Sitting of 6 November 1986

Preamble
The House met at half-past Two o'clock
PRAYERS
[MR. SPEAKER in the Chair]
Oral Answers to Questions
  NATIONAL FINANCE

    Taxpayers (Statistics)
    Mr. Greenwayasked the Chancellor of the Exchequer how many people have been taken out of taxation since May 1979; and if he will make a statement.
    The Minister of State, Treasury (Mr. Peter Brooke): Some 1·4 million people would still be paying tax today had we simply increased the 1978–79 tax allowances in line with inflation; they now pay no income tax at all.
    Mr. Greenway: I congratulate the Government on this excellent fact. Will my hon. Friend confirm that the Government aim to take more people out of taxation? Should this not be contrasted with the numbers who would be taken into taxation if public expenditure were increased by £28 billion, forcing the standard rate of income tax up to 53p in the pound, which is what the Labour party proposes if ever it wins power again?
    Mr. Brooke: It would he wrong for me to anticipate my right hon. Friend the Chancellor, but it would be in the spirit of what he has achieved so far if more people were taken out of income tax. As to the increase in public expenditure of £28 billion, it has been said by the Labour party that it would only tax the top 5 per cent. It has also been said, out of Sheffield, that to say that Labour would tax only the top 5 per cent. would be dishonest.
    Mr. Willie W. Hamilton: Is it not the case that since the Government came into office in 1979 the total tax burden hs increased from 38 per cent. of GNP to 44 per cent. now, and that a recent report of the OECD showed that our tax burden is now heavier than that of most industrial countries in the West?
    Mr. Brooke: The hon. Gentleman is correct to say that taxation as a percentage of GNP has increased, but that is why the Government intend to reduce it.
    Mr. Brandon-Bravo: In this debate, should we not also consider the impact of personal allowances? Am I not right in saying that while our personal allowances are similar to those of our major competitors, our basic rate of tax is higher?
    Mr. Brooke: My hon. Friend is correct. My right hon. Friend the Chancellor has shown a balance between real increases in allowances with cuts in the basic rate of income tax.
    Mr. Donald Stewart: Does the Minister accept that in evidence it is necessary to tell not only the truth but the
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    whole truth, and while we may take some satisfaction in the numbers that are being taken out of income tax, that cannot be dealt with in isolation? Which Government put a standard rate of 15 per cent. VAT on the vast majority of goods and services?
    Mr. Brooke: It is true that, in line with the policy of moving the burden of taxation from direct to indirect, the previous Conservative Administration discharged that task.

    Take-home Pay
    Dr. Michael Clarkasked the Chancellor of the Exchequer if he will indicate the increase in take-home pay since 1979 of a married man with two children on the average industrial wage; and how it compares with the national increase in productivity over the same period.
    Mr. Brooke: The real take-home pay of a married man who has two children and is on average earnings is expected to increase by 17 per cent. between 1978–79 and 1986–87. Since this Government took office productivity has increased by 13·4 per cent.
    Dr. Clark: Does my hon. Friend agree that those figures show that, during the Conservative Government's period in office, there has been a substantial increase in the standard of living of people in this country? Does he also agree that unless we modify our pay demands, or increase our productivity, our international competitiveness is at risk?
    Mr. Brooke: I agree with the first part my hon. Friend's question. As to the second part, what is already an outstandingly healthy economy would he healthier still if the rise in real earnings were matched by a rise in productivity, impressive though the latter is.
    Mr. Terry Fields: Is the hon. Gentleman aware that in parts of Liverpool 80 per cent. of children attending school receive free school meals, which is indicative of low pay in that area? On average, 50 per cent. of school children in my constituency of Broadgreen receive free school meals. Is it not a ludicrous and idiotic suggestion by the Chancellor of the Exchequer that people in places such as Liverpool should take more modest settlements in their income? Is that not an absolute recipe for disaster for an already impoverished region? When will the Government do something positive about providing real jobs and a decent standard of living for people in Liverpool?
    Mr. Brooke: Under present circumstances, if we could achieve a 1 per cent. reduction in the rate of growth of real pay, that would, over time, create 110,000 to 220,000 new jobs. Those figures can be increased pari passu. That would make a powerful contribution to our unemployment problems.

    Tax Yield
    Mr. Patrick Thompsonasked the Chancellor of the Exchequer if he will estimate the total tax yield from those earning more than £25,000 per annum in (a) 1978–79 and (b) 1985–86.
    The Chief Secretary to the Treasury (Mr. John MacGregor): Taxpayers with incomes of more than £25,000 paid £8·7 billion in income tax in 1985–86, which was 22·8 per cent. of the total. These taxpayers represent

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    just under 4 per cent. of all income tax payers. The same top percentage of taxpayers in 1978–79 paid £7·8 billion in income tax at 1985–86 prices, which was 20·6 per cent. of the total.
    Mr. Thompson: I thank my right hon. Friend for his reply. Does he agree that that destroys the credibility of Labour's plans for raising extra revenue? Does he accept that the result of a Labour Government would be a renewed flight of talent from this country and high tax on the low earner?
    Mr. MacGregor: My hon. Friend is quite right. The figures I gave show that the yields have increased, with lower taxes on the higher paid. They show what we have always said, that getting taxes down from the penal rate levels under the last Government motivates the wealth creators, to the benefit of the whole country, and increases yields. Labour's policy of a return to the rates of tax that existed in 1979 would, as my hon. Frind said, drive many of our most able, energetic and ambitious people out of the country.
    Mr. Ashton: Are not the statistics in this planted question so obviously fiddled? Surely, if an extra 3 million people are taken out of taxation by being put on the dole, it affects the bottom of the pyramid and makes it look better at the top.
    Mr. MacGregor: I was talking about a percentage of the total tax. I should like to make it clear to the hon. Gentleman that the figures are not fiddled. They are accurate figures and they demonstrate that a higher proportion of the taxes currently obtained—it is not a question of people at the bottom end coming out —comes from those with higher earnings, because of the motivations we have introduced.
    Mr. Nicholls: As increasing tax rates on the rich actually produces less revenue and not more, does that not mean that if Labour were to impose such tax bands the £24 billion that it has to raise for its social spending would have to be raised entirely from those paying the standard rate income tax?
    Mr. MacGregor: It is true that under a Labour Government —if ever there was one again—tax would rise on all income groups. My hon. Friend does not need to go as far as that. Labour's plan to raise £3·6 billion from the top 5 per cent. would mean tax rates of 70 per cent. for all those—including married couples with both partners earning—with earnings above £24,000. That is clearly a crippling increase in the tax burden on those groups. I believe that it would reduce yields, but it would have much more serious effects on the economy as a whole.
    Mr. Watts: Does my hon. Friend agree that priority should now be given to reducing further the standard rate of tax, which is the marginal rate for most taxpayers? As cuts in the top rates of tax have increased revenue, is it not possible that there would be a similar effect if the standard rate were cut?
    Mr. MacGregor: I am sure that my hon. Friend noted that in his Budget this year my right hon. Friend the Chancellor of the Exchequer deliberately skewed the tax reductions—this was with emphasis on the basic rate—in favour of those with average to lower incomes. It is precisely that group, which we believe is still taxed too highly, which will gain most from the Chancellor's longterm pledge on income tax.
    Mr. Gould: Is my hon. Friend the Member for Bassetlaw (Mr. Ashton) not right when he says that the figures produced by the Chief Secretary are suspect because the percentages that he quotes are those of a much narrower tax base, a base which has been made narrower by the unemployment which the Government's economic policies have produced?
    Mr. MacGregor: The absolute amount of tax increased from this group for the two years at 1985–86 prices, and not proportionately. That is why lower taxes, which motivate people, have in this instance produced a higher yield.
    Mr. Wrigglesworth: If the Government believe in lower taxes, why in the long period of seven years that they have been in office have they increased taxes for the average taxpayer by 3p in the pound?
    Mr. MacGregor: If income tax had remained at the same rates and allowances as in 1978–79, an additional £8 billion would have come through from income tax in this period. That is a sign of how we have been following our policy of reducing direct taxes.

    Wider Share Ownership
    Mr. Formanasked the Chancellor of the Exchequer if he will make a statement on Government policy towards the fiscal encouragement of wider share ownership.
    Mr. Brooke: Over the past seven years the Government have significantly improved and extended the tax reliefs available for participation in company share schemes. The number of all-employee share schemes has increased considerably, from 30 in 1979 to over 1,150 today.
    Mr. Forman: Is my hon. Friend aware that these figures are very welcome, but that the time has come when the Government need to go further in this direction? Does he accept the powerful case that is being advanced by people in all parties, I believe, that employee share schemes that are available to all employees should have some measure of time-limited tax relief? Will he draw this important point to the attention of our right hon. Friend the Chancellor of the Exchequer when he is considering his next Budget?
    Mr. Brooke: I welcome my hon. Friend's remarks. Further relief will be kept under review in the manner in which it steadily has been over the past seven years. A great deal has already been achieved, but I shall draw my hon. Friend's words to the attention of our right hon. Friend the Chancellor of the Exchequer.
    Mr. John Mark Taylor: Will my hon. Friend accept from those of us who do not have any family silver how pleased we are with the performance of our Jaguar, Telecom, TSB, Cable and Wireless, British Aerospace and other shares?
    Mr. Brooke: I am grateful to my hon. Friend for his comment. He may be interested to know that of the companies which have been privatised, 350,000 employees, or 80 per cent. of the employees therein, have become shareholders.

    Married Man's Allowance
    Mr. Barronasked the Chancellor of the Exchequer how many representations he has received on the Government's proposals to abolish the married man's allowance.
    Mr. MacGregor: We have received a considerable number of representations on the Green Paper. The great majority of those expressing a preference support the proposal to introduce transferable allowances; which is what the Government are recommending and is not the same thing as abolishing the married man's allowance.
    Mr. Barron: If the estimated cost of the proposals in the Green Paper will not be a cost to the Exchequer, are they not likely to impose a further tax burden on over 6 million tax payers, bearing in mind that if the cost were to fall on the Exchequer it would be as high as £5·4 billion? Why does the Minister not open to discussion the cost of this proposed scheme, when at the end of the day it will not do justice to the married woman's allowance anyway?
    Mr. MacGregor: It is intended that the scheme will be introduced over a period, and much depends on what happens to thresholds and allowances during that period. I believe, as is clear from the responses to the proposals in the Green Paper, that there are so many benefits in moving to transferable allowances that it is a tax reform that the vast majority of taxpayers would support.
    Mr. Marlow: Why does my right hon. Friend not take action to take the money from the married man's allowance and use it to encourage mothers to stay at home and look after their children? Will he, with one move, open up jobs in the labour market for men who cannot find work and at the same time encourage a lot of mothers to do that which they do best — stay at home and look after their children?
    Mr. MacGregor: The proposal will give choice to married couples. It will give benefits to wives who are having their first children, who perhaps have worked before and who stay at home to look after their children. They will be able to transfer the allowance to their husbands. The proposal we recommend helps couples at the stage in their lives at which suddenly one partner becomes financially dependent on the other. The crucial factor is that it gives them a choice.

    European Monetary System
    Mr. Maclennanasked the Chancellor of the Exchequer what recent discussions he has had with the President of the Bundesbank concerning sterling's relationship with the exchange rate mechanism of the European monetary system.
    The Chancellor of the Exchequer (Mr. Nigel Lawson): I have discussed the European monetary system with the president of the Bundesbank on a number of occasions.
    Mr. Maclennan: Does the Chancellor of the Exchequer accept that if his import-inducing consumer boom continues to rip sterling may again come under pressure? In that eventuality, would it not be better for the Chancellor to cover himself within the exchange rate mechanism than to rely on the uncertain bounty of the Bundesbank?
    Mr. Lawson: There is much to be said for fully joining the European monetary system. One of the reasons for joining the system is not the soft option which the hon. Gentleman implied. It would not be a soft option.
    Mr. Dykes: If France and Germany are in the EMS as larger and stronger economies, why cannot we join it?
    Mr. Lawson: France and Germany do many things which we do not necessarily do, as much as I respect the Republic of France and the Federal Republic of Germany. My hon. Friend's support for our membership of the European exchange rate mechanism is well-known and consistent. We keep this matter regularly under review. The balance of argument has shifted considerably, but the Government have not yet decided that the time is tight.
    Mr. Robert Sheldon: As everybody knows of the differences of opinion between the Chancellor of the Exchequer and the Prime Minister about joining the monetary exchange rate mechanism, will the Chancellor accept that in this instance, perhaps uniquely, the Prime Minister may be right, and that if we were to join, despite the obvious advantages of a fixed currency, we would be closely tied to the German deutschmark, with the problems that that would entail?
    Mr. Lawson: The right hon. Gentleman is extremely percipient in noting that if we were to join the EMS fully sterling would be linked to the deutschmark.
    Mr. Maples: When my right hon. Friend the Chancellor next discusses the EMS with the president of the Bundesbank, will he discuss whether there might be some connection between the fact that bank lending in Germany is growing at only about 5 per cent. a year and their interest rates are under 5 per cent., whereas here bank lending is growing at about 16 per cent. and our interest rates are 11 per cent.?
    Mr. Lawson: There are many reasons why German interest rates are lower than those in this country. One is that inflation is even lower in Germany — indeed, at present it is negative — than in this country. Another reason, and it is one to which I have alluded on a number of occasions because it is important, is that the markets can see that unit labour costs in this country are rising a good deal faster than in Germany and most of our major competitors.
    Dr. McDonald: Will the Chancellor confirm that the figures published on Tuesday show that the fall of $668 million of gold and currency reserves was spent to hold off the rise in interest rates and thus save the Chancellor's face during the Tory party conference? If so, that is a shocking waste of the country's reserves.
    Mr. Lawson: It is difficult to satisfy the Opposition. They complain when interest rates are high. However, when reserves are used tactically at a particular time to ensure that a rise in interest rates can be held to 1 per cent. and not 2 per cent., they complain about that.

    Building Societies Association
    Mr. McCrindleasked the Chancellor of the Exchequer when he last met the Building Societies Association; and what topics were discussed.
    The Economic Secretary to the Treasury (Mr. Ian Stewart): My right hon. Friend has not met the Building

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    Societies Association this year. I have myself met the BSA three times, mainly to discuss aspects of the recent building societies legislation.
    Mr. McCrindle: Will my hon. Friend tell the building societies, and more particularly their customers, that the Government have no intention of restricting mortgage tax relief either to first-time buyers, as has been suggested in some quarters, or to those who are paying the standard rate of tax alone? Would that not create a log jam at both the top and the bottom of the housing market, which would do no one any good?
    Mr. Stewart: I am grateful to my hon. Friend for drawing attention to this point. He will have noted the answer that my right hon. Friend the Prime Minister gave last week. The building societies and all those with mortgages — 8 million of our fellow citizens — should beware that the Labour party, through the Leader of the Opposition, has now made it clear that under a Labour Government only those who are young, who have many children or who fall on hard times would get the full benefit of mortgage interest relief.
    Mr. Freeson: Would it not be appropriate to switch the burden of mortgage tax relief to repair and renewal funds instead of incurring the considerable expenditure indulged in by way of relief on the capital purchase? More specifically, will the Minister discuss as quickly as possible with the Building Societies Association putting an end to the idiotic and unfathomable rule which the Treasury imposes and which as a general proposition prevents the investment of millions of pounds in the provision of rented housing, of which we are in dire need, because it will not allow the marriage between grants and private investment in rented property?
    Mr. Stewart: It is extraordinary that an Opposition Member should speak about the problems of rented accommodation when it is the Labour party's policies that have prevented the revival of the rented sector. Mortgage interest tax relief contributes satisfactorily to the growth of owner-occupation. I am glad to be able to say that that figure has now reached 62 per cent., compared with 55 per cent. when the Conservative party came to power.
    Mr. Leigh: Has my hon. Friend received any representations on mortgage tax relief from the alliance parties? Before he conveys those views to the Building Societies Association, will he say whether he has decided which alliance spokesman to believe? Is it the leader of the SDP, who appears to believe that tax relief should be abolished altogether, or the experienced and distinguished Treasury spokesman for the Liberal party, who believes that it should be restricted to basic rate taxpayers? Is the alliance as disorganised, as disunited and shambolic on this issue as on any other?
    Mr. Stewart: The policies of all the Opposition parties on these matters are in a state of confusion, but the one common theme to each is that they want to cut back on mortgage interest tax relief, to the damage of home ownership.
    Dr. McDonald: Will the Minister care to note, as he seems to have failed to understand the words of either my right hon. Friend the Leader of the Opposition or other Front-Bench spokesmen, that the party's policy is to retain mortgage tax relief at the standard rate, not to allow mortgage tax relief at the higher rate, and to give further
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    help to first-time buyers, such as my constituents, who face not only exceptionally high interest rates, which are this Government's responsibility, but high prices for such houses as they might wish to buy? Those three points have been made clear repeatedly both by the leader of the Labour party and by other Labour Front-Bench spokesmen.
    Mr. Stewart: I am always interested to note what the hon. Lady says. I note it with particular attention when what she says is so different from what the leader of her party has said.
    I remind the House that, only a few days ago, the Leader of the Opposition said that he was advocating arrangements which would mean that
    "young people, people with maximum family responsibilities to children or dependent relatives, and people who experience inadvertant falls in income, derive maximum benefit".
    The only way that such people can derive maximum benefit, unless extra resources are devoted to mortgage tax relief, is for all others to suffer. The other 8 million had better watch out.

    Inflation
    Mr. Andrew MacKayasked the Chancellor of the Exchequer if he will make a statement on the current level of inflation.
    Mr. Lawson: The retail prices index increased by 3 per cent. in the 12 months to September.
    Mr. MacKay: Does my right hon. Friend agree that the impressively low level of inflation enjoyed in this country today could be put in jeopardy if we continue to have high wage increases which bear no relation to productivity?
    Mr. Lawson: We do have a problem with wage increases running far in excess of productivity. That is perfectly true. I believe that this is basically a threat to jobs and that is why I am concerned about it. It is not a threat to inflation which can be kept under control by our monetary policy.
    Mr. Penhaligon: Does the Chancellor agree that the current level of inflation cannot sustain the personal credit explosion which is currently taking place at a level of 140 per cent. over the past 12 months? Does that mean that the Chancellor is to allow inflation to increase? Will he take measures to control credit? Or is he just hoping that it will all hang together for another 12 months?
    Mr. Lawson: I am perfectly happy to rest on this Government's record on inflation. We have brought inflation down from the peak of 27 per cent. that occurred when the Labour Government were in power, supported by the Liberal party, to the present level of 3 per cent., which is one of the lowest levels it has been for the past 20 years. The policies that brought inflation down will continue to remain in place and ensure that it remains low.
    Mr. Dickens: Is my right hon. Friend aware that, because of the firm grip that the Government have kept on inflation, the risk-takers, entrepreneurs and job creators who went abroad are returning to Britain? Those people were driven abroad by the high taxation and high inflation of a Socialist Government. I hope that the voters of Knowsley, North remember that.
    Mr. Lawson: As usual, my hon. Friend is absolutely right. I would add that a further important change has

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    arisen as a result of the new tax climate and the sharp reduction in inflation. We now have more new business formation than ever before. Every week 500 new businesses net are set up. That is one of the most important seeds for the future which can give us encouragement and which we have sought for a long time.
    Mr. Duffy: Is the Chancellor aware that his known assessment of the underlying rate of inflation is based on an underestimate of sterling depreciation which, under the law of one price, affects not only imports but works through to all goods and pay, and eventually even to the non-trade sector?
    Mr. Lawson: The answer that I gave concerned the retail prices index for September as calculated by rules which have been accepted by parties on both sides of the House. Despite its defects—and it may have some—it is the best and generally acknowledged measure of inflation that we have. If the hon. Gentleman is thinking of future inflation, I shall have something to say about that later today.
    Mr. Dorrell: Does my right hon. Friend agree that the speech that was recently delivered in Loughborough by the Governor of the Bank of England on the role of monetary policy and the control of inflation strengthens the argument for Britain joining the exchange rate mechanism of the European monetary system? As we downgrade the importance of monetary aggregates in the control of inflation, are we not by implication increasing the importance of stabilising the external value of the pound?
    Mr. Lawson: I am sure that my hon. Friend was especially pleased that the Governor of the Bank of England gave his important lecture on monetary policy in his constituency. It is a lecture that will repay reading by the whole House. As for my hon. Friend's question about the exchange rate, of course it is important, and it would be highly undesirable to see a continuing depreciation of the exchange rate, which would inevitably cause faster inflation. That I am determined to avoid.
    Mr. Heffer: The people of Knowsley, North now have to pay more for their bus fares as a result of the deregulation of the buses. Is that an increase in inflation, or not?
    Mr. Lawson: The rate of inflation of 3 per cent. is less than half the lowest figure that it ever reached in any month under the Government whom the hon. Member supported.
    Mr. Latham: Will my right hon. Friend repeat what he said in his Budget statement—that there is a good case for petrol prices to come down again? They seem to go up a lot quicker than they come down.
    Mr. Lawson: My hon. Friend, who is an acute observer of petrol price movements, may well be right. I am glad to say that petrol prices have indeed come down since the Budget, just as I predicted that they should and would. I recall that the Opposition said that nothing of the sort would happen. I was right and the Opposition, as usual, were wrong. Petrol prices are lower than at the time of the Budget.
    Mr. Gould: As the Chancellor presumably authorised the Governor of the Bank of England to announce the abandonment of sterling M3 as a monetary target, are we to assume that the whole disastrous monetarist experiment
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    of the past seven years has been nothing more than a mistake? Has the Chancellor yet made up his mind—if so, perhaps he could let us into the secret—about what new mistake he intends to use to replace the old one?
    Mr. Lawson: May I take this first opportunity to congratulate the hon. Gentleman, not merely on his election to the Labour party shadow Cabinet, but on his membership of the Opposition Treasury team? I read in one of the newspapers that his promotion to that job would add much-needed talent to a lack lustre Opposition team. I should like, on behalf of the Government, to associate myself with those remarks.
    As to the hon. Gentleman's question, it is clear that, in the short time that he has been in his important job, he has not had time to read the Governor's lecture fully. I am sure that he will do so. As for the monetarist experiment to which he referred, I would observe that the proof of the pudding is in the eating and that it has brought inflation down to the lowest level for 20 years.

    Season Tickets (Tax Relief)
    Mr. Amessasked the Chancellor of the Exchequer if he will introduce legislation to provide tax relief at the basic rate on season tickets.
    Mr. Brooke: No, Sir.
    Mr. Amess: Although I am fully aware of the enormous pressure that the Treasury is under to give such assistance, does my hon. Friend appreciate the attractiveness of such a proposal for the hard-pressed commuter who faces increasing transport costs? Does my hon. Friend agree that if he undertook such a proposal it might lead to a reduction in the amount of traffic on our roads?
    Mr. Brooke: As 2½ per cent. of the entire country's work force commutes to my constituency daily, I am familiar with the problem, but the expense of home-to-work travel has never been allowable for tax relief. Where people live has been regarded as a personal decision, so travel has been regarded as a personal expense.
    Mr. Snape: Does the Minister agree that the proposal is eminently reasonable, socially desirable and would bring some much-needed equalisation into the Exchequer's treatment of various forms of motor transport — three reasons for probable disqualification in the eyes of the Chancellor?
    Mr. Brooke: I answered the question asked by my hon. Friend the Member for Basildon (Mr. Amess) with the words, "No, Sir." and I give the hon. Gentleman the same answer.

    Charitable Gifts
    Mrs. Virginia Bottomleyasked the Chancellor of the Exchequer what representations he has received about his Budget proposals to encourage charitable gifts.
    Mr. Ian Stewart: The Budget proposals to encourage charitable giving were warmly welcomed by hon. Members on both sides of the House and by charities themselves. They represent the most substantial package of tax concessions for charities and charitable giving ever introduced in a single Budget.
    Mrs. Bottomley: Can my hon. Friend confirm that charitable giving has more than doubled since the

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    Government came to power? What expectations has he for further realising our people's sense of responsibility and generosity?
    Mr. Stewart: The contributions to charity through covenants, bequests and other means have risen dramatically since the Government took office. However, I still suggest that the payroll giving scheme and the measures introduced by my right hon. Friend the Chancellor in his Budget earlier this year will be regarded as some of the most important encouragements to charitable giving that have ever been introduced and I hope that they will be fully exploited. I also hope that hon. Members on both sides of the House will encourage charities and employers in their own constituencies to take part in the new scheme.
    Mr. Alan Howarth: In respect of the Government's welcome initiative on payroll schemes for charitable giving, does my hon. Friend agree that the timetable between the end of the consultation period and the inception of the scheme next April will be very tight? Therefore, will he announce his definitive regulations as early as possible? Is he also able to say that the Government's own employees will be able to participate in such schemes?
    Mr. Stewart: I note my hon. Friend's point about the need to have the regulations in place. The scheme is necessarily somewhat complicated. However, we published draft regulations last week. We hope that representations on those will be forthcoming as soon as possible, certainly during this month. We would then naturally want to publish the regulations in definitive form as early as we can. We want to give charities, employers and employees the longest possible notice to implement the scheme. Those who will want to take part will need to have the formal regulations available before they make their decisions.

    Unemployment Levels
    Mr. Nellistasked the Chancellor of the Exchequer if he will make it his policy to include a forecast of the levels of unemployment in his next Budget; and if he will make a statement.
    Mr. MacGregor: No. It has not been the practice of this or previous Governments to publish forecasts of unemployment.
    Mr. Nellist: Is not the real reason for that answer the fact that, despite the 18 statistical fiddles that the Government have used to count the number of unemployed in the past seven years, the only hope that the Government see for bringing the unemployment figures below 3 million by the time of the general election is through further statistical fiddles? The Government's own figure shows that there are 7,154 unemployed in Coventry, South-East, costing £46 million a year in benefits and costing those in work £35 a week. Is not the only hope for the unemployed in Coventry, South-East, not more statistical fiddles, but a change of Government?
    Mr. MacGregor: Not at all. I must make it clear that we are simply following previous practice. There is no question of any change in the publication of forecasts of unemployment. The hon. Gentleman never understands that it is customers for goods and services at home and
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    overseas who create jobs. They are hugely put off by the sort of activities which the hon. Gentleman and his colleagues previously undertook and encouraged in British industry, which did so much to destroy jobs. It is the reverse of that which is the greatest hope.
    Mr. Churchill: Although the levels of unemployment remain unacceptably high, is it not noteworthy that this country has a higher proportion of its population of working age in employment than any other major country in western Europe? Will my right hon. Friend take steps to make that fact more widely known?
    Mr. MacGregor: My hon. Friend is right and I am extremely grateful to him for giving me another opportunity to make that fact known. There is only one other country which has a higher proportion. What is more, in this country our level of youth unemployment is below the EEC average, and falling. It is also true that we have had an employment increase. It is important to emphasise, as my hon. Friend did, employment rather than simply unemployment. It is true that we have had an employment increase in the past 13 quarters, which is the longest period of continuous employment growth for almost 30 years. Those are the facts and my hon. Friend is entirely right in emphasis.
    Mr. Terry Davis: Will the Chief Secretary admit that the reason why the Government will not publish the forecast is not that the forecast does not exist but that if they did publish it it would confirm what everybody knows, which is that the Government have no hope to give the people who have no jobs?
    Mr. MacGregor: That is simply not true. We are following the practice of previous Governments, none of whom have produced long-term forecasts on unemployment.

    Asset Sales
    Mr. James Lamondasked the Chancellor of the Exchequer what is the latest estimate of the proceeds from asset sales for 1986–87.
    Mr. MacGregor: Privatisation proceeds in 1986–87 are expected to be about £4¾ billion, as indicated in the 1986 public expenditure White Paper.
    Mr. Lamond: As the gas industry in this country already has the widest possible ownership, that is, every citizen of the land, what is the point of continuing with a £20 million advertising campaign — all at the cost of consumers of gas? That is enough money to provide every retirement pensioner in this country with a week's free gas to see them over the winter.
    Mr. MacGregor: What the Government have been embarking on in their privatisation programme is not only of great benefit to industry and the economy, but provides true public ownership by the wider extension of shares.

  PRIME MINISTER

    Engagements
    Mr. Simon Hughesasked the Prime Minister if she will list her official engagements for Thursday 6 November 1986.
    The Prime Minister (Mrs. Margaret Thatcher): This morning I presided at a meeting of the Cabinet and had

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    meetings with ministerial colleagues and others. In addition to my duties in this House, I shall be having further meetings later today.
    Mr. Hughes: Has the Prime Minister had time today to reflect on the seven and a half years of her premiership, and especially on the statement made during the 1979 election that her Government's first task would be to create jobs for our economy? In 1983 the Government said that their greatest task was to create a prosperous economy providing jobs for our people. Can she therefore explain how, in this capital city, unemployment has increased from 2·9 per cent. to 9·4 per cent., with 400,000 people now out of work in London alone? Is there not one answer to that—cruel failure?
    The Prime Minister: Since 1983, 1 million net new jobs have been created, which has brought hope to 1 million more people. The hon. Gentleman asked why that has not had a greater effect on the unemployment register. There are three reasons for that: first, unit wage costs are still rising faster than elsewhere; secondly, the continued increase in the population of working age due to the baby boom of the 1960s; and, thirdly, continued reduction in overmanning in manufacturing industry.
    Mr. Waller: At this time, when we remember the sacrifices made by our service people in two world wars, will my right hon. Friend look into the actions of those local authorities which, amazingly, have specifically banned those in receipt of service and police pensions from seeking employment with them? Is she aware that the Labour-controlled Bradford council has specifically excluded service pensioners from seeking a job with it? Is that not a slap in the face for all those who have served their country with distinction?
    The Prime Minister: I saw that report and I hope that all local education authorities will use the very good teachers who are available and who have served in the forces, especially for subjects such as mathematics and physics. I urge all local authorities to exploit any potential source of good quality teachers. They will find those teachers among people who have served in the armed forces.
    Mr. Kinnock: Does the Prime Minister recall telling me on Tuesday that it was for the governors of the BBC to reply to the attacks made by her right hon. Friend the Chancellor of the Duchy of Lancaster? Now that those governors have convincingly rebutted 39 out of the 40 charges made by her right hon. Friend, does she agree with the governors or with her right hon. Friend?
    The Prime Minister: It is for the governors to answer the complaints. Perhaps the right hon. Gentleman will recognise that freedom of speech involves the freedom to make complaints — a freedom which he uses every Tuesday and Thursday.
    Mr. Kinnock: The BBC has made no attempt to make an incursion into the freedom of speech of any member of the Government. The reverse is certainly not the case. That effort at coercion is so blatant and obvious. Is the Prime Minister accepting the claims of her right hon. Friend, or is she rejecting them? Is she on his side or on the side of the independence of the BBC?
    The Prime Minister: The BBC exists because of a charter, a licence and an agreement. That is not embodied
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    in statute at all. Therefore, the governors have a special duty to see that that charter, that licence and that agreement are upheld. People are free to make complaints, and they do. It is up to the governors to answer them. In this instance, the governors have made a reply. It is not for me to judge between them.
    Mr. Kinnock: The country will conclude that the governors of the BBC have discharged their duty to freedom, which is more than can be said for the Prime Minister.
    The Prime Minister: Bearing in mind that it was the right hon. Gentleman's Labour authorities that tried to restrict the circulation of free newspapers, he is hardly in a position, when he supports that censorship, to make complaints himself.
    Mr. Speed: Will my right hon. Friend find time in between her official engagements today to congratulate Mrs. Jo Hawkes, who was the alliance parliamentary candidate in Ashford at the last election, who today joined the Conservative party?
    The Prime Minister: I gladly do so. She is welcome, and I wish her well in her future career.
    Mr. James Callaghan: In view of the Prime Minister's difficulties in answering questions from my right hon. Friend the Leader of the Opposition, may I ask how much longer she intends to allow the Chancellor of the Duchy of Lancaster to go on making a fool of the Government?
    The Prime Minister: The right hon. Member for Cardiff, South and Penarth (Mr. Callaghan) joins his right hon. Friend the Leader of the Opposition in making effective use of freedom of speech, which is freedom also to make complaints. I hope that he is not himself trying to stem that freedom by making any suggestion that the BBC has anything other than a duty to uphold the terms of the charter, the licence and the agreement.
    Mr. Michael McNair-Wilson: Does my right hon. Friend agree that the best way for the BBC to allay suspicions of bias and distortion is not for it to sit as judge and jury in such matters, but for it to be answerable, as other television companies might be made answerable, to an independent broadcasting council, to which aggrieved parties could make representations?
    The Prime Minister: The difference between the BBC and other television companies, and some of the independent broadcasting companies, is that the other companies are bound by statute passed by the House. The BBC is not bound in any way, which is why complaints have to be made to the governors. I understand that it would be very difficult to take that charter or licence or agreement to court, which imposes on the governors special duties and responsibilities.
    Mr. Loydenasked the Prime Minister if she will list her official engagements for Thursday 6 November.
    The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.
    Mr. Loyden: Will the Prime Minister now accept that the questionnaire from the Department of Employment to the unemployed is unnecessary and, indeed, is seen by many in the informed sections of the benefit system as a vicious attack on the unemployed? Will the right hon.

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    Lady now advise the Secretary of State to withdraw this obnoxious document, so that those who have a right to benefit can claim it?
    The Prime Minister: No, Sir. As I said to the House when the same question came up last week, the test of availability for work was confirmed by the Labour Government in the Social Security Act 1975. The hon. Gentleman now therefore wishes to disregard that Act, which was brought in by his own Labour Government.
    Mr. Sternasked the Prime Minister if she will list her official engagements for Thursday 6 November.
    The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.
    Mr. Stern: In the course of her busy day, will my right hon. Friend find time to consider an inquiry into the use by education authorities of section 11 money, which is provided for the teaching of English to members of ethnic communities, in view of the apparent use of that money by authorities such as Brent, and possibly Avon, for the promotion of black racism?
    The Prime Minister: I am aware that two cases have been reported, and the Home Secretary has asked Brent for further information about the use to which it is now proposing to put section 11 grants. He has made it clear that no grant will be paid unless he is satisfied by the reply. The Avon multicultural education centre is also the subject of inquiry by the Home Office, with particular reference to the eligibility for section 11 grant of certain posts there.
    Mr. Steel: In the wake of the controversy between the Chancellor of the Duchy of Lancaster and the BBC, will the Prime Minister undertake to clarify to all her colleagues the distinction between public interest and party interest? Is she aware, for example, that another of her hon. Friends has been writing to business men in his constituency offering direct access to Government Ministers at a fee of £35 payable to his Conservative association, and, further, claiming it, outrageously, to be a legitimate business expense? Will the Prime Minister recognise that there is a need to draw a clear distinction between the interests of good government and the interests of her party?
    The Prime Minister: If the right hon. Gentleman has any complaints to make, I am sure that he will make them to the proper authorities. With regard to Government and party, as the right hon. Gentleman is aware, I am responsible for answering from the Dispatch Box for Government. He equally knows that I am not responsible for answering for party. Although I have done so on the BBC matter, it is not strictly within my course of duty from the Dispatch Box.
    Mr. Conway: Bearing in mind my right hon. Friend's responsibility as First Lord of the Treasury for financing the armed forces, may I ask whether she has had time to read this week's survey showing that the majority of young people in Britain would welcome an opportunity to participate in a form of national service? In view of the highly successful expansion of the Territorial Army, will my right hon. Friend introduce a Royal Commission to examine how the young people of Great Britain can serve their country?
    The Prime Minister: I saw that report, but our armed forces are based on the existence of voluntary professional
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    armed forces and we do not have any plans at the moment to change that. There are a number of youth training places which can be served in the armed forces and those, I think, are earnestly sought after. I said that at the moment we have no plans to change that. It would, of course, be extremely expensive to alter the whole nature of our armed forces, which I do not wish to do.
    Mr. Foulkesasked the Prime Minister if she will list her official engagements for Thursday 6 November.
    The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.
    Mr. Foulkes: Can the Prime Minister explain what circumstances have changed since June to justify our ambassador at the United Nations attacking the Nicaraguans for using the judgment of the world court, which the Foreign Office welcomed when it was promulgated in June? Is this the too-high price that we have to pay for American support over Syria?
    The Prime Minister: The hon. Gentleman is talking nonsense in the latter part of his question. Although we had no legal objection to the resolution, we were not prepared to support the attempt by Nicaragua to exploit a legal judgment for its own—[Interruption.] —political ends. The Government in Nicaragua are increasingly repressive in their methods and in recent months have taken action—[Interruption.]
    Mr. Speaker: Order. The Prime Minister is entitled to a hearing.
    The Prime Minister: In recent months the Government of Nicaragua have taken action to close the Church radio station and newspaper. They also continue to intervene to promote subversion outside their borders, thus threatening the stability of the region.
    Mr. Holt: Reverting to the BBC, does my right hon. Friend recall, before the current episode blew up with the BBC, the Ian Curteis play? Is she aware that it was specifically banned from being broadcast, on the direct instructions of the director-general, because it showed the Government and my right hon. Friend in a good light?
    The Prime Minister: I am sure that if my hon. Friend has that complaint he can make it to the appropriate authorities.
    Mr. Snapeasked the Prime Minister if she will list her official engagements for Thursday 6 November.
    The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.
    Mr. Snape: Will the Prime Minister speak to her right hon. Friend the Member for Chingford (Mr. Tebbit) today and ask him to moderate his intemperate attacks on the BBC? Is she aware that her hon. Friend the Member for Derbyshire, South (Mrs. Currie) makes almost nightly appearances on the media? Will the Prime Minister ask her hon. Friend to do two things; first, ensure that a red warning triangle is exhibited, and secondly, curb her appearances before I start believing that the BBC is biased against the Conservative party?
    The Prime Minister: I am delighted that the hon. Gentleman and so many other Opposition Members have so few complaints about the economy that they can concentrate on the sort of trivia that has been raised during this Question Time.

Autumn Statement
3.30 pm
The Chancellor of the Exchequer (Mr. Nigel Lawson): With permission, Mr. Speaker, I should like to make a statement.
Cabinet today agreed the Government's public expenditure plans for the next three years. In the normal course of events that would be followed by the publication of the printed autumn statement, accompanied by an oral statement to the House, next Tuesday. For obvious reasons, that is not possible this year. So while the autumn statement will be printed in the normal way and presented to Parliament as soon as the House reassembles next Wednesday, I thought it would be for the convenience of the House if I made my oral statement today. This will cover all three of the key elements in the printed statement: the Government's outline public expenditure plans for each of the next three years and the expected outturn for this year; proposals for next year's national insurance contributions; and the forecast of the economic prospects for 1987 required by the Industry Act 1975.
The full text of the economic forecast, together with the public expenditure figures and the rest of the information customarily published with this statement, will be available from the Vote Office as soon as I have sat down. They will also appear in the printed autumn statement to be published next week.
I turn first to the outturn for the current financial year, 1986–87. The public expenditure planning total now looks likely to amount to almost £140½ billion—£1¼ billion, or a little less than 1 per cent., above what was allowed for in this year's public expenditure White Paper. The main reason for this excess is a 9 per cent. rise in the current spending of local authorities — far more than was provided for.
However, other items on the expenditure side, the largest of which is debt interest, are likely to fall short of what was forecast at the time of the Budget, thus reducing the total overrun on the expenditure side to about £1½ billion.
On the receipts side, the North sea tax take is likely to be even lower, by about £1 billion, than I envisaged at the time of the Budget, largely because for a long period the oil price has been below the $15 a barrel level on which the Budget arithmetic was explicitly based. This shortfall, however, is more than offset by the continuing buoyancy of non-oil tax revenues, in particular VAT and corporation tax. Non-oil revenues now look likely to exceed the Budget forecast by £2 billion. This would imply a net overrun on the receipts side of about £1 billion, rather more than that on the expenditure side. But this will be reduced by a change I propose to make to the North sea fiscal regime.
The collapse of the oil price has led to a sharp cutback in investment activity in the North sea, with inevitable consequences for the United Kingdom offshore supplies industry both in Scotland and the north-east of England. I therefore propose, on a carefully targeted basis, to accelerate the arrangements for the repayment to the oil companies of advance petroleum revenue tax due to them. The details of this change, which will require legislation early in the new Session of Parliament, are set out in a press notice which the Inland Revenue will be issuing as soon as I have sat down.
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The new arrangements will have a revenue cost this financial year of some £300 million, which will be fully recouped over the next three years. Taking this into account, the public sector borrowing requirement for the current year is still forecast to be about £7 billion, the figure I set in the Budget.
I turn now to the public expenditure plans for the next three years. Since 1982–83, public spending, both before and after deducting the proceeds of privatisation, has been declining as a proportion of national output. It is set to be lower still this year. The Government are determined to ensure that this trend continues—to see to it that total public spending, even without taking account of privatisation proceeds, continues to decline as a percentage of GDP.
The plans I am about to announce for the next three years secure that objective. Indeed, they show that by the end of the period the ratio of public spending to national output will be back to the level of the early 1970s. But within this overall constraint, and in the context of their policy priorities, the Government have felt it right to allow an increase in the previously announced planning totals for 1987–88 and 1988–89.
Compared with the prospective outturn for the current year, we are now planning for an average growth in the public expenditure planning total of about 1¼ per cent. a year in real terms — well within the prospective growth of the economy as a whole. The new planning totals have thus been set at £148½ billion for 1987–88 and £154¼ billion in 1988–89, an increase of £4¾ billion and £5½ billion respectively over the totals previously published. For 1989–90, the planning total has been set at £161½ billion.
As usual, these totals incorporate estimates for the proceeds of privatisation. Last year I increased the estimate of these proceeds very substantially to £4¾ billion in each of the three survey years, a figure which I expect to be duly achieved this year. Although the privatisation programme is now moving ahead more strongly than evervfhjbp;[before, I have decided to make only a modest further addition to this estimate, bringing it to £5 billion in each of the next three years. The new planning totals also contain substantial reserves, rising from £3½ billion in 1987–88 to £7½ billion in 1989–90.
The public expenditure increases I have announced allow us to make realistic provision both for local authority current expenditure, over which the Government have no direct control, and for demand-led programmes such as social security, while still leaving scope for increased spending on services to which the Government attach particular priority.
But before referring to some of the more important changes, let me make one thing absolutely clear. There can be no question of allowing the projected increases in public expenditure over the next two years to undermine the prudence of the Government's overall fiscal stance. The Government's fiscal stance has been clearly set out in the medium-term financial strategy published at the time of this year's Budget. There will be no relaxation of that stance.
Within the totality of public expenditure, the largest increase is for the local authorities, whose current spending next year is now put at £4 billion above the previous provision. This in part reflects the fact that the previous plans simply carried forward the same level or cash spending as in 1986–87. At the same time, we are increasing next year's aggregate Exchequer grant — the

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contribution that taxpayers make to local government spending — by almost 10 per cent. over this year's settlement, a rise of almost £1½ billion.
These substantial sums demonstrate in particular the priority the Government are giving to education, which, including the new proposals on pay and conditions of service for teachers announced last week, accounts for about half the total increase in provision. There is also a substantial increase in provision for the police.
On top of the increased provision for the cost of education in schools, which is contained within local authority current spending, there will be additional spending on the universities of £60 million in 1987–88 and £70 million in 1988–89.
Spending on the health and personal social services will be increased by more than £600 million. For the National Health Service alone, the increase in England amounts to more than £300 million a year. Combined with the additional resources being generated by greater efficiency, this will not only enable the Health Service to cope with the growing number of elderly patients, but will also allow it to improve services.
Gross provision for housing investment is being increased by £450 million. This will sustain the rising trend of spending on local authority renovation and improvements and provide additional resources for the housing associations.
In the light of this year's experience, £1¾ billion has been added to next year's provision for social security, most of which represents a greater expected expenditure on existing means-tested benefits.
Provision for investment in roads is being increased by £65 million next year and £75 million the year after, mostly for local authority roads.
For defence, the provision remains as planned in the last White Paper after allowing for minor changes, including a reduction in the estimated cost of the Falklands deployment. The defence programme will continue to benefit from the substantial real growth in previous years and the wide-ranging action to improve efficiency and value for money.
Taking all programmes together, the additions to planned capital expenditure amount to getting on for £1 billion in 1987–88, of which about two thirds is local authority spending. Further details of these and other changes will be contained in the printed autumn statement which will be published as soon as the House returns next week. In addition, full details, together with information on running costs and manpower, will be given in the public expenditure White Paper early in the new year.
I now turn to national insurance contributions. The Government have conducted the usual autumn review of contributions in the light of advice from the Government Actuary on the prospective income and expenditure of the national insurance fund, and taking account of the benefit uprating which my right hon. Friend the Secretary of State for Social Services announced on 22 October.
The lower earnings limit will be increased next April to £39 a week, in line with the single person's pension, and the upper earnings limit will be similarly raised to £295 a week. The limits for the reduced rate bands which I announced in last year's Budget will also be increased again in April but by proportionately larger amounts. The upper limit for the 5 per cent. and 7 per cent. bands will
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be raised to £65 a week and £100 a week respectively, and the upper limit for the 9 per cent. rate for employers will be raised to £150 a week.
The taxpayers' contribution to the national insurance fund — the so-called Treasury supplement — will be reduced by 2 per cent. to 7 per cent., but this will not require any change in contribution rates. Thus, the main class I contribution rates will once again remain unchanged at 9 per cent. for employees and 10·45 per cent. for employers.
Finally, I turn to the Industry Act forecast. Both growth and inflation have turned out to be slightly lower this year than I envisaged at the time of the Budget. Growth now looks like turning out at 2½ per cent., against a Budget forecast of 3 per cent., and inflation in the fourth quarter of this year is likely to be 3¼ per cent. against the Budget forecast of 3½ per cent.
The principal reason for this slower growth has been the disappointing performance of exports, which were hard hit by the cutback in spending by OPEC and other primary producers affected by the sharp fall in commodity prices in general and the oil price in particular.
Combined with a halving in the value of our own oil exports, this has meant a significant deterioration in the current account of the balance of payments, from a surplus of some £3½ billion in 1985—and a cumulative surplus of £21 billion over the six years from 1980 to 1985 inclusive —to a forecast of broad balance for 1986.
Looking ahead to 1987, the prospects are generally encouraging.
While the necessary adjustment of the exchange rate to the oil price collapse has now taken place, it will inevitably take time before the full benefits come through in higher non-oil exports and lower import growth. This means that we can expect the current account of the balance of payments to go into deficit next year, for the first time since 1979, to the tune of some £1·5 billion. Even so, non-oil exports are forecast to rise next year by 5·5 per cent. compared with an increase of only 1 per cent. this year, with manufacturing output in consequence up by 4 per cent. And with domestic demand continuing to expand at the same rate as this year, the economy overall is likely to grow by a further 3 per cent. next year — the sixth successive year of steady growth at an average annual rate of almost 3 per cent.
Recorded inflation is likely to edge up a little, to 3·75 per cent. in the fourth quarter of 1987. This is almost entirely due to the effect on the RPI of the timing of mortgage rate changes. The Government's commitment to a monetary policy that will squeeze out inflation remains unabated.
Meanwhile the likelihood of faster growth next year, coming at a time when unemployment already appears to have stopped rising, suggests that the prospects for some fall in unemployment are now more promising. But this promise could still be frustrated by excessive pay settlements.
The strategy that we have followed since 1979 has brought inflation down to the lowest level for two decades, combined with sustained growth and steadily rising living standards. This is a combination that has eluded successive Governments for a generation. We have brought it about by the determined pursuit of free markets and sound money. And that is what we shall stick to.
Mr. Roy Hattersley: First, I welcome the increased expenditure on health, housing and education, small though the increases in the health and housing budgets are. The sick, the homeless and parents will wish that there could be a general election every year. They will wonder why they have waited so long. They will not believe that the sudden change of heart and sudden change of judgment could possibly survive a Tory election victory.
Let me tell the Chancellor straightaway that his figures and forecasts are treated with increasing suspicion, not simply inside the House, but outside it. Therefore, I shall ask him a series of specific questions about the numbers that he has half offered us today. Will he confirm that programme spending is forecast to increase by £7·5 billion in 1987–88 — £4·7 billion on the planning totals, £250 million from privatisation, and £2·58 billion from the contingency reserve?
Will the Chancellor confirm that much of that extra spending is not the result of his careful planning, but the product of overspending this year, which he attempted, but failed, to control and is now taking on into the year that follows? Education at £1·6 billion, social security at £1·6 billion and the EEC at £440 million represent expenditure to which the Chancellor was passionately opposed when they came about.
There is a coy reference in paragraph 29 of his statement to a "greater expected expenditure" on existing means-tested benefits. Translated into English, that means that long-term unemployment has been far greater than the Chancellor kept on pretending that it would be both a year ago and at Budget time. Does the right hon. Gentleman agree that the buoyancy of non-oil tax revenue is largely the result of wage increases which have outstripped inflation — wage increases which he has constantly condemned, which he attempted to reduce, and for which he now attempts to take the credit?
Is it surprising that, against that background, the House and the country will be wholly sceptical about the right hon. Gentleman's conversion to public spending and the continuation of such policies over a substantial period? So that we can better judge the Chancellor's sincerity, will he make it clear where he stands on the whole variety of targets that were once the centre piece of his policy? Does he support the Governor of the Bank of England in his view that broad money targets should be abandoned? If he does, will he confirm that the medium-term financial strategy, of which he is the author, has finally been laid to rest?
Furthermore, will the Chancellor tell us about the fiscal adjustment, about which we heard so much last year and the year before until it suddenly disappeared? He is right to say that we have heard nothing about it, and that is why our suspicions are increased about the honesty and integrity of his figures. In the March forecast, we were told that the figure would be £2 billion, and that has been spent. Does that mean that there will be no cuts in taxes next year or that the Chancellor will increase the public sector borrowing requirement—not dealt with in the statement —to accommodate tax increases? If he will do neither, will he once more preside over an increase in the total tax burden that the Government levy?
Does the Chancellor realise that the current account deficit is more optimistic than that predicted by any other forecast, and that each forecast is absolutely incredible? Is not the economic outturn now worse than what he
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predicted at Budget time in a number of crucial areas? I shall ask him, item by item, to confirm or deny that. Is it or is it not a fact that the balance of payments is £3½ billion worse than he forecast at Budget time? Is it or is it not a fact that output in the first half of this year has increased at half the speed that was forecast at Budget time? Is it or is it not a fact that exports have risen at less than one fifth of the rate forecast at Budget time?
Despite all that, and despite all those prospects being worse, the Government propose greater spending than when the prospects were better. Is the Chancellor surprised that we are sceptical about his proposals or that he is fast losing any reputation he ever possessed for financial respectability?
In previous years, in an attempt to sustain his reputation, the Chancellor has done deep damage to the real economy. Now, he is cynically pretending to change course, and one question above all must be asked of him: Having made this apparent swerve, how does he justify the waste and suffering in th seven years of his previous policy? How does he justify the cuts in Government expenditure that robbed the pensioners and closed hospitals, or the medium-term financial strategy, which added 2 million to total unemployed? That was supposed to be the price of getting the economy right. The economy is not right, yet unemployment remains at an unacceptable level. Today's statement has done nothing to help in that essential area.
Mr. Lawson: Since the right hon. Gentleman absented himself from the whole of Treasury questions to have time to mug up the questions he has just asked, I should have thought that he could have done a little better than he did. I shall do my best to answer the right hon. Gentleman's questions. I shall take them in the order that he asked them. [Interruption.] If right hon. and hon. Members do not want me to answer the right hon. Gentleman's questions, I shall not answer them. [Interruption.]
Mr. Speaker: Order. I ask the House to hear the Chancellor.
Mr. Lawson: The right hon. Gentleman referred to the public expenditure increase. I have already announced the public expenditure increase, and it is as he says. He then referred to the buoyancy of revenues. The buoyancy of revenues is due, above all, to two facts — first, continuing vigorous economic growth and, secondly, the greatly increased profitability of companies which has led to a large increase in the yield of corporation tax.
The right hon. Gentleman asked about the medium-term financial strategy. If he had been paying attention he would have heard me explicitly reaffirm the medium-term financial strategy.
The right hon. Gentleman asked about the fiscal adjustment. He may not be aware that last year I announced that I would, and I did from last year, discontinue the practice of giving the fiscal adjustment, because it is a misleading and unreliable essay. Subsequent events proved the rightness of that course.
He then asked about the PSBR for next year. I made it quite clear in my statement that the PSBR in 1987–88 will be held to 1¾ per cent. of GDP. So there will be no expansion of the PSBR.
The right hon. Gentleman said that some things, such as exports, are lower this year than I forecast at the time of the Budget, and that GDP is 2½ per cent. as against 3

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per cent. That is absolutely right, as I announced in my statement. However, inflation was lower also. The right hon. Gentleman wondered how it was, when those items had fallen short of expectations, that I could announce an increase in public expenditure. Clearly he is unaware that the public expenditure increase is for the years ahead. As I have made clear, the prospect for the years ahead is for a growth of 3 per cent.—higher than the 2½ per cent. we have had this year. The right hon. Gentleman failed to take into account the fact that, since 1982–83, public expenditure has consistently fallen as a share of gross domestic product, and will continue to do so. That is in sharp contrast to the position when the Labour party was in government when, despite the IMF, it was rising faster than GDP. That is what got us into the problems that we had in the 1970s. The right hon. Gentleman accused me — if I took down his words correctly — of "cynically pretending to change course". I can assure him that we are not changing course.
Sir William Clark: Is my right hon. Friend aware that his statement will be welcomed, in as much as the borrowing requirement will not be increased but will be held as forecast? Will he re-emphasise that, this year, there is extra captial expenditure—the total is a lower proportion of GDP—and that, out of £148 billion the capital expenditure allocation will be over £22 billion?
Mr. Lawson: My right hon. Friend is right and I thank him for his remarks. Capital expenditure has been increased by almost £1 billion in 1987–88 over the previously published plans. The Opposition are on extremely shaky ground on capital expenditure because we all recall what they did to slash it on the Health Service, hospitals, roads and anything else on which they could lay their hands.
Mr. David Penhaligon: Does the Chancellor of the Exchequer agree that at least one conceivable weakness in his current strategy is the degree to which he is relying on the tax take that he receives from various resources as a result of the current credit boom, which is something that cannot be sustained? This is creating demand which in turn is creating consumption and imports, but it is not creating the jobs and investment that we require. The Chancellor admits in his statement that we shall have a balance of payments deficit. Could not his strategy lead to pressure on the pound in terms of interest rates and its valuation, and is it not right to say, to quote an American president, that we ain't seen nothing yet?
Mr. Lawson: That was rather a long question, if it was a question at all. If the hon. Gentleman is interested, the forecast for consumer demand in 1987 is a growth of 4 per cent. compared with 5 per cent. this year. The forecast is that consumer demand will be growing more slowly next year than this year, whereas both investment and exports will be growing more rapidly.
Mr. Terence Higgins: The statement as a whole is welcome, but does my right hon. Friend recall that those advocating higher public expenditure have stressed the importance of concentrating on capital rather than on current expenditure? Is he satisfied with the balance between the two? Is there not cause for concern
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about the level of wage settlements, especially when they are linked to national wage agreements, which are a means of increasing unemployment in areas where it is highest?
Mr. Lawson: My right hon. Friend holds a position of special responsibility as the Chairman of the Select Committee on the Treasury and Civil Service, and he is right to point to the problems of excessive pay increases in the public sector. As I said in my statement, the greatest single area of growth is in local authority current spending. Some of the spending is very welcome, but roughly 45 per cent. of local authority current expenditure is on pay, excluding teachers' pay. The rapid rise in that expenditure, over which the Government have no direct control, is a major problem in getting the balance right between current expenditure and capital expenditure, about which my right hon. Friend is rightly concerned.
Mr. Robert Sheldon: Since the last public expenditure White Paper, how much has the reserve for 1987–88 and that for the following year been reduced? In other words, how far has the Chancellor of the Exchequer eaten into that contingency reserve? Since the previous autumn statement, has the assumption for unemployment next year been increased or reduced?
Mr. Lawson: The assumption for unemployment next year will appear in the Government Actuary's report, and will be slightly higher than the figure in the Government Actuary's previous report. The right hon. Gentleman will forgive me if I am wrong, but I think that the increase is 50,000, representing an increase that has already taken place. It is not a projection of a future increase. The reserve always comes down as the year rolls closer. The reduction is especially large this year and is one of £2¾ billion, from £6¼ billion to £3½ billion for 1987–88. The reduction is rather on the large side because, as I said in my statement, and as we stated explicitly in last year's autumn statement, the figure for local authority expenditure for 1987–88 had not been agreed. Therefore, we carried forward the same cash figure for 1986–87 and stated that we had made special allowance in a specially enlarged reserve to accommodate that. This year we have put in what we consider to be a realistic assessment of local authority current expenditure for all three years.
Mr. Michael Fallon: Is it not those who are lucky enough to work in the public sector who will gain most from the transformation of the star chamber into the school tuck shop? Cannot my right hon. Friend hold out any hope of reducing the heaviest burden of taxation on the lowest paid in the private sector, who do not have the advantages of those in the public sector?
Mr. Lawson: I think that some of my colleagues—I shall not mention names—who have appeared before the so-called star chamber will be slightly surprised to hear it described as a school tuck shop. My hon. Friend knows full well the nature of the Government's taxation objectives. Taxation, however, is a matter for the Budget and not one for now. Clearly a pound cannot be used twice. A pound which is used in higher public expenditure is not available for reductions in taxation.
Mr. Chris Smith: The Chancellor announced in his statement an increase of £450 million in expenditure on housing. As the Government, in their report last year, estimated that £20 billion were

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required to bring local authority housing stock into a livable state of repair, do my constituents now have to wait 41 years for repairs to be carried out?
Mr. Lawson: I do not accept the figures which the hon. Gentleman has quoted, which were put together by local authorities, which made their own assessments of what they thought was necessary. The figures were published subsequently by the Department of the Environment. The statistics were provided by the local authorities in the various areas. The increase in housing expenditure, which I have announced, is an important one, and I hope that Opposition Members will not deride it.
Sir Edward du Cann: If my right hon. Friend is still seeking reductions in the absolute levels of expenditure in addition to the proportionate levels to which he referred, and large consequential reductions in taxation — we hope that we shall hear much more of both matters in his Budget next year — will he give urgent consideration to the proposal, which I think is supported in all quarters of the House, for the repatriation of agricultural policy? The runaway extavagance of the common agricultural policy is not only a continuing scandal, but the indiferrence of the member Governments of the European Community in grappling with it is something which is causing great impatience throughout the nation.
Mr. Lawson: I am sure that my right hon. Friend knows that Britain and its Government are taking the lead in seeking the reforms of the CAP that are long overdue. The problems of overproduction and subsidisation of food and agriculture are not peculiar to the European Community. It is a worldwide phenomenon: it is exactly the same in the United States, Japan and throughout the industrialised world. That is why my right hon. Friend the Prime Minister, at the Tokyo summit earlier this year, insisted on having for the first time in a summit communiqué mention made of a problem which the whole world must address. It is one of the greatest problems facing the world over the next 10 years.
Mr. J. Enoch Powell: Does the Chancellor of the Exchequer recognise that the ending of the long run of large surpluses on the current account of the balance of payments should be greatly welcomed in view of its beneficial effect upon the level of economic and, particularly, industrial activity?
Mr. Lawson: I note the right hon. Gentleman's views, although I do not believe that the linkage is quite as simple as he suggests.
Mr. David Howell: If there is to be an increase of £4·75 billion above the planned totals for public expenditure next year, and if, as my right hon. Friend says, there is to be no relaxation of the Government's fiscal stance, is it safe to conclude that there will be, thanks to the vigour and dynamism of the economy next year, a natural increase in revenue of about the same amount? If that is right, is it not an encouraging prospect for those of us who still want to see substantial tax cuts?
Mr. Lawson: I share my right hon. Friend's desire to see substantial, continuing tax cuts, but we shall have to wait until next year's Budget to see what the prospects will be.
Mr. Jack Ashley: Does the Chancellor seriously deny that, although he has been
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talking about the prudence of the Government's overall fiscal stance, the reality is that he has just begun to paddle his electoral canoe with a moderate expansion financed by privatisation? Will he recognise that he will not get very far with the dead weight of mass unemployment costing £20 billion? The sooner he addresses his mind to that fact, the better it will be for the country and, indeed, for the Government.
Mr. Lawson: I share the right hon. Gentleman's concern at the level of unemployment. I should have hoped that he would welcome the fact that, over the past six months there has been no increase in unemployment. The most recent seasonally adjusted figures are the same as they were six months ago. As for paddling electoral conoes, I can well understand why the right hon. Gentleman is so nervous about the prospect of an election.
Mr. Alex Fletcher: Does my right hon. Friend agree that the autumn statement again refutes the bogus accusation that the Government have written off Scotland? Will he confirm that Government spending on public services in Scotland is now greater in real terms than it was in 1979 and that Scotland is also getting better value for money, as Government funds are aimed at greater efficiency in the public services and the creation of new jobs in the private sector rather than subsidising industries that are no longer competitive?
Mr. Lawson: My hon. Friend is right. He might also have added that we are blessed with a Scottish Chief Secretary.
Mr. Dick Douglas: Will the Chancellor reflect on the fact that, seven years after the Conservative party came to power and after receiving £50 billion in revenue from North sea oil, he predicts an encouraging internationally competitive position in 1987. What does he mean by "encouraging" in terms of the balance of payments and current account? In terms of North sea oil advance petroleum revenue tax, what effect is this likely to have on the cash flows of oil companies and on exploratory and development activities in the North sea in relation to Scottish employment?
Mr. Lawson: It is encouraging that the forecast is for growth of 3 per cent. in 1987—the sixth successive year of growth of 3 per cent. or thereabouts — and of inflation remaining low.
As for the North sea oil picture, with special reference to Scotland, about which the hon. Gentleman is something of an expert, the APRT change is deliberately geared precisely to the point to which he adverted. That is why it will require immediate legislation. It is to help the immediate cash flow position, particularly of smaller independent companies. That has an important bearing on the workload of the offshore supply industry in Scotland and in the north-east of England. It is a repayment of tax that has already been paid by them.
Mr. Ian Gow: In deciding what weight to give the shadow Chancellor's advice on these matters, will my right hon. Friend reflect on the fact that 15 December marks the eleventh anniversary of the infamous letter from a former Chancellor to the managing director of the International Monetary Fund and that that letter had been preceded by a rate of inflation of 26·9 per cent? Will my

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right hon. Friend take this opportunity to reaffirm his own commitment and that of the Prime Minister to stable prices by the end of the next Parliament?
Mr. Lawson: That is certainly our aim and ambition. Having got inflation down, as my hon. Friend pointed out, from 26·9 per cent. at its peak during the last Labour Government to 3 per cent. today, it is the aim and ambition of the Government and myself to reach stable prices by the end of the next Parliament.
Mr. Ian Wrigglesworth: Will the Chancellor come clean and admit to the House that, along with the abandonment of his monetary targets, the autumn statement and the accompanying boasting press releases about public expenditure today, he has completed the abandonment of his past monetarist policies? Will he admit that he is doing that to generate a short-term preelection boom to seek a short-term party political benefit? Will he confirm that the long-term damage of the policy is borne out by the £1·5 billion balance of payments deficit, which he forecast this afternoon, and the assumption that there will still be over 3 million people unemployed in 1990? Will he change his policies so that demand is channelled into investment and exports rather than into consumption and imports?
Mr. Lawson: The hon. Gentleman is extraordinary. It is almost inevitable that, given the halving of our oil export earnings virtually overnight, there would be a period during which the balance of payments in the current account would go to deficit before the non-oil majority of the economy could increase their exports sufficiently and compete more effectively against imports. That is what will happen. As I pointed out in my earlier remarks, non-oil exports are expected to rise by 5½ per cent., almost twice the rate of the economy as a whole, and non-oil business investment is likely to rise about 3 per cent. in line with the rise in the economy as a whole. I am talking about a balanced growth, not one that is loaded particularly on to consumption, with consumption, investments and exports all going ahead.
Several Hon. Members rose—
Mr. Speaker: Order. I have to bear in mind that there is to be a further statement after this one, and there is also to be an economic debate. I will allow questions to go on for a further 10 minutes on this matter, during which time I hope that each hon. Member who has risen will be called. Those who are seeking to take part in the subsequent debate might reserve their questions until then.
Mr. Eric Forth: I congratulate my right hon. Friend on achieving a remarkable balance between obtaining the responsible management of the economy that we have expected from the Government until now and acceding to the reasonable requests of those who wanted an element of greater expenditure. How does my right hon. Friend see the economic environment in the current year, particularly for the business sector, to which we look for the generation of wealth in the future and, indeed, of future employment?
Mr. Lawson: The continuing low inflation and the high company profitability which is enjoyed in the corporate sector—the highest for about 20 years—coupled with the benefit that the non-oil sector has enjoyed arising from
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the adjustment of the exchange rate to the fall in oil prices, give British industry, and particularly British manufacturing industry, an unparalleled opportunity. I am sure they are capable of grasping that opportunity, and I hope they do so.
Mr. Reg Freeson: The Chancellor in his autumn statement, if I recall it correctly, expressed the hope for a reduction in unemployment from 1987. The Government actuarial figures, to which he referred, suggest an immediate increase in unemployment. In June or July this year, the Secretary of State for Employment forecast a reduction in unemployment by the end of this year. Can the Chancellor explain what these contradictory statements mean, if anything at all?
Mr. Lawson: The right hon. Member for Birmingham, Sparbrook (Mr. Hattersley) in his question about unemployment, correctly pointed out that the Government Actuary's figure was not a forecast but an assumption based on the current rate of unemployment. It is an assumption that has been adopted by Governments of both parties.
Mr. Michael Latham: So that this will be clearly understood by the local authority negotiators, will my right hon. Friend confirm that the increases in the education provision are intended to fund only the level of settlement suggested last week by my right hon. Friend the Secretary of State for Education and Science and not a penny more?
Mr. Lawson: Most certainly. The extremely generous settlement on teachers' pay which my right hon. Friend the Secretary of State for Education and Science announced is a decision. There is no question of any more being paid to the teachers than the substantial increases announced by my right hon. Friend. The total provision for the whole of the responsibilities of the Department of Education and Science — schools, universities and everything else has risen by £2¼ billion over the previous published plans.
Mr. Nigel Spearing: Since the junior health Minister declared at the Dispatch Box last Friday that she was more than happy with a 30 per cent. cut in non-emergency ambulance services in London, may we assume that none of the £300 million which the Chancellor has announced will go to restore those grievous cuts?
Mr. Lawson: Those are matters for my right hon. Friend the Secretary of State for Health and Social Services.
Mr. Neil Hamilton: Does my right hon. Friend think that the response to his autumn statement by the right hon. Member for Birmingham, Sparbrook (Mr. Hattersley) was rather dyspeptic, as though he had just, unusually, had to swallow something that he found disagreeable? The right hon. Gentleman referred to Government cuts, but is it not the case that, in every year since 1979, public spending has increased in real terms and that the statement, in effect, announced that that trend will continue? Does not my right hon. Friend foresee after the next general election our Government getting to grips with public spending and being able to make real reductions in it?
Mr. LawsonThere has been a steady improvement on the position that we inherited. Taking general

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Government expenditure and deducting from it privatisation proceeds in order to obtain the steady underlying trend, public expenditure increased in real terms by about 3 per cent. a year, year in, year out, over the 10 years before 1978–79. That is why, as I said earlier, we got into the difficulties we did. During the first Parliament under the Government, we reduced that increase to 2¼ per cent. a year. During this Parliament, we have reduced it further to 1¾ per cent. a year so far. Over the three years to come, we plan to reduce it further to 1 per cent. a year.
Mr. A. E. P. Duffy: In his late and quite inadequate reference to unemployment, the Chancellor said that relief could only be prejudiced by high wage settlements, despite the virtual stagnation of private sector investment. Where in his statement can the Chancellor point to a single measure that might alleviate that upward pressure on interest rates which is preventing the revival of private sector investment?
Mr. Lawson: There is no stagnation of private sector investment. Private sector investment — I may have something to say about this in the following debate has risen in the upswing since the middle of 1981 faster than consumer spending. The forecast for 1987—this is the new fact which I have to tell the House—is for non-oil business investment to rise by about 3 per cent., or perhaps even a little more, fully in line with the growth of the economy as a whole. That is by no measure stagnation.
Mr. Nicholas Budgen: If monetary indicators are no longer a good guideline to over-heating in the economy, will my right hon. Friend tell us what factors in the economy are now a good guide to over-heating?
Mr. Lawson: Monetary indicators are very important. I urge my hon. Friend, because of his deep and abiding interest in this subject, to read carefully the lecture by the Governor of the Bank of England at Loughborough which went into the matter in immense detail and was very persuasive, explaining the difficulties in interpreting broad money aggregates. However, MO—the narrowest of the aggregates—does not suffer from these deficiencies. It will be easier to see whether that is on track. I am glad to say that it is.
Mr. Tony Banks: Is the Chancellor of the Exchequer aware that, next year, in the London borough of Newham the local authority will spend almost £3 million on bed and breakfast charges, whereas in 1984 it was spending only about £92,000? Will the right hon. Gentleman allow the London borough of Newham and the other local authorities to spend the almost £6 billion that is now in bank accounts, built up through the sale of council houses in capital receipts? If the right hon. Gentleman is not prepared to give that sanction, will he please explain how spending accumulated capital receipts affects the public sector borrowing requirement?
Mr. Lawson: It is clear that all public expenditure affects the public sector borrowing requirement, whether it is notionally financed out of accumulated receipts—which in practice may often have been spent anyway—or not.
Mr. John Butterfill: Does my right hon. Friend agree that by far the most disturbing aspect of his statement is the 9 per cent. overspend by local authorities? Will he join me in urging my colleagues who
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represent shire counties to press upon county councillors the advice and the example given to them by business interests and to take independent advice on the management of their services with a view to obtaining reductions in costs?
Mr. Lawson: I agree with my hon. Friend. County councillors and, indeed, all councillors on important councils will be well-advised to do that.
Mr. Eric Deakins: Are the estimates of Britain's contribution to the EEC budget over the next three years based on a continuation of the maximum VAT rate at 1·4 per cent.? If so, is that not a very unwise assumption?
Mr. Lawson: The answer to the first question is yes. the answer to the second question is no.
Mr. Harry Greenway: What account has my right hon. Friend been able to take of the projected rate rise in many Labour-controlled councils, such as Ealing where rate increases of between 50 and 100 per cent. are expected next April after the Labour council has been one year in power? Is my right hon. Friend aware of the devastating effect that that will have on the local economy and on people's ability to pay their rates?
Mr. Lawson: I fully understand the problem to which my hon. Friend alludes. The practice of Labour councillors, cynically pushing up expenditure and the rates and not caring who gets hurt — whether it is the householders or the small business man—does immense damage. We have sought to limit that damage by the introduction of rate capping in a number of areas. That has protected the ratepayers in those areas, but in many areas that are not rate capped Labour councillors are able to do, and are doing, great damage.
Mr. Dennis Skinner: Is the Chancellor of the Exchequer aware that, if the BBC dared broadcast the truth about what he has had to say today, it might suggest that a pawnbroker stood up in the House of Commons, masquerading as the Chancellor of the Exchequer, surrounded by mountains of debts? It might suggest that that same man was handing out a few electoral bribes, never mentioning the fact that in seven years the credit card holders have become indebted to the tune of £27 billion and that the average family's debt as a proportion of real disposable income has gone up from 45 per cent. to 70 per cent. and that the Government borrowed $4 billion only seven weeks ago to bail out this failing economy and then, having finished what he had to say, having not mentioned anything about unemployment and the prospects for those people who are out of work he turned like a corkscrew and sat down next to the right hon. Lady who used to occupy the place called Grantham cafe, which has finished up as one of the 100,000 bankruptcies in Britain during the right hon. Gentleman's seven years' rule.
Mr. Lawson: Not even the BBC would be guilty of the hon. Gentleman's flight of fancy.
Mr. Edward Leigh: Following the question posed by my hon. Friend the Member for Bournemouth, West (Mr. Butterfill), will my right hon. Friend confirm that the £1·5 billion, or 10 per cent., increase in aggregate Exchequer grant should not be seen as an encouragement of profligacy in local

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government? On the contrary, it should be seen as an encouragement for local government to emulate central Government in contracting out and in the privatisation of services — something that many local authorities, even Conservative ones, have signally hitherto failed to do.
Mr. Lawson: I agree with my hon. Friend about the desirability of local authorities' contracting out and privatisation. Unfortunately, an insufficient number have done so, but those that have pursued that policy have gained great benefit for their ratepayers and need to pursue it further. What we have decided by way of aggregate Exchequer grant is fully sufficient for the needs of local authorities in Britain. I hope that there will be no occasion for anybody to suggest otherwise.
Dr. Norman A. Godman: With regard to the increase in public expenditure which has just been announced by the right hon. Gentleman, how much will go to Scotland?
Mr. Lawson: I have not the precise figures in my head. The hon. Gentleman will know full well that public expenditure per head in Scotland is considerably higher than public expenditure per head in England.
Mr. Alan Howarth: Does my right hon. Friend accept that the increased public expenditure on education—provided it is tied, as the Government rightly insist that it must be, to copper-bottomed staff contracts and a rigorous squeeze on local authority extravagance— should be properly regarded not simply as an increase in current expenditure but something quantitatively different — an investment in the future productive capacity of the nation?
Mr. Lawson: I think that we have a chance, with the decision, and its ramifications, which my right hon. Friend the Secretary of State for Education and Science has announced, of achieving a much needed transformation in our education system. That will result in teachers becoming professionals once again—which they were in danger of ceasing to be—and will be of great benefit to children. It will also benefit the future of this country, both its economic and wider future.
Mr. Harry Cohen: Can the Chancellor explain why he did not mention interest rates in his statement, especially as they have just gone up again? Industry, public services and employers are dependent on these rates. What does he propose to do to bring the interest rate down below 10 per cent? Interest rates have never reached that level under this Government.
Mr. Lawson: Interest rates have been below 10 per cent. during this Parliament. The hon. Gentleman is misinformed.
Mr. Donald Dewar: The Chancellor said that he did not have the expenditure figures for Scotland in his head. As far as I can make out, looking at the papers in the Vote Office, they are not available there either.
Can the right hon. Gentleman explain why, in a statement which had an air of unreality about it, Scotland in particular has been treated in this unreal way? He will remember that normally there are separate figures for Scotland, Wales and Northern Ireland. This year there is a new beast — territorial and other Departments. That appears to cover Wales, Northern Ireland, Scotland certain parts of the Property Services Agency and Civil Service superannuation, which are linked in one aggregate figure. Can the Chancellor explain why this is so, and, having abolished Scotland in this rather cavalier and offhand way, will he guarantee that these aggregate figures are given at an early date and apologise to Scottish Members for this ludicrous situation in which it is impossible to get any impression of the impact of the statement in Scotland or the other parts of the United Kingdom to which I have referred?
Mr. Lawson: The hon. Gentleman really should not be so impatient. It was only today that the Cabinet agreed, as I announced, the public expenditure figures for the year. It is not customary for the House to be informed on the very day of the Cabinet decision. I thought that it would help the House if I did so on this occasion.
The figures for Scotland, Northern Ireland and Wales will be published in the normal way, in the printed autumn statement that will appear on Wednesday.

Helicopter Crash (Sumburgh)
4.34 pm
The Secretary of State for Transport (Mr. John Moore): I am sorry to have to inform the House that at approximately 11.30 today, a Chinook helicopter belonging to British International Helicopters crashed into the sea approximately two miles east of Sumburgh in Shetland. The helicopter was inbound from the Brent field to Sumburgh with 47 people on board—three crew and 44 passengers. A coastguard helicopter which happened to be lifting off from Sumburgh airport at the time was at the scene of the accident almost immediately and recovered two survivors. The survivors were flown to Lerwick for treatment. A number of surface vessels, including the local lifeboat and helicopters, are now at the scene of the accident. No further survivors have so far been found. Eighteen bodies have been recovered. There will be a full investigation by my chief inspector of accidents. A team of investigators has already left for the scene of the accident, as has my hon. Friend the Under-Secretary of State who is responsible for aviation.
I know the House will join me in expressing its condolences to the bereaved and in commending the rescue services for their prompt action.
Mr. Peter Snape: Will the right hon. Gentleman accept the wish of the House to be associated with his condolences for the bereaved as a result of this appalling tragedy? I wish to be associated with his commendation of the rescue services. Does the right hon. Gentleman agree that accidents of this kind remind us that we still pay a high price in human terms for the successful exploitation of our North sea oil reserves?
Was any distress signal from the helicopter seen before the accident? Finally, will the right hon. Gentleman accept and pass on the sympathy of the House to those still awaiting news of people missing in this tragic accident?
Mr. Moore: I appreciate the hon. Gentleman's first and last points. I know the House shares his sentiments. The hon. Gentleman is right to pay tribute to those whose tenacity, courage and ingenuity have won for our nation such resources from the seas at such clear human cost. We owe them all a debt.
From the information which I have received, no warning signal was given.
Mr. David Howell: I also wish to be associated with the condolences to the bereaved which have been expressed at this horrific accident. I have travelled in a Chinook helicopter to the North sea rigs a good many times. I would appreciate any more information at this early stage about what exactly happened. My right hon. Friend will be aware that people in these usually safe vehicles wear wetsuits. If the helicopter has to ditch into the sea the passengers can usually survive for some considerable time. The appalling tragedy of the number of deaths in this case suggests that something very much worse happened — perhaps an explosion before the helicopter hit the water. Have there been any reports from witnesses at the scene?
Mr. Moore: I recognise what my right hon. Friend has to say and the experiences he gained during his time at the Energy Department, as I gained during my days there.
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I have come to the House with all the information that I have at the moment. There was in fact—coincidentally — a coastguard helicopter which had lifted off from Sumburgh and which was at the scene almost instandtly.
Mr. Malcolm Bruce: I thank the Secretary of State for coming to the House so promptly to make a statement on what is an appalling catastrophe that many of us had feared might happen but hoped would not. Will he also accept our condolences from this Bench? I have spoken by telephone to my hon. Friend the Member for Orkney and Shetland (Mr. Wallace), in whose constituency this accident occurred. He is unable to be here due to a constituency engagement but was anxious to express his sympathies and condolences at this tragedy.
I have been advised that the helicopter was seen to fall out of the sky from a height of 500 ft and it broke on impact with the water. The bodies which have been removed from the water were wearing lifejackets, but these had not been inflated, indicating that there was no warning and that no distress signal was issued.
Will the Minister, to assure the many people who fly regularly, confirm that we will get a quick inquiry into the accident and a quick declaration of the cause? Is he prepared, if necessary, to ground other Chinooks? Regrettably, this is not the first time that such an incident has occurred to a Chinook. I am sure we will appreciate that there is concern among those who, as has been said, must fly to their work tomorrow. If the Minister can give that assurance, the House and the families concerned will be grateful.
Mr. Moore: I welcome the expression of condolences from the hon. Member who represents that part of the world. I have said as much as I can at this stage about the complete absence of warning. By coincidence, a coastguard helicopter was on the spot almost instantly. I cannot go into any more detail. The great benefit of the statutory and independent role of the chief inspector in my Department in instances such as these is that any information which calls for a change in conditions or safety arrangements can be recommended to the Civil Aviation Authority immediately, and even before the investigation is over. We ought to control any suggestions about safety until we have learnt a little more about the incident.
Mr. John Wilkinson: I also express my condolences. If the accident investigation branch of my right hon. Friend's Department requires additional resources, will my right hon. Friend call in the Royal Air Force directorate of flight safety, which has considerable operational experience of the military version of the aircraft?
Mr. Moore: My hon. Friend is right. If there is a need for additional resources, we will do that. Co-operation between the military and my Department is very close on these matters. As far as I can see, there is no need for additional resources at this stage, but proper investigation of the incident will not be impeded by a lack of resources.
Mr. Donald Stewart: May I associate myself and my hon. Friend the Member for Dundee, East (Mr. Wilson) with the sympathy that has been expressed? Does the Secretary of State agree that, in spite of this sad accident, we should keep in mind the splendid record of these machines on errands of mercy and life saving generally during the past few years?
Mr. Moore: I very much welcome the right hon. Gentleman's comments. I also want to be associated with his comments about the tremendous work that is done around our shores. I recognise the great safety record that we have so far enjoyed. We shall want to investigate this incident further.
Mr. David Harris: As, until today's appalling tragedy, the worst helicopter crash occurred in the Isles of Scilly, which are in my constituency, may I be associated with my right hon. Friend's expression of condolences? Although it seems from first reports that the circumstances of the two crashes are quite different and involve a different type of helicopter, will my right hon. Friend tell me, perhaps in writing, whether all the recommendations of the inquiry into the Isles of Scilly crash have been carried out?
Mr. Moore: I shall give my hon. Friend a precise answer and ensure that the information is given to the House. As a result of the Scilly Isles crash, the CAA had to improve standards and conditions for helicopter flying. If the present investigation makes further recommendations, the CAA will be advised and I trust that it will insist on the implementation of any new conditions.
Mr. Dick Douglas: Will the Secretary of State accept that, especially in Scottish Labour minds, this is a severe tragedy? In view of the record of oil companies— Shell is involved here— and the helicopter company and bearing in mind the remoteness of the Shetlands, can the right hon. Gentleman give us some idea of the facilities that have been offered to the next of kin to enable them to get to Sumburgh to alleviate some of the grief? Does he agree that the number of people who have apparently been killed is high, bearing in mind the safety provisions involved in such operations? Is that not most disturbing? Although we want an expeditious inquiry, we want a thorough inquiry into the nature and background of the Chinook and the relevant safety requirements.
Mr. Moore: I can give the hon. Gentleman the assurance for which he asks. There is no question but that this must be a most thorough investigation by my chief
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inspector in the accident investigation branch. I should like to consider the hon. Gentleman's quite legitimate point about remoteness. We are aware of the difficulty of the distances involved. We must concern ourselves with the bereaved. I shall consider that matter with as much sympathy as I can.
Mr. David Heathcoat-Amory: If this tragic accident is found to be the result of a mechanical malfunction, does it not call into question the apparent preference of the British Army for Chinook helicopters rather than smaller British made helicopters as a means of transporting troops? Will my right hon. Friend ensure that the investigation includes Ministry of Defence personnel and that the results of it are fully disclosed?
Mr. Moore: I think it quite inappropriate for me to draw any further conclusions than the ones that I have already drawn with the information that I have now.
Mr. Robert Maclennan: I associate myself and my right hon. and hon. Friends with the expressions of sadness that we all feel at this appalling tragedy.
Although the right hon. Gentleman is right not to speculate about the causes of the accident, is he aware that those of us who have constituents who travel daily on such transport will want to know the inquiry's findings as soon as possible to end any possible speculation?
Mr. Moore: I fully understand the hon. Gentleman's point. I also understand the nature of activity in his constituency, having visited Dounreay. I shall make every effort to ensure that the House receives every possible piece of information. The most important thing is to ensure that there is a thorough investigation and to act upon its findings. We must do that first.
Mr. Michael McNair-Wilson: I also express my condolences. Does my right hon. Friend know whether the helicopter was carrying a flight recorder or a cockpit voice recorder?
Mr. Moore: I am sorry, but I cannot answer that question now. I shall let my hon. Friend and the rest of the House know the answer through a letter placed in the Library.

Master J. R. Bickford Smith
4.45 pm
Mr. Speaker: I undertook yesterday to consider the point of order raised by the hon. Member for Hackney, South and Shoreditch (Mr. Sedgemore) about the Attorney-General's answer in last Tuesday's Hansard giving the results of an investigation into the allegations made by the hon. Member regarding the case of Tubero v. Toomey and others.
The hon. Member put to me three specific points. He asked first, whether it was not
"a gross abuse of both Houses" — [Official Report, 5 November 1986; Vol. 103 c. 955.]
for the Lord Chancellor to have set up an inquiry into the hon. Member's allegations and then, without any reference to the hon. Member, to have announced the result of the inquiry in an answer given by the Attorney-General to a written question. To that point, I can only reply that since the hon. Member, as he himself said, asked the Lord Chancellor to set up an inquiry, it is for the Lord Chancellor to decide what form the inquiry should take and how its result should be announced. The Attorney-General, of course, answers for the Lord Chancellor in this House. As far as reference to the hon. Member is concerned, while that is a matter of courtesy between hon. Members and not a rule of the House, I hope it will always be observed.
In his second point, the hon. Member asked me whether it was proper to impugn the integrity of a Member by means of the question and answer procedure, instead of putting down a substantive motion for that purpose. In considering that point, I think it has to be borne in mind that last Tuesday's written answer summarised the results of an inquiry into the hon. Member's allegations. The answer consists largely of a rebuttal of those allegations. It also includes criticism of the hon. Member's conduct in presentation of his case. It is a long-established principle that criticism of a Member's conduct should be embodied in a substantive motion.
Finally, the hon. Member asks me to which Members of the judiciary the rule applies which requires reflection on conduct to be embodied in a substantive motion. The answer is set out in "Erskine May" at page 378, which specifies:
"Judges of the superior courts of the United Kingdom, including persons holding the position of a judge, such as a judge in a court of bankruptcy and a county court, or a recorder."
I am satisfied that masters of the Supreme Court do not fall within this category.
The Attorney-General (Sir Michael Havers): I of course accept your ruling, Mr. Speaker, and apologise if, in my parliamentary answer, I went further than parliamentary convention allows. The substance of my answer was a complete rebuttal of the allegations, but I regret that the answer also reflected on the conduct of the hon. Member for Hackney, South and Shoreditch (Mr. Sedgemore) in an unparliamentary way.

BBC (Libel Action)
4.48 pm
Mr. Neil Hamilton: On a point of order, Mr. Speaker. I apologise, after two long statements, for wearying the House, but this is an important matter which affects the privileges of the House.
You will know, Mr. Speaker, that the hon. Member for Workington (Mr. Campbell-Savours) has on many occasions recently sought to use the privilege of the House to call into question the conduct, or alleged conduct, of Mr. David Mitchell, an employee of Conservative Central Office, whom he has accused of having interfered with witnesses in a libel action, recently disposed of, which I had against the BBC. That is a serious criminal offence.
You will recall that on Tuesday the hon. Member for Workington announced, on a point of order, that he was sending a transcript of a tape recording of a conversation to my right hon. and learned Friend the Attorney-General. My right hon. and learned Friend yesterday wrote to the hon. Gentleman to say that in that tape recording he could find no evidence or material which would justify his asking the police to carry out an inquiry. He also sent that transcript to the Director of Public Prosecutions, who concurred with my right hon. and learned Friend's conclusion. I should like to ask whether it would be appropriate for the hon. Member for Workington, whom we all know to be a man of the highest integrity, to apologise now to Mr. David Mitchell for having made allegations about him for which there is no foundation?
Mr. D. N. Campbell-Savours: Further to that point of order, Mr. Speaker. I do not believe that the Attorney-General has given the matter his fullest consideration. For a start, the Attorney-General, during his reply, has pointedly refused to respond to any of the statements made by the parties to the transcript on interference with witnesses. At no stage in the reply does he refer to what they say. The fact that the transcript indicates, indeed states, in the words of one of the parties to the transcript, that a cover-up was organised by Conservative Central Office seems unimportant to him. He refuses to be drawn on that.
The fact that the transcript draws attention to the prospect of perjury by witnesses he treats as unimportant and refuses to be drawn on it. In his reply to me he does not refer to the fact that the transcript points to the changing of stories by witnesses and hon. Members, arid to pressure being exerted by Mr. David Mitchell. The fact that potential witnesses were frightened by the prospect of being identified and their names published in national newspapers and were modifying their evidence to avoid embarrassment seems unimportant to him. It is all in the transcript and he refuses to be drawn on it.
It is absurd for anyone to suggest that the evidence as submitted did not warrant an inquiry by the police. The Attorney-General, who refuses to be drawn on the matter of political pressure over the Westland leak, is the same man who today refuses to be drawn on the question of political pressure on witnesses to the BBC trial. No one should believe what is being said by the Attorney-General.
Mr. Speaker: I cannot see any point of order that arises for me in this. I have not heard the tape. It is not a matter of order; it is very much a matter for debate.
Mr. Gerald Howarth: On a point of order, Mr. Speaker. I believe that there is a point of order here. The right hon. Member for Swansea, West (Mr. Williams), who is in the Chamber, suggested on 27 October that the hon. Member for Workington (Mr. Campbell-Savours) would have said, had you not cut him short, that as many as 17 out of 20 witnesses may have been persuaded to withdraw.
Mr. Speaker: Order. We cannot get into a debate on this. Will the hon. Gentleman come to a point of order which I can seek to answer?
Mr. Howarth: Is it in order for hon. Members who have been cleared by the Attorney-General to be mentioned in that way? Is it not incumbent upon the hon. Member for Workington to name those people and place the transcript in the Library, so that we can all see it?
Mr. Speaker: I think that we have dealt with that matter. [Interruption.] Order. The hon. Member for Bolsover (Mr. Skinner) is not even in the Chamber.
Mr. Dennis Skinner: I am, just.
Mr. Speaker: Well, stay there. I think that we dealt with this matter on Tuesday. I cannot see any point of order for me.
Mr. Michael Brown: On a separate point of order, Mr. Speaker. In view of the fact that the hon. Member for Workington (Mr. Campbell-Savours), under the cloak of privilege, has been able to make certain challenges to the answers given by the Attorney-General and the Director of Public Prosecutions, may I ask you to rule that the hon. Gentleman should place the tapes to which he is referring in the Library of the House?
Mr. Speaker: That is not a matter for me. The tapes are not an official document.
Mr. Campbell-Savours: I would be more than happy if the Attorney-General would use the power and the right that he has, and which I do not have, to place that transcript, under the cover of privilege, in the Library. I ask him to do so.

Animal Liberation Front
4.54 pm
Mr. Colin Shepherd: I beg to ask leave to move the Adjournment of the House under Standing Order No. 10 for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
"the distribution of a booklet correlating Animal Liberation Front activities and containing instructions on how to make incendiary devices and fire bombs."
Two days ago an animal rights campaigner in Herefordshire let it be known that he was deeply concerned and disgusted at a leaflet and booklet that he had received through the post. I now have a copy of that sinister booklet and I am appalled by its content. The content is a wide incitement to action to cause damage. Most important is the explicitly detailed instruction on how to make incendiary devices and how to use them to maximum effect.
Regardless of the views that hon. Members may hold on the complicated and knotty issues of animal welfare and rights, I am sure that all hon. Members have a serious interest in the safety of their constituents and in the general rule of law. The fact that a leaflet is being freely distributed across the country at this time which gives such explicit details of how to assemble incendiary devices from everyday household materials, and how to plant them for greatest effect, must surely be a matter of immediate concern to the House. The fact that it is being widely distributed, as it claims, is even more worrisome, since it will inevitably become of interest to a wider readership than simply those interested in animal rights, who could be disposed towards mischief, innocent or otherwise, with injury or loss of life resulting. That underlines the seriousness and urgency of the matter.
I hope that peaceful recipients of this anonymous publication will waste no time in burning the copies sent to them, or will let their views be known to the publisher, if they know who it is. The House should be given an early opportunity to express its revulsion at such tactics and to discharge its duty to alert the public to a threat to public order which is being built up as a consequence of this irresponsible and reprehensible course of action from extremists, whoever they are.
Mr. Speaker: The hon. Member for Hereford (Mr. Shepherd) asks leave to move the Adjournment of the House for the purpose of discussing a specific and important matter that he thinks should have urgent consideration, namely,
"the distribution of a booklet correlating Animal Liberation Front activities and containing instructions on how to make incendiary devices and fire bombs."
I have listened with great care to what the hon. Gentleman has said. I regret that I do not consider that the matter he has raised is appropriate for discussion under Standing Order No. 10 and I cannot, therefore, submit his application to the House. However, I hope that he find other ways to bring this important matter before the Chamber.

Opposition Day
  20TH ALLOTTED DAY

    Economic Policy
    Mr. Speaker: Before I call the Opposition Front Bench .spokesman to move the motion, I must announce that I have selected the amendment in the name of the Prime Minister and that I shall introduce the ten minutes limit on speeches between 7 o'clock and 9 o'clock.
    4.58 pm
    Mr. Roy Hattersley: I beg to move,
    That this House condemns the Government's continued operation of economic policies which produce intolerable levels of unemployment, prohibitive interest rates, cuts in public sector capital spending, the destruction of the nation's manufacturing base and a serious loss of the British share in world trade; and calls upon the Government to accept that its economic strategy has failed and to replace it with policies for the real economy which promote investment, growth, employment and exports.
    Anyone who heard today's autumn statement will agree that the Government are certainly not steering the same course as last year. Indeed, they are steering no steady course at all. Part of the reason for the swerving and skidding is the ambiguity over the medium-term financial strategy. Were the Chancellor not operating his normal levels of courtesy, which make it obligatory for him never to be here when a debate begins, I would direct questions to him specifically on that subject. As it is, the Chief Secretary to the Treasury will no doubt whisper in his ear when he condescends to arrive.
    The Chief Secretary to the Treasury (Mr. John MacGregor): In all fairness, the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) will recall that he was not here throughout the whole of Treasury questions this afternoon. I shall make clear and careful notes of what the right hon. Gentleman says. My right hon. Friend the Chancellor will be here shortly.
    Mr. Hattersley: No one except the Chief Secretary would regard there as being anything like a parallel between those cases. It is clear that the Chancellor is not here, and in his absence I shall ask a number of questions about the medium-term financial strategy, of which the Chancellor is the only true begetter and author, and for which he must take responsibility.
    The Chancellor insists that the medium-term financial strategy is still in place. I do not believe that that view is accepted anywhere outside the House, nor do I believe that it is accepted by the Chancellor in truth or in honesty. The medium-term financial strategy has either been mortally wounded, or is dead, and so it should be. The strategy is built around the implicit faith that rigorous fiscal and monetary policies will inevitably lead to solutions of the problems of the real economy. That is clearly not so. Even if we are to believe — and it will stretch credulity to breaking point—that the strategy remains, and even if the Chancellor repudiates the Governor of the Bank of England's view on broad money, it is clear that the MTFS has failed and that the economic recovery which it was claimed would automatically be brought about by that strategy's application has not come about and will not
    1108
    come about until there is a change of policies. The effects of the failure cannot honestly be denied, although I have no doubt that the Chancellor will attempt to deny them.
    I should like to begin with four examples. Much of Government policy for almost eight years has been designed to hold down interest rates, yet today real interest rates are not only the highest in our history, but are the highest in the industrialised world. The balance of payments, which Government policy proposed to bring into a full year's surplus of £3·5 billion, has slumped into deficit. Indeed, in seven years the Government have converted a surplus of £4 million in the manufacturing account into a £4 billion deficit.
    Employment in this country, which the Government claim to have increased—indeed, in the amendment that we are to debate, still claim to have increased — has actually fallen by 1,207,000 since 1979. The Government will have to learn to live with the fact that many of us recall that the Government were elected in 1979, and we are not prepared to start counting their achievements over the past three years alone.
    I notice that the Chancellor has just entered the Chamber. I shall give way to him if he wants to apologise for his absence.
    The Chancellor of the Exchequer (Mr. Nigel Lawson): I was absent for the first few minutes of the right hon. Gentleman's speech — which I regret — for exactly the same reason as he was absent through all of Treasury questions, although he has not expressed any regret for that. This is a rather busy day.
    Mr. Hattersley: I was absent from the Chamber during Treasury questions because I was reading the Chancellor's autumn statement. I had hoped that the Chancellor would deliver it before 4.30 this afternoon.
    I was describing some of the Government's failures. I had dealt with interest rates and was talking about the bogus claims that the Chancellor and his colleagues have made about employment. I repeat for the Chancellor's benefit that employment in this country has actually fallen by 1,207,000 since 1979. Indeed, in Britain over the past seven years we have lost more jobs than the rest of the EEC countries combined. We have lost more than 2 million full-time jobs. We have lost 11,000 jobs in the last quarter, arid 114,000 jobs in manufacturing industry in the year to August 1986.
    The figures for men and women actually in work, catastrophic though they are, are the figures which the Government attempt to use as a diversion from their unemployment record. On an honest calculation of unemployment—the calculation which the Government inherited — unemployment now stands at almost 4 million. On the Government's own massaged figures it is 3,333,000. On the Government's own initially secret forecast it will be 3,100,000 at the beginning of the next decade. Indeed, we heard from the Chancellor this afternoon that the Government Actuary's report has increased the assumption on unemployment since the report was published last year.
    If, in 1979, the BBC had predicted that the result of seven years of Conservative government would be record unemployment, record real interest rates, a collapsing balance of payments and a net job loss of 2 million, the chairman of the Conservative party would have accused it of Bolshevik bias.

    1109
    The charge sheet is very much longer than that. It includes a record number of company liquidations, the highest total tax bill in British history and the lowest value for sterling ever. The charge sheet is well known in this country, and so is the plea of mitigation. The Government say, and the Chancellor said again this afternoon, that they have done very well on inflation. The Government inherited a retail prices index of 10·3 per cent. They doubled that, largely by a massive increase in value added tax. Then, at a terrible cost to jobs, output and public services, the RPI came down to 3 per cent., although it is now rising again.
    In June the Chancellor said:
    "our rate of inflation is, if anything, below the European Community average".—[Official Report, 3 June 1986; Vol. 98, c. 758.]
    That is a wonderful example of the power of selection that the Chancellor has over statistics. I concede at once how perfectly true that is and that we are doing better than Spain and Greece. However, if we compare the British record with that of other industrialised countries, which are a fair comparison, we find that the picture is very different.
    I should like to quote some figures from British Business, the Government's own publication. It shows that inflation is 3 per cent. in the United Kingdom, 2 per cent. in France, 1·6 per cent. in America, 0·8 per cent. in Belgium, 0·1 per cent. in Japan, and in Germany minus 0·4 per cent.
    Mr. Michael Latham: As the right hon. Gentleman is talking about records, will he remind us when between 1974 and 1979 inflation stood at 3 per cent.?
    Mr. Hattersley: The hon. Gentleman knows the answer. Let me give him the other parallel. If he were to compare inflation in Britain with that in the rest of Europe, he would find that it is in no way to the Labour Government's discredit when compared with this Government's record.
    Mr. Lawson: Yes, it is.
    Mr. Hattersley: The Chancellor says that it is. He will have the opportunity to quote the figures in a moment.
    The truth is that, despite the reduction in oil prices and the other factors that have come to the Government's aid, the achievements of which the Government boast are relatively poor compared with what has happened in the EEC. While that part of the Government's record is relatively poor, the rest of the Government's record is absolutely castastrophic. The Government's failure is the Chancellor's personal failure. He is the author of the medium-term financial strategy and the inventor of the nominal targets, and it is the pursuit of those targets which has devastated the real economy.
    I know very well that the Chancellor's response will be to defend himself with selective statistics, false comparisons and bogus forecasts. The time has come to deal with some of the sleight of hand in which the Chancellor specialises from debate to debate. The obvious example is that we are told that output in this country is at its highest level in history. So it is, but all that that means is that we are no longer doing worse than we were on the day that the Conservatives were elected. For some years we were doing worse than on election day.
    1110
    Although we are no longer doing worse than on the day that the Prime Minister entered No. 10 Downing street, we are still doing spectacularly badly. Since 1979 the economy has expanded at an annual average of 1·4 per cent. In the previous 30 years the figure was 2·6 per cent. If the Chancellor, or the hon. Member for Rutland and Melton (Mr. Latham), wants to ask what the figure was during the Labour Government, let me tell them that it was 1·8 per cent. over the entire period that we were in office— a great deal better than the Government's record since the election.
    The Chancellor tells us, too, that exports are at a record level. We are not told that a combination of expanding world trade and a boom in consumer spending has caused imports to rise at an even faster rate. We are not told that we are losing our share of world trade while increasing the volume and value of our imports. The fact is that, in those areas, the Chancellor never tells us the whole truth when it is convenient for him, particularly with regard to trade exports and imports, because to give a truthful account of our balance of payments record would be to expose the cynicism of the Government's policy. We are facing a consumer-led balance of payments crisis. The Chancellor's response to that is to attempt to buy votes by cutting taxes, as I have not the slightest doubt he will in next year's Budget.
    Mr. William Cash: Will the right hon. Gentleman be more truthful with the House on the matter and agree that one reason for the high level of imports is the lack of quality in British industry? That quality will not be achieved by the prescriptions that he has been putting forward to the British nation over the past two years.
    Mr. Hattersley: I do not believe that for a minute. The reason for our record being as bad as I have described is the attack on our manufacturing base, which has been central to the Government's economic policy. More important in that context, the reasons are debatable between us; the facts are not. I only wish that the Chancellor would tell us the facts rather than put the invariable gloss on the truth, which is his stock in trade.
    I have no doubt that the Chancellor will deny many of those things when he speaks, so I should like to pause for a moment to evaluate the worth of his denials. On 9 October, on Channel 4 news, he was accused of dodging the issue of exchange rates in his conference speech. I have listened to this with great pleasure several times during the past day. The right hon. Gentleman defended himself by saying that he would deal with the subject in his Mansion house speech in seven days' time. He did not say a word on the subject. However, he dealt with the balance of trade, describing the August trade figures as a freak. What impression did he intend to give by describing them as a freak? Did he mean to suggest that the September figures, about which he must have known something by then—a deficit of £277 million—should be regarded as normal, or was he trying to convey the impression that the balance of trade and the balance of payments were moving into surplus? The truth is that the Chancellor will say anything to get out of a corner. Trapped in a sinking ship, he always throws his integrity overboard, and we hear the splash almost at once.
    The Chancellor has similarly played for time with the economy, and he has been rumbled. Capital assets are sold off to finance brief tax reductions. Oil has briefly filled the

    1111
    hole blown in the economy by the collapse of manufacturing industry and the collapse brought on by the pursuit of the arbitrary medium-term financial strategy targets.
    In both cases the Government have taken refuge in the most temporary of expedients, for North sea oil is running out, and every time the markets catch a glimpse of what, on present policies, the British economy will be when the oil has gone, they withdraw their confidence from the British economy. That is because the Chancellor has managed to make us peculiarly dependent on the 6 per cent. of gross domestic product that oil provides. I should think—indeed, I feel certain—that there can be no other industrialised country in the world where the Finance Minister would go to Parliament and offer as one of his excuses for failure the reduction in costs inherent in the reduction in oil prices.
    As the Chancellor made clear today, that has become one of the reasons why things are not operating in the way that he would choose. Had he used seven years of oil revenues to build up our industrial base, that reduction would have been an unprecedented boom, but, tragically, we are particularly vulnerable to fluctuations in oil revenues because of that dependence, because of the way that the Chancellor has chosen to lean upon them. Because of our tragic dependence, he has made sterling particularly vulnerable to changes in market valuation of our future prospects.
    The most desperate example of that was the depreciation of the pound to $1.06 in March 1985. The most recent example was in August this year, when the markets discovered that even with oil we were in massive trade deficit.
    The House will recall that the Chancellor told us at the time of the Budget that the reductions that were brought about by the fall in oil prices and oil revenues
    "should not cause us undue concern."—[Official Report, 18 March 1986; Vol. 94, c. 168.]
    During the Budget debate the right hon. Gentleman's complacency either rose to new heights or sank to new depths, depending on how complacency is evaluated. He said that, having lost half the value of oil in 25 weeks and survived, we could easily accommodate losing the rest over the next 25 years. I hope that he recalls what has happened since he told us that all was well, that everything was on course, that the economy was moving in the direction that he chose, and that we should not concern ourselves with the change in oil prices. Since then the balance of payments, which at that time was forecast to produce a £5 billion surplus, has moved into deficit. The best that the Chancellor can say about it now is that it will break even, as distinct from the surplus of £5 billion.
    Interest rates have gone up again. The Chancellor still shrugs off increases in interest rates—that is, when they are not likely to take place during the Conservative party conference—but as a result of his attitude towards those matters, and as a result of the market's judgment about the economy when the oil runs out and the discovery of our true trade position, and despite the massive intervention in which he was involved in October, the pound still required an increase in interest rates, which inevitably caused enormous damage to investment prospects and enormous hardship to home owners.
    Mr. John Maples: In what way does the right hon. Gentleman think that the policies that he has proposed would have reduced interest rates to the level of those of some of our industrial competitors?
    Mr. Hattersley: The straight answer to the question is that the repatriation of funds recently invested overseas will produce an upward pressure on sterling and make it unnecessary to run record interest rates in the way in which the Chancellor has done it.
    Having answered the question, let me tell the hon. Gentleman—[Interruption.]—and his colleagues that we chose this debate so that we could talk about the Government's policy. The Chancellor emphasised that by deciding to make his autumn statement today. Now and in future debates neither the hon. Gentleman nor the Chancellor will run away from the consequences of the past seven years by trying to divert attention to other things.
    Mr. Nicholas Budgen: Will the right hon. Gentleman give way?
    Mr. Hattersley: I shall not give way.
    I was going to mention the intervention in October and say that the Chancellor, having spent seven or eight days encouraging and supporting that proposal and that attitude, was still driven to the increase in interest rates, with enormous damage to the economy, as well as the loss of the funds that were used for intervention. I suppose that it made it possible for the Conservative party to end its conference on a happy note. It made the Prime Minister participate in not only the longest ovation in political history, but the most expensive.
    Although the inevitable was postponed for a week or so, the cycle of long-term collapse continued. Interest rates went up, and manufacturing industry was damaged again. That damage meant that the economy went into further decline. It meant an emphasis on, and acceleration and continuation of, the trends since 1979. It meant less investment than in 1979, less output than in 1979, and a further erosion of the manufacturing base on which our economy is so dependent. Inevitably, the result has been another bad balance of payments performance and another sterling crisis, and the whole damaging process is repeated again and again. The only question is how soon the cycle will once again come round.
    In a moment or two the Chancellor will, as is his way, reject all the blame, deny every allegation and reject all criticism. However, he will do so with less than complete conviction, because if he really believed in his own innocence he would not spend so much time tampering with the evidence. I offer him the chance to make his defence more plausible than it has been during the last four years. I shall do so by asking him five specific questions about what he has produced, what the medium-term financial strategy, for which he is responsible, has produced and what the Government have produced since 1979.
    My first question concerns unemployment. I shall make it as easy as I can for him to answer this question, knowing his pathetic reluctance to answer questions on unemployment. For a moment, I suppose wrongly and irrationally, I overlook the 18 statistical changes that have been introduced to reduce the total of the registered unemployed. I overlook the new tests and targets that have been introduced this week to squeeze unemployed men

    1113
    and women off the register. I overlook even the special schemes, measures and projects introduced for the same purpose—the artificial jobs which the Prime Minister condemned during the 1979 election campaign. Allowing for all the Government's statistical figures, for all the bullying to take men and women off the register and for the schemes which are not real jobs, will unemployment be down to 3 million at the next general election?
    Mr. Patrick Nicholls rose—
    Mr. Hattersley: I am sure the Chancellor will recall that the chairman of the Conservative party said—ironically, on BBC television—that if the Government were unable to bring unemployment down to 3 million by the next election they would not be worth re-electing. Will the Chancellor and his colleagues be worth re-electing on polling day? Even on the Chancellor's phoney figures, will the unemployment figure be 3 million by that date?
    Secondly, the labour force has fallen by 1·2 million and 2 million full-time jobs have been lost. When will the number of jobs in the economy be back to its 1979 level? That has nothing to do with the demographic change to which the Prime Minister constantly refers, and nothing to do with the fact that, as the Prime Minister prays in aid, more women are entering the labour market.
    Thirdly, when will real interest rates, now about 8 per cent., fall to their 1979 level? From experience, I know that the Chancellor usually claims that high real interest rates are the result of his success. His claim enables us to measure the recklessness with which he replies to such questions. He claims that high real interest rates are the product of low inflation.
    If the right hon. Gentleman is going to make that claim today and say that the only reason why real interest rates in this country remain at about 8 per cent., I should like him to answer another question. When will real interest rates in Britain be as low as those in comparable countries where inflation is even lower than ours? I gave the Chancellor a list of the countries with better inflation records than our own, and in most cases their real interest rates are lower than ours. When will we aspire to, let alone achieve, the success of our OECD and EEC competitors in either of those regards?
    Fourthly, may we hear more about the August balance of payments "freak"? I agree with the Chancellor that one record catastrophic month proves nothing. That catastrophic month was followed by a bad month. In themselves, two months of pretty grim figures may not prove anything. So, what will the Chancellor tell us about the year from August, the year from that freak figure to next August? Will it be in surplus, or in deficit?
    Finally, what are the prospects for manufacturing industry? Since 1979, manufacturing output has fallen by 7·5 per cent., manufacturing investment has fallen by 17 per cent., and the manufacturing balance of trade has shifted from a £4 billion surplus to a £4 billion deficit. Under existing policies, will manufacturing output, investment and trade ever return to the 1979 position?
    I have to confess that to a degree each of those questions is rhetorical. Anybody who has listened to the Chancellor in the House, or elsewhere, knows that the chances of his even essaying an honest answer are negligible. In the light of that, I want to ask the Prime
    1114
    Minister a question, in her absence, about what I hope will become her most notorious statement during the general election campaign of 1979.
    On 19 April 1979, at an election rally in Birmingham, the Prime Minister promised to cut unemployment and described how that would be achieved. We are, she said,
    "going to do it by creating the conditions for real jobs, not artificial ones, so that once again the products stream from our factories and workshops whilst the customers of the world scramble over each other to buy them."
    The right hon. Lady has done the exact opposite. Unemployment has risen by 2 million, the register has been reduced by artificial jobs and arbitrary disqualifications, factories and workshops have been starved of investment and have gone into liquidation in record numbers and the salesmen of the world fall over themselves to sell their goods in our markets.
    It is a big claim, but even the Prime Minister has never made a more cynical promise, nor broken her word more consistently and cynically. I make it absolutely clear that my hon. Friends and I will vote tonight against the cynicism and deception that are an integral part of Tory economic policy, as well as against the Government's obvious failure.
    5.28 pm
    The Chancellor of the Exchequer (Mr. Nigel Lawson): I beg to move, to leave out from "House" to the end of the Question and to add instead thereof:
    "congratulates Her Majesty's Government on the success of its economic policies, which have brought inflation down to its lowest levels for two decades, combined with sustained economic growth, a million new jobs created since 1983, steadily rising living standards, and record levels of investment.'.
    The last part of the speech of the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) was even more extraordinary than usual. He not only claimed that the result of the 1979 election was a foul, but seemed totally oblivious of the fact that the British people had an opportunity in 1983 to record their own verdict, not his verdict, on the Government's economic performance and returned us with an increased majority.
    In my statement earlier this afternoon, I set out the prospects for the economy over the next year. It is above all a prospect of yet another year of the steady progress that we have seen over the past five years, with healthy economic growth, inflation at low levels, and 1 million new jobs created since 1983.
    Mr. Hattersley: I spoke for 28 minutes and that was not half enough to get the truth out of the Chancellor. He has given us the figure of new jobs since 1983. Will he now give us the figure of job losses since the Government were elected?
    Mr. Lawson: I shall make my speech in my own way. It really is no use refighting the 1983 election. The country gave its verdict on our performance between 1979 and 1983. That is over and done with. We are now talking about what has happened since we were re-elected in 1983 and since then there are very nearly I million more jobs. That is a fact.
    That steady progress is something that we have come to take so much for granted on both sides of the House that it now seems almost routine. The only questions that we ask ourselves are whether growth will be, say, 2·5 per cent. or 3 per cent., or whether inflation will be, say, 3 per cent. or 4 per cent.

    1115
    Yet, when one thinks about it, this is a pretty remarkable turnround. Not so long ago, we used to debate whether Britain could have sustained growth without a sharp and damaging increase in inflation. The 364 economists were not the only people who said that it was completely impossible. Well, we have put an end to that argument and it is one debate that has been decisively won. It has been won by the Government sticking to their guns. But if ever there was a year in which that has been tested, this is it. The dominant event has clearly been the collapse of the oil price—halving from almost $30 a barrel at the time of last year's autumn statement to around $14 a barrel today.
    There were those who would have said, a year ago, that this halving of the oil price would wreak enormous damage to the British economy, and many did so. That is another argument which has been decisively won. Earlier this year, there were some who gambled that pressure on sterling, combined with the loss of our oil revenues, would cause us to abandon the free market policies which have made our North sea oil industry the success it has been. The Opposition, as short sighted as ever—the hon. Member for Thurrock (Dr. McDonald) will well remember this—urged us to do so. Yet is there anyone now, at home or abroad, who doubts our resolve to keep the North sea free? I very much doubt it.
    What has happened to the United Kingdom economy in a year when we have lost more than half of our oil revenues and half of the value of our oil exports? As I explained earlier this afternoon, public borrowing remains on track, despite the fact that oil revenues this year are set to be no less than £6½ billion lower than last year. Despite that, the PSBR is on track. To have weathered a revenue loss of this magnitude is a remarkable achievement. The reason we have been able to weather it, and the impact of the oil price fall generally, is the underlying strength and resilience of the British economy as a whole, coupled with the prudence of the Government's financial policy.
    Domestic demand has been growing steadily, and the forecast for this year as a whole is a rise of 3½ per cent. over last year, with consumer spending particularly strong. Some of the commentators and some Labour Members have woken up to that a bit belatedly and with something of a start.
    When I said in May that we were seeing a pause in economic activity but that I expected it to be short, the conventional wisdom, and certainly the view on the Labour Benches, was that the pause was not a pause but a halt, that the economy was underperforming and in danger of grinding to a stop. That was what was said as recently as May this year. Now that the extra spending power to which I pointed then is feeding through into demand, in much the way that I expected, the conventional wisdom on the Labour Benches has changed tack. Suddenly I am told that the economy is overheating—
    Mr. Mark Fisher: Sucking in imports.
    Mr. Lawson: —with a consumer boom destined to do nothing but, in the startlingly original words of the hon. Gentleman suck in imports.
    As usual the Opposition do not know which horse to back. One moment they tell us that the economy is flat on its back, and the next moment they say that we are engineering an irresponsible pre-election boom. Indeed,
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    the hon. Member for Thurrock has written to me suggesting that I am engineering what she called a "postelection boom"—that is precisely what she wrote. They clearly do not know whether they are coming or going.
    I can, of course, fully understand why they are so worried about the next election, whenever that may be. But the plain fact is that demand at home is growing very much as I expected at the time of the Budget, and as I reiterated in May. Indeed, its growth has been remarkably steady.
    What has fallen short, it is true, has been this year's growth in exports, largely because of the worldwide slowdown in trade earlier this year, and the cut-back in spending by OPEC and other primary producers. But that has only reduced our overall growth rate this year from about the 3 per cent. that I forecast in the Budget to the 2½ per cent. that I now expect. Looking ahead to next year, there is every reason to expect demand at home to go on rising steadily while our export performance picks up again. The outlook for exports is very encouraging.
    Mr. Hattersley: The Chancellor makes a typical point about the fall-off in our exports and world trends. Why have we lost a disproportionate share compared with similar countries?
    Mr. Lawson: The right hon. Gentleman is, as usual, completely wrong. He is so concerned about manufacturing. The only accurate figures that we have are for manufacturing trade. Manufacturing exports' share of world trade has been steady; if anything, it is rising slightly. It has certainly been steady for the past five years, whereas under the previous Labour Government it was steadily falling, year in, year out. There has been a remarkable change in trade.
    As I was saying, the outlook for exports is encouraging. The recent CBI quarterly survey shows that companies themselves are a good deal more optimistic about export prospects than they were earlier in the year. Non-oil exports have resumed a vigorous growth and stand at an all-time high. The right hon. Gentleman once again made much of the difficulties of the manufacturing sector, but just as the fall in exports had a particularly marked impact on manufacturing companies, so the pick-up will be of particular benefit to manufacturers.
    The signs are encouraging. In the third quarter of 1986, exports of manufactures were some 3 per cent. higher in real terms than in the first half of the year. World trade in manufactured goods is likely to grow more rapidly in 1987, and I am confident that British exporters will seize the opportunities open to them. Over the past five years, British manufacturing exports have succeeded in maintaining their share of world markets — a success unprecedented in recent history, and in sharp contrast to the marked fall under the previous Government.
    Mr. Hattersley rose—
    Mr. Lawson: I shall give way in a moment.
    The competitive position of the non-oil economy has been improved by the necessary adjustment of the exchange rate to the oil price collapse. A continuous fall in the exchange rate would simply mean ever higher inflation, and that is something no one wants, and to which this Government are resolutely opposed.
    The plain fact is that the pound is now highly competitive.
    Mr. Hattersley: The right hon. Gentleman made a number of claims about world trade and our share of it. Will he give the honest accurate figures now, will he ask the Chief Secretary to give them, or shall I give them instead?
    Mr. Lawson: The figures for our volume share of world trade are contained in the printed version of the autumn statement and they will show precisely what I said a few moments ago.
    I said in my statement earlier today that in the short term the current account of the balance of payments, to which the right hon. Gentleman alluded, is expected to go into a deficit of some £1½ billion next year— after, incidentally, a cumulative surplus of £21 billion over the past six years, compared with a cumulative deficit of about £5 billion under the previous Labour Government.
    But we have now had a major improvement in cost competitiveness. As the full benefits feed through, the current account deficit should steadily diminish. Overall, non-oil exports are forecast to rise next year by 5½ per cent., continuing the present strong upward trend. The London Business School is forecasting an even stronger recovery in exports, particularly in manufacturing. This more than offsets some slowdown in consumer spending, while investment continues to rise broadly in line with the economy as a whole.
    Looking at the overall position, the prospect for next year is for faster growth that is balanced in two senses: first, between domestic demand and exports; and, secondly, between investment and consumer spending. I have to say that the latter achievement was conspicuously lacking in the upswing that took place under the previous Government. Between 1975 and 1979 under Labour—[Interruption]—know that the right hon. Member for Sparkbrook does not like listening to this, but he will have to. Between 1975 and 1979, under Labour, consumer expenditure grew twice as fast as investment, whereas over the period since 1981—which is a much longer upswing, incidentally, and one which is still continuing —investment has gone up by an average of over 4 per cent. a year and consumer spending by less than 3 per cent.
    Of course there remains deep concern on both sides of the House about the continuing high level of unemployment. The number of jobs has substantially increased—by 1 million since 1983, more than in the rest of the European Community put together. Total employment has now risen for 13 successive quarters—the longest period of uninterupted growth in employment for almost 30 years. Opposition Members ought to welcome that if they have any concern at all for the unemployed, which they have not. They seek to exploit the unemployed for their own party political purposes. They simply do not care.—[Interruption.]
    Here, too, there are signs that the outlook is more promising. Last month's figures show unemployment at the same level as six months previously, and the highest number of registered job vacancies for seven years. But the key to continuing and accelerating the growth in the number of jobs is a more efficient and competitive economy. Next year's faster growth means that the outlook for jobs should be more promising, provided always that pay settlements are at a level that can be afforded.
    The right hon. Member for Sparkbrook spent a long time talking about the decline of the manufacturing sector.
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    The picture, inevitably, is not nearly as uniform as he implied: in certain industries, mostly the metal-using industries, output certainly is still below the pre-recession peak. But in others, such as chemicals, food, and electrical engineering, it is well above the levels of 1979.
    I do not, of course, dispute that manufacturing output altogether has fallen slightly under this Government, just as it did when Labour was in office. Indeed, given the forecast of 4 per cent. growth in manufacturing output for next year, the overall fall under this Government will be, if anything, less than under Labour. But there is this critical difference: manufacturing productivity has grown almost three times as fast since 1979 as it did under Labour. Partly as a result, manufacturing profitability is at its highest level since 1973.
    Nor, of course, is it right to overlook the non-manufacturing side of the economy — which, after all, accounts for some three quarters of total national output. In looking at the overall picture, it is interesting to compare the six years from 1973 to 1979, dominated by the Labour Government, with the period since, when we have been in office. Overall output growth has been similar, though slightly higher since 1979, up by an average of 1½ per cent. a year compared with 1¼ per cent. a year under Labour. But what is significant is that most of the growth under Labour was simply attributable to North sea oil. Excluding oil, output went up by an average of only ½ per cent. a year between 1973 and 1979 compared with 1¼ per cent. a year since.
    Mr. Hattersley rose—
    Mr. John Prescott: Why use the 1973 figure?
    Mr. Lawson: That was the last year before the Labour Government took office. That was the base. The right hon. Member for Sparkbrook asked me about the comparison between inflation in this country and inflation in the Community as a whole. During the entire period of the Labour Government, inflation in Britain averaged 4½ per cent. more than inflation in the Community as a whole. Throughout the time that we have been in office, inflation has averaged the same as in the Community as a whole and, indeed, is now below it. Not only has our absolute performance on inflation improved but so has our relative performance.
    Mr. Hattersley: I am fascinated once more by the right hon. Gentleman's technique. Having chided me for constantly choosing periods going back beyond 1983, why has he suddenly started to make statistical comparisons with periods going back to 1979 and 1974? Is he not doing what he always does—just choosing whatever arbitrary period produces a bogus figure?
    Mr. Lawson: That year is the obvious base. As the Labour Government came into office in March 1974, they inherited the 1973 position. The right hon. Gentleman also suggested that we had now abandoned both fiscal and monetary policies. I explained to the House earlier today that fiscal policy remains firmly on track in spite of the £6½ billion fall in oil revenues compared with last year. We have achieved a continuing reduction in public expenditure as a percentage of GDP, whether or not the proceeds of privatisation are included, and at the same time made prudent increases in spending in certain priority areas.

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    As for monetary policy, I never really expected the right hon. Member for Sparkbrook to understand the complexity of operating it, a skill which would anyway be quite pointless for him to try to acquire since, fortunately for the nation, he will never be required to discharge that responsibility.
    There is absolutely no change in this Government's view that the key to controlling inflation is monetary policy, and the key instrument of monetary policy is short-term interest rates. That policy is delivering the goods.
    I accept the fact to which the right hon. Member for Sparkbrook referred, that interest rates here are higher than in other major industrial countries. There are a number of reasons for that, including the high level of pay settlements, and the premium needed to cover the market's fear of a Labour Government—however unlikely that may be. But, as I explained in my Mansion house speech, my objective has to be to keep short-term interest rates, on average, at whatever level is necessary to achieve the overriding aim of securing monetary conditions that bear down on inflation.
    The trouble with the Opposition parties is that they cannot make up their mind whether they are coming or going. They want to argue both that monetary policy is too loose and that interest rates are too high. They say openly that they would borrow a great deal more and then they say that they would get their interest rates down. They do not know whether they are coming or going or which way to turn.
    Opposition Members are always keen to demonstrate their compassion for the needy in society but the rampant inflation that their policies created—
    Dr. Jeremy Bray rose—
    Mr. Lawson: I am afraid that the right hon. Member for Sparkbrook has taken up the time for interventions.
    Opposition Members are always keen to demonstrate their compassion for the needy in society, but the rampant inflation which their policies created left millions of people watching helplessly as the value of a lifetime's savings was eroded. Inflation does not create jobs; it destroys them.
    Dr. Bray rose—
    Mr. Lawson: We have brought inflation down to the lowest levels seen for a generation. We have brought public borrowing under control and are gradually reducing the ratio of public spending to national output, even without taking acccount of privatisation proceeds. But within this overall constraint, and thanks in part to the attention—
    Dr. Bray rose—
    Mr. Deputy Speaker (Mr. Harold Walker): Order. The hon. Member for Motherwell, South (Dr. Bray) must have seen that the Chancellor clearly does not intend to give way to him.
    Mr. Lawson: But even within that overall constraint, and thanks in part to the attention we have paid to improving efficiency and value for money, we have been able to improve public services in priority areas such as education, health, law and order, and housing. The plans that I announced today will bring a further reduction in the ratio of public spending to gross domestic product, and further improvements in priority areas. In a moment I will compare that to the performance of the last Labour Government.
    Mr. Robert Sheldon: What the right hon. Gentleman has just said is very important. Right from the beginning of monetary policy it was the monetary aggregates that were the key to the reduction of inflation. Today, he has announced that the prime instruments that he will make use of in reducing inflation are interest rates. Therefore, there has been a switch from monetarism to the old standby of reducing activity and so reducing inflation by the use of high interest rates. It is the old, old story. The right hon. Gentleman has changed completely.
    Mr. Lawson: I recommend that the right hon. Gentleman should read my speech to the Lombard Association in April, when I set this out at great length. Given that he was once a Treasury Minister, I am astonished that he makes no connection between the demand for money and the level of interest rates. One relates to price, and the other to supply and demand.
    Dr. Bray rose—
    Mr. Lawson: I have just given way.
    Let us contrast the record of this Government with that of the last Labour Government. They spent money all right—13 per cent. more on public expenditure in real terms in 1974–75 than in 1973–74—and they increased public borrowing eventually to more than 9 per cent. of GDP. But far from leading to the Socialist nirvana that they were expecting, it led them simply to the international equivalent of the bankruptcy court and a lesson in 0-level economics from the IMF. Spending then had to be cut, and they cut it in very damaging ways that we have had to make good.
    The Opposition's motion accuses us of cuts in public sector capital spending. That is rich. We have kept capital spending roughly the same in real terms. It was Labour who cut it—by 20 per cent. in real terms. And look at Labour's priorities. During their whole time in office, capital spending on the Health Service fell by 30 per cent. in real terms, and with the plans that I have announced today we will have increased it by 30 per cent. in real terms.
    Several Hon. Members rose—
    Mr. Lawson: No, I shall not give way.
    Spending on motorways and trunk roads — [Interruption.] Opposition Members do not like to listen to this, but they will have to. Spending on motorways arid trunk roads also fell by 30 per cent. in real terms under Labour. Today's announcement means that it will be nearly 30 per cent. higher in real terms in 1987–88 than in 1978–79.
    I will admit to cutting the cost of building roads. In real terms the public now gets six miles of roads for the price of five compared with the time that we took office. Given the differences between our record and that of Labour, it is nothing short of an impertinence for the Opposition motion to accuse us of cuts and for the right hon. Member for Sparkbrook to say, as he did in a recent speech, that a Labour investment programme would ensure that
    "essential and long neglected services — roads, houses, hospitals, schools—are at last funded."
    Labour cut those services by 30 per cent. in real terms and by 20 per cent. overall.
    Therefore, I am more than happy to compare and contrast our record in office with that of the Labour Government. However, unlike the right hon. Member for

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    Sparkbrook, it is not my habit to dwell on the past for too long. He has given us a few glimpses of how he would manage the economy if ever he were to be given the chance. From his recent pronouncements, some people might think that he was a reformed character. According to one of his recent statements,
    "We were, and we remain, determined to promise no more than the nation can afford … Of course, the easiest way to reduce the ratio of debt to GDP is to allow inflation to rise".
    That is what he said, and he should know, because that is what Labour did when in office, and that is what it would do if it were to get into office again. The right hon. Gentleman also said:
    "Working within that firm financial framework, the next Labour Government will have to operate a system of strict policy priorities".
    Where have I heard the words "firm financial framework" before? In part these plagiarised sentiments are aimed at the voters because the right hon. Gentleman knows that they rejected Labour's profligate approach in 1979 and 1983.
    In part they are no doubt aimed at the financial markets. But most of all they are aimed at the right hon. Gentleman's own colleagues, sitting with him on the Opposition Front Bench — not today, because they cannot wait to get away —who have been so ready to promise the earth and think about how to pay for it later. For example, the right hon. and learned Member for Monklands, East (Mr. Smith) is on record as saying:
    "I am sure that it's not important to cost everything in detail."
    That is the sort of remark that we normally associate with his hon. Friend the Member for Oldham, West (Mr. Meacher).
    We have some sympathy with the right hon. Member for Sparkbrook, given his difficulties with his colleagues, but the trouble is that he is far too late because the country and the financial markets have already heard enough to understand what another Labour Government would be like. The answer is that they would be exactly like the Government we had before—back to the disaster of the 1970s, with massive Government spending increases.
    To try to get some rigour into the debate—which I thought the right hon. Gentleman would welcome—my right hon. Friend the Chief Secretary had a costing done of the Opposition's pledges, and they amounted to a total of £28 billion. For months and months the right hon. Gentleman has had no answer to that. The Opposition have a non-answer, and try to pray in aid the Institute for Fiscal Studies, but the right hon. Gentleman's "only" model of reassurance is that the first year cost would be only £10 billion—as if that were not more than enough. At least he admits to that, even though on his own dubious arithmetic it would be another £4 billion or so on taxes and roughly twice as much borrowing as we have now.
    Mr. Nick Raynsford: And unemployment down.
    Mr. Lawson: How ignorant can one get to imagine that that would lead to a reduction in unemployment. When Labour went on its spending spree, unemployment doubled.
    But only the right hon. Member for Sparkbrook could believe that the first year is all that matters. We elect Governments for a whole Parliament, and what happens
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    during the whole of that Parliament is what matters. If Labour were ever to be elected, which pledges would it fulfil? If some are to be deferred, what would they be? The House and the country have a right to know.
    I have today published this Government's expenditure plans for the next three years, and the House knows, that they are backed by detailed costings, properly worked out. We have a right to ask the Opposition what alternatives they are putting forward. Which pledges would be met and which would not? I shall gladly give way now for an answer.
    Mr. Prescott: We shall certainly answer the right hon. Gentleman's challenge about the use of public expenditure. We can get people back to work, and one example that we shall carry out is the commitment to return to Labour's previous housing programme when 2,000 houses a week more were built than during the period of this Government.
    Mr. Lawson: Clearly I should not have given way, because that is no answer to my question. I therefore ask it again, so that there will be time to answer it in the reply. In his letter, the Chief Secretary listed a number of specific Labour pledges. I ask a simple question: which of those pledges will be deferred and which will not?
    Mr. Prescott rose—
    Mr. Lawson: The hon. Gentleman is too late.
    It is idle to pretend that Labour's pledges could be funded simply by increasing taxes on the better off. Even the right hon. Member for Sparkbrook has come to realise that, because after vainly trying to maintain that taxes would go up only for the top 5 per cent. of the population, he admitted defeat and said that the point above which people would have to pay more would be
    "a jagged, or broken, line".
    The right hon. Gentleman has a jagged and broken policy, and the overwhelming majority of the population would have to pay more taxes if he were ever to come into office.
    In any case, the right hon. Gentleman's attempt to raise taxes for the top 5 per cent. would be most unlikely to raise anything like the £3½ billion which he claims it would. All the evidence suggests that extremely high tax rates reduce rather than increase the amount of revenue raised, and that lower top tax rates bring in more, not less, revenue. That is precisely what has happened. The top 5 per cent. of taxpayers now pay 27 per cent. of total income tax revenue, which is a higher proportion than they ever paid under the Labour Government.
    Throughout the world, countries such as India, Australia and New Zealand as well as France, Germany and the United States are realising that and are reducing their rates of tax. It is only the Opposition in this House who are out of step. It is clear that either some of Labour's pledges would have to be deferred, in which case we had better hear which ones, or that the tax burden would have to go up for everybody, or, more probably, both.
    Perhaps that is why the right hon. Gentleman the Leader of the Opposition stepped in last week with his own new suggestion for raising money. He has pledged Labour to what he euphemistically refers to as a "revision" of mortgage interest tax relief. No doubt the 8 million people who currently benefit from it will draw their own conclusions.
    Our economic policy has delivered low inflation, sustained growth, and a million new jobs since 1983. That

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    is the way forward. The Opposition offer polices which the electorate rejected decisively in 1979 and decisively again in 1983, and which the people of this country will reject again when, in the fullness of time, they are given the opportunity to do so.
    6.1 pm
    Mr. Roy Jenkins: Although the Chancellor of the Exchequer's speech included some enjoyable debating points against the Opposition, it must have a high claim to qualify as one of the most complacent that 1 have ever heard from him or from anybody else in the House.
    The right hon. Gentleman can at least be regarded as relatively lucky in the sense that this debate takes place today, not a few weeks ago when he was more manifestly up against the ropes. Indeed, I suspect that he will be so again in only a few weeks' time. It is perhaps not a great tribute to the Opposition's sense of timing that they fixed this debate today. Of much more significance is the fact that his respite is short-term, whereas the faults of the Government's management are deep-seated and long-term.
    I deliberately used the word "management" rather than "policy" because it is now almost impossible to tell what the Government's economic policy is. Insofar as it exists, it is in a state of complete confusion. In the early days of the Government, the policy used to be clear, perhaps too clear. It was also wrong. It was obsessively monetarist—there is certainly room for monetary policy in the management of the economy — and it sought to keep sterling M3 within a steadily declining range.
    Sterling M3 is now growing at about 18 per cent., so the Governor of the Bank of England was encouraged recently to say that it was an unreliable indicator which should be and probably would be abandoned. There goes the old centrepiece of the Government's policy. There is a new form of Luddism—if one does not like the reading on an instrument, one destroys it and picks up another instrument in its place.
    Mr. Lawson: Will the right hon. Gentleman give way?
    Mr. Jenkins: I have hardly started, but yes.
    Mr. Lawson: I set out at considerable length and clearly the Government's monetary and fiscal policy in a speech which 1 gave to the Lombard Association in April this year. I hope that the right hon. Gentleman will read it before he says that there is nothing clear about the Government's policy. Meanwhile, perhaps he would care to tell the House what his policy is.
    Mr. Jenkins: Yes, I have read the right hon. Gentleman's speech to the Lombard Association. In the immortal words Ernest Bevin used when he was asked by Molotov through an interpreter whether he had studied Marx in the commentary of Hilferding,
    "You can tell Mr. Molotov that I 'ave read 'Ilferding and I found him tedious."
    That is the position.
    Whatever else the right hon. Gentleman did in his Lombard Association speech, he certainly did not clarify the Government's monetary policy. Nearly every independent commentator in this country and elsewhere has been even more muddled about the Government's policy since then than they were previously. The idea that
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    he made everything clear then is absolute nonsense. I shall tell him some of the policies that I would pursue, but I shall tell him, as he would do, in my own order, not his.
    What other instrument will he put in place instead of this rejected sterling M3 which was such a centrepiece of Government policy? Will it be ML, or MO as it is sometimes called? That seems to be somewhat in favour again—although the Chancellor was not keen on it in his Budget speech— because at present it is giving the right result. Certainly the Bank of England, as is well known, thinks that it is virtually useless as an indicator. It is mostly notes and coins and says practically nothing about the future. It merely gives some indication of some aspects of the present. But as inflation picks up, as it certainly will somewhat, the indicator will also probably start misbehaving in its turn. What will the Government do then? Will they have another Luddite bash at MO and turn to something else? In that way, ML or MO will join sterling M3 in the category of not being "one of us"—not being reliable in its performance.
    I hope that the Chancellor, whose manners are absolutely extraordinary and who could not come to listen to the beginning of the speech of the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley), will at least have the courtesy to listen to some of the speech of an ex-Chancellor. I have a good deal to say before I sit down and it would help him to listen to it.
    If sooner or later all the monetary aggregates prove to be unreliable, there will be no alternative to an exchange rate target as a sheet anchor. That is a perfectly good alternative. We cannot have interest rates just stated like that. What is the Government's target? What are we working on? They say that we are working on interest rates. Interest rates can be a mechanism, but they do not tell one how to use the mechanism. If one abandons monetary aggregates because they do not work or work unreliably, one must have something to put in their place and an exchange rate target is the only effective alternative.
    First, the Chancellor has declined to define an exchange rate target and, secondly, it cannot be said that his recent interest rate decisions have been coherently aimed at an exchange rate target. If they have been aimed at anything, as opposed to being merely a reluctant, inevitable reaction to circumstances, they have been aimed at political targets, especially the Conservative party conference.
    Thirdly, to try to base a policy on a secret exchange rate target — it has never been published — which is incompetently aimed at, while rejecting the support of the European monetary system direction finder, is perversity beyond the bounds of acceptable eccentricity.
    We know or think we know that the Chancellor, together with the Bank of England and the Foreign Office, would prefer to be fully in the EMS, but they have all been overruled by the Prime Minister. That says a good deal about the Chancellor's lack of authority within the Government, to which I shall return later.
    First, I shall deal with the substance of what is, after all, Government policy, even if the Chancellor does not agree with it. Several years ago, looking at the wreckage caused by largely irrational currency fluctuations, I formed and advocated the view that the way to get some necessary stability back was to construct a tripod of the dollar, the yen and the ecu, with sterling coming fully into the European monetary system mechanism, and with the authorities of those currencies or groupings accepting

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    responsibility for keeping them in a reasonable relationship with each other. A full return to Bretton Woods would be a bridge too far in present circumstances. That tripod seems to be both practical and desirable.
    Without fanfares — they do not matter — to a substantial extent that has now occurred. The authorities of the three major currencies are accepting that responsibility and are keeping the three in a reasonable relationship with each other. However, there is one important exception. Sterling has not adhered and is outside the triangle. It is the only even medium-sized currency to be on its own.
    Mr. David Howell: The right hon. Gentleman has enormous experience and was one of the founding fathers of the EMS. He talks about the yen, the dollar and the ecu. Surely he means the yen, the dollar and the deutschmark. The ecu is not a currency but an expression of an indexed unit, the use of which arises only because the European currencies are so volatile that it pays some countries to use ecus. Surely he means the deutschmark.
    Mr. Jenkins: I mean the ecu. The right hon. Gentleman has also studied these matters carefully and constructively so he must know that the ecu is increasingly used in private transactions throughout the world. He should not, therefore, dismiss it as a figment. It is extensively used in private and bank transactions.
    Let us not worry too much about the nomenclature, but let us consider the tripod with three legs. One of those legs must be a European leg and so long as sterling is outside that leg is hobbled. That is a disadvantage to us and the other countries, not so much because of the importance of sterling, but because of the importance of London as a financial centre.
    Beyond that, and looking at the matter from British self-interest, the wider interest is of considerable importance. If I were to choose one significant currency in the world which was least suited to steam off on its own across a tumultous ocean, rejecting the company of any convoy, it would be sterling. That is the perversity of the Prime Minister's choice. It is not only a hazardous choice but it is a ludicrous choice. It would be splendid only if we genuinely rejected all support from others. But do we?
    Three weeks ago we were cap in hand to the Bundesbank. The future of the pound now depends very much upon OPEC and its decisions. Only the sheikhs may cut production and send oil up to $18 or $20 per barrel and only they stand between the Government and the total collapse of their policies.
    The Prime Minister's attitude to the EMS is, in a financial context, a repeat of the old song that Britain is not as other countries are and that Britain must always remain somewhat outside. In a political context that has been the constant accompaniment to our national decline over the past 35 years.
    I come back to the Chancellor. Why is his reputation so low this autumn? The Government, I regret to say, are not doing badly with public opinion according to the indications. But not the Chancellor. He made a technically good speech at the Conservative party conference. That speech contained part of the clue. It was not a Chancellor's
    1126
    speech. It was a success because it told the audience exactly what it wanted to hear, with not a single uncomfortable message.
    By the time of the Mansion house speech, the Chancellor seemed to have lost both his new speech writer and anything to say. Perhaps that was because his exchange rate policy had been vetoed by the Prime Minister. As one commentator put it, he stood up and said, "I haven't got a monetary policy, but trust the Chancellor." But the people do not trust the Chancellor. The City does not trust the Chancellor. For the Chancellor to try to found a policy on trust is like the Prime Minister trying to found a policy on humility.
    A Chancellor who is so easily vetoed by the Prime Minister on his direct responsibility—the exchange rate policy — is not up to his job. Under the manifold pressure of modern government, the Chancellor is effective only if he is almost as necessary to the Prime Minister as he or she is to him. By contrast, the present Chancellor could be bundled into a political dustbin without a squeak of protest from the voters, the City or even the Conservative party. The right hon. Gentleman is not a Chancellor. He is a mannikin with a thick coating of bombast.
    The Chancellor's weakness, the monetary muddle, the exchange rate confusion, would not matter greatly if underlying factors—the real economy—were sound. But are they? Let us start with the Government's strong point—the jewel in the crown, if there is one—inflation. It is down, but it is the highest, somewhat, of any country supporting a major currency. We are one of the five which support major currencies. Whatever else that suggests, it hardly suggests a unique achievement. It is likely to return to an upward trend.
    The combined efforts of Government policy since 1979 have been not to improve but substantially to worsen our competitive position. We have gone from a huge manufacturing surplus of £5·5 billion in 1980 to a 1986 third quarter deficit of £8 billion a year. I do not think that that will be repeated in forthcoming quarters. I certainly hope that it will not. It is the road to disaster.
    Even with oil production continuing for some time, the current account has gone from a £3 billion surplus to a deficit predicted by the Chancellor of £1·5 billion. The deficit might be even worse. That is not surprising, as the stock of capital equipment in manufacturing industry is lower than it was seven years ago. In addition, we have the Chancellor's complacency and the stark words of the Government's submission to the European regional development fund which states:
    "In the present difficult economic climate, investment in directly productive industry is at a low level."
    I take it that in an official document the Government were telling the truth and not deceiving the ERDF to get more money.
    Sadly, the Government's great contribution, having refused to stimulate the economy by more respectable means, is a roaring consumer boom, which there is not the slightest chance of their moderating before an election. A roaring consumer boom does not, to any significant extent, mean more employment. In our competitive position, worsening under the Government, it means overwhelmingly higher imports, a still worse balance of payments position and a classic path to perdition.
    To have produced, after seven and a half years, the combination of total monetary muddle, a worsened

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    competitive position, a widespread doubt in other countries as to how we are to pay our way in the future, a desperately vulnerable currency and the prospect of an unending plateau of the highest unemployment in a major country in the industrialised world is a unique achievement over which the Chancellor is an appropriate deputy acting presiding officer.
    6.20 pm
    Sir Edward du Cann: I agree with what the right hon. Member for Glasgow, Hillhead (Mr. Jenkins) said at the beginning of his speech. However much good news there may be, this is no moment for complacency. However much good news there is, there is one piece of consistently bad economic news, and that is the present, high and tragic rate of unemployment. It is excellent that the United Kingdom's employment rate is the highest of the major European Community countries. It is excellent, as my right hon. Friend the Chancellor of the Exchequer pointed out, that new jobs are up by 1 million since 1983. Incidentally, how good it was to hear him speaking with such confidence and style. Even so, the highest priority of any Government should and must be stabilisation of the unemployment rate and its reduction.
    The international context is hardly encouraging. As the most recent Bank of England paper says, "The world economy pauses". The immediate reality is that the United Kingdom is experiencing a disappointing year to date economically. Exports have stopped growing, fixed investment shows little growth, industrial production is hardly buoyant and a rise in consumption, as the right hon. Member for Hillhead said, owes too much to heavy consumer borrowing and increases in incomes for comfort, although, broadly speaking, we are a low-wage economy.
    The question is: what is to be done? I make no secret of my views. I wish to see our country pursue an expansionist cause and mount a more convincing and imaginative attack on both unemployment and low wages. Any such advocate is usually told that that is a policy that would put the fight against inflation at risk. I would answer, "Poppycock." In the first place, I am and I always have been a supporter of the Government's medium-term financial strategy — that is sound money. The Government have never been fully committed to monetarism, as the Select Committee on the Treasury stated in its third report, published in February 1981. The Government have never had the courage of what their enemies call their conviction. If there is an author of monetarist policies in the United Kingdom, it is the right hon. Member for Hillhead.
    There is no conflict there, and in any case, I care more about people than for any economic theory, for experience disproves them all, in greater or lesser degree, sooner or later.
    I have two recommendations for my right hon. Friend the Chancellor, both of which are in tune with what I understand Government policy to be. I introduce them by putting a question. Why are the Government so halfhearted about so much that they do? For instance, why are they so unsuccessful in the control of state expenditure? Every year, the all-party Select Committee on Public Accounts, whose distinguished Chairman is here now, reports numerous examples of failure adequately to control expenditure. It is obvious that by comparison with private industry, financial controls in Government are wholly inadequate.
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    For example, the Rayner exercise rose like a rocket when it first started. Like a rocket, it excited a moment or two's attention, but it and its lessons are now locked away in an anonymous bottom drawer. The reality is that the scope for huge savings in domestic public expenditure in the budget total is largely unexploited. In my view, for what it is worth, it runs into billions of pounds.
    As to overseas expenditure, the European Community sucks up cash like a sponge. Our net contribution since 1973 is no less than £7·5 billion. The lack of will on the part of member Governments to exercise a proper discipline over community expenditure is nothing short of pathetic.
    The determination to effect a proper economy in the expenditure of taxpayers' money should be a success story for the Government, for everyone is a taxpayer and therefore everyone must be in favour of careful spending. However·here is the paradox that one saw when the Chancellor was making his autumn statement — my colleagues are defensive about their policies in the face of the crescendo of whining complaint about economies that is our daily experience.
    It is high time that we changed gear. As the Institute of Directors pointed out in a recent admirable paper, research by the World Bank shows a clear connection between low public spending, low taxes and high growth, including employment growth. However, in the United Kingdom, the total tax burden is higher than it was in 1979, when the Government took office, and that is a shameful fact. We have a succession of public and semipublic arguments and agonisings of one sort or another, year after year, over the Government's public expenditure plans. Always, the end result is the same — total expenditure exceeds expectations, but the public has an unshakeable belief that every part of expenditure has suffered substantial, some would say uncaring, cuts. That is political brilliance—getting the worst of every possible world.
    It need not be so. I recommend two priorities to my right hon. Friend the Chancellor, which would change the situation dramatically and for the better. On the first, I agree totally with the right hon. Members for Hillhead and for Birmingham, Sparkbrook (Mr. Hattersley). It is essential that we give top priority to helping manufacturing industry. The Government set the climate in which industry works and in some respects, they have done extraordinarily well. For instance, a few years ago we were, as the House knows, a strike-prone society. Happily we are now largely a strike-free society, and that is something for which we can be deeply thankful. In other respects, the Government are doing carelessly badly.
    Mr. Prescott: In the interests of truth, are not the facts that in the period of this Government, we have lost more working days in disputes than we did in a similar period of Labour office?
    Sir Edward du Cann: With great respect to the hon. Gentleman, the events of the winter of discontent, for example, are freshly in the memories of us all to give the contradiction to what he is now claiming. The Government create the climate, and in the field of industrial relations, the legislation introduced over the past half dozen years has been a positive force for good. In other respects we have acted carelessly and, I think, badly. I shall give two examples of what must be clone. First, we in government could do a great deal to reduce

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    costs for industry. We allow too many costs to be continuously too high. For instance, electricity costs in the United Kingdom are higher than those in most competitor countries. That cannot be right. Interest rates are an enormous burden, especially on smaller businesses.
    Apart from costs—no doubt other right hon. and hon. Members can give their own examples—there is the subject of training. Whenever I visit schools or universities, I remain immensely depressed at the unworldliness of academics' approach to life as it really is. There is too much theory and far too little practical interest is taken in subjects, such as mathematics, science, and so on. Manufacturing still represents over 50 per cent. of our exports. Remarkable though the development of small firms has been, they depend on the bigger firms and their prosperity. They are all interdependent.
    What I am trying to say to the Government is this: the figures cited by the hon. Member for Hillhead about the decline of manufacturing industry were correct. We should all be deeply worried at present trends. The best thing that we can do is find a multitude of practical ways of ensuring that the burdens on industry are reduced so that it can compete more effectively in world markets.
    Second, we must achieve massive tax cuts if we are to have a new prosperity. We need a strategy and we need targets to which we are determined to adhere. We must reject the direction in which, it seems to me, the European Community is moving. It seems to be careless about tax matters, and often it seems ready to consume money in unlimited quantities. By way of contrast, tax reduction and tax reform in the United States have created 9 million new jobs since 1981. Henceforward, the top brackets will be as low as 18 and 28 per cent. The highest rate is lower than the United Kingdom's standard rate.
    The United Kingdom's tax and benefits system is quite chaotic. The biggest business in our economy is the transfer industry — Government taking money out of one private pocket and putting it into another. After all that activity, over half the population is in the same position, broadly speaking, after paying taxes and receiving benefits, as it was before. So the transfer industry is the most inefficient business in the country, if not in the world. It is certainly the most expensive.
    National Health Service costs are approaching the huge sum of £20 billion a year. Yet, as we all know and complain, quite rightly, the percentage of the gross national product spent in the United Kingdom on health care is lower than that spent in the United States, Sweden, Germany, the Netherlands, France, Denmark and Norway. The transfer industry is the area to attack, and hard.
    I have argued many times in this Chamber for a massive increase in capital expenditure to provide new schools, hospitals, prisons, and so on. A boost for the construction industry would be a terrific boost for employment. It could be achieved almost overnight if as many of those desirable projects as possible were turned over to the private sector.
    Mr. Peter Hardy: Although it is right to call for increases in capital expenditure, is the right hon. Gentleman aware that the building supply industry has reduced its capacity as a consequence of the Government's policy? So even the best intentions will be delayed before they can be implemented.
    Sir Edward du Cann: The hon. Gentleman is right. There is always a time lag. That is all the more reason for starting immediately. Many of those desirable projects to build new schools and hospitals should be turned over wholly to the private sector. If that were done, Government expenditure would reduce and, therefore, the Budget total would reduce. The state would acquire a massive accretion of capital assets financed through rental payments after only a few years. There would be as much, if not more, scope for tax reductions as ever have been derived from asset sales.
    I argue for setting free the builders, the hospital administrators, the local education authorities and the Home Office — free from the constraints of financial limits, free from capital allocations, and so on, and free from the whole administrative infrastructure that goes with them. Let us say yes to new projects on a massive scale. Following that, the scope for tax reduction is assured.
    I believe that my right hon. Friend has a brilliant opportunity in his next Budget. I pray that he takes it with courage and imagination. It was disappointing to hear nothing in today's statement about either the control of Government expenditure or potential tax reductions. We have heard great boasts outside this Chamber about privatisation. A further dose of privatisation in the way I suggest would undoubtedly enable him to both reduce Government expenditure and substantially reduce taxation. I am impatient to see him do so. I think that the mood of the country is sympathetic to the idea generally. The foundation is laid. In my view, we should literally build on it.
    6.35 pm
    Mr. Robert Sheldon: The right hon. Member for Taunton (Sir E. du Cann) was quite right to draw attention to the problems of manufacturing industry under the Government when many of our exports depend on manufacturing industry. It may well be that the Government, who have not paid much attention to manufacturing industry and are faced with a balance of payments deficit for the first time—that is a notable change in the past seven years—will begin to accord to manufacturing industry some of the assistance that was given to it in the past.
    I echo the comments made by the right hon. Member for Glasgow, Hillhead (Mr. Jenkins) and express my regret at the early departure of the Chancellor of the Exchequer. The motion before us condemns his actions. We should express our dissatisfaction at the fact that he left the Chamber when the right hon. Member for Hillhead had hardly begun his speech. I hope that that message will be passed on to him. In his Budget statement this year, when dealing with oil and oil revenues, the Chancellor said:
    "Inevitably, we suffer a decline, too, in the value of our net oil exports. But the oil price fall will be beneficial for the industrialised world as a whole. Even for the United Kingdom, what we gain on the swings should, over time, more than offset what we lose on the roundabouts." — [Official Report, 18 March 1986; Vol. 94, c.168.]
    I find that statement impossible to understand. It seems to me as egregious nonsense as one can utter on such an important matter. What the Chancellor could have done with oil revenues was to add them to the national income and export benefits that we get, so that we would end up with a higher gross national product. That would have been of advantage to us if it had been used properly.

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    I call in aid the Morgan Grenfell economic review, which, happily, I found on my desk this morning. It was a useful review, pointing out the advantages that we have had from oil exports and showing the effect of the decline in the price of oil on certain other countries—from Japan, Italy and Germany, which have benefited enormously from the drop in the price of oil, to ourselves, who have lost considerably. It is a clear picture. Our industrial competitors benefited largely, and we lost considerably.
    In a number of respects, we must consider oil as a commodity that is not much different from other commodities. If we happened, as a country, to be a big grain producer, such as France or the United States, our interest would lie in a high world price for wheat and maize. If we were a coffee-producing country, such as Brazil, our interest would lie in a high world price for coffee. If we were big potato farmers, we would be happy for a high world price for potatoes.
    Similarly, we should be able to recognise our own interests staring us in the face and rejoice in a high world price for oil. Unfortunately, we have not been able to gain the benefits that would accrue from that, but if we want to do so we must act. Both the two forms of action that I have suggested are necessary but unfortunately inimical to the present dogma of the Conservative party.
    First, it is necessary to hold talks with OPEC. I am not saying that we should become members of OPEC if it is unwise enough to change the rules of membership, but we can talk and—what is harder for this Administration—listen.
    The Chancellor of the Exchequer prides himself on the fact that we have the freest oil province in the world. He said that in his Budget statement this year. Why should we pride ourselves on that? Why should we be less interventionist than the United States or Canada? Why is it thought that we have something to be proud about? I would sooner pride ourselves on the fact that the oil industry is working for the benefit of the entire country and for its future. The level of the output of oil should not be left to companies which may have no involvement in the future industrial performance of Britain. It should be determined by the interest to our country in maximising our resources and the prosperity of Britain as a whole.
    Secondly, I would wish to relieve industry, and possibly consumers, of the effects of higher oil prices. For a start, we could reduce oil taxation. That is an easy action to take and a welcome one, and it would provide an offset against higher oil prices. Interest rates also need to be reduced, for reasons that we have heard, and they could be reduced still further as higher oil prices strengthened the pound. Important also is the fact that there could be a trade-off between the benefits to the Exchequer from the higher oil price and the passing on of some of those benefits to our hard-pressed industry.
    Genuine investment incentives might be considered. I grant that the best expenditure is made when the manufacturer decides that particular investment is required irrespective of the help that a Government may give but do not let us scorn the investment that comes when a Government are involved. After all, every successful nation practises that form of investment, and so should we. The trouble is that we are not very good at it. We are not very good at merging the interests of the Government and industry. It is a grievous fault that we possess; a fault which other countries do not have to
    1132
    anything like the same extent, and one that we should be busying ourselves in putting right. We should not be adopting the hands-off attitude that is so common now.
    I turn to what I call sterling M3 and other good luck charms. I, like a few of my hon. Friends, have a copy of the Financial Statement and Budget Report 1980–81. It is a treasured copy. It is signed by the Financial Secretary to the Treasury, who happens to be the present Chancellor of the Exchequer. It set out in detailed form how we would obtain all the successes arising from the control or monetary stock. It shows how the money supply was to be connected directly to the reducing of inflation, from 7 to 11 per cent. in 1980–81, down to 4 to 8 per cent. in 1983–84. In fact, it was 10 per cent. during that period. Undeterred in 1985, the Financial Statement and Budget report brought forward by the Chancellor of the Exchequer rearranged the timetable to bring the range down to 2 to 5 per cent. in 1988–89.
    We have seen the level of inflation reduce to 2·5 per cent., and the latest money supply figure of September 1986 is 18·3 per cent. If there is any connection between the sort of monetarism practised by the Chancellor of the Exchequer and the reduction of inflation, it is contradicted by the statistics on which the right hon. Gentleman set the monetary targets in 1980. I know that economic targets are not easy to achieve, but a Government who put the fullest possible trust in an economic objective and failed so signally deserve a special page, possibly, in "Guinness Book of Records".
    As the right hon. Member for Hillhead said, the Governor of the Bank of England finds himself completely bemused. The Chancellor of the Exchequer, as is his wont when he is challenged, said today that monetary indicators are very important, but no one really believes that he pays much attention to them. We heard today, more clearly than in any speech that the right hon. Gentleman has made previously, that interest rates are much more important than he has ever allowed for in the past. Interest rates interact with the level of exchange rates, as the hon. Member for Hillhead said, but it is only an interaction. If we were to find that it required too high a level of interest rates to achieve the exchange rate that we want, there would have to be a modification. The prime factor is likely to be the exchange rate, but it is influenced by the level of interest rates and the level of economic activity.
    Gone out of the window is any attempt to continue with the sort of monetarism that has been preached, but because it was preached it tends to be reaffirmed in some way each time the Chancellor of the Exchequer deals with these matters. We know what the reality is, however.
    Very high interest rates have been disastrous for manufacturing industry, as well as the high pound. There was always some sort of a case to squeeze the home market and make the export market more attractive to industry by a combination of high interest rates and low exchange rates. That was the de Gaulle solution in 1958. There is a case to be made also for encouraging the home market to achieve economies of scale, and that was the basis of Maudling's dash for growth. No case can be made, however, for a simultaneous squeeze on export markets and home markets by high exchange rates and high interest rates. We have clearing bank base rates of 11 per cent., which means interest rates of 13 per cent. or more for good-class borrowers. That means that in real terms they are paying over 10 per cent., which is historically high. As for the poor, wretched new companies which get all the

    1133
    crocodile tears from the Government — these are companies which have not established themselves—they are faced with interest rates of 12 or 13 per cent. It is extremely difficult to establish a company on that basis.
    In these circumstances, the only gainers are the financial intermediaries. The City booms, in direct contrast to the decline of manufacturing industry. The wretched aspect is that the House is divided, not into political parties, but in the types of constituency that we represent. There are rundown manufacturing towns and there is the affluence that is provided by the City of London and dispersed in an area around it, where those engaged in the City live and work.
    In March 1986, 9·6 per cent. of all employees were employed in the financial sector. Is this a wise division of our resources in the present harsh economic climate? We are grateful, of course, for any jobs, but in the long term should the building societies, banks, insurance companies and unit trusts —all the financial intermediaries which take our money and place it elsewhere — have such a dominant role in our economy? I remind the House that 60 years ago Sir Winston Churchill eyed the City of London and compared it with industry and said that finance should be less proud. I regret that the Government have no equal in pursuing a course opposite to that advocated by Sir Winston.
    It is right, as the right hon. Member for Taunton said, that we must start giving much more assistance and attention to manufacturing industry, not least because of the damage done to it over the past six or seven years. More than a third of the manufacturing industry within my constituency has been lost, and that is reflected elsewhere. These were small, good and viable firms which could have continued to earn a living by producing medium-tech articles and objects. Sadly, all these firms have gone and they cannot be resuscitated. We must make an early start in trying to build up and build upon what we have.
    The Chancellor of the Exchequer looks to privatisation to make up his deficiencies. We know that there is a great deal of money sloshing around in the economy, and we know, too, that house prices have increased enormously. We know that credit levels are historically high and that credit card use has expanded out of all recognition. We know also that, because of the increase in house prices, house buyers' collateral is historically enormous. With a £60,000 house on which repayments of £20,000 have already been made, a number of people have many thousands of pounds of credit which they can use to convert capital to income. It is increasingly easy to convert capital to income, via building societies, among other ways.
    The trouble is that the oil money is not enough. The Chancellor of the Exchequer is using that oil money. He is using privatisation money from British Telecom, gas and, later, water for current expenditure. With the use of oil money to finance current expenditure, and privatisation to finance current expenditure, the scene is being set for an election some time next year. That is what it is all about. Once again this country will pay a high price. It normally pays a bit of a price for an election. It will pay a much higher price for the next election, to the disadvantage of every one of us.
    6.52 pm
    Mr. Ray Whitney: The right hon. Member for Ashton-under-Lyne (Mr. Sheldon) made a good deal of the importance of high interest rates and the damage that they cause. He must consider also the impact on interest rates of the policies that are seemingly advocated by his party, should it ever come to power. As a certain leader across the Atlantic said, "We ain't seen nothing yet," as far as that is concerned. The right hon. Gentleman should take cognisance of the fact that the creation of new companies at the rate of about 550 a week suggests that entrepreneurs are coming forward and are not deterred by the level of interest rates — much as we would all, of course, like to push interest rates down. Certainly, the way forward cannot be the one advocated by the Opposition parties.
    One strange aspect of the speech by the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) was the absence of any suggestion of his own policies. This was the dog that did not bark. Indeed, when pressed by one or two of my hon. Friends to vouchsafe comments on the Labour party's record or promises for the future, a note of panic entered his voice. He said, "We chose this debate so that we could talk about the Government's policy." That is understandable, given the sort of policies that are offered to the country. Whether we are talking about £10 billion expenditure, £28 billion expenditure or the £8 billion pot of gold mentioned by the hon. Member for Oldham, West (Mr. Meacher) for health and social services, the impact and the consequence would be disastrous, not least, as I have said, on interest rates and the level of the pound. So-called social ownership is the side development of the party that has not changed the red flag for the red rose. Nationalisation is changed to social ownership, but the effect is the same. The same applies to the impact on pension funds, which affect many millions of workers throughout the country, and the threats which the right hon. Member for Sparkbrook and his friends have uttered about what they would do about Government interference with pension funds.
    I could continue to list the threats and promises of the Labour party, but the debate is on the Government side of the House. As so often happens in important measures, the contributions from the Liberal and Social Democratic parties are difficult to find. It is always difficult to find their policies or, indeed, those who enunciate them. The right hon. Member for Glasgow, Hillhead (Mr. Jenkins) made an extraordinary personal attack on my right hon. Friend the Chancellor of the Exchequer. His only recommendation seemed to be that we should join the European monetary system. I listened with interest to a number of comments by my right hon. Friend the Chancellor of the Exchequer on that topic, which will continue to be a subject of debate.
    Some of my hon. Friends wish for even more capital spending. I hope that they take account of the autumn statement, which promises an increase of a third of £1 billion in capital spending across the programmes enunciated by my right hon. Friend the Chancellor. That is an important step. Those who attach such importance, understandably and rightly, to Government spending should take due account of that fact.
    Monetary figures and economic management are other sources of concern. We all recognise that the management of an economy such as ours is very delicate and complex.

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    Hon. Members on both sides of the House are lured into the belief that the power residing within any Chancellor of the Exchequer to manage the economy is a great deal less than one might suppose from noting the debates in the House or from reading the views of the newspaper pundits. But to the extent that the Government can manage the economy, it is a complex process.
    There must be a two-part approach to the economy. The first involves steady adherence to clear medium and long-term objectives and readiness to cope adequately with short-term pressures and dangers. No one has a better record in that regard than my right hon. Friend the Chancellor. Prior to his being Chancellor, he was Financial Secretary to the Treasury. If I may declare an interest, for a short time I had the privilege to serve as his parliamentary private secretary. He is aware of the short-term dangers. We must guard against the danger of the inflationary pressures which are building up within the economy. This is a crucial matter and one on which we have had outstanding success.
    I recognise that present conditions are different from those in earlier years. Conditions today are better because of the Government's achievements. For example, unlike the conditions which obtained in the 1970s, the present inflation rate is far below the current level of interest rates. One effect is that, to a much greater extent, people hold a far larger proportion of their wealth in bank deposits than they did before. This is just one of the technical changes in the financial system which have occurred in the past few years. Those changes have disturbed the relationship between the measure of broad money and the national income.
    That matter was discussed in detail in the speech, to which my right hon. Friend the Chancellor referred with approbation, by the Governor of the Bank of England at Loughborough university last week in which he said:
    "It is fair to ask whether a broad money target continues to serve a useful purpose".
    He went on to suggest that perhaps
    "we would do better to dispense with monetary targetry altogether "
    Whatever difficulties are associated with the measurement of monetary targets and monetary statistics, the Governor was also right, in a speech a fortnight earlier, to point out:
    "Liquidity and credit have been gowing uncomfortably fast."
    My right hon. Friend reaffirmed that he appreciates such dangers. I was glad to hear—I hope I correctly quoted what he said—that the Government's commitment to a monetary policy which will squeeze out inflation remains unabated. It is important that all his ministerial colleagues adhere to that commitment, but I recognise the pressures on them and feel guilty, as do virtually all hon. Members, about adding to the pressures on Ministers in spending Departments.
    It is essential that we recognise, after all the Government's valiant efforts, that surrendering to inflation at this stage would be unthinkable. That must not be allowed to happen. We have come down a long and difficult road. There is too much at stake and the opportunities before us are too great to be missed.
    There seems to be a spirit of defeatism — certainly among the Opposition—about what British industry is doing, and can do in the near future, about the opportunities offered to it. British industry enjoys many advantages which have been given to it since 1979. The featherbedding and overmanning of the 1960s are things
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    of the past. They will only return if the Opposition parties seize power — [HON. MEMBERS: "Seize?"] Perhaps I should have said when they are granted power. Perhaps some of the people in Militant Tendency made me use that word. Should the unhappy occasion come to pass whereby nationalised industries and local authorities are told to take on labour, we would be back to featherbedding. But, with this Government's policies, those times have passed.
    Record resources are being devoted to training and investment. The past few years have seen sharp rises in Britain's overseas assets, in company profits and in the underlying rate of productivity growth. As my right hon. Friend the Chancellor said, sterling is now highly competitive. Its value against the deutschmark has decreased by about 30 per cent. since the middle of last year. There can be no country where venture capital is easier to obtain, although I recognise the problems caused by high interest rates.
    The labour and trade union scene has been transformed, thanks largely to the Government's sensible trade union legislation, which gave back to trade union members the power they had lost to some of the union bosses. The attitudes which are now being reported on both sides of industry give me great confidence for the future.
    All these factors add up to a great opportunity for British industry to compete ever more effectively on overseas and domestic markets. The outlook there is good. Demand in this country is strong. As my right hon. Friend the Chancellor said, consumer spending will grow by about 4 per cent. next year. As the London Business School pointed out, world trade is expected to grow by more than 6 per cent. next year—twice this year's rate.
    Provided that we can keep our unit labour costs under control, I believe that contrary to the Opposition's pessimism, there is every reason to look forward to a sustained continuation of the economy's growth of the past five years. The new jobs to add to the 1 million created since 1983 will come from there. Those opportunities will be taken by the 550 companies that are being created each week.
    It is from there that the increasing Government revenues will come to produce yet more schools and hospitals and even better social services. The Opposition clamour all the time for those measures, but only the policies of the Conservative Government can produce the resources to sustain them.
    Several Hon. Members rose—
    Mr. Deputy Speaker (Mr. Ernest Armstrong): Order. I inform the House that, by order of Mr. Speaker, the ten minutes rule for speeches is now in operation.
    7.4 pm
    Mr. Kevin Barron: The hon. Member for Wycombe (Mr. Whitney) said that he wanted to expand social services but the hard reality is that the Government's attack on the ability of local government to sustain and expand social services decries that aim.
    Mr. Maples: How can the hon. Gentleman say that in the light of an autumn statement that has just allowed an increase of £4 billion in local authority spending?
    Mr. Barron: In the past seven years, Rotherham metropolitan borough council has lost more than £30 million of rate support grant which would have gone into

    1137
    expanding those services and programmes that have had be put out to contract because of what is happening in the Department of the Environment.
    When I looked at the Order Paper and saw the amendment tabled in the names of six senior members of the Government, including the Prime Minister and the Chancellor of the Exchequer, a phrase that we use in Yorkshire came to mind. I wondered how anyone could have the "brass neck" to table such a motion claiming the success of this Government's economic policies. That view was strengthened when I heard the Chancellor say that the Opposition did not care about the plight of the unemployed. I should like to talk about the problems of the unemployed and what is happening in the regions that I and many other hon. Members represent.
    To claim that the Government's economic policies have been successful is difficult if one comes from regions that have faced massive rundowns in those industries that have kept employment stable over many years. It might be good to claim success if one is in the top 5 per cent. of those income earners who, over the past seven years, have been given back more than £3 billion a year by the Government in tax handouts to the rich. One might be able to claim success if people have invested their money in banks and so on, and are in the fortunate position of having money.
    The right hon. Member for Taunton (Sir E. du Cann), the hon. Member for Wycombe and the Chancellor talked of how well the Government had done. The right hon. Member for Taunton did not explain that in great detail. The 1 million jobs which we are told have been created since 1983 are certainly not full-time job equivalents. Since 1979, more than 1 million full-time job equivalents have been lost.
    Unemployment in areas such as the Rother Valley is becoming critical. Since 1981, unemployment in my constituency has increased by more than 77 per cent. Of course, those are the numbers of registered unemployed, not the real figures. In July 1986, of the 6,421 registered unemployed in the Rother valley, 34·;8 per cent. had been unemployed for more than 12 months and 36 per cent. were under 25. Recently, the registered unemployed figure increased to 6,500. It has been increasing every month for a long time.
    It is estimated that the cost to the public purse of unemployment in my area is £42 million a year or, to put it another way, each person working in the Rother valley has to find more than £1,100 from his or her income to pay for the unemployed. Real unemployment in the constituency is hidden by certain facts. In July this year, 2,800 16-year-olds left school in the Rotherham metropolitan borough council area, which covers three constituencies. Over 89 per cent. of them are without work or are going on to youth training schemes or courses.
    YTS first started in the economic year 1983 and I have only recently been able to get figures relating to its first year of operation, 1983–84, from the Rotherham careers officer for Rotherham borough council. Those figures show that the success rate in the first year of YTS in the area was a little less than 50 per cent. These figures have taken time to collect because not everybody completed YTS training in the first year.
    In the earlier part of the debate, Conservative Members spoke of youth training as the be-all and end-all for kids, yet for the majority of kids it is like being in a revolving
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    door. After 12 months — now presumably after two years—they come out of that same entrance. They leave the scheme knowing that they do not have a chance of full-time employment.
    Quite recently, a Minister came to the south Yorkshire region and visited many constituencies including mine. The Under-Secretary of State for the Environment, the hon. Member for Surbiton (Mr. Tracey), visited the area. I wish that he was present in the Chamber now so that I could invite him to tell the House what he saw when he visited west and south Yorkshire. The day after that visit he was quoted in the press as saying that he was
    "deeply depressed by the experience and understood why people in coalfield areas thought that current spending on restoring the coalfield environment was not enough to solve the problem of unemployment and increasing poverty in such areas."
    He was quite right. It is a great pity that there is no opportunity for the junior Minister to get that message to the Front Bench, especially the Treasury Front Bench which is not helping these people.
    Mr. Cash: Does the hon. Gentleman agree that NCB Enterprise Ltd. has provided significant amounts of money in the area which are facing difficulty. Has his area not received any money?
    Mr. Barron: I do not know of one job which has been created in the Rother valley as a result of the work of National Coal Board Enterprise Ltd. The unemployment level in my constituency would account for over 50 per cent. of the jobs that will be created by the enterprise board by the end of the financial year. However, that board was set up to look after problems nationally and not just in my constituency but neighbouring constituencies. Some areas have far worse levels of unemployment than my constituency. Money is not being directed to these areas.
    Many of today's speeches have concentrated on how the economy is expanding but we are talking about getting money into areas which are in desperate need of help. The level of unemployment is unacceptable to the Labour party and, I hope, to members of the Conservative party. What is more unacceptable is that more than 30 per cent. of a generation of young people between the ages of 16 and 24 in the south Yorkshire region are being denied the right to go to work and are denied the right to be brought up as we were in years gone by.
    I agree with the right hon. Member for Taunton (Sir E. du Cann) that it is not a question of economics or economic philosophy but a question of people. People are in need in Britain not just in the north but in the south-east and south-west. The Government must change course and direct resources to these areas.
    7.14 pm
    Mr. David Howell: Earlier in the debate the right hon. Member for Glasgow, Hillhead (Mr. Jenkins) called in aid the independent commentators and financial market analysts who he said had been confused by the recent path and progress of policy. However, I believe that those who ended up with most egg on their faces after the last six weeks of policy were precisely those independent commentators and analysts. They have made fools of themselves in predicting and sometimes hoping about what would happen.
    The market analysts believed that the short-term interest rate was bound to go up 4 per cent. — they

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    believed that it was only a matter of time—and some of the less ambitious put the level at 2 per cent. The general overwhelming consensus of so-called market opinion—I say so-called because it is the opinion of those who get their views projected by the media through their grumbles—was not the genuine reflection of opinion at all. These analysts were determined to prove the Chancellor wrong and somehow talk interest rates up to stratospheric levels. My right hon. Friend the Chancellor was being judged on absurd standards by some of the market commentators, and some right hon. Members, including the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley).
    My right hon. Friend was right to delay the move on interest rates until he did. His timing was precisely right as it enabled the whole strain to be taken by a 1 per cent. increase. He nearly succeeded against the advice of the so-called experts in seeing us through this period with the entire strain being taken by the exchange rate without any interest rate increase. When it turned out that their forecasts were wrong, they dreamed up all manner of excuses such as Sheikh Yamani, the Bundesbank and everything else. The basic assessment of people who thought that sterling interest rates would roar up by 4 per cent. was wholly wrong. Their assessment was wrong for an interesting reason which is useful to consider.
    The weakness of these analysts is that they think too much about domestic aggregates. To an extent they are led on by Ministers of all Governments who tend to talk in terms of what they can control on their home ground. In reality there is no real effective control of either the Keynesian aggregates or the monetary aggregates—all of which have proved enormously unruly. We have a wider open economy washed by enormous movements of capital and finance—£90 billion passes every afternoon through the London currency markets. Yet it is against that sort of background that some policy makers seriously believe that the Chancellor is in a position to influence the monetary aggregate in one direction or another and that he is magically responsible for these international forces. That is naive.
    The Chancellor has to be totally flexible—more than the Chancellor of three or four years ago, let alone 20 or 30 years ago. He has to be ready to use interest rates, exchange rates and the cash reserves with great agility and inevitably, in a way which constantly changes. Those who argue that the policy is not clear or has changed, or complain that movements have changed over the weeks are absurd and are like those who in a rowing boat in a storm would complain when the oarsman changed direction to avoid being drowned by a wave.
    In the past six weeks a great deal has emerged about the way in which our economy and aggregates operate. We have successfully got through a difficult period of pressure on sterling arising in some degree from reasons which had nothing to do with sterling. At the end of it all I agree that we are very exposed currency—about that there can be no doubt. If we do nothing about this and postpone the inevitable decision to join the exchange rate mechanism we shall fall under the gravatational orbit of the Bundesbank and that of the deutschmark. We should seek to resist that. We would do better to enter into arrangements which give us some say in the pattern of currencies in Europe rather than be left as a minor part of the deutschmark bloc. So I think we should get on with the inevitable membership of the European monetary system or exchange rate mechanism. I hope that my right hon. Friend the
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    Chancellor will prepare the way for action after the next general election. Then once the hothouse atmosphere of politics has cooled down the Government can join the European system when they have resumed office for a third term.
    The other issue which has run through the debate so far is whether we have a choice between more public capital spending—my right hon. Friend the Chancellor has that choice—and lower taxes. Is that really what the debate is about? I believe that it is simply not the choice. I have never believed that there was such an intense choice between those two strategies. One reason for that belief was put clearly by my right hon. Friend the Member for Taunton, who reminded us that there is now substantial current infrastructure spending. Taxpayer-financed capital spending is roaring ahead. I should like there to be more in many areas.
    The hon. Member for Rother Valley (Mr. Barron) correctly reminded us of the miserable, dismal and ghastly conditions in which many housing estates in some of our great cities remain. But my right hon. Friend the Member for Taunton further reminded us that the potential for such spending not just through public but through private finance — increasingly through private finance — is enormous and growing. That is not a fantasy being put forward by Conservatives in Britain—the idea is being adopted by Governments of all colours in almost every country.
    Franchise financing is now beginning to be used for infrastructure and major public works throughout the planet and at last, we are doing it here successfully. My right hon. Friend the Secretary of State for Transport has at last persuaded the Treasury to drop its ridiculous arguments about crowding out and accept that the new bridge across the Thames at Dartford can be financed privately. It is a magnificent new infrastructure project and it is being financed privately.
    We can go ahead with very much bigger infrastructure and enormous public works on the basis of new techniques for private finance. I hope that we adopt them. That leaves us room for substantial tax cuts as well. We have the resources to do both. They are essential because of the crucial effect that high taxes have on low earnings.
    I do not understand Opposition Members, especially members of the Labour party, who do not seem to sympathise over the evil effects that big tax deductions have on pay slips, especially for people on very low earnings or people on pensions. It seems an utterly soulless approach and I plead with them to have a new look at the conditions experienced by some of their constituents.
    Tax cuts are a major social priority, and they are a priority as well because they are a crucial element in job disincentives. Anybody who has seen how pay slips are reduced by national insurance contributions and tax must realise that those reductions have a great deal to do with the lack of job opportunities. They deter people who long to go to into work from taking a job.
    It is questionable, too, whether tax cuts reduce revenue. We have evidence, on which my right hon. Friend the Chancellor touched this afternoon, to show that, at the higher levels, the more we cut taxes, the more revenue we get. That is what has happened under the present Government. We have halved capital taxes and doubled the revenue. Perhaps tax cutting produces more revenue,

    1141
    which can be used for the social purposes that Opposition Members so often advocate. It beats me why they regard tax cuts as so dreadful.
    Countries all around the world are cutting taxes. The United States is doing so and Japan and Germany are thinking about it. Those nations understand that lower taxes means lower costs on industry, more jobs, more choice, better opportunity and better social conditions for families. We would be crazy not to follow suit.
    7.22 pm
    Mr. Eric S. Heffer: I wonder what Sir John Nott, the chairman of the merchant bankers Lazards, who doubled his salary last year to £366,436, would do with his tax cuts. I wonder about the others.
    "He was among hundreds of top City staff earning six-figure pay packets even before the Big Bang, according to a report published today …
    24 directors and nine employees earned more than £250,000 a year. Another 361 directors and 667 employees in 42 companies earned more than £100,000 prior to the summer round of recruitment."
    So reports this evening's edition of the London Standard.
    I am not against tax cuts, but I often wonder what happens with tax cuts for people in high income brackets. Presumably they have another holiday abroad, for example. In the meantime, my people, like those about whom my hon. Friend the Member for Rother Valley (Mr. Barron) spoke, suffer massive unemployment and continue to live in bad housing where the drug problem is increasing and where there is despair among youth because they do not have jobs. They would like to be earning some money so that they could get some tax cuts.
    The right hon. Member for Taunton (Sir E. du Cann) made a telling point. He said that he believed more in people than in economic theory. That seemed to bring him right up against the Chancellor who said, as he always does, that the Labour party, when in power, doubled unemployment. I do not deny that unemployment increased from 2.6 per cent. to 5 per cent. between 1974 and 1979, but, in May 1979, 1,218,000 people were unemployed, and within three years, to October 1982, the number had increased to 3,049,000. That is a large increase in three years.
    It is indeed people, the unemployed and their families, who matter. The hon. Member for Wycombe (Mr. Whitney) mentioned strikes, but if people do not have work, they are hardly likely to go on strike—there is nothing to strike about. The Govenment's trade union legislation and unemployment have been used to discipline workers who still have jobs and to weaken the power and strength of the trade union movement.
    Unemployment has another effect, especially in conjunction with high interest rates. In areas such as mine, which have high unemployment, one can go down streets of council houses which people bought because they thought that it was a grand thing to buy their house, and accepted the Government's policy, where there are a dozen or more "For Sale" signs. Because of unemployment, people cannot pay their mortgages. That is what unemployment and the Government's economic policies mean.
    Of course, some people have done very well. I have mentioned a few who have done very well indeed out of the present economic system. I support the Opposition
    1142
    motion. If I have any criticism of it, it is that it does not go far enough. It does not say what we intend to do. I have probably been involved in every economic debate since I came to the House 22 years ago. We always get involved in great arguments about the best way in which to run the existing economic system.
    The time has come to stop arguing about the best way to run the economic system. The time has come to change the economic system and get rid of it. We should have the principle of co-operation, working together rather than being in competition man against man, woman against woman, employer against employer and industry against industry. We need to have an entirely new concept if we are to begin to deal with the economic problems. I accept that all Conservative Members, and some Opposition Members, although those I am referring to are never here, would not agree with me on that concept. I am not talking about a command economy with which the right hon. Member for Leeds, North-East (Sir K. Joseph) used to frighten the life out of everybody, believing that we wanted an east European type system. We have never argued for that. We must have greater planning of the resources of our country and we must have greater control of our industry. We must also concern ourselves with the planning of our exports.
    I said that I thought the speech of the right hon. Member for Taunton was excellent. However, I do not agree with him when he talks about setting the builders free. I want private builders or any other builders to build the houses, schools and roads that are required. However, we still have to do that with some measure of planning for, financial assistance and aid and it has to be paid for through the Government and local authorities. That is not feather bedding. That is putting people to work on the basis of seeing what the people need and planning the resources properly in order to deal with those needs.
    That is the issue with which we are faced. If we do not do that, we will sink even further into the mire. The thought of another five years of government of the type we have had since 1979 fills me with absolute horror. For example, some Labour and Conservative Members are going up to Knowsley. Let them look around the areas where the factories used to be and see what has happened to them. Many of those factories are now closed. Those assets have gone. It is not like it used to be even in the 1930s. The factories closed down then, but they could be opened up again. We have reached a crucial stage. I support this motion but, my goodness, I believe that we must go much further, much faster and much more resolutely than at present.
    7.32 pm
    Mr. Mike Woodcock: Quite rightly, we have heard a great deal about job losses and oil. I represent a constituency which is not very different from that of the hon. Member for Liverpool, Walton (Mr. Heffer). It has many similar problems. However, no doubt he will realise that my view of the reasons for those jobs losses is not the same as his. It is an industrial constituency which has a large motor vehicle plant. It has the nation's only nuclear enrichment facility, a massive chemical complex and the country's largest oil refinery. Last week, we reached something of a milestone because when that refinery announced a further 700 job losses, it brought the total of job losses in my constituency over the past six years to a staggering 7,000.

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    During the 1960s, my constituency was booming. Vauxhall Cars established its second United Kingdom factory. A large oil and chemical complex was created and we had massive investment in housing and infrastructure. many people from Liverpool and the west midlands moved to the area because of its relative prosperity. I regret to say that, by contrast, during the 1980s we have had major problems and major job losses. Burmah Oil closed its refinery, Bowaters closed its paper mill, Vauxhall Motors shed 1,200 jobs, Associated Octel — makers of lead additives—cut back on workers as the world began to decrease the amount of lead in petrol. British Nuclear Fuels Ltd. reduced its staff by 600. Only last week Shell announced 700 further jobs losses on top of the 1,000 job losses last year, effectively bringing the work force of the nation's largest refinery down from 3,400 to 1,700 in less than two years. Even as I speak, a threat hangs over a further 300 jobs at the plant of UKF Fertilisers. As I said, there have been 7,000 jobs losses in six years, with hardly a family in my constituency unaffected.
    It would be tempting to say that the job losses are the result of the Government's economic policies. Many Opposition Members would argue that that is the case. Many local politicians invariably argue that what is happening in my constituency is a direct result of the Government's economic policy. They say that the Government should pump in more taxpayers' money and that they should introduce import controls and increase regional aid. Those actions are not solutions. They avoid the economic reality.
    I shall look at the genuine background to the 7,000 job losses in my constituency. The reality in the oil industry is that the demand for oil products has decreased by 30 per cent. There is a massive over-refining capacity in Europe and all of that has brought about much greater competition. My constituency entered this phase of greater competition with the largest United Kingdom oil refinery and one of the smallest. Neither was in any way competitive in international terms. Burmah, the smallest refinery, quickly closed, paying the price for being uncompetitive. It closed its doors for good in 1981, and now stands empty and derelict as a reminder of what happens w hen industry fails to adapt and improve.
    The larger refinery, rather belatedly, took note of an independent assessment which showed it to be one of the most inefficient refineries in Europe in terms of manpower utilisation. That inefficiency was brought about by a set of factors which were endemic in British industry in the 1960s and 1970s. Those factors included restrictive practices stemming from over-powerful trade unions which prevented necessary change, weak management which failed to face up to the challenge of a new economic environment, and a regional grant structure which subsidised inefficiency and led to increasing uncompetitiveness and nearly led to the permanent closure of Britain's largest refinery.
    The choice for that refinery was stark — either become efficient or go out of business. I am pleased to say that the company and the work force chose to face reality. The result has been the tragic loss of 1,700 jobs, but we now have a refinery with a bright future which has secured £400 million worth of new investment.
    The reason for the job losses was not the Government's economic policy, but the sort of policy advocated by the Opposition. Those policies would have led to the extinction of that refinery. The present policies, although
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    painful, have led to long-term survival. Similarly, job losses in Vauxhall Motors and Bowaters paper mill were brought about by the lack of competitiveness and poor industrial relations. The Vauxhall site in my constituency could have been the centre of General Motors' expansion in Europe. Instead, because of appalling industrial relations, those investments went to Germany. The acres of unused land stand as a monument to the poor industrial relations of the 1960s. Vauxhall is now producing more competitive products.
    In both cases, the answer was to face competition and produce the right product at the right price. That is the only meaningful response. That is what the Government are advocating. By contrast, the Opposition continue to preach protectionist policies. Yet even that fundamental belief in protection did not prevent the Opposition spokesman on trade and industry from arriving at the Vauxhall plant in my constituency recently in a Nissan car provided by the local Labour party agent.
    In the nuclear industry the job losses that we have sustained have occurred because of increased efficiency. The development of the centrifuge process of uranium enrichment has inevitably led to job losses. It is inevitable that as the world becomes more competitive, as stocks of fossil fuel become exhausted, and as we realise that fossil fuels are more valuable as a chemical feedstock than as an emergency source, we will have to rely more and more on nuclear power.
    As industry gears up to face the challenges of the 21st century, what do the Opposition propose? They propose phasing out nuclear power and returning to an overdependence on coal. They propose a return to the days when the National Union of Mineworkers held the country to ransom. As the Confederation of British Industry stated only this week, the rejection of the nuclear option will mean slower growth, reduced competitiveness, higher unemployment, higher costs and lower living standards.
    The job losses in my constituency are not the result of the Government's economic policy. They are the inevitable outcome of years of restrictive practices, overmanning, unreal jobs, uncompetitiveness, Government subsidies, indecisiveness over the future of nuclear energy, overtaxation of industry and overspending by local authorities, all of which were encouraged by the Opposition's economic policies.
    Mr. Barron: Will the hon. Gentleman give way?
    Mr. Woodcock: I will not give way, because I have only two minutes left.
    By contrast, as a result of Government policy I now have an oil industry in my constituency that is secure and efficient; a car industry that can beat any competition; a nuclear enrichment facility that is a major foreign earner; a new paper mill that is achieving production levels that were never dreamt of before, an industry that has more to invest after tax and which is now investing for the right reasons and not the wrong reasons. We have an enterprise economy that is producing hundreds of new firms that will grow and provide thousands of new jobs.
    We all know that we need more jobs, but the only jobs that are worth having are real jobs that come from a competitive and efficient industry. What my constituency and this country needs is not the dreadful policies of the Opposition, but another seven years of the Government's economic policy.
    7.42 pm
    Mr. James Lamond: Page 25, paragraph 61, of the autumn statement reads:
    "Throughout the current financial year growth in £M3 has been above the target range in the MTFS, with growth in excess of 18 per cent. in the year to mid-September. In part this has reflected the increased attractiveness of interest-bearing bank deposits relative to other retail deposits. PSL2, which includes most of these other deposits, rose by 14 per cent. during the year to mid-September."
    I have to tell you, Mr. Deputy Speaker—and you know Oldham as well as I do—that in my constituency of Oldham, Central and Royton very few people will get their hands on the autumn statement, and of those who do there will be fewer still who will understand the paragraph that I have just quoted. However, despite the complacent boastings of the Chancellor of the Exchequer at the Dispatch Box this afternoon about the improvement in the economy, so many years of continual economic growth, and the million jobs that he claims to have been able to create since 1983, the working people of Oldham understand only that since the Government came to office their position has gradually deteriorated.
    No matter where we look in Oldham, that is the case. If people want a job, they have to face the fact that 8,000 men and 4,000 women are registered unemployed in the town. At the jobcentre there are 508 vacancies for 12,000 unemployed people.
    It may happen that someone in Oldham might want hospital care for his mother. Perhaps she has a cataract that needs attention. That person will be told at the local hospital that of course his mother needs treatment, but the waiting time is two to three years. However, if the mother has £1,800 and wishes to pay, she can have a private operation the following week. Arnold Broadbent and his wife, or Kevin Clegg and his wife, who do not have £1,800, cannot understand how the Chancellor can be so complacent about these matters.
    Perhaps someone's son or daughter is to be married soon and needs a house. Perhaps they may be able to buy one of the splendid little houses that are still for sale in Oldham for £20,000, or they may want a council house. Of course, as soon as they try to borrow money on a mortgage to buy the house, they find that the rates have increased steadily during the time that the Government have been in office. Contrary to the claims that the rate of inflation is falling, they would have to pay more for their mortgage than they would have paid one month ago. They ask how that can be squared with the Chancellor's claims.
    No matter where we look—at jobs, housing, health or education — we find that matters have deteriorated since the Government came to office. Yet time after time the Chancellor makes his claims from the Dispatch Box. He has claimed that jobs have been created. I would not want to be unfair to the Government. Of course jobs have been created in Oldham in an attempt to make up for the famous firms that have gone to the wall. Platts International, the textile machinery firm which was famous throughout the world, disappeared. Indeed, textile mill upon textile mill has disappeared.
    Oldham metropolitan borough council has been trying to create jobs. It is one of those much maligned bodies— the local authorities — which the Government have lost no opportunity to deny funds. During the whole of the Government's term of office Oldham metropolitan borough council has tried to step in and do the job that
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    any decent, self-respecting Government would have done. It has tried to encourage people to come to Oldham, and it has been successful, but without much encouragement from the Government. The council has tried hard to make up for the drop in jobs. It has been successful, but not successful enough to enable the Chancellor to stand at the Dispatch Box, as he did this afternoon, and expect people to support him again at the next election unless he does something about his policy.
    As my hon. Friend the Member for Liverpool, Walton (Mr. Heffer) said, the Chancellor must face reality and not suggest that there is nothing wrong, that his policy is working wonderfully, or that the fall in the value of the pound had nothing to do with him but is the fault of the City of London. We do not believe that for a moment.
    With all the opportunities that the Government have had during their lifetime, such as the enormous revenues from North sea oil, which have not been enjoyed by our competitors—the Federal Republic of Germany, France, Spain and Italy—people of Oldham want to know why our currency, which is the measure of the confidence of the outside world in the future of our country, has fallen steadily against the currencies of other European countries.
    How can it happen like that if everything is so successful? It may be that the Chancellor can produce statistics in the autumn statement which are difficult to follow for the man in the street, but all the statistics in the world will not convince me and the people of Oldham, and the many millions of other working people, that our country's economy is all right and that the Chancellor deserves another chance. He clearly does not.
    There must be a solution—a very radical solution. I do not have time to go into that in 10 minutes, but I shall vote for the motion. I have every confidence that when our Government come into office, which may be within the year, we shall face a difficult task, but we shall resolutely tackle the most important matter of all, which is to get the unemployed back to work and create the wealth with which we shall be able to carry out the rest of our programme.
    7.50 pm
    Mr. Richard Alexander: It is appropriate that at the end of a parliamentary Session we should be debating economic policy because it enables the Government and the country to take stock of what has been achieved and, of course, it enables us to explain what remains to be done.
    The Official Opposition are on dangerous ground when they use the subject for one of their Supply days, because it enables their own policies as well as the Government's to come under much closer scrutiny. As the election draws ever nearer, the electorate will be looking not just at our record but at what the Opposition propose. For that reason all of us in the Conservative party welcome the debate.
    The debate enables us to expose the frightening cost of the promises made by the Opposition over recent months. It is easy, in the heady atmosphere of one's own party conference—we have all done it—to say things that please one's own side, and to promise the earth. It is less easy to explain to the electorate in the ensuing weeks and months precisely how it will be paid for. It is even more difficult to explain to the electors that they, the electorate, will have to pay for those promises. Those promises, so

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    easily made, are now being costed. They will continue to be costed, and until the election is over and the Labour party has been trounced at the polls, we shall ram home the expensive nature of what it proposes.
    The Opposition will, of course, point to the unemployment figures and compare them with the figures when they were in power. It is absolutely fair for them to do that as a political argument, but what they will not tell the electorate is that in 1979 this country was grossly overmanned in virtually every large industry, the Civil Service had swollen to figures hitherto unknown and inflation was approaching that of some of the South American banana republics. But for today's Opposition, the 1970s were the golden days. They were the days of financial irresponsibility, of spending more and more money, which had not been earned, but which had come from people's taxation or increased borrowing. They were the days of the gimmick and the cosmetic fix. They did more damage to stable, long-term employment and the value of people's savings than they care to admit. That is one of the many reasons why they were defeated in the 1979 general election.
    We have seen Labour's economic policies in operation before. During the years of socialism our overseas economic debt doubled. It is a debt that this Government have had to pay, and are repaying. Spending on the Health Service was cut in real terms, although one would never have recognised it when one listened to some of the utterances by the Labour party, or the utterances of its Liberal and alliance partners, who have departed the scene of today's debate.
    The Opposition, who posture before us today, promised before and did not perform. Now they promise more of the same medicine to the electors. They have the nerve to criticise this Government for what they have achieved. They offered, and imposed, nationalisation, with all the horrendous burdens that it brought for the taxpayer and the customer. They now call it social ownership, but the effect on the taxpayer will be just the same, and the change of a name cannot conceal their true intentions for the future of this country. Nor have they learnt anything from France's experiment in Socialism, yet today French men and French women cannot wait to get to the polls to turf out their Socialist masters and have done with that experiment. If this country were to follow the economic sirens from the Labour party, it would regret that. We would suffer as the people are suffering in some of the London boroughs that are under Socialism— Ealing, Lambeth, Haringey and Hackney. We would suffer the thought police that people are having to endure in Brent. We would have the economic drabness of Birmingham and Manchester.
    The hon. Member for Liverpool, Walton (Mr. Heffer), who is not in the Chamber, said that he was not advocating an eastern European state in what he intended to say, but I would tell him now if he were here that that is precisely what would be achieved if his proposals came into effect.
    The Government have nothing to apologise for to the Labour party. Inflation is lower than in any year under the Labour Government. Output is at the highest ever and is still increasing. Economic growth is higher than in any year under their Government. The economy, which is what we are debating, is sound, and the Opposition, for all their rhetoric, know it. The electors know it. That is why we shall win the next election, whenever it is called.
    7.58 pm
    Mr. Willie W. Hamilton: I think that there will be general agreement that the biggest problem that all Governments have faced since the war has been to marry a reduction or containment of unemployment with controlling inflation. To get inflation down and at the same time keep employment up is the $64,000 question that has never been answered by any Government since the war. The present Government make a great boast of the way in which they have reduced inflation. If one takes the bare statistics, they are impressive. The annual rate of inflation when the Labour Government went out of office in 1979 was 10 per cent. That figure is hardly admitted by the Government.
    It has subsequently gone down, although it rose rapidly in 1980 as the direct and immediate result of the Government's first Budget, when VAT was doubled, contrary to the promises that they made in the election campaign.
    Leaving that aside, it is true that the figure is now about 3 per cent. That has little to do with the Government's policies. The violent fluctuations in prices in the 12 years since 1974 have been due not so much—in fact, hardly at all—to the Government's policies, as to the rapidly fluctuating prices of the raw materials upon which our industry is based, and especially the price of oil.
    I should like to put on record some figures that I got from the Library. Between 1973 and 1979 the United Nations world export price index of primary products, excluding crude petroleum, went up by 62 per cent. That increase in raw material prices took place mostly in the lifetime of the Labour Government. In the same period, crude oil import prices rose by 600 per cent. A vast amount of our industry depends on oil for its supply of energy. Between 1973 and 1979, the retail price index reflected those prices and rose by 140 per cent. That frighteningly high rate of increase was primarily due to the escalating prices that we had to pay for our raw material imports, and especially for oil. In comparison, between 1980 and 1985, raw material prices went down by 23 per cent., as against the increase of 62 per cent. in the lifetime of the Labour Government. Crude oil import prices between 1980 and 1985 rose, not by 600 per cent. as under the Labour Government, but by a little over 50 per cent. In the same period, the retail price index rose by 67 per cent.
    The achievement suggested by those figures had very little to do with the Government's policies, or with the North sea oil bonanza, which was not created by the Tory party, although the Prime Minister might try to convince the people that it was. The fact is that the Government have had the bonanza of £53,000 million in oil revenues since 1979.
    In 1985 alone, the Government got £11·5 billion. or almost £1,000 million every month from North Sea oil revenue. Every penny of that £11·5 billion has been squandered. The revenue collected last year from North sea oil can be compared with the £20 billion that was paid out in dole money, unemployment benefit and lost taxes. So oil revenue paid for just about half of the dole money that kept 4 million people kicking their heels in idleness, instead of giving them gainful employment. If we had invested that money instead of spending it on unemployment, we could have modernised our industry

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    and our infrastructure — our roads, schools, hospitals, houses and communications system. The economy would have been in a much better state than it is now.
    Despite what the Chancellor says, manufacturing investment in our industry today is one sixth what it was in 1979. Since 1979, £96 billion of British money has gone abroad and has been invested in modernising industry abroad. We are getting more and more imports because as our industry declines it becomes less and less modern. Our money is financing the modernisation of industry abroad and so imports sweep into this country. I challenge anybody in the House or elsewhere to say that he does not have something Japanese, Italian, German or whatever, in his garage or house, for example a television set or radio.
    That is a sad state of affairs and the results of it are seen in many ways. The Government should understand that, unless they dramatically change their policies, the situation will get worse. For example, the attention of the House has been drawn to an article in The London Standard this evening about the colossal salaries that are being paid in the City and in big business. Sir John Nott, a former Secretary of State for Defence who was also at the Treasury, used to lecture ordinary workers on the importance of restraining their greed when asking for wage increases of £3 or £4 a week. As the chairman of merchant bankers, Lazard Brothers, he doubled his salary to more than £366,000 last year. That is not exceptional, many people in big business in Britain make that sort of colossal salary. So the Government should not lecture ordinary workers about their greed in wanting an extra £3 or £4 a week to maintain a reasonable standard of living for their wives and families.
    The big complaint about this Government is the gross unfairness and injustice of their policies. I compare Sir John Nott's salary of £366,000 with the figures given in an article that appeared in The Times a few months ago:
    "A big increase in employment of school leavers in Britain's hotels and restaurants, at weekly wages of between £35 and £40, is now expected after the reform of the wages councils."
    Those wages will be reduced by £20 a week as a direct consequence of the Government's abolition of the wages councils. The Government want an increase in service jobs —in hotels and restaurants—where those kids will be fully employed and taken off the dole queue at a wage of between £30 and £40 a week. People in the City are earning £100,000, £200,000 or £250,000. Such are the figures paraded in the City.
    The British people are seeing through this gross unfairness and will vote against the injustices which will be perpetrated and extended by the Government if they get the opportunity at the next election. The British people have rumbled the injustices and unfairness, the vastly increased unemployment and the likely prospect of their continuing increase. The people will say, "Get the hell out of it," at the next election, and a damned good thing too.
    8.9 pm
    Mr. Michael Fallon: I shall vote for the amendment this evening and nothing that I say now should be taken as anything other than wholehearted support for the Government's economic policy.
    I hope my hon. Friends will accept that no economic policy can be considered entirely successful if all cannot
    1150
    share in its success. One group especially has not yet fully shared in the success of our economic policy, and it should now be enabled to do so. I refer to those who are on less than average earnings and who, at the moment, bear a quite penal burden of taxation.
    Let us be clear about how many people are involved. About 8 million people in Britain earn less than £7,000 a year. Some 4 million, even on official Government definitions, earn less than 140 per cent. above the supplementary benefit level. Some 500,000 people receive family income suppolement. All those people have to pay tax at 29 per cent. That is a lot better than paying 33 per cent. tax, and a lot better than having to pay some of the tax rates that will be necessary if the Labour party ever comes to power, but those low-paid people are paying tax at a rate of 29 per cent.—a rate higher than the top rate of tax in the United States next year. Moreover, they must pay it at a starting point very much lower—at one of the lowest points in the Western world. They must pay 29 per cent. tax as soon as they start earning £2,300 a year. A person would not pay 29 per cent. tax in the United States at the moment unless he earned £17,000 a year.
    It is not possible for the Conservative party to promise to increase the living standards of the low-paid, those on benefits who are being taxed, and the 40 per cent. of pensioners paying tax, except by reducing the burden of taxation upon them. Therefore, I have to say that I am disappointed that in the autumn statement we heard this afternoon we did not get any clearer idea of the scope that is available for those tax cuts for low-paid people in the Budget next year or of a medium-term taxation strategy for bringing down the basic rate of tax to well below its present level of 29 per cent., and indeed, for devising a much lower base rate for the low-paid in our society.
    It should be obvious to everybody that such deep cuts in taxation will not be possible without substantial reductions in public expenditure. We must ask ourselves, after a series of autumn statements in which public expenditure has slightly increased from year to year, perhaps not as a proportion of GDP, why it has been so difficult for my right hon. and hon. Friends to achieve the reductions in public expenditure which they have honestly and earnestly sought.
    There are three reasons why they have so far failed to make substantial reductions in public expenditure. The first is the public expenditure system itself. The system remains constructed, despite all our endeavours, on the basis of political entitlement rather than on the basis of pure economic and social need. We have only to look at the details in the Estimates to see the extent to which that political entitlement is reflected in over-provision in the Scottish and Northern Ireland blocks, in the dominance of defence procurement spending and in the sacrosanct nature of spending on agricultural support.
    It is not simply the system that is at fault. We do not fully understand why the PESC survey and the Star Chamber do nothing to eliminate that political entitlement, but actually consolidate and perpetuate those entitlements by refining them and matching them, and eventually attempting to reconcile them.
    Secondly, built into the public expenditure system is a massive proportion of expenditure on public sector pay, allowances and pensions. Some 60 per cent. of all public expenditure, nationally ordained and laid down, is somehow elusively outside the control of the Treasury and my right hon. Friends. It is controlled by agencies which

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    stand between the Government and spending on the ground. It should be obvious now to everybody that there are only two courses to take: either we bring such public sector pay within the full control of the Government—as indeed we are proposing to do with teachers' pay—or we devolve it to local bodies which can effectively reflect the real economy in our regions and make the necessary adjustments.
    The third reason why it has been so difficult to reduce public expenditure is the benefit system and the extent to which it is simply demand led. I am not suggesting that our benefits are too generous. They are open-ended, and they are non-motivating in that they help to perpetuate dependence on the Giro, but, nevertheless, the extent to which they can continue to upset our public expenditure reviews is well brought out in paragraph 22 of the autumn statement that we heard today. There can be no finer indictment of the difficulties that we face in trying to control public expenditure than the wording of paragraph 22.
    In conclusion, I must tell my hon. Friends that, despite their best endeavours, it is clear that we have not yet been able to refine and reform the system to achieve the sorts of reductions that we need in public expenditure to finance the necessary and permanent cuts in personal taxation that are essential if all are to share in the enterprise and success of our economic policy.
    8.15 pm
    Mr. Seamus Mallon: I find this a very depressing debate, as indeed I am sure most people find any debate on the economic situation. But I find it depressing for a different reason. If the Chancellor of the Exchequer was as good as he says he is, and if any future Chancellor of the Exchequer were to be as good as he thought he might be and together they were given a magic wand, and if I spoke in the debate on this subject in a year's time, I should be facing the same problems. If that magic wand worked, and if the analyses and strategies that we have heard here today were all correct, I should still be facing a structural problem which would leave the area where I live and which I represent at a disadvantage in comparison with the rest of the people represented in the House.
    That structural disadvantage is that while we are part of Britain politically, we are not of Britain. We are an offshore island of an offshore island. We are given parity when it suits the Establishment here, and we are denied that parity when it may be of tremendous advantage to the people in the north of Ireland. For that reason, I must draw attention to Northern Ireland's unique position in that regard and address my remarks not just to the Government but to previous Governments and to future Governments. Our problems did not start with this Government; they started long before they took office and will continue for as long as that structural problem remains.
    It is even more important to set the matter in the context of the whole of the north of Ireland. I shall resist the temptation to speak exclusively about my constituency. I do not claim to speak for the 1·5 million people in Northern Ireland, but I hope that I speak on their behalf. The region is suffering more than any other part of the United Kingdom under the jurisdiction of the House in economic, human and social terms. In my constituency alone one person in four people is unemployed. Thirty-two
    1152
    per cent. of public sector vacancies advertised are community programme vacancies, as opposed to 14 per cent. in the rest of Britain. That tells us something about that type of programme and the demand for it. Forty-four per cent. of the population are under 25, and almost 30 per cent. of them are out of work. In a politically volatile situation, that surely is a recipe for disaster. Sixty-six per cent. of the population who are employed are in public services. That gives some idea of the deficiency in other areas of employment. The most startling fact of all is that Northern Ireland is the only region in the EEC where more people are unemployed than are working in the manufacturing industries. That is frightening, and is worth thinking about.
    A similar phenomenon is present in the wages structure., in that there is also a lack of parity. The wage rate for males in Northern Ireland is 89—9 per cent. of that in the rest of the United Kingdom. I agree with what has been said about the pittances for which young people work because they are not protected by wages councils. In Northern Ireland only 10 per cent. of young people have contracts of employment. They are being used, and that position will blow up. Unemployment now officially stands out 22—3 per cent. It is even more startling that 11,700 more people have become unemployed in the past 12 months. Of those, 50 per cent. have been out of work for more than a year.
    When those statistics are added up, they reveal a human tragedy which suggests strongly that the position in Northern Ireland is unique and that it must be considered differently from the rest of the United Kingdom. I repeat that even if the Chancellor of the Exchequer had a magic wand those problems would still have to be faced. Irrespective of a possible upturn in the economy, those deficiencies will remain.
    The unemployment gap in Northern Ireland differs from that in the rest of the United Kingdom. During the past 12 months, male unemployment in Northern Ireland has risen by 9·;8 per cent. My figures are taken from the annual report of the Northern Ireland Economic Council, which was published this week. That increase in male unemployment is startling compared with the increase for the same period in the rest of the United Kingdom. Again, that shows a disparity that is not made up through benefit or social security. That must be considered.
    The construction industry is crucial to Northern Ireland, yet 2,500 jobs have been lost during the past year. If that loss of jobs is not halted now, half the jobs in the construction industry will have been lost by 1990.
    The most serious position can be seen in agriculture. Northern Ireland has only two natural resources: people and grass. Agriculture is approaching a crisis, and many people would say that it has already reached it. The food processing industry is now almost non-existent in a country that produces beef, milk and a limited amount of cereals.
    The Government should give their full support to the proposed EEC study of an integrated rural programme for Northern Ireland so that all the attendant problems in agriculture in Northern Ireland can be dealt with. They must be dealt with because Northern Ireland farmers now receive 48 per cent. below the 1984 farm income level. Farmers are receiving almost half what they received in 1984. Do not take my word for it. Take the word of the

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    Northern Ireland Economic Council. The farm labour force has dropped by 2 per cent., which is understandable with such returns.
    The Government have treated Northern Ireland farmers very unfairly over the milk levy system, because none of the special EEC allocation of an extra 4—5 per cent. quota in 1984 came to Northern Ireland. The small producer in Northern Ireland does not receive the same level of quota as the small producer in England, Scotland and Wales. The Government cannot have their cake and eat it. This Government, or any Government ruling Northern Ireland, cannot continue with this unfair system of parity when it suits them, but not when it does not suit.
    I began with a reference to the report of the Northern Ireland Economic Council, and I shall also finish with one, as it contains some constructive suggestions. I turn, first, to the restoration of a housebuilding programme, with increases in new buildings and rehabilitation. Expenditure on new build in Northern Ireland is £60 million, while expenditure on refurbishing stock is £58 million. The difference between the money spent on rebuild and on refurbishing is £2 million. That tells us something.
    Mr. Deputy Speaker: Order. The hon. Gentleman is approaching the 10-minute limit.
    Mr. Mallon: I shall not continue, Mr. Deputy Speaker. I shall leave it to hon. Members to analyse the position in Northern Ireland, and I hope that they will consider my suggestions.
    8.25 pm
    Mr. John Maples: Today's debate has been somewhat overshadowed by the autumn statement, but I wish to spend some time talking about interest rates and why I think that Britain is suffering from a very high level of interest rates. I shall offer a perhaps somewhat unusual explanation.
    The inter-bank rate in the United Kingdom is 11 per cent. Most borrowers have to pay interest of between 12 and 13 per cent. With inflation at 3 per cent. that implies a real interest rate of 10 per cent., which is obviously extremely high. When that is contrasted with interest rates of 4·5 per cent. in West Germany and in Japan, 6 per cent. in the United States, and 7·5 per cent. in France, we must ask why there are such high rates in the United Kingdom. Several reasons have been advanced for that, such as the United States' deficit and the exchange rate, but the reason that I offer has nothing to do with those factors. It is a largely domestic factor.
    Let us consider interest rates as the price of money and accept that the price of any commodity is affected by the relationship between the demand for it and its supply. In the context of interest rates, one can think of the relationship between the demand for credit by borrowers and the supply of savings from the economy. If there are consistently double digit interest rates, one can draw the fair conclusion that demand for lending and for credit is excessive in relation to the supply of savings. One must ask why that should be. After all, one would expect the two things to make a fairly neat balance.
    A fairly convincing explanation is the liberalisation of the banking system during the past 10 years or so, and the extraordinary way in which the banking and credit industries in this country, and in other countries, but
    1154
    especially in the United Kingdom, have arranged new ways of lending people money. There has been an enormous increase in credit cards, in mortgage lending by building societies, and now also by banks, much of which leaks into consumption. There has also been an enormous increase in hire purchase, personal loans, and all forms of credit. All these forms of lending money have expanded considerably.
    It can never have been easier to borrow than it is now. That comes back to the banking system and the way in which it operates. It used to be a system for saying no. If one asked one's bank manager 20 years ago for a loan, the odds were that he would have said no. Now bank managers say "Do you not want more?" They are almost selling loans to people. Indeed, they are inventing ways of creating lending and of expanding their own activities. That makes perfectly good sense to them, but it results in the extraordinary boom in lending that has occurred. Perhaps one of the bad things about that boom is that the banks have concentrated on the personal and property sectors, at the expense of others.
    Let us consider the lending offered by the big banks during the last five years. I shall pick one example, but it could well come from any of the big banks. The loan portfolio growth for the five years from 1981 to 1985 has risen by 33 per cent. in lending to manufacturing, 94 per cent. in lending to financial services and distribution, 120 per cent. in lending to construction businesses, 170 per cent. in lending to property companies and a staggering 215 per cent. in lending to individuals.
    The reason for it is that the big borrowers — the personal sector and property companies—are not very sensitive to high interest rates. Banks can increase their lending to them, and they are willing to pay higher interest rates. Individuals are usually concerned about the amount of the monthly payment and whether they can meet it, and not about the theoretical interest rate. Someone involved in a relatively short-term property deal does not mind paying high interest rates for a short time. On the other hand, if a manufacturing company is making a long-term investment, the decision is very different.
    I suggest that banks, by their own activities, have swelled the volume of lending by persuading people to borrow more money. They have done so above the rate at which the economy normally supplies savings. The banks have therefore had to raise interest rates to bid back from the economy the savings that they need for funding. The only way they have been able to obtain those savings is effectively by raising interest rates.
    Technically, that is done on the inter-bank market, although it is not necessary to go into that. However, it is a fallacy to think that this procedure works in reverse and that the bankers are sitting in their offices waiting to see how much is taken in in deposits before deciding how much they can lend. I do not believe that that is what they do.
    The consequences of what I am saying are illustrated if one compares what is happening here with what is happening in West Gemany. In West Germany, bank lending is increasing at about 5 per cent. a year and the interest rate is about 4·5 per cent. In the United Kingdom bank lending is growing at more than 16 per cent. a year and our interest rate is 11 per cent. That confirms my view that the expansion of bank lending and the activities of the banks have almost of themselves driven up interest rates. They are certainly a substantial factor.

    1155
    While the people at whom the banks have targeted their lending are not sensitive to interest rates, important parts of the economy are, particularly manufacturing industry. If a manufacturing company is thinking of making a fairly long-term investment in new plant or a factory, borrowing money at 13 per cent. for five or 10 years is a fairly terrifying prospect. One would want to be sure of achieving returns of around 20 per cent. before being prepared to enter into that type of loan commitment. Very often it is decided that the risks simply do not justify the cost, and that has an effect on manufacturing investment. That is shown, not just in the manufacturing investment figures, but in the amount of big bank lending to manufacturing companies.
    The bad consequence is not just that investment by industries that cannot afford such high interest rates is effectively discouraged. There are other consequences. High interest rates devalue current assets and encourage takeovers. It is often more profitable and easier to buy existing assets on a devalued basis than to invest in new plant and equipment. That leads to a short-term view of investment opportunities, for which the City is often criticised. If one can get 10 or 11 per cent. by leaving one's money in the bank or by lending it to the Government at virtually no risk, it is not surprising that investment managers take short-term views.
    Mr. Cash: Does my hon. Friend accept that manufacturing investment has increased since 1983 by as much as 25 per cent.?
    Mr. Maples: I do accept that, but the bank lending figures speak for themselves. Although I am glad that manufacturing investment has recovered over the last few years, it is still down on what it was before 1983.
    One of the other consequences is that because the City and the financial markets look at credit expansion figures, that of itself is a weakening factor on the pound. The raising of interest rates to protect the pound is simply the treatment of a symptom. In my view the same credit expansion is causing both the weakness in the pound and the growth in interest rates.
    We are also seeing a very dangerous level of lending to the personal sector, and one is now seeing increasing defaults on mortgages, credit card payments and hire purchases. Personal sector liability has risen from 50 to 85 per cent. of personal sector disposable income in the last five years, and that must be dangerous and worrying for credit and financial markets.
    Perhaps the worst consequence is that most of this lending to the personal sector goes into consumption, particularly on imports. We have a peculiarly high propensity to import, and every month we seem to hear of record retail sales, record levels of manufactured imports and record levels of personal credit. I cannot help thinking that they go together.
    If this is accepted as a cause of high interest rates and the things that flow from it, we must take some steps to restrain the growth of credit and these high levels of imports. We should try to channel some of this lending away from the personal sector and into productive investments in industry. The Bank of England and the Treasury have the power to achieve that end if they want to. If we do not do so, we shall continue to suffer high interest rates and their consequences for a very long time.
    I hope that the Chancellor and his colleagues in the Treasury will give this some thought. It is not an original
    1156
    analysis. It has been suggested by other people. However, it is not commonly propagated, and it is worth some investigation and action. If we take intelligent action to restrain credit growth, we could end up with lower interest rates, a stronger pound, a reduced level of manufactured imports and all the other good consequences that would flow from that.
    8.34 pm
    Mr. Peter Hardy: I hope that the hon. Member for Lewisham, West (Mr. Maples) will forgive me if I do not follow him at length, except to say that welcome his comments about the effect of high interest rates, especially on manufacturing industry and job creation.
    Like many of my hon. Friends, I am suspicious of economic indicators, and I am obliged to my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) for describing them as good luck charms. I am suspicious of economists as well.
    Indeed, if the Chancellor looks at our historic development, he will see that the decline of the British economy is almost in direct relationship with the employment of economists in the public sector. Instead of indulging in the jargon to which my hon. Friend the Member for Oldham, Central and Royton (Mr. Lamond) referred, it might be better if the Chancellor let rip his natural instincts and operated, not as an amateur economist, but as a transient secondhand car salesman. In that situation, Britain might well be better off than it is now. The right hon. Gentleman might not then have made his reference to another good year, which will be seen as a foolish comment by everyone living above a line from Watford to Bristol. If the Chancellor and his hon. Friends think that people in the industrial areas of the north believe that the last five or six years have been good, they are deluding themselves.
    My hon. Friend the Member for Rother Valley (Mr. Barron) referred to the unemployment figures. Today, the situation in our area is as bad as it is in the constituency of the hon. Member for Newry and Armagh (Mr. Mallon). Once relatively prosperous areas of Britain are now suffering the economic condition of Northern Ireland, bringing with it long-term ills, risks and perils for our communities. Does the Chancellor think that such communities can long withstand a situation in which the majority of their young people are unemployed? Does he consider that British industry can survive when, for example, the special steels industry in my constituency is competing against the French, who in direct aid provide between £4 and £5 a tonne, while the British Government are providing 56p per tonne? Can the record-breaking, highly successful and recently privatised special steels industry in my constituency compete when the Italian Government allow their steel industry to receive energy at 37 per cent. of the price that our people must pay for electricity for their electric arc furnaces?
    It is no good the Chancellor talking about cheap nuclear power. That has nothing to do with it. The Governments in Italy, France, Germany and almost every other OECD country recognise that they cannot afford an arm's-length relationship with industry and that their own industries must survive — [HON. MEMBERS: "The Chancellor is not paying attention."] Of course not. The

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    Government are paying no notice. They are happy to see the young people of Britain blighted and our manufacturing base destroyed.
    After six years, it is time that the Government did something about that. In the last 12 months there have been tremendous improvements in productivity in the coal industry, yet the Government cannot even perceive the logic of that achievement. When the CEGB sites its two new power stations on the south coast, it will not be required to ensure the shipping orders to enable the coal to be brought from the Humber or the north-east to feed those power stations. The Government will not even urge the CEGB to apply the logic of the research and technology carried out in Yorkshire on pressurised fluidised bed combustion. They will continue to say that the technology is not proven, although the Americans ordered two last month. We are at a pretty pass. For the Government to rely on the jargon which my hon. Friend the Member for Oldham, Central and Royton demonstrated to be stupid is no answer.
    I ask the Government to consider the cost of unemployment and to recognise that for each young person in my constituency entering the youth training scheme there is a basic cost of £50 a week. If only we had spent half that money on sustaining British industry and preventing the disease which now affects us, instead of treating the symptoms, we would be a great deal better off.
    In the past 12 months the deutschmark has gained 23·1 per cent. against the pound. We once made fun of the Italian economy. I wonder how the Italians see us now that the lire has improved 21·1 per cent against the pound. The franc has improved 17·6 per cent. against the pound. What is worse, those countries have not had the benefit and boon of offshore oil. There we have it. The Government have enjoyed the enormous benefit of offshore oil and have simply presided over the erosion of our industrial bases and the betrayal of areas such as mine.
    8.40 pm
    Mr. William Cash: I congratulate the Government on their economic policies. During the past seven years the United Kingdom, through the Government's activities, has managed not only to survive the difficulties which were directly related to a period of appalling Labour government but to come through what can fairly be described as 40 years of terminal decline. The Government have provided the opportunity for the country to get back into contention with the rest of the world. That is a tribute to the quality of my right hon. Friends the Chancellor of the Exchequer and the Prime Minister. They have persevered with determination against the background of a serious world recession, such as was almost impossible to imagine in 1979 when they first came to power.
    The speech of the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) substituted adjectives for policies. I am sorry to say that that is becoming increasingly characteristic of his speeches. The difference between the realism with which the Chancellor put forward his arguments and the third-rate, tawdry approach adopted by the right hon. Gentleman was a salutary lesson.
    At the end of the day much of the economic performance of other countries depends, and has
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    depended for some time, on a number of important factors — savings, low inflation and investment. Against that background, the policies that we are pursuing are paying off with great dividends. On savings, we should look to the experience of Japan and the United States. One of the lessons that we had to learn was undoubtedly from the Japanese experience in the 1950s and the American experience in the 1920s. Tax-cutting policies provided substantial opportunities for their economies to take off and that enabled them to build substantial savings which in turn enabled them to invest in new industries.
    In the early 1950s, Tashan Isabaki enabled the Japanese economy to take off and achieve the success that it has achieved over the past 30 years, despite the prognosis of the American adviser to the White House at the time that Japan was flat on its back with nowhere to go. The provision of incentives is the way to achieve enterprise in society. A main ingredient of the provision of incentives is to cut taxes, as the Chancellor and Prime Minister are proposing. That has great support from most of the British people, particularly from Conservative Members.
    Manufacturing industry has increased by 25 per cent. since 1983, as I said in an intervention in the speech of my hon. Friend the Member for Lewisham, West (Mr. Maples). The importance of that is that, by providing the environment in which investment in manufacturing industry can increase, we are at the same time enabling our companies to engage in quality production. Over and over again we hear Opposition Members saying that we need to increase the volume of production. The right hon. Member for Sparkbrook said that today and the right hon. Member for Islwyn (Mr. Kinnock) said the same recently. That is wrong. We do not need to increase the volume of production of goods which people do not want or need to buy, especially if the quality of the goods is not sufficiently high. In an intervention in the speech of the right hon. Member for Sparkbrook, I pointed out that one of our great difficulties is that our industries are not achieving a sufficiently high quality. There are many other factors involved, but that is an important one.
    The gravitational pull of the argument of the right hon. Member for Sparkbrook was that the Government were encouraging imports. The point is not that imports are being sucked in, but that the quality of goods from abroad is, regrettably, superior. We must take that point on board for the sake of the constituents of the hon. Member for Rother Valley (Mr. Barron) and others. I lived in Sheffield for 20 years and saw the industries decline. I knew many of the managers and people who worked there and I have great sympathy for the predicament in which they find themselves.
    The reality is that we cannot compete with imported goods unless the quality of our products is good enough to ensure both that we can export them to other countries which want them and that they can compete in design, quality, price and marketing with other countries' products. I challenge hon. Members to tell me that they have not bought a Seiko watch, a Japanese car or a Japanese television set. If they were honest about why they bought those goods, they would admit that it was because they believed that they were getting something worth having.
    Mr. Barron: Does the hon. Gentleman agree that the Government should intervene in private industry, as the Japanese Goverment do, to ensure that products on the

    1159
    bench and in scientists' minds are brought into production? Or does he agree with the Government that the Government should leave that to the free market?
    Mr. Cash: In Washington the situation is different. I have sympathy with the car workers at Longbridge, but as individuals they now have to compete with fellow car workers in Washington. It is a question of the quality of production.
    We must take on board this essential ingredient in our economic strategy. We have lived through a period when economic decline seemed to be with us. It was directly attributable to nationalisation and to the dead hand of bureaucracy which goes with it. That is now being substituted by the semantic alchemy of social ownership, which is utterly meaningless. It is nothing more than a change in emphasis. Many moderate Opposition Members know that it is just a con and a fraud on the British people.
    When Opposition Members are joined by the expected flood of militants in the new Parliament, the word "nationalisation" will reappear. All the vague semantic differences between social ownership and nationalisation will be back with us again. That will he the means by which this country goes back to the dark ages of the economy if the British electorate vote for them in sufficient numbers, which I doubt will happen.
    8.50 pm
    Dr. Jeremy Bray: I am sorry that the Chancellor of the Exchequer did not have the grace to give way when I sought to intervene this afternoon. I am glad that he is back in the Chamber, and I hope that I shall have the chance to allow him to intervene.
    The point that I hope to make was made eloquently by my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon), the Chairman of the Public Accounts Committee, who quoted a document which is well known to the Chancellor because he was the author of it. He was not just the signatory, he was the author and inspirer—one of the three musketeers. They consisted of himself, Sam Brittan and Peter Jay. All three have flown from their loyalty to the document. One disciple is left — young Tim Condon, who was Peter Jay's deputy at The Times, and who is still weeping bitter tears at the Chancellor's desertion from his former policy.
    I remind the House of that policy. In the Financial Statement and Budget Report 1980–81, which laid out the shape of the medium-term financial strategy, the Chancellor said:
    "Control of the money supply will over a period of years reduce the rate of inflation. The speed with which inflation falls will depend crucially on expectations both within the United Kingdom and overseas. It is to provide a firm basis for those expectations that the Government has announced its firm commitment to a progressive reduction in money supply growth … To maintain a progressive reduction in monetary growth in these circumstances it may be necessary to change policy in ways not reflected in the above projections. The Government would face a number of options for policy changes to achieve this aim, including changes in interest rates, taxes and public expenditure. But there would be no question of departing from the money supply policy, which is essential to the success of any anti-inflationary strategy."
    The words "exchange rates" are not even mentioned in the text of the medium-term financial strategy. They began to creep in after two or three years and today the Chancellor explained that adjustments to the exchange rate due to the fall in the oil price have now taken place and it was now
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    at a level which should be sustained. The strategy has been completely abandoned. Some new hon. Members do not remember just what it was that tied the Government down.
    Just the other day the Governor of the Bank of England said in his lecture at Loughborough:
    "Monetary targetry is only a means to an end. There may be circumstances in which the relationship between the intermediate target and the end objective changes unpredictably"—
    that has happened in the relationship between money incomes and money supply—
    "as has indeed been our experience during the 1980s. In that case if the marksman does not have the wit to adjust his aim he may inflict severe injury on the economy."
    That is precisely what happened. The severe loss of competitiveness in Britain because of the rise in exchange rates between 1980 and 1982 resulted in a swathe of destruction of manufacturing industry — more than Hitler managed to destroy in the war. It was destroyed by the pigheadedness of the Chancellor. Today the economy rests in the hands of this pigheaded man.
    Where have we got in terms of the conduct of monetary policy to stabilise the exchange rate? The major change is the switch from a money supply target to an exchange rate target. That is what the Chancellor has done, although he will not admit it. While he was pursuing a money supply target, he neglected the behaviour of other economies. It was a marvellous idea. He could forget about international economic co-operation. It did not matteer what the other guys did. We could get automatic stabilisers working correctly in our own economy by stabilising the growth in the money supply.
    However, it takes two to make an exchange rate. Exchange rates are vulnerable to the movement of United States interest rates and to the United States deficit, to whatever happens to the Bundesbank, to interest rate policy and to intervention policy.
    We have heard references to international economic cooperation at various meetings. The Chancellor has complained about the misbehaviour of the American economy in particular. That economy is far more successful than ours, under a man who is every bit as Right wing, but he is less mistaken technically and less pigheaded than those who have shaped our Government's economic policy.
    The management of the more complicated exercise of trying to stabilise exchange rates must have an eye on the prime objectives — of unemployment and inflation. It must also keep an eye on the intermediate target of the exchange rate. That can become complicated with movement of interest rates elsewhere. It is natural that the Treasury should have now adopted methods of analysis which come under the generic label of policy optimisation on which in 1975, by way of an amendment to the Industry Act, I required the the Government to issue forecasts.lt is as a result of the discharging of that statutory obligation that the Chancellor made his statement today.
    Also in that amendment, for which the Chancellor voted, was a requirement on the Treasury to implement the methods of policy optimisation on the Treasury model. Under a Tory Government, that has been done, and the Chancellor has adopted the computer programmes of the research group that I established in 1971 at Imperial college. Those are a practical guide to the complex business of trying to stabilise the exchange rate where others are playing their own game in other countries. That now needs to be carried on to the international level.

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    I suggested to the Chief Secretary that the Treasury should help to introduce such work in the design of international economic co-operation into the OECD, because that is now technically a much more sophisticated animal than the International Monetary Fund. The IMF is talking about taking over the OECD analytical system. The Chief Secretary fluffed it. He inquired at the wrong level in the OECD, and the opportunity for the United Kingdom Treasury to exercise some seminal influence on the development of methods in the OECD seems to have slipped.
    Let us move from the broad macro-strategy to the control of public expenditure. I thought that the Chief Secretary was a person of some integrity, and I was astonished that he should have lent himself to that fraudulent act of examining speeches made by Labour Members, taking every little phrase, misinterpreting it and taking it out of context, leading to the absurd estimates of what effect Labour proposals will have on public expenditure. The Chief Secretary has shown himself in that office simply as the pawn of some scruffy little researcher in Conservative Central Office. That list has all the evidence of a Central Office hack job that Ministers are normally sensible enough to ignore completely. The Chief Secretary lent the weight of his office to a so-called costing of these policies, of which the Treasury officials who lent their hand to it should be thoroughly ashamed.
    Again, to help us in the serious analysis of public expenditure questions, I made a further suggestion to the Chief Secretary, that the annual public expenditure White Paper should be presented to the House in such a way that we could genuinely examine alternative policies, so that if we wanted to argue for a change in the pupil-teacher ratio, or greater expenditure on the youth training scheme so that it could be made effective, or whatever, the effects could be traced through in all the interactions and ramifications within the expenditure of the different Departments involved. Again, the Chief Secretary fluffed it, and has presented to the House simply that document, which I agree is an improvement over what it was, but is still a totally inadequate basis for the serious costing of alternative policies.
    The Government are not concerned about informing the House or the national debate on effective alternative policies. They are simply exposing themselves to the same hack attitude that the Conservative Central Office, under the chairmanship of the Tory party leader, is showing to the BBC.
    There is then the effect on the micro-structure of the economy. Up to a point, we had an honest speech from the hon. Member for Ellesmere Port and Neston (Mr. Woodcock), who represents various areas around Stanlow, the Shell oil refinery, outlining the factors that have caused the 7,000 redundancies in his constituency. It is important for the Government to be able to follow the implications of the changes that they are making on the fortunes of the major companies and on a representative sample of the smaller companies, so that they can see, for example, when corporation tax provisions are changed, whether companies have any taxes that they are liable to pay against which they can offset allowances.
    The person who pioneered that work in the United Kingdom was Dr. John Kay, who has just moved from the Institute of Fiscal Studies to director of the centre for
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    business strategy at the London Business School. He led the way to the Treasury implementing a similar way of analysing the tax liabilities of companies. So anxious was the Chancellor for Dr. Kay's insights into the workings of the markets to play a part in the regulation of the stock exchange that he knocked Dr. Kay off the list of nominees of the Department of Trade and Industry to be on the Securities and Investments Board.
    On the question of what should be done about companies, again the Treasury is moving. I have argued for years that our analysis of the economy is inadequate if we do not, and cannot, look at the position of individual factories, establishments and companies within our constituencies, where we know perfectly well what the real impact of Government policies will be, but which are a shut book to the Government, using simply aggregate statistics.
    Again, we have an initiative, which I warmly welcome, financed by the Chancellor through the so-called consortium of the Treasury, the Bank of England and the Economic and Social Research Council to develop a micro-to-macro-economic model system. For example, a model might be constructed to take into account the behaviour of competing firms and the factors influencing individual management decisions on output, prices and factor demands.
    I refer to the work done on the Swedish economy. Sweden has individually modelled enterprises, down to the production division level, of 80 per cent. of Swedish manufacturing industry. Therefore, it is able to trace what the effects of, say, the exchange rate shift would be on different firms. The Chancellor's PPS may smile. He comes from a city that has just been through an enormous big bang. The investment analysts are paying themselves fantastic sums of money. I am sure that he is not aware of the fact that the biggest market for company level analysis in responding to Government behaviour is the investment analysis market. That will be the market which the London Business School will supply under the consortium that I mentioned.
    Arrayed on the Government Front and Back Benches is the old, incompetent guard of the pigheaded, highly privileged but incompetent tradition within business, banking and finance in the Tory party. While those are the intellectual influences that prevail, and while that is the level of complete incompetence of which the Chancellor is aware—nobody knows better his changes of position—there is no hope for the economy. The dishonesty, as well as the incompetence, of the Government, will see them out of office.
    9.6 pm
    Mr. Martin M. Brandon-Bravo: Notwithstanding the tragic problem of unemployment in my home city of Nottingham, I am more than content to support the amendment in the name of the Government and to reject the Opposition motion. Many contributions have been in the customary macro-economics of debates of this kind. I join with the comments of one of my colleagues, my hon. Friend the Member for Ellesmere Port and Neston (Mr. Woodcock), who made an excellent speech. He related this debate to his constituency and outlined how events in his constituency had led him to support the Government's policy.
    In Nottingham, 23,500 people are unemployed. That is a great personal tragedy to thousands of families. A

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    Labour party pamphlet that has been circulated in that city has the same disregard for the truth as most of the speeches that we have heard from the Labour Benches. For example, the pamphlet talks of seven disastrous years and says that our city has 14,000 more unemployed than it had in 1979. I cannot deny that. It is a fact. However, the pamphlet slips up because it points out that there have been 30,000 job losses in the city during the past seven years. Perhaps the Chancellor, with his great knowledge of mathematics, will confirm my calculation that that means that we have created 16,000 jobs in the same period.
    I draw the House's attention to the reasons that the Labour party gives for unemployment and the companies that it lists that are shedding jobs. Two companies appear to account for half the number—TI Raleigh, which has shed just under 6,000 jobs in that seven-year period, and Players, which has shed just under 2,000. It is being suggested that that is the result of Government policy, and I accept that it is in one small respect. My right hon. Friend the Financial Secretary to the Treasury, who was a Minister in the Department of Trade and Industry, will be well aware that one of the results of regional grant aid was to shift quite a few hundred jobs from TI Raleigh in Nottingham to South Wales. I am delighted that we have reformed our regional policy since then. Far too much money was spent merely shifting jobs from one area of the country to another.
    The real loss of jobs at Raleigh has nothing to do with Government policy. Nottingham is the proud home of a vast university as well as a vast technical college and polytechnic, which means that if it were in another country the city would be full of cyclists, yet we hardly ever see them. Our young people, unemployed or not, drive bangers or ride motor cycles. My son has a banger, and he will not thank me for calling it that because it is his pride and joy. There has been a massive decline in the home market of the cycle industry because many people no longer ride bicycles, and there is no point in blaming the Government for that. If there are no customers for cycles, cycles will not sell.
    The other company that is referred to in the pamphlet is John Player. As I have said, the pamphlet is seeking to blame the Government for the loss of 2,000 jobs in the tobacco industry. There is great dishonesty on both sides of the House in the debate about smoking. Everyone complains about the habit, but when smoking declines it is the height of hypocrisy to publish a leaflet that claims that Government policy has destroyed 2,000 jobs in Nottingham.
    Mr. Geoffrey Lofthouse: i shall try to bring the hon. Gentleman down to earth. What would he advise the 42 per cent. of all those under 24 years of age in my constituency to do? The males would have gone normally into the mining industry but that is no longer possible, and there are no other opportunities and no Government aid to assist employment in the area. They have no bangers or motor cycles.
    Mr. Brandon-Bravo: I cannot speak for the hon. Gentleman's constituency. He represents a mining constituency, and I think that the entire House sympathises with the towns and cities throughout the length and breadth of the country that relied on one industry. When that industry has to die there is a social
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    problem, and nobody will argue on that ground. The single-industry town is our nation's tragedy and there are no quick fix-it answers to the problem.
    Another company is referred to in the pamphlet and the job losses in it are not, as claimed, the result of Government policy. The company is in the textile sector, and as I spent about 30 years in that industry, courtesy requires me not to name it. I do not wish to intrude on private grief. It is sufficient to say that the group in which I was engaged—I was proud to be one of its chief executives — employs more people now than in 1979, even if the group that is named in the pamphlet has shed 3,000 employees.
    No one denies that there has been a decline in the textile industry, but I take this opportunity to thank my right hon. and hon. Friends on the Treasury Bench for the work that they have done. They listened honestly to representations by hon. Members on both sides of the House on the multi-fibre arrangement. The author of the pamphlet is supposed to be on our side in fighting for a good multi-fibre arrangement, but when the county council in the area which I represent, which is Labour-controlled, organised a local conference to enable us to put our case together prior to putting it before Ministers, he began to criticise the British retail trade. In particular, because he happens to he one of the far-Left politicians, the author chose to criticise one of our most successful high street chains, Marks and Spencer plc. Somebody should have told that prospective Labour party candidate that, but for companies such as Marks and Spencer, there would not be a textile trade in this country. Job losses would have been 10 times worse. [Interruption.] Labour Members can rattle on, I do not mind.
    The pamphlet went on to state, in the same dishonest vein as members of the Opposition Front Bench adopt, that, somehow or other, unemployment can be cured in the lifetime of a Parliament. The leaflet sets out a scheme to create 5,000 jobs in each of the five years' duration of a Labour government. Lo and behold, there will be nil unemployment in the city of Nottingham. It is utterly dishonest. Fortunately, the author of the pamphlet knows as much about the city of Nottingham as Arthur Scargill did. The people of Nottinghamshire told Arthur Scargill where to go when he tried that stupid business two years ago. I thank my right hon. Friends on the Government Front Bench. I would thank them much longer, but I have only a couple of minutes in which to conclude my remarks.
    Hon. Members on the Government Front Bench have targeted real help to cities such as Nottingham. One of the Government's great unsung successes has been urban development grants. This week, I was grateful for yet another grant to our city. In the past three or four years, about £4·5 million of public money has produced investment of some £25·5 million in Nottingham. That policy is one of the great successes. Nationally, though it is decried by Labour Members, £100 million of public money has produced well over £400 million of private investment.
    Mr. Cash: Does my hon. Friend acknowledge that, at the end of this debate, when the Opposition have apparently attempted to censure the Government on their economic strategy, the Chamber is almost devoid of Opposition Members, including the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley), who led the debate for the Opposition. Does my hon. Friend also

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    acknowledge that this has been one of the most tawdry exhibitions by the Opposition that we have witnessed in this Parliament?
    Mr. Brandon-Bravo: That is a fair point. [Interruption.] May I conclude? That is the arrangement that was made, if that is what the Opposition Front Bench is getting so uptight about. I ask the Government Front Bench to hang on tightly to the basic policy of restraining inflation. Nothing destroys confidence, savings and jobs more than runaway inflation. My great worry is that, in a city such as Nottingham, there are thousands of young people who have no real memory of the monster of runaway inflation that so characterised the Labour Government's term of office. Heaven help us if Labour Members have a chance to do that again.
    9.15 pm
    Mr. John Prescott: At the outset, I wish to direct a very serious matter to the Chancellor of the Exchequer. During his introduction of the autumn statement, he informed the House that the information about it would not be available to hon. Members or, presumably, to anyone else until he sat down. He sat down at approximately 10 minutes to four. At about five o'clock we discovered a Conservative research department brief, marked "confidential" in a telephone booth in the House. That document contained all the details of the statement, but came from the Conservative party office. Clearly, that is a serious matter. Obviously, the Chancellor would wish to address his mind to it, particularly as the Chancellor of the Duchy of Lancaster is also the chairman of the parliamentary party and sits in the Cabinet. Will the Chancellor of the Exchequer assure us that this information was not available confidentially to the Tory party central office so that it could make notes on the statement? I am quite prepared to give way to the Chancellor.
    Mr. Lawson: I can give that assurance.
    Mr. Prescott: Do I understand the Chancellor to say that he gives the assurance that it was not given to the central office before 10 minutes to 4 o'clock? If that is the case, I must say to him that the detail of the six or seven pages of his statement would have had to be printed, produced and brought to the House, all within one hour.
    Mr. Lawson: I will happily double check. I shall explain the procedure that we use. That document was produced by my special advisers in the Treasury. [HON. MEMBERS: "Oh."] The top page was stapled on later. It was not done by Conservative Central Office.
    Mr. Prescott: I do not find the Chancellor's answer satisfactory. I now give him notice that I should like him to reflect on the answer he has given to the House. At the end of the debate and after the House has met, we could consider through the normal channels whether the right hon. Gentleman wants to think further and give the House a more informed reply.
    Undoubtedly, the debate has shown us that the exchange between the two sides of the House and the nature of the autumn statement have dominated the Opposition's motion on the economy and employment. Perhaps that was inevitable, but it has been clear that, apart from the Government Front Bench and one or two
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    other Conservative Members, most hon. Members have been highly critical of the performance of the economy after seven years of this Government. Having listened to the speeches, one would have thought that Labour went out of office 12 months ago and we were still being blamed for all the problems in the economy, or that it was the Labour party that paid for the advertisement that said that Labour was not working, when unemployment was just over 1 million.
    The debate has flowed between both sides of the Chamber. It has shown that the level of investment, particularly in manufacturing, is still below the 1979 level. There is a crisis in the balance of payments and a trade deficit in manufacturing. Exports may be increasing, but imports are increasing much faster. Even much of the evidence on interest rates—we already know that we have record interest rates compared with other economies — and the Chancellor's facts on inflation had been somewhat tampered with, inflation being taken as an average for the rest of Europe and the averages during the terms of the Labour Government and the Tory Government being compared.
    We have seen a great deal of manipulation of statistics and even a picking of years. Unusually, the Chancellor chose 1973 as the base year. Most of the evidence given for the revival in the British economy, according to the Chancellor, is taken from before 1981 or 1982, as though the Conservative party did not come to power until then.
    One particular aspect missing from the autumn statement was a projection of what would happen with employment. There is a debate about unemployment. Few Conservative Members, with honourable exceptions, mentioned the problem of unemployment. A great deal of play was made of inflation, but the consequences of the mass unemployment which we have seen develop after seven years of Tory Government rule are clear for everyone to see, no matter how the figures are dressed up.
    The Opposition are grateful for one factor in the speech the Government claim that the levels of public expenditure now are higher than they were under the Labour Government. The intention is to raise the contingency reserves, to use other resources, such as those obtained from privatisation, to increase the levels of public expenditure. Those wasteful bodies, as the Chancellor and other Ministers regard them—the local authorities—will be used to spend the money. Those are precisely the sort of methods that the Labour party has argued should be used to get our people back to work. This very much reflects the evidence—it had to be dragged out by way of a leaked document—given by the Government to the European Commission when they were pleading for more money to deal with the collapse of aspects of the infrastructure—the decline in our inner cities and the stagnation of our housing programmes. All those items are spelt out in the documents given to the Commission because the Government were seeking money. They are precisely the type of public investment projects that the Labour party believes can be used to get people back to work.
    I was somewhat surprised to hear almost cheers from the Conservative side when the Chancellor claimed how good the Government were at using public expenditure. Although we may argue that the expenditure is not large enough—there will be differences between us—we would

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    be churlish not to welcome the fact that public expenditure, in certain areas, will he used to considerable effect in providing real jobs.
    When the Chancellor was pressed for his predictions on unemployment he could not answer. He discussed whether unemployment might reach 3·2 million. The document that was given to the Commission suggested that by 1990 it would still be about 3·2 million. That is before the Government get to work on a further fiddle—the 18th—of the unemployment figures. The Chancellor of the Duchy of Lancaster may well regret his statement that the Tory party should not be re-elected if unemployment is not below 3 million. I suspect that more and more pressure is being applied for an increase in public expenditure, to chase more and more people from the employment exchanges, to create more and more low-pay schemes and more part-time and self-employed jobs in order to doctor the figures in an attempt to massage them down below 3 million.
    We heard the arguments about the real levels of unemployment and of employment. The Government said that they have created a million jobs‖indeed, that figure is in the amendment to our motion. The Chancellor is well aware that that I million is made up of over 823,000 self-employed. The level of self employment has increased by 823,000 during the Conservatives' term of office. That increase is largely due to a statistical exercise. The Chancellor is aware that the figures were based on a 5 per cent. survey and they have been constantly rejigged. That has caused concern among statisticians as to whether one can prove the claimed increase in new jobs. That is the least of the Government's statistical offences.
    It is true that more part-time work has been created, and, indeed, it is the Government's policy to encourage that. If one wanted a fair measure of an increase in employment one must consider the 142,000 extra people in work when Labour left office compared to when it took office, and the fact that almost 1·5 million more people are unemployed now compared to 1979. I do not deny that there will be more and more part-time and flexible working within the economy, but one must judge that in terms of full-time equivalents. It is a crude measure, but it has been used by the Bank of England. I asked the Library to compare the period when Labour was in power-1974 to 1979 — with the period of this Administration. Between 1974 and 1979 the increase in full-time equivalents was 93,000. My hon. Friend the Member for Rother Valley (Mr. Barron) suggested that, under this Government, 1 million full-time equivalent jobs had been lost to the employment market. The Library's calculations show that that loss is 1,936,000.
    That is the scale of the decline in employment prospects since 1979. However it is measured, it is a catastrophic decline. When Britain's unemployment is compared with that of any of our competitors, using the OECD average, the EEC average or the figures I have here from a very authentic source, we find the same story. The British average is 13·3 per cent.; the EEC average is approaching 10·8 per cent.; and the OECD average is 8·1 per cent.
    The Chief Secretary to the Treasury (Mr. John MacGregor): What is the source?
    Mr. Prescott: My source is the private and confidential document given to Lord Young to brief him on the unemployment figures. We presume that that document is acceptable.
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    In reality, whether in percentage or absolute terms, the Government's policies have had a catastrophic effect on employment, and are a direct cause of the high level of unemployment. Perhaps, as suggested in the debate, the Government will switch from a monetarist policy. I believe that they will.
    It is important to compare what has happened to Britain's patterns of public expenditure with those of our main competitors in Europe. They increased their public expenditure, as did Britain, but they put less into defence and more into housing and infrastructure — the very things that the Chancellor complained about in his evidence to the Commission when he was asking for money. One of the essential differences between us and our European competitors is when it comes to managing the economy. It concerns the quality and the type of public expenditure.
    It is a bit much for the Chancellor to suggest that the Opposition exploit the unemployed when his party gave us "Labour isn't working." More important than that, the Government have conducted 17 fiddles of the unemployment figures. Their latest pernicious activity is the suggestion that the unemployed should be subjected to an interrogation about whether they are working.
    The Government are suggesting that those who suspend people's unemployment benefit if they fail a questionnaire should become bounty hunters and be paid according to how many people they suspend from the employment benefit. That is shown by another Government document. The evidence has been debated in the House. That demonstrates the Government's pernicious approach to the unemployed.
    The Government's policy is to drive people off the employment exchange and not to provide them with work. When the Government say that the Opposition exploit the unemployed, I must remind them of a notice that we received in our post this morning. The Government create part-time employment and talk of successful business and of removing the barriers to business. The right hon. Member for Taunton (Sir E. du Cann) said that the burden of costs on business should be relieved. He mentioned electricity costs, but the Government talk about reducing health and safety protection and removing employment protection rights.
    The Equal Opportunities Commission told us today that anybody who appeals against unfair dismissal will now have to pay a £25 tribunal fee to have a complaint heard. That £25 fee will presumably be taken from a single householder who gets £30 a week benefit, supposing that it has not been suspended. That is the kind of priority that the Government give to the unemployed and people in part-time and other forms of employment about which we have heard today.
    Hearing the right hon. Member for Taunton speak of reducing costs reminded me of the Chancellor saying that the Government had managed to secure increased revenue from corporation tax. The reason is, presumably, that corporation tax has increased by about 25 per cent. since the Government came to power. It involves many thousands of millions of pounds made by companies.
    The prevailing wisdom is that companies will invest. We know that they have often not invested in machinery but, more to the point, they have not put their money into training either. We have the worst trained labour force of any developed country, yet companies put only one fifteenth of 1 per cent. of turnover into training. According

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    to the Manpower Services Commission, most of our competitors put between 2 and 3 per cent. of turnover into training.
    Mr. Lawson: I have said that.
    Mr. Prescott: The Chancellor should remember that he has relieved companies of the training levy, dismantled several of the industrial training boards and witnessed a collapse in the number of apprenticeships. If British companies invested only 1 per cent. of turnover on training, that would raise between £6 billion and £8 billion. The taxpayer would then not have to find the £2 billion now needed for the skivvy youth training and community programme schemes.
    The Chancellor asked me how much Labour's programme would cost. The Chief Secretary to the Treasury has made some scandalous charges. He should be thrown out of accountancy in view of what he said about the costing of Labour's programme. The Chief Secretary has trawled through various speeches and documents, some of them quite wrong, and discovered, apparently, that our training programme would cost £900 million. Let me tell him, the analysis was incorrect. More importantly, why should we not impose a levy on industry to pay for training? Previous Tory Governments used to believe in levies because industry would not invest in training. Do not be surprised, industry will pay for training as our competitors and many industries abroad already do. We are short of every kind of skill in this country and we have to make a rapid and radical change in our training programme. There is no doubt about that. We know that it costs money. Industry is not paying anywhere near its fair share, even on the Chancellor's own evidence.
    Many of the 26 proposals mentioned in the document are wrong. The Chief Secretary has already admitted that perhaps on education he was wrong. He quotes speeches and documents. The Labour party will put through its commitments in the manifesto when we decide them in the normal way. I shall give the House some examples. The Chief Secretary said that there is a commitment to a 35-hour week. That is not a commitment anywhere in our document, although we might like to move towards it. The Chief Secretary gives us a bill of £3,000 million for that. He also mentions early retirement at 60. That is something that the Government have regrettably changed. He gives us a bill of £2,600 million, but that is not a commitment. We also have no commitment as to precisely what the minimum wage would be. There is a commitment to a minimum wage but one cannot possibly estimate the cost without knowing what that wage will be. Yet the Chief Secretary tells us that it will cost £1,000 million. Therefore, there is a total bill of £6,600 million and no commitments. It is a charade. The Chief Secretary should answer those questions.
    If the Chief Secretary looks at our document he will also see that money should be made available for housing. We are witnessing the building of 2,000 houses fewer per week than we did under a Labour Government. That is one indictment of the Government. The local authorities have the money — £6 billion in capital receipts — and there are 500,000 building workers unemployed. My constituency has worked out a programme for 1,000 houses at a cost of £66 million a year. That would provide
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    4,000 jobs and good training. I can give the House many public expenditure examples where the Chief Secretary calls for the money from the EEC.
    We are working extremely hard to see where the extra jobs will come from, whether in nationalised industries, local authorities or the private or public sectors. Yes, they can do much more to provide jobs and they will, make no mistake about it.
    There is one carefully costed document that I would like to give the Chief Secretary. It has been worked out in detail with the financial people and spells out precisely what the jobs are and where they will come from. It is an inner-city authority with a massive housing problem and is in massive decline, which is recognised by the Government in their inner-city partnership schemes. That authority is Southwark. It has produced a plan which shows precisely where the jobs will come from. There will be 5,800 jobs, 25 per cent. of them in housing and about 20 per cent. in social services. I notice that many of the jobs provided in social services are to deal with the problem created by the Government when they kicked people from mental hospitals in the name of community care and dumped them on local authorities without providing the resources for the authorities to deal with that.
    I hear the Government talking about £4·5 billion they are giving local authorities to assist them in their expansion programmes. Local authorities have lost over £20 billion in the reduction in the rate support grant. That is why we have seen a reduction in jobs and services. We must be prepared to look at the needs of our inner cities, the needs of our services, the need to build houses and the need to train. Many of our local authorities, which have been doing a valiant task trying to create jobs and improve services, could provide a considerable amount of the jobs we are talking about.
    I shall let the Chancellor into a secret. A proportion of the 1 million job target that we have set to achieve over the two-year period will almost certainly come from local authorities. I have three projects before me now Lancashire enterprise body, Southwark and the Hull corporation. We could certainly put together 10,000 jobs there if he is prepared to take those targets now. We can do that if the resources are available. Local authorities are engines of growth. They are important in the development of our economy.
    It is all very well for the Chancellor to smile but his proposals today hope to use the local authorities in the spirit of election because they learned a lesson. In 1983, the only time when the figures showed a flip upwards in reducing unemployment, the Chancellor told local authorities to spend, spend, spend public money because he wanted to reduce unemployment before the general election. The Chancellor has done the same today. No doubt the Budget statement in March will add to the tax cuts in today's proposals.
    The Opposition believe that local authorities and nationalised industries can play a role in keeping real jobs, with real money, meeting real need. We shall provide the alternative to the skivvy community programme and YTS schemes which the Government have used to reduce the figures. We shall provide real jobs and real money to meet real need.
    9.40 pm
    The Chief Secretary to the Treasury (Mr. John MacGregor): One of the penalties of trying to allow

    1171
    everyone to speak in the debate and therefore having only short wind-ups is that I cannot, alas, refer to as many contributions as I would have liked.
    All of us recognise—and no one would claim to the contrary — that, despite the improvement in the economy, there are still, and always will he, enormous challenges even to sustain our present standards of living, given the highly competitive world in which we live, and to keep our industries constantly competitive, changing and flexible. There are also enormous challenges to deal with unemployment.
    The contributions from Opposition Members showed that they were living in the past. They fail to recognise the highly competitive world in which we live. They fail to recognise how things change. They seem to believe that past habits, structures and types of industry can go on for ever. They would do well to heed the contributions of my right hon. Friend the Member for Guildford (Mr. Howell), for Ellesmere Port and Neston (Mr. Woodcock) and for Darlington (Mr. Fallon) who made pertinent comments on that point. Opposition Members also fail to recognise the considerable progress of the past five or six years, which must be the background to this year's spending plans.
    Mr. Max Madden: On a point of order, Mr. Speaker. I think you will have been told that there is considerable concern on the Opposition Benches about a document which has been produced by Conservative and Unionist central office, which contains considerable details about the public expenditure statement.
    Mr. Speaker: I understand that this matter has already been raised and that it may be raised again later.
    Mr. Madden: Further to that point of order, Mr. Speaker. Surely the Leader of the House should make a statement about who produced the document, when it was circulated, and to whom. Will we receive some information about this, as clearly the Chief Secretary to the Treasury is very reluctant to reveal details of the party political activities of senior Treasury officials?
    Mr. Speaker: I must tell the hon. Gentleman that the Chief Secretary to the Treasury has been on his feet for only two minutes. I have had an intimation that this matter may be raised as a point of order later. I think that we should leave it at that.
    Mr. MacGregor: That intervention has taken two minutes of my time. For the hon. Gentleman to raise that point in a debate about employment, jobs, and the Government's programme shows how serious he is about these matters. If that is all that the hon. Gentleman can do [Interruption.]
    Mr. Speaker: Order. The debate has proceeded in good order until now. I ask the House to give a fair hearing to the Chief Secretary to the Treasury.
    Mr. MacGregor: I am grateful to you, Mr. Speaker, as I should like to deal with the debate and the Government's expenditure programmes, which are extremely important.
    The background is that we are now into our sixth successive year of economic growth at an average so far of nearly 3 per cent. per annum. That is the longest period of uninterrupted growth since 1973. The volume of total fixed investments, to which many hon. Members have referred, is at an all-time high and manufacturing
    1172
    investment—and we heard so much about manufacturing investment from the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley)—is up 31 per cent. since the last election. Company profitability is the highest for more than 20 years—almost three times the 1975 level.
    Mr. Hattersley rose—
    Mr. MacGregor: This is the last time that I shall give way.
    Mr. Hattersley: I am concerned about the right hon. Gentleman's selective use of figures. He said that manufacturing investment had risen since the election. Will he tell us its relationship with the election when his party became the Government in 1979?
    Mr. MacGregor: The right hon. Gentleman knows perfectly well that there was a deep worldwide recession after 1979, but what actually matters is the progress since then. I should have thought that the right hon. Gentleman would welcome the fact that manufacturing investment is up by 31 per cent. Export volumes—non-oil—rose by 2·5 per cent. in the third quarter of 1986 to an all-time high. It is worth pointing out that there has been no previous five-year period in recent history over which manufacturing has so successfully held its world market share.
    Recently, inflation has been at the lowest level for almost 20 years. The lowest on-year inflation rate recorded by the previous Labour Government was higher than any inflation rate since the election. The right hon. Member for Sparkbrook suggested that inflation was the only successful indicator of the Government. As I have demonstrated, it is not. But how wrong he would be to downgrade the importance of inflation, as his Government did. It is on the way to a level that is well below any level that the previous Labour Government ever achieved in one year. I tell the right hon. Gentleman that the battle could so easily be lost again, at such damage to our economy and international competitiveness, as it would be under Labour policies.
    That is why today the Chancellor put such emphasis on the fact that there would be no relaxation of our fiscal stance in the medium-term financial strategy published at the time of the Budget. It is vital, underpinning all that we set out in our programmes today. As my right hon. Friend said, there can be no question of allowing the projected increases in public expenditure over the next two years to undermine the prudence of the Government's overall fiscal stance.
    Equally vital is the continuation of our objective to reduce public expenditure as a proportion of gross national product, which we have succeeded in doing over past years and in the programmes now before the House. The success of the economic strategy, reflected in inflation at levels not seen for almost two decades, and economic growth averaging nearly 3 per cent. for six successive years—that prudent management of the economy—enables us to make further increases in priority services. [Interruption] I want to say a word about them. This debate is about our public expenditure programmes as well. The first point that I should like to make is this. Over the past few years, when we have been succeeding in getting public expenditure down as a proportion of CiDP—[Interruption.]—we have also succeeded—
    Mr. Robert Key: On a point of order, Mr. Speaker. It is impossible for us to hear the debate. Only 30 members of the Labour party are present for this important debate, and they are shouting and buffooning —[Interruption.]
    Mr. Speaker: Order. I ask the House to hear what the Chief Secretary has to say.
    Mr. MacGregor: I am grateful to you, Mr. Speaker.
    Dr. Bray: Will the right hon. Gentleman give way?
    Mr. MacGregor: I shall not give way now. I have only a short time left.
    As I was saying, over the entire period we have been increasing public expenditure in key priority areas. I now want to say a word about how we are doing it in the plans announced today. We have made a major increase in the current three-year plans in provision for education, for both schools and higher education. The universities are being offered substantial increases in funding in return for their agreement to an approach that embraces a greater emphasis on quality in teaching standards, improved financial management, greater selectivity and some rationalisation. We are providing more for local authorities' capital and current spending on schools.
    Funds have also been made available for the city technology college initiam c announced recently by my right hon. Friend the Secretary of State for Education and Science. We have made provision to cover the full costs of the offer on teachers' pay that he announced to the House last week. As he made clear, that offer is tied to terms and conditions of service for the teaching profession which mean that teachers would have enforceable contracts of employment which would specify their professional duties. We believe that that is a fair, reasonable and generous deal for the taxpayer and the ratepayer who will have to find the money and for the teachers.
    In the three-year plans, education features most prominently, which demonstrates the Government's commitment to give the education service the resources that it needs. That is what we have been doing throughout, because the amount of education spending per pupil has increased considerably in real terms over recent years.
    Let me deal with the next priority area. Our plans provide for a 2·2 per cent. real increase in expenditure on the hospital service next year. That will enable the Health Service to respond to growing needs and an increasing number of patients, with improving services. In addition, the hospital service will retain the full benefit of increasing resources being released through the cost improvement programme.
    I have often noticed how little attention the Opposition give to value for money in terms of the use of the taxpayers' pounds. That programme has already achieved £390 million of cumulative savings since 1981–82, plus other improvements in efficiency. In the current year we expect a further £150 million in savings and we expect those savings to continue to accumulate throughout the survey period.
    The result is that there are now 75,000 more front-line staff in the Health Service—17 per cent. more than in 1978. As a result of the survey decisions, my right hon. Friend the Secretary of State has also been able to announce further major initiatives in the Health Service. Capital expenditure on the hospital building programme
    1174
    by the NHS rose by 31 per cent. in real terms between 1978–79 and 1985–86. No wonder the hon. Member for Thurrock (Dr. McDonald) does not want to know. That is in contrast to the 31 per cent. reduction under the Labour Government.
    As my right hon. Friend has announced, over the next three years more than 100 Health Service building schemes, with an estimated value of nearly £700 million, are due to be completed. The total capital programme for the hospital and community health service will increase from about £1 billion this year to £1·2 billion by 1989–90. Health authorities will also retain in full receipts from sales of surplus land and buildings. What a contrast that hospital building programme is with the previous Labour Government's programme.
    The same applies to the road programme, which has increased substantially in real terms, and to which we are giving further additional resources this year. Under the previous Labour Government the road programme was slashed in real terms.
    We are also planning increased capital investment in housing. We have increased the provision in 1987–88 to honour the commitment given by my right hon. Friend the Member for Wanstead and Woodford (Mr. Jenkin) in 1984 to local authorities that we would guarantee them 80 per cent. of the 1985–86 allocations. In addition, substantially higher capital receipts from the highly successful programme of the sale of council houses are now forecast throughout the survey period, which will enable greater investment in housing and will allow carefully targeted increases to be made in gross spending on some vital programmes at relatively low cost to the Exchequer. We are targeting additional provision for the renovation of the housing stock through the urban housing renewal unit and are providing for the Housing Corporation to start on private finance schemes to provide additional low-cost housing.
    We are also maintaining the priority that we have given throughout our years—an increase of 39 per cent. in real terms—to all issues dealing with law and order; to the police, the prison building programme and in many other ways; for example, in tackling the drugs issue.
    Those are particular priorities on top of the priorities which were given to the employment programmes in the Chancellor's Budget, which increased our employment measures by £300 million next year and the year after. I was extremely distressed to hear the hon. Member for Kingston upon Hull, East (Mr. Prescott) describe them as "skivvy schemes". The youth training scheme, the community programme and many others are doing beneficial work throughout the community. We are spending about £3,000 million this year on such employment and training measures. It is typical of the hon. Gentleman to say that we are not spending money on employment and then to describe those massive sums as "skivvy schemes".
    I wanted to cover many issues where we have achieved much greater value for money for the taxpayer through many measures that we have taken in efficiency scrutinies, competitive tendering, purchasing initiatives and in many other ways. All I can say is that I know that those are always criticised by the Opposition. They do not understand the concept of value for money. They do not understand why we are getting much more in output from our public expenditure programmes than has been achieved before.

    1175
    Equally, I dismiss the idea that we have been neglecting capital investment. Infrastructure spending is likely to be up by about £1 billion next year on the previous figure of £20 billion. As a result, there are many examples all over the country of very significant capital expenditure programmes. Tonight, alas, I do not have time to deal with them, but I shall do so on another occasion.
    The hon. Member for Kingston upon Hull, East referred to some of the Opposition's employment measures. It was interesting that the right hon. Member for Sparkbrook stressed that in all future debates he would concentrate on the Government's policies. As my hon. Friend the Member for Wycombe (Mr. Whitney) pointed out, that is no surprise. The right hon. Gentleman wants to avoid people focusing on his policies. It is no wonder that he got such a cheer from behind him. The probing of Labour's policies causes them as much embarrassment as it causes him, but he will not get away with it. It is right that the country should know, just as the national and international business and financial community already knows, just what disarray his policies are in, and what damage they would do to all the things that he spoke about today.
    The hon. Member for Kingston upon Hull, East gave us some idea of which programmes would be dropped from those which I costed in that £28 billion.
    Mr. Prescott: We have not decided.
    Mr. MacGregor: The hon. Gentleman said that he was committed to a minimum wage. Does he still stick to the policies outlined at a recent Labour party conference, which involved the minimum being two thirds of average wages? We would all like to know the answer. Will the hon. Gentleman say which pledges he intends to drop?
    Opposition Members have argued that their so-called poverty programme of £3·6 billion will be covered by taxing the very rich, or top 5 per cent., but that would do considerable damage to many people who will be most surprised to discover that they fall into the category of the very rich. It will also do considerable damage to the economy as a whole and to the wealth creators.
    In addition, the hon. Member for Kingston upon Hull, East claims that a Labour Government would borrow an additional £6 billion on top of what we are doing in terms of job creation programmes. I have looked at the Southwark programme mentioned by the hon. Member for Kingston upon Hull, East. He said, interestingly enough, that it would form the sort of basis for the local authority programmes that he hopes to encourage —[Interruption.] The hon. Gentleman is certainly moving away from what he said in The Guardian. I have read about the Southwark blueprint, but such a programme would mean that the Labour party was claiming to achieve an additional 1 million jobs in two years.
    Mr. Prescott: I did not say that. Just in case the Chief Secretary starts on another false trail, I should point out that I said that jobs would come from local authorities, nationalised industries and other industries. We have already begun discussing with local authorities the sorts of plans that we have in mind. That was one discussion yesterday. This is what I said and meant.
    Mr. MacGregor: The hon. Gentleman will know that to achieve 1 million jobs over two years—[Interruption.] The hon. Gentleman does not want to hear, but achieving
    1176
    that over two years would cost another £20 billion. Moreover, it would lead to higher rates for existing businesses, which would destroy jobs. During the next year or so we shall probe just to discover what is the basis of that programme.
    We have produced public expenditure plans based on prudent management of the economy which enable us to increase resources in key priority areas. The Labour party's programmes would do enormous damage to jobs, investment and inflation, and that is why we reject the motion.
    Question put, That the original words stand part of the Question:—
    The House divided: Ayes 145, Noes 309.

    Division No. 310]

    [10.00 pm

    AYES

    Abse, Leo

    Hardy, Peter

    Archer, Rt Hon Peter

    Harrison, Rt Hon Walter

    Ashley, Rt Hon Jack

    Hart, Rt Hon Dame Judith

    Ashton, Joe

    Hattersley, Rt Hon Roy

    Atkinson, N. (Tottenham)

    Heffer, Eric S.

    Banks, Tony (Newham NW)

    Hogg, N. (C'nauld & Kilsyth)

    Barnett, Guy

    Holland, Stuart (Vauxhall)

    Barron, Kevin

    Home Robertson, John

    Bermingham, Gerald

    Howell, Rt Hon D. (S'heath)

    Bidwell, Sydney

    Hoyle, Douglas

    Blair, Anthony

    Hughes, Dr Mark (Durham)

    Boothroyd, Miss Betty

    Hughes, Roy (Newport East)

    Bray, Dr Jeremy

    Hughes, Simon (Southwark)

    Brown, Gordon (D'f'mline E)

    Hume, John

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

    Jenkins, Rt Hon Roy (Hillh'd)

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

    Kaufman, Rt Hon Gerald

    Brown, Ron (E'burgh, Leith)

    Kennedy, Charles

    Buchan, Norman

    Kirkwood, Archy

    Callaghan, Rt Hon J.

    Lambie, David

    Campbell, Ian

    Lamond, James

    Campbell-Savours, Dale

    Leadbitter, Ted

    Canavan, Dennis

    Leighton, Ronald

    Cartwright, John

    Lewis, Ron (Carlisle)

    Clarke, Thomas

    Litherland, Robert

    Clay, Robert

    Livsey, Richard

    Clelland, David Gordon

    Lofthouse, Geoffrey

    Cohen, Harry

    Loyden, Edward

    Cook, Frank (Stockton North)

    McCartney, Hugh

    Cook, Robin F. (Livingston)

    McDonald, Dr Oonagh

    Corbett, Robin

    MacKenzie, Rt Hon Gregor

    Corbyn, Jeremy

    Maclennan, Robert

    Cox, Thomas (Tooting)

    McTaggart, Robert

    Craigen, J. M.

    McWilliam, John

    Crowther, Stan

    Madden, Max

    Cunningham, Dr John

    Mallon, Seamus

    Dalyell, Tam

    Marek, Dr John

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

    Marshall, David (Shettleston)

    Deakins, Eric

    Martin, Michael

    Dewar, Donald

    Maxton, John

    Dormand, Jack

    Meacher, Michael

    Douglas, Dick

    Michie, William

    Dubs, Alfred

    Mikardo, Ian

    Duffy, A. E. P.

    Millan, Rt Hon Bruce

    Dunwoody, Hon Mrs G.

    Morris, Rt Hon A. (W'shawe)

    Ellis, Raymond

    Morris, Rt Hon J. (Aberavon)

    Field, Frank (Birkenhead)

    Nellist, David

    Fields, T. (L'pool Broad Gn)

    Oakes, Rt Hon Gordon

    Fisher, Mark

    O'Brien, William

    Foot, Rt Hon Michael

    Patchett, Terry

    Forrester, John

    Pavitt, Laurie

    Foster, Derek

    Powell, Raymond (Ogmore)

    Foulkes, George

    Prescott, John

    Freeson, Rt Hon Reginald

    Randall, Stuart

    George, Bruce

    Raynsford, Nick

    Gilbert, Rt Hon Dr John

    Redmond, Martin

    Godman, Dr Norman

    Richardson, Ms Jo

    Golding, Mrs Llin

    Roberts, Allan (Bootle)

    Gould, Bryan

    Roberts, Ernest (Hackney N)

    Hamilton, W. W. (Fife Central)

    Rooker, J. W.

    Hancock, Michael

    Ross, Ernest (Dundee W)

    1177

    Rowlands, Ted

    Wardell, Gareth (Gower)

    Ryman, John

    Wareing, Robert

    Sedgemore, Brian

    Welsh, Michael

    Sheldon, Rt Hon R.

    White, James

    Shore, Rt Hon Peter

    Wigley, Dafydd

    Silkin, Rt Hon J.

    Williams, Rt Hon A.

    Skinner, Dennis

    Wilson, Gordon

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

    Winnick, David

    Snape, Peter

    Woodall, Alec

    Soley, Clive

    Wrigglesworth, Ian

    Spearing, Nigel

    Steel, Rt Hon David

    Tellers for the Ayes:

    Stewart, Rt Hon D. (W Isles)

    Mr. James Hamilton and

    Thompson, J. (Wansbeck)

    Mr. Don Dixon

    Torney, Tom

    NOES

    Adley, Robert

    Dicks, Terry

    Aitken, Jonathan

    Dorrell, Stephen

    Alexander, Richard

    Douglas-Hamilton, Lord J.

    Alison, Rt Hon Michael

    Dover, Den

    Amery, Rt Hon Julian

    du Cann, Rt Hon Sir Edward

    Amess, David

    Dunn, Robert

    Ancram, Michael

    Durant, Tony

    Ashby, David

    Dykes, Hugh

    Atkins, Rt Hon Sir H.

    Eggar, Tim

    Atkinson, David (B'm'th E)

    Emery, Sir Peter

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

    Evennett, David

    Baker, Nicholas (Dorset N)

    Eyre, Sir Reginald

    Baldry, Tony

    Fallon, Michael

    Batiste, Spencer

    Farr, Sir John

    Bellingham, Henry

    Fenner, Mrs Peggy

    Bendall, Vivian

    Finsberg, Sir Geoffrey

    Benyon, William

    Fletcher, Alexander

    Best, Keith

    Fookes, Miss Janet

    Bevan, David Gilroy

    Forman, Nigel

    Biffen, Rt Hon John

    Forsyth, Michael (Stirling)

    Biggs-Davison, Sir John

    Forth, Eric

    Blackburn, John

    Fowler, Rt Hon Norman

    Body, Sir Richard

    Franks, Cecil

    Bonsor, Sir Nicholas

    Fraser, Peter (Angus East)

    Bottomley, Peter

    Freeman, Roger

    Bowden, Gerald (Dulwich)

    Fry, Peter

    Boyson, Dr Rhodes

    Gale, Roger

    Braine, Rt Hon Sir Bernard

    Galley, Roy

    Brandon-Bravo, Martin

    Gardiner, George (Reigate)

    Bright, Graham

    Gardner, Sir Edward (Fylde)

    Brinton, Tim

    Gilmour, Rt Hon Sir Ian

    Brooke, Hon Peter

    Glyn, Dr Alan

    Brown, M. (Brigg & Cl'thpes)

    Goodhart, Sir Philip

    Browne, John

    Gorst, John

    Bruinvels, Peter

    Gow, Ian

    Bryan, Sir Paul

    Gower, Sir Raymond

    Buchanan-Smith, Rt Hon A.

    Greenway, Harry

    Budgen, Nick

    Gregory, Conal

    Butler, Rt Hon Sir Adam

    Griffiths, Peter (Portsm'th N)

    Carlisle, John (Luton N)

    Grist, Ian

    Carlisle, Kenneth (Lincoln)

    Ground, Patrick

    Carttiss, Michael

    Grylls, Michael

    Cash, William

    Gummer, Rt Hon John S

    Chalker, Mrs Lynda

    Hamilton, Hon A. (Epsom)

    Channon, Rt Hon Paul

    Hamilton, Neil (Tatton)

    Chapman, Sydney

    Hampson, Dr Keith

    Chope, Christopher

    Hanley, Jeremy

    Churchill, W. S.

    Hannam, John

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

    Hargreaves, Kenneth

    Clark, Dr Michael (Rochford)

    Harris, David

    Clark, Sir W. (Croydon S)

    Harvey, Robert

    Clegg, Sir Walter

    Haselhurst, Alan

    Colvin, Michael

    Havers, Rt Hon Sir Michael

    Conway, Derek

    Hawksley, Warren

    Coombs, Simon

    Hayhoe, Rt Hon Barney

    Cope, John

    Hayward, Robert

    Cormack, Patrick

    Heathcoat-Amory, David

    Couchman, James

    Heddle, John

    Cranborne, Viscount

    Henderson, Barry

    Critchley, Julian

    Hickmet, Richard

    Crouch, David

    Hicks, Robert

    Currie, Mrs Edwina

    Higgins, Rt Hon Terence L.

    Dickens, Geoffrey

    Hind, Kenneth

    1178

    Hirst, Michael

    Nicholls, Patrick

    Hogg, Hon Douglas (Gr'th'm)

    Normanton, Tom

    Holland, Sir Philip (Gedling)

    Norris, Steven

    Holt, Richard

    Oppenheim, Phillip

    Hordern, Sir Peter

    Oppenheim, Rt Hon Mrs S.

    Howard, Michael

    Osborn, Sir John

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

    Ottaway, Richard

    Howarth, Gerald (Cannock)

    Parkinson, Rt Hon Cecil

    Howell, Rt Hon D. (G'ldford)

    Patten, Christopher (Bath)

    Howell, Ralph (Norfolk, N)

    Patten, J. (Oxf W & Abgdn)

    Hubbard-Miles, Peter

    Pattie, Geoffrey

    Hunt, John (Ravensbourne)

    Pawsey, James

    Hunter, Andrew

    Peacock, Mrs Elizabeth

    Hurd, Rt Hon Douglas

    Percival, Rt Hon Sir Ian

    Irving, Charles

    Pollock, Alexander

    Jackson, Robert

    Porter, Barry

    Jessel, Toby

    Powell, William (Corby)

    Johnson Smith, Sir Geoffrey

    Powley, John

    Jones, Gwilym (Cardiff N)

    Prentice, Rt Hon Reg

    Jones, Robert (Herts W)

    Price, Sir David

    Joseph, Rt Hon Sir Keith

    Prior, Rt Hon James

    Key, Robert

    Proctor, K. Harvey

    King, Roger (B'ham N'field)

    Raffan, Keith

    Knight, Greg (Derby N)

    Raison, Rt Hon Timothy

    Knight, Dame Jill (Edgbaston)

    Rathbone, Tim

    Knox, David

    Rees, Rt Hon Peter (Dover)

    Lamont, Rt Hon Norman

    Rhodes James, Robert

    Lang, Ian

    Rhys Williams, Sir Brandon

    Latham, Michael

    Ridley, Rt Hon Nicholas

    Lawrence, Ivan

    Ridsdale, Sir Julian

    Lawson, Rt Hon Nigel

    Rippon, Rt Hon Geoffrey

    Lee, John (Pendle)

    Robinson, Mark (N'port W)

    Leigh, Edward (Gainsbor'gh)

    Roe, Mrs Marion

    Lennox-Boyd, Hon Mark

    Rossi, Sir Hugh

    Lester, Jim

    Rost, Peter

    Lewis, Sir Kenneth (Stamf'd)

    Rowe, Andrew

    Lightbown, David

    Rumbold, Mrs Angela

    Lilley, Peter

    Ryder, Richard

    Lloyd, Sir Ian (Havant)

    Sackville, Hon Thomas

    Lloyd, Peter (Fareham)

    St. John-Stevas, Rt Hon N.

    Lord, Michael

    Sayeed, Jonathan

    Luce, Rt Hon Richard

    Shaw, Giles (Pudsey)

    Lyell, Nicholas

    Shaw, Sir Michael (Scarb')

    McCrindle, Robert

    Shelton, William (Streatham)

    McCurley, Mrs Anna

    Shepherd, Colin (Hereford)

    Macfarlane, Neil

    Shepherd, Richard (Aldridge)

    MacGregor, Rt Hon John

    Shersby, Michael

    MacKay, Andrew (Berkshire)

    Silvester, Fred

    Maclean, David John

    Sims, Roger

    McLoughlin, Patrick

    Skeet, Sir Trevor

    McNair-Wilson, M. (N'bury)

    Smith, Sir Dudley (Warwick)

    McNair-Wilson, P. (New F'st)

    Smith, Tim (Beaconsfield)

    Madel, David

    Soames, Hon Nicholas

    Major, John

    Speed, Keith

    Malins, Humfrey

    Spencer, Derek

    Malone, Gerald

    Squire, Robin

    Maples, John

    Stanbrook, Ivor

    Marland, Paul

    Stanley, Rt Hon John

    Marlow, Antony

    Steen, Anthony

    Marshall, Michael (Arundel)

    Stern, Michael

    Maude, Hon Francis

    Stevens, Lewis (Nuneaton)

    Maxwell-Hyslop, Robin

    Stewart, Andrew (Sherwood)

    Mayhew, Sir Patrick

    Stewart, Ian (Hertf'dshire N)

    Mellor, David

    Stradling Thomas, Sir John

    Merchant, Piers

    Taylor, John (Solihull)

    Mills, Iain (Meriden)

    Taylor, Teddy (S'end E)

    Mitchell, David (Hants NW)

    Temple-Morris, Peter

    Moate, Roger

    Terlezki, Stefan

    Monro, Sir Hector

    Thatcher, Rt Hon Mrs M.

    Montgomery, Sir Fergus

    Thomas, Rt Hon Peter

    Moore, Rt Hon John

    Thompson, Donald (Calder V)

    Morris, M. (N'hampton S)

    Thompson, Patrick (N'ich N)

    Morrison, Hon C. (Devizes)

    Thorne, Neil (Ilford S)

    Moynihan, Hon C.

    Thurnham, Peter

    Mudd, David

    Townsend, Cyril D. (B'heath)

    Murphy, Christopher

    Tracey, Richard

    Neale, Gerrard

    Twinn, Dr Ian

    Needham, Richard

    van Straubenzee, Sir W.

    Nelson, Anthony

    Vaughan, Sir Gerard

    Neubert, Michael

    Viggers, Peter

    1179

    Waddington, David

    Wiggin, Jerry

    Waldegrave, Hon William

    Wilkinson, John

    Walden, George

    Winterton, Nicholas

    Walker, Rt Hon P. (W'cester)

    Wolfson, Mark

    Wall, Sir Patrick

    Wood, Timothy

    Waller, Gary

    Woodcock, Michael

    Walters, Dennis

    Yeo, Tim

    Ward, John

    Young, Sir George (Acton)

    Warren, Kenneth

    Younger, Rt Hon George

    Watson, John

    Watts, John

    Tellers for the Noes:

    Wheeler, John

    Mr. Robert Boscawen and

    Whitfield, John

    Mr. Tim Sainsbury.

    Whitney, Raymond

    Question accordingly negatived.
    Question, That the proposed words be there added, put forthwith pursuant to Standing Order No. 33 (Questions on amendments) and agreed to.
    Mr. Speaker forthwith declared the main Question, as amended, to be agreed to.
    Resolved,
    That this House congratulates Her Majesty's Government on the success of its economic policies, which have brought inflation down to its lowest levels for two decades, combined with sustained economic growth, a million new jobs created since 1983, steadily rising living standards, and record levels of investment.
    10.14 pm
    Mr. Hattersley: Earlier this evening my hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott) raised a point which affects the rights of hon. Members. I now raise it with you, Mr. Speaker, and, through you, the Leader of the House on a point of order.
    When the Chancellor of the Exchequer made his autumn statement, he told the House that details of the statement would be available to hon. Members when he sat down. He did so at approximately 3·50 pm. Shortly after 5 pm — say, 70 minutes after he sat down — a printed document was found in a telephone booth. The document contained detailed information of the Chancellor's autumn statement and a detailed analysis of that statement. It could not have been produced and printed in one hour and 10 minutes.
    When my hon. Friend raised the matter in the debate, the Chancellor, much to my hon. Friend's surprise and mine, rose to give an explanation. He said that the information had been prepared in advance of its being made available to hon. Members, and that it had been prepared by special advisers in the Treasury. I confess that it is not clear to me whether the special advisers were on the Conservative party payroll, who should not have seen the information, or whether they were on the public payroll and should not have been working for the Conservative party. However, what is clear, on the Chancellor's admission, is that before hon. Members received the information a digest was prepared for circulation to Conservative Members and for printing in Conservative Central Office. The Chancellor made that clear in your absence one hour ago, Mr. Speaker.
    Clearly the matter affects the rights of every hon. Member. Many of us would regard it as abuse of the information which is at the Chancellor's disposal, not as a party politician but as a Minister. I do not expect the Leader of the House to make a statement on the subject tonight, for I have no doubt that, to protect the rights of hon. Members, he will choose to make inquiries into the
    1180
    matter. I simply tell him that we believe that he will want to make a statement on the subject at 11 am tomorrow. I advise him to confirm that he proposes to do that.
    Mr. Lawson: The right hon. Gentleman is barking up the wrong tree. When the hon. Member for Kingston upon Hull, East (Mr. Prescott) raised the matter, I replied immediately and gave an explanation. I said that I would double check. Since then I have double checked, and I can say that the story I told was correct. The document was prepared and copied in the Treasury by a special political adviser. The document was paid for by Central Office, which supplied the front cover. It was not released until well after I had sat down. That is a practice of long standing.
    Mr. Hattersley: The Chancellor of the Exchequer seems to think that the answer that the document was paid for by Central Office covers everything. Hon. Members who are interested in rights and privileges will not believe that information being paid for by Central Office entitles Central Office to that information before hon. Members. I believe that the Leader of the House, whose honour in this matter I trust absolutely, should consider the position and report to the House on the propriety of it, according to our general custom, tomorrow morning.
    Mr. Madden: Further to the point of order, Mr. Speaker. The matter is of considerable concern. Earlier this evening, the Chancellor of the Exchequer said that there was nothing unusual about the preparation of the document. It contains a great deal of additional information that was not contained in the statement made by the Chancellor at 3.30 pm. It is extremely important that we know the time when the document was circulated and to whom it was circulated. It is clear that the contents of the document could be used for personal gain by those who had advance knowledge of it and received it. It is not good enough for the Chancellor of the Exchequer to attempt to laugh off this matter. The contents of the statement were not available to Members until nearly 4 o'clock, and it is clear that this Conservative Central Office document was available long before that.
    Mr. Dennis Skinner rose—
    Mr. Dick Douglas rose—
    Mr. Speaker: Order. I shall take further points of order, but I cannot see that there is anything in this matter for me.
    Mr. Skinner rose—
    Mr. Speaker: Order. I remind the House that the Chancellor of the Exchequer resumed his seat at 3.48 pm. The House heard him say that the document, or a document, would be available at that time. I have no idea what this other document is, and it is not a matter for me.
    Mr. Alan Williams: On a point of order, Mr. Speaker. If the document were in the public domain, why has Conservative Central Office marked it "Confidential"?
    Mr. Skinner: On a further point of order, Mr. Speaker. The Chancellor of the Exchequer failed to mention to the House just when the document was made available to those in Conservative Central Office, the people who wanted to read it. You will know, Mr Speaker, that the last important document that was leaked resulted in the issue

    1181
    having to be debated by various Select Committees, and it would be worth while seeing the same procedure take place on this occasion, especially as one in eight of Tory Members is a member of Lloyd's. Half of the Tory Back Benchers represent companies on the stock exchange. With the kind of information that was available in advance to them, they could have made a killing. They could have lined their pockets—[Laughter.] This is not a laughing matter. It is all right for the Chancellor of the Exchequer to try to laugh it off, but he is the man who is responsible for doubling the number of people who live in poverty in this country. At the same time he is lining the pockets of others—
    Mr. Speaker: Order. That is a debating point.
    Mr. Douglas: Further to that point of order, Mr. Speaker. It will be within your knowledge that, although the statement of the Chancellor of the Exchequer was not a Budget statement, there were significant tax elements in it, especially on petroleum revenue tax. Therefore —[Interruption.] The Chancellor of the Exchequer is interrupting from a sedentary position. We require a statement from him not mutterings from a sedentary position.
    I ask you, Mr. Speaker, to study carefully the Hansard report, especially the reply which the Chancellor of the Exchequer gave to my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) when he asked a question about Scottish expenditure being lumped with other elements in the statement. He was told—I cannot quote verbatim, and I have not had the opportunity of checking this—by the Chancellor of the Exchequer that the Cabinet met this morning and that there was no time to apportion Scottish expenditure in a manner that would be apportioned when the autumn statement was fully prepared.
    Time is of the essence, Mr. Speaker, and I ask you to try to prevail upon the Leader of the House to accept his
    1182
    responsibilities for the House and to ensure that what the Chancellor of the Exchequer said — that this is not a precedent — is the truth. We have doubts about the authenticity of what the Chancellor is saying about this not being a precedent. Will the Chancellor quote other examples of political advisers in the Treasury behaving in a similar fashion?
    Mr. Robert Key: Further to the point of order, Mr. Speaker. This is a matter of the utmost gravity. Conservative hon. Members have had made available to them today not one document but two on this matter. I understand that for some time the Labour party has been trying to persuade us that there are some 4 million people unemployed, rather than nearer 3 million. This document revealed that the Labour party was not prepared to believe that.
    At approximately mid-day today, I was photocopying a letter to a constituent, and I read the rules about the photocopier—
    Mr. Speaker: Order. This is very interesting, but it is not a point of order for me.
    Mr. Key: We are dealing with a point of order, Mr. Speaker, on an abuse of this House. I understood that it was an abuse of the House to misuse photocopiers. I have a document here which was revealed to Conservative Members, published, apparently, by Labour Members and headed "Lawson Questions, 6 November 1986". It was a mass distribution to Labour Members of planted questions to the Government. Before they accuse us of receiving one document from an unauthorised source, they had better check their facts with their own Member about the other document.
    Mr. Speaker: Order. The House knows that this has nothing to do with me as a point of order. These are debating points which should be raised at the proper time, on the Floor of the House, not at this time of night and not through me.

Visas (Fees)
Mr. Gerald Kaufman: On a point of order, Mr. Speaker. I draw your attention to a matter on which you have had occasion to comment in the past — the Government's making available information to the press before it is made available to Members of the House. Today, an Under-Secretary of State at the Foreign Office planted a question with his hon. Friend the Member for Berkshire, East (Mr. MacKay) about an increase in visa fees. The information shows that visa fees are to be increased by 66⅔ per cent. for some people and are to be doubled for others.
That information, Mr. Speaker, has been in the possession of the Government for some considerable time and could have been provided to the House in the debate on visas on Monday of last week. It was deliberately withheld by the Government, and now it has been given in a written answer. But that written answer was made available to the press at 3.30 pm. It was only because the press informed certain hon. Members about it that they know about it, and—this is the important point—would know about it before the House is prorogued and before the next Session commences next week.
This is a deliberate attempt — a piece of sharp practice — by the Government to smother this reprehensible information in a way that will prevent hon. Members from raising it in the House for a considerable time. I ask you, Mr. Speaker, to do what you have done in the past, with the appreciation of hon. Members on both sides of the House, and rule that it is not acceptable for the Government to provide information to the press before it is available to hon. Members so that they can raise it on behalf of their constituents.
Mr. Speaker: Order. I have no way of knowing whether this was made available in advance to the press. I accept what the hon. Gentleman has said. I know that question
1184
No. 281 was on the Order Paper today. The answer was given to the hon. Member for Berkshire, East (Mr. MacKay) at 3.30 pm. I am sure that hon. Members have seen this answer, as I have just done, which states that the new fees will come into operation on 18 November. It seems to me that there is adequate time in which to debate this matter.
Mr. Kaufman: Further to the point of order, Mr. Speaker. That is the very point. The whole House has not seen the information. The hon. Member for Berkshire, East (Mr. MacKay) has seen the information. No other hon. Member had it available to him or her while members of the press had it available to them. Therefore, it was an abuse of the House of Commons to give information to the press when the House as a whole did not have it.
Mr. Speaker: I would certainly deprecate it if the information was given in advance to the press. The whole House knows that written answers are available at 3.30 pm in the Library.
Mr. Kaufman indicated dissent.
Mr. Speaker: They are. It is a practice which has been going on for many years. I do not see that there is a point of order for me.
Mr. Robin Maxwell-Hyslop: Further to the point of order, Mr. Speaker. Since this alleged point of order has been raised so late in the evening, may I point out that what the right hon. Member for Manchester, Gorton (Mr. Kaufman), who raised the point of order, refers to as the "whole House" is an almost empty House on his side of the Chamber. In other words, his own hon. Friends are not interested in the matter.

Visas (Fees)

  AGRICULTURE
  Ordered,
  That Mr. David Maclean be discharged from the Agriculture Committee.—[Sir Reginald Eyre, on behalf of the Committee of Selection.]

PETITION

  Hypothermia
  10.31 pm
  Mr. Jeremy Corbyn: I present a petition from constituents of Islington, North and all other constituencies. It contains the names of some 13,000 petitioners. The signatures were collected by pensioners' organisations, health campaigns, tenants' associations and such groups which believe that deaths through hypothermia are an insult to a civilised society. They are concerned that in the forthcoming winter there will be further deaths from hypothermia in our so-called civilised society.
  The petition calls for a substantial increase in old-age pensions. It states that pensioner households should not
  1186
  be forced to pay standing charges for their gas and electricity and, above all, should have their supplies guaranteed so that they do not face the indignity of having their fuel supplies cut off, with a consequent danger to health and death from hypothermia.
  The petitioners pray:
  that the honourable House do urge the Secretary of State for Health and Social Services to put into law the Pensoners' Right to Heat, Light and Communications Bill to protect pensioners from fear of cold homes every winter.
  The petition is signed by some 13,000 people, many of them elderly—many are over 80—who have written to me in support of their demands for urgent action by the House before prorogation to protect them in the forthcoming winter.
  To lie upon the Table.

Conference on Security and Co-operation in Europe
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Malone.]
10.34 pm
Mr. David Atkinson: Earlier this week the third follow-up meeting of the conference on security and co-operation in Europe — the so-called Helsinki process — opened in Vienna. It takes place against a very different background from its two predecessors.
The first review conference in Belgrade in 1977 and 1978 represented a great disappointment to those participating states which had hoped to see some progress in the two years following the euphoric signing of the Helsinki Final Act. It dashed the hopes of those in Communist Europe who were monitoring the implementation of the humanitarian provisions of the Act in the courageous but naive expectation that they would enjoy a degree of international protection for so doing.
It contributed to the growing realisation on the part of the free world that detente was proving to be a one-way street for the Soviet Union, which was seizing all the advantages of trade, credit and technology transfer while delivering nothing on the human rights issues spelled out in the Final Act. It was also, we now know, taking advantage of the spirit of detente to build up its own offensive capabilities, while we in the West were doing precisely the reverse.
The second review conference in Madrid in 1982 and 1983 took place against a background of the Soviet occupation of Afghanistan, the imposition of martial law in Poland, continued repression in eastern Europe, and, during the course of it, the shooting down by the Soviet Union of the South Korean airliner.
Despite such a deterioration in East-West relations, it was perhaps both surprising and encouraging that the concluding document at Madrid added to the original Helsinki commitments and provided for a series of subsidiary meetings on confidence-building measures, the peaceful settlement of disputes, human rights, and human contacts and scientific and cultural co-operation. By contrast, the Vienna conference this week begins with a far more encouraging background.
Last year in Helsinki at the tenth anniversary meeting of the signing of the Final Act all 35 Foreign Ministers recommitted themselves to full implementation of the Act. The confidence-building measures arrived at in Stockholm represent an encouraging step forward in verification through on-site inspection, which could well contribute to other arms control negotiations.
General Secretary Gorbachev is giving all the appearance of a new broom following the moribund Brezhnev, Andropov and Chernenko years. There is a more public Soviet perception of its immense economic problems which a significant reduction in defence expenditure and Western technological aid can help to reduce, although, as we all know, only a free economy will deliver the goods to the Russian people as it has to ours. We are in the middle of summitry. Geneva — followed by Reykjavik and Washington — hopefully in the new
1188
year—may yet lead to meaningful reductions in arms before President Reagan retires to go down in history as one of his country's greatest Presidents.
All this augurs well for Vienna but only at first sight, because we must never allow ourselves to ignore the formidable realities and challenges that remain. There is, as yet, absolutely no evidence that the new leadership in the Kremlin is any different from that which so cruelly and effectively put an end to the Hungarian attempt at neutrality and political pluralism exactly 30 years ago, or indeed the Prague spring in 1968. Perhaps Vienna as a venue, just a few miles down the road from both Budapest and Prague, will remind all those participating there that these were the same roads taken by thousands of Hungarians and Czechoslovakians seeking refuge and freedom from Soviet domination. Nor is there any real evidence that the Soviet Union is to withdraw from Afghanistan, and I regret that the European Community is resuming those negotiations with Comecon which it broke off six years ago because of Afghanistan. What has changed?
The treatment of the Soviet Union's so-called dissidents has not improved. Police brutality, harsh treatment in labour camps, abuse of psychiatry—the case of Serajim Yevsyokov is particularly tragic— a wide variety of punishments and pressures, harassment and discrimination—in reality apartheid—remain the norm for anyone seeking true freedom of expression, assembly, unions or worship. Indeed, if anything, pressure on dissidents has intensified under Gorbachev. There is a practice— now commonplace — of re-sentencing dissidents while still serving sentences. That is surely contrary to natural justice. Conditions in penal establishments are deteriorating, and new laws against contact with foreigners and receiving gifts from abroad have been introduced contrary to the spirit of Helsinki.
As the whole world knows, one crude measure of repression is the number of Jewish refusniks denied exit visas and of the growing number of Christians who, like the Siberian Seven, are seeking to leave for countries where they may bring up their families in a religious manner free of state interference. It has been no different in every other eastern European Communist country.
In Poland, while we must but welcome the release of political prisoners, there is no relaxation of party control despite the clear support of the majority of its people for both Solidarity and the Church. In East Germany the number of political prisoners has reached 7,000 and the Federal Republic pays immense sums to purchase their freedom. In Czechoslovakia, in addition to the continual persecution of the Charter 77 campaigners, in recent weeks the authorities have called in some 300 young members of the so-called Jazz Section, an independent group which publishes books and music. In Bulgaria the entire Turkish population is being forcibly subjected to a total loss of their ethnic identity. In Rumania repression against religion continues unabated. Churches in Bucharest and elsewhere have been deliberately demolished to make way for housing blocks.
Last month I visited for the second time the Second Baptist Church in Oradea, in north-west Rumania, which holds 1,000 people, where Pastors Nichole Gheorghit a and Paul Negrut have built up a congregation of more than 2,500 people at every service, and where last year the authorities withdrew their original permission for them to rebuild a larger church to hold 2,200 people on a new site.

1189
Now the old church is deteriorating and will collapse because of the way the drainage from the surrounding development has been laid.
I mention the Second Baptist Church in Oradea in particular because it was the present Romanian Deputy Foreign Minister, Mr. Iionne Totu—who is to visit London shortly for consultations—who was the official on the Central Council of the Romanian Communist party who was responsible for granting the original approval for the new larger church to be built, and which has since been withdrawn after his promotion. Perhaps my hon. Friend will ensure that this matter is raised with him when he comes to Britain.
Nor should we be fooled by the release recently of a number of well-known campaigners for human rights on whose behalf the free world has been campaigning, such as Shcharansky, Orlov and Father Calcui from Romania. While their release proves that perseverance on behalf of those whose names have thus become internationally known can succeed, if only to be exchanged for spies or as pawns in pre-summit propaganda, there are so many more who remain, like Sakharov, Father Gleb Yakunin and Lev Rengelson—of the Moscow Committee for the Defence of Religious Rights—like Valerie Sendarov and Ratislov Endikomov—the free trade union campaigners —and even Irana Ratsushinskaya, the Christian poetess, who though released this autumn is being denied a visa to obtain hospital treatment in Britain, and many thousands of prisoners of conscience whose names we do not know, as my right hon. and learned Friend said in Vienna on Tuesday.
Of course, we must hope that in time internal developments in all these countries will one day lead to the establishment of that pluralist democracy which we know offers the best guarantee of human rights and an end to the separation of Europe between freedom and slavery. In the meantime, it is the Helsinki process which offers the best and only peaceful way forward and it is in that realistic spirit which I know the Foreign Secretary and his colleagues will be negotiating at Vienna. They will, I hope, be .pursuing balanced progress in all areas of existing agreements of the Final Act before any new commitments can be entered into.
There are a number of positive steps which I hope will be considered at Vienna, which I want to put to the House on behalf of the three organisations with which I and several other hon. Members are associated: the International Society of Human Rights, the Inter-Parliamentary Group for Human Rights in the Soviet Union, and Christian Solidarity International.
First, Western participating states should ensure that a detailed report of all known previous violations of the conditions contained in principles VII and VIII as well as basket III should be presented. They should emphasise that the Final Act constitutes one entity. Those who violate the humanitarian conditions of basket III cannot expect to obtain advantages from the economic, scientific and technological co-operation suggested in basket II. Secondly, they should seek to construct a human rights commission and court of justice for the CSCE signatory states. In that way, the right of individual petition for citizens to voice complaints can be protected. Thirdly, they
1190
should agree a charter for humanitarian aid which will guarantee every citizen the right to receive and provide such aid, which is currently denied in several states.
Fourthly, they should pass a declaration of the right of every citizen to supervise the observance of the Helsinki agreements and to form monitoring groups operating free of state interference. Fifthly, they should call for an experts conference concerning the question of movement and family reunification. Finally, they should call for an experts conference on ethnic minorities and a charter of rights for such minorities in CSCE participating states.
I think the whole House will agree that we who are fortunate enough to belong to one of the minority of nations in the world which enjoy true freedom and democracy have a moral obligation to raise our voices on behalf of those who do not. Standing up for human rights does not represent intervention in the internal affairs of other states. It is indeed provided for by the very principles of the Final Act without which real and lasting peace, security and co-operation are not possible. That is what I know my right hon. and learned Friend the Foreign Secretary and his colleagues are doing in Vienna at the present time, and the whole House will want to wish them every success.
10.45 pm
The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs (Mr. Tim Eggar): The House will be grateful to my hon. Friend the Member for Bournemouth, East (Mr. Atkinson) for raising this matter and to you, Mr. Speaker, for selecting this subject for debate.
As my hon. Friend said, the third conference on security and co-operation in Europe follow-up meeting opened in Vienna on 4 November. This is therefore a timely opportunity to discuss the Government's approach to the CSCE process.
My right hon. and learned Friend the Foreign Secretary has just returned from Vienna, where he spoke on behalf of the 12 nations of the European Community. A copy of his speech has been placed in the Library.
My right hon. and learned Friend stated in his speech that in the CSCE process we aim to reduce tension and put an end to conflict, to release new forces for co-operation, and to respect both national and individual rights. He said:
"The Twelve believe that the Final Act can be a force for good and a force for change in European and East-West relations. If all 35 countries who signed the Final Act implemented its principles the political atmosphere would be transformed, and not only in Europe. Mutual mistrust would give way to mutual confidence. Uncertainty and insecurity would give way to security. Anxiety would give way to optimism".
We are realists. We do not expect such ambitious results to be achieved overnight. Vienna is only one step in a long process of building confidence between East and West, but it is an important one which gives opportunities which must not be missed.
First and foremost, Vienna is an opportunity to take stock of the achievements of the Helsinki process and to review the implementation of the commitments entered into by 35 countries. Secondly, it is an opportunity to look for new ways of ensuring that those commitments are better carried out, and for new areas of East-West co-operation.

1191
Superficially, there sometimes seems to be a tension between these various aspects. Reviewing implementation of commitments means exposing the failure of the Soviet Union and some Eastern European countries to treat their citizens humanely. The Soviet Union used to say that such exposure was unwarranted interference in internal affairs, which contradicted the search for new ways of co-operation.
In reality, of course, there is no contradiction, for greater East-West confidence, and better co-operation, can come about only against a background of frankness and truth in acknowledging where commitments are not being honoured. In the past few years, even the Soviet authorities have come to accept that human rights and humanitarian questions are a proper subject for international discussion.
Readiness to discuss is one thing; readiness to improve respect for human rights across the board is another. We are unfortunately still a long way away from that. The release by the Soviet Union of Anatoly Shcharansky, Yuri Orlov and others is very welcome, but it is not nearly enough.
We must not forget the continued existence of that unnecessary monstrosity, the Berlin wall, the enormous number of German, Jewish, Turkish and other ethnic would-be emigrants from Warsaw pact countries, the systematic wasteful jamming of western broadcasts to the east, the recent cri de coeur from individuals in Hungary, Czechoslovakia, the German Democratic Republic and Poland on the 30th anniversary of the Hungarian revolution and the continuing Soviet occupation of Afghanistan. Nor must we forget those many individuals of differing creeds in the Soviet Union who are persecuted merely for seeking freedom of religious expression. Those are things the whole House will want to recollect. That is the reality of life behind the iron curtain.
Those are issues which Ministers and officials raise regularly with the Soviet and East European authorities in the CSCE framework and bilaterally. Recently my right hon. and learned Friend the Foreign Secretary raised our concern over Soviet human rights abuses when he met the Soviet Foreign Minister, Mr. Shevardnadze, in Vienna. The Vienna meeting offers the opportunity patiently to press the Soviet Union and other East European countries to act more humanely. Change, when it comes, will largely be internally generated. However, we can help that process by reminding those countries of the standards to which they subscribed at Helsinki, by continuing to press for improvement and by showing that our concern is wholly compatible with the contacts and dialogue we want to encourage between East and West.
The meeting starts with fair omens. At the preparatory meeting, which settled the arrangements and agenda, we and our partners and allies obtained some modest improvements on previous meetings. There will be a rather longer period for reviewing implementation of existing commitments. Since that review is at the heart of the meeting, we welcome it. Rather more sessions will be open to journalists and others. That too is welcome. Another good omen is the recent successful conclusion of the CDE Stockholm agreement on confidence and security building measures.
The Vienna meeting will start with a review of implementation, or stocktaking, which will last into the new year. I have said enough to show that we attach priority to this part of the proceedings, and want to see a
1192
full and thorough debate which does not gloss over the shortcomings of the Soviet Union and East European countries in human rights and contacts.
But the CSCE process ranges much more widely than human rights. It is a conference on security and cooperation in Europe. The Government's aim is to maintain a balance between all elements of the process. This means maintaining or restoring momentum in each of the three CSCE baskets. I will remind the House that basket I deals with basic principles, including human rights and security, basket II concentrates on economic co-operation, science and technology and the environment, and basket III concentrates on human contacts, information, culture and education.
We will aim at Vienna to reaffirm the West's longstanding view that these areas are linked, and that detente — for want of a better word — is indivisible and not susceptible to partial interpretation in terms of subject or geographical area. We will go on to stress that security cannot be divorced from the political, economic and human aspects of relations between states. Confidence and mutual trust cannot develop properly against a background of repression of human rights. When the conference goes on to consider new proposals for developing the CSCE process, our priorities will be in the areas where performance falls furthest behind commitments—military security, human rights and information.
Let me first deal with security. The Stockholm agreement is a major CSCE achievement. If implemented thoroughly — we will insist on that — it will be an important contribution towards greater openness about military activities in Europe. By establishing detailed provisions for on-site inspection, including on Soviet territory, the agreement breaks new ground. It shows that progress can be made in arms control negotations with the Soviet Union provided we are clear about our objectives.
The Stockholm agreement—the details of which will be familiar to the House — represents a significant achievement for the United Kingdom. Our delegation played a major role in the negotiation, particularly in the crucial discussions on verification. The excellent co-ordination with our partners and allies was an essential condition of success.
The task now is to build on this achievement. The Vienna meeting must help find ways to do this. We and our allies are currently considering the way forward in the NATO high level task force set up—at Franco-British initiative—by Foreign Ministers at Halifax in May. We intend that their final report in December will set the broad lines of the allied approach when discussion resumes at Vienna in the new year. There is clearly scope for further work on measures to increase confidence and stability. But we must also keep in mind our objective of working towards reductions leading to parity at lower levels of conventional forces in Europe. We hope, and will continue to insist, that the Stockholm agreement should now be matched by progress in the mutual and balanced force reductions talks at Vienna, where the major Western proposal—again initiated by Britain—of December last still requires a substantial response from the Warsaw pact.
In the vital "human dimension" of the CSCE process, Vienna must build on the discussions of those specialised meetings since Madrid which did not produce final documents. We will take the Western proposals tabled at the Ottawa human rights meeting, the Budapest cultural forum and the Berne experts meeting on human contacts

1193
as our starting point in considering new texts on which we might agree. We also see value in the possibility of an experts meeting on information after Vienna. This is an important aspect of the Final Act which has been rather neglected since Madrid. I can think of no better venue for such a meeting than London, with its tradition of vigorous and free journalism and broadcasting.
The CSCE is about people, and their values, it is about individuals. We are regularly asked to raise individual cases in CSCE meetings. My hon. Friend has mentioned several examples of these—and five proposals—of which I have taken careful note. I will ensure that his comments are passed to the head of the United Kingdom CSCE delegation, Mr. Laurence O'Keeffe. I assure my hon. Friend that we share the concerns expressed and take parliamentary and public views into account when considering which matters to raise.
1194
We do not always raise all the cases brought to our attention in plenary meetings. Sometimes we decide quite deliberately to raise such matters in private, bilateral sessions. There is, after all, a place for quiet, not megaphone, diplomacy.
For long-standing and well-understood reasons, we cannot commit ourselves to raising particular cases on specific occasions, but we recognise our obligation to the individuals concerned; and we will always be alive to opportunities to help them. We will ensure that the problems that their cases represent are fully and fairly addressed at Vienna.
The Government will maintain pressure at Vienna on the Soviet Union and East European countries to improve the lives of the people of Europe. This is an essential factor in maintaining public support for the CSCE process—a process which we believe lies at the very core of East-West relations.
Question put and agreed to.
Adjourned accordingly at two minutes to eleven o'clock.

ATTORNEY-GENERAL
  War Pensions (Appeals)
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  Parrot Corporation Ltd.
  Parrot Corporation Ltd.
PRIME MINISTER
  Civil Servants (Select Committees)
  Civil Servants (Select Committees)
  Southend Hospital
  Southend Hospital
  Stoneleigh, Kenilworth
  Stoneleigh, Kenilworth
  Libya
  Libya
  EC (Council Meetings)
  EC (Council Meetings)
  Falkland Islands
  Falkland Islands
  Prisoners of War
  Prisoners of War
  Official Functions
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TRANSPORT
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  Manchester (Bus Deregulation)
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NORTHERN IRELAND
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WALES
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EDUCATION AND SCIENCE
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  Teachers (Pensions)
  Religious Education
  Religious Education
ENVIRONMENT
  Departmental Expenditure
  Departmental Expenditure
  Rate Support Grant
  Rate Support Grant
  Bathroom Fittings industry
  Bathroom Fittings industry
  Council House Sales
  Council House Sales
  Basildon (Housing)
  Basildon (Housing)
  Sports Council
  Sports Council
  Rates
  Rates
  Family Expenditure
  Family Expenditure
  Bed and Breakfast Accommodation
  Bed and Breakfast Accommodation
  Tenants' Rights
  Tenants' Rights
  Pollution
  Pollution
  London Residuary Body
  London Residuary Body
  Houses (Multiple Occupation)
  Houses (Multiple Occupation)
  Thamesdown Borough Council
  Thamesdown Borough Council
  New Towns (Finance)
  New Towns (Finance)
  Grant-related Expenditure
  Grant-related Expenditure
  Council House Sales
  Council House Sales
THE ARTS
  Value Added Tax
  Value Added Tax
NATIONAL FINANCE
  Mortgage Interest Tax Relief
  Mortgage Interest Tax Relief
  Monetary Policy
  Monetary Policy
  The Economy (Management)
  The Economy (Management)
  Keith Report
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  Furnished Property (Landlords)
  Furnished Property (Landlords)
  Exchange Rates
  Exchange Rates
  Value Added Tax
  Value Added Tax
  Unemployment
  Unemployment
  Public and Private Investment
  Public and Private Investment
  Interest Rates
  Interest Rates
  Charities
  Charities
  Public Sector Pay
  Public Sector Pay
  Consumer Expenditure
  Consumer Expenditure
  Income Tax
  Income Tax
  Nurses (Tax Relief)
  Nurses (Tax Relief)
  Household Indebtedness
  Household Indebtedness
  European Monetary System
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  Wage Increases
  Wage Increases
  Share Ownership
  Share Ownership
  Building Societies Act 1986
  Building Societies Act 1986
  Civil Servants (Select Committees)
  Civil Servants (Select Committees)
  Sub-contractors' Tax Certificates
  Sub-contractors' Tax Certificates
  Works of Art (Taxation)
  Works of Art (Taxation)
  Medium-term financial strategy
  Medium-term financial strategy
  Christmas Parties (Taxation)
  Christmas Parties (Taxation)
  Public Expenditure
  Public Expenditure
  Inland Revenue
  Inland Revenue
  Systime plc
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  EC (Agricultural Expenditure)
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  EC (Finance Council)
  EC (Finance Council)
  Inflation
  Inflation
  Central Office of Information
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EMPLOYMENT
  Restart Scheme
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  Training Schemes
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  Labour Statistics
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  Disabled Persons
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  Job Losses
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  Action for Jobs (Advertising Campaign)
  Action for Jobs (Advertising Campaign)
HOME DEPARTMENT
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  Marches
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  Prisoners (Correspondence)
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  Magistrates' Courts
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  Leg Irons
  Leg Irons
  Little Ilford Estate, London
  Little Ilford Estate, London
  Royal Observer Corps
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  Crime Statistics
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  Irish Citizens
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  Charity Commission
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  Visas
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AGRICULTURE, FISHERIES AND FOOD
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ENERGY
  Nuclear Power
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  Sizewell
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FOREIGN AND COMMONWEALTH AFFAIRS
  Falkland Islands
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TRADE AND INDUSTRY
  Office of Fair Trading (Leaflets)
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  Liverpool (Ministerial Visit)
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  Systime plc
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  Integrated Development Operations
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  Post Office
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  Lawnmowers
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  Contracts for Differences
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  IBM UK
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  Cement Imports
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  Manufactured Goods
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  System X
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  Restrictions in the Professions
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  Balance of Payments
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  Chemical Exports (Iraq)
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SCOTLAND
  Torness Power Station
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  Nuclear Installations (Training)
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  Cervical Screening
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  Rates
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  Peterhead Prison
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  Under-age Drinking
  Under-age Drinking
  Duke Street Hospital, Glasgow
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  Local Government Finance
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  Assisted Places Scheme
  Assisted Places Scheme
  Education (Expenditure)
  Education (Expenditure)
  Job Creation, Dundee
  Job Creation, Dundee
  Social Work Services
  Social Work Services
  Dundee and Aberdeen Colleges of Education
  Dundee and Aberdeen Colleges of Education
  European Community College of Education
  European Community College of Education
  Mental Health (Code of Conduct)
  Mental Health (Code of Conduct)
  Workers Educational Association
  Workers Educational Association
  Mental Patients
  Mental Patients
  Carlops and Broughton Bypass
  Carlops and Broughton Bypass
  Musselburgh Bypass
  Musselburgh Bypass
  Glasgow Airport
  Glasgow Airport
  Health Expenditure (Tayside)
  Health Expenditure (Tayside)
  Education (COSLA Talks)
  Education (COSLA Talks)
  Teachers (Dispute)
  Teachers (Dispute)
  Roads
  Roads
  School Transport
  School Transport
  Schools Curriculum
  Schools Curriculum
  Teachers (Right to Strike)
  Teachers (Right to Strike)
  Teachers (Pay)
  Teachers (Pay)
DEFENCE
  Naval Quarters, Yeovil
  Naval Quarters, Yeovil
  Fulbeck (Police Costs)
  Fulbeck (Police Costs)
  Nuclear Missiles
  Nuclear Missiles
  Service Houses
  Service Houses
  Yantlet Range (Noise)
  Yantlet Range (Noise)
  Plutonium Shipments
  Plutonium Shipments
  Portsmouth (Dredging)
  Portsmouth (Dredging)
  Falklands Garrison
  Falklands Garrison
  Nuclear Reporting Cells (Royal Observer Corps)
  Nuclear Reporting Cells (Royal Observer Corps)
  Equestrian Events
  Equestrian Events
  US Submarines
  US Submarines
SOCIAL SERVICES
  Christmas Bonus
  Christmas Bonus
  AIDS
  AIDS
  Cervical Cancer
  Cervical Cancer
  Psychiatric Beds
  Psychiatric Beds
  Hypothermia
  Hypothermia
  Personal Incomes
  Personal Incomes
  Nurses
  Nurses
  NHS (Treatment Criteria)
  NHS (Treatment Criteria)
  Benefits and Allowances
  Benefits and Allowances
  NHS (Staffing)
  NHS (Staffing)
  Pensions
  Pensions
  Restart Scheme
  Restart Scheme
  Departmental Staff
  Departmental Staff
  Vaccine Damage Payments
  Vaccine Damage Payments
  Whooping Cough
  Whooping Cough
  Black Report
  Black Report
  Kidney Patients
  Kidney Patients
  Mr. J. A. Sandeman Allen
  Mr. J. A. Sandeman Allen
  Children (Homelessness)
  Children (Homelessness)
  NHS (Costs)
  NHS (Costs)
  Great Ormond Street Hospital
  Great Ormond Street Hospital
  Paediatric Nurses
  Paediatric Nurses
  London Ambulance Service
  London Ambulance Service
  Mental Illness (Newham)
  Mental Illness (Newham)
  Speech Therapists
  Speech Therapists
  Dental Charges
  Dental Charges
  Leaflet NI 247 (Court Judgment)
  Leaflet NI 247 (Court Judgment)
  Lorazepam
  Lorazepam
  Cash Limits
  Cash Limits
  Statutory Sick Pay
  Statutory Sick Pay
  National Insurance Contributions
  National Insurance Contributions
  Manchester
  Manchester
  Unemployed Persons (Benefits)
  Unemployed Persons (Benefits)
  Mortgage Assistance
  Mortgage Assistance
  Hospital Beds (Thames Region)
  Hospital Beds (Thames Region)
  Hospital Waiting Lists
  Hospital Waiting Lists
  NHS Expenditure
  NHS Expenditure
  Geriatric Care
  Geriatric Care
  Abortions and Sterilisations
  Abortions and Sterilisations
  Health Services (Expenditure)
  Health Services (Expenditure)

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

Ruskin College, Oxford: Funding
Lord Boyd-Carpenter: 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 is the annual cost to public funds of Ruskin College, Oxford.
Baroness Hooper: My Lords, a total of £674,100 has been allocated to the college for capital and recurrent expenditure during the 1986–87 academic year. Costs of £365.000 are likely to be incurred on adult education state awards for students studying at Ruskin during the same period.
Lord Boyd-Carpenter: My Lords, while I thank my noble friend for that Answer, may I ask whether she can add to it by indicating whether the Government are satisfied that this is a proper expenditure in the light of recent revelations about the denial of academic freedom in this institution?
Baroness Hooper: My Lords, the facts surrounding the issue are in dispute, and my honourable friend the Under-Secretary of State has sought further clarification of some aspects of the matter. He met representatives of the college on Monday and has also offered Mr. Selbourne the opportunity, to comment on these issues.
Lord McIntosh of Haringey: My Lords, it may be helpful to your Lordships' House to know that we are talking about Mr. David Selbourne. Can the noble Baroness confirm that the contract of employment for academic staff at Ruskin College, in contrast to many other academic institutions, guarantees the freedom of expression of points of view by academic staff? Is it not the case that the college has imposed no disciplinary action of any kind on Mr. Selbourne? Is it not also the case that any attempt at collective action by students to boycott Mr. Selbourne's lectures has been opposed forcefully by the college authorities? In those circumstances, does the noble Baroness consider that there is any strength at all in the case made by the noble Lord, Lord Boyd-Carpenter?
Baroness Hooper: My Lords, the Government are always disturbed by any allegations of interference in academic freedom or in freedom of speech. We are committed to supporting freedom of speech, whether for invited speakers or the academic staff who are going about their proper business. However, I understand that Mr. Selbourne has instructed his solicitors to undertake legal proceedings against
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Ruskin College. In that case, I do not wish to comment on detailed aspects of the situation, since to do so could be prejudicial to the outcome of any court action.
Lord Beloff: My Lords, is my noble friend aware that despite what the noble Lord, Lord McIntosh, said, public pronouncements have been made by members of the staff of Ruskin College that trade union solidarity and trade union principles must rank as more important than other aspects of freedom? If that turns out to be the case, is it not proper that the trade union movement, rather than the public purse, should support this no doubt very valuable and important institution?
Baroness Hooper: My Lords, we are of course aware of the public comment that has been made. We recognise that while the college clearly has strong links with the trade union movement, its aim is to provide courses for liberal adult education which are open to all applicants, and primarily for people from economically and socially disadvantaged areas. That is why the Government have supported the college.
Lord Mulley: My Lords, in considering the amount of public money devoted to this college, rather than take an isolated incident should not the noble Baroness and her colleagues reflect on the distinguished history of the college in giving higher education opportunities to many who would not otherwise have had it? The college has produced many distinguished leaders of the nation, including former Members of this noble House.
Baroness Hooper: My Lords, successive governments have recognised that the provision of long-term residential education for adults by such colleges as Ruskin College is a valid and valuable contribution to the range of educational opportunities available for adults in the United Kingdom.
Lord Boyd-Carpenter: My Lords, can my noble friend say whether, particularly in the light of the last supplementary question, any expression of regret for the recent incident has been made by the principal or by the college?
Baroness Hooper: My Lords, I understand that the meeting with my honourable friend the Under-Secretary of State on Monday constituted a full and frank discussion, but I am not at present able to inform the House of the details.
Lord Taylor of Gryfe: My Lords, may I ask the Minister whether the present difficulty will prejudice the Government's support for this distinguished college which has contributed so much, particularly in the important field of industrial relations, to preparing people for responsibilities in that field?
Baroness Hooper: My Lords, as I have said, the situation is rather difficult, particularly as we understand that legal proceedings might be about to commence. Perhaps the less said at this stage which might prejudice the outcome of those proceedings, the better.

South Africa: EC Sanctions
3.12 p.m.
Lord Molloy: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
[he Question was as follows:
To ask Her Majesty's Government when the limited sanctions against South Africa agreed by the European Economic Community in September will be fully implemented.
The Minister of State, Foreign and Commonwealth Office (Baroness Young): My Lords, we have fully implemented the package of restrictive measures adopted by the Twelve on 15th and 16th September.
Lord Molloy: My Lords, is the noble Baroness aware that that is a most welcome reply she has been able to give? Is she further aware that this will now encourage the United States of America, which is profoundly opposed to apartheid and indeed at one time was more determined than the British Government to see apartheid opposed? Will the economic sanctions that are now to be imposed also be increased so that we can show our solidarity both with the United States of America and with the victims of apartheid?
Baroness Young: My Lords, the Question relates to the measures agreed by the European Economic Community. The question of measures taken by the United States is, I think, outside the terms of the Question.
Lord Elwyn-Jones: My Lords, will these sanctions be phased in or will they be brought in at once and, as far as practicable, together? Have any preparatory steps already been taken by the Government in this regard?
Baroness Young: Yes, my Lords. We have implemented them and, as I am sure the noble and learned Lord will be aware from the Written Answers given to Questions in this House on 30th October, we have indicated our view and what has happened on new investment and on tourism.
Lord Paget of Northampton: My Lords, can the noble Baroness assure us that these sanctions will not in any sense be applicable to Namibia, which has taken rather splendid steps to bring apartheid to an end?
Baroness Young: My Lords, the measures apply to South Africa.
Lord Gridley: My Lords, perhaps I may ask my noble friend the Minister whether she or any member of the Government saw the broadcast on Channel Four television last night (which I understand was not connected with the BBC) in which there appeared to be hopeful signs that various communities in that part of the world were coming together. For instance, I believe that the ANC were there to hear the opinions expressed and they felt that in order to avoid having excessive sanctions, or sanctions of any type, applied
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to them they should now try to work out something wherein whites, Africans and even the ANC are present to hear what has been decided.
Baroness Young: My Lords, the point that my noble friend raised is wide of the Question, but I can say to him, as I have said on many occasions, that as a Government we wish to see an end to the system of apartheid.
Lord Hatch of Lusby: My Lords, can the noble Baroness inform the House of the Government's strategy so far as concerns the advocation of sanctions? Is the objective to express disapproval of apartheid—which has been done in words many times—or is it to reduce the power of the South African state to oppress its own citizens? If the latter is the case, would it be advisable for Her Majesty's Government to follow the lead of the American Congress and greatly strengthen the sanctions that are to be imposed?
Baroness Young: My Lords, at Brussels the Twelve decided to send a further signal to the South African Government indicating the need to change. The impact of the measures is not only economic: it is also a political signal.
Lord Monson: My Lords, can the noble Baroness say what good will actually be achieved by these sanctions? They will kick the increasingly prosperous black middle-class off the ladder which they are rapidly climbing at the moment, particularly in the hotel industry, and will force talented whites to emigrate. They also happen to be a good deal more anti-apartheid than the less talented whites who will remain.
Baroness Young: My Lords, I think the answer that I gave to the noble Lord, Lord Hatch, indicates the purpose of the measures that we have agreed to take in conjunction with our Community partners.
Lord Orr-Ewing: My Lords, can my noble friend say where one could obtain a list of the results of past sanctions and these sanctions to see whether they are being effective and are producing some results? For instance, in this country we read nothing about the degree of mixed sports which now take place on a very wide basis. We read nothing of the way in which some action has already been taken to lessen the severity of the well-despised and disliked methods of apartheid. We read nothing about any changes. Is there any way by which we can measure what is happening as a result of the actions taken by the EC and ourselves?
Baroness Young: My Lords, the particular point raised by my noble friend is of course wide of the Question. If he would like to put down a Question on that subject. I shall try to answer it. We have welcomed the steps that the South African Government have taken toward ending some aspects of apartheid, but we believe that they have been too few and too slow.
Lord Molloy: My Lords, is the noble Baroness aware that even these limited sanctions in a way are

1183
supportive of the very brave speeches made by the Foreign Secretary when he was in South Africa? Not only was he appallingly snubbed then, but it is now clear that the recent changes in Mr. Botha's Government include people who helped to create apartheid. There is very little chance that they will voluntarily try to dismantle it, and the only hope for South Africa—and indeed it could be said for all mankind—is that black people all over the world will unite and that something will be done. We are on the right road with sanctions and I hope that we shall not be diverted from it.
Baroness Young: My Lords, I do not think that the noble Lord actually asked a question.
Lord Gisborough: My Lords, would my friend agree that the South Africans are fed up—
Lord Molloy: My Lords. we should not be diverted—
Noble Lords: Order, order!
Lord Molloy: My Lords. I asked a question in reference to the British Foreign Secretary. I asked whether the Minister was aware of the courageous statement of the British Foreign Secretary. She may not think that it was a courageous statement, and she is allowed to remain silent if she thinks fit.
Baroness Young: My Lords, the answer to that question is yes.
Lord Gisborough: My Lords, does my noble friend agree that the South Africans are fed up with trying to break down apartheid in small ways and never getting any credit, and that if they were given credit when they did make progress they would be more inclined politically to go still further?
Baroness Young: My Lords, I hope my noble friend Lord Gisborough appreciates that in fact I indicated that the South African Government had taken a number of steps to break down apartheid. We wish that they would move faster and do more.

Commonwealth Games: Financial Loss
3.18 p.m.
Lord Mackie of Benshie: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they accept any responsibility for the events contributing to the large financial loss incurred by the Commonwealth Games.
The Earl of Dundee: My Lords, the Government have at no stage accepted responsibility for the finances of mounting the Thirteenth Commonwealth Games and do not do so now.
Lord Mackie of Benshie: My Lords, I congratulate the Minister on the admirable way in which he gave that appalling Answer. May I say, in the light of the previous Question, that the antics which have been seen all around in trying to pay off this debt are quite extraordinary and most undignified? There was the appeal to a Japanese philanthropist and all sorts of other manoeuvres. However, everyone appreciates—I am coming to it!—does the Minister realise that it is quite obvious to the ordinary citizen that the failure of the Government and the Prime Minister to convince our Commonwealth partners that we dislike apartheid was the main reason for the departure from the games of so many countries which did such enormous harm? Surely the Government must accept responsibility for that. Does he agree that they should pay at least a part of the debt?
The Earl of Dundee: My Lords. first I should like to thank the noble Lord for his kind remarks. But I do not think that I agree with what he says. The organisers were aware that political boycotts were one of the risks they had to face. The Government did everything in their power to prevent the boycott of the games from spreading. Her Majesty's Government are not responsible for the consequences to third parties of the actions of overseas governments who seek to change the will of Her Majesty's Government by boycotting international events. The overseas governments concerned are responsible for their own actions.
Lord Taylor of Gryfe: My Lords, is the Minister aware that there is considerable resentment in Scotland over the fact that the Government are doing nothing in this case, although they agreed to underwrite Birmingham's bid for the Olympic Games?
The Earl of Dundee: My Lords, had Edinburgh been bidding for the Olympic Games and Birmingham for the Commonwealth Games, government policy towards both events would have been the same. Both the Commonwealth Games Company and the organisers of the Birmingham bid understood that funds from central government were not available. Neither was offered support for an operating deficit or help with capital expenditure. A so-called Doomsday guarantee was given to Birmingham to cover any loss in excess of £100 million caused by the last minute cancellation of the games for reasons beyond the organisers' control. That was a requirement of the Olympic Committee to cover the possibility of cancellation. A similar guarantee was not required for the Commonwealth Games.
Lord Carmichael of Kelvingrove: My Lords, I also congratulate the noble Earl on his first appearance at the Dispatch Box and on the way he has so quickly fallen into the negative attitude of the replies that we normally receive. Surely the Government's lukewarm attitude towards sanctions and apartheid, as seen by many Commonwealth countries, affected support for the games. He spoke about Doomsday support for Birmingham, had the games been affected by some outside force. Surely what happened over the Commonwealth Games was not caused by an outside force. It was a direct result of the Government's

1185
attitude and the feeling of African and coloured countries about the working of sanctions and apartheid. Has the Minister made any summation about the shortfall of money required to pay those involved—the local authorities and the many small traders, as well as the large? Would it not be a good gesture for the Government to clear the debt once and for all?
The Earl of Dundee: My Lords, the aim of the proposed settlement by the Commonwealth Games Company is, as I understand it, that all small creditors will be paid 100p in the pound. Major creditors are being asked to make substantial donations to help organisers bridge their deficit, towards which a charitable donation of £2 million is already available from the Japanese philanthropist. Mr. Sasakawa, who has provided £1.3 million, and Mr. Robert Maxwell, the company chairman, who has given £700,000. I am sure that your Lordships will join me in paying tribute to those who have contributed to the costs of mounting the games, including those who donated to the earlier public appeal which raised £l.5 million.
Lord Underhill: My Lords, do the Government appreciate that the public were delighted that the games proceeded? They were a good sporting spectacle. Will it not be harmful to the general atmosphere of the Commonwealth if the Government do not give some assistance?
The Earl of Dundee: My Lords, the Government's position has been clear from the start. No government guarantees or contributions were to be available. Creditors should therefore address themselves to the games organisers, who fully understood the position and who knew that they would have to mount the games within the resources they could raise. I am sure that noble Lords will share my confidence that the Government's policy will be vindicated by events.
Lord Paget of Northampton: My Lords, is it Her Majesty's Government's intention to continue payments of aid to countries which flagrantly repudiate their contracts here?
The Earl of Dundee: My Lords, I think that that is slightly outside the Question.
Lord Rodney: My Lords, is my noble friend aware that the so-called Japanese philanthropist is a close friend and colleague of the Reverend Moon, who is head of the Moonies?
The Earl of Dundee: My Lords, that is perhaps also outside the Question.
Lord Underhill: My Lords, did the Minister say that the Government's policy would be vindicated by events? If so, to what was he referring? Was he referring to the financial loss on the games, or what? It is the loss on the games and this country's attitude about which we are concerned.
The Earl of Dundee: My Lords, the signs are that satisfactory arrangements are being made between the games company and the creditors.
Lord Mackie of Benshie: My Lords, would the noble Earl not feel happier if the Government had contributed even a little?
The Earl of Dundee: My Lords, if the Government had contributed only a little, that would still have been inconsistent with the premise and the starting point.

County Hall, London: Use
3.26 p.m.
Lord Airedale: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will ensure that consideration is given to devoting to the arts some of the large rooms in County Hall, situated as it is close to the Royal Festival Hall and the rest of the South Bank arts complex.
The Parliamentary Under-Secretary of State, Department of the Environment (Lord Skelmersdale): My Lords, this is at present a matter for the London Residuary Body, in whom County Hall is vested. The London Residuary Body is now marketing County Hall. The future use of any of the rooms will be for the new owners of the building to determine. subject to the granting of appropriate planning and listed building consents.
Lord Airedale: My Lords, I am obliged for that Answer, but is the Minister saying that the fate of that magnificent building on that splendid site in the heart of the capital city is not a matter of national interest and concern, and therefore of concern to the Government on behalf of the people?
Lord Skelmersdale: My Lords, the fact that there is national interest in this subject was given point to, first, by the noble Lord's Question, and, secondly, by a Question of my noble friend Lord Boyd-Carpenter the other day. It is government policy, which was clearly stated during consideration of the abolition Bill, that all the assets and debts of the metropolitan counties, including Greater London, would go to the various residuary bodies, and that it would be for the various residuary bodies to determine what to do with them.
Lord Strabolgi: My Lords, who is to give planning consent? Is it Lambeth Council?
Lord Skelmersdale: My Lords, yes.
Baroness Phillips: My Lords, will the Minister explain what he meant by "marketing"? Did he mean selling? Why cannot he say that?
Lord Skelmersdale: My Lords, I thought that was a perfectly normal English word. Yes. I do mean selling.
Baroness Birk: My Lords, is it not true that the building will not be vacated and can be used until March 1988? Would it not make economic and artistic sense for those rooms to be used during the interregnum as concert rehearsals rooms, of which the South Bank is short: or for the National Theatre; or for the exhibitions that the GLC promoted, which London misses, as it does its tremendous support for the arts? Will the Minister tell us what can be done in the interregnum?
Lord Skelmersdale: My Lords, as I hoped I had made clear in my original answer, what happens in the interim is a matter for the residuary body. If the South Bank Board or anyone else is interested in obtaining rehearsal or any other facilities in County Hall, they should express their interest to the London Residuary Body, in whom County Hall is now vested.
Lord Dean of Beswick: My Lords, is the Minister not aware that some chairmen of residuary bodies in other parts of the country, where districts wish to purchase or take over public assets left by the counties, are acting like little dictators? Was that also the intention of the Act?
Lord Skelmersdale: My Lords, I was not aware of that slur on chairmen of residuary bodies in other parts of the country. If the noble Lord can substantiate what he says. I shall look into the matter.
Lord Dean of Beswick: My Lords, I shall certainly do so with regard to Wakefield and what was West Yorkshire's County Hall.

Business
Lord Denham: My Lords, at a convenient moment after 3.30 p.m. this afternoon my noble friend Lord Trefgarne will, with the leave of the House, repeat a Statement that is being made in another place on the Autumn Statement.

Channel Tunnel Bill
Viscount Davidson: My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That, if a Channel Tunnel Bill shall be brought from the House of Commons in the next Session, any notices published and served and any deposits made in respect of a Channel Tunnel Bill in the Session 1985–86 shall be held to have been published, served and made for the Bill in the next Session.—(Viscount Davidson.)
On Question, Motion agreed to, and it was ordered that a Message be sent to the Commons to acquaint them therewith.

European Court: Nationalisation Judgment
3.31 p.m.
Lord Harris of High Cross Lord Harris of High Cross rose to ask Her Majesty's Government whether they accept that the findings of
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the European Court of Human Rights on the terms of compensation under the Aircraft and Shipbuilding Industries Act 1977 (c.3) provide a precedent for the expropriation, nationalisation, or renationalisation of British-owned assets at home or abroad, and are contrary to the principle of prompt, adequate and effective compensation which British governments have previously supported as a rule of law.
The noble Lord said: My Lords, this Question was framed with the assistance of my noble friend Lord Shawcross, who has sent me a communication, since he is unable to be with us, that he has authorised me to read to the House. It goes to the heart of the Question. My noble friend says:
"The problem created by the Strasbourg judgment was discussed at a recent meeting in Copenhagen of the International Association for the Promotion and Protection of Private Foreign Investments, APPI.
"I should explain that this organisation was founded in the 1950s by Herr Hermann Abs, the famous German industralist and banker, Monsieur René Massigli, the French ambassador, and Sir Hartley Shawcross, as he then was, for the purpose precisely indicated by its title. It was set up because of the number of nationalisations and expropriations taking place in various foreign countries and to support what its members considered the established rule of international law about the payment of adequate, effective and prompt compensation.
"The council of APPI expressed concern at its meeting that the majority judgment of the European Court would give foreign countries some justification for expropriating property without the payment of proper compensation. It felt that the matter was one on which representations should be made to the Government as the danger of confiscatory cases of nationalisation remains a real one in many parts of the world.".
In raising this Question, I feel that I should start by setting out some of the facts as briefly as the complexity of the situation allows. It started in 1974 with the election of a Labour Government—a minority Labour Government—committed to nationalising the aircraft and shipbuilding industries. Over a year later, in March 1975, Mr. Wedgwood Benn announced that the compensation would be based on the value of 43 companies in the six months' reference period preceding the election; that is to say, from September 1973 to February 1974. Values would be based on Stock Exchange prices for the one quoted company and on agreement or arbitration for the remainder which were either unquoted private companies or subsidiaries of public companies.
In March 1977, after delay s to which I shall return, the Aircraft and Shipbuilding Industries Bill received Royal Assent. In April 1977, the aerospace companies were vested in the state, followed by the shipbuilding companies in July. Negotiation over compensation was thereafter conducted between the Department of Industry and representatives of stockholders with an arbitration tribunal in reserve. In May 1979, it may be recalled, a Conservative Government were returned to power. Sir Keith Joseph became the Secretary of State responsible for continuing the negotiations with the outstanding companies which accounted for by far the greater part of the assets.
Between September 1977 and June 1981 a number of plaintiffs petitioned the Commission of Human Rights in Strasbourg for a declaration that the proposed compensation terms violated a number of articles of the European Convention for the Protection of Human Rights and Fundamental Freedoms. In

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January 1983, the commission declared most of the applications to be admissable, thereby completely rejecting Her Majesty's Government's argument that the case depended entirely upon the 1977 Act and was therefore out of time. The commission invited the petitioners and the Government to seek to resolve their differences by the established procedure known as a friendly settlement. Alas, it takes two to make friends, and the Government declined to play their part.
Accordingly in March 1984, over a year later, the case returned to the commission, which, by a majority vote, expressed the opinion that there had been no breach of the convention but that such important issues were raised that it should be referred to the European Court for a final judgment. Then in 1985 the case was heard against Her Majesty's Government, who conducted a vigorous defence and even asked the court specifically to declare that the compensation met the international law standard in that it was "prompt, adequate and effective".
Finally, on 8th July this year, the court found by a majority decision against the plaintiffs on the six alleged breaches of the convention. However, on the central issue of Article 1. Protocol 1, which entrenches the general right of every person "to the peaceful enjoyment of his possessions", five out of 18 judges found that a violation of the convention had taken place. They criticised the compensation provisions of the Act because of the remoteness of the reference period, and they criticised the way that the Secretary of State had applied those terms five and more years later to produce what they called "unreasonable and disproportionate distortion" in the payments made to at least three applicants: namely, Kincaid, Vosper Thornycroft and Brooke Marine, all of which were paid compensation less than the value of the cash in their accounts.
Due to the untiring efforts of Sir William lithgow, a major shareholder, the most famous case is that of Kincaid, a successful manufacturer of diesel engines. Sir William claims that assets valued at £18 million in 1977 including £5 million in ready cash were seized in exchange for compensation of a paltry £3.8 million. Other less publicised examples included Vospers which received £5.3 million for assets valued at £37 million including £5.5 million in cash. There was Yarrows, the naval shipbuilding firm, who were paid £6 million for assets valued at £16 million, later sold to GEC for £34 million. For the outstandingly successful British Aircraft Corporation, Vickers and English Electric claimed £350 million compensation and were awarded £95 million.
It is only since the July judgment this year that it has been revealed that Her Majesty's Government achieved this pyrrhic legal victory by relying entirely on the papers prepared by Mr. Wedgwood Benn and by trying to persuade stockholders' representatives to take less than the Government's advisers suggested as a fair minimum. I need not remind some noble Lords that back in 1976 when the Bill to nationalise these industries was before the House, leading Conservative and Cross-Bench Peers vied with one another in denouncing the provisions for compensation in such
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choice terms as derisory, disastrous, a disgrace, unfair, confiscation and expropriation. However, I wish to be fair in the matter to the Labour Party and to the noble Lord, Lord Bruce. w ho is to take part later in the debate. The Labour Party was far from being wholly to blame for this unfair final outcome. Nationalisation is, after all, a legitimate if not entirely sensible course that governments may pursue. It does not necessarily involve the punishment of the shareholders.
Likewise, the court and others have accepted in principle that the choice of a "reference period" before Stock Exchange prices were affected by the threat of nationalisation is a tolerable starting point. Again, the Labour Party can hardly be blamed that spirited opposition, both in the Commons and in this House, over the important matter of hybridity as well as over the issue of compensation, led to a long delay from the first introduction of the Bill in April 1975 until March 1977 when it passed through the Lords only under the provisions of the Parliament Act. Nor I think was the Labour Party to be held responsible for Mr. Heath's three-day week and control over dividends, which inevitably depressed the value of productive assets in the reference period. However. if the Labour Party was not responsible for the explosion of the oil price, it must accept some blame for the accelerating inflation to record levels which debased the value of the 1974 compensation pound to 55p by 1977 and to 40p by 1980 when much of the compensation was still outstanding.
It was as a result of these developments that most companies were plainly worth a great deal more in money as well as in real terms in 1977 than any necessarily arbitrary estimate relating to a vanished world of 1973 prices and values. Obviously, a Conservative Government had good cause to reconsider the outcome of blindly applying the 1973–74 formula. Indeed, at the very centre of the European Court's divided verdict was the unanimous judgment that a sovereign government enjoy a wide margin of discretion in assessing compensation.
Thus, on page 44 of the judgment we read:
"The Court's power of review … is limited to ascertaining whether the decisions regarding compensation fell outside the United Kingdom's wide margin of appreciation; it will respect the legislature's judgment in this connection unless that judgment was manifestly without reasonable foundation".
Thus the difference between the majority and minority verdicts on this central issue might be simply expressed by saying that 13 judges thought that the compensation was at least above the lower limit of discretion, while five judges thought that it was below that minimum. The paradox which we have to raise is that Sir Keith Joseph, as Secretary of State, on 7th August 1980, in a Written Answer in the House of Commons, seemed to have conceded the minority view against his own decision. In the Official Report in another place, at col. 290, Sir Keith wrote:
"We recognise that some previous owners and many members of this House and of the public believe that the terms of compensation imposed by the 1977 Act were grossly unfair to some of the companies and we share this view".
However, he went on to regret that,
"amending legislation to establish new compensation terms retrospectively would be unjust to the many people who sold shares on the basis of the previous terms".
From long personal acquaintance with and great affection for Sir Keith Joseph, I have sadly come to the conclusion that his quite exceptional integrity led him here into a double error. His first error was in thinking that retrospective legislation would then have been necessary when, as the European Court unanimously agreed, he enjoyed a wide discretion in applying the 1973–74 formula. The second misconception, which is plain to almost any observer who will contemplate the matter, was pointed out by Sir Nicholas Goodison as chairman of the Stock Exchange. He explained in September 1980 that all dealings in shares can take place only on the basis of information and expectations available at the time and can never be invalidated or challenged in the light of subsequent events. Incidentally, on retrospection the Employment Act 1982 showed how compensation could be made available to remedy past injustices.
It must be remembered that the majority of the European Court did not say that the terms were fair but only that they were above the lowest conceivable margin of the wide discretion available to Sir Keith. For obvious reasons an international court will be reluctant to appear to direct an elected government on how they should exercise an acknowledged element of discretion. Even so, five of the 18 judges explicitly condemned Her Majesty's Government for failing to give their subjects the protection of their property guaranteed by the European Convention.
In the final reckoning, therefore, I am arguing that it is not the Labour Party as instigators, but the Conservative Government as implementors, who are principally guilty of invading the property rights of Sir William Lithgow and others. Whatever the legal quibbles offered to deflect responsibility from Her Majesty's Government I would, as a layman, take my stand with the distinguished Supreme Court Judge, Sir Robert Megarry, who on another occasion declared:
"The Crown is the traditional fountain of justice, and justice is not confined to what is enforceable in the courts.".
As must already be apparent, my interest in this issue is that of neither a lawyer nor a politician but as a citizen and only after that as an economist. As a citizen I have an urgent concern shared by all others—including, I suppose, the Duke of Westminster—that such possessions as I may build up or legally acquire shall not be forcibly taken from me by another (not even by the Government) on arbitrary terms that would widely be judged unjust. Where others may not share my objections to the court's view—for example, on leasehold enfranchisement—I venture to say that most impartial observers who grasped the essential facts of this case would conclude that Sir William Lithgow and others have been unjustly treated. They have been cheated of a large part of the value of their possessions.
Yet security of private property is the bastion of individual freedom, which chiefly distinguishes our Western societies from the slave states of Eastern Europe. Our superior economic and social progress depends on harnessing the energies, thrift and enterprise of free people, to maximise long-term future social output. Governments may tax, they may regulate, they may even nationalise, but civilised governments may not pillage and should not do so
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even in their own interests. If their exactions undermine every man's expectation of continuing to enjoy sufficient of the fruits of his own efforts, then short-sighted politicians will have struck at the roots of long-run economic and social progress.
I would argue that both principle and expediency point to the need for secure entrenchment of property rights. As an economist, I would briefly assert that the reason Hong Kong flourishes and is free, while much of Africa languishes and is in chains, is that Hong Kong guarantees the sanctity of property even including the property each has in his own person, whereas many African governments notably fail to provide security of person or property.
Her Majesty's Government have been congratulated that the Hong Kong treaty commits China, after 1997, to the principle of paying "the real value of the property" as compensation in similar circumstances to those before Strasbourg. Yet, I ask this question: Is it realistic to expect a Communist power to honour property rights which the British Foreign Office, in this case, before the Commission, in camera, explicitly said did not exist in Britain? My question is whether Her Majesty's Government accept that, even by inadvertence, or through the misplaced political scruples of Sir Keith Joseph, they have set a thoroughly bad example at home and abroad for the further undermining of property rights on which the liberties and future prosperity of every one of us chiefly depend.
Lord Bruce of Donington: My Lords, before the noble Lord sits down, in order to clarify a point and to save time, will the noble Lord say whether or not he accepts the earnings basis as being a valid way of determining the true valuation of a concern and of the shares in it?
Lord Harris of High Cross: My Lords, I would not wish to get involved in a long argument on matters of accountancy with the noble lord. However, as I understand it, in the absence of a Stock Exchange quotation, which applied to only one of the 43 companies, an attempt was made to create hypothetically a Stock Exchange valuation on the basis of the assets in 1973–74. When we look at the progress of many of these companies after 1974, until 1977, the whole issue is that where a share price might at least be enlarged for those companies that had the prospect of good future earnings, the cash assessment of the asset value at the time of 1973–74 might miss out that factor. The British Aircraft Corporation was a highly successful, expanding and growing company and to value it on an asset basis would not take into account the prospective earnings in future years, as a share valuation would have done.

Autumn Financial Statement
3.50 p.m.
The Minister of State for Defence Procurement (Lord Trefgarne): My Lords, with your Lordships' permission. I should like to repeat a Statement being made in another place by my right honourable friend

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the Chancellor of the Exchequer. The Statement reads as follows:
"Cabinet today agreed the Government's public expenditure plans for the next three years. In the normal course of events that would be followed by the publication of the printed Autumn Statement, accompanied by an oral Statement to the House, next Tuesday. For obvious reasons that is not possible this year. So while the Autumn Statement will be printed in the normal way and presented to Parliament as soon as the House reassembles next Wednesday. I thought it would be for the convenience of the House if I made my oral Statement today.
"This will cover all three of the key elements in the printed Statement: the Government's outline public expenditure plans for each of the next three years and the expected outturn for this year; proposals for next year's national insurance contributions; and the forecast of the economic prospects for 1987 required by the Industry Act 1975.
"The full text of the economic forecast, together with the public expenditure figures and the rest of the information customarily published with this Statement, will be available from the Vote Office as soon as I have sat down. They will also appear in the printed Autumn Statement to be published next week.
"I turn first to the outturn for the current financial year, 1986–87. The public expenditure planning total now looks likely to amount to almost £140½ billion—£1¼ billion, or a little less than 1 per cent. above what was allowed for in this year's Public Expenditure White Paper. The main reason for this excess is a 9 per cent. rise in the current spending of local authorities—far more than was provided for. However, other items on the expenditure side, the largest of which is debt interest, are likely to fall short of what was forecast at the time of the Budget, thus reducing the total overrun on the expenditure side to about £½ billion.
"On the receipt side, the North Sea tax take is likely to be even lower, by about £1 billion, than I envisaged at the time of the Budget, largely because for a long period the oil price has been below the 15 dollars a barrel level on which the Budget arithmetic was explicitly based. This shortfall, however, is more than offset by the continuing buoyancy of non-oil tax revenues, in particular VAT and corporation tax. Non-oil revenues now look likely to exceed the Budget forecast by £2 billion. This would imply a net overrun on the receipts side of about £1 billion, rather more than that on the expenditure side. But this will be reduced by a change I propose to make to the North Sea fiscal regime. The collapse of the oil price has led to a sharp cutback in investment activity in the North Sea, with inevitable consequences for the UK offshore supplies industry both in Scotland and the North East of England.
"I therefore propose, on a carefully targeted basis, to accelerate the arrangements for the repayment to the oil companies of advance petroleum revenue tax
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due to them. The details of this change, which will require legislation early in the new Session of Parliament, are set out in a press notice which the Inland Revenue will be issuing as soon as I have sat down. The new arrangements will have a revenue cost this financial year of some £300 million, which will be fully, recouped over the next three years. Taking this into account, the public sector borrowing requirement for the current year is still forecast to be about £7 billion, the figure I set in the Budget.
"I turn now to the public expenditure plans for the next three years. Since 1982–83, public spending, both before and after deducting the proceeds of privatisation, has been declining as a proportion of national output. It is set to be lower still this year. The Government are determined to ensure that this trend continues: to see to it that total public spending, even without taking account of privatisation proceeds, continues to decline as a percentage of GDP. The plans I am about to announce for the next three years secure that objective. Indeed, they show that by the end of the period the ratio of public spending to national output will be back to the level of the early seventies.
"But within this overall constraint, and in the context of its policy priorities, the Government have felt it right to allow an increase in the previously announced planning totals for 1987–88 and 1988–89. Compared with the prospective outturn for the current year, we are now planning for an average growth in the public expenditure planning total of about 1¼ per cent. a year in real terms, well within the prospective growth of the economy as a whole.
"The new planning totals have thus been set at £148¼ billion for 1987–88 and £154¼ billion in 1988–89, an increase of £4¾ billion and £5½ billion respectively over the totals previously published. For 1989–90 the planning total has been set at £161½ billion.
"As usual, these totals incorporate estimates for the proceeds of privatisation. Last year I increased the estimate of these proceeds very substantially to £4¾ billion in each of the three survey years, a figure which I expect to be duly achieved this year. Although the privatisation programme is now moving ahead more strongly than ever before, I have decided to make only a modest further addition to this estimate, bringing it to £5 billion in each of the next three years. The new planning totals also contain substantial reserves, rising from £½ billion in 1987–88 to £7½ billion in 1989–90.
"The public expenditure increases I have announced allow us to make realistic provision both for local authority current expenditure, over which the Government have no direct control, and for demand-led programmes such as social security, while still leaving scope for increased spending on services to which the Government attach particular priority.
"But before referring to some of the more important changes, let me make one thing absolutely clear. There can be no question of allowing the projected increases in public

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expenditure over the next two years to undermine the prudence of the Government's overall fiscal stance. The Government's fiscal stance has been clearly set out in the medium-term financial strategy published at the time of this year's Budget. There will be no relaxation of that stance.
"Within the totality of public expenditure, the largest increase is for the local authorities, whose current spending next year is now put at £4 billion above the previous provision. This in part reflects the fact that the previous plans simply carried forward the same level of cash spending as in 1986–87. At the same time, we are increasing next year's aggregate exchequer grant—the contribution that taxpayers make to local government spending—by almost 10 per cent. over this year's settlement. a rise of almost £1½ billion.
"These substantial sums demonstrate in particular the priority the Government are giving to education, which, including the new proposals on pay and conditions of service for teachers announced last week, accounts for about half the increase in provision. There is also a substantial increase in provision for the police.
"On top of the increased provision for the cost of education in schools, which is contained within local authority current spending, there will be additional spending on the universities of £60 million in 1987–88 and £70 million in 1988–89.
"Spending on the health and personal social services will be increased by more than £600 million. For the National Health Service alone, the increase in England amounts to over £300 million a year. Combined with the additional resources being generated by greater efficiency, this will not only enable the health service to cope with the growing number of elderly patients but will also allow it to improve services.
"Gross provision for housing investment is being increased by £450 million. This will sustain the rising trend of spending on local authority renovation and improvements and provide additional resources for the housing associations.
"In the light of this year's experience, £1¾ billion has been added to next year's provision for social security, most of which represents a greater expected expenditure on existing means-tested benefits.
"Provision for investment in roads in being increased by £65 million next year and £75 million the year after, mostly for local authority roads.
"For defence, the provision remains as planned in the last White Paper after allowing for minor changes, including a reduction in the estimated cost of the Falklands deployment. The defence programme will continue to benefit from the substantial real growth in previous years and the wide-ranging action to improve efficiency and value for money.
"Taking all programmes together, the additions to planned capital expenditure amount to getting on for £1 billion in 1987–88, of which about two-thirds is local authority spending.
"Further details of these and other changes will be contained in the printed Autumn Statement which
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will be published as soon as the House returns next week. In addition, full details, together with information on running costs and manpower, will be given in the public expenditure White Paper early in the New Year.
"I now turn to national insurance contributions. The Government have conducted the usual autumn review of contributions in the light of advice from the Government Actuary on the prospective income and expenditure of the National Insurance Fund, and taking account of the benefit uprating which my right honourable friend the Secretary of State for Social Services announced on 22nd October.
"The lower earnings limit will be increased next April to £39 a week, in line with the single person's pension, and the upper earnings limit will be similarly raised to £295 a week. The limits for the reduced rate bands which I announced in last year's Budget will also be increased again in April, but by proportionately larger amounts. The upper limit for the 5 per cent. and 7 per cent. bands will be raised to £65 a week and £100 a week respectively, and the upper limit for the 9 per cent. rate for employers will be raised to £150 a week.
"The taxpayer's contribution to the National Insurance Fund—the so-called Treasury supplement—will be reduced by 2 per cent. to 7 per cent., but this will not require any change in contribution rates. Thus the main Class I contribution rates will once again remain unchanged at 9 per cent. for employees and 10.45 per cent. for employers.
"Finally, I turn to the Industry Act forecast. Both growth and inflation have turned out to be slightly lower this year than I envisaged at the time of the Budget. Growth now looks like turning out at 2½ per cent. against a budget forecast of 3 per cent., and inflation in the fourth quarter of this year is likely to be 3¼ per cent., against the Budget forecast of 3½ per cent. The principal reason for this slower growth has been the disappointing performance of exports, which were hard hit by the cutback in spending by OPEC and other primary producers affected by the sharp fall in commodity prices in general and the oil price in particular.
"Combined with a halving in the value of our own oil exports, this has meant a significant deterioration in the current account of the balance of payments, from a surplus of some £3½ billion in 1985—and a cumulative surplus of £21 billion over the six years from 1980 to 1985 inclusive—to a forecast of broad balance for 1986. Looking ahead to 1987 the prospects are generally encouraging. While the necessary adjustment of the exchange rate to the oil price collapse has now taken place, it will inevitably take time before the full benefits come through in higher non-oil exports and lower import growth. This means that we can expect the current account of the balance of payments to go into deficit next year, for the first time since 1979, to the tune of some £1½ billion.
"Even so, non-oil exports are forecast to rise next year by 5½ per cent., compared with an increase of only 1 per cent. this year, with manufacturing output, in consequence, up by 4 per cent. And with

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domestic demand continuing to expand at the same rate as this year, the economy overall is likely to grow by a further 3 per cent. next year—the sixth successive year of steady growth at an average annual rate of almost 3 per cent.
"Recorded inflation is likely to edge up a little, to 3¾ per cent. in the fourth quarter of 1987. This is almost entirely due to the effect on the RPI of the timing of mortgage rate changes. The Government's commitment to a monetary policy that will squeeze out inflation remains unabated.
"Meanwhile the likelihood of faster growth next year, coming at a time when unemployment already appears to have stopped rising, suggests that the prospects for some fall in unemployment are now more promising. But this promise could still be frustrated by excessive pay settlements.
"The strategy that we have followed since 1979 has brought inflation down to the lowest level for two decades, combined with sustained growth and steadily rising living standards. This is a combination that has eluded successive governments for a generation. We have brought it about by the determined pursuit of free markets and sound money. And that is what we will stick to".
My Lords, that concludes the Statement.
Lord Bruce of Donington: My Lords, we on this side of the House are most grateful to the noble Lord for repeating the Statement which was made in another place. Your Lordships will recall that last year the Autumn Statement had to be interposed in the middle of a debate on the Address on the home front and the environment, and it is obviously to the convenience of the House that the Statement is made today. Moreover, in view of the attack of jitters that has taken place since the speech of the Chancellor of the Exchequer at the Mansion House, I expect that the City wants to be reassured as to what the noble Lord's right honourable friend the Chancellor of the Exchequer is likely to do.
I deeply sympathise with the noble Lord in reading a Statement of this kind, which I am bound to say is much more elegant than the statements made by his own right honourable friend, the former Minister for the Environment, immediately prior to the 1983 election, when he advised his colleagues to "Spend, spend, spend". The result of course was that there was a certain increase in government expenditure. There was a slight buoyancy in the economy as a result, and in the event the party opposite was quite successful in the 1983 election. The noble Lord will note—and I believe that the country will also note—that there should be an election every year on this basis, because when an election appears to be imminent all kinds of goodies which were formerly reckoned to be impossible are apparently within easy achievement.
Indeed we on this side of the House, and I am sure the House generally, will most certainly welcome the increased expenditure on education; the extra grants to local authorities; the extra money to be made available to universities; the small extra amounts available to the National Health Service; the albeit marginal increase in investment in roads, and so on. All these
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are extremely promising, and of course the Government themselves have consistently fought against them all these years.
The Government now claim in this Statement that all these goodies are the result of a sound financial policy and a sound economic policy. But I am afraid one thing that is not mentioned in the Statement itself, and perhaps it will be elaborated on later, is that despite all these "goodies" and all the manipulations that have taken place in the figures as distinct from the real numbers. unemployment still remains at 3¼ million at the least, and probably somewhere near 4 million. This is not exactly the best testimonial that the Government can lay before the country.
One thing requires to be made clear. Do the Government—and it is not clear from this Statement, apart from their usual self-congratulatory noises about the success of the medium-term financial strategy—still believe in M3? Do they still believe in the limitations that they have hitherto regarded as almost axiomatic? I well recall, as will the House, the almost dogmatism, if one could use the term. of the noble Lord, Lord Cockfield, on this subject when he occupied the Bench opposite for this purpose. Is M3 still the be all and end all of government policy in their financial and fiscal stance, because some doubt has been cast on this by none other than the Governor of the Bank of England?
How far does the medium-term financial strategy have any significance at all, particularly in view of the fact that broad money targets, as the noble Lord well knows, have grossly exceeded the band forecasts that were put in the medium-term financial strategy at the time of the Budget? Could the noble Lord give us some firmer indication of what the public sector borrowing requirement is likely to be next year?
There is one other point, which is a point of detail but on which I should be glad to have the noble Lord's reaction: do the existing expenditure figures take any account of the massive overspending in contemplation in the European Economic Community next year? The forecast overspend on the CAP is something like £2 billion, which of course gives this country a share of approximately £600 million. Do the figures make allowance for that contingency? Could the noble Lord give us some information as to whether this expectation of a deficit of that magnitude has any effect at all on the prospects of our receiving our due refund for the current year, which I believe is put at some £486 million? We should be glad to have information upon that point.
Speaking personally, I would much prefer to examine this Statement in conjunction with the detailed figures that are going to be produced later in order that I may compare them, and the House may compare them, with the forecast that appeared at the same time last year, so that we can see what the Government's record is like in the forecasting game. Therefore, I shall refrain from asking the noble Lord any more detailed questions and just give a general view that, compared with the needs of the country, compared with the requirements as already spelt out by both the CBI and the TUC and by most informed economic opinion in this country, this series of expenditure plans will do nothing at all to revive the prosperity of this country.

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The prosperity of this country is not by reference only to the fortunes of 200 or 300 large companies; in our view it is by reference to the welfare of the people of the country as a whole, and in particular those 3½ million people who are condemned at the present time to unemployment and idleness.
4.15 p.m.
Lord Diamond: My Lords, may I too thank the noble Lord the Minister for repeating this Statement and for helping the House in a sphere with which perhaps he is not wholly familiar? I must say, if I may borrow from the well-known advertisement, that it appears that becoming a junior Minister in the House of Lords is very much a gymnasium of the mind. The noble Lord has to turn his attention to a great variety of matters.
So far as the Statement is concerned, we are glad that there will be an early opportunity for debating both the principles of it and the detail, no doubt on the last day of the debate on the Queen's speech. Therefore for that reason and the fact that it is never wise to make too many comments off the cuff immediately one hears a Statement. I have not too many comments to make on the detail at this stage.
However, there emerges from this Statement a major question. One notes, and one is grateful for, the increase that is proposed for education, for which we on these Benches have been pressing hard. We also welcome an increase in the provision for the police, although until we see the figures we very much doubt whether it is adequate to meet the rise in crime with which we are all faced. We also welcome the increase in spending on health and personal social services. All these we welcome very much indeed. We welcome the gross provision for housing investment, although it is very small. We have been pressing for that, and will continue to press for it, from these Benches.
All these we welcome. But has the Minister observed the economic background produced by this Statement against which these increases in expenditure are inexplicably proposed? Has he noted, for example, that the Statement says that growth next year is expected to fall to 2½ per cent. from the figure of 3 per cent. given in the Budget? Has he noticed that exports are down, so much so that the current account this year is expected to be flat, and there is expected to be a deficit next year in our current account of £1½ billion? Has he noticed—it is not in the Statement, but we are all very much aware of it—that interest rates are not only at a fantastically high level but in real terms (I imagine the noble Lord will correct me if I am wrong: I am sure he has the figures) must be the highest they have ever been? I repeat they must be the highest they have ever been, or very nearly that in real terms.
Against that background how have the Government come to the conclusion that now—just now—is the right time (and of course politicians are concerned with timing above everything else) for announcing all these increases that the noble Lord from the Front Bench of the Labour Party has accurately referred to as "goodies"? Why has the Minister announced that now? What is the explanation for the sudden change in the Government's stance?
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Does the noble Lord remember what the Chancellor said last year, as repeated by the noble Lord, Lord Young of Graffham? I am looking at column 153, the Autumn Financial Statement, on 12th November 1985. I have no need to read out the detail unless the House desires it, but the Government reaffirmed in the strongest language their determination to keep public expenditure flat in real terms, and therefore at a decreasing level, and gave the figures for the years which are under consideration now.
Why have the Government suddenly decided now, of all times, when there can be no question of a general election in the immediate future, that there should be an increase in all these expenditures for which we have been pleading year after year ever since the last general election, and which have been denied to us with all the usual excuses of "firm monetary policy" or "sound monetary policy"? It is the kind of sound monetary policy that enables the Conservative Government, to my continuing amazement, and to their own shame, to continue to sell the assets of this country wholesale (£5 billion a year for the next three years) and use the money for ordinary current expenditure or for buying the goodwill of the voters or both. That is what they call "sound monetary policy".
I am asking the Government, against the background that has come out clearly in this Statement: why have they chosen now to alter their oft-repeated statement as to their position to announce all these "goodies", unless I am perhaps wrong and perhaps there is a general election in the year after all? That is my main question.
May I also ask, with regard to the public sector borrowing requirement, because it is not made clear in the Statement, what would the position be this year and next year if no credit were taken for privatisation? That is a simple arithmetical question.
The final comment I have to make is that your Lordships will accept it from me when I say that the Statement which has just been read out covers more than seven pages, four and a quarter lines of which are devoted to the most pressing and urgent social problem of all, unemployment. Why is that? Does that give a proper indication of the Government's priorities?
Lord Trefgarne: My Lords, I am grateful to both noble Lords. The noble Lord, Lord Bruce of Donington, opened his remarks by speaking about some sort of bonanza, some sort of spend, spend, spend. This is no bonanza. As the Statement makes clear, the proportion of GDP which is being devoted to public expenditure as reflected in the Statement is a declining not an increasing proportion. If the noble Lord wants to talk about spend, spend, spend, I would remind him of the commitments which his party has apparently entered into, which amount to some £28,000 million. That is if one excludes the undertakings given by Mr. Meacher, the status of whose assurances is never entirely clear.
As for unemployment, it is a most serious matter, but as the Statement also indicated—this matter was raised by both noble Lords who have spoken—there are signs that the unemployment figures are now flattening out. Nearly 1 million new jobs have been

1201
created since June 1983, and these are not reflected in lower unemployment because the labour force has been growing even more rapidly. Budget measures and pick-up inactivity mean that the immediate prospects of reducing unemployment are now more favourable. Slower growth of the labour force is projected for the rest of the decade and should improve the chances of reductions over the next few years. But as the Statement also makes clear pay developments remain critical.
The noble Lord, Lord Bruce, asked me about the position of sterling M3. As the Chancellor explained in a recent speech, the trend of sterling M3 growth affected by the freeing-up of the financial system over recent years and the shift from negative to positive real interest rates since the 1970s, makes interpretation more difficult. So the messages from M3 need to be continuously tested against the evidence of other indicators.
The noble Lord, Lord Bruce, asked me too about the position of our rebates from the European Community. The United Kingdom 1986 rebate is 1,900 million ecus, which is approximately £1,250 million and is the largest abatement or refund that we have ever received. In other words, the United Kingdom VAT contributions to the Community are being reduced by over £100 million each month. As for the 1987 European Community budget, which is still in draft, that I understand was agreed by the Budget Council in September, drawn up within the 1.4 per cent. ceiling, and agricultural provision is the financial guideline figure and the total for non-compulsory expenditure is consistent with the maximum rate provisions of the treaty. The calculation of what the United Kingdom rebate might be next year is a particularly complicated matter. I think the noble Lord might prefer that I did not delay your Lordships on that; but I should be happy to write to the noble Lord, Lord Bruce, if that would be of assistance.
The noble Lord, Lord Diamond, offered a number of welcomes to the provisions in the Statement which I have just repeated. Indeed some of the points that I have replied to from the noble Lord, Lord Bruce, were raised too by the noble Lord, Lord Diamond, particularly the point about unemployment. I have said that we have generated a very large number of jobs since 1983. The fact is that the total number of people seeking jobs has increased even faster. As for interest rates, that again is a rather technical matter. I have a page of detailed information which I could give the noble Lord, but your Lordships may prefer that I write to him on that matter as well. I hope that I have endeavoured to cover the main points raised by noble Lords.
Baroness Seear: My Lords, how can the Minister maintain that the monetarist policy and the medium-term financial strategy are in place when he surely recognises that the consumer boom, in which he seems to rejoice, is being financed by excessively easy credit and a very large increase in personal indebtedness?
Lord Trefgarne: My Lords, the public expenditure increases, which were referred to in the Statement,
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have been contained within what is a declining proportion of the gross domestic product generally. I do not think there is anything particularly wrong in the matter to which the noble Baroness referred. The provision of consumer credit has long been a feature of the high street.
Baroness Seear: My Lords, I am so sorry to come back to this, but the Minister really has not answered my point at all. How can he claim that the monetarist policy of controlling the money supply is in place when it is in fact being refuelled by consumer credit which is outside the control of the Government?
Lord Trefgarne: It is not being refuelled by that at all, my Lords. It is being fuelled by increased prosperity of our companies, not least in the export field.
Lord Boyd-Carpenter: My Lords, is my noble friend aware that many people outside and many people inside this House will feel that the improvements in various areas which the Statement contains have been earned by the steady and consistent policy of the Government over the last few years, and by their determination not to be pushed into excessive public expenditure? Is he also aware that some of us would be a little unhappy about one aspect of the Statement: that is, its apparent acceptance of a very substantial increase in local government expenditure? Can we have some assurance that the Government will not relax their efforts to prevent gross overspending by quite a number of local authorities?
Lord Trefgarne: My Lords, my noble friend is quite right to point to the fact that the Statement referred to a considerable increase this year in local government expenditure and an undoubted increase next year along the lines that the Statement reported. Certainly the Government will not relax their efforts to ensure that local authority expenditure is contained within reasonable limits. There is a limit to the controls that the Government have over local authorities, as my noble friend will be aware, but we have moved into an era of rate-capping which can be applied where appropriate.
Lord Renton: My Lords, will my noble friend bear in mind that a number of the factors with which the Chancellor has to contend are quite beyond his control? Is he aware that many of us are full of admiration at his having achieved the Statement which we have heard? On this question of local government expenditure, could my noble friend give some idea of the actual and estimated effects of the changes in local government which have been made by legislation the year before last?
Lord Trefgarne: My Lords, I think that I should need to have notice in order to give a reply to the question which my noble friend has put to me. I shall certainly make inquiries and see what information I can give him.
Lord Ezra: My Lords, I should like to put a particular question and also a general question to the noble Lord arising from the Statement which he has just read out to us. The particular question relates to the North Sea. I was glad to note that the Government have recognised that it was harmful that there had been such a reduction in investment in the future development of oil resources. Is he satisfied that the changes now proposed will deal sufficiently with the question? There has been a massive reduction in investment, having a harmful effect on current employment and a harmful effect on our future prospects for oil production. Is this something which the Government will review again at a later date?
My second question relates to the forecast for the balance of payments. The balance-of-payment figures for the last two months have been, to say the least, very discouraging. There is a view that we could run into a deficit this year and a rather higher deficit than the noble Lord has indicated from the Statement next year. If those developments were to occur, are the Government's financial policies sufficiently flexible to take them into account?
Lord Trefgarne: My Lords, the Government's policies will always be sufficiently flexible to take whatever changes occur fully into account. If I may seek to reply to the first point that the noble Lord raised about the special arrangement for the advanced petroleum revenue tax which was announced in the Statement, that proposal is designed precisely to deal with the matters to which the noble Lord referred, although I must say that I do not think that I would have referred to them in quite the apocalyptic terms used by the noble Lord. I understand that there is to be a detailed press release by the Inland Revenue this afternoon giving the details of those arrangements, which I hope the noble Lord will feel able to look at.

European Court: Nationalisation Judgment
4.33 p.m.
Debate resumed.
Lord Peyton of Yeovil: My Lords, I am sure that your Lordships' House will be grateful to the noble Lord, Lord Harris of High Cross, for raising the matter earlier this afternoon. He dealt clearly and at some length with the facts so that it is not necessary for me to take up more than a very limited amount of your Lordships' time. I myself do not propose to delve into the matter of how the question was handled by the European Court, for that court seems to have handed the matter back to this country more or less untouched. After a prolonged legislative wrangle lasting some years, the Government acquired in 1979 the assets of the Kincaid company. They paid for those assets £3.8 million and they received £5 million of cash and £13 million of trading assets. That seems to me to be the cardinal fact with which we have to deal.
In August, 1979, Sir Keith Joseph—and I should like to take the opportunity of endorsing the remarks made by the noble Lord in opening the debate, remarks referring to the respect which we all have for
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his intelligence and his integrity—gave a Written Answer to Parliament. It is a well known practice for governments which wish to dispose of an awkward and unpleasant Question to do so by means of a Written Answer immediately before the Summer Recess. This matter was one which I think was very well fitted to that kind of manoeuvre.
I should like to quote briefly from the Written Answer which Sir Keith gave on that occasion for it is very germane to the matter we are now considering. Sir Keith said:
"We recognise that some previous owners and many members of this House and the public believe that the terms of compensation imposed by the 1977 Act were grossly unfair to some of the companies and we share this view. We have explored every possibility to right the injustice done by the previous Government, but to our very great regret we have concluded that amending legislation to establish new compensation terms retrospectively will be unjust to the many people who sold shares on the basis of the previous terms".
One comment which must immediately be made is that, so far as 1 am aware, no shares in the Kincaid company changed hands—or at least the shares were not subject to a public quotation.
There are a number of questions which I hope the Government will answer and which I hope my noble friend will answer clearly. Who arrived at the figure of £3.8 million? By what process was the stockholders' representative convinced that this was the best that he could do? One understands very readily how the majority of the stockholders may have been convinced that the game was not worth the candle and that to argue at length with a government would be to take on an opponent whom they could not beat. But they needed the money and it was better to get the whole matter settled for good.
I take it that the Government accept that in these matters the question of fair dealing is of some importance. So I would ask this: Who, during this whole saga, ever applied his mind to the question of how far the compensation offered could possibly be described as fair and adequate? And if that were so, how on earth could that person have come away satisfied! I say with some unease that if the Government cannot address themselves to that question and satisfy your Lordships' House upon it, it would be very difficult to avoid the conclusion that the present Administration followed the example of their predecessors in regarding the question of fairness as being unimportant. I hope that that is not the case.
4.40 p.m.
Lord Monson: My Lords, we are indebted to my noble friend Lord Harris of High Cross for giving us the chance to discuss this important ethical question this afternoon. I should like to assure the House that I have no personal axe to grind. On the contrary, the compensation terms for the one shipbuilding company in which I had a miniscule interest were generally agreed to be not unreasonable.
There are a number of things which I submit are beyond dispute. Whatever the perverse interpretation, or at any rate the highly curious interpretation, of Article 1 of Protocol 1 of the European Convention on Human Rights by some of the judges at Strasbourg, the compensation terms for a number of the

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companies concerned undoubtedly contravene the principles of the 1948 United Nations Universal Declaration of Human Rights as well as contravening the Washington Convention, both of which have been ratified by the United Kingdom. The fact that they may have no force in law is neither here nor there when we are discussing matters of principle.
Secondly, the compensation terms (or the confiscation terms as they might more accurately be called) for the unluckier shipbuilders were condemned throughout the length and breadth of the Conservative Party during the mid-1970s, the late 1970s and indeed into the 1980s in both Houses of Parliament, as well as in public. I have hundreds of quotations that I could cite to your Lordships in support of this, if time permitted. Of course, much criticism came also from the Liberal Benches and from these Benches, notably from my distinguished noble friend Lord Goodman, the late Lord Robbins and the late Lord George-Brown.
The Conservative Government, when they came to power in May 1979, had the power, and the majority, to reopen past cases if the political will had been there. Even more so did that Government have the power to ameliorate, or at least compromise upon, those cases which were still in the pipeline in late 1979 and early 1980, if the will and determination had been there. But the Government evidently did not have that will or that determination. What is more, ironically but shamefully, the compensation terms finally agreed after May 1979 were even more confiscatory on balance than those finalised before that date.
The practical consequences of this have been mentioned on earlier occasions both in Parliament and in the press: such as the fact that the Conservatives, unlike the Liberals, the Independents and members of the SDP, will not have a moral leg to stand on if a future government of the extreme Left starts to nationalise everything in sight and in so doing fixes compensation at less than one-fifth of asset value, or the fact that overseas governments may well see this as a green light to renege on their commitments to Britain: their commitments in respect of Hong Kong, for example.
However, there are further adverse consequences to be expected of a less tangible but equally worrying nature. A great many people are deeply concerned about the continuing erosion of what we loosely term "middle-class morality"—which of course was never strictly confined to the middle classes as such. It may be that middle-class morality is dying; but it is ironic that it should be a Conservative Government, ostensibly devoted to Victorian values (and charitably I have always assumed Victorian values in this context to mean Victorian virtues rather than Victorian vices) which hammers the final nails in the coffin of middle-class morality. A Conservative government which makes a complete U-turn on the fundamental matter of property rights—fundamental to individual freedom, that is—is hardly likely to dispel the pervasive and all-prevailing cynicism that we see in this country today and the consequent determination to get rich quick by any means while the going is good. It is not as if the Government's opportunist rejection of property rights was an aberration. On the contrary,
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it represents the culmination of a series of decisions in financial and fiscal fields which seem to indicate a lack of consistent principle on the part of this Government.
To give a few examples at random: householders who apply for social security benefits are treated a good deal more favourably than those people who have the misfortune to rent their houses, where capital disregard is concerned. Men or women earning £14,000 a year pay a lower marginal rate of tax cum national insurance than people earning only half that amount. An elderly person who has held a share for 25 years which has shown a 50 per cent. capital loss in real terms may nevertheless be liable for substantial capital gains tax upon that loss as a result of the inexplicable refusal by the Chancellor to index pre-1982 acquisitions; whereas short-term speculators, who may well be aided by inside information, can make short-term speculative gains up to £6,300 a year without paying a penny in capital gains tax.
On the other hand, a man or woman in a 9 to 5 job has to pay tax cum national insurance at a marginal rate of 34 per cent. on every penny they earn over £2,250 a year or so, assuming that they are single. And we all remember the fiasco over mortgage tax relief and relief on pension contributions at the time of the 1985 Budget Statement. The whole pattern seems to be governed by expediency and by whichever powerful pressure group has shouted the loudest most recently, rather than being determined by a consistent philosophy and morality.
To reiterate, my Lords, this breeds cynicism, coupled with a resolve to make money fast while the going is good, rather than to invest and plan for the longer term, in case the rules which people hitherto imagined to be immutable turn out to be transient and subject to capricious alteration or reversal. Unless this tendency can be halted, things do not look good for the long-term future of this country.
4.47 p.m.
Earl Ferrers: My Lords, I think the House owes a great debt of gratitude to the noble Lord, Lord Harris of High Cross, for introducing this topic today on the matter of compensation which has been paid to companies taken over by nationalisation. I am bound to say that I feel a certain tinge of sorrow for my noble friend Lord Lucas. It fell to a Conservative Government—the last one—to administer a law which was passed under a Labour Government and to which the Conservative Party when it was in Opposition and indeed later when in government, was deeply opposed. My noble friend will no doubt seek to defend what the Government have done. I am motivated to take part in this debate because there has been manifest unfairness, and I should like to see that unfairness aired, debated and rectified.
The unfairness which has been ascribed to certain companies indicates the unfairness of nationalisation. The party opposite has always been a protagonist for nationalisation. It has wanted it and has succeeded in drawing into public ownership a number of different companies. It is absolutely entitled to do that; it is entitled to its views and entitled to take that action. The fact that between the two sides of the House there are different views on the merits of the case for

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nationalisation is neither here nor there as regards this debate. It is solely to do with the compensation which was applied on the basis of the nationalisation when it took place.
However, what is important—and I am sure noble Lords opposite will agree—is that when companies which have quite properly and legitimately traded in the private sector find that they are involuntarily taken over and taken into the public sector, those companies should be fairly treated as regards compensation. That, I suggest, has not been the case.
The basis of the compensation to be paid to the companies taken over under the Aircraft and Shipbuilding Industries Act was the value of the average price on the Stock Exchange for six months ending in 1974; and of the 43 companies taken over, only one had such a quotation. The value of other companies which were taken over had therefore to be determined—not agreed, but determined—by the Secretary of State for Trade and Industry in consultation with the stockholders' representative who was to look after the interests of stockholders. The Secretary of State had discretion to fix the values. He had discretion to fix them above the minimum and he alone had that discretion.
The first unfairness is that, whereas public companies tend for obvious reasons to publicise their successes, private companies tend for equally obvious but different reasons to be more modest about their successes. Therefore, to ascribe to an unquoted private company the sort of share figure which it might have had had it been a publicly quoted company (which it was not) is obviously unfair, inaccurate and indeed invidious. That is what happened to 42 companies. Only one was a quoted company.
Their values had to be determined by the Secretary of State for Trade and Industry or by arbitration; but the arbitration was to invent the value of a share which did not in fact exist. It had to be invented according to the Act's supposition that the company was a public one. The tribunal had no powers of discretion. It was the Secretary of State who had those powers, and they were wide powers.
It is this value for different companies which has been the cause of such bitterness and controversy—so much so that some companies felt the injustice to be so great that they took their case to the European Court of Human Rights. The Conservative Government who had by then come into office had to defend the case for compensation which they had inherited from the previous Labour Government and which they had resolutely opposed. That is a somewhat bizarre state of affairs but that is life.
I am not a lawyer but as I understand it the judgment, in which five judges dissented, did not say that the Government were right and that the appellants were wrong, but merely said, in effect "This is a domestic matter for the United Kingdom in which the court does not have the locus to interfere". The unfairness therefore comes back again into the area of responsibility of the Secretary of State for Trade and Industry, and there are a variety of aspects to this unfairness. By the time that the payments were made it was 1979–80.
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On the values which had purported to obtain in 1974, no allowance had been made for inflation which by then had been about 80 per cent. No allowance had been made for the fact that certain companies—Kincaid being one—were undergoing developments in 1974 which resulted in profits being less than they might otherwise have been. Therefore, their successes were modest and profits and earnings formed a major plank in arriving at valuations. As the noble Lord, Lord Harris, said, in the case of Kincaid, the Government obtained the business in 1977, which at that time consisted of £13 million of assets and £5 million of cash, or a total of £18 million, for £3·8 million. So for £3·8 million the Government acquired immediately £5 million of cash, making thereby an immediate profit off £1·2 million, and they also had the whole of the rest of the business whose assets were worth £13 million thrown in for nothing. By no conceivable stretch of the imagination can that be said to be fair.
In the case of Vosper the vesting date was July 1977 and, as the noble Lord, Lord Harris, reminded us, (and it does no harm to remind ourselves again), Vosper had assets of £37 million and cash in the bank of £5½ million. It was making pre-tax profits at the annual rate of £7 ·85 million. The Government paid £5·3 million. That cannot possibly be said to have been fair. It is not surprising that in desperation these companies went to the European Court of Human Rights to ask whether it could help. However, as I said earlier, the court concluded that this was a domestic matter for the United Kingdom.
The fact that the Government's compensation levels have been unfair can be instanced by Lithgow Drydocks. The Government offered £800,000; the shareholders said that this was inadequate and elected to go to arbitration. The Government said "If the shareholders go to arbitration, our offer lapses". When the shareholders went to arbitration, the Government offered not £800,000, but £500,000. The shareholders asked for £3 million. The arbitration tribunal awarded not £500,000, which the Government had offered, but £3,500,000, which was even more than the shareholders themselves had asked for.
These are merely examples and it gives me no pleasure to say that the Government, of whom I had the honour to be a member (or some may uncharitably say of whom I was an ornament) have acted unfairly. However, they have. The noble Lord, Lord Peyton, mentioned that Sir Keith Joseph, who was then Secretary of State for Trade and Industry, referred to the fact that there was unfairness, and he said "We share this view".
If something has been unfair, it is always possible to right it or at least to ameliorate the unfairness. I ask my noble friend to have an open and a generous mind in his consideration not just of the figures but of the grievance as a whole. I ask him two questions. Does he consider that these companies have been treated fairly in compensation? If he does not think so, or if he is even in doubt, I ask him whether he will undertake to look into the matter to see, even now, whether steps can be taken to rectify what seems to many people to be a manifest unfairness and even an injustice. The request that I make to him is whether he will undertake to look into this matter and see what can be

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done. I do not ask him for a guarantee to alter the situation, because that would be asking too much, but I ask him to look into it.
4.57 p.m.
Lord Denning: My Lords, as this Question concerns a decision of the European Court of Human Rights, I have taken the opportunity of reading the whole 80 pages of the decision. It is most instructive, and having read the judgment of the 13 judges and the dissenting judgment of the five judges, my view (and I think I will be supported by many) is that the five dissentients were right. I ask Her Majesty's Government to implement the views expressed by those five dissentients.
This matter needs a little explanation for laymen as well as for lawyers, but the salient facts are these. When the Labour Government for the first time obtained a majority (though not an overall majority) in Parliament in February 1974, they announced that they were going to nationalise the shipbuilding and aircraft industries. It was then asked, "What is the compensation to be?". The answer was, "We will base it on the previous six months' share values, because share values will be distorted by the prospect of nationalisation and we are therefore going to take the base figures as those of the six months at the end of 1973". If that had gone through promptly and effectively within a few months, it might have been fair compensation. But owing to parliamentary and other troubles it took three-and-a-half years before the shares were taken over and nationalised.
In those three-and-a-half years up to July 1977, values had altered dramatically. For instance, in the Kincaid case, instead of being worth between £2 million and £3 million at the end of 1973, by the time they were vested their value was far more—over £5 million in cash at the bank and £14 million in trading assets. So it was nearly £20 million as against £3 million. All that had taken place because of the delay in vesting. So the value that the Act contemplated was entirely different from what it was when vesting actually took place. Was that right or was it not?
I now come to the very difficult question of what the European Court of Human Rights had to say. They had to go to a most general and illusory article in the convention. Paragraph 1 of Article 1 states:
"No one shall be deprived of his posessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law".
That does not give much help until you have the lawyers or the court to interpret it. I shall not go into all the interpretations.
One of the key passages was, according to the "general principles of international law". I may say in passing that that is a very debatable area. But I think it is generally accepted that a person should not be deprived of his property or possessions except in the public interest and having—these are the important words—prompt, adequate and effective compensation for his property. Would compensation based at the end of 1973 be prompt, adequate or effective when the takeover was not until July 1977? There is a little controversy over those applications of international law, but I am told that our Government accepted that it had to be prompt, adequate and effective.
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There are quite a lot of technicalities, but what did the majority 13 say! They said that that article had not been broken. But what did those other five say? They said, "It is all very well to put that 1973 valuation in at the beginning, but owing to the lapse of time that took place before it was settled there ought to be provision for reconsideration of the amount before it came to be paid".
I shall read two passages from that minority judgment. First:
"No one can deny that it was possible to introduce some mechanism whereby a financial adjustment would have been made to take account of the increased remoteness of the reference period … Such a course was all the more necessary because it had been argued in Parliament that certain of the Act's provisions were unfair, a fact which the Government did not contest at the hearings."
Secondly, they went on:
"by virtue of the prolongation of the internal initially envisaged [there was] unreasonable and disproportionate distortion".
That is what they said. As time went on, there ought to have been provision put into that Act before it was passed to make adjustments, so as to make allowances for the difference that had arisen. But there it was. The Act went through without the adjustments being made. That was a mistake. I do not say which Government it was that made the mistake.
But then we get on to the position after the Act was passed. On principle, and in view of what was said by those five, ought not account to have been taken of the lapse of time? In the ordinary course of events in the courts, we take account of that when we are assessing personal injuries. If someone is awarded compensation five years after his accident, we always take inflation into account. We take into account other factors which have appeared in the interval. In the case of Kincaid, that company had improved their business; they had worked hard; they had a good business and they had saved money. As I said, they were not allowed to part with it. They had over £5 million in cash and £14 million in trading assets. Clearly, common justice required that their position should have been reconsidered in the light of the intervening events.
I am afraid that that is what Sir Keith Joseph virtually said in reply to a Question for Written Answer on 7th August 1980. At col. 290 of the Official Report, he said:
"We recognise that some previous owners and many Members of this House and the public believe that the terms of compensation imposed by the 1977 Act were grossly unfair to some of the companies and we share this view. We have explored every possibility to right the injustice done by the previous Government, but to our very great regret we have concluded that amending legislation to establish new compensation terms retrospectively would be unjust to the many people who sold shares on the basis of the previous terms".
I do not agree for one moment with that last bit. What we ought to consider are the people whose property has been taken and paid for on the basis of a gross undervalue, because there was no intervening provision for readjustment.
If the Conservative Government at that time took the view that it was grossly unfair to the companies, they did not need amending legislation for something like that. Whether or not it was called an ex gratia payment, the Government could do what was fair without amending legislation. They admitted that

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there was gross unfairness and they ought to have done something. If only those five had been in the majority, the Government would have been compelled to do it. If those five had been in the majority they would have held that our legislation did not comply with the European Convention on Human Rights, just as we said in the case of those railwaymen. There was legislation about the closed shop and so on, and the Court of Human Rights said it was not right and it had to be remedied by giving those railwaymen compensation. So if those five had been in the majority, those people would have had to be paid because their property was taken on the basis of a gross undervalue.
In a way, I am speaking of the European Court of Human Rights. The question they ask is: is it to be a precedent? I suggest that that decision is not binding on your Lordships. It is no part of our law. On the other hand, I think that your Lordships, or the Government, can give a good example to the world by going by the views of the dissentient majority. Indeed, I gather that my noble friend Lord Shawcross, whose memorandum was read out, says that all the investors in companies and so on want to know what is the position. If they have shares in companies which are to be nationalised—whether they are overseas or inland shareholders; it does not matter which—the compensation has to be prompt, adequate and effective.
I suggest that the Government could give a good example to industry and to the world in general by ensuring that on nationalisation the compensation is fair, adequate and effective. In this particular case, where it has not been fair or adequate and as so much time has passed, it ought at least to be remedied now.
5.11 p.m.
Lord Diamond: My Lords, having given notice to both Front Benches, and having listened to a series of speeches from the Conservative and the Cross-Benches, all criticising the Government, I hope I will be forgiven for saying a few words in favour of the Government's point of view. I had some experience of and responsibility for these matters in my time, which was of course a long time ago.
The most recent development is the Big Bang and the way in which the Government—and indeed some of the Opposition—are encouraging people to buy shares and to become shareholders. The test is going to be shares and a market in which one can deal in those shares. That is going to be the one main aim. People are being encouraged to invest in shares. Let us all be shareholders and all be part of this market where we know that it is not unwise to go in because you can always get out; you can always sell. At which price do you sell? It is the ruling price on the market.
Therefore when compensation was being considered long before the 1970s, as the noble and learned Lord mentioned—because this matter has a much longer history than that—what could be fairer for compensation than the price at which people voluntarily and willingly buy and sell their shares? If I may say so with the greatest possible respect to those who do not think that that is the best test and who have
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some anxiety about what a future Labour government might do: do you think it wise to suggest to a Labour government of the future that paying the fair value as shown by the market quotations on the relevant day should be discarded as a method of paying compensation? Should some other scheme be invented—God knows what it might be—which the government might feel appropriate, having regard to their general policies and the pressures put upon them at the time by some of their Back-Benchers?
I should have thought that we would be far better off—many of us who are shareholders, possibly holding shares in a company which might be taken over and compensation paid—having regard to a price at which we are willingly buying and selling those shares, day after day. That is my first point.
Criticism has been made against that for a number of reasons. One reason is that no provision was made in the Act which provided for what I can only repeat I regard as a very fair form of compensation which I had the good fortune to adopt when I was responsible for these matters. The complaint is that no allowance for any variation was made in the relevant Act. The noble and learned Lord spoke about variation upwards. He did not utter one syllable about variation downwards and what would happen if the value dropped to one-tenth of what it might otherwise have been or was at the relevant date.
The government might then say, "Ah, we were foolish. We must look after the nation's assets. We promised X pounds per share because that was the market price but now that we are actually paying over the cheque the shares are being quoted at one-tenth of X; so here is one-tenth of X". Your Lordships can imagine the row that would occur if the Government went back on the Act, passed by Parliament, on the method of compensation.
Another complaint is being made—an unusual complaint, but one that I welcome from these Benches—that in future we should have regard to the minority vote rather than the majority vote. I welcome that with open arms. I hope that every time I find myself in the minority we shall, with the assistance of the noble and learned Lord, convert that into the decision of your Lordships' House and march merrily on with legislation on that basis. I wish that were so, but I dare say the noble and learned Lord will not go as far as that. Therefore I am afraid I cannot feel totally convinced by that argument.
The criticism is then made, "But what about the delay? You could have brought in a new Act and done something about it". I refresh your Lordships' memories about the delay that occurred on the nationalisation of the steel industry. Steel was to be nationalised and the compensation formula was again this same formula—the price at which people would buy and sell steel shares willingly up to the point of time when nationalisation was notified and, therefore, would affect the price. Obviously, in such a case the price falls immediately and, equally obviously, shareholders regard it as unjust that they should be required to accept the reduced price when it is only a political effect. Therefore you stick to the price before nationalisation is announced. Of course you do not take one day, but a period. In fairness, you must

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average it over a period. I am sorry that I do not know what was done in this particular case, but my recollection is that in the case of steel the period was six months, and that seems to me to be a reasonable period.
Any of your Lordships who are octogenarians will remember as well as I do that what happened was that two members of the Labour Party, which was the government party at that time, did not share the view of their colleagues. Nobody will recollect more than the noble Lord sitting on the Woolsack that at that time the government majority was two. That had an impact because we had not adopted the noble and learned Lord's theory that you should go by the minority. On the contrary, at that time the other place went on the basis of the majority. But there was no majority, so the matter was delayed and the Act was not passed.
After the return of a new Labour Government which had, in the vote of the people, authority to continue with the nationalisation of steel, that legislation was resumed and a new Act was passed with the same formula. However, a delay having taken place the Act then applied to the new date on which it had been announced. Therefore the relevant compensation was calculated on the six months prior to the new date, not the old date. What was the result of that? Whereas the previous formula referred to a date on which the share prices were on a plateau, and then came down, the new formula referred to a date on which the prices were partly on a plateau and partly in a valley.
As a result, your Lordships will be pleased to note that those two dissenting Labour Members saved the country and the Exchequer a great deal of expenditure. To put it the other way round, the shareholders obtained less than they would have received had nationalisation taken place earlier. That was the effect of bringing in a new Act, and that refers to the philosophy which has been promulgated by the Cross-Benches only this afternoon. So I am bound to say that I regard the fairest way of giving compensation as the price at which a willing buyer and a willing seller exchange the property in question. That is what a free market signifies. That is what we have all been spending weeks and weeks on in the past few months in order to try to achieve that the market will be free, working properly and unbiased.
Earl Ferrers: My Lords, I should like to put a question to the noble Lord before he sits down. Quite correctly, he has addressed his mind to the fact that the price should be what a willing buyer will pay to a willing seller. He has not addressed his mind to what is the price of a certain article which has no willing buyer and willing seller because it is not quoted.
Lord Diamond: My Lords, it was because I did not want to detain your Lordships further. The answer is such an obvious one: one goes to arbitration. As every practising accountant knows, it is very difficult to value private shareholding. I am sure my professional colleagues will confirm that immediately. It is terribly difficult. One has to have something on which to anchor it, on which to hang it. There can be argument after argument and a minority shareholding in a
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private company can be valued at anything from X down to literally nothing. So what way can be found other than both parties putting their points of view to an informed and able judicially-minded individual, letting him listen to the arguments and decide?—and that of course is what happened.
Lord Monson: My Lords, before the noble Lord sits down, will he agree that he has said nothing about the three-day week which was in force at the time compensation was fixed and which greatly depressed share prices at the time? Nor has he said anything about the enormous inflation which took place between the date when the compensation was fixed and the date when it was actually paid out and for which no allowance whatsoever was made.
Lord Diamond: My Lords, with the greatest possible respect, that is just not accurate. It is not accurate to say that no allowance was made for the intervening period. As my information goes, the full interest was payable from the date that the compensation was payable until the date that it was actually paid. The full interest took account of inflation. It is the only way one can take account of it. That is the normal way of taking account of it. So I am afraid that I am not affected at all by that situation.
If the noble Lord should say, "Why didn't you take account of a situation which was exceptional and arose for a very short time?" the answer is that one spreads over six months. That is the argument for doing it. It is what we did, and, as I understand it, it is what happened in this case.
5.23 p.m.
Lord Bruce of Donington: My Lords, the House will be grateful to the noble Lord, Lord Harris of High Cross, for having drawn its attention to what, after all, is a very serious matter. No one in your Lordships' House wants any individual in the United Kingdom to suffer an injustice. A sense of justice and fairness is one of those elements that should be, and very often is, enshrined in the British character. We like to be fair.
Sometimes I wonder whether this sense of fairness comes directly into our consciousness when, if ever, we contemplate the fate of those people in our country who are less fortunate than ourselves and are not fortunate enough to be shareholders in either public or private companies. If it is to be pursued as an end, justice ought to be thoroughgoing and extended to the lowliest people in our country. I should like to think that some of the enthusiasm for justice to shareholders that has been expressed today is capable of more universal and generally perceptible application. However, this does not affect the issue before us.
Your Lordships will be aware that one of these cases is again coming before the European Court of Human Rights. At least one company intends to have another attempt in that Court. Perhaps it behoves us therefore to be a little careful in what we say today. I am very sorry that the noble and learned Lord, Lord Denning, who is erudite on these subjects, is not present to give me the necessary legal backing, but your Lordships will recall that under the Continental system evidence is not restricted in the same way as it is before the British courts and that parliamentary proceedings and

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what is said in Parliament are taken into account in judgments that emanate from both the European Court of Justice and the European Court of Human Rights.
Like the noble and learned Lord, Lord Denning, I, too, have read through the judgment—some 77 pages of it—and I have also acquainted myself with the broad provisions of the appropriate sections in the Aircraft and Shipbuilding Industries Act 1977. Perhaps I may say immediately that reading through the judgment of a case before either the European Court of Justice or the European Court of Human Rights does not give one all the information required to form an objective judgment of whether the decision was right or wrong. That is unfortunately the case.
This afternoon I listened carefully to the noble and learned Lord, Lord Denning, and I thought that perhaps he was speaking in the role in which I knew him before the war when he was a KC, acting as a leader in the King's Bench Division. He was indeed a brilliant advocate, and today I thought that he was speaking in the role of advocate rather than talking in a judicial capacity, because on the basis of the judgment itself I do not see how he could possibly have come to the quick decision that the five dissenting judges were right and the 18 judges—as they are altogether—were wrong.
I found it very difficult to make up my mind, and I speak as an accountant concerned with the true and fair valuation of the assets of companies involved in this kind of operation. Those of us who have read the judgments will have been made aware of a very eminent firm of accountants—which will be known to practically all noble Lords who have any connection with the City or commercial and industrial affairs—called Whinney Murray. In every case they were the accountants appointed by the Government to arrive at a true and fair valuation of the business as a going concern, based upon the earnings and the likely future earnings of the various companies.
Many figures have been quoted this afternoon. I cannot reply to them because I have not seen the balance sheets of the companies involved. I have not seen, as is customary in British cases, a transcript of the case put forward by the plaintiffs and the respondent. All one can see is what appears in the judgment.
Noble Lords have referred to the value of the assets of the various companies. Without seeing the complete case and the balance sheets, I do not know whether they have taken account of the liabilities, because the judgment nowhere states "net assets"; it merely points out that assets are involved.
We are in a little difficulty. All governments, of whatever political complexion, should seek always when they bring in such legislation, to see that the persons whose assets or claim to assets are being taken over are properly compensated in line with the circumstances explained to them at the time that they acquired the assets; for example, if they are involved in privatisation terms.
It is true, as the noble Lord, Lord Harris of High Cross, pointed out, that some of the leading representatives of the party opposite committed themselves to
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rather extravagant observations at the time that the compensation proposals were originally published and debated in both Houses. Mr. Nigel Lawson, the present Chancellor of the Exchequer, described the compensation proposls as grossly inadequate. The right honourable Member for Henley, Mr. Michael Heseltine, described them as more like confiscation than compensation. Mr. Norman Tebbit, who expressed himself with a degree of moderation that one would find difficult to recognise in current circumstances, contented himself with the observation that there was no equity in them. Mr. Tom King was extreme about the matter; he spoke of outright confiscation.
We can understand the chagrin of the noble Lord, Lord Harris of High Cross, when a Conservative Government came into office and proceeded apparently to renege on their somewhat extreme political observations, which on reflection I suppose they must have regretted. Another factor is ignored. As I said, we have not seen the accounts. We do not know whether the assets referred to by noble Lords are net assets. We do not know whether they have taken liabilities into account.
The noble and learned Lord, Lord Denning, does not know whether the figures quoted as assets are net assets or whether the liabilities have been taken account of. Therefore, he is in no position to say what the valuation of the assets is. Although as an advocate he may be entitled to his opinion, as a man speaking in a judicial capacity it is not worthy of judicial observation in the absence of information. I shall not go through the judgment in detail because of the time. I shall refer to pages in the judgment where details can be found. Kincaid is dealt with at page 17; Vosper Thornycroft at page 19; Yarrow at page 27; Hall Berrill at page 25; Vickers at page 29; and the final one is at page 30.
If your Lordships read the transcript, you will find that in all those cases there was an initial valuation by that eminent firm of accountants, following which the Government made an offer to the shareholders or to their representatives. It is interesting to observe from the judgment of the European Court of Human Rights—this will be of considerable interest should another case go before it involving a different government—that it recognised the right of the majority of the shareholders of a particular class to arrive at a valid decision on behalf of them all.
That is enshrined in the 1977 Act. It will not lie within the precedent that has been created by the European Court of Human Rights for any shareholder of a class that has already agreed by a majority to the acceptance of a figure to go to that court because it protects the majority as against the minority of a particular class of shareholder.
A valuation on the basis described by the noble Lord, Lord Diamond, and elaborated on a little by me was arrived at by that eminent firm of accountants. The Government made an offer to the representatives. There were subsequent discussions about it. In some cases, reference was made to arbitration. In the case of Kincaid, a shareholders' meeting was held on 21st November 1979, to consider a resolution approving the agreement arrived at with the Government.

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Sir William Lithgow and eight other stockholders were present, but he abstained from voting because he considered that the information available on the settlement was insufficient and that the figure did not represent Kincaid's value during the reference period or on vesting day. If he was dissatisfied, there was nothing to prevent him from dissenting and recording his dissent to the resolution approving the agreement.
In the event, in every case negotiations took place between representatives and the Government and a figure was finally arrived at. In all cases, the Conservative Government upped the figures beyond those originally contemplated by them.
The noble and learned Lord, Lord Denning, whose legal opinions are almost written on blocks of stone in my opinion, says that in his view—he speaks as a lawyer of some eminence—there was nothing to stop the Government from making an ex gratia payment. They did not need an amending Act. I took down his words as he said that. I am glad about that, because it seems to me that the Government did that. On the basis of the valuation prepared by Whinneys anything beyond the valuation that they had determined and negotiated upon was in the nature of an ex gratia payment.
I have not seen all the papers; I have seen only the judgment and therefore I cannot say whether the ex gratia payment made by the Conservative Government, in conformity with the suggestions made by the noble and learned Lord, was adequate or otherwise. This is one of the defects of accepting the Continental legislature over the top of our own.
English law tends to be precise. It requires evidence, cross-examination and everything else. One can achieve ultimately what is a reasonable and equitable view. But, after all, we accepted the ruling in advance by agreeing the whole covenant of the European Court of Human Rights in exactly the same way that we accept apparently the going and extended rights of the European Court of Justice in connection with Community matters. It may well be that the court made a mistake. There is no way of evaluating the decision made by the European Court of Justice unless one sees the arguments put forward by the respective parties.
I have, however, come to the conclusion that it would be most unlikely for a Conservative Administration—not unmindful, some might think, however unfairly, of the protection of property, especially the property of those who comprise a comparatively small minority of the population—to be unmindful of the claims made upon them not only by the individuals concerned but also their own philosophy. I cannot bring myself to think that within their own canons of justice, with which I do not always agree, they would act unfairly. I cannot believe that the trivial claims of the Treasury—what people sometimes regard as its mercenary penny-pinching attitudes—to safeguard the nation's finances down to the last £10 million or whatever, could ever overcome the profound sense of justice of the government of the day, who, after all, always seek to protect property interests wherever they can.
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There is a lesson. The lesson is that one has to be very careful when one subordinates the system of British justice to systems that are apparently more flexible and often more ambiguous than our own. However, this is the way we are in modern civilised society. At least the British Government have been honourable in this. Unlike some governments that opt out of verdicts of the European Court of Justice when they think the judgment is going against them, at least the British Government had the good sense and the honour not to announce in advance that they would not accept the judgment of the court. For that, they deserve to be congratulated by us. I doubt very much, however, whether that will be much comfort to those who, even on the basis of what I consider to be insufficient evidence, still feel aggrieved about the money they might have lost.
5.43 p.m.
The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Lucas of Chilworth): My Lords, I am grateful to all noble Lords who have contributed to the debate on the Question raised by the noble Lord, Lord Harris of High Cross. I am not proposing in any way to discuss with your Lordships the amounts of compensation, the amounts of claim, or so on. I shall, if there is sufficient time, address myself to questions of substance raised by noble Lords. At the outset, I wish to deal specifically with the words contained in the noble Lord's Question. There has been speculation from time to time about the implications of the judgment in the case of Lithgow and others. The Government consider that this speculation is without foundation. I hope that my response will put the matter firmly in perspective.
The House will recall that the Lithgow case arose from seven applications lodged with the European Commission of Human Rights. The principle complaint was that the Aircraft and Shipbuilding Industries Act 1977 did not fulfil the Government's obligations under Article 1 of the First Protocol to the European Convention on Human Rights. The relevant part of that article—I appreciate that some noble Lords have already quoted it—reads,
"Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law".
It is important to recall that the issue before the European Court of Human Rights was whether the 1977 Act was so open to objection as to show that the United Kingdom acted outside the margin of appreciation which the convention leaves with member states. As the House knows, the court found in the Government's favour by a large majority, as the commission had done before.
The court decided that the general principles of international law of prompt, adequate and effective compensation do not apply to the taking by a state of the property of its own nationals. In doing so, it reaffirmed the position in its judgment in the case of James and others, more commonly known as the Duke of Westminster's case.

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I should recall in this regard that it was common ground between the Government and the applicants that the general principles of international law stipulate that a state may only take the property of a foreigner if the taking is for a public purpose, is not discriminatory and is accompanied by adequate, prompt and effective compensation. This has been the consistent position of British Governments, and it remains the position today. It is simply not true to suggest that the court's judgment constitutes any precedent for the expropriation of British assets abroad.
The European Court further held, again consistent with the previous case law, that the taking of property without payment of compensation of an amount reasonably related to the value of the property would normally constitute a disproportionate interference which could not be considered justifiable under Article 1.
In the particular circumstances of the Lithgow case, the court held that its power of review was limited to ascertaining whether the decisions regarding compensation fell outside the United Kingdom's wide margin of appreciation under the convention. Here, the court held that it would respect Parliament's judgment in this connection unless that judgment was manifestly without reasonable foundation.
It still is for the electorate and Parliament to decide whether any further nationalisation should take place and, if so, on what terms. The judgment of the court does not change this. Indeed, that is why prospectuses for privatisation draw attention to the statements of the Opposition so that investors can take such statements into account in deciding whether to subscribe. The noble Lord, Lord Diamond, and the noble and learned Lord, Lord Denning, drew attention to that point.
Of course, I realise that some may feel disappointed that the European Court did not give a judgment which would ensure that compensation in the event of nationalisation would aways be at a level which those affected would willingly accept. But the court itself commented that the valuation of major industrial enterprises for the purpose of nationalising a whole industry is in itself a far more complex operation than, for instance, the valuation of land compulsorily acquired and normally calls for specific legislation which can be applied across the board to all the undertakings involved.
I would suggest therefore that it is unrealistic to suppose that any method of valuation will be accepted as fair by all. Nationalisation is normally not a bargain struck with a willing seller.
The House will recall that the Strasbourg case arose from the Aircraft and Shipbuilding Industries Act 1977, which the Conservative Party when we were in Opposition vigorously criticised during its passage through Parliament, both as regards the merits of nationalisation and the compensation provisions.
We have not changed our minds in the slightest that there was much in that Bill to criticise, but we reluctantly had to decide in 1980 that we could not amend the compensation provisions. No practical and fair way of amending the terms could be found.
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Contrary to what has been suggested, there was nothing in the arguments submitted by the Government to the court in Strasbourg that was incompatible with the earlier criticism of the compensation terms. Those arguments were directed to a quite different question. That is, whether the 1977 Act contravened Article 1 of the First Protocol. The court's judgment, in the Government's view, does not in any way adversely affect the position of British investors, whether at home or abroad.
I turn briefly to some of the comments that have been made this afternoon. I turn immediately to the report in Hansard in another place of 7th August 1980 at cols. 289 and 290, to which my noble friend Lord Peyton referred. He read a paragraph from that, as indeed did the noble and learned Lord, Lord Denning. However, both noble Lords ended their quotation at the end of the second paragraph. They failed to go on and quote what my right honourable friend Sir Keith Joseph, then the Secretary of State, said. He went on from the paragraph that the two noble Lords have quoted to say this:
"We had to recognise, moreover, that had we wanted as an alternative to offer the companies back to the former owners legislation would have been required. This would inevitably create a long period of uncertainty for the industry during the passage of legislation, the preparation of the detailed offer to the former owners and the consideration of the terms. Moreover He cannot return to the former owners that which was taken from them because the assets and liabilities of the companies concerned have changed. In the case of the aircraft industry the changes are quite clearly irreversible. We have therefore come to the most reluctant conclusion that there is no satisfactory way to alter the 1977 compensation terms—.
The noble Lord, Lord Diamond, underlined this.
I have to say with the greatest respect to the noble Lord, Lord Harris of High Cross, that he was not quite correct in all that he said this afternoon. The wide margin of appreciation referred to in the court's judgment relates to the right of any contracting state to decide on the method and terms of compensation. But the 1977 Act did not give a wide measure of discretion. Compensation had to be within the confines of the statutory formula. In part that is an answer to one of the comments of my noble friend Lord Ferrers. Discretion to alter the compensation terms would have needed new legislation and the Government decided against this course, as I have reminded your Lordships by completing the quotation in Hansard of 1980.
I cannot help the noble Lord, Lord Monson, other than to suggest that his contribution was an interesting commentary on Government financial policies, with which he obviously does not agree, and some of the social consequences of those policies. I fear that it had little to do with the court's judgment.
My noble friend Lord Ferrers spoke of the unfairness in compensations. As other noble Lords have suggested, applicants' estimates of value relate to 1977. But, again, the noble Lord, Lord Bruce of Donington, reminded us that there was at the disposal of the Govenment of the day an eminent company to help in the valuation. The Aircraft and Shipbuilding Industries Act stipulated a reference period of six months ending 28th February 1974 for valuation for the purpose of compensation. The Secretary of State at the time had no discretion whatsoever to alter this. It was enshrined in the Act.

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My noble friend Lord Peyton asked me about three specific matters. First, how was the compensatory formula arrived at? It was in fact arrived at by negotiation on the hypothetical base value of the unquoted shares, again as required by the Act, and I think that he will probably recall that. Secondly, how were the shareholders' representatives persuaded to accept ultimately the offers made? It is not for me to answer for the shareholders' representatives. Presumably they were ultimately satisfied that they would not do better if they went to the tribunal. Thirdly, the noble Lord, and indeed my noble friend Lord Ferrers, said that this was unfair. Again I refer to the Hansard report of 1980.
However, in addition perhaps I might say this to my noble friends. Sir Keith was faced with the problem of balancing one unfairness against another. No satisfactory base could be found for amending the terms. There was the probability of unfairness if they were to be changed. My noble friend Lord Ferrers asked me to be open minded and generous. But I have to say to him, with all the openness and generosity that I can muster, that I cannot give him the undertaking that he seeks. I am sure my noble friend will appreciate the reasons for my being unable to do this.
Earl Ferrers: My Lords, may I ask my noble friend one question? I am very grateful to him for giving way. Does the noble Lord mean by that answer that he therefore considers it fair to pay £3·8 million for £5 million of cash and £13 million of assets?
Lord Lucas of Chilworth: My Lords, I said at the outset that I was not going to involve myself in figures, for the same reason that the noble Lord, Lord Bruce of Donington, did not do so. I do not have the balance sheets. I do not have personal knowledge of the situation in 1974 when the valuations were made. It would be quite wrong with hindsight to make the kind of judgment my noble friend seeks from me.
I turn to the points made by the noble and learned Lord, Lord Denning. He spoke with hindsight. The Government have made plain their views at the time on the merits of the 1977 Act. The question was whether the harm it did could be repaired. The Government decided that repair was not possible. The noble and learned Lord said that we could have legislated. If the court's decision had been against us then we would have felt bound to seek ways of meeting the court's judgment. It is not for me this afternoon to determine by what means that would be done.
Perhaps I may turn to the noble Lord, Lord Diamond. From the reference point of vesting day, dividends could be paid subject to the safeguarding provisions. However, after vesting day interest was payable on the compensation and the court observed that this gave some shelter against inflation from then until the date of payment. The noble Lord questioned his own memory of this fact, and I can confirm that his memory is correct. It is, of course, exactly the answer to the question raised of him, by the noble Lord, Lord Monson.
I should like to turn lastly, but not least, to the noble Lord, Lord Bruce of Donington. I am grateful to the
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noble Lord for referring the House to the passages concerning the judgment of the court, as to how the amount of compensation was arrived at in each case. I believe that those noble Lords who still feel some disquiet in this matter should take the judgment and read it most carefully, as it puts into perspective a number of the figures and the suggestions that have been made.
I recognise, as does the noble Lord, Lord Bruce of Donington, that the judgment is no comfort to all those who feel very deeply that they were unfairly treated by the provisions of the 1977 Act. I repeat that we were unhappy at the time about many of the provisions of that Act, and remain so. However, I have said and given the reasons why it is with reluctance that the Government decided as soon as they came to power, after a very full and exhaustive review in 1980, that the compensation provisions could not be altered.
Lord Harris of High Cross: My Lords, before the noble Lord sits down finally, I should like to ask whether or not he accepts that what was on trial both at the Commission and at the international court was not the precise terms of the 1977 Act for the reason that they would have been out of time, more than six months having elapsed. I should like to ask the noble Lord whether or not he agrees that what was under consideration was the implementation of that law, and that was still being moulded at that time in 1980, 1981, or 1982, by his colleague the Secretary of State for Industry.
Lord Lucas of Chilworth: My Lords, I am not a lawyer or in any way connected with the legal profession. However, what the court had to determine was whether or not the 1977 Act, and those matters that flowed from the Act, were in contravention of our obligations under the 1952 European Convention on Human Rights, and in particular Article 1 of Protocol 1, which we have read out. That is what the court had to determine and they have given their judgment upon that matter.

Personal Information: Accessibility
6.3 p.m.
Baroness Ewart-Biggs Baroness Ewart-Biggs rose to ask Her Majesty's Government what steps they intend to take to increase the accessibility of information of concern to members of the public and, in particular, access to their personal files.
The noble Baroness said: My Lords, I should like to say how grateful I am to noble Lords who have stayed behind, though I quite understand if some noble Lords are now disappearing. However, I should like to say how grateful I am to noble Lords who are remaining to this last business at the end of a long and arduous parliamentary session. I think it shows a great fidelity to the subject that I am raising.
There are many views on what we should do about official secrecy—what information should be open and what should be protected. I have no doubt that most people believe that they ought to see the information public authorities and other institutions hold about themselves or regarding their own personal affairs:

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information which schools keep about their children; which doctors and hospitals keep about their health; which public authorities keep about their entitlement to housing and various benefits; the personnel records which employers keep or the records which social workers and other professionals hold.
I should like, as briefly as I can, to cover the following points. The first is my reasons for believing that a freer disclosure of such information would not only be right in principle but would also be advisable from a practical point of view. Secondly, I wish to describe the level of support which such a proposed measure is attracting. I should also like to outline the safeguards as contained in the draft Access to Personal Files Bill, safeguards which would counter any adverse effects that this great freedom would bring about. Lastly, I should like to say that I feel that the time is right to make progress of this kind.
From a moral point of view, I believe most sincerely that people should have a legal right to see records about themselves or their children. I think this is right in principle. I also think the practical arguments for freer access are overwhelming. I should like to describe some of these arguments. Such records are the basis often of crucial decisions about our lives and it is essential that we should be able to check them to make sure that any mistakes or false impressions are corrected.
One has recognised the fact that many people do not even realise that the authorities and institutions with whom they have dealt briefly at some time in their lives, hold files on them. Still less do they realise that information from such files may be passing from one agency to another. For example, when a person applies for a job or for life insurance it is usual now to be asked to authorise the taking up of a medical reference. The doctor is asked to give the employer or insurance company a report on his patient's health. In some cases the doctor may barely know him. He may just have arrived in the practice. However, the doctor will report on his physical health and perhaps also his mental health, using the records passed to him by a former doctor. The record may describe a condition which existed some time ago, but fail to report that that condition has since been completely cleared up. There may be mistakes. The person's employment or insurance prospects may thus be damaged. At the moment he is not entitled to see the report the doctor writes or the medical records the report is based on. There is no chance of any errors being corrected.
Another danger is that mistakes can affect the medical treatment that people are given. This is a very important point. If past symptons, treatments or tests are wrongly described an incorrect diagnosis may be reached and the real cause of illness may be overlooked. On a further point, a small survey of records at one medical practice reported in 1978 that doctors were ignorant of much of the information considered to be important for the clinical care of patients. The survey found that 50 per cent. of women who have suffered complications of pregnancy, miscarriage, stillbirth, terminations, have no note of this on their medical records. Ten patients in this practice had known allergies to drugs. However this was not recorded on their medical files.
There are many examples of these mistakes that I could give your Lordships. However, it is sufficient to say that one general practice in London which does encourage patients to look at their own records reported recently that as many as 12 per cent. of their patients discovered errors on their medical notes. Many of the errors were minor, but some were not. Some of these files had details relating to other patients which had been misfiled, and were included in their own notes. Mistakes are found not only in medical records; they can also occur in social services files. I know of one instance of an elderly lady whose file contained wildly different accounts of her supposed age. Her entitlement to various benefits depended entirely upon her age. The taking up of these benefits could well have been jeopardised by the false information. There can be little doubt that the most effective way of maintaining accurate records is by allowing the relevant person to correct the mistake himself or herself.
There is another reason why people may want to see their records; that is, to learn about themselves. To a person who has spent his or her childhood in care, the record kept by the social services department may be a very real and vital source of personal history. Denying such people access to their own records when they grow up seems a particular injustice. Others may wish to see their records because they are suspicious about their contents. They may think that decisions are being taken behind their backs, or that they have been misrepresented or ignored altogether.
Indeed, it has been shown that authorities which do allow access to their records report that it often works wonders in removing misplaced suspicion. People are able to see precisely how their affairs are being looked after and dealt with. Sometimes they have not realised what considerable efforts are being made to help them, and therefore they are greatly impressed by what they learn from their records.
It is sometimes suggested that a right of access to medical records would cause special problems. I am quite sure that most of us would prefer to learn about our health by asking our doctor directly. No one would suggest that we should stop doing so and turn to our records whenever we want information. There are all kinds of reasons why most of us would not wish to do so, not least of all perhaps the difficulty of reading the doctor's handwriting, though I must ask my noble friend Lord Rea to forgive me for saying that. However, there are times when people simply do not get the information they need from their doctors. The British Medical Journal reported this June on the results of a study into the way in which young doctors handled consultations with patients. It found that very few provided information about the cause or likely prognosis of an illness or about any tests that were being done.
To put the problem from the patient's point of view, I know of a woman who, when in hospital—and it has happened to many of us—described how she obtained information about her blood pressure. She looked at her chart when the nurse was not looking, and when the doctor came in, instead of finding out from him, she listened to the information that he was giving the students. I know that I have done that, especially when

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I have taken my children to hospital. I have obtained my information through listening to what the students were being told by the doctor.
Moreover, there are still too many cases of patients not being told their diagnosis when they are seriously ill, and too many cases of people learning not from their doctor but from some other source that they have a serious condition. Indeed, examples have been given in the Lancet of how people have learnt of their serious illness from a receptionist, or indeed in one case from a home help. Many of these patients had questioned their doctor about their illness, but had been put off, perhaps because the doctor feared that an emotional scene would result. Some patients may not want to be given such bad news, and of course it should never be forced on them. However, equally, patients should not be put in the position of having to force it out of the doctor. Surely the best solution must be that the person should be given the option of either informing himself through his records or remaining in ignorance. However, it is his decision rather than the doctor's.
I should like to say a few words about the attitudes of the medical profession, though of course my noble friend Lord Rea will be doing this. I regret the fact that the British Medical Association's annual meeting this year voted, by the narrowest of margins, against allowing patients any right to see their records. However, on the other hand, it is encouraging that the BMA's GPs' committee and also its ethical committee both recommended that patients should have a right of access, though they wanted the doctor to retain the opportunity to withhold information where it was felt that disclosure would harm the patient's health.
I should like to comment briefly about the support there is for the measure that I am suggesting. It is particularly encouraging to see that there is a high level of support from the professions for this principle of opening up the records. This has come from such bodies as the Institute of Management, the Institute of Housing, the British Association of Social Workers, the Royal College of Midwives, the Health Visitors Association, and many others. This morning, I received a letter from the National Consumers Council, which of course was very supportive of this particular measure.
Still more significant are the steps that some authorities have already taken, on their own initiative, to allow access to the records that they hold. This has been done by a number of education and housing authorities and by some doctors, whose patients are given their records to see while they wait. Also, a number of employers, including the IBM, British Coal, Swan Hunter Shipbuilders and British Gas allow employees to see their own personal records. Such records are on occasions also open to officers and soldiers in the army.
Therefore I think that this shows that the process of allowing greater openness has been started, and I am sure that it will come as no surprise to your Lordships to know that the measure is enormously popular with the public. A MORI poll commissioned in July this year found that of some 1,900 people questioned, as many as 73 per cent. wanted a right of access to their medical records. In the same survey, 67 per cent. Of
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those asked favoured a right of access by parents to their children's school records.
As your Lordships know, from November 1987 the Data Protection Act will give us the right to see and correct personal information held on computer, and this is a very important step. However, our concern today is that the Act does not extend to records kept on paper, and I have no doubt that as people begin to exercise their new right, this anomaly will strike them forcefully. Perhaps it will even seem ridiculous. Why should their right to ensure that decisions about them are taken on the basis of accurate information depend on the form in which the information is recorded? Indeed, it seems ironic that this right should be determined according to whether or not a particular authority uses a computer. I cannot help feeling that it will be a great struggle to have two systems—one of open files held on the computer and one of closed manual files.
There are disturbing signs that some computer users are considering deliberately transferring what they regard as sensitive information from computer disk onto paper solely in order to avoid having to disclose it. Therefore it seems inevitable that soon there will be a very strong demand for the right of access to be extended to paper records. It is for this reason—in order to complete the process started by the Data Protection Act—that the Access to Personal Files Bill has been prepared.
I shall not go through the provisions of this Bill, but I should like to conclude on the protections that are being offered in the Bill by way of safeguards. The first safeguard protects personal information on a file which may relate to some third party—perhaps another member of the family. The second would protect the identity of members of the public who had provided information to an authority about the subject of the record. The third would allow information to be withheld where disclosure might expose someone to the risk of physical attack. The fourth would allow information to be withheld from the subject of the record where a doctor believed that he or she could be seriously harmed by the disclosure. This recognises that there may be occasions—for example, if a person is already in the midst of a severe emotional crisis—when it would be better to defer access to information about a particular traumatic event until the crisis had passed or counselling to help the person cope with the revelation could be provided.
Therefore I think that everything is moving in the same direction. We have a Data Protection Act; we have a Department of the Environment which has provided for applicants for council houses to check that the information they have supplied has been accurately recorded. The Education Act 1981 provided the right of access to some information to parents of children with special education needs. In 1983, the DHSS launched a consultation process on access to social work records and in a circular encouraged local authorities to adopt a more open approach.
As I say, I think that everything is now coming together to show that we want to go this last step and make files open for people to see, whether they are on computer or on paper. I believe that that would really

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show that the public are becoming a great deal more interested in health and medical information. They are showing a great deal more sophistication in this matter. Therefore the right of access would be to the benefit of everybody and it would support those individuals who, after all, wish to be more responsible for themselves. I very much hope that the Government will do everything possible to further this aim.
6.20 p.m.
Lord McNair: My Lords, this is not the first occasion, and I am sure it will not be the last, on which the House finds itself very much indebted to the noble Baroness, Lady Ewart-Biggs, for bringing before it an interesting subject and one which is of deep personal concern to a considerable number of people. She has covered the ground so comprehensively that she has not left a lot for the rest of us to say, but on past form I doubt whether we shall find that too inhibiting. There will be many specific areas in the much wider area, that she has covered that we can amplify or underline.
The first thing I want to do is to assure her that my noble friends on the Alliance Benches fully support this freedom of information campaign of which she has spoken. Indeed my Liberal Party has chosen as its president for this year Mr. Des Wilson, who is the chairman of the campaign committee. However, our support for this campaign should not, and does not, blind us to the fact that some progress has already been made in desirable directions.
I want to talk today about children, and it would be most ungenerous if I failed to remind your Lordships that the Children Act 1975 considerably increased the right of adopted children to discover their origins. I suggest that it is difficult to exaggerate the importance of measures of this sort. Those unforgettable words "know thyself", which were written for all to read in Apollo's Temple in Delphi, must surely be the best advice ever given to anybody by anybody else. For children who, through no fault of their own, have had a chequered upbringing self-knowledge may very likely be the essential prerequisite, without which they have little or no hope of achieving a sound, rational and non-neurotic attitude towards other people and towards the world into which they have, often so unthinkingly, been brought.
Under the Children Act an adopted child on reaching the age of 18—and I wonder whether perhaps it ought to have been 16—has a legal right to receive a copy of his or her original birth certificate, but only—and this is important—after careful counselling. He or she will at least learn from that the name of the natural mother and is then free to pursue what further inquiries he or she may wish. I am told, incidentally, that only a very small proportion of such children go so far as to seek out and confront their natural mother, but the Act is still young, it is only about 10 years old and it would probably be premature to draw statistical conclusions.
The adopted child, particularly in cases of what one might call traditional adoption, where the baby joins its adoptive parents at a very tender age, is in many ways in an enviable position compared with some others. If you have had a happy childhood and if your
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adoptive parents have correctly given you as much information as they can about your origins as and when you ask for it, you may well in your teens be interested to find out more about your genetic inheritance but you probably will not be unduly bothered about it. The much more worrying case is what one might call the young human shuttlecock; the child who has been batted to and fro, in and out of care, fostered here and fostered there, with periods in between in various children's homes.
Imagine the questions which may ferment, perhaps possibly even fester, in your growing mind: "I wonder why they chucked me out?" "Where on earth was I between that family and that home?" "What went wrong? I quite liked it there. I can't remember". You are almost in the position of one of these fictional characters who comes round after some physical or mental shock and cannot remember who he is. You are a young person with a half-remembered, patchy past; and the answers to all these questions are locked up in the files of perhaps several social service departments.
These will almost certainly not be computerised, and so the Data Protection Act will not help you. You are one of the many kinds of person who would be helped by the sort of draft Bill to which the noble Baroness referred. The schedule to that draft Bill mentions among the records to which access, apart from essential safeguards, would be open to all, the following: records relating to any individual who has been or is in the care of a local authority; and, in the private sector, records relating to any individual in residential accommodation for orphans or other children no longer being cared for by their parents or adoptive parents.
There are many other categories of person who would benefit from such a Bill. For example, people who have either been rejected or struck off the list of possible foster parents. Should they not have a right to know why, to see the record and, if it is wrong, to correct it? In conclusion, the sooner we get some such Bill the better. I hope that the noble Lord, Lord Belstead, will be able to tell us that the Government are contemplating some steps in this humane and, I would hope, politically uncontroversial direction.
6.28 p.m.
Lord Denning: My Lords, the law has often had to consider the confidentiality of reports. It is important in nearly all cases that the person who makes the report should be able to do it fully and frankly without fear of a libel action being brought against him. Therefore in many cases the public interest requires the report to be kept confidential. But there are cases when it should be made open. It depends so much on the individual cases.
Let me take the first matter, employer and employee. It is everyday practice for reports to be made to the manager or superior officer on the conduct and efficiency of an employee. Often they are confidential and are not disclosed. In one case we had, a man after he had been dismissed managed to get sight of a confidential report which said that he was unstable, highly sensitive and the like. He brought a libel action on account of it, and the jury awarded £15,000. We had to reverse it afterwards. But that is employer and employee.

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We had other cases concerning employer and employee where a lady complained that she had not been promoted, whereas two men had been promoted and she was much better than they were. She said "I want to see my reports and the reports on those two men, because I am sure that they were not as good as mine". She was allowed to see her report but the men said that theirs were confidential and that she must not see them. We said it was to be left to the discretion of the chairman to decide. But in another case we were told (I hope it is right still) that the Civil Service and many other big employers allow the individual person to see all his own personal reports. I believe that is the practice in the Civil Service and in many of the big companies. I should have thought that was a good advance, but I do not think that I would make it a legal obligation.
Then we have social workers reporting on whether a couple are fit to adopt a child. Social workers say whether a child has been maltreated or not, reporting to the council what they find. I am afraid that some parents say "We want to see all those reports. They must be untrue. We want to sue for libel". In most Cases the reports must be full, frank and honest. It would be quite a mistake to allow the parents or other people to have complete access to them. If it comes to a court or inquiry, whoever it is will use his discretion to say whether that should be allowed or not. It may be the worst thing possible to let the proposed parents, or whoever it may be, see the reports.
What about medical reports? How often have we come across those? They often come up in actions against doctors or hospitals for negligence. Continually it is the case that they disclose where agreeable the hospital records and reports, subject to the medical report being full and frank. We had one case of suspected cancer. Was it right for the patient to see that and be worried accordingly? Quite often doctors for the sake of their patients do not tell them the whole truth. It is a question of medical knowledge and expertise as to how much the patient should be told. But when the doctor is making the report so that those advising or following on can see it, he ought to make it full and frank, not having to worry whether the patient will see it afterwards.
In a way it is a delicate matter of judgment. It would be a pity to give every patient a right to see every medical report made upon him. Doctors would not be fair and frank or give a proper report if they thought that a patient would be worried out of her senses if she knew the truth. In other words, it is a delicate balance to take in all these cases, whether one is to protect these confidences, which are vital in many cases, or whether one can have open information.
I should like to have whatever is in the best interests of those concerned. I suggest that it is not a matter in which the courts or even the law or Parliament can intervene. I should like those immediately concerned to lay down rules of guidance about what should be done and when there should be disclosures, not in the law but as a matter of guidance in all the difficult and infinitely varied problems that may arise in life.
This is a most important question. I should be against any lawmaking upon it. We should leave it to
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the good discretion of the professions and of others concerned.
6.36 p.m.
Lord Rea: My Lords, the Question which my noble friend has raised has been discussed at great length by professionals from a number of disciplines, including legal experts. We have heard a notable contribution from one of the most eminent of these. Also lay people representing the general public have thought deeply about these matters. As has been mentioned, there is a campaign for freedom of information which has produced a draft Bill on this subject. I have not been at the forefront of these discussions, but I feel qualified to speak in support of my noble friend's Question because I am a member of a profession that probably makes and holds records about more people than any other. Almost everybody has a general practitioner and some sort of note is usually made at each consultation. About 200 million consultations occur with GPs every year. The records of some patients contain long and detailed letters and reports to and from specialists giving in-depth assessments of a particularly personal nature. The notes of hospital patients are sometimes even more complex and often impossibly bulky. Sensitive information of a similar kind is also held in the files of social service and education departments, housing authorities and other bodies and professions which deal with people and their problems.
Because nearly everybody has a medical record held by his GP it is not surprising that in the recent MORI poll mentioned by my noble friend it was general practice records that most people wanted to see. It was 73 per cent. as she mentioned. It is traditional to regard medical files as sacrosanct. However, they are obviously of enormous interest. I have often gone out of my consulting room to fetch something and on my return found the patient guiltily flipping through the notes—like a naughty schoolchild caught smoking behind the bike shed. I think we should remove that guilt. The tradition that "doctor (or nurse) knows best" was always accepted rather reluctantly and was imposed by a profession which relied on a mystique for its authority because until 50 years ago it had very few scientific remedies to offer. Notes were more scanty—and often in Latin—and the traditional bad handwriting of doctors, which I own to, was an aid in perpetuating professional mythology. But, as diagnosis and treatment have become more rational and the importance of social factors in medicine has become increasingly recognised, more complete notes are needed, especially as medical practice becomes more of a team effort. This applies to other professions as well, especially to social work. I personally believe that the patient, as far as possible, should be a member of that team.
If that became the case, should they not have the right to know what information is held about them? I should like to be able to give an unqualified "yes" because of the apparent justice of the principle and because there are many advantages to be gained by adding the patients' scrutiny of their notes to that of the professional. There has necessarily to be some qualification of the principle, and I shall go into this a little bit later, but, first, the advantages of patients

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having access to their records include, for instance, from a purely practical point of view the fact that records are likely to become more factually correct even on something so simple as date of birth.
There are sometimes quite glaring inaccuracies in people's notes which may affect how other doctors and professionals approach them. One unusual example that has been brought to my attention was that of a woman who was recorded in the medical notes as being a registered drug addict, which she was not. In fact, she had been impersonated by a drug addict who had used her name while the patient had been out of the country for three years.
More open records lead to greater trust between the client or patient and the professional worker and this particularly applies in the social-work field. Another problem is that professional records today all too often contain judgmental and opinionated statements and I think that that goes beyond what is "fair and frank", in the words of the noble and learned Lord, Lord Denning. I personally have to confess that I have recorded derogatory remarks in a patient's notes on occasions when I have felt that someone is going on too long when there is limited time at my disposal. Of course, it might be possible that if a patient should read the derogatory remark a difficult area might be opened up, beneficially.
I consider that it would be very salutary for doctors to consider carefully the effect of what they write on the future doctor/patient relationship should the patient read it. Sometimes patients read things even now, and the effect is not always good. Also, such remarks when read by the next professional may well bias him or her against patients before even meeting them. That is something very much to be deplored and which more open access to records would avoid.
People sometimes need to read their records to find out important things about themselves, as the noble Lord, Lord McNair, has pointed out. It so happens that only yesterday a patient of mine, a woman of 26, came to see me and said that she was trying to complete a record of her origins and childhood so that her son, who is now a baby, could read it when he was older, as she knew very little about her early life. I was able to go back into her records and show her a report which had been made when she was two years old which was a summary of her admission to the Whittington Hospital. The report read:
"Diagnosis: generalised bruising and cephalhaematoma. History: child of problem family, mother known to knock the children, particularly Ann (a fictitious name), about. Father had found the child crying, bleeding from the right ear with a large bruise in the occipital region."
This woman, apart from always having had a bad relationship with her mother, knew nothing about this episode. I was able to advise her on how to get further information from the Social Services Department about her early history and how to get details about her birth.
People can make important decisions more easily if they know the full truth about their medical condition—the fact that they are suffering from multiple sclerosis, for instance. I take the point of the noble and learned Lord, Lord Denning, that sometimes doctors are not certain of the diagnosis and
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that it is perhaps right not to divulge their degree of uncertainty if it is going to worry the patient greatly. But I shall go on to that in a moment because there is another side to it.
Medical opinion is coming round to agreeing to patient access to records, but with safeguards. The most important group backing the principle of freer access is the inter-professional working group established by the BMA and chaired by Sir Douglas Black. Their report says:
"Access encourages openness and can improve the quality of the record by correcting factual errors and reducing misunderstanding."
They go on to discuss the safeguards which they feel are needed to prevent disclosures causing distress, harm the breaching of other people's privacy and to ensure that information is properly explained.
These safeguards have been spelt out in the draft Bill mentioned by my noble friend and seem to me to provide reasonable protection. The most difficult area—and I do not think that the proposed Bill as it stands has fully cleared the difficulty—is in deciding when disclosure might cause distress or harm to the patient or client and, I might add, alter the professional relationship in an unhelpful way. This might occur, for example, in a psychological or pschyiatric framework when the patient is still in a vulnerable, disruptive or disturbed state. Here I think there is a case for a degree of paternalism, or maternalism if you like, if the doctor or therapist is consciously using it appropriately as a therapeutic tool.
I am not sure that, if the right to access were declined and the patient used his suggested "right to seek access through an independent health professional of his choice", this situation would be adequately covered. Faced with this situation, the notes that the professional concerned makes during a consultation could be modified so that remarks could be made which mean one thing to patients and another to a fellow professional. And to some extent this is already done, although considerable difficulty could arise with regard to information that is already recorded in notes were clients to have access to their entire records. My noble friend has mentioned that the proposed Bill has thought about this and that it is only from the date of the legislation becoming law that patients will have full access, or even modified access, to their records.
I am inclined to agree that the professionals concerned should be able to prevent past records which were thought to be damaging from being divulged and that only information which was recorded from the date of the Act should be covered. It certainly would be a formidable operation to "vet", if one may use that word, all the records held relating to past events, and I think that some such rule would be necessary. I hope that the further discussion which will doubtless take place if legislation along these lines is introduced will result in a clearer solution to the kind of problems I have been mentioning.
As I have said, the medical profession is now on the brink of accepting the principle, with safeguards, and the BMA's annual representative meeting only just failed to agree to this by a vote of 183 to 169 at the Scarborough meeting this June.

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The General Medical Services Council of the BMA, which represents GPs, is in favour of modified access and has accepted the principle, as has the Royal College of General Practitioners. Hospital doctors are not so much in favour, and the Royal College of Psychiatrists, while in principle in favour of free access, felt that greater safeguards would be required in the case of psychiatric problems, not least because so many people other than the patient are involved in giving information on the understanding that it is confidential. I very much hope that the Government will look favourably on any legislation based on this draft Access to Personal Files Bill which may be proposed in either House in the next parliamentary Session. Of course it would be better still if they were to introduce such a Bill themselves, but I shall be very interested indeed to hear the views of the noble Lord, Lord Belstead, when he replies tonight.
6.50 p.m.
Lord Jenkins of Putney: My Lords, I hope your Lordships will permit me to make a brief intervention. My name should have been on the list but, because of inadvertence and an error, it was missed off. Nevertheless I will endeavour not to detain your Lordships for too long. I should like to join those who have congratulated my noble friend on introducing this subject. It is an important one and she has performed a service in bringing it before us this evening, even if we are getting towards the end of our present Session.
As my noble friend has said, next year personal records are to become available where they are kept on computer; but there seems to be no reason why they should not continue to be concealed by keeping difficult or sensitive cases off the computer and in typescript, which is still the normal means of recording the bulk of official information. I therefore think that this proposed Bill is necessary for that purpose alone, if for no other, because it would be an absurd anomaly that the whole issue should depend on what particular form of record was adopted. One can easily envisage a situation where it would become the norm to have one form of computerised record of anything which could be released without any problems at all, and to have a second, non-computerised record of things which might give rise to difficulties or problems.
However, our discussion tonight has concentrated very largely upon the medical aspects of matters, and there are other things as well. In particular, so far as the Data Protection Act is concerned and also so far as the draft Bill is concerned, there are some areas of exclusion. Oddly enough, there is one particular area of exclusion—a normal area of exclusion—which I particularly think should not be excluded. It is a difficult area, certainly: it is the problem of national security. Because national security is, as it were, not to be looked at, not to be investigated and to be put on one side, there are good grounds for believing that much more evil and much more error exist in this area—for the simple reason that none of the ordinary means which exist in all other areas, medical or otherwise, for keeping an eye on the scene is permitted to occur in this area.
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There is reason to believe that error in this area is not unusual. Indeed, there are those who suspect that it is the norm. The difficulty arises in distinguishing between a desire to improve the world and a determination to destroy it. At first glance this may seem a simple distinction to make, but in practice the line between seeking to change society and overthrowing the establishment is not always an easy one to draw.
So far as the secret services are concerned, socialism and subversion are virtually synonymous. Indeed, it is said that there are a number of files in the secret service on a substantial number of Labour Members in another House, and indeed even on one or two Members of your Lordships' House, I am sorry to say that the time when I was myself regarded as a danger to society is probably long past; but unless they have been shredded, I suppose the files are still available.
The secret service was a nuisance to me for a number of years with their tapping, bugging and so on—and even burglary on one occasion. They affected the course of my post-war career quite substantially, and indeed my presence here this evening is probably due to the secret service more than to anyone else. That may be regarded as a benefit or otherwise, according to how your Lordships may look at it, but the secret service brought this about by advising the BBC in the immediate post-war period that, as a security risk, I could not be employed by them. I therefore turned to trade unionism and politics, and thus ended up in your Lordship's House. So you have the secret services to thank—if that is the right word—for what has happened: otherwise I might now be a long-retired disc jockey!
Seriously, the problem is the total lack of supervision and the inability of the suspect to know that he is suspected, let alone of what he is suspected. This is the problem. If a freedom of information Bill were to come before your Lordships' House, I should take the view that every voter in this country is entitled to know whether or not he is regarded as a security risk and whether the security services are storing information about him or her. In this case it may be difficult to give every suspect access to full information. As I say, it is a difficult area and the right to see files is one which I think would have to be looked at with some considerable care. But in view of the belief—we cannot say whether it is a fact or not because we simply do not know—that a lot of the alleged information held in these files is inaccurate, something must be done to bring the security services under parliamentary supervision, as is done in many other countries.
Before I sit down—and I promised that my intervention would be short—I should like to draw to your Lordships' attention the report by Richelson and Ball on the intelligence co-operation between the United Kingdom, the United States of America, Canada, Australia and New Zealand and to give your Lordships a short quote from it. They are talking about the degree to which throughout the world there exists a framework of communication of security services which, for the most part (and particularly in this country) nobody knows anything about. More is known in the United States and in Australia and the other countries I have mentioned. In those countries examinations have taken place. The report says:

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"In each case, also, the investigating bodies have discovered a wide range of security service activity which would generally be considered either improper or clearly illegal".
I know this to be the case from my own experience. Improper and illegal activity, I suspect, while not necessarily the absolute norm, is a pretty frequent occurrence in the secret service area; and I think it is time that Parliament took a look at this problem. Parliament should decide that we really cannot any longer go on in this way whereby something is happening all the time which we know nothing whatever about because there is no effective control over it.
This Bill, which we hope will become before us, may or may not be the right way to approach this problem, but if we are going to move into a more fully informed society then we ought not to put on one side the one area of which we know least about of any. We ought to make some movement into this area and try to bring it under some more rational control, because the most peculiar and odd things take place at the present time which have no rhyme or reason in them whatsoever.
I again congratulate my noble friend on introducing the subject and I hope we are going to hear much more about it. I look forward to the Government's reply and, in particular, as to whether the noble Lord will say anything at all about the aspect of the problem which I have briefly introduced this evening.
7 p.m.
Lord Silkin of Dulwich: My Lords, my noble friend is to be thanked for bringing to the attention of this House the question of accessibility of information, which is of concern to members of the public, and in particular the question of access to personal files. It is a wide subject and both my noble friend's speech, which was extremely, thoughtful and delivered with great feeling, and the other contributions which the House has heard concentrated for the most part on the second part of the Question, with regard to access to personal files. The notable exception was my noble friend Lord Jenkins of Putney who, as I think he will agree, somewhat widened the area of discussion.
In the discussion before the present one the House was concerned with the provisions of the European Convention on Human Rights and it is perhaps of interest to observe that the right to information is not one of the fundamental rights and freedoms enshrined in the convention and that such a right could therefore not become part of our law if the convention were simply enacted in United Kingdom law. If anything, the convention rather leans the other way and tends to favour the protection of citizens' correspondence and indeed subjects even the right of freedom of speech to restrictions to prevent the disclosure of information received in confidence. However, I think it has become more and more widely recognised that the fundamental freedoms—freedom of speech, the right in a democratic society to exercise one's vote and the right to impart or receive information—must, in order to be fully effective, be informed freedoms. The citizen cannot make an informed choice without the necessary knowledge of the issues before him, and similarly he cannot effectively exercise his right to the
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measures to protect his reputation without having the right to become aware of what is said about him and the record about him which may be to the detriment of that reputation. Hence the two pillars upon which my noble friend's Question is founded are bound up with the preservation of our freedoms. They are necessarily ancilliary to the freedoms which the convention safeguards.
I want to say a word or two on each of those pillars, although I have recognised that the debate has been mainly about the personal files aspect of information of concern to the public. Dealing with that aspect first, I am bound to say that, like my noble friend and others who have spoken in this debate, I have never understood the logic of giving access to computer data but not to manual records which relate to precisely the same information. The ability to defend oneself against attack, and indeed even to know in what respect an attack is being made, has no reality if one cannot find out the nature of the attack. Unless files are open to inspection there can be a great temptation to make careless and unjustified comments. I am sure that that is not a temptation confined by any means to doctors, but is one which may affect very many people.
There are indeed a number of examples given in the well-argued report issued by the Campaign for Freedom of Information and the noble and learned Lord, Lord Denning, referred to the possibility of opinionated statements which may not have any apparent basis of fact but on which others may rely. I hope the House will allow me briefly to give an example of that which affected my own family—with what consequence I think it is for each person to judge for himself.
It is part of the lore of my family that in the first decade of this century, when my father was coming to the end of his schooldays, he sat for and won a mathematical scholarship to Worcester College, Oxford, but his means were such that without a grant from the local authority he would not be able to take it up. To get that grant he had to have a recommendation from his head teacher. His head teacher gave a recommendation that stated that in the head teacher's opinion "this boy would not benefit from a university education". That was a matter of opinion and not of fact. My father always used to say, in a somewhat sceptical way, that had that not been done and resulted in his not going to the university, he would have probably lived his life doing the very important task of a mathematics teacher rather than as Minister of Town and Country Planning. Being an opinion, that could not be demonstrated to be false—at least not until later on.
It is quite clear that the right to examine records cannot be wholly unlimited and the report of the campaign very fairly recognises this. Indeed it considers with very great care the exemptions that would be necessary. It would be wrong in this debate for me to go into those in detail, because we may at some time in the future have either a Government Bill or a Private Member's Bill and that will be the time to work out the precise boundary lines. I think it is sufficient to say that the balancing of public interest has always been a problem which has delayed legislation in fields analagous to this one, particularly on the subject of freedom of information. The

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question is always where the line is to be drawn. While I agree with the noble and learned Lord, Lord Denning, that it does raise extremely difficult questions, I do not myself think that one should therefore fight shy of legislating at all. I think that this is the difficulty which Parliament has faced in other fields and which it ought to be prepared to face in this one.
Perhaps I may say a word or two about the more general question of freedom of information. The Labour Government issued a White Paper (Cmnd. 2285) in 1978 which traced the long history of this problem and made the pertinent comment that:
"Recent Governments have, in fact, done more and more to provide information to the public".
One ought not to assume that things have stood still through the report of the Franks Committee and the events of the years that followed it. Whether in the form of White Papers, consultation papers, briefings, evidence to Select Committees or otherwise, far more information has been made available to Parliament and to the public than was made available 30 or more years ago. I hope we would all agree that Parliament, above all, is entitled to information, and that we need to be very wary of any Government seeking to circumscribe the information that may be revealed to Parliament through Select Committees.
However, the Command Paper went further. It emphasised the very close connection between that which, whether for security or other essential reasons—my noble friend Lord Jenkins will forgive me for saying "essential"—must be protected by the criminal law, and the residue of information which cannot be released to the public under the most liberal system that one could enact. Indeed one has to recall that even in the United States and Sweden, which are usually held up to us as being countries where liberality in this field goes furthest, there are exemptions for security and other reasons. The White Paper went on to advocate a system of the kind indicated, though possibly, but not necessarily, that was for future discussion to be embodied in statute law.
To give it credit, the Conservative Government that followed tried, though unsuccessfully, to embody the form of Section 2 of the Official Secrets Act in statute form. But in doing so they demonstrated that today reform of Section 2 must go hand in hand with positive legal rights for the citizen to obtain information. Since then the Government seem, naturally, to have been a little shy of this subject.
My noble friend has done a service by bringing it back to your memories, particularly perhaps with a general election in the offing, even if the Question was concentrated more particularly on the matter of personal files. When we come to the general election, I for one hope that all the parties will subscribe to the proposals made by my noble friend, and will indeed go further and subscribe to the idea of a general increase of information available to the public, so that when the election manifestos are prepared this subject will not be a party political one. I have no doubt that my own party will present a manifesto in those terms.
7.12 p.m.
The Minister of State, Ministry of Agriculture, Fisheries and Food (Lord Belstead): My Lords, I join in expressing my gratitude to the noble Baroness, Lady Ewart-Biggs, for raising for debate this evening a subject which is of great interest and covers a vast range, from access to government information to access personal data, whether held manually or electronically, whether held by government or some other official body, or by private firms or individuals.
The noble and learned Lord, Lord Silkin, in making the final speech from the Opposition Front Bench, referred briefly to the aspect of access to non-personal government information and I think it would he your Lordships' wish this evening that I follow the noble and learned Lord in only a sentence or two, simply saying that the Government's policy on access to general information held within government is to make as much information as possible available, while preserving the confidentiality essential to the effective working of government. As well as stating this publicly, my right honourable friend the Prime Minister has made sure that the Government's policy is known to Ministers in charge of departments and through them to their officials.
But the Government are opposed to a statutory right of access to official information and the two reasons which we have given again and again, and which I shall not embellish this evening, are, first, that we feel, as the noble and learned Lord, Lord Silkin, said, that there is now an enormous amount of official information being made available, the best example being the work of the Select Committees which, after all, the previous Conservative Government in 1979 helped to set up, and which make available interviews, memoranda and other documentation from the Executive. We see good examples of that from the Select Committee reports in your Lordships' House and from the other place. The other reason that the present Government have always given is that we think that a statutory right of access to official information would be inappropriate because it would cut across our system of parliamentary democracy. I do not think all noble Lords will agree with me on those two legs of the reasons I have given for that, but, as this evening's debate has centred upon personal files, perhaps your Lordships would prefer that, having said what I have just said, I should try to answer the debate by sticking to that subject.
Let me say a few brief words about the Data Protection Act 1984, which comes into force, as some of your Lordships have said, in November next year. As your Lordships will well know, the Act works through a system of registration by data users with the Data Protection Registrar. Individuals are already entitled to compensation if they suffer damage as a result of inaccurate data or because data have not been properly protected. There is also a right to the correction or removal of inaccurate data or data held in breach of any of the principles of data protection set out in the Act. As I think the noble Baroness said, the rights under the Act are of considerable significance and importance.
The Act again, as your Lordships will remember, extends to data held by government departments, local authorities and other official organisations. There are

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inevitably exemptions from the rights of access; for example, data held for law enforcement and revenue purposes, if access to them would be likely to prejudice law enforcement or revenue collecting. But overall I am confident that the rights being introduced under the 1984 Act are a significant addition to the freedom of information in this country.
I think it right that I should just say this evening in this short debate that, whereas some critics have said that the Act does not go far enough in protecting the interests of data subjects, most of the complaints which have been received by the Home Office and the registrar have come from people and organisations that feel that the registration requirements are an unnecessary burden on the business community. It is argued that the form-filling required and the fee demanded for registration run counter to the Government's general intention of lifting burdens of this kind from industry in general and in particular from small businesses.
As I said and as some of your Lordships have said this evening, a considerable number of exemptions from the requirements of the Act have been devised, but what has proved impossible is to provide a general exemption for the small-scale user. In speaking about small businesses in this connection, I simply say that the Government do not think that in practice the registration requirement will prove to be such an onerous burden. After all, the Act sets out very real rights that data subjects will acquire. They will have great advantages and we look forward therefore to the coming into force of the Act.
The same system of registration would plainly, I suggest, not be appropriate for manually held records. It requires only a moment's thought to imagine what a bureaucratic nightmare would be created if everyone had to identify and register the information they held on normal files. It has to be borne in mind that the impetus behind the European convention and our legislation springs from people's concern about the use and potential for abuse of computers. It is their ability to hold vast amounts of data, to process it rapidly in so many different ways and then to transmit it elsewhere with great ease and rapidity which gives rise to concern. These considerations do not apply to manually held data.
There are nevertheless, and understandably, pressures to allow rights of access to manually held records. The noble Baroness drew attention to the Bill of the Campaign for Freedom of Information with that object in view. I find it interesting that the Bill does not, as I understand it, propose a registration system but simply provides a right to receive copies of certain defined types of records. The Government's view is that even a right of this kind would impose considerable burdens on the organisations holding the records, especially in government departments themselves. It could also prove very costly. I have to say to your Lordships that some departments have said that the scheme would require yet more staff and the Government would not be prepared to agree to extra public expenditure for this purpose.
The noble Lord, Lord Jenkins of Putney, touched on the very difficult subject of security services. I must
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say that I cannot share his views that those individuals who are regarded as a security risk to their nation should be given warning of that fact. I suggest to the noble Lord that on reflection he recognises the serious risks that that would entail.
In trying to make progress so far as manually held files are concerned we are very much bearing in mind the warning which I understood the noble and learned Lord, Lord Denning, gave, that some advice of this nature needs to remain confidential while other advice needs to be made available. It is in pursuit of that that as long ago as 1983 the Department of Health and Social Security issued a circular setting out the general principles for access by clients to local authority social services manual records; and authorities generally are already on the way to implementing arrangements for access.
The Government have already announced their intention to make regulations during the first half of next year to allow access to the educational records of pupils. Consultations have recently taken place on the practical means to implement access to housing records. Following the report of the Royal Commission on Environmental Pollution, steps are now beng taken to improve public access to information obtained by pollution control authorities. Indeed, the importance the Government attach to this last field is shown by the resolution tabled only last week for consideration by the European Communities' Environment Council urging all member states to adopt the same approach.
The noble Baroness and the noble Lord, Lord Rea, spoke about medical records. Health records are, of course, maintained by health professionals to help them in the care and treatment of their patients. It is a matter for professional judgment whether in particular cases it is in the patients' best interests to have access to their own records. Although there is no automatic right of access to medical records it is recognised as good practice for health professionals to be as open and informative to their patients as possible. The Government support that, but do not think that legislation or blanket coercion are the best routes.
The process of greater openness is accelerating in, for example, the field of maternity care; and on computerised records the DHSS has circulated a consultation document to a wide range of professional bodies and consumer groups. The overwhelming majority favour access to computerised health records in one form or another, as do DHSS Ministers. They have therefore decided that patients should have access to their own personal health records held on computer, subject to the condition that doctors may withhold information which is likely to cause harm to the wellbeing of the patient or of others. The DHSS is discussing with the medical profession how best the twin concerns of access and protection for those in need can be accommodated.
In this general context, let me add to what the noble Lord, Lord McNair, said about the careful arrangements that are provided for counselling young adopted people before they are shown their original birth certificates. I think that underlines very clearly how careful one has to be to balance the interests of the individual in being given information about himself or

1241
herself and the emotional harm that can be caused if that information is disclosed in an unprepared or thoughtless way.
Finally, let me thank the noble Baroness and noble Lords who have spoken in this debate. There is, rightly, considerable concern that information should not be withheld unnecessarily from the public. As a result of my reply I trust that your Lordships will feel that, although I have by no means completely gone along with the noble Baroness, the Government nevertheless share the concern that has been expressed and are taking steps to ensure that more information is made available both by government and others in ways that are appropriate to the information in question.

Brighton Marine Palace and Pier Bill [H.L.]
  County of Cleveland Bill [H.L.]
    Dyfed Bill [H.L.]
      London Underground (Goodge Street)
        Bill [H.L.]
          West Glamorgan Bill [H.L.]
          A message was brought from the Commons that they concur with this House in the resolutions relative to the Bills communicated in the Lords messages of 27th October and 3rd November.
Aberystwyth Harbour Bill
  British Railways (No. 2) Bill
    London Docklands Railway (City Extension) Bill

      Pontypridd Markets Fairs and Town Hall Bill
      A message was brought from the Commons that, having considered the resolutions of this House relative to the Bills communicated in the Lords messages of 29th October and 3rd November, they have come to the following resolutions:
      That the Promoters of the Bills shall have leave to suspend proceedings thereon in order to proceed with the Bills in the next Session of Parliament, provided that in the case of each Bill the Agents for the Bill give notice to the Clerks in the Private Bill Office of their intention to suspend further proceedings not later than the day before the close of the present Session and that all fees due on the Bill up to that date be paid:
      That on the fifth day on which the House sits in the next Session the Bills shall be presented to the House;
      That there shall be deposited with each Bill a declaration signed by the Agents for the Bill, stating that the Bill is the same, in every respect, as the Bill at the last stage of its proceedings in this House in the present Session;
      That each Bill shall be laid upon the Table of the House by one of the Clerks in the Private Bill Office on the next meeting of the House after the day on which the Bill has been presented and, when so laid, shall be read the first, second and third time and shall be recorded in the Journal of this House as having been so read;
      That no further Fees shall be charged in respect of any proceedings on the Bill in respect of which Fees have already been incurred during the present Session;
      That these Orders be Standing Orders of the House.

Channel Tunnel Bill
A message was brought from the Commons that they have made the following orders:
That, when the Committee on the Bill reports the Bill to the House, further proceedings on the Bill shall be suspended until the next Session of Parliament:
That if a Bill is presented in the next Session in the same terms as those in which the Channel Tunnel Bill stood when proceedings thereon were suspended in this Session—

(a) the Bill shall be ordered to be printed and shall be deemed to have been read the first and second time;

(b) if the Committee has reported that it has gone through the Bill, the Bill shall be deemed to have been reported from a Select Committee;

(c) if the Committee has reported that it has not completed its consideration of the Bill—

(i) the Bill shall stand committed to a Select Committee of the same Members as the Members of the Committee in this Session;

(ii) all Petitions presented in this Session which stand referred to the Committee and which have not been withdrawn shall stand referred to the Committee in the next Session;

(iii) any minutes of evidence taken and any papers laid before the Committee in this Session which have been reported to the House shall stand referred to the Committee in the next Session;

(iv) the Instruction [17th July] shall be an Instruction to the Committee;

(v) only those Petitions mentioned in subparagraph (ii) above, and any Petition which may be presented by being deposited in the Private Bill Office and in which the Petitioners complain of any matter which has arisen during the progress of the Bill before the Committee in the next Session, shall stand referred to the Committee;

(vi) any Petitioner whose Petition stands referred to the Committee in the next Session shall, subject to the Rules and Orders of the House and to the Prayer of his Petition, be entitled to be heard by himself, his Counsel or Agents upon his Petition provided that it is prepared and signed in conformity with the Rules and Orders of the House, and the member in charge of the Bill shall be entitled to be heard by his Counsel or Agents in favour of the Bill against that Petition;

(vii) the Committee shall have power to sit notwithstanding any adjournment of the House, to adjourn from place to place within the United Kingdom, and to report from day to day the Minutes of Evidence taken before it;

(viii) three shall be the Quorum of the Committee;

(ix) any person registered in this Session as a parliamentary agent entitled to practice as such in opposing Bills only who, at the time when proceedings on the Bill were suspended in this Session, was employed in opposing the Bill shall be deemed to have been registered as such a parliamentary agent in the next Session:

(d) the Standing Orders and practice of the House applicable to the Bill, so far as complied with or (in the case of the Standing Orders relating to Private Business) dispensed with in this Session, shall be deemed to have been complied with or (as the case may be) dispensed with in the next Session; and

(e) if the Bill is reported, or is deemed by virtue of paragraph (b) above to have been reported, from a Select Committee in the next Session, it shall thereupon stand re-committed to a Standing Committee.

That this Order be a Standing Order of the House.

National Health Service (Amendment) Bill
Returned from the Commons with the amendments agreed to.
House adjourned at twenty-five minutes past seven o'clock.

GAS INSTALLATIONS:
  SAFETY STANDARDS
  SAFETY STANDARDS
  CORGI: FUNDING OF SUCCESSOR BODY
  CORGI: FUNDING OF SUCCESSOR BODY
  MARITIME FRAUD: COST AND CONTROL
  MARITIME FRAUD: COST AND CONTROL
  WEST LONDON HOSPITAL: CLOSURE PROPOSAL
  WEST LONDON HOSPITAL: CLOSURE PROPOSAL
  AMRINONE DRUG
  AMRINONE DRUG
  STERIMATIC NON-REUSABLE SYRINGE
  STERIMATIC NON-REUSABLE SYRINGE
  CARDIOGRAPHY: WAITING TIME AND FUNDING
  CARDIOGRAPHY: WAITING TIME AND FUNDING
  J. E. HANGER CO. LTD.: FACTORY DISPUTE
  J. E. HANGER CO. LTD.: FACTORY DISPUTE
  CO-COM RESTRICTIONS: OIL INDUSTRY EQUIPMENT
  CO-COM RESTRICTIONS: OIL INDUSTRY EQUIPMENT
  GATT: CHINA'S APPLICATION TO REJOIN
  GATT: CHINA'S APPLICATION TO REJOIN
  FINANCIAL SERVICES ACT: AUTHORISATION DECISIONS
  FINANCIAL SERVICES ACT: AUTHORISATION DECISIONS
  BRITISH GAS: COST OF PRE-FLOTATION PUBLICITY
  BRITISH GAS: COST OF PRE-FLOTATION PUBLICITY
  BRITISH GAS: UNDERWRITING ARRANGEMENTS FOR SHARE ISSUE
  BRITISH GAS: UNDERWRITING ARRANGEMENTS FOR SHARE ISSUE
  "EUROPE FROM THE ATLANTIC TO THE URALS": DEFINITION
  "EUROPE FROM THE ATLANTIC TO THE URALS": DEFINITION
  FCO: S. AMERICAN AND FALKLAND ISLANDS DEPARTMENTS STAFFING
  FCO: S. AMERICAN AND FALKLAND ISLANDS DEPARTMENTS STAFFING
  CHILE: TERRITORIAL CLAIM
  CHILE: TERRITORIAL CLAIM
  GOTLAND: SWEDISH/SOVIET DISPUTE
  GOTLAND: SWEDISH/SOVIET DISPUTE
  VISA FEES
  VISA FEES
  CHARITY LAW
  CHARITY LAW
  FIREARMS CERTIFICATES: FEE LEVELS
  FIREARMS CERTIFICATES: FEE LEVELS
  FIREARMS CERTIFICATES: COUNTY FEE REVENUE
  FIREARMS CERTIFICATES: COUNTY FEE REVENUE
  CRIMINAL INJURIES COMPENSATION SCHEME
  CRIMINAL INJURIES COMPENSATION SCHEME
  IMMIGRATION: GUIDELINES ON REPRESENTATION
  IMMIGRATION: GUIDELINES ON REPRESENTATION
  THE CHARITY COMMISSION VOTE
  THE CHARITY COMMISSION VOTE
  CASTLEHILL PEAT SURVEY
  CASTLEHILL PEAT SURVEY
  DUICH MOSS SSSI: RESOLUTION
  DUICH MOSS SSSI: RESOLUTION
  HARDWOOD TREES: POLICY
  HARDWOOD TREES: POLICY