  Straw, Jack

  Harrison, Rt Hon Walter

  Thomas, Dafydd (Merioneth)

  Hogg, N. (C'nauld & Kilsyth)

  Thompson, J. (Wansbeck)

  Home Robertson, John

  Wallace, James

  Howarth, George (Knowsley, N)

  Wardell, Gareth (Gower)

  Howell, Rt Hon D. (S'heath)

  Wareing, Robert

  Howells, Geraint

  Welsh, Michael

  Hughes, Robert (Aberdeen N)

  Wigley, Dafydd

  Hughes, Roy (Newport East)

  Winnick, David

  Hughes, Simon (Southwark)

  Young, David (Bolton SE)

  John, Brynmor

  Johnston, Sir Russell

  Tellers for the Ayes:

  Jones, Barry (Alyn & Deeside)

  Mr. Ron Davies and

  Kirkwood, Archy

  Mr. Sean Hughes.

  NOES

  Aitken, Jonathan

  Budgen, Nick

  Alison, Rt Hon Michael

  Cockeram, Eric

  Baker, Nicholas (Dorset N)

  Colvin, Michael

  Batiste, Spencer

  Conway, Derek

  Bellingham, Henry

  Cope, John

  Benyon, William

  Dorrell, Stephen

  Boscawen, Hon Robert

  Douglas-Hamilton, Lord J.

  Bottomley, Peter

  Dunn, Robert

  Bottomley, Mrs Virginia

  Fallon, Michael

  Brooke, Hon Peter

  Favell, Anthony

  Brown, M. (Brigg & Cl'thpes)

  Forth, Eric

  Buck, Sir Antony

  Fox, Sir Marcus

  1323

  Franks, Cecil

  Nicholls, Patrick

  Fraser, Peter (Angus East)

  Norris, Steven

  Freeman, Roger

  Osborn, Sir John

  Galley, Roy

  Ottaway, Richard

  Garel-Jones, Tristan

  Page, Sir John (Harrow W)

  Goodlad, Alastair

  Page, Richard (Herts SW)

  Gow, Ian

  Patten, Christopher (Bath)

  Greenway, Harry

  Patten, J. (Oxf W & Abgdn)

  Gregory, Conal

  Pollock, Alexander

  Griffiths, Peter (Portsm'th N)

  Portillo, Michael

  Grist, Ian

  Powell, William (Corby)

  Ground, Patrick

  Powley, John

  Grylls, Michael

  Proctor, K. Harvey

  Hamilton, Hon A. (Epsom)

  Raffan, Keith

  Hamilton, Neil (Tatton)

  Rathbone, Tim

  Hanley, Jeremy

  Rhodes James, Robert

  Harris, David

  Ridsdale, Sir Julian

  Harvey, Robert

  Roberts, Wyn (Conwy)

  Havers, Rt Hon Sir Michael

  Robinson, Mark (N'port W)

  Hawkins, Sir Paul (N'folk SW)

  Roe, Mrs Marion

  Hayward, Robert

  Rowe, Andrew

  Heddle, John

  Sackville, Hon Thomas

  Hickmet, Richard

  Sainsbury, Hon Timothy

  Hind, Kenneth

  Sayeed, Jonathan

  Hirst, Michael

  Scott, Nicholas

  Holt, Richard

  Shaw, Sir Michael (Scarb')

  Howard, Michael

  Shelton, William (Streatham)

  Howarth, Alan (Stratf'd-on-A)

  Shepherd, Colin (Hereford)

  Howarth, Gerald (Cannock)

  Silvester, Fred

  Hubbard-Miles, Peter

  Sims, Roger

  Hunt, David (Wirral W)

  Skeet, Sir Trevor

  Hunt, John (Ravensbourne)

  Speed, Keith

  Jackson, Robert

  Speller, Tony

  Johnson Smith, Sir Geoffrey

  Spicer, Jim (Dorset W)

  Jones, Gwilym (Cardiff N)

  Spicer, Michael (S Worcs)

  Jones, Robert (Herts W)

  Stanbrook, Ivor

  Key, Robert

  Steen, Anthony

  Knight, Greg (Derby N)

  Stern, Michael

  Knowles, Michael

  Stevens, Lewis (Nuneaton)

  Lang, Ian

  Stewart, Allan (Eastwood)

  Lawler, Geoffrey

  Stewart, Andrew (Sherwood)

  Lawrence, Ivan

  Temple-Morris, Peter

  Leigh, Edward (Gainsbor'gh)

  Terlezki, Stefan

  Lennox-Boyd, Hon Mark

  Thatcher, Rt Hon Mrs M.

  Lester, Jim

  Thomas, Rt Hon Peter

  Lilley, Peter

  Thompson, Donald (Calder V)

  Lloyd, Peter (Fareham)

  Thompson, Patrick (N'ich N)

  Lord, Michael

  Thorne, Neil (Ilford S)

  Lyell, Nicholas

  Thurnham, Peter

  McCurley, Mrs Anna

  Waddington, David

  MacKay, Andrew (Berkshire)

  Wakeham, Rt Hon John

  MacIean, David John

  Wall, Sir Patrick

  McLoughlin, Patrick

  Waller, Gary

  McNair-Wilson, M. (N'bury)

  Ward, John

  Major, John

  Wardle, C. (Bexhill)

  Malins, Humfrey

  Warren, Kenneth

  Marlow, Antony

  Watts, John

  Marshall, Michael (Arundel)

  Wells, Bowen (Hertford)

  Mather, Carol

  Wheeler, John

  Mayhew, Sir Patrick

  Whitfield, John

  Merchant, Piers

  Wiggin, Jerry

  Meyer, Sir Anthony

  Wilkinson, John

  Miller, Hal (B'grove)

  Wolfson, Mark

  Mills, Iain (Meriden)

  Wood, Timothy

  Moate, Roger

  Woodcock, Michael

  Morris, M. (N'hampton S)

  Yeo, Tim

  Morrison, Hon C. (Devizes)

  Moynihan, Hon C.

  Tellers for the Noes:

  Nelson, Anthony

  Mr. Francis Maude and

  Neubert, Michael

  Mr. Tony Durant.

  Question accordingly negatived.

  Private Bill Procedure
  Motion made, and Question proposed,
  That, in accordance with the resolution of 16th June in the last Session of Parliament, a Select Committee of seven Members be appointed to join with a Committee to be appointed by the Lords to examine the process of enacting Private Legislation and to consider whether:

  (a) there are any matters of a kind at present dealt with by Private Bill which could more appropriately be dealt with some other way, taking account of the interests both of Promoters and other affected parties;

  (b) any changes arc desirable in Private Bill procedure; and

  (c) any amendments are desirable to the Private Legislation Procedure (Scotland) Act 1936 and the procedure thereunder;

  and to consider whether any amendments are desirable to the Statutory Orders (Special Procedure) Act 1945.
  That the Committee have power to send for persons, papers and records.
  That three be the Quorum of the Committee.
  That Mrs. Ann Clwyd, Mr. Terry Davis, Sir Anthony Grant, Mr. Patrick McNair-Wilson, Mr. Albert McQuarrie, Mr. Roger Moate and Sir John Stradling Thomas be members of the Committee.—[Mr. Boscawen.]
  Mr. Robin Maxwell-Hyslop: This is debatable, is it not, Mr. Deputy Speaker?
  Mr. Deputy Speaker (Mr. Ernest Armstrong): No, it is after 10 o'clock. It is not debatable.
  Mr. Maxwell-Hyslop: On a point of order, Mr. Deputy Speaker. This is a debatable motion.
  Mr. Deputy Speaker: But it has not been exempted.
  Mr. Maxwell-Hyslop: No; therefore, I understand that it cannot proceed if hon. Members wish to debate it.
  Mr. Deputy Speaker: That is correct.
  Mr. Maxwell-Hyslop: I wish to debate it, Mr. Deputy Speaker.
  Mr. Deputy Speaker: There is an objection. Further consideration what day? No day named.

  SCOTTISH GRAND COMMITTEE
  Ordered,
  That, in the course of its consideration of the matter of Agriculture and Fishing in Scotland, the Scottish Grand Committee may meet in Edinburgh on Monday, 19th January 1987, at half-past Ten o'clock.—[Mr. Boscawen.]

  TERMS AND CONDITIONS OF EMPLOYMENT
  Motion made, and Question put forthwith pursuant to Standing Order No. 101 (Standing Committees on Statutory Instruments &c.),
  That the draft Employment Protection (Variation of Limits) Order 1986, which was laid before this House on 2nd December, be approved.
  That the draft Unfair Dismissal (Increase of Limits of Basic and Special Awards) Order 1986, which was laid before this House on 2nd December, be approved.
  That the draft Unfair Dismissal (Increase of Compensation Limit) Order 1986, which was laid before this House on 2nd December, be approved.—[Mr. Boscawen]
  Question agreed to

  PUBLIC SUPPLY CONTRACTS
  Ordered,
  That this House takes note of European Community Document No. 8034/86 on public supply contracts, and the Supplementary Explanatory Memorandum from Her

  1325
  Majesty's Treasury dated 5th December; endorses the view that revisions to the earlier supplies Directives 77/62 and 80/767 are necessary in order to improve public purchasing opportunities throughout the Community; and welcomes the Government's endeavours to amend the proposals so as to reduce the administrative burden on purchasers and suppliers.—[Mr. Boscawen.]

  Prisoners (Northern Ireland)
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Boscawen.]
  11.42 pm
  Mr. Seamus Mallon: I very much welcome the opportunity to debate briefly the problem of those, especially young people, who are sentenced under the pleasure of the Secretary of State for Northern Ireland and those who are serving life sentences. This is an opportune time to consider the matter, because the nature of the problem is emphasised at this time of year. It is also important to discuss the matter because, in many ways, we are reviewing many of the provisions and terms of justice in the north of Ireland.
  One cannot properly discuss the problem without considering the position of young people in Northern Ireland. They have lived their young lives against a background of unrest and violence. Indeed, an entire generation of young people in the north of Ireland have never known normality, have never known anything but violence and have been unable to adjust to the unrest They are caught in the spiral of violence and they have lived through some very emotional periods.
  Youngsters from both sections of the community—Nationalist and Unionist—whatever political opinions they have, have all lived through emotional and emotive times. They include the period after bloody Sunday, when 13 people were killed in Derry, when the Stormont Parliament was prorogued, after the deaths on hunger strike in the prisons. It has also happened because of the catharsis in the Unionist community. Young people have become the pawns in this spiral of violence. They hive become the victims of the godfathers of violence, the hate-mongers, those who wish to incite people to violence. It is for that reason that I ask for a review of the procedure under which their sentences are reviewed, and that should be done in a spirit of compassion and humanity.
  I take this opportunity to thank the Minister for the way in which he has approached the problem. I am not sure of the figures, but I believe that about 50 have been released under the review system since 1983, and 12 have been released this year. I ask him, at this time of the year, to take the opportunity substantially to increase that figure, because it is the key to many problems that we are not solving.
  We are dealing with legislation that was framed in 1969, when this period of violence, lasting four times as long as the last war, could not have been foreseen. It is inadequate because it was not intended to cope with the problems with which it has to cope. Section 73(1) of the Children and Young Persons Act simply cannot deal adequately with the problems that face it. The period of conflict was not foreseen, and the Act was not drafted to cope with it. It was drafted to ensure two things. The first was that young people did not receive the same sentences as adults, who were in a position to make concious judgments about their decisions. Secondly, it was framed to try to ensure that young people did not serve life imprisonment.
  Unfortunately, it has done the opposite. It has ensured that the young person receives the same sentence as the adult prisoner, and is reviewed under the same procedure, with one minor change. It ensures that young people are serving life sentences. I know that it is difficult to define a life sentence, but the same norm is being applied to

  1327
  young people as is applied to adults in the review of sentences. The same procedure and time scale are used, with one small difference of eight instead of 10 years. They are getting roughly the same lengths of sentence, with the added factor that in the case of a young person's sentence under the Secretary of State's pleasure, the sentence is indeterminate. That in itself creates problems that do not exist for the adult person who has been sentenced to life imprisonment.
  I ask the Secretary of State to examine the basis of the legislation and the review procedure. We are reviewing the Emergency Provisions (Northern Ireland) Act, and we shall soon review the police complaints procedure. We shall be reviewing the legislation on public order. Why do we not have a review of this crucial legislation and procedure? I ask the Minister to consider not just adopting a piecemeal approach but repealing the legislation and replacing it with adequate, updated legislation that is capable of dealing humanely and compassionately with the problems as it is now, and not as it was envisaged in 1969. The fact that the term "the death penalty" was used in that legislation shows how outmoded it is.
  I ask the Minister to reconsider the indeterminate length of the young offender's sentence. It has a tremendous psychological effect, not just on the prisoner but on his family and the community from which he comes. The Baker report drew attention to this problem. It referred to the
  "case for compassion and the giving of hope of release at however distant a date."
  However distant that date may be, it gives the prisoner, his family and everybody else who is concerned something to hang on to. Indeterminate sentences have a tremendous effect on prisoners. One of the saddest duties is to visit young people in prison who were caught up in violence at a very early age and swept along on an emotional tide, prompted by those who had lost not one minute of their own freedom. They say consistently, "If only I knew when I might be getting out."
  There are other consequences. People, especially young people, become institutionalised very quickly. It centres on the despair of not knowing when they may once again experience freedom. They become alienated from the outside world and locked into a very introverted society, where they do not benefit from the good influences that they would experience outside prison. They see no future for themselves. They become disoriented from other influences and displaced in time—like something out of a Kafka novel. That is not a humane way in which to deal with young people who were sentenced before they reached the legal age for sentencing.
  I know that the Minister of State is aware of the effect on the family and the community. Parents fear that they may not live to see the release of their son or their daughter. That nagging fear is with them day after day. They become bitter against society and against the process of law. Their bitterness starts to translate itself into what can be a very dangerous factor in the community. They look upon their sons and daughters as the forgotten tools of the manipulators of violence and believe that they are carrying the can for them. Their cases should be considered much more seriously. I do not suggest that the
  1328
  Minister is not considering them seriously. I know that he is, but he ought to be provided with the power to deal properly with them.
  I do not think that there is a simple answer to the question, but I ask the Minister to consider two options. The legislation ought to be repealed, and the Government ought to consider replacing it with a maximum sentence for young people. I realise the dangers. There are obvious dangers connected with maximum sentences, but they would mean that young people had a date in mind from the beginning of their sentence. It would have to be accompanied by a review half way through the maximum sentence. Or perhaps there could be new guidelines—perhaps a judicial review, when evidence could be given. The details would have to be teased out, because dangers and problems accompany each of those lines of approach.
  At present, the prisoner does not appear at any of the review board hearings, nor can he be represented at those hearings, when a competent person might put forward his case. He is unaware of the information that is presented to the board, he is provided with no details of it, and he is not advised of the reason for the refusal, if and when his case is reviewed. That is serious, because if the prisoner knew why there was a refusal, when the final review came he could re-examine his position with a lot more efficiency and accuracy. These review boards are held in camera and there is no accountability. That is surely wrong in a place where there is a crisis of confidence in the process of law. We must have accountability, and at present there is no accountability to the prisoner or to any body.
  Those especially interested in the cases of young people should be given some role on behalf of the prisoner. As it is, the only role open to such people is to make representations. Beyond that they cannot go. As I said yesterday in relation to the judicial system, the greater the number of minds working on a problem, the better the chance of a proper resolution of that problem.
  One of the conditions of a review, an obvious renunciation of association with paramilitary organisations or political organisations which are associated with paramilitary organisations, is an almost impossible condition for people in prison. It is a closed society and pressures are very strong. People feel isolated if they cannot cling to the one bulwark that they know. I know of the need to protect society and to ensure that people will not return to violence, but this condition should be re-examined, because the weight of pressure, especially on young people, during a long prison sentence is quite enormous. Indeed, the pressure is enormous for the ordinary life prisoner. We must seek for and find some way around that.
  I am also worried about the dependability of the lower ranks of prison officers. Many of them are not properly trained and do not have the experience to make the type of judgment that is expected of them. I do not rule out the possibility of prejudice. In prison where people live closely together, there is almost a hothouse atmosphere and ordinary likes or dislikes start to come into play. A way must be found of getting round the problem of people who do not have basic training or expertise and a way must also be found to assess the attitudes of people employed in the prison system.
  I conclude by making a plea to the Minister. As we approach the season of peace, and as the bells start to ring in a new year, I ask him to be generous and humane in his provision for parole and for the release of prisoners,

  1329
  especially young people sentenced at the pleasure of the Secretary of State and people who have spent a long time in prison under a life sentence. I suggest to the Minister that the greatest enemy of peace in Northern Ireland, as elsewhere, is despair. He has an opportunity to foster hope by taking the type of action that I suggest, not as a gesture, but in the sure knowledge that such releases in themselves release a new spirit in the family and in the small community areas. That new spirit will expand and will have a tremendous influence.
  I know that the most potent weapon against hatred and violence is compassion and benevolence. I have seen the effect of those things on communities that are regarded as very hardline. I know that substantial releases would be reciprocated 100-fold and would help us to continue with the task of creating peace in Northern Ireland, a peace based on humanity and compassion.
  11.59 pm
  The Minister of State, Northern Ireland Office (Mr. Nicholas Scott): I am grateful to the hon. Member for Newry and Armagh (Mr. Mallon) for raising this matter. As I respond to the points that he has made it will become clear that there is not a lot of difference between us. This Christmas, the home leave that we give to prisoners in Northern Ireland will be as generous as possible. We have a scheme that is unique within the United Kingdom, and, in organising that Christmas home leave scheme, we shall seek to be as responsive to the special role of the family, particularly in Northern Ireland, and the need to show that prisoners who fulfil the criteria for home leave are treated as generously as possible.
  The hon. Gentleman has analysed the pressures on young people who were caught up in the troubles at the beginning of the 1970s. Many of them, either because they felt their community was under threat or because they were under physical or other threat to respond to the godfathers to perform on behalf of their community, now find themselves in prison while others have gone free and have not been made amenable to the law.
  I want to see a prison administration, and an attitude towards those who are in prison for indeterminate sentences in particular, that is as liberal and humane as we can make it, as long as, at the back of our minds, we always have the importance of the safety of the public and, in so far as it is humanly possible, we are sure that those who are released from prison do not embark on a campaign of violence again and threaten the lives or safety of individuals outside.
  The hon. Gentleman rightly set this matter against the background of other measures that we are taking, such as those relating to public order, the police complaints reforms and the emergency provisions legislation. I know that in a number of those areas he would have wanted us to go further and faster than the Government have felt able to do, but we are moving on those matters and the way in which we approach life sentence and the Secretary of State's pleasure cases is part of a process of seeking a balance between the safety of the public, on the one hand, and a proper treatment of those who are in prison, on the other.
  The hon. Gentleman talked about the effect of indeterminate sentences on young people. He said—and I am sure that it is true in some cases—that some of them become institutionalised and suffer because of that. I must set against that, because it is an area that I take
  1330
  seriously, the considerable opportunities that exist for education in prison. Anybody who listened to the radio programme "Out of the Maze" a couple of weeks ago on the education system in Northern Ireland will remember that one young prisoner said that prison was the best thing that ever happened to him because he had been able to avail himself of the opportunity that it gave him to widen his horizons and educate himself about life in general. I am sure that he will not be involved in any violence when he is released.
  I am not diminishing the impact of the indeterminate sentence on young prisoners; I am just saying that some may be institutionalised and some may suffer unduly because of it, but others will seize the opportunity that it offers and come out better able to cope with life outside.
  It is worth while reminding ourselves why we have the sentence of detention during the Secretary of State's pleasure. It originates, as the hon. Gentleman said, from a time when capital punishment existed, to which young people were not subject. There are equivalent forms of that sentence in other parts of the United Kingdom and elsewhere. We in Northern Ireland cannot consider it alone, and I doubt whether we could move away from an indeterminate to a determinate sentence for somebody who has taken another person's life or been part of an operation that cost somebody his life.
  The decision that has to be taken is not a judicial but an executive one. Could an individual, who has cost an innocent person his life, be freed unless one was sure that he would not embark on the same course again? That could not easily be put to a court, certainly not a court of first instance. I would be reluctant to go down the road, suggested by the hon. Gentleman, of judicial review, with a prisoner being present and legally represented, and with reasons being given for refusal. I take this procedure seriously.
  I take the closest possible personal interest and try to be as liberal and humane as I can be without imposing any extra risk on the community. I have read carefully the document produced by the party of the hon. Member for Newry and Armagh and listened carefully to what he said tonight. However, I would take a lot of persuading to believe that we should move back into a judicial or executive area, in this difficult and sensitive territory. I believe that the Government's record is good in this area. I have tried to strike the best balance between the interests of prisoners and those of society outside.
  The hon. Member asked about the numbers who have been involved in the procedure. Since the board was set up we have considered 360 cases. Some cases have been considered more than once, and I think that the figures that have appeared as a result of the process show that we have made positive progress. A total of 51 prisoners—22 life sentence prisoners and 29 young persons, Secretary of State's pleasure cases—have been given dates since the process started. As a matter of interest, 23 were Republican, 25 were Loyalist, and three did not fit easily into either category.
  The prisoners are usually given a date about a year in advance of their release. I do not take a firm view whether a year should be absolute. In a recent case where a prisoner had an opportunity for employment immediately available to him, we took the view that he could be released in advance of a year. We may consider in future whether a

  1331
  prisoner would need as long as a year to prepare himself for re-entry into the wider world, especially when he has a clear entry into outside life.
  In addition to the numbers I have mentioned—51 with dates, 23 released—following the two most recent meetings of the Life Sentence Review Board—we have to consult the judges about these cases—another 15 prisoners are in the pipeline; that is, we are consulting the judiciary about their situation. Subject to the views of the judiciary, we may be able to give them dates. I believe that the figures show clear evidence of our desire to have a positive approach to the problem.
  I know that there are some who say that we should go further and faster. I am particularly aware of the views of Father Faul, who believes that if we went much faster the impact of the releases on the community would be so dramatic that we could swiftly bring to an end the campaign of violence in Northern Ireland. I wish that I could go along with Father Faul, but I have some reservations about going that fast. However, I am aware of the impact that individual releases can have in the community. I have to try to get the balance right between the risk to the community, the benefits that can flow to individual prisoners and the community, and the climate for peace that we can get by a systematic consideration of the cases and by trying to treat them as liberally and sensibly as possible.
  We have to be sure that a person who is sentenced to prison serves a period that is sufficient to meet the gravity of the offence that he or she has committed. We have to be sure that the prisoner will not repeat his offence or commit some other crime of violence if he is let out. We do not ask any prisoner to renounce his political beliefs. We have announced dates and released prisoners from inside the compounds and from segregated wings inside the Maze prison. We do not regard that as a total bar to setting a date for release. As I have said, a prisoner does not have to renounce his political views, but, where an indeterminate sentence is being served, we need to be satisfied that he will not repeat his offence outside.
  In coming to a conclusion as to whether a prisoner will or will not commit another offence outside, factors that must be taken into account are the organisation to which
  1332
  he or she has some allegiance and the level of violence outside the prison. These factors must be weighed in the balance when considering the likelihood of an offence being committed. If the organisations that are committed to violence in the north of Ireland were to renounce violence as a way of achieving their political ends, that would obviously affect the judgment that I and my right hon. Friend the Secretary of State have to make about the release of prisoners. If the threat of violence were removed, that would affect our judgment of the likelihood of prisoners being caught up again in a campaign of violence.
  Mr. Mallon: I ask the Minister to consider the other side of the coin. I believe that many paramilitary organisations wish certain prisoners to remain in prison and do not want to see them out. They want to use them as a propaganda weapon. They have always used imprisonment as a propaganda weapon. The more that a possible increase in violence is made a factor, the more we play into the hands of those who want to keep prisoners in prison rather than see them released. They are a propaganda weapon when they are in prison—much more so than if they were released into society.
  Mr. Scott: I take that point. We have embarked on the process that is under discussion because we want to be fair and responsive to the needs of those who are in prison and the way that they were caught up in the violence. I am not unaware that if we behave sensibly and responsively we could undermine the pressures that the paramilitary organisations put on those outside prison.
  We consider especially carefully the cases of young prisoners who were young and vulnerable when they became involved in terrorist-type crimes. We shall always view their cases with considerable sympathy. I assure the House, and especially the hon. Gentleman, that I consider every individual's case, as does the Life Sentence Review Board, as carefully as possible at the appropriate interval in the light of all the information that is available. I know that often shadowy figures—they are called the godfathers—have not been made amenable to the law while many young prisoners have—
  The Question have been proposed after Ten o'clock and the debate having continued for half an hour, MR. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
  Adjourned at twelve minutes past Twelve o'clock.

WALES
  Farmers
  Farmers
  Housing
  Housing
EDUCATION AND SCIENCE
  Miss Maureen McGoldrick
  Miss Maureen McGoldrick
ENERGY
  Passive Solar Housing Technology
  Passive Solar Housing Technology
  Nuclear Waste
  Nuclear Waste
PRIME MINISTER
  Westland plc
  Westland plc
  Family Income
  Family Income
  Cabinet Committees
  Cabinet Committees
TRANSPORT
  London Regional Transport
  London Regional Transport
  Transport Council
  Transport Council
  Traffic Lights
  Traffic Lights
  Coaches (Speed Limiters)
  Coaches (Speed Limiters)
  Motorways
  Motorways
  Buses
  Buses
  Road Accidents
  Road Accidents
  Motor Cycle Noise
  Motor Cycle Noise
  Safety Barriers
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  Rate Support Grant
  Rate Support Grant
OVERSEAS DEVELOPMENT
  Jordan
  Jordan
  RMS St. Helena
  RMS St. Helena
EMPLOYMENT
  Tourism
  Tourism
  Labour Statistics
  Labour Statistics
  Training Scheme (Transfers)
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  Printing Industry (London)
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  Restart Scheme
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  Care Facilities
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  YTS
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  Manufacturing Industry
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  Inner Cities Initiative
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  Industrial Disputes
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  Official Secrets Act
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FOREIGN AND COMMONWEALTH AFFAIRS
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TRADE AND INDUSTRY
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SCOTLAND
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HOME DEPARTMENT
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HOME DEPARTMENT
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NORTHERN IRELAND
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NATIONAL FINANCE
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SOCIAL SERVICES
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ENVIRONMENT
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  London Docklands Development Corporation
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  European Year of the Environment
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  Rent Arrears
  North-East (New Towns Corporations)
  North-East (New Towns Corporations)
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  Council Laundries
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  Haringey Borough Council
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  Green Belt Development
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  Derelict Urban Areas
  Urban Programme (Job Creation)
  Urban Programme (Job Creation)
  Political Advisers
  Political Advisers
  Unemployed Workers Centres
  Unemployed Workers Centres
  Housing
  Housing
  Property Services Agency
  Property Services Agency
  Housing (Multiple Occupation)
  Housing (Multiple Occupation)
  Mr. Kevin Finch
  Mr. Kevin Finch
  Home Owners
  Home Owners
  Agriculture Buildings and Works
  Agriculture Buildings and Works
  Urban Programme
  Urban Programme
  Mortgage Arrears
  Mortgage Arrears
  Costing Figures (Review)
  Costing Figures (Review)
  London Residuary Body
  London Residuary Body
  London Marathon
  London Marathon
  Planning (Select Committee Report)
  Planning (Select Committee Report)
  London (Barrier Flood Plan)
  London (Barrier Flood Plan)
DEFENCE
  Defence Depots
  Defence Depots
  Pensions
  Pensions
  Departmental Staff
  Departmental Staff
  Non-combatant Duties (Injuries)
  Non-combatant Duties (Injuries)
  Nuclear Weapons Convoy, Burghfield
  Nuclear Weapons Convoy, Burghfield
  Nimrod
  Nimrod
  Flight Simulator Training System
  Flight Simulator Training System
  Airborne Early Warning System
  Airborne Early Warning System
AGRICULTURE, FISHERIES AND FOOD
  Council of Agriculture Ministers
  Council of Agriculture Ministers
  Brazil (Exports)
  Brazil (Exports)
  Hill Livestock Compensatory Allowances
  Hill Livestock Compensatory Allowances
  Farmers
  Farmers
  Trent Grain Company
  Trent Grain Company

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

Barony of Strange
The Lord Chancellor (Lord Hailsham of Saint Marylebone): My Lords, I have to inform your Lordships that Her Majesty has been pleased to terminate the abeyance of the Barony of Strange in favour of Jean Cherry Drummond. The barony has been in abeyance since the death in 1982 of her father John, Lord Strange. A Writ of Summons has been issued in pursuance of Section 6 of the Peerage Act 1963, and the noble Baroness attends at the Bar to take her seat.
Baroness Strange took the Oath.

Air Transport: EC Internal Market
2.36 p.m.
Baroness Burton of Coventry: 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 prior to relinquishing the Presidency of the European Community on 31st December they will make a statement on the step-by-step advance they propose for the inclusion of air transport in the agreed decision to work towards the elimination of barriers to the internal market of the Community by 1992.
Viscount Davidson: My Lords, the Council agreed in June that the 1992 target date applies to air transport in common with other sectors of the economy and that there should be a step-by-step approach to full liberalisation by that date. We have therefore concentrated on a three-year first step. At the Transport Council on Monday there was unanimous support for our proposals on capacity and a substantial majority in favour of our ideas on market access. Seven states clearly support our proposals for cheaper fares and only two are still totally opposed.
Baroness Burton of Coventry: My Lords, I wish that I were as optimistic as the Minister in his reply. Will he not agree that responsibilities of the Presidency extend to the whole of the Community? I am asking whether the Minister considers that at the end of this year, on 31st December, we, as President, should issue a statement on what we have tried to do on this matter, where we have failed and what we think the step-by-step advance towards this 1992 achievement should be. That would surely be a legacy to leave behind as President, and a necessary one.
Viscount Davidson: My Lords, I am grateful to the noble Baroness. I shall certainly convey her remarks to
166
my right honourable friend. I am sure the House will agree that my right honourable friend has done extremely well. Our efforts represent solid progress and put the incoming Belgian Presidency in a commanding position to complete a worthwhile first-stage package.
Baroness Burton of Coventry: My Lords, I am sorry to niggle. Is the Minister aware that I think Mr. Moore and the Government have done their best? However, it is not enough. Is he aware that there is no sense of urgency in the Community on these matters? Everything we read in the paper speaks of developments in three or four years and when the Commission has taken further decisions. Can the Minister urge on his right honourable friend and the Prime Minister that we would welcome a Statement on 31st December along the lines I have suggested?
Viscount Davidson: My Lords, I shall certainly convey the remarks of the noble Baroness to my right honourable friend. The noble Baroness knows better than I do how difficult it is to get two parties to agree on a policy, let alone 12. However, we are treating it with the maximum urgency.

Balance of Payments:Estimate
2.40 p.m.
Lord Ezra: 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 what are their latest estimates on the outturn for the current account of the balance of payments in 1986 and 1987.
The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Lucas of Chilworth): My Lords, the Chancellor in his Autumn Statement put the likely outturn for this year at broad balance on the current account and a deficit of £1½ billion for next year.
Lord Ezra: My Lords, will the noble Lord comment on the trend in the non-oil visible balance underlying the overall balance, bearing in mind that so far this year there has been a deficit of some £9½ billion on the non-oil visible balance compared with £10 billion for the whole of last year? Does this not indicate that, in spite of improvements in our export trends, imports of goods continue to surpass them?
Lord Lucas of Chilworth: My Lords, manufacturing output between September and October is up by a half per cent. The forecast for 1987 on 1986 is an upturn of 4 per cent. While it is true that imports continue to exceed our own domestic consumption, the outlook remains bright.
Lord Williams of Elvel: My Lords, is the noble Lord aware that there is a serious problem of credibility in the estimates produced by Her Majesty's Government on balance of payments in 1986 and 1987? Will he comment on the revised estimate of invisible earnings which was debated on the Statement which the noble

167
Lord repeated from another place in this House and which has now come down in the latest figures from the Central Statistical Office? Does the Minister think that those figures will come down further in the future?
Lord Lucas of Chilworth: My Lords, I do not believe that there is any lack of credibility in the statistics provided by the CSO. I do not think that I can add anything to that which I said in response to the noble Lord and to other noble Lords in this House on 26th November.
Lord Ezra: My Lords, nonetheless, is it not surprising that, as we indicated in the debate on the occasion of the Statement being made by the noble Lord, estimates should have been made on invisibles so close to the period when the actual figures would emerge? In the event the actual figures were somewhat lower than the estimates then made. I agree with the noble Lord, Lord Williams, that if this is to become a regular practice, even if a lack of credibility may not be the case, nevertheless we could become confused.
Lord Lucas of Chilworth: My Lords, again, I do not think that I can add a great deal to what I said on 26th November. It has been the practice of all governments to adjust and modify the figures as information comes to light. That could be upwards as well as downwards.
Lord Harmar-Nicholls: My Lords, is it not unhelpful to the overall position of this country for the official figures to be accused of lacking credibility without facts being produced to justify such an extreme comment?
Lord Lucas of Chilworth: My Lords, I am grateful to my noble friend for his question. The truth of the matter is that our exports are in a very healthy position. Over the last two or three years we have gained in world share on 1980. We continue to make an impressive performance in world markets. The surpluses which have arisen in other areas have led to increased demand, reflected in higher imports, and that is indicative of the success of the Government's fiscal policies.
Lord Beswick: My Lords, how can the noble Lord expect credibility when he talks about increased exports without giving a satisfactory explanation for the increased imports?
Lord Lucas of Chilworth: My Lords, I am quite sure that the noble Lord appreciates, as I do, that as the wealth of the country increases consumer demand increases. Our manufacturing industries have not yet been able to meet the increased demand. There is therefore a demand which is satisfied by imports.
Baroness Seear: My Lords, does the noble Lord agree that a considerable amount of the increased demand is being financed by debt, and that this not only creates serious problems but to some extent makes nonsense of the Government's claim to be able to control liquidity—to control the money supply?
Lord Lucas of Chilworth: My Lords, I do not think that this makes nonsense of the Government's policies at all. If the noble Baroness would like to put down a Question on the element of indebtedness of the nation, I or one of my noble colleagues will be pleased to answer it.
Lord Beswick: My Lords, has the noble Lord not noticed that the total amount of debt floating around has increased by £1,000 million? This has been used for consumer purposes. That is why we are sucking in imports from abroad. Has this not something to do with the Government's financial policy?
Lord Lucas of Chilworth: My Lords, that may well be so and it may have some effect upon the Government's policy. Nevertheless, the situation reflects a growing confidence both of the lender and the consumer and a confidence in the buoyancy of the economy.
Lord Mackie of Benshie: My Lords, did I understand the noble Lord to say that the result of this tremendous efficiency and success was to be a £1½ billion deficit in the balance of payments next year?
Lord Lucas of Chilworth: My Lords, I shall not comment on the forerunner to the noble Lord's question because he draws an assumption which I did not. I gave an estimate and repeated the Chancellor's estimate of the outlook. One must accept that the change in the trading pattern that has occurred over the last two years, notably since the fall in oil prices, takes some while to readjust. I believe that our manufacturing industry is making that adjustment, and that is reflected in the acceptance of our exports abroad.
Lord Williams of Elvel: My Lords, can the noble Lord explain how, when the figure of £800 million per month surplus on invisibles was given by the Government from statistics provided by the Central Statistical Office at the time that he commented on the Statement on invisibles, two weeks later the CSO revised that figure down to £750 million? What new facts came to light for it to revise the estimate downwards?
Lord Lucas of Chilworth: My Lords, I explained to your Lordships' House on 26th November exactly how these figures are arrived at, the length of time it takes to collect figures on invisibles in particular and the way in which adjustments are made. I see nothing wrong with the way in which the CSO has arrived at the figures. I believe that it is right and proper that, as the information comes through, the adjustments as it sees them are made public.
Lord Leatherland: My Lords, in view of the sad nature of the figures that the Minister has given us, is he satisfied with the economic policy which the Government are pursuing?
Lord Lucas of Chilworth: My Lords, first, I see nothing sad whatever in the figures. Manufacturing industry output is at a higher level than it was in 1980. Investment is greater; profitability is greater; our

169
penetration of export markets is greater. That is all indicative of the success of this Government's financial policies since we came to office in 1979.
Lord Leatherland: My Lords, does the Minister agree that the number of unemployed, which is well over 3 million, is greater than it was in 1979?
Lord Lucas of Chilworth: My Lords, I or one of my noble colleagues will be happy to answer questions on unemployment if the noble Lord cares to put down a specific Question.
Lord Leatherland: My Lords, the Minister cannot answer the question.
Lord Beswick: My Lords, in all kindness perhaps I may say to the noble Lord that credibility is not increased when he selects 1980 as the base line instead of 1979.

London University Slide Library
2.49 p.m.
Lord Ardwick: 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 report is true that the London University Library Resources Committee has recommended the closure of the photographic slide library.
Baroness Hooper: No, my Lords. I understand that the committee's recommendation was that new ways should be found of funding the slide library.
Lord Ardwick: My Lords, I thank the noble Baroness for that Answer. This will give great reassurance to many extramural students who regard the library as an absolutely essential teaching aid in the appreciation of art. I also ask the noble Baroness whether she is aware that they are extremely disturbed at the threat of the savage cuts over the next three years in the extramural department of London University; so much so that the department itself may be jeopardised.
Baroness Hooper: My Lords, in so far as the Question concerns the University of London library—that is, the central library and not the more heavily used individual college libraries—this is currently operating at a deficit, and it is consequently reviewing which of its activities might be reduced or how additional income might be attracted, which has given cause to the rumours which prompted the noble Lord's Question.
It is recognised that the library has a collection of over 300,000 photographic slides covering architecture and fine arts and that this collection is held mainly to support teaching by the Department of Extramural Studies. But, as I have said, there is no question of the collection being disposed of in any way but of seeking to find sources of alternative funding.

Engineers: Transfer to Teaching
2.51 p.m.
Lord Taylor of Blackburn: 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 what steps they are taking to encourage the suggestion of the Engineering Council that engineers who are also mathematicians and physicists and who are nearing retirement should take early retirement and join the teaching profession.
Baroness Hooper: My Lords, the Government are taking a number of measures to attract engineers and other suitably qualified people to change to a career in teaching by, for example, special funding for initiatives in higher education institutions, the development of better industry and education links, and the introduction of a £1,200 bursary scheme for students.
Lord Taylor of Blackburn: My Lords, I thank the noble Baroness for that reply. May I ask the noble Baroness whether she will go on encouraging the Engineering Council in the way that they are going, in making suggestions for people from their ranks to take up posts in education?
Baroness Hooper: Yes indeed, my Lords. The Government welcome the Engineering Council's concern and interest in this matter. I am sure that the industrial affiliate organisation of the Engineering Council, which has a loose network of subscribers from the public utilities and other major industrial companies who gather together to discuss items of common interest, will prove extremely helpful, and officials are currently giving further consideration to the best ways to tap into this matter.
Lord McIntosh of Haringey: My Lords, would the noble Baroness not agree that these laudable objectives would be better secured if the Government were to refrain from their hamfisted attempt to intervene in the teachers pay negotiations, which are rapidly approaching a successful conclusion, and to withdraw the Teachers' Pay and Conditions Bill?
Baroness Hooper: No, my Lords.
Lady Kinloss: My Lords, did the Minister see a report in the Daily Express of Tuesday, 2nd December last, that Margaret Chavington, the director of the Think British Campaign, welcomes the £100 million plan for a pilot network of technology schools? Can the Minister say whether this is a government plan, where they hope to build the technology schools, and whether they would consider employing these retired teachers in these schools?
Baroness Hooper: My Lords, I am not absolutely aware of the particular reference in the newspaper report to which the noble Lady has referred. Certainly the Government are, as I said, in a number of different ways taking initiatives to encourage both the increase of training of teachers in these areas and, in the form of the city technology colleges, in the spread of technology instruction.

Business
2.54 p.m.
Lord Denham: My Lords, after the end of the short debate on the accountability of the security services and before the short debate on Cyprus, my noble friend Lord Belstead will, with the leave of the House, repeat a Statement that is to be made in another place on the Agriculture Council. It has been agreed through the usual channels that the Statement which is to be made in another place on the Foreign Affairs Council 15th/16th December should, by leave of the House, be printed in the Official Report.
I should like to say a word about the arrangements for this afternoon's two short debates standing in the names of the noble Lord, Lord Jenkins of Putney, and the noble Lord, Lord Willis. It is customary in short debates that the mover is allowed approximately 15 minutes, and that the Minister should rise to reply not less than 20 minutes before the scheduled end of the debate. In the case of the short debate in the name of the noble Lord, Lord Jenkins of Putney, it means that all other speeches should be limited to a maximum of nine minutes. If any noble Lord should speak at greater length, it will be to the disadvantage of subsequent speakers in the debate.
In the case of the short debate in the name of the noble Lord, Lord Willis, the number of speakers is such that it is not necessary to propose any formal time limit, but I know that the House would appreciate it if noble Lords would still limit their speeches to a length in keeping with the spirit of these short debates.

Foreign Affairs Council Meeting, 15th-16th December
Following is the Statement by the Secretary of State for Foreign and Commonwealth Affairs referred to above:
"With permission, Mr. Speaker, I should like to make a Statement on the meeting of the Foreign Affairs Council which I chaired in Brussels on 15th and 16th December. My honourable friend the Member for Wallasey represented the United Kingdom.
"Foreign Ministers confirmed the reappointment for a further two-year term of the President of the Commission and the Vice-Presidents.
"The Council noted that a solution had not yet been reached in the negotiations with the United States concerning the accession to the Community of Spain and Portugal. Ministers emphasised the need to reach a settlement as soon as possible, and confirmed the decision of the April and June Councils that in the event of unilateral US action the Community would take equivalent action to defend its interests.
"The Council approved a negotiating mandate for a Trade and Economic Co-operation Agreement between the Community and Romania.
"The Council expressed its concern about the considerable number of current trade problems with Canada, and invited the Commission to pursue these matters vigorously and firmly with Canada.
"The Council discussed the guidelines for the 1987 Asia and Latin America aid programme, and an export stabilisation scheme for least developed countries not party to the Lomé Convention.
"The Council discussed two important procedural consequences of the Single European Act: concerning the powers of the Commission and the Council's own rules of procedure. I am glad to say that on the latter point a satisfactory agreement was reached.
"The Council also discussed social measures in the coal and steel industries; and held a conciliation meeting with a delegation from the European Parliament on the new regulation on food aid policy and management on which the Development Council agreed a common position on 11th November. The regulation, the UK Presidency initiative, was then formally adopted.
"An Association Council at Ministerial level was held with Cyprus. Both sides agreed on the importance of bringing the current customs union negotiations to an early conclusion."

Debtors (Scotland) Bill [H.L.]
2.55 p.m.
The Earl of Dundee: My Lords, on behalf of my noble and learned friend the Lord Advocate, I beg to introduce a Bill to make new provision with regard to Scotland for an extension of time for payment of debts; to amend the law relating to certain diligences; to make provision in respect of messengers-at-arms and sheriff officers; and for connected purposes. I beg to move that this Bill be now read a first time.
Moved, That the Bill be now read a first time.—(The Earl of Dundee.)
On Question, Bill read a first time, and to be printed.

Infant Life (Preservation) Bill [H.L.]
The Lord Bishop of Birmingham: My Lords, I beg to introduce a Bill to reduce the period of pregnancy which for the purposes of the Infant Life (Preservation) Act 1929 is evidence that a woman was pregnant of a child capable of being born alive. I beg to move that this Bill be now read a first time.
Moved, That the Bill be now read a first time.—(The Lord Bishop of Birmingham.)
On Question, Bill read a first time, and to be printed.

Employment Guarantee Bill [H.L.]
Lord Jacques: My Lords, I beg to introduce a Bill to make provision for opportunities of employment for persons unemployed for periods of time; and for connected purposes. I beg to move that this Bill be now read a first time.
Moved, That the Bill be now read a first time.—(Lord Jacques.)
On Question, Bill read a first time, and to be printed.

House of Lords Offices: Select Committee Report
The Chairman of Committees (Lord Aberdare): My Lords, I beg to move that the First Report from the Select Committee be agreed to.
Moved, That the First Report from the Select Committee be agreed to.—(The Chairman of Committees.)
The Report was as follows:
1. Appointment of Sub-Committees
The following members of the Committee were appointed to the Sub-Committees:
(a) Library Sub-Committee

L Ardwick

L. McIntosh of Haringey

L. Fanshawe of Richmond

L. Mowbray and Stourton

E. Ferrers (Chairman)

L. Seebohm

With the Clerk of the Parliaments.
With power to co-opt further Lords.
(b) Refreshment Sub-Committee

L. Ampthill (Chairman)

L. Nugent of Guildford

L. Boyd-Carpenter

B. Phillips

L. Denham

L. Ponsonby of Shulbrede

B. Hylton-Foster

B. Stedman

L. Moran

L. Tordoff

With the Clerk of the Parliaments.
With power to co-opt further Lords.
(c) Works of Art Sub-Committee

Ardwick

B. Hooper

M. Cholmondeley

E. Munster

L. Fanshawe of Richmond

L. Strabolgi

L. Gibson (Chairman)

With the Clerk of the Parliaments.
With power to co-opt further Lords.
(d) Computer Sub-Committee

E. Ferrers

L. McIntosh of Haringey (Chairman)

With the Clerk of the Parliaments.
With power to co-opt further Lords.
(e) Staff of the House Sub-Committee

L. Aberdare (Chairman)

B. White

L. Nugent of Guildford

V. Whitelaw (L. President)

B. Seear

With the Clerk of the Parliaments and the Gentleman Usher of the Black Rod.
With power to co-opt further Lords.
(f) Finance Sub-Committee

L. Aberdare (Chairman)

L. McIntosh of Haringey

L. Ampthill

L. Ponsonby of Shulbrede

L. Denham

B. Stedman

E. Ferrers

L. Tordoff

With the Clerk of the Parliaments.
With power to co-opt further Lords.
(g) Administration Committee

L. Aberdare (Chairman)

L. Gibson

L. Ampthill

B. Hylton-Foster

E. Cathcart

L. McIntosh of Haringey

L. Denham

L. Ponsonby of Shulbrede

E. Ferrers

B. Stedman

B. Fisher of Rednal

L. Tordoff

With the Clerk of the Parliaments and the Gentleman Usher of the Black Rod.
With power to co-opt further Lords.
2. Staff of the House
The Committee considered further proposals from the Sub-Committee.
They agreed to the introduction of a scheme permitting limited flexible complementing at chief clerk and senior clerk levels and authorised payment of night duty allowances to certain administrative staff up to the rank of chief clerk or equivalent.
A proposed restructuring of industrial grades in the refreshment department was agreed and revised scales of pay and laundry allowances for uniformed staff were authorised.
3. Computer Developments
The Committee agreed a proposal that from the financial year 1987–88 provision for parliamentary computer services be transferred to the Votes of the two Houses.
4. Revised Scales of Pay
The Committee confirmed the application to staff of the House of Lords of the following Civil Service memoranda:—
CM/768—Revised subsistence payments towards the cost of meals and overnight expenses.
IM 86/8—Revised rate of London weighting for industrial staff.
5. Gift to Australian Commonwealth Parliament
The Committee agreed that provision be made in the House of Lords' Vote to meet a share of the costs of providing a vice-regal chair for a new Parliament building in Canberra which is to be opened in 1988 when the Australian bicentenary is celebrated.
6. Late Night Transport
The Committee agreed a revision in the conditions regulating the provision of transport to certain staff who work late after public transport has ceased to run.
7. Superannuation
The Committee were notified of the following awards made under the House of Lords Staff Pension Scheme:

(a) Revised pension and lump sum to Mr. A. W. K. Chittil, re-employed doorkeeper, who finally retired on 15th November 1986.

(b) Pension and lump sum to Mrs. M. E. Curd, clerical officer, who retires on 20th December 1986.

(c) Pension and lump sum to Mrs. M. J. Hacking-Brian, personal secretary, who resigned on 3rd October 1986.

(d) Preserved Pension and lump sum to Mr. G. F. Holborn, assistant librarian, who resigned on 31st May 1985.

(e) Lump sum death benefit and short-term pension to widow of A. E. Tomlin deceased, former doorkeeper, who died on 31st October 1986.

On Question, Motion agreed to.

Security Services: Accountability
2.58 p.m.
Lord Jenkins of Putney Lord Jenkins of Putney rose to call attention to the lack of accountability of the security services; and to move for Papers.
The noble Lord said: My Lords, I beg leave to move the Motion standing in my name on the Order Paper. Much water—not all of it clean, I am afraid—has passed under several bridges since this Motion was put down. In the other place, debates have tended to concentrate on the mistakes of the Government and on the defence of their actions, as is customary and natural in that House. But perhaps here we may concern ourselves, as the Motion suggests, with the wider question of what ought to be done about the secret services.
There are those who will say, "Well, yes, it does seem that all is far from well, but what can be done? How can secret services become accountable and still remain secret?" The Government's position is that nothing needs to be done; but that view is not widely held now outside the Government, and even inside it it is said that it is held with a certain lack of conviction.
I can best declare my own position by quoting, if I may, from a letter I wrote to the Cabinet Secretary in 1978. At that time it was Sir John Hunt, now Lord Hunt of Fawley, who is aware of my intention to refer to him. It was about a book I wrote, subtitled An

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Experience of Government and Arts. Sir John, to whom I had, as instructed, submitted the typescript, had objected, as indeed was his duty, to certain passages. I quote my reply:
"One of the objects of the book is to show how decisions are made and this cannot be done without demonstrating how advice is given by civil servants and quoting opinions expressed by Ministers. Nevertheless I am very ready to go along with the recommendations of the Committee of Privy Counsellors, whenever I can do so without damage to the public interest. I regard such damage as being done whenever information is concealed without good reason".
I went on to say that a junior Minister in an area remote from national security, the arts, was well placed to advance the reality of open government. I added:
"I consider it wrong to deprive the electorate of information about the processes of government, for where they are bad they remain bad and get worse in the dark".
That remains my view. I think it all too clear that the reason why the Government are concerned not only about Mr. Peter Wright but about such smaller fry as Miss Joan Miller and Miss Cathy Massiter, is that the Government still mistakenly hang on to the view that to preserve secrecy everything must be secret. The opposite is true. To preserve secrecy only essentials must be secret. The Government must not be economical with the truth. They must be economical with secrecy.
As it is, we are the most secret of all those governments who profess to be open. Even the Soviet Union does not pretend to be without secret services. In that closed society the existence of the KGB and of those at the head of it is freely discussed. It is respectable to be a spy. Perhaps our attitude regarding the spy and the counter spy as opposite sides of the same coin, as people doing dirty work which has to be kept under the table, is nearer the truth. But that should not involve carrying it to the point at which we become a laughing stock, to the point at which a senior civil servant is persuaded to behave publicly and privately in a way which demeans a hitherto highly respected man, to the point at which even the word of the Prime Minister in Parliament becomes suspect. That is going too far because by seeking to cover everything up we have made the preservation of secrecy so widespread that its cloak simply will not cover the essentials, and a judge in open court calls the Government's case "baloney".
The quality of books about the Secret Service varies considerably. I am not an admirer of Mr. Chapman Pincher, and like Sir William Rees-Mogg, like Mr. Philip Knight—whose impressive book was impressively reviewed, if I may say so, by Lord Annan last Sunday in the Observer—and many others indeed, including the Prime Minister, I shall need more than the evidence of Mr. Peter Wright to convince me that Sir Roger Hollis was a Soviet spy. As for Lord Rothschild, the tergiversations of his role in these matters have so far defied rational explanation. If I were the noble and learned Lord the Lord Chancellor I might be tempted to say that the whole lot of them seemed to have gone completely bonkers. As Mr. Knightley shows in his book, the risk of inter-spy lunacy is one of the dangers of a secret service which is not subject to systematic oversight and is not
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accountable, even indirectly, to the open forum of Parliament.
The description by the noble and learned Lord, Lord Denning, of the nature of the British security services in his report on the Profumo affair has stood the test of time in all but one vital respect. The noble and learned Lord says in Cmnd. 2152, paragraph 273, that the security services have no executive powers. That of course is true. But unfortunately Lord Denning goes on to say that the security services have "managed very well" without executive powers. They have not. They have assumed powers they do not legally possess. They regularly break the law.
The full examination of the secret services which has taken place in other countries and which must surely now take place here shows that, without exception, secret services commit crimes as a matter of course. I ask you Lordships to see The Ties that Bind by Richardson and Ball, which is available from the Library. I think it is the best comparative book obtainable on this subject.
In 1952 the Maxwell Fyfe directive set out for the first time what the general duties of our five secret service agencies are supposed to be. Clause 2 says, inter alia, that the task includes defence against dangers arising:
"from actions of persons and organisations whether directed from within or without the country which may be judged to be subversive of the state".
That judgment is left to the security service itself and, as Mr. Roy Jenkins said on 3rd December in the House of Commons (at col. 959 of Hansard) that spies and counter-spies are,
"entirely unfitted to judge between what is subversion and what is legitimate dissent.".
The record suggests that the security services judge the Conservative Party to be virtually synonymous with the state and the Labour Party to be naturally subversive. This is in spite of the fact that the Maxwell Fyfe directive goes on to say that the security services must keep themselves free from political bias. According to Mr. Andrew Roth, there are a number of ex-intelligence officers in the House of Commons. All of them are members of the Conservative Party. There are a number of Members of Parliament who have been under surveillance from time to time by the security services. All of them are members of the Labour Party.
When I was chairman of CND I used to talk frequently on the telephone to Dr. John Cox, who was a vice-chairman. It has since been admitted that Dr. Cox a member of the Communist Party—a rather orthodox member of that party: I believe he stood politically somewhat to my right—was bugged under an authority signed by Mr. Leon Brittan, who was Home Secretary at that time. The flat which my wife and I still occupy in Putney was the subject of a curious unacquisitive burglary about that time, with papers strewn all over the place and all drawers and cupboards open, but nothing much apparently taken. For a time after that our telephone behaved oddly with scraps of conversation heard. The police were baffled and so were my wife and I. Let us hope it was just a coincidence. I am sure no Home Secretary authorised anything.
Why have the Government taken action to suppress the book One Girl's War by Joan Miller? Some copies were issued before the suppression came into effect and here is one of them obtained by the House of Lords Library being quick off the mark. There is nothing in this book which could possibly threaten the safety of the realm, for the late Miss Miller's connection and story, as the title, One Girl's War, suggests, was essentially a war-time one. Miss Miller was naïve but she was patriotic and, like Miss Cathy Massiter today, she had her own moral standards. Her stomach was turned by some of the things she had to do.
Miss Miller quite casually and almost accidentally reveals what a sleazy and irresponsible and occasionally ruthless bunch these spooks were. She worshipped her chief, Maxwell Knight, with whom she lived for some time. She described him as being anti-Semitic and much else. When he decided to drop her she began to fear for her life, for she recalled another member of the staff who:
"performed some unofficial jobs for M [as he was called] such as getting rid of an unreliable double agent in the middle of the North Sea".
Well, it is peacetime now and there could not be any truth in the idea that Miss Hilda Murrell, the antinuclear rose grower, was murdered by accident by an agent of MI5, could there? Surely not!
I must leave to others to suggest how this can of worms can be cleansed and prevented from again falling into the smelly decay which seems to be the natural habitat of the spy. There is not time to give details of my own views, but I would suggest an outline. In another place, the committee proposed by the Alliance has been seen in two lights: first, as a committee to examine the situation and to make recommendations; and, secondly, as a permanent oversighting body. That might happen but first must come the examination and the proposals for reform.
Personally, for that purpose, I would settle for a committee of Privy Counsellors from both Houses, providing that they were representative of all parties. Second must be the report to Parliament—and there must be an annual report—not by the director of the security services, for he cannot be exposed, I think, to that. He should report to the committee and the committee should report to Parliament. In this way, accountability and security may both be served without breaching the principle of ministerial responsibility.
Finally, I would hope that one of the recommendations of the committee would be the adoption of the proposal of Mr. Roy Jenkins—and on this subject he knows what he is talking about, because he was of course a most distinguished Home Secretary—that MI5 be pulled out of its political surveillance role. It is particularly important that this nonsense should be stopped when we are lumbered with a Prime Minister who talks about "the enemy within" and about "eliminating socialism".
If we want to go on settling our differences by discussion and by majority voting, we must not descend to the level at which power is preserved by force and surveillance. It would be better for us all if that kind of talk and that kind of action were to stop
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on both sides—indeed, on all sides. My Lords, I beg to move for Papers.
3.12 p.m.
Lord Dacre of Glanton: My Lords, finding myself, to my surprise, the first to follow the noble Lord, Lord Jenkins of Putney, I am glad to take this opportunity of being the first to congratulate him on introducing a debate on this important subject. I have to be very tentative for we are moving in a world of cloaks and daggers, false names and false identities; but I think that I may be the only person here who has actually worked in both MI5 and MI6. Admittedly, that was a long time ago and in rather special circumstances. But, after all, the skeletons which come tumbling out of our cupboards to enjoy their periodical ritual dance all date from that time.
Although there have been many changes in the services since then—mostly, I think, for the better—time and observation have rather confirmed than refuted the general views which I then formed about the nature and the limitations of the work of the security services. Whatever may be the truth of recent allegations, I think it is clear that they have done great damage to the reputation and to the morale of the services. That, after all, is why we have this debate.
The root cause of the damage is, I believe, a lack of control, both external and internal, a lack of consistent policy and excessive secrecy. I find myself, again to my surprise, in agreement with many of the things—not everything but many of the things—which the noble Lord, Lord Jenkins of Putney, said. The services need control not only to ensure discipline but also for their own protection—protection especially from themselves.
All professions have their occupational dangers and the occupational danger of enclosed societies is a tendency to live in a private world; hence a loss of balance and of sense of proportion. These dangers are compounded by secrecy. Secrecy takes its toll and needs its psychological compensations. It can lead to fantasy and even occasionally to paranoia.
Much of the recent trouble, I believe, has been due to fantasy; uncontrolled conspiracy theories made paranoid by unusual events. The discovery that both MI5 and MI6 had harboured traitors in responsible positions was a traumatic event. But the paranoia, I believe, has been uncontrolled and the question that we have to ask is how it can be brought under control. Obviously, it requires a more consistent discipline, a stricter chain of command, regular accountability; but mere mechanical discipline cannot of itself cure the ailment.
It may intensify it and especially, I may add, when it is lifted, for it is then often that the fantasy is released. I have observed that the most advanced cases of it have occurred after such persons have retired—and I am not thinking here of one case only; I can think of several—after they have returned from the excitement of shared, continuous machination to the vacuum of retirement.
What is needed, I believe, is not only the pressure of a consistent discipline but also safety valves for the steam generated under that pressure. The operations of a secret service must necessarily be secret but the

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services themselves need not be so. At least they need not be so all the time. The days are past when we need—if, indeed, we ever needed—to pretend that they do not exist. The whole mentality of romantic, puerile amateurism generated by a school of popular novelists, a mentality which was still cultivated, deliberately cultivated, in those services when war descended upon us, is surely out of date.
Secrecy must be reduced to its necessary minimum or it will take its revenge in a psychosis of suspicion. I believe that what is required is an indivisible package: first, firmer responsibility all the way up, both internal and external; secondly, safety valves for the evacuation of suspicion; and, thirdly, less secrecy in inessentials. On internal discipline I believe that the Government were quite right to make a stand in the case of Mr. Wright, although I believe that they should have done so in the case of Mr. Pincher and I do not understand why they did not.
He was, after all, only a pseudonym and a ghostwriter for Mr. Wright. On external discipline, I have come to the view that responsibility to Parliament through an overburdened Cabinet Minister of high rank is not enough. There must also be a body which, though external to it, enjoys the trust of the service, which sits in secret and which can hear confidential complaints, enforce attendance and give advice.
I do not think that the Security Commission can fill this role; it is too remote. Such a body would be both a watchdog and a safety valve. If such a body had existed, I think that the scandals and public exposures of recent years could have been avoided. Members of the service who suspected their own chief, or even the Prime Minister, could have gone to it. The problem could then have been either resolved internally or, if that proved impossible, referred to a judicial inquiry.
Such a system exists in America in the form of the Senate Intelligence Committee. A close friend of mine, a distinguished former intelligence chief whom I greatly respect, tells me that the intelligence community in America was at first opposed to this innovation but, now that it is reconciled to it, it finds that it is a very valuable institution and wishes to preserve it. I have no doubt that some such body would be equally valuable here.
Finally, there is secrecy. Provided that there is internal discipline, and that members of the service are forbidden by enforceable contracts to publish books or to supply matter to writers, or at least cannot do so without express authority, I believe that the fetish of security could be left to wither away. Let journalists speculate; their speculations can be treated as such. Let historians write as they do. The secrecy of the history of the security services, as distinct from their current operations, is not worth protecting. It is already open to those who know where to look. A distinguished historian, the late Sir Lewis Namier, once wrote:
"most secrets are in print if one knows where to look".
He also observed:
"documents have nine lives, for they have eight carbon copies".
My Cambridge colleague, Dr. Christopher Andrew, has recently published an excellent and very readable
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history of the British Secret Service entirely from public sources, mainly in the Public Record Office. There is now a learned journal with the title, Intelligence and National Security, regularly published in London. I recommend it to your Lordships as a useful work of history and perhaps also of psychological therapy for bringing the intelligence world out of the closed mentality from which the recent traumas have grown.
3.22 p.m.
Lord Hutchinson of Lullington: My Lords, I should also like to congratulate the noble Lord for initiating so topical a debate. I should like to say at once that I agree with a great deal of the remarkable speech we have just heard from the noble Lord, Lord Dacre. My justification for speaking is that over 25 years I have had a close professional involvement in court cases involving the security services. Blake, Vassall, Martelli, Roberts and Conway were all my clients, as were the editor of the Sunday Telegraph and Mr. Duncan Campbell in the ABC case. Even Miss Keeler sought my services.
It has been my duty to cross-examine a number of security service personnel. Indeed, Mr. Turnbull's role in Sydney has at times seemed curiously familiar; though I must add that if a potential Prime Minister had sought to contact me during the currency of a case for purely political reasons and, as it now quite clearly appears, to give succour to the case against the Government, he would have received a massive flea in his presumptuous ear.
In the area of defence and terrorism, the security services are essential. Over terrorism their performance, with the special branch, has been brilliant and we all owe them a huge debt of gratitude. But their reputation overall, I suggest, no longer stands where it should in the eyes of the public. A restoration job is plainly necessary. The list of defectors and leakers is astonishing and the accumulation of credible allegations of unauthorised and mischievous operations is substantial.
My experience has led me to three conclusions. The first is that the blanket secrecy which smothers the service has become a harmful obsession and has infected responsible civil servants and Ministers in successive governments. I go along with what the noble Lord, Lord Jenkins, said about that. The Maxwell Fyfe directive of 1952 lays down a far too restrictive obligation on Ministers, I suggest, based as it is on the stifling principle of the need to know. Also, the need for a safety valve for officers to channel complaints and suspicions is surely made out; and I am glad that the noble Lord, Lord Dacre, takes the same view.
I will deal with those three headings shortly, but I should like to quote from an article in The Times of 29th November last by the distinguished diplomat Sir Reginald Hibbert, our last ambassador in Paris. He writes.
"On a strict interpretation of the Official Secrets Act, government in Britain is carried on by a process of leaks. The system depends on everyone knowing and respecting how much they are allowed to leak"—
my Lords, the authentic voice of the establishment!

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He then points out, with an exquisite use of words, that the secret and security services have,
"to endure the full rigours of the Official Secrets Act without ever enjoying the relief of leaking".
He adds:
"The historical convention is that they do not exist and can neither be seen nor heard.
He continues:
"it is not surprising that an elaborate system of controlled leaking from the top has been evolved, leaking to chosen writers and journalists"—
and, I would add, politicians.
In the ABC case, it took us three days of cross-examination to convince a High Court judge that the existence, location and purpose of GCHQ could not be a state secret to be kept from the public as argued passionately by the Crown witnesses. By taking photos from public footpaths, reading unrestricted service magazines and looking at notice boards, anyone could establish which Signals unit was there at Cheltenham, the name of its commanding officer, and indeed, for any radio enthusiast, the frequency on which the station transmitted its messages. The only secret was: what were the messages received and how were they used?
My client was charged under Section 1—the most serious of all secrecy offences. After a week the judge threatened to summon the Attorney-General to court unless the prosecution withdrew the charge, which he described as oppressive. After two more weeks the judge, unprecedentedly, announced that whatever the verdict on the other charges he had no intention whatever of imposing a custodial sentence. I am sure that the noble and learned Lord, Lord Silkin, who was the Attorney-General at the time, would agree that he had not been properly briefed by the security services when he pitched the prosecution so high. We see the same thing happening daily in Sydney, Australia. The reason: obsessive secrecy, even in relation to Ministers of the Crown.
It is absurd and untenable to forbid any publication by any member of the security services, past or present, in any circumstances, whatever may be the public interest. It is absurd to deny the existence of MI6. Indeed, I am not persuaded that the noble Lord, Lord Dacre, has made what I might call another mistake. What surely is sensible is to admit the existence and location of the security services and to allow publications subject only to vetting by the service on clearly stated, sensible grounds, spelt out as a reasoned policy.
The Need to Know, the Maxwell Fyfe directive, refers to the convention that Ministers are,
"furnished with such information only as may be necessary for the determination of an issue on which guidance is sought."
In other words, the initiative must come from the Minister. The truth is that the busy Minister does not want to know and the service does not want to tell. Those awkward political birds of passage must only know what they need to know.
The Secretary of State says that if the director general's judgment is wrong, he is answerable to the Home Secretary. But that is ex post facto. When Commander Crabbe swam under the Russian cruiser, which was ironically on a goodwill mission at
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Portsmouth, the Russians found him out and blew the operation. The Prime Minister had to come to the House of Commons and admit, humiliatingly, that he and other Ministers knew nothing whatever about the operation.
There must surely be some political oversight, some political guidance and some sharing of responsibility. Sir Robert Armstrong, I suggest, should never have been expected to undergo a political cross-examination. Accountability means neither interference in operations nor sharing secrets; nor does it mean a total crossing of Mr. Hurd's barrier of secrecy. It is the old question that all democracies have had to answer: quis custodet and where lies the public interest. Other democracies have solved these questions, and with some political will we can do the same.
What is required is a forum which is not a court of law where these questions can be put. That would provide the watchdog and the safety valve to which the noble Lord, Lord Dacre, referred. That plus the reform of the Official Secrets Act and the passing of a freedom of information Act would restore the reputation of the security services. I ask the Minister: is the time not demonstrably overripe for some inquiry into the whole affair?
3.34 p.m.
Lord Denning: My Lords, I too wish to thank the noble Lord, Lord Jenkins of Putney, for raising this topic. In 1963 the then Prime Minister, Harold Macmillan, asked me, in the light of the circumstances leading to the resignation of the former Secretary of State for War, Mr. J. D. Profumo, to examine the operation of the security service. I undertook that task. Coming before me to give evidence were not only the Prime Minister but most of the members of the Cabinet, the director general of the security service and many of his staff. I visited MI5 as well. I hope that I performed that examination carefully.
The first matter to be observed is the structure of the security service. On this matter, perhaps I may repeat what I said in my report at paragraph 273:
"The Security Service in this country is not established by Statute nor is it recognised by Common Law. Even the Official Secrets Acts do not acknowledge its existence. The members of the Service are, in the eye of the law, ordinary citizens with no powers greater than anyone else".
I had much confidential information given to me and I summarised that in the report. Until 1952 the Prime Minister was responsible for security. In 1951, a proposal was made to the Prime Minister by Sir Norman Brooke, who many of your Lordships will remember as one of our most experienced civil servants. He proposed that responsibility should be transferred to the Home Secretary. Sir David Maxwell Fyfe in 1952 gave an important directive to the director general of the security service which is set out in the report. I also had a great deal of further evidence.
The general principle, which I ventured to state in paragraph 239, was as follows:
"(1) The head of the Security Service is responsible directly to the Home Secretary for the efficient and proper working of the Service and not in the ordinary way to the Prime Minister.

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(2) The Security Service is, however, not a department of the Home Office. It operates independently under its own Director-General, but he can and does seek direction and guidance from the Home Secretary, subject always to the proviso that its activities must be absolutely free from any political bias or influence.
(3) The function of the Security Service is to defend the Realm as a whole from dangers which threaten it as a whole, such as espionage on behalf of a foreign Power, or internal organisations subversive of the State. For this purpose it must collect information about individuals, and give it to those concerned. But it must not, even at the behest of a Minister or a Government Department, take part in investigating the private lives of individuals except in a matter bearing on the Defence of the Realm as a whole".
The burden of the report is that the security service is not to investigate the private morals or private lives of individuals or their political aspirations. It must be quite independent of any moral or political bias whatsoever. The director general of the service is answerable to the Home Secretary. In matters of prime importance, the last section of paragraph 239 of the report states:
"The head of the Security Service may approach the Prime Minister himself on matters of supreme importance and delicacy".
I venture to think that that report and those recommendations still hold good and that there is no need for a further or more elaborate chain of accountability. I saw all those witnesses in connection with that report, and I saw the director general, Sir Robert Hollis, myself. I saw his staff. They were keeping in touch from the very beginning with the situation involving Stephen Ward and the Russian, Ivanov, and with the happenings in Ward's flat with such people as Christine Keeler and the like. They were reporting on the situation to the proper people—to the Foreign Office and to Admiralty House, where the Prime Minister then was. They took the line all along that it was not their function to investigate either the private morals or the private lives of any individual. Having regard to the whole of the circumstances, they came to the conclusion that there was no security risk involved in anything that Mr. Profumo did. I hope that all those suspicions were cleared away by that report.
Having seen Sir Roger Hollis, his staff and how they worked with him, I have complete confidence in his integrity and uprightness, and indeed in Lord Trend's subsequent vindication of him. So much for that inquiry.
As regards the matters which are the subject of controversy today, I shall not go into them. There is undoubtedly unease about disclosures that have been made. Do they require another inquiry? All I would say is that any senior officer of the service who has any doubts about the loyalty of his superiors and others should immediately report them to the Home Secretary or to the Prime Minister, rather than waiting until after people are dead and unable to answer for themselves. That is what anyone who was uneasy about the conduct of persons in office should have done, rather waiting until after such persons were dead and unable to answer for themselves.
I hope that the House will accept the importance of people in the security service maintaining complete confidence not only during their period in the service but for their whole lives. In the circumstances, I hope that those principles will be established firmly throughout.
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To come back to the question of whether there is any need for further accountability, I venture to think that the system I described in my report still holds good. In exceptional cases, there may be need for an inquiry, as there was in the case in question, but as a general rule let the position go on as it is. It is very good on the whole and has withstood the test of time.
3.40 p.m.
Lord Campbell of Croy: My Lords, our gratitude is due to the noble Lord, Lord Jenkins, for having raised the question of accountability of the security service, which is an important subject. We have to ask ourselves how best to balance the need for some basic secrecy with the proper supervision of such a service in a democracy.
The noble Lord in the Motion and in his speech has used the plural, "services". I shall refer to the "security service" in the singular, the organisation concerned with counter-espionage, also known as MI5. As regards any other organisations involved in gathering intelligence, I shall refer simply to the British intelligence system.
In the limited time available to each speaker I hope that I can make a thoughtful contribution, because my work in public service has at times brought me in touch with the security service and our intelligence system, in particular when I was Private Secretary to Sir Norman Brooke, then Secretary to the Cabinet. I should make it clear that I have never myself been a member of the organisations concerned. I saw something of their problems and their successes, and I benefited from the products of their work.
In speaking today, I am very conscious of being subject to the restraints of the Official Secrets Act, imposed when I entered the Foreign Office in 1946. Since 1970, I have also been bound by the Privy Counsellor's oath. Consequently, your Lordships will understand that I tread with care, and will speak in general, not in detail.
Because of the positions that I have held, my interest has been engaged, and continues to be engaged, in the nagging question: how can the activities of the security service and the intelligence system be satisfactorily supervised and accounted for? There is no straight-forward solution of the orthodox kind because we must recognise that there are two special requirements. First, most of their important work must be secret, otherwise they could not carry out their functions. There would be no point in their existence. Secondly, they ought to have discretion to carry out covert activities, and be able to act quickly, in accordance with understood guidelines.
Their accountability at present, as in the past, is to certain Ministers through designated officials. The Ministers are of course accountable to Parliament, but they do not discuss the work of the organisations in Parliament, or elsewhere in public, since this would make it impossible to retain the necessary secrecy. That convention has always been accepted by governments and official oppositions.
From time to time there have been suggestions for a Select Committee or a parliamentary commission. The same difficulty, I suggest, arises as for the Floor of either House. It is not a suitable place for a discussion

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of matters most of which are secret and are being ardently sought after by certain hostile organisations and individuals.
Another proposal suggested in another place in the debate on 3rd December, and again today the preference of the noble Lord, Lord Jenkins, is a conference of Privy Counsellors. I happen to be in an excellent position to comment because I was the secretary of the first such body to be appointed at the end of 1955, and so was involved in drafting its report, produced four months later. The conference was on security. It was established after the Soviet Government had suddenly produced in Moscow Burgess and Maclean, who some three years earlier had disappeared. The Russians obviously did this in order to embarrass the West. Their appearance certainly caused headlines, confusion and calls for an inquiry.
The problem, however, was how an inquiry could be unbiased, yet consist of people who could be informed about very secret matters. An internal investigation within government was not considered acceptable, though party politics did not arise at that stage because the events to be examined occurred during periods in office of different governments. The Privy Counsellors appointed were as follows: three members of the Conservative Government of the day, the Lord President, the Lord Chancellor and the Home Secretary; three former Labour Cabinet Ministers, including Lord Jowitt, a former Lord Chancellor, and Mr. Morrison, a former Foreign Secretary. The seventh Privy Counsellor was Sir Edward Bridges, who was head of the Civil Service as well as Permanent Secretary to the Treasury. One member was Lord Kilmuir, who, as Sir David Maxwell Fyfe, had been the Home Secretary who formulated in 1952 the directive to the security service which I understand still governs its operations today.
The report of the conference making recommendations on security in the public service was published as a parliamentary paper, Cmnd. 9715. Incidentally, I had met both Burgess and Maclean in my work in the Foreign Office in the late 1940s. A similar formula was used when another conference of Privy Counsellors was appointed a few years later on telephone tapping. Again, sensitive secret matters were to be looked into.
Having had a hand in thinking up this kind of body, the first one in 1955, I favour it as a formula for certain occasions but not as a permanent body. It was clearly suitable as a means of investigating a particular situation or episode, but I believe it is not appropriate as a body attempting permanently to monitor and supervise the security service. It would make little if any addition, I think, to accountability to Parliament. For completeness, I should mention that a similar group of Privy Counsellors was established immediately after the Falklands conflict where an inquiry was clearly needed and defence and security secrets were involved. An internal government inquiry might have been seen as a whitewash.
At that time, I was aware of the same climate of concern as in 1955. I am sure that the Government had it in mind, but in case the formula had been overlooked I reminded the appropriate quarter of the 1955 conference. I was therefore gratified to find that
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this was eventually adopted even to the equivalent of Sir Edward Bridges—for Sir Patrick Nairne, the civil servant, was appointed a Privy Counsellor and made a member of the committee.
I have spoken of secrecy. Your Lordships will know from Question Time that I am one of those who have been trying to get Section 2 of the Official Secrets Act replaced. Indeed, the Government introduced a Bill to do that in 1979. They made a worthy effort, but ran into difficulties.
I believe that those who are recruited and work in the security service should not be free to release sensitive information or write memoirs, including such information after retiring. If they have an urge to write about their work they should go into another occupation. I also believe that some blame attaches to publishers if they press for memoirs with the maximum number of names, rumours and allegations. The effect is to reduce to some extent the security of the 55 million people living in this country. The effectiveness of our security service is diminished and other countries will be less willing to share secret information with us.
Perhaps I may express a final thought about past relationships with the Soviet Union. During the war, from 1941 to 1945, the Russians were our allies and presumably military intelligence and other useful intelligence was passed to them. Those who worked in our intelligence system had to readjust after 1945. That could be illustrated by my own case because I was an ordinary regimental soldier from the beginning of the war until the end of the war in Europe. I was wounded during the assault across the Elbe on the day before Hitler committed suicide.
What was our objective? My division was due to meet the Russians near Lübeck, which happened within two days. I departed with a bullet through my middle which kept me in hospital for more than a year. A year and a half after that sudden departure from the army I entered the Foreign Office, having been successful in the entrance exam, and was immediately sent to the Eastern European department where I found myself dealing with the Russians on a quite different basis. They had changed from being wartime allies to being potential enemies with whom we had to be very careful.
I accept that there is a place for special inquiries on particular subjects and episodes and that membership can be devised suitable for receiving secret information. But I do not think a workable system can be set up permanently for supervision and accountability which would improve upon the present arrangements for ministerial responsibility.
3.51 p.m.
Lord Hooson: My Lords, I should like to join in thanking the noble Lord, Lord Jenkins, for initiating this debate. It seems to have come at a particularly appropriate time not so much because of the affair that is going on in Australia but because in the other place there is an early-day motion, headed by the very respected former Home Secretary Mr. Merlyn Rees, calling for an inquiry into the alleged political surveillance of the noble Lord, Lord Wilson of Rievaulx, when he was Prime Minister of this country. As your

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Lordships will recollect, Mr. Merlyn Rees was the Home Secretary who reported to the succeeding Prime Minister, Mr. James Callaghan, that everything was all right because it had been reported to Mr. Rees—and I have had words with Mr. Rees about this—by the director general of M15 that there was nothing to report. The fact that his name now heads an early-day motion calling for an inquiry into the matter underlines the seriousness of the affair.
I found the speech by the noble Lord, Lord Dacre, with his excellent knowledge and experience, totally convincing. The Government would do well to heed his very wise words in regard to the security services. I should like to underline the point that has been made that there is excessive secrecy. I was engaged last year in my professional duties, defending in the so-called Cyprus spy trial of young servicemen charged with Section 1 offences. The way senior officials of the intelligence services had to deny the existence of facts that could be simply proved by producing newspaper reports and government announcements over a number of years was ludicrous. The jury and everybody else in the court found it ludicrous. There is excessive secrecy.
I should like to make my position clear. I accept of course that the security services must necessarily be properly and effectively secretive about their legitimate operational matters. I totally accept that there must be a binding obligation for life on members of the security services not to disclose what was entrusted to them as confidential in the legitimate pursuit of their duties. But that is not the point that really arises; and we all know this to be true.
I want to concentrate on two spheres where difficulties arise. First, if the service under its director general indulges in legal activites—for example, under the guise of political surveillance—given its power and expertise, it must be very tempting at times to go beyond the bounds of legitimacy. It would be very dangerous for the country as a whole, as well as being totally and unacceptably unfair to individuals who were selected as targets, if this were allowed to go on uncontrolled. I entirely take the point that the noble Lord, Lord Dacre, so convincingly made about the need for tighter internal control. I also accept his view that there should be a measure of external control.
Secondly, there is the much more likely scenario of dissident members of the security services indulging in illegal activities—for example, if they do not seek warrants to intercept telephone calls but just do it; if they commit burglaries, and so on—in pursuit of what they subjectively consider to be acceptable aims. If a part of the service gets out of control, as it has been alleged part of the service did for one period, what is the situation of an individual member of the service who is an upright person and is deeply offended by what is going on? What is his duty? Is it to keep silent? The answer is no, it cannot be. Is it to report to his superiors? Clearly, it is.
However, what if the superiors pay no attention? Is he to take an active part in a cover-up? Is he to continue making protests when perhaps his superiors do not want to know? What is that officer's duty to the country? I have to remind your Lordships that at
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Nuremberg, in a different context truly, the defence of superior orders was there held by all the judges to be no answer to a charge of the commission of a war crime. It is not entirely an analogous situation but there are certain situations when even in the security services it is legitimate to say that the defence of superior orders is no defence.
The danger is this. The individual involved has to reach a subjective judgment on what is or is not legitimate and on what is or is not proper for him to do. Surely the noble Lord, Lord Dacre, is right that there must be somebody to whom an officer can report, an outside body or at least an outside individual, so that an anxiety can be expressed, guidance sought and advice taken or to whom he can legitimately make a complaint about the running of the service. This appears to be the greatest single problem affecting the security services at the present time.
I go back to the allegations concerning the noble Lord, Lord Wilson of Rievaulx, of whose political views and political activities I never entirely approved. I am bound to say that the allegations are that there were surveillance, interceptions and burglaries involving the houses of the Prime Minister himself. Did it happen? Surely that can be answered. Why did it happen? Was it authorised? If so, by whom? If it was not authorised, who did it? How many were involved? What disciplinary action was taken in respect of them? Surely these are matters that the public have a right to know. This House and I think the Government owe a duty to the country to make as much information available as possible so that the matter can be fairly judged.
I do not have the expertise to suggest what kind of body is appropriate for the external control but I think it should be a permanent body to which any member of the security services with true anxieties and needing real guidance can go. That would perhaps prevent the kind of scene that has presented itself in the court in Sydney, where the Government are quite legitimately trying to prevent the publication of all kinds of disclosed secrets, when if they had provided their own machinery for complaint and guidance they would not be faced with that situation.
3.59 p.m.
Lord Beloff: My Lords, I join in thanking the noble Lord, Lord Jenkins of Putney, because the subject we are discussing is important and one on which I think most people's minds are not closed. We have had a variety of suggestions as to how the situation might be improved.
I cannot claim, as have other speakers, to have had any direct involvement in any capacity with any of the security services. As a private citizen and, at the time, a university teacher I was from time to time approached with questions about a pupil or other former acquaintance of mine who was presumably being looked at with a view to confidential employment. My impression on those occasions was that the security service was employing people whose degree of political sensitivity was rather low. I should have thought that the important aspect in a security service must always be the quality of the personnel.

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I share the admiration for Mr. Christopher Andrew's remarkable History of the Secret Service. If one reads his book one is amazed, at a time when great efforts were made to handle recruitment for the Civil Service, the armed forces and the Colonial Service, how haphazard and amateur was the procedure by which people became members of the secret services. Therefore I should have thought that if strengthening is needed that is where the strengthening is required.
What I am doubtful about—apart from this question of appeal by a dissident member, where I think the noble Lord, Lord Hooson, is probably right in saying that there ought to be such machinery—is the suggestion of a permanent body of oversight. The noble Lord, Lord Dacre, suggested the parallel of the Senate Intelligence Committee; but in spite of his praise for that institution recent revelations in the United States would not suggest that the activities of the American services are altogether free from blame. Indeed, they seem more bizarre than many of the allegations against our own service.
It does not seem to me that parliamentary surveillance is appropriate in this field. It is of course tempting—the noble Lord, Lord Campbell of Croy, referred to this—to make use of the existence of the special status of Privy Counsellors, but I can only refer to the point made by the noble Lord, Lord Hutchinson of Lullington; that is. when the Leader of the Opposition, who is a Privy Counsellor, associates himself and aids the presentation of an anti-government case in a security matter, as Mr. Turnbull made quite clear in court yesterday, that is very damaging to the cause of those——
Lord Mishcon: My Lords, I am sure the noble Lord will give way. So far this debate has taken place without any party political points being set. Will the noble Lord be careful in his language? He said that it was aiding the case against the Crown. Mr. Kinnock, to whom the noble Lord is referring, is an honourable man. He said that he was asking to correct, if necessary, information that he had. He was not giving information. Will the noble Lord please remember that and couch his terms a little more carefully?
Lord Beloff: My Lords, I am sorry, but I am not referring to what Mr. Kinnock said. I am referring to what Mr. Turnbull said in court yesterday. He said that were it not for the information elicited by Mr. Kinnock in questioning the Prime Minister he would not have been able to present so convincing a case. That is Mr. Turnbull's statement, not mine. I was not using it in a party sense. I was using it in the sense that the Privy Counsellors' oath is perhaps insufficient.
Lord Mishcon: My Lords, the noble Lord is courteous in giving way but not courteous in his language. He is now referring to what was openly said in Parliament by way of question and answer. That was in public.
Lord Beloff: My Lords, I never indicated that it was in private. I am sorry, but I never indicated that anything was done in private. I merely said, as did the noble Lord, Lord Hutchinson, in rather more extreme language than I have used, that this event cast some
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question over the possibility of using a committee of Privy Counsellors. If it had involved a Conservative, a Liberal or a Social Democrat I should have taken precisely the same view. There are problems in using the Privy Counsellors' oath in matters of this kind. It may be possible to overcome those problems, but it would be idle to pretend that they do not exist.
Another point which I believe must be made is this. I can quite understand the belief, the wish and the hope that has been expressed by the noble Lord, Lord Jenkins of Putney, that security should be limited, so far as possible, to non-political matters. Of course when it is a question of not allowing a potential enemy to have a picture of some weapon of war everything is very straightforward and few people find that to be a problem. But the history of the secret service has, alas, never been limited to that.
The first and great exponent of the British secret service was Sir Francis Walsingham, who, in the reign of Queen Elizabeth I, spent a great deal of public money and employed a great many perhaps doubtful people in seeking out Catholic priests who were thought to be agents in a plot to dethrone Queen Elizabeth in favour of a Catholic pretender. If one refers to the state papers of William III's reign one finds, again, an enormous amount of secret activity directed towards intercepting communications between this country and foreign courts where the Stuart pretender of the day was residing.
Therefore, whenever you have in a country a great gap between what the Government of the day or the state regard as security and some element in the population which directly challenges that view it is difficult to see how the security services can avoid being implicated. The noble Lord, Lord Jenkins of Putney, for example, indicated that he thought the service went beyond its brief in looking at or intercepting communications between two prominent members of the Campaign for Nuclear Disarmament. However, in view of the fact that persons associated with that campaign have not merely made propaganda—as is their right—for a totally different set-up in our defences but have actually intercepted military convoys and endeavoured to interrupt the ordinary course of military practice, clearly at some point such people will no doubt deserve and receive the attention of the security services.
It is a very difficult area, and short of having tight ministerial control, better recruitment and, as the noble Lord, Lord Hooson, said, a proper appeal mechanism for those who feel aggrieved or feel that things are going wrong, I find it hard to see how much progress can be made.
4.9 p.m.
Lord Wilson of Langside: My Lords, so far we have had an interesting debate. I venture to say that it will probably become even more interesting when the Minister replies to at least half of the very pointed questions put to him by the noble Lord, Lord Hooson. I hope he will have already applied his mind to that.
It has been, too, an encouraging and useful debate. Like many others, I found the speech of the noble Lord, Lord Dacre, particularly encouraging and interesting. I think the question to which the House

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will wish to have an answer, in the context of what he said, is this. Can we take it that, broadly speaking, what he said represents the Government's approach to the problems in this area with which we are concerned this afternoon? Can we take it that the Government have absorbed the lessons of the events which led to such nonsense as the trial in Australia and the various other bits of nonsense which have been visited upon us over the last 40 years? Moreover, can we take it that the Government's approach to that situation is broadly the sensible one which, as I understand it, the noble Lord, Lord Dacre, was advocating?
I found the speech of the noble Lord, Lord Dacre, intriguing too because he reminded me of my own experience in the intelligence hierarchy at the very bottom of the ladder of which he was at the top. My experience, which was brief, took place when I was in my mid-20s and took the shape of the lowest form of life in the military field; namely, the regimental intelligence officer.
As the noble Lord was describing his experience, I wondered what excuse I had for participating in your Lordships' debate this afternoon. At various levels over the last 40 years or so, for my sins I have been involved in prosecuting and trying criminals and that has given me a wide experience. During this time I have often reflected upon the dangers of the establishment cover-up, which is an invention neither of the media nor yet of the anti-establishment lobby but is a fact of real life. I feel that my experience has perhaps given me some locus to participate in the debate.
More seriously, I am concerned to make only one short point to emphasise the importance of accountability in this sphere. What above all persuaded me that some government action was essential with regard to the accountability of the security services was the granting of immunity from criminal prosecution to the traitors Blunt and Philby. I thought that the circumstances surrounding that grant of immunity to both those rogues were quite outrageous. So far as they are known to the public, the circumstances will be well known to your Lordships and I shall not venture to elaborate upon them, but it is said that the Attorney-General of the day was consulted. I should dearly like to know the form that that consultation took but I know that if I asked him the Minister would not tell me, even if he knew, which I imagine he does not.
If that circumstance is true I find it profoundly disturbing that a Law Officer of the Crown should have concurred in such a step. To me it suggests a degree of irresponsibility that sits ill with such an office. In the other place on Monday, after dealing with the statement of 23rd August 1977 made by the then Prime Minister, Mr. Callaghan, a statement of which so much was made by the Government in debates in the other place and outside, the Minister of State at the Home Office said:
"No one is above the law in this country, and members of the Security Service are no more immune from prosecution than anyone else if they commit criminal offences".
That is from the Official Report of the House of Commons, of 15th December 1986, col. 796. The question that I put to the Minister—and I hope that he will attempt to answer it—is what warrant there is in
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the law of any part of the United Kingdom for the grant of that immunity to those two traitors.
4.16 p.m.
Lord Annan: My Lords, I am very much in agreement with the speakers who have opened this debate and particularly with the noble Lord, Lord Dacre. The problem we are facing stems from the fact that there has been a change in the position of the security services. In the period before 1914 spies were people who were paid by nations to extract information, whereas after 1919 spies were motivated by ideology. One of the greatest disservices done to their country by the Cambridge spies was to create within the security services a profound sense of unease about who was or was not loyal within the service. That is one reason why things have changed.
The second reason is that we are no longer living in a society which respects confidentiality in the way that it was once respected. It is no good hoping that those days will return. I know perfectly well from my academic life that if I send a confidential letter about someone's merits or demerits for a particular academic post that letter will be leaked probably right back to the person about whom it was written. Times have changed and we are unlikely to return to a time when one can rely on secrecy and confidentiality being preserved. It is not preserved in Government. We all know the way in which government is conducted by leaks.
There is a point on which I slightly dissent from the noble Lord, Lord Dacre. He expressed surprise that Mr. Chapman Pincher had not been prosecuted. I am not a lawyer but I cannot see how he could have been prosecuted, because he has nothing to do with the security services and was merely retailing what he heard. I would guess that one reason why it would have been so unwise to prosecute is because the noble Lord, Lord Hutchinson, might well have been the counsel who would have been briefed for his defence. The noble Lord has had the most astonishing and remarkable forensic successes in security matters.
We live in a free country. So when the noble Lord, Lord Wilson of Langside, asked why it was that Blunt was not prosecuted, the answer must be that in a court of law Blunt would have won his case with ease because he would have refused to admit anything. It was only by a promise of immunity that information which, in the opinion of the security services was of great value to the state, could have been extracted from him. There is an inconsistency about the way in which confidential material has been regarded by the Crown. The first notable book on secret matters which appeared was that written by the late Sir John Masterman who was a great pillar of the Establishment, the Provost of Worcester and the tutor in history of the noble Lord, Lord Dacre of Glanton—from whom no doubt, he learned a great deal! Sir John was the person who first revealed the secrets of the double-cross during the war—the use of double agents to deceive the German Army.
Then we had the revelations of Group Captain Winterbottom who revealed that there was a place called Bletchley and that the cryptographers who worked there produced the remarkable traffic known today as Ultra. Those of us like myself who did not

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produce but consumed Ultra knew that its existence was known to hundreds of people, and yet not one of them ever said a word about this. Was the Group Captain Winterbottom told that he might write his book? Was he told that unofficially? I do not think he could have been told it officially because the official history is now being written by Sir Harry Hinsley.
There is the case of another person. We all know that many operations of great gallantry were performed during the war by officers in Greece. Mr. Paddy Leigh Fermor is famous for having captured General Kreipe in Crete, and wrote an enthralling book about it. Colonel Monty Woodhouse wrote an extremely good book about his operations with ELAS. Another officer wrote a book about his operations in the Epirus. Why was it that there was an attempt to stop publication of this last book? The reason an attempt was made to stop it was that after the war (not during the war) that officer joined the security services. The book was in no way connected with anything he did while in the service. It really is very strange when there is such inconsistency to know what line is likely to be taken about publication.
Mr. Wright is undoubtedly someone who has broken his trust. He is also someone who, as the noble Lord, Lord Dacre, said, is paranoid that his view of what happened in the years between 1950 and 1970 is not accepted by his superiors. So long as we try and maintain, as the noble Lord, Lord Dacre, said, total secrecy about these matters there will be rows and confusion. We must move more towards the American system whereby an officer of the CIA submits any book he wishes to write about his life to the CIA which judges what parts of it, if any, should be excised. If we go on saying that nothing can be published of any kind, we shall have another case like that in Sydney again on our hands.
I therefore very much approve of the proposal that there should be a more thorough system of surveillance of security matters than exists today. I should hope to see any such commission headed by one of Her Majesty's judges, perhaps with two Privy Counsellors in attendance, because I think that judicial wisdom is required there. We need someone who can ask the right questions of the security chiefs, and particularly so since it is always difficult to know what the right questions are.
There is one last point I should like to make which concerns political surveillance. It is not entirely true that the security services are interested only in Left-wing organisations. In 1939 a former member of the security services, Admiral Sir Barry Domville was interned for the duration of the war, and Joan Miller was used by MI5 to infiltrate a ludicrous fascist cell.
When one comes to the business of political surveillance, one needs to remember that people come under suspicion very often because of those they associate with. Having associated during my life with disreputable company, I would not be at all surprised if at any time the security services began to investigate me.
Lord Dacre of Glanton: My Lords, before the noble Lord. Lord Annan, sits down, may I correct a small point? I never suggested—or at least I never meant to
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suggest—that Mr. Chapman Pincher should have been prosecuted. My point was that his book should have been prevented in the way that an attempt is being made to prevent the publication of Mr. Wright's book; or if that had failed, that Mr. Wright should have been prosecuted then, rather than pursued now.
Lord Annan: My Lords, I am so sorry if I misunderstood the noble Lord. Thank you so much.
4.26 p.m.
Lord Birdwood: My Lords, this is not the first time I have had reason to thank the noble Lord, Lord Jenkins, for initiating a topic of exceptional interest, nor is it the first time in which I find myself in profound disagreement with him.
The use of the word "accountability" in the Motion before the House is in the height of political fashion. The Left uses is as a petulant taunt to any body which does not go through the Left's own play acting at democracy. It is no surprise that a universal feature of Left-wing totalitarianism is complete, obliterative secrecy in all its actions. But the word "accountability" is scarcely safer in the hands of the Right wing ideologues. This is the accountability of super pragmatism, of any means to achieve ideological ends.
There is a popular surge of feeling in our times for openness in all the mechanisms of authority. We are told that public demand will not be served, and cannot be served, until all the levers and cogs of state become public knowledge. Anybody who questions this headlong rush to disclosure is pointed out as a conspirator, a plotter, a concealer, an enemy of the people. Openness has become confused with honour. Discretion has become confused with conspiracy.
Let me give your Lordships' House a personal perception of reality not fantasy. To start with, the reality is that we are discussing an arm of state which is properly called the secret services. The Official Secrets Act is an oath of secrecy, openly, willingly taken. It is not some temporary condition of employment such as travel warrants. Your Lordships have heard a lot about "wrestling with conscience" or "deeper loyalties". In the areas of behaviour covered by the Official Secrets Act, breaking that oath is the first step to treason. It is a clear choice between reality and fantasy. It is an oath of secrecy. There are anomalies which make good copy—but they are not the anomalies of tyranny.
Every so often, a debate in this House allows us to peer briefly into our deeper ideas of values, and one of these ideas is our judgment of what makes tyranny and what makes freedom. Do we seriously believe that accountability of our secret services would somehow promote freedom? I suggest that reality—perhaps one should say Realpolitik—shows us that invariably these activities go into deeper and ever deeper concealment.
The Left on this matter likes to play the American card. Its posture is: here is the society you say you want to emulate. Go ahead: show us the British equivalent of the Senate Intelligence Committee. In an outstanding essay in Time Magazine a few days ago this notion is blown out the water. While we are fiddling with schemes of letting light in on our intelligence activities, the Americans are realising that in their maturity of global power there is now an absolute responsibility of secrecy.

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Another authoritative article in The Times newspaper dissected the issue of secrecy and concluded incontrovertibly that if some regulatory hand is ceaselessly monitoring every action in detail we shall get not better government but worse.
I have listened to the argument supporting the Congressional Intelligence Committee system and, closer to home, the Franks Committee remodelling of the Joint Intelligence Organisation. Nowhere do I find an able, cogent case for a permanent programme or accountability—what is sometimes called the "oversight" body. It may come about that there is a need to mount specific ad hoc investigations. We have the capability to do it in the existence of our senior legal voices—the judges, the inheritors of nine hundred years of holding truth to be important.
The reality is that I am a British citizen. This is not the time to talk about all that this means to me. But in my defence of this state of mind are vigilance, subtlety, perseverance and honour. Perhaps, for me, it is part of being British that I trust in the un-elected components of this nation's machinery of state, and trust that its secrets are kept.
4.30 p.m.
Lord Gladwyn: My Lords, like the noble Lord, Lord Dacre—whose speech we all so greatly admired—I should perhaps start, even after the lapse of about half a century, and subject, of course to the Official Secrets Act, by declaring a certain limited interest. During 1938, 1939 and the early part of 1940 I was, in fact, as private secretary to the head of the Foreign Office, Sir Alexander Cadogan, the sole direct link with what is now, I understand, known as MI6, but not with MI5, which was responsible to the Home Secretary. In that capacity, I was assisted by one lady typist and, as war approached, by an elderly retired diplomat. That was all the assistance I had!
In those far-off days the relationship of the government with what were then called "the friends" was, on the whole, a happy one. The organisation was perhaps not all that important. Its reports were quite valuable but on the whole they did not add a very great deal to our existing knowledge of what was going on in Nazi Germany. On the other hand, from about the middle of 1940 onwards, as is now common knowledge, their reports became a major importance owing to the organisation's immense success in cracking the German and many other ciphers.
Certainly the "friends" were in a general way accountable—that is the word used by the noble Lord, Lord Jenkins—in that we in the Foreign Office were conscious of what we were doing in a general way even though they could rightly be repudiated if anything went seriously wrong—which in my time I do not think it did. It never occurred to us that there might be defectors or enemy agents in the ranks of the "friends". In so far as such defectors were at that time, as we now know, pro-Soviet and not pro-Nazi, no doubt their existence did not matter very much until after the war was over. I have no idea what the position now is. In fact, I do not even know for certain—apparently with the Government—that MI6 exists! But I imagine that by this time all possible
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precautions have been taken as regards treachery. We must assume that that is so.
However, what the Russians gained by the treachery of Burgess, Maclean, Philby and others was probably less important than what we ourselves gained from the intelligence provided over the years by the many Soviet defectors. I believe, for instance, that Penkovsky gave us more information regarding Soviet nuclear progress than they ever gleaned from the reports of Fuchs, and even from Maclean himself. Incidentally, it is possible that Maclean was acting in the interests of the Western world by presumably reporting from Washington to Moscow that the Americans were entirely serious about organising NATO and joining the Europeans in a common Atlantic defence. Perhaps that even prevented war.
In other words, we should perhaps not be too despondent about the activities of traitors in the Western camp. Some no doubt still exist in Western Germany at the moment. We should not be too despondent. Traitors may always to some extent be with us. I am talking of the Western world. Nor should we get too excited about goings on in our secret services generally.
As regards MI5, I have, as I have said, no inside information whatever, but it rather looks as though the allegations that Sir Roger Hollis was a Soviet spy are without foundation and that the exact motives of Mr. Wright in pursuing this vendetta may be open to question. What is certain is that it is quite wrong for an ex-employee of any secret service who has sworn not to talk about his experiences in the service to break his word and do precisely that. That is surely wrong and that must be admitted by everybody.
However, there remains this question. How can these secret services best be controlled and prevented from doing anything which might be considered prejudicial to the public interest? In this connection my attention has been drawn to the statement made in 1977 in the House of Commons by Dr. Shirley Summerskill, at that time Parliamentary Under-Secretary of State at the Home Office, when the House debated an interview between journalists and the former Prime Minister, Sir Harold Wilson, in which the latter seemed to be accusing MI5 of having insinuated that Members of his Government had had improper relations with the Soviet Union. With the permission of the House I shall quote a few sentences from this statement of Dr. Summerskill, because it seems to me to give an excellent definition of ministerial responsibility. I quote:
"Whatever may be the inhibitions upon our discussion of these matters in the House, honourable Members are entirely justified in seeking to be assured that Ministers are satisfied of the competence, integrity and loyalty of this service. That more than the accuracy or otherwise of allegations of what happened or did not happen on particular occasions in the past, is the serious point in all this. The House is entitled to look to the Ministers to whom the security service is answerable and accountable—that is, my right hon. Friend the Home Secretary and in the last resort my right hon. Friend the Prime Minister—to accept responsibility that all is well in this respect …
"As to that, the tradition in this country is that the service is accountable to Ministers. Parliament accepts that the accountability must be to Ministers rather than to Parliament, and trusts Ministers to discharge that responsibility faithfully.
"My right hon. Friends, the Prime Minister and the Home Secretary will continue to undertake a close oversight of the work of

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the security service and will take any further action that may be required, from time to time, to assure themselves that it is staffed by persons who are competent professionally".
It seems to me from this statement—which I trust is still valid—that if there are any abuses in a security service, which there would have been if the allegations regarding improper action against Lord Wilson and some of his colleagues in 1977 were at all true—then these must be rectified in the first instance by direct ministerial action.
It has, however, recently been suggested—and suggested by many noble Lords this afternoon—that there is a case for some kind of supervision over the secret services being maintained by a committee, perhaps of especially appointed Privy Counsellors, presumably responsible to Parliament.
It seems to me—and I think one or two noble Lords have said this—that such a body, if constituted, should not be concerned with the operations of such a service but rather with possible investigations into any alleged misuse of its powers, or with any major defections on the part of its staff. In this way the public, and notably Parliament, might be assured that the Government, which would still have the primary responsibility of coping with the incident, were at least taking the matter seriously.
It is presumably questionable whether the findings of such a committee should be published in extenso when transmitted to the Government. It must in any case be hoped that they would not be formulated on any party lines. May I therefore suggest that the commission, if it is ever formed, might be composed of Privy Counsellors who are also Cross-Bench Members of your Lordships' House and, after all, Members of Parliament. I think it may also be desirable that such a body, if formed, be composed of not more than possibly three or five members. I am sure that suitable Privy Counsellors of that calibre and in that number could be found among the Cross-Benchers. In this way party politics would not come into the commission's conclusions at all.
It is undoubtedly a difficult and perhaps dangerous subject to pursue, so I will conclude my brief remarks with what might perhaps be a constructive idea. It could appeal to the Government if they are going to take the proposal for some body to supervise the secret services at all seriously.
4.43 p.m.
Lord Harris of Greenwich: My Lords, I think that there is general agreement in the House that this has been a very worthwhile debate. We all owe a debt of gratitude to the noble Lord, Lord Jenkins of Putney, for having initiated the debate.
What I want to say tonight relates primarily to MI5. It is involved in two areas of work which in my view require the highest degree of public confidence in its activities. First, it has to deal with the undoubted threat posed to this country and our colleagues in the North Atlantic Alliance by the existence in this country of Soviet and East European intelligence services. Secondly, there is the crucially important work it does in relation to the terrorist threat. In those two areas it is of the utmost importance that it gets the highest degree of public support. I think it is a matter
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for concern that over the past few years there has been a substantial degree of dissatisfaction expressed about some of its activities. I think that we must look at some of those criticisms in the debate tonight.
I should first like to discuss the Australian case (if I may so describe it) and related matters; and, secondly, the question of the accountability of the service. I should like to begin by making my position on Mr. Wright quite clear. I do not regard the publication of books containing sensitive information by former members of MI5 and MI6 as acceptable. Indeed, I regard it as deplorable; and on that issue I very much agree with what the noble Lord, Lord Campbell of Croy, and my noble friend Lord Gladwyn, said a few moments ago.
However, in my view that does not begin to justify the activities of the Government in the courts in Australia, and indeed those in Ireland. Already one of those cases, the case in Ireland, has failed, and to put in mildly, the case in Australia does not appear to be going terribly well at the moment.
Perhaps I may quote what Mr. Justice Powell said on Monday in Sydney:
"How can one, after what has happened in the last five years, accept that the British Government is genuinely concerned to demonstrate that MI5 is leakproof when it has, with abundant forewarning and … abundant opportunity to do something about it, let the Pincher book go to print, the West book, in a truncated form, go to print, the Massiter interview go to air and, more to the point, Mr. Wright to go to air".
Lord Mishcon: My Lords—
Lord Harris of Greenwich: My Lords, with great respect—
Lord Mishcon: My Lords, the case is before the courts.
Lord Harris of Greenwich: My Lords, I have very little time at my disposal. With great respect, the speaker of the House of Commons has already made it clear that this matter is not sub judice, and I am surprised that the noble Lord appears to be unaware of that.
That is what the trial judge said in Sydney. I think it is a matter that the House has to take very seriously. If it is right to attempt to use the Australian court in this way, why have the Government decided not to use the British courts? This is precisely the point that the noble Lord, Lord Dacre, made a few moments ago. The Government say that they acted against Mr. Wright and failed to act against Mr. Chapman Pincher for his book Their Trade is Treachery, which contained exactly the same allegations as does the book by Mr. Wright, because Mr. Wright used to work for MI5 and Mr. Chapman Pincher did not. However, as we all know—and the Government know this just as well as everyone else—Mr. Pincher was little more than a ghost writer for Mr. West. Again that was a point made by the noble Lord, Lord Dacre. They even split the proceeds of the book on a fifty-fifty basis. Why did the Government not attempt to get an injunction against Mr. Pincher—not a prosecution, my Lords, but an injunction?
The judge in Australia has said that he did not understand it and we now know that the Attorney-

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General in this country was not consulted either. There is one document which goes to Ministers in this Government as it went to previous governments, which is known as "Prime Minister's Instructions to Ministers". This document has already been leaked extensively in the British press, so one can draw upon it. It makes it quite clear that the Attorney-General must be consulted in any case where major interests of the state are involved. Yet we now know that at no stage was the Attorney-General consulted. I find that astonishing and I should like to know what reply the Government have to make to that particular point.
I believe that the Government made a further great error by sending Sir Robert Armstrong to defend their case in Sydney. I worked with Sir Robert Armstrong in two government departments. I know him to be an official of the highest degree of integrity and honour, and I think it most unfortunate that a distinguished public servant has been pushed into the firing line in this way. I hope that Ministers have experienced some degree of embarrassment for the position in which they have placed him.
Turning to the question of accountability, Mr. Justice Powell referred to the Massiter case and the Government's strange reluctance to use the courts in this country in respect of the serious allegations which she made. In this case an ex-M15 employee made allegations on Channel 4 television. She alleged that the definition of "subversion' given by me in this House as a Member of the then Government was deliberately misused in order to allow telephone interception of the CND. To reply to what the noble Lord, Lord Beloff, said, that is an organisation, which the last Home Secretary said he did not regard as subversive.
Secondly, Miss Massiter's allegation was that the Kilmuir guidelines had been deliberately breached by Ministry of Defence officials who had obtained information about the political beliefs of some CND executive members for partisan political use by Ministers. This subject was raised in this House during the debate on the Interception of Communications Bill. On that occasion, on behalf of my noble friends, I pressed for a security ombudsman on the lines proposed in the House of Commons by Sir Edward Gardner, supported by Mr. Callaghan and Mr. Rees, and by many others. I very much welcome the support given to this today by the noble Lord, Lord Beloff, which makes it even more puzzling because when we put the matter to the vote last year, the noble Lord voted against us.
I think that undoubtedly progress in this direction is now of critical importance, and I believe that that has been recognised by Members on both sides of the House. The noble Viscount, Lord Whitelaw—who was in his place until a few moments ago—sought on the occasion of that debate to reassure us that efforts were being made to provide internal outlets for grievances by members of MI5 and MI6. He said at col. 994 of the Official Report of 1st July 1985:
"He"—
that is, the new director general of the security services—
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"has also—and this is a crucial consideration so far as this new clause is concerned—been asked to consider and to report on what developments he proposes by way of internal outlets for the expression of grievances or anxieties by individual members of the service.
"The matter with which this new clause is concerned is accordingly under his examination."
I hope that the noble Earl, Lord Caithness, will answer this question: what progress has been made since July of last year to fulfil that undertaking?
His right honourable friend the Home Secretary, when pressed on this particular matter in the House of Commons, said this:
"Discussions on that important point are still going on."
That is at col. 944 of Hansard, House of Commons, on 3rd December. So, one and a half years have passed and still nothing has been done. It does not seem to indicate that there is a great deal of urgency.
It seems to me that it is damaging to the morale of the security service that in one and a half years there has been no move to create an internal avenue of complaint in the security service. If Miss Massiter was right in her allegations, they should have been investigated. Likewise, the grave allegations relating to activities against the noble Lord, Lord Wilson, should clearly also have been investigated if any member of the then security service was aware that they were going on.
Quite apart from this, we need an all-party watchdog committee on the lines proposed by my right honourable friends in another place and my noble friend Lord Gladwyn today. Without this, this climate of suspicion will continue to grow, and I believe that that will damage the basic interests of the security services.
4.52 p.m.
Lord Mishcon: My Lords, I think I owe it in courtesy to the noble Lord, Lord Harris of Greenwich, and to the House to explain why I rose in the midst of his interesting speech. It was not that I was going to plead any point of sub judice. But it seemed to me—possibly the House may think that I am right, or wrong—that it was not extremely loyal to be arguing a case against the Government while that case is still pending in Australia, and to do so by quoting statements made by the learned judge of the court trying the case when he was making remarks which seemed to be contrary to the case of Her Majesty's Government. It seemed to me rather worse than any allegation that could be made that a leader of a party communicated on the telephone with counsel for the defence. That was why I rose as I did, and I do not apologise for doing so.
If I may turn to the subject of this important debate, I do so at the commencement not merely as a matter of courtesy but in sincerity by thanking my noble friend Lord Jenkins of Putney for choosing such an important debate at this time. As is customary in this House, the debate has been conducted, with very few exceptions, in an atmosphere which is objective and contructive and which has in no way involved petty party points.
It would be wrong for this House to do anything else. Either MI5 and MI6 are inconsequential in regard to the defence of the realm—in which case why talk

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about accountability; why not just do away with the departments?—or they are vital to the security of this country, in which case one does not try to interfere with the morale of those in the service. Nor does one, by cheap comments or by empty debates, add doubt to our allies who trust in the adequacy and efficiency of those services. It certainly only does something to aid our own possible enemies. Therefore it was the right atmosphere that we had throughout this debate, and if I may humbly say so I propose to continue in that atmosphere.
There are possibly three matters of concern. There is the Official Secrets Act. I am not going into that in any detail except to say, as nearly everybody has said who has ever talked about that Act, that Section 2 is an abomination, but an abomination that Parliament has not yet been able to rid itself of merely because the alternative has not been agreed upon. The sooner there is some consensus of opinion, whatever be the proper channel to reach it in regard to an amendment of Section 2, the better.
The next point that obviously worries everybody is the question of the channel of complaints. If something is going wrong in the services, if really there is a suspicion that people who are in a high position are doing something which instead of helping the security of this country impairs it, where is the channel if there is no accountability for complaints?
The third question that worries everybody who has been concerned with this matter—and I think that at this moment the public is concerned about it—is: what is the machinery for reviewing what MI5 and MI6 may be doing? It has been said, and correctly, that the present channels which are there—MI5, the Home Secretary, and, in case of need, the Prime Minister as the ultimate person to whom to go; MI6, the Foreign Secretary, the Prime Minister, if it has to go to that level—are unsatisfactory. The unsatisfactory situation in regard to that is that Home Secretaries and Foreign Secretaries are not only busy people but they are somewhat transient. It may be that they are transient with no ambition reached, because they lose their position and everything else. It may be of course that they are translated into other spheres. If there is one thing that you need if you are dealing with accountability, especially in regard to services like these, it is some sort of permanence.
We then turn, both in regard to the complaints matter and the review matter, to the suggestion that has been made about the Privy Counsellor's committee. Obviously that ought to have quite a hit of consideration. I suppose there are two doubts that I have: first, what happens if a Prime Minister to whom the names are submitted has some doubt in regard to the adequacy (I am not talking about loyalty) of the person nominated by a political party, or indeed on behalf of the Cross-Benches, as has been mentioned? To turn down that name is really to have the innuendo about it that it has been turned down on security grounds. It is a very embarrassing position.
But the greater fault that I find—this is only a personal opinion—with any such suggestion is that if it is to be a surveillance of policy that the committee is committed to, is it to be a committee of Back-Benchers that tells Ministers of whatever government
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what they have to do? That strikes me as a little difficult.
Therefore in an endeavour to be constructive I put forward a suggestion which did not appeal—and he dismissed it very shortly—to the noble Lord, Lord Dacre, who, as everybody who has mentioned his name in this debate said, delivered a most thoughtful, instructive and, if I may say so, literally rather beautiful speech. The noble Lord said in regard to the suggestion that we look at a body which is already there and is non-political—the security commission—that it was too distant. I was listening with great interest to hear how he was going to develop that point. Because of the time limit imposed on all of us he was presumably unable to do so.
What are the terms of reference of that commission that was set up in 1964? It was requested by the Prime Minister to investigate and report upon the circumstances in which a breach of security is known to have occurred in the public service and upon any related failure of departmental security arrangements or neglect of duty, and, in the light of any such investigation, to advise whether any change in security arrangements was necessary or desirable.
Those terms of reference could be extended to the hearing of complaints that there might be within the security service that ought to be referred to such a commission ("referred" is a word I am using deliberately)—matters of concern at that moment; or to allow the commission to take unto itself a referral of any thing to do with the security service and give it the power to call for documents and witnesses; add to its number—I shall say one word about its membership in a moment—a couple of High Court judges: I especially did not mention Lords of Appeal, in ordinary or otherwise. I mentioned High Court judges with all the robustness that some puisne judges undoubtedly have.
My last word is to tell your Lordships of the present membership of such a commission. It is not had. The reports it has produced have been worthy and helpful reports. The members are: Lord Griffiths, the right honourable Lord Justice Lloyd, Lord Allen of Abbeydale and General Sir Hugh Beach. If your Lordships add to that two High Court judges, do you not have a pretty permanent commission to which surveillance and accountability could well be brought? Add to that the duty to produce an annual report in discreet language, preserving the security of these services, and that might produce a solution which is at least worthy of government consideration.
5.2 p.m.
The Minister of State, Home Office (The Earl of Caithness): My Lords, I welcome the initiative of the noble Lord, Lord Jenkins of Putney, in providing the House with an opportunity to debate the issue of the accountability and control of the security service. I particularly welcome the opportunity to put on record the debt which our country owes to the security service. Its work constitutes a vital dimension of the defence of the nation. The nature of the work means that its members receive few plaudits and they deserve better than to be the butt of the present rash of stories, claims and counterclaims, rumour and innuendo.

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The control of the security service is naturally a matter of legitimate public concern. The public has the right to expect the Government to ensure that the country is protected by an effective security service and that the service itself does not abuse the cloak of secrecy which must cover its work.
I must inform the House that I am under two constraints—one general, one particular—in what I can say today. First, I am under the general constraint, which I know your Lordships will well understand, that I cannot always give an answer to many questions which have been raised about the security service. The noble Lord, Lord Wilson of Rievaulx, wrote in his book The Governance of Britain that,
"the Prime Minister is occasionally questioned on matters arising out of his responsibility. His answers may be regarded as uniformally uninformative".
This has been the practice under successive governments of all parties and must remain so.
A second and particular difficulty is that I cannot comment on the case currently before the courts in Australia. While we are conducting that case, for reasons which my right honourable friend the Home Secretary has explained, we may not be drawn on the matters which are currently at issue. I know that the noble Lord, Lord Harris of Greenwich, will understand that. If he was still in the position that I now have the honour to hold as Minister of State at the Home Office he would have said the same as I say.
Obviously it would be nice if we lived in a world where we did not need to safeguard ourselves against espionage or to protect ourselves against terrorism. These threats continue to loom large. Indeed the threat of domestic and international terrorism is probably now greater than it has been at any time. Through force of circumstance the role of the security service in combating terrorism has grown. An effective security service is a crucial part of the defence forces of the Crown and is central to the present and future safety and security of the British people. It would be a contradiction in terms to think that the security service could carry out its operations effectively in a blaze of publicity. Publicity is anathema to sensitive intelligence gathering operations.
It is not our contention that secrecy should mean the total isolation of the security service from all our democratic institutions. There has to be some means of ensuring oversight and responsibility. There has to be some way of working out that the resources and the opportunities provided for the security service are used for the national good.
The security service operates under the directive issued to the director general by the then Home Secretary, Sir David Maxwell-Fyfe, in 1952. Ministerial responsibility operates through the director general to the Home Secretary, although on matters of extreme delicacy the director general has access to the Prime Minister. The directive was made public in the report of the noble and learned Lord, Lord Denning, and still applies today. I was very pleased to hear the excellent contribution to today's debate made by the noble and learned Lord.
The director general is expected to seek direction and guidance from the Home Secretary as to the way
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the service goes about its business. But with one exception the Home Secretary does not concern himself with individual operations. That one exception is when an interception warrant is sought, when of course the Home Secretary must be given sufficient supporting information for him to judge whether the application comes within the established criteria. But as paragraph 6 of the directive makes clear:
"Ministers do not concern themselves with the detailed information which may be obtained by the Security Service in particular cases but are furnished with such information only as may be necessary for the determination of any issue on which guidance is sought".
The security service is emphatically not in the business of obtaining information on behalf of the Government. It is there to protect the state against external and internal dangers and must, as the directive makes clear, do this without political bias. That is why operational judgments must be for the director general to make. If his judgment is wrong, he must answer to the Home Secretary.
Parliament is entitled to expect the Home Secretary to be well informed about what the service is doing; about its priorities, about how it is deploying its resources and about the overall effectiveness and efficiency of its operations. The Home Secretary receives reports, asks questions and meets the director general and other members of the service. My right honourable friend explained in another place on 3rd December his approach to the trust and responsibility which rests upon his shoulders in carrying out these functions.
I understand though that however high the regard in which the Home Secretary and the director general of the day are held, there is a frequent nagging desire to impose a further check upon them in their role as custodians of the public interest. It is an understandable impulse, but however wide a view one takes of the public interest in these matters it is much more difficult to design a satisfactory framework to meet the objective. It is essential to judge any proposal for radical change or external oversight against three criteria. First, will it preserve effectively the necessary secrecy of security service operations? Secondly, will it blunt or diminish the direct personal reponsibility of the Home Secretary of the day to Parliament? Thirdly, will such a change serve to increase the confidence felt by Parliament and the public in the security service?
Different models have been suggested by your Lordships this afternoon for some form of external review body to monitor the security service. My noble friends Lord Campbell of Croy, Lord Beloff and Lord Birdwood mentioned the possibility of an ad hoc committee. I think that something like what they were suggesting exists in the present Security Commission.
The noble Lord, Lord Gladwyn, made reference to a committee of Cross-Bench Privy Counsellors. After 12 minutes of trying to exploit some of the recent unease relating to the security service, the noble Lord, Lord Jenkins of Putney, said that he had little time to pursue his suggestion that there should be a select committee of Privy Counsellors charged with this task. My noble friend Lord Dacre of Glanton suggested that a judicial body was the right one to take the matter forward. The idea of expanding the role of the existing

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Security Commission was raised by the noble Lord, Lord Mishcon. The noble Lord, Lord Hooson, said that something was needed but he was not quite sure what.
On the question of permanent supervision of the security service, any of these suggestions would tend to blunt—because they would share—the direct responsibility towards Parliament which rests on the Home Secretary of the day. Even if this not inconsiderable obstacle could be overcome, any form of external security body would need to have a clearly defined role in respect of the operational responsibilities of the service.
I have emphasised the need for the secrecy of operations to be maintained but there are additional practical constraints. If we start to share the director general's responsibilities with a group of outsiders, this to my mind is a sure recipe for confusing lines of command and accountability in day-to-day management. On a day-to-day basis we must leave the managers in the service working within the terms of the directive to manage their responsibilities effectively and properly.
The central problem, however, is that there must be a veil of secrecy drawn between the security service on the one hand and the debates of Parliament and the speculations of newspapers on the other. On which side of that veil should a monitoring body sit? If the monitor sat on the secret side of the veil, how would that help public accountability? Having to preserve secrecy and not being able to produce the evidence, how would it be able to satisfy the public interest in what was going on and public concern that everything was being done correctly?
Let us suppose that it was given limited review powers so that it could get access to some information but remained apart from operational details. Surely it would have little credibility if it gave the security service a certificate of probity merely on the basis of general reports by the director general without being able to check with operational statements if those reports were true. If, on the other hand, it sat on the public side of the veil it would be less well informed and less directly and personally accountable than the Home Secretary himself and therefore would perform no particularly useful functions.
I wish to dwell for a moment, if I may, on the proposal put forward by the noble Lord, Lord Mishcon; that is, to extend the role of the existing Security Commission. The commission has been in existence for more than 20 years and brings together a distinguished membership of retired senior officers and civil servants under the chairmanship of a judge. Under its terms of reference it investigates and reports on any failure of security arrangements and advises upon whether changes in these arrangements are needed. But the Security Commission does not attempt to provide a continuous monitoring of the security service. Its interventions are intended to be ad hoc. In order that its role should touch upon the central issue in today's debate, which is the relationship between Ministers and Parliament and the security service, its role would need to be fundamentally changed, thereby calling into question the present membership and structure of the commission.
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I should also mention a further practical point relating to any parliamentary form of scrutiny. It is difficult to envisage such a change being brought about unless there were to be re-establishment of the type of consensus on the two matters of national defence and security which used to characterise dealings between the parties before 1979 and with which most other Western democratic countries are blessed.
We know that many well respected noble Lords on the Benches opposite view the policy of their party with regard to defence with nothing short of horror. This was recently made clear by the noble Lord, Lord Stewart of Fulham. Were their party's policy to be implemented, it would place the security of our country in grave jeopardy. Were those—albeit a limited number—of members of the Labour Party who have no concern for the effectiveness of our security service in defending our country and who think only of seeking to embarrass Ministers who hold posts of influence, to be in a future government, we should all have cause to sleep uneasily in our beds. If the Labour Party's pledge to repeal the Prevention of Terrorism Act were carried out, the police—
Lord Cledwyn of Penrhos: My Lords—
The Earl of Caithness: My Lords, may I at least—
Lord Cledwyn of Penrhos: I merely wish to say that—
The Earl of Caithness: My Lords, I am going to tie it all in and—
Lord Cledwyn of Penrhos: My Lords, I merely wish to say that we strongly resent the line which the Minister of State is taking. It is totally irrelevant to the subject of the debate.
The Earl of Caithness: My Lords, with due respect to the noble Lord the Leader of the Opposition, I do not think it is irrelevant to this debate. If he had let me finish, I should have tied it all in. If the Labour Party pledge to repeal the Prevention of Terrorism Act were carried out, the police would be denuded of many of the powers which they need to combat the terrorism menace.
For that reason I support what the noble Lord, Lord Mishcon, said when he stressed the need for continuing bipartisanship in the approach to a subject as important as these security matters. I do not wish to give the House the impression that the present arrangements for ministerial responsibility for these matters are static and uninformative. That is not so. This Government can claim to have discharged their responsibilities to Parliament in as full and open a way as is consistent with the need to preserve national security.
On 21st November 1979 my right honourable friend the Prime Minister thought it right to confirm that Blunt was a Soviet agent, a factor of which previous governments had been aware but had not informed Parliament. On 26th March 1981, during a debate on the implications of the hook Their Trade is Treachery, my right honourable friend commented that positive vetting arrangements had not been

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reviewed since 1962 and indicated that she had asked the Security Commission to review the security procedures and practices followed in the public service.
In 1983, the Security Commission, in connection with this and other inquiries, including the Prime case, made a number of suggestions for improvements in the positive vetting procedures. In May 1985 the Prime Minister reported to Parliament on the results of the inquiry by the Security Commission into the Bettaney case and made a full statement on the commission's criticisms and suggestions for reform. My right honourable friend announced acceptance of the Security Commission's recommendations for changes in positive vetting procedures in the security service. She also said that she and my right honourable friend the then Home Secretary were determined to see that action was taken to remedy the management weakness identified within the service.
The present director general has devoted a major part of his time and energy to that management task, especially in regard to personnel arrangements. Earlier this year the director general put forward to my right honourable friends the Home Secretary and the Prime Minister a report on changes in the organisation and a management of the security service. The report was made available to the Security Commission. All concerned have been impressed with the thought and effort which the security service has devoted to dealing with the problems identified by the Security Commission during the inquiry into the Bettaney case.
The Security Commission has informed my right honourable friend the Prime Minister of its approval of a more open style of management which the director general has introduced throughout the service. The Security Commission has also noted with approval that the vetting procedures were being improved following recruitment of more investigating officers and that division of responsibility between management and specialist personnel managers had been tackled and clarified.
The commission considers that the director general is to be congratulated on the way he has tackled the problem identified in the report following the inquiry into the case of Mr. Bettaney. Finally, this Government have had the courage to bring the difficult issues raised in the Interception of Communications Act 1985 before Parliament. Interception has been undertaken for many years outside any framework of law under the authority of Ministers of successive governments. Since the 1985 Act a full statutory framework has been provided within which interceptions have to be authorised.
The decisions of Ministers are subject to two forms of outside scrutiny. Anyone who thinks his communications have been wrongly intercepted can appeal to an independent tribunal of distinguished lawyers empowered to inquire into warrants and, if it judges fit, to quash them. In addition, the interception commissioner, a senior judge, keeps all the arrangements under continuing review and has access to all material.
The Government believe that the principle of ministerial responsibility, adapting itself as it has to
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particular events and situations, continues to provide the best model for the British security service. We are not at present persuaded that any of the alternative models would yield marked advantages. No government, when they have thought through the issues raised, have felt it right to share responsibility in these matters with some form of external review body. Within obvious restraints, this Government have, I believe, been open and receptive to fresh ideas in the field of security.
The noble Lord, Lord Mishcon, and my noble friend Lord Campbell of Croy, raised the question of the Official Secrets Act 1911. I have answered Questions in this House fairly recently about that, and your Lordships will recall the 1979 debate that we had on trying to reform the Act and the difficulty encountered on getting agreement, notwithstanding the work of the Franks Committee.
The noble Lords, Lord Jenkins of Putney and Lord Hooson, questioned whether the security service was out of control. The Government accept that it is certainly not. The allegations, true or false, relate to a period ending in 1976, when Mr. Wright retired. Ministers have made very clear their continuing concern to satisfy themselves that the security service operates entirely within the letter and spirit of the Maxwell Fyfe Directive.
The noble Lord, Lord Jenkins of Putney, and the noble and learned Lord, Lord Wilson of Langside, questioned whether there had been illegal actions by the security service. It is quite clear that no one is above the law in this country and that members of the security service are no more immune from prosecution than anyone else if they commit a criminal offence. It would be quite wrong for me to comment on any individual case mentioned, except the case of Mr. Blunt, which was raised by the noble and learned Lord. On that I would refer him to the debate in another place.
Lord Silkin of Dulwich: My Lords, I wonder whether the noble Earl will give way—
The Earl of Caithness: My Lords, I am sorry, my time is limited in the debate. I have only 20 minutes and I must conclude. Discussion of the present—
Noble Lords: Order!
Lord Silkin of Dulwich: My Lords, this is a matter of correcting a question of fact.
The Earl of Caithness: My Lords, I have only 20 minutes. Discussions of the present arrangements will doubtless proceed beyond this afternoon's debate. What is of overriding importance is a continuing appreciation that the conduct of security must proceed in secret. That must be the basis of a consideration of arrangements to ensure accountability.
There are two obvious dangers if we seek to elaborate the handling of security matters. The first is that by unduly widening the information generally available we prejudice the secrecy necessary for effective security service operations. The second is that by creating a new structure we blur the lines of

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responsibility and detract from the Government's central accountability to Parliament as a whole.
Surely that is not what this country wants or deserves. My right honourable friend the Home Secretary made it clear on the 3rd December that the Government do not approach this matter with a closed mind, but our advice to the House is that we should be most cautious in considering a change in the present arrangements lest we create diversity without clear responsibility and imperil the safety of our people.
Lord Silkin of Dulwich: My Lords, before the Minister sits down, in view of his reference to Blunt, which might have been misconstrued when he spoke about the Prime Minister having revealed to the public the facts about Blunt, will he be good enough to confirm that immunity was granted to Blunt by the late Sir John Hobson in early 1964 and that that fact was known to all successive governments?
The Earl of Caithness: My Lords, I apologise. With the leave of the House, let me say that I think it would be wrong for me to comment any further than I have at the moment.
Lord Jenkins of Putney: My Lords, it seems to me to be a pity that this debate, which has been carried out on a very high level—I thought most of us appreciated that we were trying seriously to deal with the nature of the problem—should have been terminated in a way not up to that level. That seems rather sad. That is the only thing I wish to say. It is not our custom for the mover of a short debate to be given permission to reply. Therefore I shall not attempt it, much though I should like to.
I thank those who have taken part in this debate. Most of your Lordships have taken the view that something is wrong and that something needs to be done. That is the first step.
I am very glad that the noble Earl said that the Government's mind is not closed. He could have fooled me, but I am glad I was wrong about that. It seems that he will be going to his right honourable friend in another place and it is possible that even now the Government may be coming forward with something to rectify a situation which has disquieted so many of us. It is on that note that I should like to conclude the debate and not on any note of party-political contention. I beg leave to withdraw my Motion for Papers.
Motion for Papers, by leave, withdrawn.

EC Milk and Beef Reforms
5.26 p.m.
The Minister of State, Ministry of Agriculture, Fisheries and Food (Lord Belstead): My Lords, with the leave of the House, I should like to repeat a Statement which is being made in another place. The Statement is as follows:
"With permission, I will make a Statement on the outcome of the meeting in Brussels of the Council of Agriculture Ministers which covered 90 hours of negotiations, including two all-night sessions, and
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ended yesterday afternoon. My right honourable friend the Minister chaired this meeting and I"—
that is, my Lords, my right honourable friend Mr. Gummer—
"represented the United Kingdom. Important decisions were taken which involved major reforms to the milk and beef sectors.
"On milk, the agreement will result in reduction in production of 94 per cent. over the next two years. This is to be achieved first by the permanent reductions in milk quotas of 2 per cent. for 1987 and a further 1 per cent. in 1988, as agreed last April; secondly by a temporary suspension of quota by 4 per cent. in 1987 and a further 1½ per cent. in 1988; and finally by a further 1 per cent. reduction which results from a tightening up in the operation of the quota system. I insisted throughout the negotiations that the necessary reductions in production had to apply in all member states, and this was agreed.
"Our aim will be to achieve as much of the permanent reduction as possible in the United Kingdom by the voluntary outgoers scheme. I am pleased to say that the maximum rate of Community compensation under this scheme will be increased by 50 per cent. from 2.6 pence per litre a year to 3.9 pence per litre a year over seven years. Compensation from FEOGA for the temporary suspensions of quota will be paid at 6.5 pence per litre per year, and this rate is guaranteed for two years.
"Changes are to be made next year in the arrangements for implementing the supplementary levy in order to make this more effective in discouraging production in excess of national quotas. We succeeded in our aim of retaining Formula B and Article 4a, which contribute to ensuring the flexible operation of the quota arrangements within the United Kingdom. As part of the agreement, changes are to be made in the intervention arrangements. These are designed to prevent excessive recourse to intervention, which has been noticeable in the Community particularly over the past year.
"The Council took note of a Commission paper which sets out its plans for a major disposal of existing intervention stock, designed to reduce these to more manageable levels by 1989. The cost of this programme of disposals will be financed over the four years beginning in 1989.
"On beef, the Council agreed substantial reforms in the intervention system. These are designed to reduce both the cost and the volume of intervention buying. They involve reduction in the price levels at which intervention buying will operate. It will take place only when the average price in the Community is below 91 per cent. of the intervention price and when at the same time the average price in a particular member state or region is below 87 per cent. of the intervention price.
"Alongside these changes in intervention, various premium arrangements were agreed. These include a new premium worth £16 per head payable on male animals only on specialised beef enterprises up to a limit of 50 heads per farm. This particular premium was totally unacceptable to the United Kingdom, and we shall not be applying it here.

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Instead, we succeeded in retaining our existing variable premium arrangement on its existing terms, which is much more favourable. The maximum rate payable averages at about £45 per head and covers heifers as well as steers and young bulls. Moreover, the 50-head limit does not apply to it. In addition, the rate of Community funding for the suckler cow premium is being increased. It will be possible in 1987 to pay up to a maximum of £33 per head. The decision on the actual rate will be taken later.
"These changes to the beef system represent a major shift away from dependence on intervention towards a more market-orientated policy. This is in line with the approach which we have followed in the UK under our variable premium system. The beef arrangements have moreover been agreed until the end of 1988. They will, therefore, provide an important element of stability for beef producers during a period when the adjustments to milk production, and the effects of this on the beef market, will be felt.
"In response to the request which we made last September, the Council agreed to devaluation in our green rate of 6 points for beef and 3·2 points for sheep. These changes, which take effect on 5th January, will result in support prices in these two sectors being increased by around 5 per cent. and 1½ per cent. respectively. This will be worth an additional £50 million to farmers in a full year. The devaluation will also help towards restoring our meat traders' position relative to Ireland. Other green rate devaluations were agreed at the same time: for France in the same two sectors; and for Greece, Portugal and Spain in the sheep sector only. The Council broadly approved in outline a package of socio-structural measures and agreed that detailed decisions on these would be reached by the end of February.
"One major aim of these arrangements is to help tackle the surplus problem. Member states will be required to offer aid for the extension of production and conversion to non-surplus output, and also to operate an early retirement scheme for farmers who want to abandon production on their farms. These schemes will be able to cover afforestation as well as fallowing. Member states will have a wide measure of discretion on how they will be applied.
"The measures will help the southern countries in the Community to restructure their farms. There is provision for Community-funded schemes for environmentally sensitive areas. This is of course an important concept which has been introduced into Community legislation as a result of the pressure from the United Kingdom",
and in particular from my right honourable friend.
"The Commission originally proposed a limit on the financial contribution to compensatory allowances for livestock which would have severely discriminated against some farmers in this country. I succeeded in securing a form of words in the final document which is acceptable both to us and to them. The changes, particularly in the milk sector, will of course cause serious problems of adjustment
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for many individual farmers. But they will be sizeably compensated. The package agreed at the Council on milk and beef fits in well with the best interests of the UK industry. In particular, the cutback in milk production will be applied across the Community and we have retained flexibility in the system; we have kept the beef variable premium and an improved suckler cow premium; and we have secured the green rate changes which will greatly benefit our livestock sector.
"The Agriculture Council has, I believe, under the British Presidency taken an historic step forward in tackling the problems of surpluses which will bring substantial savings to the Community budget. Twelve nations have together found the way forward in agriculture, despite differences so big that once they could have caused wars. It is in the interests of all of us—farmers, consumers and taxpayers alike—that decisions have been taken which put the common agricultural policy on the right road for the future".
My Lords, that concludes the Statement.
Lord John-Mackie: My Lords, we are very grateful to the Minister for repeating this complicated, interesting and important Statement. I should like first to congratulate the Minister of Agriculture on the tremendous amount of work which he has put in on this subject. He has achieved what are in many ways very good results indeed. However, I think that the press have become rather euphoric about this matter. For the Daily Telegraph to say that,
"EEC conquers food mountain",
in letters almost two inches high is going a bit too far.
The Financial Times is much more cautious in saying:
"Brussels reform package gets to grips with milk problem".
The Times says:
"Farm Ministers agree on sweeping CAP reforms"
and it again asks what is a very big question:
"How soon will EEC mountains begin to fall?"
I think we must look at the situation in the light of the major problem which is tackled here on two fronts only—but they are indeed two important fronts. I will not go into the details of this very complicated Statement, which will require much more study and much more time than we have tonight. However, as we all know, there is a necessity to stop the building up of surpluses and this is only a start. Very little is said concerning how to deal with surpluses which are already there. There is, in the paragraph half-way down the first page, the statement:
"The Council took note of a Commission paper which sets out its plans for a major disposal of existing intervention stock".
There has been some publicity on how this will be done, but I hope the Minister will be able to comment on this major item involving getting rid of the present surpluses as well as controlling those which may occur in the future.
As regards milk, we note that the United Kingdom is to rely mainly on a voluntary outgoers scheme for the next two years. After our debate at either the end of last year or the beginning of this year on this subject of whether an across the board cut in quota was the

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best plan for a voluntary scheme, I made it plain that I frankly did not think that scheme would work. We know that the response was very poor. I should like to ask the Minister whether, in spite of an increase in inducement, he really thinks this will give the 9½ per cent. over two years that the Government expect in this country, as distinct from other European countries. This is a very real problem indeed.
The other point I should like to have clarified concerns the paragraph in the middle of the first page of the Statement which says:
"As part of the agreement, changes are to be made in the intervention arrangements. These are designed to prevent excessive recourse to intervention, which has been noticeable in the Community particularly over the past year".
We are not told how that will be carried out.
I said that I would not go into detail, but I am afraid that I have done so. However, as regards beef it is difficult to tell how much effect the scheme will have. As the noble Lord knows, there is a great deal of beef in the pipeline and one cannot shut it off like a tap. We are very grateful indeed for the retention of the variable premium and the increase in the suckler cow premium. Of course all this depends on whether the premium will be sufficient to compensate for a drastic drop in price. The devaluation of the green pound will certainly help; there is no question but that it will help all stock.
However, there have already been estimates that there will be a drop of £50 per head for fat cattle. I do not know how correct that estimate is. But when one thinks of the flood of dairy cows that will come on to the market if the Government get their outgoers scheme, with the number of cows that will come out of the scheme, one realises that it will create a big beef problem. If that happens, the demand for dairy calves will go down, which will be yet another disadvantage in terms of the income of the dairyman. I should like the Minister to look at this point. Everything that is done has a rolling effect on all facets of agriculture; then a major scheme like this comes forward to reduce the price. The devaluation of the green pound, as I have said, will help all stock, including sheep producers. The problem is what one does if one goes out of milk or out of beef. In many areas—indeed, in the bulk of areas—I think the decision is bound to be to go into sheep, which will create a surplus in the sheep regime.
The Statement refers to alternatives. Perhaps the Minister has some idea what these alternatives are likely to be. They are getting fewer as the years go on. Whether the socio-structural measures mentioned in the Statement will help by persuading farmers to retire and abandon their land is anyone's guess. No one denies that we have these enormous problems. We are grateful for the start that has been made in the conditions on which the Ministers of Agriculture have managed to agree. As I said earlier, it is such a detailed question to go into that I hope we may get a debate on the whole subject after the Recess.
I ask the Minister to remember that drastic cuts in farm income will hurt not only farmers and farm workers but the entire rural community. I hope that will be borne in mind as further plans for dealing with the problem are envisaged.
Lord Mackie of Benshie: My Lords, I thank the Minister for the Statement. As usual, I have to come after my noble kinsman, who has said many of the things that I wanted to say. However, it would do no harm to say them again.
The cuts are necessary, but I do not think that anyone should pretend that they will not hurt somebody. There is no need to declare an interest; my interest in agriculture is long term. The reason that I welcome the breakthrough—and it is a breakthrough that has been made—is that, if we do not do something about it, the whole of the CAP will go "bust", and we will be left without any support arrangements for farming except the national ones that may be made in this country—a country that is the least sympathetic to agriculture in Europe.
The Government have therefore done reasonably well in making a start. If they had been more European and more sympathetic and had not lectured quite so much, they might have made a start earlier. Nevertheless, they have made a start. On milk, which is the worst problem that we have, I wish to ask the Minister how much he intends to reduce the surplus. The previous target that we had resulted in an enormous surplus continuing to go into store, so ruining world markets. I should like to ask him, if we achieved 9.5 per cent. to 10 per cent., what state of balance this will give between production and consumption in Europe.
It is important to realise that the EC has had a severely deleterious effect on really competent and unsubsidised agricultural industries in New Zealand, which I think is the best example. I have just come back from there. The farmers are really being hit over the head. They are making every effort to cut. They are cutting production—they have to—but I should not like them to be bracketed with the United States, as I see they are in the press. It would be valuable to know the Minister's attitude on New Zealand production.
I should also like to ask the Minister what effect he thinks the cuts in milk quota—the release of cows for slaughter on to the beef market—will have on the good effects of the 5 per cent. revaluation on beef. If the intervention price is lowered to 87 per cent. before the premium is paid, I do not think that we can look forward to anything but a definite fall in the price of beef and a very difficult three or four years for the beef industry. I should like the Minister to comment on that. Can the Minister also say whether we are paying the maximum allowed under EC rules to the hill farmer for his hill cow and hill sheep? I think that he will need this protection. Without any doubt some people will go over to the rearing of sheep on the low ground.
The Statement mentions the other measures that will have to be taken, such as getting land into forestry. That, the Statement says, is a national matter. Will the Minister tell us what practical plans he is producing? It is very important that the farmers know there is some real alternative to creating a surplus in another area, which of course is what happens when one takes land out of production. If there is no substitute, that simply causes a surplus in another area. If he can tell us something on that, it would be helpful.

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The final point that I wish to raise concerns cereals. I should like to ask the Minister what the Government are going to do about cereals, which are one of our biggest problems next to milk. Something must be done, or we will be floating up to our necks in cereals. We already have enormous surpluses costing large sums to store. It is extraordinary that no mention has been made of any plan to deal with the main factors now threatening the CAP.
5.45 p.m.
Lord Belstead: My Lords, I am grateful to the noble Lords, Lord John-Mackie and Lord Mackie of Benshie, for their reception of the Statement. The noble Lord, Lord John-Mackie, gave his congratulations to my right honourable friend for the negotiations that he has conducted through many long days and indeed nights over last week. The noble Lord, Lord Mackie of Benshie, was good enough to say that this is a breakthrough. Indeed, I believe it is. In these negotiations, the Government believe, we have moved from a position in which Europe has been for many years since the war, when we were protecting people from shortages, to trying now to do something about tackling the unacceptable surpluses.
The noble Lord, Lord John-Mackie, asked what the savings will be. At this stage, ahead of any debate that we may have, perhaps I may say that the milk package is designed to produce savings to the Community budget of £1,200 million over the next three years. The decisions on beef should produce savings, compared to the present beef arrangements, of some £138 million up to the end of 1988. There will also be savings on CAP market support resulting from the socio-structural measures. It is true that those savings will be offset to some extent by the costs of the green rate devaluations, but, as I know the noble Lord, Lord John-Mackie, will be the first to say, those are very necessary and welcome to the producers in the country. In brief, that is the scene on the financial savings.
Both noble Lords asked me to what extent this Statement and these negotiations are going to reduce the surpluses. In regard to milk, the intention is to reduce both butter and skimmed milk powder stocks to normal levels over the next two years. By that I know that the Community means trying to get the stocks down to levels of 200,000 tonnes in store for both butter and skimmed milk, compared with 1½ million tonnes of butter in stock and 1 million tonnes of skimmed milk powder in stock at the present time. It is intended that this should be done by deferring the reimbursement to member states of their purchase price for intervention butter until 1989 and then to spread the cost of the reimbursement to the member states over the next four years.
The noble Lord, Lord John-Mackie, asked whether we are really going to achieve the uptake of the outgoers scheme by farmers, even though, as he was good enough to recognise, there has been in the negotiations a massive increase of 50 per cent. for the outgoers scheme in the compensation that will be offered to farmers. Let me just put this on the record. The objective is to achieve a 3 per cent. reduction in production of milk by permanent quota cuts. We hope
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that with the 50 per cent. increase in the rate of payment to outgoers it will be possible to get the outgoers to come in and take up the whole lot.
I say that because we have gone from 18.3p per litre compensation to be offered up to 27½ per litre to be paid over seven years, an increase of 50 per cent. But if farmers do not come forward in sufficient numbers to take up the outgoers scheme, one of the great advantages of this negotiation is that we could then pay the enhanced rate of compensation across the board to farmers from whom we should then have to make the necessary resulting cuts in order to achieve the 3 per cent.
Then 5½ per cent. is to be achieved by temporary quota cuts over the next two years. These will be across-the-board cuts but the compensation will be at the generous rate of 6.5p per litre a year for at least two years, and the remaining 1 per cent. cut in production is to be achieved by changes in the calculation of the super-levy. This should eliminate production over quota, which amounts to about 1 per cent. at the present time.
The noble Lord talked about the income of farmers from beef. I simply say at this stage of the afternoon that it is reckoned that the beef variable premium scheme is going to add £120 million to the incomes of farmers for the forthcoming year. I am delighted that that is so. Perhaps I may take this opportunity to say that it gives me the very greatest pleasure to be able to stand at the Dispatch Box and say that we are continuing with the scheme which was started by the noble Lord, Lord Peart, in the 1970s. I also make the point that the green rate devaluation will lift the maximum rate of the variable premium in this country to 9.4p per kilogram. I think that the position for beef producers, although not easy, is nonetheless perhaps better than the noble Lord was indicating.
The noble Lord then asked what when all is said and done the alternatives are. This is where we come to the last part of the Statement, which talks about the agreement—what I would call heads of agreement, which have to he finalised by the end of February of next year—on the socio-structural measures. Embedded in those agreements on socio-structural measures, as the Statement says, is an agreement that there is to be a scheme for payments for more extensive or reduced production, including fallowing.
That is the answer to the noble Lord, Lord John-Mackie, who asked what the Government are going to do about cereals. This is the trailer for what could be, if our proposals are accepted by the Community, a cereals set-aside scheme, a cereals land diversion scheme. The words in my right honourable friend's Statement on socio-structures where they refer to fallowing are quite clearly an opportunity which could still be seized by Community countries early next year to go in for a cereals land diversion scheme. But we shall have to wait to see whether that will in fact happen.
There are two other questions which I do not think I have answered. The noble Lord, Lord Mackie of Benshie, asked me whether we are paying up to the maximum in the less favoured areas. I think the noble Lord knows perfectly well that we are not quite up to the maximum. I say no more about that at the

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moment. The noble Lord asked me a very important question, which is a variant on the question of the noble Lord, Lord John-Mackie. He asked whether at the end of the day there will be quite a lot of trouble in the beef market because of the cow meat coming out as a result of milk cow slaughterings. I should just like to make the point, which was not in my right honourable friend's Statement, that I understand that the Commission is to put forward 435 mecus in order to meet market management costs in the future.
Lord Boyd-Carpenter: My Lords, will my noble friend also accept from this side of the House the congratulations which have been so generously offered from the other side to his right honourable friend on this first substantial attack on what most of us regard as the scandal of the common agricultural policy? Is he aware that I offer these congratulations with particular enthusiasm, having just returned from Australia, a country in which comment on the common agricultural policy is not such that I can repeat it within the confines of this House within the rules of order?
Will my noble friend also answer two specific questions? He gave us a good many figures on the savings resulting from these changes. But can he bring the figures, plus and minus, together so as to tell your Lordships the actual net annual savings that will result from next year onwards from these changes? Can he also confirm—I hope he can—that one effect of these changes will be to secure that the sale at a nominal price to the USSR of butter and other foodstuffs will be brought to an abrupt and final end?
Lord Belstead: My Lords, I am grateful to my noble friend for what he has said about the success of the negotiations and I shall draw his words to the attention of my right honourable friend.
The net savings are as follows. They include the savings for milk, including stock disposals, and the deferred reimbursement to which I referred for paying from 1989 onwards. The net savings for beef, for socio-structures but with offsettings for the green rate changes, would be for next year 1,020 mecus. (I am talking in mecus; not, I am afraid, in pounds.) For 1988 there would be a saving of 450 mecus and for 1989 there would be a saving of 300 mecus to the Community budget. At this stage I have to say that the question of stock disposals is a matter on which we must await further proposals from the Commission, but I have taken on board what my noble friend said about the public attitude to disposals abroad.
Lord Walston: My Lords, I am full of admiration for the stamina of the noble Lord's colleagues in Brussels. I have not such full admiration, but I have some admiration, for their achievements. However, I must confess—I hope this is not unduly grudging on my part—that I cannot see that this is a real breakthrough which helps towards the ultimate solution of the basic problems of the common agricultural policy.
In considering the actual figures for milk, my understanding is that our present surplus of milk production within the Community is around 12 per cent. These proposals appear to me to reduce milk production in 1987 by about 7 per cent., leaving a surplus of 4½ per cent. to 5 per cent. which will add still
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further to the butter mountain or the milk powder mountain. In the following year the total reduction will have amounted to 9½ per cent. Therefore according to my calculations, although the mountains will grow less fast they will still continue to grow. I hope that my calculations are wrong and that the noble Lord will be able to show that in fact the surplus will not only grow less fast but will disappear and become a minus quantity. I should be grateful if the noble Lord could inform the House further on that point.
I support my noble friend Lord Mackie of Benshie in his comments about cereals because, after all, milk and cereals between them are by far the greatest part of the cost of the common agricultural policy and present the largest problems with regard to storage. While I hope a breakthrough may have been made, there is nothing in the Statement which tells us anything about cereals; and although there are pious hopes from the noble Lord that in February something may be done we need rather more concrete action than that if the cereal mountain is to cease growing at the terrifying rate at which it is now growing. All that is quite apart from the question of the disposal of existing surpluses, but I do not think I would be in order to trespass on that subject now.
6 p.m.
Lord Belstead: My Lords, the noble Lord is more or less right in what he said at the beginning of his intervention. The figure I have is a 6 per cent. reduction in the production of milk products. The noble Lord put to me the logical conclusion that therefore the mountains will continue to grow. With respect to the noble Lord, he is neglecting that part of the Statement which makes clear that there will be a policy of stock disposal by the Commission, about which I said to my noble friend Lord Boyd-Carpenter that I did not think I could say more this evening. However, I said to the noble Lord, Lord John-Mackie, that the intention through the stock disposal policy is that over the next two years it will be possible to reduce the stocks of both butter and skimmed milk powder to normal proportions in store. There is therefore that additional factor which, with respect to the noble Lord, I think he omitted.
As regards cereals, again with respect to the noble Lord, who said that something needs to be done, I must say that two things have been done. We have put forward from this country—and we did this three months or so ago—definite proposals which we believe are workable and attractive for a cereals diversion scheme—a form of set-aside which we believe could work and which is being considered by the Community at present. What is important, as I have already said, is that embedded in my right honourable friend's Statement—in the reporting of what has got to be agreed by next February on socio-structures—it is clear there must be some agreement on the giving of aid by nations for the fallowing of land. This is an open door which could lead to a cereals diversion scheme.
Lord Stodart of Leaston: My Lords, this is an immensely complicated subject. I think I saw even on the face of the noble Lord, Lord Cledwyn, a slightly

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puzzled look, even with his tremendous experience of agricultural politics 10 years ago. It is much more complicated than it was 10 years ago.
Lord Cledwyn of Penrhos: My Lords, 16 years ago.
Lord Stodart of Leaston: My Lords, one thing is absolutely certain. It was a remarkable achievement at Brussels to secure a package which has been accepted by all the countries concerned. The complication is such that I believe it is quite impossible to give a balanced view of it, particularly off-the-cuff.
My noble friend on the Front Bench said (and I am sure he is right) that it is a very good deal for beef. However, I wonder whether he heard the figure that was quoted on early morning radio today—it was also mentioned by the noble Lord, Lord John-Mackie—to the effect that it means a drop in income to the country of, I believe, £50 to £60 per head for beef cows. If that is the case, what prospect does my noble friend think there is for the beef industry?
The beef industry is of particular importance to what have always been the most difficult areas in agriculture in this country. I refer to the uplands—the land that lies just below the high hills. Uplands are just outside what are often called the handicapped areas and they are vitally dependent on beef. If that figure is true, can my noble friend say what he thinks the prospects are for beef production?
Lord Belstead: My Lords, I am grateful to my noble friend for the kind words that he asked me to pass on to my right honourable friend. That I shall do.
My noble friend put the point that there are obviously concerns, as a result of these negotiations about the incomes of beef farmers. I think I should simply say that the retention of the beef variable premium scheme, the further devaluation of the green pound by some 6 per cent. so far as beef is concerned, and, incidentally, the harmonisation of arrangements for steers and bulls from which we will benefit to some extent in this country, will mean that the incomes of beef farmers will be down by only a small percentage. We must remember as I said earlier, that the target premium under the beef variable premium scheme, as a result of the green pound devaluation, is to be 9.4 pence per kilogramme. That is nicely up compared to previous years.
Lord Kimball: My Lords, does not my noble friend agree that he has made an encouraging start in the right direction with minimum hardship to the agricultural community?
Turning to the environmentally sensitive areas, when my noble friend negotiates the figure in February—I think it is still to be negotiated—will he please bear in mind that the figure of £6 million which was allocated to the environmentally sensitive areas for the last farming year was most welcome but in view of the number of areas put forward it was found to be inadequate? I think we have six areas agreed and a great many more areas put forward.
The set-aside policy, as my noble friend said, is still wide open. As regards the emphasis on fallowing, it
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would be a great advantage to the English countryside as a whole if we were allowed to return to permanent grass. Permanent grass need not necessarily be a crop. One can have permanent grass and provided it is mown out and not harvested or grazed, it will be far more useful and a greater advantage than having a lot of fallow land.
Lord Belstead: My Lords, I am grateful to my noble friend for saying that he feels that this important and difficult negotiation has resulted in a major and important change with as little hardship as possible. That more or less hits the nail on the head.
As regards environmentally sensitive areas, I am glad that my noble friend feels that the policy is right. I note that my noble friend suggests more money is necessary. On the final point that he made, I feel that there are both husbandry and sporting interests in that question and I shall look at them with interest.

Cyprus
6.10 p.m.
Lord Willis Lord Willis rose to call attention to the situation in Cyprus; and to move for Papers.
The noble Lord said: My Lords, I should like to begin this debate with a kind of preface. Like many of your Lordships, I have visited Cyprus on several occasions both before and after the island was divided. I have been to both the North and the South. As a result, I have developed a great affection for the people there, whether they are Turkish Cypriots or Greek Cypriots. Sometimes when I go to that island it seems to me that something of the sun that shines so warmly over it has entered their hearts because they are such a warm and friendly people, and although they are sometimes bewildered by the attitude of the British Government, in spite of everything they still retain an affection and respect for this country which I regret is not always returned by us in full measure.
In the light of those remarks, I hope that your Lordships will understand that in this debate I shall try to speak without prejudice or bias on one side or the other, and simply put forward what I know to be the facts. Perhaps the first and most important fact to grasp is that the inhabitants of Cyprus are not, and in the whole of their history never have been, one nation. They are two separate and distinct ethnic communities. They have no common language, although they are linked by a second language called English. They have no common religion and basically they have no common culture. In fact they are two peoples: the Greek Cypriots and the Turkish Cypriots. We have to remember that very basic element in this puzzle.
Of course, these two peoples managed to live together quite peaceably for many years; but that was a long time ago and that fragile peace has long since been destroyed by tragic events and it will take many years before the confidence has returned that will enable them to live together again as equal, independent peoples. We may regret that, but no one should be surprised. We ourselves know only too well the problems of Ulster, where people who actually speak the same native tongue but who have different

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religions find it difficult if not impossible to live together. This is one of the tragedies of the modern world and it can be seen as well today in the Middle East.
When we talk about Cyprus we have to talk about history because in a sense Cyprus is history. The modern "Cyprus problem" goes back many years. I do not want to go back for 400 years, but perhaps we may go back in time to 30 years ago when we governed the island and there was a long and bitter struggle, spearheaded by mainland Greeks and Greek Cypriots, which originally began as a fight for independence but later developed into a campaign for Enosis—political union with Greece. At no point were the Turkish Cypriots consulted about such a demand, and had this struggle for union with Greece been successful, the Turkish Cypriots who were in the minority would have found themselves to be the unwilling citizens of Greece or forced to emigrate. The seeds of discord for the future were sown then.
That was only the first phase of the struggle for union with Greece. In the event that campaign was defeated and in 1960, after the British withdrawal, a new constitution was drawn up and agreed by both sides. I shall not weary the House with long details about that long-dead constitution. In brief, it provided for bi-communal republic in which the Greek Cypriots were to be the senior partners by virtue of their superior numbers but which guaranteed the rights of all. Thus there was to be a Greek Cypriot president, a Turkish Cypriot vice-president and a division of power along those lines in the Government, Civil Service, the Army, and so forth. There were also certain guarantees and rights of veto which guaranteed the minority.
It is worth noting that Article 185 of that constitution, which was negotiated by the international community in alliance with Greece and Turkey, clearly laid down that there could be no Enosis or no union with Greece. But it is a fact of history that within months of the acceptance of the constitution, the then president, the late Archbishop Makarios, had put back Enosis on the agenda. In September, 1960 he said:
"The cause of Enosis has not died. I cannot say that Enosis has been forgotten".
It is not difficult to imagine the effect of this statement on the Turkish Cypriot community who believed that they had agreed to a constitution which guaranteed them against such an event. Was Enosis going to start all over again? Indeed it was. Within three years the Greek Cypriot majority had effectively destroyed the constitution by excluding Turkish Cypriots from their allotted positions. When the Turkish Cypriots tried to invoke the safeguards which had been written into the constitution, they were vilified, abused and worse. Again, it is a matter of fact and of history that by the end of 1963—three years after that constitution had been agreed—the Turkish Cypriots had effectively been stripped of their rights. They had effectively become stateless citizens. They were not allowed to register their children or even to apply for passports. The Greek Cypriots who only three years before had agreed to share power now began to rule Cyprus without reference to the Turkish community. At the
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time they were described—with good cause—by the Daily Telegraph as "double crossers".
Sadly, this was the beginning of the story and not the end because if Enosis (union with Greece) were to be achieved, first of all the minority of Turkish Cypriots had to be removed. So a wave of terrible violence was let loose against the Turkish Cypriots. The Daily Express carried a report of a massacre in the sealed off section of the Turkish Cypriot community in Nicosia in which over 200 people perished. The reporter wrote:
"We have seen sights too frightful to be described in print".
The Observer reported a similar outrage at Limassol in February 1964 in which hundreds of Turkish Cypriots were massacred. According to the Daily Telegraph, all the Turkish Cypriots of one village were murdered. Their bodies were exhumed from a mass grave in the presence of the Red Cross. Those are facts. The Secretary General of the United Nations, reporting to the Security Council in 1967, gave details of thousands of Turkish Cypriot homes and properties which had been destroyed, damaged or looted.
I do not doubt that there were faults and excesses on both sides. We all know that action leads to reaction and terror provokes counter-terror; but in essence, in the light of these facts and in the light of history, it must be said that the Turkish Cypriots have certainly had the short end of the stick.
The effect of these events was that many Turkish Cypriots became refugees. They left their homes and went into sealed-off areas, mostly into enclaves in the North. In a sense the island effectively was divided then and the Turkish Cypriots were rendered almost powerless. At that time hundreds of Turkish Cypriots emigrated to Turkey, Great Britain, the United States or West Germany in order to escape.
Then in 1967 the Greek Cypriot Government, which were still officially recognised as the legal government although they were by no means a legal government, enacted a resolution calling for a struggle, again to achieve Enosis. The resolution spoke of "uniting the whole and undivided Cyprus with the motherland". This was more than a piece of paper because in 1971 Archbishop Makarios said:
"Cyprus is Greek—Greek and undivided. We shall deliver it to Greece.".
Again one can imagine the effect that such a statement must have had on the Turkish Cypriot minority. In 1971 in order to back this up the guerrilla leader Grivas, whom the British have long cause to remember, returned to Cyprus from Greece and began a political and military campaign to achieve union with Greece. Events were now moving quickly towards an inevitable and tragic conclusion. In July 1974 the Greek junta, the colonels, decided that Makarios was not moving fast enough towards Enosis, so he was forcibly deposed and one of Grivas's henchmen, Samson, was installed as President and virtual dictator of Cyprus. Makarios fled and in a speech to the United Nations he confirmed that the coup was the work of Greek army officers, acting under orders from the Greek military government in Athens. It was in effect an invasion by Greece for the purpose of taking over Cyprus.
Samson then began the second stage. He ordered his troops to begin the systematic murder of Turkish-Cypriot people. Once again they became refugees and fled as far North as possible. They appealed to the Turkish Government for help and Turkey landed troops in the North of the island. In fact, as one of the guarantor powers they had the right to do it. That was not the point. If they had not gone there the Turkish-Cypriots would have been virtually eliminated.
What has happened since then is, I am sure, well known to your Lordships. The tragedy is that this long and bitter history has meant tragedy for so many innocent people on both sides, Greek Cypriots and Turkish-Cypriots. It is worth noting at this point that since the Turkish intervention, there has been peace on this troubled island of Cyprus. I think this is one of the reasons why we have not yet found a solution to the problems there. Turkey intervened to protect the lives and property of the Turkish-Cypriots and to its credit it did just that. In the 12 years since the intervention there have been no killings and no massacres. For the first time in 30 years, the Turkish-Cypriot minority feel safe. Enosis has been buried as a practical possibility, if not as an idea.
Sadly, instead of recognising the reality of the situation the Greek-Cypriot Government and the Greek Government have found other means to express their opposition to the Turkish-Cypriot minority. It is a matter of record that they have blocked all attempts by the United Nations and others to find a settlement. Each time the general secretary of the United Nations has worked out an agreed formula, the Greek-Cypriot leadership has backed down. The Turkish-Cypriots, under Denktash, have offered far reaching concessions in an effort to reach a settlement but still the prevarication goes on. Every time there is a chance of an agreement the Greek-Cypriots move the goalposts.
In September of this year, with justifiable irritation the Wall Street Journal commented:
"The problem of Cyprus can be summed up in two words: Andreas Papandreou. The last thing the Greek Prime Minister wants is a resolution of the island's differences. He would lose his opportunity to accuse Turkey of devious intentions which he does to distract the Greeks from their decrepit economy".
Thus Cyprus has become a pawn in a murkey political game. If that were all, it would be enough. But the Greeks and the Greek-Cypriots have carried their bitter vendetta to almost unbeliveable lengths. Sadly, the international community has done very little to help Turkish-Cypriots. To our shame they have succeeded in pursuading us to construct an embargo on the Turkish-Cypriot community. Today it is impossible to post a letter direct to North Cyprus; it has to go to Turkey. It is impossible to fly direct to North Cyprus; one has to go via Turkey. It is impossible to send goods and passengers by sea directly to North Cyprus; it is necessary to go via Turkey. Most of the international aid earmarked for Cyprus goes to the already prosperous South.
What is the justification for this blatant discrimination? Is it because when they grew tired of Greek-Cypriot procrastination the Turkish-Cypriots declared independence and set up their own democratic state—the Turkish Cypriot Republic of North Cyprus? What is wrong with that? Surely it is the right of any
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people to take their future into their own hands, to be free and independent and to govern themselves? If noble Lords care to cast their minds back to our own history they will realise at once that the United States did exactly that, and in more recent times we have the examples of Eire and Bangladesh. Is it because they are a very small community of 125,000 to 130,000 people? We have given independence to West Indian islands with smaller populations than that. Iceland, with a quarter of a million people (less than the population of Southampton) does very nicely, thank you. Therefore, it cannot be because it is small. Have we then abandoned the basic principle that a people has the right to choose its own future.
The reluctance of the international community to recognise this little republic becomes inexplicable when one considers the almost indecent haste with which we recognise governments which have been established by military coups and which are controlled by dictators. Is it because the Turkish Cypriots refuse to agree to the withdrawal of Turkish troops? In view of the bloody history of Cyprus in the last three or four decades, if I were a Turkish-Cypriot, I should not wish to see those troops go.
I have been to North Cyprus and the people there look upon the Turkish army much as the Falklanders look on the British army, not as an army of occupation but as an army of liberators. "We feel safe now," was what one cab driver said to me a few months ago. That is the general feeling that one gets in North Cyprus, a feeling of peace and security and that there can be no more of the troubles that have beset them over the past 30 years.
The Republic of North Cyprus has declared itself ready to reach a settlement with the South. But such a settlement must be reached on the basis of two, free and independent peoples sitting down on terms of absolute equality. If your Lordships think about it that is the only basis on which partnerships can be achieved. If there is going to be a partnership in the governing of the island then there has to be the recognition of that basic fact. If the Greeks will accept this, then a federated Cyprus, in which the two nations collaborate together on certain issues and over certain problems which concern the whole island, is absolutely possible and could work.
However, we have to face the situation as it is today. There can be no going back to some romantic idealised notion of Turkish and Greek-Cypriots sharing the same villages, and working the same fields. That is a lovely poetic, romantic thing; but the hard facts of modern life are that it will not work. We may regret it. There can be no going back to the old constitution for that is unworkable. There can be no dissolution of the Turkish-Cypriot Republic of North Cyprus. It is legal, it was elected by the people. It is democratic and it has political parties stretching from the Left to the Right and it exists because it is the will of the people that it should exist. It will last and it will prosper because it is built on sure democratic foundations.
What is the way forward? The first step must be the recognition of the Turkish-Cypriot Republic. Only this will force the Greeks to come to the table in a serious frame of mind. If this is too great a step to take at one time, too great a mouthful, at least in the name of justice let us get rid of the international embargo.

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We cannot forever keep a whole people, however small, in quarantine, which is exactly what we are doing at the moment.
In Raoul Denktash, the President of the Turkish-Cypriot Republic, as many of your Lordships will know, there is an outstanding politician and statesman who has led his people for 30 years through their troubles with courage and integrity. He is a great democrat. He has declared himself willing to negotiate on most of the outstanding issues—compensation for lost property, adjustment of the land area, and mutual co-operation for the good of the Island. It is not his fault that successive attempts at agreement have broken down. He has twice agreed and twice the Greeks have moved the goal posts. The only thing that he will not negotiate is the independence and the freedom of the people he has served for so long.
The British Government, as the former ruling power in Cyprus, and as one of the three guarantor powers, have a special responsibility for Cyprus. It seems to me that they have been very silent and very slow on this issue over the years. They have failed to exercise their responsibility. They are content to allow the situation to remain as it is in the hope that some solution will emerge out of the woodwork, largely, I suspect—as I said earlier—because Cyprus is at last and at least at peace and is therefore not presenting a very great problem for our Government.
However, it is now time for our Government to act in the name of justice not against the Greek Cypriots but simply to give the Turkish Cypriots the even-handed treatment which is their rightful due. That is all they ask. They do not want treatment that is better than the Greek Cypriots. They want even-handed treatment, and the quarantine removed. To do otherwise—to allow Athens to keep calling the tune—will be an act of monstrous injustice and a stain on our conscience. I beg to move for Papers.
6.31 p.m.
Lord Newall: My Lords, I am sure that everyone, including myself, will be most grateful to the noble Lord, Lord Willis, for introducing this subject. It comes at a very timely moment, when so many leading newspapers are carrying articles about this very subject and have been doing so since June. The visit of Mr. Denktash also alerted us to the situation. With his usual command of the language the noble Lord was a pleasure to listen to, and I disagreed with him not at all.
Since 1974, as we have heard and as I am sure noble Lords will hear again, there have been two sides in Cyprus. But there is no need for me to take sides; I certainly do not wish to do that. There are many facts and a lot of fiction. There is a certain amount of truth, and there are other stories which are more often called being economical with the truth these days.
I spent a week on each side of Cyprus. I went with no historical views; I had an open mind. Since I went there very little has changed, even if the economics and commercial activities have varied a little. However, we have to remember the sequence of Greek dominance over the Turks, who eventually were likely to be thrown off the island like unwilling lemmings. I am
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sure that the noble Viscount, Lord Hanworth, will have something to say about that later.
The history of the island is long and complicated, and nobody wants to go back over it. We have to look at the present situation. The position now is understandable with the knowledge of some history, but it not one that should be allowed to remain. We have to look at the future and at the way that we can help to resolve the present situation.
Although some of this has already been covered it bears repetition. We must remember that over 100,000 Turkish Cypriots have not been recognised in international circles for 12 years. They have had little or no international aid. They have had restrictions on imports, on exports and on their general development. They have luckily had a democratic internal government, but they have had a great struggle. Let us not forget that. They have been unrepresented internationally and have been denied many normal human rights. If perhaps the Greek Cypriots or even the Greek Government had made the slightest effort to co-opt them back into the government in which they were under the original agreement, or if they had given them a proper share of their international aid, to which they should rightly have been entitled, things might be very different today.
Some of the writings which I see from the Greek Cypriot side can be described ony as propaganda. It is full of half truths and one-sided views. They never mention how many Greek troops are on the island; that there are 8,000 Greek officers looking after 20,000 in the local militia with a force of 100,000 able to be called up. There is nothing wrong in that except that the only story they tell is of the Turkish troops which now number approximately 17,500. They never mention how many displaced Turkish Cypriots there are. They never mention why the Turks are so happy and calm in spite of their financial difficulties, because there is no longer the fear—the fear of being killed—that there used to be.
The Greek Cypriots never mention the settlers who have come into Greek Cyprus from Greece, Lebanon and many other places. There were many Turkish Cypriots who left the island; and there were only 15,000 new Turkish settlers, whereas 40,000 Turkish Cypriots have returned, having been turned out of the island in the past. They never mention the Turkish missing persons or the mass graves of the Turkish Cypriots killed by the Greeks. They do not mention even now the new university in Famagusta which is teaching in English, and they have nothing like that yet on the Greek Cypriot side.
However, this is history. We need to look forward. I do not necessarily blame President Kyprianou. I do not believe his health is very good. It is probably difficult for him. He is apparently a puppet of Greece. However, I blame the Greek Government who not only find the present situation highly tolerable, anything else would be worse, but also as members of NATO they fail to live up to their commitments. Until they do, they must remain a very suspect ally. They have brought it all on themselves in my view, but if they were to agree with solutions put to them by the United Nations their credibility could improve. If they do not, they will remain the victims of their own deeds.

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Unless they show some signs of improvement I shall be forced to believe that they prefer Cyprus as it is if they cannot have it all their own way. The Turkish Cypriots are a very strong race and they will never go back to the oppression of former years.
The Greek Cypriots must surely know this. They must also know that public opinion has changed over the years and is still changing. People now believe that there are two sides of the coin and the story is possibly not one that they knew before. What the Turkish Cypriots have to say is increasingly more believable. I fear that very soon the Greeks and the Greek Cypriots will have fewer and fewer friends.
I find this very sad. I have many Greek and Greek Cypriot friends. They are often worried about the present situation and the way the Greek government are influencing the Greek Cypriots. We need a practical solution in 1987 and not later. I should very much like to think that this Government could partake as an intermediary in some way under the United Nations. I am sure that both sides would listen very hard. It is therefore my plea, and a very genuine one, from a neutral standpoint, that the Greek Cypriots look at the present situation as it is and stop trying to do what is no longer possible. Enosis is dead, and so let us take it off the life support system now and start proper talks about accepting United Nations proposals and recognising the fact that the Turkish Republic of Cyprus will not go away in a hurry.
6.39 p.m.
Lord Kennet: My Lords, we have heard the Turkish Cypriot case ably pressed in the first two speeches in this debate. My original intention was to be as evenhanded as possible in this sad affair. However, after listening to the last two speakers I admit to the temptation to take some time presenting the Greek Cypriot case; that is, the case of the legal government of the island of Cyprus. But I shall not do that. I shall continue to be as evenhanded as possible.
I have visited Cyprus at the invitation of the Government of that country. I have talked with Ministers of that Government and Members of the Parliament of Cyprus. During that visit I was also able to travel in the Turkish occupied zone in the north of the country and to talk with representatives of the occupying power and with Turkish Cypriot separatist politicians.
We must have a little bit of history and we must start somewhere. I do not propose that we should start 1,200 years ago when Greeks and Turks first met and started to quarrel. Nor do I propose that we start in the nineteenth century when Cyprus moved from Turkish rule to British rule, or at the end of British rule in the post-Second World War period.
In 1974 the then Greek Government, being a military junta, took a ridiculous action. They staged a coup d 'état in Cyprus, and on seeing that action most of European opinion thought that if that did not destroy them what on earth would destroy them? Of course it did destroy the Greek military Right-wing dictatorship, to the great relief of all democrats and all civilised people. They managed to destroy themselves by that action in Cyprus. However, that was not before
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the Turkish invasion fleet had sailed and within a couple of weeks occupied the northern third of the island.
I do not want to enter into legalities, but I think it is clear to anyone with an understanding of politics and human motivation that the Turkish Government had a pretty good justification for their action. I do not believe it is possible to say yet whether the Greek Government would have fallen without it. I think that it probably would have fallen, but this is hindsight and who can say? However, Turkey did that and was one of the three guarantors of the Cyprus Treaty of Independence and the Cyprus constitution; the guarantors were Turkey, Greece and ourselves.
The Greek fascist government having been destroyed, what should Turkey have done next? In my submission, it should have gone away again. The justification for the enormous Turkish army there was the Greek coup d 'état. Once that threat had receded there was no justification for an invading army. However, it did not, and the Greeks were driven out of northern Cyprus. With the Turkish army at their back, the Turkish Cypriots, who constituted one-fifth of the people in Cyprus, were at the end of the day left in control of 36 per cent. of the territory. There have been minor adjustments since then.
The age since has been a sad one. In 1978 this country, together with the United States of America and Canada, put forward a plan. That plan did not get anywhere. In 1983 the last threads of dialogue between Greek and Turk in Cyprus broke down and the matter was referred to the UN in due form and order. Later that year the Turkish Cypriot Assembly (the body purporting to govern northern Cyprus) took a decision to call itself the independent state of northern Cyprus.
There were UN initiatives in 1984, 1985 and 1986, all of which our Government very rightly worked for and with. Our Government drafted Resolution 541, which is still the leading UN text in the field and is binding. The noble Baroness will correct me if I have that wrong. That was all to no avail.
We can stand for as long as we like before the fact that Greek and Turk in Cyprus do not agree and say that it must be somebody's fault. We can say that it must be the fault of the Greek Cypriots, as we heard in the first two speeches in this debate, or that it must be the fault of the Turkish Cypriots, as one can hear throughout most of the world. I think we should be more usefully employed if we considered what could best be done now, but not by Greek and Turk. There is no point in sitting there advising them; they have been quarrelling for 1,200 years all over Asia Minor and South-Eastern Europe, and the quarrel is now confined, thank God, to one small island. Long may it stay confined to that one small island, but roll on the day when it is not confined anywhere and when the quarrel at last comes to an end.
What can we do to help? We are in the face of a phenomenon of fear. As is usually the case in a deadlock like this, the two sides are afraid of each other. Perhaps we may look for a moment at the objective basis of this fear. It is fear of armed men. The original founding treaty of the Republic of Cyprus allows Greece and Turkey each to keep a certain military contingent on the island. I want to take the

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military facts in order. The treaty allows Turkey 450 armed men on the island and it allows Greece 650 armed men on the island.
Let us begin with the country which has a common language with the larger part of the Cypriot population; namely, Greece. Athens Greece is allowed 650 men on the island. According to the best information I have been able to glean, they have between 2,000 and 3,000 armed men on the island. That of course is in breach of the treaty but everybody in Cyprus is in breach of the treaty with every breath they draw.
Turkey, with a smaller population related by language and culture, would have a right to 450. Here the estimates of the true number of Turkish troops on the island differ. British sources in general are inclined to say that it is between 25,000 and 30,000. The Cyprus High Commission in London puts it a little higher at 35,000. We are comparing the presence of 2,000 or 3,000 Greek troops with 25,000 Turkish troops—ten times as many. Let us remember that the Greek population is five times as many as the Turkish.
I turn now to the native levies, as one might call them. The Republic of Cyprus, the legal government, has a national guard, and once again the figures differ. The Institute of Strategic Studies puts that national guard at 13,000, while the Cyprus High Commission in London puts it at 10,000. The difference is not very wide. That national guard contains a contingent of Greeks from Greece—officers and NCOs. Here the estimates differ widely. Perhaps the noble Baroness can confirm that the Foreign Office's best information is that it now stands at about 600. The Cypriot High Commission in London says that there has recently been a rapid decline and it stands at only around 150. On the Turkish Cypriot side there is a levy of Turkish Cypriots which stands somewhere between 4,500, which is the ISS figure, and 8,000, which is the Cypriot High Commission figure.
These are big discrepancies but, doing a rough sum, British-based sources will give a ratio of two to one in favour of Turks for armed men on the island: two Turkish armed men for one Greek or Greek-Cypriot armed man on the island. Cypriot Government sources give a ratio of four to one.
But the populations are far from equal, and if we scale these figures to the fact that the Turkish Cypriot population is one-fifth and the Greek Cypriot population four-fifths, we find that the preponderance of Turkish armed men over Greek and Greek Cypriot armed men is, on British figures, eight to one, more or less, and on Cyprus Government figures fifteen to one, more or less. We must ask ourselves who has the better right to be afraid.
We must also look at why the two sides do not sign up on Mr. Perez de Cuellar's dotted line. It looks an excellent text from the outside. The reason is military fear. We should not be far out if we were to say that the greater military fear exists among the Greek majority. On the figures I have just given that is bound to be so. The Greek Cypriot majority is afraid to sign up for a new constitution, a new basic statute for the island regulating Graeco-Turkish relationships, unless and until the military dispositions are agreed and put into effect in advance.
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They are invited to sign up for a constitution which would give the Turkish Cypriots a veto over all the important matters. That is quite a reasonable thing to have if you have two absolutely separate cultures, languages, religions, as the noble Lord, Lord Willis, pointed out at the beginning. They are not going to live together in every village, as the noble Lord, Lord Newall, pointed out. They are going to be separated into two regions or constituent parts, or whatever it is. But if the minority part has an absolute veto over the majority you cannot expect the majority to go on facing a military superiority of at least eight to one on the other side. A veto backed by that military superiority is something that would indeed be hard for any people to accept.
The role of this country has to be to do whatever is helpful. We have to recognise that it is a matter of fear and mistrust. We have to discount the horror stories on both sides, or else count them equal. Whichever side of Cyprus you go to you find horror stories. Some of them are true on both sides, and some of them are untrue on both sides. You will even on one side—and I am not going to say which—find a museum of horrors dedicated to perpetuating hatred of the other side.
It is obvious that the United Nations has to carry on with its present efforts. It is obvious that we have to back the United Nations. We are not going to go against either Turkey or Greece in any big way. Both are members of NATO; NATO needs them both. It is obvious that the United States is not going to go against them in any big way either.
What we have to do—and let us remember that we have a better historical knowledge of Cyprus than any other country except Turkey and Greece, the warring partners—is to be alert every day, by all means, for any possible action that we can take either alone or together with the other guarantors of the old treaty, Greece and Turkey themselves, to help a solution forward. I cannot stand up and say that I know what that ought to be. I do not suppose that the Government can either.
Alertness is necessary—to be staffed for alertness and to have instructions out for alertness. In the meantime it appears to me quite clear in international law that our Government must continue to apply such policies towards the Turkish occupied zone of northern Cyprus as must, under international law, be applied to invaders who divide an existing state and plant a large army on it over the decades, and purport to set up a new state on part of that old one.
We in this country, as a leading member of NATO, should also remember that the Turkish invasion and occupation of part of Cyprus has been, except for Vietnam, by far the largest out-of-area military operation ever undertaken by any NATO government. Its effects on the counsels and plans of NATO itself cannot be helpful.
6.54 p.m.
Lord Caradon: My Lords, I am happy that I can follow a speech so thoughtful and so careful as the one we have just listened to. I want to explain my position in this matter. I was for five years or more in the island of Cyprus, first as colonial secretary and then as the

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governor. I have a devotion for that beautiful island and an affection and admiration for its people of all categories. I know them well. I have worked with them well, and I trust them.
From the time when I first went to Cyprus 15 years ago I have had one overwhelming anxiety, and that is to work with all the people of Cyprus to find a solution in which all categories can make their contribution. I felt it strongly at the time I was there as governor. I worked with both sides, and I was proud and glad when I left that the leaders of both the Greeks and the Turks came to see me at the wharf and to thank me for the work I had done.
At that time, when I left and when Cyprus became independent under arrangements which had been worked out with both sides, I had confidence that the people of Cyprus, Greek and Turk, could work together. That was the only solution that seemed to me possible or acceptable for the island. To divide it in two would be grossly unfair and would make real progress towards a peaceful and satisfactory solution impossible.
I am glad that when I left, the representative of the Greeks, Archbishop Makarios, and the representative of the Turks, with whom I had worked very closely, both came to see me off. They reinforced my passionate devotion for a united Cyprus. Indeed the arrangements that we had made in consultation together at that time would have worked. Since then both sides have stated their own positions and have attempted to get their own advantage.
When I heard that this short debate was to take place here this evening I was sad, because I felt that we should do no good by giving encouragement to one side or the other that they could get their own way. I am afraid that that is what has happened this evening. We have had some speeches already and some still to be made which take a strong line on one side or the other. They say that a substantial and prosperous part of the island should be under complete Turkish control. The Greeks, on the other hand, say that they want an island with the Turks having some powers within their area but being subject, certainly in international affairs, to a joint government.
My mind went back, I must admit, to the time that I was there when we did get agreement and when the leaders of both sides came together and accepted an arrangement that I believe could have worked perfectly well. That was a time when it was agreed that there should be an international Cyprus, with both sides working together and with the minority side, the Turkish side, exercising a wide control within the areas in which the Turks were in the greater number.
At that time I felt an intense desire to see a united island. I felt it more strongly as I listened to the reports of what happened subsequently. Now when I hear speeches such as those we heard at the beginning of our debate this evening, which of course are replicas of what the Turkish community has been saying, I am filled with an intense desire that we in this country should give a lead for equality and a sharing of responsibility rather than that we should come down on one side or the other and ensure bitter conflict for
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another generation in an island which in the past has been so beautifully peaceful.
I am happy to be here this evening to speak for all the people of Cyprus. I hope and pray that we in this Parliament will not do anything which will make that purpose any more difficult. I hope we can make a contribution similar to that made 10 years ago when both sides came together and there was agreement. An agreement was signed in Switzerland and then in London setting out a practical plan which could have been satisfactorily carried out, and can still be carried out, if we the British take a lead as I think we should and must.
I hope that in the final settlement Greeks and Turks will come together as they came together when I was there 10 years ago and will make the island an example to the world of how people of different origins may work effectively together. I pray that that will happen and I pray that in this House we shall not give ourselves to arguments and bitternesses between two peoples with whom we worked before.
I was there in the war and we had the happiest, most effective relations with Greeks and Turks on the island. It can be so, I have seen it so and I hope we do nothing in this House to make a settlement on that equal basis more difficult.
7.2 p.m.
Lord Broxbourne: My Lords, I feel a double sense of privilege in following the noble Lord, Lord Caradon, in debate: first, because of his eminent service in Cyprus but also because he is a member of a family for whom over many decades I have entertained high regard and warm friendship.
I speak as a friend of Cyprus: when I say "friend of Cyprus", I mean a friend of all Cyprus. I, like other noble Lords, have friends in both parts of that lovely but troubled island. As I said to your Lordships in February last, there are nice people in both parts, only with the difficulty of seeing each other's point of view—rather like Parliament, your Lordships may think.
I seek to follow the maxim of my calling: audi alteram partem—hear the other side. It is for us to assess the evidence and evaluate the facts in a spirit of objectivity and good will. Of course problems are always easier to solve the more remote they are. If one is tempted in Cyprus to say, "Is it not remarkable that you here with long centuries of coexistence and common history cannot live together in peace and amity?" may not they reasonably call attention to Ireland, much nearer to us here, and say "Is it not remarkable that the people of that small island, speaking the same language and professing the Christian religion, cannot live together in peace and amity?"
Clearly there is a basis of comparison not only in the existence of the problems but in the fact that so far it has not been found possible to solve them. But of late there is a further common factor, a more welcome one, in that recent efforts and ingenuity have given fresh hope for the future. It is to the future that I want to address myself today.

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As to the past I say only this. Cyprus, like Ireland, is to some extent a prisoner of its past. In the long history of Cyprus with Byzantine, Ottoman and Venetian rule the period of British suzerainty stands out well. The much-maligned British colonial rule bestowed the great benefits of security and the rule of law, benefits which in many parts of the Commonwealth have failed to survive the end of colonial rule.
In 1960 Britain devised for Cyprus a constitution guaranteed by Greece and Turkey as well as Britain which could and should have given Cyprus the stable and peaceful future for which we hoped. It did not. Instead there were the sad events of 1964 and 1974, a period of partition and recrimination. Now, however, the opportunity lost in 1960 presents itself again, thanks to the devoted labours of the Secretary General of the United Nations and his staff, in the form of the draft framework agreement of March this year.
If accepted by both sides it would, in the words of the Secretary General:
"Allow for the very first time, all the outstanding issues to be tackled in earnest as an integrated whole".
Though Mr. Denktash, in his letter of 21st April, expressed his willingness, Mr. Kyprianou withheld his consent and requested an international conference to deal with defined issues. A study of the agreement makes it difficult to understand why it should not be accepted and indeed welcomed as the basis of a just and lasting settlement for Cyprus. It proposes the establishment of a federal republic, independent and non-aligned, bicommunal and bizonal. There is nothing inherently unsuitable about a federal constitution for Cyprus. It is indeed the obvious and perhaps the only viable mechanism for a united Cyprus.
Your Lordships will appreciate that there is no rigid single pattern for a federation. It is a form of government which provides for the allotment of functions between prescribed federal powers, to be exercised by the central government, and residual powers to be exercised by the federated states. The precise appointment is a matter for the proposed constitution to be made in accordance with what is required by the parties. This procedure is meticulously followed in the framework agreement. Article 2 specifies the federal powers and also the residual powers. There is provision in Article 3 for a two-chamber legislature with a balanced membership. Article 4 provides for a Greek Cypriot president, a Turkish Cypriot vice-president, with appropriate rights of veto, and for a council of ministers. Article 5 provides for a constitutional court to adjudicate on disputes between the federal government and the two federated states.
It is difficult to see how the generality of these provisions can be faulted. Indeed, there is no direct challenge to them, though Mr. Kyprianou makes a number of detailed comments and criticisms in his long letter of 10th June. His basic response is to withhold acceptance until prior agreement is achieved by way of international conference or high-level meeting on three basic issues: that is, withdrawal of the Turkish forces and settlers; effective international guarantees; and the application of the three freedoms—of movement, of settlement, and the right
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to property. But all these matters are in fact catered for in the draft agreement. The provision for the withdrawal of troops is clear and specific in Article 8. There is provision for territorial adjustment in Article 7; and Article 6 provides for a working group to discuss these matters.
I hope in regard to the three freedoms that your Lordships will accept my interest in human rights in view of the fact that your Lordships kindly agreed to the Human Rights and Fundamental Freedoms Bill which it was my privilege to present to your Lordships in the last Session. There is no doubt that the sad events of the post-1960 period have imposed much human hardship in the form of forced removal, expropriation and the like—hardship on both sides which all will wish to mitigate and, where possible, to remove.
There is in the draft agreement provision for a compensation fund to facilitate resettlement. This could be extended in the proposed discussions so as to allay the suffering and make good the loss of those unfortunates who have lost houses and possessions in the continuing troubles. The advantages of federation in terms of peace, security and the solution of the problems of Cyprus are clear and conclusive. In addition, great economic benefit is likely to acrrue from the removal of the so-called green line restrictions, the opening up of Nicosia airport, the easing of controls and of passport procedures and the withdrawal of troops, with the financial savings consequent thereon. Such steps will remove inhibition on foreign investment and greatly improve the prospects of tourism, with its much needed contribution to the economy of the island as a whole.
In any reasonable assessment of the situation, clearly it is desirable to institute a federal government on the lines adumbrated by the draft agreement. But supposing the general proposition is in the event accepted by both sides but that there are nevertheless genuine points of difference on some of its provisions—a not unlikely situation in so complex and comprehensive a document. There need be no difficulty in resolving such differences within the context of an agreed acceptance of a federal constitution. Article 16 of the draft agreement provides for the assistance of the Secretary General in the interpretation of the agreement if so required. Points of difference could be referred to him in an arbitral capacity or possibly in the wider and less formal jurisdiction of what Continental lawyers call an aimable compositeur; and his decision would bind the parties without jeopardising the federal constitution.
There is, however, one other, if unwelcome, possibility: that in spite of the unremitting efforts of the Secretary General there might be a refusal in the event to enter into an agreement for a federal constitution. As things stand, and as Mr. Denktash has expressed his willingness to accept the draft agreement, such eventuality can only come about by the refusal of the Greek Cypriots, possibly encouraged by the Government in Athens. What then would be the position? We could not properly envisage a continuance in those circumstances indefinitely of the status quo, with Greek Cyprus alone having international recognition and all the advantages deriving therefrom, although patently not representing

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the substantial minority of Turkish Cypriots. If a federal solution unhappily proves impossible, and, a fortiori, if it proves impossible because of Greek Cypriot intransigence, then the anomaly of exclusive recognition must be removed and Her Majesty's Government must recognise the Administration of Northern Cyprus.
I know of no reason in constitutional law or international law why such recognition should not be accorded. It is our British practice to accord recognition on a pragmatic basis. It is a de facto recognition of the exercise of sovereignty rather than a certificate of legitimacy or moral propriety. Indeed, were it otherwise it would be difficult to envisage recognition of some régimes which in fact we recognise today. There is no doubt that Mr. Denktash's government exercises de facto sovereignty. But, more than that, it does so by the expressed and unfettered will of the people and it would indeed be entitled to recognition even on more exacting standards than those which actually apply. Therefore, if the proposals for federation are relegated to the Greek Kalends—a singularly apposite metaphor perhaps in this context—then Her Majesty's Government must take the course which principle and reality alike require, and afford recognition.
But recognition without federation is a pis aller, a last resort, necessary only if federation unhappily proves unobtainable. A federation by mutual agreement with joint participation is surely the best solution. It is the goal to be pursued, with conciliation in place of conflict and common striving in place of divisive strife. It is thus and thus alone that we can hope to realise for Cyprus that better future which its people so sorely need and the world so devoutly desires.
7.18 p.m.
Viscount Hanworth: My Lords, at the outset, I wish to make it quite clear that the views I express are mine and that in some areas they are not so far indicated to be the views of our leader, Dr. Owen. First, I pay tribute to the late Lord Spens, who at a time when it was very unpopular to do so, put forward the Turkish point of view with the intention of counteracting some of the extreme Greek propaganda. I have visited northern Cyprus three times with him and twice since. I was also a member of the CPA delegation which visited Greek Cyprus, but my concern goes far deeper than that.
Before turning to the immediate problem I feel that I too must look at history, because some of the things which I am going to say depend upon it. I apologise for the fact that I shall be at least the third speaker tonight to do so. Between 1963 and 1974, when Turkey intervened, the Greek Cypriots pushed their Turkish neighbours (representing something like a quarter of the population) into enclaves and murdered many of them in the villages and also in Nicosia. They denied them building material and these people suffered near starvation. Finally, when the Greek colonels obtained control they decided to adopt Hitler-type liquidation methods to get rid of the awkward Turkish Cypriot minority by evicting them from the island and also by killing them.
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All these facts are documented but we do not hear much about that these days. We have a bad conscience. We did not live up to our idealised self-image as defenders of the rights and freedoms of the people of our former empire. It was at that point that the Turkish army intervened. The interesting fact is that before doing so Turkey asked Britain, as a fellow guarantor power, to take action jointly with her. It is to our shame that we did not do so. Although we had drawn heavily on the loyalty of the Turkish minority a few years back, as upholders of law and order, Britain abrogated responsibility for the Turkish Cypriots who were still British citizens. This matter was raised in our House not so long ago but no satisfactory answer was given by the Government. The reason probably was that we were then preoccupied with the Aden situation.
During the period I have mentioned, in the 1960s, Archbishop Makarios was doing his best to move towards Enosis. As we have heard, that would have been quite intolerable to the Turkish minority and in fact a breach of the convention. What seems to me so strange today is that after all this has happened some jurists, though by no means all, and our Government still maintain that the Cyprus constitution, where the Turkish minority had no power whatsoever, still remains today. This seems to me an extraordinary view, which is neither moral nor practical in today's context.
I believe that an understanding of and forgiveness for past mistakes are important elements in reaching an acceptable solution in Cyprus. In my view it is therefore unfortunate that the Greek Cypriots have complete amnesia—loss of memory—over what they did to the Turkish minority between 1963 and 1974. They should accept, as the Germans have done in the case of Nazism, that they brought the Turkish invasion on themselves.
I would be the last person not to have the greatest sympathy over the appalling refugee problem that resulted for the Greek Cypriots after the Turkish intervention and over the loss of their properties in a part which many consider to be the most beautiful part of that beautiful island. But I am afraid that, however much we may wish now and in the future that all this could be put behind us, it cannot. There is no possibility within the immediate future, or so far as I can see, of the Greeks being able to return to their houses or anything else in the north. It is absolutely idle to suppose that that is possible so far as we can see the situation today.
Equally, I am afraid I must castigate some of our own people who just do not want to know about the facts of life. Bitterness can so easily grow by what it feeds upon and in the short term there will be a younger generation brought up only to hate. In a war-torn Middle Eastern situation these two territories, each of which at present enjoys peace and security, are in danger of becoming pawns of major outside powers, whose political interests have nothing to do with the peoples of Cyprus.
Enough of the past: Today we still have a very efficient, massive and ruthless Greek propaganda machine, determined to promote any issue which may suit its cause, regardless of morality or accuracy. That

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is nothing new. It exists in all societies. But the Turkish Cypriots cannot afford the money to combat it.
What worries me about this is the effect it is having in preventing a solution in Cyprus. I give your Lordships only one or two examples. I have been exposed to the Greek missing persons act, and it is just an act. It is merely turning the knife in the wounds of bitterness—and both sides have these wounds. The number missing on both sides, for Turks and Greeks alike, is roughly the same. This is the sort of thing which happens in a war, and the Turks have done their best to supply the information. I say no more about that except that the Greeks have continued on every possible occasion to make political propaganda out of it.
To take a more homely example, it is put about that a holiday visit to north Cyprus would be dangerous. Actually there is very little crime there and you are much safer than in London. It is said that there are no good hotels and that the Turkish army is present everywhere. Both are lies and derogatory; and they have the effect of discouraging tourism. However, I wonder whether your Lordships realise that if a firm in England were to advertise such a tour the opposing side would see to it that that firm lost its franchises in all Greek-speaking countries—an even more effective discouragement.
Turning to political negotiations, one must make the point that on the last two occasions the Greeks have refused to accept the proposals put forward by Mr. Perez de Cuellar on behalf of the United Nations, when Mr. Denktash, for the northern Cypriots, has been willing to do so. I know the Greek Cypriots' point of view, which briefly is, "We have been robbed of a large part of our island and we have a real (though completely irrational) fear of the Turks taking over the whole island". That is of course the last thing the Turks would want to do.
In this context it is strange for the Greeks to say that the Turks should remove their army, which is roughly about 18,000 or so men, before—and I repeat before—negotiations begin. The Turkish Cypriots, judging from previous experience, would view this as an act amounting to suicide. If the Greek side seriously wanted negotiations they would not ask the impossible, and of course they know it.
What sort of settlement is possible sometime in the future? It cannot be in terms of a federation as most of us understand the word, with analogy to the United States or to Germany. It might be more aptly called a commonwealth of Cyprus, where matters of mutual concern and benefit could be discussed and agreed. Only after the passage of time would a closer association be possible, and even then there must remain two communities, territorially separate. It is very important that for some time the United Nations peace-keeping force should remain on the border. In existing circumstances it would be only too easy for hot-heads to cross over and kill some villagers, with possibly appalling consequences. In saying this, I would not necessarily blame the Greek Cypriots as much as I would blame their propaganda. It is inflammatory and, as I have said before, potentially very dangerous.
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It is long past the time for us to come to terms with the reality of the situation which I have tried to describe. The Greeks must realise that whatever they do they will not get back the north of Cyprus on the terms they would like. Equally, it is time that our Government faced the issue. Sometimes one would like to hope that we in Britain just might be more sensibly and morally inspired, instead of sitting back and doing precisely nothing.
7.29 p.m.
Lord Stallard: My Lords, it is with some trepidation that I rise from the Back-Benches to speak briefly in the short debate this evening, because I recognise only too well the amount of knowledge and experience of the problems of Cyprus that exist in your Lordships' House; and the debate has already shown that.
I am grateful to my noble friend Lord Willis for introducing this debate on a part of the Commonwealth about which most of us in this country know very little. I first became interested and involved in the problems of Cyprus in the early 1950s when I was a local elected representative for a part of London where many Cypriots of both communities had settled. They had settled there before the war, they had served in our armed forces during the war and they had resettled there after the war. There were many more who came during the 1950s and 1960s because of many different circumstances, and there were many who came shortly after 1974 who were also able to settle here. They came from both communities and we had excellent relations then. Those excellent relations still exist in that part of London, as they do in most parts of London, between the two communities and at many levels.
I became interested and very much involved in that period. I have maintained my interest and have tried since then to keep up-to-date, although it is very difficult because of the scant attention that the problems of Cyprus receive in much of the press and certainly in our media. We can understand that there are a variety of reasons for that.
Much has been said about the history of Cyprus. I never object to that because I have always maintained that a knowledge of the history of any region under discussion is essential to the understanding of its present situation. If we think of the Middle East, we must understand the history of that region if we are ever to arrive at a solution. To come nearer to home, if we do not understand the history of the Irish situation, we shall never get near to a solution of those terrible problems.
Although there is no shortage of literature on the history of this beautiful island, it is the interpretation of the history of all the situations that creates many of the problems. I am probably as guilty as most in this connection. I find it very difficult to understand those who say, "I do not intend to take sides and I shall try to be neutral". They then leave us in no doubt, within a few minutes, as to which side they are on. That might even happen to me; but I shall try to confess before I get into that position! However, I do not intend to get into that position because I genuinely believe that my noble friend Lord Caradon made the most telling comment this evening. If we could only follow his example, perhaps we should get nearer to a solution. I

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do not aspire to reach this great depth of understanding, but I can try.
I shall not go back further than 1974, because that would both take too long and be far too controversial, as we have seen. I imagine that there is general agreement that Turkey invaded Cyprus on 20th July 1974 and occupied approximately 40 per cent. of the Republic's territory. I hope that we agree that that happened and that it is a part of history. The pretext for the invasion was the coup against the legitimate government of Cyprus by the Greek military junta which had taken place only a few days before 20th July. I hope that these are accepted facts.
The territory that was captured by force in 1974 is still under Turkish military occupation. The search for an acceptable solution has gone on ever since. In the area under occupation and prior to the occupation, there were some 162 Greek and mixed villages accounting for about one third of all the inhabited localities of the old Republic. Before the invasion, the total Turkish population of the whole of Cyprus amounted to 18·4 per cent. of the total population. They owned just under 17 per cent. of the total land in private ownership. Most of that land was devoted to agriculture. However, the occupied area contained some of the best farmland in Cyprus, which constituted 65 per cent. of all cultivated land in the Republic. Before 1974, that part of the Republic had housed 32·6 per cent. of the total population of the Republic, most of whom were Greek.
I apologise for mentioning statistics such as these. But they come from official British and international sources and I hope that they cannot be disputed. The population in that northern part of the Republic, Greek and Turk alike, was uprooted in 1974 and forced to flee in all directions, but mainly to the south. They became refugees in their own country. Some of them made their way to this country and to other Commonwealth countries. However, the vast majority of the Greek Cypriots—almost 200,000 of them—are still prevented from returning to their land and homes where their people had lived for many generations.
There was also a problem of course with about 40,000 Turkish refugees. However, there was a completely different approach to the Turkish refugee problem. That was inevitable. They did not have the same problems of housing and resettlement; they had an entirely different outlook in that they were encouraged to have the outlook of victors and to look forward to the fruits of victory. There was a different outlook and approach both on their part and on the part of their authorities. It is significant that in the intercommunal negotiations which have taken place so far since 1974, the refugee problem has only been raised by the Greek Cypriots and never by the Turkish Cypriots. That is significant because I think they have virtually solved that particular problem, so far as they are concerned.
We all know that in 1974 a Prime Minister of the Labour Government of the time—I think it was Mr. Callaghan—went to Limassol and personally organised or assisted in the airlifting of some 8,000 to 10,000 Turkish Cypriots from Limassol to the Turkish mainland. Many of those people were brought
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back again after the occupation of the North. It was therefore not exactly the same problem. It is certainly not the same problem as that of the 200,000 people who are still refugees in their own country.
Although it has been mentioned almost in passing, there is a very serious problem concerning the fate of the 1,619 Greek Cypriot refugees who have been missing since the Turkish invasion. We do not know where they have gone; we have asked many times but the problem still remains undetermined and I understand that it is difficult to get any co-operation in resolving this problem. Perhaps the noble Baroness, in replying in this debate, will be able to update us on what steps may have been taken or are being taken on behalf of the many relatives who contact some of us to try to trace these refugees.
There was certainly genuine political progress being made before 1974 in the Republic to try to bring both sides together, as I have discussed many times with representatives of both communities. There was an attempt and a willingness on the part of many people (although not enough people) to try to bring the communities together before 1974. The situation now is that there is a demarcation line guarded by the military artificially separating both communities, despite the wishes of many members of those communities to be allowed to co-exist, as they had done before, in reasonable peace.
It has been mentioned that during the past 12 years efforts have been made to resolve the tragic situation in Cyprus. In 1974 the United Nations Security Council passed Resolution No. 3212, formally endorsed by Turkey, calling for the immediate withdrawal of all foreign troops from Cyprus. So far, Turkey has failed to comply with that resolution. It begins to appear, even from some speeches tonight, that the Turkish authorities both in Cyprus and in Turkey have been trying ever since to achieve permanent partition of the island and indeed have brought over an estimated 60,000 settlers from the mainland in what would appear to be an attempt to alter the demographic character of Cyprus. It has also been mentioned that in 1983 the area of Cyprus occupied by Turkish troops was illegally declared independent. Far from being democratically based, that part of Cyprus was illegally declared independent by the people there. This secessionist move was strongly condemned by the United Nations Security Council. That also was not mentioned, but it is a fact. The entire international community supported the United Nations on that resolution, including Her Majesty's Government, so it was an almost universal condemnation of this attempt to secede that part of Cyprus from the Republic. Most of us in the international community, and certainly in this country, had been striving for a re-united Republic of Cyprus, so were bound to take that attitude. So far as I can ascertain, no country other than Turkey recognises this pseudo-state that apparently exists in northern Cyprus. All calls from the United Nations and resolutions on the matter have been ignored.
Given that recent background, is it any wonder that the United Nations Secretary-General's initiative in Janary 1985, which resulted in a high level meeting in New York between President Kyprianou and Mr. Denktash, ended in failure, yet it is this breakdown

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that has given Turkey and the Turkish leadership in Cyprus the opportunity to proceed even further with attempts to consolidate partition. In my view, these attempts to partition the island run contrary to UN resolutions backed by the international community in the search for progress towards the solution of the problems of Cyprus.
The most recent in March 1986 was mentioned by the noble Lord, Lord Broxbourne, from the depth of his tremendous experience in this matter of international agreements. He mentioned the United Nations Secretary-General's draft framework for an agreement on Cyprus. The Cyprus government, I understand, have responded to those proposals. They have offered to initiate negotiations on three basic issues. These were mentioned by the noble Lord, Lord Broxbourne, and I had a copy typed out so that I would not make a mistake.
The three proposals are, first, the withdrawal of all foreign occupation troops and colonists. As I said, that is an accepted policy. The second is effective international guarantees for the sovereignty and independence of the Republic of Cyprus. The third is a guarantee of implementation of the three fundamental freedoms—the freedom of movement, the freedom of settlement and free ownership of property throughout the territory of the Republic of Cyprus.
I should say that the Government of Cyprus have offered a solution that could be the basis of discussion and negotiations. I should hope that it would be seen in view of all that has gone on before—the United Nations situation and the stance of the international community on such matters—that these proposals provide a comprehenisve mechanism for a just resolution of the Cyprus problem.
Partition has never resolved any other serious, thorny, problem, and there are many examples. I can think of Vietnam, of Korea and of India; and certainly, nearer home, of Ireland. Other noble Lords could probably add to the list. Partition has never been a permanent solution, nor would it be in this island. It would probably create more serious problems than it would resolve in a very sensitive area of the world.
Those of us who genuinely wish to see a peaceful resolution of the Cyprus problem must continue in the face of all difficulties to work towards achieving an independent, sovereign, territorial, integral federal Republic of Cyprus, as outlined by the noble Lord, Lord Broxbourne—perhaps not in exactly those words but in similar terms—and to be free from occupation, troops and sectors, to the benefit of all the citizens, both Greek and Turkish loyalists alike.
7.44 p.m.
Lord Cledwyn of Penrhos: My Lords, we are grateful to the noble Lord, Lord Willis, for enabling us to have this debate on the current position in Cyprus and for his interesting speech and historical analysis.
We have had several knowledgeable speeches. Many of them reflected a partisan viewpoint on the one side or the other. We must not complain about that in the mother of Parliament. But there are times, I think, when it is wise to be muted in our views, especially when there is a possibility of a settlement.
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It is just over three years since we last debated this issue. Our discussion then took place in an atmosphere of crisis, because the Turkish Cypriot community had just made a declaration of independence. I listened carefully to what my noble friend Lord Willis said about past history in Cyprus. I have no doubt that it was accurate. But nobody so far has pointed out that the declaration was universally condemned because it went completely against the United Nations resolution and against the treaty of 1960.
It also seemed at the time to almost everyone who took part in the debate that it stultified the efforts then being made by the Secretary-General of the United Nations, Senor Perez de Cuellar, to find a solution to the island's intractable problems.
This debate is again timely. It takes place against the background of a number of developments. The first is the continuing admirable persistence of Senor Perez de Cuellar to achieve agreement between the two sides. I shall return to this in a moment.
The second is the Turkish Prime Minister's visit to Cyprus in July, which angered the Greeks because he said he would like Turkish northern Cyprus—and I quote him—"to live for ever". Thirdly there is the visit of Mr. Denktash to this country, during which he was critical of Her Majesty's Government's current stance on Cyprus—criticisms that have been repeated in several of the speeches tonight. The fourth is the meeting in this country of leaders of the two communities, the first informal meeting of its kind since the invasion of 1974. Mr. Denktash had said that he wanted this country to try harder to promote the UN resolution.
Here I return to the Secretary-General's efforts. Senor Perez de Cuellar certainly deserves support and encouragement. Repeated failures that would have daunted many men have not deterred him. He knows the problems, because he served in Cyprus as a special representative several years ago. Britain also has special interests and responsibilities because of our former occupation, our obligations under the treaties, our large bases on the island—which have not been mentioned in the debate so far—and our membership of NATO with Turkey and with Greece.
It is very much in the interests of the West to see a settlement. In passing, we also recognise that the Soviet Union has interests too. One of them would be the removal of the bases that we have in Cyprus.
Over the last two years the Secretary-General has placed three sets of proposals on the negotiating table, and we must note the reaction to these. The first in January 1985 failed because President Kyprianou refused to accept it as it was drafted. The second produced later last year was rejected by Mr. Denktash, although Mr. Kyprianou was favourable to it. The third attempt, which was referred to by the noble Lord, Lord Broxbourne, and others, was made earlier this year and sought a compromise between the first two. Here it is Mr. Denktash who says yes but Mr. Kyprianou is indecisive. All this demonstrates the appalling difficulties of the negotiator, with whom we sympathise.
What, therefore, are the snags, what are the sticking points that make agreement appear to unachievable? The principle of a federal solution appears to be

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accepted by both parties. It is a solution that I fully support. It seems that the withdrawal of the Turkish troops is the essential Greek Cypriot condition that stands in the way of agreement. This is understandable.
How many Turkish troops are there in northern Cyprus? The Turks say there are 17,000 and the Greeks say there are between 25,000 and 35,000 and that the number is increasing. I noted the claim in The Times of 10th December that there are 35,000 Turkish troops in Cyprus. Can the noble Baroness tell us what is the Government's estimate? Mr. Denktash says that the troops are there as a result of the Greek Cypriot coup of 1974. But the short point that emerges from all this is that neither side trusts the other. As a settlement is delayed, so things get worse. The lack of trust increases. The regime of Mr. Denktash becomes more entrenched, with growing dependence on mainland Turkey, with all that that implies.
The number of immigrant Turks in Cyprus is now substantial—I think some 50,000—although Mr. Denktash claims that there are 300,000 Cypriot Turks overseas who have the right to return to Cyprus. The closer one views the scene, the more one sees the seeds of destabilisation multiplying on the ground; and that is what worries me most of all. Furthermore it is certainly not healthy or in anyone's interests that the tension which exists should grow between Greece and Turkey, both countries over-armed and both very nervous. There are plenty of dangerous spots in the world without this part of the near East becoming a flash point.
There is a case for our intervention and for more positive action towards a settlement. The Secretary-General is still probing towards an understanding. One possible step which has been suggested is the reduction of Turkish troops to, say, 5,000 as a preliminary stage. This would be enough, or should be enough, to give confidence to the Turkish community and should be a concrete token of good faith to the Greek Cypriots.
Here again we need the co-operative understanding of the United States Government. Here we are, the United Kingdom, Greece, Turkey and the United States, all members of the alliance. It should be possible to reach an agreement with the help of the United States Administration. Their tendency, for defence and security reasons, is to lean slightly towards the Turks and the Turkish Government. This may not be a formal Washington Administration view but the mood can be gauged from reading the American newspapers. It seems clear from them that there is a tendency towards Turkey as against Greece. There are reasons, which I shall not discuss now, why that should be so, but I believe that here again it would be prudent for the United States to be even-handed in the treatment of the two countries.
The point has been made that people are suffering and that human rights are transgressed in Cyprus today. This is an additional essential reason why urgent steps should be taken towards a settlement. It is in the interests of the people of Cyprus of both communities that there should be an early accommodation. It is a choice between a workable federal solution, which could bring economic, social and
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political benefits to all Cypriots and which could be guaranteed by the United Nations and by NATO, or the increasing enmity and destabilisation described by my noble friend Lord Willis.
In consultation with the Secretary-General and President Reagan, the Government should take an initiative very soon. We are the only country involved in the 1960 guarantees which could take this decisive step. Someone has said, and I quote:
"As a former colonial power and as a guarantor, this nation owes both communities in Cyprus something more than tea and sympathy".
This was the sense of the very moving speech made by my noble friend Lord Caradon, who knows more, I believe, about Cyprus and its problems than any other Member of this House. We are all delighted that in spite of his recent illness he has been able to join us this evening to make what was a notable contribution.
It is also the fact, and it is an encouraging one, that, although he has not yet succeeded, the Secretary-General has come very close to success. There was enough promise in his third attempt to turn the proposals into success with support and effective negotiation. It is here that I should like to see Her Majesty's Government, with the special position that this country occupies, taking a lead at this crucial time. We have everything to gain and very little to lose by doing that.
7.55 p.m.
The Minister of State, Foreign and Commonwealth Office (Baroness Young): My Lords, this debate has again demonstrated the very real concern your Lordships feel for the situation in the beautiful but tragically divided island of Cyprus. I welcome the opportunity which has been provided by the noble Lord, Lord Willis, to debate the situation in Cyprus today.
Her Majesty's Government fully share the concern that has been expressed. My own visit to Cyprus in 1983 is still fresh in my mind. I recall with particular vividness my visit to the United Nations "green line" in Nicosia, which underlined the danger and the futility of the present situation. It benefits nobody and brings enormous distress to many. Certainly the present situation is not in Britain's interests. We want a stable Cyprus. We know and respect its people and wish them well. In purely national terms we should recall that we have important bases there. And we wish to see the maximum stability on NATO's southern flank.
For all these reasons we want to see an early peaceful, just and lasting settlement. Our commitment to the search for peace is demonstrated by, among other things, our major contribution to the United Nations peacekeeping force, UNFICYP. If I may say so to the noble Lord, Lord Willis, I was surprised that he did not mention this point in the course of his remarks. We contribute by far the largest number of men—760 out of a total of 2,350; and we contribute by far the largest amount of money—more than £21 million annually, more than a third of the total cost.
That, if I may say so to those who are tempted to think along those lines, is more than tea and sympathy. Indeed, this is an enormous financial

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commitment which critics—for example, the noble Viscount, Lord Hanworth, who seemed to favour a long-term presence—should bear in mind. There is a very real cost. This is an enormous financial commitment which critics who feel we should be doing more in Cyprus should remember. But the Secretary-General has said that UNFICYP currently remains indispensable in creating the conditions necessary for constructive negotiations between the parties. We agree.
We regret that one side could not accept the United Nations Secretary-General's March proposals for a unified federal Cyprus. This was a serious setback to the search for peace. But the UN initiative is still very much alive. The Secretary-General is determined to carry on. Perhaps I may say how grateful I was for the remarks of the noble Lord, Lord Cledwyn, in support of the Secretary-General's initiative. I am also grateful to my noble friend Lord Broxbourne and others who have spoken in the same vein.
In his six-monthly report on his mission of good offices produced this month, the Secretary-General has restated his conviction that with good will and determination on all sides it should be possible for negotiations to proceed. Your Lordships will recall that he met President Kyprianou and Mr. Denktash in New York in September to discuss a way forward, and that the United Nations Under-Secretary-General Goulding followed up these meetings with visits to Cyprus, Greece and Turkey in November. We understand that the results of his visits are currently being assessed in the United Nations.
I can confidently say that no other country has done more than the United Kingdom in support of the United Nations Secretary-General's efforts. He has repeatedly told us how much he values our contribution. We are of course prepared to continue to offer him all the help we can. We all listened with great interest to the contribution from the noble Lord, Lord Caradon, and I hope he will accept the importance of what I have said about British support to the UN Secretary-General.
In the course of this debate a number of noble Lords have said that we should do more. We are certainly not complacent about the future. We are working closely with the UN Secretary-General. We take every possible opportunity to remind the parties of their responsibilities to the Cyprus people as a whole. We point to the extreme danger of actions liable to provoke the other side, and we discuss these dangers and the opportunities offered by the Secretary-General with both the Turkish and the Greek governments.
However, an independent British initiative would not be helpful. We are convinced that only direct talks between the leaders of the two communities will lead to agreement. The UN Secretary-General's office and its international standing make this, in our view, the best place to secure this. We would not wish to cut across his efforts. The most helpful contribution we can make is to continue to support those efforts. Perhaps I may say again that we take every possible opportunity to remind both parties of the dangers of actions liable to provoke the other side. We speak frankly and frequently to both Turkish and Greek governments about these dangers.
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It is for those reasons that we are not enthusiastic about the Soviet Union's idea of an international conference, for which the Greek Cypriots have shown some support. We do not like it. Such a conference would provide a forum for debate, but it would do little else. It would not address the constitutional and territorial issues on the island which still have to be agreed. We understand there is very little support for the idea in the Security Council. This accurately reflects the council's view that we should not be distracted from the current UN initiative.
There are those inside and outside Parliament who believe that the British Government should be doing more to put pressure on Turkey to withdraw her troops from northern Cyprus. We are obviously concerned about the number of Turkish troops in northern Cyprus. We have told the Turkish Government that we believe their withdrawal, along with that of other foreign troops from the republic, must form part of a compehensive settlement. This we believe they accept. If the UN March documentation had been accepted by both sides, negotiation on this and other outstanding issues could now be underway. We wish it were.
The trouble is that both sides, deeply scarred by recent history, see the problem as one of security. The Turks keep large numbers of troops in northern Cyprus to reassure the Turkish Cypriot minority. The Greek Cypriots, aware of Aegean geography, live in fear that the turkish troops will spill over into the rest of Cyprus. There is no point in urging people simply to stop being fearful. The people need convincing. That is the role of the respective political leaders. Only when we have a political settlement agreeable to all parties can these fears be put at rest. This is what we should be aiming for.
I have been asked a number of questions about the figures for the number of troops on the island. The noble Lord, Lord Cledwyn, in particular asked about this, and my noble friend Lord Newall also quoted numbers. The figures for the number of Turkish troops in northern Cyprus are, unsurprisingly, a matter of dispute between the two communities, but our estimate is that there are between 25,000 and 30,000 such troops. As regards Greek troops, we understand that in Cyprus there has been no significant change in numbers, which we estimate remain at between 2,000 and 3,000. There are about 650 Greek officers and NCOs seconded to the national guard.
The noble Lord, Lord Kennet, raised a number of detailed points about the numbers. We think that we must be cautious about concluding too much from the figures and the numbers that have been given. It was Disraeli who spoke about lies, damned lies and statistics. Perhaps that is particularly apt of the situation in Cyprus.
Others in your Lordships' House, and outside, say to me equally vehemently that our present policy is unfair towards the Turkish Cypriot community. The noble Lord, Lord Willis, used the word "quarantine" several times. I do not accept that. It is true that we do not recognise the so-called Turkish Republic of Northern Cyprus. We took a very serious view of the Turkish Cypriot declaration of UDI in 1983, and continue to do so. However, this does not affect our

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acknowledgement of the interests or aspirations of the Turkish Cypriot community. We maintain contact with their leaders in northern Cyprus. We continue to trade normally with them. They both benefit from aid that we give to Cyprus.
We took some trouble to make sure that the Turkish Cypriot community was being consulted informally by the European Commission on negotiations for a European Community-Cyprus Customs union which they will apply throughout the republic. To answer some of the points concerning aid, raised by my noble friend Lord Newall, may I add that, as regards European Community aid, under the second financial protocol to the association agreement Cyprus was offered 44 million ecus. The protocol expires in December 1988 but projects under the protocol must benefit both communities. As regards bilateral aid, we have a small ODA-financed co-operation programme of £250,000 per annum. This includes scholarships and technical aid which goes both to the Turkish Cypriot and to the Greek Cypriot communities.
The noble Lord, Lord Stallard, asked about missing persons in Cyprus. The position is that the UN intercommunal committee on missing persons resumed its work under its new Swiss chairman about 18 months ago. We understand that it is making progress. Certainly it is the best vehicle for this problem. We believe that a separate intervention by Her Majesty's Government with any party would risk cutting across the committee's work; though if the Secretary-General and the whole committee asked for our help we would of course be ready to do what we could. The problems are formidable. As in so many other areas, progress essentially depends on the will of both parties to achieve it.
I think we all agree that the situation in Cyprus is tragic and wasteful. There is an undesirable and unnecessary division of the island. This complicates the political situation in the eastern Mediterranean. It fuels Greek/Turkish disagreements; it runs counter to British interests and those of our NATO allies. All parties say they want a settlement; so does the international community in the United Nations. With sufficient political will on both sides, we believe a settlement is attainable. The present situation has gone on for far too long. The UN Secretary-General is working hard with the parties to achieve a settlement. We are doing all that we can to help. I am sure your Lordships will continue to support that objective.
8.9 p.m.
Lord Willis: My Lords, it is not the custom in these debates for the mover of the Motion to reply to speeches, much as I should like to reply to some of them. However, I want to thank all noble Lords for participating in what I think has been a very useful debate. In particular I thank the noble Lord, Lord Caradon, for his very moving and sincere speech. Nothing that I or other speakers said earlier detracts from his vision, which we all share, of a united and peaceful Cyprus at some time. We may differ about how that may come about but we share the dream. I beg leave to withdraw the Motion for Papers.
Motion for Papers, by leave, withdrawn.

Licensing (Restaurant Meals) Bill [H.L.]
8.10 p.m.
Viscount Montgomery of Alamein: My Lords, I beg to move that this Bill be now read a second time. I thought it might be helpful if I started by giving some background as to why this measure has been brought before your Lordships. As on past occasions, I must begin by declaring an interest, as I am the honorary president of the Restaurateurs Association of Great Britain. The RAGB, as it is generally known, is a trade association concerned with safeguarding the interests of independent restaurants and promoting the highest standards of catering.
Your Lordships will be aware that in July 1985 and in April this year I initiated short debates on the need for some general licensing reform, possibly based on the Scottish experience. I had hoped that Her Majesty's Government would take this question on board and would introduce some measure during the current Session. However, as the Queen's Speech failed to produce any new development, I thought it might help both Her Majesty's Government and the cause of licensing reform to proceed on a step-by-step basis. This simple measure is therefore one very small first step in that direction.
This one-clause Bill will allow flexibility for restaurants or any other establishments at which table meals are served to provide drinks with meals at any time. The main problem for restaurants concerns the afternoon hours when late lunch customers request drinks with meals. It will be obvious that lunching habits vary widely throughout Western Europe, and indeed countries are on different time-scales. For instance, the Spanish lunch-time generally starts at about the same time as the English lunch hour ends. Throughout Western Europe there are no restrictions and only the United Kingdom has remained with outdated and outmoded regulations concerning the serving of drinks with meals in restaurants.
The restaurant trade is not pressing for late night extensions, which are already available up to 1 a.m. or 2 a.m. through special certificates, but is concerned with the afternoons between 2.30 p.m. and 5.30 p.m. on weekdays and between 2 p.m. and 7 p.m. on Sundays.
Let me make one point quite clear. People go into restaurants to eat, and drink is an accompaniment to food. If people want to drink there are many other outlets where that need can be satisfied. Therefore it follows that this Bill is not intended as a bonanza for boozers. Quite the contrary; restaurants provide an important service within the tourist industry and general substantial employment, but they are currently disadvantaged by the restriction on hours. This is the case throughout the length and breadth of the realm, although there has been a move forward in Scotland, for which we must all be grateful.
In conclusion, this Bill is about the quality of life. It is about tourism. It is also about employment. Most job creation schemes are expensive but this modest measure will provide many jobs at no cost whatsoever. This Bill will allow the British restaurant trade to operate on the same basis as continental Europe and

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most other parts of the world. I commend it to your Lordships.
Moved, That the Bill be now read a second time.—(Viscount Montgomery of Alamein.)
8.15 p.m.
Lord Lloyd of Kilgerran: My Lords, it is with great pleasure that I rise to support the Bill, which has been so clearly and succinctly presented by the noble Viscount, Lord Montgomery. I must declare an interest in this matter, because when I last supported the main theme of the Bill presented by the noble Viscount some years ago I was not quite in the position in which I find myself now. Since that time, as some of your Lordships will be aware, I have become the chairman of a trust—the Brantwood Trust—which supports the home of John Ruskin in the Lake District. The trust maintains the house, which is open to the public, and it receives 30,000 visitors a year.
My managers are always looking for opportunities to increase revenue and recently they decided that one of the stable blocks where Ruskin used to keep his horses and carriages should be converted into a restaurant, which has been done. As Ruskin supported the Pre-Raphaelites, my managers and advisers thought it desirable that we should decorate the restaurant in the Pre-Raphaelite style but rather than associate it with the Pre-Raphaelite brotherhood we should refer to the Pre-Raphaelite sisterhood. It is furnished with full length portraits of ladies who were associated with the Pre-Raphaelites, and those pictures were presented to us by the Manchester Art Gallery.
I must apologise to the House. Because of prior long-standing commitments I shall not be able to stay until the end of this debate. I am sure that it is not necessary at this late hour for me to put forward further argument in support of the realistic Bill that is now before your Lordships. It seems to me that it is very much in the public interest that such a measure should be passed. The Bill ought to be welcomed by the Government as being another step forward, and not merely a step forward in the sense mentioned by the noble Viscount in his speech but a step forward in harmonisation, particularly with EC countries, so that our arcane laws of licensing will become modified in a European sense in the future.
8.17 p.m.
Lord Mancroft: My Lords, I, too, should like to add a few words of support for this useful little measure which has been moved by my noble friend Lord Montgomery in his customarily lucid way. I must declare a previous interest in exactly the same way that he did, because I preceded him in the office of president of the Restaurateurs Association of Great Britain, a duty that I carried out to the best of my ability for nearly 10 years. I therefore support this Bill not only out of loyalty but also because I think it is an extremely good Bill, especially as I tried to bring forward exactly the same kind of measure about seven years ago but failed because the Home Office said that it would be tackling the job piecemeal and that we should try to obtain wholesale licensing reform.
Having served for some years in the Home Office and knowing its ways, I suspect that when it said that
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the Bill would thereby become too big and should be the subject of a public Bill and a private Members' measure, that was a polite method of putting it in a pigeonhole. Perish the thought that such a thing should happen today! I was only too delighted to hear the present Home Secretary, Mr. Hurd, mention the desire to introduce racing on Sundays.
Baroness Macleod of Borve: Hear, hear!
Lord Mancroft: The noble Baroness says "Hear, hear!", my Lords. Five years ago the Home Secretary would have been swinging from the nearest lamp post if he had suggested such a thing. I know, because I was then chairman of the Tote, and when we tried to get betting on the Prix de l'Arc de Triomphe on a Sunday I realised that I was in danger of losing my job. However, times have changed.
I went all over the country when I tried to introduce my little Bill and I found very little opposition indeed. I know that my noble friend Lord Montgomery has also made detailed inquiries. If I thought for one moment that this measure would increase the incidence of drunken driving or alcoholism I should not be supporting the Bill at all. I do not want to add to the reasons for commendation given by my noble friend—the noble Lord, Lord Lloyd of Kilgerran, too, has added his support for other reasons—but I should like to put forward one new one.
I am strongly opposed to nonsensical Bills which the public despise and which the police shut their eyes to, and which authority does not want to touch. In Oliver Twist, Mr. Bumble said: "If that is the situation, the law is an ass; the law is an idiot". I despise asinine and idiotic laws. This law, which the noble Viscount, Lord Montgomery, is trying to reform, is an asinine law, and so are the existing licensing laws generally. When I come to think about it, so are the Sunday shopping laws. I was very sorry indeed to see them fall by the wayside. I have been deeply concerned with them. Therefore, I am very pleased to support this measure.
I remember the 1954 Shopping Act. It was at the Despatch Box representing the Home office in your Lordships' House, that I tried to get it through. I spent nearly three columns of Hansard trying to persuade your Lordships to understand why only a Mohammedan or a practising Jew could operate as a barber in Scotland on a Sunday. I failed, and I hope the noble Viscount will have more success with his Bill than I had with mine. I beg leave to support the Bill.
8.21 p.m.
Lord Monson: My Lords, this is a Bill which one has unqualified pleasure in supporting. I can say without fear of intelligent contradiction that it is a measure which is long overdue. We must all be grateful to the noble Viscount, Lord Montgomery, for taking the initiative and goading us into action to remove a stupid anomaly which has been tolerated for far too long.
To be able, if one so chooses, to enjoy a modest glass or two of wine, beer or cider with one's main meals is not only a prerequisite for enoying the greater part of Western European cuisine, but is an integral aspect of Western European civilisation. It may not be part of the Ayatollah Khomenei's civilisation, it may not even

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be part of the civilisation of the American mid-west, but these cultures are no concern of ours. It must follow that to circumscribe and restrict that modest pleasure in a country such as ours (which is part of Western European civilisation) is tantamount to cultural barbarism.
Almost as barbarous are regulations which permit the unlimited consumption of wine, beer or spirits at the beginning of a meal and which then force diners to swill down the rest of their bottle, or bottles, in 20 seconds flat or even to see their glasses snatched away unfinished in order to beat the deadline of some arbitrary chiming of the clock.
There may just conceivably have been some justification, albeit shaky and tenuous, for this uncivilised practice in a static provincial society where everybody works exactly the same hours and where everybody eats their meals at identical times. However, there can be no justification in a thriving cosmopolitan society such as ours. This is so especially in these days of large scale international tourism where people may want to eat their lunch at three o'clock following an exhausting round of museums, or conversely may want to eat their dinner at five o'clock before an early evening theatre performance. Nor can there be any justification in these days where people must practise shift work in so many occupations. Especially not at the present time when so many people, particularly in London, but also in other parts of the country, are obliged by the nature of their work to keep the hours of Tokyo, New York, Vancouver, Sydney or Hong Kong and must adjust their mealtimes accordingly.
The puritans and busybodies will demand: "What about drunkenness and alcohol-related diseases!". As the noble Viscount said, the answer to that is that anybody who wishes to get drunk is certainly not going to go to a restaurant to do so. Unless he positively prefers the greater ambiance and expense of a pub, our would-be drunkard will head instead for an off-licence, a supermarket or a corner grocery shop where he can buy drink of all sorts for up to 15 hours a day from Monday to Saturday and for up to five hours a day on Sundays—drink which will cost him between one-half and one-third of what he would pay in a restaurant. So that alarmist argument is a bogus one which will simply not hold water. My Lords, let us declare ourselves in favour of a more civilised Britain by supporting this Bill overwhelmingly.
8.25 p.m.
Lord Kimball: My Lords, it is very appropriate that my noble friend Lord Montgomery should introduce the Bill at this time. After all, we had the Erroll Report just at the time that the breweries and the supply of beer was referred to the Monopolies Commission. At this moment the Director of Fair Trading is looking at the whole of the tied house system.
There is one argument that I am not influenced by. I am not influenced by this great cry that the tourists want it. I look at this Bill from the point of view of what is good for the people of England. If it happens to be of help to the tourist, that is all right. I am all for taking the maximum amount of money off the tourists because they cause us enough trouble and do enough
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damage to this country. But we actually have to have them. Let us be realistic about it. Do not let us legislate just for the sake of the tourist.
I regard this Bill as much more important. I regard it as part of a better Britain, and a brighter Britain. I regard it as the forerunner of dealing with the other problems not only of licensing but Sunday trading, Sunday racing and Sunday betting. However, I approach it in the same way as I approach those matters. We have had a certain experience of those problems under fire. I used to follow the noble Viscount across the ploughs of Cambridgeshire. I hunted him across those ploughs for three years when he used to run for the Cambridge drag. However, I am not prepared to follow him into the political valley of death, unless the guns have been spiked. I think the noble Lord, Lord Mancroft, will recall that that was the context in which the Home Secretary made his speech the other day at the Gimcrack dinner at York. If we want to reform the laws on licensing, shopping and racing on Sunday, then we have to get the lobby properly organised.
One must realise that in every constituency there are churches and chapels covering nearly every polling station. They are an enormous lobby which at the moment is not necessarily on our side. The lobby that wants to see sensible licensing laws and see a sensible Bill like this on the statute book is the majority of people. But so far those people who support these sensible amendments have not been properly organised. They will not be organised by all-party committees or by public relations men having people to lunch in London. It will be organised only by running the matter properly at grass roots level throughout the constituencies.
Concerning the effect of liberalising the licensing laws on the whole question of drink, we have the example of Scotland. Afer all, the Scottish licensing restrictions were far greater than they were in this country. Since the laws in Scotland have been changed, drunkenness has fallen by 41 per cent., which is a pretty amazing statistic. If there are more civilised drinking hours, then there will be much less drunkenness.
I congratulate my noble friend Lord Montgomery on introducing this Bill. He said it is a Bill which goes a long way to allow us to have drinks with meals at any time—a highly civilised idea. I wish him the greatest possible success.
8.29 p.m.
The Viscount of Falkland: My Lords, I too support the Bill of the noble Viscount, Lord Montgomery. There is no inconsistency with the recent speech that I made in your Lordships' House where I promoted the idea that we had a very severe problem as regards alcohol in this country. I support this Bill for the very good reason, as the noble Lord has just said—if I may take the meaning of what he has said—that it improves the quality of our life here to enable people to pursue the civilised pursuit of eating and drinking and all that that entails.
However, I think that it is worthwhile pointing out again that we have an alcohol problem and I should like to press the Minister on that. This is a two-part

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problem. There is the question of dependency and addiction, which is the traditional problem. There is also the problem of intoxication and its immediate effects, particularly among the young, which result in violence to the person and destruction of property. I feel that that is something which has not been given proper attention by the Government.
It is significant that alcohol consumption is increasing in this country whereas in neighbouring countries it is on the decrease. In France, in particular, which is a country where there is no restriction on what one may drink and eat or at what time, it has decreased by 20 per cent. The reason why they do not have the problem of this increase in consumption that we have is that there is consensus. There is consensus with government, with those who manufacture alcoholic drinks, and with the public. There is awareness in this country but we have not yet reached that point.
There have been a number of excellent television programmes recently. Quite a lot of work is being done by groups who are interested in this social problem. I do not think that those groups will welcome this Bill because they will see the measure quite simply as another way of increasing consumption. I do not agree with that argument. The young will not be particularly interested in this measure. The consumption among the young is mainly from outlets which under no circumstances could be described as restaurants.
One can get drink anywhere one likes nowadays all round the clock. The laws are a nonsense. I agree with the noble Lord, Lord Mancroft. Indeed, today when driving to a meeting, I heard on the Brian Hayes programme on LBC, a woman who telephoned in saying that she had a son who is clearly under age (she did not state his age but it sounded as though he might be 12, 13 or 14) and who habitually came home drunk. She went to the publican and protested that he and his friends were being served. He was very off-hand about this. He said that as far as he was concerned these young men were of drinking age. She said, "If you do not do something about it, I shall report you to the police". She went to the police, and the police said, "We understand your problem but would you mind standing off for a couple of months because we have this pub under observation as a place where there is trade in drugs". We therefore have a very extraordinary situation where the police are not enforcing the laws of the country as they now stand. I am not saying that this applies generally. This is a situation where drugs and drink are being confused; they overlap. There is definitely much more concern about drugs.
Of course there should be concern about drugs and I shall not repeat the figures I gave when I spoke to your Lordships the other day about the effect of alcohol abuse in terms of illness, crime and so on. However, our drinking culture needs to be considered and debated, and I hope it will be. It will in no way be harmed—indeed it will be improved—by the Bill proposed by the noble Viscount, Lord Montgomery. I hope that the Government will take action before this problem becomes so great that they can no longer go on ignoring it.
Drink is an enormous revenue-earner. The position may well be not unconnected with the news today that
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the enormous revenues coming into the Exchequer this year may possibly result in a lowering of the tax rate. The revenue from drink is immense. I can understand the unwillingness in Government circles to alter this situation.
This Bill has been warmly welcomed in your Lordships' House. I welcome it as an important cultural step in the alcohol culture of this country. At the same time I hope that the Minister will take on board the concern of all of us about alcohol abuse in this country, which is growing. I hope that something can be done to alter the laws to take that into account as well.
8.35 p.m.
Baroness Macleod of Borve: My Lord, I hope to be as brief as all the other speakers, who have been commendably brief so late at night. We are discussing a part of a Bill which was introduced over 70 years ago. Change has occurred in this country, as I am sure all noble Lords will agree. Apart from the relaxation in Scotland in 1976, we have stood by the law introduced 70 years ago. I would hope that all noble Lords—and there are few present—would agree with me that change is our ally and we must march forward and change with the times.
I shall say only a very few words. Mine is a cri de Coeur from a housewife. On many occasions people arrive for a meal by plane, ship, air or train, and one is unable to go to a restaurant as one had hoped because one cannot get a drink of any kind and it would therefore be very inhospitable to take anyone to a restaurant for a meal after perhaps three o'clock in the afternoon.
Accordingly, one has quickly to prepare a meal for eight or 10 people, because it is so very easy to purchase several bottles for eight or 10 people from the local grocery store. But that is not leisurely drinking. Leisurely drinking is impossible in a restaurant at such a time. One is looking at the clock. One therefore has problems in coping with people from overseas, and I do not entirely agree that we should not take those people into consideration. If one looks at the Germans, the Italians, the French and the Spanish—and I have travelled in all those countries—they rarely eat and drink at the same time before three o'clock in the afternoon. Our hours are, as the noble Viscount, Lord Montgomery, quite rightly pointed out, completely different from theirs.
This is not a big measure, but a small one that will help the quality of our life, as I think one noble Lord said. It will help the quality of our welcome to people from abroad. I wholeheartedly support the Bill. I hope that the Government will do so also.
8.38 p.m.
Lord Harris of High Cross: My Lords, I am very glad to join others in congratulating the noble Viscount on this effort to remove obstacles to civilised drinking with meals. I rejoice that it has so far been supported by all the previous speakers. I am very sad to report that my noble and learned friend Lord Simon of Glaisdale is unable to be with us. However, I can vouch that he would have lent strength and vigour to the advocacy of this case.

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As a general rule, if I find too many people agreeing with me I often pause to reflect whether I might be on the wrong side. However, I have decided that there are some propositions that remain true even though supported by Conservatives, Social Democrats and even Liberals—and we have yet to hear from the Labour Benches.
I have no hesitation in supporting this Bill on two grounds. The first is the high principle of individual freedom of choice. The second is the subordinate but wholly supporting expedient of economic efficiency in catering for the widest range of consumer demand. As my noble friend Lord Monson has pointed out, changing patterns of work and more travel and growth in tourism make it increasingly anomalous that the Government should attempt to prescribe the hours at which people may enjoy the amenity of drinking with their meals.
As the noble Viscount, Lord Falkland, and others have said, the only possible cause for a moment's doubt could be on grounds related to the acknowledged evils of alcoholism. Undoubtedly the abuse of alcohol is one of our gravest social problems. There can be few of us who have reached an age to qualify for membership of this noble House who do not have friends or relations who are, or have been or may become, in peril from the demon drink. I confess that I have at least two people currently on my prayer list for this reason. However, the Scottish experience seems to confirm that excess springs from drinking at home or in clubs or in private at parties. The safest environment for drinking is surely the controlled public setting of a pub or restaurant, where the publican or restaurateur has a powerful interest in avoiding the excess that could bring his licence—his business—into jeopardy. My only objection is that for my liking this Bill is a touch too modest a step towards the wider freedom and flexibility that I hope will remain our aim. With that qualification, I gladly support this positive and constructive measure.
8.40 p.m.
Lord Campbell of Croy: My Lords, I should also like to congratulate my noble friend on introducing the Bill, which will take the situation a step forward in England and Wales. I agree with what the noble Lord, Lord Harris, said about Scotland.
Your Lordships know that I would be the last person to suggest that life and conditions in Scotland are the same as they are in England and Wales. I live in Scotland and my home is in Scotland, and I suggest that over the past 10 years the experience in Scotland is very relevant. I remind your Lordships that I was the Secretary of State who in 1971 appointed the Claysing Committee to review the law in Scotland. It reported expeditiously while I still held that office, and I set in train the preparation for legislation which was passed in 1976. I was therefore the initiator of the reform in Scotland.
It was a liberalisation and a rationalisation of the previous restrictions. My main concern was that it would not lead to an increase in drunkenness. There was some drunkenness in Scotland before the reform because there was an incentive to drink up before
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closing time; it was trying to beat the clock, apart from the points which the noble Lord, Lord Harris, mentioned.
The important thing is that the reports on the effects since 1976 show that there has not been an increase in drunkenness and that drinking is now more civilised. In general it has been accepted in Scotland as a successful reform. In particular, two benefits have arisen. First, it has considerably helped the tourist industry and, secondly, it has provided more employment. The employers were worried at the time because it upset their work programmes but they adjusted and worked out new schedules.
In passing, I should mention that of course there is also freedom to shop in Scotland on Sundays. The situation in Scotland is already what the late lamented Shops Bill would have introduced in England and Wales. That freedom does not detract from Sunday in Scotland. Statistics show that a larger proportion of the population in Scotland go to church on Sundays than is the case in England and Wales.
I should briefly like to take this opportunity of dealing with a very recent development where clarification and correction are needed. A few days ago garbled versions of another report came out in the media. At first hearing it sounded as though the reform of Scottish licensing laws had led to an increase in alcohol poisoning. The report was in the British Medical Journal of 6th December, so I looked it up. It appeared to be contrary to the previous report to which I have referred about improvements over the past 10 years.
I now put this in proper perspective. The observations in the British Medical Journal concerned one hospital only in West Fife and did not relate to Scotland as a whole. They were for 12 years: six years before 1976 and six years after the reform. However, the cases were only cases of admissions for self-poisoning, deliberate or accidental, but presumably most cases were attempted suicides by overdoses of drugs. The findings were that in such cases there had been an increase in the frequency of alcohol taken in association with self-poisoning. One hospital is only a very small sample of the Scottish population as regards people who have been trying to poison themselves, most of them presumably trying to take their own lives.
This was the result of scholarly and meticulous research but it related to people who had been taking overdoses of drugs in one small area of Scotland and not to alcoholism in Scotland as a whole. The authors stated in their article that there was no evidence to support the theory that overdoses tend to be more serious when even moderate amounts of alcohol are taken concurrently. They went on:
"It has become increasingly recognised that alcohol has pharmacological actions which may moderate the effects of certain types of drug overdose. In the acute phase alcohol may decrease the severity of self-poisoning".
Some of their findings were the other way. Of course they were not suggesting that alcohol should be taken in such cases. Their conclusions were that, though there appears to have been no increase in the severity of overdoses associated with increase in alcohol abuse, there has been a rise in admission rates.
I am glad to have clarified what the findings really were, because some of these reports made headlines in

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broadcast news. I am therefore glad to point out what the findings were really about. Some of the brief summaries in the media gave a quite different impression. However, all the reports about the Scottish experience have come to the same conclusions.
8.46 p.m.
Baroness Ewart-Biggs: My Lords, I am sure that the noble Viscount must be very grateful that his Bill has aroused so much interest and support. He must also be very pleased that so many noble Lords have spoken even at this late hour and at close proximity to Christmas shopping. As the noble Viscount said, this is not the first time he has brought the subject of our licensing laws to our attention. In April of this year he asked the Government to consider introducing flexible hours in public houses following the reform in Scotland. I remember that the Minister was not persuaded that this was the right course to take, though in his speech he allowed a glimmer of hope to emerge.
I remember that my own view, spoken from the Front Bench on this side, was that on the one hand the opening hours of a public house should fit in with the needs of the local community, and that one unequivocal result from the Scottish experience was that there had not been less drinking but that there had been more civilised drinking. I agreed with the Minister that bringing about more flexible licensing hours might well turn public houses into areas where the whole family might enjoy a place and might have either alcoholic or non-alcoholic drinks.
On the other hand, I remember very clearly the speech that the noble Viscount, Lord Falkland, made when he deplored the lack of sufficient education about the dangers of drinking and the insufficiency of funds going to organisations seeking to provide this education.
In spite of that glimmer of hope that we heard from the Minister in the previous debate, we did not hear anything in the Queen's Speech about any legislation coming from the Government. We have not heard from the Government that they intend to develop a comprehensive policy on alcohol control while at the same time introducing legislation to update our licensing laws. Instead of that we have this Bill relating to licensing hours in restaurants. In the other place we understand there is to be another Private Member's Bill introduced to cover licensing hours in public houses. That Bill is not yet printed, but that is what we understand will happen.
My first point is: what will be the effect, hypothetically speaking, of both these Bills? If the Government support them both, we may see a very radical change affecting the whole of our licensing laws. If the Government intend to support these two Private Members' Bills, which it is thought may be the case, why do they not bring forward a Bill preceded by the usual consultations and formalities which normally go with major social legislation? I very much hope that the Minister, when he answers, will make the Government's position and views clear on this point. It is important to the way we see the noble Viscount's Bill this evening.
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Perhaps I may make one or two comments on the noble Viscount's Bill and put one or two questions to him. First, I certainly agree with the intention behind the Bill. I believe it is perfectly logical and constructive to wish to help restaurants provide a better service to their customers. At the moment there is little doubt that many foreign tourists as well as British families are inconvenienced when arriving late for lunch at a restaurant and are not allowed to have a drink with their meal. This is a well-known fact. The new measure that the noble Viscount wishes to introduce through this Bill seems sensible and, on the face of it, not at all contentious.
However, there are implications which must be considered. As I understand it, there is an elimination of every kind of restriction on an establishment provided meals are served in a predesignated area. This means not only that reputable restaurants could serve alcohol at any time without restrictions, but also that public houses of whatever kind could sell alcohol without control provided they serve meals in designated areas. I have described their service in this way because nowhere is a meal defined; and a plate of sandwiches is no less acceptable within the terms of this Bill, as I understand it, than a five-course meal.
It also has to be noted that the concept of permitted hours completely disappears under the terms of this Bill. As it is, after all, now common practice for public houses to serve food, it is only a small step to common acceptance of a designated area where alcohol, on purchase of a token quantity of food, will be available 24 hours a day.
The failure of the Bill to define a restaurant and a meal, both of which I can understand are difficult to define, raises problems. For instance, would the legislation allow alcohol to be served with fast food? There are many fast-food establishments which are popular with young people, and the serving of alcohol in places such as those would produce a real danger to them, and one that I am sure none of us would wish to see. Secondly, would the proposal bring a spread of increased licensed premises? At present when magistrates are asked to grant new licenses to pubs and wine bars or off-licences they have to consider the question of the need in the locality. If they consider that the locality is already well served they may refuse a licence.
However, this of course is not the case with restaurants. Once it meets the fire regulations and has the proper facilities and security arrangements for drink, etc., a restaurant must be given a licence. This Bill would allow all-day servings, and therefore allow much longer hours than pubs and might bring about a great rush for more licensed restaurants.
I wanted to make those points because I feel that these are the areas that need looking at in the Committee stage of this Bill. I hope that the noble Viscount will consider including amendments which will introduce proper controls, and that the proposals to allow 24-hour unlimited drinking in places where meals are served will be changed.
Many noble Lords have mentioned the arguments concerning Continental behaviour in these matters. The noble Viscount, Lord Falkland, made it clear that this is rather misleading, in that without exception

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those countries are introducing increased restrictions on alcohol. France, for example, has reduced its consumption by 20 per cent. in the past ten years. I believe that at this particular moment we are the only country going in the other direction.
Those of us on these Benches agree that there are many anomalies in our drink laws. We are certainly not against altering them as a point of principle. But we believe that any change made in them should not be done in a piecemeal manner. Surely change can only come from a clear policy on alcohol, and although there have been a number of reports on the subject there is still no clearly defined policy from the Government. If we had that it would provide a proper context in which to consider the anomalies which exist in our licensing laws.
Therefore while congratulating the noble Viscount on this further initiative to rouse the Government into looking seriously at this whole field, I must once again ask the Minister why the Government do not provide their own legislation having first arrived at this clear policy. This policy must be worked out with those who are affected by the anomalies—people in catering and restaurant businesses—and also with those organisations which are trying to assist in the whole area of drunkenness and alcoholism. None of the statistics has been brought out today, but indeed a horrifying toll is paid.
There should also be discussion with those representing the labour force who work in this vulnerable and badly paid area of the workplace. I hope that when the Minister answers he will put the Government's position. In the meantime, I am glad that the noble Viscount has once again brought forward something which will encourage the Government to do that.
8.57 p.m.
The Earl of Caithness: My Lords, I have listened with great interest to the views expressed tonight in your Lordships' House. My noble friend Lord Montgomery has stressed the benefits to tourism and employment which his Bill would bring by allowing restaurants to serve drinks with meals beyond the present licensing hours. My noble friend Lady Macleod of Borve has highlighted the irritation and disbelief of tourists coming to this country who find it impossible to buy a drink in a restaurant after 2.30 or 3 o'clock in the afternoon. My noble friend Lord Kimball said, "Don't worry so much about the tourists". It is the poor Englishman he is concerned about. Not surprisingly therefore, the flexible approach contained in my noble friend's Bill has found considerable support.
The noble Baroness, Lady Ewart-Biggs, made reference to the Bill introduced last week in another place which is designed to benefit all licensed premises and registered clubs, including of course restaurants. I shall come back to that in a moment. I need first to say a few words about restaurants in terms of what the law now allows and the effects of the Bill before us. We are not talking about all premises which may serve drinks with meals, such as the bars of public houses, but only those which are designed to cater specifically for customers sitting down to a meal to which the
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consumpton of alcohol is ancillary. In this context therefore we are concerned with the structurally adapted, self-contained restaurant, including those within or attached to premises such as hotels, public houses or the private members' clubs.
The hours during which restaurants may serve alcohol with meals are governed by the Licensing Act 1964. As a general rule, the permitted hours for all licensed premises are from 11 a.m. to 3 p.m. and 5.30 p.m. to 10.30 or 11 p.m. on weekdays. On Sundays the hours are shorter, with an afternoon break between 2 o'clock and 7 o'clock. For restaurants which are structurally adapted for their purpose and which serve alcohol only as an ancillary to a meal, the supper hour certificate enables drinks to be served for an extra hour in the evening and until 3 o'clock in the afternoon, seven days a week. For premises which also provide entertainments, late-night extensions are available allowing the sale of alcohol until 1 a.m., 2 a.m. or 3 a.m.
As I understand it (and my noble friend has confirmed this this evening), the main purpose of his Bill is the removal of the dry period in the afternoons; that is, the period between 3 p.m. and 5.30 p.m. Mondays to Saturdays, and between 3 p.m. and 7 p.m. on Sundays. If this were done it would be possible for anyone dining at, say, four o'clock in the afternoon to have a drink with a meal. That is not unreasonable. But when one looks criticially at the Bill one finds it goes beyond that modest ambition, as the noble Baroness, Lady Ewart-Biggs, correctly pointed out.
The Bill effectively removes restaurants from all controls over permitted hours, and would enable them to serve alcohol 24 hours a day. This would mean that there would be no effective safeguards against the restaurant whose customers dispersed in the small hours of the morning and who caused disturbance and nuisance to those living nearby. The only remedy available would be to oppose the annual renewal of the restaurant's licence—a drastic step if all that was needed was a curtailment of the opening hours.
Premises which provide only food but not alcohol throughout the night are subject to a registration procedure by the local authorities so that those which give rise to disorderly conduct may be controlled. No similar restraints would apply to licensed restaurants under the provisions of my noble friend's Bill. We doubt whether this is an acceptable approach. We can all think of examples of restaurants filling with customers once public houses in the area have closed. I wonder whether it is such a good idea to allow restaurants to continue to serve alcohol, albeit with a meal, until the last customer sees fit to leave. Those living in the vicinity of such restaurants may well view the prospects with alarm.
It was for that reason that I was slightly surprised by the speech of the noble Viscount, Lord Falkland, considering what he said when we debated the gracious Speech. He made a strong attack on alcoholism and suggested ways in which the Government should tackle that very serious problem. I fully sympathise with him on this. Having had the honour to be a Whip and to speak for the DHSS, it was one of the areas in which I took a particular interest.
My noble friend Lord Campbell of Croy referred to Scotland. The evidence to emerge from Scotland,

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where the facility for extended licensing hours was introduced in 1977, is that longer opening hours can lead to more civilised and leisurely drinking. That only goes to support the views of my noble friend Lord Montgomery. However, a survey has been conducted by the Office of Population Censuses and Surveys, and, although there has been a small increase in the consumption of alcohol by men, in the eight-year period to 1984 women's consumption of alcohol has increased by 36 per cent.—the very housewives that my noble friend Lady Macleod mentioned. But let us not be mistaken about Scotland. Restaurants in Scotland serving drinks with meals may operate only during strictly limited hours. The proposals in the Bill would go way beyond the situation in Scotland.
In some ways my noble friend's Bill goes wider than the Government would wish, in that it removes what we regard as an important safeguard in the conduct of premises, but in another way it can be criticised for being too narrow, because it seeks to benefit only restaurants. As your Lordships will know, the Government believe there is a strong case for measured reform of the licensing hours to benefit all premises serving alcohol.
Piecemeal reform of the law may be appropriate in some circumstances, and I have much sympathy with my noble friend's objectives. But it is difficult to justify singling out one type of premises for special treatment when others too have a case deserving consideration. My noble friend Lord Mancroft, with his very great experience, will understand the consistency of my argument on that point. At this point I return to the Bill which was introduced last week in another place and which could affect all licensed and registered club premises, including restaurants. Until we have had a chance to consider that Bill, which was printed only yesterday, your Lordships will not, I hope, expect me to offer the Government's reaction to it.
The noble Baroness, Lady Ewart-Biggs, asked what we were going to do as the Government. It was her party, among others, that said we were bringing in too much legislation. If she is happy to sit a little bit longer I shall see what I can do.
It is only right that I have found it necessary this evening to point out the Government's objections to the Bill on two counts: its narrow approach, in that it seeks to benefit only one sector of the licensed trade, and its removal of all effective controls on the hours during which restaurants may serve alcohol. I have, however, taken full note of the speeches in support of the Bill and I cannot but recognise a view in your Lordships' House that my noble friend's measure is a sensible and desirable reform. If any amendments are tabled to define the periods during which restaurants may supply drinks with meals, I can say that the Government will be prepared to look at them with an open mind. I hope therefore that my noble friend will not feel too dispirited that my initial remarks indicated a rather negative approach on the part of the Government.
9.5 p.m.
Viscount Montgomery of Alamein: My Lords, I find myself in rather a difficult position on the Back Benches trying to sum up this very wide-ranging debate, although it is on a narrow subject—if that is
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not a contradiction. First, I thank all noble Lords and noble Baronesses for their support for this measure. We have had speeches from all parts of the House, from all parties. Without exception—although I think the noble Baroness, Lady Ewart-Biggs, had a few reservations—in general there was support from all quarters of the House. It has been my privilege to have been supported in this measure by no fewer than two former Ministers of the Crown. Indeed a third would have spoken, the noble and learned Lord, Lord Simon of Glaisdale, but he was not able to be here. As the noble Lord, Lord Harris of High Cross, said, he too would have supported the idea of reform.
It is difficult to sum up the debate, but perhaps I could make one or two remarks and comment on what has been said, particularly before I come to the remarks of my noble friend Lord Caithness. I should like to lay one ghost to rest concerning the quite understandable preoccupation of many people, particularly the noble Viscount, Lord Falkland, with alcoholism.
Let it be quite clear that British restaurateurs are responsible citizens and that the British restaurant trade is equally opposed to intoxication and alcoholism, as any other citizen should rightly be. But let it also be clear that alcoholism and intoxication are not good for the restaurant business, as I said at the beginning. People go into restaurants to eat; alcoholics and others who suffer from that sort of disease, by and large, do not eat. That is their problem. They are not really catered for by the restaurant trade. Let that be quite clear.
The noble Baroness, Lady Ewart-Biggs, asked me some questions. I am not certain that I am qualified to answer them all, but fortunately they have mostly been answered by my noble friend Lord Caithness. The Bill is not trying to create licences and widen licensing as such. It is trying to provide for a certain section of the licensed trade to operate with greater flexibility, both for the benefit of the tourist and, as my noble friend Lord Kimball said, for the benefit of the home market. I think that was a valuable point.
If I may, I shall turn to my noble friend Lord Caithness. I was gratified to see that he welcomed the idea in some ways, although he had reservations. I see no problem about accommodating the restriction in hours; in other words, what we should do is to narrow this down as far as possible to cover the dry period. I use that phrase, "the dry period", because that was the term he himself used. I believe that it would be quite possible. I shall go away and endeavour to construct an amendment which will meet his request and requirement in that connection; that this one single Act should be restricted in hours to cover the dry period.
My noble friend made some very good points about late night business and the early mornings. But that is not really the problem from which the restaurant business suffers. The problem is in this short, dry period, which is a great handicap to employment and a great handicap for many other reasons.
On the subject of the piecemeal approach I think I take slight issue. If we were to have a wider approach to all this, we should have a general reform. When something is described as piecemeal, I do not think that I quite go for that. We should be very happy for

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this to be a general reform. As it is not, I should rather use the expression, "step-by-step" than "piecemeal". If you are not able to scale the ladder at one go, the only way to ascend it is to go up little by little.
What this Bill attempts to achieve is not to single out a specific industry—although it happens to do so—but to proceed on a logical basis. It happens that I have selected this particular industry and I have explained why. If the Government were prepared to widen the legislation, that would be a very simple amendment. But I think that that is not for me to do at this stage, although that would be very welcome and perhaps the Bill which he talked about in the other place but which none of us has yet seen will cover this aspect. That indeed would be more than welcome.
Encouraged by the limited support that we have, if it is possible to narrow down this Bill to the hours to cover the dry period, I think that that would be acceptable at this stage on the basis that one must proceed on a step-by-step basis. With those few words, it remains for me once again to thank the Minister and all noble Lords who have spoken so cogently and so briefly in this debate.
On Question, Bill read a second time, and committed to a Committee of the Whole House.

Chevening Estate Bill [H.L.]
Committed to a Committee of the Whole House.
House adjourned at twelve minutes past nine o'clock.

  HOSPICES
  HOSPICES
  PRESBYOPIA
  PRESBYOPIA
  ANIMALS (SCIENTIFIC PROCEDURES) ACT 1986
  ANIMALS (SCIENTIFIC PROCEDURES) ACT 1986
  CRIME PREVENTION ADVICE
  CRIME PREVENTION ADVICE
  FIREARMS CERTIFICATES: METROPOLITAN POLICE WORK STATISTICS
  FIREARMS CERTIFICATES: METROPOLITAN POLICE WORK STATISTICS
  FIREARMS CERTIFICATES: POLICE COSTS
  FIREARMS CERTIFICATES: POLICE COSTS
  DIPLOMATIC MISSIONS' UNPAID PARKING FINES
  DIPLOMATIC MISSIONS' UNPAID PARKING FINES
  RMS "ST. HELENA": REPLACEMENT
  RMS "ST. HELENA": REPLACEMENT
  JORDAN: FIVE-YEAR PLAN
  JORDAN: FIVE-YEAR PLAN
  NICARAGUA: UK SECURITY COUNCIL VOTE
  NICARAGUA: UK SECURITY COUNCIL VOTE
  NICARAGUA: SOVIET ROLE
  NICARAGUA: SOVIET ROLE
  EXPORT CREDITS: STATISTICS
  EXPORT CREDITS: STATISTICS
  HAZARDOUS CHEMICAL STORAGE LOCATIONS: DISCLOSURE TO LOCAL AUTHORITIES
  HAZARDOUS CHEMICAL STORAGE LOCATIONS: DISCLOSURE TO LOCAL AUTHORITIES
  CROWN ESTATE PAVING COMMISSIONERS
  CROWN ESTATE PAVING COMMISSIONERS
  NORTHERN IRELAND: ASSIs
  NORTHERN IRELAND: ASSIs
  HILL LIVESTOCK COMPENSATORY ALLOWANCES
  HILL LIVESTOCK COMPENSATORY ALLOWANCES