Sitting of 21 January 1987

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

    Philippines
    Mrs. Shieldsasked the Secretary of State for Foreign and Commonwealth Affairs what steps he intends to take to support the Government of the Philippines in their attempt to establish lasting peace and democracy.
    The Minister of State, Foreign and Commonwealth Office (Mr. Tim Renton): We continue to offer our strong support to President Aquino and her Government in their efforts to consolidate democracy and to bring about national reconciliation in the Philippines.
    Mrs. Shields: In view of the pressure from some quarters to make the Government of the Philippines abandon negotiations and opt for a military solution to their problems, will the Minister say that the Government fully support the process of negotiation? Will he also ask his EEC colleagues to make a European statement of support for that process?
    Mr. Renton: We fully support the process of negotiation in which President Aquino is currently involved. We also fully support her efforts to bring the Philippines back to being a fully democratic state and the process of national reconcilation in which she is engaged. This was very much the spirit behind the statement issued by the Community last November, and we will certainly consult our European Community colleagues if a further statement along the lines suggested by the hon. Lady will be helpful.
    Mr. Soames: In acknowledging the importance of the Philippines in the general region, does my hon. Friend agree that it is vital that, if possible, Britain should be able to contribute through the Overseas Development Agency to any development projects that may seem to be to our advantage?
    Mr. Renton: Yes. My hon. Friend will be pleased to know that since President Aquino's Government came to power we have doubled our bilateral aid to the Philippines to about £425,000 for the current year and are planning to increase it to £545,000 for the year ahead. We are especially looking for projects such as consultancies in agriculture and development through which we can help the Philippines. I am sure that that is exactly in line with what my hon. Friend would like us to do.
    Mr. Forth: Can my hon. Friend confirm that the so-called President of the Philippines lost the only election
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    ever held and has not been legitimately elected, and that the best solution to the problems of the Philippines would be a legitimate and proper election?
    Mr. Renton: With respect to my hon. Friend, I do not think that his comments are helpful. A plebiscite is to be held on 2 February on the new constitutional developments in the Philippines and at that time the people of the Philippines will have the opportunity to give their verdict on the reforms that President Aquino has introduced.
    Mr. Anderson: As opposed to the Marcos tendency on the Government side, may we give our full pledge of support by any means to strengthen democracy in the Philippines? As the Minister is aware that the Government of the Philippines are seeking to diversify their foreign relations because of their very pervasive dependence on the United States of America, will he take further initiatives in the EEC as a partial counterweight to that United States influence? Given the importance of multisectoral organisations in the Philippines and their wide spread, will the Minister try, in our aid policies, to use the non-governmental organisations in the United Kingdom?
    Mr. Renton: I know that the hon. Gentleman has just returned from the Philippines, and I hope that he had a useful and constructive visit. From that recent experience of the Philippines he will be aware of the great and continuing importance of the Americans there. They give large amounts of aid and there is also the militarily important presence of their bases at Clark Field and Subic Bay, particularly as a counter-reaction to the Russian base at Cam Ranh in Vietnam.
    The European Community's aid has already increased substantially, and I understand that Commissioner Cheysson is looking at means of increasing it further. The hon. Gentleman's point about the involvement of non-governmental organisations is a good one, and I shall certainly pass it on to my hon. Friend the Minister for Overseas Development to see whether the NGOs can be used further.

    Argentina
    Mr. Meadowcroftasked the Secretary of State for Foreign and Commonwealth Affairs if he has taken any steps to improve relations with the Government of Argentina since the announcement of the Falkland Islands exclusive fishing zone.
    The Secretary of State for Foreign and Commonwealth Affairs (Sir Geoffrey Howe): While making it plain that sovereignty is not for negotiation, I have repeatedly reaffirmed our willingness to work for a multilateral solution on fisheries and for progress on other practical issues.
    Mr. Meadowcroft: Is it not within the great traditions of British diplomacy and foreign policy that if, when faced with a change of Government towards democracy in a country with which we have been in conflict, and with a conciliatory and flexible response such as we had from that Government on 17 November, we should be prepared to make a detailed form of response to that Government to engage in discussions? Should we not contemplate a solution to an intractible problem that is costing the country many millions of pounds each year?
    Sir Geoffrey Howe: It would be in accordance with the high traditions of diplomacy, to which the hon. Gentleman has kindly referred, and in the tradition of sensible diplomacy, not to embark on any discussions on the basis of any false premise or false expectations, which is why we have always excluded from the agenda negotiation on sovereignty. Beyond that, the tables of my opposite number, Foreign Minister Caputo, and of President Alfonsin, are positively groaning with proposal after proposal for discussion of all the other issues of a wholly constructive kind.
    Mr. Crouch: May I suggest to my right hon. and learned Friend that he should continue to stress the importance of our willingness to re-establish friendly relations with Argentina, notwithstanding our understandable—they should understand this too—feelings that there can be no question of discussion of sovereignty of the Falkland Islands at this stage? But a reiteration of our willingness to re-establish friendly relations with Argentina should continue, and I believe that it could be successful.
    Sir Geoffrey Howe: I entirely agree with the approach commended by my hon. Friend. Our position has consistently been that the intractible question of sovereignty should not stand in the way of the development of more normal relations in every other respect. Throughout my recent visit to Mexico, Columbia and other countries in the region I emphasised time and time again the approach commended by my hon. Friend. I think that our approach is widely and increasingly understood.
    Mr. Haynes: Does the Foreign Secretary know what is going on down there? Is he aware that, unfortunately, I had to make a visit to the Falkland Islands where I met councillors who want to go back to the pre-1982 situation. If that is the case, why are we spending hundreds of millions of pounds down there, but refusing pensioners a free television licence?
    Sir Geoffrey Howe: It is always encouraging to receive a message from the hon. Gentleman couched in characteristically straightforward terms. The inhabitants of the Falkland Islands recognise that Argentina's actions in 1982 destroyed the foundations of the good relations that previously existed, and they look to Her Majesty's Government to provide defence on the basis on which we are prepared to go on doing so.
    Mr. McLoughlin: Will my right hon. and learned Friend reiterate today that the British Government would not have taken the action that they did in the exclusion zone if the Argentine Government had not steadfastly refused to have a multilateral agreement?
    Sir Geoffrey Howe: Indeed. My hon. Friend is right. We emphasised over a long period our willingness and desire to establish a multilateral system of conservation. That is why we took the matter to the Food and Agriculture Organisation. We still want to move on from the present position to a more broadly agreed system of fishery conservation.
    Mr. Foulkes: Will the Foreign Secretary confirm that the American Government are worried about dangers that arise from the Soviet's failure to recognise the unilateral fisheries regime that he has declared? As the Foreign Secretary has reaffirmed that he would prefer a
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    multilateral agreement, why did he rebuff Argentina's approach of 17 November? Why is he not taking up the offer for informal talks in the United States now? Will he talk seriously with Mr. Habib, who, it is reported, will want to discuss the issue? What practical action will he take to obtain some agreement on this which will prevent the possibility of some clash arising with the Soviet vessels in the south Atlantic, which all of us want to avoid?
    Sir Geoffrey Howe: I am sure that everyone is anxious to avoid any clash arising in relation to fisheries conservation in the south Atlantic. That is why the clash that occurred between Argentine and Taiwanese vessels last year was a matter of such great regret. It is for that reason that we have been in touch with all the nations concerned in the region, including the Soviet Union. The Soviet Union has said that it will conduct itself in a fashion not inconsistent with our claims in the area, and a large number of nations, including, for example, Poland, have already, through their firms, applied for and been granted licences.
    Beyond that, we are, of course, anxious to respond sensibly to any possibility of moving towards the establishment of a multilateral regime. It is a topic on which we make our view clear to many nations, as I have already said, and on which we hearken to the possibility of progress, but where we have to proceed with prudence if we are not to run the risk of abortive contact of the kind that took place in Berne some two years ago.

    Falkland Islands
    Mr. Campbell-Savoursasked the Secretary of State for Foreign and Commonwealth Affairs if he has given any consideration to a scheme to compensate any Falkland Islanders wishing resettlement following the conclusion of an agreement with Argentina on the future of the Falklands.
    The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs (Mr. Tim Eggar): No. The Falkland Islanders have consistently made clear through their elected representatives their wish to remain in the Falklands under British sovereignty.
    Mr. Campbell-Savours: In so far as we shall be spending one third of a million pounds this year for every Falkland Islands citizen, that we shall have spent since 1982 nearly £2 million on every Falkland Island citizen and we simply cannot afford it, is it not now about time that we considered some sort of resettlement grant for people in the Falkland Islands, giving them the option either to stay or to emigrate from those islands under a negotiated settlement with Argentina?
    Mr. Eggar: The hon. Gentleman is well aware that the Falkland Islanders wish to remain in the Falklands under British sovereignty. They have always had the option to leave the Falkland Islands and come to this country if they so wished. The fact is that they have not wished, and, indeed, the population in the Falklands has increased, not decreased, since the conflict.
    Mr. Bill Walker: Does my hon. Friend agree that in a world where democracy is in a minority it would be a mistake ever to give up simply because the balance sheet said that we could not afford it? If we could not afford a democracy, we would never have had it. It is not something on a balance sheet.
    Mr. Eggar: I entirely agree with my hon. Friend.
    Mr. Canavan: Could the Foreign Office not take some steps to resettle Sir Rex Hunt in some remote territory, because, despite being deprived of his colonial governor's hat, he seems to be strutting around all over the place making stupid statements and doing his best to torpedo any chance of a reasonable, peaceful negotiated settlement betwen Britain and Argentina on the future of the Falkland Islands?
    Mr. Eggar: Sir Rex Hunt gave distinguished service in the Falkland Islands and I am frankly amazed that the hon. Gentleman believes in curtailing the freedom of speech.
    Mr. Stokes: Is my hon. Friend aware that the previous question was, typically, most mischievous? [Interruption.] Is there no question of the Falkland Islanders living there if they wish to, or going elsewhere if they wish to? Why such a defeatist question? Whose side is the hon. Member for Workington (Mr. Campbell-Savours) on—England's or Argentina's?
    Mr. Eggar: It is both mischievous and typical, and the House in its response to my hon. Friend's question has given its answer.

    Chile
    Mr. James Lamondasked the Secretary of State for Foreign and Commonwealth Affairs if he will recall Her Majesty's ambassador to Chile for consultations on United Kingdom relations with opposition parties there; and if he will make a statement.
    Mr. Eggar: No. Our policy is to bring about the early restoration of democracy in Chile; to maintain close contact with opposition leaders; and to encourage Opposition leaders' efforts to open a full dialogue with the Chilean Government.
    Mr. Lamond: What is all this about our ambassador interfering in the internal elections of the Chile Christian Democratic party by trying to push the chances of the extreme Right-wing contestant, unsuccessfully as it happened? There are even rumours that the Right-wing party has been obtaining money from the British Tory party. Which side are we on, Pinochet's or Britain's?
    Mr. Eggar: The hon. Gentleman has a fertile imagination. We are on the side of improving human rights within Chile. We have consistently backed support for the national opposition parties.
    Mr. Wilkinson: Does my hon. Friend agree that it would be much better for our excellent ambassador to remain in place to monitor that Government's decision last week to allow political parties again, after 13 years without them, to monitor a return of exiles to Chile, and to improve our already good relations with that country, which has a serious terrorist threat fomented and actively supported by Cuba and other countries?
    Mr. Eggar: I entirely agree with my hon. Friend. The presence of an ambassador in Santiago is the best way available to us of ensuring that pressure for change can be applied at the highest levels. I notice that the views of Labour Members contrast significantly with the way in which they constantly urge us to increase our representation in Managua.
    Mr. Tony Lloyd: In the light of an earlier supplementary question, will the Minister take this chance to deny categorically that the ambassador was involved in paving the way for the rumoured coup against Pinochet, in which the United States is supposed to have been involved, in order to replace him with a Christian Democrat?
    Mr. Eggar: That is a purely hypothetical question. I am not even aware of the reports.
    Mr. Foulkes: Does the Minister recall that the Prime Minister recently invited released Soviet dissidents to No. 10 Downing street? Will the Minister therefore encourage the Prime Minister to demonstrate her evenhandedness by also inviting to No. 10 Downing street Pedro Fernandez Lembach, who arrived back in the United Kingdom last year after a campaign here to get him released from Pinochet's jail? Now that he is back in the United Kingdom he should also be welcomed to No. 10 Downing street like the Soviet dissidents.
    Mr. Eggar: May I wish the hon. Gentleman a happy birthday. I shall not divulge his age to the House. We very much appreciate the role that he, among other hon. Members on both sides of the House, played in urging the Chilean Government to release Pedro Lembach. I have made clear to the Chilean Government our welcome for that release.

    EC (United Kingdom Presidency)
    Mr. Jacksonasked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on progress made during Britian's presidency of the European Community in promoting the Community's position in international affairs.
    Mr. Knoxasked the Secretary of State for Foreign and Commonwealth Affairs what discussions he has had with his European Community partners concerning the development of common European foreign policies.
    Sir Geoffrey Howe: The Twelve spoke and acted together on a wide range of international issues during the British presidency. Significant achievements during the period included: common action against Syria's involvement in terrorism, which I announced on 10 November; active co-operation on East-West issues, in particular, in achieving the successful outcome of the Stockholm Conference; and a common position on South Africa based on promoting peaceful change through national dialogue. A fuller list of presidency achievements has been placed in the Library of the House.
    Mr. Jackson: My right hon. and learned Friend knows well that Conservative Members appreciate the success of the British presidency and, notably, the contribution of the Foreign and Commonwealth Office. Is he satisfied that the European voice is being heard with sufficient clarity and weight in the great debate about arms control between the United States and the Soviet Union?
    Sir Geoffrey Howe: The answer to that is yes. The Community voice speaks on defence issues outside its constitution, but it speaks on security questions, including arms control aspects of that through political co-operation and, beyond that, through the participation of 11 of 12 members in the councils of NATO. In all those ways, not

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    least through the contribution made by the United Kingdom, the voice of the Community on these important questions is being heard loud and clear.
    Mr. Knox: Will my right hon. and learned Friend confirm that greater co-operation within the Community on foreign affairs remains the Government's principal foreign policy objective?
    Sir Geoffrey Howe: Yes, I can confirm that. On a large range of issues the position that we wish to make clear and assert is likely to be more effectively asserted and maintained by presenting it in a Community context.
    Mr. Ernie Ross: Will the Foreign Secretary tell us what successes the European Community has had in resolving the Arab-Israeli conflict?
    Sir Geoffrey Howe: I do not think that the European Community has been more successful than any of the other parties concerned with that tragic conflict, which has continued for many years. We have certainly been applying our attention to measures that can improve the situation. It was as a result of a British initiative during the British presidency that the Community adopted measures to enhance Community aid and Community trade access for those living in the occupied territories on the West Bank.
    Mr. Deakins: Have any of the anodyne statements made by the EEC in recent years under the heading of political co-operation led to the resolution of any international problem?
    Sir Geoffrey Howe: To take one example to which we have been referring, the position adopted by the Community on the Arab-Israeli dispute, as set out in the Venice declaration, has represented a continuing lodestone of guidance for the many who have tried to advance the position. It has been a significant and sustained contribution.
    Mr. Walters: I recognise the advances on many issues which have taken place during my right hon. and learned Friend's presidency, but the progress in the middle east has been disappointing. Will he take the opportunity of Mr. Peres's visit to reaffirm that British policy and European policy have not changed, that we appreciate that there cannot be a settlement in the middle east without recognising Palestinian rights, and that the continuing Israeli occupation of the West Bank is illegal?
    Sir Geoffrey Howe: I shall certainly be taking the opportunity of discussing these matters with Foreign Minister Peres during his visit to London, on the basis of the well-established principles of the right of the state of Israel to secure a peaceful existence and the right of the Palestinian people to self-determination and proper representation in any discussion of the future.
    Mr. Healey: In the right hon. and learned Gentleman's new capacity as a pedler of lodestones of guidance, does he believe that it would be wise for the Community to take a much more public and consistent line on the major issues of arms control that are now under discussion between the United States and the Soviet Union? Can he explain why the Prime Minister did not follow Chancellor Kohl's lead in deploring President Reagan's decision to violate the SALT 2 agreement and welcoming Mr. Gorbachev's decision not to follow President Reagan's lead?
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    Secondly, on the strategic defence initiative, on which I believe the European countries have a consistent and common view that is very different from that of the present American Administration, can the right hon. and learned Gentleman allay some of the disquiet that is felt on the Opposition Benches and elsewhere at the Prime Minister's recent retreat from her initial agreement at Camp David on SDI with President Reagan? Can he say that Her Majesty's Government unequivocally expect the United States to observe the ABM treaty in its pursuit of its star wars initiative in the restricted interpretation which has been endorsed by those who negotiated the treaty in the United States?
    Thirdly—[HON. MEMBERS: "Too long".] These are possibly the most important issues which this or any other Government are likely to face over the next few years. Thirdly, will the right hon. and learned Gentleman seek an agreement with his Community colleagues to take an initiative towards achieving agreement on a comprehensive ban on nuclear tests by seeking an agreement which, by stages, would progressively limit the yield and frequency of such tests?
    Sir Geoffrey Howe: The right hon. Gentleman has resorted—understandably, and I make no criticism—to asking a question about arms control as an earlier question was not asked.
    Mr. Healey: Where was the alliance spokesman when he should have asked his question?
    Sir Geoffrey Howe: The right hon. Gentleman and I are on common ground.
    With regard to progress on SALT 2, the Prime Minister confirmed to the House on 18 November last that, in our judgment, the SALT agreement should continue to be observed by both sides. That remains our decision.
    With regard to SDI, one of the components of the first Camp David agreement is that that programme should be pursued in accordance with the provisions of the ABM treaty. United States policy is that the broad interpretation is justified. However, SDI research is being continued within the restricted interpretation, and that should be welcomed.
    On the right hon. Gentleman's last point about the test ban treaty, we welcome the specific progress made at Reykjavik, which provided, in our judgment rather hopefully, for a phased approach to nuclear tests. That was consistent with our policy. That approach will start with the threshold test ban treaty and the peaceful uses of nuclear energy treaty and beyond that to the remaining stages on verification issues. That is how such progress should be made.

    Afghanistan (Chemical Weapons)
    Mr. Brightasked the Secretary of State for Foreign and Commonwealth Affairs whether he has any evidence of the use of chemical weapons by the Soviets in Afghanistan; and if he will make a statement.
    Mr. Renton: We are aware of reports of use of chemical weapons by the Soviet Union in Afghanistan. We regret that independent investigation of reports of use of chemical weapons in that country has not proved possible, but we believe that at least some form of incapacitating agent has been used by Soviet forces there. This underlines

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    the importance of early agreement on a comprehensive and global chemical weapons ban, and, of course, the early withdrawal of Soviet troops from Afghanistan.
    Mr. Bright: Bearing in mind the attitude of the Soviet Union towards chemical weapons and the growing concern about their use, especially in the middle east, can any light be shed on some general progress towards the control of those weapons that are especially nasty? Most people certainly believe that it is as important to control chemical weapons as it is to control nuclear weapons.
    Mr. Renton: I agree with my hon. Friend that any report of the use of chemical weapons is very disturbing, especially in the middle east, and their use in the Iran-Iraq war. We are slowly making progress in Geneva towards a comprehensive ban on the production and stocking of chemical weapons. My hon. Friend will be aware that the British Government, at that conference last summer, tabled their own initiative on the crucial question of challenge inspection. There is still a great deal of hard pounding to be done about the detail of our proposals and we shall continue to discuss those matters in the weeks and months ahead in the hope of making further progress.
    Mr. Ron Brown: While Afghanistan has suffered from black propaganda in the past, which has alleged all sorts of atrocities—many people suffer in a civil war—may I ask the Minister at least to welcome Dr. Najib's ceasefire proposals, which would lead to an early withdrawal of Soviet troops? Will he go further and invite the Afghan leaders to London to discuss and encourage that initiative? If the Minister wants peace, why does he not encourage it?
    Mr. Renton: The hon. Gentleman can accuse us of many things, but I do not think that he can accuse us of controlling Jane's Defence Weekly, including the issue of 22 November, which reported the further use of chemical weapons by Soviet troops in Afghanistan.
    With regard to the hon. Gentleman's wider point, the Soviet ambassador came to my office yesterday afternoon to discuss the recent proposals surrounding the ceasefire. I made it abundantly clear that we would welcome any move that could lead to the halting of the bitter fighting in Afghanistan over the past seven years. At the end of the day, we trust that those moves will lead to a Government in Kabul who are truly representative of all the Afghan people and not just of the Communist party, and that they will also lead to the early and complete withdrawal of Soviet troops.
    Mr. Lawler: When my hon. Friend next meets the Soviet ambassador, will he draw to his attention—indeed, I draw this to the attention of Opposition Members—the experience directly related to me last week by an Afghan refugee of the use of chemical weapons by Soviet forces? When my hon. Friend meets the Pakistan ambassador on his arrival in this country in the next few weeks, perhaps he could discuss with him the level of British aid to Afghan refugees, given that they are still arriving to the tune of about 79,000 a month.
    Mr. Renton: I note carefully what my hon. Friend has said. We have contributed many millions of aid to the Afghan refugees over the last six years, and I should like to take the opportunity to express the support that I am sure the whole House feels for the very great effort that Pakistan has made to take Afghan refugees, notably into
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    the North-West Frontier Province, where there are more than 3 million refugees. That is one of the largest settlements of refugees in the world.
    Mr. Winnick: As a sponsor of the early-day motion in January 1980 opposing Soviet military intervention in Afghanistan, may I point out to the Minister that I have not changed by view and that I, for one, am very pleased that what the Russians have done in that country has not succeeded? If the new Soviet leadership wants to show good faith, it should withdraw completely from Afghanistan, but does the Minister agree that it is somewhat odd for people who defended and justified the Suez aggression and what the Americans did in Vietnam to be critical of the Soviet Union in Afghanistan?
    Mr. Renton: I am pleased to find myself in unusual agreement with the hon. Gentleman on the first part of his question. Perhaps he will make his point of view better known to his hon. Friends further down the Benches so that they, too, may have an unusual alliance. I agree that it is extremely important that the Soviet troops should withdraw totally as part and parcel of the movement towards a genuinely representative Government in Kabul. On the second part of his question, I do not agree with him. I cannot see any analogy in what he says. Let me remind him that the Soviet invasion of Afghanistan has caused 5 million people to leave that country. There has been no such exodus of refugees elsewhere in recent times. That is one reason why we look very much at the moment for a total withdrawal of the Soviet troops.

    EC (United Kingdom Presidency)
    Mr. Cashasked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on achievements made during Britian's presidency of the European Community.
    Dr. Michael Clarkasked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on achievements secured during Britain's presidency of the European Community.
    The Minister of State, Foreign and Commonwealth Office (Mrs. Lynda Chalker): A full account of achievements under the United Kingdom presidency has been placed in the Library of the House. Among the most important, I would emphasise the crucial importance of agreement on common agricultural policy reform; the adoption of more internal market measures than in any previous half year; and the adoption of an action programme for employment growth and agreement on measures to help small businesses.
    Mr. Cash: Will my hon. Friend accept the congratulations of the Government side of the House on the very significant achievements made by herself and by the Secretary of State and other Ministers during the extremely important period of our presidency? Will she also accept our congratulations on developing the action programme for small and medium-sized businesses to promote enterprise and employment both in this country and in the Community as a whole? In regard to African affairs, does she agree that the progress on relations with the front-line states has made a significant contribution to stability in that region?
    Mrs. Chalker: I am grateful to my hon. Friend for his kind remarks to my right hon. and learned Friend, myself

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    and other Ministers who have been in the forefront of activity during the last six months of the British presidency. I am particularly glad that the help for small businesses, which my right hon. and learned Friend the Paymaster General has pushed so hard, has been agreed and that Finance Ministers were able in November to make available new loan facilities worth over £1 billion for small firms to help them get access to the new technology which they so much need. Proposals have also been made for the VAT threshold for small businesses to be increased, making it easier for small firms to establish themselves. The action programme on employment which was adopted in December will also help people starting their businesses and provide assistance with training and counselling for the long-term unemployed.
    On South Africa, the United Kingdom presidency led the 12, in their wish to take positive measures, to help the front-line states by co-ordinating our activity. We have, of course, announced additional help of over £15 million over five years for southern Africa and £12 million for black South Africans. I might add that the European Community allocation for 1987 is 15 mecu compared with 10 mecu in 1986.
    Dr. Clark: I, too, would like to congratulate my hon. Friend and her colleagues on their achievements during the British presidency, especially on the 48 achievements which are listed in the document which is to be found in the Library. May I ask where there was any achievement to ease the movement of commercial vehicles across internal frontiers and customs posts in the Community?
    Mrs. Chalker: I am grateful to my hon. Friend for his remarks. Achieving 48 measures concerning the internal market was a record that has never been equalled by any other presidency. [Laughter.] As the aim is to help business and employment throughout the Community, I should have thought that this was a serious matter, not a humourous one. Progress has been made with border facilities, in that we shall reduce the number of documents needed from 17 to 1. We hope that further improvements will be made during the next few months under the Belgian presidency.
    Sir Russell Johnston: Does the Minister agree that the British presidency would have been greatly enhanced if it had been marked by British entry to the exchange rate mechanism of the European monetary system and by a clear commitment to proportional representation for the next European elections? Has the Minister observed that both those propositions are strongly supported by the President of the European Parliament, Sir Henry Plumb, who I should like to congratulate?
    Mrs. Chalker: I am sure that the whole House will join the hon. Gentleman in congratulating Sir Henry Plumb on his election as President of the European Parliament. [Interruption.] As for the exchange rate mechanism, of course the Government recognise the European and national political and economic advantages of joining it, but the Government have made clear their wish to do so when the balance of the argument is in favour of entry. The hon. Gentleman must recognise that one of the difficulties is that sterling, like the German deutschmark, is a widely traded currency. There is at present only one such currency in the exchange rate mechanism, and the introduction of
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    a second could put it under strain. That would be damaging to the whole of the European Community. That is why we need to be sure that the circumstances are right.
    I note what the hon. Gentleman said about proportional representation. I have noted carefully the views of the President of the European Parliament, and I shall see him tomorrow to discuss his views further.
    Mr. Madden: Does the Minister not believe that Britain's reputation in Europe and elsewhere has been seriously damaged by the Foreign Office spending British taxpayers' money on inviting two South African Nationalist Members of Parliament to visit Britain? They represent a country which has detained hundreds of people, including young children, which has a propaganda regime that would be the envy of Dr. Goebbels, and which has launched aggressive acts against neighbouring, independent and sovereign states.
    Mrs. Chalker: The hon. Gentleman and the House will know that I hold no brief for the South African Government. I have to say, however, that the Central Office of Information has a number of sponsored visits, which are to exchange information. They are made available widely to a large number of people with whom the Government would not necessarily agree. Following the policy that, to extend dialogue and to try to influence cannot be a bad thing, I think that the exchanges which those two people have obviously had with people in the United Kingdom will have been nothing but a force for good to help impress on the South African Government the views of the British Government and people about that Government's actions at present.
    Mr. Temple-Morris: Were any steps taken during our presidency to achieve a common European view towards encouraging some sort of compromise between the United States and the Soviet Union over the strategic defence initiative, bearing in mind that, in the end, strategic arms control and disarmament depend on such a compromise?
    Mrs. Chalker: As my right hon. and learned Friend said this afternoon, this matter does not fall within the competence of European political co-operation or the European Community. Obviously, Ministers have had discussions in Western European Union and other forums. We work closely together on issues of such major importance to every country concerned. We shall continue to do so, but within the European Community this aspect does not arise.
    Mr. Pike: How can the Minister claim that reforms of the common agricultural policy are an achievement when the majority still view the common agricultural policy as a disaster, damaging to the economy, and a lead weight around the neck of the Common Market, dragging it down to bankruptcy? When will the Government take positive steps to reform that policy?
    Mrs. Chalker: I am not sure where the hon. Gentleman has been recently, but my right hon. and learned Friend and I and many other Ministers have repeatedly said that reform of the common agricultural policy was not only urgent but vital for the future of the Community. That is why, at the December meeting of Agriculture Ministers, we agreed on an 8·5 per cent. cut in milk quotas over the next 15 months, plus a further 1 per cent. to be taken out

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    of production through the increase in the super levy and the tighter application of quota arrangements. We will make a total cut of 9·5 per cent. in the milk quota.
    Further, we have agreed that, with that reduction in milk production, there will be a major stock disposal scheme for 1 million tonnes of butter, and we shall cut back by about 165,000 tonnes the amount of beef being brought into intervention. These measures will save £1·3 billion over the next three years. That was done under the British presidency. We are determined to reform the common agricultural policy, and we had agreement in the Community, under our presidency, to do so.
    Sir Anthony Kershaw: Is my hon. Friend aware that if the hon. Member for Bradford, West (Mr. Madden) had cared to attend the Foreign Affairs Select Committee session this morning he would have heard a fruitful and honest discussion with one of the South African Members of Parliament to whom he referred, which might lead towards a peaceful and amicable solution to the South African problem in due course?
    Mrs. Chalker: I am delighted to hear from my hon. Friend that such a discussion took place during the Foreign Affairs Select Committee meeting this morning. It entirely bears out my answer to the hon. Member for Bradford, West (Mr. Madden) that discussion should take place and that we can influence matters if we lift our eyes above the low parapet at which he sets his.
    Mr. George Robertson: Is not the legacy of the British presidency of the European Community a financial shambles, which means that the European Community still has no agreed budget for 1987? A trade war with the United States of America is looming and it threatens to cause long-term damage to European and United States relations. [Interruption.] When Conservative Members do not want to hear certain points, the heckling starts. The superficial deal on agriculture prices has still not spared us the spectacle of huge stocks of cauliflowers being destroyed simply to hoist their price to the consumer. Is that not the real, poor record to set against the 48 propaganda points that have been circulated among Conservative Members?
    Mrs. Chalker: There is no time when the hon. Gentleman is less convincing than when he tries to pull holes in a real and certain achievement. Indeed, there have been achievements. It is right that there is no Community budget for 1987 at present. The Council of Ministers has refused to agree a budget that exceeds the minimun rate of increase laid down in the budgetary procedure. A budget cannot be adopted in the absence of Council agreement. We can proceed on the basis of one twelfth, which allows the Community at least to get on with some of its business. The Community has taken a firm stand over United States trade relations. The Commission has our full support in the present negotiations. We shall do our level best to reach a negotiated agreement that will make retaliatory measures unnecessary.
    Sir Anthony Grant: Now that my right hon. and learned Friend the Secretary of State has finished a most distinguished period in the presidency of the Community, will the Foreign and Commonwealth Office apply its mind to the broader Europe of the 21 countries of the Council of Europe, which are very much concerned with the problem of human rights—in fact, much more so than
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    the Community? Will my right hon. and learned Friend persuade his colleagues in the Council of Ministers to be much less stingy with the amount of money that they make available to that important organisation?
    Mrs. Chalker: We are extremely appreciative of the excellent work that the Council of Europe has done, not only on human rights, but on the drugs issue. I shall carefully bear my hon. Friend's comments in mind.

    Afghanistan (Human Rights)
    Mr. Rostasked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement about human rights in Afghanistan.
    Mr. Eggar: Large-scale violations of human rights continue. These are documented in the recent report of the United Nations special rapporteur. A report by Amnesty International includes accounts of the complicity of Soviet personnel in the torture of prisoners. We are deeply concerned at these allegations and have made that concern clear to the Soviet Government.
    Mr. Rost: What representations can my hon. Friend make about the dreadful, shameful plight of the refugees?
    Mr. Eggar: We have obviously given considerable assistance to Afghan refugees. There are 5 million refugees outside Afghanistan—more than one third of the population in 1979. We are continuing to assist in meeting their needs. Of course, the answer to the refugees' plight is the withdrawal of the occupying Soviet forces which still remain in Kabul and outside it.
    Mr. Heffer: Although I totally accept the idea that we must make it absolutely clear to the Soviet Government that we are in favour of human rights in Afghanistan and elsewhere in eastern Europe, will the Minister assure us that the Government will not adopt a double standard but will be in favour of human rights in places such as Chile, Guatemala and South Africa, and that they will not take a one-sided view of human rights, as Conservative Members often do?
    Mr. Eggar: If the Soviet Union and the Kabul regime now wish to permit a genuine settlement to bring peace and freedom to the Afghan people and to enable them to determine their own future, we, of course, would welcome that change of heart, but so far we have little evidence of a determination to bring about a final, peaceful settlement in Afghanistan.
    Mr. Heffer: Give us the answer.
    Mr. Eggar: With regard to the second part of the hon. Gentleman's question, we condemn human rights violations wherever they may take place.
    Mr. Terlezki: In relation to the violation of human rights in Afghanistan and the 5 million refugees in Pakistan who are sheltering there and are not able to return to their own country, does my hon. Friend agree that at the Vienna conference the Soviet Union must be reminded time and time again that the 5 million refugees in Pakistan must all be able to return home and that the 5 million people in the Soviet Union who are in slave labour camps and psychiatric hospitals must also be released?
    Mr. Eggar: I entirely agree with my hon. Friend. I assure him that at the Vienna CSCE conference our

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    delegation and I—I was there just before Christmas—have taken every possible opportunity to bring the attention of the Soviet authorities to human rights abuses in the Soviet Union and elsewhere.

    Vietnamese Refugees
    Mr. Dubsasked the Secretary of State for Foreign and Commonwealth Affairs how many Vietnamese refugees there are in Hong Kong; how many landed there in 1986; and how many are in closed camps.
    Mr. Renton: On 1 January 1987 there were 8,039 Vietnamese refugees in Hong Kong, of whom 4,527 were in closed camps. There were 2,074 arrivals in 1986, and 3,816 refugees from Hong Kong camps were resettled elsewhere, so that the number in the camps fell by 1,742 in the course of the year.
    Mr. Dubs: Does the Minister agree that there is an urgent need for further international discussions to get people out of those camps, and that other countries can be expected to accept some refugees only if Britain sets a lead? Will the Minister confirm that there is no intention of repatriating those Vietnamese refugees who are in the camps in Hong Kong, and that there is no intention of ever turning away any further refugees who arrive by boat in Hong Kong?
    Mr. Renton: I should like to stress that Britain has a good record for accepting refugees from Indo-China. We have accepted almost 20,000 refugees, including 12,000 from Hong Kong. However, I agree with the hon. Gentleman that the continuing arrival of refugees in Hong Kong is a matter of great concern to the people and the Government of Hong Kong. Therefore, we are consulting other major resettlement countries and the United Nations High Commission for Refugees to see what can further be done at present.
    The issue of repatriation to Vietnam was mentioned in a recent debate in the Legislative Council in Hong Kong. The hon. Gentleman and I will agree on the fact that repatriation to Hong Kong can take place only when we and other major resettlement countries are much more convinced than we are now about, for example, human rights in Vietnam and how such migrants would be treated and looked after if they went back to Vietnam.
    Mr. Bowen Wells: Can my hon. Friend tell the House how many of the refugees in Hong Kong are fleeing from the unemployment and depressed economic conditions in Vietnam and are not, in any way, political refugees? Having made that assessment—I hope that he has made it, and if he has not I hope that he will do so—will he arrange for those people quickly to be returned to Vietnam with guarantees from the Vietnam Government about their human rights? It is clearly wrong for Hong Kong to accept people who are fundamentally seeking economic relief from their conditions, and not political relief.
    Mr. Renton: The situation is not quite as simple as my hon. Friend has set out, although I know of his deep interest in the problem. At present there is no screening of Vietnamese refugees entering Hong Kong. It would be possible to establish those refugees who are economic migrants, to use a jargon phrase, and those who are genuine political refugees only if there was such a process of detailed screening. However, even then it is questionable whether one would necessarily arrive at
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    totally correct answers. That is one of the problems facing all the major resettlement countries. I have already discussed the situation in Vietnam when I answered a previous question, but I am sure that we could be satisfied with the prospect of returning to Vietnam those who were not political refugees only if we were more satisfied than we are now about human rights conditions in Vietnam.
    Sir Russell Johnston: Does the Minister agree that even if he were successful, as the hon. Member for Battersea (Mr. Dubs) has suggested, in improving the quota of refugees accepted by different countries, including our own, there would still be a number who, because of age, lack of linguistic knowledge or narrow work experience, would find it very difficult to be resettled anywhere? What will happen to those people when the transfer of power takes place?
    Mr. Renton: That is still 10 years away. However, the hon. Gentleman has put his finger on a very sensitive question. That is precisely what is worrying Hong Kong, and it is because of that problem that we are currently having further discussions with the major resettlement countries and talking to the UNHCR, which has a new dynamic commissioner, about how we shall deal with those problems in the long term.
    Mr. Sims: Does my hon. Friend agree that there is a moral obligation on the part of the people of the free world in Asia, as well as in America and Europe, not only towards the Vietnamese refugees, but towards the people and Government of Hong Kong, who have fed and sheltered every refugee who has appeared there and who have not turned a single one away? Is it not now time for a positive initiative to be taken by Her Majesty's Government to get international co-operation to relieve Hong Kong of the unreasonable burden that that country has had to shoulder for far too long?
    Mr. Renton: I accept what my hon. Friend said. However, one should never underestimate what the major resettlement countries have done in recent years in taking refugees out of the Hong Kong camps. For example, there were 24,000 departures in 1979 and 3,800 last year. Every year a great quantity of refugees have been accepted by the major resettlement countries precisely for the reason mentioned by my hon. Friend—a sense of obligation. Obviously, we now have to look at what to do with the 8,000 refugees who remain in the camps. That is a matter of great worry to Hong Kong, as expressed in the recent Legislative Council debate, and that is precisely what we are consulting about at present.
    Mr. Anderson: May I advance what was said by my hon. Friend the Member for Battersea (Mr. Dubs) about the case for seeking to trigger a response from our allies by our own example in relation to the Vietnamese refugees? If, as the Minister says, the long-term key to the problem lies in Hanoi, why have the Government not taken any initiative with our United States allies in seeking to open negotiations with the Vietnamese Government?
    Mr. Renton: I am somewhat surprised by that question from the hon. Gentleman, who knows the situation in south-east Asia well. He knows the position on human rights in Vietnam, and he knows that Vietnam is currently supporting an invasion of Cambodia and that there are more than 100,000 Vietnamese troops in Cambodia. Therefore, it is rather ridiculous to chide us for not yet

    889
    making direct approaches, with or without other countries, to Hanoi when such an intolerable human rights situation remains in Vietnam. We have to consider with other major resettlement countries whether there is a process of pressure that we can bring to bear on Vietnam under which conditions will so improve in that country,
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    for example, by the withdrawal of Vietnamese troops from Cambodia, that it might be possible to suggest that refugees could go back. If they were sent back at present, I am sure that no one would object more strongly than the hon. Gentleman.

Devonport Dockyard
3.32 pm
The Parliamentary Under-Secretary of State for Defence Procurement (Mr. Archie Hamilton): With permission, Mr. Speaker, I should like to make a statement on the Devonport dockyard.
My right hon. Friend the Secretary of State announced yesterday, in following up an answer to a question from my hon. Friend the Member for South Ribble (Mr. Atkins), that the Government are now satisfied that there exists the basis for an advantageous contract to be placed for the future operation of Devonport dockyard with Devonport Management Limited, which is a company formed by Brown and Root (UK) Limited, the Weir Group plc and Barclays de Zoete Wedd Ltd. I am sorry that the Official Report has not yet printed my right hon. Friend's answer. However, I did write yesterday to those Members most concerned.
All three companies in the consortium are British, but Brown and Root is a United Kingdom subsidiary of the United States Halliburton company. As the hon. Member for Clackmannan (Mr. O'Neill) will recall from our discussions of the Dockyard Services Bill, the upper limit which we set for foreign shareholding in the companies bidding for the contracts was 30 per cent. In determining whether a particular shareholding should be considered foreign, account is taken of the parent companies. On that basis, Brown and Root's share in Devonport Management Ltd. has been set at 30 per cent.
The House will recall that, in our paper to the trade unions of 4 December, we announced our preferred contractor for Rosyth. My right hon. Friend is at this moment chairing a meeting with general secretaries of eight unions to hear their views on that paper, before he takes a final decision.
In forwarding the paper on Devonport to the unions yesterday, my right hon. Friend proposed a meeting with them on 13 February to discuss that paper. No contract has yet been placed, and my right hon. Friend has said that he will do so only when the unions have had an opportunity to give him their views.
Mr. Martin J. O'Neill: I am grateful to the Minister for making that statement. I wish that he had been able to do so for Rosyth as well when the occasion arose. However, we are disappointed—and I am sure I speak not only for Opposition Members but for the people of Devonport, who I imagine will not be represented here this afternoon. None of us is convinced by any of the claims made by the Government on the future of the dockyards. Will the Minister confirm the story in the Western Mail this morning that the number of redundancies likely to follow the change of contractor will be about 4,000?
Will the Minister further confirm that, although Brown and Root has only a 30 per cent. share, that is the highest possible share that it could have, given that it is American-owned, and that its secondary position in the consortium is little better than a financial fiction, as everyone knows that it will be the lead in the contractor consortium? Will the hon. Gentleman elucidate and give some information on why the Lazard group withdrew at the last possible minute—only yesterday morning—from the consortium, and was replaced by Barclays de Zoete Wedd?
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Does the Minister recognise that the work force at Devonport will be angered almost beyond belief by that American takeover of their yard, and that those are loyal men, who have served their Queen and country for decades, and who resent being reduced to the level of chattel slaves, to be handed over to the Americans? That is what the transfer of undertakings involves. It is the selling of the work force; it is nothing more nor less than that. It will be opposed, as it has been throughout the campaign by both the work force and Opposition Members.
Mr. Hamilton: I shall deal first with the withdrawal of Lazard from the consortium. That must be the concern of the consortium—it must be up to the consortium to decide who its financial backers are. However, there have been changes in the make-up of all the different consortia that have been bidding for the contract.
On foreign control, as I said, we set the level of foreign shareholding for companies bidding for the dockyard contract at 30 per cent. If a foreign shareholding exceeds that level, my right hon. Friend the Secretary of State will have the power, under the contract, to act where circumstances are contrary to the essential interests of security. My right hon. Friend could terminate the contract if he felt that to be necessary. However, we do not say that a 29 per cent. shareholding would be acceptable in all cases or that a 31 per cent. shareholding would be unacceptable. We can think of examples where even a tiny foreign shareholding would be unacceptable and where a shareholding above 30 per cent. would be acceptable.
Protection of security has always been and always will be a paramount consideration. Devonport Management Ltd is a list X company. That means that, in order to undertake classified defence work, the company has to satisfy the Government's stringent security, physical and personnel requirements, which have existed under successive Governments. There are, of course, many foreign firms that satisfy the Government's security rules.
On manpower levels, in the paper that we issued on the Government-owned plc option in September, we said that, under that option, there were likely to be reductions over a seven-year period of some 5,000 jobs in Devonport and 1,200 jobs in Rosyth. Obviously, those calculations were based on assumptions about possible improvements in efficiency and on forecasts of the amount of unallocated naval and commercial work that the company might secure. It is of significance that the preferred contractors at Devonport believe that, under their management, reductions will be measurably less.
Mr. Keith Speed: My hon. Friend will be aware that under the Admiral Rickover rules, non-United States citizens are not allowed to have any contact with United States navy nuclear propulsion systems. Is it correct that under the contractual arrangements that my hon. Friend has announced, there is a possibility that not only United States companies but United States citizens will be relating directly to our nuclear propulsion systems, and the SSN refitting capability at Devonport dockyard, and thus will be at a considerable advantage from a defence and commercial point of view compared with United Kingdom citizens and the United States nuclear propulsion system, with which we are not allowed to have any interface at all?
Mr. Hamilton: United States personnel might be involved, but they would be security cleared.
Mr. John Cartwright: Will the Minister assure the House that the proposed vesting date of I April for the takeover by the new contractors is not set in stone? If, as seems highly unlikely, all the complicated transitional arrangements are completed by that date, will the hon. Gentleman assure the House that he will delay the takeover until all the problems can he properly sorted out?
Mr. Hamilton: I can assure the hon. Gentleman that the vesting day is 6 April. We have every hope of being able to meet that date.
Sir Peter Emery: Will my hon. Friend assure the House that the major concern of Her Majesty's Government is the essential and successful future operation of the dockyard in relation to the work that has to be carried out? If that is the case, has not Brown and Root played a major part in other British developments, particularly in the North sea? It is an expert in this area. Can my hon. Friend give an assurance that, when considering the future work force, those who are already employed will be given, as far as possible, first preference for the jobs that have to be filled?
Mr. Hamilton: Yes, of course I can give my hon. Friend that assurance. It is quite true that Brown and Root is bringing in great expertise from outside. If we consider the development of the oil potential of the western approaches, I am sure that this will be of enormous benefit to Devonport. It will remain the most important dockyard dealing with Royal Navy refits, which still remain an absolutely essential part of our capacity to keep our ships afloat.
Mr. Michael Foot: Will the hon. Gentleman take into account the fact that this proposal, as originally put to the House of Commons, was bitterly opposed in different parts of the House and that it would have been all the more bitterly opposed on Second Reading and during the other stages if it had been suggested then that a very powerful foreign holding was to play a part in the final result? The hon. Gentleman referred to the meeting with the unions. In the light of the Government's humiliating defeat when this measure went through the House of Commons and the other place, will he give an absolute assurance that, if the work force is still opposed to this proposition, the Government will not go ahead with it, at least until the electorate has had a chance to pronounce upon it? The people of this country are not prepared to see Devonport dockyard handed over to profiteers and people who will not be able to serve the country as they have done for generations.
Mr. Hamilton: I cannot give the right hon. Gentleman that assurance. The House has made its position quite clear on this issue. I am afraid that I do not go down the road of sharing his paranoia of anything to do with the Americans. I believe that Brown and Root will have a great contribution to make to the management of these dockyards.
Mr. Robert Hicks: Is my hon. Friend aware that the Plymouth sub-region already has very severe economic and social problems, sadly comparable to those in any part of the United Kingdom? In view of this increased job loss, what efforts will his Department make to alleviate the position, in terms of job
894
training and the attraction of alternative industry to the area? Does my hon. Friend not agree that his Department—not just the Departments of Employment and of Trade and Industry—has a responsibility, in view of the decision that has been taken this week?
Mr. Hamilton: I sympathise with my hon. Friend on that point. But the difficulty is that the work load in the Devonport dockyard is falling. Therefore, I do not think that it is the job of the Ministry of Defence to subsidise jobs in Plymouth. The fact is that my right hon. Friends the Secretaries of State for Employment and for Trade and Industry are mainly concerned with Government support for the area. I believe, however, that the preferred contractor whom we have selected will provide the best possible opportunities for work to be brought into the dockyard.
Mr. Gordon Brown: Are we now to have Trident courtesy of the American Government, helicopters courtesy of Sikorsky, early warning aircraft courtesy of Boeing, and the refit of the majority of our naval frigates and submarines courtesy of Brown and Root of Delaware? Will the Minister tell us exactly how many jobs will be put at risk by subordinating the interests of national security to those of commercial gain? Will he not realise even at this late stage that the defences of this country should be under the control of this country?
Mr. Hamilton: I do not believe that the United States would feel that it is subordinating its national interests by accepting weapons systems from here. There is a two-way trade, and I welcome it.
Mr. Robert Atkins: As one whose great great great grandfather was party to building the Plymouth-Devonport dockyard and as, therefore, I have an interest in it, may I ask my hon. Friend to confirm that the contract that his right hon. Friend has negotiated is a very tight one, giving the company the responsibility to find the money for redundancies and to ensure that there is not an excessive profit on non-competitive naval work? Will my hon. Friend also confirm that this contract, if it is completed, will provide, through the company. A much wider range of job opportunities, in that the company will have much wider world wide support, which will enable it to put contracts the dockyard's way?
Mr. Hamilton: That is absolutely true. The dockyards will be much more competitive if they become more efficient, because they will be able to get work from outside. I am convinced that Brown and Root has every opportunity to bring in such work. It is worth making the point that the combined savings of the two dockyards at Devonport and Rosyth will be about £320 million over 10 years.
Mr. Dick Douglas: Will the Minister take cognisance of the point made by his hon. Friend the Member for Ashford (Mr. Speed) about the personnel who may be in control of this consortium? What information can he give the House about the dominant role that Brown and Root will play in the selection of top personnel? Will he ensure that these top personnel are United Kingdom citizens so that vital information is not leaked across the Atlantic to a company that is highly engaged in defence contracts, especially in the Houston area? Will he not confirm that, despite all the protestations of unions and others, the Government have rolled on in

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their merry way with the idea of keeping to the vesting date of 1 April 1987 that they originally had in mind and that the whole process of consultation has been nothing but a farce?
Mr. Hamilton: The process of consultation has not been a farce. The unions have had six weeks in which to consult their members and that was on an extended timetable which the unions proposed. I understand that they have finished their consultations in Rosyth. It is unfortunate that they left their Devonport consultations until the last of these six weeks. Be that as it may, last week's weather may have made consultations more difficult. In the circumstances, we are prepared at today's meeting to consider Rosyth and the preferred contractor for it that we announced in December. We shall shortly issue a further paper on Devonport about the way negotiations have proceeded there and we shall invite the unions' views on that when they have considered that paper. I hope the House will agree that this is a sensible way to proceed.
Mr. Gerrard Neale: I regret that I cannot report to the House the occupation of my great great grandfather. There is a common view in Devon and Cornwall about the need for a good future for Devonport, but there is no common view that what my hon. Friend is doing is wrong. Many people feel that it is perfectly sensible for him to look into proposals of this kind, which offer a better guarantee for the introduction of new work to the dockyard.
Mr. Hamilton: That is really the significant point, and I am grateful to my hon. Friend for making it. If the Devonport dockyard remains in the ownership of the taxpayer as a Government-owned plc, there will be significant job losses—5,000 of them in Devonport. The deal that we have made with Brown and Root says that the job losses will be somewhat less and the company offers the opportunity of bringing in more work.
Mr. Tam Dalyell: It would not be doing the Minister an injustice to suggest that he was a bit vague about the whole matter of foreign shareholdings. He said that it might be 29 per cent. and that that might not be acceptable, but that 31 per cent. might be all right. How do the Government know the exact foreign shareholding, given that there are nominee shareholders, which may make it difficult to know the percentage? Is not this all a bit of a farce?
Mr. Hamilton: It is not at all a farce. There is always difficulty about knowing precisely the number of shareholders in any company, but we will do our best to monitor that.
Mr. Patrick Nicholls: Does my hon. Friend agree that the immoderate way in which American involvement is attacked by the Opposition will cause a great deal of fear to the many tens of thousands of people in Britain who derive their living from working for American companies or for companies with American involvement? Does he also agree that the 45 per cent. of the shares held by Barclays de Zoete Wedd would be available for take-up by British companies, including the local dockyard management consortium, and that that shows that the overwhelming influence will be national and not international or American?
Mr. Hamilton: I can certainly confirm that. The Barclays de Zoete Wedd holding is 45 per cent. and, with the agreement of the Government, some or indeed all of that may be made available to British companies and, I hope, employees as well.
Mr. D. N. Campbell-Savours: Will not the people of Plymouth be very angry tonight when they find out that not a single Member of Parliament from Plymouth is in the Chamber when D-day, D for Devonport, is being debated? When the Minister says that fewer jobs will be lost, will he give us a time-scale? The Minister said that the in-house offer was a loss of 5,000 jobs over seven years. Is it not possible that 4,000 jobs will go within two years under the proposals that the Government have accepted? Can we have a straight answer to that question?
Mr. Hamilton: The scale of job losses and what period they are spread over are confidential matters between the Government and the contractor. I am afraid that I am unable to answer for the people of Plymouth.
Mr. Tony Marlow(Northampton, North): As I understand that NATO, which includes the United States, has kept the peace for the past 40 years or more, why is it that the knee-jerk reaction of the Opposition is one of rampant, paranoid, negative and spiteful hostility to the United States?
Mr. Hamilton: As my hon. Friend says, it is remarkable that we are keen to attract American investment into Britain, but when a good company comes in to take over the management of this dockyard, there is this extraordinary reaction, which will do nothing but damage to the prospects for jobs in this country.

Pilkington plc
Mr. Kenneth Hind: On a point of order, Mr. Speaker.
Mr. Speaker: Does it arise out of questions?
Mr. Hind: No, Sir, it arises out of yesterday's business, and it is of some importance. Yesterday, in the debate on the north-south divide, the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) said:
"after Pilkingtons had been forced to take a number of decisions to protect itself against the merger, which are deeply damaging to the long-term interests of that company."—[Official Report, 20 January 1987; Vol. 108, c. 768.]
What was suggested by the right hon. Gentleman—
Mr. Speaker: Order. There must be a point of order that I can answer. I am not responsible for what is said in debate in this place.
Mr. Hind: Pilkington's management has told me that no such—
Mr. Speaker: Order. The hon. Gentleman will have to find other ways of raising the matter. It is patently not a matter of order for me.
Mr. Patrick Nicholls: On a point of order arising out of questions, Mr. Speaker. Bearing in mind the point made by the hon. Member for Workington (Mr. Campbell-Savours) about the lack of Members representing Plymouth in the House—
Mr. Speaker: Order. That is not a matter of order, either.

Rent Control (New Lettings) Abolition
3.52 pm
Mr. Michael Brown: I beg to move,
That leave be given to bring in a Bill to amend the Rent Acts to permit new lettings to be free of rent controls.
The Bill is designed to enable more people in Britain to be housed. One of the problems of housing in Britain is homelessness. Empty homes, whether in the public or private sectors, are a waste.
It has been said:
"Local authorities estimate—these are the only estimates we have—that in England 545,000 private sector homes were empty in April 1985. Nearly 100,000 of them were in London, where the problem of homelessness is greatest. Many of those homes, but not all—even some needing refurbishment—could be let to people who need them if landlords were not inhibited by the effects of the Rent Acts."—[Official Report, 19 February 1986; Vol. 92, c. 381.]
Those are not my words, but the words of my hon. Friend the Minister for Housing, Urban Affairs and Construction, who spoke so eloquently on 19 February 1986. How right he was.[Laughter.] Opposition Members may scoff at those words, but they were true then and, if they were true then, they are even more true today.
We all recognise that there is a problem of homelessness, and that over 500,000 homes are available in Britain. Surely there is little doubt, even among those blinkered Opposition Members, that if we seriously want to do something about the problem of homelessness, it is the Rent Acts which are standing in our way.
I acknowledge that there are people who benefit from the Rent Acts. Indeed, my Bill specifically excludes, by both its short and long titles, those people who benefit from the Rent Acts. But there can be little doubt that at present in Britain there is a demand for rented accommodation which is not being met because of the Rent Acts, which have been on the statute book for several decades.
Surely the time has now come for us to give the British people the right to rent. There are people in Britain who want to be tenants in council houses and they still have that right. There are many people who wanted the right to become home owners, and my hon. Friend and his predecessors gave them that right. But there are single people in Britain who come to London for the first time to start their working career, as I did in the early 1970s: I must be typical of many hundreds of thousands of single people who, in their early twenties, leave the provinces for London and face the problem of a shortage of accommodation. They would be willing customers of the suppliers of private rented accommodation.
I recognise that one must go slowly in such matters, but, heaven knows, we have gone at a snail's pace in the past in addressing ourselves to this delicate problem. I also recognise that it would be unfair at this stage to include within the scope of my Bill those who are at the moment beneficiaries under the Rent Acts. But there is little doubt from the statistics of comparison available between Britain and other countries that Britain has a low level of supply of rented accommodation. In West Germany, 36 per cent. of households rent from private landlords; in France, the figure is 32 per cent., and in the United States it is 33 per cent. In Britain it is just 9 per cent. In those other countries, private renting is not the major political issue that it is in the United Kingdom.

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We must ask—the question is posed not by me but by my hon. Friend the Minister for Housing, Urban Affairs and Construction in his excellent speech last year—why we in the United Kingdom seem to concentrate on just two types of tenure—home ownership or council tenancy. There must be an alternative middle way to supply accommodation for those people who wish to have the right to rent.
We know that more than 500,000 homes in Britain are empty. They must be empty because of the restrictions of current and previous legislation. I believe that there is a willingness on the part of the Government to address themselves to the problem of homelessness in a way that no other Government have done in the past.
It may be possible for the Bill to reach the statute book in the present session of Parliament. However, I recognise that that is a big step. If the Bill is given a fair passage this afternoon, it is more likely that it will be a spur to my hon. Friend and his colleagues to ensure that it is included as a firm commitment by the Government in the Conservative party's next election manifesto. The people in Britian who are homeless and looking for rented accommodation and who want to exercise that right to rent will be able to do so only with a Conservative Government.
If I am successful this afternoon, I would dearly wish my hon. Friends in the Department of the Environment to ensure that Government time is made available so that the Government's clear wish can come to pass before the next election. I recognise, eternal optimist though I am, that that might be difficult. I note that my right hon. Friend the Leader of the House is here and he might wish to make Government time available. But if, by chance, there is some difficulty, I urge my hon. Friends to pick up the Bill immediately they are re-elected after the next general election.
3.59 pm
Mr. David Winnick: I begin by congratulating the hon. Member for Brigg and Cleethorpes (Mr. Brown) on raising this matter. He has done us a service by spotlighting what would certainly occur if, by some mischance, this Government were reelected. I remind him that, when the hon. Member for Eastbourne (Mr. Gow) was Minister for Housing, Urban Affairs and Construction, he tried to persuade the Cabinet, of which he was not a member, to bring forward legislation along the lines advocated by the hon. Gentleman today. The hon. Member for Eastbourne was reported in the press as having been quite upset when the Cabinet told him that no action would be taken in that Parliament.
The Cabinet is no less keen and enthusiastic in wishing to see the decontrol of the privately rented sector than the hon. Members for Eastbourne and for Brigg and Cleethorpes. The Prime Minister and her Cabinet colleagues simply consider it unwise to take any action before the next election. That is why, unlike last Friday, the ministerial payroll will abstain today. Eighteen months ago, when I opposed a private ten-minute Bill, it was lost by one vote. I am sure that the ministerial payroll will abstain today and that I shall be proved right.
The present Housing Minister, as the hon. Member for Brigg and Cleethorpes said, has made the Government's
900
position perfectly clear. In February last year, he said that there was little point in putting forward major legislation halfway through a Parliamentary term because of what he described as the destructive attitude which the Labour party was sure to take. If by "destructive attitude" he means that the Labour party would defend the right of private tenants to have protection on rents and security, we plead guilty. We are not ashamed of that.
Moreover, in his speech at the party conference on 7 October last year, the Minister made it clear that the Government, if re-elected, would remove controls and security of tenure from new lettings.
The Minister referred during that speech and on other occasions to "Socialist controls" in the privately rented sector. If they are "Socialist controls" why have they not been removed in nearly eight years of a Right-wing Conservative Administration? Why were these "Socialist controls" agreed to by the Conservatives when the Labour party was in office? The Conservatives made it clear that they would not oppose the Rent Acts being restored?
The hon. Member for Brigg and Cleethorpes was right in one respect—there is an acute housing crisis, but deregulating the privately rented sector would make it far worse. The Conservatives use the same argument that was used when the Rent Act 1957 was going through. In 1956 the right hon. Member for South Down (Mr. Powell), when he was a junior housing Minister said that deregulation would provide more tenancies and more flexibility. The same argument is used today by the housing Minister, other Ministers and the hon. Member for Brigg and Cleethorpes today.
In June 1956, before the 1957 Act came on the Statute Book, there were 6·5 million private dwellings. In 1961, after four years of the Act, there were 5 million. Where were the further dwellings?
The truth is that, once the places became vacant, many of the owners simply sold them off. Therefore, the Act which provided for decontrol led not to more but to substantially less rented accommodation. The Rent Act 1957 led to something else. It led to great homelessness, misery and injustice for many many private tenants and to Rachmanism. It led to the terror that existed in parts of London and other places, where Rachman and his agents were even willing to use Alsation dogs to force tenants out.
When the hon. Member for Brigg and Cleethorpes says that existing tenants will be protected, I say that, if deregulation came along, there would be great harassment and intimidation of sitting tenants, in order to get them out so that the places would become decontrolled and the landlord could let those places without any limits on rent and without any security. Hundreds of thousands of existing private tenants would be greatly at risk if this Government were re-elected and they introduced another Act like the 1957 Act. I say to the Labour Front Bench and to the Labour party nationally that we have a duty and a responsibility to ensure that, during the election campaign, we warn private tenants what is likely to happen if the Tories win.
Many, many people are desperately in need of accommodation, but they will not find that accommodation at a reasonable rent in any deregulated private sector. That is why it is so necessary for local authorities to start building once again. This year, there will probably be even fewer than 30,000 new dwellings built by local authorities and housing associations. So many of our people are

901
desperately in need of housing. They want rented housing, but they will get adequate rented housing at a reasonable rent and with protection only from the public sector.
I call on my right hon. and hon. Friends to oppose this Bill, to ensure that, even in this Tory-dominated House of Commons, private tenants will continue to have that protection.
Mr. Speaker: The question is that the hon. Member—
Mr. Tony Marlow: On a point of order, Mr. Speaker.
Mr. Speaker: Order. I must put the Question.
Question put, pursuant to Standing Order No. 15 (Motions for leave to bring in Bills and nomination of Select Committees at commencement of public business):—
The House divided: Ayes 132, Noes 144.

Division No. 62]

[4.06 pm

AYES

Alexander, Richard

Hill, James

Amess, David

Hind, Kenneth

Ashby, David

Holland, Sir Philip (Gedling)

Atkins, Rt Hon Sir H.

Holt, Richard

Atkinson, David (B'm'th E)

Hordern, Sir Peter

Batiste, Spencer

Howarth, Gerald (Cannock)

Beaumont-Dark, Anthony

Howell, Ralph (Norfolk, N)

Bellingham, Henry

Hubbard-Miles, Peter

Bendall, Vivian

Irving, Charles

Best, Keith

Jessel, Toby

Bevan, David Gilroy

Johnson Smith, Sir Geoffrey

Biggs-Davison, Sir John

Jones, Gwilym (Cardiff N)

Blackburn, John

Jones, Robert (Herts W)

Bottomley, Mrs Virginia

Kershaw, Sir Anthony

Bowden, Gerald (Dulwich)

King, Roger (B'ham N'field)

Brandon-Bravo, Martin

Knight, Dame Jill (Edgbaston)

Brinton, Tim

Latham, Michael

Brown, M. (Brigg & Cl'thpes)

Lawler, Geoffrey

Bryan, Sir Paul

Leigh, Edward (Gainsbor'gh)

Buck, Sir Antony

Lewis, Sir Kenneth (Stamf'd)

Butterfill, John

Lilley, Peter

Carlisle, John (Luton N)

Lloyd, Sir Ian (Havant)

Churchill, W. S.

MacKay, Andrew (Berkshire)

Clark, Dr Michael (Rochford)

McLoughlin, Patrick

Clark, Sir W. (Croydon S)

McQuarrie, Albert

Cockeram, Eric

Marlow, Antony

Colvin, Michael

Mather, Sir Carol

Coombs, Simon

Meyer, Sir Anthony

Corrie, John

Monro, Sir Hector

Dickens, Geoffrey

Montgomery, Sir Fergus

Dicks, Terry

Morris, M. (N'hampton S)

Dover, Den

Mudd, David

Emery, Sir Peter

Neale, Gerrard

Eyre, Sir Reginald

Nicholls, Patrick

Fallon, Michael

Page, Sir John (Harrow W)

Farr, Sir John

Pawsey, James

Finsberg, Sir Geoffrey

Peacock, Mrs Elizabeth

Forsyth, Michael (Stirling)

Powley, John

Fox, Sir Marcus

Proctor, K. Harvey

Galley, Roy

Raison, Rt Hon Timothy

Goodhart, Sir Philip

Rhys Williams, Sir Brandon

Gower, Sir Raymond

Roe, Mrs Marion

Griffiths, Sir Eldon

Ross, Stephen (Isle of Wight)

Griffiths, Peter (Portsm'th N)

Rossi, Sir Hugh

Grist, Ian

Rost, Peter

Ground, Patrick

Rowe, Andrew

Hamilton, Neil (Tatton)

Sayeed, Jonathan

Hannam, John

Shaw, Sir Michael (Scarb')

Harris, David

Shelton, William (Streatham)

Harvey, Robert

Shersby, Michael

Hawkins, Sir Paul (N'folk SW)

Soames, Hon Nicholas

Hawksley, Warren

Speed, Keith

Hayes, J.

Stanbrook, Ivor

Hayward, Robert

Stern, Michael

Heathcoat-Amory, David

Stewart, Andrew (Sherwood)

Higgins, Rt Hon Terence L.

Stokes, John

902

Stradling Thomas, Sir John

Watts, John

Tapsell, Sir Peter

Wells, Bowen (Hertford)

Taylor, John (Solihull)

Whitfield, John

Terlezki, Stefan

Wiggin, Jerry

Thomas, Rt Hon Peter

Wilkinson, John

Thorne, Neil (Ilford S)

Wolfson, Mark

Thurnham, Peter

Wood, Timothy

Townend, John (Bridlington)

Yeo, Tim

Vaughan, Sir Gerard

Walker, Bill (T'side N)

Tellers for the Ayes:

Ward, John

Mr. Eric Forth and

Warren, Kenneth

Mr. Allan Stewart.

NOES

Adams, Allen (Paisley N)

Home Robertson, John

Alton, David

Howell, Rt Hon D. (S'heath)

Anderson, Donald

Howells, Geraint

Archer, Rt Hon Peter

Hughes, Robert (Aberdeen N)

Ashdown, Paddy

Hughes, Roy (Newport East)

Ashton, Joe

Hughes, Sean (Knowsley S)

Atkinson, N. (Tottenham)

Hughes, Simon (Southwark)

Bagier, Gordon A. T.

Jenkins, Rt Hon Roy (Hillh'd)

Banks, Tony (Newham NW)

John, Brynmor

Barron, Kevin

Johnston, Sir Russell

Beckett, Mrs Margaret

Jones, Barry (Alyn & Deeside)

Bell, Stuart

Kaufman, Rt Hon Gerald

Bidwell, Sydney

Kennedy, Charles

Blair, Anthony

Kirkwood, Archy

Boothroyd, Miss Betty

Lambie, David

Boyes, Roland

Lamond, James

Bray, Dr Jeremy

Leighton, Ronald

Brown, Gordon (D'f'mline E)

Litherland, Robert

Brown, Hugh D. (Provan)

Lloyd, Tony (Stretford)

Brown, Ron (E'burgh, Leith)

Lofthouse, Geoffrey

Buchan, Norman

McDonald, Dr Oonagh

Caborn, Richard

McKay, Allen (Penistone)

Callaghan, Jim (Heyw'd & M)

McNamara, Kevin

Campbell-Savours, Dale

McWilliam, John

Canavan, Dennis

Madden, Max

Cartwright, John

Marek, Dr John

Clarke, Thomas

Marshall, David (Shettleston)

Clay, Robert

Mason, Rt Hon Roy

Clwyd, Mrs Ann

Maynard, Miss Joan

Cook, Frank (Stockton North)

Meacher, Michael

Corbett, Robin

Meadowcroft, Michael

Crowther, Stan

Michie, William

Cunliffe, Lawrence

Millan, Rt Hon Bruce

Cunningham, Dr John

Morris, Rt Hon A. (W'shawe)

Dalyell, Tam

Oakes, Rt Hon Gordon

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

O'Brien, William

Deakins, Eric

O'Neill, Martin

Dixon, Donald

Orme, Rt Hon Stanley

Dobson, Frank

Park, George

Dormand, Jack

Parry, Robert

Dubs, Alfred

Patchett, Terry

Eadie, Alex

Pendry, Tom

Eastham, Ken

Pike, Peter

Evans, John (St. Helens N)

Powell, Raymond (Ogmore)

Fatchett, Derek

Raynsford, Nick

Fields, T. (L'pool Broad Gn)

Redmond, Martin

Fisher, Mark

Rees, Rt Hon M. (Leeds S)

Flannery, Martin

Richardson, Ms Jo

Foot, Rt Hon Michael

Roberts, Allan (Bootle)

Forrester, John

Roberts, Ernest (Hackney N)

Foster, Derek

Robertson, George

Foulkes, George

Rooker, J. W.

Fraser, J. (Norwood)

Ross, Ernest (Dundee W)

Freud, Clement

Sheldon, Rt Hon R.

Garrett, W. E.

Shields, Mrs Elizabeth

George, Bruce

Shore, Rt Hon Peter

Gilbert, Rt Hon Dr John

Short, Ms Clare (Ladywood)

Godman, Dr Norman

Skinner, Dennis

Golding, Mrs Llin

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

Gould, Bryan

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

Hamilton, James (M'well N)

Soley, Clive

Hardy, Peter

Steel, Rt Hon David

Harrison, Rt Hon Walter

Stott, Roger

Haynes, Frank

Strang, Gavin

Hogg, N. (C'nauld & Kilsyth)

Straw, Jack

Holland, Stuart (Vauxhall)

Thomas, Dafydd (Merioneth)

903

Thomas, Dr R. (Carmarthen)

Wigley, Dafydd

Thompson, J. (Wansbeck)

Williams, Rt Hon A.

Thorne, Stan (Preston)

Winnick, David

Wainwright, R.

Woodall, Alec

Wallace, James

Wardell, Gareth (Gower)

Tellers for the Noes:

Wareing, Robert

Mr. Terry Lewis and

Welsh, Michael

Mr. David Clelland.

Question accordingly negatived.

Orders of the Day

  Local Government Finance Bill
  COMMITTEE [Progress 19 January]
  [MR. ERNEST ARMSTRONG in the Chair]
  4.17 pm
  Dr. John Cunningham: On a point of order, Mr. Armstrong. I seek your help and guidance on a point of order which is somewhat complex and crucial to the future consideration of the Bill. I gave you prior notice of my intention to raise this point of order, Mr. Armstrong, as I did to the Office of the Secretary of State for the Environment. I am grateful that the right hon. Gentleman is in his place on the Treasury Bench.
  There remains a major difference of opinion about the legal implications of powers in the Bill. The Secretary of State has courteously advised my hon. Friends and myself, both publicly and privately, that our interpretations of the Bill were wrong in law, and we thought it appropriate, therefore, to seek counsel's opinion. That we have done. We have sought two independent opinions on the implications of the powers that the Secretary of State is asking the House of Commons to grant him under the Bill.
  Clause 4(6) provides that subsection (1)
  "shall have effect notwithstanding any decision of a court (whether before or after the passing of this Act) purporting to have a contrary effect."
  Subsection (1) provides:
  "Anything done by the Secretary of State before the passing of this Act for the purposes of the relevant provisions in relation to any of the initial years or intermediate years shall be deemed to have been done in compliance with those provisions."
  The definition of the relevant provisions is to be found in clause 4(2) of the Bill:
  "Part VI of the 1980 Act, section 8 of and Schedule 2 to the Local Government Finance Act 1982, sections 2 and 3 of the Education Act 1986 and section 2 of the Rate Support Grants Act 1986."
  Our advice is that four other statutes are affected and:
  "Accordingly, anything done by the Secretary of State before enactment for the purposes of these provisions is deemed to be done in compliance with their requirements. There is nothing limiting the deeming provision to errors arising out of the erroneous definition, and therefore calculation of relevant and total expenditure."
  We believed that the provisions of the Bill went much wider than that from the outset and the opinion we have received confirms that:
  "The present wording appears quite clearly to cover any procedural impropriety, failure to consider a matter rationally, or other unlawfulness in respect of anything done by the Secretary of State for those statutory purposes."
  During the discussions on 19 January the Secretary of State explained his view as follows:
  "It depends on the subject of the litigation. If it has to do with total expenditure or involves the definition of total expenditure, the Act will prevail over any decision of the court."—[Official Report, 19 January 1987; Vol. 108, c. 643.]
  He went on at some length to support that view.
  It is our view, and that view has been confirmed by counsel's opinion, that that statement is based on a misinterpretation of the clause as it stands. To be

  905
  consistent with the Secretary of State's statement a substantial amendment to the Bill would be required, relating the deeming provisions solely to calculation of total and relevant expenditure otherwise reasonably made under the previous understanding of those terms.
  A similar point arises in clause 6(2) which states:
  "Anything done by the Secretary of State before the passing of this Act for the purposes of Part I of the 1984 Act in relation to the financial year beginning in 1985 or that beginning in 1986 shall be deemed to have been done in compliance with the provisions of that Part."
  Our legal advisers state:
  "This is not restricted to issues arising from total and relevant expenditure, but once more covers other procedural impropriety, irrationality and illegality. By sub-clause (3) any designation of an authority is deemed to have been made in compliance with Part I, even if otherwise unlawfully made, including unlawfulness in no way connected with errors arising from the interpretation of total and relevant expenditure."
  I am setting this out in some length and I apologise but this is a complicated matter. We consider it is impossible to continue discussion on a reasonable, rational or coherent basis unless the Secretary of State's—[Interruption.] The Secretary of State laughs, but we are in this position today only because of the incompetence of the Secretary of State and his predecessors concerning such matters. Shortly we shall come back to discuss the continuing incompetence over which the Secretary of State is presiding.
  It is important to have a full explanation of the retrospective and respective provisions. We have taken this matter very seriously and I seek your help, Mr. Armstrong, concerning the future proceedings of the Committee. We consider that the Committee should not proceed to a final consideration and vote on clause 1 until it has had an opportunity to hear from the Attorney-General about these matters. With regard to discussions of clause 4 and clause 6 of the Bill, it would be appropriate for the Attorney to be in attendance throughout the Committee's considerations. [Interruption.] The Secretary of State is not bothering to listen to what we have to say.
  The Secretary of State for the Environment (Mr. Nicholas Ridley): On a point of order, Mr. Armstrong—
  The First Deputy Chairman of Ways and Means (Mr. Armstrong): Order. I cannot have a point of order on a point of order.
  Dr. Cunningham: I am grateful to you, Mr. Armstrong. Apart from a lack of normal relations between the Secretary of State and the Labour party, the Secretary of State is apparently unwilling to listen to serious arguments about the Bill.
  The Secretary of State's remarks in respect of the Greenwich case which is again due to come before the courts—
  The First Deputy Chairman: Order. The hon. Gentleman is aware that the Committee has already discussed the judicial review. We shall come to clause 4 and clause 6 in due course. The hon. Gentleman may raise those matters at that time, but up to now I have not been aware of any point of order for me.
  Dr. Cunningham: I said at the beginning that this is a complicated matter and I do not apologise for seeking to get it right. It is crucial to the whole discussion of the Bill.
  906
  My point of order is first to seek your guidance, Mr. Armstrong, and to safeguard the Committee's rights in this matter.
  Is it appropriate that we should proceed with consideration of those matters without clarification and is it not in the interests of the Committee that the Attorney should be present to give his view on them? The Secretary of State's remarks and his interpretations made during debate on a previous group of amendments is at issue. I seek your help and guidance.
  The First Deputy Chairman: The interpretations made by the Secretary of State are, of course, matters for debate. The presence of the Attorney or any other Government Minister is not a matter for the Chair. I have no jurisdiction over that.
  Mr. Allan Roberts: On a further point of order, Mr. Armstrong. It appears to us that the purpose of this unique and unprecedented Bill is to validate decisions of the Secretary of State that were deemed illegal by the Attorney-General. The Secretary of State's interpretation of the Bill, in trying to validate his previous illegal action, is wrong. If this legislation becomes an Act, the House of Commons, and indeed the Government, will end up with exactly the same position that we are now trying to correct. My point of order is that the Attorney-General is not just a Government Minister who advises the Government in his official and legal capacity. He also advises the House. It is in order to move, on a point of order, that the Attorney-General should come before a Committee. That has been done in other Committees—not in a meeting of the full House in Committee. It has been moved, on a point of order, that the Attorney-General be required to come to a Committee to give advice. That is what we are seeking today. If that does not happen and we proceed we may finish up in a very difficult situation. We are already trying to put a difficult situation right through this legislation.
  It seems to me that the Secretary of State continually makes illegal actions and mistakes. He cooks the books and asks—
  The First Deputy Chairman: Order. The hon. Gentleman ought to know that, however important the issue may be, the presence of the Attorney-General is not a matter for me. The hon. Gentleman can request, and he has made his request, but he cannot move that the Attorney-General be present. Quite frankly, he has not raised a point of order with me.
  4.30 pm
  Mr. Ridley: Further to that point of order, Mr. Armstrong. I hope that you will be able to protect the Committee from dubious and spurious arguments, based on unnamed legal advice on a point to be raised on a later clause, being trumped up as a spurious and bogus point of order by the hon. Gentleman. We have a lot of work to do and I should like to make progress with the real business of the Committee. The hon. Member for Copeland (Dr. Cunningham) has been wasting the time of the Committee raising matters of substance under a point of order. I hope that you will be able to protect the Committee so that orderly progress can be made.
  Mr. Allan Williams rose—
  The First Deputy Chairman: Order. I listen to all hon. Members who wish to raise a point of order. I am bound

  907
  to say that no point has been raised that is a matter for me. The matters raised are for debate and will come up at the appropriate time.
  Dr. Cunningham: Further to the Secretary of State's point of order, Mr. Armstrong, which he thinks is a genuine point of order. As he has challenged apparently the bona fides of what I was saying, may I point out that the opinion was provided by Mr. Roger Henderson QC?
  The First Deputy Chairman: The hon. Gentleman has raised the matter and I accept that. Even so, it is a matter for debate and not a matter for the Chair.
  Mr. Williams: Further to the point of order, Mr. Armstrong. The important point for hon. Members is that during the debate we have to determine whether we will give the Secretary of State a certain range of powers. In determining whether to give him those powers, the judgment of the Committee will be influenced by whether those powers are being given purely in relation to the future or whether they are also being given retrospectively. We cannot continue with a meaningful debate on the range of powers until we have had legal clarification as to precisely what it is that we are giving the Secretary of State. It is from that point of view that my hon. Friend has said that we need clarification from the Attorney-General as to precisely which range of powers is covered by the retrospective clearance.
  Mr. Andrew F. Bennett rose—
  The First Deputy Chairman: Order. Let me reply to the point of order. The right hon. Gentleman has raised a matter which is a matter for debate. If the right hon. Gentleman or any other hon. Member is not satisfied with the explanation from the Front Bench, he has the opportunity to debate and to vote against it, but it is not a matter for me.
  Mr. Bennett: Further to that point of order, Mr. Armstrong. I appreciate the point that you have just made, but may I put it to you that your duty in the Chair is to try to ensure the orderly consideration of the Bill. As an Opposition, the only way in which we can press the Government for information is by the threat to delay proceedings. I am sure you are aware that regularly in Committee the Opposition have to mount delaying tactics so as to press the Government to make a statement. If we want to make good progress, it would be helpful if the Government would tell us that, when we get to the two clauses where the extraordinary powers for judges are to be debated, they will arrange for the Attorney-General to make a statement. If we are told at this stage that the Attorney-General will be here to make a statement and will confirm either that the legal advice that we have received is correct or that the interpretation of the Secretary of State is correct, it would be possible for us to make fairly rapid progress. But if the Government are not prepared to give that undertaking, the traditional response for the Opposition is to delay and to do everything they can to press the Government to produce a statement.
  I should have thought that you, Mr. Armstrong, were in a position at least to give the Government the opportunity to facilitate progress by finding out whether they wish to say that the Attorney-General will be here to
  908
  make a statement on the legal implications of the points raised by my hon. Friend the Member for Copeland (Dr. Cunningham) a few moments ago.
  The First Deputy Chairman: I am sure that no hon. Member needs permission from me to make his position clear. It is a matter for the Government whether a statement is made. Fortunately, it is not my job, but anyway I do not need to advise the hon. Gentleman about delaying tactics.
  Mr. John Heddle: On a point of order, Mr. Armstrong. Is it not right that the Government seek your protection in this regard, and that now is the opportunity for my right hon. Friend the Secretary of State to put right something that the Opposition have ignored for the last four or five years and to bring the rate support grant that is due shortly into line with the law? Further to that, is it not right that if the hon. Gentleman is demanding the presence in the Committee of my right hon. and learned Friend the Attorney-General at least he should have the shadow Attorney-General with him on the Front Bench?
  The First Deputy Chairman: As the hon. Gentleman knows, these are not matters for me. We ought to proceed.
  Mr. Tony Banks: On a point of order, Mr. Armstrong. Can you advise me whether there is a parliamentary precedent whereby a Standing Committee has moved a motion, debated it and voted to request a Government Minister to attend the Committee to give advice? I should like to know whether there is any precedent which would enable us to move a motion, to vote on it and, if we succeeded in getting sufficient votes, to request a Minister or an Officer of the House to come and advise us.
  The First Deputy Chairman: All Members of the House are members of the Committee and are entitled to come. Fortunately or unfortunately, I cannot command either their presence or their absence. The matters which have been raised are very important but they are matters for debate and not matters for the Chair. I think we should proceed.

  Local Government Finance Bill
    Clause 1

      RATE FUND REVENUE ACCOUNTS
      Dr. Cunningham: I beg to move amendment No. 19, in page 2, line 26, at end insert—
      '(6A) The Secretary of State shall lay before Parliament an annual report on any specification made in respect of subsection (6) above.'.
      The First Deputy Chairman: With this it will be convenient to take the following amendments: No. 20, in page 2, line 26, at end insert—
      '(6A) Specifications made under subsection (6) above must be contained in an Order under this Act which shall be subject to annulment in pursuance of a resolution of either House of Parliament.'.
      No. 21, in page 2, line 26, at end insert—
      '(6A) Specifications made under subsection (6) above must be contained in an Order under this Act and no Order under this subsection may be made unless a draft of it has been laid before and approved by a resolution of each House of Parliament.'.
      No. 48, in clause 2, page 3, line 14, at end insert
      `provided only that any such specification shall require an affirmative resolution of both Houses of Parliament.'.

      909
      No. 51, in page 3, line 14, at end insert
      `Specifications made under this subsection must be contained in an Order under this Act, and no Order under this subsection may be made unless a draft of it has been laid before and approved by a resolution of each House of Parliament.'.
      No. 52, in page 3, line 14, at end insert
      `Specifications made under this subsection must be contained in an Order under this Act which shall be subject to annulment in pursuance of a resolution of either House of Parliament.'.
      No. 71, in clause 3, page 4, line 14, at end insert—
      '(7A) Specifications made under subsection (7) above must be contained in an Order under this Act which shall be subject to annulment in pursuance of a resolution of either House of Parliament.'.
      No. 72, in page 4, line 14, at end insert:
      `(7A) Specifications made under subsection (7) above must be contained in an Order under this Act and no Order under this subsection may be made unless a draft of it has been laid before and approved by a resolution of each House of Parliament.'.
      No. 154, in clause 9, page 7, line 44, at end add—
      '(7) The power may only be exercised provided that there shall have been an affirmative resolution of both Houses.'.
      Dr. Cunningham: There remains, as we have just been demonstrating, considerable concern about the power of the Secretary of State in respect of the Bill. One concern is about the power of the Secretary of State to make specifications regarding local authority accounting practices for the purposes of clause 1. Amendment No. 19 makes the minimal requirement that, once specifications have been made in a given year, the Secretary of State should lay an annual report before Parliament setting out the details. That is not only a reasonable but a sensible requirement. It would give Parliament the opportunity to consider and review what had happened.
      It would also provide a means for Parliament at least to be informed of the implementation of subsection (6) in practice. It would also provide an opportunity for local government accountants to examine the Government's intentions in the exercise of proper professionalism, which we presume this is all about. The accountants would no doubt want to ensure the Government's interventions were met with the most appropriate and uniform response in accordance with accountancy practice. As the Government talk about good and proper practices, presumably they intend also to try to seek uniformity. It is, I understand, at least in part the Government's case that lack of uniformity is one thing that they want to bring to an end.
      Amendments Nos. 20 and 21 call for any specification made under subsection (6) in respect of local authority accounting to be made the subject of an order. Amendment No. 20 provides for a negative order and amendment No. 21 for an affirmative order subject to approval by both Houses. The alternative proposals spring in part from the difficulty of trying to find out the Government's intention and, therefore, the likely importance of any specifications to be made. The Government's attitude is obscure, to say the least. Some of the specifications are likely to be of considerable significance to local authority accounting practice and to the financial circumstances of the authorities concerned.
      Other specifications may be trivial, but at least in the case of more important ones it is important to have some safeguards to allow for parliamentary scrutiny. If no such scrutiny is provided for, it seems clear that the Secretary of State could make changes which have a substantial
      910
      impact on an authority in the forthcoming financial year without there being any recourse to Parliament. That seems unfair and a significant departure from previous practice.
      The power to specify extends to naming additional accounts against which expenditure or income is to be disregarded for purposes of calculating block grant, and possibly even wider purposes. From the point of view of authorities that are under financial pressure, the power in respect of income definitions in particular could have major implications. If our guesswork is right, it is incumbent on the Minister for Local Government to be candid with the House and say what the implications are.
      Other amendments, which we would have liked to have been selected, deal with related matters. Amendments Nos. 50 and 51 would require the affirmative and the negative resolution procedure respectively for orders. Amendment No. 50 would preserve the opportunity of Ministers to make specifications, but require a local authority to have regard to any specification only when determining what to count against its rate fund revenue account.
      Amendments Nos. 71 and 72 would limit the power of the Secretary of State to specify adjustments upwards or downwards to calculations of authorities' total expenditure in any year from 1987–88. The power is a further example of the way in which the Bill goes beyond the simple technical requirement to clarify the law. Amendments Nos. 71 and 72 would require the making of a negative and affirmative order respectively before any such specification could be effective. They seek the kind of safeguards that I spoke of a little while ago.
      I have been brief because, in spite of what the Secretary of State said earlier, it is not any part of our purpose to talk just for the sake of it or unnecessarily to delay the Bill. I hope that I have said enough to allow the Minister to take more time to reply in detail to our fears.
      4.45 pm
      Mr. Michael Meadowcroft: I wish to speak to amendments Nos. 48 and 154. I agree with the hon. Member for Copeland (Dr. Cunningham). I am not anxious to delay the Committee unduly.
      Mr. Tony Banks: Drag it out.
      Mr. Meadowcroft: The hon. Member can speak for himself.
      Much of what we are discussing goes beyond simply rectifying the law. The Government are trying to take powers to determine what should go in what accounts. If the Government want to force through more centralising powers over local government, those powers must lie as far as possible with Parliament rather than with the Government or, still worse, the Secretary of State.
      The alliance amendments are like those proposed by the hon. Member for Copeland. We say in amendment No. 48 that the items that the Government believe should be put in or deleted from a local authority rate fund revenue account should be considered by the House on the affirmative resolution procedure. We have proposed the same, with miscellaneous specifications, under clause 9.
      The House should retain those powers because of the distinction that we would make between accounting techniques or systems employed by local authorities that are legitimate or illegitimate. It is perfectly legitimate for

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      a local authority to do things which it believes are genuinely acceptable in terms of its fiduciary powers and which are what the Government of the day wish to do, and not to rely on a change of Government retrospectively to put money into its funds again.
      A local authority which says that, bearing in mind its understanding of existing Government policy towards local government, it should be able to sort out its accounts to the best advantage of people in its area and pursue what it understands to be Government policy, is acting legitimately. If, however, it decides to do various things with its account in the hope that, before it goes bankrupt, a new Government will be returned and retrospectively put money back into the account, it is acting illegitimately.
      It is important that Parliament should retain its powers of scrutiny and not allow a Government to overrule one course of action and allow the other. If we are to have such centralising powers, Parliament must have powers of scrutiny. I do not want to scrutinise such matters, but that is better than leaving it to the Government.
      Mr. Peter Pike: I hope that amendments Nos. 20 and 21 are carried. In this group of amendments, we have given the Government a choice between them and a more moderate line. Amendment No. 19 is a much more modest version, and the Government should be prepared to accept it if they are at all reasonable.
      I am anxious that we are increasingly taking powers from local government and limiting the powers of Members of Parliament to be aware of what the Secretary of State decides. The present Secretary of State is fond of introducing legislation which gives him powers. He did that with the Transport Act 1985. Here, in clause 1(6)(b), the right hon. Gentleman is empowering himself to change what is not concluded in schedule 1.
      One can assume that, if the accounts already exist and the Government wish to specify them at some future date, they will be included in schedule 1. We have the right to debate schedule 1 and to decide whether we agree with what is included in it. Clause 1(6)(b) gives the Secretary of State power at any future date to add without reference to the House items of which he may now be aware. If he wishes he could name them at this stage.
      I recognise that, because of the haste with which the Bill has had to be prepared and the wide diversity of local government, the Secretary of State may not be aware of everything that should be taken into account. Of course, circumstances change. A future Secretary of State, whether Conservative or Labour, may consider that certain matters should be included in the provision and may want to add to the list of items already included in schedule 1. Our principal point of difference concerns the way in which that is to be done, if we accept that it might be necessary.
      My hon. Friends and I believe that it is totally wrong that the Secretary of State, without any reference to the House, may change a specified account and thereby change the way in which local authorities can administer their services and meet the needs of their communities. Government Members must remember that it may not be long before my hon. Friend the Member for Copeland (Dr. Cunningham) is the Secretary of State. If the Bill as it stands is passed, he may wish to take some action without reference to the House.
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      The amendments have been tabled in a reasonable manner. It is right that we should include those provisions. If amendments Nos. 20 and 21 are not agreed, amendment No. 19 is the absolute minimum that the Government should be prepared to accept. If Conservative Back Benchers respect their positions as hon. Members, if they believe that there is any point in being Members of Parliament and do not wish power to be continually eroded and given to Secretaries of State who will not have to answer for their decisions—this clause will give increased power to a Secretary of State—they should join Labour Members in the Division Lobby and vote for one or other of the amendments.
      Mr. Peter Hardy: I shall make basically the same point as was made by the hon. Member for Leeds, West (Mr. Meadowcroft) who considered that Parliament should be concerned about legitimacy. My hon. Friend the Member for Burnley (Mr. Pike) properly spoke about the need for Parliament to have an adequate opportunity to press important matters. This week, I received a letter from the Under-Secretary of State for Employment—the hon. Member for Rossendale and Darwen (Mr. Trippier)—which led me to make my brief contribution in support of amendments Nos. 19 to 21. Parliament must have an opportunity to challenge not only illegitimate but unreasonable Government actions. One of my constituents, who is developing a small business, wrote to me about problems that he encounters. He made a passing reference to rates. The Minister's reply, in part, states:
      "The whole issue of business rates is of major concern to the Government and it is a matter which has to be tackled at the roots by encouraging value for money and discouraging excessive spending by individual authorities. The Government have already introduced a number of measures to ease the rates burden on business."
      The Under-Secretary's letter contains not one word about the fact that businesses must bear a £6 billion burden because of the Government's action in reducing central support and forcing local authorities to increase rates. Parliament will be put in a bad position if it is denied an opportunity to challenge the irresponsible and unreasonable comments by Ministers who write letters such as this to my constituents and disregard the truth, the reality and the record. The Minister must understand that the House of Commons needs an opportunity to challenge illegitimate and unreasonable Government actions.
      I am not a lawyer and I do not have the expertise to determine which Government actions are illegitimate. But, as an ordinary citizen and an experienced Member of Parliament, I can say with absolute confidence that the Government's actions are entirely unreasonable and that Parliament will greatly be at fault if it does not take sufficient power to challenge irresponsible and unreasonable attitudes.
      Mr. Tony Banks: During the speech of the hon. Member for Leeds, West (Mr. Meadowcroft) I intervened to the effect that I certainly wished to drag out the debate on the Bill for as long as I possibly could. I part company, perhaps, with my hon. Friends on the Front Bench in that respect. By nature, I am far more of a kamikaze Member of the House. I shall be quite clear about this matter. As long as I stay within order, if I can inflict some damage on the Government, if only by the boring nature of my speeches—if that is the only recourse that I have—that is what I shall do. Therefore, I make no apologies.

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      Provided I always stay within order—I know that you, Mr. Armstrong, will guide me in this respect—I may delay the Committee to exact some form of retribution on the Government. Two hon. Members, who are not here at the moment but are standing by, fully armed and ready to rush in at a moment's notice—my hon. Friends the Members for Newham, North-East (Mr. Leighton) and for Newham, South (Mr. Spearing)—and I are so outraged at what the Government are doing to our borough that we shall do anything we can to deny the Government this legislation and to deny Conservative Members their sleep or dinners, always, of course, staying within order.
      It has been said that amendment No. 19 is the minimum requirement. All that we ask of the Secretary of State is that he brings a report to Parliament giving details of what changes have been made in local authority accounting practices for the purposes of clause 1. That is a perfectly reasonable demand. Amendments Nos. 20 and 21 go slightly further, but in the same direction. They call for any specification made under section 1(6) in respect of local authority accounting to be made the subject of an order. Amendment No. 20 will provide for a negative order and amendment No. 21 will provide for one subject to the affirmative procedure, requiring approval by both Houses. With two forms of order, one can choose that which is most suited to the provision being introduced by the Government. That merely underlines how reasonable and flexible we are, and we invite the Government to join us.
      Ministers cannot have it both ways. If Ministers insist on interfering in the day-to-day affairs of town halls and county halls, and insist on dragging unwilling Members of Parliament into the affairs of local authorities, making this the place in which decisions that previously were taken by democratically elected local councillors are now taken, we should have the right to interrogate them and to ask for reports from them in much the way that local councils do in respect of their leaders, chairs of committee and chief officers. If we are to turn this place into a mega town hall, we might as well import many of the practices followed in town halls and county halls. I do not welcome that development. It is deplorable that a local authority's decision-making responsibilities are constantly reduced by a Government who have repeatedly said since 1979 that they intend to take Whitehall off the backs of town halls.
      5 pm
      The effect of all the local government Bills since 1979 has been contrary to the Prime Minister's stated intention in 1979. Parliament is interfering in and deciding matters that used to be the day-to-day concern of democratically elected local councillors. That is to the disadvantage of local authorities and Parliament. Hon. Members are not really interested in getting so close to the detailed financial provisions of local authorities. In this part of the Bill we can see just how detailed we are becoming in our consideration of local authority matters. I can prove the point that Parliament—meaning its Members—is not happy about these activities by once again pointing at the deserted Conservative Benches. Conservative Members are simply not interested. We realise that these proposals are neither of interest nor of close concern to Conservative Members.
      In these amendments we are saying that, if the Secretary of State insists that Parliament should take over many of the responsibilities now exercised by local government,
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      Parliament must have the right to examine all the Government's proposals in detail. I have pointed out more than once—I suspect that, if I am fortunate enough to catch your eye, Mr Armstrong, during the many hours that we shall no doubt consider the Bill, I shall do it again—that, if we are to interfere in the affairs of local authorities, we must have the power to ensure that we exercise those functions in the best possible and most efficient manner.
      These amendments are reasonable. I am surprised that the Government are resisting them so strongly. I shall wait to hear the Minister and perhaps, if I can catch your eye, Mr. Armstrong, I may even speak again on this clause.
      Mr. Stuart Holland: I support amendments Nos. 19, 20 and 21. The Committee will be aware that the vagaries of local government finance have been well known for many years to Secretaries of State of more than one party. Indeed, the black box of the rate support. grant system is such that I understand that at least one former Secretary of State held his head in his hands waiting for the result of the programme which showed the various weightings, allocations, cross-references of individual items, and so on.
      This is a very complex business. It is hardly surprising that many people in our constituencies do not understand the vagaries of the rate support grant system or why they are being shot in the hip on the housing investment programme, and cannot follow all the arguments in detail. If there is anyone who should be following all the arguments in detail, it is the Secretary of State responsible for those matters. It is incumbent on him to make apparent and transparent to the House of Commons precisely what kind of expenditure and what kind of criteria are involved.
      A major parliamentary principle is involved in these issues, and it concerns retrospective legislation. In the past, hon. Members have taken extra-parliamentary action to oppose the principle of retrospective legislation. It is crucial that the Secretary of State should be accountable in the manner recommended by amendment No. 19, which states:
      "The Secretary of State shall lay before Parliament an annual report on any specification made in respect of subsection (6) above."
      Why is the Secretary of State not prepared to make an annual report? Is it the simple fact that he has got it wrong so often that he does not have the self-confidence to work out the figures accurately, even once a year, and present and defend them in the House of Commons? What are the rights of the House in relation to the scrutiny of public expenditure if it cannot get a statement from the Secretary of State concerned? This legislation combines with the measures that the Government have taken in depriving some 11 million people of the vote in the metropolitan authorities and in abolishing the metropolitan authorities. It takes further powers from the House, just as the Government have abolished the powers of elected government in metropolitan counties and the right of people through their elected representatives to see what is happening.
      Mr. Tony Banks: I should like to correct my hon. Friend in one respect. The number of people who lost the vote through the abolition of the GLC and the metropolitan county councils was not 11 million but 18 million. I am sure that my hon. Friend would want to be corrected.
      Mr. Holland: I am grateful to my hon. Friend for reminding me of that figure.
      As for accounting procedures, the Government have maintained repeatedly from the Front Bench, with vociferous support from their Back Benches—fuller than they are today—that they wish commercial practices to be introduced into local authority finance; that they wish to see entrepreneurship flourish and would like to see the same in local authorities. The Government have claimed—one Conservative Back Bencher did so during Monday's debate—that local authorities are in some sense bureaucratic and hamstrung and cannot respond with initiative to problems as they arise. As it happens, last week several of the London boroughs responded to the very cold weather that we were facing in London. In Lambeth, meals on wheels were increased to more than 15,000 a day, emergency heating repairs were carried out—250 in one day—and provision was made for assisting the elderly who were faced with a crisis.
      How will a local authority—whether Lambeth or Camden or one in Liverpool or any other part of the country—be able to be confident that it can fulfil its obligations to those in need during such a period under the emergency powers which at present in principle obtain to it if the Secretary of State rules retrospectively that these powers are out of order? What will the liability be, for example, in relation to surcharging? It is bad enough that councillors have to face the prospect of surcharging when Ministers certainly do not. For example, the Chancellor of the Exchequer has got his sums wrong by several thousand million pounds a year in every medium-term financial forecast. Perhaps it would be a good idea if he were personally liable for that surcharging.
      It is intolerable that not only should elected councillors face the risk of surcharging for defending the interests of those who elected them, or even for fulfilling their statutory obligations, but that it should be open to the Secretary of State to revise the basis of what is or is not legitimate expenditure, and to do so without bringing the matter before the House of Commons.
      The Government laud certain kinds of commercial practice. There has recently been a spate of takeover bids in the City of London. Many of the companies involved, such as BTR, are classic conglomerates. Their aim is to enlarge their sphere of profit rather than the sphere of public service. But they take over the headquarters of a building and then sell it off or lease it out or lease it back in much the same manner as has been done with certain town halls where local authorities are seeking to be able to match appropriate income to appropriate expenditure.
      That is highly relevant to the matters that are before us, in as much as the circumstances of individual local authorities differ so much. We know very well that very few inner-city constituencies are represented by Conservative Members, very few Conservative Members do more than, for example, live in an inner-city constituency within easy reach of this House. Many of them pride themselves on the fact that they live in the borough of Lambeth, thinking that they somehow have expertise in the problems of that borough.
      Mr. Heddle: Where does the hon. Gentleman live?
      Mr. Holland: Let me identify the sort of problems that are relevant to the amendments.
      Mr. Tony Banks: I do not know whether my hon. Friend heard the comment that has just been made by the hon. Member for Mid-Staffordshire (Mr. Heddle). I suggest that my hon. Friend asks that hon. Gentleman, who just wanders in and out as if this was a buffet meal rather than the House of Commons, to repeat the remark that he made. The hon. Member for Mid-Staffordshire asked my hon. friend what bourgeois suburb of London he lives in. Perhaps my hon. Friend would like to tell him.
      Mr. Holland: Perhaps the hon. Member for Mid-Staffordshire (Mr. Heddle) would care to get to his feet on that matter. I do not happen to live in a bourgeois suburb. I live in my constituency. I do not know where the hon. Gentleman lives.
      The reality is that many Conservative Members have walked into the debate as did the hon. Member for Eastbourne (Mr. Gow) on Monday, who got to this feet and started to talk about the Soviet borough of Lambeth, saying, apparently supporting his knowledge of the matter, that he lives there. It is not enough simply to live in a constituency to understand what its problems are.
      In the London borough of Lambeth, for example, over half of the council housing is pre-1919. Now what does that mean in terms of the renewal expenditure undertaken by the council? It means not only that the expenditure per flat for modernisation is higher than other expenditure figures but quite simply that there comes a critical time in the life of housing stock when one cannot remedy a problem by replacing slates on the roof, or clearing the drains; one actually needs new roofs, new heating systems and new drains.
      Therefore, there are indivisibilities in the expenditure that individual councils face. If they are to be able to fulfil their obligations to maintain a decent stock of housing, they will incur more expenditure when housing in that stock has come to the end of its natural life than those councils in other boroughs which have hardly any multistorey tenancies and where there is detached council housing. In that respect, it is really quite wrong for Ministers to set down general guidelines without reference to the special needs that are accounted for and represented by that particular character of housing stock.
      The argument that, in principle, rate support grant takes account of that is simply not supported by the overall figures that come out of the black box in the Department. I see that an official is quite desperate to get a message to the Minister. Perhaps the Minister is interested in replying on that, or perhaps he is not. It would be very interesting if he was to get his briefing on it, since clearly he does not know how to reply on the matter himself.
      The reality is that, for example, in the London borough of Lambeth, with very special housing needs because of the age of the housing stock, the actual cuts that have occurred in the rate support grant system since 1979 have been well in excess of a single year's total annual revenue, including rate support grant systems.
      5.15 pm
      I put it to the Minister: what private company—if one wants to apply commercial criteria to the funding of local authorities—could possibly survive if it were to be deprived over five, six or seven years of resources and investment resources equivalent to a year's total income? No such company would be able to do that. Many companies in recent years have been offsetting the relative

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      squeeze on their profits by resorting to techniques such as creative accounting. They are able to get away with creative accounting without being challenged by Ministers, so why are councils challenged on their use of accounting to meet the expenditure needs which they must incur to fulfil their obligations?
      By steamrollering the procedures of the House and by not being prepared to come forward with either an annual statement or a statutory instrument, affirmative or negative, the Government will be depriving the House of the right to debate these issues. However, there are also the social services obligations on local government. I will certainly admit that one thing is wrong in the borough of Lambeth—overcrowding. There is overcrowding in the borough and I not only admit but advertise to the House that the London borough of Lambeth is in breach of statutory obligations. It has a statutory obligation to ensure that teenage children of both sexes do not share the same bedroom. But it does not have the alternaive housing into which to put the children concerned.
      The Government have compounded the problems with which we are faced by the abolition of the strategic housing role of the GLC. When I became the Member for my constituency we used to move between 1,500 and 2,000 families a year out of Lambeth. The door was slammed on that by what people now regard, quite rightly, as the farce of inter-borough nominations. The Government's population projections were for a falling inner-city population, but since the abolition of the GLC, which permitted that falling inner-city population, the demand for housing has been rising. Over the past few years, between 6,000 and 8,000 additional persons have been put on our books in Lambeth who otherwise would have been able to gain alternative housing outside the London borough of Lambeth and who therefore would not have been a claim on its charges.
      In relation to the rate support grant system, how are we going to be able to raise such issues, of what is or is not a due expenditure by a local authority, if the Minister is not going to enable us, as provided in amendments Nos. 19, 20 and 21, to lay before Parliament an annual report or to ensure that the expenditure rules by which local authorities may spend their money are brought before this House?
      Mr. Heddle: We have already heard that the hon. Gentleman lives in his constituency and has an intimate knowledge of his constituency. No doubt an examination of "Who's Who" and "Dod's Parliamentary Companion" will show whether he gives his address as the House of Commons, or as an address in his constituency, or the address where he resides at the weekend.
      Because of the comprehensive knowledge that the hon. Gentleman has of his constituency, perhaps he would now tell the Committee how many houses in his constituency—he mentioned overcrowding in his constituency—have been vacant for three months in the London borough of Lambeth and how many have been vacant for six, nine or 12 months. Will the hon. Gentleman now admit to the Committee that over 1,378 houses in his constituency have been vacant for more than 12 months?
      The First Deputy Chairman: Order. I have allowed the intervention because the hon. Gentleman was talking about overcrowding and so on, but we are getting away from the amendments, which concern parliamentary control.
      Mr. Holland: I think I am grateful to you, Mr. Armstrong, for allowing an intervention and then deeming that it may be out of order.
      Mr. Tony Banks: I do not want to spoil my hon. Friend's flow, but would he be interested to know that the intervention that he has just had to suffer was based not upon the intimate knowledge of Lambeth of the hon. Member for Mid-Staffordshire (Mr. Heddle), but on information from civil servants, via the Front Bench, via the gofer to the hon. Member for Mid-Staffordshire?
      The First Deputy Chairman: The hon. Gentleman knows that that is not at all relevant to anything that we are discussing.
      Mr. Holland: What surprises me about the intervention of the hon. Member for Mid-Staffordshire (Mr. Heddle) is that for some reason he actually suggested that I do not live in my constituency. He then claimed that the proof of whether I live in my constituency is not whether I am actually there, whether I pay any rates, or whether any of my constituents know that I am there, but whether it is published in "Dod's Parliamentary Companion" or in "Who's Who", the very mirror of "Spitting Image", the one entry which hon. Members—some of them admiring their own images so much—write for themselves. I am sure that the hon. Gentleman has pinned his "Who's Who" entry to his shaving mirror. I can tell the hon. Gentleman that I do live there. I am proud to live there and I enjoy living there. I do not know whether it is listed in "Dod's Parliamentary Companion" and I do not give a damn, because I do not spend all my time reading my own entries in "Who's Who" or Dod's.
      The hon. Gentleman's second point was relevant and I am grateful to him for raising it. The reality is that Lambeth's record on lettings for an inner-city borough with a housing stock of the character I have described is no worse than any other pressured inner-city borough. We know what the Tory party is up to. We know that there is a target list of boroughs. We know the sort of sophisticated, scalpel-like and incisive parliamentary language Conservative Members use such as, "loony Labour borough lock-outs." If they can rise above that gutter language and address the issues, they will address the points that I have made.
      When over half of one's public housing stock dates from the first world war, it is extremely difficult to pursue the necessary modernisation programmes. There is a great deal of housing stock in Lambeth that has not been re-let because the resources have been taken away by the cuts in the housing investment programme, so that the houses cannot be brought up to a decent standard. That is item one. The second item relates precisely to the point I made on the abolition of the strategic housing role of the GLC. If one takes away mobility and cannot take the pressure off inner-city boroughs, one does not have the mobility necessary to reallocate the appropriate housing. For example—
      The First Deputy Chairman: Order. Before the hon. Gentleman gives his example, I must say that I am trying hard to relate what he is saying to the amendments before the Committee. He must direct his remarks to the amendments.
      Mr. Holland: It would be useful to have an assurance from the Minister that what I am saying will not be

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      relevant to the part of the Bill we are discussing and that it will be possible for any hon. Member to raise those issues on the Floor of the House regardless of what the Government deem to be an appropriate specification.
      Mr. Straw: Does my hon. Friend agree that clauses 1(6)(b), 2(4), 3(7), 3(8) and 9 give wide powers of specification in relation to the accounts of local authorities? For example, under clauses 3(7) and 3(8) the Secretary of State has powers to specify additions or subtractions from relevant expenditure. As the Bill is currently drafted, that can be done without parliamentary scrutiny. If such subtractions or additions are made, it might seriously affect the ability of a borough such as Lambeth to raise funds and to spend them.
      Mr. Holland: I agree with my hon. Friend. One could look at areas with desperate social needs such as homelessness. The propaganda from the Conservative Benches about the number of inner-city boroughs that are providing bed-and-breakfast accommodation to their constituents directly relates to whether it is possible to provide decent alternative housing for them in the inner-city area. As my hon. Friend the Member for Blackburn (Mr. Straw) said, what happens if the Minister were to deem that it was inappropriate for any borough to spend more than X per cent. on bed-and-breakfast accommodation for more than a given period, without it being possible for us to debate such matters in the House? In Lambeth, homelessness and bed-and-breakfast accommodation went up by over 130 per cent. in 1986 at a time when Lambeth is not open to seek re-determination and when it cannot argue its specific needs to Ministers unless amendments Nos. 19, 20 and 21 can be accepted.
      The European Community has precious few clear criteria in any area, but at least, on the use of public funds, articles 85 and 86 stress the importance of transparency. We are not getting from the Bill any transparency in the use of public funds or what may be deemed an authorised expenditure. We had a shambles of a performance from the Minister on Monday. Even when he was in the Committee it was difficult to extract appropriate answers from him. We certainly will not be in a position to extract such answers if we do not have the formula recommended in amendment No. 19 for an annual report to the House or if we cannot get the matters debated in the House through the use of statutory instruments.
      I am sure that it will be enlightening for you, Mr. Armstrong, if I talk about the propaganda from the Conservative party in terms of the rates burden breaking the back of businesses. A written answer that I extracted from the Chancellor of the Exchequer shows that rates in this country are less than 1 per cent. of the total cost of industrial enterprise. Of course there is a rates burden. My hon. Friend the Member for Wentworth (Mr. Hardy) was right to say that rates revenue has had to rise to enable councils to offset the cuts in rate support grant and central expenditure. However, to argue that rates alone are penalising the inner city defies imagination when there is a decline in employment and therefore in the taxable base of pay-as-you-earn in the inner cities. More than a third of my constituents living in council housing are drawing supplementary benefit. Those people would be glad to
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      work were it not for the fact that the centre of London has been de-industrialised, compounding the problems facing inner cities.
      Mr. Tony Banks: Since my hon. Friend is talking specifically about financial and accountng practices of local authorities, will he say that it is probably true that local authorities have had to get themselves more involved in the special accounting methods so that in certain cases they can do something about rates of interest? Those interest rates are caused directly by Government policy. Surely, in terms of business, the consideration that weighs most heavily is not the rates but the rates of interest. That is entirely within the power to the Government to determine.
      Mr. Holland: I am glad that my hon. Friend has raised that point. A definitive study about to be published by Croom Helm on the life and birth of small firms does not stress rates as a problem, but the imposition of interest rates and the high cost of bank lending. Private banks are making a claim on the assets of the enterprise and if a small private firm is in difficulties it could find itself in the hands of the liquidator. More small firms fail than succeed as a result of those policies. That is where the Government have got it wrong, and that is why it is vital that we should have a proper framework for debate of these issues on the Floor of the House.
      I hope that the Government will reconsider. I hope that some Conservative Members will be prepared to think again before they make sweeping and uninformed criticisms of local councils such as my own. We can assure them, as they continue to do so, that they write off their support in inner-city areas. What is important is that they should not write off the inner city areas themselves. They cannot close the door on inner cities in such a way. By their high-handed and arrogant action of removing from the House a scrutiny of expenditure they are not only ignoring the problems and the right of elected representatives to address them, but are slamming the door on the inner cities.
      There has been a strange change. Earlier today, I was in Birmingham town hall looking at a portrait of Joseph Chamberlain. He would have spun in his grave to see what the Conservative party is doing by undermining the right of local authorities to determine their own expenditure. It is one of the key rights in democratic procedure that those who are taxed have the right to representation. It should also be the case that those who have the right to representation should be able to determine their own level of local taxation. It is certainly the case that they should not be subject to retrospective legislation without any apparent principle. If there is any principle, the Minister should tell us what it is.
      The Government get it wrong time and again. They never get it right. It is time they recognised as much and, with a little humility, offered themselves to further scrutiny by the House in the manner proposed by the amendments.
      5.30 pm
      Mr. David Clelland: The most worrying aspect of this part of the Bill is that it implies that further dictatorial powers will be conferred on the Secretary of State. Clause 1(6)(b) refers to
      "any other account specified in respect of the year concerned by the Secretary of State."
      Such statements can be found throughout the Bill, and, indeed, this Government's history is riddled with such

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      statements, giving more powers over local authorities to the Secretary of State for the Environment. The paragraph does not state what account the Secretary of State will specify and when he will do so. Will it be at the beginning of the financial year or halfway through it? Perhaps the Secretary of State will specify something that should be designated as a special account, and local authorities will have to look at their accounts in retrospect rather than for the following year. There is nothing in the Bill to say how the clause will operate in that respect.
      The Bill has continued the Government's tradition of centralising powers and weakening local democracy, under which local people can develop their own services and priorities in the way that they think fit. That tendency is dangerous, and threatens the very basis of our democracy, local government. The system of local government was not imposed on the people by Parliament. It was not invented by Parliament. It developed through history out of necessity, although its structure has been altered from time to time by Parliament. The Bill is only the latest example of how Parliament interferes with local democracy. At no time in history has local government been interfered with more than during the term of office of this Government.
      It is not often appreciated that local government is older than Parliament itself. Forms of local government can be traced back to the Anglo-Saxons. If one traces the history of local government, one sees that, in Anglo-Saxon times, a "tunscipe" was developed. That was a small community that governed its own affairs. Around that time the "burghs" also developed. Those have become familiar terms today, although the English language is now different. The "tunscipe" has become the "township", the "burgh" has become the "borough" and the robber baron has become the Secretary of State for the Environment. The desire of and need for local communities to develop their own services in their own way and meet local priorities can be traced back long before the history of the House. Thus it should be looked upon with a little more respect than that which the Government accord it. Different conditions in different parts of the country have emerged, so different priorities are perceived by local communities.
      We saw how those differences have developed during yesterday's debate on the north-south divide. My constituency of Tyne Bridge has an unemployment rate of about 28 per cent., and the needs and priorities of such a community will be different from those in constituencies represented by Conservative Members.
      Local communities must have a right to develop in their own way, but the clause assumes that the Secretary of State knows better than the local councillors who live among the people in the communities, who make demands of the councillors. The Secretary of State knows better than the local treasurers and finance officers, as well as the Chartered Institute of Public Finance and Accountancy, the local government treasurers' organisation. The Secretary of State and his civil servants are apparently the only people who understand the system. Opposition Members would certainly contest that. It has been evident from the statements made by the Secretary of State himself and his Ministers when discussing the Bill that the right hon. Gentleman and his Ministers, and, indeed, some of their civil servants, do not understand local government
      922
      finance. Had they understood it, they would not have got into the trouble that they are in today, having to put the law right in retrospect.
      The amendments at least give the House of Commons, this elected body, some power to see what the Secretary of State intends to do. They make him accountable to a democratically elected body rather than give him further dictatorial powers.
      The Minister for Local Government (Dr. Rhodes Boyson): We have had a fairly wide-ranging debate on the amendments. I am sorry that the hon. Member for Newham, North-West (Mr. Banks) is not here. He said that the empty Conservative Benches were symptomatic of possible disinterest. I think that it is a vote of confidence, in that my hon. Friends feel that they can visit their constituents knowing, with a sense of total satisfaction, that the Bill is going through the House so well. If they had all poured in and intervened, that would have been a sign that we were in trouble. From time to time it is nice to see people such as my hon. Friend the Member for Mid-Staffordshire (Mr. Heddle), but it is nice to have that total vote of confidence. I am sure that the Opposition Front Bench would like to think the same from time to time, that there was nobody sitting behind them.
      The hon. Member for Vauxhall (Mr. Holland) referred to Joseph Chamberlain in the great civic city of Birmingham, and to the history of that city. I do not think that Joseph Chamberlain would have involved himself in creative accountancy, passing bills on to the next generation. That is basically what it is—
      Mr. Meadowcroft rose—
      Dr. Boyson: We shall now hear the authoritative statement from the hon. Gentleman. As with one chief constable, it may be direct from the other world.
      Mr. Meadowcroft: It is only from the history books. The Minister must know that one of the things that was deliberately set up in Birmingham for that purpose was a municipal bank, to finance local authority expenditure and avoid the problem of having to go into the ordinary money market.
      Dr. Boyson: I welcome the hon. Gentleman's intervention, which broadens the debate. I must be careful that I am not tempted to go too far to one side or the other, particularly the Left. There is a difference between selling something one that has and then paying for it over 20 years and banking something that one has and having the interest. There is no comparison. I take as an example the mutual funds of the 19th century—[Interruption.] I was linked with a co-operative society—I was a member of its management board before I came to London. That is totally different from selling the furniture. The dividend number was 1723. If anyone returns to that town and puts money into that number, I shall realise that I have the confidence not only of my hon. Friends but of Liberal Members.
      I return to the amendment. I sometimes think that Opposition Members are reading into the Bill things that are not there. My right hon. Friend the Secretary of State had the same experience two days ago when we put a Bill together to deal, in a limited fashion, with a particular problem, at the same time as bringing it into line with the rest of the legislation. Wherever possible, we have kept the situation as it was before. As I said on Monday, as far as

      923
      possible, local authority accounts will be kept in the way in which the majority of the local authorities have kept them instead of having to turn the system upside down.
      The amendments seek to subject to some form of parliamentary control or scrutiny the exercise by my right hon. Friend of his powers to make specifications under clauses 1(6), 2(4), 3(5) and 3(7). Given the matters covered by the specifications, that could be contrary to all precedents under the Local Government, Planning and Land Act 1980, and would be an inappropriate use of parliamentary time. Specifications under clause 3(7) on total expenditure marry with the present powers of direction under section 56(8) of the Local Government, Planning and Land Act 1980, and specifications under clause 3(4) and (5) are broadly analogous to those on relevant expenditure under section 54(5) of the 1980 Act. Wherever possible, it is in parallel with the previous legislation.
      As the Committee will be aware, we are seeking to amend clause 3, but we are proposing to maintain a power of specification on relevant expenditure. Similar specifications to those under clause 1(6) and clause 2(4) are indeed not to be found in the 1980 Act, as they relate to the rate fund revenue account which is a new concept in statute, but as they relate to detailed accounting matters it is entirely appropriate that they should be treated in the same way as the other specifications.
      The reports will be laid before the House for approval. They will be supplementary reports, but we cannot deal with them until the Bill becomes an Act. I remind the Committee that before making any specifications my right hon. Friend must consult such local authority associations as appear to him to be concerned and with any local authority with which consultation appears to him to be desirable. It is true that for the rate support grant reports that are to be made immediately after the passing of the Bill we are seeking to have the consultation requirement waived, but we shall still be open to representations on all specifications. The Bill keeps the question of specifications and their laying before Parliament as before, apart from the fact that we have to hurry on this year because the local authorities need their money on 1 April. I am glad that we are making faster progress today than on Monday. Unless the Bill is passed, the local authorities will have no money for the rate support grant on 1 April. That would cause serious problems for local authorities. For this year, therefore, we have to make special arrangements. Consultation has taken place—
      Mr. Straw: Will the hon. Gentleman give way?
      Dr. Boyson: No, I shall not give way. I must finish my sentence or I may forget what it is and the Committee will be deprived for ever more of this particular thought. No Government have ever before consulted to such an extent before a rate support grant decision has been taken as have this Government. Two consultation documents have been sent out. Moreover, hon. Members have come to see me and other Ministers.
      Mr. Straw: The Minister is suggesting that the powers of specification are relatively small. That may or may not be the case, but will he illustrate the kind of specifications that could be made under clause 9? The Minister has the
      924
      power both to bring things into account and to take them out of account. What kind of things does the Secretary of State have in mind?
      Dr. Boyson: I prefer not to deal with that point now. When we consider clause 9 I shall give illustrations of our intentions. I do not want to wander from one clause to another.
      5.45 pm
      Any exercise by my right hon. Friend of his power to make specifications will be subject to the requirements of the general and administrative law to act reasonably, and it will be reviewable by the courts. That applies equally to the specifications for future years and intermediate years that are made after the passing of the Bill. It applies also to any specifications in the reports and supplementary reports that we are planning to make immediately after the passing of the Bill. For those reasons, I urge the Committee to reject this set of amendments.
      Mr. Straw: This has been an entertaining debate. My hon. Friend the Member for Vauxhall (Mr. Holland) referred to the damage that is being done to his borough by the Government's rate support grant policies, and in an intervention the hon. Member for Mid-Staffordshire (Mr. Heddle) referred to the residence of Members of Parliament. I am pleased to be able to tell my hon. Friends that the hon. Member for Mid-Staffordshire does not live in Lambeth. According to "Dod's Parliamentary Companion", the hon. Gentleman lives at flat 21, 73 St. James's street, London SW1.
      Mr. Heddle: During the last six years I have grown to respect the hon. Member for Blackburn (Mr. Straw) for quoting in full anything that he may read out in this place. Will he now tell the Committee precisely what "Dod's Parliamentary Companion" says and not quote selectively from it? Will he read correctly the lines that appear in italics? He had the benefit of a public school education and he then went to a well-known university. He can read. Perhaps he will read those lines in full.
      Mr. Straw: I am pleased to be able to tell the hon. Gentleman that I was taught to read some time before I reached the age of 11. I mean to do no injustice to the hon. Gentleman. Therefore, I shall read out the two and a half lines.
      The First Deputy Chairman: Order. The Committee has access to "Dod's Parliamentary Companion", if it is interested. However, this exchange shows that my tolerance earlier in the debate was unwise. We ought to return to the amendments.
      Mr. Heddle: On a point of order, Mr. Armstrong. The hon. Member for Blackburn (Mr. Straw) was seeking to answer an earlier intervention by me. May I ask you, Mr. Armstrong, to ask the hon. Member for Blackburn to confirm that "Dod's Parliamentary Companion" also says that my address is 14 The Close, Lichfield, which is in the heart of my Mid-Staffordshire constituency?
      The First Deputy Chairman: That is now on the record. I think that we ought now to deal with the amendments.
      Mr. Straw: The amendments relate to whether the decision of the Secretary of State on specifications should or should not be subject to parliamentary scrutiny. It is conceivable that the wide power under clause 3 might be used to exclude from account the rate income from 14 The

      925
      Close, Lichfield, Staffordshire, or, indeed, from the Carlton club, which is also referred to in "Dod's Parliamentary Companion". Were that to be the case, the Committee would wish closely to scrutinise that decision.
      This is a relatively narrow issue: whether the specifications made by the Secretary of State should be subject to scrutiny in this place. The Minister said that such scrutiny would be contrary to all precedents. I accept that it has not been the practice up to now for such specifications to be discussed in this place under the order-making procedure. However, the Minister accepted that there is no detailed definition of a rate fund revenue account in any previous statute, and the Bill is seeking to put into better order the structure of local government finance that was established in 1980. To some extent we are dealing with a future that had no past. This is a complex matter. The powers given by clause 3 in conjunction with clause 9 can be fairly wide. Clause 3(7) gives the Secretary of State power to specify additions to or subtractions from a council's total expenditure for any year. I shall be glad when we debate clause 3 stand part. I accept that the Minister has had no notice of my next point, but perhaps he could give us examples of where such power might be used.
      The Minister asks us to take what he says at face value. However reasonable a Minister may seem to us, seven years' experience of ministerial decisions on local government finance do not lead us to believe that local authorities, especially Labour local authorities, are always treated fairly. Let me he blunt. We are suspicious about the way in which the power could be used and think that there ought to be proper provision for scrutiny by the House.
      The Minister's last point was that it would be a wrong use of parliamentary time if the specifications were always subject to parliamentary scrutiny. The amendments provide two ways of scrutinising these matters in the House. The first is by the affirmative resolution procedure and the second by negative resolution. If the Minister had been willing to meet us on this we would have been willing to accept that the negative resolution procedure would be appropriate in most cases. I am sorry that he is not prepared to do that and regret that we must press the amendment to the vote.
      Question put, That the amendment be made:—
      The Committee divided: Ayes 191, Noes 243.

      Division No. 63]

      [5.44 pm

      AYES

      Abse, Leo

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

      Adams, Allen (Paisley N)

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

      Alton, David

      Bruce, Malcolm

      Archer, Rt Hon Peter

      Buchan, Norman

      Ashdown, Paddy

      Caborn, Richard

      Ashley, Rt Hon Jack

      Callaghan, Rt Hon J.

      Ashton, Joe

      Callaghan, Jim (Heyw'd & M)

      Atkinson, N. (Tottenham)

      Campbell, Ian

      Bagier, Gordon A. T.

      Campbell-Savours, Dale

      Banks, Tony (Newham NW)

      Carter-Jones, Lewis

      Barron, Kevin

      Cartwright, John

      Beckett, Mrs Margaret

      Clark, Dr David (S Shields)

      Bell, Stuart

      Clarke, Thomas

      Benn, Rt Hon Tony

      Clay, Robert

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

      Clelland, David Gordon

      Bidwell, Sydney

      Clwyd, Mrs Ann

      Blair, Anthony

      Cocks, Rt Hon M. (Bristol S)

      Boyes, Roland

      Coleman, Donald

      Bray, Dr Jeremy

      Conlan, Bernard

      Brown, Gordon (D'f'mline E)

      Cook, Frank (Stockton North)

      Brown, Hugh D. (Provan)

      Cook, Robin F. (Livingston)

      926

      Corbett, Robin

      Marek, Dr John

      Cox, Thomas (Tooting)

      Marshall, David (Shettleston)

      Craigen, J. M.

      Martin, Michael

      Crowther, Stan

      Mason, Rt Hon Roy

      Cunningham, Dr John

      Maynard, Miss Joan

      Dalyell, Tam

      Meacher, Michael

      Davies, Ronald (Caerphilly)

      Meadowcroft, Michael

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

      Michie, William

      Deakins, Eric

      Mikardo, Ian

      Dewar, Donald

      Millan, Rt Hon Bruce

      Dixon, Donald

      Morris, Rt Hon A. (W'shawe)

      Dobson, Frank

      Morris, Rt Hon J. (Aberavon)

      Dormand, Jack

      Oakes, Rt Hon Gordon

      Douglas, Dick

      O'Brien, William

      Dubs, Alfred

      O'Neill, Martin

      Dunwoody, Hon Mrs G.

      Orme, Rt Hon Stanley

      Eadie, Alex

      Park, George

      Eastham, Ken

      Parry, Robert

      Evans, John (St. Helens N)

      Patchett, Terry

      Fatchett, Derek

      Pavitt, Laurie

      Field, Frank (Birkenhead)

      Pendry, Tom

      Fields, T. (L'pool Broad Gn)

      Pike, Peter

      Fisher, Mark

      Powell, Raymond (Ogmore)

      Flannery, Martin

      Prescott, John

      Foot, Rt Hon Michael

      Radice, Giles

      Forrester, John

      Randall, Stuart

      Foster, Derek

      Raynsford, Nick

      Foulkes, George

      Redmond, Martin

      Fraser, J. (Norwood)

      Rees, Rt Hon M. (Leeds S)

      Freeson, Rt Hon Reginald

      Richardson, Ms Jo

      Freud, Clement

      Roberts, Allan (Bootle)

      Garrett, W. E.

      Robertson, George

      George, Bruce

      Rogers, Allan

      Gilbert, Rt Hon Dr John

      Rooker, J. W.

      Godman, Dr Norman

      Ross, Ernest (Dundee W)

      Golding, Mrs Llin

      Ross, Stephen (Isle of Wight)

      Gould, Bryan

      Rowlands, Ted

      Gourlay, Harry

      Sedgemore, Brian

      Hamilton, James (M'well N)

      Sheerman, Barry

      Hardy, Peter

      Sheldon, Rt Hon R.

      Harrison, Rt Hon Walter

      Shields, Mrs Elizabeth

      Haynes, Frank

      Shore, Rt Hon Peter

      Healey, Rt Hon Denis

      Short, Ms Clare (Ladywood)

      Heffer, Eric S.

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

      Hogg, N. (C'nauld & Kilsyth)

      Silkin, Rt Hon J.

      Holland, Stuart (Vauxhall)

      Skinner, Dennis

      Home Robertson, John

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

      Howell, Rt Hon D. (S'heath)

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

      Howells, Geraint

      Soley, Clive

      Hughes, Robert (Aberdeen N)

      Spearing, Nigel

      Hughes, Roy (Newport East)

      Steel, Rt Hon David

      Hughes, Sean (Knowsley S)

      Stewart, Rt Hon D. (W Isles)

      Hughes, Simon (Southwark)

      Stott, Roger

      Jenkins, Rt Hon Roy (Hillh'd)

      Straw, Jack

      John, Brynmor

      Thomas, Dafydd (Merioneth)

      Johnston, Sir Russell

      Thomas, Dr R. (Carmarthen)

      Jones, Barry (Alyn & Deeside)

      Thompson, J. (Wansbeck)

      Kaufman, Rt Hon Gerald

      Thorne, Stan (Preston)

      Kennedy, Charles

      Wainwright, R.

      Kinnock, Rt Hon Neil

      Wallace, James

      Kirkwood, Archy

      Wardell, Gareth (Gower)

      Lambie, David

      Wareing, Robert

      Lamond, James

      Weetch, Ken

      Leadbitter, Ted

      Welsh, Michael

      Leighton, Ronald

      White, James

      Lewis, Terence (Worsley)

      Wigley, Dafydd

      Litherland, Robert

      Williams, Rt Hon A.

      Livsey, Richard

      Wilson, Gordon

      Lloyd, Tony (Stretford)

      Winnick, David

      Lofthouse, Geoffrey

      Woodall, Alec

      McCartney, Hugh

      Wrigglesworth, Ian

      McDonald, Dr Oonagh

      Young, David (Bolton SE)

      McGuire, Michael

      McKay, Allen (Penistone)

      Tellers for the Ayes:

      McNamara, Kevin

      Mr. Lawrence Cunliffe and

      McTaggart, Robert

      Mr. John McWilliam.

      Madden, Max

      927

      NOES

      Adley, Robert

      Garel-Jones, Tristan

      Aitken, Jonathan

      Glyn, Dr Alan

      Alexander, Richard

      Goodhart, Sir Philip

      Amess, David

      Goodlad, Alastair

      Ancram, Michael

      Gow, Ian

      Ashby, David

      Gower, Sir Raymond

      Atkins, Rt Hon Sir H.

      Grant, Sir Anthony

      Atkins, Robert (South Ribble)

      Greenway, Harry

      Atkinson, David (B'm'th E)

      Griffiths, Sir Eldon

      Baker, Nicholas (Dorset N)

      Griffiths, Peter (Portsm'th N)

      Baldry, Tony

      Grist, Ian

      Banks, Robert (Harrogate)

      Ground, Patrick

      Batiste, Spencer

      Grylls, Michael

      Bellingham, Henry

      Gummer, Rt Hon John S

      Best, Keith

      Hamilton, Hon A. (Epsom)

      Bevan, David Gilroy

      Hamilton, Neil (Tatton)

      Biggs-Davison, Sir John

      Hampson, Dr Keith

      Blackburn, John

      Hanley, Jeremy

      Body, Sir Richard

      Hargreaves, Kenneth

      Bonsor, Sir Nicholas

      Harris, David

      Boscawen, Hon Robert

      Harvey, Robert

      Bottomley, Peter

      Haselhurst, Alan

      Bottomley, Mrs Virginia

      Havers, Rt Hon Sir Michael

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

      Hawkins, C. (High Peak)

      Bowden, Gerald (Dulwich)

      Hawkins, Sir Paul (N'folk SW)

      Boyson, Dr Rhodes

      Hawksley, Warren

      Brandon-Bravo, Martin

      Hayes, J.

      Bright, Graham

      Hayhoe, Rt Hon Sir Barney

      Brinton, Tim

      Hayward, Robert

      Brittan, Rt Hon Leon

      Heathcoat-Amory, David

      Brown, M. (Brigg & Cl'thpes)

      Heddle, John

      Browne, John

      Henderson, Barry

      Buchanan-Smith, Rt Hon A.

      Hicks, Robert

      Buck, Sir Antony

      Higgins, Rt Hon Terence L.

      Bulmer, Esmond

      Hill, James

      Butler, Rt Hon Sir Adam

      Hind, Kenneth

      Butterfill, John

      Hirst, Michael

      Carlisle, John (Luton N)

      Holland, Sir Philip (Gedling)

      Carlisle, Kenneth (Lincoln)

      Holt, Richard

      Cash, William

      Hordern, Sir Peter

      Channon, Rt Hon Paul

      Howard, Michael

      Chope, Christopher

      Howarth, Gerald (Cannock)

      Churchill, W. S.

      Howell, Rt Hon D. (G'ldford)

      Clark, Dr Michael (Rochford)

      Hubbard-Miles, Peter

      Clark, Sir W. (Croydon S)

      Hunt, John (Ravensbourne)

      Clarke, Rt Hon K. (Rushcliffe)

      Irving, Charles

      Cockeram, Eric

      Jessel, Toby

      Colvin, Michael

      Johnson Smith, Sir Geoffrey

      Conway, Derek

      Jones, Gwilym (Cardiff N)

      Coombs, Simon

      Jones, Robert (Herts W)

      Cope, John

      Jopling, Rt Hon Michael

      Corrie, John

      Joseph, Rt Hon Sir Keith

      Couchman, James

      Kershaw, Sir Anthony

      Critchley, Julian

      King, Roger (B'ham N'field)

      Crouch, David

      King, Rt Hon Tom

      Dickens, Geoffrey

      Knight, Greg (Derby N)

      Dicks, Terry

      Knowles, Michael

      Douglas-Hamilton, Lord J.

      Latham, Michael

      Dover, Den

      Lawrence, Ivan

      Edwards, Rt Hon N. (P'broke)

      Lennox-Boyd, Hon Mark

      Eggar, Tim

      Lester, Jim

      Evennett, David

      Lightbown, David

      Eyre, Sir Reginald

      Lilley, Peter

      Fairbairn, Nicholas

      Lloyd, Sir Ian (Havant)

      Fallon, Michael

      Lloyd, Peter (Fareham)

      Farr, Sir John

      McCrindle, Robert

      Favell, Anthony

      MacKay, Andrew (Berkshire)

      Fenner, Dame Peggy

      MacKay, John (Argyll & Bute)

      Fletcher, Sir Alexander

      Maclean, David John

      Fookes, Miss Janet

      McNair-Wilson, M. (N'bury)

      Forman, Nigel

      McQuarrie, Albert

      Forsyth, Michael (Stirling)

      Malone, Gerald

      Forth, Eric

      Marlow, Antony

      Fox, Sir Marcus

      Mather, Sir Carol

      Franks, Cecil

      Maude, Hon Francis

      Fraser, Peter (Angus East)

      Mawhinney, Dr Brian

      Galley, Roy

      Maxwell-Hyslop, Robin

      Gardiner, George (Reigate)

      Meyer, Sir Anthony

      Gardner, Sir Edward (Fylde)

      Monro, Sir Hector

      928

      Montgomery, Sir Fergus

      Stern, Michael

      Moore, Rt Hon John

      Stevens, Lewis (Nuneaton)

      Morris, M. (N'hampton S)

      Stewart, Allan (Eastwood)

      Neale, Gerrard

      Stewart, Andrew (Sherwood)

      Neubert, Michael

      Stewart, Ian (Hertf'dshire N)

      Nicholls, Patrick

      Stokes, John

      Ottaway, Richard

      Stradling Thomas, Sir John

      Pawsey, James

      Sumberg, David

      Peacock, Mrs Elizabeth

      Tapsell, Sir Peter

      Pollock, Alexander

      Taylor, John (Solihull)

      Portillo, Michael

      Temple-Morris, Peter

      Powley, John

      Terlezki, Stefan

      Prior, Rt Hon James

      Thomas, Rt Hon Peter

      Proctor, K. Harvey

      Thompson, Donald (Calder V)

      Raison, Rt Hon Timothy

      Thompson, Patrick (N'ich N)

      Rhys Williams, Sir Brandon

      Thorne, Neil (Ilford S)

      Ridley, Rt Hon Nicholas

      Thornton, Malcolm

      Rifkind, Rt Hon Malcolm

      Townend, John (Bridlington)

      Roberts, Wyn (Conwy)

      Townsend, Cyril D. (B'heath)

      Roe, Mrs Marion

      Trotter, Neville

      Rossi, Sir Hugh

      Twinn, Dr Ian

      Rost, Peter

      van Straubenzee, Sir W.

      Rowe, Andrew

      Viggers, Peter

      Sackville, Hon Thomas

      Waddington, Rt Hon David

      Sainsbury, Hon Timothy

      Waldegrave, Hon William

      Sayeed, Jonathan

      Walker, Bill (T'side N)

      Shaw, Giles (Pudsey)

      Waller, Gary

      Shaw, Sir Michael (Scarb')

      Ward, John

      Shelton, William (Streatham)

      Wardle, C. (Bexhill)

      Shepherd, Richard (Aldridge)

      Watts, John

      Shersby, Michael

      Wells, Bowen (Hertford)

      Silvester, Fred

      Wells, Sir John (Maidstone)

      Sims, Roger

      Whitfield, John

      Skeet, Sir Trevor

      Wiggin, Jerry

      Smith, Tim (Beaconsfield)

      Wolfson, Mark

      Soames, Hon Nicholas

      Wood, Timothy

      Speed, Keith

      Woodcock, Michael

      Speller, Tony

      Yeo, Tim

      Spencer, Derek

      Young, Sir George (Acton)

      Spicer, Jim (Dorset W)

      Younger, Rt Hon George

      Spicer, Michael (S Worcs)

      Squire, Robin

      Tellers for the Noes:

      Stanbrook, Ivor

      Mr. Tony Durant and

      Steen, Anthony

      Mr. Richard Ryder.

      Question accordingly negatived.
      Mr. John Fraser: I beg to move amendment No. 22, in page 2, line 27, leave out subsection (7).
      The First Deputy Chairman: With this it will be convenient to discuss the following amendments: No. 23, in page 2, line 28, leave out 'does not' and insert 'shall'.
      No. 24, in page 2, line 32, leave out subsection (8).
      No. 25, in page 2, line 33, leave out 'does not' and insert 'shall'.
      No. 26, in page 2, line 33, leave out 'unless' and insert 'whether or not'.
      6 pm
      Mr. Fraser: This set of amendments omits the special provisions which are made for the City of London in the Bill. I am not sure why they are there. I understand that the City of London does not receive any block grant. It is affluent enough to look after itself, as well as other parts of London.
      Although it may not be of any practical importance to the City of London, the amendments raise matters of principle that we should explore. They relate to the different views that the Government take about public expenditure. For instance, if a firm spends £25 million upon the professional fees involving a takeover, it is not a matter of concern for the Government because that is private expenditure, with which they do not interfere.

      929
      However, if a smaller amount of money is spent by a local authority on the provision of blankets or heating for the poor during the inclement weather they do need to interfere. In the same way, the Government are unconcerned that people come and go at salaries which were reported in the paper this morning of between £200,000 and £300,000 per annum. That is of no consequence to the Government because that is private expenditure, but the Government sit heavily on local authorities that employ people to look after those who are poor, deprived and need the assistance of their local authority. That difference of opinion between public and private expenditure illustrates and underlines the difference between the Opposition and the Government.
      However, there is an even more bizarre example of that difference of opinion in clause 1. The Government are saying that if any local authority, apart from the City of London, uses special funds the expenditure that is saved by the income from those special funds going into the general rate account should be left out of the account altogether, but that that should not apply to the City of London.
      I understand the reason that lies behind that. The City of London is enormously rich because it has accumulated funds over hundreds of years for various special purposes. Once a year, the City of London is good enough to invite Members of Parliament to discuss the way that the City of London is run as a local government unit. The City of London explains to us—I make no complaint about this—that the City's great celebrations and displays of pomp and circumstance do not cost the taxpayer or the ratepayer a penny because of the accumulated funds. The City of London must have approached the Government and asked that their special funds be treated differently from those of any other local authority. The Minister will not disagree that the result of the Bill is that the City of London is treated differently from any other local authority.
      How does that work in practice? It means that if the City of London uses special funds—as I believe it does—to have a banquet at the Mansion house or to entertain the Chancellor of the Exchequer, the Prime Minister, a foreign statesman, or a foreign dictator at the Guildhall, as it does by tradition, and if it serves the traditional boeuf en croute or smoked salmon mousse, those matters are not of concern to the Government or matters that should be restrained by any local government legislation, and the City of London should be able to continue with that kind of expenditure untrammelled.
      However, if a local authority does not want to provide banquets for foreign statesmen—least of all for the Chancellor of the Exchequer—but does, as its main priority, want to provide a meals on wheels service for the indigent people of its borough, the Government take a different attitude and say that any kind of device that a local authority employs, or any kind of creativity within its accounts, is to be dealt with by the draconian provisions of the Bill.
      In the City of London there is a hands-off attitude to expenditure on boeuf en croute or smoked salmon mousse, but meals on wheels for the poor is a different matter. I have heard criticism of the use of race relations advice in Lambeth over the meals-on-wheels service to ensure that moslem constituents are not offended by being sent roast
      930
      pork in their meals on wheels. That is just as ridiculous an expenditure as providing a seven-course meal for Dr. Hastings Banda.
      Let us have another example. The City of London has a bridge fund. The Government do not want to interfere in the expenditure of that bridge fund. Its purpose is to replace London bridge. That expenditure on the rates has, I think, led the City of London to have an expenditure above its target and GREA. It is always top of the league—my hon. Friend the Member for Blackburn (Mr. Straw) says 300 per cent.—in overspending. The Government want to ignore that. But once the bridge is built and people are sleeping beneath the arches of the bridge in winter, if Southwark, on the south side of the river, wants to assist with blankets those people beneath the bridge which was built with City funds, its expenditure will be penalised under the rating system, yet it is only caring for the poor and disadvantaged of the borough.
      Another example is expenditure on the Barbican. I enjoy going to the Barbican, when I can find it. I enjoy its theatre and music. I understand that much of that is also provided by special City funds. I make no complaint about the City's contribution to Britain's arts. It subsidises the Royal Shakespeare theatre and Shakespeare said that music soothes the savage breast. But there are a good many savage breasts in other parts of Britain—people who are unemployed, people who have suffered grave discrimination and people who have little chance of getting on in life. Some local authorities want to provide art at a different level for such people. They want to provide music, instruments and tuition for such people. That is lumped on to their general expenditure and can incur the penalties which are visited upon people by the rate support grant system, and that is to be treated entirely differently. One could go on.
      My complaint is not about the City of London's expenditure—some of us may be a little envious of its funds—but that the Government do not judge according to need but according to affluence. They say that because the City of London has accumulated moneys, whatever the nature of its expenditure, no matter how flamboyant or extravagant it might appear to the outside world, it is not to be constrained or dealt with in any way at all under Government legislation relating to local government finance. But if, on the other hand, a borough is less affluent than the City of London, if a local government district has great deprivation, poverty and need within its boundaries but it is not an affluent borough, the Government say that borough should be dealt with in an entirely different way.
      Therefore, I move the amendment not in any sense of envy or complaint about the City of London's expenditure under these circumstances, but to underline what we regard as a discriminatory attitude between one local authority and another. It is to underline that point of principle that I move the amendment today.
      Mr. Tony Banks: I support amendments Nos. 22 to 26 in respect of the City of London.
      The City of London already enjoys too many privileges and rights which are not extended to other authorities. I do not see why the City should be treated as an exception yet again in this legislation. I assume that the reasons are as stated by my hon. Friend the Member for Norwood (Mr. Fraser)—that the City has special cash funds and resources that place it in a different position from other

      931
      local authorities and the Bill therefore seeks to allow the City to continue to enjoy those additional and unique funds and does not want to tax them. That is wrong."/>
      If the City wants to remain part of Britain's local government structure, it must suffer the same problems and burdens as the rest of local government in terms of interference by the Government. The City should share the misery that all other local authorities now have to suffer as a result of Government legislation.
      I have a great deal of respect for the City of London as an institution. I do not want my remarks to be misunderstood or misinterpreted. While I was chairman of the Greater London council I enjoyed a great deal of the hospitality of the City corporation, particularly the Lord Mayor and the sheriffs. It was an amiable period. One tried to reciprocate as best one could, but one could never hope to emulate the City's hospitality. Indeed, no local authority would even attempt to do so because it would be rightly castigated by its ratepayers and the press for a great waste of money. However, it is difficult when one receives the hospitality of the City to know how to respond. One perhaps should not respond by continually attacking it, but when I do, I do so as someone who believes that the City of London has no place within the democratic structure of London's local government and, indeed, local government nationally, although it has a role and a history that one must respect.
      6.15 pm
      Mr. Allan Roberts: Is it not the case that when a Labour-controlled local authority provides hospitality it is vilified by the media for wasting ratepayers' money, and when a radical Labour local authority gets rid of such things it is attacked for destroying the customs and traditions of the area?
      Mr. Banks: What my hon. Friend is adequately demonstrating is that Labour local authorities cannot win. Whatever they do, they will be attacked and vilified by the press, egged on by the Conservative party. We understand the point. That is what offends. In many cases the press and the Conservative party are one and the same thing. However, it still offends what little sense of natural justice a Member of Parliament can maintain after three years in this place.
      Effectively, the City of London exists today as an unreformed ancient municipality. It was granted privileges by King John in 1215 and until 1948 it returned its own Member of Parliament. To demonstrate the way in which it is treated as an exception in London—the Bill wants to continue to treat it as an exception—the City retains its own police force. It has its Lord Mayor and a bench of aldermen. Aldermen were abolished elsewhere in local government some years ago, I think by the legislation of 1972. That would not be so bad, but it goes much further than that. Those aldermen—there is a bench of 25—are elected for life. How can the City postulate in any credible fashion that it is a democratic structure when it still has aldermen in it who are elected for life.
      It is from the aldermanic bench that the Lord Mayor is elected. Until quite recently, that bench made sure that no women were elected. Although Edwina Coven—a name remarkably like that of a Conservative Member—won elections she could not take her seat because the sexist
      932
      rules of the City prevented her from doing so. That has now passed, but it took until recent years for that particular rule to be broken down.
      I am seeking to demonstrate that the City is continually treated differently from every other local authority in terms of its structure, practices and procedures and now its financial accounting. I really cannot see that this is a defensible position within the context of Government policy towards local government generally or in terms of the specific requirements of the Bill.
      The matter has best been summed up by the Herbert commission which sat between 1957 and 1960 and studied the structure of London local government. Indeed, it was the Herbert report which was used as the basis of the London Government Act 1963 which set up the GLC. These words will keep coming back because they are amazing. When the Herbert commission looked at the structure of London local government it said:
      "If we were to be strictly logical we should recommend the amalgamation of the City and Westminster. But logic has its limits and the City lies outside them."
      That was a Royal Commission saying, in effect, that the City was too powerful and was served by too many vested interests.
      That is an amazing statement on the way in which the City has always resisted the logical restructuring of local government and any changes in the way in which the electoral processes of local government are administered.
      When we refer to the City of London many foreigners and people from outside London assume that we mean just the greater London area. So that hon. Members are clear about it, I must say that it relates only to the square mile.
      In the 19th century a number of Prime Ministers, especially Gladstone, tried to get the City of London to assume responsibility for the whole of the wider London area, but it steadfastly refused to do that. I realise and respect the fact that many Londoners like the City's traditions, especially the Lord Mayor's show. Therefore, it would be unwise of a Labour Government to confront the City head on and say, "Let us abolish the City of London." After all, we have just fought many battles over abolition. That word does not commend itself to Labour Members in respect of local government, and it will not commend itself to us when we are in power.
      We must ensure that we are consistent. We have said that we shall look at local government structures and be objective in our assessment. When we are in government we must not abolish the City but incorporate it so that the Court of Common Council could become in effect the equivalent of the Greater London council. Each member on it could stand as an elected member for each of the London parliamentary constituencies. They would then all be democratically elected for a four-year term. The bench of aldermen in the City of London would be abolished, along with a number of other practices.
      The Court of Common Council would be made up of the elected representatives from the 92 London constituencies who would elect the Mayor. We would retain the Lord Mayor's show, but he would be the Lord Mayor of Greater London and could speak as the number one citizen of Greater London. That would ultimately fulfill the historic role that Gladstone offered the City in the 19th century.
      I remind hon. Members that, although at present the City only covers one square mile, it is the richest of all the local authorities in London. It contributes a massive

      933
      amount to the other London boroughs and to the equalisation system. We accept that fact. The City of London has benefited disproportionately from the abolition of the Greater London council, especially where new schemes have been set up which are based on a contribution on a per capita basis because it has a farcically low number of electors. The most recent register of electors that I have comprises an electorate of 4,811. There is massive wealth in the hands effectively of an electorate of 4,811.
      The City of London's ward lists record an electorate of 14,189 for the 25 wards, of which 4,760 are resident voters and 9,439 non-residents. Those lists are used when electing aldermen and members of the Common Council. The resident electorate is small. Therefore, its demands on the City's services in terms of social services, education or housing are, indeed, minute, hence the fact that the City must contribute so much to the other parts of London. We must bear in mind the fact that the City of London is surrounded by some of the poorest boroughs in London, such as Tower Hamlets and Hackney, to name but two. Hackney is the most deprived local authority area in the whole of England and Tower Hamlets comes third.
      Mr. Gerrard Neale: Does the hon. Gentleman accept that, to a large extent, those councils have been the victims of their own problems in that they have been most obstructive to any attempts made to try to improve the rateable values of those areas? The Government have brought forward such areas as the docklands and helped many of the London boroughs to obtain better rateable value in the future.
      Mr. Banks: The hon. Gentleman's point leads on to a whole area of argument on the impact on the east end of the docklands area and, especially, its impact on Tower Hamlets. I am delighted to enter that argument if I can stay within order. Whatever additional benefit may come to Tower Hamlets or to Newham through activity by the London Docklands development corporation area, the impact on property prices has been so dramatic as to remove that area from its residents. The traditional residents, the east enders, are effectively being forced out of the east end.
      Mr. Allan Roberts: It is true that the Tower Hamlets council, which is now under Liberal control, but even previously when it was Labour controlled, adopted a policy of selling estates to the private sector and encouraged—some Labour Members thought wrongly—the City to move into Tower Hamlets. The council even kept the rates down to encourage that. Tower Hamlets is one of the lowest rated London boroughs. I, as a resident there, am aware of those matters. I do not necessarily agree with those policies, but the council did that, contrary to what the hon. Member for Cornwall, North (Mr. Neale) said.
      The First Deputy Chairman of Ways and Means (Sir Paul Dean): I hope that the hon. Gentleman will not be tempted to stray from the Common Council, which is what the amendment is about.
      Mr. Banks: Whenever an hon. Member gets involved in a discussion about the City of London such matters tend to arise. The City of London is a speck of enormous affluence in a great sea of poverty in the east end. It will cause a great deal of controversy as long as it continues to
      934
      exist, in terms of its peculiar position in relation to local government democracy and the inordinate concentration of wealth that it has at its disposal. The City has for many years resisted attempts to reform it by powerful politicians in this place. They do not come much more powerful than W. E. Gladstone. The City even resisted his attempts to reform its structure and its system. The City can still draw enormous power from within the Conservative party.
      I know that the City is proud of saying, "We are totally democratic. We have elections and, after all, we are nonparty political." That is absolute nonsense. The City is the ultimate Tory authority. It has reached a point where the Conservative party so controls everything in the City that it can declare itself to be non-political. The City has effectively made it impossible for anyone other than someone of Conservative politics to gain control in the City.
      Before Conservative Members jump up and remind me, I know that there are Labour party Members on the Court of Common Council. But no one who is honest enough to declare himself as a Labour party candidate can get elected. We are discussing the most undemocratic local government institution in the country bar none. The day of the City is fast approaching. A Labour Government will adopt a solution for the City, perhaps broadly along the lines that I described a little earlier.
      6.30 pm
      Mr. Meadowcroft: If the hon. Gentleman is relying on a future Labour Government, the City is fairly safe.
      Mr. Banks: It was not worth giving way to the hon. Gentleman to allow him to make that intervention.
      An interesting report was published by the London Labour party in 1974 following the setting up of a working party. It makes extremely interesting reading and the hon. Gentleman might care to exchange notes with his Social Democratic party colleague, the hon. Member for Woolwich (Mr. Cartwright), about some of the things that he was saying at that time about the City, with which I agreed entirely. I hope that he still holds those views, but I do not know what the alliance's policy is on the City of London. I hope that the hon. Member for Woolwich is as forthright today as he was in 1974.
      There is no such thing as a free lunch, although this place would believe that it has found the source of all free lunches. Someone has to pay in the end. There is no such thing as a free lunch in the City. Although the City can say that the great civic events that it provides—for example, the Lord Mayor's show and many other services—are paid for out of City cash, the moneys came from somewhere. The moneys are the product of someone's efforts, or were filched from a group of industrious workers in the City of London or thereabouts. The moneys still belong to the public. They cannot be private moneys, and no local authority can say that it has access to private moneys. All local authority resources and finance are public money by definition.
      Although the City of London may be able to pay for magnificant banquets at the Mansion house and the Guildhall out of City cash, it is still using public money. If the Government are opposing the amendments because of the existence of City cash, they are wrong to do so. I shall listen with great interest to what the Minister says about the amendments I am supporting.
      Dr. Boyson: I was delighted two days ago to see that the hon. Member for Newham, North-West (Mr. Banks) had in his possession a copy of the Sunday Telegraph.
      Mr. Tony Banks: I still have it.
      Dr. Boyson: A vintage copy. I would not agree necessarily with the line that the hon. Gentleman has advanced. Indeed, I am sure that he would be disappointed if I did. He has referred to the famous free market doctrine that there is no such thing as a free lunch. Day by day I see the improvement of the hon. Gentleman, who is a regular attender of our debates. Milton Friedman's book is on my shelf, and I am sure that by now it is on the hon. Gentleman's shelf. This shows what time in the House of Commons, or advanced age as we approach it, does to us all. The hon. Gentleman has dined at the Guildhall, and I did so last night. I did not realise yesterday that I would be replying to the debate that has taken place on the amendment. I am sure that huge sums would have been paid to enable individuals to hear the speech which I delivered last night. It would seem that I have shared City hospitality with the hon. Gentleman.
      I was interested in the remarks of the hon. Member for Bootle (Mr. Roberts) about local authorities maintaining tradition or destroying it. I like tradition. I would never attack a local authority or any other authority for maintaining it. I never agreed—this shows how reactionary I must be—with the destruction of the alderman tradition. Many aldermen carried out useful functions and served in that capacity for a long time. Some authorities, thank goodness, retained aldermen.
      I shall not take up all the remarks which have been made about the City. It should be remembered that it brings about £7·5 billion a year into the balance of payments. That is a sum that any Labour Government would be glad of, never mind a Conservative Government. Certainly, any Chancellor of the Exchequer would be glad to have it. About 1 million are employed in the financial services sector, it being the sector that has expanded the most.
      It has been accepted that the Common Council of the City of London has a number of unusual funds for historic reasons. It does not act like a normal local authority and it has taken on responsibilities that go wider than those which local authorities normally assume. The purpose of subsections (7) and (8) is to ensure that the revenue expenditure and income do not have to be shown in the rate fund revenue account. If the expenditure and income were shown there, it would have to be taken into account in calculating the Common Council's relevant and total expenditure for rate support grant purposes although it receives no RSG. In existing legislation "relevant expenditure" is defined as all expenditure falling to be defrayed out of the rate fund, and the rate fund is defined in relation to the Common Council in section 54 of the Local Government, Planning and Land Act 1980 as a general rate. Thus under existing legislation only expenditure and income that is defrayed out of the general rate is taken into account for relevant and total expenditure purposes. Subsections (7) and (8) of clause 1 preserve the present position and Opposition Members know that amendments Nos. 22 to 26 would change it. I ask my hon. Friends to resist the amendment and allow the position to be left as it is.
      Amendment negatived.
      Mr. John Fraser: I beg to move amendment No. 27, in page 2, line 36, leave out
      `in relation to future years'
      and add
      'only in relation to the financial year 1977–78'.
      The Second Deputy Chairman: With this it will be convenient to take the following amendments: No. 28, in page 2, line 36, leave out 'future years' and add
      'the year beginning in 1988 and subsequent years'.
      No. 57, in clause 3, page 3, line 18, leave out 'any future year' and insert
      'the year beginning in 1988 and subsequent years'.
      No. 76, in page 4, line 19, leave out 'any future year' and insert
      'the year beginning in 1988 and subsequent years'.
      No. 186, in schedule 4, page 15, line 39, leave out from 'Schedule' to end of line 45 and insert
      'shall have effect in relation to the financial year beginning in 1988 and subsequent financial years'.
      There is a misprint in amendment No. 27. The financial year should be 1987–88.
      Mr. Fraser: I move amendment No. 27 for the purpose of introducing a discussion on the amendments that are grouped with it. I realise that amendment No. 27 contains a misprint.
      We are dealing with emergency legislation to deal with a situation which has come to the attention of the Secretary of State relatively recently, and he must act quickly before local authorities make decisions about rating next year. Our initial reaction was to apply a restriction to 1987–88 but not thereafter. When we gave the matter further thought, we came to the conclusion that the clause should be amended with a provision that should apply to 1988 and future years, and I shall tell the Committee why we took that view.
      Clause 1 attempts to make considerable alterations in the way in which the rate fund is calculated and there is no disagreement across the Floor of the Chamber about that. The Government wish to control the rate fund much more diligently, including those items that are to be debited and those that are to be credited to the rate fund account. We shall debate this issue at greater length when we come to the Birmingham case and other cases. We know that the Government's proposals fly in the face of the advice that local authorities have received from private auditors, including some of the largest firms of auditors and accountants in the world. They fly in the face of the advice that has been given to Birmingham, for example. We know that the Government are seeking to change the practices which have been authorised, perfectly properly, by district auditors as well as by private accountants. They propose making such fundamental changes in the way in which the rate fund account is calculated that we believe that it is wrong that they should proceed without consultation with those concerned.
      I do not think many people would quarrel with the proposition that there is a good deal of probity and integrity among those who deal with local accounts whether they prepare them as part of the staff of the finance department of a local authority, or those who audit those accounts. However, I am not saying that such people should have exclusive wisdom on such matters. The public have a right to know how such accounts are kept.
      One should defer the operation of this part of the Bill until 1988. That would allow for a year of consultation between the Government, accountants, auditors and those

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      in local government on how matters should proceed. No doubt there is a measure of agreement about the changes that should be made to the calculation of accounts. If this amendment were passed, there would be about 12 months available to consult the various parties about the changes.
      We are not proposing any different practice from that which would be followed if one proposed changing the format of company accounts, corporation tax or any similar fiscal measure. Why should local authorities be treated in this peremptory fashion when those in commerce and industry would be treated with much more consideration? There would also be more consultation with those parties than is proposed with local authorities.
      I ask for this amendment to be carried so that there can be adequate consultation. Such consultation would mean that the Government could reach a decision about the proper way in which to conduct local government accounts.
      Mr. Meadowcroft: I support the proposal to postpone the introduction of these rules for one financial year.
      I sometimes wonder what knowledge Conservative Ministers have about local government processes. It is assumed that the proposed changes can be introduced rapidly. However, local government budgeting processes for the next financial year are well under way. That budgeting commenced in late autumn. The various spending departments have put forward their proposals and they have been considered by the finance and policy committees. The final decisions on budget will be reached shortly. Therefore, it is a devastating thing to suggest that the accounting basis on which a local authority prepares the future year's spending should be changed at this stage.
      I hope that Ministers recognise that local government does not cover some small parish council but vast cities and huge counties with complex financial arrangements. It would be very difficult for local government to institute proper budgetary plans if it faced the prospect of the Government altering, in detail, its accounting processes. Any changes would abide in the next financial year. Therefore, it is perfectly logical and reasonable to suggest to the Government that, if they wish to carry the Bill in its present form, they should be sensitive to the needs of local government and avoid imposing new plans at short notice.
      Dr. Boyson: The Bill is necessary because the total expenditure definition contained in the Local Government, Planning and Land Act 1980 that we presumed meant one thing turned out to mean no such thing. That is why action had to be taken and quickly. That mistake had put at risk the whole settlement.
      The 1980 Act was based upon the recommendations made by the local authority associations but I do not blame those associations. Certain advice came from ministerial advisers within the Department and from the local authorities, but the local authorities were mistaken about the definition.
      The purpose of the Bill is to put back the definition exactly to what was presumably meant in 1980 and had been recommended by the associations. If there had not been any doubt about the definitions, this Bill would not he before the House and we would not have the pleasure of one another's company today and on Monday.
      Amendment No.27 should refer to 1987–88; there is a misprint in its reference to 1977–78. The amendment would
      938
      mean that, in the years after 1987–88, we would have no means of calculating relevant or total expenditure and the rate support grant system could not be operated for those years.
      The House is aware that we have had to rush through this Bill so that we can validate the methods of distribution of rate support grant to enable local authorities to receive the money from the 1 April without a challenge being put down that could stand in the courts against the basis of that distribution.
      6.45 pm
      Opposition Members who have been present for the debate will be aware that my—right hon. Friends and I have no love for the present system of local government finance—[Interruption.] We are proposing a Green Paper on the subject. Therefore, will we have the support of the Opposition?
      Mr. Straw: Ministers are now saying that they have no love for the present system, as if that system had nothing to do with them. I am glad they have no love for it because it is a mess, but will Ministers have the humility to recognise that they set it up?
      Dr. Boyson: Lucky is the man who has never made a mistake in his life. There have been clashes within the Labour party when some consider it has made a wrong decision.
      There is a general feeling within the Conservative party that the present system of local government finance is unsatisfactory. That is why we have suggested the move to the community charge, which has met with Labour party opposition, and the centralisation of the business rate. Both suggestions are in the Green Paper. We already have a Bill going through regarding finance in Scotland and a commitment that we shall introduce a similar Bill affecting the English and Welsh rate support grant and how it is distributed. That Bill will be introduced in the near future.
      Mr. John Fraser: Next week?
      Dr. Boyson: No, not next week but it will be introduced, at the latest, in the first Session of the next Parliament.
      Mr. Allan Roberts: Will the Minister undertake that the Government will not abolish rates in Scotland and then seek to introduce the poll tax after the general election? Will they have the full system working before the general election so that people can decide at the ballot box whether they prefer what has been introduced or what the Government have abolished?
      Dr. Boyson: If the hon. Gentleman is suggesting—it is an interesting proposition—that we delay the general election for five years to enable us to vote on the working of the poll tax he may well have my support.
      Mr. Allan Roberts: The Bill before Parliament will, in theory, abolish the rating system in Scotland and it should be passed before the general election. However, if the general election is called within a certain length of time after the Bill has been passed, the rating system will be abolished but no one will yet have been required to pay the poll tax or community charge. Will the Government delay the general election or speed up the introduction of the payment of the poll tax to apply a true test of which method the electorate prefer?
      Dr. Boyson: Given a choice, I would choose to delay the election. That is much more attractive.
      Mr. Fraser: I believe that the Minister misunderstood my question. I wanted to know whether we would have another local government finance Bill next week on grant recycling and whether it will run in tandem with this Bill.
      Dr. Boyson: I am aware that there is another Bill coming forward. We shall all meet again, of that I am certain, in the House and in Committee upstairs. We can look forward to the same cast and we shall have many performances—not necessarily as many as the Windmill. I cannot pre-empt the Leader of the House or the usual channels to say when that Bill will come forward. I know that there is great zeal on the Labour Benches for that Bill to be introduced, but I must not be distracted any more by interventions from Labour Members.
      It is impossible for the systems that we prefer—centralised business rate and community charge—to be brought in before the next general election. That is why we have to introduce this measure, which will validate existing practice. That is what we are doing throughout. Amendments Nos. 25, 57, 76 and 186 would mean that the new provisions will not apply to 1987–88. Amendment No. 27 would mean that we could not make any reports and supplementary reports for 1987–88 using current practices on total and relevant expenditure. The result would be chaos for local government, so I urge hon. Members to reject the amendment.
      Amendment negatived.
      Question proposed,That the clause, as amended, stand part of the Bill.
      Several hon. Members rose—
      The Second Deputy Chairman of Ways and Means: I will call hon. Members who are rising. Perhaps I should remind the Committee that it is not in order to cover ground that has already been covered in the debate on the amendments.
      Mr. Nigel Spearing: If I trespass on that ruling, Sir Paul, I am sure you will tell me. I want to refer to exchanges between myself and the Secretary of State in the debate on Monday on the first group of amendments in relation to the powers of the Secretary of State over the courts. I submit, Sir Paul, that any matter covered in that debate which was not satisfactorily concluded because of differences of opinion must, under the rules of the Committee, be in order now. In particular, I draw your attention to the exclusion of clause 6(4) which was considered with the first group of amendments.
      On Monday the Secretary of State intervened in my speech and said;
      "I do not know whether the hon. Gentleman was here when I spoke to the amendment, but, even if he was, he does not seem to have heard me. I think that, if he had listened, he would agree that he has the wrong brief."—[Official Report, 19 January 1987; Vol. 108, c. 657.]
      I went on to make some remarks to which the Secretary of State obviously took exception. I have read the debate several times and I wish to respond to what the Secretary of State said. What I wish to say may overlap some of the points of order that were raised earlier today. I apologise to the Committee for not being here but I was upstairs at the time chairing a Select Committee.
      There are three strands to the Bill, as is recognised by everybody—validation of previous practice into statute,
      940
      further measures in respect of rate limitation, and restriction of court jurisdiction. I have sent a letter to the Secretary of State setting out the points that I am now bringing to the attention of the Committee. The Secretary of State must reply to those points at the end of the debate, at a future date or by letter. I am glad to see the Minister assenting to that.
      On the first point, the validation of previous practice in statute, we all agree that that is necessary. In his statement to the House on 16 December, the Secretary of State made it clear that that was what the Bill would be about. He said that it would
      "validate for England and Wales all past decisions involving the use of relevant or total expenditure and allow decisions to be properly taken for the remainder of the present rate support grant system, in line with the practice that has hitherto been adopted."—[Official Report, 16 December 1986; Vol. 107, c. 1051.]
      I emphasise the last words.
      When we came to it, the Secretary of State himself admitted in the debate on Monday that there was an addition to that. He said:
      "I plead guilty, if guilt is involved, in that the Bill goes further than pure validation in regard to rate limitation."—[Official Report, 19 January 1987; Vol. 108, c. 640.]
      So we have a second element in the Bill which does not just restore the status quo ante but sweeps away the whole area of negotiation and determination which has been embarked on with several local authorities.
      The third element, the one where I differ most strongly with the Secretary of State, is on restrictions on court jurisdiction. The Secretary of State says that because court cases are still to be concluded on the basis of the law as it stands, but not after the Bill gets Royal Assent, he thinks that it is necessary, in respect of the measures covered by the validation procedure, to ensure that the determination of the court will be consistent with the law as it will be after the Bill becomes an Act, rather than with the law as it stood when the case was being heard. He seeks to make that change by clause 4(6). That provision needs to be prospective, as well as retrospective, since it will be possible for a judgment to be made before or after Royal Assent. However, it has further consequences. First, it reduces the effective power of the courts over matters that would have been justiciable even if no fault had been found in the legislation. Secondly, it applies to a range of matters in the additional provisions of the Bill. It is the retrospective aspects that are unacceptable.
      In respect of the matters to whose addition the Secretary of State pleaded guilty we have prospective jurisdiction as well. I accused the Secretary of State of court-capping in that he was covering not only the cases where hearings are completed but in which no judgment has been made, but future cases. Clause 6(4) applies to clause 7 and to schedule 2 which covers the designated authorities for which complicated formulae are set out. That stems from the additional powers that the Secretary of State requires. Of course, there could be litigation in respect of those.
      Determination and notification are very important. In clause 6(4) the Secretary of State rules out anything which will have a contrary effect on such notification and determination. By putting clause 6(4) into the Bill he is saying that his executive power will be without the jurisdiction of the court because the words "contrary effect" do not have an obverse effect but an effect different

      941
      from the notification and determination by order or by whatever executive means the Secretary of State wishes to use.
      The Secretary of State clearly thought that I was wrong in what I said on Monday. I am justifying and showing the Committee where I think he is wrong. In the closing part of that debate a remarkable exchange took place between the Secretary of State and my hon. Friend the Member for Islington, South and Finsbury (Mr. Smith). The Secretary of State had talked about retrospective powers for the courts. I interrupted to remind him that it was to be a matter of prospective executive limitation of the courts as well. In reply he said:
      "Therefore, any concept that there can be a challenge to decisions in the courts is a challenge to Parliament because Parliament will have enacted the legislation and these will be the provisions."
      My hon. Friend the Member for Islington, South and Finsbury rose immediately and said:
      "Any subsequent challenge to the designation or rate capping of a specific authority would be a challenge not to Parliament but to the exercise by the Secretary of State of general powers that are given to him by this statute and, in part, included in schedule 2, which does not specify individual authorities, except in a number of specific cases. It does not specify actual figures but it specifies formulae that will be subject to a report or an order to be tabled by the Secretary of State giving his administrative decision."—[Official Report, 19 January 1987; Vol. 108, c. 671.]
      It is therefore clear that the Secretary of State is indeed taking unprecedented executive powers by virtue of clauses 4(6) and 6(4). The Secretary of State does not know what is in his own Bill or he does not know the British constitution or, conceivably, he knows neither.
      7 pm
      As I understand it—it has not been challenged—the liberty of the subject in this realm depends partly on the separation of the powers of the Executive, the legislature and the judiciary. Once the Executive begins to encroach on powers of judicial determination which are properly those of the judiciary, it is taking the judiciary's powers as well as its own.
      I have telescoped somewhat the terms of the letter that I have written to the Secretary of State, but I think that I have incorporated all of its essentials. I hope that the Minister for Local Government will feel able to reply. The Secretary of State is wrong in terms of the constitution. He is wrong to take powers which he must not and should not have if the liberty of the individual and corporate subject is to be protected.
      Mr. Meadowcroft: Although it is quite true that the more objectionable clauses which insert wholly new matter into local government finance come later, there are aspects of clause 1 which make it unacceptable. If we were simply making the law what we thought it was, we would accept clause 1, but subsection 6(b) goes way beyond what is required to validate the existing law. It is a catch-all subsection and makes the clause unattractive.
      The Government are saying that they made a mistake and that they are determined to get the law right. In so doing, however, they have inserted subsection (6) which means that it will not be possible for local authorities to conduct their business legitimately and properly in terms of their powers and their constitution as corporate bodies.
      We object to other aspects of the Bill, but on those grounds we would not want clause 1 to be incorporated into the Bill.
      Dr. Boyson: I shall be brief because we have spoken at length on the amendments.
      I have listened to the hon. Member for Newham, South (Mr. Spearing). His letter was delivered today, I believe, and I have a copy of it with me. I believe that a reply, which will be with the hon. Member shortly, is being prepared. What he has said is fairly technical, but clause 4 is substantially involved.
      Clause 1 requires local authorities to keep for the financial year 1987–88, and in all subsequent financial years, a rate fund revenue account. It provides for certain items of account which must be included in the rate fund revenue account and provides that expenditure and income debited or credited to the accounts that are listed in schedule 1, or to any other account specified by the Secretary of State, should not be debited or credited to the rate fund revenue account.
      The rate fund revenue accounts that we are requiring will be similar to, if not the same as, the traditional non-statutory rate fund revenue accounts which authorities have kept until now. As I have said, we shall keep the present system as far as possible.
      The rate fund revenue account is fundamental to the method of calculating total and relevant expenditure as laid down in clause 1. I hope that the Committee will accept the clause.
      Mr. Straw: My hon. Friend, the Member for Newham, North-East—
      Mr. Spearing: Newham, South.
      Mr. Frank Dobson: Keir Hardie's old seat.
      Mr. Straw: And also the area where my mother was the headmistress of a school, so I ought to remember it. My hon. Friend the Member for Newham, South (Mr. Spearing) and the hon. Member for Leeds, West (Mr. Meadowcroft) have made our objections to clause 1, and we shall divide the Committee.
      Mr. Kenneth Hind: Some of us feel that clause 1 must be part of the Bill. I fully support what my hon. Friend the Minister said.
      I referred on Monday to the Audit Commission report on the London boroughs. It speaks of had management and poor industrial relations. There is a need for proper accounting procedures in many Labour-controlled authorities, especially those which have been criticised often in the House, which cover 5·8 million people.
      The problems were described in the Evening Standard of 2 December under the heading, "London is going bankrupt." The article said:
      "London is heading for bankruptcy, the head of the local government finance watchdog warned today".
      Mr. Tony Banks: Will the hon. Gentleman give way?
      Mr. Hind: Poor management and bad control over expenditure are at the root of those comments. The vast majority of local authorities do not need the clear guidelines that are laid down in clause 1.
      Mr. Tony Banks: Will the hon. Gentleman give way?
      Mr. Hind: Many Labour-controlled authorities need it spelling out. People who expect local authorities to collect and spend money responsibly will respect that point of view.

      943
      Housing has been mentioned. Some authorities are not collecting money from their tenants. Liverpool has arrears of £7·5 million.
      The Second Deputy Chairman: Order. I am finding it difficult to relate what the hon. Gentleman is saying to clause 1. He must speak to clause 1.
      Mr. Hind: I apologise if I have drifted. The structure that clause 1 lays down is badly needed in many local authorities because of their failure simply to collect the rent. In June last year, Southwark had arrears of £24 million.
      Mr. Dobson: On a point of order, Sir Paul. The clause does not relate to housing accounts. The hon. Gentleman referred to housing accounts.
      The Second Deputy Chairman: Order. I shall give the hon. Member an opportunity to relate his remarks to the clause. I am sure that he will do so.
      Mr. Hind: I shall follow your ruling on this matter, Sir Paul. Deferred payments have enabled local authorities to get around the structures of the previous legislation. Again, this needs to be sorted out. We do not wish to saddle our children with burdens caused by the inefficient, poor management of Labour authorities who borrow money today. Money should be properly collected. Lambeth Council has 64,000 unprocessed housing benefit claims, and 923 are more than three years old.
      The Second Deputy Chairman: Order. I am sorry to interrupt the hon. Member again. This is not a general debate; it is a clause stand part debate. The hon. Member's remarks must relate directly to clause 1.
      Mr. Hind: Proper accounting practices are required. Many local authorities do not follow proper accounting practices. It is necessary to impose them upon them. For that reason, I welcome this clause.
      Question put, That the clause, as amended, stand part of the Bill:—
      The Committee divided: Ayes 224, Noes 190.

      Division No. 64]

      [7.10 pm

      AYES

      Aitken, Jonathan

      Brandon-Bravo, Martin

      Alexander, Richard

      Bright, Graham

      Amess, David

      Brinton, Tim

      Ancram, Michael

      Brittan, Rt Hon Leon

      Ashby, David

      Brooke, Hon Peter

      Aspinwall, Jack

      Brown, M. (Brigg & Cl'thpes)

      Atkins, Rt Hon Sir H.

      Browne, John

      Atkins, Robert (South Ribble)

      Bruinvels, Peter

      Atkinson, David (B'm'th E)

      Bryan, Sir Paul

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

      Buchanan-Smith, Rt Hon A.

      Baker, Nicholas (Dorset N)

      Buck, Sir Antony

      Baldry, Tony

      Budgen, Nick

      Banks, Robert (Harrogate)

      Burt, Alistair

      Batiste, Spencer

      Butcher, John

      Bellingham, Henry

      Butler, Rt Hon Sir Adam

      Bendall, Vivian

      Butterfill, John

      Best, Keith

      Carlisle, John (Luton N)

      Bevan, David Gilroy

      Carlisle, Kenneth (Lincoln)

      Biffen, Rt Hon John

      Cash, William

      Blackburn, John

      Chope, Christopher

      Body, Sir Richard

      Churchill, W. S.

      Bonsor, Sir Nicholas

      Clark, Dr Michael (Rochford)

      Boscawen, Hon Robert

      Colvin, Michael

      Bottomley, Peter

      Coombs, Simon

      Bottomley, Mrs Virginia

      Cope, John

      Boyson, Dr Rhodes

      Corrie, John

      944

      Couchman, James

      Kershaw, Sir Anthony

      Critchley, Julian

      King, Roger (B'ham N'field)

      Crouch, David

      Knight, Greg (Derby N)

      Dickens, Geoffrey

      Knight, Dame Jill (Edgbaston)

      Dicks, Terry

      Latham, Michael

      Douglas-Hamilton, Lord J.

      Lawrence, Ivan

      Dover, Den

      Lester, Jim

      du Cann, Rt Hon Sir Edward

      Lewis, Sir Kenneth (Stamf'd)

      Dunn, Robert

      Lightbown, David

      Durant, Tony

      Lloyd, Sir Ian (Havant)

      Edwards, Rt Hon N. (P'broke)

      Lloyd, Peter (Fareham)

      Evennett, David

      MacKay, Andrew (Berkshire)

      Eyre, Sir Reginald

      Maclean, David John

      Fallon, Michael

      McNair-Wilson, M. (N'bury)

      Farr, Sir John

      McQuarrie, Albert

      Favell, Anthony

      Malone, Gerald

      Fenner, Dame Peggy

      Mates, Michael

      Fletcher, Sir Alexander

      Mather, Sir Carol

      Fookes, Miss Janet

      Maude, Hon Francis

      Forman, Nigel

      Mawhinney, Dr Brian

      Forsyth, Michael (Stirling)

      Meyer, Sir Anthony

      Forth, Eric

      Moore, Rt Hon John

      Fox, Sir Marcus

      Morris, M. (N'hampton S)

      Franks, Cecil

      Norris, Steven

      Fraser, Peter (Angus East)

      Peacock, Mrs Elizabeth

      Freeman, Roger

      Pollock, Alexander

      Gale, Roger

      Portillo, Michael

      Galley, Roy

      Powley, John

      Gardiner, George (Reigate)

      Rifkind, Rt Hon Malcolm

      Gardner, Sir Edward (Fylde)

      Rippon, Rt Hon Geoffrey

      Garel-Jones, Tristan

      Roberts, Wyn (Conwy)

      Glyn, Dr Alan

      Roe, Mrs Marion

      Goodhart, Sir Philip

      Rossi, Sir Hugh

      Goodlad, Alastair

      Rost, Peter

      Gow, Ian

      Sackville, Hon Thomas

      Gower, Sir Raymond

      Sainsbury, Hon Timothy

      Grant, Sir Anthony

      Sayeed, Jonathan

      Gregory, Conal

      Shaw, Giles (Pudsey)

      Griffiths, Sir Eldon

      Shaw, Sir Michael (Scarb')

      Griffiths, Peter (Portsm'th N)

      Shelton, William (Streatham)

      Grist, Ian

      Shepherd, Richard (Aldridge)

      Gummer, Rt Hon John S

      Silvester, Fred

      Hamilton, Hon A. (Epsom)

      Sims, Roger

      Hamilton, Neil (Tatton)

      Skeet, Sir Trevor

      Hampson, Dr Keith

      Smith, Tim (Beaconsfield)

      Hanley, Jeremy

      Soames, Hon Nicholas

      Hannam, John

      Speed, Keith

      Hargreaves, Kenneth

      Speller, Tony

      Harris, David

      Spencer, Derek

      Harvey, Robert

      Spicer, Jim (Dorset W)

      Haselhurst, Alan

      Spicer, Michael (S Worcs)

      Havers, Rt Hon Sir Michael

      Squire, Robin

      Hawkins, C. (High Peak)

      Stanbrook, Ivor

      Hawksley, Warren

      Steen, Anthony

      Hayes, J.

      Stern, Michael

      Hayhoe, Rt Hon Sir Barney

      Stevens, Lewis (Nuneaton)

      Hayward, Robert

      Stewart, Allan (Eastwood)

      Heathcoat-Amory, David

      Stewart, Andrew (Sherwood)

      Heddle, John

      Stewart, Ian (Hertf'dshire N)

      Henderson, Barry

      Stokes, John

      Hickmet, Richard

      Stradling Thomas, Sir John

      Hill, James

      Sumberg, David

      Hind, Kenneth

      Taylor, John (Solihull)

      Hirst, Michael

      Temple-Morris, Peter

      Holt, Richard

      Terlezki, Stefan

      Hordern, Sir Peter

      Thomas, Rt Hon Peter

      Howard, Michael

      Thompson, Donald (Calder V)

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

      Thompson, Patrick (N'ich N)

      Howarth, Gerald (Cannock)

      Thorne, Neil (Ilford S)

      Howell, Ralph (Norfolk, N)

      Thornton, Malcolm

      Hubbard-Miles, Peter

      Thurnham, Peter

      Hunt, David (Wirral W)

      Townsend, Cyril D. (B'heath)

      Hunt, John (Ravensbourne)

      Trotter, Neville

      Irving, Charles

      Twinn, Dr Ian

      Jessel, Toby

      van Straubenzee, Sir W.

      Johnson Smith, Sir Geoffrey

      Viggers, Peter

      Jones, Gwilym (Cardiff N)

      Waddington, Rt Hon David

      Jones, Robert (Herts W)

      Wakeham, Rt Hon John

      Jopling, Rt Hon Michael

      Waldegrave, Hon William

      Joseph, Rt Hon Sir Keith

      Walker, Bill (T'side N)

      945

      Waller, Gary

      Yeo, Tim

      Ward, John

      Young, Sir George (Acton)

      Wardle, C. (Bexhill)

      Younger, Rt Hon George

      Watts, John

      Wells, Bowen (Hertford)

      Tellers for the Ayes:

      Wells, Sir John (Maidstone)

      Mr. Mark Lennox-Boyd and

      Whitfield, John

      Mr. Richard Ryder.

      Woodcock, Michael

      NOES

      Abse, Leo

      Freeson, Rt Hon Reginald

      Adams, Allen (Paisley N)

      Garrett, W. E.

      Alton, David

      George, Bruce

      Anderson, Donald

      Gilbert, Rt Hon Dr John

      Archer, Rt Hon Peter

      Godman, Dr Norman

      Ashdown, Paddy

      Golding, Mrs Llin

      Ashley, Rt Hon Jack

      Gould, Bryan

      Atkinson, N. (Tottenham)

      Gourlay, Harry

      Bagier, Gordon A. T.

      Hamilton, James (M'well N)

      Banks, Tony (Newham NW)

      Hardy, Peter

      Barron, Kevin

      Harrison, Rt Hon Walter

      Beckett, Mrs Margaret

      Haynes, Frank

      Bell, Stuart

      Healey, Rt Hon Denis

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

      Hogg, N. (C'nauld & Kilsyth)

      Bidwell, Sydney

      Holland, Stuart (Vauxhall)

      Blair, Anthony

      Home Robertson, John

      Boyes, Roland

      Howell, Rt Hon D. (S'heath)

      Bray, Dr Jeremy

      Howells, Geraint

      Brooke, Hon Peter

      Hoyle, Douglas

      Brown, Gordon (D'f'mline E)

      Hughes, Robert (Aberdeen N)

      Brown, Hugh D. (Provan)

      Hughes, Roy (Newport East)

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

      Hughes, Sean (Knowsley S)

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

      Hughes, Simon (Southwark)

      Brown, Ron (E'burgh, Leith)

      Janner, Hon Greville

      Bruce, Malcolm

      Jenkins, Rt Hon Roy (Hillh'd)

      Caborn, Richard

      John, Brynmor

      Callaghan, Jim (Heyw'd & M)

      Johnston, Sir Russell

      Campbell, Ian

      Jones, Barry (Alyn & Deeside)

      Campbell-Savours, Dale

      Kaufman, Rt Hon Gerald

      Carter-Jones, Lewis

      Kennedy, Charles

      Cartwright, John

      Kinnock, Rt Hon Neil

      Clark, Dr David (S Shields)

      Kirkwood, Archy

      Clarke, Thomas

      Lambie, David

      Clay, Robert

      Lamond, James

      Clelland, David Gordon

      Leadbitter, Ted

      Clwyd, Mrs Ann

      Leighton, Ronald

      Cocks, Rt Hon M. (Bristol S)

      Lewis, Terence (Worsley)

      Coleman, Donald

      Litherland, Robert

      Conlan, Bernard

      Livsey, Richard

      Cook, Frank (Stockton North)

      Lloyd, Tony (Stretford)

      Cook, Robin F. (Livingston)

      Lofthouse, Geoffrey

      Corbett, Robin

      McCartney, Hugh

      Cox, Thomas (Tooting)

      McDonald, Dr Oonagh

      Craigen, J M.

      McGuire, Michael

      Crowther, Stan

      McKay, Allen (Penistone)

      Cunningham, Dr John

      McNamara, Kevin

      Dalyell, Tam

      McTaggart, Robert

      Davies, Ronald (Caerphilly)

      Madden, Max

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

      Mallon, Seamus

      Deakins, Eric

      Marek, Dr John

      Dewar, Donald

      Marshall, David (Shettleston)

      Dixon, Donald

      Martin, Michael

      Dobson, Frank

      Mason, Rt Hon Roy

      Dormand, Jack

      Maynard, Miss Joan

      Douglas, Dick

      Meacher, Michael

      Dubs, Alfred

      Meadowcroft, Michael

      Dunwoody, Hon Mrs G.

      Michie, William

      Eadie, Alex

      Mikardo, Ian

      Eastham, Ken

      Millan, Rt Hon Bruce

      Evans, John (St. Helens N)

      Morris, Rt Hon A. (W'shawe)

      Fatchett, Derek

      Morris, Rt Hon J. (Aberavon)

      Field, Frank (Birkenhead)

      Nellist, David

      Fields, T. (L'pool Broad Gn)

      Oakes, Rt Hon Gordon

      Fisher, Mark

      O'Brien, William

      Flannery, Martin

      O'Neill, Martin

      Foot, Rt Hon Michael

      Orme, Rt Hon Stanley

      Forrester, John

      Park, George

      Foster, Derek

      Parry, Robert

      Foulkes, George

      Patchett, Terry

      Fraser, J. (Norwood)

      Pavitt, Laurie

      946

      Pendry, Tom

      Soley, Clive

      Pike, Peter

      Spearing, Nigel

      Powell, Raymond (Ogmore)

      Steel, Rt Hon David

      Prescott, John

      Stott, Roger

      Radice, Giles

      Strang, Gavin

      Randall, Stuart

      Straw, Jack

      Raynsford, Nick

      Thomas, Dafydd (Merioneth)

      Redmond, Martin

      Thomas, Dr R. (Carmarthen)

      Rees, Rt Hon M. (Leeds S)

      Thompson, J. (Wansbeck)

      Richardson, Ms Jo

      Thorne, Stan (Preston)

      Roberts, Allan (Bootle)

      Torney, Tom

      Roberts, Ernest (Hackney N)

      Wallace, James

      Robertson, George

      Wardell, Gareth (Gower)

      Rogers, Allan

      Wareing, Robert

      Rooker, J. W.

      Weetch, Ken

      Ross, Ernest (Dundee W)

      Welsh, Michael

      Rowlands, Ted

      White, James

      Sedgemore, Brian

      Wigley, Dafydd

      Sheerman, Barry

      Williams, Rt Hon A.

      Sheldon, Rt Hon R.

      Wilson, Gordon

      Shields, Mrs Elizabeth

      Winnick, David

      Shore, Rt Hon Peter

      Woodall, Alec

      Short, Ms Clare (Ladywood)

      Young, David (Bolton SE)

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

      Silkin, Rt Hon J.

      Tellers for the Noes:

      Skinner, Dennis

      Mr. Lawrence Cunliffe and

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

      Mr. John McWilliam.

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

      Question accordingly agreed to.
      Clause 1, as amended, ordered to stand part of the Bill.
      Schedule 1 agreed to.

    Clause 2

      RATE FUND REVENUE ACCOUNTS: FURTHER PROVISIONS
      Mr. Allan Roberts: I beg to move amendment No. 33, in page 3, line 6, leave out second 'the' and insert 'any'.
      The Second Deputy Chairman: With this it will be convenient to take the following amendments: No. 34, in page 3, line 6, after second 'practices', insert
      '(which may be practices which are alternatives to each other, which authorities may elect to use and which have been approved by an authority's auditors)'.
      No. 35, in page 3, line 6, leave out from second `practices' to end of line 10 and insert
      `to be observed in compiling accounts at the date the debit or credit is to be made.'.
      No. 36, in page 3, line 6, after 'practices', insert 'for the time being'.
      No. 37, in page 3, line 7, leave out
      'for the year beginning in 1986'.
      No. 38, in page 3, line 8, leave out from 'items' to 'in' in line 9.
      No. 39, in page 3, line 9, leave out from 'accounts' to end of line 10.
      Mr. Roberts: The title of clause 2 is
      "Rate fund revenue accounts: further provisions"—
      an ominous title. The fact that the title is ominous leads one to inquire in some detail about the implications of the clause, especially in the light of the fact that its provisions follow those in the 13 pieces of local government legislation to deal with housing and local government finance which have been introduced by the Government since 1979. We have been promised a 14th only next week. The Government have still not got it right.
      I want to know when reading
      "Rate fund revenue accounts: further provisions",
      what those further provisions are. The history of legislation under this Government has been one of trying

      947
      to impose central Government's will on democratically elected local government to force them to cut services and make people redundant and one of central Government taking powers to interfere even in the minute details of local government finance and the way in which local authorities organise their accounts and financial affairs. This clause is no exception. The amendments try to do something about that.
      We are again considering "proper practices"—the new concept dreamed up by the Government to enable them to impose their will on the way in which local authorities keep their accounts. Not only the whole of local government, whether Conservative, Labour or alliance authorities, but professional people involved in local government finance—auditors and others—are worried about this.
      The Government's stated purpose in clauses 1 to 3 is to change the method of calculating relevant and total expenditure for rate support grant purposes to bring the law into line with the practices followed since 1981. The Minister has again spelt that out. Transfers of cash from the rate fund revenue account to other accounts or special funds are classed as expenditure and transfers from such accounts back to the rate fund revenue account are classed as income.
      However, clause 2(4) goes well beyond that purpose, just as every aspect of the Bill goes beyond the purposes that the Government claim for it. It gives the Secretary of State unfettered powers—once again—now and in the future to specify what will count as income and expenditure for rate fund revenue account purposes. The Government are taking unto themselves, outside Parliament's control, the power to specify what will count as income and expenditure for every local authority. As we heard in the previous debate, that includes giving the Secretary of State the power to look at the smallest type of account kept by local authorities as well as the rate fund revenue account.
      One of the creative accountancy devices that local authorities have used commonly in recent years, rightly, to keep their expendiure above the level required by the Secretary of State while avoiding massive penalties—there is nothing wrong with that as long as it is within the law—has been the transfer of money to special accounts for use in special years. It is good housekeeping to save up this year so that one can spend the money next year. If a householder did that, the Prime Minister and the Minister would compliment him on being prudent and on thinking of the future, but if a local authority does that it will now be penalised. This subsection could be used to block off those devices, prevent local authorities saving for the future and could force authorities to impose massive rate rises, if they can, or, if they are rate-capped, to make cuts.
      7.30 pm
      The powers that are sought in the subsection go well beyond the stated intention of the Bill and the Government should come clean about the legislation and admit what they are doing. This is another piece in a long line of 12 pieces of legislation to control and to take more powers over local government. The powers are subject neither to parliamentary scrutiny nor to consultation with
      948
      authorities. We were at least given those assurances by previous Secretaries of State for the Environment when they passed their rate-capping and other legislation.
      The powers are left totally at large and it is not clear whether internal transfers of cash from account to account are caught by the procedures specified in clause 2(4). It is clear that transfers of cash from an external source to the rate fund revenue account are caught in that way, if the Secretary of State says they are.
      The legislation does not just validate what has happened in the past. It alters the way in which things happened because it gives the Secretary of State power to alter the practices of the past and to prevent local authorities from taking advantage, as they have been able to in the past, of those transfers, which were legal, and had been validated, but which will now be made illegal if the Secretary of State so determines, not if Parliament so determines. On Second Reading, the Under-Secretary of State for Scotland hinted that some internal transfers "may be caught". However, it appears that all internal transfers will be caught, if the Secretary of State so deems.
      Income from external sources to the rate fund revenue account often emanates from sources that may be treated, in professional accountancy terms, as capital or revenue. There are a number of different professional practices on that issue. The power that the Secretary of State is taking under clause 2(4) holds out the possibility of him making unlawful only a certain number of the professional practices that are currently used. That is bad legislation, because it is unclear from the Bill what use the Minister will make of those sweeping powers. By ministerial diktat, many local authorities could be deprived of many millions of pounds of revenue income. If the Secretary of State has total discretion, and if past performance is anything to go on, he will deprive Labour local authorities of millions of pounds of income and turn a blind eye to Conservative local authorities, or even to some hung councils and Labour local authorities in areas in which some of his hon. Friends have marginal seats. The Minister should give clear assurances as to how that power will be used.
      Amendments Nos. 33, 36, 38 and 39 deal with the new concept of "proper practices", which will be used to enable Ministers to interfere in even more detail with local authority financial activities. The amendments seek to restore some discretion to local authorities. Any true believer in local government and in the need for people to be able to alter the nature of and the way in which their local authority is run by voting in a local election should support the amendments. We are restoring discretion to local authorities in relation to accounting practices which are heavily circumscribed by clause 2(3). That subsection fails to give a fair definition of "proper practices".
      My hon. Friends and I have asked the Minister four or five times, in Committee and on Second Reading, to define the words "proper practices". We still have not received that definition. The subsection still fails to give a clear definition, although it seeks to describe those practices as being applicable to the entry of the sort of income and expenditure that the Bill requires to be charged against a rate fund revenue account. What on earth does that mean? The Government should clarify the meaning of those practices, and our amendments give the Government that opportunity.
      The amendments would also broaden the definition to cover any practices applicable for the time being for the entry of items of account into such a fund. In other words,

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      local authorities would be allowed to continue acting, in the same way as in the past, which has been legal and proper, and which internal and external auditors have already validated. That would give local authority treasurers some opportunity to exercise professional judgment in the application of accounting practices in areas that are covered by the Bill.
      Amendment No. 37 is significant because it would remove the retrospective element from the definition of "proper practices". Retrospective provisions and retrospective legislation are, all other things being equal, bad legislation. If the legislation validated the previous custom and practice as legal—as everyone believed—and merely corrected that, as my hon. Friends and I have said earlier, there would not be a problem. However, it does not. The retrospective elements concerning the definition of "proper practices" introduces an entirely new concept.
      At present, clause 2(3) applies the rather vague definition of the practices as being
      "for the year beginning in 1986"—
      or, in other words the financial year 1986–87. Amendment No. 37 would remove those words, with the result that the definition of requirements flowing from it would take effect from the date of Royal Assent. Therefore, the retrospective nature of the legislation would be removed, without any detriment to local or central Government.
      We do not see any reason why there should be retrospection when it is not necessary, or even why it should be applied at all. It is not designed to prevent the retrospective validation in law of what has happened, nor does it alter the difficulties that central and local government now face in paying out rate support grant if the Bill becomes an Act. On the contrary, it seeks to further certainty in local government finance by preventing the retrospective application of proper practices. The authority requirements of clause 1 are intended to take effect from 1987–88 onwards. The Government should explain why those proper practices should take effect from 1986–87 when there is no need for the entirely new concept that has nothing to do with validating what has previously happened.
      Opposition Members, and, I am sure, some Conservative Back Benchers, are amazed at the nature of the legislation and at the outrageous statements that Ministers are making to justify it. Ministers have staggered from one disaster to another. Unless they take on board the intent of our amendments and accept some of the constructive points made by Opposition Members, and if the legislation reaches the statute book without serious amendment, Ministers will be setting themselves up for another series of disasters and will be in the same difficulties in future as they are now.
      As I have said, that all goes to prove that central Government cannot run the affairs of local government as well as the locally elected councillors and their chief and other officers.
      Mr. Meadowcroft: I shall concentrate briefly on two amendments in this group. I agree entirely with the hon. Member for Bootle (Mr. Roberts) that amendment No. 37 contains no requirement whatever for retrospection. The subsection concentrates on the issue of proper practices, which seems to be an obsession with the Government. As there is no requirement for the validation of the £70 billion
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      of local government expenditure to have retrospection in relation to proper practice, I accept the terms of amendment No. 37.
      One issue that has been hardly touched on by hon. Members either on Monday or today is that the profession of the auditor appears to be called into question by the way in which the Government have presented the legislation. In that context, amendment No. 34 is extremely important. I have a high regard for the internal audit of local government. In my time in local government, I have known many auditors employed by the local authority who exercised their authority to point out bad practices and to ensure that they were rectified without fear or favour from departments within the local authority.
      The provision also demeans the practice of external auditors. It does not matter whether they are professional or district auditors: the fact is that the external audit of local government is held in high regard and should not be diminished by the Government's proposals.
      The way in which the Government take powers to themselves says to auditors, "We do not trust you and we alone will be the arbiters of what is proper practice; we will set the one route down which you must go." It is saying to the external auditors, "We do no even accept your high standards."
      As I said in an earlier debate, the distinction between what is legitimate accounting, which seems to make the cost advantageous use of local authority resources, and what I would regard as improper practice, is whether a course of action can be sustained within the policies of the Government of the day. If it cannot and it has to be rescued by some future Government, then I would regard it as improper. The interesting thing is that case after case that has fallen into the latter category has been picked up by external audit. It is not something that has been hidden. It has been pointed out, and some cases have gone to the courts. The report to which the hon. Member for Lancashire, West (Mr. Hind) referred, however badly or incorrectly, has come into the public eye. It was not hidden.
      The present practices and methods of audit have all served to expose that which ought to be exposed. There is no necessity for the proposals on proper practice in clause 2. That is why amendment No. 34 is important. It accepts the professional standards of the auditors and says that there can be alternative practices, as long as they are approved by the auditors. That is where the responsibility properly lies. It should not lie prescriptively with the Government to say that there is one narrow road down which we must go and that there is no diversion from it. Therefore, the important aspects of this group of amendments are that they remove retrospection, which is not necessary, and trust the powers and professional standards of the auditors.
      Mr. Pike: These amendments are important. They seek to bring the position as close as possible to that which we understood to be in existence prior to the legislation being introduced. The way in which the clause is worded could lead to a retrograde step. It challenges not only the political judgment of local authorities, of whatever party, but the professional judgment of officers, whether the chief executive officer, the borough treasurer, the internal audit system or, as the hon. Member for Leeds, West (Mr, Meadowcroft) pointed out, even the external audit system. It is left solely to the Government to decide what they

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      determine to be "proper practices". I wonder why we should believe that the Government are the only people who have the ability to determine what is proper practice. It is the wrong direction in which to be moving.
      7.45 pm
      The phrase "proper practice" appears in the clause on several occasions. It is very vague and does not say what the Government mean. However, we know that the Government are trying to prevent what they see as creative accountancy. However, creative accountancy has come into being only because of the actions of the Government and the way in which they have dealt with local government in recent years. I have been connected with local government for many years in one way or another. Ten years ago the phrase "creative accounting" had not even been heard of. I am sure that many people who served on local councils never got to know what the phrase meant.
      I have always accepted that, at the end of the day, the Government have the right to determine how much money they are prepared to give to local government. I believe that the House and local government have the right to argue about whether that amount is sufficient to meet the needs of local areas. I believe that the Government have gone wrong by failing to make sufficient money available. I accept, although I do not like it, that they have the right to determine that figure. However, they have tried to deprive councils of the freedom to raise locally what people are prepared to pay in additional income to the council to enable it to provide the services that are required.
      I believe that when councils provide the necessary services they are looking responsibly at the needs and requirements of the communities they represent, whether that be domestic ratepayers, industry or commerce. All councils know that if their areas are to survive they must maintain industry and commerce. No council puts up rates deliberately to punish industry or anybody else. Domestic ratepayers have a direct say in whether they are satisfied that the council is doing its job correctly and meeting the needs of the community.
      As councillors we found it difficult every year. We knew what we wanted and needed to do to meet the needs of the community, but that had to be balanced by what we could do and by what we could ask the ratepayers to pay. If the clause is not amended it will limit the power of councils to try to get the best possible deal for the people they represent. It is the duty of councillors, from whichever party, to do their best for the people in their communities. That is not only the responsibility of the councillors, but it is the task of the officers. As long as councils work within the law and are acting in the interests of the community I believe that they will be using "proper practices" to protect the interests of those they represent.
      While I was the leader of the council I had to take the chairmanship of the local authority finance committee for a year because the chairman of finance became the mayor of the borough. We set up a fund to finance a project to convert an existing listed building next to the town hall into an arts centre and theatre. That opened last year. The officers said to the leaders of the council that if we put a certain amount into a special fund we would incur penalities because we would spend more than the
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      Government would permit. However, they said that we would receive grant at a higher level then the penalties. Therefore, we decided to put money into the fund because that was in the best interests of the people we represented. I am sure that the Minister will say that we were wrong to do that. However, I would argue that we were acting in the best interest of the community by putting the money to one side, benefiting the ratepayers in future years by the equivalent of a penny rate.
      If the clause stands in its present form, I am sure that the Government will be able to decide that what we did was not proper practice and that it would be outside the provisions of this legislation. That is just one example. I could give many others, but I do not intend to do so because we wish to make progress.
      If the Government are not prepared to accept one or more of the amendments and to try to move in the direction that we seek, it will be yet another blow to local government, another restriction, another limitation on the ability of local authorities to meet the requirements of the people whom they represent. At the end of the day, it is local government that knows what is best for the people in the area. Before 1979, the Government said that they would give freedom to local government, which has been referred to many times in earlier debates. Everything that the Government have done has been in the opposite direction.
      We believe that local authorities should have more powers and the ability to finance what they do, although I accept that, while we may argue strongly about the figure that the Government say they are prepared to put in, the Government have the right to determine exactly what they wish to pay. The clause should not remain as drafted. It was unnecessary for the Government to draft it in that way to deal with the problem that has arisen as a result of their own legislation. The Government are wrong, yet once again they are striking a blow at local government.
      Mr. Clelland: It is not only unreasonable and unfair but unnecessary for the Government to impose these further restrictions on local authorities. After all, in their accounting practices and finances, local authorities are more open than any other organisation, probably including even central Government. Local government accounts can be scrutinised by electors and auditors. They are run in a professional manner by the treasurers and finance officers who are responsible for them. Therefore, one must ask why the Government feel it necessary to introduce the concept of "proper practices" into rate support grant law.
      We know that "proper practices" are already exercised by the auditor, or at least he has to see that the authority has observed proper practices in compiling its accounts, but apparently the Government now wish to apply the concept also to rate support grant law. It is not as if that was the only thing that the Government were doing. Apart from imposing the concept of proper practices in the clause, they intend to provide the Secretary of State with yet more power to specify expenditure or income that is to be regarded as of a revenue nature. Thus there is a double-pronged attack on local authorities. The Opposition think that that is unnecessary. The Minister should explain the necessity for the provision, if the Government feel that it is necessary.
      A full explanation would be appreciated, particularly in the light of the Government's record of explaining their

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      decisions. The Minister will recall that I have had considerable correspondence with the Department about the reason why Newcastle city council was refused disregards. I appreciate the reply that I received yesterday to a letter that I wrote to the Department in October last year. The reply has taken a long time to come to me; it arrived yesterday and tells me no more than what the Minister's predecessor told me, which is that the Minister will not tell me anything. If that is the practice that will be adopted, not only will local government have to observe proper practices that are not defined, but it may not even be given an explanation of why it is in breach of proper practices that were not defined in the first place, after the Minister imposed them. That is the ridiculous maze that local government finance is entering.
      I support the amendment. I hope that, in his reply, the Minister will explain to the House a little more fully exactly what the proper practices are intended to be.
      Mr. Tony Banks: I wish to speak to the various amendments on proper practices. I should like, first, however, to take the opportunity to correct something said by the hon. Member for Lancashire, West (Mr. Hind) when he spoke in the clause stand part debate. It relates to the financial practices of local authorities. He said that the Audit Commission chief, John Banham, had suggested that Labour local authorities in London were heading towards bankruptcy. In justification of that accusation, he quoted a story in an edition of the London Evening Standard in December. He could have gone on to quote a story that appeared on Sunday in the Sunday Telegraph, a newspaper that I have been keeping about my person since the debate started, drawing some comments from the Minister for doing so.
      We must get the record absolutely straight. The stories that have appeared in the Tory newpapers such as the London Evening Standard and the Sunday Telegraph bear little relation to what John Banham actually said. We know that the stories are all part of the generalised Tory onslaught on Labour local authorities. In particular, inner London Labour-controlled authorities have found themselves virtually sinking below the financial waters because of Government policies, loss of rate support grant and so on—all the things that we keep discussing in the House. In various ways they have tried to mitigate the impact of Government policies, and in doing so have become involved in several accounting practices that the Government now wish to proscribe.
      It must be said that none of the things that local authorities have done in creative accounting have been declared illegal. That is the important point. It is the Secretary of State's practices that have been effectively declared unlawful or illegal, hence the need for the Bill. Before one starts throwing accusations around about the special accounting practices of Labour-controlled authorities, one should bear it in mind that at no stage has anyone been able to say that those are illegal practices.
      Following the story that appeared in the London Evening Standard, councillor Margaret Hodge, who chairs the Association of London Authorities, wrote to John Banham and asked him for his comments. The hon. Member for Lancashire, West used the comments in the London Evening Standard as a rerun of his speech on Second Reading and of that which he delivered on the First
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      day of the Committee stage. He has only one speech, and I suspect that we shall hear it time and again before we reach the end of the Bill.
      Mr. Martin M. Brandon-Bravo: The hon. Gentleman has only one speech.
      Mr. Banks: My speeches vary.
      Mr. Brandon-Bravo: Only marginally.
      Mr. Banks: My speeches vary in content and pitch, and in the general level of boredom, hysteria, humour, intelligence or whatever, so at least I can say that I vary the pace somewhat. But the hon. Member for Lancashire, West has a line and he sticks to it. He ain't ever going to give way to anyone. He is deliberate in his policy. Obviously, he pursues a policy of cerebral hygiene. He does not want to be given information, so he ploughs on. I am prepared to give way to any Conservative Member who wishes to intervene.
      I return to the article that the hon. Member for Lancashire, West quoted from the London Evening Standard and the comments ascribed to John Banharn, the chief of the Audit Commission. Mr. Banham described the report as "inaccurate", and said:
      "My paper made it clear that the commission was not in favour of privatisation as a universal prescription.
      At no time did I suggest that there was any possibility of local authorities in London or anywhere else becoming technically bankrupt.
      Indeed I made the point explicitly that borrowing ratios in local government were relatively modest by private sector standards."
      That is what John Banham said in response to the stories that appeared in the London Evening Standard. Some hon. Members might have heard the erudite speech by my hon. Friend the Member for Vauxhall, who probably has a far greater grasp of economics than anybody else in the House. He made precisely the same point. The Secretary of State laughs. He is not the person to go around bragging about his economic prowess. I suggest that if he wants to challenge my hon. Friend the Member for Vauxhall to a debate about economics, he will get the whipping of his life.
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      Mr. Meadowcroft: The hon. Gentleman rightly referred to what Mr. Banham said and the correction that he made. The hon. Gentleman is also aware that I am no lover of the line purveyed in this Chamber regularly by the hon. Member for Lancashire, West (Mr. Hind). Does he accept that Councillor Mrs. Hodge has also written a long article in the current edition of New Socialist in which she refers explicitly to the accounting practices of Islington and makes the point very straightforwardly that unless a future Labour Government were to do something retrospectively about money, the so-called dented shield that she and her colleagues in the Labour party have been urged to hold up would be unable to survive? The accounting practices in Islington have fallen on the wrong side of the division to which I referred earlier and cannot be sustained within the philosophy of the Government of the day. To my mind, therefore, they are improper.
      Mr. Banks: The hon. Gentleman is correct in part. Local authorities that have attempted to defend jobs and services—they are probably the most hard-pressed local authorities in the country—have been caught up in a major problem. In attempting to defend jobs and services

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      they have involved themselves in financial accounting practices that would be difficult to sustain if there were another Conservative Government.
      Labour local authorities, in particular Labour local authorities in London, are doing certain things upon the assumption that there will be another Labour Government. I do not believe that the structure of local authority finance can survive another Conservative Government. Those local authorities have taken a risk. It is a high risk strategy, but it is justifiable in terms of what they are seeking to do. I am very honest and straightforward about what is going on in local authorities in London, and their high risk strategy requires a Labour Government. If we do not have another Labour Government, local authority finance will be destroyed. It will be the Government's baby.
      I have suggested that we should say to the Government, "It is impossible for us financially to manage this local authority; the Government must now take over the running of the local authority so that the people in the area will see who is truly responsible for the impact on the services within the area." One of the problems that the dented shield philosophy poses for Labour authorities is that they are blamed by the local electorate for the decline in the standard of services, although the blame should be laid firmly at the Government's door.
      Mr. Ridley: Is the hon. Gentleman aware that his hon. Friend the Member for Copeland (Dr. Cunningham) and the leadership of the party to which he belongs have made it clear that they will not bail out the Labour authorities? It is indeed an extremely high risk strategy. If it is not right for the Labour party to bail out these authorities, why does the hon. Gentleman suggest that the Conservatives should bail them out? If all parties—including, I believe, the party of the hon. Member for Leeds, West (Mr. Meadowcroft)—are of this opinion, the risk is so high that it must have been absurdly reckless to undertake it.
      Mr. Banks: No, I do not agree. It does not greatly surprise me that my views and those of my hon. Friend on the Opposition Front Bench are different. I am not aspiring to high office. Therefore, I can preserve the degree of personal candour that perhaps cannot be retained by others—[HON. MEMBERS: "Oh."] I make that point in a friendly and amicable fashion, but I can stand up and speak my mind in this place without fear or favour.
      It is not a question of bailing out the local authorities. I understand that a Labour Government will restore the relationship between centrally funded services and locally funded services. They will return the rate support grant to the point where it bears some relationship to the position that existed before 1979. That would solve the majority of the financial problems that are now faced by Labour local authorities.
      It goes much further than that. Labour local authorities are not involved merely in trying to get round this or that specific Act in terms of their accounting practices. They also have to deal with the impact on their local communities of central Government policies across the whole spectrum. For example, the Government's economic policies have a major national impact on unemployment.
      The Chairman of Ways and Means (Mr. Harold Walker): Order. The clause relates to accountancy
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      methods, not to how the money is counted. We are now talking about the amount of money and how it is distributed. We ought to return to the clause.
      Mr. Ridley: The hon. Member for Newham, North-West (Mr. Banks) is now suggesting that a future Labour Government would restore rate support grant to the 64 or 65 per cent. level of 1979.
      Mr. Banks: It was 61 per cent.
      Mr. Ridley: Very well, 61 per cent. I could not remember the exact fgure. I wonder whether the Opposition Front Bench would confirm that suggestion. It is important that the local authorities should be aware of precisely what the position is.
      The Chairman: Order. Important though it may be, I do not think that its importance is related to the substance of the clause that is before the Committee. I hope that we shall return to accountancy.
      Mr. Banks: Indeed, Mr. Walker. I am exploring the areas of broader concern and interest in order to explain why local authorities have become involved in special accounting practices. I take your point that that relates to counting the money. However, one needs to know how much money one has before one starts to allocate it. Local authorities find that they do not get the same sort of money as they used to get from central Government. I am as interested in the reply to that question as is the Secretary of State: whether the next Labour Government will be taking rate support grant, in terms of central Government contribution, back to the percentages that were achieved during the period of the last Labour Government. I shall willingly give way to my hon. Friend the Member for Blackburn (Mr. Straw) if he wishes to confirm the point.
      I rose merely to correct a very misleading newspaper story that was quoted by the hon. Member for Lancashire, West. I am afraid that it will be necessary on a regular basis to correct the distortions of Conservative Members about the policies and the financial practices of Labour local authorities. They are staying within the law. That is why the law keeps being changed. If the local authorities were acting unlawfully, the district auditor would be able to move in on them, the ratepayers would be able to take them to court and they could be accused of not fulfilling their fiduciary duties in respect of rate-borne expenditure. None of that has happened. It is the Secretary of State, not Labour local authorities, who is in the dock. Therefore, it is absolutely misleading and incorrect for Conservative Members to start pointing the finger at Labour local authorities when the real lawbreakers, the real recidivists, are sitting on their own Front Bench tonight.
      The Parliamentary Under-Secretary of State for the Environment (Mr. Christopher Chope): We have had two debates on this group of amendments. The latter debate, initiated by the hon. Member for Newham, North-West (Mr. Banks), gave us a fascinating and candid insight into the debate taking place in the Labour party about the extent to which inner London councils run by that party are already bankrupt or about to become bankrupt, and about the extent to which any future Labour Government would be prepared to bail out those councils. We have also heard about the philosophy of the dented shield. The hon. Member for Blackburn (Mr. Straw) ought to reply to that debate and I hope that in due course he will have an

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      opportunity to explain where he stands on the important issues raised by the hon. Member for Newham, North-West.
      Probably much less interesting to hon. Members but nevertheless important for people outside who are trying to follow the proceedings on this Bill has been the main debate on this group of amendments which was initiated by the hon. Member for Bootle (Mr. Roberts). I noted that most of his remarks were addressed to clause 2(4) which is the subject matter not of this group of amendments but of the next group. For that reason I hope that he will forgive me for not replying in detail to the points that he made. He said that clause 2 was ominous. It is ominous only to someone who does not understand it. With the indulgence of the Committee, I shall read some quite lengthy notes on what clause 2 is all about.
      These amendments relate to the rate revenue account, and it may assist the Committee if before dealing with the detail of the amendments I explain the general approach that we are adopting in the Bill to the rate fund revenue account.
      Clauses 1 and 2 of the Bill set up in statute the rate fund revenue account for the purposes of the new statutory definition of relevant and total expenditure which is in keeping with the current approach that in practice we have adopted for relevant and total expenditure. Although not required to do so by statute, local authorities have in general kept an account of their main revenue transactions—an account which has often been known as the rate fund revenue account. Current practice on relevant and total expenditure, as distinct from the statutory provisions in the Local Government, Planning and Land Act 1980, has been to calculate relevant and total expenditure by reference to these traditional rate fund revenue accounts, Therefore, the provisions in the Bill, which are designed to maintain the status quo on relevant and total expenditure, introduce into statute the concept of the rate fund revenue account.
      I must stress that this concept is introduced solely for the purposes of providing a statutory definition of relevant and total expendiure. It is not an attempt to control local authority spending, nor is it an attempt to regulate local authority accounting. As mentioned in earlier debates in Committee, my right hon. Friend already has powers under section 23 of the Local Government Finance Act 1982 to make regulations about such matters as the form of accounts and statements of accounts. I remind the Committee that my hon. Friend the Minister for the Environment, Countryside and Planning, when he was Minister for Local Government, announced on 28 February 1986 that we had decided not to make new regulations on local authority accounts, but to invite the local authority associations in conjunction with the Audit Commission and accountancy bodies to set up their own arrangement for dealing with accounts. This remains the Government's position, and I am pleased to tell the Committee that the Chartered Institute of Public Finance and Accountancy together with officers of the Audit Commission have now prepared a draft code of practice on local authority accounts on which they are currently seeking comments from local government and other interested parties.
      The provisions of the Bill are designed so that the statutory rate fund revenue account which authorities will be required to keep for 1987–88 and subsequent years will
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      be very similar, if not the same, as the traditional non-statutory rate fund revenue accounts which authorities have in general been keeping. The starting point is that in clause 1 the rate fund revenue account is identified as the account to which all revenue expenditure and income must be debited or credited—with the exception of that revenue expenditure or income which is properly debited or credited to certain other accounts. The revenue expenditure and income to be excluded is not simply that which is properly debited or credited to any other account kept by the authority, since expenditure and income included in memorandum accounts—such as the account for section 137 expenditure—should also be included in the rate fund revenue account. This is the way the non-statutory rate fund revenue account has traditionally been kept. The main accounts, the expenditure and income of which are to be excluded from the rate fund revenue account, are specified in schedule 1. The power for my right hon. Friend to make specifications under clause 1(6)(b) will enable us to cope with any other such accounts, including any such accounts established by local Acts.
      8.15 pm
      In addition to revenue expenditure and income, other items of account can be included in the rate fund revenue account, such as contributions to special funds or certain capital expenditure, where this conforms to proper accounting practices. Clause 2 provides that these practices are any practices drawn from the practices applicable to the traditional non-statutory rate fund revenue accounts in 1986–87, but taking into account variations in practice occurring from time to time. I should say something about proper practices. Local authorities prepare their accounts according to proper practices and a local authority's auditor is required to satisfy himself under the Local Government Finance Act 1982 that proper practices have been observed in the compilation of the accounts. These practices are not set out in statute, and accountants and auditors—in particular the professional accountancy institutes—have developed, and continue to develop, accounting practices which are considered proper for local authority accounts. The Bill does not specify precisely what the proper practices are. As I have already made clear, it is not our intention to interfere with local authority accounting. Clause 2 of the Bill provides that the practices to be applied to the statutory rate fund revenue accounts are those applicable in 1986–87 to traditional non-statutory rate fund revenue accounts, but will take account of variations of practice occurring from time to time.
      Mr. Meadowcroft: Has the Minister seen the draft code prepared by CIPFA? It looks at the points that we have been debating about the difference between reserving money and providing for committed expenditure. The Minister talks about things being included in the rate fund account and ordinary practice, but they are already contained in the code. I am baffled as to why he has to go through this great rigmarole when what has been proposed and sent out for consultation covers the points that he is making.
      Mr. Chope: I shall come to the point about why it is necessary to set out in this clause the relationship with proper practices. I have not read the detail of the substantial volume that has been produced as a code of

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      proper accounting practice. If in this clause the Government were defining one sort of proper practice and saying that no local authority could adopt any other practice, perhaps even one which had hitherto been regarded as proper, then local government would have cause for complaint.
      In order to emphasise that the status quo has been maintained we say that anything which has been proper accounting practice can be taken into account. We say that when the authority compiles its rate fund revenue account for 1987–88 it can select such practices as it considers appropriate from the body of practices that were applicable in 1986–87. That is why amendments Nos. 33 and 34 are unnecessary. I ask the Committee to reject them.
      Allegations were made that amendments Nos. 35 to 39 were sinister because they were retrospective. I hope that I can demonstrate to the Committee that the only way in which they are retrospective is that they refer back to proper accounting practices being used at present. If we do not refer back to those practices it is hard to know what they are when we talk about defining them in the Bill.
      Amendments Nos. 35 to 39 seek to remove any connection between the practices to be used for compiling statutory rate fund revenue accounts with the practices applicable in 1986–87 to non-statutory rate fund revenue accounts. The result of that would be that the practices to be used for compiling the new statutory rate fund revenue accounts would merely be practices properly applied to that new account.
      As the statutory account is a new entity, no one would know what these practices are. The point that the Opposition have made is that by the issue of these accounts we are creating a situation whereby local authorities will not know where they stand. If the amendments proposed by the Opposition were to be passed, local authorities would indeed be able to complain that they were in the dark, because no one would know what the practices were.
      If the statute is to provide for the new rate fund revenue account to be like the traditional rate fund revenue account, we must refer to the practices that apply to that traditional account. This is best done by referring to the practices that are applicable to the traditional non-statutory accounts kept for 1986–87, which is the last year before authorities are required to keep the new statutory accounts, and take account of variations in practices occurring from time to time.
      This is a complicated subject, but it has been made more complicated by the failure of Opposition Members to understand what it is about, and their attempts to raise the spectre that this is introducing something sinister. This clause is designed to help local authorities prepare for the new definition set out in this Bill, and I hope that the Committee will reject the amendments.
      Mr. Allan Roberts: What a tangled web we weave. The purpose of this complicated legislation, in the words of the Minister, is to enable local authorities to know where they stand. The Minister's explanation was about as lucid and illuminating as the clause itself. If, after reading it in Hansard and studying the clause, local authorities know where they stand I shall be amazed.
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      In this clause, the Secretary of State is taking powers unnecessarily to legislate retrospectively. As he is to interfere in the day-to-day detail of local authority accounts this complicated plethora of measures is needed to hedge everything about, to make this or that account clear, to put in to legislation, so that the Government can validate their own mistakes, what local authorities do now anyway. The clause and speech of the Minister are hallmarks of the Government's approach to local government. All of this is needed because the Government have decided that they can run local government better than the people who know their own communities and who are accountable to their own electorate.
      We shall not push these amendments to the vote. The Minister has attempted to some extent to explain what the Government mean by proper practices. He has said that local government is carrying out proper practices. If that is so, why do we need this legislation? We need this detailed, interfering legislation because the Government want to control the details of local government and interfere. I honestly believed, when some Conservatives said that they did not believe in bureaucracy, that they meant it, but I am beginning to doubt that.
      Amendment negatived.
      Mr. Straw: I beg to move amendment No. 40, in page 3, line 11, after 'any', insert 'initial or intermediate'.
      The Chairman of Ways and Means: With this it will be convenient to take the following amendments: No. 41, in page 3, line 11, after 'year', insert
      'commencing not less than twelve months after the date of specification.'.
      No. 42, in page 3, line 11, leave out subsection (4) and insert—
      '(4) The Secretary of State may specify in respect of any initial or intermediate year, kinds of expenditure or income from an internal source which are to be regarded as of a revenue nature for the purpose of debiting or crediting items of account to a rate fund revenue account.'.
      No. 43, in page 3, line 11, leave out subsection (4).
      No. 45, in page 3, line 12, leave out 'are to' and insert `in his view should'.
      No. 47, in page 3, line 14, at end insert
      'and a local authority shall have regard to any specification made under this subsection in determining whether or not to debit or credit items of account to its rate fund revenue account'.
      No. 49, in page 3, line 14, at end insert
      'but any such specification shall not override any decision by a local authority as to any expenditure or income regarded by it as of a revenue nature for such purpose where that decision is in accordance with the practices mentioned in subsection (3) above.'.
      No. 50, in page 3, line 14, at end insert
      'and any authority shall have regard to any such advice from the Secretary of State in determining the form in which to maintain its account'.
      No. 53, in page 3, leave out line 16.
      No. 56, in clause 3, page 3, line 46, at end insert
      'commencing not less than twelve months after the date of specification'.
      No. 73, in page 4, line 14, at end insert
      'commencing not less than twelve months after the date of specification.'.
      New clause 6—Consultations—
      'No specification under section 2 above shall be made before the Chartered Institute of Public Finance and Accountancy and the local authority associations are consulted.'.
      Mr. Straw: These amendments relate to the powers of the Secretary of State to specify income and expenditure items. The amendments seek to circumscribe the power given to the Secretary of State in clause 2(4) to specify the kinds of income or expenditure that are to be regarded as revenue for the purposes of the rate fund revenue account. Some authorities fear that that power may lead the Secretary of State to take measures by use of the specifications to restrict special accountancy techniques to maintain spending levels.
      Ministers have come to Parliament over the last couple of years and given notice that they consider that a particular arrangement should no longer apply. I recollect that that was the case with section 7 of the Rate Support Grants Act last year. As I recall—I stand to be corrected—we did not object to that clause. Do the Government intend—the Minister can inform us when he replies—to deal with special or creative accountancy techniques? I hope that the Minister will make that clear, because, while he may take exception to some of those techniques, they have been accepted by auditors and the district auditor as legitimate in the past, and it is important that authorities should understand their position.
      The problems of local authority accounting techniques have changed in the last seven years. They have changed out of all recognition, not just because of the cuts in the absolute level of rate support grant from 61 per cent. to 47 per cent., but because of the impact of target and penalty and the penalty-related block grant that authorities receive.
      Once they spend over a certain level they get less rather than more. That has meant that what is brought into account on the revenue side in any given year is of far more critical importance to its revenue than it ever was in the past, when the amount of grant that they received was only broadly related to their expenditure, as was the system before 1980. Marginal changes in given revenue expenditure did not produce the dramatic differences in income through block grant that the system now produces. I hope that the Minister takes that point on board. It is the introduction of these penalty systems—not just the changes of absolute income—that has led authorities to search for other devices to transfer revenue expenditure into forms of capital expenditure.
      Amendment No. 41 would impose a 12-month period on any specification issued by the Secretary of State. That is to enable local authorities to have some warning of the terms of any changes in the rules—a point that I have just referred to. It is important that authorities are given breathing space and given notice of the effect that new technical accounting specifications may have on their levels of real income, and therefore expenditure.
      Amendments Nos. 45 and 49 would remove the mandatory nature of a specification by the Secretary of State, and in its place he would be entitled to issue advice, which local authorities would have a duty to regard. The Minister will recall that when he was a humble Back-Bencher during the course of proceedings on the Local Government Bill in 1985 there was a lengthy debate—I think it was that Bill and not one of the other endless pieces of local government legislation to which it has been my lot to devote the last four years—[Interruption.]
      Mr. Tony Banks: My hon. Friend has done very well.
      Mr. Straw: I wish to place on record, for the avoidance of any doubt, that my hon. Friend the Member for
      962
      Newham, West (Mr. Banks) says that I have done well. I take the compliment in the manner in which it was intended.
      We have had many discussions about the nature of a "have regard" duty upon authorities. It is not a light duty. It may not be mandatory, but if anybody ignores a duty to have regard to some requirement in the law, that is actionable. An obvious case is the "Highway Code", to which every driver must have regard, and the code which will be provided at some stage under the Local Government Act 1985.
      8.30 pm
      A "have regard" duty under amendments Nos. 45 and 49 would not make the Bill unenforceable, but would provide some flexibility so that authorities would have regard to what the Secretary of State was asking, but they would, at the margins, be allowed some freedom of choice in allocating, for example, financial transactions between capital and revenue spending. However, if they went beyond that margin, their decision could be challenged by the auditors and ultimately in the courts.
      The hon. Member for Leeds, West (Mr. Meadowcroft) has tabled amendment No. 48, but that has not been called so I shall deal with the other amendments. Amendment No. 49 would provide an opportunity for councils to resist a specification. Councils would not be obliged to regard a specification as overriding where their previous decision on whether an item of expenditure or income was revenue was in accordance with the proper practices as defined in the Bill.
      Amendment No. 50 would preserve Ministers' opportunities to make specifications, but would only require a local authority to have regard to any specification in determining what to count against its rate fund revenue account.
      New clause 6, to which the hon. Member for Leeds, West will no doubt address himself, is designed to provide for consultation with the Chartered Institute of Public Finance and Accountancy and local authorities. He will no doubt also wish to speak on amendment No. 73.
      To return to the point that I made at the outset, all of us wish to see local authority accounts, as with company accounts or any other institution's accounts, in proper order. There is a clear distinction between some capital expenditure and some revenue expenditure. A major housing scheme is plainly capital expenditure. Refuse services are plainly a revenue expenditure. However, many items of expenditure do not have a clear dividing line. For example, at what point does a repair to a property become a major repair which enhances the capital value of a property and could reasonably be regarded as capital expenditure? There are many other areas in which there should be some flexibility.
      There is also the matter of into what year certain expenditure should be put. Again, local authorities should be allowed some discretion in that matter, just, as the Minister will know, people who pay tax under schedule D are allowed some discretion, particularly on the opening and closing of a business, as to which year income should be brought into account.
      We seek to improve and to introduce greater flexibility into the scheme proposed in clause 2.
      Mr. Meadowcroft: I want—as my warm-up man, the hon. Member for Blackburn (Mr. Straw), said earlier—

      963
      to comment on amendments Nos. 56 and 73, in my name and the names of my hon. Friends, and new clause 6 on consultation.
      The first two amendments deal with timing. Those of us who are worried about local government structure and methods of working are anxious to protect the integrity of local government and to assist it to make the changes which will be forced on it by the Bill. I am surprised that the Minister, who has had a long career in local government, is not prepared to accept the need to move slowly from one system to another. There is no way in which it is possible for local authorities suddenly to switch course in midstream and to change their accounting practices—to change the way in which they organise their rate fund revenue accounts. There is no way that they can accommodate such matters simply by diktat overnight. It is arrogant of the Government to say that they do not care about that and will simply order that it be done.
      Our amendments, like some of those moved by the hon. Member for Blackburn, seek to say that, if the Government are to force this measure on local government, at least they should give some breathing space during which time local government can organise its accounting practices to cope with the pressures created by the Government. If adequate time is not given to local authorities to make such changes, there are likely to be problems within local authorities, not caused by some malevolent view from within local authorities, but caused by the pressures put on them to make the changes too hastily. We are talking about bodies which spend vast sums of money and employ large numbers of people. Therefore, it is important to make sure that they can carry out such changes in their practices and that due regard is taken of the time it will take.
      New clause 6 on consultations is straightforward. The Bill, as now drafted, has consultation with local authority associations written into it. The new clause seeks only to put into a particular part of the Bill, and also to include in the consultation written into the Bill, the Chartered Institute of Public Finance and Accountancy. I think that there is a misspelling but that is of no crucial importance. It seeks to put CIPFA into that process as a body specifically engaged in accountancy and the practice of accountancy within local authorities. If we do not recognise the status of the profession, we do a disservice to the whole practice of local government. Therefore, it is our wish to write into the Bill the principle of consultation with local authority associations at that point, together with CIPFA. I hope that the Minister, with his experience of local government, will accept the new clause.
      Mr. Chope: Amendments Nos. 40 to 43, 45, 47, 49, 50, 53 and 56 all relate to clause 2(4). They all seek to modify or delete the provisions in the Bill relating to my right hon. Friend's powers to make specifications that certain kinds of expenditure and income are to be regarded as of a revenue nature and hence are to be included in the rate fund revenue account unless they should be included in accounts referred to in schedule 1 or specified under clause 1(6). I recommend that all the amendments should be rejected and it may assist the Committee if I explain the background to clause 2(4).
      964
      The purpose of these powers is to enable my right hon. Friend to specify that some item of expenditure or income is of a revenue nature where there may be some doubt. For example, all rate income is normally credited to the rate fund revenue accounts which authorities traditionally have kept. We might wish to see that practice continued even though it might be argued that that part of rate income used to pay for capital expenditure is not of a revenue nature. In those circumstances, a specification might be made stating that all rate income is of a revenue nature. We would need to do this for each year for which it is intended that further supplementary reports should be made, as well as for 1987–88 and subsequent years.
      The powers of clause 2(4) do not permit my right hon. Friend to specify that some item of expenditure is not revenue—that is, that it is capital—nor do they provide for specifications about items which are not expenditure or income, such as transfers between accounts. I can assure the Committee that my right hon. Friend has no intention of attempting to say that something is revenue which the whole world thinks is capital.
      Mr. Straw: Will the Minister explain the example that he gave a moment ago—I realise that it is rather technical—of expenditure that is paid for out of the rate fund in support of a capital scheme? Did he say that that would count as revenue or as capital? How would the specification work in those circumstances?
      Mr. Chope: I said that if rates were levied to finance a capital project, it might be argued that the rates were income of a capital nature. That power would enable the Secretary of State to specify that all rate income was of a revenue nature.
      We propose to make specifications simply to clear up doubts in such a way as to ensure that all new statutory rate fund revenue accounts will be in the form in which authorities have kept their traditional revenue accounts. I urge the Committee to reject these amendments.
      We are also debating amendment No. 73 and new clause 6. Amendment No. 73 would prevent us from making specifications in relation to total expenditure for 1984–85 to 1986–87 in Wales and for 1983–84 to 1986–87 in England and for 1987–88 in both countries. To maintain the status quo, we need to make specifications for those years that will reflect directions we have made on total expenditure under the existing statutory provisions for 1986–87 and previous years. I therefore recommend the Committee to reject amendment No. 73.
      Mr. Tony Banks: Would a local authority have recourse to the courts for a decision taken by the Minister under this subsection of clause 2?
      Mr. Chope: This clause does not restrict the right of any individuals to seek their remedies in the courts, as they have always sought to do and regularly do. Normally, the courts decide that the Government have exercised their discretion reasonably and properly.
      New clause 6 would add CIPFA to those to be consulted before a specification is made under clause 2(4). That would be inappropriate. Although I recognise the professional expertise of CIPFA, that institute does not represent the local authorities that are affected by block grant. The authorities and their associations have the necessary expertise to respond to any consultation on the

      965
      matter. Moreover, the consultation provisions in the Bill relating to specifications are in line with all the other consultation provisions relating to rate support grant.
      We would not wish, nor is there any need, to change well tried precedents. I recommend that the Committee rejects new clause 6.
      Amendment negatived.
      Mr. Allan Roberts: I beg to move amendment No. 54, in page 3, line 16, at end add—
      'An item of account shall not be held to be contrary to law for the purpose of section 19 of the Local Government Finance Act 1982 by reason only of its being debited or credited to any account of a local authority where by virtue of this section it is required to be debited or credited to another account of that authority.'.
      I shall speak briefly about amendment No. 54 as it relates back to a previous debate about what the Government are generally trying to do in this clause. This amendment is designed to give protection to local authorities that continue to make up their accounts in ways other than those prescribed in the Bill. As the Minister has already said that the legislation is not intended to do anything but prescribe what is already local authority practice, there is no reason why he should not accept this amendment, which writes his statement into the clause.
      The provisions in the clause are mostly unnecessary, except for the validation of previous practice that has been deemed to be unlawful. As we have said, the provisions are necessary only because the Government now have, and want even more, detailed control of local authority expenditure.
      8.45 pm
      We want to know what is wrong with the present position—what is unlawful in items of local authority accounts and why the legislation is necessary. The law is clear, and deals with the misuse of money. Without this legislation, expenditure may have been unlawful because the local authority had no statutory power to incur it or because it was incurred as a result of an abuse of discretion. A particularly fine distinction in law has already been drawn between items of account that are on their face unlawful and those items that the council may lawfully incur, but which in a particular case might be tainted by illegality. An example is Beacham v. Metropolitan Auditor in 1976, where the Divisional court upheld the auditor's refusal to declare unlawful the expenditure incurred by an authority for demolishing some buildings, notwithstanding the argument that the demolition had required planning permission that had not been obtained. The court held that an item of account would be unlawful only if, by law, it should not have appeared in the accounts. That is an item of expenditure that the council has no power to incur.
      The present position is that an item of account need not relate only to expenditure; it may be an item of either expenditure or income. An item of income might be unlawful because, for example, it came from an illegal source or it was for an illegal purpose.
      If there are any "crooks"—the word used by the Conservative party chairman on television last night—in local government or in the City of London, they should be brought to book and prosecuted. Labour Members are totally against people behaving illegally and corruption in local government. The Labour party has more to lose from corruption and inefficiency in local government because it
      966
      is the party that believes in local government, public expenditure and local authority public services. Therefore, we believe that such things should be adequately and forcibly dealt with.
      We do not understand why the present law needs amending. What is wrong with the present definition of legality and illegality? We should like to put into the legislation protection for local councillors and local authority officers to carry on with the accounting practices in the way that they have done according to the current law of the land. As the Minister said previously that the Government's intention is to allow existing practices to continue, that must be in keeping with the thrust of that argument. I commend the amendment to the Minister.
      Mr. Chope: I hope to persuade the Committee that the amendment is unnecessary. In answer to the point made by the hon. Member for Bootle (Mr. Roberts)—if it is unnecessary there is no harm in including it—I must point out that if we were to include it, it would make things worse for local authorities. The amendment seeks to provide that where an item of account is debited or credited to an account contrary to the provisions of clause 2, it is not to be held contrary to law for the purposes of section 19 of the Local Government Finance Act 1982.
      Section 19 of the 1982 Act is all about ultra vires expenditure—surcharge and disqualification. It deals with those circumstances where an authority has incurred expenditure without the power so to do, or which it has incurred through an abuse of its powers by acting unreasonably.
      I am advised that reference to items of account that are contrary to law under section 19 would not include references to items of account that have simply been debited or credited to a different account from that to which statute provides they should have been debited. Accordingly, as I have said, the amendment is unnecessary and I recommend the Committee to reject it.
      Were the amendment to be carried, it would cause problems because it would suggest that any other expenditure that should have been shown in some other account, such as an account under section 137 of the Local Government Act 1972, would be contrary to law for the purpose of section 19 of the 1982 Act if not shown in that account. I hope that with that explanation the hon. Gentleman will withdraw the amendment.
      Amendment negatived.
      Question proposed, That the clause stand part of the Bill.
      Mr. Allan Roberts: As none of the amendments has been accepted—and, therefore, the clause stands unamended—I urge the House to reject the clause. As I said in my opening remarks,
      "Rate fund revenue accounts: further provisions"
      still sounds ominous, despite the Minister's attempts to reassure us. The clause still contains major pieces of retrospective legislation that we believe to be unnecessary. It introduces new provisions as well as validating past practices. It still includes the provision of extra powers that the Secretary of State will be able to exercise dictatorially without the scrutiny of Parliament and without consulting local authorities through their associations or individually.
      These powers are being given to the Secretary of State in a clause that we consider to be bad legislation. This proposed legislation seeks to enshrine into law more

      967
      powers to enable the Government to be involved in the detailed running of local authorities' internal affairs and internal accounting procedures. The clause is opposed by Labour in local government, by alliance councillors, independent councillors and, even more significant for the Government, by Conservative councillors and those who help the Conservative party in local government through their local authority housing associations.
      Beyond that, the clause is opposed by the Chartered Institute of Public Finance and Accountancy and by others who are involved professionally in dealing with local authority accounts. In short, it is bad legislation. It flows from previous pieces of bad legislation, and this is the 13th Local Government Finance Bill that the Government have introduced. At each stage, they have assured us that their purpose is to clarify the law in protecting local government and simplifying procedures for it. At each stage, however, the law has become less clear, more complicated, more bureaucratic and more centralist. Clause 2 is no exception to that process.
      We tried to amend the clause in a way that would have prevented the need to vote against it. Our amendments sought to give more rights and freedoms to local democratically elected councils. We sought to amend it in a way that would prevent state interference with one of Britain's finest democratic institutions—local government. Our intention was to amend it in a way that would make retrospection unnecessary. If our amendments had been accepted, it would not have been necessary for Ministers to say, "We are seeking to set out in legislation the good practices that local government already observes." Local government follows those practices and has done so for many years.
      If these good practices exist, why do we need to introduce bureaucratic legislation on to the statute book? Unfortunately, it is necessary to take that course because the Government find themselves in a mess through their own desire to interfere. They wish to cut services and to cause local authorities to make their employees redundant. The Government find themselves in a mess because of their attempt to reduce services and public expenditure through cutting local authority expenditure. They have had to erect a panoply of legislation to enable them to interfere.
      The clause will not clarify the issue, nor will it simplify it. If it becomes part of an Act, it will prove to be as unworkable as every other piece of local government legislation that the Government have introduced. Every piece of their previous legislation has been circumvented because of local government's ingenuity. As that has happened at every stage, the Government have introduced another Bill, but local government chief officers and treasurers have been able legally to defend jobs and services in their areas. They have circumvented previous legislation and they will circumvent the Bill. Further legislation will be needed, especially as the Bill has been hurried and is ill thought out. It is not understood even by the Secretary of State for the Environment, let alone by local government. I hope that the Committee will reject the clause.
      Mr. Chope: I hope that the Committee will allow clause 2 to remain in the Bill. It is an important clause. I note that the Opposition did not have the courage of their
      968
      convictions to call a Division on any of their amendments. Perhaps they were not quite sure whether any of them were adequate.
      Mr. Allan Roberts: If we receive challenges of that sort, we shall vote on every amendment. We are well aware that the Government have a majority, that the Government Whips are on and that the payroll vote is in the House of Commons. By voting against the clause standing part of the Bill, we are dividing on a matter of principle. We had hoped that by reasoned argument we would persuade the Government to accept some of our amendments.
      Mr. Chope: My right hon. Friend the Chancellor of the Duchy of Lancaster has pointed out to me that perhaps—
      Mr. Walter Harrison: On a point of order, Mr. Walker. If the Minister wishes to challenge the Opposition, we can divide on all our amendments and every Government amendment. The ability to do so was illustrated in 1971, and that illustration can be repeated. If the Minister provokes the Opposition, he will get that irrespective of what the Opposition Front Bench says. Let the Minister know that.
      Mr. Chope: I would not wish to pick an argument with someone who has had the experience of being an Opposition Deputy Chief Whip. I am advised by my right hon. Friend the Chancellor of the Duchy of Lancaster that perhaps the Opposition have not voted on their amendments to clause 2 because they do not have their troops here. I do not know whether there is any truth in that piece of advice.
      The clause, along with clause 1, introduces into the Bill the concept of the rate fund revenue account so that relevant and total expenditure can be defined in statute and the new statutory definition is that which in practice has been adopted since 1981.
      Question put, That the clause stand part of the Bill:—
      The Committee divided: Ayes 240, Noes 178.

      Division No. 65]

      [8.55 pm

      AYES

      Aitken, Jonathan

      Brinton, Tim

      Alexander, Richard

      Brittan, Rt Hon Leon

      Alison, Rt Hon Michael

      Brooke, Hon Peter

      Amess, David

      Brown, M. (Brigg & Cl'thpes)

      Ancram, Michael

      Browne, John

      Ashby, David

      Bruinvels, Peter

      Aspinwall, Jack

      Bryan, Sir Paul

      Atkins, Robert (South Ribble)

      Buchanan-Smith, Rt Hon A.

      Atkinson, David (B'm'th E)

      Buck, Sir Antony

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

      Budgen, Nick

      Baker, Nicholas (Dorset N)

      Bulmer, Esmond

      Baldry, Tony

      Burt, Alistair

      Banks, Robert (Harrogate)

      Butcher, John

      Batiste, Spencer

      Butterfill, John

      Bellingham, Henry

      Carlisle, John (Luton N)

      Bendall, Vivian

      Carlisle, Kenneth (Lincoln)

      Benyon, William

      Cash, William

      Best, Keith

      Chapman, Sydney

      Bevan, David Gilroy

      Chope, Christopher

      Biffen, Rt Hon John

      Churchill, W. S.

      Blackburn, John

      Clark, Dr Michael (Rochford)

      Body, Sir Richard

      Clark, Sir W. (Croydon S)

      Bonsor, Sir Nicholas

      Clarke, Rt Hon K. (Rushcliffe)

      Boscawen, Hon Robert

      Colvin, Michael

      Bottomley, Peter

      Conway, Derek

      Bottomley, Mrs Virginia

      Cope, John

      Bowden, Gerald (Dulwich)

      Corrie, John

      Boyson, Dr Rhodes

      Couchman, James

      Brandon-Bravo, Martin

      Crouch, David

      Bright, Graham

      Currie, Mrs Edwina

      969

      Dicks, Terry

      Knight, Greg (Derby N)

      Dorrell, Stephen

      Knight, Dame Jill (Edgbaston)

      Douglas-Hamilton, Lord J.

      Latham, Michael

      Dover, Den

      Lee, John (Pendle)

      Dunn, Robert

      Lennox-Boyd, Hon Mark

      Durant, Tony

      Lester, Jim

      Edwards, Rt Hon N. (P'broke)

      Lloyd, Sir Ian (Havant)

      Eggar, Tim

      Lloyd, Peter (Fareham)

      Evennett, David

      Lord, Michael

      Eyre, Sir Reginald

      MacKay, John (Argyll & Bute)

      Fairbairn, Nicholas

      McQuarrie, Albert

      Fallon, Michael

      Malone, Gerald

      Farr, Sir John

      Mather, Sir Carol

      Favell, Anthony

      Maude, Hon Francis

      Fenner, Dame Peggy

      Mawhinney, Dr Brian

      Fletcher, Sir Alexander

      Mayhew, Sir Patrick

      Fookes, Miss Janet

      Monro, Sir Hector

      Forman, Nigel

      Moore, Rt Hon John

      Forsyth, Michael (Stirling)

      Morris, M. (N'hampton S)

      Forth, Eric

      Moynihan, Hon C.

      Franks, Cecil

      Neubert, Michael

      Fraser, Peter (Angus East)

      Newton, Tony

      Freeman, Roger

      Nicholls, Patrick

      Gale, Roger

      Norris, Steven

      Galley, Roy

      Pattie, Rt Hon Geoffrey

      Gardiner, George (Reigate)

      Pollock, Alexander

      Gardner, Sir Edward (Fylde)

      Portillo, Michael

      Garel-Jones, Tristan

      Powley, John

      Glyn, Dr Alan

      Price, Sir David

      Goodhart, Sir Philip

      Raison, Rt Hon Timothy

      Goodlad, Alastair

      Rathbone, Tim

      Gower, Sir Raymond

      Rees, Rt Hon Peter (Dover)

      Grant, Sir Anthony

      Rhys Williams, Sir Brandon

      Gregory, Conal

      Ridley, Rt Hon Nicholas

      Griffiths, Sir Eldon

      Rifkind, Rt Hon Malcolm

      Griffiths, Peter (Portsm'th N)

      Rippon, Rt Hon Geoffrey

      Grist, Ian

      Roberts, Wyn (Conwy)

      Ground, Patrick

      Roe, Mrs Marion

      Gummer, Rt Hon John S

      Rossi, Sir Hugh

      Hamilton, Hon A. (Epsom)

      Rost, Peter

      Hamilton, Neil (Tatton)

      Rowe, Andrew

      Hampson, Dr Keith

      Sackville, Hon Thomas

      Hanley, Jeremy

      Sainsbury, Hon Timothy

      Hannam, John

      Sayeed, Jonathan

      Hargreaves, Kenneth

      Shaw, Giles (Pudsey)

      Harris, David

      Shaw, Sir Michael (Scarb')

      Harvey, Robert

      Shelton, William (Streatham)

      Haselhurst, Alan

      Shepherd, Richard (Aldridge)

      Havers, Rt Hon Sir Michael

      Silvester, Fred

      Hawkins, C. (High Peak)

      Sims, Roger

      Hawkins, Sir Paul (N'folk SW)

      Skeet, Sir Trevor

      Hawksley, Warren

      Smith, Tim (Beaconsfield)

      Hayes, J.

      Soames, Hon Nicholas

      Hayhoe, Rt Hon Sir Barney

      Speller, Tony

      Hayward, Robert

      Spencer, Derek

      Heathcoat-Amory, David

      Spicer, Jim (Dorset W)

      Heddle, John

      Spicer, Michael (S Worcs)

      Henderson, Barry

      Stanbrook, Ivor

      Hickmet, Richard

      Steen, Anthony

      Hind, Kenneth

      Stern, Michael

      Hirst, Michael

      Stevens, Lewis (Nuneaton)

      Holland, Sir Philip (Gedling)

      Stewart, Allan (Eastwood)

      Holt, Richard

      Stewart, Andrew (Sherwood)

      Howard, Michael

      Stokes, John

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

      Stradling Thomas, Sir John

      Howarth, Gerald (Cannock)

      Sumberg, David

      Howell, Rt Hon D. (G'ldford)

      Taylor, John (Solihull)

      Howell, Ralph (Norfolk, N)

      Taylor, Teddy (S'end E)

      Hubbard-Miles, Peter

      Tebbit, Rt Hon Norman

      Hunt, David (Wirral W)

      Temple-Morris, Peter

      Hunt, John (Ravensbourne)

      Terlezki, Stefan

      Hunter, Andrew

      Thomas, Rt Hon Peter

      Irving, Charles

      Thompson, Donald (Calder V)

      Jackson, Robert

      Thompson, Patrick (N'ich N)

      Johnson Smith, Sir Geoffrey

      Thorne, Neil (Ilford S)

      Jones, Gwilym (Cardiff N)

      Thornton, Malcolm

      Jones, Robert (Herts W)

      Thurnham, Peter

      Jopling, Rt Hon Michael

      Townsend, Cyril D. (B'heath)

      Joseph, Rt Hon Sir Keith

      Trotter, Neville

      King, Roger (B'ham N'field)

      Twinn, Dr Ian

      970

      van Straubenzee, Sir W.

      Wheeler, John

      Viggers, Peter

      Whitfield, John

      Waddington, Rt Hon David

      Whitney, Raymond

      Wakeham, Rt Hon John

      Wolfson, Mark

      Walker, Bill (T'side N)

      Wood, Timothy

      Waller, Gary

      Woodcock, Michael

      Ward, John

      Yeo, Tim

      Wardle, C. (Bexhill)

      Young, Sir George (Acton)

      Warren, Kenneth

      Watts, John

      Tellers for the Ayes:

      Wells, Bowen (Hertford)

      Mr. Richard Ryder and

      Wells, Sir John (Maidstone)

      Mr. David Lightbown.

      NOES

      Abse, Leo

      Foster, Derek

      Adams, Allen (Paisley N)

      Foulkes, George

      Alton, David

      Fraser, J. (Norwood)

      Anderson, Donald

      Freeson, Rt Hon Reginald

      Archer, Rt Hon Peter

      Garrett, W. E.

      Ashley, Rt Hon Jack

      George, Bruce

      Atkinson, N. (Tottenham)

      Gilbert, Rt Hon Dr John

      Bagier, Gordon A. T.

      Godman, Dr Norman

      Banks, Tony (Newham NW)

      Golding, Mrs Llin

      Barron, Kevin

      Gould, Bryan

      Beckett, Mrs Margaret

      Gourlay, Harry

      Bell, Stuart

      Hamilton, James (M'well N)

      Benn, Rt Hon Tony

      Hancock, Michael

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

      Hardy, Peter

      Bermingham, Gerald

      Harrison, Rt Hon Walter

      Bidwell, Sydney

      Haynes, Frank

      Blair, Anthony

      Heffer, Eric S.

      Boyes, Roland

      Hogg, N. (C'nauld & Kilsyth)

      Bray, Dr Jeremy

      Home Robertson, John

      Brown, Gordon (D'f'mline E)

      Howell, Rt Hon D. (S'heath)

      Brown, Hugh D. (Provan)

      Howells, Geraint

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

      Hoyle, Douglas

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

      Hughes, Robert (Aberdeen N)

      Bruce, Malcolm

      Hughes, Roy (Newport East)

      Buchan, Norman

      Hughes, Sean (Knowsley S)

      Caborn, Richard

      Janner, Hon Greville

      Callaghan, Jim (Heyw'd & M)

      John, Brynmor

      Campbell, Ian

      Jones, Barry (Alyn & Deeside)

      Campbell-Savours, Dale

      Kaufman, Rt Hon Gerald

      Carlile, Alexander (Montg'y)

      Kirkwood, Archy

      Carter-Jones, Lewis

      Lambie, David

      Clark, Dr David (S Shields)

      Lamond, James

      Clarke, Thomas

      Leadbitter, Ted

      Clay, Robert

      Leighton, Ronald

      Clelland, David Gordon

      Lewis, Terence (Worsley)

      Clwyd, Mrs Ann

      Litherland, Robert

      Cocks, Rt Hon M. (Bristol S)

      Livsey, Richard

      Cohen, Harry

      Llyod, Tony (Stretford)

      Coleman, Donald

      Lofthouse, Geoffrey

      Conlan, Bernard

      McCartney, Hugh

      Cook, Frank (Stockton North)

      McDonald, Dr Oonagh

      Cook, Robin F. (Livingston)

      McGuire, Michael

      Corbett, Robin

      McTaggart, Robert

      Cox, Thomas (Tooting)

      McWilliam, John

      Craigen, J. M.

      Madden, Max

      Crowther, Stan

      Marek, Dr John

      Cunningham, Dr John

      Marshall, David (Shettleston)

      Davies, Ronald (Caerphilly)

      Martin, Michael

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

      Mason, Rt Hon Roy

      Deakins, Eric

      Maynard, Miss Joan

      Dewar, Donald

      Meacher, Micheal

      Dixon, Donald

      Meadowcroft, Michael

      Dobson, Frank

      Michie, William

      Dormand, Jack

      Millan, Rt Hon Bruce

      Dubs, Alfred

      Mitchell, Austin (G't Grimsby)

      Dunwoody, Hon Mrs G.

      Morris, Rt Hon A. (W'shawe)

      Eadie, Alex

      Morris, Rt Hon J. (Aberavon)

      Eastham, Ken

      Nellist, David

      Evans, John (St Helens N)

      Oakes, Rt Hon Gordon

      Fatchett, Derek

      O'Brien, William

      Field, Frank (Birkenhead)

      O'Neill, Martin

      Fields, T. (L'pool Broad Gn)

      Park, George

      Fisher, Mark

      Parry, Robert

      Flannery, Martin

      Patchett, Terry

      Foot, Rt Hon Michael

      Pendry, Tom

      Forrester, John

      Pike, Peter

      971

      Powell, Raymond (Ogmore)

      Spearing, Nigel

      Prescott, John

      Steel, Rt Hon David

      Randall, Stuart

      Stewart, Rt Hon D. (W Isles)

      Raynsford, Nick

      Stott, Roger

      Redmond, Martin

      Strang, Gavin

      Rees, Rt Hon M. (Leeds S)

      Straw, Jack

      Richardson, Ms Jo

      Thomas, Dr R. (Carmarthen)

      Roberts, Allan (Bootle)

      Thompson, J. (Wansbeck)

      Roberts, Ernest (Hackney N)

      Thorne, Stan (Preston)

      Rogers, Allan

      Torney, Tom

      Rooker, J. W.

      Wainwright, R.

      Ross, Ernest (Dundee W)

      Wardell, Gareth (Gower)

      Ross, Stephen (Isle of Wight)

      Wareing, Robert

      Rowlands, Ted

      Welsh, Michael

      Sedgemore, Brian

      White, James

      Sheerman, Barry

      Wigley, Dafydd

      Sheldon, Rt Hon R.

      Williams, Rt Hon A.

      Shields, Mrs Elizabeth

      Wilson, Gordon

      Shore, Rt Hon Peter

      Winnick, David

      Short, Ms Clare (Ladywood)

      Woodall, Alec

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

      Young, David (Bolton SE)

      Silkin, Rt Hon J.

      Skinner, Dennis

      Tellers for the Noes:

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

      Mr. Allen McKay and

      Soley, Clive

      Mr. Lawrence Cunliffe.

      Question accordingly agreed to.
      Clause 2 ordered to stand part of the Bill.

    Clause 3

      MEANING OF LOCAL AUTHORITIES EXPENDITURE
      Dr. Boyson: I beg to move amendment No. 58, in page 3, line 19, leave out from 'year' to end of line 20 and insert—

      '(a) reduced by the aggregate of the credit items of account for the year, and

      (b) adjusted by making such additions or subtractions (or both) as are specified in respect of the year concerned by the Secretary of State.'.

      The Second Deputy Chairman of Ways and Means (Sir Paul Dean): With this amendment it will be convenient to discuss Government amendments Nos. 59 to 63, 65 to 67, 74, 89, 150 and 152.
      Dr. Boyson: These are amendments to the power of my right hon. Friend to make specifications in relation to relevant expenditure. They bring this power into line with the power to make specifications on total expenditure in clause 3(7).
      It may assist the Committee if I indicate how we intend to use this power of specification. First, my right hon. Friend intends to make specifications so that relevant expenditure in future will be in essence the same as it has been taken to be in the past. That is, relevant expenditure will be broadly the net expenditure of an authority, excluding certain items such as mandatory student grants which are financed by specific and supplementary grants, rate support grants, rate or precept income, and balances.
      Secondly, we intend that specifications should provide that, when an item of account has been entered in the rate fund revenue account contrary to proper practice applicable to that account, it is excluded from relevant expenditure. The amendments are necessary to deal with that latter point.
      These matters have not arisen with the existing statutory specification in the 1980 Act because the statute does not refer to accounts or accounting practices although, in practice, we have operated as if it did.
      Under our current approach, if we considered that total expenditure, and hence relevant expenditure, which
      972
      authorities submitted to us improperly omitted an item of account, or improperly contained such an item, we would adjust the submitted figures after giving the authority an opportunity to comment on what we propose.
      Thirdly, we intend to make specifications so that, if an authority includes in its rate fund revenue account transactions that involve putting more money into special funds, and if there is no specific liability against which the money is being provided—what we colloquially call deficit financing of special funds—the transactions will be excluded from relevant expenditure and hence total expenditure.
      If we had not been advised that our general approach to total and relevant expenditure was incorrect in law, we would have sought to exclude such transactions from any figures of expenditure submitted by authorities, following our normal practice of dealing with figures which appear to my right hon. Friend to be improperly compiled.
      Under the powers that we are now taking, we intend to deal with all such situations by means of specification. I should add that, before making specifications, my right hon. Friend will consider carefully all of the representations that he receives and consult when he is required to do so. To make specifications here, his powers will have to be exercised in accordance with principles that must be applied to all local authorities.
      Any decision to make a specification must be exercised in accordance with general and administrative law principles, so the Secretary of State cannot make unreasonable decisions. His decisions will be answerable to the courts.
      Mr. John Fraser: The central objection to clause 3 is not that Parliament is seeking the power to regulate what should or should not go in or out of a local authority's account, as we have to concede that Parliament takes powers from time to time to regulate the contents of accounts. I have referred frequently to the Companies Acts. There is no disagreement in that regard. Our objection is that the power to determine what should be omitted from or included in a local authority's revenue account is to be specified by the Secretary of State. The Minister made no secret of that. However, he said two things which I welcome.
      First, the Minister said that, when making specifications, he would consider representations made by the relevant authority. I take it that he will give us an assurance that, when he makes any general specification about what should be included in or omitted from a local authority's account, he will consider the representations of local authorities generally, as expressed by local authority associations. It would be helpful if the Minister was able to give an assurance that general representations will be received in addition to the representations that I believe he referred to.
      The second assurance that the Minister has given is that the principles on which the specifications are applied will be general, and will not differentiate between local authorities. We understand that future decisions will be challengeable in the courts. I am sure that if the Minister chose to discriminate between one authority and another, the courts would not be slow to intervene under the principles of administrative law. It will be helpful—perhaps the Minister will reply constructively—if the Minister will accept an amendment on Report that would incorporate the obligation to consult to which the Minister

      973
      adverted. If he is willing to do that, it will go at least some way towards assuring local authorities that they will be consulted about these matters and will not be dealt with differentially.
      9.15 pm
      Mr. Dobson: I should be grateful if the Minister will answer some questions arising from the probing Opposition amendments. I should like clarification from the Minister, particularly in view of his earlier interest in education, of the status of payments made and income received by education authorities when they provide education for pupils from other areas. Will the Minister give us some information about the income that the Inner London education authority receives from, say, the London borough of Barnet, which is represented by the Prime Minister? In 1986, the parents of 780 children so recognised the superiority of the education provided by the Inner London education authority that they sent their children from Barnet to Inner London education authority schools. Even allowing for those who go the other way, there is a net inflow of 332 children from Barnet schools into ILEA schools. Is that income reckonable and does it fall within clause 3 as a credit item?
      If the Minister thinks that I singled out the borough that the Prime Minister claims to represent, where parents overwhelmingly voted with their children's feet to get a better education from the Inner London education authority, he might prefer to look at the example of the London borough of Brent, part of which he claims to represent. Before any of the Minister's more ignorant hon. Friends suggest that the London borough of Brent was Labour-controlled, I remind the Minister that, in 1985, when the London borough of Brent was Tory-controlled, no fewer than 1,924 children from the London borough of Brent were sent by their parents to Inner London education authority schools because they recognised the superiority of the service that the Inner London education authority was able to offer at that time.
      I shall be grateful if the Minister will tell us exactly what will happen to the income that will accrue to the Inner London education authority in those circumstances. I hope that he will persuade one or two of his colleagues, should any actually turn up for the debate, to recognise that parents, particularly those in the outer London boroughs and the overwhelming majority living on the borders, recognise the superiority of the service provided by the Inner London education authority, despite the adverse publicity that he, his hon. Friend, the London Evening Standard and other obnoxious journals constantly pump forth.
      Mr. Hancock: I should like the Minister to clarify the point raised by the hon. Member for Holborn and St. Pancras (Mr. Dobson) on Government amendment No. 58. This set of Government amendments gives the Secretary of State enormous powers. I believe that local government is worried about the proposed change. The Bill as it stands allows the Secretary of State to exempt items from the expenditure of a local authority, if he wishes. These provisions allow him to add items, if he wishes.
      Many local authorities, for various reasons, run reserve funds which come within the categories covered by schedule 1. It could be a vehicle reserve fund, in which the local authority saves money to buy new vehicles, or a
      974
      general reserve fund. My local authority of Portsmouth has a reserve fund. It would be worried if a Secretary of State had the discretion in one year to add its reserve fund to or exempt it from the general way in which its expenditure is reckoned for rate support grant in a subsequent year.
      Will local authorities be treated differently? Many hon. Members and I fully accept the Government's fear of the creative accounting that has taken place. Many people believe that this will lead to problems when local authorities are finally brought to book and made to account in real terms. Many local authorities are afraid that items over which they have little control will be added to or exempted from their accounts. They may have great difficulty, therefore, in operating their budget for the coming year. Will the Secretary of State have the discretion to pick on a particular local authority and put it in this category?
      I should be afraid if the Committee supported the Government's amendments. Many questions arise as to what can and what cannot be covered. I am concerned about the discretionary power being wheeled in, somewhat like a guillotine, whenever it suits the political climate. If I read the legislation correctly, it could lead to the Secretary of State inflicting a mini-budget on a local authority half-way through the year and suddenly adding an item that had not previously been included. That must send shivers down the spines of many local treasurers, if not local councillors. The legislation gives enormous powers to the Secretary of State and we are entitled to a full explanation of how it will operate and exactly what it will cover.
      Dr. Boyson: I shall try to deal as adequately as I can with the important questions that have been raised on this technical matter. If I cannot deal with all the questions, I shall write to the hon. Members concerned.
      On the point raised by the hon. Member for Norwood (Mr. Fraser), I give the commitment that the local authority associations will be seen. Further, I can say that decisions will be challengeable in the courts. I therefore give affirmative answers on those two points.
      If I could have the attention of the hon. Member for Holborn and St. Pancras (Mr. Dobson), I shall answer his points.
      Mr. Dobson: I hang on the hon. Gentleman's every word.
      Dr. Boyson: I am grateful to the hon. Gentleman. I trust that he is still doing so when I have finished speaking about the matter which he raised.
      There is much movement of children between one authority area and another in London. I do not want to make a party point, but I must say that the movement of children out of Brent has increased greatly. For two and a half years the Conservative party had control over Brent with the Liberal party. But the movement out of Brent had occurred before then. Next week, I shall find out the movement from ILEA to Brent and Barnet. I trust I hat I shall be able to get the figures to send them to the hon. Member for Holborn and St. Pancras. I know that he is a seeker after truth.
      Mr. Dobson: On the assumption that the hon. Doctor is a seeker after the truth, why did only 1,783 come into

      975
      ILEA schools in 1982 and why did the number increase to 1,924 after the Conservatives and the alliance had been in charge in Brent for two years?
      Dr. Boyson: As I said to the hon. Gentleman, I shall look at the figures. I have not the slightest doubt that those figures are correct. However, I shall consider them.
      The hon. Gentleman must remember that ILEA schools were built up to a high standard. I served as a headmaster in ILEA schools for 14 years. Therefore, I can see both sides of the issue. However, the hon. Gentleman would probably not have appointed me had I applied when he was the chairman of the governors. My school was the most over-subscribed in London, and still has the longest waiting list in London. Therefore, I am aware of the movement between schools.
      I do not doubt the hon. Gentleman's word when he speaks about education, but I shall consider the figures and pass them on to him because I know that he would like to have them, and so would I.
      This year, 25·6 per cent. of children in Brent are going to independent schools or to county schools elsewhere in London. That is a very large figure and it is four times the average for London.
      The hon. Gentleman asked me about the status of the recoupment passing from one authority to another. I must advise the hon. Member that in 1980 I took a Bill through its Committee stage which gave parents more choice of schools and gave them the right to cross boundaries. Therefore, the hon. Gentleman should worship at my shrine. The ingratitude of the hon. Gentleman is like a charcoal biscuit—it is very difficult to absorb. I do not expect the hon. Gentleman to join my party immediately although, obviously, he should be influenced by that fact.
      The expenditure on recoupment payments between Brent and ILEA, or between ILEA and any of the London education authorities, would come from the rates fund revenue account for Brent and it would be income for ILEA. That is the way in which the payments would move between the two bodies. The expenditure would come out of the rate fund revenue account for Brent and would be counted as income for ILEA. As I have said, there is much movement in London between one authority and another.
      A moment ago I knew the answer to question raised by the hon. Member for Portsmouth, South (Mr. Hancock), but it has just slipped my memory for the moment. I shall include it in one of my later answers to the hon. Gentleman.
      Mr. Hancock: The question referred to the reserve funds operated by many local authorities, and whether those funds could and would be brought in and out at the Minister's discretion, and how those reserve funds would be allowed to operate in those local authorities in years to come and whether that discretion would be reflected across the board or whether individual local authorities would be picked out.
      Dr. Boyson: I presume that that would apply to all authorities and it would actually count as a special fund. Obviously, we have had to legislate identically for all authorities. The legislation is difficult enough now without discriminating between one local authority and another.
      Mr. Hancock: The way in which the provision is worded at present, especially with amendment No. 74,
      976
      gives, if I am reading it correctly, the Minister of State the ability, if he so desires, to say, for example, to Portsmouth city council, "You must include, in this year's reckonable expenditure any reserve fund that you are holding." However, at the same time, if I am reading the legislation and the amendment correctly, he could not, if he so chose, push that same commitment on other local authorities. We must watch that ability to choose and we should also consider whether it covers, for example, the reserve funds that many local authorities operate.
      Dr. Boyson: The reserve funds will count as special funds. I shall check and write to the hon. Member so that I can give him a full reply on the question whether they are universal. That is a serious question that affects all authorities throughout the country.
      Mr. John Fraser: The Minister gave an assurance that there would be general consultation with authorities, as well as with individual authorities, and I am grateful for that. However, it is by no means unusual to have an obligation for the Government to consult included in the statute.
      Apart from our fundamental objections to the Bill, my hon. Friends and I believe that the power to specify is one over which Parliament should have some control and that therefore it is a matter that, at least, should be dealt with by statutory instrument so that when the Minister comes forward with a set of specifications he will have to seek the consent of the House of Commons and the other place. We shall table an amendment that will deal with that. At the very least, will the Minister accept on Report an amendment to place a statutory obligation on the Government at least to consult before making a specification? May we have an assurance that such an amendment, if tabled, would be accepted?
      Dr. Boyson: As I said to the hon. Gentleman earlier, the Secretary of State will consult local associations and the specification is answerable to the courts. I cannot give a commitment to the hon. Gentleman that we will accept any amendment. We shall look at all the amendments on Report, as we are doing now. I can say no more than that at this stage.
      Mr. Fraser: We were invited to divide on every amendment when the Minister spoke earlier. We will not divide on every amendment and I do not propose to advise the Committee to divide on this. However, that does not mean that we are simply allowing this matter to pass. We want to make some progress. I hope that, with your permission, Sir Paul, we will have a debate on clause stand part and we shall express our dissatisfaction in the appropriate way when we reach that point.
      Question put, That the amendment be made:—
      The Committee divided: Ayes 234, Noes 171.

      Division No. 66]

      [9.30 pm

      AYES

      Aitken, Jonathan

      Batiste, Spencer

      Alexander, Richard

      Bellingham, Henry

      Alison, Rt Hon Michael

      Bendall, Vivian

      Amess, David

      Benyon, William

      Ancram, Michael

      Best, Keith

      Ashby, David

      Bevan, David Gilroy

      Aspinwall, Jack

      Blackburn, John

      Atkins, Robert (South Ribble)

      Body, Sir Richard

      Atkinson, David (B'm'th E)

      Bonsor, Sir Nicholas

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

      Boscawen, Hon Robert

      Baker, Nicholas (Dorset N)

      Bottomley, Peter

      Banks, Robert (Harrogate)

      Bottomley, Mrs Virginia

      977

      Bowden, Gerald (Dulwich)

      Harris, David

      Boyson, Dr Rhodes

      Harvey, Robert

      Brandon-Bravo, Martin

      Haselhurst, Alan

      Bright, Graham

      Hawkins, C. (High Peak)

      Brinton, Tim

      Hawkins, Sir Paul (N'folk SW)

      Brittan, Rt Hon Leon

      Hawksley, Warren

      Brooke, Hon Peter

      Hayes, J.

      Brown, M. (Brigg & Cl'thpes)

      Hayhoe, Rt Hon Sir Barney

      Browne, John

      Hayward, Robert

      Bruinvels, Peter

      Heathcoat-Amory, David

      Bryan, Sir Paul

      Heddle, John

      Buchanan-Smith, Rt Hon A.

      Henderson, Barry

      Buck, Sir Antony

      Hickmet, Richard

      Budgen, Nick

      Hind, Kenneth

      Bulmer, Esmond

      Hirst, Michael

      Burt, Alistair

      Hogg, Hon Douglas (Gr'th'm)

      Butcher, John

      Holland, Sir Philip (Gedling)

      Butterfill, John

      Holt, Richard

      Carlisle, John (Luton N)

      Hordern, Sir Peter

      Carlisle, Kenneth (Lincoln)

      Howard, Michael

      Cash, William

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

      Chapman, Sydney

      Howarth, Gerald (Cannock)

      Chope, Christopher

      Howell, Ralph (Norfolk, N)

      Churchill, W. S.

      Hubbard-Miles, Peter

      Clark, Dr Michael (Rochford)

      Hunt, David (Wirral W)

      Clark, Sir W (Croydon S)

      Hunt, John (Ravensbourne)

      Clarke, Rt Hon K. (Rushcliffe)

      Hunter, Andrew

      Colvin, Michael

      Irving, Charles

      Conway, Derek

      Jackson, Robert

      Cope, John

      Johnson Smith, Sir Geoffrey

      Corrie, John

      Jones, Gwilym (Cardiff N)

      Couchman, James

      Jones, Robert (Herts W)

      Crouch, David

      Jopling, Rt Hon Michael

      Currie, Mrs Edwina

      Joseph, Rt Hon Sir Keith

      Dicks, Terry

      King, Roger (B'ham N'field)

      Dorrell, Stephen

      Knight, Greg (Derby N)

      Douglas-Hamilton, Lord J.

      Knight, Dame Jill (Edgbaston)

      Dover, Den

      Latham, Michael

      Dunn, Robert

      Lennox-Boyd, Hon Mark

      Durant, Tony

      Lester, Jim

      Edwards, Rt Hon N. (P'broke)

      Lightbown, David

      Eggar, Tim

      Lilley, Peter

      Evennett, David

      Lloyd, Sir Ian (Havant)

      Eyre, Sir Reginald

      Lloyd, Peter (Fareham)

      Fairbairn, Nicholas

      Lord, Michael

      Fallon, Michael

      MacKay, John (Argyll & Bute)

      Farr, Sir John

      Maclean, David John

      Favell, Anthony

      McQuarrie, Albert

      Fenner, Dame Peggy

      Major, John

      Fletcher, Sir Alexander

      Mather, Sir Carol

      Fookes, Miss Janet

      Maude, Hon Francis

      Forman, Nigel

      Mawhinney, Dr Brian

      Forsyth, Michael (Stirling)

      Monro, Sir Hector

      Forth, Eric

      Moore, Rt Hon John

      Franks, Cecil

      Morris, M. (N'hampton S)

      Fraser, Peter (Angus East)

      Moynihan, Hon C.

      Freeman, Roger

      Neubert, Michael

      Gale, Roger

      Newton, Tony

      Galley, Roy

      Nicholls, Patrick

      Gardiner, George (Reigate)

      Norris, Steven

      Gardner, Sir Edward (Fylde)

      Peacock, Mrs Elizabeth

      Garel-Jones, Tristan

      Pollock, Alexander

      Glyn, Dr Alan

      Powley, John

      Goodhart, Sir Philip

      Raison, Rt Hon Timothy

      Goodlad, Alastair

      Rathbone, Tim

      Gower, Sir Raymond

      Rhys Williams, Sir Brandon

      Grant, Sir Anthony

      Ridley, Rt Hon Nicholas

      Greenway, Harry

      Rifkind, Rt Hon Malcolm

      Gregory, Conal

      Rippon, Rt Hon Geoffrey

      Griffiths, Sir Eldon

      Roberts, Wyn (Conwy)

      Griffiths, Peter (Portsm'th N)

      Roe, Mrs Marion

      Grist, Ian

      Rossi, Sir Hugh

      Ground, Patrick

      Rost, Peter

      Grylls, Michael

      Rowe, Andrew

      Gummer, Rt Hon John S

      Ryder, Richard

      Hamilton, Hon A. (Epsom)

      Sackville, Hon Thomas

      Hamilton, Neil (Tatton)

      Sainsbury, Hon Timothy

      Hanley, Jeremy

      Sayeed, Jonathan

      Hannam, John

      Shaw, Giles (Pudsey)

      Hargreaves, Kenneth

      Shaw, Sir Michael (Scarb')

      978

      Shelton, William (Streatham)

      Thompson, Patrick (N'ich N)

      Shepherd, Richard (Aldridge)

      Thorne, Neil (Ilford S)

      Silvester, Fred

      Thornton, Malcolm

      Sims, Roger

      Thurnham, Peter

      Skeet, Sir Trevor

      Twinn, Dr Ian

      Smith, Tim (Beaconsfield)

      van Straubenzee, Sir W.

      Soames, Hon Nicholas

      Viggers, Peter

      Speller, Tony

      Waddington, Rt Hon David

      Spencer, Derek

      Walker, Bill (T'side N)

      Spicer, Jim (Dorset W)

      Waller, Gary

      Spicer, Michael (S Worcs)

      Wardle, C. (Bexhill)

      Stanbrook, Ivor

      Warren, Kenneth

      Steen, Anthony

      Watts, John

      Stern, Michael

      Wells, Bowen (Hertford)

      Stevens, Lewis (Nuneaton)

      Wells, Sir John (Maidstone)

      Stewart, Allan (Eastwood)

      Wheeler, John

      Stewart, Andrew (Sherwood)

      Whitfield, John

      Stokes, John

      Whitney, Raymond

      Stradling Thomas, Sir John

      Wolfson, Mark

      Sumberg, David

      Wood, Timothy

      Taylor, John (Solihull)

      Woodcock, Michael

      Taylor, Teddy (S'end E)

      Yeo, Tim

      Tebbit, Rt Hon Norman

      Young, Sir George (Acton)

      Temple-Morris, Peter

      Terlezki, Stefan

      Tellers for the Ayes:

      Thomas, Rt Hon Peter

      Mr. Gerald Malone and

      Thompson, Donald (Calder V)

      Mr. Michael Portillo.

      NOES

      Abse, Leo

      Dormand, Jack

      Adams, Allen (Paisley N)

      Dubs, Alfred

      Alton, David

      Dunwoody, Hon Mrs G.

      Anderson, Donald

      Eadie, Alex

      Archer, Rt Hon Peter

      Eastham, Ken

      Ashley, Rt Hon Jack

      Evans, John (St. Helens N)

      Atkinson, N. (Tottenham)

      Fatchett, Derek

      Bagier, Gordon A. T.

      Field, Frank (Birkenhead)

      Barron, Kevin

      Fields, T. (L'pool Broad Gn)

      Beckett, Mrs Margaret

      Fisher, Mark

      Bell, Stuart

      Flannery, Martin

      Benn, Rt Hon Tony

      Foot, Rt Hon Michael

      Bermingham, Gerald

      Forrester, John

      Bidwell, Sydney

      Foster, Derek

      Blair, Anthony

      Foulkes, George

      Boyes, Roland

      Fraser, J. (Norwood)

      Bray, Dr Jeremy

      Freeson, Rt Hon Reginald

      Brown, Gordon (D'f'mline E)

      Garrett, W. E.

      Brown, Hugh D. (Proven)

      George, Bruce

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

      Gilbert, Rt Hon Dr John

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

      Godman, Dr Norman

      Bruce, Malcolm

      Golding, Mrs Llin

      Buchan, Norman

      Gourlay, Harry

      Callaghan, Jim (Heyw'd & M)

      Hamilton, James (M'well N)

      Campbell, Ian

      Hancock, Michael

      Campbell-Savours, Dale

      Hardy, Peter

      Carlile, Alexander (Montg'y)

      Haynes, Frank

      Carter-Jones, Lewis

      Heffer, Eric S.

      Clark, Dr David (S Shields)

      Hogg, N. (C'nauld & Kilsyth)

      Clarke, Thomas

      Home Robertson, John

      Clay, Robert

      Howell, Rt Hon D. (S'heath)

      Clelland, David Gordon

      Howells, Geraint

      Clwyd, Mrs Ann

      Hoyle, Douglas

      Cocks, Rt Hon M. (Bristol S)

      Hughes, Robert (Aberdeen N)

      Cohen, Harry

      Hughes, Roy (Newport East)

      Coleman, Donald

      Hughes, Sean (Knowsley S)

      Conlan, Bernard

      Janner, Hon Greville

      Cook, Frank (Stockton North)

      John, Brynmor

      Corbett, Robin

      Jones, Barry (Alyn & Deeside)

      Cox, Thomas (Tooting)

      Kaufman, Rt Hon Gerald

      Craigen, J. M.

      Kirkwood, Archy

      Crowther, Stan

      Lambie, David

      Cunliffe, Lawrence

      Lamond, James

      Cunningham, Dr John

      Leadbitter, Ted

      Dalyell, Tam

      Leighton, Ronald

      Davies, Ronald (Caerphilly)

      Lewis, Terence (Worsley)

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

      Litherland, Robert

      Deakins, Eric

      Livsey, Richard

      Dewar, Donald

      Lloyd, Tony (Stretford)

      Dixon, Donald

      Lofthouse, Geoffrey

      Dobson, Frank

      McCartney, Hugh

      979

      McDonald, Dr Oonagh

      Rogers, Allan

      McGuire, Michael

      Rooker, J. W.

      McKay, Allen (Penistone)

      Ross, Ernest (Dundee W)

      McTaggart, Robert

      Ross, Stephen (Isle of Wight)

      McWilliam, John

      Rowlands, Ted

      Madden, Max

      Sedgemore, Brian

      Marek, Dr John

      Sheldon, Rt Hon R.

      Marshall, David (Shettleston)

      Shields, Mrs Elizabeth

      Martin, Michael

      Shore, Rt Hon Peter

      Maxton, John

      Short, Ms Clare (Ladywood)

      Maynard, Miss Joan

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

      Meacher, Michael

      Silkin, Rt Hon J.

      Meadowcroft, Michael

      Skinner, Dennis

      Michie, William

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

      Mikardo, Ian

      Soley, Clive

      Millan, Rt Hon Bruce

      Spearing, Nigel

      Mitchell, Austin (G't Grimsby)

      Steel, Rt Hon David

      Morris, Rt Hon A. (W'shawe)

      Stewart, Rt Hon D. (W Isles)

      Morris, Rt Hon J. (Aberavon)

      Stott, Roger

      Nellist, David

      Strang, Gavin

      Oakes, Rt Hon Gordon

      Straw, Jack

      O'Brien, William

      Thompson, J. (Wansbeck)

      O'Neill, Martin

      Thorne, Stan (Preston)

      Park, George

      Torney, Tom

      Parry, Robert

      Wardell, Gareth (Gower)

      Patchett, Terry

      Wareing, Robert

      Pendry, Tom

      Welsh, Michael

      Pike, Peter

      White, James

      Powell, Raymond (Ogmore)

      Wigley, Dafydd

      Prescott, John

      Wilson, Gordon

      Randall, Stuart

      Winnick, David

      Raynsford, Nick

      Woodall, Alec

      Redmond, Martin

      Rees, Rt Hon M. (Leeds S)

      Tellers for the Noes:

      Richardson, Ms Jo

      Mr. Walter Harrison and

      Roberts, Allan (Bootle)

      Mr. Tony Banks.

      Roberts, Ernest (Hackney N)

      Question accordingly agreed to.
      Amendments made: No. 59, in page 3, line 23, leave out `or parts of items'.
      No. 60, in page 3, line 27, leave out 'or parts of items'.
      No. 61, in page 3, line 30, leave out or parts of items'.
      No. 62, in page 3, line 33, at end insert 'and'.
      No. 63, in page 3, line 36, leave out from 'courses)' to end of line 38.
      No. 65, in page 3, line 40, leave out 'or parts of items'.
      No. 66, in page 3, line 41, at end insert 'and'.
      No. 67, in page 3, line 43, leave out from 'authority' to end of line 46.—[Dr. Boyson.]
      Mr. Roland Boyes: I beg to move amendment No. 68, in page 4, line 1, leave out subsection (6).
      The amendment seeks to delete subsection (6). It appears to be another example of the Secretary of State building legal safeguards and judge-proofing into the Bill. It is surprising that the Secretary of State has found it necessary to include this catch-all subsection. He has had at least three months in which to draft the legislation.
      Clause 3 defines what is meant by local authorities' expenditure for the purpose of part VI of the 1980 Act's support grant. It is acceptable to us, so far as it goes, subject to the safeguards that we are trying to build into clause 3. However, clause 3(6) says:
      "Subsection (1)…shall have effect subject to any enactment (whenever passed)".
      Will the Minister explain what this phrase means and tell the Committee what was the Government's intention in including this phrase? Is it retrospective?
      Will the Minister also list the Acts to which the phrase refers? The Committee is being asked to give a blank cheque to the Secretary of State. How are hon. Members
      980
      to know whether the redefinition of "relevant expenditure" is appropriate in the context of other enactments? Does the Secretary of State know what they are? If so, will he list them, or is this a manifestation of legal paranoia?
      9.45 pm
      Dr. Boyson: I am grateful to the hon. Member for Houghton and Washington (Mr. Boyes) for his comments. This is a technical matter and I shall answer as best I can about what this amendment would do and why we are resisting it. The amendment would mean that the definition of relevant expenditure in the Bill would exclude certain items that we do not want excluded. It would delete clause 3(6) which provides that the definition of relevant expenditure is
      "subject to any enactment (whenever passed) having the effect that anything is or is not to be treated…as relevant expenditure".
      An example of such an enactment is the Social Security and Housing Benefit Act 1982, which provides that if an order is made—and one has been made—certain contributions to the housing revenue account are not to be treated as relevant expenditure. It is on this basis that our current practices on rate support grant have been operated. The effect of the amendment would be that in any rate support grant reports and supplementary reports made after the passing of the Bill those contributions would no longer be excluded from relevant expenditure.
      It is right that the provisions which provide that certain items are not part of relevant expenditure should continue to have effect. I need hardly remind the Committee again that the purpose of the Bill is to enable us to continue current practice and, as far as possible, clause 3 and the rest of the Bill will ensure a continuance of current practice. I hope that the Opposition will not press the amendment to a vote, because it would undermine part or all of clause 3.
      Mr. Hancock: This amendment is a challenge to the Minister because he must tell the Committee what it means. Let me put myself in the position of a local government treasurer reading this legislation and being asked by his members to explain what it means. What does this cover and what does it not cover? It is not good enough for us glibly to push aside an amendment which is not only a probing amendment but one which means something. It means that in future the Government will have to spell out exactly what they mean by it. It is not good enough for us to be told time and time again that these matters will be open to challenge in the courts. That is not a fair basis upon which local government should have to work in the next 12 months after the Bill receives Royal Assent.
      We need specific answers to those points. I am sure that with the best will in the world the Minister will say that in time he can give those answers. I look forward to that time and to the correspondence. This debate is sparsely attended, but there is a wider audience outside which has some enthusiasm for local government expenditure. Such enthusiasm is hard to engender in the Committee, but in the months ahead many people will have a difficult time if we do not get some clarification of exactly what is meant by the Minister's statements.
      I am sure that Hansard will be read by those treasurers and councillors who care about what is happening to local government finance. They will wonder what the Minister meant in his reply to the hon. Member for Houghton and

      981
      Washington (Mr. Boyes), who moved the amendment. The Minister must spell out what is covered and what is not. What areas of expenditure does he want to see included but which are not specifically mentioned in the Bill? May we please have answers to those questions?
      Dr. Boyson: I shall reply briefly to the questions asked by the hon. Member for Portsmouth, South (Mr. Hancock). I shall have to be careful with the words because all these words mean something and have to be interpreted. [Interruption.] I try to interpret them for myself at the same time as I interpret them for the Committee and five minutes later I wonder if I have. I should prefer to write to the hon. Member about this, because I do not want to be tied to what I say is the interpretation. For example, I have written down for my own reference the definitions for net expenditure and total expenditure. I have written that net expenditure is, first, from the rate support grant, secondly, from the rate and precept income, thirdly, from balances and, fourthly, from specific and supplementary grants. Total expenditure, which one would expect to be more, is all these without specific and supplementary grants. Having understood that, I think that I had better be careful on the other definitions.
      Amendment negatived.
      Mr. Boyes: I beg to move amendment No. 69, in page 4, line 12, leave out paragraph (b).
      The Second Deputy Chairman: With this amendment it will be convenient also to take amendment No. 70, in page 4, line 12, leave out from 'by' to end of line and insert
      "the addition or subtraction of such descriptions of expenditure or receipts."
      Mr. Boyes: Clause 3(7) allows the Secretary of State to adjust the definition of total expenditure given in the Bill by adding or subtracting items in any future year. The definitions of relevant and total expenditure form the basis of the legal difficulty currently facing the Government in their rate support grant and Rates Act policy. That power will give the Secretary of State a substantial measure of control in the future to affect the basis of local authority spending policies.
      In his statement to the House on 16 December 1986, the Secretary of State said:
      "The Bill is designed to make no changes in policy, but as far as possible to apply existing policy within a tight timetable."—[Official Report, 16 December 1986; Vol. 107, col. 1051.]
      In fact, the Minister is taking several opportunities in the Bill to augment his powers, as in this case. Clause 3(7)(b) contains unspecific and sweeping powers for the Secretary of State to reduce or increase an authority's total expenditure, which is used to calculate its entitlement to grant. There is no sign of how the power will be used or by what criteria that use will be governed. Given that it may be used arbitrarily to deprive local authorities of millions of pounds, it is essential that Parliament retains an ability to scrutinise the use of the power rather than leaving such general powers in the hands of the Executive. Our amendment will delete paragraph (b), which includes these extra powers.
      Dr. Boyson: Section 56 (8) of the 1980 Act provides that total expenditure is relevant expenditure reduced by the amount of specific and supplementary grants, and adjusted by the addition or subtraction of such
      982
      descriptions of expenditure or receipt that the Secretary of State may direct. Directions were made under this power for each of the years 1983–84 to 1986–87. It is intended to make specifications under clause 3(7)(b) which broadly will reflect the directions made in the past.
      The effect of amendment No. 69 is that total expenditure will be relevant expenditure reduced by the amount of specific and supplementary grants. Total expenditure will not therefore be the same as in the past. The basis of the Bill is to put in definitions that will stand up that we presumed from 1980 to 1986 were the definitions on which so much local government financing went ahead.
      Amendment No. 70 will replace the power to make specifications in clause 3(7)(b) with a power in the same terms as the present power in section 56(8) of the 1980 Act. The purpose of the amendment is to find out why the terms of the power have been changed. The reasons are that the existing power allows adjustment to be made only in respect of expenditure—that is, expenditure incurred in respect of third parties—and receipts which are, income from third parties.
      Some of the adjustments made in the past were not, or might not, be expenditure or receipts. I am sure that the Committee is following this very carefully. Clearly, the hon. Member for Houghton and Washington (Mr. Boyes) is. For example, directions were made so that discounts for prompt payments of rates should be added—something that has been discontinued in most parts of Britain, but we used to have discounts for rates if they were paid by a certain time.
      It is only arguable that that is expenditure. Directions were also made that certain reductions in block grant as a result of regulations under schedule 10 of the 1980 Act—that is, the Act on educational pooling—should be added. But those reductions in block grant were neither expenditure nor receipts. Unless the power is in the terms of that in clause 3(7)(b), it will not be possible to reproduce what has been the practice for 1983–84 to 1986–87 in the future. One will realise what a disaster that would be for the country.
      Mr. Pike: By his comments the Minister showed that there might be a case for not pressing the amendment. However, rather than giving one example, he needed to give more details about why it was essential that the clause should not be amended.
      On amendments Nos. 69 and 70 the Minister said that the Government's intention is, as far as possible, to try to maintain the status quo in all respects. However, we would argue that that is not the case. Burnley borough council, on which I used to serve, still gives 2·5 per cent. discount for the prompt payment of rates. That is highly successful, although whether it is worthwhile is considered every year by the council when it fixes the annual rate. The council must calculate how much discount it will give and provide extra income to cover that. The prompt payment of rates means that it can save on interest payments and gain income from investing money for a short period.
      However, I doubt whether clause 3(7)(b) means exactly what the Minister says it does. If it really does mean what the Minister is saying, I could accept the logic of leaving it as it is, although, obviously, we do not like many of the provisions in the Bill.
      I would argue that the clause gives the Secretary of State scope beyond what the Minister was saying and that

      983
      is the danger. If the Minister is sincere in what he has just said, and if the Secretary of State is also sincere—he is in the Chamber—they should tell the House tonight that they are prepared to amend the clause on Report in order to clarify it because it can be interpreted in a different way.
      I strongly believe that it is not what a Minister says, whether in Committee upstairs or on the Floor of the House, that makes the law; it is the Bill as it is written which will have to be interpreted in the courts. Even if we are prepared to be generous to the present Secretary of State, another Secretary of State could use this in a different way at a later stage.
      In all seriousness, if the Minister really believes what he said to us, let him prove his good faith by saying that the Government are prepared to look at this again and return on Report with something which will make it clear that what he said is what the clause actually means. At the moment, I believe that it can be interpreted in a different way and others will also believe that. If that is the case, it is not acceptable. I hope that the Minister will be prepared to look at the clause in that spirit and say that the Government are prepared to think again.
      Dr. Boyson: I am grateful for the speech of the hon. Member for Burnley (Mr. Pike). I am glad to know that the 2·5 per cent. discount is still paid in the hon. Gentleman's constituency. I come from the next valley, the Rossendale valley, and a 2·5 per cent. discount was always paid there. I never understand why authorities in London do not have discounts to get their money in more quickly. If there is a north-south divide, it seems to be that discounts are paid in the north but not in the south.
      This week we in the Government have been blamed for the number of amendments that we have put down because of the speed with which we have had to bring this Bill before the House. If we started putting down more amendments on the suggestion of the hon. Member for Burnely, honest as I am sure he is in the desire for further clarification, we would have to be careful what we did.
      We shall consider what the hon. Gentleman said and what is contained in the clause. If it is then our conviction that the amendments can be expressed more clearly and will stand up in the courts—
      It being Ten o'clock, THE CHAIRMAN left the Chair to report Progress. and ask leave to sit again.
      Committee report Progress

  BUSINESS OF THE HOUSE
  Motion made, and Question put,
  That at this day's sitting the Local Government Finance Bill may be proceeded with, though opposed, until any hour.—[Mr. Ryder.]
  The House divided: Ayes 250, Noes 10.

  Division No. 67]

  [10.01 pm

  AYES

  Aitken, Jonathan

  Aspinwall, Jack

  Alexander, Richard

  Atkins, Robert (South Ribble)

  Alison, Rt Hon Michael

  Atkinson, David (B'm'th E)

  Alton, David

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

  Amess, David

  Baker, Nicholas (Dorset N)

  Ancram, Michael

  Baldry, Tony

  Arnold, Tom

  Banks, Robert (Harrogate)

  Ashby, David

  Batiste, Spencer

  Ashdown, Paddy

  Bellingham, Henry

  984

  Bendall, Vivian

  Forth, Eric

  Benyon, William

  Fox, Sir Marcus

  Best, Keith

  Franks, Cecil

  Bevan, David Gilroy

  Fraser, Peter (Angus East)

  Biggs-Davison, Sir John

  Freeman, Roger

  Blackburn, John

  Gale, Roger

  Body, Sir Richard

  Galley, Roy

  Bonsor, Sir Nicholas

  Gardiner, George (Reigate)

  Boscawen, Hon Robert

  Gardner, Sir Edward (Fylde)

  Bottomley, Peter

  Garel-Jones, Tristan

  Bottomley, Mrs Virginia

  Glyn, Dr Alan

  Bowden, Gerald (Dulwich)

  Goodhart, Sir Philip

  Boyson, Dr Rhodes

  Goodlad, Alastair

  Brandon-Bravo, Martin

  Gower, Sir Raymond

  Bright, Graham

  Grant, Sir Anthony

  Brinton, Tim

  Greenway, Harry

  Brittan, Rt Hon Leon

  Gregory, Conal

  Brooke, Hon Peter

  Griffiths, Sir Eldon

  Brown, M. (Brigg & Cl'thpes)

  Griffiths, Peter (Portsm'th N)

  Browne, John

  Grist, Ian

  Bruce, Malcolm

  Ground, Patrick

  Bruinvels, Peter

  Gummer, Rt Hon John S

  Bryan, Sir Paul

  Hamilton, Hon A. (Epsom)

  Buchanan-Smith, Rt Hon A.

  Hamilton, Neil (Tatton)

  Buck, Sir Antony

  Hancock, Michael

  Budgen, Nick

  Hanley, Jeremy

  Bulmer, Esmond

  Hannam, John

  Burt, Alistair

  Hargreaves, Kenneth

  Butcher, John

  Harris, David

  Butler, Rt Hon Sir Adam

  Harvey, Robert

  Butterfill, John

  Haselhurst, Alan

  Carlile, Alexander (Montg'y)

  Havers, Rt Hon Sir Michael

  Carlisle, John (Luton N)

  Hawkins, C. (High Peak)

  Carlisle, Kenneth (Lincoln)

  Hawkins, Sir Paul (N'folk SW)

  Cash, William

  Hawksley, Warren

  Chapman, Sydney

  Hayes, J.

  Chope, Christopher

  Hayhoe, Rt Hon Sir Barney

  Churchill, W. S.

  Hayward, Robert

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

  Heathcoat-Amory, David

  Clark, Dr Michael (Rochford)

  Heddle, John

  Clark, Sir W. (Croydon S)

  Henderson, Barry

  Clarke, Rt Hon K. (Rushcliffe)

  Hickmet, Richard

  Colvin, Michael

  Hind, Kenneth

  Conway, Derek

  Hirst, Michael

  Cope, John

  Hogg, Hon Douglas (Gr'th'm)

  Corrie, John

  Holland, Sir Philip (Gedling)

  Couchman, James

  Holt, Richard

  Crouch, David

  Hordern, Sir Peter

  Currie, Mrs Edwina

  Howard, Michael

  Dorrell, Stephen

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

  Douglas-Hamilton, Lord J.

  Howarth, Gerald (Cannock)

  Dover, Den

  Howell, Rt Hon D. (G'ldford)

  Dunn, Robert

  Howell, Ralph (Norfolk, N)

  Durant, Tony

  Howells, Geraint

  Edwards, Rt Hon N. (P'broke)

  Hubbard-Miles, Peter

  Eggar, Tim

  Hunt, David (Wirral W)

  Emery, Sir Peter

  Hunt, John (Ravensbourne)

  Evennett, David

  Hunter, Andrew

  Eyre, Sir Reginald

  Irving, Charles

  Fairbairn, Nicholas

  Jackson, Robert

  Fallon, Michael

  Johnson Smith, Sir Geoffrey

  Farr, Sir John

  Jones, Gwilym (Cardiff N)

  Favell, Anthony

  Jones, Robert (Herts W)

  Fenner, Dame Peggy

  Jopling, Rt Hon Michael

  Fletcher, Sir Alexander

  Joseph, Rt Hon Sir Keith

  Fookes, Miss Janet

  King, Roger (B'ham N'field)

  Forman, Nigel

  Knight, Greg (Derby N)

  Forsyth, Michael (Stirling)

  Knight, Dame Jill (Edgbaston)

  Lang, Ian

  Meadowcroft, Michael

  Latham, Michael

  Mitchell, David (Hants NW)

  Lennox-Boyd, Hon Mark

  Monro, Sir Hector

  Lester, Jim

  Moore, Rt Hon John

  Lloyd, Sir Ian (Havant)

  Morris, M. (N'hampton S)

  MacKay, John (Argyll & Bute)

  Moynihan, Hon C.

  Maclean, David John

  Neubert, Michael

  Major, John

  Nicholls, Patrick

  Malone, Gerald

  Norris, Steven

  Maude, Hon Francis

  Pollock, Alexander

  Mayhew, Sir Patrick

  Portillo, Michael

  985

  Powley, John

  Stokes, John

  Raison, Rt Hon Timothy

  Stradling Thomas, Sir John

  Rathbone, Tim

  Sumberg, David

  Rees, Rt Hon Peter (Dover)

  Taylor, John (Solihull)

  Rhys Williams, Sir Brandon

  Taylor, Teddy (S'end E)

  Ridley, Rt Hon Nicholas

  Tebbit, Rt Hon Norman

  Rifkind. Rt Hon Malcolm

  Temple-Morris, Peter

  Rippon, Rt Hon Geoffrey

  Terlezki, Stefan

  Roberts, Wyn (Conwy)

  Thomas, Rt Hon Peter

  Roe, Mrs Marion

  Thompson, Donald (Calder V)

  Ross, Stephen (Isle of Wight)

  Thompson, Patrick (N'ich N)

  Rossi, Sir Hugh

  Thorne, Neil (Ilford S)

  Rost, Peter

  Thornton, Malcolm

  Rowe, Andrew

  Thurnham, Peter

  Ryder, Richard

  Trotter, Neville

  Sackville, Hon Thomas

  Twinn, Dr Ian

  Sainsbury, Hon Timothy

  van Straubenzee, Sir W.

  Sayeed, Jonathan

  Waddington, Rt Hon David

  Shaw, Giles (Pudsey)

  Walker, Bill (T'side N)

  Shaw, Sir Michael (Scarb')

  Wallace, James

  Shelton, William (Streatham)

  Waller, Gary

  Shepherd, Richard (Aldridge)

  Wardle, C. (Bexhill)

  Shields, Mrs Elizabeth

  Warren, Kenneth

  Silvester, Fred

  Watson, John

  Sims, Roger

  Watts, John

  Skeet, Sir Trevor

  Wells, Bowen (Hertford)

  Smith, Tim (Beaconsfield)

  Wells, Sir John (Maidstone)

  Soames, Hon Nicholas

  Wheeler, John

  Speller, Tony

  Whitfield, John

  Spencer, Derek

  Wilkinson, John

  Spicer, Jim (Dorset W)

  Wolfson, Mark

  Spicer, Michael (S Worcs)

  Wood, Timothy

  Squire, Robin

  Woodcock, Michael

  Stanbrook, Ivor

  Yeo, Tim

  Steel, Rt Hon David

  Young, Sir George (Acton)

  Steen, Anthony

  Stern, Michael

  Tellers for the Ayes:

  Stevens, Lewis (Nuneaton)

  Mr. Peter Lloyd and

  Stewart, Allan (Eastwood)

  Mr. David Lightbown.

  Stewart, Andrew (Sherwood)

  NOES

  Banks, Tony (Newham NW)

  Redmond, Martin

  Brown, Ron (E'burgh, Leith)

  Skinner, Dennis

  Caborn, Richard

  Wilson, Gordon

  Clay, Robert

  Lamond, James

  Tellers for the Noes:

  Maynard, Miss Joan

  Mr. Walter Harrison and

  Pike, Peter

  Mr. Donald Coleman.

  Question accordingly agreed to.

  Local Government Finance Bill
  Again considered in Committee.
  Question again proposed, That the amendment be made.
  Dr. Boyson: In conclusion, I recommend to my hon. Friends that we vote against this amendment and keep the clause as it is.
  Amendment negatived.
  Amendment made: No. 74, in page 4, line 17, leave out from 'subsection' to end of line 18 and insert—
  '(1) or (7) above shall be calculated; and an addition or substraction specified under subsection (1) or (7) above may or may not represent an item of account debited or credited to the authority's rate fund revenue account for the year.'.—[Mr. Lennox-Boyd.]
  Mr. Meadowcroft: I beg to move amendment No. 77, in page 4, line 23, leave out '(b) or (c)'.
  I hope that the amendment's import becomes clear. If the wording is not exactly correct it must be remembered that we do not have the great parliamentary draftsmen at our disposal. I am sure that wording could be corrected in another place if we convince the Committee, by our eloquence, to accept the principle.
  986
  The crucial point concerns the amounts which are available under central funding through grants to local government and which are constrained by the provisions in the clause that we seek to amend. The amendment seeks to take out the provision for the transport supplementary grant—to take out subsection (b) or (c) in section 54(2) of the 1980 Local Government, Planning and Land Act. That would give local government some £7 million of transport supplementary grant and national parks supplementary grant.
  Since the advent of deregulation, the transport problems, especially in urban areas, have been more acute. This is of no surprise to many hon. Members. Local government has to subsidise transport to ensure a proper transport system is available but providing that service has become a serious problem because of lack of resources. I hope, therefore, that the Government will recognise the problem and recognise that this sum of money should go back into the amount for local government. We will then have some extra help, small though it may be, to deal with local government problems.
  10.15 pm
  Dr. Boyson: The amendment would mean that relevant expenditure would be a figure net of transport supplementary grant and national parks supplementary grant unless my right hon. Friend makes specifications to avoid that. According to current practice, relevant expenditure is not a figure net of these supplementary grants. We wish that to continue. Therefore, the amendment serves no purpose and I recommend hon. Members to resist it in spite of the oratory of the hon. Member for Leeds, West (Mr. Meadowcroft) which I found slightly persuasive if I could have been persuaded.
  Amendment negatived.
  Question proposed,That the clause, as amended, stand part of the Bill.
  Mr. Boyes: Clause 3 is intended to give the Minister effective power to rewrite the definitions when it suits him. New powers may be given to the Minister in subsections (4)(c), (5)(c), (7)(b) and (8). He may adjust the basis of calculation of debit and credit items of account; he may adjust up or down the basis of calculation of total expenditure for any local authority; he may specify the manner of calculation of total expenditure and the factors to be taken into account. For practical purposes, the Secretary of State will gain control of local authority expenditure calculations and definitions with the clear intention of using the power to restrict spending. There is no limitation in the Bill on the manner of calculation or factors which may be relevant. The power is not subject to parliamentary scrutiny and there is no requirement to consult affected parties, despite the fact that large amounts could be involved. It is normal practice in relation to grant matters to consult at least the local authority associations. Finally, I agree with the remarks of the hon. Member for Portsmouth, South (Mr. Hancock) and with the remarks that I made myself on other amendments which demonstrate that certain clauses are completely incomprehensible to the people who have to administer local government finance.
  Dr. Boyson: I must not be tempted by the last point made by the hon. Gentleman. I was glad to hear that he

  987
  still agrees with himself and with what he said on earlier amendments, which shows consistency that all of us should follow. Certainly I try to be consistent.
  The clause defines for the year 1987–88 and subsequent years the relevant expenditure and total expenditure of local authorities for the purposes of part VI of the 1980 Act. The clause is a key provision in providing a new statutory definition of relevant and total expenditure and follows the practice adopted since 1981. So once again we are trying to continue a practice that we believe should remain.
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  The clause provides a definition which refers to items of account debited or credited to the rate fund revenue account set up by clauses 1 and 2. Those items of account include as debit items transfers from the rate fund revenue account to special funds such as reserve funds, and as credit items transfers to the rate fund revenue account from special funds. In short, the clause is the key to setting up in statute the practical method of calculating relevant and total expenditure which we have been operating since 1981. The definitions in the Bill will validate them for the past, and also, we trust, for the future.
  Question put and agreed to.
  Clause 3, as amended, ordered to stand part of the Bill.

  Cause 4

    VALIDATION FOR PAST AND GENERAL PROVISION FOR FUTURE
    Dr. Boyson: I beg to move amendment No. 79, in page 4, line 43, leave out from first 'of' to end of line and inset 'an amount of block grant payable'.
    The Second Deputy Chairman: With this it will be convenient to consider Government amendments Nos. 9 and 187.
    Dr. Boyson: These are technical amendments to the provisions dealing with the calculation of relevant and total expenditure for certain previous years. They are necessary if we are to be able to make the conclusive calculations of block grant payable and further supplementary reports for years as intended.
    For England, supplementary reports intended to be the final ones have been made for 1981–82 and for 1982–83. All that is intended for the future for those years it to make a conclusive calculation of block grant payable to each authority. Clause 4 provides for that to be done. For other previous years for England, further supplementary reports are intended—clauses 4 and 5 provide for that.
    When conclusive calculations for supplementary reports are made for years before 1986–87, the authorities to be covered by the calculations and reports include the metropolitan county councils and the Greater London council.
    The conclusive calculations for 1981–82 and for 1982–83 will simply confirm entitlements that have already beet notified to authorities, but if, as a result of further reports, the grant entitlement of those authorities is different from the grant that has already been paid, any adjustment will be made with the appropriate residuary body it accordance with the Local Government Act 1985. The effect of any adjustment will thus be shared among the district councils in a metropolitan county area or among the boroughs in London.
    The amendments will enable clauses 4 and 5 to cater for the GLC for years before 1986–87. I know that there are hon. Members who served on that council. Without the amendments, we could not proceed as we intend, and the status quo would not be maintained. I commend the amendments to the Committee.
    Mr. John Fraser: If I have understood the Minister correctly, there could be a retrospective change in the accounts of the GLC which would affect local authorities that have no control whatever over the decisions that have been made. One cannot possibly attribute to Southwark, Lambeth, Merton or Sutton the consequences of decisions made by the GLC.
    The very least that one ought to ask is that the Minister should give assurances that, if he is thinking of making any substantial changes retrospectively in the construction of the GLC's accounts, he will consult the London authorities about the consequences of those decisions, as they could be adversely affected by decisions in which they play no part.
    Mr. Tony Banks: Will the Minister explain how he would intend to do what he has just outlined with regard to any interpretation of the GLC's accounts? I do not know how it will be done. I do not know where all the
    990
    information about the GLC's accounts is held. I assume that the Department of the Environment has a fairly shrewd idea what went on in the days of the GLC. I hasten to add that there was nothing improper.
    The London residuary body is still in the process of winding up the affairs of the GLC's various committees but, I understand, is making fairly slow progress. I listened to what the Minister said, but I am not sure how he would obtain the information with which to do what he says he would do. I should be most grateful if the Minister could assist me in that respect.
    Dr. Boyson: The Government amendments make any required action possible. I cannot this evening refer to the details of that action. I should not like to delay the Committee with the details at this late hour. They may be more difficult to understand than some of the amendments. The hon. Member for Newham, North-West (Mr. Banks) raised an interesting point. The hon. Gentleman often raises interesting points. I am quite prepared to see the hon. Gentleman or to write to him about the details. There is no question of changing our re-interpretation of the GLC accounts. The information about the GLC expenditure is submitted by the London residuary body. I know that the hon. Gentleman is concerned about the matter. I certainly did not wish to disturb his sleep this evening.
    Question put and agreed to.
    Mr. Straw: The Committee has caught me on the hop. I shall endeavour to follow in the rhetorical footsteps of the Minister. I beg to move amendment No. 80, in page 4, line 44, leave out subsection (5).
    Subsection 5 states:
    "In relation to any intermediate year—

    (a) after the passing of this Act relevant and total expenditure of a local authority shall be calculated for the purposes of Part VI of the 1980 Act in accordance with section 5 below, and

    (b) anything done (including an adjustment made) after the passing of this Act for those purposes shall, to the extent that it involves relevant or total expenditure of a local authority, be done by reference to expenditure so calculated."

    In a moment we shall have an opportunity to debate the wider issues raised by the clause. The Opposition moved this amendment to get an explanation from the Minister about the operation of the subsection.
    Dr. Boyson: I shall attempt to give an explanation to the hon. Member for Blackburn (Mr. Straw) about why we reject this clause. It will damage the Bill. I am sorry, we must not reject the clause.
    Ms. Clare Short: Why not?
    Dr. Boyson: I was looking forward to the debate. The hon. Lady may participate in it. We have not heard the hon. Lady's voice today in the stand part debate. With some of these figures, she may be thinking of standing fast.
    The amendment will have the effect that relevant and total expenditure for the so-called intermediate years—that is the years 1983–84 to 1986–87 in England and 1984–85 to 1986–87 in Wales—could not be calculated for any of the purposes for which such figures of expenditure will be needed after the passage of the Bill. Thus, the amendment will prevent my right hon. Friend from making any further supplementary reports for these years. They could not continue to act in the way intended and as local government expects.

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    In short, the amendment would prevent us from achieving our aim of maintaining the status quo. Even Labour Members, I hope, would not wish us to depart from that. I recommend that the Committee reject the amendment. Basically, in this clause we are following, as far as one can, preceding practice.
    Ms. Clare Short: We are constantly told that the Bill is about validating the past. The Minister tells us that, if the amendment were passed, the Government could not interfere with settlements for 1984–85. That is a long time ago. I am surprised that the Government need take powers back that far. Will the Minister explain more thoroughly, rather than just reading from the brief, exactly what the effect would be if the amendment were passed?
    10.30 pm
    Dr. Boyson: I shall answer the hon. Lady without reading the brief. Let me put it on the record so that lawyers do not need to fight about the next definition.
    Supplementary reports are made. Each year the Government give a rate support grant settlement to each authority and it then knows what it will receive. But, as the year passes, the data change—population, rateable values, the number of children under five, the number of old people, and so on—and there is continuing updating, so that, by the end of the year, the position of the 485 local authorities has changed. A reassessment occurs from time to time, including one of expenditure.
    I have referred to the intermediate years of 1984–85 to 1986–87, the present year. Supplementary reports are required to let the local authorities know the exact position. We cannot obtain those supplementary reports until we get the legislation and our definitions right. Every Government have used supplementary reports from previous years so that they continually bring up to date the amount of money that goes to each local authority.
    Amendment negatived.
    Question proposed, That the clause, as amended stand part of the Bill.
    Dr. Boyson: Clause 4 validates all those things done by the Secretary of State for rate support grant purposes under the provisions described in clause 4(2). It also provides that for those years for which rate support grant supplementary reports have been made which are intended to be final, the conclusive calculations of block grant are to be made on the basis of the supplementary reports and the information that the Secretary of State took into account in making them. The clause provides that the future decisions on supplementary reports for 1983–84, for 1984–85, and for 1985–86, which do not yet exist, and for 1986–87 shall be taken in line with the provisions of clause 5.
    Clause 5, when we come to it, provides that expenditure shall be defined for those years in the same way as for 1987–88. The supplementary reports will contain a definition of total and relevant expenditure and all the other information, just as is being done for the 1987–88 report.
    Mr. Tony Banks: The Minister will be aware that the London borough of Newham has seen his Department a number of times to try to do something about the problems that were first encountered through the creation
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    of special funds in the 1982–83 accounts which, in effect, were disallowed by the Department of the Environment. Those contributions were neglected in the 1983–84 accounts and, due to additional grant penalties, this resulted in a deficit of about £4 million. I could go into some detail about Newham's current position following its position in 1982–83 and the creation of special funds. However, it has been reflected since then in all the settlements we have had. I should like to know whether there is still a chance for Newham's case to be rectified before the Bill becomes an Act. Is there any point in going to see the Minister yet again in order to explain Newham's case and to see whether we can get some redress, or is he now saying that with the passage of the clause, and eventually the Act, we might as well forget about the problems that arose in 1982–83 and that we have no redress either in law or by appeal to the Minister?
    Dr. Boyson: I understand why the hon. Gentleman raised that issue, which is a source of concern for Newham. However, that is involved in schedule 2 and I would prefer to deal with it then. I am aware of the hon. Gentleman's point.
    Mr. Spearing: I appreciate what the Minister says. We are to deal with amendment No. 132, on schedule 2. As I understand it, the Minister is saying that any adjustment will have to be taken account of within the formula of schedule 2 and cannot be in any way adjusted under the terms of clause 4 because it is a rigid clause. Will the Minister confirm that? That is, in effect, what he said but I would like him to be explicit.
    Dr. Boyson: The hon. Gentleman is correct: it does fall under schedule 2. If there is any disagreement, there is nothing to stop the hon. Gentleman from tabling an amendment on this matter. However, as it stands it will be under schedule 2.
    Mr. Straw: As the Minister has explained, clause 4 validates past Acts and makes general provisions for the future. It seeks to clear up the mess of the past seven years of rate support grant and local government finance regimes which the Government have created. During the course of the debates we have had statements from the Minister and the Secretary of State trying to disclaim all responsibility for the 1980 Act, and every amending Act since then. We have had one every year. It is typical of the Government that whenever anything goes wrong they pretend that somehow they had nothing to do with it.
    The financial regime of local authorities is based upon the 1980 Act. I am glad to see the hon. Member for Hornchurch (Mr. Squire) agreeing with that. That Act was the creation of the right hon. Member for Henley (Mr. Henseltine) and it was supported enthusiastically by every Conservative Member of the time. It was the Labour Opposition who opposed that Act on the grounds that it was impractical, and incomprehensible and would lead to serious problems for local authorities. By this Bill we have been proved right and the Government have been proved wrong.
    I hope that the Minister and the Secretary of State show some humility. They keep coming to the Dispatch Box saying that they dislike the present local authority financial regime. That may be the case but why did they vote for it and why do they, no doubt, support it within

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    Government? We are seeing a latter-day conversion. What guarantee do we have that the new system will be any better than the present system?
    Our real concern about clause 4 is not that it seeks to validate past Acts, which people had thought were valid anyway, but about the way in which it seeks to do that, especially, as we discussed under the group of amendments including No. 2A, the fact that, in order to validate the provisions, the Secretary of State seeks to make himself immune from court action. We had a detailed debate on that on Monday and I do not intend to repeat it.
    However, I wish to ask the Secretary of State two sets of questions. Is he willing to consider—I have not given him notice of this—having the clause amended to bring it into line with what he said it meant when we discussed it on Monday? I refer in particular to clause 4(6). The matter was first raised on Monday by my hon. Friend the Member for Birmingham, Ladywood (Ms. Short). The Secretary of State quoted subsection (1) which refers to
    "Anything done by the Secretary of State before the passing of this Act".
    The right hon. Gentleman said:
    "It is only in relation to actions taken before this Act was published that anything I do escapes challenge."
    My hon. Friend the Member for Newham, North-West (Mr. Banks) said:
    "Passed not published."
    The Secretary of State replied:
    "The hon. Gentleman is wrong, because since the Act was published I have done nothing nor will I do anything in the sense of this clause. I have taken no actions whatever in relation to the rate support grant settlement since the time that I realised it would be illegal for me to do so."
    Therefore, my first question to the Secretary of State is: is he willing to consider writing into the opening part of the clause a replacement for the phrase
    "before the passing of this Act"
    using the words, "before 18 December 1986", which is the day that the Bill was published?
    My second question is more substantial, although the first was not insubstantial. During his first speech on Monday, the Secretary of State sought to explain that, in his view, the Opposition were wrong to believe that subsection (6), which makes the clause judge-proof, was wide in its effect. I asked what effect subsection (6) would have. The right hon. Gentleman replied:
    "It depends on the subject of the litigation. If it has to do with total expenditure or involves the definition of total expenditure, the Act will prevail over any decision of the court…Where a matter has nothing to do with the definition of total expenditure or with the rate support grant calculation based on it, it is judiciable but it might be better for the court to await the passage of the Bill so that it knows the definition of total expenditure."—[Official Report, 19 January 1987; Vol. 108, c. 643–70.]
    I accept that if the Bill as drafted was so narrowly defined as the Secretary of State said in that statement, at least there would be less to argue about than we think there is now. Our problem is that clause 4, as drafted, appears to be wide. I do not want to repeat what I said on Monday, but anyone who looks at part VI of the 1980 Act realises that it covers not just definitions of total expenditure or the rate support calculation based upon it, but a wide area—the whole scheme of block grant as set down in that Act. That is reinforced and buttressed by provisions such as section 8 and schedule 2 to the Local Government Finance Act 1982, sections 2 and 3 of the Education Act 1986 and section 2 of the Rate Support Grants Act 1986.
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    If the Secretary of State only wishes the clause to be as narrow as his statement to the House, is he willing to see it amended so that, under clause 4(1), it would read:
    "anything done by the Secretary of State before the passing of this Act for the purposes of the relevant provisions in relation to any of the initial years or intermediate years and only in relation to the definition of total expenditure or the rate support grant calculation based upon it".
    I am quoting from the words that the right hon. Gentleman used. If he means what he says, I can see no reason why that clause should not be limited as he said.
    The Secretary of State says that our concern about the judge-proofing of this clause and clause 6 is unjustified. Earlier today my hon. Friend the Member for Copeland (Dr. Cunningham) quoted respectable legal advice to the effect that our fears are justified. It would be a measure of the Secretary of State's true intentions if he agreed to consider the two points that I have raised and to make a substantive reply on Report.
    10.45 pm
    Ms. Clare Short: There is another very important point. The Secretary of State claims that the Bill is necessary to validate action that he took when he thought he was acting according to the law. We have said all along that if that were all, it would not be controversial. However, we know that in the past local authorities have taken action that, on good legal advice, they thought was lawful, but which is being made unlawful by the Bill. We must ask that the protection that is to be accorded to the Secretary of State should be accorded to local authorities. Their actions should also be validated and made judge proof. If he were an honourable Secretary of State and if he were honourably trying to extricate himself from a legal difficulty, he would extend this protection to local authorities. He should explain why he is unwilling to do so.
    Mr. Straw: I am grateful to my hon. Friend. When we debate amendment No. 87 there will be an opportunity to raise the Birmingham point at much greater length. However, I accept the point that, if the Secretary of State is seeking indemnity for past unlawful actions, what is sauce for the goose is sauce for the gander and the indemnity should apply equally to authorities like Birmingham.
    Mr. Ridley: Since the hon. Member for Blackburn (Mr. Straw) has asked me to respond to two specific questions, I shall have great pleasure in doing so. It gives me an opportunity to clear up the slight misunderstanding which the hon. Member for Copeland (Dr. Cunningham) was in such a ferment about and which he raised on a point of order. As one who purports to put legal challenges before the Committee, he might at least realise the difference between a point of order and a point of substance. But we live in hope.
    The hon. Member for Blackburn first asked the Government to substitute an earlier date—18 December—for the validation. One minute's thought will make him realise that the period between 18 December and the passing of this Bill would be a period when there was no proper definition of rate support grant. The old definition would remain in force. It would be possible for authorities to bring a mass of legal cases, on the basis that at present the law is as it is under the 1980 Act and that the definition was not valid for the period covering the passage of the

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    Bill. He must realise that that would not be a sensible solution. Law suits can arise not only from actions taken by the Secretary of State; they can arise on any matter that an authority chooses to pick upon at any time.
    Secondly, the hon. Gentleman asked about the letter that his hon. Friend the Member for Copeland read out from the Association of Municipal Authorities. I am grateful to the association for sending me a copy of that letter. As I said on Monday, the provisions of clause 4(6) and clause 6(4) validate decisions and actions under those parts of existing legislation that involve total or relevant expenditure. I said that anything that is wholly extraneous to total or relevant expenditure and hence is not within those parts of the existing legislation that are specified in the Bill is not covered by the validation.
    If we did not make the position on those past decisions absolutely clear, it would be a recipe for costly and unnecessary litigation. I hope that the Opposition do not believe that such litigation flowing from the technical flaw which we are here putting right would be in anybody's interest.
    Mr. Straw: The Secretary of State is repeating what he said on Monday. Does he not accept that part VI of the Local Government Planning and Land Act 1980 goes far wider than simply to define total expenditure?
    Mr. Ridley: That is exactly the point that the hon. Gentleman has not grasped, that total expenditure or relevant expenditure is endemic in all of the sections of those Acts that are quoted in the Bill. It is impossible to disentangle some parts of any conceivable court case from those parts that relate to total expenditure. That is exactly what I said on Monday and that is the hon. Gentleman's answer.
    Mr. Straw: It is true that total expenditure pops up in a number of sections in part VI of the 1980 Act, but that is not the exclusive concern of part VI. In order to bring the law more into line with the Minister's statements we have not suggested that there should no longer be any reference to part VI of the 1980 Act, but that that reference should be limited to references to total expenditure. What is wrong with that, since that is exactly what he told the House on Monday?
    Mr. Ridley: I was right on Monday and I am right again today. It is impossible to distinguish some parts of part VI of the 1980 Act about total or relevant expenditure from other matters in that Act. It is the foundation upon which the whole of rate support grant and rate limitation have been calculated and one cannot, as it were, divide the foundations into some parts which are faulty and have to be validated and other parts which are not. If the hon. Gentleman will think about it, he will discover that such a distincition is virtually impossible.
    Mr. Dobson: Will the right hon. Gentleman give way?
    Mr. Ridley: This validation concerns only past decisions. When I come to make further decisions for all the years from 1983–84 to 1986–87 on which there are outstanding supplementary reports to be made, my decision—
    Mr. Dobson: Will the right hon. Gentleman give way?
    Mr. Ridley:—will be subject to the normal review of the courts. My decisions on the rate support grant for 1987–88 and on reports and supplementary reports thereafter will be subject to review by the courts.
    Mr. Dobson rose—
    Ms. Clare Short: The right hon. Gentleman should give way.
    Mr. Ridley: Under the formula in schedule 2, my determination of rate limits for 1987–88 will be subject to review by the courts. Decisions on future years' rate limitation will, of course, also be subject to review by the courts. I hope that puts to rest the misunderstanding which Opposition Front Bench speakers have brought to the debate.
    Mr. Spearing: I would not have risen had the Secretary of State had the courtesy to give way when I or my hon. Friend—
    Mr. Ridley: That is what I have done: I have given way to the hon. Gentleman.
    Mr. Spearing: I hope that I can be as polite or even improve on the politeness of the right hon. Gentleman.
    Mr. Dobson: My hon. Friend could scarcely fail to do that.
    Mr. Spearing: The Minister spoke about clause 4(6) applying to definitions of expenditure. He implied that that court capping, as I have nicknamed it, applied only to definitions of expenditure. However, later he said—I paraphrase—that everything is so intermingled that it is impossible to separate one element from another. He thus appeared to validate the point made by my hon. Friend the Member for Blackburn (Mr. Straw) that clause 4 has a wider ambit that the Secretary of State planned.
    Earlier in the debate, the Minister for Local Government assured me that the Secretary of State had earlier today received a letter from me about these very matters and that I would receive a reply. I rose on that point. I invite the Secretary of State to intervene in my speech, because I will gladly give way to him. I rose to ask if the reply to that letter would come from him and would cover these points at issue. If we went into the points in detail tonight we would not be popular with other hon. Members. I want an understanding from the Secretary of State that not only will I get a reply—I have received that assurance already from the Minister of State—but that that reply will be signed by him and will address the matters that we have been discussing.
    Mr. Ridley: I shall send the hon. Gentleman a signed copy of Hansard with the speech that I have just made, which is a full answer to the letter from the AMA. It quotes me as saying:
    "If it has to do with total expenditure or involves the definition of total expenditure, the Act will prevail over any decision of the court."
    The Acts specified in the Bill all involve the definition of total expenditure, and that is inseparable from all the matters concerned in those Acts. What I said was perfectly valid. I invite the hon. Gentleman to repeat what I said as well.
    Mr. Spearing: I think that the Secretary of State has misunderstood me. The letter that I referred to was not the letter that I read out earlier today by my hon. Friend the Member for Copeland (Dr. Cunningham); it was a letter

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    that I wrote yesterday which the Secretary of State received this morning. The right hon. Gentleman may not have seen it yet, but his hon. Friend the Minister has assured me that I will receive a reply, and I am grateful for the assurance that it will be signed by him.
    Mr. Ridley: I shall be happy to sign the letter myself, having checked it carefully, it if will help the hon. Gentleman.
    Mr. Dobson: Will the Secretary of State tell the Committee whether the legal interpretation that he is now giving, partly in response to the representations from the AMA, is the interpretation that he has arrived at himself, or whether he has received legal advice from the officials of his Department to that effect? If it is the latter, are they the people who drafted the offending legislation in the first place?
    Mr. Ridley: I must be responsible for my words at the Dispatch Box. I would not seek to hide behind the advice or assistance that I receive from others.
    Mr. Tony Banks: Will the Secretary of State carry on from his quotation from Hansard of 19 January? It says:
    "It depends on the subject of litigation. If it has to do with total expenditure or involves the definition of total expenditure, the Act will prevail over any decision of the court…Where a matter has nothing to do with the definition of total expenditure or with the rate support grant calculation based on it, it is judiciable but it might be better for the court to await the passage of the Bill so that it knows the definition of total expenditure."—[Official Report, 19 January 1987; Vol. 108, c. 643.]
    Since the Secretary of State has told us that they are so closely interwoven, can he—so that we can move on—give us a good example of some other form of definition that could be challenged in the courts along the lines that he gave in his speech on 19 January?
    Mr. Ridley: It is like Question Time, Mr. Walker, but I am happy to continue as long as the Committee wishes.
    A possible parallel would be the rateable value of an authority, which is nothing to do with the definition of total expenditure, but is a matter concerned in those Acts.
    Another case that I cited on Monday was the Greenwich case, which concerns the multiplier. I do not want to prejudice that case, but the multiplier has not yet been the subject of a decision because it might be embodied in the first supplementary report for 1986–87, and therefore will be subject to a final decision by me at a stage later than the passage of this Act. I do not want to prejudge the decision of the court, but that matter may be open to judicial review, as I said on Monday in response to the hon. Gentleman.
    I have given him two examples of matters that are not within the scope of the Bill or proof against action by the courts. I am sure that with his great legal knowledge and ingenuity he can think of many more examples of the same sort.
    11 pm
    Mr. Straw: We have all listened with care to the Secretary of State, but the truth is that the assurances that he sought to give on Monday do not square with the wide terms of the Bill as it is drafted. As the letter from the legal adviser to the Inner London education authority points out:
    "There is nothing limiting the deeming provision to errors arising out of the erroneous definition, and therefore calculation, of relevant and total expenditure."
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    Our point is that the present wording clearly appears to cover any procedural impropriety, failure to consider a matter rationally or other unlawfulness in respect of anything done by the Secretary of State for those statutory puposes.
    It is no good the Secretary of State seeking to be patronising with the Committee. I am afraid to say that we have been here before. Ministers have too often given bland assurances about the nature of legislation which have turned out not to be the case. Indeed, if the assurances that were given by his ally the right hon. Member for Henley (Mr. Heseltine) had been correct, the Government would not be in their present mess. It is precisely because Acts have turned out to be something quite different from that which Ministers promised the House that we are in this mess.
    What is more, Labour Members are aware of the fact that Conservative Members of Parliament pay scant regard to the rule of law. For them, it is simply an instrument to use or to discard as it suits them. It is all right for them to lecture us on the rule of law when it suits them, but when they make unlawful Acts, they come to the House to seek wide immunity from the law, and immunity not only in respect of Acts which everybody thought were valid in the past, but from errors, mistakes or acts of unfairness. It is that which we wish to pursue. It is on that that the Secretary of State has given no proper explanation and it is for that reason that we shall seek to vote against clause 4.
    Question put, That the clause, as amended, stand part of the Bill:—
    The Committee divided: Ayes 217, Noes 169.

    Division No. 68]

    [11.02 pm

    AYES

    Aitken, Jonathan

    Budgen, Nick

    Alexander, Richard

    Burt, Alistair

    Alison, Rt Hon Michael

    Butcher, John

    Amess, David

    Butler, Rt Hon Sir Adam

    Ancram, Michael

    Butterfill, John

    Ashby, David

    Carlisle, John (Luton N)

    Aspinwall, Jack

    Carlisle, Kenneth (Lincoln)

    Atkins, Robert (South Ribble)

    Carttiss, Michael

    Atkinson, David (B'm'th E)

    Cash, William

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

    Chope, Christopher

    Baker, Nicholas (Dorset N)

    Churchill, W. S.

    Baldry, Tony

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

    Banks, Robert (Harrogate)

    Clark, Dr Michael (Rochford)

    Batiste, Spencer

    Clark, Sir W. (Croydon S)

    Bellingham, Henry

    Clarke, Rt Hon K.(Rushcliffe)

    Bendall, Vivian

    Cockeram, Eric

    Benyon, William

    Colvin, Michael

    Bevan, David Gilroy

    Conway, Derek

    Biffen, Rt Hon John

    Cope, John

    Biggs-Davison, Sir John

    Corrie, John

    Blackburn, John

    Couchman, James

    Body, Sir Richard

    Crouch, David

    Bonsor, Sir Nicholas

    Currie, Mrs Edwina

    Boscawen, Hon Robert

    Dickens, Geoffrey

    Bottomley, Peter

    Dorrell, Stephen

    Bottomley, Mrs Virginia

    Douglas-Hamilton, Lord J.

    Bowden, Gerald (Dulwich)

    Dover, Den

    Boyson, Dr Rhodes

    Dunn, Robert

    Brandon-Bravo, Martin

    Durant, Tony

    Bright, Graham

    Edwards, Rt Hon N.(P'broke)

    Brinton, Tim

    Eggar, Tim

    Brittan, Rt Hon Leon

    Emery, Sir Peter

    Brooke, Hon Peter

    Evennett, David

    Brown, M. (Brigg & Cl'thpes)

    Fairbairn, Nicholas

    Browne, John

    Fallon, Michael

    Bruinvels, Peter

    Farr, Sir John

    Bryan, Sir Paul

    Favell, Anthony

    Buck, Sir Antony

    Fenner, Dame Peggy

    999

    Forman, Nigel

    Morris, M. (N'hampton S)

    Forsyth, Michael (Stirling)

    Neubert, Michael

    Forth, Eric

    Nicholls, Patrick

    Franks, Cecil

    Norris, Steven

    Fraser, Peter (Angus East)

    Portillo, Michael

    Freeman, Roger

    Powley, John

    Gale, Roger

    Rhys Williams, Sir Brandon

    Galley, Roy

    Ridley, Rt Hon Nicholas

    Gardiner, George (Reigate)

    Rifkind, Rt Hon Malcolm

    Gardner, Sir Edward (Fylde)

    Roberts, Wyn (Conwy)

    Garel-Jones, Tristan

    Roe, Mrs Marion

    Glyn, Dr Alan

    Rossi, Sir Hugh

    Goodlad, Alastair

    Rowe, Andrew

    Grant, Sir Anthony

    Sackville, Hon Thomas

    Greenway, Harry

    Sainsbury, Hon Timothy

    Gregory, Conal

    Sayeed, Jonathan

    Griffiths, Sir Eldon

    Shaw, Giles (Pudsey)

    Griffiths, Peter (Portsm'th N)

    Shaw, Sir Michael (Scarb')

    Ground, Patrick

    Shelton, William (Streatham)

    Grylls, Michael

    Shepherd, Richard (Aldridge)

    Gummer, Rt Hon John S

    Silvester, Fred

    Hamilton, Hon A. (Epsom)

    Sims, Roger

    Hamilton, Neil (Tatton)

    Skeet, Sir Trevor

    Hampson, Dr Keith

    Smith, Tim (Beaconsfield)

    Hanley, Jeremy

    Soames, Hon Nicholas

    Hargreaves, Kenneth

    Speed, Keith

    Harris, David

    Speller, Tony

    Harvey, Robert

    Spencer, Derek

    Haselhurst, Alan

    Spicer, Jim (Dorset W)

    Havers, Rt Hon Sir Michael

    Spicer, Michael (S Worcs)

    Hawkins, Sir Paul (N'folk SW)

    Squire, Robin

    Hawksley, Warren

    Stanbrook, Ivor

    Hayes, J.

    Stern, Michael

    Hayhoe, Rt Hon Sir Barney

    Stevens, Lewis (Nuneaton)

    Hayward, Robert

    Stewart, Allan (Eastwood)

    Heathcoat-Amory, David

    Stewart, Andrew (Sherwood)

    Heddle, John

    Stradling Thomas, Sir John

    Henderson, Barry

    Sumberg, David

    Hickmet, Richard

    Taylor, John (Solihull)

    Higgins, Rt Hon Terence L.

    Taylor, Teddy (S'end E)

    Hind, Kenneth

    Tebbit, Rt Hon Norman

    Hirst, Michael

    Temple-Morris, Peter

    Hogg, Hon Douglas (Gr'th'm)

    Terlezki, Stefan

    Holland, Sir Philip (Gedling)

    Thomas, Rt Hon Peter

    Holt, Richard

    Thompson, Donald (Calder V)

    Hordern, Sir Peter

    Thompson, Patrick (N'ich N)

    Howard, Michael

    Thorne, Neil (Ilford S)

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

    Thornton, Malcolm

    Howarth, Gerald (Cannock)

    Thurnham, Peter

    Howell, Rt Hon D. (G'ldford)

    Townend, John (Bridlington)

    Howell, Ralph (Norfolk, N)

    Trotter, Neville

    Hubbard-Miles, Peter

    Twinn, Dr Ian

    Hunt, David (Wirral W)

    van Straubenzee, Sir W.

    Hunt, John (Ravensbourne)

    Viggers, Peter

    Hunter, Andrew

    Waddington, Rt Hon David

    Jackson, Robert

    Waller, Gary

    Johnson Smith, Sir Geoffrey

    Wardle, C. (Bexhill)

    Jones, Gwilym (Cardiff N)

    Watts, John

    Jones, Robert (Herts W)

    Wells, Bowen (Hertford)

    Jopling, Rt Hon Michael

    Wells, Sir John (Maidstone)

    King, Roger (B'ham N'field)

    Wheeler, John

    Knight, Greg (Derby N)

    Whitfield, John

    Knight, Dame Jill (Edgbaston)

    Wilkinson, John

    Latham, Michael

    Wolfson, Mark

    Lennox-Boyd, Hon Mark

    Wood, Timothy

    Lester, Jim

    Woodcock, Michael

    Lloyd, Sir Ian (Havant)

    Yeo, Tim

    Lloyd, Peter (Fareham)

    Young, Sir George (Acton)

    Malone, Gerald

    Mates, Michael

    Tellers for the Ayes:

    Maude, Hon Francis

    Mr. David Lightbown and

    Mayhew, Sir Patrick

    Mr. Richard Ryder

    Moore, Rt Hon John

    NOES

    Adams, Allen (Paisley N)

    Ashley, Rt Hon Jack

    Alton, David

    Ashton, Joe

    Anderson, Donald

    Atkinson, N, (Tottenham)

    Archer, Rt Hon Peter

    Bagier, Gordon A. T.

    Ashdown, Paddy

    Barron, Kevin

    1000

    Beckett, Mrs Margaret

    John, Brynmor

    Bell, Stuart

    Jones, Barry (Alyn & Deeside)

    Benn, Rt Hon Tony

    Kaufman, Rt Hon Gerald

    Bermingham, Gerald

    Kirkwood, Archy

    Bidwell, Sydney

    Lambie, David

    Blair, Anthony

    Lamond, James

    Boyes, Roland

    Leadbitter, Ted

    Bray, Dr Jeremy

    Leighton, Ronald

    Brown, Gordon (D'f'mline E)

    Lewis, Terence (Worsley)

    Brown, Hugh D. (Provan)

    Litherland, Robert

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

    Lloyd, Tony (Stretford)

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

    Lofthouse, Geoffrey

    Bruce, Malcolm

    McCartney, Hugh

    Buchan, Norman

    McDonald, Dr Oonagh

    Caborn, Richard

    McGuire, Michael

    Callaghan, Jim (Heyw'd & M)

    McKay, Allen (Penistone)

    Campbell-Savours, Dale

    McNamara, Kevin

    Carlile, Alexander (Montg'y)

    McTaggart, Robert

    Clark, Dr David (S Shields)

    McWilliam, John

    Clarke, Thomas

    Madden, Max

    Clay, Robert

    Marek, Dr John

    Clelland, David Gordon

    Marshall, David (Shettleston)

    Clwyd, Mrs Ann

    Martin, Michael

    Cocks, Rt Hon M. (Bristol S)

    Maynard, Miss Joan

    Cohen, Harry

    Meacher, Michael

    Coleman, Donald

    Meadowcroft, Michael

    Conlan, Bernard

    Michie, William

    Cook, Frank (Stockton North)

    Millan, Rt Hon Bruce

    Cook, Robin F. (Livingston)

    Mitchell, Austin (G't Grimsby)

    Corbett, Robin

    Morris, Rt Hon A. (W'shawe)

    Cox, Thomas (Tooting)

    Morris, Rt Hon J. (Aberavon)

    Craigen, J. M.

    Nellist, David

    Crowther, Stan

    O'Brien, William

    Cunliffe, Lawrence

    O'Neill, Martin

    Cunningham, Dr John

    Orme, Rt Hon Stanley

    Dalyell, Tam

    Park, George

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

    Parry, Robert

    Deakins, Eric

    Patchett, Terry

    Dewar, Donald

    Pendry, Tom

    Dixon, Donald

    Pike, Peter

    Dobson, Frank

    Powell, Raymond (Ogmore)

    Dormand, Jack

    Prescott, John

    Douglas, Dick

    Radice, Giles

    Dubs, Alfred

    Randall, Stuart

    Dunwoody, Hon Mrs G.

    Raynsford, Nick

    Eadie, Alex

    Redmond, Martin

    Eastham, Ken

    Rees, Rt Hon M. (Leeds S)

    Evans, John (St. Helens N)

    Richardson, Ms Jo

    Fatchett, Derek

    Roberts, Allan (Bootle)

    Field, Frank (Birkenhead)

    Roberts, Ernest (Hackney N)

    Fields, T. (L'pool Broad Gn)

    Robertson, George

    Fisher, Mark

    Rogers, Allan

    Flannery, Martin

    Ross, Ernest (Dundee W)

    Foot, Rt Hon Michael

    Ross, Stephen (Isle of Wight)

    Forrester, John

    Rowlands, Ted

    Foster, Derek

    Sedgemore, Brian

    Foulkes, George

    Sheerman, Barry

    Fraser, J. (Norwood)

    Sheldon, Rt Hon R.

    Freeson, Rt Hon Reginald

    Shields, Mrs Elizabeth

    Garrett, W. E.

    Shore, Rt Hon Peter

    George, Bruce

    Short, Ms Clare (Ladywood)

    Gilbert, Rt Hon Dr John

    Silkin, Rt Hon J.

    Godman, Dr Norman

    Skinner, Dennis

    Golding, Mrs Llin

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

    Hamilton, James (M'well N)

    Soley, Clive

    Hancock, Michael

    Spearing, Nigel

    Hardy, Peter

    Steel, Rt Hon David

    Harrison, Rt Hon Walter

    Stott, Roger

    Haynes, Frank

    Strang, Gavin

    Hogg, N. (C'nauld & Kilsyth)

    Straw, Jack

    Holland, Stuart (Vauxhall)

    Thompson, J. (Wansbeck)

    Home Robertson, John

    Thorne, Stan (Preston)

    Howell, Rt Hon D. (S'heath)

    Wardell, Gareth (Gower)

    Howells, Geraint

    Wareing, Robert

    Hoyle, Douglas

    Weetch, Ken

    Hughes, Robert (Aberdeen N)

    Welsh, Michael

    Hughes, Roy (Newport East)

    Williams, Rt Hon A.

    Janner, Hon Greville

    Winnick, David

    1001

    Woodall, Alec

    Tellers for the Noes:

    Young, David (Bolton SE)

    Mr. Ron Davies and

    Mr. Sean Hughes.

    Question accordingly agreed to.
    Clause 4, as amended, ordered to stand part of the Bill.
    Motion made, and Question proposed, That the Chairman do report Progress and ask leave to sit again.—[Mr. Ridley.]
    Dr. Cunningham: On a point of order, Mr. Walker. I wish to make it clear that we do not intend to oppose the motion to report Progress, but out of that motion arises a legitimate question that I hope it is appropriate to raise on a point of order. I shall raise it in whatever way is appropriate—
    The Chairman of Ways and Means (Mr. Harold Walker): Order. The question is debatable. If the hon. Gentleman wishes to speak to the question before the House that is perfectly in order.
    11.15 pm
    Dr. Cunningham: I think that I shall continue with my point of order, Mr. Walker.
    We are entitled to have a statement from the Government about their intentions on this business. We have just concluded discussion on clause 4. The Bill, as it now stands, has 17 clauses and five schedules. That was at the last count, but we have difficulty keeping up with the Government changes. Do the Government intend to table any further amendments or new clauses? When do they intend to bring the business back to the Floor of the House? Do they intend to introduce a timetable motion for further discussion of the Bill?
    Mr. Ridley: The hon. Gentleman has not correctly counted the number of clauses and schedules—[Interruption.] It sometimes helps to see what we have done rather than work on last year's "Bradshaw".
    There is a possibility of one further Government amendment at some stage in the Bill's progress. It is not yet ready to be tabled. I have not counted the amendment's words any more than the hon. Gentleman has counted the clauses in the Bill.
    We have made a little progress today, although not as much as we had hoped. I shall consult my right hon. Friends about the Government's intentions, and no doubt in due course the hon. Gentleman will come to know them through the usual channels.
    Mr. Tony Banks: I wish to push the Secretary of State a little further. When can we expect an announcement? I have twice brought my sponge bag, and twice I have returned home early. My wife clearly thinks that I am having an unsuccessful affair.
    Mr. Ridley: I really do not think that I can be held responsible for the disappointment of Mrs. Banks.
    Question put and agreed to.
    Committee report Progress; to sit again tomorrow.

  Mr. J. J. Murray and Mr. J. J. Calvey
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Durant.]
  11.18 pm
  Mr. Stan Thorne: I am glad of the opportunity to raise this matter, and a little surprised that I do so somewhat earlier than I had expected.
  James John Murray and John Joseph Calvey were arrested on 24 June 1985 and, despite five bail applications, remained in custody until acquitted after a trial lasting seven working days. They spent 16 months in prison.
  On 7 October 1986, both men faced an indictment returned to the Old Bailey in London. There were two counts on the indictment against each man. One count alleged offences of wrongly withholding information under section 11 of the Prevention of Terrorism (Temporary Provisions) Act 1984, and the second alleged a conspiracy to pervert the course of justice. The evidence against the men was that they had assisted two known terrorists to evade arrest by driving them out of the area of Leyland to south Wales at a time when they knew that the police were anxious to arrest them because they had been involved in a proposed act of terrorism.
  The proposed act of terrorism was to cause an explosion at the Eagle and Child public house at Weeton. Throughout intense questioning Joseph Calvey denied any knowledge of the act of terrorism and only after James Murray had been questioned at great length over a period of several days did he make an admission, under duress, which he immediately retracted when solicitors were able to take his instructions. By virtue of their acquittal it is argued that a jury recognised that these men were innocent throughout and that their involvement in providing transport for terrorism was done innocently or, at the very worst, under duress.
  Both men were refused costs at the end of the trial. That was especially harsh in the case of Calvey, because he contributed several thousand pounds towards his own costs, the burden of which would otherwise have fallen on the state. Both men had a record in the Preston and Leyland area as diligent and hard working. They often worked seven days a week. They were family men highly respected within the communities in which they lived. James Murray was known by his neighbours as a quiet, gentle man. Unfortunately, it may be said that he had a "wrong" relative whom, of course, he had not chosen.
  Originally the men were detained at Risley remand centre where their families and friends had access to them and could give them moral support. In the case of Mr. Murray, this also enabled him to see his children. The committal proceedings into which the men were joined took place at Lambeth magistrates' court. Following the committal, they were remanded to Wormwood Scrubs. Despite entreaties, both on an emotional and financial basis, efforts to have the men returned to Risley failed. Their solicitors made repeated written requests and I made representations on humanitarian grounds to the Home Secretary for Murray in particular to be returned north to enable his wife and children to see him. This was refused.
  It is my considered opinion that any claim for an ex gratia payment for compensation must be based on assurances the men received prior to them being charged with the offences. Whilst in custody James Murray was

  1003
  given promises. The first assurance Mr. Murray received was on page 85 of the handwritten depositions. It is as follows:
  "Answer: Look I have got to go back there.
  Question: What do you mean?
  Answer: If they found out that I had been talking then that's it. I don't want knee-capping. That's if I'm lucky.
  Question: So you do know something?
  Answer: Remained silent.
  Question: Its up to you Jim, only you know the truth about these matters. What you tell us does not get repeated anywhere else."
  The second assurance Mr. Murray received is on page 107 and is in the following terms:
  "Question: Right Jim let's carry on.
  Answer: You don't know what they're like. I'm going to get a bullet in the back if I'm not careful.
  Question: Try not to worry Jim. I have told you before what you tell us does not go anywhere. It is between the three of us."
  Whilst not specifically recited in written evidence, Calvey was also given similar assurances. The effect of those assurances was that the information being provided by the men would go no further than the police officers to whom they were talking.
  Contrary to this, not only was the information they were providing used to found an indictment on which they were acquitted, but it was published in the most detailed and graphic terms to those whom the men feared most and with whom, until a late stage in the proceedings, they shared the dock. To give the information provided to known and dangerous members of the IRA, despite their custody, is a breach of confidence of the gravest possible terms.
  The purpose underlining the Anglo-Irish Agreement is that there should be co-operation between Irish nationals and British nationals to curtail the activities of terrorists. It is a tragedy that, when requested to provide information, and so doing on the basis that it is to be held in confidence, not only is that information used to prosecute but it is also published to those whom these men and their families most fear. This is surely entirely contrary to the spirit of the Anglo-Irish Agreement and, accordingly, it can be argued that these men are entitled to some ex gratia payment for the abuse of their trust evidenced above.
  They have lost their livelihood and suffered considerable personal anguish and pain although they are innocent of any offence. The men were requested to provide information. On expressing fears for their safety before doing so, they were assured that the information they gave would be treated confidentially. Not only was it not treated confidentially, it was used to base a prosecution against them, the result of which was that they spent the equivalent of what was almost a two-year prison sentence in custody prior to being acquitted by a jury. If people are to be encouraged to provide evidence concerning acts of terrorism, this can hardly be described as an encouraging way of dealing with them.
  I hope that the Home Secretary will consider these representations in depth and find it possible to make an ex gratia payment to Murray and Calvey in view of the special circumstances that I have briefly outlined.
  I should be glad, Mr. Deputy Speaker, if you would allow the hon. Member for Chorley (Mr. Dover) to contribute to the debate.
  Mr. Deputy Speaker (Mr. Harold Walker): Does the hon. Member for Chorley (Mr. Dover) have the consent of the Minister?
  The Parliamentary Under-Secretary of State for the Home Department (Mr. Douglas Hogg): By all means.
  11.27 pm
  Mr. Den Dover: It gives me great pleasure, on this matter of major concern, to support the hon. Member for Preston (Mr. Thorne), who has spoken well on behalf of his constituent, Mr. Murray. I rise to speak on behalf of my constituent, Mr. Calvey. I am delighted to see my hon. Friend the Member for South Ribble (Mr. Atkins) present, because he covers the border between the hon. Member for Preston and me.
  The hon. Member for Preston has explained our anxiety. I wrote to my right hon. Friend the Home Secretary on 16 December outlining the case. It involves a major breakdown of confidence, as these two gentlemen have been let down badly. They were given assurances by the police. They could not have been more worried about their future and the possibility of IRA retribution, yet their confidence was betrayed.
  The hon. Member for Preston has emphasised the fact that the men have lost their livelihood for two years. They have also suffered mental agony and torment at having themselves and their families associated with the activities that have been spoken about.
  I wrote often to the Home Office Ministers to try to get Mr. Calvey moved from Wormwood Scrubs to the local prison at Risley, to no avail. It was extremely inconvenient and expensive for Mrs. Calvey to travel down to Wormwood Scrubs to see her husband for only, literally, 15 minutes at a time. She did that regularly. She had full confidence in her husband. I have met and spoken to Mr. Calvey about the circumstances relating to his detention. I am convinced that he is an absolutely straight up and down member of the community and that he is doing his level best to get back into the construction industry. I am delighted to say that he is taking steps in that regard.
  Therefore, it gives me great pleasure fully to support the hon. Member for Preston who admirably laid out the matter. I sincerely believe that, in this case, an ex gratia payment is the only way to compensate these two gentlemen.
  11.35 pm
  The Parliamentary Under-Secretary of State for the Home Department (Mr. Douglas Hogg): I thank my hon. Friend the Member for Chorley (Mr. Dover) and the hon. Member for Preston (Mr. Thorne) for having put the case for their respective constituents so clearly. Obviously, this is a matter of concern to them and to their constituents. Both my hon. Friend and the hon. Gentleman have put the case lucidly and persuasively. I am not in a position to give, and shall not give, a final reply to the matter. I propose to set out some considerations. I make it plain that, as yet, no final conclusion has been reached. The points made by the hon. Member for Preston and by my hon. Friend the Member for Chorley will most certainly be taken into account and given the weight that they so evidently deserve.
  For reasons that I hope the House will understand, I do not have a full knowledge of the case as yet. We have asked the Lancashire police for a full report, and I

  1005
  anticipate receiving one. It may be necessary to read the transcript of the case. The hon. Member for Preston, supported by my hon. Friend, referred to some of the major facts, but they bear repeating, at least in part, so that the case is put into its proper perspective.
  Mr. Murray and Mr. Calvey were arrested in June 1985. The charges, as the hon. Member for Preston said, were under section 11 of the Prevention of Terrorism (Temporary Provisions) Act 1984—namely, withholding information and perverting the course of justice. The charges relate to a period in 1983, when it seems clear that both Mr. Murray and Mr. Calvey gave assistance to Patrick Magee and Mr. Murray's brother, Patrick Murray, in particular by driving them to various destinations. As I understood the hon. Member for Preston, the issue is not whether the assistance was rendered—I think it is accepted that it was—but, rather, whether it was done with the necessary criminal intent. That seems to be the main issue with which we are concerned. They were committed for trial on 20 November 1985. The trial took place between 7 and 15 October 1986. As we have heard, they were acquitted.
  It is regrettable that these men should have been held in custody for such a long time. It is a great misfortune for them and it is an unsatisfactory aspect of our criminal system that, from time to time, events such as this happen. The Government are conscious of the need to tighten these periods. The House will know that, under the Prosecution of Offences Act 1985, we took power to enable us to impose time limits. Without going into detail—this is not the most appropriate time to do so—we are about to apply statutory limits in three areas to try to combat the problem.
  My hon. Friend the Member for Chorley also made a point about location. It is true that he wrote to the Home Office a number of times to make representations on behalf of his constituent to the effect that he should be held in the north and not in the south. Prisoners remanded in custody to await trial at the Central Criminal Court—where these two gentlemen were tried—are normally located in or near London. The Home Office explored the possibility of making an exception on compassionate grounds, but I am afraid that it was not possible because the establishments in the northern region were severely overcrowded and were simply unable to take prisoners from other regions. I pay tribute to my hon. Friend the Member for Chorley for his steps to promote his constituent's interests.
  While the two gentlemen were in custody, and as the hon. Member for Preston has reminded the House, applications for bail were made on no fewer than five occasions—once to the justices, twice to Preston Crown Court and twice to the Central Criminal Court. It is perhaps useful and necessary to note that the applications for bail were refused. The House, and you in particular, Mr. Deputy Speaker, know the circumstances in which applications for bail are refused. It is a matter for the court, not for Ministers or the Executive. It would be wrong for me to comment, save to say that on five separate occasions a court with jursidiction declined to grant bail.
  It is being said that the two men require and deserve compensation. It is important that we should determine the circumstances in which compensation is paid. As a general proposition, there is no statutory right to compensation in cases of this kind. People who feel that they have been done an injustice in terms of false
  1006
  imprisonment or malicious prosecution can commence civil proceedings. I recognise that, in many cases, that is an illusory remedy, in the sense that it is not one that they are likely to pursue. My right hon. Friend the Home Secretary has made a statement by way of a written answer setting out his approach to ex gratia payments and compensation. The circumstances in which compensation is payable are set out in Hansard in a written answer on 29 November 1985.
  I shall summarise the points that must be made. We are dealing with a number of classes of cases. Let us begin with those cases where there has been a conviction—which is not the case here—and it has gone to appeal. There is a power and discretion, and it has been the practice, to grant compensation where there has been a free pardon or where the conviction is quashed by the Court of Appeal or the House of Lords following a reference of the case under section 17 of the Criminal Appeal Act 1968 or where the conviction is quashed by the Court of Appeal or the House of Lords following an appeal out of time. But the quashing of the conviction must be founded on some new fact which shows conclusively that there has been a miscarriage of justice. I appreciate that this case does not fall within those criteria. I mention it so that the House has this matter in the proper perspective.
  A different situation arises where, as in the present case, there was an acquittal. It is not my practice to read from the Dispatch Box, but this point perhaps needs stating. It is important that we should have the phraseology in mind. I would like to remind the House of the principles that apply in cases where there has been an acquittal. The written answer to which I have referred states:
  "There may be exceptional circumstances that justify compensation in cases outside these categories"—
  largely those to which I have referred.
  "In particular, facts may emerge at trial, or on appeal within time, that completely exonerate the accused person. I am prepared, in principle, to pay compesation to people who have spent a period in custody or have been imprisoned in cases such as this. I will not, however, be prepared to pay compensation simply because at the trial or on appeal the prosecution was unable to sustain the burden of proof beyond a reasonable doubt in relation to the specific charge that was brought."—[Official Report, 29 November 1985; Vol. 87, c.689–90.]
  It is plain from that answer, which reflects settled Government policy, that the mere fact that there has been an acquittal does not give rise to any claim for compensation. That may be wrong as a matter of principle, but if we want to change it we must do so by statute and the House must decide that that is what we want to do. However, that is not the law as it stands at present. The fact that someone has spent a long time in prison on remand is not a justification for claiming compensation. It must go beyond that. My right hon. Friend the Secretary of State said that the facts must, for example, "completely exonerate" the accused person. Although I am the first to realise that when a person is acquitted he is in one sense exonerated, it is quite plain that that phrase in my right hon. Friend's answer is different from a mere acquittal. If we do not like it, we have to change it by statute, but we have not, as a House, done that.
  The mere fact of the acquittal does not bring the case within the range of those that have an obvious claim for compensation. The mere fact of this length of time in custody on remand does not do so, although I accept that it is regrettable that that should have happened. The

  1007
  representations to which the hon. Member for Preston referred do not fall obviously within the scope of the written answer and certainly the loss of income, to which my hon. Friend the Member for Chorley referred, does not.
  Mr. Stan Thorne: I am following closely what the Minister is saying. I appreciate the points that he has made. Would he consider that the circumstances in this case, which arise from the Prevention of Terrorism (Temporary Provisions) Act 1984, the questioning by the police and the comments made by the men in terms of what happened, would be embraced by the references he has made in regard to the prospects for compensation?
  Mr. Hogg: No, I would not. I accept that it is a discretionary remedy and it does lie within the power of my right hon. Friend the Secretary of State to go beyond what he has already said. However, what he has said in his written answer shows clearly his approach. It is an exceptional remedy that can arise only in exceptional circumstances. The circumstances that I for one would contemplate are when it is wholly plain that the person
  1008
  could not have committed the offence, because, for example, an offence was never committed, or it could not have been committed by the defendant because he was in France when the offence happened in Brighton.
  That is not the case here. This case is an acquittal, the jury, as I understand it, having determined that they were not satisfied that the defendant, who did certain admitted acts, had the necessary criminal intent. On the face of it, that does not fall within the scope of the discretionary power that my right hon. Friend the Secretary of State has described.
  I should like to say to the hon. Member for Preston and my hon. Friend the Member for Chorley that we shall give very serious consideration to the points that they both put so clearly, but at first blush, and without having had the full police report, and without having had the transcript, I have to say that it is not obvious to me that the case falls within the accepted parameters. The representations so carefully and persuasively put will be considered carefully, but I cannot in all honesty go beyond that.
  Question put and agreed to.
  Adjourned accordingly at fifteen minutes to Twelve o'clock.

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Preamble
The House met at half-past two of the clock: The CHAIRMAN OF COMMITTEES on the Woolsack.
Prayers—Read by the Lord Bishop of Chichester.

British Gas: Cost of Flotation
Lord Beswick: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what was the total cost of the flotation of British Gas; and whether the total includes the cost of the march to the Stock Exchange, headed by the Secretary of State for Energy, the chairman of British Gas and a band, in celebration of the first day of dealing in British Gas shares.
Viscount Davidson: My Lords, the cost to the Government in 1986–87 of the sale of British Gas has been estimated at around 2 per cent. of the total proceeds of some £7,750 million. Any costs incurred in connection with the march to the Stock Exchange on 8th December, which was led by the Scottish Gas Pipe Band, were met by British Gas and not by the taxpayer.
Lord Beswick: My Lords, I thank the noble Viscount for his Answer, though he contrived of course to gloss over what were the sums of money involved. It would be helpful if he were to give them in clearer terms. Is there not something significant, even sinister, in society when we have these appalling disclosures of excessive greediness in the City of London today while at the same time the Government are spending these enormous sums of money in encouraging and exploiting the same acquisitive instincts in the rest of us? Having spent so much time, effort and money in selling the shares, why did the Government go to this bizarre length of marching to the City to applaud those who sold the shares to make a 12 per cent. or 20 per cent. overnight profit?
Viscount Davidson: My Lords, I fail to see the connection between part of the noble Lord's supplementary question and the original Question. He asked about the actual costs. I said that they came to 2 per cent. of the £7,750 million.
A Noble Lord: My Lords, how much is that?
Viscount Davidson: My Lords, I am about to tell the noble Lord. If he would like to do a certain amount of arithmetic he will see that these costs amount to £164 million; but the result is that British Gas has the largest number of shareholders of any company in the world. I should have thought that is a success well worth celebrating.
Lord Renton: My Lords, can my noble friend say roughly how many of these shareholders have never been shareholders before and are therefore for the first time able to say that they have a stake in this great national enterprise, never previously having had a stake in industry?
Viscount Davidson: My Lords, it has been estimated that 2 million applicants for British Gas shares are first-time shareholders.
Lord Bruce of Donington: My Lords, is the noble Viscount aware that although one can understand the physical exuberance of those who marched and who were going to receive a 20 per cent. profit or more the day following flotation, it is a scandal that a celebration of this kind, headed by the Secretary of State for Energy, among others, according to the Question, should be made at a time when most of the country is suffering from unparalleled distress?
Viscount Davidson: My Lords, the proposal for the march came from Sir Denis Rooke and British Gas was entirely responsible for organising it. The costs are therefore a matter for British Gas and not for the Government.
Lord Mackie of Benshie: My Lords, can the noble Viscount advise the House where the Government are going to invest the £7,750 million? Into what productive industry is it going?
Viscount Davidson: My Lords, that is not a question for me.
Lord Campbell of Croy: My Lords, can my noble friend tell the House whether the pipe band included in its repertoire that day the mournful pipe tune Sidney's Lament, for the reason that the message never in fact got through to him?
Viscount Davidson: My Lords, I am afraid I was not on the march myself.
Lord Somers: My Lords, will the noble Viscount tell the House what benefit, if any, this process will bring to the ordinary consumer?
Viscount Davidson: My Lords, I am afraid I did not hear the question.
Lord Somers: My Lords, I asked the noble Viscount whether he could tell the House what benefit, if any, this process will bring to the ordinary consumer.
Viscount Davidson: My Lords, it depends on whether consumers applied for shares and received shares. Most consumers have done so.
Lord Maude of Stratford-upon-Avon: My Lords, is my noble friend aware that most people will consider that there is much to be said for adding an element of hilarity, if not farce, to what is essentially a very dull business?
Viscount Davidson: I agree entirely, my Lords.
Lord Glenamara: My Lords, is the noble Viscount aware that before privatisation everyone in Britain was a shareholder in British Gas and now only a small number of them are? What is there to trumpet about in that?
Viscount Davidson: My Lords, before privatisation nobody received any dividends.
The Earl of Halsbury: My Lords, is the noble Viscount aware that yesterday I attended a lunch for the old boys who were once upon a time executives or part-time members of North Thames Gas Board? I now have a new tie to wear, which is that of an employee of the gas board, with a red stripe to indicate that I am also a shareholder.
Viscount Davidson: My Lords, I am delighted.
Lord Ennals: My Lords, can the noble Viscount comment on the very strange priorities by which £160 million is paid for publicity for this operation and £20 million is made available for publicity for AIDS? What sort of priority is that?
Viscount Davidson: My Lords, I do not think that question requires an answer.
Lord Ennals: Does it not? Why not, my Lords?
Lord Underhill: My Lords, does the noble Viscount not think it strange that in all the comments on the successful flotation celebrations there has been no mention whatever that the reason for this so-called successful flotation is the great success of the publicly-owned industry in the days before it was nationalised? Why has no comment been made that there was so much interest in the flotation because a successful public industry had already been built up?
Viscount Davidson: That, my Lords, is a matter of opinion.
Lord Beswick: My Lords, in view of the fact that so much has been said about the enthusiastic shareholding involved, can the noble Viscount say that the buyers who offloaded 20 per cent. of the shares at a profit on the first day cared a damn about British Gas? Can he give me one other example from here or elsewhere of a march to celebrate stagging on the stock market?
Viscount Davidson: No, my Lords, I cannot.
Lord Paget of Northampton: My Lords, is the noble Viscount aware that I still want to know who paid for the band?
Viscount Davidson: My Lords, I shall tell the noble Lord. I understand that British Gas paid the band a fee, plus compensation for loss of earnings and expenses for its members.
Lord Hatch of Lusby: My Lords, can the noble Viscount tell the House what difference in principle the Government see between using money to advertise the privatisation of the gas industry and the GLC using
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its money to publicise the causes for which it was responsible?
Viscount Davidson: There is a considerable difference, my Lords. All I can say is that the sale was highly cost-effective.

Power Stations
2.45 p.m.
Lord Dean of Beswick: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether any progress has been made towards commencing a programme of building and commissioning new power stations.
Viscount Davidson: My Lords, as I indicated to the noble Lord in my Answer to his Question on 13th October 1986, my right honourable friend the Secretary of State for Energy's decision on Sizewell B will clearly be important for the CEGB's proposals for any future nuclear and conventional stations. The full version of the report has now been delivered to my right honourable friend. It is a major work and will need careful consideration. My right honourable friend will make his decision as quickly as possible.
Lord Dean of Beswick: My Lords, I am grateful to the Minister for that reply, but in my Question I deliberately did not refer to Sizewell B because there are other problems to be dealt with. Is the noble Viscount aware that the Electricity Council recently published a report showing that by the year 2000 there will be a necessity for 12,000 megawatts of new power capacity? This will mean building between 11 and 15 brand new power stations. As it takes seven years from the ordering to the commissioning of a power station, does it not make sense immediately to order two coal-fired power stations, because irrespective of the public inquiry on Sizewell, coal will still play a major part in our energy requirements? In view of the unemployment problems that the industry is continuing to suffer, does it not make sense to place the order now?
Viscount Davidson: My Lords, I understand that the CEGB is considering the possibility of building new coal-fired stations but that no applications to construct new power stations have been received, apart from that for Sizewell B. I understand that the board take into account the planning timetable in considering the many factors involved in the choice of sites for new power stations.
Lord Mellish: My Lords, is it not a fact that during this excessively cold spell that we have been enduring we have received a great deal of our energy from France? In fact, France's power is nuclear. Has the noble Viscount received any protests about nuclear policy from those using this power?
Viscount Davidson: My Lords, the noble Lord is quite right; and I must also say that I have had no protests.
The Earl of Lauderdale: My Lords, is my noble friend aware that some has also come from Scotland?
Viscount Davidson: Yes, my Lords.
Lord Glenamara: My Lords, are the Government bearing in mind sufficiently that the life of a power station is about 30 years, and as a number of our power stations were built in the early 1960s they will become obsolete in the middle '90s? Is it not time therefore that the Government—or somebody—placed orders for the two coal-fired power stations? Is the noble Viscount aware that the northeast firm of NEI announced 500 further redundancies just before Christmas, which is only a small fraction of the redundancies they will face over a two-year period, and that the ordering of one coal-fired power station would transform the employment prospects there? As the firm has already done a great deal of work on one of those power stations, can the Government help the north-east by expediting this order?
Viscount Davidson: My Lords, I am sure that my right honourable friend will read what the noble Lord has said. Proposals for new power stations, nuclear or otherwise, must come from the electricity supply industry. The CEGB has identified a number of possible sites for future coal-fired stations, but it is still evaluating them and has made no firm decisions on where such stations might be sited.
Lord Avebury: My Lords, have the Government noted that voltage reductions took place during the recent cold spell? What guarantees can they give that in future years, should we have a spell of bad weather as extensive as that which we have suffered in the last three weeks, there will not be even more serious cuts in electricity supplies? What plans do they have for accelerating the building of new power stations to ensure that such cuts do not happen?
Viscount Davidson: My Lords, I have already said that this is a matter for the CEGB and I am sure that it will read the noble Lord's words.
Lord Nugent of Guildford: My Lords, is my noble friend aware that during this excessively cold spell although a record load was being carried by the CEGB it managed to maintain supplies without shedding load, to the great appreciation of the whole country?
Viscount Davidson: My Lords, I am most grateful to my noble friend. I think that the CEGB should be very warmly congratulated.
Lord Dean of Beswick: My Lords, while it is accepted that the CEGB trigger off the mechanism for ordering power stations, will the noble Viscount agree that the Government have some influence in this situation? Is he aware that the firms of GEC and NEI (which was referred to by my noble friend Lord Glenamara) as well as the firm of Babcock, those being the major firms that are concerned with power stations, over the past 10 years have invested nearly a quarter of a billion pounds in modernising their plants to deal with this situations? They are not asking for government hand-outs. They are asking for
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work to be brought forward which is in the interests of the community, is economically viable, and will justify itself. Will the noble Viscount make the most urgent request to the Secretary of State to do something to bring forward this programme in the interests of everybody?
Viscount Davidson: My Lords, I shall draw the noble Lord's remarks to the attention of my right honourable friend.
Lord Bruce of Donington: My Lords, will the noble Viscount give some indication of the extent, if any, to which those plans are being inhibited by considerations of the public sector borrowing requirement and its applicability to public boards?
Viscount Davidson: My Lords, so far as I know, there is no connection.

Namibia: Exclusion from Sanctions
2.50 p.m.
Lord Hatch of Lusby: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government why Namibia was excluded from the provisions of the EC sanctions agreement; and whether they consider this exclusion to be a hindrance to the effective implementation of that agreement.
The Minister of State for Defence Procurement (Lord Trefgarne): My Lords, we joined other European partners in excluding Namibia from the measures taken against South Africa because we do not believe that to apply such measures to Namibia would advance the common objective of Namibian independence. We do not consider that this exclusion will be a hindrance to implementation of the measures.
Lord Hatch of Lusby: My Lords, were not EC sanctions imposed against the racist regime of South Africa which illegally occupies the territory of Namibia? Would it not therefore be much more effective if those sanctions were applied totally to the South African Administration within South African frontiers and also within the frontiers of Namibia which it illegally occupies?
Lord Trefgarne: My Lords, I can assure the noble Lord that the exclusion was not intended to allow the leakage of banned products, but if South Africa were shown to be using Namibia as a loophole we should be prepared to review the situation.
Lord Boyd-Carpenter: My Lords, would not the impoverishment of a country be the worst possible way of helping it towards independence?
Lord Trefgarne: My Lords, I agree entirely that impoverishment would in no way contribute to the aim to which my noble friend has referred. The best way to achieve independence for Namibia would be the implementation of the United Nations plan.
The Lord Bishop of Manchester: My Lords, does the Minister appreciate that in Namibia there are representative black voices calling for the implementation of such sanctions in the interests of speeding the independence process?
Lord Trefgarne: My Lords, I believe that they are mistaken.
Lord Wilberforce: My Lords, can the Minister confirm that the United Nations' policy of sanctions against South Africa does not extend to Namibia?
Lord Trefgarne: My Lords, the noble and learned Lord is right.
Lord Mellish: My Lords, is the sanctions policy having any success at all?
Lord Trefgarne: My Lords, I have as yet observed none.
Lord Hatch of Lusby: My Lords, is it not the case that the sanctions imposed by the United States Congress include Namibia? Whatever the Minister may think about the impoverishment of the country, on behalf of his Government does he not fully support the EC policy of applying sanctions to South Africa to undermine the apartheid policy? He referred in an earlier answer to a possible leakage through Namibia. Is it not possible that Namibia may be used for the new investment which is forbidden in South Africa? Could not the South Africans use Namibia as a means of obtaining new investment, against the EC sanctions policy?
Lord Trefgarne: My Lords, as I said earlier, if it became apparent that loopholes existed in the arrangements that are in place, we should be prepared to review the situation. I remain very much of the view that sanctions would not contribute to Namibia's course to independence. As I said earlier, I believe that the best way to achieve that is by the implementation of the United Nations plan.
Lord Shackleton: My Lords, does the Minister agree that the failure to implement the plan is due entirely to the attitude of the South African Government? At the same time, does he recognise that the important difference is that in Namibia there is no colour bar or apartheid of the kind that prevails in South Africa?
Lord Trefgarne: My Lords, circumstances in Namibia are different in sociological terms from those that exist in South Africa. As to the attitude of South Africa towards the independence of Namibia, it is committed to the United Nations plan, as the noble Lord will be aware. It is now up to all parties concerned to implement it.

AIDS: Northern Ireland Campaign
2.55 p.m.
Viscount Brookeborough: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what arrangements have been made in Northern Ireland for the public education campaign against AIDS.
The Parliamentary Under-Secretary of State, Northern Ireland Office (Lord Lyell): My Lords, the Government's public education campaign on AIDS is being co-ordinated on a national basis by the Department of Health and Social Security. Health departments in Scotland, Wales and Northern Ireland have been consulted and kept fully informed of developments.
Viscount Brookeborough: My Lords, I thank my noble friend for his reply. In view of the intimate connection which exists between Her Majesty's Government and the Dublin Government and the high incidence of AIDS in Dublin due to the high level of drug abuse there, will the Government use the opportunities of the Anglo-Irish Conference to ensure that condoms are freely available in the Irish Republic?
Lord Lyell: My Lords, your Lordships would hardly expect me to speak for the Government of the Republic of Ireland. The incidence of AIDS is kept under regular review in meetings between my right honourable and honourable colleagues with their colleagues in Dublin. The last meeting at which such affairs were discussed was in November last year.
Lord Glenamara: My Lords, have the Government had any discussions with the Anglican Church with a view to the general adoption of the practice announced today by one of the Cambridge colleges for communion, whereby communicants may dip the wafer into the wine instead of putting their lips to the chalice?
Lord Lyell: My Lords, not so far as I know. There have been no discussions on this aspect of the matter. The noble Lord and your Lordships would not expect the Government to enter into any religious discussions, especially in Northern Ireland. I shall refer the remarks made by the noble Lord to the expert advisory group which is dealing with all the more technical aspects of this matter.
Viscount Brookeborough: My Lords, do I understand from my noble friend that this subject came up at the Anglo-Irish Conference?
Lord Lyell: My Lords, not as such.
Lord Prys-Davies: My Lords, whatever be the special factors that work in Northern Ireland, do we have the Minister's assurance that those factors will not and could not lead the Government to advocate for Northern Ireland preventive measures different from those advocated on this side of the water?
Lord Lyell: My Lords, the noble Lord is right. All discussions that are taking place with the Department of Health and Social Security and the expert advisory group have regular input on this matter from Northern Ireland and also from Scotland and Wales.
Lord Monson: My Lords, given that communicants are now being advised not to drink from the chalice at Holy Communion, as the noble Lord, Lord Glenamara, has pointed out, that dentists are now being advised to wear gloves when treating certain patients and that the Government's AIDS leaflet warns people against sharing tooth brushes (as if such warning were needed), how is it that in the same government leaflet people are told that there is no danger in kissing relative strangers and, more importantly, that there is no danger in allowing people who may be AIDS carriers and who may have cuts, scratches or sores on their hands to prepare food for other people during their employment?
Lord Lyell: My Lords, I am sure that if the noble Lord consults these valuable leaflets all will be made clear to him. If he requires any further information perhaps I may write to him.
The Lord Bishop of Birmingham: My Lords, is the noble Lord aware that the noble Lord, Lord Monson, is incorrect in saying that the churches have given advice that the chalice should not be used at Holy Communion?
Lord Lyell: My Lords, I shall make sure that the remarks of the right reverend Prelate reach my right honourable colleagues.
Lord Blease: My Lords, can the Minister give us information about the composition and functions of the Northern Ireland Committee on AIDS? Has that committee in hand or is it proposing to undertake any research into the social and demographic implications of this disease in the Province?
Lord Lyell: My Lords, I understand that the Northern Ireland Committee on AIDS comprises four representatives of the Northern Ireland Department of Health and Social Services, of whom two are medical and two are administrative, four representatives from the health and social services board, and I understand four clinicians who are most closely involved with the disease. I understand that there are other interested parties who attend as necessary, of whom two are dealing with the drug misuse advice at the Shaftsbury Square Hospital. The function of this committee is to do everything that is being done this side of the water in Great Britain. We are taking steps in parallel with the expert advisory group in London.
Lord Blease: My Lords, my question was related to ongoing social and demographic research in the Province. It is vital to have that linked with what is happening in the Province.
Lord Lyell: My Lords, that involves a fairly substantial answer which I cannot give from the Dispatch Box this afternoon. May I write to the noble Lord with as much information as we are able to give him?
Lord Avebury: My Lords, the noble Lord said that the subject of AIDS did not come up at the Anglo-Irish talks. Would it not be a very appropriate subject for common action by the governments of Dublin and London? Will the noble Lord suggest to his right
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honourable friend that it be placed on the agenda for future discussion?
Lord Lyell: I am sure that my right honourable friend will note the comments of the noble Lord.
Lord Prys-Davies: My Lords, flowing from the reply of the Minister to the first part of my noble friend's Question, is the department satisfied that this coordinating committee will have the resources, the budget, to advance the campaign that is necessary in Northern Ireland? Ought there not to be a special health authority for Northern Ireland charged with this function?
Lord Lyell: My Lords, briefly, yes, the Government are satisfied that the Committee will be able to carry out its work and has the resources to do so. Perhaps I should let the noble Lord and your Lordships know that so far the statistics are that four confirmed cases have been reported in Northern Ireland, and that a further 30 individuals are known to be infected with the virus of whom about half are haemophiliacs. So far as we know, there are no women.

Business
3.3 p.m.
Lord Denham: My Lords, at the end of the short debate on the effect of private enterprise on the National Health Service and before the short debate on CAP surpluses and curtailment policies, my noble friend Lord Trefgarne will, with the leave of the House, repeat in the form of a Statement the answer that is to be given to a Private Notice Question in another place on the management of Devonport dockyard.
Also with the leave of the House, I should like to say a word about the two short debates standing in the names of the noble Lord, Lord Bottomley, and the noble Lord, Lord John-Mackie. It is customary in short debates that the mover is allowed approximately 15 minutes and that the Minister should rise to reply not less than 20 minutes before the scheduled end of the debates. In the case of the short debate in the name of the noble Lord, Lord Bottomley, this means that all other speeches should be limited to a maximum of eight minutes and in that of the noble Lord, Lord John-Mackie, 10 minutes.
I should perhaps remind the House that the time is up the moment that the figure concerned arrives on the indicator and not when it leaves it.

NHS and Private Enterprise
3.4 p.m.
Lord Bottomley Lord Bottomley rose to call attention to the effect of private enterprise on the National Health Service; and to move for Papers.
The noble Lord said: My Lords, I rise to propose the Motion standing in my name on the Order Paper. It was my privilege to be a member of the post-war Labour Government which passed the Act of Parliament creating the National Health Service. I was

933
then Member of Parliament for Rochester and Chatham. Dame Sybil Thorndike was a strong supporter of mine. She was a Freeman of the City of Rochester and came to speak during one or two general elections. On one occasion there was a memorable meeting at the Corn Exchange in Rochester. In a very emotional speech she told how her father—who was a local clergyman—used to send her to meet friends and ask for bed linen to be cut up and used as bandages in the local hospital. She also mentioned on that occasion that she had started her stage career in that hall. She performed as a pupil of the Rochester High School for Girls. It was therefore not to be wondered that on that occasion she aroused the emotions of a large congregation.
Things have changed considerably since then. We have no longer to depend upon private charity to make provision for supplies to the hospital. We have all cherished the high standards ever since they were laid down by the National Government in 1944. The White Paper at the time said that it was intended to establish a comprehensive service for everyone in the country. The Government wished to ensure that every man, woman and child could rely on receiving all the service, treatment and cure they needed—the best medical advice and facilities available. Receiving these services should not depend upon whether they could pay for them. The aim was that the country's full resources should contribute to reducing illness and promoting good health in all its citizens.
Since that time, successive governments have accepted this statement of policy. For ideological reasons, the present Government have failed to live up to the requirements. There are many agencies, consultants and firms who seek ways of making money out of the National Health Service and are encouraged to do so by the Government as a part of their ideological battle against the National Health Service.
The Government's policy is not based on any evidence that privatisation will produce real savings or an improvement in the standard of the service. In fact, there is an increasing amount of evidence to the contrary. Work has been allocated to private contractors at a cost to the National Health Service greater than that which would have been the cost of direct labour. Many private contractors have failed dismally to maintain reasonable standards set out in the original tenders. This has caused difficulties and frustrations for National Health Service employees, the administrators, the medical staff and the nurses. Health authorities have been compelled to terminate the work of private contractors, leaving National Health Service employees to clear up the mess. Properly trained and experienced staff are as a result leaving the health service.
In the meantime the Government's privatisation policy continues. The Government seek to abolish all public enterprise. Privatisation does not apply only to manual workers, but includes architects, surveyors, engineers, clerical workers and professional services. There are plans to privatise the ambulance service which is in the front line of the National Health Service. In some areas there are attempts to do this. One company, energetically engaged in these activities, is encouraging health authorities to co-operate.
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The last thing a person involved in an accident wants is to be treated by someone who is unskilled. That is likely if profit is put before service.
There is enough evidence accumulating to show that private enterprise is having a disastrous effect on the National Health Service. My own union, the National Union of Public Employees, has produced a document showing the failures of private enterprise. The document cites some of the expensive retendering when contractors withdraw, additional payments in order to improve standards and labour-intensive monitoring of services when contractors run into difficulties.
Among many examples was that of a private contractor in Birmingham who pulled out of a catering contract at the city's Queen Elizabeth Hospital after the health authority refused to pay an extra £120,000 a year. Meals were served on dirty crockery and cutlery and the contractors were eventually removed from the regional health authority's list. At Addenbrookes Hospital in Cambridge, the domestic cleaning contract has risen in price by more than £250,000, which now makes it £197,000 more expensive than the quotation from the hospital's own cleaners.
At Westminster Hospital, the standards of service have fallen since a private contractor took over the cleaning services this year. The chairman and vice-chairman of the community health council paid a visit to the maternity ward where they found a shower with tray and tile surrounds thick with built-up dirt and the showerhead virtually blocked up by scale. The sinks and draining boards in two ward kitchens were in a disgusting state, encrusted with long-term dirt and grease. In the treatment room where sterile dressings and equipment were stored, the sink and draining boards were filthy, with dust on many shelves.
The South Cumbria health authority had to complain to a private contractor about linen being delivered damp and clothing belonging to patients being lost. The local health authority has been concerned about consistently poor cleaning standards and unacceptable work practices by contractors at Park Side Hospital in Macclesfield.
National health authorities have ended their contract with a private company whose cleaning services were not up to standard at Queen Mary's Hospital, Roehampton. Cleanliness is essential to protect patients with wounds against infection. The contract is now going out to tender in May and it is very pleasing to know that the hospital's own staff are being asked to tender to perform that service.
The Prime Minister has been anxious to speed up the process of putting the catering, laundry and linen services in the National Health Service out to private contract. It appears that because of this one of her junior Ministers, Ray Whitney, lost his job in the recent government changes. Private contractors are recruiting nurses trained in the National Health Service at public expense. Private medicine concentrates on non-urgent cases, leaving the National Health Service to deal with emergencies. When the Prime Minister went into a private hospital in Berkshire to have her eye operation, staff had to call on the local hospital in Windsor for help.
The Comptroller and Auditor General, Sir Gordon Downey, in his recent report, said that private patients were getting major surgery on the cheap from the National Health Service. Commenting on this report, the then Minister in the department said that private patients brought extra valuable resources to the health service. He said that the consultative paper was concerned not so much with the principle of charging, to which the Government remain committed, but with the system for determining those charges. Private patients might not be paying the full cost of major operations in many National Health Service hospitals. It is altogether wrong that National Health Service patients are being deprived of treatment because of the under-charging of private patients.
At the time of the disaster in Brighton, the Minister of Health, the chairman of the Conservative Party and the Prime Minister sang the praises of the National Health Service and the other services concerned. In the next breath they are telling these hardworking, dedicated people that they are going to put out their work to private contractors in order that those contractors can make a profit out of a public service. Some members of the medical profession, who see themselves more as financial entrepreneurs than medical consultants, assist the Government's privatisation policy by encouraging the growth of private hospitals and private medicine. They shamelessly exploit National Health Service equipment and services. To engage private contractors who are not part of the public service and who have no commitments to it is to undermine the whole concept of public service itself.
There is a proposal that private hospitals should help to cut long waiting lists at National Health Service hospitals by offering "bargain basement rates", as one Government spokesman put it. What they really desire is to fill empty beds in private hospitals. The way to reduce waiting lists is to get National Health consultants, some of whom spend much of their time moonlighting in private hospitals, back to the National Health Service.
At one time we could boast that we had the best health service in the world. That is no longer true. A recent report by the Office of Health Economics shows that Britain spends less per head on health care than any nation in Western Europe except Italy and Ireland. It was no surprise to me when Professor John Davies resigned as chairman of the Cambridge health authority. He protested against the Government's policy, and concluded the letter which he sent with the words:
"If we are not prepared to pay the economic price for acting morally, we may end up paying the moral price for acting economically.".
That is something we should all take to heart. We have to ask ourselves whether the privatisation of the National Health Service serves the public well or not. My Lords, I beg to move for Papers.
3.20 p.m.
Lord Colwyn: My Lords, I am sure that we are all grateful to the noble Lord, Lord Bottomley, on two counts this afternoon: first, for initiating our debate; and, secondly, for his long interest in the National
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Health Service. I listened to his speech with interest and can only apologise that, owing to the diverse nature of the title of our debate, I intend to take the opportunity this afternoon to say a few words about the relationship between the National Health Service and my own—and indeed the noble Baroness, Lady Gardner's—free enterprise profession, dental surgery.
I hope that my noble friend the Minister will be able to tell me later that there were inaccuracies in many of the noble Lord's opening remarks. The Government have just completed what I am sure we would all regard as a valuable exercise—the first full review of primary health care services since the start of the National Health Service in 1948.
The Green Paper debate has focused on the family practitioner services—the front line health care providers in the NHS—family doctors, dentists, pharmacists and opticians. These are independent contractor professions working under contract within the NHS but managing their own work and representing, it seems to me, a very significant private enterprise element in the NHS.
There are some contractual differences between the four groups, but fundamentally they are making their own decisions—including financial decisions about equipment, investment, staff and so on—without the interference of a great bureacratic hierarchy above. They are the people on the ground who can see what their patients need and can offer it, if they can find the money.
The general medical practitioner might decide to set up a screening programme for, say, hypertension; or the dentist might decide to set up a preventive unit to help with health education work with children; or they might install computers to help keep track of follow-up units, or run patient recalls for dental check-ups. This is private enterprise within the NHS benefiting patients, giving taxpayers value for money, and giving the doctors and dentists concerned a high degree of professional autonomy and therefore job satisfaction. It is an arrangement which I hope we can all appreciate and encourage.
The private sector of health care can also stimulate the National Health Service. I hope that we can ignore the doctrinal arguments about the NHS. It seems to me that there is very wide support for the service and that we should not waste time on the private versus NHS argument. We need both. And the private sector, by moving faster and showing the public what can be done, can often stimulate the National Health Service to improve.
Sometimes the lead is a technical and clinical one. This has tended to happen in my own profession of dentistry where new methods and materials are often used first in the private sector, while the NHS is cautious about approving them for general use. I must draw attention to preventive dentistry too, and the very limited opportunities to practise preventively in the NHS general dental service practice.
But the stimulus can also apply to simple things like the manner in which patients are treated. I was much taken with a comment from Rudolf Klein recently:
"The legacy of 1948 lingers on in bureaucratic lethargy and professional rigidity. What the NHS all too often lacks is plain good manners towards those who use it, perhaps one reason for the growth of the private sector."

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The last factor that I wish to consider this afternoon is the cost of private health care, particularly the cost of primary health care, including dental treatment. If patients are helped to cover private health care costs through some sort of insurance or prepayment scheme, then the take-up of private treatment will grow, and this must help relieve the pressure on the NHS.
I am sure that we should all regret a rush into the private sector out of desperation and dissatisfaction with the NHS. But many people feel that health care is a top priority and is something they would like to spend more money on. Growth in the private sector in that circumstance is a proper response to patient choice. I should like to see more help for people to make that choice in dental care through new third party funding schemes.
The expansion of provident association membership was responsible for the growth of the private sector in acute medicine. I should like to see the same sort of opportunities growing up in dentistry and in all primary health care. As I said at the beginning, I believe that the family practitioner services of the NHS are very great merits, but they could still benefit from competition. The development of competition in primary health care will depend on funding arrangements to help people spread the cost of services.
My noble friend the Minister made it quite clear to me yesterday that she did not wish me to say anything about my involvement and interest in the many alternative and complementary therapies that I feel are a vital area of free enterprise that will eventually play a major role in the continued health of the nation. I am aware of her sympathetic views on this subject, and I look forward to being able to discuss its relevance at some time in the near future.
3.26 p.m.
Lord Winstanley: My Lords, the noble Lord, Lord Bottomley, introduced this important debate with a sincere, honest and moving speech on matters about which he rightly feels strongly. I hope that the noble Lord will forgive me if I say that he focused his remarks somewhat narrowly in relation to the actual wording of his Motion, and I hope he will forgive me if I spread to other aspects of the influence and effects of the private sector or private enterprise on the National Health Service. Towards that end I shall divide my speech, like Gaul, into three parts; and allowing for these preliminaries that would appear, with eight minutes, to allow me about two and a half minutes for each part. I say without hesitation that if any part exceeds its two and a half minutes I shall take that out of the next part rather than out of the time of the next noble Lord.
In the first part I should like to say a few words about private medical practice, whether that medical practice be in or out of the hospitals. On these Benches we believe that it would be impossible, even were it desirable (and we are not convinced it is) to abolish private medical practice by statute. Therefore taking that view, we believe it is right that private medical practice in and out of hospitals should be allowed to
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continue, but that does not mean that we may not entertain the hope that perhaps the need for private practice will diminish as the standards of the National Health Service rise.
To what extent does the private sector of private medical practice take away resources from the National Health Service? The plain fact is that the total resources, private and NHS added together, are quite inadequate at the moment to deal with the total workload. To the extent that the private sector adds new resources, then to that extent it is undoubtedly helping.
It also helps in another way. I think the private sector helps not only by adding extra resources here and there but by setting standards of ideal medicine at which the National Health Service must clearly aim. Therefore I think that the existence of a small private sector—which I hope will never get too large—aiming to practise ideal medicine on anybody who goes to it is an important monitor of the standards of the National Health Service. To my mind, if we see areas in which the demand for private practice goes up then we should look immediately at the National Health Service, where we shall possibly find that its standards are diminishing and need attention.
There is an important way in which the private sector of medical practice hinders the National Health Service and it is this. In so far as the private sector removes from the National Health Service the articulate and influential patients who are the very patients who would insist on the maintenance of high standards in the National Health Service, that can be damaging to the National Health Service in the end. That is a reason why we have to look from time to time at the size of the private sector lest, by taking away the influential and articulate patients, it should allow the standards of the National Health Service to diminish more than they would perhaps otherwise do.
As my two and a half minutes are up on that section I shall carry on by saying that I see a hopeful development on the horizon. When the private sector was set up in the very early days with BUPA and the rest, to which my noble friend Lord Wigoder will refer in more detail, they aimed to provide ideal medicine for their members. The members were a very small number of rich and healthy people. It is possible to provide ideal medicine for a small number of healthy and rich people, but as the private sector has expanded and some of the insurance schemes have taken on whole companies and all their employees or whole trade unions and all their members, the private sector suddenly finds that it is meeting the very problems with which the National Health Service is faced.
The National Health Service has a duty to try to provide ideal medicine for every man, woman and child, rich or poor, old or young, and it cannot do it. It is impossible to have a total unlimited commitment of that kind. Therefore, it is possible that now the private sector is finding the same difficulties as the National Health Service. That may be making some people aware of the kind of difficulties, some of them insoluble, with which the National Health Service is faced. Some of the people becoming aware are those who would otherwise not be aware. I have exceeded my two and a half minutes on that part so the next section will be very short.

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On privatised services, such as catering and cleaning, I have no objection provided they are better for the patients. What matters is the end result. The one thing I believe, and we all believe on these Benches, is that the decision must be local and not a central one. We do not like the increasing tendency for the concentration of power centrally in the National Health Service. We have the Minister now as chairman of the National Health Service Management Board. This is a matter for the regions. If the people in Penzance want private catering services, so be it, so long as the people who represent them in the region decide. But I do not want decisions of that kind taken centrally at the Elephant and Castle.
I move finally to one other area, and my last part will be quite short—that is, to a very important aspect of health in general, the pharmaceutical industry. The developments in the pharmaceutical industry have revolutionised and totally changed the health prospects of many people alive today. Most of those discoveries and developments have come from a private enterprise pharmaceutical industry. I say to those who are in favour of a nationalised pharmaceutical industry that the Soviet Union—which has produced very distinguished surgeons and physicians and has made great strides in medical research in all sorts of fields—with its wholly nationalised pharmaceutical industry, has not yet produced a single new therapeutic substance of any real value. That is a fact we must all recognise. The real advances in the new discoveries of new drugs have come from a private enterprise pharmaceutical industry and not from a nationalised pharmaceutical industry.
That does not mean that we think everything is happy and well in the pharmaceutical industry: it is not. There are perhaps many controls needed and many things that have to be looked at to provide better and more precise competition. But the general principle is the same.
I finish by saying that anything which helps the National Health Service must be accepted, but the aim must be to recognise that modern medicine is now so complex, so intricate and so very expensive that it is utterly impossible ever to expect the individual to be able to pay the cost of his health treatment or diagnosis himself. That cost must be spread throughout life on a taxation or an insurance basis. How that is done is another matter, but let us not worry too much; let us focus our attention on the National Health Service where our attention should really rest.
3.36 p.m.
Lord Smith: My Lords, when I was appointed a consultant at St. George's Hospital, Hyde Park Corner, it was two years before the NHS began, so I have lived all my professional life from the beginning hand in hand with the NHS. But I feel, as nearly all doctors feel, that the NHS is afflicted by a sickness which provides, in medical terms, less and less for patients year by year. I hope your Lordships will forgive me, but when there is something amiss with the health of a patient, the doctor studies the patient's history for the cause of the illness, the present situation and the prognosis—the future—because these may be very relevant to the treatment.
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I hope your Lordships will be very patient with me while I deal briefly with the cause of the trouble. It is produced directly by enthusiastic doctors and research workers. The last 40 years have seen a scientific explosion on every front, and medicine has not lagged behind. The phenomenal advance in scientific knowledge and technical skill has improved the success rate in almost all diseases, but these spectacular improvements in treating patients are very nearly all much more expensive than the previous treatment.
Let us consider enormous advances in diagnostic aids which make the 1986 scanner, costing very nearly £500,000, out of date in 1987. I ask your Lordships to compare the cost of treatment of one common ailment among very many in 1948 and in 1987. In 1948 a patient with angina pectoris was treated with a bottle of vaso-dilator tablets and physical rest, at the cost of a few shillings a week. A patient with angina pectoris today receives a number of very sophisticated and very expensive tests and perhaps a cardiac operation, with all that implies. The difference in cost in that one instance between a few shillings and thousands of pounds is staggering. The cause of the trouble is chiefly the lack of money to pay for medical advances.
I was elected president of the Royal College of Surgeons in 1973. I served as president for 4 years, but 1975 was troubled by a fierce disagreement between the medical profession and the Secretary of State for Health. I am sure I do not need to refer to the pay bed dispute, but naturally it was vitally concerned with the treatment of patients in the NHS. The conference of presidents of all the medical royal colleges in the United Kingdom of which I was chairman, was particularly worried by two things. One was: were we to have industrial action in medicine, on which the conference stated firmly it could not support any action that could harm patients. But the other consideration was the gap in treatment between what the profession could do and what the National Health Service could afford. It seemed to me that private practice and private enterprise must support the NHS and not be evicted from it, or the health service must markedly deteriorate.
I said at the college 10 years ago that before 10 years passed the country in its original medical sense would not be able to afford the NHS. In its original medical sense this is true because we cannot afford all things for all people. The gap has widened sufficiently, the acceleration of scientific knowledge has increased to such a level that if we increased the grant from the Exchequer to a spectacular level and advanced it by 8 per cent. or 9 per cent., the medical world would say "Thank you very much" and ask for more.
A decade ago when Parliament debated private practice and the health service I believe that it should have concentrated upon how private practice could and should support the health service. Instead of this I believe a catastrophe occurred. Private practice was partially evicted from the health service hospitals. This enforced separation between private and health service practice gave a fillip to private practice and accentuated the difficulties with which the health service was competing.
I believe the health service cannot properly survive without reversing this process. Private enterprise

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should be encouraged to fund private wards in national health hospitals with no restriction on the admission of NHS patients to them. Private enterprise should be encouraged to provide consulting rooms in national health hospitals, with the rent going to the NHS. This would have the added advantage of keeping the consultant in his national health hospital where he would be of maximum use to his NHS patients.
Of course I am aware that theory and practice are not always the same thing. I am also aware that nothing is past like a past president. Nevertheless, my view is supported by many doctors who would rather see private enterprise exposed to persuasion than a health service which rapidly deteriorates, not the least among these doctors being the last PRCS and chairman of the Conference of Presidents of the Royal Colleges; so am not alone. I implore the DHSS to call a conference with the BMA and particularly the Conference of Presidents of the Royal Colleges to work out a plan for the support of the NHS by private enterprise.
My final point is a brief comment about the acrimony which some show to those who hold a different point of view. Let us concentrate upon a single thought: the provision of the best treatment possible for all patients, whether they be national health patients or private patients. Let us beware of subsiding into a state of internecine warfare which leads inevitably to two standards of medical care in this country.
3.42 p.m.
Lord Wells-Pestell: My Lords, it is over 50 years since I attended my first meeting to consider the possibility of setting up a National Health Service. I am glad we are having this debate this afternoon, though to some extent it will not serve the purpose that my noble friend hoped because too many of us are taking part in too short a debate. We should have had many more people taking part in it, and it ought to have been for an unlimited time because we shall not be able to express all the salient points.
I believe the legislation setting up the National Health Service to be one of the finest, if not the finest, pieces of legislation that this country has had this century. It is true that the NHS leaves much to be desired at the present moment because it is far from able to meet the demands of the numbers of people who require its services. I have nothing against the private sector. I live in a democracy, as we all do, and in a democracy we should try to meet the needs of all people in that democracy provided those needs are genuine, worthwhile, and not antisocial. But we are seeing an ever-increasing private service tending more and more people at far greater fees than people visualised, and at the same time watching the National Health Service in a sense falling short of its required standards.
I am looking at an article in The Times of 18th October, which says:
"Sir Raymond Hoffenberg, president of the Royal College of Physicians, said yesterday: 'Many consultants combining National Health Service and private practice could command salaries of up to £250,000 a year'."
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I do not think the man has yet been born who is worth £250,000 a year. If this is the sort of thing that is going to happen, I think we must have a very real look at the private sector because it is obviously going to detract from the public sector.
I have found it impossible to discover the exact number of consultants in the private sector. I do not know whether my friend Lord Wigoder will be able to provide the answer. What I have been able to find out is that there are 16,246 consultants in this country, of whom 8,264 are in full-time employment within the National Health Service. That is roughly half. But I cannot find out where the others are. If the Minister can do that, I should be most grateful because I think one should know where they are.
It is true that most of the 8,264 who are whole time in the National Health Service are in fact not barred from working in private practice provided the period is set up in their contract. I think, too, that when we come to consider the private sector we need to bear in mind that a very high percentage of doctors—as I say, I do not know how many doctors there are in the private sector—will probably have cost the ordinary taxpayer in this country something like £100,000 for their medical training. Following the recent inquiry I made, I was told that it costs £100,000 to be trained as a doctor in this country.
What I should like to ask the Minister to do when she comes to reply—and I think she has the most difficult job on the Government Front Bench, regardless of anybody else who sits there; it is a very diffcult subject indeed and it is one which raises its head once or twice a week, so my sympathies are always with her, I having been in that position myself on one occasion—is to move away from saying that the Government have increased this expenditure by 5 per cent. or that expenditure by 7 per cent. and let us know exactly what the position is. As I understand it, the position is very serious from the point of view of people awaiting operations and treatment and waiting to go into hospital.
The director of nursing and in-patient services at Charing Cross Hospital stated recently that the hospital had 149 vacancies for nurses out of an establishment of 670. In Oxfordshire, where I live, it was reported this week that the health authority is short of over 700 nurses. That is not the only region where there is a shortage. In the same local paper it was reported this week that an elderly woman hospital inpatient was raped, and that hospital was short of nurses to the extent of something like 100. We cannot go on allowing extreme skill and expertise as one finds it working in the private sector—able to see anybody who needs help, able to take in anybody who needs a bed—while thousands of men and women are not in a position to get treatment either at home or, for that matter, in hospital.
In Oxford only this week there was a report concerning the Nuffield Orthopaedic Centre which said:
"Over the next five years the gap between provision and demand to the point where either the service for the elderly will break down or there will be a curtailment of provision for the young, middle-aged and those in need of provision. Neither alternative is acceptable and yet within the present staffing level and financial allocation the Nuffield Orthopaedic Centre cannot meet the problem."

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This is a story that one hears all over the country. It is not something new: it is happening everywhere. Hospitals are being closed, waiting lists are being increased to a tremendous figure and elderly people have more or less given up ever being able to live without pain, for the simple reason that although the facilities are there the beds are not there and the doctors are not there. If I were to make a suggestion it would be that the two sides should get together—the public side and the private side—and there should be some restriction placed on the private side until our National Health Service hospitals are able to build up a stronger medical staff and far better services than they are able to offer at the present moment.
3.51 p.m.
Baroness Gardner of Parkes: My Lords, I am very grateful to the noble Lord, Lord Bottomley, for bringing such an interesting subject to us today. I listened very carefully to his introduction although of course I do not agree with many of the points that he made. I thought it was most interesting that the noble Lord, Lord Smith, made the point about pay beds because I think that is a highly relevant factor in what has happened to the health service. Indeed, it is often said that the people in Harley Street believe they should almost erect a statue to that 1975 Secretary of State—and a Socialist one, I might add—because she did more to push the private sector ahead than anyone else ever had. Of course that was not her intention.
But by this attempt to throw out all pay-beds from the national health hospitals—and of course it did not really work completely because some have still quite a lot of pay-beds and others have a very small number—to the extent that it happened, it took the private doctors out of the hospitals where they did one round in the evening and they saw everyone in that hospital, private and national health. They are now doing that round somewhere remote from the national health hospital and therefore the national health patient is missing that bit of extra attention. I do not agree with the view of the noble Lord, Lord Bottomley, on moonlighting because I think that in the past national health consultants gave a great deal of extra time to the national health hospitals which now they have to spend in travelling or in seeing patients elsewhere.
It was interesting, too, that he thought direct labour was cheaper. I think the general experience in many fields, in local authorities and so on, has shown that this is not always the case. It is a fact that the hospital's own staff is always open to tender and usually does so on all tenders. As I understand it, many tenders—the majority—have been won by the hospital staffs themselves; and so I think we should clear that point up.
The noble Lord also said that the private patients are getting treatment on the cheap at the expense of the NHS. I do not agree. I am on the Board of Governors of the Brompton National Heart Hospital. Our experience there is that we have a lot of pay-beds and we have always looked on them as a marvellous way of earning extra funds for the hospital. The cost per day is £262 for those pay-beds and that more than covers
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the cost. We have worked out that for every two private heart operations there we are able to fund one additional national health heart operation; so there is that contribution.
We also have a system of nurse training. We work with the Cromwell, which is a fully private hospital, and the nurses are trained in advanced theatre techniques for half the time in Brompton and for half in Cromwell. That has proved greatly to the advantage of nurse training and at the end of that training period we have been able to retain quite a large number of those nurses.
There is a problem in London about nurses and our recent research has convinced us that it is an accommodation problem. The type of nursing accommodation that was offered in the past is no longer attractive to nurses, or indeed acceptable to them. We are working on that and we are designing a new unit of accommodation which will give self-contained accommodation. That is wanted by nurses today. I was interested in what the noble Lord, Lord Wells-Pestell, said about there being s shortage of accommodation outside London as well. That worries me a little because it may mean that this housing project is not going to solve the problem.
Another hospital of which I have direct experience is the Eastman Dental Hospital, the only postgraduate hospital for dentistry in this country. There all the fees earned by the consultants—and they are allowed to treat private patients at the hospital—are paid to the Institute of Dental Research. Again, that has proved to be a most valuable means of funding dental research and advanced dental treatment for patients. All costs to the hospital are fully covered in the charges that are made to the patients.
Perhaps I may add that the Brompton hospital greatly welcomes the fact that as from 1st April, instead of only being able to charge £262 a day, and to charge that to someone whether very expensive treatment or very much less expensive treatment is required, there will be flexibility. As I understand it, we shall be able to set our own charges and to vary them according to the amount of theatre or other specialist work that is required. That is something for which we have been asking for a long time, and we are delighted to have it.
Another way in which there is a great benefit to the National Health Service from private enterprise is in the way residential homes for elderly people have been set up. I know a lot of people consider that at one time residential homes for the elderly were a bonanza: it was a way to make money. Certainly this no longer seems to be the case and people who have gone into that business recently have found that it is not at all so easy to make money. However, I shall not go into the financial aspects but merely state the fact that if those people were all thrown on to the health service for treatment tomorrow there is no way we could cope with providing the care that would be required. The way that private enterprise and voluntary agencies have worked in together to provide this care has been an excellent thing because the whole pattern of care for the elderly has changed. People now remain in sheltered accommodation or in their own homes until they are at a much more advanced age and then

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perhaps require hospitalisation right at the end. But these residential homes fill a great gap.
The noble Lord, Lord Bottomley, made an interesting point about agency staff. I deplore the use of agency staff in hospitals because it is either intended to be an economy or it is done because you cannot increase your staff. It has nothing to do with what government happens to be in power, because I remember exactly the same thing happening when the Government of our noble friend on the Front Bench opposite were in power. You are not allowed to take on additional nurses; yet you have to turn round and employ agency nurses, which cost a lot more than if you had been able to have one or two more on your own staff. This applies also in many other specialties and so I think this is a fairly difficult point.
I was slightly amused when he described the visit of the community health council representatives to the hospital because although I believe everything he said about the dirt, it shows how very important it is to have someone checking that the work is done. That was one of the things that went wrong in our hospital reorganisation—making our areas (and now our districts) rather too remote from the actual board of governors that used to be there on the spot. That is where the special health authorities have a great advantage now.
As regards the noble Lord's point that the shower head was blocked by scale, I would say that if it is in London—and Westminster certainly is—that can happen in a week. I find that with my own shower head you have to be at it with a nail brush almost every week because the water is so hard in London.
Time is limited and my number is just about to come up on the clock, so although there are other points that I should have liked to make there is no time for them. This is a most interesting debate and I hope that we shall have a longer time available on a future occasion.
4 p.m.
Lord Porritt: My Lords, I, too, should like to thank the noble Lord, Lord Bottomley, for fathering this Motion and for his rather ingenious method of introducing what has really become a mini-debate on the NHS. I do not imagine for one moment that in this debate it is necessary to express an interest, but I should like to say that I have, man and boy, for the last 70 years been involved with British medicine.
The dominant words in the noble Lord's Motion are "private enterprise", but I do not wish to elaborate on the pros and cons of the various piecemeal efforts that have been made to try to solve the different problems. At the moment, I would rather agree with him that it seems to be a somewhat "hit and miss" method of dealing with what is rapidly becoming an insoluble problem—how to finance the NHS in its present form.
What I might call the minutiae of privatisation as debated this afternoon are just examples of the fragmentation of effort—the "stop-go", or should I say "stop-gap"? policies that have been employed more and more in recent years in a Canute-like series of exercises to stem the inevitable tide that is slowly but very steadily drowning our health service. Nobody in this House or for that matter in the country, or any person with a drop of humanity or compassion in his
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blood, would for one moment query the ideal behind the inception of the National Health Service. It is the practical implementation of that ideal that has gone so sadly awry. Why can we not, after 40 years of trial and error, admit that present efforts and present methods have failed to produce the expected result?—and this in an era when almost miraculous advances have been made in medicine, as we have already heard this afternoon. These advances should have brought enormous advantages to those most concerned—namely, the patients—if only overall resources had allowed them to benefit from what was available.
Any reasonable person—and that applies particularly to the medical profession—knows, and will frankly admit, that the NHS has done an enormous amount of good. But it is just not on to expect one central source of supply, the Treasury and taxation, to fulfil for everyone the demands of modern medicine, some of which your Lordships have heard mentioned already this afternoon. It has become a dire necessity, therefore, that we are now practising selective medicine in this country, and the trouble is that the selection is being made by the wrong people. It is being made by politicians for financial reasons instead of by doctors for medical reasons. Politicians and civil servants are not trained to treat patients, any more than doctors are trained to manage colossal business enterprises. This is getting back to the basics.
I have had occasion previously to say that you can nationalise a business, a corporation or a company but you cannot nationalise a profession. It is a contradiction in terms. In a profession the supplier and the consumer are essentially working on a personal basis. This is not to say that medical services would not benefit greatly from central government assistance, but surely not on a state-monopoly basis. How can the Government, any government, face up to the bill as we are trying to do at the moment? There are only two ways to do it. One is to reduce standards and the other is to raise taxes, and neither of these, I suggest, is very likely to produce anything but a voter rebellion.
Medicine should not be a political football, and particularly not a party political football. Let us get rid of strong emotion and weak logic. Let us get rid of damaging antagonisms and rabid ideologies and concentrate on co-operation, on co-ordination and, yes, even on competition between all the many methods which are available for providing medical services. Private practice is only one. Grant-aided practice would be essential. Then there are insurance-backed service, fee-for-service practice, endowments, voluntary charity subscriptions and even this morning we hear of lotteries. All these together would be hard pressed to meet the demands of today's medicine. But so long as we go on trying to convert a profession into a business by a series of unpopular and, to date, not very successful managerial schemes, we shall not get back to that original ideal of nobody being denied the medical care required for lack of financial resources.
Last year the BMJ described the NHS as,
"a political, statistical and managerial battleground."
If that was not bad enough, I came across a horror just the other day which described the NHS as,
"Britain's proudest achievement and their biggest man-made disaster."

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What has happened to our "envy of the world", the "jewel in the crown of the welfare state"? How good it would be to have a Minister of Health concerned with health, and by that I mean environmental problems, the provision of equipment and facilities, the support of research and the prevention of illness and accidents, leaving the medical treatment of patients to the profession.
Surely the traumatic experiences that this Government, and all governments, have suffered in the last 40 years in trying to finance and administer the present monolithic health service have made it essential and urgent that we should find some viable alternative, to ensure that we do not lose for ever the tradition and prestige of British medicine. It is, I suggest, not possible or politically practical to go on much longer with this highly cost-ineffective organisation, constantly patched-up by a "bits and pieces" policy of ad hoc improvements.
To restore the tradition and worldwide prestige of British medicine, and to be able to give patients anything like a viable guarantee of improving service, we urgently need some very brave and far-seeing man or woman, or group of men and women, prepared quietly to dismantle the health service in its present form and, using to the full the lessons of the last 40 years and the experiences of elsewhere in the world, to indulge in some honest, clear thinking, long-term methods of health provision.
In conclusion, may I revert to today's debate on privatisation and quote the words of Aneurin Bevan in 1948, just before the National Health Service was launched? He said:
"Of course, in an ideal world we would all be private patients."
4.8 p.m.
Lord Wigoder: My Lords, I do, of course, declare an interest as chairman of BUPA, which is an organisation that insures some 3¼ million people, which overall manages some 12 private hospitals and screens medically through its centres something like 100,000 patients a year. I say that not in any way as a boast, nor as an advertisement, but simply so that your Lordships can get some idea of the size of the private sector as compared to the size of the National Health Service.
The total number of people who are insured in this country is about 5 million or one-tenth of the population. The total resources spent in the private sector are certainly less than 10 per cent. of what are spent in the country as a whole. I make that point in order to indicate that it is perhaps a little absurd to try to regard the private sector and the NHS as being in some way, in deadly competition. One cannot compete, one would not seek to compete, with an organisation 10 times one's own size. Indeed, as an interesting illustration of the way in which they are not in competition, may I deal with the question of nurses that was touched upon by the noble Lord, Lord Bottomley, in his admirable opening observations? There are in this country, on a rather local basis, shortages of nurses in certain specialties. On the last count, it was found that there are fewer nurses employed in the whole of the acute private sector in
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the country than there are unemployed at present. Therefore, to try to blame the private sector for the problems in regard to nurses is rather artificial.
The point was made by the noble Lord, Lord Bottomley, and the noble Lord, Lord Wells-Pestell, in a sincere and much appreciated speech, that nurses and, indeed, doctors, are trained by the state. So they are. Let us reflect a moment: so are a great many other people. Any civilised community these days regards it as its duty to train its young people. They may be chemists, engineers, nurses or doctors. No one has ever suggested that chemists and engineers, once they have been trained by the state, should work only in the nationalised industries. What is the logic of saying that that should apply to nurses and doctors?
Indeed, putting it in a very simple way that I know the noble Lord, Lord Bottomley, will appreciate, because of his long and distinguished connection with NUPE, a doctor or nurse in the NHS relieving the suffering and treating the illness of a member of NUPE is doing an invaluable job. A doctor or nurse treating a NUPE patient and relieving suffering—a patient who has gone into the Manor House Hospital, which is by far the largest private hospital in the country—is doing exactly the same valuable work so far as the community is concerned and so far as the individual is concerned. I suggest that it is quite wrong to start trying to assess the value of the work done by devoted health care personnel by looking at the means by which a particular patient happened to come to obtain treatment.
I would therefore sugggest that it is not right to say that the two sectors are in competition. They can, I think, occasionally stimulate each other to mutual advantage—in hospital building techniques, for example, in areas of hospital management, in medical screening. We have recently finished training some 50 NHS radiographers in order to assist them in the latest screening techniques when they go back to work for the NHS.
Far from there being cut-throat competition, let me make it as clear as I possibly can that every responsible person in the private sector is full of admiration and affection for the National Health Service. Everybody wants to see it thrive. Everybody recognises that it will be the dominant supplier of health care in the country for the foreseeable future.
The role of the private sector is not to compete with that. The role of the private sector is to supplement that, to try to help by increasing the total resources available in the country for health care at a time when, as everybody would agree, those resources are already in short supply.
Let me give some illustrations. In pure finance, something like £1,000 million a year is provided towards the health service by patients who go privately. It is provided because, of course, they pay their taxes, there is no reason why they should not do so and they certainly do not complain about it. They pay their national insurance, they pay their bed charges and so forth and that very substantial sum of money is then used, not by the people who have provided it, but by those who may not be able to afford other treatment and to whom the NHS seeks to provide services.

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The noble Lord, Lord Bottomley, made a point about under-charging in respect of pay beds. This is partly true. It is true, I gather, that for some of the more complicated operations patients were undercharged. Equally the report said that, for the less complicated operations, they were being overcharged. That cannot be held against the private sector. That is a matter where the NHS should put its internal house in order and ensure that it does not continue to happen.
Apart from the purely financial situation, approaching 500,000 operations a year are carried out in the private sector. Where would our waiting lists be—they are already in serious trouble—if one had almost to double their length and add another 500,000 to the figures? There are some 45,000 beds in the private sector looking after the elderly, the handicapped and psychiatric patients. How could the National Health Service, with every good will in the world cope with that number of people unless the private sector were there to help out? Those are some of the figures.
The co-operation between the two sectors, of course, has been very substantial. Machinery has been provided. We spent £1 million providing a machine at St. Thomas' Hospital, which now looks after some 1,000 NHS patients and 400 private patients every year. There are many examples of that sort of practical co-operation. The DHSS contracted out some 9,000 operations to the private sector last year. Some 10,000 long-stay patients are contracted out. All over the country facilities are being shared between the two sectors.
I should like to continue at length. I cannot do so. I will end, if I may, by making this observation. At Westminster politicians talk, and ideology and dogma raises its ugly head. Sometimes things are said that really have very little relationship to what goes on in the real world. If one goes out into the field outside Westminster, one will see the people who are actually providing health care, the doctors and the nurses both in the National Health Service and the private sector, co-operating perfectly happily and perfectly contentedly with each other because they put this sort of political ideology on one side and they are concentrating on the important job, that of making sick people better and, as the noble Lord, Lord Porritt said, seeing that we have the greatest possible quantity of resources in the country to help to that end.
4.17 p.m.
Lord Hunter of Newington: My Lords, I wish to make only a few points as much of the ground has already been covered. First, I add my tribute to the noble Lord, Lord Bottomley, for the way that he introduced the subject. He got the debate off to a flying start, and we have covered a great deal of ground. May I also say that the noble Lord, Lord Smith, was unduly modest, for he was one of the people who gave the National Health service its flying start that lasted for almost 20 years.
At the beginning, it looked as though matters would be fine from the point of view of private practice. A great deal of consideration was given to the issue. It
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seemed that the way to deal with it in many cases was to give the consultant a nine-elevenths contract, and then allow him to do private practice.
However, there was something else that no government had really done very much about which was terribly important in relation to the patients. That was the provision of amenity beds. These have never been fully developed in the NHS. It was a very important caring provision. People could pay additional moneys to have more privacy, perhaps when a relative was dying. I can remember at the time talking to a Secretary of State—not the noble Lord, Lord Ennals, but another one—about the private bed situation, and almost trying to demand, if one can do that of Secretaries of State, why something had not been done about amenity beds. One reason, I suppose, was lack of physical facilities within hospitals. How were the pay beds to be provided together with a whole range of facilities, many having to be diverted from other purposes?
I know that at the Queen Elizabeth Hospital in Birmingham there was a wing for private practice. I can also recall some 10 to 12 years ago a daughter of mine, who was a staff nurse in the private wing, returning from duty, dropping exhausted into a chair and confessing that there had been no-one on the ward except the consultant and herself while in the consultant's NHS wards, there was a senior registrar, a senior house officer and junior house officer. In other words, the provision that had been made was not adequate to give proper medical care.
Although I personally did not welcome it, in a sense the setting up of hospitals by people from abroad has been a challenge when one considers the amenities now being provided in many countries for private patients. There has been no attempt, really, by any government in this country to cope with the provision of private or amenity beds.
The point I wish to make is simply this. It is still possible to build, near hospitals or in the grounds of NHS hospitals, private wings which are contracted out to groups of doctors or others, perhaps including nurses, to run a private wing. They might use and have made available to them National Health Service laboratory, X-ray and other facilities at commercial rates. The benefit of such an arrangement should go to that hospital or, if not to that hospital, to that district authority. As has already been mentioned, this would mean, among other things, that the doctors would not be far away and could be easily contacted if NHS patients required treatment.
I should like the Minister to say whether it is possible to build such wings to be run privately by the hospital staff. I see no reason why we should not do that. It would seem to me to be a great step towards ridding us of the bitter conflict that is doing so much damage to the National Health Service.
Lord Polwarth: My Lords, I am sure that we are all deeply grateful to the noble Lord, Lord Bottomley, for giving us a chance to talk about this extremely important subject. I think we all equally appreciate the sincerity of the way in which he introduced this subject, even if some of us may not go all the way with him in what he has said. I hope he will forgive me if I do not follow the somewhat narrow line to which he

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devoted himself. I believe that the terms of the Motion entitle one to range a bit wider, as a number of noble Lords have done.
I should say that my only excuse for daring to enter the lists after so many eminent and experienced speakers is, first, that I am a subscriber (as I have no doubt are a great many of your Lordships) to a private health insurance scheme. As a result of paying my dues—out of taxed income, I hasten to say—over more than 30 years, I have just succeeded in buying myself a beautiful new hip joint at a saving to the National Health Service of well over £3,000 and 11 days' occupation of a hospital bed.
Secondly, I am chairman of the board of the private hospital where this superb operation was carried out. This 60-bed hospital was financed by private enterprise and built in Edinburgh. It opened two and a half years ago. Judging by the use being made of it and the comments on the service provided, it is filling a very real need and demand. For instance, in under two and a half years we have carried out almost 7,000 operations. We have received over 30,000 out-patient visits and we recently opened a screening service which is very much in demand. That service is just getting started and we hope that by early diagnosis it will relieve the health service of some of the subsequent demands that otherwise might be made upon them.
I think that both those examples go to show that rather than being to the detriment of the National Health Service it is to their benefit to have the services available in that they relieve both the NHS and the taxpayer of some of the burden. Surely it is for the benefit of patients that they should have a choice of treatment and for the benefit of staff that they should have a choice of employer, rather than both those groups being the victim of a monopoly.
A point that has been frequently raised is that private hospitals poach their staff (and particularly nursing staff) from the public sector, which has trained them. Of course there is movement between the two sectors. However, I can assure your Lordships that in our case we have found that the movement is not all in one direction. One example I can give is that two of our best sisters, after coming to us from the NHS, have in due course gone back to it with broader and wider experience. They have gone to more senior posts within the National Health Service, and that can only be beneficial all round. We shall of course welcome them back as matrons or suchlike in due course!
We are also able to give more opportunities to older women with nursing experience who are no longer in a position to give full time to the job. I think we are able to employ their services more flexibly, for instance in helping to meet our peak needs.
In conclusion, I should say, as other noble Lords have said, that the problems of maintaining our health service are undoubtedly due to far wider causes than the existence of a private sector. To restrict or clobber the private sector would merely aggravate the crisis. The two sectors can help each other. As the noble Lord, Lord Porritt, has said in a speech which would have justified the existence of this debate for itself alone, there is a plea to be made for co-operation and indeed for competition between the two sides—though
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I do not think they should be regarded as two sides. It would be for the benefit of the person for whom, after all, this is all in aid of—the patient. I therefore simply echo the noble Lord's plea.
4.26 p.m.
Lord Graham of Edmonton: My Lords, like other contributors to this debate, I wish to begin by saying how grateful we are to the noble Lord, Lord Bottomley. It is quite clear that there are two worlds. One world occupies the National Health Service hospitals and the other world occupies the private hospitals. Other than the arguments concerning entitlement, if any noble Lord argues that there is no difference then there will be a great argument indeed. There is a world of difference between the quality of care, the quality of attention and ultimately the quality of opportunity for survival by those who—for whatever reason, but in the main for economic reasons—are condemned to rely upon the National Health Service facilities and those who rely on the private sector.
A number of noble Lords have indicated that the debate has widened slightly. But what this debate is all about is the effect of the presence of the private sector on the ability of the state to provide a better service than it does. I am not going to knock the quality of the service in the private sector. However, I am concerned with a better quality of service in the public sector.
For my text perhaps I may quote from today's evening Standard. On page 9 of that newspaper there is a report headed:
"'Model for disaster'"
followed by:
"Patients' group warns on hospital cutbacks".
The report says:
"Hospitals in central London are a 'model for disaster', says a patients' watchdog body".
The report comes from Bloomsbury Community Health Council, which covers a great part of central London. It says:
"The district health authority maintains that its aim ts to provide a model health service. The regional health authority claims it wants a 'caring service' and the Government still asserts that the NHS is safe in its hands.
"We naturally want the health service to be run efficiently and without waste. But is it a 'caring' or 'model' service that cannot do anything for you until you become an emergency?"
There may be noble Lords who have little current experience of visiting public wards in our public hospitals. In the past month I have visited Chase Farm Hospital to visit a dear friend. I have visited North Middlesex Hospital as well. I visited both those hospitals in the presence of the noble Baroness, Lady Gardner of Parkes. I visited Edmonton, Enfield and Barts hospitals with my son, who has a medical problem. In regard to all three hospitals, one cannot say a word against the dedication, care or cheerfulness of the people working there. But when it comes to decoration and furnishings, equipment and the standard of care compared to what we would want for ourselves and what we know is provided in the private sector, then there is a great deal to be said.
It has to be said—although it is difficult to quantify—that the private sector bleeds in part the ability of the people in this country to provide a better

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National Health Service. The noble Lord, Lord Bottomley, and other noble Lords have referred to the way in which the private sector and private patients receive treatment if not on the cheap, then cheaper than at an economic cost level when using National Health Service facilities.
I do not take kindly to what was said by thenoble Lord, Lord Wigoder. There are illustrations where profit is made. There are illustrations where there is a net detriment as far as cost is concerned. Last year the director of finance of the Bloomsbury health authority had to report that his authority was owed £1.3 million by private patients and others. He said:
"I have experienced considerable difficulty in verifying both the size and the age of this sum … I am obliged to advise the authority that, potentially, up to £500,000 of the sum shown as due at 31st March 1986 should be considered as doubtful".
That is one illustration of the manner in which the problem of the private sector and the public sector is affecting the public purse.
The noble Lord, Lord Hunter of Newington, gave an illustration concerning the use of public sector facilities by private hospitals and how the two sectors could work together, perhaps with spare land and private facilities built within easy access. The private hospital is very often deliberately built near to the public sector hospital in order that it can take advantage of the facilities. I am told that private clinics have on average 43 beds. Such clinics are very often built near to NHS facilities. Certainly, that is done to poach the staff from the public sector.
Only 30 per cent. of private clinics have their own pathology departments, only 57 per cent. have radiological departments, and few have intensive care units. The game was given away when a recent report indicated how an independent clinic built in central London was to be projected. The private sector would gain a high quality new hospital with the back-up availability of the full resources of a major teaching hospital. For a private hospital, the availability of sophisticated supporting services and skilled staff within University College hospital would provide a range and quality of services which is not generally available within private hospitals and probably could not be provided by other means.
I use that example to illustrate that the private sector is in part subsidised and takes advantage of the facilities that are made available by the public purse.
I should like to use my remaining one minute to deal with another point. The noble Baroness, Lady Gardner of Parkes, knows from her local knowledge, as I do, of the current practice borne out of the Rayner report,—namely, selling off as many hospital accommodation units as possible. This Government have a mania for transforming those who have access to, and benefit from, public sector housing, forcing them to look for other facilities.
In the Enfield health authority, there is a hiatus where nurses are being bludgeoned, pressed and harassed to vacate nursing accommodation provided for students and those recently qualified. They are urged to go into the private sector and buy their own homes or to go—laughingly—to Enfield council and ask for rented accommodation. I find it quite hypocritical that there are those who argue that it is good to
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enjoy the right to buy while student nurses in Enfield and elsewhere are being put under enormous pressure at a time when, as the Royal College of Nursing has said, they should be concentrating on passing their examinations.
Certainly, this debate provides a number of opportunities. The opportunity that I wish to take is to show how the incidence of the private sector is certainly detrimental to the quality of service that the vast majority of people in this country are entitled to enjoy from the National Health Service.
4.36 p.m.
Lord Harris of High Cross: My Lords, Edmonton and High Cross are almost adjoining fiefdoms, but I fear that my approach remains somewhat remote from that of the noble Lord, Lord Graham of Edmonton. I must add my thanks to the noble Lord, Lord Bottomley, for introducing this debate so gently and modestly, though I fear he will regard my remarks as an ill reward for those efforts.
I should like to start by saying that, whatever our disagreements, we all accept the desirability, even the urgency, of increasing the health care available to all our people. We want to shorten the queues in the doctors' surgeries and reduce the waiting lists. Standards of comfort and convenience should be improved, as referred to by the noble Lord, Lord Graham of Edmonton, and such improvements should not be confined only to those with social push and political pull.
Yet under governments of all persuasion, since 1948, Labour and Conservative Ministers have been periodically obliged to stop, or slow down, the growth of spending on medical care. It is true that nevertheless the total public outlay has escalated, and employment in the NHS has more than doubled since 1960. Such almost grudging expansion has failed to still criticisms and certainly has failed to satisfy the claims for treatment. Grievances have multiplied despite mounting expenditure, and yet the NHS lobbyists go on pleading that another few hundred million pounds, or perhaps a billion or two more pounds, would solve the problem of inadequate supply. It is with that proposition that I fundamentally take issue.
The folly of such optimism is exposed by the most elementary economic analysis. Where scarce resources are supplied free and financed through taxation, demand will always run ahead of supply. That is not a matter of ideology mentioned by some noble Lords but a matter of economic logic. The everyday function of price is to guide supply and ration demand. It is true that if price is suppressed in the health services you get rid of what is pejoratively called "rationing by the purse". But, you do not get rid of scarcity. Instead you have rationing by politicians, doctors, administrators and others.
The laudable aim always is to ensure that no one is denied access to health care. However, the result in the NHS is to condemn everyone to an inefficient and under-financed medical monopoly. The alternative which I commend is to encourage more spending, by choice, through private payment and insurance.
First, we must leave aside the understandable but regrettable emotional antipathy to paying for medical

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care. After all, we now pay for food, heating, homes, holidays and other components of good health. We could then concentrate on the social objective of ensuring that finance is available to all. We must accept that the chronic economic anaemia of the NHS is a direct result of relying on the rather thin gruel of public finance. Whatever people say to those nice opinion pollsters, most are more enthusiastic to consume free services than they are to have more taxes deducted from their wages and salaries. This insight was not always denied to conscientious and shrewd Ministers in Labour governments. My noble friend Lord Houghton posed this as a central dilemma almost 20 years ago. In a paper entitled Paying for the Social Services in, I think, 1967, he foresaw:
"What is in doubt is whether we in Britain will ever give medicine the priority given to it in some other countries … so long as it is financed almost wholly out of taxation".
In a similar vein about the same time the wily Richard Crossman acknowledged with reference to superannuation the same dilemma. He said:
"People are prepared to subscribe more in a contribution for their own personal or family security than they ever would be willing to pay in taxation devoted to a wider variety of different purposes."
I believe that the encouragement of private health insurance would confer a number of advantages. As my noble friend Lord Porritt said, it would sharpen competition in catering for consumer preferences; which would, in time, compel the National Health Service to be more cost-conscious and make more efficient use of its resources. Competition, in turn, would galvanise the discovery process which in the United States of America has recently widened choice with the development of health maintenance organisations, one-day surgeries, walk-in clinics, home care agencies and even a home birth movement at a fraction of the cost of prolonged hospital confinements under the NHS.
The major gain from increased private health insurance would, I believe, above all be to enlarge the resources devoted to medical care. It does not take a prophet to forecast that as standards of living continue to rise in the years ahead health care in all its many forms will, like education, holidays, home comforts and hobbies, be among the most rapidly growing parts of the expanding service sector of this economy. So long as they are not held back by dependence on public finance, these labour-intensive services offer a major hope of significant and sustained growth in satisfying employment.
The danger from the well-intentioned but, I must say, backward-looking advocates of the NHS monopoly is that they would inadvertently obstruct this advance in medical care and employment by restricting finance to what can be raised through the single, narrow channel of taxation. They would thereby simultaneously frustrate economic growth through higher taxes, while still holding medical care below what the increasingly prosperous majority would choose to provide for themselves and their families.
4.43 p.m.
Lord Kilmarnock: My Lords, I join with all other noble Lords in paying tribute to the noble Lord, Lord
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Bottomley, for having introduced this extremely interesting debate. The Alliance is fully committed to the maintenance of a tax-based National Health Service and the "thin gruel" of the noble Lord, Lord Hams of High Cross, seems to have produced some remarkable results over the years.
Apart from anything else, goodness knows how we would cope with such a dreadful problem as AIDS if the service were to disintegrate. Furthermore, it is well known that the administrative costs are much lower than those in other countries with insurance-based schemes. The percentage of GDP taken up by health care, despite the extent and the range of the service, is well below the OECD average. The noble Lord, Lord Bottomley, seemed to regret that, but I interpret it as a tribute to the National Health Service and I do not think I can accept the strictures of the noble Lord, Lord Porritt, on cost-ineffectiveness—the international comparisons point the other way.
Sometimes the spectre of erosion by privatisation is raised, and indeed the noble Lord, Lord Bottomley, spoke of the Government's ideological battle against the NHS. The noble Lord, Lord Colwyn, suggested that we should not be having this argument but instead concentrating on a more fruitful sort of symbiotic relationship, and my noble friend Lord Wigoder went down that road, too.
In 1979 the Royal Commission on the National Health Service reported that the private sector was too small to make a significant impact on the National Health Service except locally and temporarily. It seems to me that the questions to be addressed in this debate are whether that is still true and, if not, whether the present impact is malign or benign; or, as seems more likely, a bit of both. If that is so we have to consider which links between the two sectors should be encouraged and which should not.
The size of the private sector and the relevant statistics are set out in the report Private Health Care issued by the Office of Health Economics in November 1985, a copy of which I have. The facts appear to be that private sector acute beds have risen from 6,578 in 1979 to 10,876 in 1985–86—an increase of about 4,000 beds. Private expenditure on acute health care, 70 per cent. of which is insurance funded, was estimated at £535 million in 1984. This was only about 7 per cent. of the total NHS and independent sector spending combined. In fact, I think that my noble friend Lord Wigoder gave a slightly higher figure, but it was not very different. As he said, about 5 million people are covered by medical insurance schemes of one kind or another, which is just under 10 per cent. of the population. We can live with a private sector of 7 per cent. or 8 per cent. of total health expenditure, but if the figures started to move up to 15 per cent., 20 per cent. or 25 per cent., the alarm bells should start ringing.
On the vexed question of pay beds, it will be recalled that in 1980 the Conservative Government repealed the Labour Government's Health Services Act 1976 which had set up the Health Service Board presided over by my noble friend Lord Wigoder, one of whose main jobs was to phase out pay beds from the NHS. The board reduced the number of pay beds by 911, from 3,444 to 2,533 over a period of three years. Most of those beds had been under-used.

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Some of those who promoted this policy in principle criticised it retrospectively on three grounds. First, rather than further diminishing the private sector it encouraged and strengthened it. That point was made by the noble Baroness, Lady Gardner of Parkes. The second was that the administrative effort required by the Health Services Board and by the health authorities and hospitals was not justified by the results. Thirdly, hospital doctors were alienated at a time when the government needed their co-operation on other issues.
Since the repeal of the 1976 Act and under Conservative legislation the number of pay beds has increased slightly to about 3,000. I myself would not want to revert to a deliberate phasing-out policy. It should be left to local health authority decision. Total NHS income from pay beds is in the region of £60 million. Some authorities may price themselves out but, equally, some patients may feel that famous London teaching hospitals at £174 a day are good value. In fact the noble Baroness, Lady Gardner of Parkes, mentioned an even higher figure. As she said, that money can be an important part of an authority's income.
It seems to me that the important thing here for the health service is that proper control systems are exercised, fraud eliminated, the Auditor-General's criticisms met; and not only the consultants but also the junior doctors who assist them should be properly rewarded.
On the question of consultants, we have to recognise that the system of delivery in the NHS is a compromise. It was from the outset, with the recognition of the independent status of GPs by Aneurin Bevan. If good consultants are to be retained in the National Health Service they must have some opportunities for private practice, otherwise they will migrate to the private sector. Some of the figures that the noble Lord, Lord Wells-Pestell, was seeking will be found in the report I have here. One of the statistics contained in it is that in 1984 there were 5,066 part-time consultants. Surely we would not want to lose those from the National Health Service.
Pay beds are a relatively small aspect of the relationship between the private and public sectors. Here it is worth noting an important point from the Review of the RAWP Formula by the NHS Management Review Board, in the section headed Provision of Services by other Agencies. I was going to quote from it but there is not time. The board recommends that the RAWP formula should not take account of the provision of services by other agencies, that is to say, by private hospitals. I take some comfort from that because it seems to me that it reaffirms a commitment to proper provision of NHS acute hospital services across the country regardless of private sector activity, which I am sure is right. At the end of the debate I shall be most grateful to the noble Baroness if she will confirm that this is the Government's intention. At the moment it is just a recommendation of the management board.
Leaving the subject of pay beds, there are much more important sources of National Health income from the private sector. In fact the total is in the region
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of £1 billion out of a total projected National Health Service budget for 1986–87 of £17 billion. Clinical facilities, such as pathology laboratories come very high on the list: over 40 per cent. of health authorities have contractual arrangements for the use of path labs by the private sector. Here the flow is very heavily weighted toward the National Health Service as provider and the independent sector as consumer. I see no reason why this traffic should not continue, provided that proper commercial charges are made and collected. No doubt the new management board will concern itself with that matter.
On the question of chronic care, the flow is almost exclusively in the opposite direction, with about one-third of health authorities contracting out long-term care to the independent sector. It is almost impossible to envisage how the elderly with chronic conditions are to be cared for without private and voluntary schemes. Here again, I am in agreement with the noble Baroness, Lady Gardner of Parkes. The pressing question is whether this private and voluntary sector is properly inspected and regulated and whether the local authorities have adequate funds for this purpose.
There are other areas in which privatisation is far less desirable. I am sure that in primary care we should stick to and improve the current system, which is a classic compromise, if ever there was one. There is nothing to prevent doctors setting up health maintenance organisations on American lines, as the noble Lord, Lord Hams of High Cross, has said; but at £85 per head and full medication costs the option is expensive for the average person. Good primary care and particularly good preventive care are much more likely to come through practices financed through general taxation as at present.
It is still an amazing fact that only 1 per cent. of all GP consultations take place privately. That seems to me to be an immense tribute to the classic British compromise system that we have built up. It seems to me to be a great pity to erode it. Here I tend to part company with the noble Lord, Lord Colwyn, but certainly improvements should be put in hand along the lines recommended by the Royal College of General Practitioners.
The other area to which my noble friend Lord Winstanley referred and which needs to be carefully watched is that of the ancillary hospital services. On the 9th December last Mr. Barney Heyhoe wrote:
"The programme of competitive tendering for support services has some way to run".
If that means more arm-twisting of districts to privatise at all costs it seems to me to be totally wrong, particularly in view of the miserable, not to say scandalous, conditions in which the employees of some of the tendering companies are employed, leading of course to the poor results that the noble Lord, Lord Bottomley, has described.
The sub-contracting of ancillary services may be necessary and even desirable in some cases, but it should be a matter for regional and local decision, carried out, if at all, on its merits and not as a result of some ideological direction from the Government, to use the words of the noble Lord, Lord Bottomley.

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I end where I began: the National Health Service must be maintained intact, but maintenance does not mean rigidity. Some, but not all, private links are acceptable and it is important to clarify whch we countenance and which we do not, and I have endeavoured to show where we think the lines should be drawn.
I have a final question for the noble Baroness. It is a question which was put to her by the noble Lord, Lord Hunter of Newington. Does she have any figures on amenity beds? I too should be very interested to hear her answer.
4.54 p.m.
Lord Ennals: My Lords, I should first like to congratulate my noble friend most warmly on his choice of subject, the quality of his speech and the very wide interest that his Motion has evinced. We are all grateful for the participation of the noble Lords, Lord Porritt, Lord Smith and Lord Wells-Pestell, to name but a few from different Benches, all of whom have made a tremendous contribution to the National Health Service.
May I start by putting this debate into its context. We are debating a service which commands very warm support from all sections of the British public. No other national service is more welcomed and more appreciated than is the National Health Service, partly because of the respect held for its staff and partly because of the quality of the treatment which the public has come to expect. I would say to the noble Lord, Lord Harris, (if he is still in the Chamber, because he is always a little difficult to see) that opinion poll after opinion poll has shown that the general public greatly admire the National Health Service—and that they think it would be safer in our hands, although that is quite a different matter—and would be prepared to pay more through taxation because they believe it is underfunded.
Some words of Aneurin Bevan have been quoted by the noble Lord, Lord Porritt, and I should like to offer another quotation—something he said in 1947:
"Medical treatment and care should be made available to rich and poor alike in accordance with medical need and no other criteria".
I believe that he was right then and that what he said is right now; I see no reason to question that view at all.
Let us make no pretence. As was said by the noble Lord, Lord Smith, the National Health Service has made very great progress during its 40 years and more. There has been a revolution in medical and pharmaceutical knowledge which has been to the great advantage of the British public. But let us also make no pretence—today the National Health Service is in a very serious situation, and anyone who pretends otherwise simply does not know what goes on in our hospitals up and down the country.
I want to give a few examples. Of course the National Health Service is seriously underfunded. If we consider the needs of an ageing population, the growth in inflation in the National Health Service and the very modest pay increases that have to be covered, even with the bonus handed out by the Chancellor in his pre-election mood of generosity, there is room for improvements. On balance there is nil growth. In fact,
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sadly the number of beds is decreasing, being eroded, partly through underfunding and partly through what is now becoming a very serious and growing shortage of trained staff, which was a point referred to by the noble Lord, Lord Wells-Pestell. There is a growing shortage of nurses, midwives, occupational therapists, speech therapists and so on—I could go on through the list. It is a very disturbing situation.
The Minister keeps telling us that more patients are being treated. She may say that to us this evening, but she does not know, because no figures are available to her except those for admissions, which include patients and there is an increasing number of elderly patients who enter hospital three or four times a year who are registered as new patients. So her statistics are not of patients but of admissions.
I have to say also that there are wards which have never been opened because of underfunding. There are wards that have been closed in many parts of the country in order to save money in what the Government call "efficiency savings". Efficiency savings serve to lengthen the waiting list and to undermine the service.
So what contribution can private enterprise make toward solving these monumental problems? In a sense the private sector, rather like a leech, lives off the National Health Service. I shall not say that it does not perform a service. Not for a moment would I say that one should make it illegal for there to be a private sector of the health service, but I want to say that the private sector lives off the National Health Service. Who trains the doctors, the nurses and members of the professions complementary to medicine? It is the taxpayers who pay for them, not organisations such as BUPA, PPP and other private providers of health care. When it comes to the care of the elderly, the disabled, the mentally ill or handicapped, the poor and the chronically sick, I should be very interested if the noble Lord, Lord Wigoder, could give me some figures to show what proportion is looked after by the private sector compared with the responsibility that falls on the National Health Service.
Lord Wigoder: My Lords
Lord Ennals: My Lords, I cannot give way at the moment. Perhaps the noble Lord will write me a letter. I am sure that the noble Baroness will say the same. That intervention has taken half a minute off my time.
The private sector is also dependent upon the National Health Service for staff, equipment, pathology and blood for transfusions. What damage, if any, does the private sector do to the quality of care? It takes away consultant time from National Health Service work. That is clearly revealed in the figures given by the noble Lord, Lord Kilmarnock. Half of the consultants work part-time in the private sector and part-time in the National Health Service. It would be better if they were working far more in the National Health Service.
Secondly, the private sector distorts the waiting lists by producing a system of queue jumping. The Expenditure Committee of the House of Commons gave evidence of the use of National Health Service equipment and articles such as syringes, scalpel blades, sutures and dressings, which have not been paid for.

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All the facts and figures are set out in the documents. It has therefore drawn upon the funding of the National Health Service. As my noble friend Lord Bottomley said, the 46th report of the Public Accounts Committee published last July showed that many millions of pounds were being lost to the National Health Service by the undercharging of the private patients by the National Health Service. I urge the noble Baroness, Lady Gardner of Parkes, to read the report.
I should like to quote from that report but time does not permit. It gives example after example of where tens of thousands of pounds have been lost to the National Health Service. That is a scandal. All that the Government have now done in response to that fully documented parliamentary report—the committee had on it a majority of Government supporters—is to say, "We will leave it to the local health authorities to decide how to cope." It is scandalous at a time when the Secretary of State and the noble Baroness are constantly boasting of value for money and increased efficiency.
What about the new private hospitals? What can they offer? They are now offering to help the health authorities with the appallingly long waiting lists. Of course, that is at a price. Why are they doing that? They are doing so because, on average, only two-thirds of the private sector beds are occupied. That is a far lower occupancy than is found in the National Health Service. They are looking for business. However, the National Health Service does not always have the money to pay for the beds that the private sector offers.
My last point relates to contracting-out. What about contracting-out services such as laundry, cleaning and catering? Let us get the situation clear. Health authorities have had that option since the National Health Service was created. All that has happened is that the Government, for dogmatic reasons, have changed the rules to make it easier for private firms to obtain contracts. They have brought maximum pressure to bear upon health authorities to make them go for private contractors.
What is the basis of the savings? Usually, it is in lower standards; always in lower pay. By paying his staff less a private contractor can put in a tender lower than that put in by those already working in the National Health Service. In these days of massive unemployment it is likely to be able to succeed.
Private firms often cancel their contracts because they cannot provide the service or are not making profits. Health authorities often end contracts because of the poor quality of the work. In my view, it is an experiment that has taken an enormous amount of time to little benefit. Such savings as there have been have been greatly exceeded by the losses in services. Once again, I warmly congratulate my noble friend on having initiated this debate.
4.54 p.m.
The Parliamentary Under-Secretary of State, Department of Health and Social Security (Baroness Trumpington): My Lords, I, too, am most grateful to the noble Lord, Lord Bottomley, for initiating this
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debate. I have listened with great interest to the 14 distinguished noble Lords who have spoken.
When I came to consider what I might say, I looked first at the wording of the Motion on the Order Paper:
"the effect of private enterprise on the National Health Service."
That is indeed a broad topic. I appreciated the sympathy expressed for me by the noble Lord, Lord Wells-Pestell, in my task of summing up. Although the noble Lord, Lord Bottomley, focused in his contribution on competitive tendering and private practice in the NHS, I hope that your Lordships will forgive me if I begin with a few wider reflections.
First, and most basic, without private enterprise to provide the financial basis of the Exchequer there could be no NHS at all. We ignore that at our peril. Secondly, private enterprise has an integral role as a supplier to the NHS—of goods, from soap to brain scanners, and of services, from cleaning to hospital building. Nothing in this private sector involvement is new, although it is growing. Thirdly, private enterprise complements the NHS in many ways: in the provision of contractual services, where the NHS buys services from the private sector; in the provision of care for the elderly; and in the provision of private medicine. Overall, private enterprise is very much involved in the NHS. It always has been involved and it will continue to be involved. That is as it should be.
I shall return to my original three points and, I hope, enlarge on the partnership that exists between private enterprise and the NHS as I do my best to answer the questions asked by your Lordships during this interesting and worthwhile debate. But let me stress one crucial point: our primary objective is patient care. Private enterprise is working in support of that objective, just as all directly employed health authority staff are. The partnership between authorities and the private sector is a partnership in pursuit of one goal: the better care of patients.
I turn now to the points raised by your Lordships. Let me deal first with competitive tendering for support services. Virtually since the NHS began, some services have been provided by outside contractors; for example, equipment maintenance work. For too long, however, almost all health authorities had been accepting without question that hospital support services like domestic catering and laundry services had to be provided in-house. They should have been asking themselves, "What is the most cost-effective way of providing these services"?—services which cost the taxpayer £823 million in the last financial year.
In September 1983, we identified these services as particular areas where the private sector would be able to provide an alternative source of service. This was, and I must emphasise it, a competitive tendering initiative, not privatisation. Our aim—I look at the noble Lord, Lord Bottomley—was not to promote private practice but rather to promote efficient practice. In the absence of competition, for example, from private contractors there could be no cost yardsticks to assess efficiency and value for money. That is not to assume that the private sector is always more efficient; it has no inherent superiority, but it does need to make a profit to survive.
But it is nonsensical to argue, as some trade unions have, that there is an obsolute obligation to maintain

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jobs in the public sector. The primary job of the NHS is treating patients and NHS staff do that job superbly well. But the NHS may not necessarily always be the best source of the cleaning, catering and laundering services it needs. It must test its ability and its relative efficiency, and the only way to do that is through competitive tendering.
My noble friend Lady Gardner of Parkes referred to the majority of contracts going in-house. She is right. As at the end of September 1986, almost 70 per cent. of those three services had gone out to tender. As the noble Lord, Lord Ennals, said—and let us get this clear—the majority of tenders have been won by the in-house contractors. However, that does not in any way invalidate our initiative. Savings of around £73 million a year have been generated and these resources are going into patient care. Norwich Health Authority, for example, has funded an extra consultant post in psychogeriatrics from its competitive tendering savings.
As the remaining services are tested by competitive tendering, so savings will continue to grow. In addition, this initiative has meant managers looking in a critical, systematic and disciplined way at the standard, quality and type of service they require, looking, for example, at the rationalisation of laundries and at frequency levels in domestic services. This means services will continue to be more cost-effective.
Private enterprise has played a very considerable part in helping the NHS. At the end of September 1986, 173 contracts had been won by private contractors, generating estimated annual savings of almost £25 million. The remainder of the total savings to date, some £48 million, resulted from 773 tendering exercises won by in-house organisations, where of course the private sector tenders provided the competitive spur to the in-house tenderer.
The question of wage rates and job losses has been raised. It is not part of the NHS's job to provide care at the expense of its workforce. But equally it is quite wrong for health authorities to specify the terms and conditions of service private contractors should provide for staff working on NHS contracts. An authority can certainly consider, among other things, whether the wage rates and conditions likely to be offered by that contractor will be adequate to attract the right kind of staff. Beyond that, there is no sensible basis upon which a health authority can interfere in the relationship between the contractor and its employees.
Whether there are any job losses will depend to a large extent on how efficient services were prior to tender action. Where contracts are awarded to the contractor, the current staff are mostly re-employed by the contractor. Those entitled to redundancy payments receive them. Indeed, there have been instances where NHS staff have wanted the contractor to win the contract so that they could draw their redundancy money and then subsequently be employed by the contractor!
The noble Lord, Lord Bottomley, picked out certain hospitals for castigation. Noble Lords can imagine my regret that I cannot talk about Addenbrooke's
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Hospital where I once had the honour to sit on its board. I have the information but I do not have the time. I can supply that information to the noble Lord afterwards.
I turn now to private practice in the National Health Service, an issue which still generates a surprising amount of excitement. I was very grateful to the noble Lord, Lord Wigoder, for his remarks. I agree with almost all he said. However, I would dispute the assertion of the noble Lord, Lord Wigoder, that insured people pay for the NHS but never use it. I think that it is true to say that 50 per cent. of insured patients use the NHS free when entering hospital. I would accept the point of the noble Lord, Lord Wigoder, that the system of determining charges for private patients needs changing.
On the question of charges for private patients, until now patient charges have been set centrally for different classes of hospital. They are inclusive daily amounts which reflect the average cost of treatment for all patients. This system has been criticised because charges are not related to the cost of the treatment received by individual private patients. After extensive consultation with interested parties we have decided to devolve to health authorities the setting of charges subject to costs being fully recovered. Authorities will be able to choose whether to set charges locally or adopt rates produced centrally. Decisions on the 1987–88 level of these centrally-produced rates will be announced in due course.
The example of Bloomsbury, quoted by the noble Lord, Lord Graham, is indeed deeply disturbing. The authorities concerned have been left in absolutely no doubt as to how we regard their failure. Of course we attach great importance to ensuring that arrangements for collecting income due to the NHS for the use of facilities for private medical practice are operating effectively. More than £1 million weekly is collected; £52 million a year from in-patients and £9 million a year from out-patients in England alone. We have issued revised and consolidated guidance in the form of a handbook on the management of private practice in NHS hospitals. We have told authorities that they must distribute it to everyone concerned and must implement its contents.
The noble Lord, Lord Wells-Pestell, referred to consultants' earnings. Almost all the remaining consultants in the total to which he referred work in the NHS at least part of the time. There are very few who are purely private. Doctors who wish to practise privately have the right to do so, both within and outside the NHS provided their NHS work has priority over private practice. Those with a whole-time NHS contract may not receive a private practice income in excess of 10 per cent. of their gross NHS earnings. If we forced doctors to choose between NHS and private work, some would be lost to the NHS altogether, while the total volume of medical care would diminish. When people obtain private treatment in health service hospitals, this provides extra revenue for the NHS. Even those on NHS waiting lists are helped if it means fewer people seek NHS care.
I agree with the greater part of what the noble Lord, Lord Smith, said in his excellent speech concerning private practice supporting the NHS and that it should

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not be evicted from it. I shall most certainly try to ask my right honourable friend the Secretary of State to consider his suggestion of a conference.
I listened with interest to the remarks of the noble Lord, Lord Hunter of Newington. He deserves a fuller answer than time permits me today. I do not agree with his scenario but I think that I should bring the idea to the attention of my right honourable friend the Secretary of State and the Minister of Health, as I shall do with all your Lordships' remarks. The noble Lords Lord Hunter of Newington, Lord Porritt, and Lord Smith, by speaking from an academic viewpoint on medicine give me the very welcome opportunity to congratulate most warmly the medical schools who have done such a marvellous job in attracting funding from sources other than government.
In this context one must not forget the givers. By this I mean the work of publicly-supported, medically-oriented charities, for instance, the Heart Foundation, the cancer charities, and so on. The pharmaceutical industry also does a very great deal in helping to fund the medical schools. I pay tribute therefore to the medical schools for their hard work in raising these funds and to the efforts of the many hard-working voluntary people in those charities and the pharmaceutical industry. I am sure that all noble Lords will join me in paying this tribute.
I was most grateful to my noble friend Lady Gardner of Parkes for her remarks concerning pay beds. We are prepared to allow facilities to be made available for private practice in the NHS where a demand for it is demonstrated. There are about 3,000 authorised pay beds, some 500 more than when we came to office, but these are not reserved for the exclusive use of private patients. Other safeguards to ensure that private practice does not interfere with the provision of services to NHS patients include common waiting lists.
The question of amenity beds was raised by the noble Lord, Lord Kilmarnock. I do not have to hand the precise figures of the number of amenity beds. It is almost 2,500 in total. Authorisation of amenity beds is now a matter for health authorities to decide rather than the Secretary of State, who decides the number of pay beds. Far from being a drag on the NHS, collaboration with private enterprise in the independent health sector can also be particularly beneficial. Here the noble Lord, Lord Wigoder, gave excellent examples when speaking about the lithotripter at St. Thomas's Hospital.
Common waiting lists are used for urgent and seriously ill patients, and for highly specialised diagnosis and treatment. The same criteria should be used for categorising paying and non-paying patients. This principle has been accepted by the medical profession since 1980 and was recently endorsed by them. The principle does not require the establishment of any particular type of waiting list system, only that, whatever system is in use, private and NHS patients in those categories should be selected for in-patient admission, or out-patient attendance, according to the same criteria irrespective of whether they are NHS or private patients.
It is worth while emphasising the size of the private sector, and perhaps I may pick up a remark made by
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the noble Lord, Lord Winstanley. With a total of some 50,000 beds it is still relatively small. Approximately 10,000 of those are in about 200 private hospitals, with the remainder being in private nursing homes, which mainly look after the elderly. The private sector does not represent a comprehensive alternative to the NHS, but there can be no doubt that in some fields of activity it makes a significant impact. More than one in eight of all elective surgery operations are undertaken privately, and more than one-quarter of all hip replacements are performed privately.
There are statutory controls on the number and location of private hospitals but we have not needed to use them. However, we have introduced improved controls of the standards in private hospitals and nursing homes. All must be registered with district health authorities and inspected by them at least twice a year. Fees for this work have been increased to ensure that health authorities recover their costs.
The noble Lord, Lord Wells-Pestell, referred to waiting lists caused by vacancies in the nursing staff because nurses have been taken away by the private sector. I should retort to him that the shortage of nurses in the NHS is not because they all prefer to work in private hospitals because the pay is better. It is unusual for private sector salaries to be much more than the Whitley rates in the NHS. Nurses, like doctors and other professionals, should be allowed to work wherever they wish. We have no intention of introducing artificial constraints in the growth of the private sector. Provided that it does not damage the NHS, there is no reason why the private sector should not be allowed to flourish.
No speech dealing with the private sector could be complete without a reference to contractual arrangements: the system whereby health authorities contract with a private sector health care body for the provision of health services. There is a long tradition of private facilities complementing the statutory services through these contractual arrangements, and we are committed to a full and constructive partnership with the private sector in this as in many other ways.
In a most interesting speech the noble Lord, Lord Colwyn, asked me about general dental services. I can assure him that the Government do not intend to depart from the present arrangements under which general dental services are provided under the NHS. However, we remain determined to ensure that the public receive the best possible service, and the aim of the discussion document on Primary Health Care, which the Government published last year, was to seek ways of improving services to the public. We shall in due course be responding to the comments that we have received.
The noble Lord, Lord Graham of Edmonton, spoke of two worlds. I dispute that there is any difference in the quality of service provided by the NHS and by the private sector. I concede that the surroundings may differ, but not the standards of care.
The noble Lord, Lord Harris of High Cross, sparkling as usual, spoke about competition being good and private medical insurance worth stimulating, and thus gives me the opportunity to endorse some of his remarks. However, I take issue with this description that £18 billion a year spending on the NHS is "thin gruel".

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Perhaps I may end in this way. I suggest that your Lordships' debate today has demonstrated clearly that private enterprise is vitally involved at every stage of the NHS. I make no apology for saying that the Government welcome the role of private enterprise in the NHS and see it continuing as an essential partnership in care provision.
Lord Wigoder: My Lords, before the noble Baroness sits down, if I said that those who are medically insured never use the NHS, that would have been manifestly wrong, and I certainly had no intention of saying any such thing.
5.26 p.m.
Lord Bottomley: My Lords, first, I should like to thank the noble Lord, Lord Winstanley, for his kind references. The noble Lord regretted that I did not broaden the basis of my speech. I should have liked to do so but I was under a time limit.
It has been particularly pleasing to me that eminent members of the medical profession have taken part in the debate, and I thank them for doing so. If I mention the noble Lord, Lord Porritt, in particular, it is for personal reasons. Together we have played an active part in Commonwealth affairs, and it is my privilage, with him, to be an honorary fellow of the Hunterian Society. All noble Lords who have taken part in the debate have played their distinctive part and I thank them for that.
My noble friend Lord Ennals always supports me. I am grateful and particularly pleased for his personal remarks about me. I am sure that the Minister will not be surprised if I say that in spite of all her usual charm and persuasion she has not moved me one inch. The fact is that private enterprise ensures that if one has the money one gets priority of service. My Lords, I beg leave to withdraw my Motion for Papers.
Motion for Papers, by leave, withdrawn.

Devonport Dockyard: Management
5.28 p.m
Lord Trefgarne: My Lords, with the leave of the House, I should like to intervene to repeat a Statement which has already been made in another place by my honourable friend the Parliamentary Under-Secretary of State for Defence Procurement.
However, before repeating the Statement, perhaps I may remind your Lordships that the Statement bears heavily on the Starred Question which we had yesterday on this matter. Probably in the normal course of events your Lordships would not have wished me to repeat the Statement. Nonetheless, it has been asked for so I shall repeat it.
The Statement is as follows:
"My right honourable friend the Secretary of State announced yesterday (in following up an answer to a question from my honourable friend the Member for South Ribble) that the Government are now satisfied that there exists the basis for an advantageous contract to be placed for the future
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operation of Devonport Dockyard with Devonport Management Limited which is a company formed by Brown and Root (UK) Limited, the Weir Group PLC and Barclays De Zoete Wedd Ltd.
"I am sorry that the Official Report has not yet printed my right honourable friend's Answer. However, I did write yesterday to those MPs most concerned.
"All three companies in the consortium are British but Brown & Root are a UK subsidiary of the US Halliburton Company. As the right honourable gentleman the Member for Llanelli will recall from our discussions of the Dockyard Services Bill the upper limit which we set for foreign shareholding in the companies bidding for the contracts was 30 per cent. In determining whether or not a particular shareholding should be considered foreign, account is taken of the parent companies. On that basis, Brown & Root's share in Devonport Management Ltd has been set at 30 per cent.
"The House will recall that in our paper to the trades unions of 4th December we announced our preferred contractor for Rosyth. My right honourable friend is at this moment chairing a meeting with general secretaries of eight unions to hear their views on that paper before he takes a final decision.
"In forwarding the paper on Devonport to the unions yesterday my right honourable friend proposed a meeting with them on 13th February to discuss that paper. No contract has yet been placed, and my right honourable friend has said that he will only do so when the unions have had an opportunity to give him their views."
My Lords, that is the Statement.
Lord Graham of Edmonton: My Lords, I am grateful to the Minister for repeating the text of a reply given in another place to a Private Notice Question by my honourable friend. I agree with him that we pre-empted a substantial amount of the content of the Question being asked in another place today in our exchanges yesterday. Nevertheless, we take advantage of all opportunities that we have in this matter.
Perhaps I may ask the Minister one or two questions arising directly from the Statement. Reference is made to Devonport Management Limited in which there are three companies named. We have the benefit of knowing that Brown and Root, who are the American subsidiary, have 30 per cent. of the shares. Can the noble Lord tell us how the other proportions fall with the other two companies?
Can the noble Lord tell us more about the US Halliburton Company? I profess ignorance, but I am anxious to know whether all possible steps have been taken both to verify their financial standing and also their ability to do the wide range of work that they will have to undertake.
Would the Minister care to tell us his reactions and those of his colleagues to the statement made by the manager at Plymouth, Mr. David Johnson—who, as he will recall, put in a bid for a management group—when he estimated that there would be 1,500 job losses in the first two years of private management

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through redundancy and early retirement? On redundancy and early retirement, can the noble Lord tell us what kind of pressure, or what kind of understandings or undertakings have been sought from the consortium in respect of that important matter?
Can the noble Lord also tell us whether the Government have yet begun the process with the unions and with the local authorities to consider the enormousness of the consequences of such a change? I am delighted to see, as always, the noble Baroness, Lady Vickers, in her place. She raised this matter directly yesterday, and I am sure she has something more that is pertinent to say on it.
Does the Minister understand that the local community, and indeed the trade unions, are deeply disappointed at the speed with which the Government have moved towards their hitherto published vesting day of April? The Minister makes comments in various documents about listening carefully and taking all things fully into account. If the unions and the local authorities want a longer time in order to consult and assess what the Minister is doing, is he even at this late stage prepared to move the vesting date to a later date?
Lord Diamond: My Lords, we on these Benches should like to thank the noble Lord for what he has said, but regrettably we cannot welcome the Statement. We want to make it clear to the Government that the only Statement on this issue that we would welcome is the kind of statement that BTR has recently made with regard to withdrawing from its proposed purchase or proposed takeover bid.
Perhaps first I may, as a small matter but as a matter of courtesy to the Minister, ask why it is that he takes the posture of repeating a Statement made in another place when he is the Minister of State for Defence Procurement and his honourable friend in another place is, I think, the Parliamentary Under-Secretary of State for Defence Procurement? It is exactly the same department, only not as responsible a task as the noble Lord's. Is this due merely to the timing of the two Statements? This would seem to me hardly a sufficient reason for departing from our normal practice and sustaining the standing of your Lordships' House and the courtesies due to a Minister of State.
May I now go on to deal with the Statement? The first point in the Statement is in regard to foreign share holding. We are very unhappy indeed about this. The foreign shareholding limit has been put by this House at 30 per cent. That is the maximum for safety. The whole of that 30 per cent. is being absorbed in the Brown and Root shareholding, they being a wholly-owned subsidiary of an American company.
There is another shareholder, BZW, who are going to hold 45 per cent., as I understand it, of the shares. They are of course merely a storehouse. They are merchant bankers who will take the shares in the first place and then pass them on for an appropriate consideration. If they resell only one half of their shares, then there will be more than 50 per cent. of the shareholding of this management group held abroad, and we are talking about a company which manages defence procurement for the Royal Navy. We are
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unhappy about that and should like to hear how the noble Lord reconciles that with our responsibilities for securing British control over defence procurement.
The next thing that the Statement mentions in its last lines is:
"and my right honourable friend has said that he will only do so"—
that is, place the contract—
"when the unions have had an opportunity to give him their views."
That is not the kind of pharaseology that we regard as consistent with the Government's responsibility of full consultation. Full consultation may well result in different views about how the employees' rights can be maintained, but it cannot result in those rights being totally discarded as these words would permit. What we should like to know about here are the pension rights; the employment rights; the redundancy rights of the whole of the, I think, 11,500 workforce; and whether the Government are going to guarantee them.
I do not want any guarantees from any limited companies. We want the same conditions continuing as apply now, which means that the Government must guarantee the full payment of those pensioners, should that arise; the full payment of those redundancy payments on their present levels, should that arise. Can the Minister give me the necessary assurance on that? Can the noble Lord say, in the event (as is contemplated) of some unfortunately possibly substantial redundancies, that the Government are taking special steps to encourage methods of reemployment in that area?
The next matter with which the Statement deals is the paper that has been issued and which is in the Library, available for every one of your Lordships to read, from which we see that this massive business is all in order to provide the kind of competition which very largely rests on cost-plus contracts. There will be a large element of our old friend cost-plus, with all the extra dangers that involves, all the time involved in monitoring and carrying out the contract, the profit margin and all the dangers of impropriety which we are familiar with. If the Government want me to remind them about this I can go back to 1946 and give them chapter and verse, but we do not want to rake over ashes of that kind.
All this is being done to procure savings which are estimated to amount to under £20 million a year and which are disputed and which go over a period up to 1993–94. I do not know whether your Lordships would place enormous credence on estimates covering a period that far ahead. I certainly should not. The argument that there are great savings is highly suspect and it is for this very doubtful benefit that the Government are, in my view, endangering the defence by sea of this country.
5.45 p.m.
Lord Trefgarne: I shall first explain the circumstances about my repeating a Statement made in another place. In fact, it was a Private Notice Question in the other place, which it would have been entirely proper for my honourable friend to answer. Unfortunately the right honourable Member for Llanelli was not in his place when the Private Notice Question was called and my honourable friend therefore, thinking quickly on his feet, changed it into

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a Statement so that the other place could have the benefit of the Answer he had in front of him. Thus it is I find myself repeating a Statement made by my honourable friend, which might not in all circumstances have been appropriate.
I now turn to the points that have been raised. First, the noble Lord, Lord Graham, asked me about the other shareholdings in the preferred company at Devonport. I indicated earlier that 30 per cent. of those shares will be held by Brown and Root (UK) Limited; 25 per cent. will be held by the Weir Group plc and the remaining 45 per cent. by the merchant bank Barclays De Zoete Wedd.
As the noble Lord, Lord Diamond, rightly apprehended, Barclays De Zoete Wedd have made it clear that they would be willing to dispose of those shares as appropriate, but it is our hope and expectation that that disposal will take place in favour of employees within the dockyard in Devonport, if in due course we decide to award the contract to Devonport Management Limited. I make it clear that we have not yet so decided. We have indicated that Devonport Management Limited is our preferred contractor, but we have also made it clear that we wish to have further consultations with the trade unions on this point. For that purpose they have been invited to attend a further meeting with my right honourable friend the Secretary of State and myself in the middle of next month.
The Statement also refers to a meeting which took place a short time ago. In fact, it was taking place when my honourable friend made the Statement. That meeting is now over. I was present at it. I can tell your Lordships that my right honourable friend has said that consultations about Rosyth are now over. He will take careful account of all the points that were made to him today at the meeting with the trade unions, together with all the points they have made on the numerous other occasions we have met them and in the various exchanges of correspondence. He will be making up his mind shortly about the future for Rosyth.
The noble Lord, Lord Graham, asked me about the vesting date. We do not believe there is any need to reconsider the date at the beginning of April which we propose for the vesting date. We are convinced that the necessary consultation can be completed by then and my right honourable friend again made this clear to the trade unions at the meeting today.
As for the implications for jobs, in the paper which we issued on the government-owned plc option in September last year we said that under that option there were likely to be reductions over a seven-year period of some 5,000 jobs in Devonport and 1,200 jobs in Rosyth. Obviously those calculations were based on assumptions about the possible improvements in efficiency and on forecasts of the amount of unallocated naval and commercial work that the company might secure. It is of significance that the preferred contractors at Devonport and Rosyth believe that, under their management, reductions would be measurably less. I hope that will be of some reassurance to those both in Rosyth and in Devonport who have been concerned on that matter.
Perhaps I may try to help the noble Lord, Lord
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Diamond, on the question of foreign shareholdings. The 30 per cent. limit which was included in the legislation is the point at which the Secretary of State can take a view upon the desirability of an increase in the proportion of shares owned by foreign shareholders. Of course there are some foreign shareholders who would cause us no difficulty whatever but there are some foreign shareholders who would indeed cause us some difficulty for obvious reasons. However, my right honourable friend the Secretary of State is fully armed with the necessary powers to guard against that difficulty. It is worth noting that quite a number of important suppliers to the Ministry of Defence are foreign owned in any event. What is important is that the security arrangements they put in place to deal with sensitive work are properly effective.
I believe that both in the Statement and yesterday I have dealt at some length with the consultation procedures we have undertaken. They are not yet complete, particularly so far as concerns Devonport, and my right honourable friend will be considering what time is appropriate to set with the trade unions for consultation on the paper which was issued to them yesterday. I hope I have been able to reassure your Lordships.
Lord Denning: My Lords, as I have been much concerned, perhaps I may first thank the Minister and the Government for the steps they have taken so far. The big problem at the beginning was which system should be adopted in future for the dockyards. Was it to be a trading fund, as the unions would have liked? Was it to be a government-owned plc, as some others would have liked, or was it to be a commercial management company? There have been extensive consultations on that and I suggest that the Government have done all that is reasonably necessary and have come down in favour of commercial management.
The next difficult question was who was to be the preferred bidder. Again the Government, it seems to me, have gone through all the proper information and consultations and they have named their preferred bidder. But I should like to suggest that there is still a long way to go before the information and consultation processes are finished.
I take two or three sentences from the paper which was enclosed. Paragraph 3 states:
"The Department has now taken the contract negotiation … to a point where there exists a firm basis for signature. The contract is based on the draft circulated, to the Trade Unions in April"—
that is, in April last year.
I considered that draft closely. I suggested there were flaws in it. I suggested it was like when you are selling a beehive: you do not sell the hive separately from the bees; you have to sell it all at once. So with a licence to run a dockyard for seven years the men, the workers in it and all the plant and equipment should go together. The unions would like to see that objection successfully overcome, because the question of the licence being for seven years is a new matter.
Quite rightly, the Government remain owners of all this important defence plant and equipment, but they are just licensing it for seven years. If that is to be

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extended, where is the new capital to come from? Those are some of the questions. On foreign control, the terms of the contract seem to have many loopholes. We know what can be done with nominees and the like: it is often difficult to find what the true ownership is.
The last point, which is new, is No. 13:
"Transitional Arrangements; A separate Services Contract is being negotiated to cover the resources employed between signature of the Term Contract and the Vesting Day."
I do not know how long that will be. The vesting date will be the beginning of April. When is the signing of the contract to be?
Then there is this strange sentence:
"This contract can be extended for a period of up to 56 months if Vesting Day is delayed, after which there will be a mutual right to terminate the Term Contract".
That is going to be a strange situation—that after the contract has gone and men have been transferred there is a mutual right to terminate it.
It seems to me that many matters need to be considered further in the course of the negotiations before the contract is signed.
Lord Trefgarne: My Lords, if I may briefly answer the noble and learned Lord, my right honourable friend has indicated his preferred way forward so far as concerns Devonport but he has not reached a final decision. I should like to underline that. He has invited the trade unions to call upon him again towards the middle of next month with their views, and it will certainly not be until after that meeting that he will reach final conclusions on that matter.
Baroness Vickers: My Lords, I should like to add a few words, if I may, and ask the Minister a few questions. I should also like to thank the noble and learned Lord, Lord Denning, for coming down to Devonport and spending a day going round the dockyard with me. I think that was very helpful in many ways in regard to its future.
Paragraph 4 of the paper says that tenderers were affected by difficulties in getting into the yard. I hope that this will be changed in the future. What is meant by "difficulties of access to the Dockyard"? How can tenders be raised if there is going to be difficulty and a lack of detailed information needed to prepare realistic price bids? I should like to know whether this matter has been authoritatively settled.
Then we have paragraph 10, which says:
"Future employment levels are not built into the contract, since they are dependent on at least five variables".
I shall not read out the five variables, but I should like the Minister to let me know whether those are going to be considered in future.
The paragraph also says:
"The contractor and the Department will discuss the programme of work in the Dockyard on a quarterly basis".
Do we get reports on what is going to happen in those discussions? Are we going to be allowed to discuss this matter in future in the defence debate? I see it still comes under the Ministry of Defence. Will we get yearly reports? Perhaps the Minister could let us know exactly how it is going to work in future, because it is going to be a very difficult time for the people who
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have worked in these yards for years and years. They do not know what their future will be.
Finally, I should like to know what is going to happen about training of young people, which is so essential for the area concerned. This has been going on for many years. I asked this question the other day and I should like to know whether it is possible for me to have an answer.
Lord Trefgarne: My Lords, my noble friend is right to raise the points that she has raised. As she says, she has raised some of them on earlier occasions. On the question of the training of young people, I know I have given her one or two answers previously. I shall be happy to write to my noble friend with some more information if I can do that. In regard to future parliamentary accountability in this matter, of course the size of the naval programme and the work that emanates from it is very much subject to parliamentary scrutiny, and my noble friend will be absolutely entitled to table Questions on that matter as the need arises.
Perhaps I may also deal with one point made earlier by the noble and learned Lord, Lord Denning. I remember that we had a long discussion about the hive and the bees during the passage of the legislation. The noble and learned Lord will be pleased to hear that the contract which he saw earlier has since been amended to take account of those changes which were agreed to the legislation.
The Earl of Onslow: My Lords, what other NATO nation would allow 30 per cent. of one of its naval dockyards to be under the control of a foreign power? Can my noble friend seriously think that 30 per cent. of Norfolk, Virginia, could be owned by ICI, or that the French would allow Lorient or Brest to be controlled by a German firm; or even that the Germans at Kiel and Hamburg would allow the same? I am an internationalist, but it seems to me a pretty rum thing to allow that amount of foreign control over people who are mending and repairing our nuclear submarines.
Lord Trefgarne: My Lords, had my noble friend taken an active part in the legislation that we considered he would have been aware that in fact the ownership of the dockyards is not being changed by this legislation or by the arrangements that we are now discussing. The ownership of the assets remains vested in my right honourable friend the Secretary of State. What we are talking about is the management of the dockyards. It is the case that a number of major defence contractors are a lot more than 30 per cent. owned by overseas interests. What is important is that the security interests of this country be properly sustained. We do that by a very careful system of scrutiny and procedures, and those scrutinies and procedures will apply in this case.
The Earl of Onslow: My Lords, I am fully aware that I made a slip of the tongue when I said "ownership" instead of "management". I should still like the question to be answered. Can the Minister conceive of foreigners having the same percentage of management over either Lorient or Norfolk, Virginia, or Kiel?
Lord Trefgarne: My Lords, I certainly do not see why they should not.
The Earl of Onslow: But do they, my Lords?
Lord Diamond: My Lords, perhaps I may repeat one very important point in addition to what the noble Earl has mentioned. He has referred to only 30 per cent., whereas the arrangement that is proposed permits of a far higher percentage than that. It is with regard to the vesting date. The Minister has been good enough to say that he does not at the moment contemplate the need for postponement, but others fear that the date may have to be postponed. Frankly, can the Minister say what serious damage to defence procurement would arise if it were postponed for a short period? I cannot see that there would be any at all. A postponement could be immensely beneficial to the atmosphere of consultations which take place in the meantime.
Lord Trefgarne: My Lords, this matter has been under discussion and consultation for two or three years at least. I am totally persuaded that continued uncertainty is not in the least desirable, and for that reason I think we should agree to get on with these arrangements just as soon as we can.

EC Food Surpluses: Policy
5.59 p.m.
Lord John-Mackie Lord John-Mackie rose to call attention to the attempts of successive Councils of Agricultural Ministers to deal with CAP surpluses and to the need to assure the farming industry that curtailment policies will not be introduced that would be socially and agriculturally unacceptable; and to move for Papers.
The noble Lord said: My Lords, we have put down the Motion standing in my name on the Order Paper because we appreciate that much more has to be done in the way of surpluses and so on, first, to get rid of the present huge surplus stocks and, secondly, to see that they do not accumulate again. We are fully aware that the situation is critical and I think that has been made fairly plain by the financial situation in the European Community. However, we are anxious that too-drastic action should not be taken that would seriously hurt the farming economy, which in turn would greatly affect the whole social structure of our country and of rural life.
I well remember the depression of the late 1920s and the early 1930s. Everyone in the countryside was touched by it: all the ancillary industries, the grocer, the butcher, the baker, even the doctor and, to a certain extent, the parson and many more. However, there is one difference that perhaps I should point out. We did not pay off men in those days. We simply reduced the wages until, by the early 1930s, in many cases wages were down to even below £1 cash per week. Many farmworkers of course had perquisites, such as houses (they were not very good ones, I am afraid), milk (at least it did not have antibiotics in it), potatoes, feed, fuel, and so on. However much that amounted to, it was a shockingly low standard of living.
Today, as things get bad we simply pay men off. Because of the uncertainty many large farmers are paying men off now in anticipation of the difficulties that are going to arise. I know of quite a few who are cutting down on labour, on buying machinery and on everything else. Unless farmers can get an assurance for the future, that trend will go on, along with the neglect of the infrastructure of the land, neglected hedges, ditches and drains, neglected fences and roads—not to mention run-down buildings and houses. That was the picture 55 to 60 years ago and I trust that nobody in this House or anywhere else wants to see that again.
Since surpluses began to appear 10 years ago, suggestions and advice as to what should be done have developed and have almost now reached a crescendo. Farmers do not know what to do. Over the past few years as the surpluses and the costs grew, Ministers from the Treasury, the Ministry of Agriculture, the Department of the Environment, the Department of Employment, the DTI and others have poured out suggestions, along with other politicans—Sir Richard Body, for one—and economists. One well-known agricultural writer and farmer, Anthony Rosen, produced a white paper of his own. The media have given vent to their ideas or lambasted farmers for doing what successive governments, as all your Lordships know, have been pleading with them to do ever since the end of the war.
The Prime Minister entered the lists on the 23rd November with her bid, according to The Times the following day:
"to slash the £8 billion food mountain."
It is not quite clear whether the Prime Minister agrees with the 20 per cent. cut in land-use which was suggested in an article on the next page, headed "Food Monster Grew Out of Control". That was a strange remark in a world where we are told by the FAO that some 400 million people are starving. Then followed five articles in The Times on the subject that week which, if read by farmers—I do not know how many farmers read The Times—would give them, to say the very least, pretty cold comfort.
Let us look at what is happening and at the many suggestions made for the near future. We have milk quotas. They are to be cut by another 9½ per cent. in the next two years. There are changes in intervention buying for beef, with the addition of a premium of £ 16 for up to 50 head. We are paying £3.37 per tonne on all cereals we sell. This does not apply of course to farm-to-farm sales; and these are increasing greatly.
Nothing in the last two will affect beef or cereal production: the calves are all in the pipeline and most of next year's crops are sown. The decrease in the milk quota still leaves a large surplus of milk. So where do we go from here? Advice and suggestions are in good supply. Indeed, so far as I am concerned, they are in surplus on my desk. Fortunately, it has dawned on the "price-slashing lobby", if I may call them that, that the roll-on effect of these things on the rural community would be disastrous, and so far as cropping is concerned, farmers would simply try to increase their production to cover the cuts and thus exacerbate the situation.
It needs a big drop in farm prices before it affects the consumer's shopping bag. Wheat prices have come down considerably in the past three years, but bread has not got any cheaper. I can give other instances of a similar kind. It might be better if some people took a look at what happens to food after it leaves the farm gate before they complain about who might be creating what they think are high prices.
Levies, whether co-responsibility or not, are not the answer. Where is the cereal levy going? I have just paid slightly over £2,500. Where is that going? It is certainly not doing a great deal to get rid of present stocks, which is what it was supposed to do. As regards two-tier prices, certain quarters, if I might say so, got rather short shrift on that one, and I wonder whether there are long discussions between the two parts of the Alliance now, as there were over defence, as to whether the agricultural policy is not quite as acceptable as they would like it to be. I shall put it as kindly as that.
We then come to quotas. Quotas by quantity can really work only where the bulk of the produce goes through central marketing points like the MMB or the co-operatives in many parts of the European Community. It might be possible with beef, as most animals go through large slaughterhouses; but illicit slaughtering is not too difficult. However, with crops, and particularly cereals, which are marketed through many different channels, the administration would be almost impossible and I think it would be a fantastic headache to try to make it work.
This brings me to quotas by the acre—that is, the setting aside of land from growing anything that is in surplus. Suggestions of how to do this are legion and some are very intriguing. One is that the European Community and/or governments should buy up land as it becomes available, up to the acreage they think is required, in order to stop the surplus production and turn them into playgrounds for the urban population. That suggestion was put forward at Oxford by a member of the Mackie clan. Some of the papers said that he received rapturous applause for his suggestions, but I think that was a gross exaggeration. There was rapturous criticism as well. However, that is one suggestion.
Another suggestion is to allow farmers to sell off plots of 10 acres or so to people so that they can build houses there and keep a pony, or what-have-you. One hundred thousand of such plots would take out a million acres. I can see the noble Lord, Lord Sandford, is laughing at that suggestion, and I appreciate that some of his friends would be up in arms over it.
Then there is the tree-planting lobby. I am very much in favour of trees but apart from the very long-term nature of forestry I cannot see many trees being planted on good arable land where the surplus is coming from. Now we have the delightful plan, which I am sure will intrigue your Lordships, to pay about 8 per cent. of farmers to take a Sabbatical every 10 or 12 years. That would take something like 3 million acres out of production each year. That is something that would need to be thought over and I believe that a discussion of it might be better over coffee at dinnertime.
Then we have a lot of pressure for less intensive farming, reducing production overall to a level that would supply only the demand. Quite frankly, it would be virtually turning the whole country into an ESA—which some people might say is not too bad a thing if it is done on a proper basis. This would tie up with the many people who feel that a tax or the rationing of nitrogen would solve many of the problems. I have a feeling that they would create as many problems. But I understand that the noble Viscount, Lord Ridley, has ideas on this, and I look forward to hearing what he has to say.
One of the advantages of the less intensive plan is that the labour required would be the same. It would not affect the labour situation, and that is a good point in its favour. However, I think that the best plan is an across-the-board cut in the acreage for crops at a percentage required to cut the surplus, and all the figures suggest that this will vary from about 9 to 12 per cent. I should hate the thought that it would need the Prime Minister's 20 per cent.
One objection is that farmers will simply take out pieces of their worst land and it will make little or no difference to their production. But that could be got over by making it a mandatory rotation over the whole farm over the years. That would cope with that difficulty and would make for good farming. The advantage of this method is that the land is kept in good order by fallowing and can go back into production staight away if, or when, necessary. I have heard that there are some people who are predicting that surpluses may disappear much quicker than we think in a few years' time.
The Government are thought to be working, if the press is to be believed, on a package code named Alternative Land Use and the Rural Economy (ALURE). The Observer remarked about this. Everybody seems to know about it except Parliament. An Observer headline read: "Secret Plan Threatens the Countryside", while the Farmer's Weekly said: "Farmland Policy for Radical Shake-Up". As I said, I gather it is dealing with much of what I have been saying, but with the emphasis on what use the land taken out should be put to. Diversification is also being discussed and we look forward to getting more information. Perhaps we shall get some from the Minister tonight—who knows?
Presuming that the choice can only be between taking land out of production or going to "extensive"—if that is the right word—farming, how can this be done without creating the situation mentioned in the Motion of what is "socially and agriculturally unacceptable"? Taking the Chief Secretary to the Treasury's figures, which he gave at Oxford, the public expenditure on agriculture is approaching £3,000 million per year, of which £2,000 million is spent on all the aspects of dealing with surpluses. If you take about 2½ million to 3 million acres out of production to solve the problem, this means £800 per acre. A payment out of this to reimburse the farmer for the loss of profits per acre—and I am using a rather off-the-cuff figure of £80 per acre—would be a very handsome saving to the EC and to the Government.
I see the Government's spokesman looking a little worried at these figures. As I said, I got them from the

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Treasury and I worked out the figure by the acre. I should like to hear what he thinks of the point. If at the same time farmers were allowed to augment their incomes as well by all the various diversifications that have been mooted—I shall not go into them, because they have been well enough publicised—then we should have the minimum of upset, economically and farming-wise. The letting of redundant buildings would bring more people into the countryside—something which many people would like to see happen—and would enhance rural life.
But there are difficulties. We have 4½ million to 5 million acres in the green belt, and councils there are being very sticky about the situation. We had a short debate about this not very long ago and I do not think the situation has improved. But I hope that when the ALURE paper arrives it may have something to say about that.
I was paid this morning for the last of my 60th harvests. Over all these years, I never had any doubts about the next harvest. This year, along with my fellow farmers, I have grave doubts about the next one. These doubts are causing us to take actions detrimental to the rural scene. We are paying off men, we are not buying new tractors and machinery, which is a loss to industry, and, as I said earlier, we are starting to neglect the infrastructure of our farms. This will continue unless we get the assurance asked for in this Motion. My Lords, I beg to move for Papers.
6.15 p.m.
Viscount Ridley: My Lords, as this is an agricultural debate, I hope the House will agree that we should offer our congratulations to Sir Henry Plumb on being elected president of the European Parliament. He is not only the first British president but is also a distinguished agriculturalist. I am sure that under his presidency we shall see some solutions advanced to the dramatic problems which the noble Lord, Lord John-Mackie, has so well described. I apologise to my noble friend Lord Belstead because I may not be able to stay to the end of the debate owing to another engagement in connection wth the dockyards.
I am greatly intrigued by the wording of the Motion, but I have respect, as we all do, for the great experience that the noble Lord, Lord John-Mackie, has had in agricultural matters especially during the depression before the war. We are all grateful to the noble Lord for introducing the debate. We must all accept that there is a need now to introduce what he called curtailment policies to reduce the CAP surpluses. I am less happy that they can be, as he put it, in all respects, socially and agriculturally acceptable.
It is a sad fact that, as often happens, a small minority has damned the majority. In this case, some farmers have given the industry a reputation for greed and indifference to the environment. It is probably not deserved, but it exists. And the public are, perhaps rightly, no longer sympathetic to mountains and lakes of produce. We have all forgotten about the U-boats and the desperate shortages of food during the war of 40 years ago. But most farmers, if not all, now accept that something drastic must be done. The sooner this nettle is grasped and something is done, the more acceptable it will be. It probably means finding the least painful solution.
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I want to concentrate my very few remarks on one solution to the problem which has not yet, I believe, received sufficient public attention and debate; that is, the limitation of nitrogen. I believe that this may be preferable to the set-aside which is being debated everywhere, although it could be complementary to it. I say this because I wonder whether it is any longer politically acceptable to pay British farmers very large sums of money to do absolutely nothing and to grow nothing at all.
I can see a violent reaction to the idea. Never mind that it might be cheaper to do it than to subsidise unwanted butter, never mind the fact that it has been happening in America for a very long time. I think it would make agriculture even less popular in the public mind than it is now, and we should see the return of that old scourge of the agricultural industry, Mr. Featherbed Evans and all his works.
Nitrogenous fertilisers are the chemicals which boost yields of crops and grass. Their excessive use can be held at least partly responsible for the overproduction of cereals, milk and beef. It therefore follows that yields will fall if nitrogen use can be reduced. The problem is how to do this. I make no pretence and I am quite certain that it is not easy. Indeed, I know that it bristles with all sorts of problems, administrative and otherwise. I am certain that we shall be told by my noble friend that this has been carefully considered. But it has perhaps been too easily rejected.
I should like to start by summarising the main disadvantages of this process. It is said that the rationing of nitrogen will be expensive to operate and difficult to enforce. Yet it worked very well during the war when all fertilisers had to be rationed because of the shortage of supply. And if a tax were to be levied as well, that could at least be made to cover the costs of the operation. It is said that black markets will develop, as to some extent they already have with milk quotas. But it is the total nitrogen applied that matters. Anything that increases the price theoretically discourages profligate use.
I have no doubt that farm profits will suffer if nitrogen is limited. But the farming industry will have to come to terms with and adjust to that under any conceivable new system now being debated. There is no way that food profits can remain intact. Nitrogen limitation may well be the least painful alternative, particularly if it is not introduced too suddenly. Any reduction in the current surpluses must affect profits. Nitrogen limitation may well be described as a blunt instrument, but I believe that production quotas, price reductions on any scale and compulsory set-aside policies or levies will be very much blunter.
It is said that there will be unemployment in fertilizer factories here and, I believe, in Norway. For a short period perhaps, the tax levied would help to compensate for this until the factories were able to adjust. Many things could be done with such a tax.
It is said that one must not un-invent technology. We have the technology to produce these very high yields; we must use all the available resources to achieve that and maximise the efficient use of our land and resources. If that principle is followed to its logical

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conclusion, there will, in a short time, be no small farmers, no hill farmers and very few agricultural workers left in the country. It is a major snag that anything of this kind must be done on a European scale, but this applies to any other solution as well.
I should like to turn to the advantages of the quota system. I believe that it would make farmers much more careful in using nitrogenous fertilizers. Some apply 200 to 300 units per acre as opposed to an average of about 100, one unit of nitrogen containing 1.12 pounds of ammonium nitrate. Almost alone among the farmer's costs, the cost of nitrogen has fallen in the last year or two from £3.30 per unit in July 1985 to £2.40 last month. We are talking about 1.5 billion tonnes of artificial nitrogen in one form or another used in the United Kingdom in 1984. The temptation to combat falling prices by the use of yet more nitrogen is only too obvious, thus creating yet more surpluses. Price reductions across the board in my opinion have no hope of coping with the problem on their own.
Any quota system could be designed to affect the larger farms most. Thus horticulturalists, smallholdings and hill farms which use relatively small amounts would be less affected, if at all. This must be "socially acceptable", in the words of the noble Lord, Lord John-Mackie. All farmers would receive a quota per acre based on past usage or something of the kind. The cost of the scheme, as I have said, would be met from charging the tonnage allotted. Taxation could be raised or lowered to discourage or encourage the use of fertilizer as the surpluses fell or rose in Europe.
To help smaller farmers, the threshold at which tax became payable would be variable. But taxation alone will not have any effect. It has been calculated that at least 100 per cent. and probably 200 per cent. tax would be necessary to have any effect on usage. I believe that Sweden has experience of this. We might look to that country. The growth of environmentally popular organic farming and cultivation of such things as peas and beans which need no nitrogen would be encouraged, as would mixed farming. Organic nitrogen from animal manure cannot be rationed or taxed but only what is known as the artificial bag nitrogen.
A further enormous advantage would be to limit pollution of water supplies by excessive nitrogen. Opinions differ as to the effect of this chemical on human health. However, no one denies the steady increase of nitrogen in water supplies which has shown itself as "eutriphication" of lakes and rivers. I believe that the Norfolk Broads are the most glaring example of what has happened. There is evidence that nitrogen now in our water was applied 20 years ago when much less was being used on the land.
What will things be like by the year 2000? If farmers are to be faced in the future with paying for cleaning up rivers on the "polluter pays" principle, which they should be, a nitrogen tax now would be seen as a very small price to pay. We should also look seriously at a voluntary ban on the use of nitrogen during the winter months.
The report of the Nitrate Co-ordination Group—a body of which I confess I had never heard—published
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by the Department of the Environment last November, said:
"Most groundwater sources in East and Central England will eventually have quite unacceptable nitrate levels unless agricultural practices are changed. Some sources already exceed the limit set by the European Community drinking-water directive.".
It looks as though we may have to take some action to limit nitrogen in any case.
I have no time to continue further on the subject. I have already taken much longer than I should have done. I believe that there is support in Europe for mothballing nitrogen plants. Denmark has already decided to experiment with limiting supplies to farmers. A Mr. Rickard, speaking for himself but with the grand title of "Director of Economics Division" of the National Farmers' Union, said at a conference last September:
"The claim that nitrogen limitation would be impossible to administrate is a red herring used by opponents of the idea who want to see the subject swept under the carpet; it is up to the bureaucrats to make the system work.".
Those are stirring words. I hope that he can justify them.
There is no solution to the problem of CAP surpluses that is totally easy. Someone will be hurt in the process. Farmers are the victims of their own extraordinary successes. I conclude by quoting Swift. Some of your Lordships will remember that Gulliver was told by the King of Brobdingnag:
"Whoever could make two ears of corn, or two blades of grass, to grow upon a spot of ground where one only grew before, would deserve better of mankind, and do more essential service to his country, than the whole race of politicians put together.".
We now need the whole race of politicians to reverse this trend.
6.25 p.m.
Lord Walston: My Lords, I offer brief but sincere thanks to the noble Lord, Lord John-Mackie, for giving us an opportunity to discuss this vitally important subject and for the able way in which he introduced it. I shall speak as briefly as I can but quickly, so while there will be many points on which there ought to be greater elaboration, I hope that your Lordships will forgive me if I do not do so.
The problem of agriculture at present falls under three headings. Unless we separate those three headings clearly in our own minds, we shall never be able to come to a solution. The first heading is the disposal of existing surpluses. The second is the prevention of further surpluses and at the same time the containment of costs. The third heading is the prevention of hardship to rural communities—rural communities, not just farmers—and prevention of the dereliction of the countryside.
As regards the surpluses, I say briefly, and shall not expand upon it, that to my mind food aid is not a serious solution. By all means let us give as much as can be done reasonably in food aid, but it will by no means solve the problem. If one is honest about it, the cheapest way of dealing with the surpluses and the enormous storage costs that they entail is to dump them in the sea. That I do not put forward as a serious suggestion. It is morally repugnant, and I do not think that we could possibly contemplate it.

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I suggest that we give away all that we possibly can. The EC has taken the lead in a very modest way in giving food to charitable organisations in the cold weather. That can be expanded. It need not be in this country or this continent only. I am sure that Mother Teresa and many other people doing that sort of work could use our surpluses if only they could be donated and no payment was required. The rest of it we could sell at the best possible price. Even though it goes to the Soviet Union, even though we lose money, we do not lose as much money as we would if we were to retain the surpluses. We should maintain something like a normal granary—as the late Lord Boyd-Orr christened it—for famine relief whenever it came up, and that should be an international and not simply an EC operation.
Moving on to the prevention of further surpluses, alas! it seems that the Government still pin some faith—although not as much as before—on the price mechanism. We have heard about the price mechanism for many years, yet the surpluses do not disappear and are still produced. The price mechanism alone cannot possibly achieve the results.
Then we have the quota for milk. It was hurriedly introduced, it is bureaucratic and cumbersome and, above all, it has been fixed so that, even if it operates, surpluses continue to be produced. Thus quotas as they are at present have not worked. Unless they are made much more stringent, they will not work in removing surpluses.
Now we come up with the new idea, borrowed from the United States, of the set-aside. I must say that I am frankly sceptical about this. There are particular areas which contribute most to our enormous surpluses, especially in cereals, but also in other commodities. These are areas such as the Basin of Paris, Lower Saxony and East Anglia. In those areas the set-aside is not really a starter. It will operate only in the smaller marginal areas where relatively little grain is produced. I shall be delighted if the noble Lord the Minister can give an indication of how much land he really expects to go out of cultivation, how much will have to be paid for it and how much the total cereal production will be reduced as a result.
The other suggestion (which I only mention to show that it is still in my mind, as I have spoken to your Lordships frequently about it) is the introduction of quantums on a national scale and on similar lines to those used for sugar beet. However, it should be much more stringently applied so that the actual quantum for which the guaranteed price is paid is no greater than what the Community wishes for itself.
On this particular heading, my final word is that no matter what method or series of methods is adopted, they must be part of a long term policy which is announced now. We have dallied far too long. That policy should be implemented gradually over the next five years so that farmers know what is expected of them and can take the appropriate action to meet new circumstances. To dilly and dally with a little bit of price mechanism, a little bit of quota and a little bit of set-aside when no one knows how long it will continue or when it will be implemented, is not fair on farmers and will not have the desired result.
The third point I should like to make concerns
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prevention of hardship. This is primarily a sociological matter. It is a matter not of economics but of society. I suggest that this matter must be separated completely from the common agricultural policy as such. I suggest that it should to a very large extent be renationalised. Each member country of the Community should have the responsibility of dealing with its own social problems which follow as a result of diminution of profits and which will inevitably affect, and are already affecting, farmers throughout the whole country.
The two advantages of that policy are, first, that each country has entirely different forms of bureaucracy, local administration and national administration. Something which is imposed to deal with social hardships by Brussels, while it might work in Greece, is unlikely to work in Germany; while it could work in Denmark, will not be applicable to Southern Italy, and so on. We need to give national governments the responsibility for working out the best methods.
The second reason for implementing this policy is that the standards of living in the different member countries vary enormously. Any form of social payment which would satisfy the Dutch farmer would give untold wealth (relatively speaking) to the Portuguese farmer; anything which was adequate for the Greek farmer would leave the Danish farmer in penury. For those reasons, the general process of administering social welfare in order to prevent rural damage should be done on a national scale, without in any way interfering with the overall beliefs in a common agricultural policy or in the Community.
A further point on this aspect of the matter is that some countries (including, I am glad to say, our own) set great store on the environment. We want to have a beautiful environment and we are prepared to pay for it. We want access to the environment; we want national parks, picnic sites and all the rest of it. We want to have areas where wildlife can be preserved. There are many areas which are now used for cultivation and food production where all these things could be achieved.
However, those matters are not of particular interest to some of our fellow members within the Community. We should be free to promote that type of good use of the land—use which the people of this country want and are prepared to pay for—without being hampered in any way by Community disagreements over it. In the same way, we should not impose our own views on this sort of thing upon those countries who are members of the Community and who do not wish to pay for any of those amenities.
This has been a brief and rapid run-through. When the Minister replies I hope we may get from him some indications, particularly of the amount of reduction which the set-aside programme will bring about, of the sort of payment which it is considered will be necessary in order to persuade farmers to set aside some land and meet the high overheads with which most farmers are faced and, failing that, what other long term proposals he has to make or believes should be made in order to solve this problem.
6.36 p.m.
The Earl of Onslow: My Lords, I must certainly

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thank the noble Lord, Lord John-Mackie, for introducing this debate. I think it is extremely important and opportune. We are dealing with the problems of success. As the noble Viscount, Lord Ridley, has said, we no longer remember the U-boats in the Channel. Only the slightly older Members of your Lordships' House will remember the rural deprivation of the 1920s and 1930s. None of us remember the rural deprivation of the 1870s.
I think it is also worth remembering that it is impossible for Europe to solve its own problems without bearing in mind what has happened in the rest of the world. There is a grain store in Kansas which can hold the whole of the UK annual wheat production. Over the last five years, 800 million Chinese peasants have doubled their food output. The Japanese have a method of making absolutely certain that nobody gets to their farming market. They protect their farmers in a way that only the Japanese can do; then they look the rest of the world in the face and sign GATT. To counter this, the Russians—thank God for the world grain market!—still have their agriculture in an unholy mess. I should like your Lordships to ponder how devastating it would be if the Russians actually made their grain and agricultural world as efficient as that of either the United States or the Chinese. Even poor benighted Africa has managed to reduce its food production by 1 per cent. per annum since independence; therefore, at least some of it can go there. I do not think it is possible to sort out European problems without looking at a much wider picture.
I wish now to suggest two methods, one of which I am almost certain would solve the milk lake problem. That is a very arrogant thing to say; several others have tried it. However, I suggest that we make all milk quotas completely negotiable throughout the whole of the European Community, in such a way that it would be possible for anyone here to buy a quota and lease it. In other words, it becomes like a stock and share. The bureaucrats in Brussels could buy in on the open market a sufficient number of quota over a sufficient number of years to allow the actual production to fall. Quota is being sold at the moment at a going rate, which I believe is about 30 pence per litre, with the Community paying 27 pence a litre. Surprise, surprise! it is not getting many takers.
If the Commuity were to buy straightforwardly in the open-market, and let that quota lapse, we would then have a system whereby after two to three years there would be no more milk surplus in the Community. This must then be allied to a further method of looking at the countryside. From 1939 until now we have tended to look at the countryside solely as a medium for producing food. The countryside is much more important than just that. It is a place of beauty and leisure. It is a place of craft and a place which is enormously important to the health of an urban population.
Some noble Lords, such as the noble Lord, Lord Kimball, and myself, like falling off horses when endeavouring to jump over hedges. In those circumstances it is important that we can keep hedges over which we can make fools of ourselves. There are some people many of them probably in your Lordships' House who like killing birds. Equally,
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there are some people, (again there are many in your Lordships' House) who like looking at birds. There are people who like to walk, or fish, and people who like to look at the countryside through all its varieties. We could change the Ministry of Agriculture into a Ministry of the Countryside; and note you well that I said "change the Ministry of Agriculture" rather than the Department of the Environment. Historically, once the Ministry of Agriculture has been given a brief it has carried out that brief extraordinarily well. Therefore, the environmental protection part of the Department of the Environment should be hived off to the Department of Agriculture. Consequently, the Ministry of Agriculture becomes a Department of the Countryside.
It is known that the subsidy on feed wheat, exported to the Middle East the other day, was £86 per tonne. Let us assume somebody grows 3 tonnes to the acre of feed wheat. This is not an enormously high yield; it is just above average. Let us also assume that instead of subsidising that gentleman (which we are to the tune of £240 an acre) we say to him, "Look, we will pay you to farm in an extensive way. We will pay you not to use so much nitrogen. We will pay you to produce two and a half ewes per acre as opposed to four ewes per acre. Also, you will have to cut and lay your hedges for the noble Lord, Lord Kimball and myself to fall over, and for the various birds to nest in and to make an attractive countryside. We will pay you to grow small hardwood copses at £100 an acre, where they can be put in a way to beautify the countryside and make it correct. We will pay you to rebuild your drystone walling." In other words, we are paying people to do things rather than not to do them.
The great fault in the Wildlife and Countryside Act is the fact that somebody is paid not to do something. I believe that there is one Member in another place who comes from a family of noble and long lineage which has not missed a trick for 300 years. It is reputed that that Member is being paid £40,000 not to cut down his best pheasant cover. I am jealous and full of admiration for somebody who can go to a Government who are prepared to offer him this trough. My Lords, he is a fool if he does not put his nose in that trough. It is much more to the point to say to people: "This is what we want. This is what we would like you to do. We would make it economically worth your while." There is so much money being spent on the Community agriculture that we have got the necessary money with which to do this.
Concerning the method of paying people to do things rather than not to do them I suggest that we should look at the subsidy payment for hill sheep. This is calculated on a headage basis. The temptation is to keep alive every old ewe who can stagger to the vet on the day before counting day. Surely it would be better to say, "We will pay you on an acreage basis, and if you cheat you pay back five times what you have been paid on subsidy." Then it is possible to pay people to farm in the way you want them to farm.
In summing up I should like to suggest we make milk quotas totally marketable and then they can be taken gradually off the market. We should turn my noble friend Lord Belstead into the chief gardener and gamekeeper of England. We should also make the Ministry of Agriculture a countryside Ministry and

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pay people to do things rather than encourage them in wheezes, namely being paid not to cut down their best pheasant covers.
6.45 p.m.
Baroness White: My Lords, I think all noble Lords have regarded this as a most welcome debate and we are all grateful to my noble friend for initiating it. It is a short debate, so we have only one ministerial speech. The noble Lord, Lord Belstead, can no doubt be alluring on occasion, but we shall have to wait to the end of the debate to hear what the Government have in mind about alternative land uses and the rural economy. We do not yet know how much will be revealed even when the Minister does speak.
Despite the most apposite comments of the noble Earl, Lord Onslow, I believe that it is too soon to discuss at any length the landscape, conservation and comparable aspects of possible forthcoming land-use changes. The major Countryside Commission report is not due out for a couple of weeks at least. The considered views of the Royal Society for Nature Conservation will not be available for a couple of months. However, an excellent discussion paper by Dr. Clive Potter of Wye College is currently in circulation, as indeed are some very valuable notes from the Royal Society for the Protection of Birds and other organisations. I hope that we may have an occasion, perhaps later in the spring, to discuss some of these aspects of the problem.
In the meantime many noble Lords are much concerned about the rumours of ministerial conclusions on planning. We understand that, while the London Green Belt is secure, elsewhere planning controls may be considerably relaxed. A few days ago the Housebuilders Federation claimed that with a proposed set-aside policy anything up to 4 million acres of farmland could become redundant over the next decade. Other estimates are somewhat lower at about 2½ million acres. Whichever estimate proves to be correct, undoubtedly enough green-field sites could be released for house building by the federation and its colleagues. Many of us believe some relaxation to be desirable, but certainly not on the scale that they suggest.
It is true that in common with other entrepreneurs the main hopes seem to be being pinned on the South-East and other flourishing areas. Here, as in parts of Germany, we are told, there is now an increasing trend to what the Germans call "die Flucht ins Grüne"—that is, the increasing trend of better-off families, and upwardly mobile young professionals to relocate themselves from urban life (some of which they find not very attractive) to new rural stockbroker belts, as we used to call them. Perhaps the Minister can tell us what the Government have in mind about planning and this possible trend.
I should like to turn to the very different picture presented in the more remote uplands and some of the coastal areas of for example, Cumbria, parts of Scotland and, of course, Wales. Here the changes in the CAP support régime can bring very real hardship unless they are most skilfully handled. Of course, we can no doubt provide land for careful additions to
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forestry, and for the golf courses and riding schools desired by the more affluent holidaymakers from across the border.
But these less favoured areas are really becoming fearful that the farmers on the better land elsewhere may take over a larger share of the dairying and stock-rearing on which the less favoured areas themselves depend almost absolutely. They fear that agricultural production, as they put it, may be moving downhill. The milk quota changes, soon to be reinforced, in many parts of West Wales in particular have been devastating. What worries them, I think, is not only the personal tragedies, of which some of us are aware, but also the longer term, possibly disastrous, demographic knock-on effects. Sixty years ago half the dairies in London were run by Welshmen. They sent money home and provided jobs for their relations. There were at least a dozen modern creameries in Wales 10 years ago. We now have six and, if the reinforced quotas come about as expected, it is almost inevitable that some of those creameries, which provide hundreds of jobs between them, will have to close. Tanker drivers, incidentally, will still be in full employment.
In these areas many older farmers will stay, but they will pull in their belts. This will cut local spending and employment because they will very much reduce, or give up altogether, the maintenance of farm buildings, the money spent on drainage, and so on. They will also reduce their personal expenditure, and that, too, has a knock-on effect on the local economy. We believe that a lot of young people will leave, many of them without skills or with skills which are not of much use in city life, to join the disillusioned urban youth. There are, therefore, many apprehensions in those parts of West and North-West Wales with which I am familiar.
Of course, we have glowing examples of entrepreneurial zeal and innovation. We receive admirable help from the Welsh Development Agency and Mid-Wales Development. CoSIRA, of course, does not operate in the Principality. I suppose that the jewels in the crown are the Laura Ashley factories—in particular the large one under construction in Newtown—but there are other very useful ones in other parts of Montgomeryshire. But obviously more is needed.
I read the excellent Country Landowners' Association booklet on rural diversification. It suggests everything from lupins to hang gliding, from snail farming to biomass. This booklet has its avid readers in Wales. We have very successful organic farming. We have excellent large-scale honey production, cheese production and so on. There are suggestions for growing blueberries and other exotica. But that is for a minority—in particular for those who are capable enough to latch on to large enterprises, mostly across the border, which organise transport and distribution. Without that type of organisation the remote areas can hardly make a success of innovative production. This is a particular aspect of possible rural regeneration which needs more attention than perhaps it has so far received.
We in Wales have an extra problem. The socio-demographic problems which are especially worrying to us in certain areas are in the Welsh-speaking areas of the Principality. We have maintained our language

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and traditions over the centuries, through bad times and good. With the kind of economic decline which could be envisaged over the next couple of decades—we are not pretending that it will be a dramatic once-off manifestation—some of us are apprehensive that we could see a serious deterioration in the social fabric in parts of Wales. These are areas where one is not concerned with building executive houses in undesirable places, or anything of that sort. We are concerned with the future of the very structure of local community life. That is one reason why we are anxious that in what are now the less favoured areas—and they do have certain special treatment—that special treatment is maintained even though various details of it may be modified in the light of CAP and other changes.
Unless one can deal with that sort of situation with imagination as well as practical remedies, and if we are not on the alert, in perhaps 15 to 20 years' time the social structure in some of these areas will be weakened to a point where we can do little but take refuge under an ever-spreading coniferous blanket which few of us wish to accept. We need people as well as trees and I hope that the Minister can give us some reassuring news.
6.56 p.m.
Lord Stodart of Leaston: My Lords, of one thing I am quite certain—the noble Lord, Lord John-Mackie, must be thoroughly satisfied with his good fortune in the ballot, because I find this a totally absorbing debate. It is a subject which needs grappling with and every contribution that we have had so far has thrown up at least one good idea. Like every other occasion when farmers gather together, unanimity is pretty well absent. The noble Lord said that farmers were getting rid of men and selling tractors. I am not getting rid of any men and I have just purchased a new tractor. I throw that remark into the pool.
Now that we have broken through the self-sufficiency barrier in practically every commodity, it seems to me to be unarguable that production must be cut back by some means. However, I urge on my noble friend that he should be cautious with the surgery, because I agree with my noble friend Lord Ridley that too severe a use of the price mechanism only will bring bankruptcies in its wake; but without severe use of the price mechanism we will not get the great reductions that are needed. Therefore, we must not depend on it alone. Moreover, I think one must remember what people often forget; that is, the line between plenty and shortage is not as broad as many people believe.
My approach therefore is that one must try to find a good use for land which is not needed. I believe—and I say this with great respect to my noble friend Lord Onslow—that land is basically there (I emphasise basically) for producing something that will grow on it. Having selected that, one channels public money into where it is needed. I believe I am right in thinking that everyone expects the countryside to be kept tidy. Therefore to take land out of production, full stop, is not a runner because it would mean the growing of dockens, thistles and so on. Land has to be managed.
I agree with the noble Baroness, Lady White, that these alternative crops exist, even with primroses,
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lupins, and so on, but I doubt whether they would grow on farms at the altitude to which she referred and which I farm. In any case, their effect would be absolutely minimal. Therefore one comes back to the suggestions about which one has read. For example, the land can be fallowed. The countryside would be kept tidy, and it is a traditional way of farming. I merely add that it has to be rotational fallowing and not permanent fallowing because I cannot believe that the farmworking population would be anything other than totally demoralised with simply maintaining fallow year after year.
Then there is recreation. The pleasure parks at Oxford were mentioned. I am not quite certain about the hunting of wild boar. I have a feeling that such a sport might run up against the animal welfare lobby. However, there is obviously great scope for recreation in certain parts of the country.
Thirdly, there is forestry, for which I think there is quite undeniable scope. I cannot believe that the saving on imports, on which we spend so much just now, would not be worth while. Forestry can fit in with recreation, though a lot of people seem to think otherwise. There are vociferous criticisms of the blocks of softwood trees to be found particularly in Scotland, about which the Forestry Commission has drawn a lot of flak.
However, let us give credit to the Forestry Commission. In Scotland the popularity of its log cabins and woodland walks is manifest by the number of cars to be seen in the car parks leading to the walks and by the heavy advance bookings for the log cabins. I feel that perhaps for too long—and this point has been made by other noble Lords—the blinds have been drawn on what we all know must be faced. It seems to me to be rather like the inevitable departure of a dear friend. It is inevitable but we really cannot bring ourselves to discuss it.
From what I have read recently in the press I am glad to note that the Minister has bitten the bullet and given us one or two facts and figures of which I for one am sadly in need. He has said that taking out 10 per cent. of the cereal land in the 30 to 35 hundredweight an acre category would produce the necessary 14 million tonne cut in the cereal mountain. That is a figure that rather interested me. The Minister also said that for grain going into intervention and staying there for five years the cost per acre at a 30 hundredweight yield would be £350 to £400; namely, £70 to £80 a year.
Obviously whatever the solution it will require public money and, with recollections of the Treasury's views on forestry, I have a shrewd suspicion that it will expect the saving in intervention costs to be put in its own pockets and will give nothing in exchange. Therefore I am quite certain that my noble friend will need all his strong powers of persuasion.
I end by saying that I feel a certain amount of guilt in taking part in this debate. I think back to the month of June 1970 when I first went into the Ministry of Agriculture with an import saving manifesto and an immediate minireview with a price rise for the farmers, while anguished and indignant protests from the Board of Trade were dismissed. What a truly delightful task for agriculture Ministers, all of whom were farmers!

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Of course the response by farmers—this point has been made—has really been a productivity record as good as in Japanese industry. But, alas, as my noble friend has said, farmers are not pin-up boys. There is no praise or commendation from grateful consumers. Mountains of butter, meat and grain have labelled the farmers as anti-social and determined only to produce food which is not wanted, at considerable cost to the taxpayer. Therefore I express my penitence, perhaps belatedly, to my noble friend.
7.5 p.m.
Lord Houghton of Sowerby: My Lords, I cannot hope to make remarks of the value that have come from nearly all those who have spoken so far in the debate. I have no farming interests. I am merely a lover of the countryside, in which I was born and where I have mainly lived. I think that my noble friend Lord John-Mackie, to whom we are much obliged for introducing this debate, will have to widen the scope of such Motions in the future. We cannot hope to satisfy the agricultural industry alone in this matter. There is a great deal else involved here, and indeed the longer the debate continues the wider becomes the perspective of the whole problem.
I want to take the Minister back to where he left the discussion yesterday because I think that that is the more practical matter which we ought to explore. Yesterday at Question Time he was saying that very shortly further discussions would take place in the European Economic Community on the price factor in this matter. In col. 813 of yesterday's Official Report he is recorded as saying:
"There must be a two-pronged approach toward our problems. They cannot be solved by price alone. We shall be as tough as we possibly can be, and I hope that the Community will be tough too, so far as the price fixing is concerned. However, in the interests of both producers and consumers, there must be another plank to the platform of trying to reduce surpluses. That plank is involved in the answer that I gave to my noble friend's supplementary question when I said that we strongly welcomed the agreement on a diversion scheme or land where sectors are in surplus".
That is Whitehall phraseology for saying that the second plank is that we shall take land out of agricultural use.
It seems to me therefore that if that is the immediate objective of the discussions in the EC, we must reconcile ourselves to the fact that the toughness on price will depend on a toughness throughout the Community, because I assume that "price" means a Community price. As regards the question of shedding land from agricultural production, again we shall not be complete masters in our own house. There will have to be European agreement about what will be the proportion of land shedding, and there are many complications about that. I think that a national solution is important in deciding the use we make of the land which may go out of agricultural production. There have been many ideas, some of them very exciting, but there are many worries about what we should do.
I have been looking at two articles that have appeared in the Independent newspaper. They are by Richard North, who was for a long time a writer on environmental matters for The Times. Unfortunately,
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the next article, which is to appear in tomorrow's issue of the paper, deals with the vision of the future. It would have been very useful to have had that contribution to the debate, too.
The Farmers Weekly, which I occasionally read, is giving some information about a piece of attractively named Government machinery called ALURE (alternative land use and the rural economy) of which I gather the Prime Minister is the chair person. It may be appropriate that she should be. Various ideas about what use may be made of land shed from agriculture are canvassed in the columns of the Farmers Weekly. We have had some exciting ideas from the noble Earl, Lord Onslow. I am all for paying people to make Britain a better and more pleasant land in which to live. That is one of the matters to which we could devote public resources, to the universal acclaim of people who are more conscious of environmental conditions today than ever before. There is no reason why all the land should be taken over for agricultural production.
It is many years since a Prime Minister said that the land belongs to the people, but it has never reached them. There should be much more access to the countryside than there is at present. We should like it more and we should use it more. One of the biggest problems we shall have to consider in the future is what we shall do with increased leisure.
Before we go too far with the programmes that flow from price and land shedding, which we are already discussing, we should take another and a critical look at the nature and shape of farming. What do we mean by farming these days? From my observation, in some cases it means large areas under cereal production with not an animal on the land. All the land is under the plough and the combine harvester. Farmers are all burning stubble at much the same time under the same unsuitable conditions.
Farmers are not what we understood to be farmers. What are we to call the people who have animals locked up in their intensive animal husbandry equipment—the battery hen, the veal calf, the pig and all the other animals that are kept in miserable captivity? We hear about intensive animal husbandry extending to sheep. We shall soon see no sheep around. They will all be enclosed as well. We have imprisoned our farm animals and gone in for cereal production.
If farming of the future is to be confined to those who are permitted to grow cereals and those who have animals shut up in sheds, huts and other enclosures used for intensive husbandry, what sentiment will there be for farming in the public mind? Where will the romance of the countryside be? We must pay much more close regard than we have so far to that aspect of agriculture.
There is no doubt that many farmers are disturbed by the treatment that their animals receive during transport, in slaughterhouses and often in the intensive conditions in which they are bred and kept. There is nothing elevating about the treatment of our farm animals today. We have converted them into the raw material of farming. We have mechanised cows linked to mechanised milking equipment. We have

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automatic feeding. They are all things which are prescribed for greater production at lower cost.
If that is farming of the future, the public will want to see something better before they pay out a great deal of money to farmers to go out of business or to become the countryside wardens of the future. That is one suggestion contained in a recent issue of the Farmers Weekly. I am all in favour of farmers being the wardens of the countryside of the future, but it must all be acceptable to people who want to see more of their ideas about the environment and the treatment of animals carried out, and who generally want to live a more civilised existence. All that must be satisfied.
I am not sure where one ultimately goes to find what is acceptable and what is unacceptable in a complex subject such as this. The treatment of animals is a subject upon which the public will have a firm idea by the time we have to solve the problem, probably at considerable public expense and even generosity to farmers who have to give up much of their livelihood in the interest of avoiding large food surpluses.
7.16 p.m.
Baroness Elliot of Harwood: My Lords, this has been an extremely interesting debate. Before I say anything that I have in my notes, I should like to assure the noble Lord, Lord Houghton, that on the Borders of Scotland, in the Highlands and our other areas of great beauty, all the animals are out of doors. They are not kept indoors. All my sheep lamb out of doors. In hill areas, nothing happens indoors. I know that a great deal of intensive farming goes on in other parts of the country and that there is a different kind of farming there, but there are thousands and thousands of acres upon which sheep and cattle graze. They never go inside.
I hope that your Lordships will not think that all farmers are cruel to their animals, because they are not. As far as I know there is no cruelty in the area that I have farmed now for 50 years. What is often cruel is that during lambing time there are too many foxes and they attack and eat the lambs. We shoot foxes because we do not want to lose a lamb. That is another matter. I am just saying this because I am anxious to assure the noble Lord that although some of what he said is no doubt correct, a great deal of it can be countered.
Lord Mackie of Benshie: My Lords, does the noble Baroness agree that some of those poor animals would rather have been inside during the recent bad weather?
Baroness Elliot of Harwood: My Lords, I daresay that is true. During the past fortnight I have been unable to get home because there has been so much snow. All my sheep are out in the snow, I only hope to goodness that the shepherds have been able to see that they did not starve and were not injured by the snow.
I shall not repeat much of what has been said, because I agree with a great deal of it. However, one or two things have not been sufficiently stressed. What about alternative agriculture production? On Monday, I asked a Question about deer farming in the Highlands and uplands. I received a satisfactory answer from the noble Lord, Lord Belstead, who will obviously encourage such activity.
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One of the newest farming activities in the past few years has been fish farming. I believe that that is successful. I know two young farmers who are changing some of their farming activities. I know one dairy farmer who is now making great quantities of yoghourt and selling it to shops and townspeople. That is a great success. I do not know how many such changes there are, but, in the area I know, that is a new venture that is going well.
As we all know, there are areas where we grow great quantity of cereals. The farmers are now growing fruit and vegetables and encouraging what is called "pick your own". I know one farmer who lives in Gloucestershire not far from Bristol, in an area where it is possible for people to come to pick-your-own. That operation has been a great success. We should encourage change as much as possible. One cannot do that unless it is economic. In these cases it has been economic and noble Lords will know of pick-your-own areas in many parts of the country which are quite successful.
Again, as with anything to do with farming, it depends on the weather. Last year the pick-your-own people did not do too badly. The year before it was hopeless; it poured with rain in July and August and they lost a great deal of money. In farming one cannot plan ahead without reference to what the Almighty will produce in the way of weather. That makes an enormous difference and has to be borne in mind. One must remember that when talking about these enormous surpluses which we all know about. Although it may not affect cereals so much, very bad weather—a drought or some difficulty of that kind over which farmers have no control—could occur. That could reduce production enormously. We must have a reserve which will allow us to compete with those conditions should they occur.
One of my hobbyhorses—as the noble Lord, Lord Gallacher, knows all too well—is this. As farmers we are very good at production. Everyone knows that we have increased our production to 80 per cent. of what we consume. But we do not think enough about what the consumer wants to buy. This is a matter which none of us considers sufficiently. We have to find out what people want to buy and not produce masses that we cannot sell.
Some of your Lordships may remember the Royal Agricultural Show of two or three years ago. The noble Lord, Lord Sieff, was the chairman of the show. He invited me to the opening, which I attended with great interest. I listened to his opening remarks. I was enormously impressed by them. He was saying that we farmers must find out what the public want to buy. He instanced something called the Arctic lettuce, which Marks and Spencer had encouraged farmers in a certain area to grow. The lettuce had been so successful that they had put it into every single one of their great food stores. It was now a booming product in an area where people can grow vegetables.
I give this as one small incident but it shows that we ought to think more about what people want and try to grow it. We should not always think that what we want to grow or what we have always grown is what we can go on growing. Although this is a limited proposal, we should all think about it.

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I am a farmer. I am always thinking about production. Luckily, I live in an area where there is no over-production at the moment. In the Borders of Scotland we produce thousands of store sheep and sell them to people with richer land where they fatten them to go to market. This has been the way in which we have used the land for years. It uses hill land to best advantage.
If giving up cereals means that a lot of people in other parts of the country will grow grass and they want that grass to be eaten—which naturally they will—so they go into sheep in a very large way, there will be an over-production of sheep. I am not saying that a quota system will necessarily be needed, but it is a matter which must be considered.
I am speaking as one who has very little arable land but 5000 acres of hill land. If I could not sell my sheep in the markets to be fattened and sold by people with richer land I should be a in a very poor way, as would hundreds of farmers in areas such as the Highlands, the West Country, Cumberland and Wales. These are all areas where this is vital to the arable farmer. I may be wrong and this may not happen, but I have been warned by my colleagues in the Borders that they are terrified that there will suddenly be a very large over-production of sheep—of mutton and lamb. I hope that that will not happen, but we have to think about it.
I agree very much with what noble Lords have said about the environment. It is extremely important that the environment should be safeguarded. If one does not graze the hill land or do anything with it, people will no longer be attracted to the hills. We are to have a debate in the near future on the very important subject of forestry. I live in the biggest forest area in Europe. One does not get any return on forestry, as one does from an ordinary farm. If one plants trees there is a small return in 10 or 15 years. One does not get a big return until one clear-fells. That is in 50 years. We are all dead by then. We are planting for the next generation. One has to remember that point when talking about forestry. If one is to grow a lot of hardwood trees on good land, which is a very good thing to do, one will have to consider the farmer getting some return in another way—a subsidy or something of that kind. Otherwise they cannot live on the return.
I agreed with the noble Earl, Lord Onslow, when he talked about the third world. When I think of all the people starving in the third world it gives me a bad conscience. In this country we have this colossal surplus—and not only here but also in America. Surely in the modern world we ought to find some way in which we can distribute this food so that people do not starve. That is extremely important.
I say no more. I hope that some of the suggestions we make may be of some help to the Minister. I do not envy him his task. The difficulties of the CAP are enormous. But we are all behind the effort to improve it and we are all anxious to help. It is a question of the best way to do it.
7.28 p.m.
Lord Wise: My Lords, it is evident that the farming industry is facing a difficult time. At the moment bank
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borrowings are probably at their highest point ever. Incomes are falling. It is becoming increasingly difficult to meet interest charges and well-nigh impossible to reduce overdrafts. This is a serious situation not only for farmers but for the rural community as a whole. Many people within the rural communities are absolutely dependent for their livelihood upon farmers and a flourishing agricultural industry.
Ancillary businesses are also bound to be hard hit. We can take one example which has been mentioned: the drainage business. Reduction of the drainage grant and falling profits have led to much less drainage and maintenance work taking place. This in turn has created difficulties for the contractors. Loss of work has caused expensive machinery to lie idle and men have obviously been laid off. This has a knock-on effect for the United Kingdom manufacturers. They are probably among the best in the world and are now experiencing little demand in the home market.
That is one illustration of the widespread effect of a declining agriculture, and the same applies to every other ancillary business. What is to be done about that? One must accept that there must be a cut in the production of certain commodities. Supply and demand have to be more evenly matched. Nevertheless, it is imperative that farmers be given a fair support price for the produce that consumers will take.
Many suggestions have been put forward as the best way of achieving these production costs. All have their merits, all have their disadvantages and all present considerable problems of administration. Farmers will obviously diversify and grow alternative crops wherever possible. However, there are dangers in this. Considerable expertise is needed in many of the alternative crops. They also need particularly favourable climatic conditions in order to ensure success, and some need considerable capital expenditure. In the present economic situation farmers must obviously be very wary of plunging in at the deep end without first seriously considering all the implications.
In the proximity of urban areas agricultural land could of course be used for other purposes: sports grounds, golf courses, etc. This would necessitate a new thinking by planning authorities and a relaxation of controls. It would also need a change of heart by urban dwellers, many of whom object very strongly to any change in the coutryside around them. There must also be planning rethinking to enable small-scale industries to be established in rural areas, making use of redundant farm buildings, etc. However, again I would stress that many of these businesses would be dependent upon a healthy agriculture industry, and without that they just will not materialise.
It is debatable whether or not tree planting an extensive area of good land is an economic project. There is scope for some, but it is very much a long-term investment. As my noble friend Lady Elliot has said, money would have to be found for annual payments to be made perhaps to offset against the eventual value of the mature timber. Obviously working farmers cannot wait 40 to 50 years or more to reap their harvest; and who can tell what the value of that timber will be in 40 years' time?

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In the arable areas some system of set-aside programme must be introduced. I note my noble friend Lord Ridley's fear of a featherbedding accusation. However, more land could be rotationally fallowed. That is not exactly featherbedding because all fallow, properly done, needs a fair amount of work. Perhaps there could also be an increase in the acreage of beans and peas grown on suitable land, and this would decrease the necessity for such heavy nitrogen applications on the following crops, thereby to some small extent alleviating the environmental problem of the nitrate deposits. Within the predominantly grassland areas there is a case for an overall system, perhaps based on the present environmental sensitive areas project, which, given goodwill, could work for the benefit of all.
In all this farmers must be safeguarded and adequate payments must be made if they reduce their output to enable them to meet their overheads and living expenses. This will cost money, but surely far less than the vast sums now needed to purchase and store the present huge surpluses. The farm Ministers must get their act together. As the noble Lord, Lord Walston, said, they must produce a long-term realistic policy for agriculture. It will not be easy to achieve, but it must be done.
7.35 p.m.
The Earl of Radnor: My Lords, I, too, am very grateful to the noble Lord, Lord John-Mackie, for bringing this massive subject before us. It has caused a lot of trouble to a lot of people over quite a long period. Whether, in a short debate this evening, we shall be able to produce the ideas which will lead to its solution I am not quite sure, but I think it is excellent that we produce a few ideas.
The unreality of the situation is that my noble friend Lord Belstead may be impressed by what we say and may talk to his right honourable friend who may also be impressed. But there are Ministers in Brussels who must also pull together and think of some reasonable solution to an amazing situation in which more and more food is being produced in the world and, in a way, wasted. That has become completely unacceptable to a large proportion of the population in this country and, I imagine, elsewhere, although perhaps to a lesser extent in some European countries, notably Germany and France.
The debate has been excellent. If there is a fault, it is that we have talked a great deal about getting rid of surpluses and have perhaps been thinking in terms of what happens when they are got rid of, by whatever means. We are really saying that rural unemployment and bankruptcies in the country are at unacceptable levels. I do not envy my noble friend Lord Belstead in his task of trying to think up the answers. I am quite sure that the main plank to reducing surpluses must be the price mechanism. This will be most uncomfortable in this country, which is, in my opinion, populated by farmers who have been having an exciting time and who, in many cases, have borrowed heavily. Inevitably therefore, the price mechanism will have to come into the picture.
I am not in favour of a set-aside situation, partly for the reasons already given and partly because when something is set-aside it does not need anybody to
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work on it. And one of our considerations is unemployment.
My mind always moves towards lower input farming: some way of farming whereby the inputs are lowered but the labour input is maintained. The noble Lord, Lord John-Mackie, nods his head. He mentioned this. It is a splendid idea, because one can research the subject and practise it. However, the flaw is that when the going gets rough farmers almost invariably grow more to try to recover their costs and push up the inputs. They are like the Gadarene swine heading towards some awful financial cliff.
I return to the idea of the noble Viscount, Lord Ridley, of some form of limitation on nitrogen; some goal to force farmers, particularly larger farmers, to reduce their production and force crops which have recently been growing on land where they should not have been grown—winter wheat is grown all over the place these days—back to the more traditional areas. I have no figures on this—quite honestly, I am incapable of providing figures—but I think that there exists the capability to work it out. I suggest that the tax should be two-tier or even three-tier.
The difficulty of taxing nitrogen throughout the farming industry is that the small farmer who perhaps improves his acres through buying a bag of nitrogen will be put out of business. It is sensible that a certain tonnage should be absolutely free of impost. Thereafter, another block would be taxed reasonably severely. Then one would move into an area where nitrogen was taxed very severely indeed. This would tend to stop some people growing such heavy crops and at least start them thinking about maintaining their margins and making a profit, albeit a smaller one. We are all going to make smaller profits, I am certain about that. But, as the noble Lord, Lord John-Mackie said, at the same time, God willing, more or less the same number of people would be kept in work and crops would be back where they should be grown.
Another nibble I would take at the question is through forestry which has had scant attention in this debate. When forestry was first mentioned as an alternative crop—I heard it quite some time ago, as the noble Lord, Lord Gallacher, will know—I laughed to myself and thought it totally impractical. I am now beginning to change my mind, although I do not suggest that the matter is of any huge moment in relation to the problem before us.
If forestry were subsidised in the vital years of growth—about 25 or 30 years—until it starts making money, and if it were to be grown not on the good land but on the land that is better than it is grown on at the moment—in other words, grade 4 land—leaving the uplands for the environmentalists and the grouse, but perhaps squeezing the sheep back on to richer land and then squeezing the next crop on, this would create employment. It would create employment in awkward lumps, so to speak. The planting of trees requires quite a number of people, and labour is also needed when trees are being felled. There is rather a dull period—I admit that it is quite long—in between.
I am encouraged to mention forestry with more enthusiasm than other noble Lords and noble Baronesses because it is one of the few products that is not in surplus. It would seem from all the forecasts that

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it is a product for which there will be real need throughout the world for as far ahead as we can see.
As regards alternative crops, everything we can think of, so far as I can see, will alleviate a little the force of the price reductions. Alternative crops are extremely interesting. I am tempted, since my noble friend Lady Elliot mentioned it—and declaring my interest—to say that fish farming certainly is an alternative crop. My fish farm stretches over 54 acres on which I can honestly say that nobody used to be employed. I now employ 15 people. There are two lorry-drivers involved, and I am told that eight people are employed in the feed factory in Suffolk. On and off, I work at it a bit myself. I suggest to my noble friend Lord Belstead that if he should have an opportunity to talk to friends—if he has them—in the water authorities, a little more positive encouragement from that area might help to a certain extent.
I am coming up to my 10 minutes and one speaks ever more quickly. This is an extraordinarily difficult problem. I fear very much that there is going to be difficulty at the end of the day. I only hope that we are able to reach some sort of sensible solution for the countryside.
7.45 p.m.
Lord Mackie of Benshie: My Lords, I of course must thank my noble kinsman for introducing this debate. It is obvious from the interest shown, and the number of people who have spoken enormously sensibly about it, that it was a good debate to introduce. He did it extraordinarily well, and I shall draw him aside and explain about our need in the Alliance to look after the smaller farmers, whom obviously the Labour Party does not care for.
When we look at the situation today, we have to look at the past. For many years I, along with many other noble Lords, have been on Sub-Committee D of our EC Committee and we have been looking at the problem and recognising the problem for many years. The Motion actually says:
"To call attention to the attempts of successive Councils of Agricultural Ministers to deal with CAP surpluses".
The fact is that successive Councils of Ministers have not dealt with them, and have ignored the problem altogether in favour of short-term political gains in their own countries. They have made nonsense of efforts to see that the agricultural population, the primary producer, get a fair deal; get the basic protection—I have said this time and time again—against the 5 per cent. surplus producing a 50 per cent. drop in price, with the result that now the kitty is empty. If it is not empty it is because it is constantly being refilled. The Commission have to resort to devices such as delaying payments, and all the things we know that in a private situation are the prelude to bankruptcy. The people who pay are now no longer willing to pay.
I think, and I fear, that the solution put forward by our EC Committee, mainly through Sub-Committee D, which was one of price restraint and forewarning farmers of price restraint anything up to five years ahead, is no longer possible on its own. Many people have said this.
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It is interesting—and a number of noble Lords pointed this out, particularly the noble Earl, Lord Onslow—that all over the world people are getting better and better at producing food. He instanced China, and India is another one. I am sore afraid that Mr. Gorbachev is determined to introduce sensible policies into Russian agriculture, and without any doubt in the next few years we shall see an improvement there. Therefore, we are faced with a situation where export to other countries is no longer going to cope with the surpluses.
We are also faced with the situation where the surpluses are going to rise quickly in our patch, the EC. Already we have the figure of something like 6 million tonnes in store here, and 29 million tonnes there—one throws the millions of tonnes about as though they did not matter, but the figure is enormous—and given an average harvest next year it will go up again, and something has to be done about it.
We are also doing great harm in the third world and in the competent agricultural countries in the Commonwealth. I was recently in New Zealand, and they were going to enormous lengths to tighten their belts. They expect that 20 per cent. of the farmers there will not survive the squeeze. This was the figure given us by the federated farmers there. We visited a farm where the farmer was milking 150 cows, working hard himself, and his wife was doing it while he showed us round. He said that he had actually gone to the length of not topping his grass simply to save diesel fuel. That is entirely our fault. They are competent and efficient and while we may be right not to take their produce here, we are quite wrong to destroy their markets and the markets of poorer countries in the rest of the world. That is what we are doing.
The situation is urgent and something has to be done immediately. Many solutions have been put forward, all of them with some merit. The argument for 10 acres, a house and a horse is not a bad solution. After the first war I understand the solution was three acres and a cow. A neighbouring farmer to my father said that if that was the case he would have three acres and a bull. Seriously, sensible planning legislation has to be introduced so that people who want 10 acres in the countryside can build; but not to turn the countryside into a mass of nasty houses with 10 acres round them, for sensible planning could keep people in the countryside by adopting that suggestion.
We have heard of all kinds of mandatory rotations and about the need for the reduction of nitrogen. Although several very sensible people in this House have advocated it, we can only do it where it is a hazard to health. The same is true of pesticides. I cannot see that one can reduce competent and healthy efficiency by ordering people or taxing the root cause in order to reduce the food production. One can certainly do it where it is doing harm to the health of people, and that should be done.
I am in agreement with the noble Lord, Lord Houghton (though not with everything he said), that our intensive systems of production are not nice. They need looking into. They do not produce very tasty food, and we should encourage the production of more natural and better tasting food. I am afraid that the public will have to pay for it not only through the direct support of farmers but in a bigger price for food.

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I do not have time to go through all the solutions. My noble friend Lord Walston pointed out that a quantum which you supported should be enough if that is how much you need. Many other people produced good and necessary steps for the Minister to take. But the one essential thing he has to do is to make up his mind that something has to be done and done now. I hope that he can put it over to his fellow members of the council.
We have an extraordinary situation now that exporters are asking the Government, who are holding surplus stocks in intervention stores, to pay them a subsidy of 140 ecus per tonne to export this grain. That is £100 a tonne. I understand that the Government have indignantly turned down this offer; but enormous sums of up to £80 or £90 per tonne are being paid not only in this country but in France and other countries, to export onto the world market. This is not a world market, it is a dump market. We can afford to use this money and we must use it. Taking the figure given by the noble Lord, Lord Stodart, of the £35 to £40 a hundredweight producer going out of business, one is talking of a figure approaching £150 to £200 an acre being available to put that farmer into a business that is good and maybe profitable for the country.
Also we have to go for forestry in a big way over the country. I do not think compulsory set-aside is on. We should use the money saved from bribing people to export to put people into other products. The tree is one of them. But it has to be done, as many people have said—the noble Lord, Lord Radnor, knows much about this and spoke sensibly about it—to cover the 25 years or longer when there is no income. One always has the trees as security for money being paid out, and one is doing something for the countryside and helping to keep people in the country.
Speakers have kept very well to their time and I intend to do so. I note that I have an extra minute or so, leaving the Minister and my following speaker plenty of time. We must not forget that farming is still needed for the economy of the country. The extra food we have produced in the past 10 years since we joined the Common Market has saved about £2 billion a year in imports. One cannot throw that away as so many people think we can. Farming will still be the basic industry in the countryside. However we do it—whether we have set-aside, whether we have compulsory rotations, or whether we drop the price—any quota system will drop the farmer's income.
We must get down to it quickly and give the farmer actual figures and give him direction. The scheme the Government have put up has some hope. I hope the Government will be able to assure us that they will be quickly able to tell us what they will do instead of saying like the rest of us that there are certain alternatives.
7.56 p.m.
Lord Gallacher: My Lords, we are all indebted to my noble friend Lord John-Mackie not merely for the way in which he introduced the debate but for persuading the official Opposition to have such a debate. The quality of the speeches this evening bears
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ample testimony to the fact that this is a subject of considerable interest to your Lordships. My noble friend is entitled to share in the credit for that.
The success of the common agricultural policy is based on guaranteed prices, an intervention system, improved technology plus farming skills. The CAP is another victim of its own success, and unfortunately for the CAP this success comes in a recessionary situation for manufacturers in the EC. From that we can only draw the lesson that it is more difficult to reduce surpluses than to generate them.
Only limited action has been taken so far because the Council of Agriculture Ministers as a body has been unwilling to face unpopular decisions with farmers in their respective member states. For example, a favourite excuse for doing nothing is that elections are due in particular member states and until those elections are over radical steps cannot be taken in particular directions. Similarly a favourite fall-back device when price changes are made is to use the price mechanisms which are a part of the common agricultural policy, notably the manipulation of green rates to avoid the full effect of price changes, again in particular member states.
The result of all that is a series of chronic structural surpluses which in themselves are harmful to the concept of the EC as such, and no one is more conscious of that than those of us who are members of the official Opposition.
The nature of intervention was well described in a series of articles in The Times of 24th November 1986. At that time an indication was given of stocks held throughout the Community. Grain amounted to 16,780,000 tonnes; butter was at 1,500,000 tonnes and one-third of farm spending at that time was going on the cost of storing butter. Milk powder had reached 1,100,000 tonnes; beef was 620,000 tonnes and—a dimension that has not been mentioned this evening—wine had reached 15 million hectolitres.
There is an awareness of this because the Government themselves—great credit is due to the UK Government for their attempts to tackle these problems—made a statement in your Lordships' House on 17th December 1986 about the steps taken on milk and beef. The Minister informed us—not much notice was taken of it—that a major programme of disposal for surpluses had been agreed upon at the same agricultural council. The object of the disposal programme was to reduce the surpluses to manageable levels by 1989. The cost of this programme of disposal was to be financed over four years beginning in 1989, and such is the magnitude of the problem that the burden of cost involved cannot even be taken on board until 1989.
In the days when I had a slight responsibility for disasters (not of this magnitude, I am happy to say) it was common wisdom that the first loss in stock matters was always the best one. Apparently, although that is recognised in the Community, the agricultural council cannot begin to meet the cost of the loss until 1989, and then it has to be phased over a period of four years. There is now a real danger of panic measures, which will have a serious effect on social life in rural areas. My noble friend Lord John-Mackie dealt with that in considerable detail.

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We can all recite options or alternatives for the CAP in much the same way as we used to be able to recite the Catechism. I think the conclusion must be that there is no single solution to the problem. At heart, it seems to me the question is one of alternative land use. That is certainly the case in Britain. There must be a query, I think, as to whether these alternatives which have been canvassed this evening are in fact capable of being decided upon by the agriculture Ministers who are responsible for creating these surpluses. I say that because conditions are so vastly different in the 12 member states—a point which was very effectively brought out by the noble Lord, Lord Walston.
This is not a plea for repatriating the common agricultural policy, which has been raised by certain anti-marketeers in another place, but I think that in the measures which are now required it must be a point of substance that agriculture Ministers should regard this matter as being one where greater national control of these measures is the only effective way of achieving spectacular results without doing significant damage to the countryside. If there is a Community solution to this problem, I have yet to hear it. I have yet to see it seriously applied. I think that if a Community solution to the problem is attempted it will be costly and it may in the final analysis be ineffective.
Even if greater delegation takes place to member states, there are conflicting interests at all levels in the United Kingdom. Some of those have emerged, very politely but nevertheless quite definitely, in our discussion this evening. I think it is vital for Her Majesty's Government, at internal ministerial level, to reach some form of accord about land use, and I sincerely hope that the Minister will be able to say something positive about that tonight because it seems to me to be at the heart of the problem.
The emphasis so far in measures taken has been on the smaller farmer in poorer areas; for example, the outgoers scheme. However, the problem of surpluses lies more with large units in the best farming areas, and if those farmers are forced to do something significant about their problems there is a danger, which the noble Baroness, Lady Elliot, touched on, of diversion by them into other kinds of farming. Cereals into sheep were mentioned. I think there is an equal danger if, as a result of the measures which are contemplated, large and efficient farmers are in fact invited and encouraged by fiscal measures to start farming inefficiently.
Much consideration needs to be given to the position of farm workers, who, because of their special position, may suffer unduly under conditions of change—not merely through loss of employment but because, through tied houses and the like, they lack the mobility of other workers. There is a housing crisis in urban areas. After a life on the land they face the problem of adaptation to living in urban areas. This, too, must be a consideration in any reconstruction of the common agricultural policy.
I accept totally that Her Majesty's Government are more seized of the problem as a whole than many other member states in the Community. That is to their credit. I think it is equally to the credit of the Minister that during his presidency he tried to do so
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much to solve this particular problem. The Community's industrial export performance as a whole gives cause for concern. One of the questions which must be asked in this situation is whether the Community can carry the cost of the CAP and still compete in world markets as a manufacturer.
It is recognised that there are now dangers of retaliatory action if export markets in which the CAP has an interest are not brought under control. I think that eventually conflict in this particular area could undermine the General Agreement on Tariffs and Trade so that the dimension of the problem is not merely Community-wide but international and, indeed, national, and its effect is not merely on industry but on farming and the whole future of the Community itself.
The common agricultural policy reforms propounded thus far are at the margin of the problem. There is a need for more effective action on an urgent basis, but that must be combined with enlightened social and land use policies. To that extent we look forward to hearing the Minister. I echo the thanks of my noble friend Lord John-Mackie to those who have spoken in this debate.
8.6 p.m.
The Minister of State, Ministry of Agriculture, Fisheries and Food (Lord Belstead): My Lords, I should like to thank the noble Lord, Lord Gallacher, for the generous words that he spoke about my right honourable friend the Minister of Agriculture during the United Kingdom's presidency of the Council of Ministers, and also to join with your Lordships in thanking the noble Lord, Lord John-Mackie, for initiating today's debate.
In trying to reply to this enormously interesting debate that we have had this evening, I think it is essential for me on behalf of the Government to try to say why reform is necessary; what the changes already agreed entail; and why they constitute, we believe, the best foundation for the development of the common agricultural policy and agriculture in the long term.
My Lords, the scale of the measures adopted for the milk and beef sectors in Brussels in December reflects the scale of change that agriculture has been undergoing for many years, particularly in the United Kingdom since our accession to the European Community. Your Lordships have already made reference to this, and perhaps it was best summed up by my noble friend Lady Elliot, who made the simple point that while we have been members of the Community our ability to produce the temperate foods needed in the British market has improved by no less than 18 per cent., from 62 per cent. to a total of 80 per cent. But the problem is, as the noble Lord, Lord Mackie of Benshie, and my noble friend Lord Onslow said, that in the world there has been an increase in agricultural production to the point where the entire pattern of agricultural trade has been transformed. The surpluses which have emerged cannot be sold economically on what is now a saturated world market. Instead, they threaten to engulf the very policies that have helped to create them.
The noble Lord, Lord Gallacher, gave us some very interesting statistics of the build-up of surpluses in

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store. I should only add that in 1985 in the United Kingdom alone there was a cost of £1 million a week to store the butter and skimmed milk powder that we had in store. There are simply not the resources to finance that extra expenditure, even if the governments of the member states, leaving aside the views of Community taxpayers, could be convinced that it was justified—and it was these realities which brought the agriculture Ministers of the Community to take tough but necessary measures in the milk and beef sectors.
If your Lordships will forgive me, I will say very little about milk, because we went through this in the Statement on 17th December, except that—and I believe it is absolutely right—the 9.5 per cent. reductions in production which have to be faced in the Community over the next two years are to be balanced by sizeable financial compensation. I was very interested that my noble friend Lord Onslow made the point that he felt that quotas should be freely negotiable so that they could be bought in to help reduce over-production. To some extent this is, in effect, happening already. After all, the council agreed last month to increase the rate for the Community outgoers scheme with a view to meeting the quota cuts agreed in April 1986 through voluntary sales. And of course the temporary suspension of quota, also agreed last month, will be compensated for by generous payments to producers, as I have already mentioned. The link between quotas and land, however, is central to the system which the Community agreed on in 1984. Changing that fundamentally would cause huge problems, particularly in the tenanted sector, which is much more important here than in the rest of the Community.
Turning to beef, perhaps I can be very brief. As a matter of fact, your Lordships have not spoken about beef this evening though it has been much in the minds of the farming community. May I make just two simple points. I think it was quite obvious to anybody who thought about the beef market before the agreement was finally reached in December that what primarily was needed was to reduce the amount of beef going into intervention and not being eaten.
This is what the Community Ministers agreed to do; but of course you cannot cut expenditure on market support without having some effect on the market. However, because of the variable premium, United Kingdom producers have never been so heavily reliant on intervention as many other countries. Last year less than 5 per cent. of our production was taken into intervention, compared with, for instance, 25 per cent. in Ireland. The forthcoming reductions in buying-in prices will thus bear less heavily on the United Kingdom market. They will also be substantially offset by a combination of the green pound devaluation and the increase in steer buying-in prices, as these are harmonised with the intervention prices paid for young bulls in some other countries.
The other thing I wanted to say on behalf of the Government on beef, is that I believe that the major success in this difficult sector was to persuade other member states of the benefit of shifting to greater reliance on this type of support. And let us not forget that the new premium being offered to the other European farmers is going to be worth only about £16
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a head, confined to the first 50 head in a herd and only on steers, whereas our variable beef premium scheme, which we have retained for a two-year period, is going to be worth about £45 a head on average, and of course paid beyond the limit of 50 in a herd. The National Farmers' Union, quite rightly, before the negotiations put very specific emphasis on trying to do something for the specialist beef producers, and I am delighted that the maximum possible rate of payment for the suckler cow premium has gone up.
Looking ahead, the December agreement forms the background to the negotiations in this year's price review. By the savings it brings on CAP market support—£750 million for this year—it makes a valuable contribution to the task of containing CAP expenditure. Clearly more needs to be done. I say that before the noble Lord, Lord Walston, says it to me and of course he would be quite right if he did say it. None the less, forecasts of expenditure requirements this year are still well in excess of the total resources available within the budget. However, I think we have put the CAP on the right course.
May I just say to the noble Lord, Lord John-Mackie, that when he spoke of the cost of our domestic market support, I thought his figures were rather on the high side. However, it does not alter the thrust of his speech, which was also a recognition that we need to stick to our guns so far as price is concerned.
Talking about price, my noble friend Lord Stodart made the point that we should be cautious about the price mechanism. The noble Lord, Lord Houghton, reminded me that I had ventured to say yesterday in your Lordships' House that we need a two-pronged approach. The noble Lord, Lord Mackie of Benshie, said very much the same. It is the Government's belief that our agricultural industry well recognises that the challenge is no longer simply to produce more, but to produce consistently and precisely what the consumer wants at prices which the consumer expects and in the quantities which meet demand.
Within the overall situation of surplus, I recognise that there is an important contribution for the Government to make to agriculture. Agricultural support is running at some £2 billion a year at the present time, but the surplus situation means that this support must be selectively applied. In particular we must also be prepared to complement the central policy of market realism to encourage some farmers to move land out of commodities in surplus.
Therefore I think it was significant that the council also agreed in December to develop a package of structural measures, one major aim of which is to reduce the pressure on the sectors in surplus. The measures under discussion include an early retirement scheme for some producers and measures to encourage more extensive farming—recommended by my noble friend Lord Onslow, among others. Of particular interest to the United Kingdom was the inclusion of a scheme for the diversion of land out of sectors in surplus. I very much hope that in this context we can develop the ideas on cereals land diversion which my right honourable friend put to his colleagues last September.
In this context the noble Lord, Lord John-Mackie, said in his speech that he wondered whether perhaps

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we ought not to keep surpluses in proportion and that in certain circumstances, such as drought and natural disasters, those surpluses could disappear. I have to say at this stage on behalf of the Government, that we have to recognise that really almost the reverse is the case. There is the very sobering forecast that if nothing is done we will have about 80 million tonnes of cereals in surplus in Europe in a few years. And of course while this happens, world markets are shrinking, other exporters are suffering and yields are increasing, as we know.
The noble Lord, Lord Walston, asked, "If the Government are going for the voluntary cereal set-aside, how is it to be done?" The September paper of my right honourable friend, which of course was for discussion, suggested that there should be payments of about £80 per acre; but the noble Lord will not need me to tell him that the price to be paid would need to be very carefully chosen in the context of prices for cereals, in order to see what would appeal to those in marginal production, coming out of production on some of their land.
I was most grateful to my noble friend Lord Stodart of Leaston for, in effect, giving the answers to the other questions asked by the noble Lord, Lord Walston. Therefore perhaps all I need say in answering the noble Lord in a portmanteau way, is that we know about 10 per cent. of cereals land in Europe needs to come out of production if a scheme of this kind is to succeed.
The Earl of Onslow: My Lords, if I may interrupt my noble friend very briefly, would it not be possible to pay different prices to different qualities of farmers? Presumably one also wants some of the grade A1 land producing between 3½ and 4½ tonnes of feed wheat per acre to come out as well; so those people presumably will have to be paid more not to farm on such land than those who are perhaps producing only about two tonnes per acre.
Lord Belstead: My Lords, if I may say so, I think that my noble friend has put his finger on a very important point. For a scheme of this kind to succeed what we would need to do is to make sure that those who are the more marginal producers will come out of production and will take enough out of production to reduce the size of the cereal mountain. My noble friend Lord Stodart gave the figuring so far as this is concerned, and what I am saying to my noble friend Lord Onslow is that I believe we can have this particular scheme without having to take any large quantities of the very best cereal land out of production.
My noble friend Lady Elliot spoke of alternatives; and while novel crops and unusual livestock enterprises offer new uses for some land, we believe that the most promising large-scale alternative land-use in current circumstances is forestry. That was the option mentioned by my noble friend Lord Radnor, my noble friend Lord Stodart and the noble Lord, Lord Mackie of Benshie. After all, we remain short of timber and will continue to be so for the foreseeable future. The Community as a whole produces only half of its timber requirements, so there is a huge market to be exploited. We should like to see some planting taking place further down the hill on rather better land
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than at present. That would help to reduce agricultural surpluses as well as increasing timber production in England and also in Scotland and Wales.
We should also like to see the development of farm woodland as a complement to conventional agriculture. We know that we do not have such a tradition in this country, but the Government believe that there is an opportunity here for generating a useful source both of farm income and employment in the countryside. It is, of course, for individual farmers throughout the United Kingdom to make the key decisions in running their businesses. An increasing number are showing an interest in diversification and this could provide alternative employment, also an issue to which the noble Lords, Lord John-Mackie and Lord Gallacher, drew attention.
I know that I do not need to remind your Lordships of the very useful part which diversification can play in sustaining farm incomes and helping to ease the problems of adjustment which the industry now faces. Your Lordships will recall the very warm welcome which the House gave to the amendment in last year's Agriculture Bill, in response to my noble friend Lord Peel and my noble friend Lord Sandford, which empowered agriculture Ministers to make orders providing for a grant scheme for ancillary farm-based businesses.
But grants are not the whole story. I listened very carefully to the warnings of my noble friend Lord Wise about the care needed before a farmer plunges into diversification. Advice to farmers on the oportunities open to them to diversify from their existing base can often prove just as valuable as financial assistance from the Government. ADAS is already playing a major role here, working in close co-ordination with other agencies concerned with the welfare of the countryside, and we are committed to continuing to provide such advice in this important sphere.
May I just say how much I agreed with my noble friend Lady Elliot about the worth of adding value and of expert marketing, in a situation where food supplies are more than adequate and farmers need to produce as high a quality as possible for a specific market. I listened with great care to what my noble friend Lord Ridley said about restrictions on nitrogen, but I join with the noble Lord, Lord Mackie of Benshie, in scepticism about these restrictions and I do so on one simple ground. They would be indiscriminate. They would be inequitable, I think, without regard to the different response rates of crops or indeed of what crops were needing nitrogen; and very much the same thing would happen if you had a fertiliser tax or levy. And, of course, on a Community-wide basis which would be a necessity, it would be an absolute administrative nightmare. Nonetheless my noble friend was speaking about an important matter.
He also referred to another very important matter when he talked about the Nitrate Co-ordination Group's Report. But here may I say that, so far as nitrates in water are concerned—yes, agriculture is a contributor, but so is industry and so is sewage—an integrated approach is needed in dealing with this matter. The Government are not insensitive to this problem and the issue is under very active consideration.

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I also listened very carefully to what the noble Baroness, Lady White, said about planning. I think your Lordships will not expect me to comment on various reports in the media as to what the Government might have in mind about planning. But what I can say, and will say, is that the Government have repeatedly stressed their firm commitment to safeguarding the green belt. We are also firmly committed to preserving the best and most flexible land. This is an important asset if we are to respond to changes in the common agricultural policy while maintaining a healthy and efficient agricultural industry.
Finally, may I say that I felt that one of the things which showed the difficulty of the subject which we are addressing this evening—and I am grateful to the noble Lord, Lord John-Mackie—was the fact that my noble friend Lord Ridley, I think understandably, said what a good thing it would be if we now had more mixed farming instead of the single arable farms. Yet the noble Baroness, Lady White, and indeed my noble friend Lady Elliot of Harwood, both expressed the fears of some of the hill farmers that more people might go into livestock down the hill, and that their livelihoods in the hill would be endangered. My conclusion on that was how glad I was that this Government have stuck to supporting the hill farmers, and how glad I was that we had increased the size of the less favoured areas only two years ago.
For the last five years, the cost of the common agricultural policy has increased by some 15 per cent. every year. Something had to be done and it was done in December in the Council of Ministers. I do not pretend that the adjustments which agriculture now faces can be made overnight. But I believe that, with the same enterprise and dynamism that the industry has repeatedly shown in the past, it can continue to make its very important contribution to the national economy and to the wellbeing of our rural economy. The policies being pursued by the Government, which I have tried to set out in reply to this debate, are aimed towards that objective.
8.24 p.m.
Lord John-Mackie: My Lords, all I can say in winding-up the debate and in withdrawing the Motion is that it has shown very clearly that the problem is a critical one, as everybody who has spoken has agreed; and the Minister emphasised that in his final words. All I shall now do is thank everybody for taking part in this debate. We are very pleased that the Minister is seized of the problem and that he has well taken note of all we have said. My Lords, I beg leave to withdraw the Motion.
Motion for Papers, by leave, withdrawn.

British Sugar Corporation
8.25 p.m.
Lord Walston Lord Walston rose to ask Her Majesty's Government whether they are satisfied, in view of the uncertainty concerning the future control of the British Sugar Corporation, that the interests not only
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of British but also of Commonwealth sugar producers are adequately safeguarded.
The noble Lord said: My Lords, may I say at the outset how grateful I am to other noble Lords who have agreed to take part in what is, in effect, a short debate. It is particularly good—and I say this with no disrespect to my farming colleagues who will be speaking—to have contributions from those who have a great knowledge of the sugar industry and of the Commonwealth in one way or another but who are not themselves specifically farmers.
It would be of use if I were to describe, as briefly as may be, the more or less recent history of the sugar industry in this country. Roughly speaking, the sugar beet industry started during the first world war and at that time the British Sugar Corporation was set up as a public company with the Government owning 30 per cent. of the shares. It was the sole buyer of sugar from beet growers. Six or seven years ago, the British Sugar Corporation was acquired by the old established and extremely respected firm of Beresfords. There was no change from the point of view of the British grower of sugar beet.
The price prior to our entry into the Common Market was fixed by Her Majesty's Government after negotiation with the farming interests, and there was a free market for sugar with deficiency payments paid to the British Sugar Corporation by the Sugar Board on behalf of the British Government. So in that way the consumer got the advantage of sugar at world prices and the British sugar beet grower got the advantage of a remunerative and guaranteed price.
Since our entry into the Common Market the system has remained essentially the same, though the price has been fixed by the Community instead of by the British Government, and the negotiations have been with sugar producers in other member states and not solely with our own. In lieu of a deficiency payment there has been a protected market to ensure that the price paid to the farmers was an adequate one, and that the margin received by the British Sugar Corporation and the sugar factories in other parts of the Community was also remunerative.
So far as what are now called the ACP countries are concerned, in the days before our entry into the Common Market the Sugar Board bought cane raws from the Commonwealth countries under the terms of the Commonwealth Sugar Agreement. Here I wish to pay tribute to my noble friend Lord Campbell of Eskan, who was, I think everybody would agree, the father, progenitor and guide of the Commonwealth Sugar Agreement.
The Commonwealth sugar cane producers, like the beet producers in this country, therefore had a guaranteed price for a specified quantity of their cane raws. Those were brought into this country as having the only capacity within Western Europe as a whole for refining the raws. This was done very largely through Tate and Lyle and Manbre and Garton, who later amalgamated with Tate and Lyle. The price at which the sugar was sold was based on the world price—this was before our entry into the Common Market—with the equivalent of a deficiency payment being paid by the Sugar Board to the refiners. Since our entry into the Common Market, that has been

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modified to some extent to take care of the new situation.
Essentially, however, the situation remains the same. Those Commonwealth countries with one or two additions, now known as the ACP countries, continue to sell their raws in this country, where they are at present refined by Tate and Lyle. The margin for that refining is agreed by negotiation with Brussels.
To put the general picture into perspective, the present UK consumption of sugar is approximately 2·2 million tonnes, of which approximately one-half is produced from home produced beet; the other half is produced from imported cane from the ACP countries.
A couple of years or so ago a large and respected food wholesaler showed an interest in acquiring the British Sugar Corporation—now of course owned by Berisford. This company withdrew when it learnt that the bid was to be referred to the Monopolies Commission.
Since then two contenders for the acquisition of Beresford—which for the purpose of this discussion is the same as the British Sugar Corporation—have appeared for Berisford's hand and have made bids, one being the Italian firm of Feruzzi and the other being Tate and Lyle.
Ferruzzi is a very large and successful private company based in this country, where it has a virtual monopoly of Italian sugar. It has extremely large interests in French sugar also. It is worth pointing out that not only is France the largest producer of beet sugar but it has far and away the largest export of the surplus.
I think there is hardly any need to describe Tate and Lyle to your Lordships. Its role in sugar is well known. It also is a very large and very well run company which has been in existence, I think I am right in saying, for something like 100 years. It has concerned itself mainly with cane but it also has considerable interests in the United States in beet sugar as well as various other activities. Today it is the sole refiner of sugar cane in this country and, indeed, as I have said, in the Community.
If either of these companies acquired the British Sugar Corporation, there can be no doubt that something very close to a monopoly of one kind or another would be created. If Ferruzzi were to acquire British Sugar, there would be a monopoly in this country of British Sugar as there is at present through the British Sugar Corporation but owned by a company based in Italy; and one, as I have said, which also has a very large interest in French and Italian sugar. But it would in fact be controlling over 25 per cent. of the total sugar of the EC.
If Tate and Lyle were to acquire the British Sugar Corporation, there would be a virtually entire monopoly in the hands of Tate and Lyle of British sugar, giving it something like 16 per cent. of the total sugar within the Community but of course subject to competition from other Community sources.
There is a fear, which has been expressed in public by Tate and Lyle, that if Ferruzzi were to acquire Berisford—British Sugar Corporation—it would be in
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a position, if it so wished, to import into this country, consistent with the EC rules, some of its very substantial surplus in France and there could ensue, as there did a couple of years ago to a rather minor extent, a price war which, if carried to its ultimate limit, could result in Tate and Lyle having to give up the refining of cane raws.
Ferruzzi counter that by saying it is extremely unlikely that this would ever take place. However, if it were by any chance to take place, and if Tate and Lyle decided to give up refining cane raws, it could perfectly easily do the refining in British Sugar Corporation factories by the addition of a certain amount of storage and certain modifications to its plant.
Therefore it is the claim of Ferruzzi that the firm obligations undertaken—and this point must always be borne in mind—by the Community in response to the very strong efforts of Her Majesty's Government of the time, and particularly of Mr. Geoffrey Rippon, for the continuation of the Commonwealth Sugar Agreement to take, buy and refine the 1.1 to 1.2 million tonnes of ACP sugar, should still be met. Ferruzzi also claims that it is interested in wider aspects of European, and of course United Kingdom, agriculture and has the capability as well as the desire to develop new crops, such as lupins. Ferruzzi suggests that possibly that gives it the edge over Tate and Lyle in its ability to promote British agriculture in general. I may say that I believe that some of these claims are disputed by Tate and Lyle, but I am trying to put the conflict objectively.
There is one further point, a fairly remote one, which—it may be five or 10 years ahead—is of considerable interest and importance. It concerns biotechnology. We have heard a lot from time to time about biotechnology. It is now on the edge of take-off. The raw material for this is sugar or starch. The starch comes largely from cereals. As we know only too well, the EC has a large surplus of both sugar and grain. Therefore any development in biotechnology will cause rivalry between the producers of sugar and the producers of grain. Biotechnology is something in which Ferruzzi has a great interest. If it develops as some people believe it will within the next 10 years, it is probable that that development would be centred in the country which has the largest excess of sugar; in other words, in France. That would be to the detriment of those firms in this country who are not connected with sugar but who have a long-term interest in biotechnology.
It is extremely hard to weigh up the merits of these two contenders, though I must confess that having studied it in considerable detail I have some preference for Tate and Lyle. I hope that that preference is not due to any chauvinistic prejudice but rather due to my interest in the Commonwealth and in the ACP countries, and the knowledge that Tate and Lyle have for many generations now exemplified to the Commonwealth sugar producers their outlet into Europe. If they were in any way threatened or if their future ability to fulfil their refining commitments was threatened, it would have a very adverse effect upon the attitude of Commonwealth countries who still look to us if not as their godmother at least as a very important factor in their economies.
Surely the best interests of the United Kingdom sugar producers and the producers of the ACP countries as well will not be served by creating a great monopoly, whether it be a UK-based monopoly with Tate and Lyle or an Italian-based monopoly with Ferruzzi. We should enable the British Sugar Corporation to continue as it has done in the past as an independent entity, being very efficiently run, developing the sugar beet industry in this country and continuing to serve the interests of the British sugar beet producers, while Tate and Lyle continue to serve the interests of the Commonwealth producers.
I hope that at the end of the day the Government will decide that the British Sugar Corporation can remain independent of either of those two great and efficient concerns. If the Government do not wish to rethink their 30 per cent. interest, they should at least have some form of share arrangement to ensure that the future of the British Sugar Corporation continues on the lines that have served the industry so well since the inception of the sugar beet industry in this country.
8.45 p.m.
Lord Campbell of Eskan: My Lords, I am particularly glad that my noble friend Lord Walston has so cogently raised this Question on an issue which the late Dr. Eric Williams, Prime Minister of Trinidad and Tobago, always called "The wars of the two sugars".
The future of the sugar industry in this country really cannot be separated from the pledges repeatedly given to the suppliers of cane sugar. Thirty-five years ago the Commonwealth Sugar Agreement was signed, and that agreement, negotiated with a Labour Government and signed by a Conservative Government, was heralded as the charter for cane sugar. It marked the beginning of the bipartisan policy of successive governments towards this issue. The spur to the hammering out of this charter following the war was the deplorable conditions on the sugar plantations. Britain was the foremost of the metropolitan countries which founded their cane industries, many of them in unpopulated areas, on slavery. Slavery was followed by cheap indentured labour and that was followed, in turn, by disgracefully low pay to the descendants of slaves and indentured workers. Therefore there are still obligations outstanding to the people of those countries.
In 1960 the Commonwealth sugar exporters, in concert with their governments, pressed for adequate safeguards for the continued access of cane sugar when Britain joined the European Economic Community. It was more or less said that they would try to arrange to get the fruits of the Commonwealth Sugar Agreement through the Community. The safeguards were eventually achieved through the Sugar Protocol which formed part of the negotiations between the Community and the developing countries.
In retrospect, it may now seem that the protocol was the inevitable successor of the Commonwealth Sugar Agreement. However, I can assure your Lordships that it was the result of a very hard-fought struggle by the cane producing countries over several years and, at the climax of the British entry negotiations, a valiant and successful struggle on the part of the then Chancellor of the Duchy of Lancaster, the right honourable Geoffrey Rippon, who was leading the British team.
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In the end, Parliament attached sufficient importance to the sugar issue to make it one of the three main conditions of British entry. Had sugar not been specially provided for, we might well now not be a member of the Community, for better or for worse.
Far-reaching assurances were given to the Commonwealth suppliers during Britain's entry negotiations. We have a great list of the assurances that were given, the exact words used and the dates on which they were used. However, I shall not waste your Lordships' time on that now. I shall only say that the developing countries were categorically assured that they would have a secure and continuing market at fair prices for that amount of their sugar guaranteed by the Commonwealth Sugar Agreement. They accepted that as what they called a bankable assurance. Incidentally, they were also given specific assurances relating to the position of cane sugar imports should European quotas for beet sugar be increased. They have been increased and nothing has been done about cane sugar. However, that is not the issue we are now discussing.
Since Britain's entry and the coming into force of the Sugar Protocol, Ministers of Agriculture of both Labour and Conservative governments have repeatedly recognised the importance to the supplying countries of their traditional outlets in the United Kingdom. They have said that they would not pursue policies which endangered those outlets.
The British sugar market continues to be absolutely vital to what are now called the ACP countries—the African, Caribbean and Pacific countries. In islands such as Mauritius, Fiji and St. Kitts, and in some mainland countries such as Guyana and Swaziland, sugar remains by far the most important industry and the main provider of foreign exchange and employment.
Promises were given to those countries and I believe that it is our responsibility to ensure that they are honoured, not only in the letter but in actual practical terms. As the noble Lord, Lord Walston, has said, this means that the cane refining industry in this country must continue to exist. It would be hypocritical and indeed untrue to maintain that the undertakings to the ACP countries have become a matter for the Community as a whole and are no longer the special responsibility of Britain. This country has by far the largest import requirement for sugar and also by far the largest cane sugar refining industry in the Community. If we renege on our commitments, the other members of the Community could not and would not make good our breach of faith.
It would also be unrealistic to maintain (and this is at the heart of the present discussion) that the future ownership and policies of the British beet sugar industry are irrelevant to the implementation of the cane sugar guarantees. Continental Europe has a beet sugar surplus of some 4 million tonnes a year. If a single entity were to control both a substantial proportion of Continental beet sugar production and the whole of the British beet sugar industry, its position would be overwhelmingly strong as against that of the cane sugar refiners.
Tate and Lyle's last two remaining refineries in London and Glasgow constitute the only bridge over which ACP sugar can continue to enter Britain in the

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required guaranteed quantities. Therefore if the undertakings given to the developing countries and the developing sugar suppliers are to be honoured in substance, it is essential that the cane refining industry should be able to survive.
I know that it has been said, and it is a point which has been mentioned by Lord Walston, that cane sugar can be processed in the British beet sugar factories should the Tate and Lyle refineries be forced to close. It is easy enough to say this, but it would be quite another matter to make it a genuine alternative. I do not believe that it is a genuine alternative. For one thing, this would mean that the ACP suppliers were totally dependent upon their main competitor for processing their product. No one could regard this as a permanently viable solution. Also, the ACP do not have large storage facilities. They produce their sugar at different times of year. It has to come in a regular flow to refineries here. The storage and transport problems would be enormous if ACP sugar were to be shipped throughout the year at acceptable freight rates. There is not the storage facility and freight would be very difficult to arrange while beet sugar factories can only process cane sugar out of their own beet season.
I know too that it has been suggested that ACP would be equally dependent upon their main competitor if Tate and Lyle were to acquire the British Sugar Corporation. However, their situation would be entirely different. Tate and Lyle are not going to close their refineries and process ACP sugar in beet factories. Their whole history and recent action and capital expenditure on their refineries demonstrate a real commitment to the cane sugar producers and deep understanding of their problems. They are themselves cane sugar producers in a large way.
Whatever the control of the British beet sugar industry, there is no doubt that Parliament and the British Government continue to bear the financial responsibility of ensuring that the promises given to the cane sugar supplying countries should be fulfilled. My deep and continuing concern is that nothing should be done which could make it impossible to honour these commitments in future. It would be possible to keep on saying that the commitments will be honoured, but to take steps which make the machinery non-existent and prevent cane sugar coming into this country. It is all easy to say that no one need worry because this or that organisation has given the necessary assurances. My fairly long experience is that when people get the whip hand they give short shrift to assurances given in the past.
It has also been suggested that an easy way out would simply be to pay suppliers less for their sugar. But this would go against the whole pattern of the Commonwealth Sugar Agreement and the Sugar Protocol under both of which guaranteed prices were an integral part of the access commitments.
Under both the Commonwealth Sugar Agreement and the EC protocol guaranteeing access has always been linked to guaranteed prices. Indeed, either would be valueless without the other. As all the other participants in the EC sugar regime, the beet farmers, the beet processors and the cane refiners must receive
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adequate remuneration, so must the suppliers of cane sugar. The promises which have been made to the supplying countries are promises of Parliament. We all have a direct responsibility to ensure that the means of honouring them are maintained.
8.53 p.m.
Lord Mackie of Benshie: My Lords, I cannot add anything to the expert speeches which have been made by my noble friends. However, I should like to approach the subject from the Scottish point of view. The refinery in Glasgow and Greenock is extremely important to that run-down area.
The Government must take their responsibilities seriously because we in Scotland have already had the appalling example of Guinness taking over Distillers and making promises. Immediately Guinness acquired the shares (apparently by somewhat dubious means) the promises were broken. For this reason, there is no question that the arguments for leaving the competition as it is are very, very strong. I hope that that is the reply which the Government will give.
8.54 p.m.
Lord Greenhill of Harrow: My Lords, I should like to make a brief intervention in this debate in support of the noble Lords, Lord Walston and Lord Campbell of Eskan. I do not have any knowledge of the sugar industry, but I have recently had the privilege of visiting Barbados through the courtesy of the Commonwealth Parliamentary Association. The question of the future of the sugar industry was much discussed when we met leading Barbadians. The Prime Minister of Barbados had just returned from London where he had had discussions both with people concerned in the sugar industry and the Prime Minister.
Travelling around the island of Barbados it is very plain to see how far the sugar plantations have contracted. It is not unusual nowadays in many countries—not least in our own—to see the signs of the decline of traditional industries. This is certainly so in Barbados.
I understand from conversations that there is no agricultural alternative in Barbados to the sugar industry. Various experiments have been made with only moderate success. The chances of a significant manufacturing industry in Barbados are necessarily very slim. You may say it has a very flourishing tourist industry, which is indeed true. They have concentrated on the upper part of the tourist market. We know very well from our own experience that it only requires one or two acts of terrorism or events such as have recently happened in Puerto Rico to make a hole in the proceeds of one tourist season. Although the industry is good and flourishing, it is undoubtedly a vulnerable one.
As has been pointed out, the deal which was made when we entered the Community for the Caribbean sugar producers was not an unsatisfactory one in all the circumstances. It has been accepted with good grace by the people of the area but it has created problems. It has reduced the demand for cane sugar and this has been complicated by the end of the important United States quota for Caribbean sugar.

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Therefore, it is for political reasons (quite apart from any other reason) that we do nothing to make the situation in this area more difficult. As has been so well explained, the fear that haunts the people of the area is that the refining capacity of this country will somehow go by the board as a result of arrangements made in the short or long term between Ferruzzi and Tate and Lyle and others.
The case for some reassurance is absolutely clear and I quite agree with the noble Lord, Lord Campbell of Eskan, on the importance which he attaches to this matter. Since independence, Barbados has managed its affairs politically and economically well. Its resources are limited and we should do our best to help them.
It is clear from talking to the people in that area that they believe the interests of this country in Barbados and the Caribbean on the whole are diminishing. I do not believe that that is the intention of Her Majesty's Government or the people of this country—indeed, I am sure it is not the intention. But help to the sugar industry at this time would be the clearest indication that the impression that the people of the area have is erroneous.
9 p.m.
Lord Pitt of Hampstead: My Lords, I should like to thank the noble Lord, Lord Walston, for introducing this Unstarred Question. I am happy to be following the noble Lord, Lord Greenhill, because he has, in effect, illustrated the point I want to make. He has described the plight that could face one of the territories in the Caribbean whose major export is cane sugar.
It is not unfair to say that Barbados is one large sugar estate. Therefore, what happens to its sugar is of vital importance to that island. As the noble Lord, Lord Greenhill, has told your Lordships, Barbados is a well run island within its capacity. In fact, it is no secret that I have often said that if Barbados had Trinidad's money, then Barbados would be heaven.
Access to the United Kingdom market at guaranteed prices for the traditional quantity of Caricom sugar is vital to the economy of that area. Cane sugar production is a labour-intensive activity and the industry is a major employer in almost all the Commonwealth Caribbean countries. It is a vital factor in respect of foreign exchange earnings. Admittedly, Barbados has tourism. Many of the islands have tourism to add to their earnings, but as the noble Lord, Lord Greenhill, pointed out, they could lose that foreign exchange from tourism. Foreign exchange earnings are crucial for the social and economic development of those countries and—something I have often spoken about—for their debt servicing.
A fair number of service industries depend on a variable cane sugar industry. There is a multiplier effect. As the noble Lord, Lord Campbell of Eskan, said—I am not as reticent as he, so I shall underline it—many assurances have been given by successive British governments since the Lancaster House conferences of 1971 and 1973 which followed our application to join the Common Market. In 1980, Mr.
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Peter Walker, then Minister for Agriculture, reiterated that assurance. On 20th February 1985 renewed assurance was given to ACP Ministers by the present Minister for Agriculture, the right honourable Michael Jopling, that the United Kingdom Government fully understood their interests and the importance of this question to the islands. Similar assurances were given to ACP Ministers when they met Mr. Jopling again in February 1986; so we have full assurances that the Government recognise the problem and that they are prepared to stand by the Caribbean.
The Lomé guarantee of access is likely to lose all force, and the point made by the noble Lord, Lord Campbell, is important. If Tate and Lyle is in jeopardy and the United Kingdom loses its cane refining industry—the cane refining industry is run by Tate and Lyle—the guarantee loses much of its force.
From the Caribbean point of view—and it is from that point of view that I am speaking tonight—disruption of this industry will lead to social unrest, threatening the stability and security of the region. As I said, the industry is a major source of foreign exchange. Your Lordships must not underrate that. Maintaining a strong economy in those countries redounds also to the benefit of the United Kingdom because we have close historical links with the area.
A number of British firms are actively engaged in infrastructural and other developing activities there. A number of students from those countries are still sent here for higher education, in spite of heavy increases in overseas student fees. They come here particularly to study in the areas of advanced technology, including computer engineering. Therefore, these British firms and institutions would be affected if countries were unable to earn the revenue to pay.
Recently, the Minister of State at the Foreign Office, the noble Baroness, Lady Young, gave an assurance, which I am sure the noble Lord, Lord Greenhill, also gave when he was in Barbados, of Britain's continuing interest in and support for the Caribbean area. In fact, the noble Baroness is showing it in a practical way because I understand she is at the moment in the region. It is in Britain's self-interest, just as it is in the interests of the Caribbean, that the area should not be allowed to disintegrate.
Britain is one of the few member states of the Community where domestic production of sugar is virtually in balance with consumption. Nevertheless, it is worth noting that the marketing is open to competition from imports, both actual and potential, from other member states whose quota production far exceeds their consumption. The noble Lord, Lord Walston, referred to France, and that is a good example. There are massive surpluses in France which pose an enormous threat to the two British manufacturers, British Sugar and Tate and Lyle.
In spite of that, in the negotiations for entry into the EC, it was Britain that rightly insisted that preferential access should be given to raw cane sugar from the small developing countries of the Commonwealth which had long been Britain's traditional suppliers. As mentioned earlier, that access for just over one million tonnes now represents a solemn commitment for the Community and takes the form of the sugar protocol to the Lomé Convention. Nevertheless, it has not

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prevented the Community from producing at high cost massive surpluses of sugar which are put on to the world market and which severely depress prices and the income that third world farmers are able to earn. However, that is a question for another debate and we shall not pursue it this evening.
Your Lordships can thus see what happens to those areas of the Caribbean. They have the limited access which is traditional and guaranteed. They have that market, but the rest of their sugar is put on the world market to be sold in competition with sugar that is dumped by the EC. So, in effect, the only real guaranteed prices that those countries have for their sugar are the prices that they obtain through the Lomé agreement.
A change of ownership of British Sugar could put the ACP quota at risk. That is the real worry, because under the EC regime a cane sugar refiner is allowed a refining margin which falls far short of that allowed for beet.
As mentioned earlier, particularly by the noble Lord, Lord Campbell, this country is the only country in Europe with the existing capacity to refine the ACP cane. The continued viability of cane refining in Britain is at grave risk in terms of profitability, return on investment and its reliance on volume throughput. It is a problem. Tate and Lyle is the company involved and therefore Tate and Lyle is important to the Caribbean countries. I am sure that if I were speaking for other parts of the Commonwealth I should be saying much the same, but I am speaking only for the part of the world that I know. It is of the greatest importance to the Caribbean that Tate and Lyle's capacity to refine raw sugar is safeguarded so that the traditional guaranteed markets can continue to exist.
I hope that when the Minister replies he will be able to give an assurance to the people of the Caribbean. Those of us who have taken part in Caribbean politics talk glibly about moving from sugar to other crops and broadening our economic base. But we always come back to the fact that, in many instances, there is no other crop.
9.12 p.m.
Lord John-Mackie: My Lords, I have had discussions with the three companies concerned and I must admit that Tate and Lyle and Ferruzzi almost convinced me that their cases were correct, but when I talked to British Sugar, the manager there pointed out to me that the situation had changed over the last year to 18 months.
At one time, Berisford had been hard up and that is why they wanted to sell their 70 per cent. share in British Sugar but they have recovered their financial situation and there is now no great necessity for selling. On this side of the House we are philosophically against mergers, especially with the present situation in the merger market, but the case for the ACP countries has been so ably made, not only by the noble Lord, Lord Walston, but also by the noble Lords, Lord Campbell, Lord Greenhill and Lord Pitt, that I do not need to say anything more about that.
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We are all very much seized of the importance to the ACP countries of raw cane sugar continuing to be refined in this country. The noble Lord, Lord Campbell, made that point, and of course Ferruzzi have shown a guarantee that they are prepared to give. However, they admit that to convert beet sugar factories to cane sugar refining at today's prices would cost somewhere around £40 million. As the guarantee lasts for five years it would probably cost twice that sum by the end of that time and, with the best will in the world, they might not have £80 million then to do it.
I do not see why Ferruzzi needs British Sugar in order to carry out the researches that it makes out that it would if it acquired British Sugar. Surely that and many of its other activities can be carried out without having British Sugar. From the meetings and discussions that I had, and after hearing what has been said tonight and the conclusion at which Lord Walston arrived, I came to the view that British Sugar should be left alone. The report is with the commission. We should leave the matter in the Government's hands and hope that they will take the right decision and leave the situation as it is.
9.15 p.m.
Lord Belstead: My Lords, this debate comes at an important time for the future of the United Kingdom sugar industry. I have listened with interest to the points made by your Lordships, most of whom are experts on this matter. I shall do my best to give a government reply. I must make one thing clear at the beginning. I am not in a position to disclose today the outcome of the as yet unpublished report of the Monopolies and Mergers Commission on the future of British Sugar.
The noble Lord, Lord Walston, said that sugar consumption in the United Kingdom, including sugar used in confectionery and other processed products, has remained relatively stable in recent years at just over 2·25 million tonnes per annum. There are two main sources of supply. British Sugar produces beet sugar up to its maximum quota of 1·144 million tonnes; and, secondly, Tate and Lyle refines about 1·15 million tonnes of cane sugar imported under preferential arrangements, which your Lordships have all mentioned, from the African, Caribbean and Pacific countries (the ACP states), in the main in this context Commonwealth countries. We also import relatively small quantities of refined sugar from the European Community and export a similar amount, mainly to third world countries.
Thus British and Commonwealth sugar producers each account for about 50 per cent. of domestic supplies available to meet the needs of United Kingdom sugar users and consumers. Safeguards exist to protect the interest of British and Commonwealth sugar producers.
As to the British producers, under the Community's sugar regime each member state is allocated a sugar production quota. The national authorities then allocate their quota among sugar producing undertakings in their country. Because we have only one sugar manufacturer, British Sugar, the entire quota is allocated to that company.

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I should make it clear that national quotas cannot be than by decision of the Council of Agriculture Ministers; in other words, it would not be possible for a company with sugar producing interests in more than one member state to transfer quota among its undertakings in different member states. Indeed, under Community regulations even transfers of quota between undertakings within a single member state can take place only as a result of a decision by the national authorities, and then only to a defined and limited extent. In deciding whether to transfer quota within its territory, national authorities are moreover required to take into account the views of all interested parties, and primarily those of sugar beet growers.
The price received by growers for their sugar beet from sugar manufacturers is protected by means of specified minimum prices which are fixed annually by the Council of Agriculture Ministers. Separate prices, as your Lordships will know, go to the manufacture of A or B quota sugar. Those minimum prices are derived directly from the intervention price for white sugar—the basic support price for sugar manufacturers—by subtracting elements representing the cost of beet processing and the value of the molasses by-product.
Subject to the minimum requirements, the actual price paid by British Sugar for its beet is the subject of annual negotiation with the National Farmers Union which represents the interests of all beet growers. Such negotiations take place within the context of an inter-professional agreement drawn up between British Sugar and the NFU. Inter-professional agreements and the form of contract between manufacturer and grower must comply with certain outline provisions set down in Community regulations. Those provisions deal in particular with general conditions governing purchase delivery, reception of and payment for beet. In the unlikely event of difficulties arising in the negotiation of contract prices or other terms or conditions relating to the purchase of beet between British Sugar and the NFU, my right honourable friend the Minister of Agriculture, Fisheries and Food, acting jointly with the Secretaries of State for Scotland and for Wales, has the power under Section 69 of the Food Act 1984 to determine or designate a person to determine the prices, terms or conditions concerned.
Sugar manufacturers are—as I am sure your Lordships well know—protected by more classical market support arrangements. An intervention price is fixed to set a floor to the market, imports of non-preferential sugar are subject to variable levies and exports of surplus quota sugar can benefit from export refunds.
In short therefore Community and United Kingdom legislation afford reasonable protection for the interests of both growers and manufacturers. Of course, that protection is not absolute in all respects, nor can it be. The interests of sugar users and consumers, and budgetary considerations, also have to be taken into account. For example, Community sugar beet prices have been frozen at the last three price fixings and in that time the effective support price for white sugar has increased by less than 1 per cent. in ecu terms. As with other commodities in surplus within the Community there is a need for price
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restraint. Despite this, however, sugar beet profitability has remained good relative to other arable sectors.
Perhaps I may say a further word on what your Lordships have been mainly talking about in this debate although the noble Lord, Lord Walston, in introducing the debate went across the whole scene. However, the thrust of most of the speeches of noble Lords has been to express concern about the cane sugar producers. I should like to say a word about them. The noble Lord, Lord Campbell of Eskan—who I realise has almost unrivalled experience in this field—spoke of the assurance which has been given to ACP countries in the past. Under the preferential arrangements established in the Sugar Protocol of the Lomé Convention there are these words:
"The Community undertakes for an indefinite period to purchase and import, at guaranteed prices, specific quantities of cane sugar, raw or white, which originate in the ACP States and which these States undertake to deliver to it".
Under these arrangements each ACP state is allocated a specific quota. Provided that it continues to supply its full quota, there is no risk of any reduction. If, however, an ACP state shortfalls on its deliveries in a particular year for any reason other than those outside its control—the expression is "force majeure"—then its quota for future years is reduced by the amount of the shortfall. The unused quota is then in practice redistributed among existing or new ACP supplying states by the EC Commission after consultation with the parties concerned.
Subject to the specified minimum prices fixed annually by the Council of Ministers, the actual price received by the ACP states for their sugar is the subject of negotiation between individual supplying ACP states and the buyer. However, the Community has undertaken to purchase at the guaranteed price any quantity of preferential sugar for which the ACP have been unable to find a commercial buyer at or above that price. ACP guaranteed prices for white and raw sugar are negotiated annually between the Community and the ACP states. The Sugar Protocol requires them to be fixed:
"within the price range obtaining in the Community".
It is fair to say that traditionally guaranteed prices have been fixed at or very close to Community intervention prices, and that with world prices being at very depressed levels for the past several years guaranteed prices represent a substantial premium over world prices.
There is one point that I should like to take up in the speech of the noble Lord, Lord Pitt. I understood the noble Lord to say that the European Community has a responsibility for the poor state of the world sugar market. I understood the concern which the noble Lord was expressing; but I am sure that he will agree that many factors have caused the poor state of the world market and that the Community has not been unresponsive to world market conditions. In the past it has taken action to help stabilise the market by putting part of exceptionally good harvests into stock and by cutting acreage. The latter has resulted in a fall in Community production from just over 15 million tonnes in 1981–82, to 12·7 million tonnes last year.

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The arrangements to which I have just been referring for guaranteed prices are of indefinite duration. Indeed, the Community has stated that, in the unlikely event that the Lomé Convention should at any time fail, the provisions of the Sugar Protocol would continue to apply. This evening I should also emphasise that Her Majesty's Government remain firmly committed to the Sugar Protocol of the Lomé Convention and recognise the importance attached by the ACP countries to their traditional outlets in the United Kingdom market. Her Majesty's Government's policies on sugar are therefore determined having regard to the need to maintain a reasonable balance between cane and beet sugar interests in the United Kingdom.
In summary, there are substantial and valuable safeguards for both British and ACP sugar producers. These safeguards are not absolute nor can they be, and it is necessary both for the producers concerned and for Her Majesty's Government to seek to ensure that circumstances do not arise that would prejudice this position, taking account of the other interests which I have already mentioned.
An example of where the position is not as certain as we would like it to be is the cane refining margin. This is one of the main factors which determines the profitability and ultimately the continued viability of cane sugar refining operations in the United Kingdom, and your Lordships have spoken about it this evening. Essentially this margin is the difference between the ACP guaranteed price for raw sugar—broadly the price Tate and Lyle pay for their sugar—and the United Kingdom effective support price for white sugar—broadly the return Tate and Lyle are able to get from the UK market.
I am sure noble Lords are aware that during the course of the negotiations for the ACP guaranteed price for 1985–86—which proved to be the most difficult and protracted negotiation of recent years—my right honourable friend the Minister of Agriculture, Fisheries and Food obtained a commitment from the EC Commission to review the cane refining margin and to submit a report to the Council of Agriculture Ministers. The Commission subsequently engaged a firm of consultants to carry out a study of the costs of refining, and the results of that study, and the subsequent report of the Commission, are awaited. We look to the Commission to make proposals which will allow the refining margin to be set on a fair and stable basis.
I should like to pick up a point made by the noble Lord, Lord Walston, in which he suggested that the prospects for the use of sugar in biotechnology were likely to be best in the Community member state which had the greatest sugar surplus; namely, France. I quite understand why the noble Lord said that, and there indeed is the major sugar surplus. I think it bears saying that since 1st July, 1986, when sugar was made available to the chemical and biotechnological industries at prices close to the world prices, there has been a modest but welcome increase in uptake in this country. Forecasts suggest that uptake in the UK could increase by some 50,000 to 100,000 tonnes by 1990.
Finally, perhaps I may say a word about the future
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of British Sugar. As your Lordships know, my right honourable friend the Secretary of State for Trade and Industry referred the proposed mergers of Tate and Lyle and Ferruzzi Finanziaria with British Sugar to the Monopolies and Mergers Commission because they raised issues of public interest arising from the special nature of the sugar market and British Sugar's place in it. The role of the Commission is to examine the proposed mergers in the light of comments it receives from all interested parties in the context of the relevant public interest matters, and to make a report and recommendations to the Secretary of State for Trade and Industry.
The report is now in the hands of my right honourable friend, who fully recognises the need to publish it and to announce any decisions as speedily as possible so as to remove the uncertainty over the future of British Sugar. But until the report is published your Lordships will understand that I really can make no further comment. I should however underline that the substantial safeguards for both British and ACP sugar producers which I have outlined will remain irrespective of the outcome of the MMC references.
House adjourned at half past nine o'clock

  AGRICULTURE MINISTERS' MEETING, 19th-20th JANUARY 1987
  AGRICULTURE MINISTERS' MEETING, 19th-20th JANUARY 1987
  GRENADA: DEATH SENTENCES
  GRENADA: DEATH SENTENCES