Sitting of 24 November 1986

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

  Coal Industry
  Mr. Rostasked the Secretary of State for Energy when he expects to discuss with the chairman of British Coal the future structure of the industry.
  The Secretary of State for Energy (Mr. Peter Walker): I meet the chairman of British Coal regularly to discuss all aspects of the coal industry.
  Mr. Rost: When will British Coal management and miners be given the opportunity now being offered to British Gas employees to become shareholders in their own enterprise as a reward for the excellent progress that the industry has made in recent months and to provide further motivation for improved productivity and profitability in the industry? Will my right hon. Friend see whether he can find Sid's brother and tell him?
  Mr. Walker: There are no present plans for privatisation, but I am pleased to say that under the bonus system operated by the NCB many miners have benefited from the massively improved productivity that has taken place.
  Mr. Mason: Contrary to what the hon. Member for Erewash (Mr. Rost) said, will the Secretary of State give an undertaking that none of the plans for the proposed structural changes to British Coal will enable it to be privatised?
  Mr. Walker: No, Sir. I have always said from the Dispatch Box that I would not rule out the possibility of the privatisation of British Coal. That would be an absurd thing to do and I hope that, on reflection, the hon. Gentleman will not do so either.
  Mr. Lofthouse: Does the Secretary of State support the increase in the private sector of the British coal industry?
  Mr. Walker: The arrangements that have taken place on the licensing of deep mines and the work of the opencast mines have been perfectly sensible and practical, and, I hope, have been to the benefit of the coal industry. I do not think that there is any problem on that.
  Mr. Orme: Was Sir Robert Haslam speaking on his own behalf or on behalf of the Government when he talked about privatisation and preparing the industry for privatisation?
  Mr. Walker: If the right hon. Gentleman reads what Sir Robert Haslam said to the Select Committee and elsewhere, he will see that he simply expressed the view that if British Coal were to be privatised it had to be done as an entity. That is a perfectly reasonable view for the chairman of the Coal Board to express.

  Electricity Meters (Remote Reading)
  Mr. Gerald Bowdenasked the Secretary of State for Energy what progress has been made in encouraging the use of remote meter reading technology for electricity users.
  The Parliamentary Under-Secretary of State for Energy (Mr. Alastair Goodlad): There are promising developments in this field. The Electricity Council has recently received a report on the field trials of remote reading systems and as a result is now planning to proceed with the next stage of development, which is expected to lead to the installation of a large-scale pilot scheme.
  Mr. Bowden: I am encouraged by my hon. Friend's reply. Does he recognise the benefit that a remote meter reading scheme might have in places such as London, where there is a high turnover of the area boards' customers and where people are often not in when the meter reader comes to check their meters?
  Mr. Goodlad: My hon. Friend is correct about the potential value of remote meter reading. He will be pleased to know that it is intended that the proposed large-scale pilot scheme, which will involve 200,000 homes, will be in London.

  Nuclear Waste
  Mr. Coombsasked the Secretary of State for Energy when he next expects to meet the chairman of British Nuclear Fuels Ltd. to discuss management of nuclear waste reprocessing.
  Mr. Peter Walker: I meet the chairman of British Nuclear Fuels from time to time to discuss matters of mutual interest.
  Mr. Coombs: Is my right hon. Friend aware of the substantial progress that has been made by BNFL in reducing the levels of discharges of radioactive material into the Irish sea? Is he also aware that BNFL has made substantial progress in becoming one of the largest yen earners in Britain, and that, indeed, in a few years time it will be on a par with Unilever?
  Mr. Walker: Yes, Sir. I am pleased to say that the discharge levels from Sellafield are down to one tenth of what they were in the year before we took office. I am also delighted to say that the potential export orders of BNFL are a considerable proportion and will greatly benefit Britain.
  Mr. Campbell-Savours: Will the Secretary of State accept not only that discharge levels are down to one tenth of their previous levels, but that by 1991 discharges to the marine environment from Sellafield will be almost zero and will meet the objectives of every green organisation in the United Kingdom? Does he further accept that with the development of the thermal oxide reprocessing plant BNFL will have spent £1·5 billion by 1990 and will have created thousands of jobs in my constituency and that of my hon. Friend the Member for Copeland (Dr. Cunningham)? Does he accept that that deserves congratulation?
  Mr. Walker: Yes. That shows the difference between those on the Opposition Benches who know what is going on and those who do not. I am grateful to the hon. Gentleman for pointing out that further major reductions will take effect by 1991. At present, THORP is providing 8,000 jobs directly in the United Kingdom, and BNFL estimates that it will save a further 10,000 jobs in supplier companies each year for the next five years.
  Mr. Heifer: While my hon. Friend the Member for Workington (Mr. Campbell-Savours) may know what is going on and others do not, the fact is that the people on Merseyside, in Ireland and in Northern Ireland are worried about what is happening in the Irish sea. Is it not clear that there must be something better than what is happening at present, because the Irish sea is becoming a nuclear waste pool? [HON. MEMBERS: "Nonsense."] It may be nonsense to Conservative Members, but they do not live in the area. Our people on Merseyside are so scared of what is happening nowadays that most of them refuse to go fishing in the area.
  Mr. Walker: I am surprised at the hon. Gentleman, because he was a Minister in the Department of Trade and Industry during the period when pollution of the Irish sea
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  was 10 times what it is at present. I hope that he will reflect on the matter and congratulate the Government for so improving the position.
  Mr. Heffer: I was not responsible for that.
  Mr. Ron Brown: Is it not a fact that under the Labour Government discharges from Sellafield into the Irish sea were at a safe level and being steadily reduced and that if they are now only one tenth that level, they are extremely safe?
  Mr. Walker: I agree with the hon. Gentleman that the levels are extremely safe.

  Electricity Supply (Connections)
  Mr. Beithasked the Secretary of State for Energy if he will make a statement on the provisions available for connecting homes without electricity to the public electricity supply.
  Mr. Goodlad: Area electricity boards are required to make a supply available to premises situated within 50 yd of a distributing main. Beyond this distance, area boards can arrange connection for an appropriate payment. In some circumstances, it is possible to requisition a board to provide a distributing main to enable connection to be made.
  Mr. Beith: Is it not a disgrace that in this day and age thousands of people are not on the public electricity supply and cannot be put on it unless they fork out thousands of pounds? My constituents are often quoted as much as £10,000. Will the Minister look at the system that operates in the North of Scotland Hydro-Electric Board area and the legislation which enables it to offer connection for much lower sums and see whether he can apply that in areas of England and the south of Scotland, where such facilities are not available?
  Mr. Goodlad: Of the United Kingdom electricity boards, only the North of Scotland Hydro-Electric Board has a statutory provision to help with the economic development and social improvement of its district. Assistance with the costs of connection is given under that provision. I shall bear the hon. Gentleman's suggestion in mind, but my right hon. Friend the Secretary of State has no plans at present for such a measure. If the hon. Gentleman has any particular cases in mind, I hope that he will draw them to my attention.
  Sir Kenneth Lewis: How many houses are still lit by gas mantles? Would it not be a good idea, before we consider privatising electricity supply, if we made arrangements to cover houses that do not have an electricity supply?
  Mr. Goodlad: I have no figures for the number of gas mantles, but I shall try to find out and let my hon. Friend know.
  Mr. Stern: Does my hon. Friend agree that the charges frequently quoted by electricity boards for reconnection, outside the small distance limit quoted by him, often smack of monopoly abuse? Will he consider ways in which competition may be introduced for the benefit of consumers?
  Mr. Goodlad: I shall bear in mind my hon. Friend's suggestion. The level of charge is designed to recover cost.

  Efficiency Schemes
  Mr. Maplesasked the Secretary of State for Energy what is his estimate of the aggregate annual savings generated by energy efficiency schemes undertaken by Government Departments; and if he will make a statement.
  The Parliamentary Under-Secretary of State for Energy (Mr. David Hunt): It is estimated that Government schemes are currently leading to savings of more than £500 million a year in industry and commerce. Nearly 3 million homes have also been insulated or draught proofed, leading to significant savings and greater comfort. Following my right hon. Friend's initiative, all Government Departments have appointed energy managers, and I shall be meeting their energy managers group next month, when I shall be reviewing progress so far.
  Mr. Maples: May I congratulate my hon. Friend on the result of the programme? Will he say what percentage of energy costs this represents and how the Government's performance compares with that of the private sector?
  Mr. Hunt: We calculate that £2 billion could still be cut from the annual energy bill of British industry and commerce. I have not yet received a calculation from the energy managers of what Government Departments have saved and what will be saved in Energy Efficiency Year. I shall write in detail to my hon. Friend as soon as the energy managers' report has been received.
  Mr. Bruce: The Minister has accepted that much more can still be achieved, even though progress has been made. Will he consider revising the capital allowance programmes of public departments and agencies with a view to exempting some energy-saving schemes from them which offer short-term paybacks? There is evidence that many public authorities which would like to introduce energy efficiency schemes are prevented from doing to because of budgeting methods.
  Mr. Hunt: I hope that the hon. Gentleman is aware of the initiative that my right hon. Friend has taken on contract energy management, which is having a significant impact already, espcially on local authorities. As for hospitals and the Health Service, my Department is pursuing an effective joint initiative with the Department of Health and Social Security and nearly 20 per cent. of the extended energy survey scheme applications have been for hospital sites, There is movement, but there is still a long way to go.
  Mr. Hannam: May I congratulate my hon. Friend on the establishment of the new telephone hotline, which has been established with neighbourhood energy action? It will help the disabled, the elderly and others on low incomes to receive assistance in keeping warm this winter. Will he ensure that all citizens advice bureaux are made aware of the hotline, they being in the front line in dealing with these problems?
  Mr. Hunt: I, too, pay tribute to the citizens advice bureaux in this crucial area. It is a fact that the disabled on low incomes and the old are only a telephone call away from receiving help on how to keep warm this winter. I hope very much that the telephone hotline will be greatly
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  used. By telephoning 0800-234-8000, callers will be put in touch with their nearest neighbourhood energy action project.
  Mr. Rowlands: Does the Minister recognise that the greatest savings can be made in the health sector? I am encouraged by the figures that he has given, but is he aware that many health authorities are having to worry about their budgets, and that in many instances capital projects that could produce the results that he is talking about are being pushed aside by other areas of expenditure that inevitably are given priority?
  Mr. Hunt: I am not aware of any examples of that sort, but if the hon. Gentleman has details, will he please give them to me? Only last Thursday I visited Withington hospital in the area of the South Manchester health authority. I was impressed with the authority's action plan, especially with the feeding through of savings, to the benefit of patients in local hospitals.
  Mr. Rost: When will the Treasury relax its restrictions on third-party financing so that the private sector can invest in energy efficiency in the public sector on a shared benefit basis?
  Mr. Hunt: My hon. Friend will know the commitment that my right hon. Friend and I have to contract energy management. We are still in early days, but we are unaware of the serious restrictions which my hon. Friend mentions, although we are monitoring the position very carefully.

  Coal Industry (Investment)
  Mr. Andy Stewartasked the Secretary of Slate for Energy how much investment there has been in the coal industry since 1979; and how this compares with the investment in the period 1974 to 1979?
  Mr. David Hunt: Since 1979 more than £5 billion has been invested in the coal industry. In real terms, the rate of investment has been more than 35 per cent. per year higher than under the previous Labour Administration.
  Mr. Stewart: I thank my hon. Friend for that excellent reply. Does it not show that record investment has made the coal industry competitive, and does it not refute the allegation that all that the Government have done is to close collieries? Was it not the previous Labour Government who starved the coal industry of its investment funds?
  Mr. Hunt: Exactly. My hon. Friend is correct. If one excludes the year of the miners' strike, in which, thanks to that tragic and unnecessary dispute, nearly £500 million worth of potential investment was lost, investment under this Administration has been almost 50 per cent. higher per year in real terms than under Labour. We have seen, especially in my hon. Friend's constituency, a massive increase in productivity, which bodes very well for the future of the coal industry.
  Mr. Ron Davies: Does the Minister acknowledge that if he wishes to make full use of the investment which has been put into the coal industry he must ensure that British miners have access to the best and most up-to-date mining equipment? If he accepts that, will he give an assurance that he will pay special attention to developments at the NCB subsiduary at Tredomen engineering works? Will he

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  give a further assurance that he will take all steps possible to ensure that any orders for mining equipment go to that subsidiary company?
  Mr. Hunt: The hon. Gentleman knows that decisions on investment at individual pits must be a matter for British Coal management. I assure him, as I think he suggested, that British technology, especially in deep-mining equipment, is the best in the world. In the mines that I have been privileged to visit during the past 18 months I have seen some of the finest equipment in the world and some of the finest miners in the world, which together have produced those tremendous results.
  Mr. Hardy: Does the Minister accept that investment in the coal industry during the past decade stems from the "Plan for Coal" for which the Labour Government were responsible and which the present Administration have continued? If the logic of that plan is to be maintained, will the Minister ensure further effort to secure greater markets for British coal in Europe, to enable the home base for that superb technology to be maintained?
  Will the Minister take steps to ensure that South African coal ceases to enter Britain as it does today?
  Mr. Hunt: I had thought that the hon. Gentleman needed no lessons from me as to the real position in the coal industry today. I am surprised that he should mention the discredited "Plan for Coal". Under this Government, investment has been far higher in real terms than was ever envisaged under "Plan for Coal". That envisaged a 4 per cent. increase in productivity every year. Under the last Labour Administration productivity fell overall by 2 per cent. Under this Government it has increased by 30 per cent. The hon. Gentleman should get his facts right.
  Mr. Eadie: Will the Minister confirm that the figures that he has just given took into consideration the two changes in accounting practice by the National Coal Board? I refer, first, to deferred interest counting as capital expenditure and, secondly, to lease assets being included for the first time in 1985–86.
  Will the Minister confirm, especially for the edification of the hon. Member for Sherwood (Mr. Stewart), who posed the question, that in 1979 total investment in north and south Nottinghamshire was £149 million? I discovered from figures obtained from the Library that, taking that at 1985–86 prices, the investment projected for those two areas totals £97 million.
  Mr. Hunt: I am afraid that the hon. Gentleman has some crucial points wrong. He has failed to appreciate that the total investment under the Labour Administration was less than that envisaged in "Plan for Coal", and considerably less in real terms than that provided under this Administration. We have seen record investment, which the Government believe is fully justified, but which evidently the Labour Government did not.

  Sizewell B (Report)
  Mr. Heathcoat-Amoryasked the Secretary of State for Energy when he expects to publish the Sizewell B inspector's report.
  Mr. Simon Hughesasked the Secretary of State for Energy when he plans to publish the findings of the public inquiry into the proposed PWR nuclear reactor station at Sizewell B, in Suffolk.
  Mr. Peter Walker: The inspector now intends to deliver his report to me at the end of this month or in early December. I shall decide on the publication date when I have seen and considered it.
  Mr. Heathcoat-Amory: I thank my right hon. Friend for that encouraging reply. Will he initiate an urgent debate on this subject in order to end the highly unsatisfactory situation whereby Britain's entire energy policy has been held up by a local planning inquiry for more than four years?
  Mr. Walker: Yes. I think that the four-year delay in making any decisions has been a sad feature of holding such a full inquiry. We must carefully consider the results of that inquiry, but then, as my hon. Friend said, we must reach decisions as quickly as possible.
  Mr. Simon Hughes: As the Government are so keen to privatise the energy supply industry, what does the right hon. Gentleman believe to be the view of the private sector and the City towards privatising the pressurised water reactor at Sizewell, or reactors anywhere else? Is not the reality that if the Government offered that PWR to the private sector without any public money there would be no economic case, and such privatisation would be seen to be a bad part of the Government's economic and energy strategy?
  Mr. Walker: I had not considered offering a PWR to the City, but I shall carefully consider the hon. Gentleman's views and see whether that is a possibility.
  Mr. Speller: May I thank my right hon. Friend for his answer? Does he agree that the British public are probably split about 50–50 on the desirability of continuing with the nuclear industry? Will he undertake to arrange for a debate to be held in the House before an answer is reached?
  Mr. Walker: As I have said, I wish to consider the report before making up my mind on these matters.
  Mr. Conlan: Does the Secretary of State realise that the long delay in publishing the report has created havoc in the industry? Is it not now imperative that he makes an early decision? Until that decision is made, the industry's major procurement decisions will be delayed. Many firms are finding it extremely difficult to cater for that.
  Mr. Walker: I well recognise that several industries, particularly in the north of England, are concerned about the delays. However, it was right that the inspector should take such care to prepare the report, and there was obviously no way in which I could hasten it. All the services that he required were offered and provided. It has been a matter of regret to me that we have had to wait so long before making any decisions. I also agree that once the report is received decisions will have to be made quickly.
  Mr. Beith: Does the Secretary of State intend to deprive residents of areas where other PWRs are planned, such as Druridge Bay, of their full rights of objection if the CEGB proceeds with other PWR proposals?
  Mr. Walker: That is a matter for my right hon. Friend the Secretary of State for the Environment.
  Mr. Chapman: Does my right hon. Friend agree that those concerned about the safety of a nuclear reactor at Sizewell B should be more concerned about the safety

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  standards of the 140 foreign civil nuclear power reactors that are within 500 miles of Britain? If those reactors were up to the standards of the British civil nuclear power organisation the country might then be reassured, but that patently was not the case at Chernobyl.
  Mr. Walker: The initiatives taken by Britain and western Europe in general to ensure that better safety standards prevail in eastern Europe are of considerable importance. In comparison with all the various forms of energy industry, none has had a better safety record in the European Community for the past 25 years than the nuclear power industry.
  Mr. Orme: Will the Secretary of State explain more fully how he will deal with the report? Will he publish it as soon as he receives it, so that the House and the country can see it? As he knows, its publication has been delayed and delayed. He promised the report in September and now, in November, he is talking about December. The country urgently needs to see that report, and we should have a debate before the Government take any decision.
  Mr. Walker: I wish to see the report before I decide on these matters.

  Coal Industry (Output)
  Mr. Harveyasked the Secretary of State for Energy what is the current level of output in the mining industry; and what was the comparable figure in 1985.
  Mr. David Hunt: Current output in the coal industry has been maintained at broadly the same level as in 1985, with output per man shift reaching a new record level of 3·55 tons in the week ending 1 November 1986, compared with 2·87 tons in the same week last year.
  Mr. Harvey: Does my hon. Friend agree that those figures represent a staggering increase in productivity? Will he convey our congratulations to both management and work force? Do not those figures represent a ringing vindication of the rationalisation policy carried out in the teeth of a politically motivated strike?
  Mr. Hunt: I completely agree with my hon. Friend. That encouraging and rapid growth in productivity since the end of that tragic and unnecessary strike demonstrates the determination of all concerned in the coal industry to succeed and to meet the competitive challenge in the energy markets. Since 1979 productivity has risen by more than 50 per cent., and productivity records have been broken in six out of the past seven weeks.
  Mrs. Clwyd: Is the Minister aware that there have been four deaths in south Wales pits during this financial year? Is he also aware that there is an upward trend in reportable accidents? Does he think that increases in productivity are being achieved by pushing unacceptable levels of safety, to the danger of the men who work in the industry?
  Mr. Hunt: I believe that to be one of the most disgraceful accusations that I have heard in the Chamber. That is an insult to all who work in the industry because, for them, safety is always paramount.

  Power Station Construction
  Sir Trevor Skeetasked the Secretary of State for Energy when he proposes to authorise the construction of further power stations.
  Mr. Goodlad: The only application to construct a power station currently before my right hon. Friend the Secretary of State for Energy is for Sizewell B, and he intends to make a decision on that as soon as possible after he receives the inspector's report.
  Sir Trevor Skeet: Is my hon. Friend aware that by the year 2000 AD there will be a shortage of generating capacity in the United Kingdom unless stations are authorised in the 1980s? Will he persuade my right hon. Friend to get ahead and order both nuclear power stations and several coal-fired power stations?
  Mr. Goodlad: As my right hon. Friend has said, he intends to lose no time in reaching a decision on Sizewell. The Central Electricity Generating Board is considering the possibility of building new coal-fired stations. My right hon. Friend has received no applications to construct new power stations apart from Sizewell. The CEGB has identified a number of possible sites for future coal-fired stations but has made no firm decisions as to where they will be sited.
  Mr. Lofthouse: Before the Secretary of State commissions any more nuclear power stations, will he first examine the cost of de-commissioning such power stations? Before there are any more commissions, will be ensure that the true cost of generating electricity by nuclear-powered stations includes their de-commissioning? When the true cost is revealed, we may find that using fossil fuel is the cheaper way of generating electricity.
  Mr. Goodlad: The cost of de-commissioning power stations is provided for in the CEGB's accounts.
  Mr. Patrick Thompson: Can my hon. Friend confirm that the usage of nuclear power in the European Community is 35 per cent. and rising, and that any decision to curtail this programme would lead to critical pressure on resources and serious implications for the Community?
  Mr. Goodlad: My hon. Friend is absolutely correct.
  Mr. Orme: On the point made by my hon. Friend the Member for Gateshead, East (Mr. Conlan), is the Minister aware that there is an urgent need for the immediate ordering of two coal-fired power stations? The demand is there, so why wait for Sizewell? Why not get ahead with two coal-fired stations now?
  Mr. Goodlad: The Government fully appreciate the importance of maintaining the capability of the industry during a period of a lack of home orders, and they have provided considerable aid and support for the industry to win overseas contracts to help maintain its capability. However, ordering is essentially a matter for the CEGB.

  Renewable Energy Resources
  Mr. Woodasked the Secretary of State for Energy how much his Department has spent on research, development and demonstration of renewable energy sources since 1979; and if he will make a statement.
  Mr. Wattsasked the Secretary of State for Energy how much his Department has spent on renewable energy sources since 1979; and what was the comparable figure in the period 1974 to 1979.
  The Minister of State, Department of Energy (Mr. Alick Buchanan-Smith): Expenditure by my Department on research, development and demonstration into the renewable sources of energy in the financial year 1979–80 to 1985–86 amounted to £91·3 million. That compares with £7·6 million in the years 1975–76 to 1978–79.
  Mr. Wood: I thank my right hon. Friend for that most helpful reply. Is the Department also looking into and monitoring the work carried out in Denmark and the Scandinavian countries into renewable resource activities, because it appears that good work is being carried out there as well as in this country?
  Mr. Buchanan-Smith: Yes, we keep in touch with all the developments in Common Market countries. The question of useful alternatives and research is discussed from time to time in the Council of Energy Ministers. I note my hon. Friends remarks.
  Mr. Watts: Has my right hon. Friend had time to read a recent report to his Department about the hot dry rock technology developed by KE International in my constituency, which is producing electricity at a lower cost than fossil fuel? In view of the export potential of this new British technology, will he favourably consider funding a demonstration plant in Cornwall to act as an export shop window and ensure that this British technology is exploited in Britain and does not need to go abroad?
  Mr. Buchanan-Smith: My hon. Friend is right to emphasise the importance and economic relevance of this area of alternative energy. I hope that a decision will be taken on this matter next year. Of course, my hon. Friend is already aware that, so far, we have spent about £20 million on geothermal hot dry rocks. That demonstrates the importance that we attach to it.
  Mr. Bruce: Does the Minister not think it unfortunate that some hon. Members have been invited to Norway in the next couple of weeks to see the installation of its prototype wave power generators, when British wave power research has been cancelled? Does he not acknowledge that, although we successfully pioneered wind power generation in Scotland, Denmark and the United States are way ahead of us in its application? Can we not take action to speed up the application of technology rather than just deal with research and development?
  Mr. Buchanan-Smith: The hon. Gentleman ought to examine the facts before he makes statements like that. So far, we have spent about £17 million on wave power. It has been studied very carefully. Perhaps the hon. Gentleman should study what happens in this country before he tries to sing the praises of other countries.
  Mr. Peter Bruinvels: I congratulate my right hon. Friend on the way in which he has encouraged the development of renewable energy resources from day one. After all, it is something for nothing. Does he agree that more emphasis given to combined heat and power will reduce the cost of energy throughout the country and will ensure that all commercial undertakings and, indeed, private individuals, will benefit from a resource that has so far been untapped and unexpended?
  Mr. Buchanan-Smith: I am very much aware—of course, I am sure that I am not as aware as is my hon. Friend—of the good work being done in Leicester. I
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  hope that he will convey to his friends in Leicester the fact that we await the report with considerable interest and expectation. I have no doubt that as this involves Leicester my hon. Friend will give it his wholehearted support.
  Mr. Campbell-Savours: Has the Minister examined the work done by the Severn barrage consortium on its Severn estuary project? Does he accept the figures that the consortium produced on the cost per unit of producing electricity?
  Mr. Buchanan-Smith: As the hon. Gentleman knows, further work is going on. The Government are helping in the funding of that work. One of the purposes is to try to clarify precisely the issue that he mentioned.

  British Coal Enterprise Ltd.
  Mr. Brandon-Bravoasked the Secretary of State for Energy what information he has about the aggregate investment generated so far by British Coal Enterprise Ltd.
  Mr. Peter Walker: British Coal Enterprise Ltd. has itself committed £18·8 million in support of some 800 individual projects. Over £100 million has been generated for these projects from other sources, such as banks, local authorities, Government grants and other enterprise agencies.
  Mr. Brandon-Bravo: I am grateful for my right hon. Friend's answer. I welcome the high percentage of other resources to add to those of British Coal Enterprise Ltd. I ask my right hon. Friend to consider another aspect. During that terrible strike, and since, the miners in the so-called good areas of long life were accused of an "I'm all right, Jack" attitude. Therefore, will he assure the House that British Coal Enterprise Ltd. will always have sufficient funds so that that charge is never allowed to stick?
  Mr. Walker: I mentioned that £18·8 million has already been provided. I have already allocated up to £40 million to the enterprise company. I have made it clear that, in my judgment, it is not a financial limitation but a matter of finding job opportunities. I am delighted to say that so far nearly 12,000 new job opportunities have been created in coalmining communities. Therefore, if one examines the amount of money expended so far, one will see that it is likely that around 25,000 new jobs will be provided under the new programme. The mining community will consider that programme an exciting one.
  Mr. Rowlands: Is the Minister aware that British Coal Enterprise is refusing to give any information or detail about where these jobs are, what types of jobs they are and what companies are being supported? Therefore, it has been impossible to evaluate what the impact in our communities of British Coal Enterprise will be. Many of us still do not see much evidence of its working.
  Mr. Walker: I am saddened at the constant way in which the Labour party has bickered about British Coal Enterprise. In view of the tens of thousands of mining jobs lost during the Labour Government, it is a pity that there was not an enterprise company then.

  Coal Conversion Schemes
  Mr. Kenneth Carlisleasked the Secretary of State for Energy what progress is being made with coal conversion schemes; and if he will make a statement.
  Mr. David Hunt: The Department of Energy has offered grant-aid under the coal firing scheme of £48 million towards the cost of 420 projects with annual coal burn of 2·7 million tonnes. The scheme will close to new applications made after 30 June 1987.
  Mr. Carlisle: I am grateful to my hon. Friend for that reply. Will he extend the scheme in view of the fact that the price of oil is always likely to fluctuate and that we do not have control over it, yet have adequate coal supplies? If we encourage people to use that coal, there will not only be a market for our coal but a very good market for the manufacturing products of engineering enterprises that go in for the coal conversion schemes.
  Mr. Hunt: The scheme has achieved the objectives for which it was set up—to help the coal industry become competitive, to reduce industrial energy costs and to reduce our long-term dependence on oil and gas. I recognise that it is a significant scheme. I am happy to announce that there is still a useful and substantial amount of money available for coal conversions and a useful amount of time left in which to make those applications.

  THE ARTS

    Public Libraries and Museums Act
    Mr. Cartwrightasked the Minister for the Arts what action he proposes to take in exercise of his powers under the Public Libraries and Museums Act 1964 in the light of the High Court judgment on the matter of the banning of News International publications in some public libraries.
    The Minister for the Arts (Mr. Richard Luce): Following its successful High Court action against three London boroughs, News International has indicated that it may institute proceedings against the other English and Welsh authorities operating similar bans if these are not lifted quickly. I am watching the situation closely. Meanwhile, I note the news that 14 authorities have lifted the ban as a result of the High Court judgment.
    I have written to the chairman of the Audit Commission drawing attention to the fact that the councillors of Camden, Ealing and Hammersmith and Fulham maintained their ban in defiance of what Lord Justice Watkins described as "impeccably sound advice" that they were acting unlawfully.
    Mr. Cartwright: Does not the High Court judgment make it absolutely clear that all the authorities that have banned News International publications have acted illegally? Will the right hon. Gentleman confirm that he has the statutory powers to uphold the law in these matters? Why has he not followed the advice of the Library Association, given as long ago as March this year, and used his powers to require those authorities to drop the ban forthwith?
    Mr. Luce: The position is absolutely clear, and as I have described it. News International took legal action. It is
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    interesting to note that Lord Justice Watkins, in referring to the Act under which I am empowered to institute proceedings, said:
    "The statutory remedy involves a cumbersome procedure which is wholly unsuited to meet the requirements of a necessarily swift resolution of the issue arising out of the ban."
    I started to institute proceedings under the Act and wrote to all authorities concerned, but in July News International decided to institute court proceedings. We now know the outcome.
    Mr. Greenway: Would it not be outrageous and unacceptable if the ratepayers of Ealing and of the other councils involved in instituting the illegal ban on The Times and other News International newspapers in libraries were required to pay the heavy legal costs of the Labour councillors who involved the councils in that action? Should not those expenses be met by those councillors from party funds or in some other way, not by the ratepayers and taxpayers?
    Mr. Luce: My hon. Friend has been right to take a close interest in this problem. For the reasons I have just mentioned, I have now written to the chairman of the Audit Commission about these matters. It is open to any elector in a borough which is maintaining or has maintained such a ban to make a formal objection to the district auditor about the conduct of the councillors involved.
    Mr. Heffer: Whether it is legal or illegal, is it not clear that many councillors feel very upset at the fact that Murdoch could sack 6,000 workers without giving a damn about what happened to them? Is it not also clear that Conservative Members are actually hiding behind the law in order to carry out policies contrary to the interests of working people?
    Mr. Luce: The important thing that the hon. Gentleman seems to ignore is that those authorities have been found to have contravened the Public Libraries and Museums Act 1964 and to have withdrawn newspapers in order to make a political or industrial point. That contravenes the Act, and if the hon. Gentleman believes in following the law he should support the decision that has been taken.
    Sir Anthony Grant: As the Act seems to be a somewhat cumbersome way of dealing with this censorship problem, would not a simpler solution be for the Leader of the Opposition, in view of his desire to improve the image of his party, to write to those loony councils and tell them to behave themselves?
    Mr. Luce: I agree entirely with my hon. Friend. It is very noticeable that we have not yet had an Opposition Member who has welcomed the decision of the judge.
    Mr. Buchan: In his new-found zest for a lack of censorship, may I ask the Minister to tell us how frequently he has intervened over some of the Tory councils, especially county councils, which have refused to carry out their full statutory duties in the way of provision of books in libraries? Could he also tell us how many libraries in the home counties which stock The Sun also stock, for example, Tribune or Labour Weekly, and if they do not, has he tried to ensure that they do that? Just out of interest, would he tell us, as the Minister responsible for the arts and culture in this country, what The Sun has contributed to human civilisation?
    Mr. Luce: I find it astonishing that the hon. Gentleman should indulge in such a long intervention and not once say that the action by those authorities was unacceptable. Not once has he condemned the court action. That is what the House and the country will note.

    Arts Council Funding (Eastern Area)
    Mr. Patrick Thompsonasked the Minister for the Arts what representations he has received concerning Arts Council funding in the eastern area.
    Mr. Luce: Several organisations and individuals have written to me.
    Mr. Thompson: I welcome the 19·5 per cent. funding this year. Can my right hon. Friend tell me what the increase has been in real terms between the current year and 1978–79? Is he aware of growing concern about the diversion of funds from traditional areas such as orchestras, theatres and touring companies, for example, the Theatre Royal in Norwich, towards community arts? Does he share my concern at that diversion of funds?
    Mr. Luce: I am grateful to my hon. Friend. I know of his interest in and support for the arts in the eastern area. Financial support for the arts in the eastern area has gone up in real terms by 132 per cent. between 1979–80 and 1986–87. The cash sums for the next year are not as yet allocated. I think my hon. Friend will agree that those figures are a real indication of the support that the Arts Council is giving through the regional arts association to the arts in his area. I am sure that my hon. Friend will ensure that is own views are known to the regional arts association. In the meantime, I am taking a close interest in the area and will make another visit there next week.

    Arts (East Midlands)
    Mr. Ottawayasked the Minister for the Arts if he will make a statement on Government support for the arts in the east midlands.
    Mr. Luce: It is for the Arts Council to determine its allocation of funds to regional arts associations. So far this year East Midlands Arts has received £1·793 million. An announcement of 1987–88 funds will be made by the council in due course.
    Mr. Ottaway: I thank my hon. Friend for that reply. Is he aware of the growing cash crisis in East Midlands Arts, which is a development agency having difficulty sustaining its present level of support for the arts in Nottingham? Is he aware of the closure of the midlands group arts centre, which is funded by that agency? Can he offer any hope for agencies such as that in Nottingham?
    Mr. Luce: I was glad to be able to visit Nottingham not too long ago. I am much impressed by the range of arts and museum facilities there. Since 1979–80 and until this financial year the amount of resources allocated to East Midlands Arts has gone up by 150 per cent. in real terms. That is a substantial increase and devolution of powers from the Arts Council. On the matter of the midlands group arts centre, I understand that the various recommendations of the working party are being examined and it should take about nine months for the centre to implement those recommendations. That seems to be the current position.
    Mr. Yeo: I welcome the increases in funding both for the east midlands and for East Anglia. Does my hon. Friend agree that the use of public funds to support arts projects in the regions is preferable to supporting high prestige projects in central London, to which only a very small proportion of the total population have access?
    Mr. Luce: The figures that I have given are a clear indication that, broadly speaking, the Arts Council is pursuing a policy of allocating more funds to support the arts in all parts of the country.

  CIVIL SERVICE

    Rayner Scrutinies
    Mr. Gerald Bowdenasked the Minister for the Civil Service if he will make a statement on the latest progress of the Rayner scrutinies.
    The Minister of State, Privy Council Office (Mr. Richard Luce): Savings already made as a result of efficiency scrutinies are now running at £300 million per year and further annual savings of £100 million are expected to be made. The scrutinies have also led directly to improvements in service to the public.
    The scrutiny process, begun by Lord Rayner and continued under the supervision of Sir Robin Ibbs, continues to prove its worth. Details of the 1986–87 scrutiny programme will be announced shortly.
    Mr. Bowden: I thank my hon. Friend for that reply. Could the Rayner scrutiny process be extended to other aspects of the public service?
    Mr. Luce: The task of efficiency scrutinies does not suddenly stop now. There will continue to be a relentless drive to ensure that the taxpayer and the public receive the best value for money and that our Civil Service is as professional as possible. The number of scrutinies will continue to be roughly 30 per annum.
    Mr. Simon Hughes: Will the Rayner scrutiny process extend to considering whether sending the head of the Civil Service to take part in court proceedings in Australia represents value for money?
    Mr. Luce: I do not think that there is anything useful that I can add.
    Mr. Key: Will my hon. Friend consider carefully a no doubt unintentional side effect of the Rayner scrutinies? A number of organisations in my constituency are aware of the shortage of apprenticeships, especially engineering apprenticeships, and of training capacity. Is my hon. Friend aware that the scrutiny arrangements sometimes mean that directors have to choose between a PhD and an apprentice because of the manpower targets? Does he agree that that cannot be sensible?
    Mr. Luce: That question goes a little wider than policy on scrutinies. As my hon. Friend knows, important training schemes are run both by central Government and by individual Departments to cope with the problems to which he has drawn attention.
    Mr. Teddy Taylor: Will the scrutinies extend to consideration of service to the public? Will my right hon. Friend examine waiting times at DHSS offices, for instance, which sometimes seem unreasonable, especially for those who have lost their jobs or face financial hardship?
    Mr. Luce: My hon. Friend raises an important point. The purpose of the scrutinies is not just to obtain better value for money, but also to ensure a better service to the public, and some services have been improved as a result of the scrutinies. For instance, recommendations to reduce the time taken to settle planning appeals from 21 to 11 weeks are being implemented as a result of the scrutiny carried out in that area.
    Dr. McDonald: The Opposition agree with the Rayner objectives of efficiency and wellbeing for the Civil Service, but is the Minister aware that those objectives cannot be achieved if the Government misuse a senior civil servant such as Sir Robert Armstrong by placing him in an invidious position in the Australian courts and requiring him to be economical with the truth when such matters are the responsibility of Ministers? As Minister responsible for the Civil Service, what is the hon. Gentleman's opinion of that?
    Mr. Luce: I welcome very much the support that the hon. Lady gives on behalf of Her Majesty's Opposition to the policy on scrutinies. With regard to our civil servants, I reiterate what I said to the House at the end of July this year—that in Sir Robert Armstrong, as both Secretary of the Cabinet and head of the Home Civil Service, we have one of the most outstanding post-war civil servants.
    Mr. Peter Bruinvels: Does my right hon. Friend accept that many people feel that there are now too many civil servants in situ? Does he agree that what we need is a loyal and obedient Civil Service, not some of the Militant Tendency civil servants, who are deliberately undermining the powers and wishes of the Government and the local departments? Can we encourage civil servants to be loyal to the Crown again?
    Mr. Luce: I must say to my hon. Friend that the size of the Civil Service has reduced by no less than 20 per cent. in the past seven years, so it is at the lowest level that it has ever been since the second world war. To suggest that the service is full of people who are disloyal is a wrong impression to give. We have a service that is impartial, dedicated and professional. The country should note that and admire it.

  THE ARTS

    Arts Council Grants
    Mr. Chapmanasked the Minister for the Arts what is the current annual total contribution of grants by the Arts Council; and what is his estimate of this as a proportion of total expenditure on the arts.
    The Minister for the Arts (Mr. Richard Luce): The Arts Council's grant for 1986–87 is £135·6 million, of which £6 million is attributable to operating costs, and £129½ million to grants. Those grants amount to some 40 per cent. of central Government expenditure on the arts.
    Mr. Chapman: Will my right hon. Friend confirm that that means that under this Government there has been a significant increase in real terms in Arts Council funding, but that, as always, that is only a minority of the total funding for the arts in the country? Does he agree that it is the responsibility of the Government to set a tax regime and economic climate that are conducive to encouraging maximum funding from local authorities, businesses and individuals?
    Mr. Luce: I am grateful to my hon. Friend. On his latter point, I confirm that our broad strategy is to do everything possible to encourage a successful partnership between the public sector and the private sector. That is one of the reasons why, in the Budget, two tax changes were introduced giving tax relief both for corporations and, from April next year, for individuals, to encourage them to give to charitable bodies, including the arts world. We have seen a real increase in resources for the Arts Council, in the past seven years, of no less than 8 per cent. and, if one includes abolition money, of no less than 30 per cent. That is a sign of our confidence in the Arts Council.
    Mr. Robert Sheldon: Is the Minister aware that in his answer to his hon. Friend the Member for Dulwich (Mr. Bowden) on Friday, he said that expenditure on the arts from 1979–80 to 1987–88 had gone up by 13 per cent., while the autumn statement shows that Government expenditure generally has gone up by 14½ per cent.? What is happening is that less money is being spent in real terms on the arts than on other areas of public expenditure. What does the Minister say about that?
    Mr. Luce: The picture is absolutely plain. There is a real increase in support for the arts—and there has been over the past seven years—amounting to 13 per cent. I am leaving out abolition money. If I include abolition money, which I should, support has gone up in real terms by 28 per cent. If that is not support for the arts, I must ask what is.
    Mr. Cormack: Does my right hon. Friend agree that he gets exceptional value for money in the expenditure that he properly makes, which we welcome? Does he further agree that it generates more money from tourism than the budgets of many of his colleagues? Does he agree that a little bit goes a long way in that area, and will he bear in mind that there could be a need for a little more soon?
    Mr. Luce: I am grateful to my hon. Friend. The evidence all round the country—I travel round various parts every week—is that the arts are expanding in almost every area. That is thanks to the partnership among the Government, the local authorities, which are doing more and more, and the private sector, to which we look to help to fuel the expansion still further.
    Mr. Beith: Is the Minister aware of the dismay in the arts world that the small 5·5 per cent. increase that he announced is more than half taken up by the British Library building programme? Does he believe that projects such as regional theatres will be able to get adequate support from the Arts Council under such conditions?
    Mr. Luce: As the hon. Gentleman has said, the arts budget on this for next year will go up by 5½ per cent. That is broadly in line with the increase in overall public expenditure next year on the arts. The hon. Gentleman is right when he says that a considerable proportion of that increase will be taken up by the new library at St. Pancras. That is an important national facility which will serve the nation well to the turn of the century and beyond.
    Mr. Lord: Can my right hon. Friend reassure my central Suffolk constituents who live in the more remote areas of East Anglia, and a long way from places such as Ipswich and Norwich, that he is aware of their problems about access to the arts, and that he will do all he can to see that they get a fair deal?
    Mr. Luce: I will indeed, and I look forward to the chance of coming to my hon. Friend's constituency next week, when I shall be able to say that again.
    Mr. Buchan: Is it not the case that almost every independent analysis disproves the Minister's figures about the increase since 1979? For example, the National Campaign for the Arts says that there has been a collapse of between 3 and 4 per cent. The Minister has forgotten every single historical incident since 1979, including the shift forward because of the computer strike in that year. Secondly, does he agree that the increase to the arts is below the rate of inflation because the figure that he is talking about of 5·5 per cent. includes two major items, the increase for the British Library and the abolition of the GLC and the mets, which put another £24 million into the
    20
    kitty. Arts expenditure is increasing by about 2·5 per cent. and that is a dramatic fall from the amount required to keep up with inflation.
    Mr. Luce: The hon. Gentleman can try as hard as he likes, but I notice that on 14 November last year he said:
    "Many companies will die as a result of the amount announced today."—[Official Report, 14 November 1985; Vol. 86, c.700.]
    That was a year ago, but not a single company has died. Indeed, we have seen the arts go from strength to strength, and I do not see why I should pay much attention to what the hon. Gentleman says. The Arts Council will get an increase of 3·5 per cent. in its basic provision. That is broadly in line with inflation, and on top of that I have helped with the abolition problem by allocating a further £3 million. That should be a help and the hon. Gentleman ought to go round the country encouraging local authorities to play their part.

Quotations (Question Time)
3.32 pm
Mr. Neil Kinnock: On a point of order, Mr. Speaker. Last Thursday when putting a question to the Prime Minister, for greater accuracy I quoted from the evidence given by Sir Robert Armstrong in the course of the current court case in Australia. I subsequently realised, of course, that quotations by hon. Members are not in order at Question Time, and I express my regret for what occurred.
Mr. Speaker: I am obliged to the right hon. Gentleman. [Interruption.] Order. The hon. Gentleman's quotations were short, which is doubtless why I did not recognise them as quotations, but he has stated the rule correctly and the House has been usefully reminded of its terms.
Mr. Norman Buchan rose—
Mr. Speaker: Order. I do not think anything further can arise on that.
Mr. Ian Gow: May I seek your clarification on one point, Mr. Speaker? You said in answer to the Leader of the Opposition that quotations at Question Time were not in order. Will you confirm that that ruling applies only to those who ask questions and does not apply to those who reply to questions?
Mr. Speaker: I do not know whether I have got the hon. Gentleman's drift. If he is saying that Ministers may quote, that is correct. It has always been the case that Ministers may quote in the interests of greater accuracy.

Ministerial Statements
3.33 pm
Mr. Giles Radice: On a point of order, Mr. Speaker. You will remember that last Monday the Secretary of State for Education and Science made only the shortest of statements to the House on teachers' pay on the ground that the agreement between the employers and teachers was not complete. On Friday, despite attempts by the Secretary of State to undermine the deal, the employers and four out of six unions formally signed the agreement. Why does the Secretary of State still remain silent? Will you convey to the Leader of the House or to the Secretary of State for Education and Science—
Hon. Members: Abuse.
Mr. Speaker: Order. Points of order must be addressed to me. I have had no request for a statement about this. The hon. Gentleman has made his point.
Mr. Peter Bruinvels: Further to the point of order, Mr. Speaker.
Mr. Harry Greenway: Further to the point of order, Mr. Speaker.
Mr. Speaker: I do not think that it helps.
Mr. Greenway: I was here last Monday as well and the Secretary of State made it clear—
Mr. Speaker: Order. I know. I was here too.
Mr. Roger Stott: On a point of order, Mr. Speaker. I wish to seek your advice. Last week, a ship called the Kowloon Bridge, which was loaded with iron ore from Canada, put into Bantry bay in Ireland. It is the sister ship of the merchant vessel Derbyshire, which went down in the South China sea in 1980, and all 44 people on board lost their lives. As the Department of Transport sent out a senior surveyor to Ireland last week when it became aware that the ship had incurred serious structural damage, could I, through you, Mr. Speaker, ask the Leader of the House whether he will persuade the Secretary of State for Transport to make a statement?
Mr. Speaker: Order, I have said that I have no responsibility for ships that are registered in Hong Kong. I call the hon. Member for Workington (Mr. Campbell-Savours) to make his application under Standing Order No. 20.
Mr. Eric S. Heffer: Further to the point of order, Mr. Speaker.
Mr. Speaker: Order. I have no responsibility at all in this.
Mr. Heffer: I know, but constituents of mine died in the Derbyshire and it seems to me that the Secretary of State has a responsibility. I agree with my hon. Friend the Member for Wigan (Mr. Stott) that the Secretary of State should be asked to make a statement to the House on this very important—
Mr. Speaker: Order. There are other ways in which to do that—and not through the Chair.
Sir David Price: Further to the point of order, Mr. Speaker.
Mr. Speaker: I will take the hon. Member's point of order, but I cannot see that I have any responsibility in this.
Sir David Price: Further to the point of order, Mr. Speaker. Like the hon. Member for Liverpool, Walton (Mr. Heffer) I had a constituent who died on the Derbyshire. I have already tabled a question to my right hon. Friend the Secretary of State for Transport which is to be answered on Monday. That seems to me to be the proper way in which to proceed.
Mr. Robert Hughes: Further to the point of order, Mr. Speaker. My hon. Friend the Member for Wigan (Mr. Stott) was seeking your advice about how to pursue the matter, bearing in mind the fact that the parent legislation allows the Secretary of State to hold a public inquiry into any sinking of any vessel which involves any British seaman in any part of the world. That is why my hon. Friend was asking how he might pursue the matter further.
Mr. Speaker: The hon. Gentleman knows that it is not the role of the Chair to offer advice on parliamentary tactics.

Standing Order No. 20
3.36 pm
Mr. Speaker: I wish to make a short statement about applications under Standing Order No. 20.
On 27 February last, the Standing Order was amended to provide that a Member should make his submission to me
"In an application lasting not more than three minutes".
Many Members, I am glad to say, complete their applications in less than this time. In fairness to all, I intend to enforce the limit strictly in future, now that the House has had time to become accustomed to it. Members will be required to resume their seat, even if their application is not complete. The full three minutes available to Members will be recorded on the clock at the Table, but Members will be able to gain a good idea of how much time they have left by keeping an eye on the digital clocks on either side of the Chamber.

Civil Servant (Briefing)
3.37 pm
Mr. D. N. Campbell-Savours: I beg to ask leave to move the Adjournment of the House under Standing Order No. 20 to discuss a specific and important matter that should have urgent consideration, namely,
"the Government's decision to require a named civil servant to make statements on behalf of the Government, to issue attacks on Members of the House of Commons in the knowledge that the civil servant was to be named in The Independent newspaper and referred to in The Guardian, while refusing to make similar statements in answer to written questions tabled by me."
The matter is urgent because the Government have now deployed a procedural device to gag Members of Parliament. The whole world's press is perplexed, aghast and at a loss to understand why the British Parliament cannot debate these matters.
The British Government are making an ass of themselves in the Australian court and using civil servants to make statements to which the Prime Minister says it would be inappropriate to make in reply to Members. It is being said that whereas, in medieval times, kings debased the coinage, the Government are today undermining the flag.
The British people object. We have no opportunity for oral parliamentary questions, no Adjournment debates are available and private notice questions are at your discretion, Mr. Speaker. You must inevitably find yourself in difficulty with private notice question applications, and meanwhile Whitehall leaks.
The matter is important because the Government have put up a Downing street junior, a civil servant, to make political attacks on individual Members of Parliament. The Government are abusing the Civil Service, and Mr. Jim Coe and Mr. Bernard Ingham would do well to consider their position. To say that this is being done to influence opinion without the Government accepting responsibility is not good enough and is a fraud. A naked civil servant is being used not only to attack hon. Members but to scatter the seeds of division between the Prime Minister and the Attorney-General.
In a shabby betrayal of a Cabinet colleague, the Prime Minister is inducing civil servants to attack the Attorney-General. The House must recognise that the Attorney-General took his instructions from, and was guided by, the British Prime Minister in all his actions. She is at the head of Britain's security services. These decisions were her decisions and she cannot deny her responsibility. The trade of a Prime Minister who lacks the courage to admit failure and who then uses the scalpel remorselessly to incise the reputation of a parliamentary friend and colleague of 25 years, is one of treachery. We need a courageous decision from you, Mr. Speaker, to exert the authority of Parliament and to give us time for a debate.
Mr. Speaker: The hon. Gentleman the Member for Workington (Mr. Campbell-Savours) asks leave to move the Adjournment of the House for the purpose of discussing a specific and important matter that he believes should have urgent consideration, namely,
"the Government's decision to permit a named civil servant to make statements on behalf of the Government."
As the hon. Gentleman knows, my sole decision in these matters is whether the matter should take precedence over the orders set down for today or tomorrow. I regret that I do not consider that the matter that has been raised is appropriate for discussion under Standing Order No. 20, and therefore, I cannot submit his application to the House.
Mr. Brian Sedgemore: On a point of order, Mr. Speaker. This concerns the use of a room within this building. I have been making some inquiries and I find that there is a room in the Turret which does not exist, in which are held meetings that do not take place. Speaking about the activities that go on in that room, Sir Robert Armstrong said in the Australian court today:
"The people who are there seek to influence opinion without accepting responsibility and seek to place in the public domain ideas which Government wish not to be seen to be putting there."
My point of order is this. Bearing in mind that the Prime Minister said, on Thursday that it would be inappropriate to discuss certain matters here, but then instructed a civil servant to discuss those matters in the room upstairs, at the meeting that did not take place, is it not time that you, Mr. Speaker, ruled the lobby out of order?
Mr. Speaker: It is a long-established practice, as I understand it.
Mr. Tony Banks: Further to that point of order, Mr. Speaker. If Mr. Jim Coe has been attacking an hon. Member, could you guide me and tell me who is the Minister to whom we should direct inquiries? Is it the Prime Minister, as head of the Civil Service?
Mr. Speaker: I am not responsible for Mr. Coe.

Civil Servant (Briefing)

  STATUTORY INSTRUMENTS, &c.
  Mr. Speaker: With permission, I shall put together the two motions on Statutory Instruments.
  Ordered,
  That the draft Recreation and Youth Service (Northern Ireland) Order 1986 be referred to a Standing Committee on Statutory Instruments, &c.
  That the draft Enterprise Ulster (Continuation of Functions) (Northern Ireland) Order 1986 be referred to a Standing Committee on Statutory Instruments, &c.—[Mr. Lennox-Boyd.]

Orders of the Day

  Petroleum Bill
  Order for Second Reading read.
  3.43 pm
  The Minister of State, Department of Energy (Mr. Alick Buchanan-Smith): I beg to move, That the Bill be now read a Second Time.
  We debate this Bill against a background of low oil prices and at a time when the industry is going through one of its most difficult periods since we were first fortunate enough to discover oil and gas off our coast. To that extent, many of us in the House—particularly those who, like myself, represent constitituencies in the areas where the activities are based—are very sensitive about the particular problems that the industry faces.
  We have particular sympathy and understanding for those individuals who face difficulties, many of whom, because of the downturn in the price of oil, have lost their jobs. Nevertheless, despite these difficulties, it is important that we should not become too obsessed with the immediate problems, important though they are, but that we should look ahead to the future of this industry and to the other challenges and problems that it will have to face in the years ahead.
  Despite the immediate difficulties that are faced by the industry, it is still very much in business. Production continues and there have been new developments, especially those relating to gas. I have considerable confidence in the continuing activity of this industry for many years to come.
  Against that background, it is important to plan at this stage not only for the continuing development activities of the industry but also for the other challenges that the industry will have to face. When no more oil or gas is economically recoverable from a field and the life of that field comes to an end, one of the challenges will be that the structure and other installations that have been used to recover the oil and gas will still be in situ. Therefore, we have to provide for what happens to those structures and installations when the life of a field comes to an end. That is the main matter that the Bill tackles. As I said earlier, it is a challenge for the future; it is not of immediate importance to the industry. None the less, I am glad that the Bill is being introduced at this stage, because it will provide us with a better opportunity to plan and to prepare for this challenge.
  The Government have taken the opportunity to deal with a number of other important issues in the Bill. They are less striking than the abandonment of installations and structures, but they will also have to be dealt with.
  The abandonment of structures and installations is not, as I have already emphasised, an immediate problem for the industry. The first fields are not expected to come to the end of their lives before the early 1990s, when steps will have to be taken to remove the installations and structures associated with them. There are now 150 oil and gas installations on the United Kingdom continental shelf. As the industry will continue to develop for many decades to come, the number of installations is expected to increase in the coming years, which will pose a substantial challenge.
  28
  Furthermore, the wide variety of gas and oil fields and the different types of structures and methods used to extract the oil and gas means that their abandonment will pose a variety of problems. There are a number of fairly small, lighweight installations in a number of fields. There are also a number of giant installations. I am thinking in particular of the huge concrete and steel jackets that are placed in water depths of up to 185 m. These very heavy structures are found mainly in the northern part of the North sea. By contrast, in the southern basin there are smaller structures that weigh as little as 300 tonnes. In the deeper waters the steel structures can weigh up to 58,000 tonnes each, creating a considerable physical problem, and concrete structures, of which we have about ten in the North sea, can weigh up to 650,000 tonnes. This illustrates the scale of the problem and the challenge which the industry and the Government have to face, and which the Bill seeks to address.
  Dr. Norman A. Godman: Has any research been conducted into the possible utilisation of the lighter structures, based as some of them are in shallow water, for artificial reefs?
  Mr. Buchanan-Smith: Yes, some research is under way on such structures and attention has been given to artificial reefs in the press and on radio and television. I believe that some oil companies may be inviting the fishing industry to consider the matter, but perhaps we may deal with that point later.
  To remove structures of the size and scale that I have described would involve huge sums of money. With the co-operation of the oil industry in 1984, it was estimated that, at 1984 prices, to require the complete removal of the structures in place at the moment—not future developments—could cost about £6 billion. That is a very large sum of money indeed.
  I emphasise that that figure is surrounded by considerable uncertainties. For example, as the hon. Gentleman has just said, there are many different structures in different areas—small structures in the southern basin and larger structures elsewhere. However, the real challenge lies in the deep waters which, although they contain only about one third of the total number of structures, might, it is estimated, involve more than three quarters of the total cost. It is that kind of uncertainty, given the scale of the problem, that makes it difficult to be specific about costs.
  Existing legislation requires the removal of such structures, but in general terms to the satisfaction of the Secretary of State. Under present legislation, we lack any detailed framework to deal with the abandonment of platforms and other installations. We do not have the provisions to set the kind of standards that might be required to do that or deal with the submission and approval of removal plans and with important matters such as preventing default from any removal obligations. The Bill seeks to enable action in all those general areas.
  A large number of interests are involved. On the one hand, there are the interests of the oil companies which installed the structures and platforms and other installations and which are now operating them and will be doing so for the rest of their productive life. On the other hand, in contrast, there are the interests of the taxpayer. At the end of the day, in the same way as development costs were allowable against tax, it has

  29
  always been understood that abandonment costs would equally he allowable against tax. Therefore, another major interest in any legislation must be that of the taxpayer and the country generally.
  There are other interests which use the sea—for example, the shipping industry, navigators and, most important, fishermen who have traditionally used the sea and the waters around our coasts for longer than the oil industry. Because of that, for longer than a year, consultations have been undertaken, some of which I have conducted. We have consulted the National Federation of Fishermen's Organisations from south of the border, a number of organisations representing the Scottish fishing industry, and the Sea Fish Industry Authority. On the industry side, we have consulted the Oil Industry International Exploration and Production Forum, the United Kingdom Offshore Operators Association and Brindex, the organisation that represents the small British independent exploration companies.
  Mr. Albert McQuarrie: I do not wish to delay my right hon. Friend and I am aware of the consultations that he is having with the various fishing organisations, but can he assure me that, before or during Committee stage, he will have further negotiations with the fishing industry, especially the Scottish Fishermen's Federation, which has expressed serious reservations about clause 2(11)?
  Mr. Peter Hardy: May I follow the intervention of the hon. Member for Banff and Buchan (Mr. McQuarrie) and ask, while I have no objection to consultations with fishermen—they seem to be a good idea—whether the Minister recognises that, in a letter from the United Kingdom Offshore Operators' Association, we are told that it is disturbed by some proposals in the Bill and is at present discussing those concerns with the Department of Energy in the hope that they can be resolved by appropriate amendments to the Bill? Would it not have been better to have delayed the Bill a little longer so that consultations could have been carried out? Can we take it that the Minister will have consultations, even at the cost of delaying the Committee stage by a day or two?
  Mr. Buchanan-Smith: I had hoped to get on with some of the detailed provisions, but I am happy to deal with these points, as they are about consultations. Consultations have been taking place now for nearly a year and in some cases for more than a year. All parties to the consultations have been aware of the problems under discussion. We have made clear what we believe needs to be done and the issues that need to be covered. If some matters are not dealt with to the satisfaction of those concerned, we shall consider them during the later stages of the Bill. Some consultations will certainly continue.
  I do not agree with the hon. Member for Wentworth (Mr. Hardy) about delaying the Bill. What he says would be a great reason for delaying all legislation. We have laid down provisions for some important issues. There may be better ways, but I shall approach the Committee stage in my usual constructive manner; I am sure that the hon. Member for Merthyr Tydfil and Rhymney (Mr. Rowlands), with whom I have worked in Committee, will do the same. If there are further representations and
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  suggestions, I shall be happy to consider them during the later stages of the Bill. I am sure that we shall have a great deal of opportunity for debate during those stages.
  Following those consultations, we have sought in the Bill properly to strike a balance between the different interests. There is a conflict of interest, as there is in any legislation. That is why the Government must reach a decision and make their proposals. We have sought, for example, both to ensure that we minimise the costs of abandonment which ultimately fall on taxpayers, thereby ensuring their interests, and at the same time to balance the interests of those who use and who will be using the sea in different ways for many generations to come. There is another important balance to strike, for we must ensure that the provisions that we introduce are consistent with our obligations under international law. That must have a bearing on what is ultimately decided.
  That is the background to what we are seeking to do by means of the Bill.
  Mr. Edward Rowlands: Am I to understand that that is all that the Minister intends to say about international obligations?
  Mr. Buchanan-Smith: I should be happy to say a great deal more on that score, but, if I do so, I shall not be able to make progress with my speech, in what is a relatively short debate. I have been interrupted constantly so far.
  I have mentioned in passing our international obligations; as the hon. Gentleman is aware, there are certain obligations under the Geneva convention of 1958, which were laid down at a time when the North sea had not been developed in the way that it is now and when international law was directed to smaller and lighter structures. The very large structures which now exist were not anticipated then.
  As the hon. Member for Merthyr Tydfil and Rhymney knows, with his experience of dealing with international matters, international law evolves constantly, and the Geneva convention has been very much overtaken by the law of the sea conference of 1982. The hon. Gentleman may know that, following that conference, the International Maritime Organisation, which is one of the arms of the international organisation that deals with this matter, will be convening meetings that will start early next year to deal with these precise issues. International law will evolve as the Bill is considered, and will evolve even further after it is enacted. We have chosen a relatively flexible framework for the Bill, as that will enable us to respond to whatever may be decided internationally. In introducing the Bill and in planning for the 1990s, we are way ahead of any other country that faces these challenges. In introducing the Bill now, I hope that we are focussing the debate on the United Kingdom and more widely.
  Mr. Rowlands: I am grateful for that elaboration. These are important matters and they will be of importance in the Committee. May I take it that the Government intend to submit proposals to the IMO at its meeting in January in giving a lead of the sort that the Minister has suggested?
  Mr. Buchanan-Smith: Discussions are taking place on the precise form of the IMO meetings and they are still at an early stage. No decision has been taken on the exact case that we shall present. We want to know slightly more about the agenda that is to be discussed. The international debate through the international organisations will be a

  31
  reflection of what we are discussing domestically. I wish to emphasise that domestically we are ahead of what is taking place internationally.
  The provisions of the Bill are addressed to providing a framework that will control the safe and orderly abandonment of installations. The Bill will not set standards in the abandonment provisions. It will enable the Secretary of State to set standards covering such important matters as safety of operation and the other important matters to which my hon. Friend the Member for Banff and Buchan (Mr. McQuarrie) referred, such as the extent of removal. My hon. Friend is probably aware that fishermen believe that international law requires complete removal, but that is not the Government's view. We believe that partial removal is possible under international law. We understand, however, the fisherman's reservations. I had discussions with fishermen's organisations as recently as the middle of last week, and we shall continue to discuss with them what we are doing.
  Dr. Godman: Will the Minister give way?
  Mr. Buchanan-Smith: I think that I have given way enough already. I shall be replying on behalf of the Government and I shall answer all detailed questions at that stage. I am aware that many other right hon. and hon. Members want to contribute to the debate.
  I was saying that the Bill does not set standards or norms for abandonment. These will follow in the regulations that the Bill, when enacted, will enable the Government to put before the House. The die is not being cast irrevocably or rigidly. We do not believe that that would be sensible. By asking the House to allow this proposed legislation to take its place on the statute book, we are enabling the oil companies especially to make sensible financial provision and clarifying what is likely to be expected of them.
  By introducing regulations at a later stage rather than setting them out in primary legislation, we are making it much easier to vary what may be required in the light of experience and in response to changes in international law. That is the reason for our approach. The Bill makes it clear that ultimately responsibility will rest with the owners of installations for their final removal. Responsibility will rest with them whether removal is partial or complete.
  The early clauses deal wholly with abandonment. Under clause 1, the Secretary of State will be able to require those responsible to draw up programmes for the removal of installations and to set out details of their programme. The Secretary of State is given power to draw up his own programme where the owner is unable or unwilling to frame his own, and will be able to recover the costs that he may incur in so doing. I hope that we shall not be required to use that power, but it is important that we have it in the event of default. The power is set out in clause 5.
  Under clause 8, strict responsibilities and duties are laid on those responsible for submitting a programme. They will have a duty to ensure that the programme is carried out properly. In the last resort, the Secretary of State will be able to arrange for the abandonment and to recover the cost of so doing. Again, that is something that I hope will not arise in practice. Clause 12 makes it a criminal offence to fail to comply with any of the requirements set out in this part of the Bill.
  Mr. Andrew Rowe: Am I right in my understanding that the Bill widens considerably the numbers and types of people who can be served with a notice by the Secretary of State, taking them well beyond those that come within the normal limited liability regulations? Is there anything in the record of the companies which have operating in the North sea which would justify such a widening?
  Mr. Buchanan-Smith: My hon. Friend anticipates precisely that to which I was about to turn. The House will realise from what I have said already that the financial costs of abandonment are extremely high. The commitments of the oil companies will vary greatly given the partnership arrangements, for example. Under clause 2—this is probably causing my hon. Friend concern—the Secretary of State may require companies to satisfy him that they can fulfil their obligations. That is why the liability under the clause has been spread widely. If a company failed to fulfil its obligations, the cost of so doing, which could be very large, would fall on the taxpayer. Therefore, the Secretary of State and the Government have an important responsibility to ensure that the interests of the taxpayer and the country are protected.
  Under legislation in other areas, provisions have been made for spreading the liability widely. I would be happy to return to those provisions later and I am sure that they will be returned to later during discussion on the Bill. I am aware, as interventions from other hon. Members have shown, that some oil companies consider that their liabilities under the clause are too severe. Given the risks that exist—I mentioned that the Secretary of State may be required to carry out certain things in the event of a company not fulfilling its obligations—there is a responsibility to ensure that companies live up to their obligations and can fulfil them. We are not asking for anything unreasonable and we would be failing in our duties if we did not make that provision. Equally, if the oil companies believe that there are better ways of achieving the same objective of protecting the taxpayer and the public interest, we would consider them.
  During consultations over the past year, several suggestions have been made to the oil companies which they have not taken up or proceeded with. In the absence of any other counter-proposal from the oil companies and their organisations that can meet practically and sensibly the fair obligation which the Government believe should be imposed upon them, we have drafted the Bill as it stands. I assure the House that we shall closely consider fishing interests when deciding on the degree to which abandonment shall take place. We shall also consult the oil companies on whether there is a better way to achieve that objective. I emphasise to the House that the objective is fair. The Government are committed to it and, in principle, I do not believe that the oil companies regard it as unreasonable. However, if there is a better way to achieve the objective, I would be happy to consider it.
  Sir Trevor Skeet: Is not the Minister faced with the problem that the initial stage, when the revenue is tumbling in, is not the time for decommissioning? At the end of the fields' useful lives, when the revenue is falling off, companies may not be in a state to give an assurance that they will make provision

  33
  for their liabilities out of future earnings which do not yet exist? Should not the Minister require the establishment of a fund?
  Mr. Buchanan-Smith: That idea has been put around and discussed from time to time. There may be a solution down that road, but it is one to which the oil companies would have to make a major contribution and in which they would have to play a major part. We have been discussing this matter for a year and no specific proposals have been made. Therefore, the Government have rightly made their proposals. If suggestions are made for another route, I would consider them.
  As the House will realise from my remarks, we have endeavoured in the Bill to adopt a flexible approach which seeks to balance different interests, including costs, and which uses regulations, to establish standards of what may be expected in the case of abandonment. An advantage of that approach is that the huge variety of different structures and installations can be approached case by case. That is the only sensible way to achieve some of the objectives.
  I hope that the Bill makes clear the Government's determination to ensure that the industry discharges its obligations. It also meets the point raised by my hon. Friend the Member for Bedfordshire, North (Sir T. Skeet), that now is the time to plan, rather than leaving it until the last minute when companies may not be clear about their obligations and may therefore be less able to provide for them. The fact that the Bill is being introduced now rather than leaving it too late in the day will ensure that proper provision is made to cover extreme eventualities.
  The abandonment provisions of the Bill have another advantage. By endeavouring to widen the debate and set out the framework under which abandonment will be approached, an opportunity will also be provided for what I would loosely and inaccurately describe as the supply industry offshore. The term "supply industry" is used for those industries that work in support of the oil industry in supplying all the goods and services. Abandonment will also require a supply industry and the development of new technology. Research is already taking place.
  This weekend an article in a Sunday paper mentioned a company in Aberdeen which was already actively pursuing and trying to evaluate the opportunities for getting involved in that area. At present, the industry is rightly concerned with development rather than abandonment. None the less, given that the United Kingdom is in the lead in terms of legislation on this matter, British industry has the scope in terms of technology and of capacity to move ahead of industries in other parts of the world by getting involved in activity, first, on our continental shelf and, I hope, on the continental shelves of other countries as opportunities occur.
  Finally, I shall mention briefly the later parts of the Bill. Part II, which deals with royalties, updates the royalty regime by rationalising procedures for royalty accounting and for arbitration. It also provides the enabling power, related to part I of the Bill, to allow the repayment of royalty to make allowance for abandonment costs. I apologise to the House unreservedly for the complicated nature of the schedules which refer to the clauses relating to royalties. I tried to do that more simply, but we are dealing with amendments to seven different sets of model
  34
  clauses. The approach that we adopted in the drafting of the Bill was the same as in previous Bills where amendments had to be made.
  I promise the House that, in Committee, I will provide full explanatory notes on that part of the Bill. Hon. Members may be even more confused when they see the length and complication of the notes, but I shall endeavour to provide them. I shall also endeavour in Committee to rewrite the schedules, although not in the sense of rewriting them as part of the Bill. I shall try to submit to the Committee draft model clauses which incorporate the amendments in the schedules. Precisely how those schedules are applied will perhaps be made clearer. I hope that that will be helpful to the Committee, as the procedure appears to be enormously complicated for what, in other respects, are not enormously dramatic changes and tidying-up measures.
  On part III, I wish to pick out two important items. Around rigs, platforms and other installations there will be automatic rig safety zones of 500 m. At present, each safety zone must be submitted in an order to the House by statutory instrument. Where a safety zone is revoked, an order must again be submitted to the House. The provisions on safety zones represent a direct response to representations from the Joint Committee on Statutory Instruments, which asked that the Government should consider this approach. I am happy that we have been able to respond. It will certainly save me placing a lot of orders before the House.
  It is worth reflecting that only about 30 orders in 1981 involved establishing or revoking safety zones, whereas up until the end of October this year about 159 orders have had to be submitted to the Joint Committee on Statutory Instruments. The provisions represent a sensible tidying up. The Committee has been very patient, as it has been pressing us for some time. This is our first legislative opportunity to oblige, and I am happy to do so.
  In recent years, those involved in the industry have expressed worries about pipelines. This Bill represents our first legislative opportunity for action. It enables the Secretary of State to prohibit the use or testing of any pipelines until specified steps have been taken by their owners to ensure that funds are available to discharge any liability for loss or damage, and so on. One or two recent public inquiries on pipelines have raised this question. It has been examined carefully and fully, and I am happy that we can now respond to those who have raised the issue. They had a legitimate point, and subject to the agreement of the House, it will be incorporated in the Bill.
  The Bill is important. I make no apology for having dwelt at length on abandonment. I hope that I have anticipated some detailed questions and answered some of the interventions made. The issue is complicated, and is surrounded by many doubts and uncertainties as to the best way to proceed. As yet, for example, we do not have the technical knowledge as to how best to deal with some of the structures. I ask the House to put this legislation on the statute book, because I believe that it will give us the necessary legislative framework, and will help to concentrate the minds of those in charge of oil companies and supply industries, as well at the minds of those in other international forums on the problems. A flexible approach means that we should be able to react to changes in policies and decisions, particularly at an international level, as the moment of first abandonment comes closer.
  I commend the Bill to the House.
  4.22 pm
  Mr. Ted Rowlands: I shall follow the Minister in one respect, in that I shall devote my remarks almost entirely to part I of the Bill. The Bill primarily creates the legislative framework with which to deal with the abandonment issues and the decommissioning of oil platforms in our waters. The Bill's other clauses involve miscellaneous questions that still, however, deserve scrutiny. I think, particularly, of those provisions relating to the royalty repayments that are involved in the whole question of covering the costs of abandonment.
  Like the Minister, I shall concentrate on the major issues contained in part I of the Bill, which deals with the abandonment of oil and gas platforms on our continental shelf. We also realise the enormous, awesome implications of abandonment. It presents us with great technical challenges. I think, too, of the fiscal implications of abandonment and of the profound concern felt by many of those involved in fishing and marine affairs, who make their livings from the North sea.
  Those issues, and the awesome challenges presented by the prospect of having to abandon such huge structures, raise major concerns. They, in turn, must be seen against the background of major international obligations and of the search for international standards. That was the reason for my intervention. I am still rather surprised that the Minister did not elaborate as much as I want to do on the international context in which the legislation is being debated. The problems involved in abandoning oil and gas platforms are to the oil and gas industries what decommissioning is to the nuclear power industry, although without such emotive connotations.
  Abandonment presents those industries with an awesome technical and financial challenge, and with major concerns with respect to fishing and the marine environment. Those issues and concerns must be set against the search for a new set of internationally agreed standards and criteria. I think not only of how those standards will affect the North sea but of the major decisions made at the law of the sea conferences in 1982. We must judge the timing and character of the legislative proposals against such major domestic and international issues.
  In some respects, I find the legislation odd, to say the least. I shall go on to explain why but first, I should underline what the Minister said about the consequences of those challenges. As he said, we are talking about nearly 150 installations. Although they are an intrinsic part of the Bill, he did not mention that for every installation there are about 2,800 miles of pipeline. It is not only the last part of the Bill that deals with pipelines, but the whole of part I. That part of the Bill deals not only with abandoning the installations but with abandoning large tracts of pipeline on the sea bed. In a way, they present just as difficult a problem.
  As the Minister said, many of the installations are very large, and form part of the approximately 6,000 installations that are scattered all over the world. But the major difference between our installations and the others is that almost 90 per cent. of the other installations stand in relatively shallow waters that are no more than 40 m deep. Only 360 of the 6,000 installations stand in waters that are deeper than 75 m. As the Minister said, we have a share of them, so it is only right and responsible of us to address ourselves to the argument as early as possible.
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  I hope that the House will agree that we should not try to diminish the size of the problem. For example, I have heard it said that, compared with the sums earned from the North sea by the oil industry, Scottish trawler and fishing interests involve only small incomes. But the House should not consider the matter in those terms. I have also read articles saying that there are 20,000 shipwrecks recorded in United Kingdom waters, thus trying to minimise the potential problem of abandoning our oil installations.
  Dr. Godman: May I point out to my hon. Friend that a modern stern trawler can fish in depths of up to 500 fathoms? Even a smaller, side trawler can fish in depths of 300 fathoms if it has the right equipment.
  Mr. Rowlands: I hope that my hon. Friend will join us on the Committee, as his knowledge and expertise will be required in the sort of Committee that we hope to have.
  We should not minimise abandonment, despite what is said in some contexts about the amount of debris that already exists on the sea bed. As the Minister said, 18 of the installations stand in the central North sea. Fourteen are major installations, of which eight, nine or even 10 are major concrete structures. Those present technical and financial challenges, and that is what has prompted the Government to introduce the Bill.
  As the Minister admits, abandonment is an intrinsic part of the Bill. The question is whether we allow partial removal, toppling or alternative uses for the platforms. Under the 1958 convention, complete removal has been the historical position. The Bill would allow the oil industry to bring forward proposals for a combination of possible solutions to the problems involving partial removal, toppling, the possible towing to and sinking in other parts of the North sea or other uses for the platforms.
  We recognise that there are enormous technical problems in trying to remove a concrete platform. The literature contains a romantic description of the champagne cork effect—if we try to pull out or remove the enormous concrete structures that are deeply embedded in the sea bed, there will be a terrible and awesome effect on the whole structure. The rapid lifting and rising will present an enormous danger to life.
  We in no way underestimate the nature and character of the problems associated with abandonment. Hon. Members will have researched the issue and will know that some fascinating work has been done by the Heriot-Watt university into possible alternative uses. One suggestion is that one or two of these installations could be turned into casinos. It might be a bit of a gamble to have a night out on the Thistle, and I would not fancy it.
  However, there are some interesting suggestions for alternative uses for the platforms. For example, one or two might be used for marine search or for communications and navigation assistance. However, in the majority of cases, the issue is one of either partial clearance, toppling or complete removal.
  Dr. Michael Clark: The hon. Gentleman said that many hon. Members have researched the problems of abandonment. During his research, did he find any evidence of research at the time when the rigs were originally designed that would assist the abandonment programme? I have found no such evidence and it would be interesting to know whether he has found any.
  Mr. Rowlands: The hon. Gentleman has made a most interesting point. A major retrospective criticism of the development of these rigs is that some aspects of design could have been done in such a way as to facilitate the handling of the problems that we are now facing. However, in view of the enormous technological breakthroughs that have enabled us to achieve so much during the past 20 years or so, we should not be too censorious.
  The hon. Member for Rochford (Dr. Clark) is on to a good point. We are now beginning to realise fully the character and nature of the problem. Some interesting studies show how designs might evolve to tackle the problems, and there might be some interesting design techniques for demolition. Although that appears to be a contradiction in terms, designing for demolition will create many challenges in engineering and physical terms. I have read only a little about that aspect of the problem, but no doubt we shall have time to discuss it in Committee.
  When considering partial abandonment, toppling and case-by-case programming, we must ensure that those who are listening understand what we are saying. There is a suggestion for international criteria for the standard that should be established for partial removal in the deepest waters. It requires that no more than 40 m of clearance from the sea should be the base for partial clearance. In other words, some of the platforms will have to be reduced to 40 in below sea level. We might be asked to approve enormous standing structures on the sea bed. Put in terms that we can understand and appreciate, that is what partial toppling involves. We are discussing structures in 500 or 600 ft of water. By seeking partial toppling of a mere 40 in we are talking about an underwater level for pylons of 300 or 400 ft.
  We shall have to devise a set of arrangements to justify that proposal. However, at least we would know what we mean by such terms as partial abandonment and partial toppling. The lack of clarity is the reason for the real concern of the fishing industry about these arguments—especially in the trawling industry and those who might ship in the area.
  We must recognise the shared concern of the United States and others about the defence aspects of leaving considerable structures or debris on the seabed after abandonment. With a Bill that contains such sweeping powers and the need for case by case solutions, we desperately need sensible and clear guidelines from the Government. Although the codes and criteria are very important to abandonment programmes, we must question whether powers in the form described in the Bill should be granted to the Government. That is one of our criticisms of the Government's approach. It is not emotive to draw clear and specific attention to the consequences of leaving such huge structures in the North sea as anticipated in the Bill.
  I will not deal now with the specific worries of the fishing industry, as they will be dealt with later by my hon. Friend the Member for East Lothian (Mr. Home Robertson). The Opposition recognise the Minister's interest and concern for the profound anxieties of the fishing and trawling interests about the consequences of policies that might be adopted under the Bill. It is important that we establish that those interests have rights.
  One of our major criticisms of the Bill is that third parties are given no right to a hearing or consultation
  38
  during programme making. The Minister might verbally promise the Scottish Fishermen's Federation that there will be consultation on the regulations, and so on. I should like him to tell me under which clause a third party's statutory rights and interests are fully to be taken into account.
  Mr. Buchanan-Smith: Before the hon. Gentleman goes too far, he should read the clauses in relation to the drawing-up of the regulations. They make it clear that there has to be consultation. There is a legal obligation of consultation when those regulations are drawn up.
  Mr. Rowlands: After the years we have sparred in Committee and across the Dispatch Box, the Minister should realise that I do read Bills. The point I made was not the one he rose to speak about. I said that, in this Bill, there are no third party rights—I was going to complete my remarks but he did not give me a chance—regarding the approval of programmes and input into their preparation. It will be of considerable concern to trawlermen and other interests that the Minister should proceed on a case-by-case basis. The cases, as well as any general criteria or general regulations, will matter. There will be general consultation on the regulations. Decisions will be made when the Minister gives approval to amend or reject individual programmes.
  If one examines the clauses dealing with those provisions, one will notice that a third party has no right to be heard or to be consulted. That is one proposal that we might consider—I hope in no partisan spirit—in Committee. I hope the Minister will have an open mind about the way in which we can build upon this procedure. If he is to approach the issue on a case-by-case basis, he must allow those who could be most affected by it to have genuine statutory rights to be consulted and involved in the process.
  Because of the way in which the Minister and the Government have brought forward these matters, we have minimum information about the Government's thinking on the criteria and guidelines that will constitute the regulations. The Minister did not give us much of an insight into the nature of his consultations. They are funny consultations in at least one basic sense. Front my experience and observation of Government consultation, there is usually a document available, especially if the matter has been going on for 12 months and many bodies are effectively involved. The Minister made the big claim at the Dispatch Box that he had conducted these consultations, but there is not one single document on which this process has been based. I asked his Department the form in which these consultations had taken place. The Minister quite properly referred to the speech of an official, Mr. Butler. It was a useful, helpful speech that some of us were directed to read. Apart from that speech and another piece of paper—there is nothing in the Library and nothing in writing—no other document has been properly used in consultation.
  If consultation of the kind that the Minister described has occurred, it has obviously been oral consultation. I understand from my inquiries and my informal contacts that the Minister has put forward some ideas. I challenge him to tell us where the ideas are presented. Are they available to hon. Members as we embark upon this major debate? I thought that he would elaborate on them this afternoon, but he has not done so.
  Dr. Michael Clark: My right hon. Friend the Minister can speak for himself. He made it clear that he had various consultations with oil companies, asking whether they could suggest ways in which this could be done. Does the hon. Gentleman agree that this is a consultation Bill? There is much scope in the Bill for consultation in Committee, when we shall thrash out so many of the matters about which he wishes to talk.
  Mr. Rowlands: I am delighted to accept the hon. Gentleman's invitation. I rather like his description. My quarrel is that, if we bring forward a Bill with such sweeping powers—if nothing else, we all agree that clause 2 and others, upon which I shall touch, are wide, enabling provisions—it should be accompanied by a much clearer idea of how the Government will implement and exercise it. A Bill of this kind giving Ministers such awesome, huge powers to do all sorts of things to all sorts of people should be accompanied at this stage by much clearer thinking and a statement of the character and nature of the Government's policies.
  I understand that the Minister has been discussing—I do not know whether orally or not; I cannot find any document—zoning the North sea. There are three zones. There is the southern basin, the central North sea and the deep North sea. Different criteria and standards relating to partial toppling, partial clearing and so on will be laid down. It is an interesting and reasonable proposition. We are debating the Second Reading of a Bill to include all those powers without having any real insight into the Government's thinking. That insight should have come as a consultative process alongside this Bill. We should not, as we shall have to, in a sense, winkle it out in Committee. The hon. Member for Rochford rightly said that the Committee stage of a Bill such as this can be a consultative process. We shall have to utilise it.
  We have been discussing how we can improve the legislative process. This would have been a good opportunity—the parties are not necessarily divided—to use the pre-legislative process. A Select Committee or a genuine pre-legislative Committee could have taken evidence on the issues and the legislative structure in a genuine, non-partisan spirit. That would have been a most useful way in which to proceed. This procedure will cause many problems and make it harder for us to grapple with the issues. I assure the hon. Gentleman that we shall make every effort to do so.
  I do not support the manner in which these issues have been brought to the House. It has led to the nature of this legislation. This point is given greater force in view of the financial and fiscal consequences of the various policies and programmes. I am grateful to the Minister for bringing to our attention the fact that core estimates of abandonment vary from £6 billion for total clearance to £2·7 billion, in 1984 terms, for partial removal. The lower figure—he did not mention this—was based on a policy of a 40 m clearance depth.
  If the Minister is considering a variable system of clearance depths of the kind that we understood he has orally been discussing with the industry, there will be different clearance levels of 55 m or 75 m, depending on the depth of the North sea and the installation itself. We will need to know the cost implications of those arguments. We could take them on a core basis.
  Every taxpayer and hon. Member should be concerned about who will pay and how. In July 1985, in the lecture
  40
  which we were advised to read, Mr. Butler, the Department of Energy official, estimated that 60 to 70 per cent. of abandonment costs would fall on the Exchequer in royalties or tax relief. He added:
  "The way in which the rules would operate in individual cases will require a good deal more study."
  That was July 1985; it is now November 1986. We shall be interested to learn in Committee how much more study of the costs to fall on the Exchequer has been done since July 1985.
  On 9 September 1986, Max Wilkinson in a perceptive article in the Financial Times drew specific attention to the capricious nature of taxation in relation to abandonment and certain companies and a certain size of field. These important matters will require much greater scrutiny in Committee.
  Confronted with a large series of major problems, unresolved policy decisions and an uncertain financial and fiscal structure, what have the Government done? They have brought forward the Petroleum Bill and provisions such as clauses 2, 4, 5 and 10. They are catch-all clauses. Because the Government are not certain what to do, they will sweep up everyone, serving notices on everyone in sight who has the slightest possible interest in an abandonment programme. Clause 2 is a catch-all provision of enormous potential.
  I understand the Minister's concern. We do not want the taxpayers to be rooked in any shape or form. He will have much support in ensuring that that does not happen. But is it the answer to bring in a provision such as clause 2? It smacks less of the Department of Energy than of the Inland Revenue. When in doubt, the Inland Revenue decides to serve notices in respect of taxation or costs on anyone who has anything to do with the issue. The House will have considerable qualms about clause 2. I shall be interested in Committee to hear the Minister reveal the precedents that it raises in respect of corporate liability, and so on.
  I was glad to note the Minister's willingness to take part in consultation in Committee to thrash out variations on the way to handle the provisions of clause 2. Clause 2(5) seems to redefine the nature of control of a company. In my ignorance, I assumed that one controlled a company with 51 per cent., not 50 per cent., of the share capital. Under clause 2(5) "one half or more" is defined as giving control of a company. Major issues arise, and we have a right to register our objection to the nature of the legislation when we do not have a clear idea of the policy.
  The international dimension—that we should relate our standards and policies to those being thrashed out in the key international forums, especially the law of the sea conferences and the International Maritime Organisation—is another important consideration. Although the Minister contested this, we are in an uncomfortable position. The only convention to which we are a party, to which we are a signatory and which is in force is the 1958 Geneva convention, but it contains the rather uncomfortable statement that there must be complete removal of installations. Rightly, we have moved on since then. In 1985, the Government sought to move away from the 1958 convention by introducing a revised article, article 60, and I compliment them on that. The agreement of 60 states was needed to make the measure enforceable. We were just over halfway there, with the support of 31 states, when the conference concluded. I suspect that we shall achieve the

  41
  agreement of 60 states only if we thrash out the definition of the article and devise genuine international guidelines which we, as much as any other country, will accept.
  On 12 January there will be the first of a series of significant meetings of the IMO to start the work of turning article 60 into a meaningful set of practical criteria and guidelines. The last time I checked, as of last weekend only two papers had been submitted for discussion at the 12 January meeting. I understand that, according to the rules, submissions must be made by 15 September. The Minister complimented himself and the Government on coming forward with this legislation to give the lead and to shape up the debate nationally and internationally, but I am surprised that we are not taking the lead in shaping the arguments which will be made at the IMO meeting in January. I understand that, unless the Minister has submitted proposals in the last few days, the Government have not submitted any ideas to the IMO. The submissions made so far show the type of problems we could come up against. One major proposal could cause considerable difficulties in implementing the Bill in this form. We are justified in bringing these important international dimensions and issues to the attention of the House.
  We understand the challenges that face everyone dealing with the issue of abandonment. We understand also the opportunities, on which the Minister touched, to develop new engineering techniques, in designing demolition techniques and in the physical opportunities of removal. We must ensure that British companies meet that challenge, take up the opportunities as outlined in the National Economic Development Council report, "Growing Markets for Demolition and Dismantling", which brought forward an interesting, important and almost contradictory concept which was nevertheless fascinating.
  I cannot conceal our view that the Government have not approached the issues in the way we should have liked. It would have been useful to have a pre-legislative process of the kind I have suggested. I hope that there will be consultation in Committee. We shall not oppose the Bill tonight. We believe that there is constructive work to be done, not on a partisan or party basis but by searching for answers to meet this severe challenge. I think that it is no exaggeration to say that the problems of abandonment present, in their way, just as much of a technological and fiscal challenge as development in the North sea has done so far.
  4.58 pm
  Sir Trevor Skeet: The hon. Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) dealt with a number of interesting international points, but my right hon. Friend the Minister is well protected. We passed legislation on deep sea mining well before the international agreement was negotiated, although we have not ratified it. That was done in enabling legislation which anticipated events, exactly as the Petroleum Bill does.
  This is a necessary Bill. It is purely an enabling measure. There are difficulties in clause 11 which prescribes standards and safety requirements, although at this stage we do not know precisely what they are. I hope that the Minister will give the Committee a draft of some of the regulations in order to establish one or two of the criteria which could he rather useful. That would not negate the value of the legislation.
  42
  The hon. Member for Merthyr Tydfil and Rhymney spoke about the vast expenditure involved. That troubled me. We must keep it in proportion. He mentioned a figure of £6 billion. That would be equivalent to £2 billion above what we are spending on research and development in the United Kingdom. That is enormous expenditure. It could be expressed in terms of the number of hospitals which could be built in the United Kingdom. Do we have to spend that vast sum on getting rid of some of the structures in the North sea? Perhaps we can say that it could be done a little less expensively by considering other matters.
  Dr. Michael Clark: I recognise that if we do have to get rid of the structures in the North sea it will involve great expenditure. I wonder whether my hon. Friend could say how the taxpayer, the nation and the state could extract that money from the oil companies in order to build hospitals and do the technical research that is required in this country?
  Sir Trevor Skeet: I am not in the oil industry but the oil companies have been paying petroleum revenue tax and taxation for many years. About 85 per cent. to 90 per cent. of the take from the receipts of the North sea is held by the Government. Therefore, when one considers the liability for decommissioning the structures, one has to take into account who has the profits. It has been the state. [HON. MEMBERS: "Where are they?"] They have been carefully invested overseas to the benefit of the United Kingdom. The hon. Member for East Lothian (Mr. Home Robertson) may laugh, but the invisible account is of no mean significance to the United Kingdom. It buys a vast quantity of manufactures and food essential to this country.
  There is one point which I consider to be of great significance. There is ample precedent. Legislation has been passed for the extraction industries. There is the Town and Country Planning (Minerals) Act 1981 in which aftercare provision was made; that is, that land had to be restored to the condition which was laid down by the Act.
  We then moved into the nuclear area. The hon. Member for Merthyr Tydfil and Rhymney mentioned the companies trying to get togeher with British Nuclear Fuels Ltd. and the Atomic Energy Authority, working with the international agencies to try to devise ways to decommission nuclear power stations. Therefore, it is not surprising that in the North sea, even though it is no man's territory and free territory in which things can be left—although it is preferred that they are not—some sort of arrangement should be made now. It is important that we should consider that point. Navigation has to be considered, as does deep trawling and the movement of craft on the surface of the sea and submarines.
  The hon. Member for Merthyr Tydfil and Rhymney mentioned that the number of platforms—144 of them—in shallow water is about 70 per cent. of the total. Those in deep water form about 30 per cent. I agree, as would many other hon. Members, that those in shallow water will have to be removed entirely. Those in deep water can be truncated or cut off. When I was at the University of Manchester Institute of Science and Technology recently I saw some novel methods of cutting the steel under water. When that has been perfected, it may reduce the costs substantially. We may look to the future when we avoid the use of those very expensive platforms and use floating production systems which are now coming into vogue.

  43
  When the Minister considers the liability of oil companies, will he be concerned with unlimited liability for those corporations—that is, after receiving certain grants or tax advantages from the state? After all, there is a principle in law that, when one brings something on to one's land and it escapes and damages a third party, one is liable for the damages, provided they are not too remote.
  I understand the point referred to, which came under clause 2, that if a company becomes defunct at the end of its life and ceases to be a paying proposition because the revenues have disappeared and it is coming to the time when liabilities are beginning to mount, what does one do? Do the Government have to take in all the bills? The little device that the Minister has resorted to has been clear. One looks to the parent company for the default of the subsidiaries. One can travel right up the tree and fault anybody in the line. I mentioned in an intervention that the right course would probably be to establish a fund in the early stages, such as the ironstone fund which was utilised in Northampton, to which all companies had to subscribe in order to deal with the final reinstatement of the land at a later date. It was discussed at one of the inquiries prior to the Town and Country Planning (Minerals) Act 1981, when it was thought that it might be a useful idea to have a fund established for that purpose. I wonder whether companies would consider that.
  Another important point is that obviously the Government want the maximum extraction from the North sea and the price of oil is one of the determining factors. That could lead to pemature closures which could lead to the loss of a lot of potential and available oil. I wonder how far the Government have got with their negotiations for a tax regime. According to the Bill, there is the possibility of the repayment of royalties, which will be appreciated. They may well be offset against corporation tax and PRT. It might be a sensible idea to do what somebody else has recommended, which is that one takes the last seven years of PRT which have been paid by the companies and offsets that in its entirety. There has been talk that we should adopt a grant system, which the Norwegians have resorted to, based on the average of tax to revenue over the complete life of the field.
  Perhaps I can make one suggestion to the Government. The idea is to maximise extraction, and a formula for diminishing tax with the age of the field could be resorted to. That would encourage the use of enhanced recovery methods. It would counter the low price of oil and take into account the fact that liabilities are likely to rise at the time of the declining revenues.
  Enhanced recovery is important. The public will recognise that about 42 per cent. of the oil is extracted and the rest is left in place. It may be extracted at some future date but, if the platforms are removed, some other method will have to be found for bringing it up. Of course, technology has not advanced to the point where it can be extracted. Therefore, it will remain in situ for the time being.
  I want to ask the Minister about licensing. Under clause 19, in part II of the Bill, licensing can be extended to the territorial waters of Northern Ireland. I wonder whether the Minister will give me some indication as to the position of the Isle of Man, which is off the west coast of the United Kingdom. Does it have its own territorial waters? Does it
  44
  have the right to raise royalties and grant licences? Does it have the right to negotiate directly with the oil companies or does it fall under his own Ministry?
  I want to be brief in order to enable my colleagues to contribute. My approach is that this is a useful Bill and must go on to the statute book. The approach must be constructive. We have to measure the opportunities which are likely to arise. The oilfields have a long time to run. The first to close will probably be the Auk field operated by Shell. That may be closed in the 1990s. Many of the other fields will be running for 20 or 30 years. Over the course of time, the regulations can be carefully devised and the Government can decide what should be done in the public interest.
  Consultations with the United Kingdom Offshore Operators Association should continue and negotiations and discussions with international bodies, especially the International Maritime Organisation, should be extended. I believe that that will be of great value in achieving our aims—to maximise the advantage of North sea oil extraction and to safeguard the public purse without being unduly punitive to the companies involved.
  5.10 pm
  Mr. Malcolm Bruce: The Minister and others have acknowledged that there is much still to be done in this area, but I welcome the Minister's opening statement because in the current downturn in North sea activities it is important to state clearly that North sea extraction is still in its adolescence rather than fully mature and that the development of new fields and platforms will continue for a long time to come. It is important that people outside the House do not get the impression that the Bill has been introduced because the North sea industry is somehow past its peak, when in fact it still has a long way to go.
  In the context of the Bill, there are a number of creative tensions between the various parties directly affected. Those who have to meet the cost of removal of offshore installations—the oil companies and the taxpayers—are naturally concerned about how the costs can be contained and how they will affect the investment already made. Those who use the sea for other purposes, however, are anxious to ensure that removal is not carried out in such a way as to prejudice their free movement. As the Minister knows, the fishing industry is especially concerned, because this enabling measure does not clearly and specifically defend the interests of that industry.
  At the outset of North sea oil development, it was acknowledged that the platforms would ultimately have to be removed and I understood at that time that complete removal was envisaged. Concern has naturally arisen because measures short of complete removal are now being discussed. I appreciate the reasons for that, but we must acknowledge the definite anxieties that arise as a result.
  If partial toppling of a major platform in middle or deep water were allowed, there would have to be a full inspection immediately after the completion of the work to ensure that it met the requirements of the various Departments involved. A more difficult question is how the condition of the installation will be monitored in succeeding years. Storms and corrosion may lead to pieces breaking off and migrating, possibly creating problems in areas in which there were previously no recorded installations.

  45
  The need to monitor installations will continue for decades after they are abandoned. Even if they are taken down to a level which would not interfere with surface navigation, there might still be problems for submarines, despite advances in modern technology, particularly if pieces break off and migrate so that some areas of the North sea become more littered than they were previously. A Russian submarine sank in very deep water this summer. Although this is an outside possibility it must be taken into account, because we would not wish to risk accidents of that kind.
  Sir Trevor Skeet: Maps of all the installations will be published. They will be pinpointed on the charts, so submarine commanders will be able to avoid them.
  Mr. Bruce: I appreciate the availability of charts and the ability of modern technology to identify obstacles, but unless there is consistent monitoring, pieces could break off and migrate to areas in which no hazard was previously recorded. We are entitled to seek an assurance that that possibility will be taken into account.
  The anxieties of the fishing industry are more immediate. I understand that the Minister met representatives of the industry last week. In informal conversation with a senior representative of the industry yesterday it was made clear to me that the industry wants total removal of offshore installations because it does not believe that partial removal can be carried out without causing potential problems for trawlers and the risk of damage and loss of equipment. We appreciate why the original plans for total removal are being reconsidered. It is a matter of cost, both for the taxpayer and for the oil industry, and no one wishes to demand expenditure if it is not necessary. But if there were any suggestion that the taxpayer and the oil companies were being protected at the expense of the fishing industry, a real conflict would arise. At present, the fishing industry is extremely unhappy about the proposals and already fears that its interests are being sacrificed.
  For those reasons, I believe that fishing and certain other interests should be specifically mentioned in the Bill and specific rights set out in the legislation. No doubt we shall return to this in Committee, but at present the Bill provides no specific protection. Clause 11(5) merely states:
  "Before making regulations under this section the Secretary of State shall consult organisations in the United Kingdom appearing to him to be representative of those persons who will be affected by the regulations."
  The fishing industry does not regard that as satisfactory and wishes to have more specific protection of its interests written into the Bill. At present, the industry is not even convinced that the Government are operating within the terms of international law. That difference of opinion can be resolved, but we shall need to consult our immediate neighbours in the North sea and many of the points that I have made will doubtless be raised by the Norwegians, the Dutch, the Danes and others using the North sea, who will want satisfactory assurances that their interests are taken into account.
  The removal of offshore installations has been compared with the decommissioning of nuclear power stations. I do not wish to trespass beyond the confines of the debate, but I believe that that comparison has some validity in that it would be wrong to establish legislation setting out different obligations from those that would apply, say, in the decommissioning of a nuclear power station. At this stage, however, I merely put down a
  46
  marker to the effect that we should not create circumstances which might be cited as a precedent in the future either by overloading the cost or by underloading the obligations in decommissioning such an installation.
  The hon. Member for Bedfordshire, North (Sir T. Skeet) mentioned the concerns of the oil industry and generously suggested on behalf of the taxpayer that petroleum revenue tax might be repaid to cover the cost of removing installations. I am not sure that that would be acceptable, because when the companies took out licences to explore and develop the fields, they knew that those obligations existed. Indeed, I understand that Shell has made substantial provision for the ultimate removal of offshore installations. If other companies have not done so, they should have done so.
  Two points arise, one of which bears further consideration. That is the suggestion made by the hon. Member for Bedfordshire, North that a fund should be established. Some of the large companies are concerned that the Bill implies that they would be liable for defaulting partners.
  I should be grateful if the Minister would clarify the last paragraph of clause 2(5), which refers to a company that
  "has the power, directly or indirectly, to secure that the affairs of the company are conducted in accordance with its wishes."
  If I am wrong, I shall be happy to be put right. Does that imply that the operating partner is a consortium could be made liable for all the members of the consortium if any of them were, for financial or other reasons, unwilling or unable to contribute to the cost of decommissioning? If that is so, the suggestion of a fund is to be commended, as it would ensure some fairness to all the operating companies.
  On the positive side, as several hon. Members have commented, the removal of offshore installations will be an industry in itself. It is a classic proof of the proverb, "It's an ill wind that blows no one any good". Whatever the figures—£4 billion to £6 billion have been quoted—somebody will be able to pick up the benefit of that.
  It is important that we have the best technology and the best means at our disposal. I ask the Minister to consider some sort of contribution, over and above what is already going on, to step up the research, perhaps through universities or other academic institutions, if suitable groups are available to be funded. Given the amount of taxpayers' money involved, and given the potential to encourage forward decision making in companies that are taking risks for further development, it would be to our domestic advantage to stimulate ways of developing new technologies that are cheap and effective, for the removal of offshore installations. That might provide the technology to meet the fishermen's concerns and would give us export opportunities.
  In that context I welcome the Bill, although it has been rather broadly drawn and leaves many questions that will need answering in Committee. I hope that the Minister will approach the Committee constructively and that he will not regard the Bill as any sign—
  Mr. Buchanan-Smith: I am always constructive.
  Mr. Bruce: I did not mean to imply anything negative by my comment. However, I hope that the Minister will not regard significant changes to the Bill as a test of his virility. Any changes would be a true and proper recognition of how Bills should go through the House, but regrettably seldom do.
  5.22 pm
  Mr. John Hannam: There has been a consensus of approval, in principle, of the Bill in the speeches made so far. However, they have suggested the need for more detailed examination in Committee. I concur with that view. The Bill is not contentious legislation but is important not only for the oil industry, but for the Government and the taxpayer, as well as for the fishing industry.
  The hon. Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) underlined the size of the problem. My hon. Friend the Member for Bedfordshire, North (Sir T. Skeet) asked whether the problem of abandonment had been taken into account in the design of the rigs when they were built, at the beginning of the development of the North sea. Presumably it was, but at the time it was a new industry and many innovations have been introduced since then. I remember visiting the Conoco tension leg rig on the Hutton field. If the technology there had been adopted throughout the North sea, the problem we now face of removing some of those structures would have been made much easier. Of course, that technology was only being developed then.
  The Bill could, of course, have been subjected to the special procedure in Standing Committee. I served on the Committee that considered what is now the Education Act 1981 and we adopted the procedure of taking evidence in several sittings before going into full Committee. It was a useful procedure, which might have worked on this occasion. This is the sort of Bill where we could have gained by having representations from those affected by the legislation.
  That is not being done. The Bill has been introduced fairly quickly and therefore there has not been a great deal of time to study all the implications. However, my right hon. Friend the Minister is right to tackle the immense problem of dismantling our North sea oil platforms now. Given the usual good co-operation between his Department and the oil industry, I am sure that the technical problems that arise, and those that are certain to arise as we go along, can be sorted out in Committee.
  Everybody has known for a long time that decisions would have to be made and that financial provision for removing offshore installations would have to be allowed for. We are committed by the 1958 Geneva convention on the law of the sea to remove every trace of our offshore oil operations and every oil company has been making provision for that in its accounts over some years. The trouble is that nobody has known what the costs would be, and how much dismantling would be required, and so nobody has known the extent to which the oil platforms would have to be removed and provision made for that.
  Originally, the oil rigs were much smaller than the present-day deep water platforms, some of which are larger than the Empire state building in New York. The complete removal of one of those larger platforms is estimated to cost about £150 million.
  As part of their licence agreements, oil companies have agreed to carry out that work at the appropriate time and, as I have said, they have made provision in their accounts. However, they have not created specific funds of cash in their reserves, so any future dismantling costs will have to be met from future cash surpluses. The total cost of dismantling all the 140 to 150 platforms is estimated to be about £6 billion over a period of years. Therefore, the
  48
  Government are right to agree that the abandonment costs can be set against corporation tax, royalties and petroleum revenue tax on a retrospective basis.
  The problem that seems to have arisen is the risk that an owner of a platform, say an overseas company, could pull out of the North sea subsidiary, declare it bankrupt and leave the Government or the taxpayer to clear the oil platform. The Government would not be left holding the baby because none of the oil rigs can be termed a baby—they are much more like grown adults in their size. In other words, the taxpayer would have lost the tax revenue that was given in relief to the company, but would still have to pay for the eventual dismantling.
  The Bill proposes—I do not agree that it is right—that the normal corporate limited liability responsibilities should be put aside and a direct charge laid on all, some, or even one of the participants in the field. No provision is made for the company or companies made responsible for the abandonment to have recourse against the other partners to ensure an even and equitable distribution of the heavy costs involved. That could discourage the major oil companies from entering into partnership with small companies in future exploration rounds. As we are still not half way in the development of the North sea, that is an important factor. Although I understand the need to prevent a parent company from offloading its financial responsibilities—that would happen once or twice, if at all—I wonder whether there is a better solution.
  In other commercial activities—my hon. Friend the Member for Bedfordshire, North mentioned motor insurance—special funds have been set up to deal with such emergencies. That would be a better approach to the problem. I hope that my right hon. Friend the Minister will confirm that, if the oil industry comes up with a special sinking fund solution, he will be prepared to consider it, rather than pursuing the present sledgehammer approach inherent in clause 2.
  The Government are quite entitled to take steps to remove the possibility of being landed with the costs of dismantling through the default of the licenses. However, I hope that by the time we get through Committee, a better solution might have been agreed with the industry. I accept that my right hon. Friend has in effect thrown the ball at the industry and said, "Come up with a possible solution and we shall consider it favourably."
  It is important that we do all we can to encourage the extension of the economic lives of our producing oilfields. The longer they run, the greater the chances of the oil companies making proper provision for the enormous abandonment costs, and of course, the greater the income to the country.
  With the new powers given to the Secretary of State in the Bill, allowing him to approve, reject, amend or even impose a different programme for abandonment, it is important that proper criteria are laid down and that a system of appeal or arbitration is established. I hope that due consideration will be given to the latter point in Committee, possibly on the lines of the appeal and arbitration system established in the Petroleum and Submarine Pipe-lines Act 1975.
  I refer finally to the methods to be used in the removal of installations. All sorts of weird and wonderful ideas are floating around, including offshore casinos, duty-free shopping centres, fishing centres and so on. I have no idea what the final solution will be for some of the platforms. The Government are right to deal with each installation

  49
  on a case-by-case basis. What cannot be denied is our responsibility to ensure safety for our sea traffic and protection for our fishing industry.
  One idea that I saw in The Scotsman, which was referred to earlier, is for research into the use of rigs for offshore reefs around which huge new fishing grounds can be developed. Apparently countries such as Japan and the United States have been building artificial reefs for many years, and in Japan some $326 million has been spent on the construction of 2,500 artificial reefs. From them the Japanese are taking annual catches of nearly 5 million tonnes of fish and shellfish, compared with Britain's total annual catch of approximately 750,000 tonnes.
  The suggestion is that some of our rigs be towed to within three miles of the shore, adapted for reef construction and sunk there. That could create jobs and help the fishing industry, as well as save costs. I have no idea whether that suggestion is workable, but as the European Community has allocated some £18 million for research into reef development, it might be worth while using some of that money to investigate the possibility of using some of our oil rigs for that purpose. That is the only suggestion that I should like to make.
  I congratulate my right hon. Friend the Secretary of State on the steps that he is taking to prepare us, with the framework in the Bill, for the time when the massive steel and concrete North sea oil structures have to be dismantled. I am sure that we can achieve a good workable piece of legislation in Committee, and I support the Second Reading of the Bill.
  5.32 pm
  Mr. Peter Hardy: I support the suggestion of the hon. Member for Exeter (Mr. Hannam) that we emulate the Japanese in the use of the offshore structures for fish production. The idea is attractive. Perhaps it is already being pursued on a small scale. The only difference is that I trust that when we catch the fish, we shall cook it, as I do not believe that we should follow the Japanese that far.
  The hon. Gentleman referred to the Conoco tension leg platform in the Hutton field, which he visited some time ago. I am not sure of his assessment that it would be easier to deal with a tension leg platform. The technicians can pursue that matter. The fact remains that that fascinating development is illustrative of the technological capacity of the industry, which may not be properly recognised by the Minister in the Bill. It might be easier to deal with such a rig; it certainly would be queasier. I visited that rig while it was more prone to movement than I think is normal. It was only a fortnight ago, and on the following morning I was relieved that the sea was calm. It was like glass, and there was not a cloud in the sky. One then began to perceive the scale of the problem. I could see 30 structures from the top of the Hutton platform, some a long way away. Many were of enormous size.
  Even that size should not daunt the Minister. He should not underestimate the capacity of the industry to make the technological advances that it has made while facing the challenges that have been presented since offshore development began. For that reason, I was delighted that the hon. Member for Exeter referred to the complexities that will face us in Committee. I hope that the Minister will recognise that, although it is right that the Bill should get its Second Reading without dissent, the fact remains that there are many weaknesses in it. I should have thought
  50
  that he would seize the opportunity to recognise that such a Bill should be bipartisan. It should be accepted by the House as a whole. The conditions that the Bill presents should be the unanimous view of the House of Commons. However, unfortunately, there are grounds for serious concern and deep anxiety about the approach that the Government have adopted. I shall say just a word about that because I do not want to make a long speech; I may make longer speeches in Committee.
  Our criticism must be that the Government have acted with enormous speed. It is outrageous that the Minister has produced the Bill today when proper consultations with the industry have not been carried out. As my hon. Friend the Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) said, I hope that evidence of adequate consultations on the proposals will be forthcoming in Committee.
  I also hope that the Minister will take note of the fact that some misgivings have been voiced on the Conservative Back Benches about the speed of the Bill. I know that Ministers in the present Administration are not accustomed to hearing dissenting or anxious voices on the Benches behind them. It is significant that such feelings have been expressed today. I suggest that the Minister delays the Committee stage a little so that he can show the Committee that consultations have been adequate, so that the anxieties of his hon. Friends can be justly and honourably relieved and so that we have a reasonable amount of time to read the complex notes on clauses that the right hon. Gentleman promised us. That suggestion is not unreasonable, given the complexity of the Bill.
  The Minister is capable of dealing with complexities. He has been dealing with complex oil legislation quite effectively from his party's point of view, and he must recognise that other Members of his own Benches, as well as those on Opposition Benches, have other things to do, and perhaps not quite the same familiarity with complex legislation as he has. Therefore, a slight breathing space for preparation would not be an unreasonable thing to ask.
  We could have seen a less draconian approach. One would not think that we had seen the technological achievements offshore that we have seen in the past decade. One imagines that the Government are running scared of the substantial task that faces the industry. They seem to be casting doubt on the industry's business and industrial capacity to meet that challenge. Perhaps the Minister perceived the low price of oil continuing and therefore earlier abandonment of the offshore structures than is now likely.
  A question to which I received an answer today might give cause for anxiety. It states:
  "In the week ending 27 October 1986, 27 mobile drilling rigs were active within the United Kingdom continental shelf. In the last week of October 1984, 49 rigs were active."—[Official Report, 24 November 1986.]
  That reduction in activity is relevant to the debate because it means that unless there is further investment, the abandonment of structures and the sterilisation of resources could accelerate. Because of that acceleration, the lower price, lack of investment, loss of confidence and developing anxieties, we are entitled to suggest to the Minister that it would be foolish for him now to appear to be seeking to rush in emergency arrangements, because it suggests to the industry that the Government take a particularly pessimistic view.

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  There is another anxiety, about schedule 1. I must confess that I am not a lawyer, and I have not had a great deal of time to examine schedule 1. It seems that it presents a particular risk. I hope that the Minister will examine it straight away because it is a serious matter. The Secretary of State was forced by the Treasury to refuse to proceed along the Sleipner gas route and he assured the House that there was an enormous additional amount of gas available. We have debated that on many occasions. That is probably the case and further gas discoveries have been made since the Sleipner decision. The Secretary of State and, I think, the Minister of State will certainly recognise that much of the additional gas which will make up for the loss of Sleipner supplies will have to be obtained from satellite platforms. Much of the gas is in small reserves and satellite platforms will have to be used.
  As I see it, schedule 1 provides a requirement for additional metering and therefore additional separation even on the unmanned satellite platforms which are developing and which will have to be used much more extensively. If the Minister insists upon separation and additional metering of satellite platforms, the prospect of achieving those platforms and of landing the gas upon which the Government's decisions rely are dramatically reduced. This is a serious point.
  We already see satellite platforms in the Viking field in the southern basin of our continental shelf operation. The Government appear to be saying in schedule 1 that there will have to be additional separation of oil, water and gas on the additional platforms which must be developed. If that is what schedule 1 means, it will inhibit development and I imagine that the Government do not want to do that, because even this Government wish to land gas so that the privatised British Gas will not find itself in difficulty within a fairly short time. In order to make their privatisation scheme work, the Government will have to ensure supplies of gas for Britain.
  The Government must ensure that the people responsible for offshore operations can operate in a sane and proper manner, but the Government's attitude gives cause for enormous anxiety. The Minister recognises the financial position, and next week we shall see the repayment of the advance petroleum revenue tax. That is not what the industry needs, and if it had more faith in the economic common sense of the Government it would not have reduced so dramatically its drilling activity. The anxieties in the industry are now considerable and they are not relieved by this sort of draconian Bill nor by a failure to introduce the concessions that were half promised in the last Budget and upon which further development of the North sea can be encouraged and the premature abandonment of our offshore structures delayed.
  The Minister should understand that there is an obligation to consult the industry, which has served Britain well. It has produced not merely £113 billion in total economic yield but £56 billion for the Government to use, and they have not always used the money as wisely as they might. It has produced at least 100,000 jobs and I know that the Minister has played some part in trying to ensure that we get jobs in the British Isles from offshore development. The industry has made a substantial contribution to our economy and it is regrettable that that contribution has been abused by the Government.
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  The Minister could at least offer some understanding that the industry has served Britain quite well and that the people in it have made a tremendous technological contribution which, sadly, has been ignored by large sections of the British media. He should demonstrate that the Government do not wish to act in a draconian manner, and he could show some appreciation of the service the industry has given and perhaps be a little more helpful by engaging in meaningful co-operation before the Bill proceeds further.
  5.43 pm
  Dr. Michael Clark: I welcome the opportunity to speak on the Bill. The problem of abandonment of oil platforms or of any other piece of equipment with which we have finished is important in this mechanical and technological age, which is also a throw-away age. If motor cars or plant and equipment are abandoned on land we can afford to dispose of them properly because of their scrap value. The scrap value of the platforms in the North sea, even if the platforms were recovered, would be far less than the cost of recovering it. For that reason, there is a temptation to leave the scrap where it is and to abandon it in the sea, but certainly not to recover it and bring it back to dry land.
  The hon. Members for Merthyr Tydfil and Rhymney (Mr. Rowlands) and for Gordon (Mr. Bruce) drew analogies with nuclear power stations. Those were valid analogies, but perhaps the most important and valid comparison between the abandonment of oil rigs and the decommissioning of nuclear power stations is that in both cases such things have not been done before. We are looking at new technology, which will be very expensive, and we need to make sure that power stations are decommissioned and oil rigs are abandoned in the interests of safety and for the sake of our environment. That environment is becoming smaller as our population increases and as people are able to travel and build much more than they did in previous centuries.
  I am in favour of a proper policy for abandoning the rigs and should like to look into the possibilities in the Bill. There is no doubt that the oil industry recognises its obligations in a proper abandonment programme. It has no reason not to do that, because the oil industry is one of the main users of the oceans as a means of transportation. It is as interested in making sure that the seas are free for the movement of ships as anyone else.
  It is possible that in the not-too-distant future oil companies will have large submarine tankers delivering oil all over the world. Such tankers will probably be more efficient because they will use less fuel and be more cost-effective. For those reasons, we do not want too many platforms or too many platform legs sticking out of the ocean in an indiscriminate manner, even if they are marked on the charts. I agree with the hon. Member for Gordon that, even though they are marked on the charts, to have them there at all is a hazard because mistakes happen and however careful people are, tragedies occur from time to time.
  The oil companies have a good record on the environment. They are conscious of the need to ensure that as far as possible the environment is returned to the way it was when they started work, whether on land or at sea. Above all, the oil companies are conscious of and obey national and international law and the 1958 Geneva

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  convention on the law of the sea and the requirement of article 5.5 to remove all traces of installations that have been placed in the sea.
  Who is liable for these platforms? When installations and pipelines are first put into the North sea they are owned by the companies that put them in and perhaps such companies have two or three partners in a consortium. When the licence expires, those installations and pipelines revert to the Government. But the Bill says that the oil companies will remain liable in perpetuity for the cost of maintaining these installations and pipelines. Clearly, the oil companies will not like that requirement, because having an indeterminate amount of money on a company's books for an indefinite time creates difficulties.
  Will my right hon. Friend consider whether oil companies might be permitted in some way to buy out their obligations, so that by paying an amount to the Government to cover the cost of looking after the installations in future years they could get the amount off their books and would know where they stand in a proper trading way?
  As many hon. Members have said, it is well known that the oil companies are not happy with the provision that allows the Secretary of State to name one person or one company as the party responsible for the costs and organisation of abandonment. They think that there should be another clause which enables the nominated person to ensure that his partners are legally responsible, and that responsibility is divided according to the equity, interest or perhaps profit that each partner has had from the enterprise. We must consider that in Committee.
  We must consider alternatives to legislation such as this. An oil company could be required to purchase a bond, which is held by the Government, as a builder of a housing estate buys a bond held by the local authority to ensure that the roads are finished. Alternatively there could be an industry liability fund, similar to the funds of building societies, banks and insurance companies to ensure that, if one member defaults, the whole industry does not get a bad name and that the taxpayer does not have to pick up the tab.
  On the other hand, we could require oil companies to pay a substantial deposit when taking up licences to ensure that abandonment costs are covered. That might be closing the stable door when the horse is truly down the track and all three suggestions are probably more expensive than what is proposed in the Bill. Oil companies might like to consider the options, compare them with what the Bill proposes, and see what they prefer.
  Some oil companies might say that we should trust them and that they will ensure that the abandonment procedure is followed. We could say that, rather than trust the oil companies, they should trust the Secretary of State not to abuse this enabling legislation. It is easier to trust people when an industry is booming and profits are high than when profits decline and business is running low, as is happening now in the North sea. I believe that there must be legislation.
  It might have been better if we had had the Bill earlier. We have had 18 years of gas production and 10 years of oil production from the North sea, and nearly 40 per cent. of its reserves have been extracted. We have about 140 installations. There will be more, but not many. We must get legislation such as this into place soon or it will be retrospective, and retrospective legislation is unpopular and, some say, unfair. We have no time to waste.
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  Although many platforms might have another 30 years' life, some will reach the end of their lives in the early 1990s and, with present low prices, some will be vulnerable earlier than we had anticipated. It is important to make the right provision bearing that in mind.
  In view of the Bill, some companies may decide to extinguish impending liability by abandoning platforms early, rather than postpone abandonment indefinitely, not knowing what the future costs of abandonment will be. Would my right hon. Friend like to consider what will happen if a platform is abandoned before the Bill is in place? Would oil companies be under the proposed obligation? Would there have to be retrospective legislation or would they get away with it and be able to leave installations in the North sea at no cost?
  The Bill could result in some oil companies continuing to pump oil until production costs equal or exceed revenue from sales. Platforms would therefore be in position longer than anticipated and remain a blot on the environment and a hazard. The Bill might arrest progressive abandonment.
  The size of the problem has already been described. I have written in my notes that we have 139 platforms, but others have said that we have 144. It seems that five have toppled since the debate started. The abandonment programme will create about 100.000 jobs. They will be useful and welcome, especially in the north and Scotland. An analogy has been drawn with the nuclear power industry. Those jobs should be compared with the 140,000 jobs which are already to be found in the nuclear industry.
  Opposition Members who want to abandon our nuclear industry should consider the fact that, welcome and important as they are, the 100,000 jobs in the abandonment programme are essentially negative jobs in that they are destroying something whereas the 140,000 jobs in the nuclear industry are positive and creating something.
  Dr. Godman: Does the hon. Gentleman agree that many of the demolition jobs will require highly developed skills and, in some cases, training so that the task is performed competently and safely?
  Dr. Clark: The job will indeed require a good, deal of skill. We do not yet know how much because the project has not been properly researched. I am sure that the hon. Gentleman agrees that many people with minimal skills have been trained to work in the North sea and that they have enjoyed substantial career development. I hope that, with the demolition programme, people in less skilled work will be trained so that they attain high levels of skill and earnings. They will deserve every penny that they earn as the job will be risky and highly skilled.
  As the hon. Member for Wentworth (Mr. Hardy) said, the major concrete platforms will probably stay in place. We might find alternative uses for them. It would be nice to think that they could be the bases for wave power machines feeding in current for transmission back to the mainland, or as bases for wind power generators. They might be used as defence installations or even have a compassionate use as rescue stations for lifeboats or helicopters. It would be sad if we brought down some of these concrete installations only to erect something similar a few years later to help sailors at sea.
  I do not like the idea of toppling rigs and leaving them on the seabed. That would be environmental vandalism.

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  The idea of leaving only 40 m of clear water, as the hon. Member for Merthyr Tydfil and Rhymney suggested, does not appeal to me. I prefer either to leave the platforms where they are or to remove them completely. I know that the latter is an expensive operation, except in the southern and shallower area of the North sea, where the figures supplied to us by UKOOA show that the cost of complete removal is no more than partial removal or toppling over. One should be able to clear the shallow waters of the southern basin.
  The cost of the project will be about £5,000 million, which is a large sum of money, although not a lot compared with the revenue coming out of the North sea to the Government, the nation and the oil companies. The extractive industries have a tradition of returning sites to the condition that they were in before they were first worked. That tradition should be continued, although the site is maritime and we are talking about platforms in the North sea. Under the laws of the land, the Government allow the restoration costs to be offset against tax and thus it is in the interest of both the Government and oil industry to keep the costs of abandonment low.
  I understand the reasons for the Bill. I support the need for it. I recognise the concern of the oil industry, and there will be an interesting Committee stage, during which all parties will be lobbying, presenting and debating the issues that the Bill brings forth. The Bill should be given a Second Reading so that the Committee can fill the many gaps in the detail of the Bill. However, I do not wish to see the oil industry and the Government fighting each other over the legislation on abandonment. Instead, I should like co-operation, so that together we can complete the task of providing legislation for a sensible policy for the abandonment that all of us consider necessary.
  6.2 pm
  Dr. Norman A. Godman: In principle, I welcome the Bill. I would give it more enthusiastic support if I thought that Ministers would be willing to listen with care to fair-minded and constructive criticisms and suggestions from Labour Members.
  I declare a personal interest, of which I think the Minister is aware. At the moment, under the Industry and Parliamentary Trust, I am seconded to BP. However, what I have to say is not influenced by the management of the company and in no way do I receive financial inducement by way of that secondment.
  People living and employed in maritime communities will take a close interest in the Bill. I argued in a debate this summer, in a meeting of the Scottish Grand Committee, that all these installations should be removed once their working lives had come to an end. I remember arguing that, if it is in the national interest to exclude fishermen from some areas to allow for exploration, development and production of offshore oil and gas fields, it is also in the national interest, when production comes to an end, to have some structures removed. I readily recognise that there are formidable problems, but nevertheless the fishing grounds of the North sea should be swept clean of such hardware.
  I should like the Minister to comment on the American experience, if he has time. Historically, the mineral management service of the United States Department of the Interior has stipulated that disused platforms and wells
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  will be cut off about 5 m below the mud line or sea floor. It also requires that the sea bed shall be restored to its original condition, and that has been my argument for a long time. This American requirement replaced the former regulations, that simply called for the marking and abandonment of derelict structures. I appreciate that there are as many differences between the American offshore experience and that of our country as there are similarities and parallels, but we should follow the American lead.
  A great deal of research is being conducted into the feasibility of turning defunct structures into artificial reefs; a journal said about this research:
  "Extensive environmental analysis has demonstrated the value of converting offshore oil and gas structures and other appropriate materials into artificial reefs for everyone's benefit. Current removal and destruction requirements are wasting a national resource of tremendous public and private value."
  That should not be the main objective of abandonment, but it could be worthy of analysis in shallow water areas.
  In two or three years, the first of the North sea platforms will have come to the end of their operational lives. They should be removed. The National Economic Development Council has stated that demolition will become a multi-million pound industry, as the hon. Member for Rochford (Dr. Clark) said. He talked about the 100,000 new jobs. The NEDC urges companies to plan ahead so that they can compete with this work. Again, this is likely to be dangerous work and will require careful management and a highly skilled work force, especially in the use of explosives, because not all the rigs can be burned. Controlled explosions will have to be used.
  Despite what the hon. Member for Rochford (Dr. Clark) said, we have experience of the dismantling of rigs to draw on. The work will require careful regulation, especially when safety matters are involved. Safety matters should be the kernel of these regulations. I support the need for safety zones, which feature in part III. Is the Minister of the opinion that a safety zone of 500 m is extensive enough?
  The Minister spoke of the partial abandonment of installations, and that causes me a great deal of concern. As I said earlier, the modern stern trawler can fish in depths of up to 500 fathoms. Even the smaller, side trawler, if it has enough warps on board, can fish in up to 300 fathoms. These are important considerations. We have heard that there are 139 rigs, or 144. They are scattered across the continental shelf, sometimes in shallow water and in other cases in deep water. The Leman bank gas rigs east of Lowestoft are in shallow water, but it should be possible if, I regret to say, costly, to take such rigs down below the sea bed, following the American example. We should follow that experience and ensure that these rigs are cut off below the sea floor. In America they refer to 5 m. I am not sure that this would be adequate in some parts of the North sea, where there is sea bed erosion. That is of considerable significance in the North sea close to the Dutch coast but it is also of some significance close to the English coast.
  Mr. Peter Gilson, a diver of many years' experience at the bottom of the North sea, has brought my attention to the following:
  "Underwater structures resting on or tied into the seabed and under 'current' influence can be subject to stress, which may lead to serious damage as a consequence of seabed 'Scour' or 'Erosion'. For example, in the case of a pipeline not resting on the seabed and fully exposed with a gap or daylight beneath it, the 'bridging and/or spanning' can put an

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  unacceptable stress load on the pipe and lead to serious damage. Further mechanical damage may occur to exposed pipes underwater as a result of contact with anchors and fishing equipment."
  If that is true of exposed pipelines, it also emphasises the dangers to fishing gear from the remnants of oil and gas rigs.
  The Minister referred to pipelines in his speech. Is he satisfied with the present protection arrangements for pipelines which are marked on navigational charts? Trawlers must not tow across or along pipelines. Most trawler skippers obey the rules, but I know one skipper who by means of his echo-sounding equipment locates pipelines so that he can tow his gear up or down them. That is a very dangerous practice—indeed, extremely dangerous when, because of sea bed erosion, the pipe becomes exposed.
  Sea bed scour or erosion emphasises the damage that can occur when trawl doors or steel bobbins come into contact with exposed pipelines and structure foundations. A beam trawler, of which we have many in the United Kingdom, could suffer severe damage if its gear were to snap on an exposed pipeline or on the remnants of a structure.
  I have several questions to put to the Minister. First, by "sea level" does he mean low water springs? In the North sea that is very important to fishermen. It is also very important to the so-called partial abandonment policy. Secondly, when a licence application is made, is the applicant required to submit an environmental statement concerning the likely environmental impact of the new development? That should be a statutory requirement. Thirdly, what protection is to be given to pipelines vis-a-vis the problems of sea bed erosion? Fourthly, is the Minister satisfied with a safety zone of 500 m?
  I hope that Ministers will pay close regard to fair-minded and constructive criticisms and suggestions concerning the Bill. To the many people who are employed in our maritime communities this is an important Bill. Many of the problems that it exposes will need to be analysed in a fair-minded and constructive way in Committee. I hope that those hon. Members who serve on the Committee will engage in a democratic analysis of the Bill and its implications. However, given this Government's record, democratic analysis is somewhat unlikely.
  6.14 pm
  Mr. K. Harvey Proctor: My right hon. Friend the Minister of State is fair-minded and constructive, so I am sure that in Committee he will respond in the way that the hon. Member for Greenock and Port Glasgow (Dr. Godman) suggested.
  I have a constituency interest in the oil industry, albeit that it is a downstream oil industry. I have not one but two oil refineries in my constituency. I share with my hon. Friend the Member for Brigg and Cleethorpes (Mr. Brown) the Mobil oil refinery and terminal at Coryton, which employs about 900 people. There is a throughput of about 180,000 barrels a day, or about 25,000 tonnes of oil a day, or about 9 million tonnes a year. The Shell oil refinery at Shellhaven employs about 625 people and 200 contract staff. Current production is about 4·2 million tonnes of oil a year. That is not an insubstantial tonnage in terms of the United Kingdom's oil refinery capacity.
  I congratulate my right hon. Friend upon the Government's foresight in introducing the Bill, in
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  particular the powers relating to the decommissioning or abandonment of offshore installations. This is the time to plan for the future. As we have heard from a number of hon. Members, the issues are complex and have very important technical, legal and financial implications. My right hon. Friend estimates that the cost of clearing the platforms—either 139 or 144—will be about £6 billion.
  My right hon. Friend admitted that there is a conflict of interest between the oil companies and taxpayers and the shipping and fishing interests and he said that the Government have attempted to establish a balance. He also said that if there are better ways of tackling these issues he will be very happy to consider them. I hope that the Government will approach the Committee in that spirit.
  I hope my right hon. Friend will consider whether this would be a suitable Bill for the special Committee procedure. My hon. Friend the Member for Exeter (Mr. Hannam) referred to the fact that he had served on such a Standing Committee. I served on a Special Standing Committee that led to very important changes to the mental health legislation. It would be appropriate for this Bill to be subject to that special kind of treatment. The first three sessions could be devoted to taking evidence from witnesses before commencement of the full Committee stage. I hope that that procedure is still available. I think that it is.
  As for the abandonment of offshore installations, I wish to refer briefly to my concern regarding the powers and liabilities that are provided for in the Bill.
  I recognise that the Bill, by the nature of the subject with which it deals, can provide little more than a framework within which the Secretary of State can regulate the requirements for abandoning fields, but in three important respects the Bill goes much further than it needs to or should do in terms of providing the Secretary of State with regulatory powers.
  First, there are no restrictions on the way in which the Secretary of State can exercise the powers given to him in the Bill—in particular, the power of the Secretary of State under clause 4 to approve, modify or reject abandonment programmes submitted under clause 1. Secondly, the Secretary of State is under no obligation to give reasons why he has exercised the powers that he has under the Bill. Thirdly, clause 14 expressly limits the rights of those affected by decisions made by the Secretary of State under the Bill to appeal against them, and, in so doing, it can be argued that it restricts the usually accepted obligation of the Secretary of State to act reasonably.
  The Bill could be construed as setting a bad precedent in giving a Minister powers which he may exercise as he chooses and without supervision. I hope that in Committee the Government will amend the Bill to provide some criteria which the Secretary of State must apply in exercising his powers under the Bill; to require the Secretary of State to give reasons why he has exercised his powers; and, at least, to provide the usual rights of appeal in relation to the exercise by a Minister of a regulatory power.
  I understand and approve the desire of my right hon. Friend the Minister of State to ensure, through the Bill, that there is no chance of the Government or the taxpayer being required to meet that part of the cost of abandoning installations which should be paid by the oil companies. However, allowing the Government to pick on any

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  member of a consortium or its bankers and make it liable for all the obligations of the consortium, as clause 2 would do, could have a number of unsatisfactory side effects.
  The larger oil companies, faced with the risk of having to bail out the smaller oil companies, will be reluctant to invite them to join consortia and thus stunt the development of the smaller British oil companies which the Government have so carefully nurtured over the past seven years. In addition, I fear that the banks will be reluctant to finance development if they face the possibility of being liable for abandonment.
  The Government may want to keep the powers in clause 2 as a fallback position, but what is primarily needed is for the Government to take steps to ensure that the oil industry disciplines itself by establishing guarantees so that, come the day, everyone, including the Government, can be sure that each member of a consortium will be able to contribute its proper share of the cost of abandoning fields. That could be done without undue difficulty by the Government.
  The House should give the Bill a Second Reading and then critically examine its contents in Committee.
  6.23 pm
  Mr. Andrew Hunter: I am grateful to have an opportunity to speak on the Bill, even in what are, for Back-Bench contributions, the dying seconds. I do not regret that enforced brevity because most of the salient features of a Second Reading debate have been well rehearsed and there is little need for further repetition.
  My overwhelming sentiment was expressed by the hon. Member for Merthyr Tydifil and Rhymney (Mr. Rowlands) when he said that he could detect no significant or fundamental matter of principle or dogma in the Bill and so we can approach the debate and subsequent deliberations on the Bill with an open mind and in a constructive way.
  For my part, I am aware not so much of the immediate positive suggestions that I have to make, but of anxiety about two broad general areas. One, which has been mentioned a number of times, concerns the practice and principle of liability as expounded in the Bill. The second is my concern about the extent and arbitrary nature of some of the considerable powers bestowed on the Secretary of State.
  With regard to the Bill's handling of the principle and practice of liability, I welcome my right hon. Friend the Minister's opening comments and the tone and terms that he used. He acknowledges that this must be the subject of further debate, and that is indeed the case. I support the comments made by my hon. Friend the Member for Rochford (Dr. Clark) when he turned his attention to that.
  Some of the reasons for my concern about liability are to be found in clause 1. We there learn that even if a company were to abide by all the recommendations in an abandonment programme laid down by the Secretary of State—this is the great point—the company could, in perpetuity in some circumstances, be held liable. We have given some thought to the principle at stake and we have acknowledged that that could be of severe potential damage to companies. However, I am struck by the inconsistency between the principle expounded here and that which the House accepted only last June when we turned our attention to the Latent Damage Act and
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  discussed unlimited liability and propounded and accepted the principle of limited liability. Greater cause for concern about liability is to be found in clause 2. I need convincing that it is necessary to abandon corporate limited liability. I certainly need to be convinced of the need to extend liability in the way that the Bill proposes, especially as that applies to banks and finance houses. We are in danger of deterring investment and of moving into uncharted waters because, as I understand it, that is without parallel in other areas of corporate liability.
  The second area for concern is the extensive powers given to the Secretary of State. I am surprised that Opposition Members did not give more attention to that theme. My hon. Friend the Member for Exeter (Mr. Hannam) referred to clauses 4, 5 and 6 and how the Secretary of State does not need to publish the criteria for his decision on whether to approve, reject, amend or even impose an abandonment programme. That is in contrast with existing law. Nor do we find in the Bill, as I understand it, provision for an arbitration procedure of the kind in existing licences.
  Clause 14 compounds the matter further. The explanatory and financial memorandum says that clause 14
  "enables any person aggrieved by certain specified acts of the Secretary of State to make application to the courts"—
  and so on. My understanding of that clause is that it limits the opportunities for remedy through public law rather than creates further opportunities. The arbitary powers proposed in the Bill perhaps reach something of a climax in clause 14, as they do also in clause 10 with the extensive reserve powers given to the Secretary of State. Hon. Members know how the offshore oil industry is expressing increasing concern about clause 10 and, indeed, about such powers altogether.
  I welcome the Bill. There is no doubt about that. Some further work needs to be done on it and we must look to the Government for appreciably more explanation in Committee.
  6.28 pm
  Mr. John Home Robertson: The last occasion I remember the House debating the scrap metal trade was in relation to a whaling station in south Georgia. The transaction was not altogether happy for those concerned. Indeed, as far as I know, the scrap is still there and the unfortunate Mr. Davidoff has not even got his money back. Perhaps that is a cautionary tale about the importance of not neglecting the residue of industries which have died or are dying.
  I rise to conclude the debate on behalf of the Opposition in my capacity as spokesman for rural affairs in Scotland. I do so because of the serious implications of the Bill for the fishing industry in Scotland. I intend to be brief because many important points have been raised and I want the Minister to have ample opportunity to respond to them in detail.
  For all those concerned with the sea this is a disturbing measure. It could enable the Government to sanction irresponsible conduct by oil companies which may want to abandon unwanted equipment on the seabed. The Minister has a good reputation as a basically decent man. I hope that he does not mind me saying that. Indeed, he earned genuine credit in Scotland when in the 1970s he defied the present Prime Minister to support legislation to establish a Scottish Assembly and achieve better

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  accountability for Government in that part of the country. To many of us it seems that the Minister is selling himself short on this measure.
  The measure is the legislative equivalent to a blank cheque—something like a blank Bill—and many gaps must be filled in Committee. It was interesting that so many hon. Members on both sides of the House emphasised the need for more information about the way in which the enabling powers would be operated and that my hon. Friend the Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) found an unlikely ally in the hon. Member for Billericay (Mr. Proctor) in suggesting a special Standing Committee to obtain more information about the way in which the Bill would operate when enacted.
  The Minister referred to his consultations with the Scottish Fishermen's Federation last week. He knows that it is far from satisfied with those consultations. Indeed, it is genuinely worried about many possibilities raised by the Bill. The Bill foreshadows the beginning of the end of Scotland's oil era. Despite all the hopes raised by the discovery of North sea oil, so far the Government have managed to spend all the oil revenues on the additional cost of unemployment.
  In Scottish terms, we now have a premature slump in the oil economy because of the Government's failure to run a sensible depletion policy. To add insult to injury, the Scottish fishing industry, which has been severely disrupted by the oil industry in the North sea, will be left with a vast obstacle course of sawn-off oil rigs and disintegrating pipelines strewn over the fishing grounds. All that is despite the assurances given by the Government and the oil industry at the beginning of oil developments in the North sea.
  Fishermen have co-operated to the full with the Government and the industry throughout and now it appears that the Government and the industry may leave them with less than they were entitled to expect at the outset. It has been acknowledged by hon. Members on both sides of the House that fairly substantial profits have been made in the North sea by the industry and the Government. I acknowledge that the cost of clearing up the mess will be substantial. The Minister suggested that it could be as high as £6 billion. However, it should not be too much to ask the oil industry to take account of its responsibility to clear up the mess that it made after it has finished the operation. Indeed, that was acknowledged by the hon. Members for Exeter (Mr. Hannam) and for Bedfordshire, North (Sir T. Skeet).
  We understand that the Government intend to cut the cost of that operation, perhaps by £2 billion, by allowing the oil companies to leave much of their scrap where it is, some with only 40 m of clear water above it. The hon. Member for Rochford (Dr. Clark) described that as environmental vandalism and he is right. We have severe doubts about those proposals and should like to consider them in proper detail in Committee.
  Certainly, to saw off oil rigs in that way would present serious hazards for any semi-submerged cargoes that ply those seas in future. It will certainly create a fine old obstacle course for submarines, as the hon. Member for Gordon (Mr. Bruce) suggested. Above all, it will leave a dangerous and costly minefield for fishermen in valuable fishing grounds. I should not need to tell the Minister about that, or about the importance of the fishing industry to the economy of many communities on the east coast of
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  Scotland—indeed around the coasts of Scotland and England—because he represents the constituency of Kincardine and Deeside where there are many fishermen.
  Our fishermen have been able to work their way around the oil and gas installations. We do not know whether there are 139 or 144. That is one of the important questions raised by the debate. When they are above the water they may be seen, and while the pipes are still in good order, the fishing industry has been able to live with the obstructions. But if the rigs are sawn off or toppled over, they will become invisible and as the years go by the rigs and pipelines will disintegrate and sections will shift around the sea bed because of the currents in the North sea, so the fishing industry, in particular, is entitled to ask for certain assurances and information from the Government.
  The first question is whether those sub-sea obstructions will be marked and propertly charted, and, if so, who will be responsible for doing that and ensuring that fishermen and mariners are aware of their presence underwater. The second question is what compensation fishermen will have for the loss of their fishing grounds, if significant areas must be put out of bounds because of the risks to fishermen and their gear. More important, what provision will be made for compensation for the loss of gear when it is fouled in those obstructions? Most important, what about the risk to human life and limb?
  I am not being alarmist. There was an incident two years ago when the fishing vessel, Mhari L, from Kirkcudbright, fishing in the Irish sea, went down and lost all its crew because the gear was caught on an undersea telephone cable. If that can happen as a result of gear being caught in an undersea telephone cable, imagine how much more danger there must be from massive unmarked structures, such as oil rigs and pipelines on the sea bed. We must accept that that could happen as a result of abandoning oil and gas equipment.
  The Minister knows and we know that the SFF wants all the scrap to be moved from the sea bed. I do not necessarily suggest that that is reasonable or practical, but I share the federation's serious misgivings about the lack of genuine consultation. That is one job that the Committee can do, particularly if it constitutes itself as a Special Standing Committee. It can undertake proper consultations with all the interests concerned.
  I tend to take the view, which has been expressed by many hon. Members, that the decommissioning of plant should be covered by the conditions of the licences to develop the oil reserves and should be included in the budgets of the oil companies involved in those operations.
  I am deliberately being brief because it is important that the Minister has a proper opportunity to reply. The Bill seems to be a shameless enabling Bill. It provides far too much leeway for Ministers, the Government and, possibly, the oil industry. It undermines some useful principles which are at present enshrined in the 1958 Geneva convention. It appears to us that the Government are selling short important Scottish interests.
  That reinforces our determination that the Labour party will establish a Scottish Assembly to protect Scottish interests better in future. It is a pity that the Minister no longer supports that principle. However, I hope that he will take this opportunity now, and future opportunities in Committee, to provide much more information about the Government's intentions in respect of the fishing industry and other maritime interests in the North sea. I

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  hope that he can allay some fears which have been expressed by his hon. Friends and Labour Members when he replies to the debate.
  6.40 pm
  Mr. Buchanan-Smith: With the exception of the speech of the hon. Member for East Lothian (Mr. Home Robertson), there has been a constructive approach to the Bill. When the hon. Gentleman has to resort to saying that the Bill is selling Scotland short and other such phrases, he does not reflect the earlier part of the debate to which hon. Members on both sides of the House contributed. If the hon. Gentleman had carried out a proper study of what the Bill involves and had consulted the various interests, he would recognise that his speech did not reflect fairly the issues with which we are concerned.
  I accept what the hon. Member for East Lothian has said about the importance of fishing interests. I hope that the hon. Gentleman will listen to me instead of talking to the hon. Member for Bradford, South (Mr. Torney), bearing in mind that he asked me to reply fully to the debate. There is probably no Member of this place who has been more involved in fishing issues over a longer period than I have. I do not think that I require any lessons from anyone on the importance of the fishing industry to Scotland and the whole of the United Kingdom. I am concerned that in a Bill such as the one before us we ensure that fishermen's interests are taken into account. That is why on two occasions I have met representatives of the fishing organisations to discuss our policy towards abandonment and work preparatory to the Bill.
  I recognise entirely the interests of fishermen and shipping generally as well as the navigational interests that have been expressed. I hope that the hon. Member for East Lothian will acknowledge the interests that Scotland has in the oil industry. It is clearly a major Scottish interest. We must bear in mind those who operate in Scottish waters, those who are employed on platform rigs and other installations and those who are employed on shore. The hon. Gentleman has acknowledged that there is a balance of interests, although at one stage it seemed that he was speaking at one level of interest and one only. We are seeking to balance the different interests which he and others have described.
  It has been acknowledged throughout the House that where we are dealing with an operation that will be so expensive it is important that we do not interfere with other legitimate interests in the sea. Against that background, however, it is only sensible to explore ways in which the cost of the operation can be diminished without putting at risk other serious long-term interests. I would have been a little happier with the hon. Gentleman's remarks if he had acknowledged that.
  A large range of issues has been covered in the debate and I shall endeavour in the time that is left to me to deal with some that come within it. The issues are varied and numerous and some of them will be more appropriately taken up in Committee, and I hope that we shall have the opportunity to do so. I assure the hon. Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) that I approach our consideration of the Bill in Committee, as I have for other measures, in a constructive way. I hope only that the hon. Gentleman is more successful, when we
  64
  deal with this Bill, than on previous occasions in tabling amendments that are constructive, and persuading me of the way in which improvements could be made.
  I endorse what was said by a number of hon. Members, including my hon. Friends the Members for Bedfordshire, North (Sir T. Skeet) and for Exeter (Mr. Hannam) and the hon. Member for Gordon (Mr. Bruce), in underlining what I said initially about abandonment and our approach to it. I reject what the hon. Member for East Lothian said about the industry's future. I do not regard abandonment as the beginning of the end in any sense. The industry has a long future in the exploitation of our own resources. It has an even longer future if we are successful in continuing the investment that we are now making in building up a supply industry that can aspire to be competitive worldwide, especially as a leader of new technology. Far from being the beginning of the end, we are preparing for a new phase. That is all that we are doing.
  As I said at the beginning of the debate, and as others on both sides have reiterated, we have the opportunity to build up new technology and a new industrial capability that will provide jobs and business for Britain for many years to come and in many different parts of the world, and not merely in our own territorial waters.
  I shall address myself to some of the central issues of the debate, some of which were referred to by the hon. Member for Merthyr Tydfil and Rhymney, but before doing so I shall take up a number of the detailed issues. My hon. Friend the Member for Bedfordshire, North spoke of the clause relating to Northern Ireland and asked whether the Isle of Man would fall into that category. Licensing the Isle of Man's territorial waters falls to the Government of the Isle of Man and not to my Department. As far as I am aware, no licences have yet been issued in that area of sea.
  My hon. Friend made some extremely interesting and constructive comments about tax revenues and tax treatment on abandonment. I think that he was rather ambitious in what he said about the Government's tax take overall. It is much lower than 85 to 90 per cent. The most profitable fields pay a marginal rate of about 86 per cent. and some of the new and smaller oilfields will be paying as low a rate as that of corporation tax, which is 35 per cent. I hope that the discussions that the oil industry will be having with the Treasury and the Inland Revenue on possible tax treatment will prove useful. The principle is accepted that the costs of abandonment are properly to be set against tax in the same way as the costs of development.
  My hon. Friend the Member for Bedfordshire, North explained that there are other approaches, and one has been mentioned by the oil companies as an alternative. The companies have drawn attention to the grant system, a system that has been considered in Norway. I accept that that approach can be considered here. I feel, however, that allowance against tax is probably the more appropriate approach given our background, but there will be discussions on tax matters. I hope that my hon. Friend will forgive me if I do not deal in detail with the comments that he has made on taxation, which involve matters more appropriate for consideration by my right hon. Friend the Chancellor of the Exchequer. I shall ensure, however, that the Treasury is aware of the point that he has raised.
  The hon. Member for Wentworth (Mr. Hardy) spoke of the practical consideration of metering and asked for clarification. The Bill's provisions apply to existing fields

  65
  and existing licences as well as new ones. These provisions will apply to the new fields within the licences and there is no intention of requiring a licensee to alter the method of measurement that is agreed for an existing field, except where he proposes to make use of the measurement facilities for existing fields in measuring petroleum that is won and saved from another field. I do not think that our proposals will give rise to a large amount of unnecessary expense.
  Mr. Hardy: The Minister will accept that, as schedule 1 stands, implications exist for the development of satellite platforms, which he knows will play an important part in the recovery of small reserves of gas. I hope that he will consider the matter to ensure that that development is not inhibited by this structure.
  Mr. Buchanan-Smith: Of course I will consider that point. I was trying to say that schedule 1 will not inhibit that. If it did, I would be worried, as we are not seeking to inhibit any activity but rather to encourage it.
  My hon. Friend the Member for Rochford (Dr. Clark) asked me a specific question regarding what would happen if, between today and the passage of the Bill, a company abandoned a platform. That is an important point. As I mentioned earlier, powers are available to prevent that. All platforms have required consent for their emplacement under the Coast Protection Act 1949. A condition of that consent is that a platform must be removed to the satisfaction of the Secretary of State when it is disused. Powers also exist under model licence clauses which provide that the licensee shall not abandon any well without the consent of the Secretary of State. Back-up powers exist. It was because of questions about the adequacy of those powers and their unspecific nature that we introduced the Bill.
  I hope that as we proceed with the Bill no abandonments will occur and that it will not be too long before the Bill reaches the statute book.
  The hon. Member for Greenock and Port Glasgow (Dr. Godman asked some detailed questions about the adequacy of safety zones. The 500 m zone is that which is allowed under the convention on the continental shelf. There is no evidence, so far as I am aware, that it does not provide, in normal circumstances, adequate protection. The hon. Gentleman asked from what level of tide one would measure clearance. I am told that it is the lowest astronomical tide. I hope that that answers his question.
  The hon. Member for Greenock and Port Glasgow asked me an important question about environmental impact. Until now, that has been covered by conditions in the licensing rounds. For example, in the 10th licensing round we proposed to license some blocks close to the shore of the Moray firth. That is an example of an environmentally important area. We are imposing specific environmental conditions regarding blocks in such areas. We are rightly sensitive to the issue of environmental impact.
  On the standards that we might require for the total removal of a platform as against its partial abandonment, the hon. Member for Greenock and Port Glasgow asked a specific question regarding the American experience. He is correct on that point. The Americans require total removal, but one should be careful when making a comparison between different countries because the Americans require removal in relatively shallow waters
  66
  where platforms can be fairly easily removed—conditions akin to our southern basin. In our discussions with the oil industry and fishing interests in areas where the water is shallow and the structures are smaller we, too, would envisage total abandonment of the platforms—
  Mr. Home Robertson: The removal.
  Mr. Buchanan-Smith: I stand corrected. In those circumstances, one would envisage the total removal of the platforms.
  Dr. Godman rose—
  Mr. Buchanan-Smith: There is not much time left. I shall be happy to return later to any specific query the hon. Gentleman may have.
  I shall now mention what I regard as the more fundamental areas of the Bill on which anxiety has been expressed. The hon. Member for Merthyr Tydfil and Rhymney and others fairly made the point about consultation. They asked what consultation had taken place up to now, how detailed it was and what consultation would take place in the future under the provisions of the Bill.
  One must make a distinction here between two different elements in the Bill. One element is the general procedures and framework which we are setting up to clarify precisely the Government's powers, and the other is the general liabilities of the oil companies so that we may proceed to more careful planning regarding abandonment. Until now, the consultations have taken place in the latter direction.
  The hon. Member for Merthyr Tydfil and Rhymney was especially critical of the fact that, during the more detailed consultations, we had not spelt out more specifically the extent to which removal would be considered necessary, and whether it should be total or partial. We have not yet reached that stage. That stage will be reached when regulations are introduced under the powers of the Bill and discussions on them take place. That distinction must be made because of the approach that we have chosen. It is the right approach. I defend it again, as I did at the outset. We are dealing with what will occur some years in the future. The legislation enables people to focus on the problems and tackle and discuss them in a much more detailed way within their proper framework. But no matter how much general consultation there may be, the position will still develop and evolve in the light of experience, not least in the light of what happens in relation to international agreements, as the hon. Member for Merthyr Tydfil and Rhymney correctly drew to the attention of the House.
  The approach that we have adopted on some major issues, making it clear where we stand but leaving open the matter of further consultation as to how the precise provisions will apply in the case of abandonment, is much more appropriate to the problem that we must tackle.
  Clause 11 deals with the regulations on the consultations with the interests involved. I envisage that fishing interests will be covered by those regulations. I will check the position, but the words used in that clause are precisely those used under present legislation when fishing interests are consulted. The legal obligation for proper consultation when the regulations are introduced is written into the clause. However, I am sensitive to the point that, if we are to approach the matter within the

  67
  framework of the regulations which will be introduced later, and if we shall require companies to produce plans and programmes for the abandonment of structures case by case—I would expect that this could be laid down by the Secretary of State in the requirement that he makes for the programme—consultation should take place. How that is done formally is a subject which I would be happy to return to and discuss. I intend that those consultations should take place at that stage case by case. Precisely how we shall give effect to them may be more appropriate for discussion in Committee. I will be happy to return to it later.
  Mr. Bruce: Will the Minister acknowledge that the fishing industry believes that the abandonment of platforms is not the same as their installation? It seeks a right of consultation and wants its views to be taken into account. That is a stronger right than its rights in the discussions relating to the installation of fields.
  Mr. Buchanan-Smith: I am in no doubt about the strong feelings of the fishing industry. I am under no illusions about it. At present, all the fishing organisations support total removal and nothing less. That is the official and public view of the fishing organisations. I do not wish to mislead the House in relation to that.
  I hope that in the further consultations that take place the industry might be prepared, without prejudice to its stated position, to consider what other alternatives might exist in relation to partial abandonment, in which its interests might not be grossly interfered with or affected in any major way and where cost savings might be achieved. In that sense, I have invited leaders of organisations to enter into further consultations on what we should do.
  Much of the debate has centred on the liability of the oil companies to discharge their obligations. I am grateful to hon. Members on both sides of the House for supporting the principle that it is correct for the Government to ensure that a company does not walk away from its responsibilities.
  I hope that all companies, particularly the larger international companies, will live up to their responsibilities. But there is always a risk that a company could, for example, bankrupt its United Kingdom subsidiary at the time of abandonment, thus causing the cost of abandonment to fall on the British taxpayer. Hon. Members have all said that that would be wrong, so the Government are right to legislate for that. Indeed, my hon. Friends the Members for Bedfordshire, North, for Exeter, for Rochford, for Billericay (Mr. Proctor) and for Basingstoke (Mr. Hunter) all made that point. Thus, if there are alternatives, I am prepared to consider them with those interests representing the oil companies.
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  This measure is not without precedent, and I should not like any hon. Member to think that it was. If, for example, banks lend to a company, they may require a parent company guarantee or other security. Equally, in the case of a small company, the bank may require a guarantee or other security to be provided by the directors. Therefore, there is a precedent in normal commercial affairs. Furthermore, in the case of large construction or supply contracts, the customer may require performance bonds or guarantees fom the supplier's parent company. Thus, there is a precedent in the commercial world for wider responsibility being required.
  Under the Insolvency Act 1985, wider responsibility is also required in the case of a company's wrongful trading. But notwithstanding that, I assure the House that as long as the objective is achieved, I am prepared to consider any practical approach.
  We have had a good debate on the Bill. I apologise to those hon. Members who raised detailed points that I have been unable to respond to in the detail that is my custom because of the shortage of time. But I am grateful to hon. Members for the general welcome that they have given the Bill, and I look forward to a very constructive and improving Committee stage. In that spirit, I commend the Bill to the House.
  Question put and agreed to.
  Bill accordingly read a Second time, and committed to a Standing Committee pursuant to Standing Order No. 61 (Committal of Bills).

  PETROLEUM BILL [MONEY]
  Queen's Recommendation having been signified—
  Resolved,
  That, for the purposes of any Act resulting from the Petroleum Bill, it is expedient to authorise the payment out of money provided by Parliament of—

  (a) any expenditure incurred by the Secretary of State under provisions of that Act relating to the abandonment of offshore installations or submarine pipe-lines, and

  (b) any increase attributable to that Act in the sums payable out of money so provided under section 40 of the Petroleum and Submarine Pipe-lines Act 1975.—[Mr. Lightbown.]

  PETROLEUM BILL (WAYS AND MEANS)
  Resolved,
  That for the purposes of any Act resulting from the Petroleum Bill, it is expedient to authorise—

  (a) the charging of fees in respect of expenditure incurred by the Secretary of State under provisions of that Act relating to the abandonment of offshore installations or submarine pipe-lines; and

  (b) the payment of any sums into the Consolidated Fund—[Mr. Lightbown]

  European Community Budgets
  7.3 pm
  The Minister of State, Treasury (Mr. Peter Brooke): I beg to move,
  That this House takes note of European Community Documents Nos. 5484/86, key figures for the 1987 Budget; 7113/86, Preliminary Draft Supplementary and Amending Budget No. 1 for 1986; 7068/86, updated key figures for the 1987 Budget; 7927/86, Preliminary Draft Budget for 1987; 9192/86, Draft Budget of the European Communities for 1987; 8877/86, Letter of Amendment No. 1 to the Preliminary Draft Budget of the European Communities for 1987; COM (86)360, Letter of Amendment to the 1986 Budget; 8876/86, Preliminary Draft Amending Budget No. 1 for 1986; 8883/86 and Addendum 1, Commission Communication on recent developments affecting the 1986 Budget and 1987 Preliminary Draft Budget; and supports the Government's efforts to achieve tighter restraint and better balance in the Community's Budget.
  Mr. Deputy Speaker (Mr. Ernest Armstrong): I have to announce that Mr. Speaker has selected the amendment standing in the name of the Leader of the Opposition.
  Mr. Brooke: The motion before the House list nine sets of documents relating to the European Community budget procedure which the Scrutiny Committee has recommended for debate. These documents relate to the annual budget procedures for 1986 and 1987. For the convenience of the House I propose to summarise the budget procedure over the past nine months, placing each of these documents in context, before commenting briefly on the current position in the 1987 budget procedure.
  I should like to begin by offering warm thanks to the Scrutiny Committee, under the chairmanship of the hon. Member for Newham, South (Mr. Spearing), for its sterling work on these and very many other documents. The Government are conscious of the need to safeguard the interests of the House in these matters, and supports the Scrutiny Committee in its vital watchdog role. I had myself the pleasure of giving evidence to the Scrutiny Committee on the Community budget procedure recently, as background to this evening's debate.
  The House will recall that the 1986 budget procedure was interrupted by the European Parliament's adoption of a disputed budget in December of last year. Following this, the Council of Ministers decided to commence legal proceedings against the European Parliament before the European Court of Justice. Simultaneously, the United Kingdom brought an action for interim measures suspending implementation by the Commission of the disputed elements in the 1986 budget until the court had given substantive judgment. On 17 March, the court accepted the United Kingdom application for such measures and ordered the Commission to implement the budget on the basis of the draft established by the Council on 27 November. The court also ordered the Commission to refund the £18 million which the United Kingdom had already contributed on a "without prejudice" basis towards the disputed part of the budget.
  In the autumn of last year, the Council had asked the Commission to consider further the question of commitments outstanding which had yet to be paid—the so-called "cost of the past" problem. In April of this year, the Commission produced a report relating to the level of outstanding commitments in the structural funds—notably the regional and the social funds. On the basis of this report, and of the need for additional
  70
  agricultural expenditure due to the sharp and sudden fall in the value of the dollar against the European currencies, the Commission brought forward on 20 May a draft supplementary and amending 1986 budget—that is, EM 7113/86—which proposed additional increases of 1,811 mecu in payment appropriations, and 1,146 mecu in commitment appropriations.
  In line with an agreement reached at the October 1985 ECOFIN Council, the draft budget also included an increase of some 500 mecu in the United Kingdom abatement for 1986. Although the 1986 budget dispute was not yet resolved, the 1987 budget procedure began in parallel.
  Mr. Teddy Taylor: Do the Government believe that the fall in the value of the dollar necessarily involved a staggering increase in EEC expenditure? If so, why did the price of some of the foodstuffs not covered by the CAP, such as coffee, bananas and pepper, rise despite the collapse in the value of the dollar? Does my hon. Friend the Minister have any evidence to show that the fall in the value of the dollar was directly responsible for the sharp increase in Common Market spending?
  Mr. Brooke: The Government accepted that there was an exceptional circumstance as a result of the fall in the dollar, and had to apply their attention to the overall impact of that fall in the value of the dollar. The products that my hon. Friend mentioned are not natural exports for the Community. The Community could not really be said to be part of a banana regime, and coffee and pepper cannot be regarded as sensitivities.
  In April, the Commission produced a document giving key figures for the 1987 budget—EM 5484/86—and its subsequent revision—EM 7068/86. These gave the broad lines of the Commission's spending plans for 1987. They were superseded in June by publication of the preliminary draft budget for 1987—EM 7927/86. These showed that the Commission proposed a 1987 budget just within the 1·4 per cent. VAT ceiling, in which the agricultural guideline was respected but non-obligatory expenditure rose by more than the maximum rate of increase of 8·1 per cent.
  The start of the United Kingdom presidency in July of this year saw the Community still without a 1986 budget at the beginning of the 1987 budget procedure. The European Court gave its substantive judgment in the 1986 budget dispute on 3 July. It found that the European Parliament had exceeded its powers in adopting a budget for 1986 with provision for non-obligatory expenditure and a new maximum rate at the level which the Council had not agreed. The court ruled that the 1986 budget procedure remained incomplete and should therefore be completed in accordance with the treaty.
  As president, the United Kingdom called a Budget Council for 7 and 8 July to agree a new Community budget for 1986. On 10 July, following three clays of intensive negotiations, the Council and Parliament reached agreement on a new budget for 1986. Although this is not technically a depositable document, full details of the 1986 budget are contained in the White Paper statement on the 1986 Community budget, Cmnd 9907, published on 3 October.
  The 1986 budget, as adopted in July, was some 7·6 per cent. larger overall than the Council's second reading

  71
  budget of November last year. This involved an excess over the original 1986 agricultural guideline of 926 mecu. The United Kingdom Government regretted that increase, but took the view that it could be justified given the exceptional size and speed of the depreciation of the dollar over the period. That covers the point raised by my hon. Friend the Member for Southend, East (Mr. Taylor).
  Mr. Tony Marlow: The budgets and budget discipline seem to have been accident-prone over the past year or so. Will my hon. Friend give a commitment to the House that in the 1987 budget the Government will not agree, in realistic terms, to a budget which without—or even with—creative accounting would go above the 1·4 per cent. VAT limit? Will he further give a commitment that this Government will never agree to an increase in the 1·4 per cent. VAT ceiling?
  Mr. Brooke: The 1·4 per cent. ceiling is recognised by all parties to the budget process. My hon. Friend was tempting me with questions that might relate to the movement of future exchange rates. I remind him of the definition given in legal dictionaries of an act of God as being an act which no reasonable man would expect God to commit. We will clearly have to wait and see what happens.
  Non-obligatory spending was increased by a further 16 per cent. compared with the November totals. The purpose of this increase was to cover the so-called "cost of the past"—commitments entered into in the structural funds but yet to be paid off—while monitoring the flow of new payments to the Ten as well as Spain and Portugal. We continue to believe that this problem could have been dealt with in less costly ways.
  The Council met again on 22 July to consider the Commission's proposals for 1987. It proved unable to reach agreement by the necessary majority on that occasion, and reconvened on 8 September in Brussels.
  During the intervening period, the Commission produced a communication on recent developments affecting the 1986 budget and preliminary draft 1987 budget—EM 8883/86. This document stated that the Community's revenue estimates from customs duties and agricultural levies for 1986 seemed likely to be over-optimistic and that there could be a revenue deficit of some 776 mecu, which the Commission proposed to offset by changes in agricultural and non-obligatory expenditure. Shortly, before the 8 September Council, the Commission produced formal proposals along those lines in its preliminary draft amending budget No. 1 for 1986—EM 8876/86. It also produced a letter of amendment to the peliminary draft budget for 1987—EM 8877/86—which incorporated certain small changes to the 1987 preliminary draft budget. These had been suggested informally by the Commission in July and their overall effect was slightly to reduce expenditure.
  At the Budget Council on 8 September, the United Kingdom argued in favour of amending the 1986 budget to take account of the prospective revenue shortfall. But the Council decided against that. Part of the problem was that the Commission had not circulated its latest estimates until shortly before the Council meeting. The Council urged the Commission instead to take all possible measures to ensure that expenditure was reduced in an equitable way in order to maintain a balanced budget
  72
  while taking account of the Community's obligations and avoiding the slippage of expenditure into 1987. The Council also noted that the Commission would provide more precise data on revenue and expenditure later in 1986.
  On 1987, as well as establishing a draft budget EM 9192/86 the Council noted that the United Kingdom abatement would have to be increased by some 350 mecu owing to revenue adjustments and undertook that, to the extent that it was not possible to provide fully for this additional abatement in the 1987 budget, provisions would be made for it in the 1988 draft budget, due to be considered by the Council next summer. The Council is thus committed to providing this additional abatement somewhat earlier than is strictly required under the agreed procedures.
  The draft 1987 budget, as established by the Council on 8–9 September, was fully in accordance with budget discipline. The 1987 agricultural guideline was respected, and non-obligatory expenditure was increased by half the maximum rate of 8·1 per cent. for payment appropriations and by rather less than that for commitment appropriations.
  However, the Commission has warned of the risk of a substantial overrun in agricultural guarantee expenditure next year if the necessary preventive action is not taken. At the instigation of the United Kingdom, the October ECOFIN meeting discussed Community spending on agriculture. There was general agreement in the Council on the urgency and seriousness of the situation. The presidency conclusions, which received general though not universal support, stressed the need for policy decisions which allowed support prices to reflect more closely market conditions, returned the intervention system to its intended role as a safety net for times of particular pressure and not as a standard alternative marketing outlet, and ensured that price support policies were more flexibly operated so that commercial risks are not entirely borne by public finance. We intend to maintain the pressure for reform over the coming months.
  Mr. Eric Deakins: In relation to the Minister's points about ECOFIN, he will recall his written answer recently to my question about the reservations expressed by the Greek, Danish and German delegations. Those reservations cannot be brushed aside, because they are quite serious. The delegations maintained that agricultural policy had to take account of political and social aspects. I believe that the Greek delegation hoped that the money would be found almost regardless of the budget circumstances. Does the Minister agree that that is serious?
  Mr. Brooke: I said that the presidential conclusions of ECOFIN enjoyed widespread support within the Council. That is an accurate statement. I would have been inaccurate had I not included a reference to certain reservations among individual countries. Those reservations were just as the hon. Gentleman reported.
  The European Parliament has now proposed amendments and draft modifications to the 1987 draft budget in accordance with its role in the Community budget procedure. These were voted by the Parliament's plenary session in Strasbourg on Thursday of the week before last. When the Parliament's formal proposals are received, they

  73
  will of course be deposited in the House in the usual way. It may, however, be helpful if in the meantime I summarise them for the House.
  The Parliament has proposed an increase in non-obligatory payment appropriations, compared with the Council's draft budget proposals, of some 520 mecu, some 170 mecu above the half maximum rate limit laid down by the treaty. The Parliament has also proposed a much larger increase, again compared with the Council's draft budget proposals, in non-obligatory commitment appropriations of some 1,020 mecu. On agriculture, too, the Parliament has proposed some substantial modifications including a reduction in dairy quotas, an increase in stock depreciation and a special fund to pay for the disposal of stocks. The Parliament's proposals will be considered by the Council at its meeting on 26 November, which I will chair, and where the United Kingdom will be represented by my hon. Friend the Economic Secretary to the Treasury.
  We are only halfway through the budget procedure for 1987. The Budget Council meets again on 26–27 November and the European Parliament has its second reading debate during the second week of December. We have considerable problems on the 1986 budget, due to the prospective revenue shortfall, and on the 1987 budget, in particular the substantial overrun of CAP expenditure. The negotiations that lie ahead are likely to be time-consuming and difficult, but a good start has been made and I have pleasure in commending the motion to the House.
  7.19 pm
  Dr. Oonagh McDonald: I beg to move, to leave out from first "Budget" to the end of the Question and to add instead thereof:
  'and views with concern the increase of 39 per cent. in payment appropriations, the 10·8 per cent. increase in agricultural spending, and the increased shortfall in 1986; notes that the 1986 Budget exhausted the Communities' own resources income from the 1·4 per cent. value-added tax base, and that there is only 665 million ecu headroom in the 1987 Budget; and consequently calls on Her Majesty's Government to restrict the expenditure of the Community in 1987 to sources of income already approved by this House.'.
  I am not surprised, I must say, at the—
  Mr. Brooke: If the hon. Lady looks at the Order Paper, she will see that, perhaps by a typographical error, some crucial words have been omitted. Since I should not want the Opposition to mislead the House, it may be desirable to put them in by manuscript amendment.
  Dr. McDonald: I have read the amendment that was submitted, and it is the same wording.
  Mr. Brooke: I shall explain what I meant by my earlier intervention. The 39 per cent. in payment appropriations, to which the hon. Lady referred, is in non-obligatory expenditure. It will help the House if that is clearly identified.
  Dr. McDonald: I should have thought that the reference to payment appropriations is clear enough. I am sorry if that is the Minister's objection.
  I am not surprised that the Minister stopped his comments when he did. Of course, he knows full well that there are enormous problems ahead with the 1987 budget. I shall begin with the 1986 budget. I am glad that the Minister has reminded the House of what, at times, became the farce of the progress of the 1986 budget
  74
  through Parliament, the Council, the EC Commission and, finally, the European Court. When the budget finally emerged on 11 July 1986, the Minister said:
  "the new budget uses up all the available revenue within the 1·4 per cent. ceiling, together with the surplus carried forward from 1985."
  He went on to spell out the various alterations that were made and commented:
  "the United Kingdom's representatives made clear their profound and continuing concern about levels of expenditure in the new budget, and the implications for budget discipline."—[Official Report, 11 July 1986; Vol. 101, c. 613.]
  At that stage in 1986, the Minister was already concerned about the nature of the 1986 budget. Since then, we have a revenue shortfall of 776 million ecu—approximately £450 million to £500 million—which the Commission document of 25 August states
  "could have serious implications for the resources available in 1987."
  Already, the 1986 budget is running into difficulties, and they will carry over into 1987. In his opening remarks, the Minister referred to the ECOFIN meeting of 13 October and to the British document, which he declared received widespread support. That document suggested that Community support prices will more closely reflect supply and demand and market conditions. But the intervention system will be regarded as a safety net rather than an alternative market. Price support policies will involve commercial risks rather than be borne entirely by public finance.
  When the Minister referred to the main items in the British document, he no doubt noticed that some mirth was expressed by hon. Members. I am not surprised that the document commanded widespread support. If he had announced that he was in favour of motherhood and apple pie, the document would have received widespread support. It was just a lot of pious waffle. There is no likelihood whatsoever of any item being adopted by the Community in the near future. We all agree with the sentiment that support prices should reflect market conditions, because otherwise the intervention system will be regarded as a safety net rather than an alternative market, but the chances of that happening in the present state of the EC are remote.
  The Minister went on to refer to the 1987 budget, which we can at best describe as a stop-gap budget. Of course, the Minister has received much praise in the press for the way in which the negotiations have been conducted, but some of that praise was properly qualified. For example, an article in the 10 September edition of The Times, praised the Minister for his tactical success, but it went on to comment on the Minister
  "securing majority agreement on a draft Budget for 1987 and managing to have the crisis on this year's budget put on one side."
  That crisis will certainly not be put on one side for long, for in those discussions, many of the warnings that had already been given by Commissioners had been ignored. For example, the Commission President, Jaques Delors, warned EC Finance Ministers on 17 October, as reported by Agra Europe, that the 12 were facing a shortfall of 3 billion ecu in 1987. They talked about the rising cost of agricultural spending as the main reason for the expected shortfall. For example, another of the Commissioners, Andriessen, produced figures to show that, on cereals alone, expenditure would have to rise by 1·5 billion ecu above the originally planned level because of the fall in value of the United States dollar. He also warned that

  75
  continuing requests from member states for green currency devaluations were contributing further to the increase in expenditure.
  Commissioner Christopherson told the Ministers that if the USSR were to ask to buy 1 million tonnes of butter from the Community, the EC could not afford to sell it to them—not 1 million tonnes, perhaps, but we have managed to afford to sell some of it to Russia—once again, quite rightly, incurring the wrath of all hon. Members and also, no doubt, upsetting many citizens throughout the Community, who cannot understand why they have to pay through the nose for butter when Russians get it on the cheap.
  That is only part, of course, of the crisis faced by the European Community. Here is another part of the crisis which, it appears, the Government are belatedly recognising. We have 1·5 million tonnes of surplus butter, over 1 million tonnes of surplus milk powder and 16·5 million tonnes of surplus cereals. The costs of storage continue to rocket. Total surplus food is valued, in the EC's books, at £7·5 billion to £8 billion, but of course there is no possibility of it ever being sold on world markets at its true price. At the moment, the Commission estimates its value at about half its book value. That is about £4 billion.
  Already, there are great losses in that surplus stock, together with the continuing obscenity of those surpluses remaining in storage. Food is continuing to waste while poor people throughout the Community find it difficult to pay for some of this stock, and while many in the Third world continue to starve. It is an obscenity. It continues and it will create a crisis in the Community. Yet, as The Times today comments, not on the front page but on an inside page:
  "near the end of a six months' tenure of the presidency of the EEC Agricultural Council we have little to show for this opportunity"
  to carry out any sort of reform.
  It is not surprising that that is the assessment. The shortfall in 1986 is likely to be carried over into 1987, thus throwing the 1987 budget out of line. We said that specifically in our references in the amendment to the shortfall in the 1986 budget and the small headroom in the 1987 budget, to show that, no matter what else happens, for that reason alone the 1987 budget is likely to overrun.
  Mr. Nigel Spearing: Did my hon. Friend notice that, when the Minister, in a rather brief introduction, mentioned the November meetings, he referred to the carry-over of the 1986 shortfall into 1987, which the Council may take up instead of blaming the Commission, but did not tell us whether, if that shortfall is added to the 1987 budget together with the amount the Assembly added, we shall still be within the 1·4 per cent. ceiling? It might be useful if the Minister were to make that point. Perhaps it will not be within the ceiling.
  Dr. McDonald: I thank my hon. Friend. We have clearly said that the 1987 budget looks likely to overrun.
  The Minister referred briefly to another feature of the 1987 budget—the possibility of further changes in the dollar-ecu rate. He mentioned that such changes could be regarded as an act of God. I thought that the Chancellor regarded such changes as examples of the wisdom of the operation of the free market. Be that as it may, the
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  Minister chose to regard this as an act of God, and I did not get the impression that he thought it was particularly reasonable. The Minister was not exactly helping the House in its consideration. As he made perfectly clear to the Select Committee in its recent deliberations, the 1987 budget is based on a dollar-ecu rate of 1·10. The current rate is already 0·96. Each 10 per cent. decline costs between 750 million ecu and 1 billion ecu.
  So the "act of God" is not a future event to be feared. It appears that it is already happening. The Minister said:
  "you will see that from that there is a potential further shortfall."
  The Minister has already made it plain that he expects budgetary discipline and the 1987 budget to be thrown out of line by changes in the dollar-ecu rate. I think that he was misleading the House in his somewhat witty references. The Minister should tell us more about the consequences for the further deliberations on the 1987 budget which, he tells us, will be forthcoming in the European Parliament and the Council meetings during the rest of this week.
  All this underlines what has been said many times by Opposition and Government Members. In June 1986, the Prime Minister told us over and over again on her return from Fontainebleau that she had secured budgetary discipline. Opposition and Government Members told her that budgetary discipline could not work without reform of the agricultural policy. We have been proved right in 1986 and will be proved right again in 1987. She said that a first step had been taken on reducing the amount of surpluses in the Community. She told us that two and a half years ago but today, on the front page of The Times, we are told of the
  "Thatcher bid to slash £8 billion food mountain".
  Those first steps are a long time coming. The Daily Telegraph of 17 November sums it up clearly:
  "It is now brutally clear that the much-praised financial settlement at Fontainebleau in 1984, to control farm spending and put EEC finances on a secure footing, has failed miserably."
  Hon. Members: Hear, hear.
  Dr. McDonald: Plainly, there is much agreement on both sides of the House on that point. However, today we are told that the Prime Minister will act and all the problems will be solved by 31 December, when the British presidency of the European Community comes to an end. We are told:
  "In a courageous bid to tackle a crisis which European leaders have been dodging for years, she will fight hard to impose this British last-resort solution at a crucial EEC summit meeting in London next month."
  Sir Russell Johnston: Does the hon. Lady agree that that article was an extraordinary, sycophantic piece of writing in a major front page story in a supposedly independent paper?
  Dr. McDonald: I could not agree more with the hon. Gentleman, especially in view of the fact that the article on the inside page contradicts most of the sentiments in the front page article in a much more careful analysis of the workings of the agricultural policy. I have already quoted from that page.
  Mr. Teddy Taylor: I cannot understand this. Why does the Labour party object to this dramatic new plan called "set aside"? Surely, if it was applied to all other industries, including engineering, shipbuilding and mining, we could solve unemployment totally by paying everyone for doing nothing.
  Dr. McDonald: I am sure that the hon. Gentleman will commend his solution to the Prime Minister, who presumably is anxious to solve that problem in time for the election. I shall leave him to his own devices.
  I am glad to note that, having belatedly recognised that the problem still exists—it is really only in the article that the Prime Minister admits that budgetary discipline has not solved everything—and having finally taken note of what has been said so often by both sides of the House, the Prime Minister at least has taken up the view expressed by Opposition agriculture spokesmen, my hon. Friends the Members for Pontypridd (Mr. John) and for East Lothian (Mr. Home Robertson) in agriculture questions and in speeches outside the House. The Labour party's policy is that land should be taken out of production of surplus products but, for environmental and employment reasons, it does not want that land to be left idle. We would prefer it to be used for other profitable and important industries, such as forestry.
  Mr. William Cash: Has the hon. Lady noticed that the Agriculture Act, which was introduced by the Government, was amended, when in Committee, to allow persons in agriculture to obtain grants to enable them to go into ancillary industries along the very lines she has advocated?
  Dr. McDonald: I have noticed that. We are waiting for the exemplification of the Government's political will to bring that about. I am sure that the hon. Gentleman is glad to note that the Labour party is about to produce a detailed document on that matter. My hon. Friends have given a little precursor of that.
  The Prime Minister hopes to solve this matter by the end of December. However, it will also involve the agreement of other Agriculture Ministers in the Community. She will no doubt have noticed the difficulties faced by her own Agriculture Ministers in endeavouring to bring it about. I refer to a report in Agra Europe dated 3 October 1986 which is entitled
  "Playing the Fool in Windermere."
  It says:
  "While the EEC's Ministers of Agriculture may have enjoyed the Cumberland wrestling, sheep dog trialing and shepherd's crook sampling laid on by the UK government at their 'informal meeting' in England's Lake District this week, it is clear that this meeting suffered from an even greater degree of unreality than is normal at Agriculture Council gatherings."
  It goes on to describe the meeting as a "Mad Hatters' Party" and refers to the French Agriculture Minister who expects to be taken seriously
  "when he suggests that the Community's claimed reduction in milk ouput since 1984 has been replaced in the world market by increased output from New Zealand and the United States."
  It goes on:
  "of course he knows, his colleagues know, and anyone who knows anything about the dairy industry knows, that the Community is now producing and processing just as much milk now as it did in 1984 when quotas were introduced."
  Whatever the intention of the Prime Minister may be, it is obviously a little bit more difficult for the British Ministers to obtain agreement on those matters within the European Community.
  As the Prime Minister is pursuing the matter she should further realise that there are delays in reducing milk surpluses which are partly due to Britain's unwillingness—I do not in any way condemn that—to part with one
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  particular method, known as method B, of calculating the levy, which is done for us through the Milk Marketing Board. That may well be understandable. I am not proposing to comment on the details of the matter All I am pointing out is that there are delays in reaching agreements in the Agriculture Council, some of which are due to understandable objections raised by British Agriculture Ministers. When the Prime Minister says that she is going to push the EC farm plan and all is to be solved by 31 December, all I can say is that she is about to become a magician. I doubt whether she will succeed.
  The article in Agra Europe also refers to the bid to slash the 8 billion ecu food mountain. Of course, that is something everybody wants to see. However, how is it to be achieved? How do we dispose of the surpluses? The Minister will know that the European Parliament voted for a separate fund outside the budget to deal with the problem of surpluses in accordance with the recommendations of the Baron report on future financing, which was voted in October. The Minister did not tell us his views on the matter. Is the Prime Minister intending that her right hon. Friend and his hon. Friends at the meeting in Brussels and subsequent meetings should agree to a separate fund to dispose of the surpluses in time to fulfill the Prime Minister's word? What is the Government's decision on that?
  Although we all agree with the sentiments expressed by the Prime Minister—it must have been in one of the Lobby briefings which are not supposed to take place any more—we regret that she has come to that view so late. We wonder how on earth she will achieve it and can express only scepticism. Will it not be another failure in the Government's record of sorry failures in dealing with the EC, especially its agriculture spending?
  7.45 pm
  Sir Edward du Cann: I shall deal in a moment with some of the points made by the hon. Member for Thurrock (Dr. McDonald). First I should like to refer to the typically elegant speech made by my hon. Friend the Minister of State. It was a valiant attempt to defend the indefensible. He reminded us that the Scrutiny Committee recommended that we should debate nine papers this evening. If one goes to the Vote Office, as I did before the debate, one is handed a great mass of 20 papers. I took them to the Library and weighed them. They weighed no less than 1·55 kg. To put that in English, they weighed 3½
  I hope that right hon. and hon. Members will not mind if I speak in English. I find it difficult to get used to the new jargon such as FEOGA, ECOFIN and, worst of all, mecu. Why do we talk about mecu? Why has my hon. Friend the Minister introduced mecu? Why do we not talk about the pound sterling, which is our own currency? It is the pound sterling in which our national accounts are written and in which our fellow citizens pay their taxes. It is pounds sterling, too many of them, which the House votes in order to support the European Community. We should stick to the use of the term pound sterling.
  Whether one talks about nine or 20 documents, kilograms or pounds or pound sterling and mecu, the point at issue is essentially simple—the validity of the budget. In my view, I say plainly and at once, the budget is bogus and a sham. I say that because everyone knows that the budget will not be kept to. That is admitted. The Prime Minister said on 18 November:

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  "the Commission has warned that on present policies a substantial overrun…is likely."—[Official Report, 18 November 1986; Vol. 105, c. 85.]
  Indeed, the Minister, with typical honesty and straightforwardness, reminded us of that. It is common knowledge that there will be an overrun. The amount is variously estimated. Some say that it will be £1 billion and one Member of the European Assembly said that it would be £2 billion. I am talking about pounds sterling. What is clear, as my hon. Friend the Minister said, is that the pressure is always upwards. The pressure for expenditure comes not least from the European Assembly itself.
  Whatever the amount of the likely overrun, it is clear that this is not a budget in the ordinary sense. It is misleading so to describe it. One end of the account is open-ended—the spending side. It is obvious, nobody can possibly deny it, that the spending side is out of control.
  It is true that the 1987 revenue figure is fixed at the legal limit; that is, 1·4 per cent. of the take from VAT.
  Mr. Nigel Spearing: This is an important point which is universally misunderstood. If it were only 1·4 per cent. of the VAT take, we would not be so concerned. But the calculations, varying a little from year to year, show that it is between 12 per cent. and 14 per cent. of the Treasury's VAT take. It is 1·4 per cent. of the VAT base which, rather like rateable value, is placed upon the United Kingdom by a Commission calculation. The right hon. Gentleman will see that the amount that we pay each year is approximately 10 times what some people think that we pay.
  Sir Edward du Cann: The hon. Gentleman does the House a service in spelling things out exactly, but I shall continue to use the phrase "1·4 per cent. VAT" as a kind of shorthand. We were told that that limit was intended to last for several years, but again the House was misled. Paragraph 4 of the White Paper states:
  "The budget uses up virtually all available resources within the new 1·4 per cent. VAT ceiling."
  In other words, as sure as we are in the Chamber today, the European Community will be coming back for more money and the European Assembly or Parliament, which is certainly no watchdog, will do nothing to prevent that.
  I appreciate the point made earlier by the hon. Member for Newham, South (Mr. Spearing). The White Paper puts the matter modestly. In fact, this near-balance has been achieved only by a series of accounting adjustments such as the advance payment of contributions—the postponement of rebates to the United Kingdom, delayed intervention payments and levies on member states in respect of storage—for which "creative accounting" is the professional term and "fiddling the books" the vulgar one.
  The hon. Member for Thurrock rightly referred to the interesting articles in The Times today. The Times states:
  "an unreformed system would bankrupt the Community."
  That is an accurate description of the situation. Remarkably, those of us who are in favour of the Community, as I am, and those who are against it find that their interests coincide in this respect. Whether one is for or against the Community, everyone agrees that there must be reform. The complaint is of the lack of political will to achieve that reform. In this respect the hon. Member for Thurrock was less than fair to my right hon. Friend the
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  Prime Minister who, alone among Community Heads of Government, has shown that political will. My only reservation in stating that plainly is, alas, in having to disagree with my hon. Friend the Minister's comment today that a good start has been made on reform. The whole nation knows that no start whatever has been made.
  As the hon. Member for Thurrock said, in the year of grace 1987 the bill will come in and it will have to be paid. One can only speculate as to how it will be paid—more delays in repayments, more one-off subventions, more advance payments—but paid it will have to be. Again, Parliament has been misled. It is impossible not to reflect that the Government are practising double standards. I regret having to say that, but it is the truth. It was good to see my right hon. Friend the Chancellor present at the beginning of this debate. In his autumn statement he prided himself on his ability to control Government expenditure and, indeed, local government expenditure—that is, domestic expenditure—but when it comes to control of European Community expenditure there is apparent indifference.
  I do not know how one is expected to explain these things to one's constituents. Perhaps Opposition Members have the same difficulty. How can I tell my constituents that expenditure must be curbed, that the second stage of the new Taunton hospital cannot be brought forward and that people in attractive places such as Norton Fitzwarren and Dulverton cannot have a desperately needed bypass because the nation cannot afford it? What do I say when they refer to my right hon. Friend the Chancellor's statement to the Select Committee on the Treasury and Civil Service that the promised reduction of standard rate income tax to 25 per cent. is now unlikely because these things are not easy to achieve? When people tell us that the highest rate of income tax in the United States is now to be less than the United Kingdom standard rate, what are we expected to reply? Are we to tell them that the Chancellor says that we have careful control over expenditure, or do we say that things would be very different if only we could control expenditure in the European Community?
  The House itself cannot escape criticism on the same account. We are tigers in following up the competent work of the National Audit Office in pursuing folly, incompetence and carelessness in the spending of taxpayers' money voted by us for expenditure by Departments of State, but with the exception of debates such as this, which are not particularly well attended, we have no machinery for the scrutiny of European Community expenditure. That is why our decision on this matter tonight is of special importance. Indifference to the way in which money is being squandered in Europe would be intolerable.
  I believe that we have been misled in two other respects. First, the House set great store by the Fontainebleau agreement, to which the hon. Member for Thurrock has referred. My right hon. Friend the Prime Minister was widely and rightly congratulated on her achievements in that respect. But the practice has been markedly different from the promise. My right hon. Friend the Chancellor said in his Budget statement that the figure for the 1986–87 United Kingdom net contribution to the EC would be about £600 million. No doubt that sounded fine to most hon. Members, but in the autumn statement the figure was revised upwards to more than £1,000 million. In other words, despite all the talk and all the understandings, all

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  the boasts and all the promises, after all the rebates and all the refunds, our payments for 1986–87 represent an all-time high. Again, the House has been misled.
  The second respect in which the House and the nation may have been misled relates to the budget itself. In 1984, there was a massive increase of 40 per cent. in the VAT levy, but it was agreed that agricultural spending would rise only in line with the rise in the resource base—that is, in proportion to receipts. It was agreed that any overspending one year would be recouped the next. Last but not least, it was agreed that there would be strict budgetary controls. In reply to the hon. Member for Newham, South, my right hon. Friend the Prime Minister said that the new controls would be binding on the Council and that that was the basis on which an uneasy House of Commons assented to what was proposed in our name. All those undertakings have been ignored.
  The hon. Member for Thurrock referred particularly to agriculture. As the House knows, some 70 per cent. of planned Community spending is for agriculture and about half of every penny spent by the Community goes on storing, dumping or destroying food surpluses. A recent House of Lords report estimated that the common agricultural policy added 10 per cent. to food prices in the United Kingdom. We all know that consumers are not happy about that. Equally—I can speak only for those in my own area—I have never known a time when farmers were more worried and uncertain about the future. It is a skilled political exercise to make both consumers and producers unhappy at the same time—an extraordinary political Left and Right.
  Another matter to which the hon. Member for Thurrock referred requires further comment. The common agricultural policy is now one of the strongest supports of Communism. Exports to the Soviet Union have risen by 1,100 per cent. since 1978. With net prices of 3p to 4p per pound for butter, 11p per pound for meat—these are delivered prices—and wine at 7p per litre, we are virtually giving away the European Community's food stocks. In Russia, bread costs between 14p and 25p a large loaf, whereas in our supermarkets it costs 57p. How many SS20s does that folly help to fund? One the one hand, the United Kingdom taxpayer supports the defensive Alliance of NATO, but on the other, his political masters are subsidising the offensive might of the Warsaw pact. What folly! We should end it at once.
  The hon. Member for Thurrock also referred to the cost of storage, for example, of grain, wine, butter, milk powder and beef. A third of farm spending goes on storing the butter mountain alone. Here is mismanagement on the grandest possible scale. It is said that if the CAP—the sacred cow of the European Community—continues as at present, the unwanted surplus of cereals alone will treble by 1991. I do not know about that, but I do know that year after year this sovereign Parliament is expected to acquiesce supinely to this state of affairs. We are expected to write yet another blank cheque. It is high time to say, "No, we have had enough." We could not give my right hon. Friend the Prime Minister a better support than to do that.
  What of the other assertions to which I have referred? We were given three undertakings, but there are no proposals for recoupment and none for any sort of budgetary control. Since every understanding has been broken, my own view is that we would be right to show our profound disapproval in the best way open to us. We
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  have every right to say that we will not approve any budget until the undertakings given to Parliament—which we accepted in good faith—are kept. Indeed, that is our duty.
  The historic purpose of this House is to supervise and if necessary, to control the activities of the Executive. On the Back Benches we can question, we can debate and discuss—as we do tonight—and we can criticise. However, in the end the only power that we have if we are dissatisfied is to deny Supply until we achieve reform. Sooner or later we should do that, and it should be sooner rather than later.
  8.3 pm
  Sir Russell Johnston: As we are reviewing Community policy, I should like first to put on record my disagreement with the decision of the Leader of the House to continue the so-called experiment of excluding European Community questions from a fixed slot within Foreign and Commonwealth Affairs questions, on the ground, according to a letter that he wrote, that it is "generally acceptable". I am not clear on what basis he reaches that conclusion. I suspect that it is by guess and by God rather than by any systematic approach. There is no evidence that it is "generally acceptable".
  Apart from our regular debates, there should be some means for regular oral questions on the Community. They need not necessarily be a part of foreign affairs questions because, despite the remarks made by the right hon. Member for Taunton (Sir E. du Cann), I no longer consider Community affairs to be foreign affairs.
  The Minister adopted a narrative approach when he introduced the debate. It is a well-known debating device in this Chamber when issues are somewhat controversial—as we know this issue is—to introduce a lawyer to lower the excitement level. The Minister succeeded admirably in that objective. From phrases such as "a good start has been made", and "we intend to maintain the pressure for reform", one did not obtain any sense of compelling urgency in his approach to the matter.
  In my view—in this case, my view accords even with those of some who are opposed to the Community and have long been so—there is no doubt whatever that the Community faces the gravest crisis, which, if it is not resolved within at least a year or a couple of years, or if clear guidelines for reform are not laid down, could lead to the complete break-up of the Community.
  In successive debates I have repeated the view—I do not apologise for it—that, while it is not possible to achieve any immediate reduction in surplus productivity, such a reduction must be achieved. It can only be achieved by means of a four or five-year phased policy covering all commodities.
  Mr. Teddy Taylor: So irresponsible.
  Sir Russell Johnston: That is true. However, I advise the hon. Member for Southend, East (Mr. Taylor) that the policy should cover all commodities. If restrictions relate to only one area, farmers will inevitably switch production. If necessary, such a policy should enable people to leave production and it should also take some proper account—I doubt whether the hon. Member for Southend, East would do that—of the wider rural economy in less favoured areas.
  Mr. Teddy Taylor: Would the hon. Gentleman give the House the broadest outline of how the Liberal party

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  recommends that this reduction in agricultural output over a five-year period should be achieved? Would he give us a broad outline of how a Liberal Government would go about that task?
  Sir Russell Johnston: I shall probably have answered the hon. Gentleman's question by the time I sit down.
  Mr. Nicholas Soames: I bet you a tenner that you do not.
  Sir Russell Johnston: I assure the hon. Member for Crawley (Mr. Soames) that I make a principle of giving way to the hon. Member for Southend, East. It may be a misleading principle, but never mind.
  Where the Government are open to the greatest criticism is that, until today's dramatic story in The Times, to which the hon. Member for Thurrock (Dr. McDonald) referred, they had not taken any lead in looking for ways to bring down production and to deal with the soaring costs of intervention. There is no evidence in the past, the recent past and certainly during the period of our present presidency of the Council, of the Government taking any lead in that matter.
  We all remember that before the introduction of quotas into the dairy sector, the Minister of Agriculture, Fisheries and Food was addressing dinners and telling people to increase their production. With respect to the hon. Member for Southend, East, there has been no shortage of proposals for achieving that objective, in particular from the Commission and more recently from the Parliament.
  The hon. Member for Thurrock referred to the European Parliament's proposal under article 200 to have some sort of war chest to set about dealing with the accumulated surpluses. She also criticised the Minister—quite rightly, in my opinion—for making no reference whatever to that and to what view the Government might take.
  We cannot reform the agricultural policy unless the problem of the existing accumulated surplus is tackled. I should like to know whether the Government support that approach and, if not, what alternative they advance. Incidentally, at the same time, the European Parliament proposed an additional cut of 5 per cent. in the milk quota. I should like to know the Government's reaction to that.
  At this point I should like to pick up part of the question put to me by the hon. Member for Southend, East. If one accepts the need to regulate production, as I do—I am surprised that the hon. Gentleman does not, but perhaps I should not be surprised, considering how long I have known him—one requires the establishment of comparable methods, not necessarily the same as those in the dairy sector, but a quota by one name or another.
  It could also take the form that Dr. Sicco Mansholt talked about in an interview in The Times today, where a certain amount of land is taken out of production compulsorily on a phased basis. However, that must be done across the board, but it cannot be done all at once. It could not be done simply by the price mechanism because, to have any effect on cereals, for example, one would require something like an instantaneous 25 per cent. drop in the price mechanism, which the big boys would be able to absorb, while the smaller producers would be decimated. That would not be socially or politically possible or desirable.
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  Such a phased approach would work. Let us do credit to the European Parliament—we should not forget that it is dominated by people from other member countries of the European Community whom certain Members in our Chamber often condemn as irresponsible. It suggests, having seen the introduction of the quota system in the dairy sector, that the slow tightening of the screw be achieved so that production is further reduced. That is the approach that I would recommend to the House and the hon. Member for Southend, East.
  Hon. Members will recall that on previous occasions I have argued repeatedly for more Community spending and Community programmes in the areas of what we describe as non-obligatory expenditure—that is, unemployment, regional development, social concerns and research and development—but because of the overspend on agriculture, it is there that we have cuts. In the new technology, Japan and the United States are pulling far ahead, yet the budget for European research has been cut, and four out of five applications for research funds are turned away. We cannot even agree a framework programme for technological co-operation. I regret to see that Britain was associated with France and Germany on that.
  I am sure that the Minister of State will recall having listened to or read a speech by Jacques Delors at the recent CBI conference, in which he properly criticised that and said that, in his opinion, such a framework programme was an essential part of the drive for a single market by 1992, with which the Government have been so strongly associated.
  There will be a major shortfall in the European Community budget, as the Minister and the hon. Member for Thurrock (Dr. McDonald) said. The guideline for agriculture is given as 22,960 mecu—I say that with apologies to the right hon. Member for Taunton (Sir E. du Cann), but that is the description—
  Mr. George Robertson: Million ecu.
  Sir Russell Johnston: I am sorry—million ecu.
  The estimated need for 1987 is 26,130 million ecu. That leaves a deficit 3,175 million ecu. If, as the hon. Member for Thurrock said, one adds the overlap from 1986 of 700 million ecu, one gets a total of 3,875 million ecu overspend. The 1986 deficit can be associated to a large extent with the change in the value of the United States dollar, but I do not think that the overspend for 1987 can be similarly easily explained.
  This is a short debate, and I shall not hold up the House for any length of time. I must confess to hon. Members that I was very much tempted to vote for the amendment on the Order Paper in the name of the Leader of the Opposition, but the final phrase is:
  "calls on Her Majesty's Government to restrict the expenditure of the Community in 1987 to sources of income already approved by this House."
  That is an impractical and inflexible approach. Were it not for that phrase, I could easily have supported the rest. Her Majesty's Government have not covered themselves with any distinction in their approach to the matter. The sadness is that if, as The Times has reported to us, the Prime Minister is about to embark on a serious approach to the CAP, the plain fact is that her political clout and capacity for influence have been gravely damaged by the long previous wrangle about the British contribution.

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  I believe that we can solve the problem, first with a phased reduction of production, on the lines that I gave when I responded to the hon. Member for Southend, East. Secondly, it will be necessary to reduce existing stocks. That may mean doing things, which, on the face of it, are foolish. There will be no option unless we become overwhelmed by them totally. In tackling those two problems, we must try, if we can, to separate them from the development aspect of the European Community in the area of research and development, regional development, approaches to unemployment and the social consequences of the decline of older industries. I very much believe that only in an effective development of those areas does our future as a country lie.
  8.16 pm
  Mr. Tom Normanton: As a member of the Budgets Committee of the European Parliament, I am in a somewhat unusual position in being able to make a contribution to the debate. I should like to concentrate my comments on the Community budget for 1986 and on what I call the draft budget for 1987 because it is only in an early stage of development.
  Before I come to those two main items, I should like—at the risk of being accused by the Opposition of being sycophantic—to place firmly on the record of the proceedings of this House the negation of what was said by the Opposition Front Bench. It was implied that my hon. Friend the Minister of State, Treasury had been wrongly praised for his handling of the acting presidency of ECOFIN since Britain assumed the presidency of the Council.
  I should like to say firmly that, in the months that my hon. Friend has been acting president, he has won an enormous amount of understanding and support from his fellow Ministers and also from Members of the European Parliament who are concerned about negotiating the budget arrangements for 1986 and 1987. Taking over the duty of acting president on 1 July, as he said in his speech tonight, he was faced with settling the conflict that had existed between the Council and the Parliament over the 1986 budget. By the exercise of what I can truly describe as skill and diplomatic expertise—and, as my right hon. Friend the Member for Taunton (Sir E. du Cann) suggested, by charm—he succeeded in resolving the many differences relating to objections from the European Parliament, which threatened a deadlock among the member states.
  I confess to a sense of deep anxiety during that period over the working of the Community in 1986 and 1987. If my hon. Friend failed to achieve that agreement in July, there would have been no prospect of resolving the problems—immense as they are—in the rest of this year. He did not fail, but let there be no doubt that the action brought against the European Parliament by the Council, by the British Government, though confirming that the European Parliament was constitutionally out of order and had acted illegally in connection with the 1986 budget, proved that in financial and budgetary terms the Parliament's analysis was fully vindicated. That was the finding of the European Court about the compromise agreement between the Council and the Parliament.
  The Council is still failing to come to grips with political problems and procedures underlining the constitutional relationship between the two budgetary authorities—the Parliament and the Council. I could present many
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  illustrations of that, but I shall quote the failure of the Council in its draft budget. It failed to make budgetary provision for the accession of Spain and Portugal to the Community on 1 January 1986. I should place it on record that my hon. Friend the Minister of State, Treasury was not occupying the presidency of any of the European Community councils at the time.
  In a sense, the councils are a collegiate body, and they completely failed to make provision for the entry of Spain and Portugal. The political problems and the terms and conditions for joining were negotiated and settled, but the 1986 budget, which the Parliament opposed, made no financial appropriations for the implementation of the decision to admit Spain and Portugal. Those matters have already been spoken about and, to use the jargon, the burdens are past. No doubt my right hon. Friend the Member for Taunton will criticise that jargon, but the term relates to European Community practices and policies and to the regional development funds. This was an aspect of the 1986 budget which the Parliament rejected and bitterly fought.
  The CAP worries all hon. Members, and the Council has constantly ducked the issue. First, it has failed to come to grips with avoiding surpluses. Secondly, it has not made provision for writing off what one would call bad stock, if one were engaged in normal business activities. Thirdly, it has made no provision for write-off, either physically or financially. We are constantly witnessing schizophrenia between Ministers of the member states which make up the various councils of the Community. It is between those who make policy decisions which incur expenditure and Finance Ministers who have to find the cash and make provision for paying bills. The European Parliament's Budgets Committee, and even the Parliament in full session, constantly try to force the Council to face those two conflicting realities.
  If an industrial undertaking were to follow the practices pursued by the Council of Ministers, that undertaking would soon be out of business, in Carey street or in the Old Bailey. My hon. Friend the Minister of State is striving to prevent the Community institutions from moving into any of these embarrassing positions. I pay tribute to his efforts in that regard. During one late sitting of the Budgets Committee, which perhaps would be better described as an early-morning sitting, he spoke to it on behalf of the Council and tried to persuade it to meet in trilogue discussion. Some critics may say that that is part of the jargon of our membership of the Community. It means to meet in discussion with the Council, the European Parliament and the Commission. Only by doing that did he think that consensus could be reached.
  Perhaps, when he is winding up, my hon. Friend will comment on how he sees the prospects for a successful outcome to such a trilogue. Will he also give the House his assessment of the way ahead? He is the acting President of ECOFIN and perhaps he can tell us what he is trying to achieve.
  Perhaps hon. Members are not aware of the way in which a Community budget evolves. That is hardly surprising, because the budget has no counterpart, either procedurally or constitutionally, in this House. We as MEPs have a role to play and a responsibility to bear in the development of a budget. The 1987 budget is referred to on the Order Paper, and MEPs have responsibility on the principle and detail of the budget. The European

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  Parliament shares that responsibility with the Council and without the agreement of both there cannot be a budget, spending commitments or payments.
  The House should note that the European Parliament has some significant powers through its budgetary control committee and through the court of auditors. It also has the power of discharge. All three are extremely valuable weapons with which to influence the decision-taking process on financial matters in the Community.
  Mr. Cash: Does my hon. Friend agree that there is a slight problem, in that a budgetary discipline is applied to the amount of money paid out? I think that Mr. Christopherson made that clear in July, before a House of Lords Committee. However, there is apparently no budgetary discipine for the amount of commitment. There is a serious problem related to the difference between the amount to which one is committed and the amount that one pays out. Will my hon. Friend comment on that?
  Mr. Normanton: I am grateful to my hon. Friend for making that point because, in a sense, the conflict between the Parliament and the Council centres on that point. The vice-president, Mr. Christopherson, is in the Commission responsible for the budget and has repeatedly made the point that my hon. Friend makes. I have already spoken about the schizophrenia in the Council of Ministers which makes policy decisions without attaching to them an evaluation of cost. The bills have to be picked up afterwards, but there is no link between policy making and financial provision.
  The 1987 budget is still being negotiated between the Council and the Budgets Committee, and between the Budgets Committee, the Parliament and the Parliament's spending committees. On 13 November, the European Parliament completed the first reading of the budgetary negotiating cycle. There is far more mileage or, for the benefit of my right hon. Friend the Member for Taunton, far more kilometrage to run before the 1987 budget is signed by the President of the European Parliament. There are many points of conflict, but one is the cost of financing additions to surpluses such as milk. Parliament voted for a cut in quotas. That will be received with great hostility in many quarters, including farmers in my constituency, but it is Agriculture Ministers who must grasp the nettle and make the decisions. Policies must carry a financial liability.
  Unless expenditure on agriculture and FEOGA is cut, there will be no money to spend in areas which can most effectively be managed on a European scale, such as energy, research, industrial strategies and the development of European technology to enable Europe to match Japan or the United States. Does my hon. Friend the Minister agree that the draft budget is completely out of balance with the economic requirements and priorities of a European industrial community? Does he agree that the alternative which faces the EC is to rejig the balance of the budget, which inevitably means cutting CAP expenditure, or a major increase in the contribution of member states above the 1·4 per cent. which has been mentioned? I ask those two questions and present no answers.
  I do not envy my hon. Friend the Minister his extremely difficult task. I and my hon. Friends who serve in the European Parliament wish my hon. Friend every success in the deployment of his political skill and expertise. He
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  will need it. This relatively short debate in no way reflects the importance of the subject. If the House divides, I shall oppose the amendment in the name of my right hon. Friend the Member for Taunton (Sir E. du Cann) and that in the name of the Leader of the Opposition with complete determination and enthusiasm.
  8.32 pm
  Mr. Eric Deakins: I did not agree with very much of what the hon. Member for Cheadle (Mr. Normanton) said, but he gave the game away towards the end of his speech when he said that an alternative was to consider increasing the 1·4 per cent. VAT limit. I am sure that he speaks for a great many Members of the European Assembly, and perhaps the majority of the Budgets Committee, the work of which he describes admirably, but I doubt whether he speaks for more than a handful of hon. Members, who have to justify the extra expenditure to our taxpayers.
  I do not want to concentrate on the document because, as the Minister said, several of the factors involved could change in the next few months in respect of 1987's draft budget and the outturn for 1986. I shall concentrate on what is wrong with the financing side of the Community—its financial procedures. I increasingly regard the catalogue of errors, supplementary budgets and court cases as a Whitehall—perhaps it should be Brussels—farce. We will go through it all again next year, and the European Court may be dragged in if the Council's budget for 1987, which will be settled this month or next, is unacceptable to the European Assembly and it decides to do what it did last year.
  The EEC's procedures are inadequate to deal with all financial matters because agriculture expenditure is open-ended. It is not axiomatic that such expenditure has to be open-minded. From 1947 to 1973, agriculture expenditure in Britain was kept within reasonable margins by Treasury control and various other mechanisms. We gave that up when we entered the EEC.
  The common agricultural policy system has many defects, but it is absurd because the budget is open-ended. It is even more absurd when one considers that the Council of Ministers recently decided that any excess agricultural expenditure in one year should be clawed back in subsequent years. It took no account of extra expenditure required by agricultural policies.
  Can anybody in their right mind imagine that, in 1987 or 1988, EEC Finance and Agriculture Ministers will agree to claw back excess expenditure? Of course they will not, but that is the principle to which the Council of Ministers has committed itself.
  We should bear in mind the pressures to increase expenditure on agriculture. As I said in an intervention, Greece, Denmark and West Germany, of all countries, are saying that we must be careful when talking about a cut in expenditure and reform of the CAP, as there are political and social considerations to bear in mind. They represent one quarter of the members of the Community. I doubt whether they represent a blocking minority, but that is a taste of what is to come. They have a lot of farmers and do not want expenditure to be cut if it will hurt their people.
  As the hon. Member for Cheadle said, expenditure is decided by spending Ministers, not by Finance Ministers. That is a complete reversal of the system employed by

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  nearly all national Governments and, as long as it continues, we shall never have radical reform of EEC spending.
  The financial guidelines were much trumpeted 18 months ago as the quid pro quo for agreeing the increase from 1 per cent. to 1·4 per cent. of the VAT limit. I was fairly sceptical about the impact that the guidelines would have at the time but, as a Minister in another place has observed, I was charitable enough to say that we must give them a chance to work. We have. Can anybody now be sanguine about the guidelines restraining CAP expenditure? One would have to be optimistic to believe that they will.
  The Government probably share my view in regard to my next worry, but I am not sure what, if anything, is being done. I refer to the fact that commitment appropriations on the non-obligatory side and on one part of the obligatory side bear no necessary relationship to payment appropriations. That has led to the so-called problem of the "cost of the past."
  That is not the end of it. We shall also get the cost of the past coming up in the future. I draw the attention of hon. Members to the fact that the cost of this problem in the future will increase. This year, the Assembly, in voting for the budget for this year and that for next year, has suggested further increases in non-obligatory expenditure. Leaving aside the principle of the increases, it is noteworthy that the increases in payment appropriation are different from the increases in commitment appropriation. Once again, we are building up further problems for the years ahead, if the Assembly has its way over the imbalance between commitment and payment appropriations in a particular financial year.
  My fifth criticism of the financial procedures of the EEC, typified by what we have heard from the Minister, is that the expenditure grows and little can be done to stop it. It is growing in accordance with, and in relation to, the increases being made available to it. Is it not astonishing that, in the first year of the 1·4 per cent. coming in, total expenditure for the year comes very near 1·4 per cent.?
  Mr. Cash: Is this not like a recent film, and are we not going back to the future?
  Mr. Deakins: I did not see the film, but I can understand the hon. Gentleman's sentiment.
  If the House were foolish enough at some time in the future—next year probably—to agree to the VAT limit being raised to 1·6 per cent., with effect from 1 January 1986, who can doubt the expenditure implications of such a rise in the own resources of the EEC? The EEC expenditure is encouraged to rise by the very fact that procedures are inadequate because last year, the year before and this year, we indulged in bailing out procedures. As the Minister has admitted, we shall have to indulge in that next year.
  We also have the intergovernmental agreements and supplementary budgets. Who can doubt that expenditure will not be contained by the budget or by the financial guidelines? Everyone knows that, whatever has been spent, or has been committed to be spent, the money will have to be found from somewhere. Even if it is not found legally as part of the budget, it will be done not within the framework of the European treaties but by means of intergovernmental advances and other such subterfuges. That is not a satisfactory state of affairs.
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  A sixth criticism of the financial procedures of the EEC, which has not been touched on, and on which the Minister might care to comment, is that the Assembly and the Council have for the past few years had different definitions of non-obligatory expenditure. I do not profess to know the basis of the differences, but there are differences, and this is highlighted in the Commission's public relations document on the budget and its differences and problems. It makes the point that there is a difference between the Assembly basis and the Council basis. If the Community cannot even agree on the base figure of such important items as non-obligatory expenditure, how on earth can we expect to get proper financial control?
  My last criticism also has not been touched on, and again I would welcome a comment from the Minister. The budget procedures, up to and including the conclusion of each year's budget for the following year, take no account of what are called agrimonetary changes. There is no mechanism in the financial procedures for bringing this into the calculations.
  There are two sorts of agrimonetary changes, and it is important to be clear on the differences between them, although they both have the same impact on the budget. The first, which we have seen this year, is the major realignment of exchange rates within the EMS. I asked the Minister a question only a few weeks ago. I asked whether, in future, he would
  "seek to require the EEC Commission to make estimates of the effects of EMS realignments on EEC budget costs and on a resources revenue".
  He replied:
  "I agree that the Commission should be asked to make such estimates, even though they must be very uncertain."—[Official Report, 23 October 1986; Vol. 102, c. 947.]
  I am grateful for that reply, but they are not so uncertain, because there is an amount in the supplementary budget, which has been mentioned in other answers, for the impact of some of these agrimonetary changes.
  As long ago as April this year, an article in the Financial Times from its Brussels correspondent said:
  "The recent realignment of the European currencies within the European Monetary System—is estimated to cost Ecu 380m in 1986 and Ecu 600m in 1987."
  That was almost at the time when the changes were taking place. How is it that a Brussels correspondent of a major newspaper can get a reasonably accurate assessment of the changes, when Her Majesty's Government, some months after the event, cannot give the House of Commons some idea of the impact of the agrimonetary changes?
  The EMS realignment was only part of the problem of agrimonetary changes. Every year that we have been in the EEC, and possibly more, we have had a variety of arrangements for rearranging the green rates for currency. This is a complex subject, on which I do not claim to be an expert, so I shall put this as simply as I can. Whatever prices are decided by Agriculture Ministers at the Agriculture Council each year for the coming agriculture price year they are not necessarily, and indeed in most cases are not, normally prices that will be received by farmers in their national currencies.
  The Government trumpeted the 1986 settlement as being another start on a major reform of the CAP. I quote from the Financial Times of 28 October, again from the Brussels correspondent, who said:

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  "The key to the farm price of the deal…was the devaluation of the 'green' currency rates of all the members except West Germany and the Netherlands. This move will soften the impact of the price freeze"—
  note those words—
  "by granting effective price rises for some products ranging from 3 per cent. in Britain and France to 5 per cent. in Italy".
  When the Agriculture Ministers are making price cuts across the board, and in particular on agriculture commodities as a result of green currency devaluations and revaluation, and altogether apart from EMS realignments, which is another factor, farmers in many countries are getting more than they should be according to the determination of Agriculture Ministers.
  The agrimonetary changes are being used, sometimes deliberately, to subvert the decisions of the Agriculture Ministers. What a crazy system. The agriculture system is appalling, but when Ministers, perhaps genuinely, have tried to modify its impact and reduce spending, the green currency exchange reduces the impact. If prices go up, farmers are encouraged to increase production rather than decrease it.
  On this, I have an important question to ask the Minister. In previous answers and statements, the Prime Minister and Ministers have said repeatedly that this year, and by implication in future years, there are certain exceptional circumstances which mean that the financial guidelines have to be exceeded. The major exceptional circumstance has been, and one understands this, the decline in the rate of the dollar-ecu relationship. However, exceptional circumstances, in the normal sense of the term, using the English language correctly, are circumstances for which one cannot be responsible. Now they are beginning to say in parliamentary answers that agrimonetary changes are exceptional circumstances. But agrimonetary changes are within the sphere of operation of the Commission and the Councils. They are brought about by decisions of Ministers. How on earth can they possibly be exceptional circumstances? However, they are not taken account of in the draft budgets. Now Ministers say that they will cause increased spending and that therefore these are exceptional circumstances.
  I quote from an answer from the Minister of State, Treasury, to me on 6 November 1986. He said:
  "at the October ECOFIN council…the Commission warned that, unless action is taken, actual expenditure"—for 1987—
  "is likely substantially to exceed the guideline figure. This assessment took a number of factors into account including a further fall in the value of the US dollar and recent agrimonetary changes…Whether any additional expenditure will involve a breach of budget discipline will depend on whether there were genuinely exceptional circumstances which made such expenditure necessary."—[Official Report, 6 November 1986; Vol. 103, c. 522–3.]
  It is clear from that—at least, it is clear to me, but I hope that the Minister will clear up this point if I am wrong and I shall certainly apologise to him—that agrimonetary changes are regarded now by Her Majesty's Government as exceptional circumstances that would allow something beyond the financial guidelines in relation to expenditure on agriculture.
  Mr. Spearing: My hon. Friend has unearthed a matter of potential importance. Does he agree that the only possible excuse for including in the formula the change in
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  agrimonetary rates would be if the circumstances in each of the countries concerned were exceptional and that that would have to be proved to legitimise this devise?
  Mr. Deakins: Yes. My point is that this is something about which I am in doubt and about which the House must be in doubt, since contradictory answers have been given by the Government. The issue is not clear and it needs to be clarified. However, it is only one of a number of financial procedures that cause me concern and that should cause the House concern. Until the financial procedures are put right the budget will not he put right, nor will the spending or the own resources be put right.
  8.52 pm
  Sir Anthony Meyer: Like the hon. Member for Walthamstow (Mr. Deakins) I, too, am gloomy about the common agricultural policy, although perhaps I am more genuine in wanting to see it improved.
  My contribution will be brief, although it will not be particularly welcome to anyone. My hon. Friend the Minister of State is carrying out his extremely difficult job very well. Europe is aglow with good will towards him for his skill, his patent honesty and his assiduity. However, the job is impossible. The pessimists are right—as, indeed, they usually are. Sooner or later, financial disaster looms for the European Community. It is helpless to avoid it because there is no way in which the decisions necessary to postpone, let alone avert, that disaster can be taken. The Single European Act was a step in the right direction but it was completely inadequate. Neither the machinery nor the will to take the necessary decisions exist even now.
  The current villains of the piece are the Germans who, faced with critical elections in a few months, dare not take any decision that is even slightly unpopular with their farmers. But when the German elections are over, there will be another Government facing an election, or a vote of confidence, or a financial crisis, which will make it impossible for them to take a decision. As, one after another, they exercise what my right hon. Friend the Member for Taunton (Sir E. du Cann) would call their sovereign right to refuse to accept what they particularly dislike, the only thing on which they can agree is to slap down the only institution in the Community which has anything sensible to offer—a superanational Commission.
  The British record is as bad as any. Since the days of Labour's botched renegotiation, through this Government's short-term—but oh how short-term!—achievements in getting the provision for a British refund written into the budget system to the present half-hearted and last-minute attempts to get a grip on the escalating cost of encouraging surplus production and then financing the storage or wasteful disposal of that surplus—provided always that we do not upset our own farmers too much, or do not push up the price of food to our consumers, or do not hand over any more power to the bureaucrats in Brussels, or do not weaken our national veto—it is a sorry tale of the country's long-term interests being subordinated to the real need to demonstrate to the Labour party how completely it failed to stand up for this country's interests, whether long-term or short-term, and to prove to a small group of malcontents, led by my right hon. Friend the Member for Taunton, that this Government, while firmly committed to the European Community, are as staunchly nationalis-

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  tic as any. Indeed, through our preposterous refusal to join the exchange rate mechanism of the European monetary system, when it comes to cutting off our own noses to spite our faces, we yield to no one.
  My right hon. Friend the Member for Taunton and his supporters have a bad case but some very good arguments. Their case is bad because they seek to weaken this country's involvement in the European Community. We have no choice but to remain in the European Community, for it is the only economic and, to an increasing extent, the only political base that is available to us. Unless we can make it work a great deal better than it is working now, it will be a disintegrating base—like badly laid concrete in an earthquake. However, my right hon. Friend and his supporters are quite right to point out that the surpluses that are being generated by the CAP, and the gigantic costs of storing or disposing of them and the damage that is thus being done to world trade, to our relations with the United States and to the hopes of the developing countries by disposing of them on the world market, will bring the whole edifice of the CAP, and in due course the Community itself, crashing to the ground.
  Furthermore, they are right—this may surprise some of them—when they question the real value of the Government's achievement in securing offsetting European Community expenditure in the United Kingdom, mainly through the European regional development fund, so as to reduce the United Kingdom's total net contribution to the European Community budget. They ask what sense there is in financing the construction of roads, bridges, schools and hospitals in our assisted areas with money that was contributed in the first place by the British taxpayer, sent to Brussels as part of our budget contribution and then sent back to us via the ERDF, having passed through a number of sticky hands on the way. They are quite right to query the logic of using the huge potential power of the world's largest trading bloc in order to build a bypass round a village in north Wales.
  As long as we go on like this—with some of my hon. Friends seeking every means to discredit British membership of the European Community, with the Opposition led by "the hon. Lady Mrs. Facing Both Ways" leaving us in the dark as to whether they want to stay in the European Community and yet demanding that Her Majesty's Government get more out of it, and with the Government contenting themselves with proving both lots spectacularly wrong but doing so by the shortest of short-term expedients—we shall get nowhere.
  The time has at last passed when the budgetary crisis in the European Community could have been dealt with usefully and relatively painlessly by using the huge potential wealth of a truly unified Common Market to finance industrial modernisation and expansion so that agriculture was relegated to a secondary role in European politics and funding.
  That chance was lost because member Governments—none more so than Her Majesty's Government—refused to contemplate either the radical removal of barriers which would have enabled the Common Market to emerge, or to accept the increase in the Community's budget which would have been necessary to create such an industrial investment and reconversion fund. They feared that any increase in the budget would be largely swallowed up by agriculture.
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  There will now have to be an increase in the budget and, instead of being largely swallowed up by agriculture, it will be completely swallowed up by agriculture. I fear it is now too late for reforms of the CAP to be carried through relatively painlessly. It is too late to avoid unacceptable damage to the legitimate expectations of our own farmers.
  The choice now facing us is a good deal less inviting than it was even a year ago. But we do still have a choice. We can either go on as we are and allow the CAP to burst, inflicting irreparable damage on the Community and leaving it as an empty shell providing its members with no real benefits, or we can tackle the problem of agricultural over-production now, which will mean paying a heavy price—a heavy price in terms of cash now and in terms of political concesssions—to those European Governments most of whom are more at the mercy of their farmers than we are.
  If we do that we can just retain some of the option of achieving a true common market by the elimination of obstacles to trade as Lord Cockfield has been urging so gallantly and so fruitlessly for so long. But, even so, we must face two extremely unpleasant certainties, as my hon. Friend the Member for Cheadle (Mr. Normanton) pointed out. The first is a substantial increase in our net contribution to the EC budget. There is now no getting away from that. The second is a dose of medicine for our farmers very much nastier than even the most pessimistic of them have been expecting.
  That is the choice facing the Government. I do not envy them. But I am at least relieved that it is they, not the professional malcontents on the Conservative Benches or the short-term opportunists on the Opposition Benches, who will have to make the choice.
  9 pm
  Dr. Norman A. Godman: One need not be a professonal malcontent to express dismay at developments within the European Community and vis-a-vis the budget. I have a great deal of sympathy for the concern expressed by that dark prince of malcontents, the right hon. Member for Taunton (Sir Edward du Cann), especially when he talks of the deep unhappiness of consumers and producers alike.
  Two industries are deeply affected by budget constraints in my constituency. One is shipbuilding and marine engineering. One must look hard through the huge collection of documents to see anything that is at all sympathetic to the United Kingdom shipbuilding industry. When I talk about the shipbuilding industry I am also referring to the important marine engineering industry, or rather, the vestiges of that industry that remain.
  The other industry, again of crucial importance to my constituency, and, indeed, to the Scottish food and drink industry, is cane sugar refining. Again, one must look hard and long to find anything that is at all sympathetic to that traditional industry.
  The draft proposal for a Council directive on aid to shipbuilding—document COM (86) 531 final/2 dated 17 October—says:
  "it is therefore proposed to authorise a level of production aid up to the level of a common maximum ceiling, based on compensation for the cost disadvantage of the most efficient European yards compared to the price of the most competitive Far Eastern price leaders in the categories of

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  ships for which the European yards are relatively more competitive. All forms of production aid, both direct and indirect, will be included in the calculation of the ceiling."
  That is poppycock.
  A report in that august journal, the Greenock Telegraph, on Friday 21 November 1986 said:
  "Scott Lithgow"—
  a shipyard in my constituency known to some right hon. and hon. Members—
  "were secretly excluded in 1984 from receiving European subsidies for shipbuilding in the foreseeable future."
  I had examined those documents and nowhere is that statement contradicted. That means, as the article goes on to say:
  "It is expected that aid of up to 26 per cent. will be agreed on shipbuilding and conversion contracts accepted on a loss-making basis by European yards.
  These are aimed at helping to bridge the gap between Europe and the Japanese, who can build at half the cost, and Koreans who build at a third.
  Scott Lithgow, who have just landed a £8 million contract to lengthen the Atlantic Conveyor"—
  the replacement vessel for the one sunk so tragically in the Falklands campaign—
  "are thus at a 26 per cent. cost disadvantage to other British and continental yards."
  Where then is the assistance that one should be able to expect from the European Community, and where are the budget provisions for this important industry? It is a scandal and I sincerely hope that the Secretary of State for Trade and Industry will defend the interests of Britain's shipyards and Britain's marine engineering industry. To make a constituency point, which I try to avoid doing, Scott Lithgow is now one of the best yards in western Europe, just as the Clark-Kincaid of Greenock is one of the finest marine engineering builders in Europe.
  Mr. Cash: With reference to Scott Lithgow and any other industrial or commerical enterprise as regards the legislative and industrial policies of the EC, does the hon. Gentleman agree that it is up to the companies, the industries and trade associations concerned to make the most of the EC by arguing effectively—which, regrettably, often appears not to be the case?
  Dr. Godman: I agree with the hon. Gentleman, but I would say that it is essential for the Government to argue a strong case for British shipbuilding industry interests. The Government have signally failed to do that on the proposal for a new directive on shipbuilding aid. The House should debate such a directive because the existing one ceases on 31 December 1986 and we shall be saddled with a new directive, I suspect, on the basis of no discussions whatever in the House.
  I shall turn quickly to the problems of the cane sugar refining industry. Since the accession of the United Kingdom to the EC, cane refining has suffered badly under the European Commission's sugar regime, which is dominated by beet interests. In recent years cane sugar capacity has been severely reduced and four out of the United Kingdom's six refineries have been closed. Since 1977, 4,200 jobs have disappeared.
  Under the EC sugar regime, cane sugar is allowed a much smaller refining margin than beet which means, for example, that British Sugar plc can always win business from the cane industry. It is in the public interest that the United Kingdom cane sugar refining industry survives. It
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  will enable the United Kingdom and the EC to honour their obligations to the African, Caribbean and Pacific sugar-producing countries.
  The House passed two resolutions, one in November 1974 under the Labour Government and a similar one in December 1985, without any Divisions about the need to protect those developing nations and the United Kingdom cane sugar refining industry.
  If the cane sugar refining industry survives, we shall secure the jobs of those in the cane industry, which is important for my constituency and Scotland. The most effective way to maintain United Kingdom cane refining would be a merger between Tate and Lyle and the British Sugar Corporation. It would remove the risks to cane sugar that would arise from the much stronger position of British Sugar. It would make further investment possible and bring about economies in production and distribution that would enable cane to be cost-effective under the beet-dominated EEC sugar regime. Finally, it would realise the advantages recognised by a Conservative Minister of Agriculture, Fisheries and Food in 1973, when he advocated a unified beet and cane sugar industry in the United Kingdom. Mr. Godber, as he then was, said:
  "It is essential to have an efficient and viable refining industry in this country ready to take, and committed to take, the Commonwealth raw cane sugar available to it.
  My own view, however, is that that purpose could best be served by having an integrated refining industry which has both port cane refineries and inland beet factories at its disposal."—[Official Report, 24 October 1973; Vol. 861, c. 1302.]
  I agree entirely with that Conservative Minister of Agriculture, Fisheries and Food.
  Such a move would also give the United Kingdom sugar industry a unified voice in Brussels, which we do not have now; hence the powerlessness of the cane industry in Brussels. A merger between Tate and Lyle and the corporation would have no adverse effect on competition. The real competition comes from the threat of imports from other European Community nations, and that will continue to be the position. There is more than enough surplus quota sugar available on the continent to satisfy the entire United Kingdom demand. There is over 1·7 million tonnes just across the Channel in France, and most of that sugar is to be found stored in Picardy and the Somme valley.
  I turn to the dangers that are facing our cane sugar refining industry from an Italian company that is being encouraged from Brussels. I refer to the Italian company of Ferruzzi, and I must offer a serious warning about its bid for British Sugar. If it were successful, it would mean the rapid demise of the cane sugar refining industry in Britain. Under Ferruzzi, the incentive to wipe out the cane sugar refining industry would be even greater than it is now, and the ability to do so would be increased.
  The incentive would be greater because Ferruzzi would gain a valuable means of access to our market. With the disappearance of Tate and Lyle and the demise of the cane sugar refining industry, Ferruzzi would be able to sell French surplus sugar into the United Kingdom through British Sugar's distribution network. That would be dangerous for Britain's cane sugar industry. Ferruzzi could use the French surplus to take business away from what was left of the cane industry.
  Ferruzzi, with some encouragement from Brussels, has become the largest sugar producer in the EEC. With the control of British Sugar it would have 25 per cent. of the

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  EEC's sugar market. Unied Kingdom prices for the industrial and retail consumer would probably be higher under Ferruzzi than at present or under a British Sugar Corporation-Tate and Lyle merger. Any suggestion that benefits would accrue to the British farmer from Ferruzzi because of its stronger voice in Brussels are likely to be outweighed by the disadvantages from the conflict between Ferruzzi's French, United Kingdom and Italian interests.
  I make no apologies for saying that in terms of shipbuilding and the cane sugar refining industry, the EEC has let British interests down badly. That does not make me a professional malcontent or a sympathiser with them, but a tough critic of the European Community. I shall continue in that role until my constituents in the shipbuilding and the cane sugar refining industries are given a fair deal. God knows they are not getting it now.
  9.15 pm
  Mr. Teddy Taylor: This debate is pretty useless because whatever we say or agree tonight will not have the slightest effect on the EEC's spending or on the simple fact that it is overspending it's legal maximum, which was determined by agreement of the Council of Ministers. Despite that, the debate has been worth while just to hear the speech of my hon. Friend the Member for Clwyd, North-West (Sir A. Meyer). I hope that all hon. Members who were not here will read his speech and learn what was behind it.
  I do not wish to spoil my hon. Friend's speech by trying to paraphrase his remarks and possibly misinterpret them, His speech was most honest and despairing. It was made by someone who had hoped for great things from the Community and who was regarded in the House as a great enthusiast for the Common Market. My hon. Friend said that, sadly, the Common Market appeared to be heading for disaster and that the constitution of the EEC and of the Council of Ministers was such that difficult decisions simply could not be taken. In those circumstances, it was honest of him to express his fears for something that he had regarded with great hope and expectation. I do not criticise him for that in any way, despite the remarks he made about the little group to which I belong.
  The debate was also worth while because we heard at last the Liberal party's solution to agricultural problems. The hon. Member for Inverness, Nairn and Lochaber (Sir R. Johnston) said that he and his party would support the so-called European Parliament in the proposal for a war chest. The war chest is a substantial additional sum of several hundred thousand million pounds which will be used to sell off the mountains more cheap by than they are sold at present, thereby somehow to get rid of them.
  Last week, we heard a report of the sale of 200,000 tonnes of beef to Brazil, at 12p a pound, which will, of course, return to Britain in the form of corned beef. Is it the policy of the Liberal party that extra hundreds of millions of pounds should suddenly be made available to offer the beef to Brazil at an even lower price?
  The crucial matter is that we are discussing an entirely bogus budget. The Government are well aware that there is not the slightest chance of the EEC budget being kept within the legal maximum which was declared in the budget. The Commission has clearly said, as the Prime Minister reported only last week, that there was not the slightest chance, on present policies, of those figures being adhered to.
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  The Minister has a duty to say something more about the specific assurances which were given to the House to persuade hon. Members to vote for the 40 per cent. increase in Common Market funding. The Minister must recall that we were told that there was a binding agreement whereby Community spending would be subject to strict restraint. We were specifically told that farm spending would increase only in terms of the natural increase of the own resources base—about 3 or 4 per cent. a year. We were also told that a safeguard existed to ensure that if, by any mistake, the EEC budget was overspent one year we would get the money back in future years. We were also told that the money would last for several years.
  This is the first year of strict budgetary control, but within a few weeks of the beginning of the year the Ministers met and agreed that it would be an exceptional year. We are right up to the maximum of 40 per cent. which was meant to last for several years. We know that 1987 will be another exceptional year, and that the year after that will also be exceptional. I wish that my hon. Friend the Minister would accept the plain fact that Common Market spending is wholly out of control and that there is nothing, on present policies, that the Government can do about it. We want to know what can be done about it in future.
  The excuse has been given that, sadly, the dollar fell in value, so the cost of the CAP increased enormously. I hope that my hon. Friend the Minister will think about the consequences of currencies going up and down. Our understanding is that if the value of a currency falls, prices tend to rise, and vice versa. The prices of foodstuffs, such as bananas and peppers, which have nothing to do with the Common Market, did not fall when the dollar fell. Prices change in accordance with supply and demand, and the price of Common Market foodstuffs plunged simply because we are loading more and more on to the world market.
  The Common Market is now spending more than £100 million every week on storing, dumping or destroying foodstuffs. According to the Common Market's own consumer unit, the average British family has to spend £13 a week because of the cost of the CAP. Yet only last week, the Government agreed to a devaluation of the green pound, which will increase the price of food in Britain by 5·5 per cent. All the time, appalling damage has been done to the Third world. The Common Market appears to care nothing about that. Damage, distress and starvation are being inflicted on the Third world because, by our crazy dumping, we are depriving it of a fair price for its food.
  Mr. Cash: Having read last year's report of the Court of Auditors does my hon. Friend agree that it was extremely critical of the way in which the Commission distributed food to people in the Third world? Should not that situation also be remedied?
  Mr. Taylor: I absolutely agree. In addition to the way in which food aid is wasted, we must consider what we are doing to those countries which cannot pay their international debts or afford to buy British machinery. We are killing the economies of the poorest countries in the world by dumping vast surpluses on the world market, so forcing prices down to nothing.
  It would not be so bad if the budget had reached the legal limit and been kept to it. But we all know that devices are used and that there is cheating in order to get above

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  the expenditure level. We had the unpopular co-responsibility levy, and people discussed whether it would help or hinder agriculture. It was meant to do neither. The aim was simply to get more money in and to increase spending. It went up by £400 million. There was also advance payment of our contributions, which served only to help overspending.
  Britain's rebates have been postponed, which has also helped to increase spending. Moreover, foodstuffs in intervention are now not being paid for on time. This week, I was told by the Intervention Board that payments for butter in intevention are now being delayed by eight months. Member states are also now having to pay 25 per cent. of the cost of storing foodstuffs in intevention. Every one of those measures enables the Common Market to spend a bit more. Thus, we are now talking about a budget that is well in excess of the legal maximum.
  Why have things gone so far wrong since even July of this year? Then, my hon. Friend the Minister said:
  "We see no case for the provision of any additional funds."—[Official Report, 21 July 1986; Vol. 102, c. 68.]
  Again, on 21 July, we were told that there would be no "carrying forward" of expenditure from 1986 to 1987. My hon. Friend the Minister should ask himself what he intends to do about the increase in spending. The House was assured that 1·4 per cent. was the absolute limit, and that it was legally binding. But we all know that the Common Market will spend much more than that. How will the difference be met? Are we not heading for an explosion in the CAP that could have devastating effects on British agriculture?
  It would not be so bad if there was the slightest sign of change, or the slightest possibility of realistic CAP reform. Instead of reform, the ludicrous, old, helpless idea of set-aside is being floated. Instead of paying farmers for producing food and then dumping it, we are paying farmers for producing nothing. There is a real chance that it will be taken up by the Common Market.
  The Opposition appear to think that it is a grand idea. Perhaps they would like to extend it to the motor car industry and all the redundant industries in Britain. We know that the Liberal party supports that idea. It always supports spending more money from the Common Market, irrespective of how that money is spent. Before my hon. Friend the Minister jumps at the ludicrous idea of set aside, he should consider what has happened in the United States and in this country. Of course, it might buy some time—perhaps two years. If there is a set-aside of 20 per cent., and we pay out a fortune, Common Market policemen will have to be employed to check that farmers are not growing where they should not be growing. If we did that even on 20 per cent. of our land, the Minister should accept the advice of the chemical industry, the National Farmers Union and others who have said that yields are increasing all the time. Indeed, on the continent yields are also increasing. Even if we were to pay off, sterilise or shoot 20 per cent. of the farmers, and all that goes with them, we would find that—[Interruption]. I was referring to sterilising the land, not the farmers. The latter is a different thing altogether.
  Before the Minister accepts the proposal as a possible solution, will he consider what has happened in the United States and accept the common-sense argument that
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  argricultural yields are soaring all the time? Even if 20 per cent. were cut out, within two or three years we would be back to square one, with surpluses mounting as before.
  In much the same way, if the Minister spends billions of pounds on a war chest, as urged by the Liberal party, on selling food to Brazil even more cheaply than the 12p per pound at which we sold it beef this year, again the mountains will rise substantially.
  I want to make one suggestion, which I believe is the only hope for containing Common Market expenditure, for improving the Common Market, and for British agriculture. Instead of fiddling the figures with our European friends—I do not mean this unkindly; it happens under all Governments—instead of trying to find devices to get through legal limits and instead of bringing out bogus schemes to control expenditure—but which do not—the Government should accept the simple proposition of repatriating agriculture from the Common Market. In other words, every country should be left to deal with its own agricultural problems.
  If the Government would decide their own future instead of looking over their shoulder to see if one country is getting more than another or depending on what election is taking place in a particular place, they might find that to be one way of containing expenditure. In Britain, it is one way of safeguarding agriculture, instead of facing the dramatic crisis that will come with overspending and breaking through budgets. There is no surplus of food production in Britain. There is a surplus to some degree in cereals and dairy products, but not an overall agricultural surplus. We could offer our farmers not a future of expansion, but a deficiency payment system based on standard quantities related to national needs. We could then safeguard agriculture from the disaster that lies ahead.
  Such a proposal would improve, not wreck, the Common Market. It would take away from the Common Market the one policy that eats up 70 per cent. of spending and which, as my hon. Friend the Minister knows, gives the Common Market a bad name because of the repulsive policy of dumping at crazy prices.
  That is the only answer to what my hon. Friend the Member for Clwyd, North-West rightly described as an insoluble problem. Those who think that Common Market Ministers can sit around a table and solve the problems of the CAP are living in cloud cuckoo land. That happened with milk quotas. They were meant to improve matters, but sadly, all that happened was that we paid out money to farmers to go out of milk production and they moved into other areas of production, such as beef, where there was already a surplus.
  I hope that the Government will at least consider the possibility of repatriation of agriculture from the EEC as a possible solution to the problem. The Minister will find that the agricultural community will regard this not as the answer to all its problems—because it will bring it under Treasury discipline again—but as something which could avoid an agricultural catastrophe. The Minister will find that some of the most enthusiastic supporters of the Common Market will say, "If only it could get rid of the CAP, the Common market might do some sensible things."
  We are discussing a nonsense budget that the Government know they have not the slightest chance of keeping. They must accept that spending is wholly out of control and that the budget mechanism has been a disaster

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  and has achieved absolutely nothing. I hope that, in the circumstances, the Government will examine real, radical decisions, not other nonsense such as putting in £5 billion or £6 billion in the hope that the problem will disappear. The real solution is to repatriate agriculture and let the Common Market take other measures that it considers to be more sensible.
  9.30 pm
  Mr. William Cash: A few weeks ago, as a member of the Select Committee on European Legislation, I had the honour and pleasure of cross-examining my hon. Friend the Minister. These documents—3 kg of them—have been placed before the House in pursuance of a recommendation for debate by the Select Committee. It might be appropriate for me to comment on the implications of these documents.
  I speak as one who takes a constructive and pragmatic view of the European Community. In no sense am I anti-European. Since I have been a Member of the House, I have made a number of points in debates, questions and at other times which I hope have amply demonstrated that I believe that the European Community is a constructive framework within which we can achieve a great deal for this country and the rest of the world.
  A Treasury memorandum about the policy implications of the documents stated that there were "none at this stage." I was left wondering precisely at what stage the policy implications are likely to appear.
  I have heard much this evening about creative accounting. The creative accounting of the kind to be seen in the Commission's document makes genetic engineering look like child's play. Above all else, we must try to place some kind of segmentation limit on the European budget as it develops. An independent group of experts recently considered ways and means of constraining the overall apparently limitless European Community budget. That group recommended that we should have a form of segmentation whereby the weak parts of the budget—the social fund, the development fund, and so on—should be allowed to expand but the other parts of the budget, particularly agriculture, which has now hit 62 per cent., should be restrained within an overall box. That segmentation policy should be pursued.
  I should like to hear what my hon. Friend the Minister has to say about the experts' report. On 30 October, when the Committee had the privilege of having him appear before it, he was cross-examined on that point. He said that, as we move to the end of the year, the independent experts' report will be considered by Treasury and that we are likely to have some guidance on the Government's reaction to it. The hon. Member for Thurrock (Dr. McDonald) asked a puzzling question about the control of public expenditure. It seems extraordinary that the Labour party, whose lack of control over public expenditure is notorious, should be so articulate when seeking to control public expenditure in the European Community. I hope that the House will take note of the Labour party's grave inconsistency.
  I am concerned about two main sectors—manufacturing and farming. There are farmers in my constituency who are deeply worried about the CAP. There is no doubt that many would like it to be reformed. They regard it as a policy that creates great uncertainty for them. Recently, it was proposed that in the dairy sector there should be a reduction of as much as 6 per cent. in the quota. The
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  differences between what goes on in other countries and what happens in this country—the same will apply to the set aside policy—must be handled carefully by Agriculture Ministers.
  Dr. Godman: Reform of the CAP should not be seen as an impossible task. The common fisheries policy was no less controversial, although of less significance than the CAP. By and large, that issue has been resolved to the satisfaction of the overwhelming majority of fish producers in the Community.
  Mr. Cash: It is possible to negotiate within the existing framework of the common agricultural policy a policy that will fairly represent the interests of British farmers. I fear that the set-aside policy—I am thinking of the Mediterranean programme and similar programmes—will be used to provide what is effectively a social wage for other farmers in the Community at the expense of ours. I hope that my right hon. Friend the Minister of State, Ministry of Agriculture, Fisheries and Food will ensure that, when the set aside policy is brought in, British farmers will get a fair slice of what is going on. It has become apparent to farmers in my constituency that they have been given less than a reasonable and fair deal in respect of dairy quotas and other aspects of the CAP.
  I congratulate my right hon. Friend on his amendment to the Agriculture Bill, which has provided for grants to farmers to enable them to become involved in alternative production. As one who is in favour of a constructive European policy, I urge that the set-aside system should be combined with the grant aid system so as to ensure that the land is not regarded as of no value and as not to be used in any way but is used to enhance certain activities, for example, recreation and fishing.
  There is no doubt that the Court of Auditors has been deeply critical of the way in which the European Community operates. It is a pity that the court's report is not taken more seriously. If the European Community is to be put into some shape, even with all the difficulties ahead of us, my hon. Friend the Minister of State, Treasury, must follow up the advice he gave the Select Committee on European Legislation. He said:
  "it is essentially an issue to which the Court of Auditors should address itself. As the Committee will recall we have a regular debate in the House on the Court of Auditors' report where they are specifically commmenting on Commission work."
  I urge my hon. Friend to ensure that the Court of Auditors' report is made available to the House in good time so that we can examine it and build on the useful criticisms that it continually makes of the workings of the European Community.
  9.39 pm
  Mr. George Robertson: In this short debate we are considering nine documents, the sight of which is positively fearsome. The nine documents are being dealt with by the European Scrutiny Committee in a way that is almost completely unsatisfactory. The documents have nine separate reports attached to them. Indeed, the Minister's interrogation cannot even be published as a report because his evidence is not a document as such. My hon. Friend the Member for Newham, South (Mr. Spearing), who chairs the Committee, has said that it has unanimously asked for the terms of reference to be changed so that coherent reports can be made on the sort

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  of documents being considered. There have been no objections of any type or from any quarter but there has still been no response to that proposal. That matter deserves urgent consideration so that the House can more properly consider the important matters we are talking about tonight.
  These debates are, of course, repeat performances. Sadly, we have all been here too often before. They would be hilarious if they were not so tragic in their effect. The hon. Member for Harrow, East (Mr. Dykes) who has left the Chamber, made a contribution to the work of the Select Committee on European Legislation. He said:
  "Do you not think, Minister of State, that we are getting a little obsessive about EEC budgetary discipline control (although it is desirable and necessary) when you compare it with the relative indiscipline which applies to national budget discipline, including our own country?"
  That is a seductive argument. There is an attractive point hidden deep within that.
  Will future generations look back on these debates and the squabbling over 1 billion ecu here and 500,000 ecu there and condemn us for the apparent petty-mindedness we display on these occasions? Will they, enjoying the marvellous benefits of a barrier-free integrated market of 250 million people, think in some wonderment of these debates? Will they, revelling in the fruits of massive research projects in the highest of technology throughout the Community, reaping the rewards of a co-ordinated energy plan and looking in wonder at the pearls bestowed by appropriate regional and social fund programmes, think us mean-minded in the extreme and nit-picking to be so fastidious and spend all our time and effort looking with such painful thoroughness at these accounts? Of course, the truth is that, if those benefits were there to be enjoyed, that might be an accurate view to express. When it is only the costs that are to be the burden of future generations of Europeans, they will thank us for taking the time and effort to highlight this Alice in Wonderland comedy and expose it for what it really is.
  On 10 September The Times said:
  "Mrs. Thatcher has vowed to make budget discipline a hallmark of Britain's handling of EEC finances during its six month presidency."
  The job of making budget discipline a hallmark lies on the shoulders of the Minister of State, Treasury. In August of this year the Financial Times said he is
  "A patient and courteous man with (so it is said) an impressive grasp of financial detail even at 3 o'clock in the morning."
  Sometimes we get close to that in these debates, but so far we have not had an EEC budget debate at 3 o'clock in the morning. Perhaps we would have to do so in order to see that courteous and able man display the mastery of figures that he all too clearly does not have when we have debates earlier in the day.
  This courteous and honourable man spoke in a broadcast direct from Brussels—at 8 o'clock in the morning—after negotiating the 1986 budget. The House had sweated through an evening's debate on the budget which, thinking to escape that punishment, he had left to the Economic Secretary. To the astonishment of those of us who had sat through the debate, we were told from Brussels that the 1986 budget settlement was "a victory for common sense". Those are the words of a conjuror, not an accountant.
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  The Government took the European Parliament to court because it had approved a budget 1,102 million ecu over the Council's 1985 budget. They went to all that time, trouble and, no doubt, enormous expense and won the court case, only to shell out an extra 3,457 million ecu the very next day in the budget settlement. Replacing a 1 billion ecu deficit with an overspend three and a half times the size is some victory for common sense. It should be enough to gain the Financial Secretary a place in the Magic Circle.
  The action in the European Court was a charade, a synthetic crisis blown up to cover the incompetence of the Council of Ministers. The hon. Member for Cheadle (Mr. Normanton) usually lauds the European Parliament and the European Community, but as a member of the Budgets Committee of the European Parliament he blew the gaff in a remarkable speech today. The fault in that crisis, which was developed and then taken to the European Court, lay within the Council of Ministers. It was a worthless charade—a crude attempt to siphon off people's proper indignation at the utter collapse of budget discipline into an accusation against the European Parliament and European parliamentarians.
  There is better yet to come. Leaving aside the convolutions of the 1986 budget and its death throes, the pantomime of the 1987 budget is still to come. The ink was scarcely dry on the 1986 budget—that victory for common sense—when a deficit was discovered. It has been passed off today as trivial and a matter of no consequence, a mere shortfall in revenue. That is Eurospeak for a cash shortage of 776 million ecu. The Minister coined a new expression today, referring to the deficit as 776 mecu to make it sound even less, but it actually means £500 million. That is more than the Government are being asked to provide to finance the teachers' pay settlement, but it is wafted away in the guise of 776 mecu, instantly eliminating the entire budget deficit.
  Through the magic of the market, that deficit is then called a "negative reserve". It is a standing joke that this country does not have terrible debates about the budget deficit as the Americans do, because we do not call it a budget deficit—we call it the public sector borrowing requirement. The hon. Member for Southend, East (Mr. Taylor), I believe, once said that most people probably thought that the PSBR was the parcel service of British Rail. By such convolutions, we avoid the problem. The European Community has what the rest of us would call a debt, an overdraft or a shortage of cash, which it promptly calls a negative reserve and puts on to next year's budget.
  The budget, which was the victory for common sense, is now in the past, apart from the £500 million debt problem. What a legacy, and what a commentary on the so-called budget discipline, leaving behind 926 million ecu above the agriculture guidelines, and, of course, getting worse every day. Some 63 per cent. of the whole Community budget was devoted to agriculture.
  The 1986 budget was almost the good news, but for no other reason than that it would be better than the 1987 budget. The 1987 budget—we are not even in 1987—is bust already. The President of the Commission, Jacques Delors, now openly says that it will be £2 billion—not mecu, ecu or anything else, but pounds—short of what is necessary and what is available on the own resources of the Community, and that by the middle of 1987, if the Minister survives that long—survivability is not long in

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  that job—he will be back again with his begging bowl for another intergovernmental agreement, a non-reimburseable advance or a reimburseable advance, all feeble disguises for more cash and fewer goods.
  The Minister even dared to wander on to the subject of the famous IGAs, another euphemism for yet more cash, but we can take the prediction that there is no possibility of an IGA next year with exactly the same pinch of salt as we have taken every other guarantee on that matter from any one of his predecessors.
  The Minister says that there is now 665 million ecu of headroom. That is what he told the Select Committee on European Legislation. But since the Committee's meeting, the European Parliament has managed to use its margin, which it always knew it would use in any event, and has reduced the so-called headroom even more. On top of that headroom, the marvellous £400 million or so of headroom that is apparently there before we hit the ceiling, we have 776 million ecu of revenue shortfall. That is another £500 million that has to be found from last year's budget. Again, in an offhand way the Minister says that, because the dollar-ecu rate is still being misjudged, another 750 million ecu, another £500 million extra, will have to be found this year on top of all that, to fund the mistakes in the accountancy.
  We have all that—we are in crisis already—and what will we get for it? Overseas aid has been cut substantially—£138 million has been cut from the Commission's proposal. There are cuts in energy, research, industry and transport budgets. The regional and social funds will not even rise by the rate of inflation in the Community. There will be more of the cost of the past and nothing has been set aside for the cost of implementing the Single European Act and the commitments in that legislation that we were told were so important.
  All that is being done to fund the uneatable, the unsaleable, the unusable, the untenable, and, of course the wholly unacceptable surpluses. Nothing is being done about them. We are also told in some of the newspaper articles from which we derive most of our information that there might be a delay in the British rebate being considered. Will the Minister tell us whether that is true? We are also told that the President of the Commission is now considering a new system for borrowing on the world markets to destock the butter and the grain mountains. Can the Minister enlighten us on how that new foreign flotation of the ecu will take place? Or will the same geniuses who are selling British Gas to the British people who own it in the first place be in charge now of selling the uneatable surpluses to the Third world? We wait pregnantly to find out the answer on that count. It is a lamentable farce. Hon. Members on both sides of the House have underlined only too vividly the disasters of the common agricultural policy, which has brought this great Community to the borders of ruin in that way.
  If the documents and these two budgets are to be paraded as the genuine hallmark of what the Prime Minister sees as budget discipline, then no wonder there is trouble. The debate has highlighted the hallucination that is financial common sense in the European Community That is not a condemnation of the Community but a sickening condemnation of the political leaders who know the scale of the challenge before our continent and who know with startling and vivid clarity what is preventing them from getting down to dealing with it. So long as successive Ministers in this House and the
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  rest of Europe continue to chicken out from dealing with the blindingly self-destructive farm policy, the only thing ahead for the European Community is disaster.
  In this debate we see the same picture as before, and all the sycophantic whitewashing of the Prime Minister's so-called courage in taking on what she has never dared touch before will not convince anyone. Only the House can stop this madness and our amendment is a moderate and minimum way in which it can be done. I commend it to the House.
  9.56 pm
  Mr Brooke: This has been an admirable debate. The number of hon. Members present for the debate has been spoken about and I am delighted to see the hon. Member for Knowsley, North (Mr. Howarth). The hon. Member for Thurrock (Dr. McDonald) was a little casual in her disclaimer about the words in the Opposition amendment. She implied that because it contained a reference to payment appropriations everyone would understand what she meant, the implication being that payment appropriations for anything other than non-obligatory expenditure were somehow not payment appropriations. I shall remember that for future debates.
  The hon. Lady talked about the 776 mecu shortfall, and for the purposes of brevity I shall continue to use the term "mecu". She also spoke about the serious implications that that might have in 1987. When we debated this matter in the Council on 8 and 9 September my hon. Friend the Economic Secretary argued on behalf of the United Kingdom for the budgetisation of the revenue shortfall of 776 mecu. It is a matter to which we shall return when we meet in Brussels on Wednesday at which time the Council will have other matters to put to us.
  The hon. Member for Newham, South (Mr. Spearing) put a question, in a sense via his hon. Friend the Member for Thurrock, about the 1·4 per cent. I shall answer at a little length to make sure that I clarify matters. Whether the 1986 budget is strictly in balance and, if it is not, whether it is illegal, was implicit in the hon. Gentleman's appropriate question. The budget adopted is in balance. The predicted revenue deficit has not been budgetised, at least not until now.
  Mr. George Robertson: It will sound much better at 3 o'clock in the morning.
  Mr. Brooke: It will read terribly well. To the extent that the necessary offsetting savings are not found this year there will be an end of year deficit to be carried forward. The financial regulation makes clear that the carrying forward of a surplus or deficit from one year to the next is normal budgetary procedure. There is no question of illegality. A usual procedure would be for the Commission to bring a deficit to account in a preliminary draft amending budget, in this instance in the summer of 1987. The Council will discuss this matter again at Second Reading on the basis of revised and updated Commission figures. I shall carry the matter forward in the context of 1987 because it has obviously informed the debate.
  The Commission took into account the prospective revenue deficiency in 1986 when drawing up the preliminary draft budget for 1987. The main effects on the 1987 budget are the likelihood, which must be even greater now, given the upward revision of the Commission's revenue deficit in 1986, of a substantial deficit being

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  carried forward from 1986, revised calculations for the United Kingdom's abatement in respect of the VAT adjustment which we paid on 1 August, and the proposed change in the 1986 VAT assiette. There is no question of expenditure in the draft 1987 budget exceeding that allowed under the 1·4 per cent. VAT ceiling. If the funds are not available, they cannot be spent and expenditure over the VAT ceiling would have to be cancelled or deferred.
  Mr. Deakins: The hon. Gentleman has raised an important point of principle, which I had not appreciated, which is that deficits in one year can be carried forward to the next. Might that be one way in which weaker spirits in the Community might want to postpone resolution of the financial problem—by having a bigger and bigger deficit each year and carrying the deficit forward to the next year?
  Mr. Brooke: We are not talking about something new. There have been budget deficits and surpluses in previous years. It goes without saying that those who might be described as stronger brethren in the Council would be anxious to prevent what the hon. Gentleman describes occurring.
  The hon. Member for Thurrock referred to the effect of the 0·96 dollar/ecu rate and quoted freely, as did the hon. Member for Hamilton (Mr. Robertson), from The Times, which I thought was not acceptable reading on the Opposition Front Bench. I listened to everything that they said. In regard to what was discussed in the ECOFIN Council on 17 October, the hon. Lady said that there was no likelihood of anything like that happening in the Community in the near future, but the seriousness of the matter indicated by the 0·96 rate is having a powerful effect on everybody concerned.
  The ECOFIN to which the hon. Lady referred was the first that anybody can remember to which the agriculture Commissioner, the budget Commissioner and the President of the Commission all came to discuss the issue with the Council. When I attended a cross-examination by the Scrutiny Committee on 30 October, I said that I thought that there was a distinct movement in the European Parliament on this issue. That view was confirmed by the votes on the European Parliament on agriculture issues on 13 November.
  In view of the stance taken by the hon. Member for Thurrock, I am slightly surprised that she seemed to forget price fixings under the CAP which were taken by the Labour Government. The Government have consistently advocated effective reform of the CAP to restrain its claims on the limited budgetary resources available to the Community and to reduce the economic waste involved in stockpiling surplus production. Effective reform is likely to involve several elements, and more realistic support prices and limiting the open-ended nature of price guarantees must play an important part. We have recognised that other measures may be necessary, and my right hon. Friend the Minister for Agriculture, Fisheries and Food recently circulated a suggestion for a scheme to divert some land out of cereals production.
  During our presidency, top priority has been given to considering the Commission's proposals for reform in the beef and dairy sectors. Those proposals are still before the Agriculture Council, which will meet again on 8 and 9
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  December. My right hon. Friend the Member for Taunton (Sir E. du Cann) rebuked me about mecu. My plea is that, in the 3·5 pounds of paper which compromise the explanatory memorandums, all of the figures are given in mecu and sterling. The problem with dealing in sterling is that one has constantly to refer to the exchange rate, whereas mecu remain constant in these transactions. My right hon. Friend mentioned creative accounting, but I do not think that he challenged its legality, as did my hon. Friend the Member for Southend, East (Mr. Taylor). My right hon. Friend the Member for Taunton said that no start has been made. That phrase was picked up by the hon. Member for Inverness, Nairn and Lochaber (Sir R. Johnston). When the Council reached its budget first reading on 8 September, budgetary discipline was maintained, as was loyalty to the agriculture guideline. There was still substantial headroom below the 1·4 per cent. VAT ceiling in the budget which we sent to the Parliament.
  My right hon. Friend referred to double standards and the difference in terms of the autumn statement remarks on domestic expenditure and the Community's apparent indifference on these matters. I would claim credit for the Government for the manner in which they have, both in the Council and in the Parliament over the past year, convinced an increasing number of people that the method by which commitment appropriations increase faster than payment appropriations is the road to ruin and needs to be reined back.
  My right hon. Friend the Member for Taunton said that the House had been misled and be referred to the great store set by Fontainebleau. He specifically referred to the change that had occurred in the current year between the figures originally predicted and the figures in the autumn statement. Although I agree that there is a difference in the wrong direction of over £400 million in these figures over the course of the next two years, if he reads further on in the document he will see the trend in the opposite direction of £800 million in the United Kingdom statement.
  My right hon. Friend the Member for Taunton referred to the 1·4 per cent. VAT ceiling, but it is worth reminding the House that the United Kingdom paid 0·68 per cent. My right hon. Friend gave a broadcast, which I much enjoyed listening to this morning, in which he said that his support for the Prime Minister was total. I can only express my personal regret that this does not extend to supporting the Government in the Lobby tonight.
  The hon. Member for Inverness, Nairn and Lochaber implied that I am a lawyer, but I am not. He referred to my quotation about a good start having been made, and implied that it had not been. I was making that statement in the context of the budgetary process for 1987 and the fact that we delivered the First Reading within the budgetary guidelines. I am not sure what he meant in implying that that was not so.
  My hon. Friend the Member for Cheadle (Mr. Normanton) said some kind words about me, for which I am grateful. He implied that the Council is failing to come to grips with the difficulties and complications. He went on to ask about the process of trilogue, which is a triangular meeting between the Presidents of the Commission, the Council and the Parliament. While the Council has been pressing for a trilogue to take place and for that process to be advanced there are some practical difficulties in the fact that, for perfectly understandable

  109
  reasons, officials on the Parliament side have greater difficulty in committing their masters than do those on the Council side.
  My hon. Friend referred to enlargement. There was no change in the provision for Spain and Portugal between 27 November 1985, Council Second Reading, and the budget that was adopted on 10 July. My hon. Friend said that the budget was out of balance, and that reflected what many hon. Members feel about the CAP.
  The hon. Member for Walthamstow (Mr. Deakins) made a thoughtful speech, as he does on these occasions, and asked a number of questions. The 1·4 per cent. ceiling and the ex novo review into which the Commission is going are not within the bounds of that at which we are looking tonight. We are debating three reports which the Commission will be bringing forward, probably before the end of the year, or, if not, early in the new year, on the future financing of the Community, the structural funds and the common agricultural policy.
  The hon. Gentleman asked about clarification and such questions are being taken to the trilogue for resolution, with the Commission holding the ring in terms of convening the meeting and conducting the debate. The number of lines involved in very small.
  The hon. Member for Walthamstow then asked me whether agrimonetary changes are regarded as exceptional circumstances under budgetary discipline. The Government do not accept that the budgetary effects of agrimonetary changes should necessarily be regarded as exceptional circumstances, justifying an excess over the budget disciplone guidelines. Although the Commission has advanced this argument, the timing and effect of EMS realignments cannot readily be forecast in advance. The question whether there are exceptional circumstances in 1987 will be considered by the Council next year.
  My hon. Friend the Member for Clwyd, North-West (Sir A. Meyer), to whom I apologise for having been out of the Chamber at the beginning of his speech, also made some kind remarks about me. A great characteristic of these debates is that a number of hon. Members participate in them regularly, which very much contributes to their sense of continuity. The emphasis that my hon. Friend placed on the common agricultural policy was characteristic of the move that has occurred in the European Parliament on this issue, where real movement is taking place on policy thinking.
  The hon. Member for Greenock and Port Glasgow (Dr. Godman) made an avowedly constituency speech. It was worth being reminded that the 3·5lbs of paper to which reference was made have an impact in the constituencies of every hon. Member, although I appreciate that, as the hon. Gentleman said, the impact is not always satisfactory.
  My hon. Friend the Member for Southend, East argued that the budget was wholly bogus. I recount to him also the fact that there is headroom within the 1·4 per cent. ceiling in terms of the budget which the Council sent to Parliament. Budgetary discipline is not bogus. Nevertheless, I acknowledge that policy changes are needed to bring spending into line with the figures.
  My hon. Friend referred to cheating and to illegalities, but I do not believe that he was implying that the co-responsibility levy is illegal. I am not entirely clear how the advance payment of contributions would help overspending since it is essentially a cash flow exercise. I agree with
  110
  my hon. Friend about late payments. However, they are an indirect way of reducing the intervention price, which the Government support.
  My hon. Friend also referred to the implications of the 1·4 per cent. ceiling in 1987. I referred earlier to the point raised by the hon. Member for Walthamstow concerning the ex novo reviews. I see little prospect of the Community accepting my hon. Friend's idea of repatriation of the CAP. However, I hope that he will take comfort and encouragement from the question asked by my hon. Friend the Member for Stafford (Mr. Cash) about the report of the Centre for European Policy Studies on the future financing of the Community. The report refers specifically to segmentation of the budget, with the agriculture policy being separated from everthing else.
  The Government regard this as a serious contribution to the consideration of reform of the Community budget. The key message is that there is no prospect of further substantial progress in the Community until the growth of spending on agricultural price support has been brought under control. We fully support this aim. The study advocates the separation of agriculture from the rest of the budget. That is worthy of future consideration.
  The suggestion that the agriculture budget should have its own resources and should be required to live within its means reflects the need to exert greater discipline over agricultural spending. The ideas in the study about how to achieve greater discipline are interesting. I hope that the Commission will take full account of the basic principle set out in the report when it publishes its ex novo review. The precise mechanisms will require full discussion.
  The hon. Member for Inverness, Nairn and Lochaber said that I was a lawyer and the hon. Member for Hamilton said that I was the Financial Secretary, both of which descriptions I regard as compliments, although, in fact, I am neither.
  The hon. Member for Hamilton went on to say that he had heard me at 8 am in Brussels. I was actually broadcasting at a civilised hour in Strasbourg. He said that the action of the Council in bringing the case before the court was a charade. I am delighted to say that the court did not take that view. I have to say in a low and quite voice that the hon. Gentleman does not understand the negative reserve, but, for the benefit of the House, I shall explain it to him in another place and at another time.
  As to the survivability of Ministers in my position, my right hon. Friend the Chancellor of the Exchequer did it for two years, my right hon. Friend the Secretary of State for the Environment did it for two years, my hon. Friend the Economic Secretary did it for nearly two years. I have, so far, done it for one year and I am greatly enjoying it. That is long enough to live with the consequences of one's own actions.
  The hon. Gentleman implied that there was likely to be a delay in the British rebate. I am delighted to say that as a result of what the Council of Ministers decided on 8 September the payment of the British rebate was accelerated rather than delayed.
  Question put, That the amendment be made:—
  The House divided: Ayes 82, Noes 174.

  Division No. 6]

  [10.15 pm

  AYES

  Archer, Rt Hon Peter

  Banks, Tony (Newham NW)

  Ashton, Joe

  Benn, Rt Hon Tony

  Atkinson, N. (Tottenham)

  Bermingham, Gerald

  Bagier, Gordon A. T.

  Bidwell, Sydney

  111

  Boyes, Roland

  Lewis, Ron (Carlisle)

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

  Lloyd, Tony (Stretford)

  Buchan, Norman

  Lofthouse, Geoffrey

  Callaghan, Jim (Heyw'd & M)

  McDonald, Dr Oonagh

  Campbell-Savours, Dale

  McKay, Allen (Penistone)

  Clark, Dr David (S Shields)

  McKelvey, William

  Clarke, Thomas

  McNamara, Kevin

  Clay, Robert

  McWilliam, John

  Clelland, David Gordon

  Marek, Dr John

  Clwyd, Mrs Ann

  Mason, Rt Hon Roy

  Conlan, Bernard

  Maxton, John

  Cook, Robin F. (Livingston)

  Millan, Rt Hon Bruce

  Corbyn, Jeremy

  Miller, Dr M. S. (E Kilbride)

  Deakins, Eric

  Nellist, David

  Dewar, Donald

  Parry, Robert

  Dixon, Donald

  Patchett, Terry

  Dormand, Jack

  Powell, Rt Hon J. E.

  Dunwoody, Hon Mrs G.

  Powell, Raymond (Ogmore)

  Eastham, Ken

  Prescott, John

  Evans, John (St. Helens N)

  Randall, Stuart

  Fatchett, Derek

  Raynsford, Nick

  Fields, T. (L'pool Broad Gn)

  Redmond, Martin

  Forrester, John

  Roberts, Allan (Bootle)

  Foster, Derek

  Robertson, George

  Foulkes, George

  Rogers, Allan

  Godman, Dr Norman

  Ross, Ernest (Dundee W)

  Golding, Mrs Llin

  Sheerman, Barry

  Gourlay, Harry

  Shore, Rt Hon Peter

  Hamilton, James (M'well N)

  Skinner, Dennis

  Hardy, Peter

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

  Hogg, N. (C'nauld & Kilsyth)

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

  Home Robertson, John

  Spearing, Nigel

  Howarth, George (Knowsley, N)

  Wareing, Robert

  Hughes, Robert (Aberdeen N)

  Welsh, Michael

  Hughes, Sean (Knowsley S)

  Winnick, David

  Jones, Barry (Alyn & Deeside)

  Lamond, James

  Tellers for the Ayes:

  Leadbitter, Ted

  Mr. Ron Davies and

  Leighton, Ronald

  Mr. Mark Fisher.

  NOES

  Alton, David

  Cash, William

  Amess, David

  Chapman, Sydney

  Ancram, Michael

  Chope, Christopher

  Arnold, Tom

  Clark, Dr Michael (Rochford)

  Ashdown, Paddy

  Clarke, Rt Hon K. (Rushcliffe)

  Aspinwall, Jack

  Colvin, Michael

  Baker, Nicholas (Dorset N)

  Coombs, Simon

  Baldry, Tony

  Cope, John

  Beaumont-Dark, Anthony

  Crouch, David

  Bellingham, Henry

  Currie, Mrs Edwina

  Benyon, William

  Douglas-Hamilton, Lord J.

  Best, Keith

  Dunn, Robert

  Biggs-Davison, Sir John

  Durant, Tony

  Blackburn, John

  Dykes, Hugh

  Boscawen, Hon Robert

  Edwards, Rt Hon N. (P'broke)

  Bottomley, Peter

  Eggar, Tim

  Bottomley, Mrs Virginia

  Evennett, David

  Bowden, Gerald (Dulwich)

  Fairbairn, Nicholas

  Braine, Rt Hon Sir Bernard

  Fallon, Michael

  Brandon-Bravo, Martin

  Fenner, Dame Peggy

  Bright, Graham

  Finsberg, Sir Geoffrey

  Brinton, Tim

  Fletcher, Alexander

  Brooke, Hon Peter

  Forman, Nigel

  Bruce, Malcolm

  Forsyth, Michael (Stirling)

  Bruinvels, Peter

  Forth, Eric

  Buchanan-Smith, Rt Hon A.

  Fowler, Rt Hon Norman

  Buck, Sir Antony

  Fraser, Peter (Angus East)

  Bulmer, Esmond

  Freeman, Roger

  Burt, Alistair

  Galley, Roy

  Butcher, John

  Garel-Jones, Tristan

  Butler, Rt Hon Sir Adam

  Gower, Sir Raymond

  Butterfill, John

  Griffiths, Sir Eldon

  Carlile, Alexander (Montg'y)

  Griffiths, Peter (Portsm'th N)

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

  Ground, Patrick

  112

  Gummer, Rt Hon John S

  Maude, Hon Francis

  Hamilton, Hon A. (Epsom)

  Mayhew, Sir Patrick

  Hamilton, Neil (Tatton)

  Merchant, Piers

  Hanley, Jeremy

  Meyer, Sir Anthony

  Hannam, John

  Miller, Hal (B'grove)

  Hargreaves, Kenneth

  Mills, Iain (Meriden)

  Harris, David

  Mitchell, David (Hants NW)

  Haselhurst, Alan

  Montgomery, Sir Fergus

  Hawkins, Sir Paul (N'folk SW)

  Morrison, Hon C. (Devizes)

  Hayes, J.

  Neale, Gerrard

  Hayward, Robert

  Nelson, Anthony

  Heathcoat-Amory, David

  Normanton, Tom

  Heddle, John

  Norris, Steven

  Henderson, Barry

  Oppenheim, Phillip

  Hicks, Robert

  Osborn, Sir John

  Hind, Kenneth

  Ottaway, Richard

  Hirst, Michael

  Page, Richard (Herts SW)

  Holland, Sir Philip (Gedling)

  Peacock, Mrs Elizabeth

  Howard, Michael

  Penhaligon, David

  Howarth, Gerald (Cannock)

  Pollock, Alexander

  Howell, Ralph (Norfolk, N)

  Portillo, Michael

  Hubbard-Miles, Peter

  Powell, William (Corby)

  Hunter, Andrew

  Powley, John

  Hurd, Rt Hon Douglas

  Price, Sir David

  Jackson, Robert

  Raffan, Keith

  Jenkin, Rt Hon Patrick

  Renton, Tim

  Jessel, Toby

  Rhodes James, Robert

  Johnston, Sir Russell

  Rhys Williams, Sir Brandon

  Jones, Robert (Herts W)

  Ridsdale, Sir Julian

  Kellett-Bowman, Mrs Elaine

  Roe, Mrs Marion

  Key, Robert

  Sainsbury, Hon Timothy

  King, Roger (B'ham N'field)

  Sayeed, Jonathan

  Knight, Dame Jill (Edgbaston)

  Silvester, Fred

  Knowles, Michael

  Skeet, Sir Trevor

  Latham, Michael

  Soames, Hon Nicholas

  Lawler, Geoffrey

  Speller, Tony

  Lennox-Boyd, Hon Mark

  Stanbrook, Ivor

  Lester, Jim

  Stern, Michael

  Lightbown, David

  Stevens, Lewis (Nuneaton)

  Lilley, Peter

  Stewart, Allan (Eastwood)

  Livsey, Richard

  Thompson, Patrick (N'ich N)

  Lloyd, Peter (Fareham)

  Thurnham, Peter

  Lord, Michael

  Townend, John (Bridlington)

  Luce, Rt Hon Richard

  Wakeham, Rt Hon John

  Lyell, Nicholas

  Wardle, C. (Bexhill)

  McCrindle, Robert

  Wells, Bowen (Hertford)

  McCurley, Mrs Anna

  Wells, Sir John (Maidstone)

  Macfarlane, Neil

  Wheeler, John

  Maclean, David John

  Wiggin, Jerry

  McLoughlin, Patrick

  Wilkinson, John

  McNair-Wilson, M. (N'bury)

  Yeo, Tim

  McQuarrie, Albert

  Major, John

  Tellers for the Noes:

  Malins, Humfrey

  Mr. Michael Neubert and

  Mather, Carol

  Mr. Gerald Malone.

  Question accordingly negatived.
  Main Question put and agreed to.
  Resolved,
  That this House takes note of European Community Documents Nos. 5484/86, key figures for the 1987 Budget; 7113/86, Preliminary Draft Supplementary and Amending Budget No. 1 for 1986; 7068/86, updated key figures for the 1987 Budget; 7927/86, Preliminary Draft Budget for 1987; 9192/86, Draft Budget of the European Communities for 1987; 8877/86, Letter of Amendment No. 1 to the Preliminary Draft Budget of the European Communities for 1987; COM(86)360, Letter of Amendment to the 1986 Budget; 8876/86, Preliminary Draft Amending Budget No. 1 for 1986; 8883/86 and Addendum 1, Commission Communication on recent developments affecting the 1986 Budget and 1987 Preliminary Draft Budget; and supports the Government's efforts to achieve tighter restraint and better balance in the Community's Budget.

  Altrincham General Hospital
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Boscawen.]
  10.29 pm
  Sir Fergus Montgomery: I am grateful for this opportunity to raise what is purely a constituency matter—the future of Altrincham general hospital. I wish to express to my hon. Friend the Parliamentary Under-Secretary of State for Health and Social Security the anxiety that is felt in my constituency about the plans for Altrincham general hospital.
  Hospital provision in the south of Trafford is not very good. Indeed, it is abysmal. We hoped that that would be rectified when we were promised a new south Trafford district hospital. In 1983, we were told that it would be on the provisional programme for the financial year 1988. We all thought that it would be the answer to our prayers and that the hospital, which we had been promised for so long, would be built.
  At the beginning of 1984, it was suggested that the new hospital should be appraised, and the so-called Wythenshawe option was mooted by the regional health authority. It decided on the Wythenshawe option, which was the extension of Wythenshawe hospital to include 112 acute beds, but they would not be for the exclusive use of patients from south Trafford; they would be part of the total south Manchester provision. To complicate matters further, Trafford health authority made further proposals for what it called an alternative strategy based on Park hospital. The regional health authority has not yet made a final decision.
  There, in a nutshell, is the tangled web of hospital provision in south Trafford. I am sick to death of being told how fortunate and privileged we are because south Trafford is such a desirable residential area. Those who live in my area have worked hard and made sacrifices to buy their homes and they are entitled to fair treatment, yet south Trafford has by far and away the worst hospital provision in the entire borough of Trafford. Recent events, including the question mark that hangs over Altrincham general hospital, have only aggravated matters.
  I do not know whether my hon. Friend knows Altrincham, but the general hospital is in the middle of the town. It is easily accessible, it is a landmark and, over the years, it has acquired a reputation for excellence. It enjoys a special place in the affections of Altrincham people, and there is enormous anger in my constituency at the prospect of acute beds being removed from the hospital. I speak with some feeling about the hospital, because, in 1978, my gall bladder was removed there. I said at the time that my treatment had been excellent and that, if I needed another operation, I would have no hesitation in returning there. I visit the hospital each Christmas, and in each ward I hear the same story from patient after patient—praise for this small, caring hospital with a hard-working, caring staff. In view of all that, my hon. Friend will not be surprised that the balloon went up with a vengeance when the story went round that Altrincham hospital would become little more than a geriatric unit.
  The general hospital currently has five wards with a total of 73 beds and there is an accident and emergency department. The local people seem to believe that those
  114
  facilities should remain. On 29 October, the community health council organised a public meeting attended by more than 300 people. That gives a clue about the strength of public opinion. I should add that I have been bombarded with letters from anxious constituents. I had hoped to attend the meeting, and I told the chairman of the community health council that my plan was to travel up in the afternoon and to return on the sleeper. As my wife remarked, "What a wonderful way to spend your wedding anniversary." The other two hon. Members who represent Trafford were also invited. In the event, none of us could attend because on that evening Parliament debated the Westland affair and there was a three-line Whip.
  However, the hon. Member for Stretford (Mr. Lloyd) wrote to the community health council to say that the problem at Altrincham general hospital was caused by underfunding. At the meeting, that point was repeatedly stressed by others of a similar political colour. Not to be outdone, the prospective alliance candidate for Altrincham and Sale—who also announced himself as the next Member of Parliament for Altrincham and Sale—underlined the point. A representative from the National and Local Government Officers Association claimed that the north-west is the worst place for health care and the poorest provided in funds. It is a great pity that they tried to score political points in an issue that greatly worries local people.
  It would be helpful if my hon. Friend the Minister, when she replies, could give the true facts and let me know just how much extra is being spent on the Health Service in the north-west, where that money is going and whether the position in south Trafford is connected in any way with the problems of the Resource Allocation Working Party set up by Lord Ennals when he was Secretary of State in a previous Labour Government. I ask for that information because I believe that the record should be set straight and that the political point scorers should be shown up for what they are—adept at empty and fallacious rhetoric.
  At a time when the Government have increased the resources for the National Health Service above and beyond the 24 per cent. already achieved since 1979, it is essential that the funds should be employed to correct the errors and failures of the past and to translate six years of words into action. In south Trafford we have, for too many years, been waiting to hear about hospital provision. Are we to get a new district hospital? Will we have the Wythenshawe option or the Park option? The people in my area have been very patient. We are entitled to know why there has been such a long delay and who is responsible for it. As long as there is uncertainty, rumours will abound and fears will be created where perhaps no fears should exist. People are confused; they simply do not know what is going to happen. The position at Altrincham hospital has brought matters to a head.
  At least the fears of the public have had some effect. If there had been a move to close Altrincham hospital, that seems to have been scotched. The chairman of the regional health authority has said:
  "The immediate future use of the Altrincham General Hospital is that it is to continue as an acute hospital with the Accident and Emergency Department continuing to be open daily from 9 am to 5 pm. The present long-term strategy for the South Sector of the Trafford District envisages, as you know, that Wythenshawe Hospital will become, for the majority of the South Trafford population, the District General Hospital; a small part would be looking to North

  115
  Trafford and Park for these services. The current proposal is that once Wythenshawe Hospital takes on the acute services from Altrincham General Hospital then the unit will be converted for use as a 55 bedded geriatric unit with 38 day places. This scheme is presently due to commence in 1994/95 with an anticipated opening of 1995/96. Although the Accident and Emergency Department will close (with accident and emergency admissions taken to Wythenshawe or Park hospitals), it is not intended that out-patient and associated diagnostic facilities should be affected; these are to remain in Altrincham, and the Trafford Health Authority intend to increase these services. I must apologise for not writing earlier but Trafford Health Authority have put forward proposals to make greater use of Park instead of Wythenshawe. I had hoped to let you know the results of our examination of these proposals but this is not yet complete. I will let you know when this is done but meanwhile will bear your views in mind in regard to Altrincham General."
  I have also heard from the chairman of Trafford Health Authority, who states:
  "At its meeting on 16th October 1986, the Trafford Health Authority again considered how to prepare a plan for 1987/88 which will enable it to stay within the estimated allocation whilst continuing to meet service objectives. The Authority decided to put a plan to the Regional Health Authority showing how the necessary savings of approximately £600,000 can be made without making major permanent changes to the patient services at Altrincham General Hospital."
  The chairman, Mrs. Alexander, continues to list several points. She concludes:
  "In putting forward this plan to the North Western Regional Health Authority the Trafford Health Authority has indicated that it was not prepared to commit itself to extensive and irrevocable changes at Altrincham General Hospital at this time, because of two major points of uncertainty. First, the North Western Regional Health Authority is to undertake a review of its bed and caseload targets for District acute services and it is, therefore, possible that some changes of policy may take place on the overall level of hospital beds to be planned for and, secondly, the Regional Health Authority has still to decide whether to re-open the option appraisal for hospital services in South Trafford."
  The reference to two major points of uncertainty is of particular importance. Therefore, the ball is very much in the court of the regional health authority.
  Perhaps my hon. Friend can discover when the review of bed and case load targets for district acute services is likely to be announced and also what is to happen with the option appraisal. I draw her attention to a letter written by the chairperson of the Trafford area health authority to the previous Minister, dated 30 June 1986. The reply from my hon. Friend the Member for Wycombe (Mr. Whitney), dated 5 August, said that the chairman of the regional health authority would write to her direct. To my knowledge, that reply has not been received.
  However, this morning I received a letter from the chairman of the regional health authority saying that tomorrow, 25 November, he would ask his authority if it would like to examine the position again. That is where matters stand. We need a decision so that people know where they are.
  I hope that tonight my hon. Friend can shed some light on why we did not get our long-promised south Trafford district hospital. Is it still an option? If we are not to have it, I want to know why not and which of the two options is to be put forward. After all, if a district hospital was promised in 1983, it must have been shown that there was a need for it in south Trafford. If that promise had been kept, I would not have requested this Adjournment debate
  116
  tonight and my hon. Friend would not have to reply to it. If the promise had been kept, I would have been perfectly happy with the hospital provision in my constituency.
  However, for reasons best known to people unknown, the promised new district hospital has not materialised. Therefore, I cannot say tonight that I am happy about hospital provision in my constituency. I assure my hon. Friend that I am expressing the anxieties of many people, of all shades of political opinion, who are genuinely concerned about what is happening. Above all, I want to know the future plans for Altrincham general hospital, because that is a matter of great concern to my constituency.
  10.42 pm
  The Parliamentary Under-Secretary of State for Health and Social Security (Mrs. Edwina Currie): I congratulate my hon. Friend the Member for Altrincham and Sale (Sir F. Montgomery) on winning the ballot, and by so doing bringing his concerns about Altrincham general hospital before the House. I know that he has been an energetic and tireless campaigner in the cause of his constituency and, indeed, is doughty in the cause of the health care of his constituents. I am sure that his efforts are appreciated locally.
  I wish first to put my hon. Friend's mind at rest, at least on the immediate concerns. There are no current proposals to change the use of Altrincham general hospital in Trafford health authority. The district health authority has said so, as has the regional health authority. Indeed, both authorities have given assurances on that matter. It was briefly discussed, but was firmly turned down.
  Before going into detail, I shall answer some of my hon. Friend's specific questions. He asked about the north-western region, the funding of the Trafford district health authority and about the importance and influence of the RAWP formula in some of the discussions that have taken place. I am glad to put some figures on the record. The north-western region is a growth region, and has been since the Government took office. Spending has risen by 22·8 per cent., compared with an England average of just under 19 per cent., between 1978–79 and 1986–87. Back in 1978–79, the north-western region was 8·9 per cent. below its RAWP target. Last year, we calculated that it was within 1 per cent. of that target, which is a considerable improvement. Indeed, the north-western region has benefited considerably from redistribution from the better-off parts of the country to the north.
  The allocation of funds for 1985–86 to the north-western region is the magnificent sum of £904 million—a 6·4 per cent. cash uplift over previous years. The region has the second highest capital allocation in England, the highest being the west midlands. That comes to a total of £71·5 million for the current year. It could not even begin to be said that the north western region has in any way been neglected. We have carried out faithfully the principles of the RAWP reallocation, and the north-western region has benefited considerably.
  I am sure my hon. Friend is aware that the Trafford district authority is about 15 per cent. over its RAWP calculation, but he will also be aware that we have been taking a close look at the way in which RAWP is now calculated to ensure that we get the balance right between the different regions. It is for the region itself to decide how the money is allocated between its districts.

  117
  It is not just a matter of the input of resources. We are actually seeing something come out for the money that is going in. My hon. Friend will know that we are spending a total of around £30 million on Manchester royal infirmary Phase II and subsequent building. My hon. Friend the Minister of State will lay the foundation stone very shortly for this most important acute and teaching hospital, which will serve the whole of the north-western region, including my hon. Friend's constituents. My hon. Friend will know about the Fairfield hospital in Bury, which was topped out in November by the Chancellor of the Duchy of Lancaster. That is being built at a cost of £6·6 million. He will know about a number of other capital schemes, all of which add up to a considerable sum of money, many of which are replacing worn-out, old facilities throughout the north-west region.
  We are treating far more patients. Last year, compared with 1978, in-patients were up by 20 per cent., out-patients were up by 10 per cent., day cases were up by the magnificent figure of 70 per cent. and direct care staff were around 15 per cent. more last year than they were in 1978. So the money is going to real, direct care.
  One small item of particular interest, perhaps to myself, is that before 1985–86 there was a computerised call and recall system for cervical cytology in only one of the 19 districts in the whole of the north-west. Within the next 17 months, with assistance from the Government, there will be such a system, which will be of great benefit and will prevent the unnecessary deaths of women in every single one of the 19 districts.
  The Trafford district health authority serves three constituencies, including the constituencies of Davyhulme and Stretford. It is a well-populated area and it nestles close to three important teaching districts of Salford, central Manchester and south Manchester. One would naturally expect at least some of my hon. Friend's constituents to enjoy the benefit of being close to those teaching districts for their more difficult problems. The main district general hospital is Park hospital, which is in the north of the district. It is separated from the south by the river Mersey. As a result of that, the residents in the south, I understand, tend to use Wythenshawe hospital in south Manchester for some of their DGH services and the acute beds at the Altrincham hospital as well.
  Sir Fergus Montgomery: My hon. Friend is right about the people who use Park hospital and Wythenshaw hospital. Part of the difficulty is commuting from south Trafford to both of those hospitals. It is all very well if one has a car. If one is old or does not have a car, there are tremendous difficulties, because transport services are not good between those two hospitals in my constituency.
  Mrs. Currie: I am sure that my hon. Friend will agree that the realities of communications bedevil simple planning done on a piece of paper. I am sure those points are taken into account in the development of the services that we are discussing. The revenue allocation that Trafford is spending is £28·82 million this year—in other words, nearly £29 million. Again, that is a substantial improvement on recent funding. My hon. Friend will know of the developments at Park hospital at a cost of around £3·7 million, which are intended to provide a geriatric unit consisting of 96 beds and 50 day beds and a physiotherapy department. These were opened by my noble Friend the Parliamentary Secretary in September 1986.
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  I have said that there is no change planned at Altrincham next year, and I hope my hon. Friend can accept that assurance. As he knows, this hospital of 73 acute beds with one operating theatre and day-time accident and emergency services, which was built around 1870, has been progressively upgraded in the last 10 years and provides an excellent service. It has been the subject of discussion on two different grounds and on two different time scales. The first and the most urgent, which I believe has led, in the immediate instance, to tonight's Adjournment debate, was the overspending of the Trafford district health authority. Its calculation for 1987–88 suggested that it was likely to overspend nearly £600,000 more than would be available. It therefore, responsibly, decided to discuss what might be done about that potential overspending.
  Among the schemes that came up was the possibility of reducing the number of acute beds at Altrincham and increasing the number of geriatric beds. This was discussed with the community health council on 11 September, but at the district health authority meeting on 16 October, which was attended by the CHC, the health authority decided against making changes at Altrincham next year to reduce overspending. It decided on a range of other measures which I believe were communicated to my hon. Friend. As I understand it, none affected direct patient care. Some of them simply involved better management of resources, which would keep the authority within its spending limit in a sensible way. However, on 29 October, the CHC organised a public meeting. The district general manager, Mr. Milnes, informed it of the decision of 16 October that no further steps would be taken. I am glad to have the opportunity to say that the DHA decided on 16 October that no action would be taken along the lines it had originally suggested.
  As my hon. Friend has said, Altrincham general hospital has been the subject of discussion in the longer term. Trafford will need more hospital beds for the elderly. This reflects the growing number of elderly people in our society. The north-western area expects about 15 per cent. of its population to be aged over 65. In Britain as a whole, there are 3 million people aged between 75 and 84 and about 750,000 people aged over 85. Sensible planning demands that provision be made for services for the elderly. I do not accept my hon. Friend's comment about Altrincham becoming little more than a geriatric unit. Geriatric medicine is an extremely respectable part of medicine, as I am sure my hon. Friend will agree. In so far as we are successful in alleviating people's acute problems through our acute services and, we hope, stopping them from becoming ill due to preventable diseases in middle age, it seems to be axiomatic that, sooner or later, we shall need more services for our elderly people that take into account of the effects of aging. I am sure that we are right to expect that districts which are underprovided in those types of services give sensible thought to them.
  The DHA and the RHA are looking at a long-term plan to spend £2 million on Altrincham, probably in 1994–95, which would provide 55 geriatric beds, 38 geriatric day places and an out-patients department with diagnostic facilities for elderly people. For that to happen successfully would mean the transfer of acute beds elsewhere. As my hon. Friend accurately said, that is the subject of considerable discussion. Any change of use from acute to geriatric or to any other use in Altrincham would require the full consultation procedure. If there were any local

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  disagreement, the matter would, of course, come before Ministers. We do not expect to hear of any such discussions for many years, but we are pleased to think that the Trafford health authority and the north-western region health authority are giving some thought to how geriatric facilities are to be provided. I ask my hon. Friend whether, with his local knowledge, he will consider how the services sought for Altrincham might be provided elsewhere. We have to provide the services somewhere. It will be a matter of considerable concern if they are not available.
  My hon. Friend rightly referred to a number of letters. I have received copies of them as well. I draw attention to the statement made by Sir John Page in 20 November which said that these matters will be discussed on 25 November. He said that he saw "little or no" advantage in the new Trafford proposals. It will, therefore, be for the
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  region tomorrow and, no doubt, at subsequent meetings, to consider how to achieve the right balance between acute care and geriatric care in Trafford to benefit my hon. Friend's constituents.
  I hope that I have answered at least some of the points raised by my hon. Friend, but I shall be happy to meet him on another occasion, if he wishes, to discuss further how to meet the needs of local people. I know that my hon. Friend has made considerable use of local contacts and has been in close touch with the regional and district authorities. I hope that he will continue to represent local people's views and that he will maintain those close links, and perhaps help the planners to get things right for Trafford's old people. We all want the same thing—the best possible services for all the people of Trafford and, indeed, the whole of the north-west.
  Question put and agreed to.
  Adjourned accordingly at six minutes to Eleven o'clock.

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