Sitting of 25 March 1987

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

    Westland plc
    Mr. McWilliamasked the Secretary of State for Trade and Industry when he intends to respond to the Trade and Industry Committee's report on Westland plc.
    Mr. Lofthouseasked the Secretary of State for Trade and Industry when he expects to reply to the report of the Trade and Industry Committee on Westland plc.
    The Secretary of State for Trade and Industry and President of the Board of Trade (Mr. Paul Channon): Yesterday I wrote to the Chairman of the Committee with the Government's response to the report.
    Mr. McWilliam: Will the Secretary of State tell the House whether that response contained an acceptance that an illegal concert party was in operation? Does he recommend that the Select Committee's view on transparency in share dealings should be taken so that such illegal activity is not possible in the future?
    Mr. Channon: It is for the Select Committee rather than for me to reveal the exact reply that I gave, but I can tell the hon. Gentleman—I do not think that the Committee will mind if I do—that it made two recommendations, one of which related to the disclosure of material interests. I said that those were being examined under the review of the operation of the takeover panel that I announced to the House on 28 January.
    Mr. Lofthouse: Is the Secretary of State aware that Government policy has led to the loss of 1,800 jobs at Westland? Does he think that Government aid will be required?
    Mr. Channon: I have no reason to assume that the company will require Government aid. The company had an extremely good year last year, and I hope that it has a prosperous future ahead of it.
    Mr. Warren: I was very pleased yesterday to receive my right hon. Friend's reply, which has been placed before the Committee. We shall be considering his response, and I hope that the Government will not hesitate to make the kind of progress that the Committee has called for, especially in relation to business ethics, with which the Committee is particularly concerned.
    Mr. Channon: I hope that the review will be completed by the end of April. I shall inform the House of the Government's conclusions at a very early date.
    Sir Peter Emery: Does my right hon. Friend agree that if we are to be able to obtain information about the ultimate beneficial owners of shares hiding behind nominees and other banks, we shall need legislation to bring that about?
    Mr. Channon: That may well be so. I would not rule that out. However, I should like to wait for the review before making recommendations to the House.
    Mr. Crowther: In view of the undertaking that the Secretary of State has already given about limiting the ownership of Rolls-Royce shares to 15 per cent., is it not essential that legislation on the lines just referred to should be introduced before he proceeds with the privatisation of Rolls-Royce?
    Mr. Speaker: Order. There is another question about Rolls-Royce. This question is about Westland.
    Mr. Crowther: With respect, Mr. Speaker, the recommendation concerns not only Westland, but companies in general. I submit that my question is in order.
    Mr. Speaker: I think that the hon. Gentleman should reserve his fire until we reach the question on Rolls-Royce.
    Dr. Hampson: Does my right hon. Friend agree that the prospects of the helicopter division of Westland are linked closely with European collaboration? Will he confirm rumours in Europe that the British Government are not to proceed with collaboration on the NH 90?
    Mr. Channon: With respect, I feel that that is a matter for my right hon. Friend the Secretary of State for Defence. I know that my right hon. Friend intends to make a statement to the House about helicopters soon.
    Mr. Robin Cook: Does the Secretary of State recall assuring the Select Committee a year ago this month that he was watching the stock exchange inquiry "like a hawk"? Now that the stock exchange inquiry and the Select Committee have both concluded that the absence of a concert party strains their credulity, would it not he appropriate for him to try swooping "like a hawk"? Is it not now abundantly clear to those who want to see that the Sikorsky deal was secured by Rupert Murdoch and Lord Hanson being prepared to pay over the odds for enough shares to secure the result that the Prime Minister wanted? Is not the real reason why there was no DTI inquiry into those share dealings that they both had more influence at Downing street than the Secretary of State for Trade and Industry?
    Mr. Channon: If the hon. Gentleman believes that, he will believe anything.

    Budget Proposals
    Mr. Thurnhamasked the Secretary of State for Trade and Industry what effect he estimates the Budget proposals will have on the level of United Kingdom trade and commercial activity during 1987.
    The Minister for Trade (Mr. Alan Clark): I expect the Budget proposals to contribute to a seventh successive year of growth in the economy.
    Mr. Thurnham: Does my hon. Friend agree that the latest CBI survey bears out the Chancellor's statement that the prospects for output and exports are now better than

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    they have been for many years? Should not the Bank of England follow the lead of my right hon. Friend the Chancellor of the Exchequer and reduce interest rates further, which would be of particular help to manufacturing industry in the north?
    Mr. Clark: My hon. Friend is right about the survey, which was carried out before the Budget. The responses on order books and the expectation of future output were higher than at any point in the history of the survey. I have little doubt that next month's figures, which will be based on a survey after the Budget, will show an even higher level of confidence. Nor is that confidence confined to the United Kingdom. My meetings abroad, with such hardheaded judges as the Swiss and the Germans, show that they also believe that permanent and beneficial changes have taken place in the United Kingdom economy.
    Mr. James Lamond: What does the Minister say about the value of the pound against foreign currencies? Is he satisfied with its current rise? Does he have any view on how far it should rise before it becomes counter-productive?
    Mr. Clark: Hello! I thought it was only a few months ago that the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) was predicting a sterling crisis because the value of the pound might fall. Perhaps he and the hon. Gentleman should have a quiet word about the appropriate angle of approach on this subject.
    Mr. Beaumont-Dark: Does my hon. Friend agree that he might he being unfair to the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley), who predicted a stirling crisis, because the excellent policies that we are now following means that the pound is bound to be strong? Does he also agree that in this excellent Budget the Chancellor of the Exchequer did not want interest rates and the pound to go too high? Would not our best hope be for the Bank of England to follow the Chancellor's excellent lead?
    Mr. Clark: We have many expectations and hopes, and whether that is the best my hon. Friend may be able to judge better than me. What is certain is that matters relating to the exchange rate and the value of our currency are entirely for my right hon. Friend the Chancellor of the Exchequer.
    Mr. John Smith: I hope that it will not have escaped the Minister's attention that the Chancellor predicted that at the end of 1987 our deficit on the balance of trade in manufactured goods will be £8 billion. What does the hon. Gentleman say about that? Does he agree with the Chancellor, who said, from a sedentary position, that that was neither here nor there? Does the Department of Trade and Industry share that thoroughly irresponsible view of the handling of Britain's economy?
    Mr. Clark: Certainly, if there is one element in our trading affairs that is less satisfactory than others, it is that relating to manufactured exports and the balance of trade for manufactured goods. We do not deny that. However, that the Opposition should make such a meal of it, singling out the one element in our trading picture where they can find a deficit, is entirely unjustified. Our trade position has to be looked at in its entirety. Our manufacturing output continues to increase. It will increase by 4 per cent. Next
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    year. As my right hon. Friend the Chancellor said in the Budget debate on Monday, the prospects for an improvement in that sector are increasing.

    National Quality Campaign
    Mr. Cashasked the Secretary of State for Trade and Industry if he will make a statement on his Department's national quality campaign.
    The Parliamentary Under-Secretary of State for Trade and Industry (Mr. John Butcher): The campaign was launched in 1983 to raise British industry's awareness of the importance of quality for economic success, to help firms to raise the level of their quality performance and to enable firms to demonstrate their achievements. To date, over 50,000 firms have been contacted through the campaign, and there is no doubt that Britain's quality performance has improved as a result. Nevertheless, much remains to be done, and the commitment of all sections of industry and commerce to quality remains vital.
    Mr. Cash: Does my hon. Friend agree that all the advantages that we have with regard to increased competitiveness, lower interest rates, and lower inflation, and the advantages in price and the other things that go with it, could be set at naught if we do not achieve the highest quality possible in our goods and services, so that we can beat off the foreign imports on our own terms and show, as we used to in the past, that "Great Britain" means "great" in manufacture and services?
    Mr. Butcher: I am sure that my hon. Friend will celebrate with me the recent figures, which show that the rate of growth of manufactured exports is slightly higher than the rate of growth of imports. I am sure we all hope that that trend will continue for the foreseeable future. My right hon. Friend is also right in linking non-price factors, such as improved quality and design, as part of the cause of that healthy trend. The national quality campaign has been the key in changing attitudes in British industry.
    Mr. Peter Bruinvels: May I congratulate my hon. Friend on an excellent quality campaign? May I reassure him that "Best made in Britain" is a good policy? Our companies are competitive. Provided we deliver our goods on time, even in Leicester, we have much to celebrate. The campaign should be supported by the Opposition, because it ensures that British goods are the best made and the best for our country's future.
    Mr. Butcher: My objective is to double the number of companies that take part in the national quality campaign, by implementing quality programmes within companies. This year we shall also take a more targeted approach, concentrating on and helping major companies and their suppliers, concentrating on individual sectors and also involving regional campaigns in the approach.

    Rolls-Royce plc
    Mr. Nellistasked the Secretary of State for Trade and Industry what arrangements he has made to discuss with the trades unions of Rolls-Royce plc the consequences of privatisation.
    The Minister for Information Technology (Mr. Geoffrey Pattie): None. Relations with the Rolls-Royce trades unions are a matter for the company.
    Mr. Nellist: Why will the Minister not meet the Rolls-Royce trade unions if, as other Ministers have stated, they believe that most workers in the company are in favour of privatisation? Why will he not meet them to explain that the Government are writing off £645 million of company debt effectively to give away Rolls-Royce, and that the management is planning to close the East Kilbride works, threatening 2,500 jobs, and generally to run down the business's dependence on aero engines, threatening thousands of jobs? Why will he not meet the unions to explain those real consequences of privatisation?
    Mr. Pattie: At the press conference last week the chairman of Rolls-Royce specifically denied the East Kilbride allegations as having no foundation in fact. The answer that I gave to the hon. Gentleman still stands—relations between the trade unions and Rolls-Royce are a matter for the company. The Rolls-Royce employees are well aware that their order book is now standing at higher levels than ever before. The prospects are better than they have ever been.
    Mr. John Mark Taylor: Does my hon. Friend agree that it would be more useful if the trade unionists from Rolls-Royce met their brothers from Jaguar and had a word with them about the privatisation experience?
    Mr. Pattie: That is a sensible suggestion by my hon. Friend.
    Mr. Wrigglesworth: Does the Minister accept that there is a national interest here which must be protected and which led to Rolls-Royce being brought into public ownership in the first place? Will he therefore reconsider his plans and retain at least 50 per cent. of the shares in public ownership, thereby enabling the employees to have a share of their own company and enabling private capital to be brought in as well?
    Mr. Pattie: No, there is no case for that. I notice that the hon. Gentleman is sitting on the 50 per cent. fence in this case. Rolls-Royce needs to be free of public sector control to be able to make its way successfully in the private sector, and we have every confidence that it will do well.
    Mr. Warren: My right hon. Friend is well aware of the excellent relationships that generally exist between the trade unions and management of Rolls-Royce. Referring to the order book that he mentioned, will he assure me that, as privatisation approaches, there will be a clear declaration by the Government, heard by the employees, managers and shareholders — the public — that the contracts into which Rolls-Royce has entered, such as those for the V2500 and the Superfan engine, will be indemnified by the Government against any consequential problems?
    Mr. Pattie: The V2500, as my hon. Friend well knows, is the subject of launch-aid already; and that should effectively dispose of his question on that matter.
    The Superfan is the subject of a later question on the Order Paper.
    Mr. Park: As the employees of any company determine its success or failure in the final analysis, has the Minister no concern for the fact that Rolls-Royce has made no attempt to explain the possible implications of privatisation?
    Mr. Pattie: That is not the in Formation that I have. The management of Rolls-Royce has assured me that it has carried out an extensive programme in all its plants of explaining exactly what the implications of the policy are, by means of fortnightly employee meetings and printed material. I shall be happy to obtain some of that material and send it to the hon. Gentleman if he wishes.
    Mr. Robert B. Jones: Will my right hon. Friend draw a distinction between the official position of the unions on this matter and the steady stream of employees from Rolls-Royce who have come to my surgery and to the surgeries of hon. Members representing neighbouring constituencies wanting to know when they will get the opportunity to buy shares in their own company?
    Mr. Pattie: I am sure that my hon. Friend is giving only the latest example of what has happened in other privatisations. The work force will seize the opportunity to participate in an undertaking, which is, after all, something in which it is involved.
    Mr. Crowther: Before proceeding with the privatisation of Rolls-Royce, is it not essential for the Government to introduce legislation requiring the disclosure of voting rights in shares? Such legislation should be on the lines suggested in an earlier report, which I shall not mention. If the Government do not, how can they guarantee the undertaking that they have already given — that not more than 15 per cent. of the shares in Rolls-Royce will be allowed to pass into foreign ownership—if foreign companies acquire shares through British nominees?
    Mr. Pattie: We shall he taking steps in the privatisation to ensure that there is a 15 per cent. limit on any single shareholding, be it foreign or domestic.
    Mr. Phillip Oppenheim: Does my right hon. Friend agree that the history of privatisations has been one of great benefit to the companies that have been privatised, to their work forces, to the economy and to the taxpayer, who gains twice: once when the shares are sold and secondly when the increased profits of privatised companies are taxed?
    Is it not true that privatised companies do not have the monopoly of job losses? After all, under previous Labour Governments, nationalised industries, such as steel and coal, took more than their fair share of job losses.
    Mr. Pattie: My hon. Friend is right. The list of successful privatisations in which productivity, performance and employee participation have increased to a remarkable extent bears eloquent testimony to the success of the policy.
    Mr. Terry Davis: Will the Minister confirm that although Rolls-Royce has denied that it is actively considering the closure of its East Kilbride plant, it has been revealed that the document referring to that has been superseded by another, which refers to rationalisation at several places in the United Kingdom? Will he confirm that there is a widespread fear that such rationalisation will inevitably lead to redundancies?
    If the Minister is to commend the suggestion by the hon. Member for Solihull (Mr. Taylor), that the trade unionists of Rolls-Royce should talk to their brothers at Jaguar about privatisation, should not the same trade unionists also speak to their brothers at Coventry Climax about their experience of privatisation?
    Mr. Pattie: The hon. Gentleman will be aware of the press reports which I also saw last week referring to East Kilbride. As I said in my original answer, the chairman of the company went to great lengths to deny these allegations and to say that the document was no more than a management exercise by someone at a rather junior level in the company.

    Nationalised Industries
    Mr. Forthasked the Secretary of State for Trade and Industry how much his Department will be spending on support for nationalised industries in 1986–87, as compared with 1978–79.
    Mr. Channon: The total external financing requirement for the Department's nationalised industries is expected to be £177 million in 1986–87, compared with £845 million in 1978–79. This is a reduction of nearly 90 per cent. in real terms.
    Mr. Forth: Does my right hon. Friend agree that these excellent figures are the result of determined Government policies and effective management of these industries over the years? Does he also agree that these reductions have enabled resources to be released which are much better and more effectively used in other parts of the economy?
    Mr. Channon: I entirely agree with my hon. Friend that the management of the nationalised industries and also the privatisation programme have been of immense benefit to the British people.
    Mr. Eastham: If these industries are such a liability, as has just been mentioned by the hon. Member for Mid-Worcestershire (Mr. Forth), why is it that we saw such indecent scandals going on in the stock exchange when people were eagerly wanting to buy up the shares in these very industries?
    Mr. Channon: The question that I have been asked is what the financing requirements are of the nationalised industries that I have in my Department. As to the question of privatisation, the whole House knows that the Government have transformed the prospects of the majority of the nationalised industries in this country. They have been placed in a situation in which they can be privatised, to the immense benefit of all concerned.
    Mr. Sackville: Does my right hon. Friend agree that the huge sums of money that have been expended on supporting the nationalised industries over the years have held back the British economy for too long, and that the sooner the rest are brought back to profitability and the private sector the better it will be?
    Mr. Channon: I am sure that we should have an increasing programme of privatisation. I agree with my hon. Friend that the sums that had to be spent in the past were a great drain on the economy, and nothing illustrates that better than the example of British Steel.
    Mr. Hoyle: Will support include non-financial matters, such as not forcing Austin Rover to give commercial information, which the right hon. Gentleman's predecessor and his Department did, although this was resisted by senior management and was extremely damaging to Austin Rover, particularly to sales of the Metro? Will the right hon. Gentleman explain why this was done, and will he assure the House that it will not be done again in the future?
    Mr. Channon: I do not accept what the hon. Gentleman says, nor does this question refer to Austin Rover.
    Mr. Gerald Howarth: In congratulating my right hon. Friend on these excellent figures, may I invite him to suggest to the House that the fact that other countries are following precisely the policy followed by this Government is in itself a major tribute to their success?
    Mr. Channon: I think that that is right. All over the world people are following the privatisation policy. It is only the out-of-date dinosaurs on the Opposition Benches who will not do so.
    Mr. Williams: Does the Minister not realise that the benefits that he talks about are somewhat illusory? Does he not recognise, for example, that it is very hard to convince the consumer, in relation to British Telecom, that he or she has benefited from the privatisation? Does he not realise that £2,000 million private monopoly profit is not difficult to achieve, exercising monopoly power, but does he recognise that that means that the Government have imposed £2 million of Tory doctrine tax on consumers linked to the British Telecom system?
    Mr. Channon: I do not agree with that at all. The privatisation of British Telecom has led to an upsurge in new industries and in new suppliers and to a very considerable increase in activity in the economy. The duopoly policy is also extremely successful. When one looks at the other nationalised industries, one sees that the Post Office has made very considerable strides, and I notice that the right hon. Gentleman did not mention British Steel.

    Export Credit Insurance
    Mr. Greg Knightasked the Secretary of State for Trade and Industry what information he has on the extent to which the private sector is providing cover for export credit insurance; and if he will make it his policy to encourage this development.
    Mr. Alan Clark: There are no published figures. Our impression from a variety of sources is that private sector credit insurers cover a very small, though growing, proportion of United Kingdom exports. I welcome any cost-effective developments which benefit our export trade.
    Mr. Knight: Is it not a sign of the Department's inefficiency that in 1985–86 it employed 1,769 people to write just over £15 billion worth of business, whereas over the same period the private sector dealt with a greater volume of work and employed fewer than 400 people in connection therewith? When will the Department be instructed to allow United Kingdom exporters to have the choice of placing all their business in the private market? Is not the present monopoly on some work indefensible?
    Mr. Clark: There are absolutely no constraints whatever on United Kingdom exporters placing their insurance wherever they wish.
    Mr. Tony Lloyd: I am pleased to hear the Minister's response. Will he confirm that the Government intend to maintain the present system, recognising its importance to many United Kingdom manufacturers, such as GEC, which simply could not compete in world markets without the existing Government-sponsored insurance scheme?
    Mr. Clark: The Export Credits Guarantee Department has an obligation to break even, and that exercises a discipline on its judgments. However, there are, of course, certain sectors of the insurance market and certain policies which the private sector—to which my hon. Friend the Member for Derby, North (Mr. Knight) referred — simply will not touch. In those sectors, if British exporters are to have a reasonable level of assurance, the ECGD is the only recourse available to them.
    Mr. Cockeram: Is my hon. Friend aware that he is not quite correct to say that there are absolutely no restrictions? The ECGD operates restrictions in that it deals with the basket of an exporter's insurance needs, whereas in the private sector the exporter can choose to insure with different companies for different markets. The ECGD will not permit that.
    Mr. Clark: I think that the difference between my hon. Friend and me is only one of semantics. The ECGD has to exercise the comprehensive principle, but if an exporter does not like the basket approach, to which my hon. Friend referred, he has the clear option to withdraw his custom and place what insurance he can where he can.
    Mr. Robin Cook: Has the Minister seen the illuminating document, "Export Goods Not Jobs" published today by the Society of Civil and Public Servants on behalf of its members in his Department? Will he confirm that, under this Government, the Export Credits Guarantee Department has been obliged to double its premiums and that, as a result, it has lost one third of its share of the market? Will he confirm that, in the same period, the number of export support staff in his Department has fallen by two fifths, and that the number of overseas commercial officers in the Foreign Office has fallen by one seventh? Is it any wonder that exports are rising at one third the rate of imports, when the Government have been so busy pulling the rug from under the feet of British exporters?
    Mr. Clark: I doubt very much whether the comparative import and export rates — to which I have already referred and which we would all like to be in better balance — have anything to do with difficulties in getting insurance cover. They certainly have very little to do with it. I am afraid that I have not seen the document to which the hon. Gentleman referred—he said that it was only published this morning — and comment on it will therefore have to wait until I can communicate with him personally.
    Mr. Watts: Does my hon. Friend share my concern that the ECGD lost nearly £55 million last year on covering commercial risk, whereas the private sector manages to provide cover on commercial risk at a profit? Does that not suggest that we need to examine closely the manning levels and cost structures of ECGD, to stem the haemorrhage of taxpayers' money?
    Mr. Clark: The losses to which my hon. Friend refers may relate to some extent to the internal arrangements of the ECGD, and when I went to Cardiff a few weeks ago I was very impressed by the changes that were taking place in that regard. Nevertheless, as I said earlier, we have to make available a service to British exporters to cover the sectors which, for one reason or another, the private sector flinches from entering. There are restraints, there are some
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    sectors in which even the ECGD will not provide cover, although they are marginal. It is perfectly justifiable that some public money should be at risk in this area.

    Regional Development Grants
    Mr. Cunliffeasked the Secretary of State for Trade and Industry what has been spent on regional development grants in England so far in 1986–87; what he expects to spend in 1987–88; and if he will provide figures for the north-west.
    The Minister of State, Department of Trade and Industry (Mr. Giles Shaw): Provisional figures for payments of regional development grants in 1986–87 to the end of February are £226·8 million in England and £91·3 million in the north-west region. The 1987–88 provision for regional development granta for England, as incorporated' in the Supply Estimates, is £105 million. Future provision for expenditure on regional development grants is not allocated at the regional level. The actual distribution will depend on the pattern of demand.
    Mr. Cunliffe: I acknowledge those figures — one is always grateful for small mercies under this Government—but is the Minister aware that the north-west region still has the second highest number of unemployed in Britain outside the south-east and London, and that far more money is necessary to get greater financial investment moving in that area and to create safer and more secure jobs? Is he further aware that the 1981–84, census taken by the Department of Employment reveals that 158,000 jobs were lost during that period in the northwest region? Is that not the result of the Government's complete neglect of a once great industrial region and the fact that they continue with their senseless and futile economic policies?
    Mr. Shaw: The hon. Gentleman will, on reflection, realise that the massive contribution of inflation to the health of the north-western economy is something for which he and other supporters of the Labour Government should take at least some responsibility. The north-west region will be a beneficiary of the improved economic climate and the £230 million of selective assistance that is being distributed, of which the north-west has £67 million, to create 17,000 jobs in recent years, is at least a start in the right direction.
    Mr. Burt: Does my hon. Friend agree that large parts of the south-east are over-priced, over-congested, overrated and thoroughly disagreeable, and that that will become far worse in the next 20 years or so? Should not northern Members of Parliament be emphasising the positive advantages of their area, which is ideally built for future business expansion, with its marvellous infrastructure, marvellously cheap places to build businesses and homes, good schools, roads, and commercial infrastructure? If business men came to our region, particularly to the metropolitan borough of Bury, regardless of regional aid grants, they would find a wonderful place for their businesses for the future.
    Mr. Shaw: I think that I must wish my hon. Friend a merry Christmas.
    Mr. Alton: Notwithstanding the reply that the Minister has just given, does he not recognise that in the north-west there are large areas of dereliction, factories which have

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    closed and many people out of work, and that the Government's hands-off approach has only been compounded by the giveaway Budget, which did nothing to provide additional resources for less prosperous regions? Will not the absence of a regional policy to provide new work, new hope and new prosperity, simply suck away yet more of our people and resources to the south-east?
    Mr. Shaw: I am astonished at the rashness of the hon. Gentleman, coming as he does from an area of Merseyside where more public money has been spent over more years than in any other part of the United Kingdom. Has he forgotten the creation of the urban development corporation, the enormous effort made to reclaim large parts of Liverpool's city centre and the substantial number of jobs created in many urban developments within the Liverpool area to try to deal with the problem of neglect?
    Mr. Nicholas Winterton: Will my hon. Friend accept from me, representing a north-west constituency as I do, that the Budget was warmly welcomed by industry from every sector? Will he also accept that, far from the whingeing that we have heard from the Opposition, if we had responsible councils seeking to reduce rather than increase rates to and planning departments that were prepared to be flexible in accordance with the Government's requirement, the opportunities for industry, which in my area are immense, could be repeated throughout the north-west region?
    Mr. Shaw: My hon. Friend is right and I am sure that he, like others who live in that part of the north-west, will welcome the creation of the urban development corporation in Trafford Park, which I am sure will have a major influence on the centre of Manchester.
    Mr. Gordon Brown: Can the Minister confirm from his figures that the cuts in regional development grant in England will be £121 million in the coming year, and that, on top of cuts in Scotland of £70 million and in Wales of £40 million, that makes a total cut in regional development grant of £230 million, the biggest single percentage cut in any one year since regional policy was established, and at a time of growing and deepening regional divisions? Given the catastrophic fall in manufacturing investment value, manufacturing employment and in manufacturing output since 1979, what possible sense does £230 million worth of cuts make? How many jobs will be lost as a result?
    Mr. Shaw: The hon. Gentleman should know perfectly well that the national expenditure on regional assistance is now £419 million, which represents a £36 million, or 9 per cent., increase on the previous year. The hon. Gentleman should also know perfectly well that there has been a change in the pattern of assisted areas, which has now includes 70 per cent., or thereabouts, of all those in the working population. That is the benefit of redrawing the map to ensure that all assistance reaches the parts that need it most. As the hon. Gentleman wants to discuss manufacturing investment I trust that he will take heart from the fact that, although manufacturing investment in the north has indeed declined substantially, and in the north-west it declined between 1979 and 1984 by 31 per cent., there has now been a substantial growth in manufacturing investment in the north-west. In the northern region as a whole there has been a growth of 26 per cent. in one year, and in the north-west that growth has been 10 per cent. in one year.

    Company Law
    Mr. Sedgemoreasked the Secretary of State for Trade and Industry what plans he has to seek to reform company law on nominee shareholdings.
    Mr. Channon: The possibility of changing company law on nominee shareholdings and other matters is already under consideration as part of the review of the operations of the takeover panel which I announced in the House on 28 January.
    Mr. Sedgemore: Why has the Secretary of State embarked on a programme of determined inertia and felicitous procrastination as regards the breaking up of offshore syndicates run by eminent and distinguished merchant bankers, accountants and solicitors who deal in nominee shareholdings? Can the Secretary of State tell us what progress has been made in the discussions between his Department and the Channel Islands and the Isle of Man, which act as havens for fraudsters in this sphere?
    Mr. Channon: We have had discussions with a number of regulatory authorities, and these are proceeding extremely satisfactorily. As for determined inertia, that is hardly a fair accusation when I have already told the House that I hope to make an announcement about the review of the operations of the takeover panel next month.
    Sir Brandon Rhys Williams: Would it not be a simple matter immediately to implement the recommendations of the stock exchange, which are that nominee shareholdings should be unable to exercise voting rights or to nominate proxies?
    Mr. Channon: Yes, that is certainly one of the matters presently under consideration.
    Mr. Campbell-Savours: Is it not possible that Marketing and Acquisition Consultants, a firm in Jersey, is a receptacle for large amounts of money belonging to Guinness, which is being fed into the island illegally? Why do the Government not find out who owns that company? Why do they not make extraordinary efforts, as against using the mechanisms that are currently available to them? The Government can find out who is behind that company if they wish to know. It is in the public interest to find out. Why do the Government not make a greater effort?
    Mr. Channon: The hon. Gentleman knows perfectly well that a number of investigations are taking place. I really do not believe that it is proper for me to go further than that in the House at this time.

    Research and Development
    Mr. Wrigglesworthasked the Secretary of State for Trade and Industry what has been the change in real terms in Government support for civil research and development since May 1979.
    Mr. Pattie: My Department's support for civil research and development in this financial year is forecast to be £372 million. This is some 60 per cent. higher in real terms than in 1979–80.
    Mr. Wrigglesworth: Does the Minister accept that the expenditure on civil research and development in this country lags far behind that of our major competitors in other parts of the world? Will the Minister tell the House why the Government have not done more to increase that

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    expenditure and to encourage companies to increase their research and development expenditure? Does the Minister not hang his head in shame at the way in which he and his colleagues have, in the past 24 hours, torpedoed the European Commission's proposals for increasing expenditure on research and development?
    Mr. Pattie: If I can take the last point first, having just returned from the particular research council, we have not torpedoed anything. What we are insisting upon is that, before we agree an expenditure of more than £5 billion, the Commission should have a sensible series of programmes with which it can convince us about what it is trying to achieve. We must also know whether the proper methods of evaluation have been put in place and whether it is possible to turn off some of those programmes if they are not achieving their targets.
    As regards the hon. Gentleman's other points, he will be interested to know, from a press release from my Department on 26 February 1987, that civil expenditure on research and development in 1985 was £4·8 billion at current prices. That represents an increase of 16 per cent. on the £4·2 billion figure in 1983—two years before.
    Mr. Richard Page: Despite the increase in 1979, does my right hon. Friend agree that scientists become somewhat blinkered about the value of projects? Is it not necessary that projects are correctly evaluated for their commercial potential? Is my right hon. Friend satisfied that the evaluation process that is carried out by the Government is sufficient, bearing in mind the vast sums of taxpayers' money involved?
    Mr. Pattie: Quite frankly, I do not think that one can ever be satisfied. The evaluation and monitoring procedures have improved a great deal in recent years. My hon. Friend is right. I do not see why, in the public sector, one should accept lower standards than one would in private business or, indeed, in one's personal life. If public money is involved, lower standards of monitoring and evaluation seem to obtain.
    Mr. Pike: Will the Minister accept that the money that is made available for civil research and development is not fairly distributed throughout the regions of the country, because there is a tendency to go where the head offices of industries are located—in the south-east? Will he take some positive steps to ensure that regions such as the north-west get a fairer distribution of this important work?
    Mr. Pattie: It is not actually the head offices that do research, as the hon. Gentleman knows. It is where the laboratories are situated. I visited several excellent research establishments in the hon. Gentleman's part of the country, which shows that some good research is going on in the north-west as well.
    Mr. Latham: Although I welcome the increase of 60 per cent. in real terms that my right hon. Friend announced, does he agree that a great deal more could be done by private industry, particularly when its profitability is sharply increasing?
    Mr. Pattie: I agree with my hon. Friend. The House will he interested to know that, although British industry expenditure on research and development has gone up 20 per cent. in the past 20 years, during the same period industry expenditure in Germany and France has doubled, and in Japan it has trebled.
    Mr. Williams: What does the Minister intend to do about the figures that he has just given? Is he not worried that we have an escalating brain drain of our top scientists? What does he intend to do about that? Does he realise that that is an absolutely essential area for Government activity? What proposals does he have to offer?
    Mr. Pattie: The right hon. Gentleman may have forgotten the Link programme that was announced in November, which is a £420 million programme designed specifically to attack the exploitation problem that we have in this country of the extra time that it takes to develop an innovation or an idea into a marketable product. It is a large programme, working with the academic sector, Government and industry, and is designed to bring everyone together and to pull new products through.

    Purchasing Initiatives
    Mr. Greenwayasked the Secretary of State for Trade and Industry if he will make a further statement on the implementation of his Department's public purchasing initiatives.
    Mr. Butcher: The public sector spends about £40 billion each year on assets, goods and services. My Department is enhancing its programme to promote, with public bodies and their suppliers, the advantages of positive purchasing with the aim of achieving value for money in this spending and, at the same time, improved competitiveness in firms.
    Mr. Greenway: Does my hon. Friend agree that a more efficient expenditure of that enormous sum of money could have a dramatic impact upon our economy? Will he do all that he can to achieve, say, at least a 5 per cent. improvement in the efficiency of the spending of that cash this year? Will he do the same in future years, if he can?
    Mr. Butcher: There are two objectives of my Department's public purchasing initiative. The first is to support the central unit on purchasing on value for money. Secondly, through the application of the principle of positive purchasing, we seek to ensure that, when the money is spent, a number of British companies become more competitive as a result of enlightened purchasing procedures and, therefore, supply more products into these contracts.
    Mr. Tony Lloyd: Does the Minister accept the fact that given the size of the public sector and its purchases there is a real opportunity to use it to encourage regional industry, such as in the northern region and the north-west of Scotland, and so on? There should be a specific and clear criterion. The Minister did not mention that, but said that he would take this regional distribution of purchasing into account to support the industries.
    Mr. Butcher: I am grateful to the hon. Gentleman for his observation. He is anticipating a certain part of our thinking on the public purchasing initiative. We have now agreed guidelines for the PPI principles, and we shall be pleased to present them either on a sectoral basis or on a regional basis. However, I accept the hon. Gentleman's point.

    Japan
    Mr. Hirstasked the Secretary of State for Trade and Industry if he will make a statement about the current balance of trade with Japan.
    Mr. Alan Clark: From the provisional figures for the 12 months ended December 1986, United Kingdom trade with Japan showed a balance of trade deficit of £3·7 billion.
    Mr. Hirst: I thank my hon. Friend for his reply, although it brings me no comfort. What evidence is there that the various undertakings that are contained in the Japanese action programme to facilitate the access of British imports to Japanese markets have been honoured by the Japanese?
    Mr. Clark: None.
    Mr. MacKenzie: Does the Minister accept that in the constituencies of various hon. Members there are electrical appliance industry and other interests which are very concerned that the Japanese people and their Government, while making encouraging noises about their desire to import, nevertheless impose such stringent and sometimes ludicrous conditions regarding the safety of various appliances that they seldom, if ever, get into Japan? If we in this country were to impose such stringent conditions as theirs, there would hardly be a Japanese product that could enter the United Kingdom.
    Mr. Clark: The right hon. Gentleman is entirely right. He cites one example of, I am sorry to say, a large number of British goods that would otherwise be competitive but that are excluded by Government or quasi-governmental devices.
    Mr. Michael Marshall: Will my hon. Friend take this opportunity to condemn the Japanese Ministry of Posts and Telecommunications action in blocking Cable and Wireless investment and United States investment, as allowed by Japanese law? Will he also take this opportunity to say what he hopes Her Majesty's Government can do, in the face of this acid test, to persuade Japan to allow British investment in that country?
    Mr. Clark: This is certainly an exemplary situation, which completely encapsulates the Japanese attitude and the difficulty of breaking into a most important sector. The British Government have been active. My right hon. Friend the Secretary of State—[Interruption.] I do not understand why the Opposition are reacting in this way. This is practically the most serious single topic with which we are dealing. [HON. MEMBERS: "What is the hon. Gentleman going to do about it?"] I am telling hon. Members what we have done. My right hon. Friend the Secretary of State wrote to Mr. Karasawa on 13 February. He received no reply. My right hon. Friend the Prime Minister wrote to Mr. Nakasone on 4 March and has had no reply. I know that a number of senior members of the American Administration have also written about it. [Interruption.]
    Mr. Speaker: Order. We all want to hear the answer.
    Mr. Clark: I assume that the Opposition's attitude is good-natured, but I detect in it a strong undertone of indignation, which I know is shared on this side of the House. In the course of time this level of indignation,
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    which is widely held in this country, in the Community and in the United States, will finally find expression —[Interruption.] Hon. Members know very well that in GATT, in the Treaty of Rome and in all our treaty obligations there are very powerful restraints on retaliatory action, but the House is demonstrating this afternoon a level of indignation that ultimately will make such action inevitable.
    Mr. Haynes: Is the Minister aware that if I were standing in his shoes at the Dispatch Box answering questions in that way I would be thoroughly ashamed of myself? I thought that the Government were asking people to buy British. How can they when they look in the warehouses, the retail outlets and the shops and all the goods are made in Japan? Why does the Minister not take the short walk to No. 10 and tell the Prime Minister that he has failed in his duty and resign?
    Mr. Clarke: I notice that neither the hon. Gentleman nor his hon. Friends actually come out and recommend import controls—or do they?
    Sir Bernard Braine: May I say how refreshing I find the candour of my hon. Friend the Minister? May I also say that expressions from the Opposition Benches about this unsatisfactory situation are not just widely, but are wholly, shared by Conservative Members? The Japanese Government must be given to understand that their behaviour in this regard militates against a healthy and natural expansion of the world economy. They are not serving their own interests in the long run and we hope that the day will come quickly when Her Majesty's Government, in company with our partners in the Community, will be able to get some effective action against these pirates.
    Mr. Clark: I am grateful to my hon. Friend for his support. For some reason, Opposition Members refuse to acknowledge that there is a comprehensive system of international trade treaties which regulate world trade. These treaties have been built up over a long period to restrain and deter trade wars. Where one country deliberately flouts, ignores or circumvents that system, it has only itself to blame for the consequences. To put those consequences in order—[Interruption.]
    Mr. Speaker: Order. Give the Minister a chance.
    Mr. Clark: I do not object to what Opposition Members are doing; I welcome it. This indignation, which has not been shown in the House before, is timely and is a great help. But hon. Members and the House must realise that to take action involves a consensus of agreement with our trading partners. It involves getting the United States and the Community on side, and it may ultimately involve action outside GATT.
    Mr. Hickmet: Miti and Japan are planning world domination through trade. Their respect for international conventions, as the Minister will know, as a historian, is hardly honourable. There are the examples of non-tariff trade barriers, the dumping of credit and the capturing of international markets. We have Nomura moving into the City of London and the financial institutions from Japan are moving to take over the City. If my hon. Friend wants a weapon, he has it there. Tell the Japanese to take their financial operations out of the City, remove their trading markets and let them go home.
    Mr. Clark: My hon. Friend is quite right. Indeed, the principle of reciprocation is embodied in the Financial Services Act. This is the one sector where we have the possibility of immediate retaliation where appropriate. My hon. Friend the Under-Secretary is going to Japan in a few weeks' time and he will make that perfectly clear.
    Mr. John Smith: Does the Minister understand that, having invited the House to be indignant, he has now heard its indignation expressed clearly and forcefully? Does he appreciate that, for a Government who have been in office for eight years, it is not good enough for them to come to the Dispatch Box and wring their hands about the difficulties in dealing with the Japanese? Let me tell him what he might consider doing—do to the Japanese what they do to us.
    Mr. Clark: I wish that I could. As the right hon. Gentleman well knows, we do not have at our disposal the same kind of administrative machine as the Japanese, and that at present we are constrained by a whole range of international treaties, to deviate from which would require the consent and approval of our partners.

    Superfan
    Mr. Sternasked the Secretary of State for Trade and Industry when he expects to announce his decision on launch-aid for Superfan.
    Mr. Pattie: Rolls-Royce has not yet submitted a full application for launch-aid. Any application will be considered in the usual way.
    Mr. Stern: Does my hon. Friend agree that perhaps the best way in which he could advance any future application for launch aid for Superfan would be an early and favourable decision on British participation in the A340 Airbus, particularly in the time scale within which he indicated to me earlier this year it would be taken, that is by the end of March?
    Mr. Pattie: I do not expect Rolls-Royce to put in its launch-aid application quite as soon as my hon. Friend has said. Perhaps it will do so in the next two to three months. My hon. Friend and the House will be pleased to know that Rolls-Royce today announced that it has signed a business agreement with Boeing to install the 211 engine—the 524D4D in the 767 family of Boeing aeroplanes. That is very good news.
    Mr. Millan: Could the Minister be a little more precise about the business of the launch-aid for the Superfan, because it is very much bound up with the success of the A340? It would help the House and those of us who are interested in the A340 Rolls-Royce engine to know exactly when all this will be resolved.
    Mr. Pattie: As I said in my original answer, we have not yet received a launch-aid application from Rolls-Royce for the Superfan. The situation about the Superfan in relation to the A340 is that the arrival of the Superfan engine will certainly improve the selling and marketing prospects of the A340. It is not essential but it makes the aeroplane still better. I understand that the International Aeroengines consortium, of which Rolls-Royce is a member, will take a decision fairly soon about whether to proceed with the Superfan. All these decisions have to be taken in sequence.

Elimination of Poverty in Retirement
3.33 pm
Mr. Jeremy Corbyn: I beg to move,
That leave be given to bring in a Bill to provide for old age pensions of a sufficient level to eliminate poverty in retirement; and to ensure that these are regularly increased in line with the average earnings of those in work.
The existing levels of old-age pension of £38.70 for a single person and £61.90 for a couple are a disgrace in a civilised society. Even with the increase in pensions proposed in April, they will still only be £39.50 for a single person and £63.25 for a couple. Those rates compare extremely unfavourably with any western European rates. The French pay £78 a week and Luxembourg pays £69 a week.
I propose this Bill to draw attention to the miserable life of many elderly people and ask the House to understand the increased costs faced by pensioners compared with the rest of the population. For example, every winter this House debates the problems of fuel poverty among elderly people. We wring our hands for a couple of months while the cold weather is here and then forget all about the pensioners. We fail to realise that, because of the low level of the pension and the need for pensioners to keep their homes warmer in winter than the homes of the rest of the population, they spend on average 10 per cent. of their income on heating, compared with rather less than 6 per cent. spent by the rest of the population.
The same applies when purchasing goods, because younger, wealthier people are able to buy in greater bulk than pensioners. Any comparison of the normal retail prices index with the retail prices index for pensioners would show that the so-called drop in the consumer prices index that the Government keep telling us about is irrelevant when talking about small consumers such as old-age pensioners. Pensions should at least have some regard to the retail prices index as it affects pensioners.
My Bill also seeks to draw attention to the problems of bad health that elderly people suffer. We have discussed, particularly during the cold weather spell, the serious problem of deaths from hypothermia. It is not a disease in the sense of cancer, pneumonia, bronchitis or anything like that: it is a disease that is solely the fault of badly designed and badly built houses, too low an old-age pension and too many pensioners living in too much cold throughout the miseries of winter.
There were 166 recorded deaths from hypothermia in the first quarter of 1983 in England and Wales. In 1984, there were 205; in 1985, 363; and in 1986, 355. In the case of Scotland, the figure is proportionately higher, from 116 in the first quarter of 1983 rising to 135 in the first quarter of 1986. That does not include the figure of deaths from hypothermia through the miseries of last winter, when even the increases in heating allowances that the Government promised have been eaten up by standing charges and high fuel bills.
We have observed, when looking at the condition of pensioners, that they often wait a long time for hospital treatment. Because of the lack of sufficient old people's accommodation provided by local government, geriatric patients often spill over to general wards, thus exacerbating the problem of hospital waiting lists. While the Government will tell us that they have a target figure
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for many services that should be provided for the elderly, in the case of the Health Service or in local government, very infrequently are these targets met.
I have before me an excellent report produced by my union, the National Union of Public Employees, entitled, "Time for Justice". It is a report on care for the elderly and it is produced by people who work day in day out caring for the elderly, and who have analysed the problems of Health Service provision and local government provision. It gives as an example the provision of home helps per thousand of population aged over 65. Of the 108 local authorities, only 18 are above the target figure recommended by the Government. Worst is the council of the Isle of Wight, which provides only 2·67 home helps per thousand of population. The highest, other than the City of London, which is an exception in itself, is Newcastle, with a provision of 16. Most authorities are unable to meet the target, and it is not always the fault of the local autorities either, because central Government rate capping and expenditure policies mean that these services have often been badly cut.
In every area, the provision of services for the elderly is inadequate and insufficient. Demand, as reported in the recent edition of "Social Trends", has increased considerably, for example in the number of people treated by home nurses and chiropody services. In no way does the increase in the services meet the increased needs of the elderly population. My Bill seeks to draw attention to some of these problems.
The first thing we propose is that the pension level should be dramatically increased. In 1980, the Government broke the relationship of the old-age pension to earnings, and that means that pensioners are worse off. A single pensioner is worse off by £7·20 and a married couple by £11·40 a week, compared with when the Government came into office eight years ago. My Bill proposes that in future the level of pensions should be linked, as a minimum, to that of the average industrial earnings. That was the proposal of the National Pensioners Convention which lobbied the House on 5 March. I wonder how many hon. Members, particularly Conservative Members, met people who came on that lobby and said, "What a good idea. How well we understand you and we go along with your proposal." At the same time, they support the Government that have done nothing about that but have increased and exacerbated poverty among the elderly.
If the Bill passes into law, as I hope it will, under the National Pensioners Convention demand, the married couple pension would increase to £86·57 and the single pension to £57 a week. That is still comparable only to the level provided by other western European countries, so is not an awful lot to look at. The Government have recently altered the tax thresholds. If the single person's pension was merely increased to the level of the single person's tax allowance, the single person would be better off by £371 per year. That is an indication of the poverty in which many elderly people live.
The other simple but important proposals in the Bill are that each local authority should be asked to report once a year the condition of the elderly people within its area, the effectiveness of the provisions of its services and how near it is to meeting Government targets. The report should include the provision of home helps, occupational therapists, chiropody services where appropriate for local

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government, and, above all, the provision of housing accommodation and what research has been done into the design of housing for the elderly.
The Bill also requires local health authorities to do exactly the same. As in the case of local government, health authorities have guidelines on the provision of geriatric beds but very seldom are those guidelines adhered to or the targets met. Again, it is not always the fault of the health authority. If one lives in an area such as mine, where the health authority is having, in real terms, a cut of 15 per cent. in expenditure this decade, it is hardly surprising that the provision of health care for the elderly suffers as a result.
The final proposal is that, instead of wringing their hands and saying that the problem of the elderly is somebody else's problem, the Government should appoint one Minister responsible for co-ordinating all aspects of policy in respect of the care of the elderly, including transport, housing and health. That Minister should present an annual report to the House which would show the deprivation and poverty in which many people in this country are forced to live.
When the Government introduced their so-called social security reforms last year, they announced that in future they would have to encourage private pension arrangements because this country could no longer afford a high level of basic old age pension. It is a scandal that they should say that, and it is nonsense.
What I am arguing in the Bill, and what other hon. Members who support the Bill are arguing, is that the country must afford to look after its elderly in a decent manner. It must afford to ensure that they are properly cared for throughout their retirement and that proper services are provided. It is no good merely encouraging City spivs to make a killing out of private pension plans, while in real terms reducing the level of the old age pension. This Bill provides an opportunity to give some decency in retirement to the elderly people of Britain who are forgotten for most of the year.
Question put and agreed to.
Bill ordered to be brought in by Mr. Jeremy Corbyn, Mr. Don Dixon, Ms. Jo Richardson, Mr. Harry Cohen, Miss Joan Maynard, Mr. Bob Clay, Mr. Dennis Canavan, Mr. Dennis Skinner, Mr. Tony Banks, Mr. Bill Michie, Mr. Chris Smith and Mr. Tony Benn.

Elimination of Poverty in Retirement
  ELIMINATION OF POVERTY IN RETIREMENT
  Mr. Jeremy Corbyn accordingly presented a Bill to provide for old age pensions of a sufficient level to eliminate poverty in retirement; and to ensure that these are regularly increased in line with the average earnings of those in work. And the same was read the First time; and ordered to be read a Second time upon Friday 1 May and to be printed. [Bill 125.]
Orders of the Day

  Rate Support Grant (England)
  3.43 pm
  The Secretary of State for the Environment (Mr. Nicholas Ridley): I beg to move,
  That the Rate Support Grant Report (England) 1987–88 (House of Commons Paper No. 253), which was laid before this House on 20th March, be approved.
  Perhaps it will be for the convenience of the House if we also consider the other two motions relating to English reports:
  That the Rate Support Grant Supplementary Report (England) (No. 3) 1985–86 (House of Commons Paper No. 259). which was laid before this House on 20th March, be approved.
  That the Rate Support Grant Supplementary Report (England) 1986–87 (House of Commons Paper No. 258)., which was laid before this House on 20th March, be approved.
  Mr. Speaker: If the House agrees to debate all three reports. so be it.
  Mr. Ridley: The House is aware that I was unable to lay those reports until the Local Government Finance Act 1987 had received the Royal Assent. In my statement of 13 January I announced my intentions for the 1987–88 rate support grant settlement. Those remain largely unchanged, apart from the modifications required as a result of the High Court judgment in the Greenwich case, which I announced to the House on 5 March, and which in the main affects authorities in London. I do not therefore propose to describe that report in detail. Despite all the difficulties that have arisen this year, I am glad that we have been able to lay the report, particularly the main report, before the new financial year starts, so that grant can be paid. I am extremely grateful to Opposition Members for their help and support in achieving this great success.
  I must remind the House that we have provided a generous settlement for local authorities. The aggregate Exchequer grant of £12,842 million is an increase of over £1 billion—9 per cent. more than in the settlement for 1986–87. Provision for local authority current expenditure at £25,251 million is 13 per cent. more than last year. Those figures exclude the additional provision of £460 million, and the grant of £183 million which we have said will be made available for the teachers' pay settlement for 1987–88.
  The settlement allows for non-rate-capped authorities to increase their current expenditure by 5·25 per cent. When teachers' pay is taken into account, that will allow education authorities to increase expenditure by 7·75 per cent. Those increases are more than the rate of inflation that we expect next year, which my right hon. Friend the Chancellor of the Exchequer forecast in the financial statement and Budget report last week to be 4·5 per cent. on the GDP deflator. Therefore, there is no reason why prudent and responsible authorities could not have chosen to set reasonable budgets and rates.
  This year, we are in a position to know how much local authorities have, in practice, chosen to spend, and the consequent effect on their rates. In most years we do not know that when we debate the settlement, but most of

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  them have now declared their budgets and rates. That makes this debate a little more interesting than normal, because we can read the book, instead of having to gaze into the crystal ball.
  If authorities had budgeted to spend at the settlement assumption, plus the allowance for teachers' pay, the average increase in rates would have been about 2·9 per cent. In practice, we find that, in aggregate, authorities are budgeting for an increase in total expenditure of around 2 per cent. more than has been provided for. That higher spending means that rates will increase by around 6 per cent. on average. Although 6 per cent. is much lower than last year, it is still too high and higher than is necessary.
  The figures—I stress that they are averages—disguise the wide variations between individual authorities. Many authorities have clearly sought to restrain expenditure and limit rate rises. Others have chosen to pursue profligate spending policies at the expense of the ratepayers.
  Let me give the precept increase figures for the shire counties, for which we now have all the reports. In Conservative-controlled counties, precepts will increase, on average, by 6·5 per cent. In Labour-controlled counties, they will increase by an average of 8·7 per cent. In Lib-Lab pact counties, they will rise by 9·1 per cent., and in the one Liberal-controlled county—the hon. Member for Isle of Wight (Mr. Ross) is not in his place, but that is the one jewel in the Liberal crown—that figure is 10 per cent. It seems that one pays a 2 per cent. premium for living in a Socialist county, and an extra 0·5 per cent. on top of that for the price of alliance support.
  Mr. Michael Meadowcroft: I am grateful to the Secretary of State for his mathematics lesson. If what he has said is right, why does the Conservative leader of the Dorset county council, Councillor David Fox, when relating the Secretary of State's figures to his own county, say that the Government are not living in the real world'? If that is what a Conservative county council leader says, the figures are nonsense.
  Mr. Ridley: The hon. Gentleman is not living in the real world, and there is a message in this for the electorate. We all know that Tory councils keep rates down and that Labour councils are high spenders and do not care about ratepayers. The new factor is that Lib-Lab-controlled, hung councils are equally high spenders. It must be depressing for those who thought that voting alliance was an anti-Labour vote to see alliance councillors supporting the same old Socialist policies of high spending and giving the Labour tail a chance to wag the Liberal dog.
  In the metropolitan areas, the average increase in the local rate of non-rate-capped Labour authorities is about 11 per cent. Compare that with Solihull—the only Tory-controlled metropolitan council—which has managed to reduce its rate by 1 per cent. [Laughter.] That is the difference. If all the others were controlled by the Tories, they might have done equally well.
  Dr. John Cunningham: I am grateful to the Secretary of State for giving way, especially since he has just given the "average" of the single Tory authority in the metropolitan districts under Conservative control. Is not the real message of what he has said that overwhelmingly in the metropolitan districts in England the Tories have been kicked from office because people do not like their policies?
  Mr. Ridley: If the hon. Gentleman wishes to make a point of the fact that there is only one Conservative-controlled metropolitan council, let me, too, point out that there is only one Liberal county council. The hon. Gentleman was happy to accept my figure of a 10 per cent. rise in the rate of the Isle of Wight council as being the highest of all the party averages. Similarly, I am happy to accept that the sample is small for the metropolitan counties.
  But it is when we look at London that we see the biggest differences in rate increases. In inner London, as a result of our successful rate-limiting policies, rates bills will be lower than last year for many ratepayers. Also, prudent authorities have budgeted sensibly, so have no rate increases—for example Westminster and Kensington and Chelsea. However, the ratepayers of Hammersmith and Fulham are not so fortunate because their council has increased its local rate by a staggering 127 per cent. Happily, our precept limits, particularly on the Inner London education authority, mean that rate bills in the borough will increase by rather less—by 50 per cent., which is still too high. Ratepayers in Wandsworth will still enjoy the lowest rate bills in London. Wandsworth's general rate will rise by 2 per cent. and it has just announced a record capital programme.
  In outer London, Ealing has increased its local rate by 72 per cent. and Waltham Forest has increased the local rate by 67 per cent. Hon. Members are already aware of some of the ridiculous ways in which Ealing proposes to spend all that money. Council workers have celebrated the council's largesse by going on strike. One local resident, the right hon. Member for Islwyn (Mr. Kinnock), the Leader of the Opposition, is reported to be happy to pay more in rates. But ratepayers in Ealing have a double bonus: they will apparently have to pay an extra 72 per cent. more for no services because the service workers are all on strike.
  Ratepayers in the alliance-Labour controlled borough of Kingston fare no better than their counterparts in the counties. In Kingston, the alliance councillors wanted to put up the domestic rates by 20·6 per cent. and Tory councillors by 5·9 per cent. The four Labour councillors got the alliance to compromise at their figure of 16 per cent. So much for the middle way.
  Mr. Harry Greenway: Is my right hon. Friend aware that services in Ealing are at a complete standstill, that people cannot be admitted to hospital for essential operations because nobody can be discharged as there are no home services and that people in sheltered accommodation are having horrendous difficulties in getting hold of their milk, laundry and mail? Those are merely a few of the terrible effects of the horrendous rate increase and the strike.
  In addition, 30 or 40 schools, including special schools, are closed and children are being sent home. That is what Socialism is about in practice. Will my right hon. Friend compare that with the 4 per cent. rate reduction last year in Ealing under the Conservatives?
  Mr. Ridley: The tragedy is that, until this year, Ealing managed to hold its real spending almost level for the eight years from 1979. For all that time, it managed to provide better services at the same real cost to its ratepayers. All that achievement has been thrown away in one year. I have every sympathy for my hon. Friend's ratepayers.

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  Next year there will be no grant recycling. The House has passed legislation to bring that to an end. Opposition Members have tried in the past to scare us with stories about the consequences. The hon. Member for Norwood (Mr. Fraser), for example, told the House on 4 February:
  "On one low estimate, the loss will he £⅔ billion. On a higher estimate it will mean a loss…of £1,000 million." —[Official Report, 4 February 1987; Vol. 109, c. 1315.]
  That would be lost through the abolition of recycling.
  The local authorities maintained that at least £400 million would he lost. I can now tell the House and Opposition Members that on the basis of the current information on spending plans available to my Department—a high proportion of all returns are now in—the grant underclaim will be around £200 million, after taking account of the changes for teachers' pay. It need not even be that high. Local authorities have only themselves to blame if they forgo grant.
  Authorities have plenty of scope for improving their efficiency and reaping the benefits in reduced costs. The benefits to be gained by putting services out to competitive tendering have been well established. The Audit Commission has done much valuable work on the scope for savings from improved efficiency. In particular, the commission's report on eight deprived London boroughs pointed out that there were specific opportunities in those boroughs for improvements of about £100 million a year —£100 million currently wasted on gross inefficiency. Its recent report into competitiveness and contracting out generally suggested that nationally some £500 million could be saved.
  I am glad to see that at last I have the support of the Labour party and that of the hon. Member for Copeland (Dr. Cunningham) in demanding more efficiency from local government. I have a copy of the new Labour party publication entitled "Best Practice News" and I am sure that Opposition Members will be very familiar with that. Its aims are
  "To show how Labour control not only means better levels of service but also better management of services".
  and to
  "Give value for people as well as value for money."
  It is that aim for value for money that I also welcome from the Opposition.
  However, when we look inside that document, it is not quite so rosy. The report of the Leeds conference contained in the document on improving services gives the game away a little:
  "Planning improvements to services and opposing compulsory competitive tendering legislation go hand in hand."
  I am not sure that they do go hand in hand in my book.
  The deputy general secretary of the National Union of Public Employees also gave the game away when he said:
  "There will be times when the interests of the consumer won't match exactly what suits the work force."
  There is no mention of value for money when we get down to the fine print.
  The truth is:
  "The services which local councils provide make all the difference to the quality of life for working people…But Labour councils are generally bad at providing them. The trouble is that municipal Socialists—most Socialists really—aren't that interested in how to run things. Lately, too, Labour councils have given too much power to the local trade unions and they have been able to stop or slow down important changes…the result is a welfare state at a local level which is generally wasteful and oppressive to work for and unresponsive, unaccountable and unpopular".
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  Would any Opposition Member care to disagree with that?
  Mr. Max Madden: Does the Secretary of State understand that report after report from every independent voice of which one can think, ranging from the Church to health authorities reporting today, show enormous inequalities of wealth and advantage between the haves and the have-nots? Will he for once show some awareness of those problems and act like a Secretary of State responsible for the inequalities that face our people and not give a speech reminiscent of a third-rate local leader of the Conservative party, blind with prejudice and ignorance?
  Mr. Ridley: The last six sentences which I quoted were not from a third-rate, blinded-with-prejudice leader of a Conservative council. They were a direct quotation from an article by a certain Mr. Hoggett from Bristol university in this month's edition of the official Labour party publication New Socialist. That is what the hon. Gentleman's friends think about Socialism in municipalities in action. I would never dare use words like that. [Interruption.] Now that my cover is blown, we shall not get the hon. Gentleman on his feet so quickly again.
  Since pay accounts for 70 per cent. of local authority costs, they should seek to reduce the impact of pay increases by seeking savings. In particular, local authorities should look to their manpower requirements. The Civil Service has reduced its total manpower by 18 per cent. since 1979. Compare this with a 3·25 per cent. reduction in local authority manpower. I was most concerned to learn that figures issued by the Joint Manpower Watch yesterday show that, for the sixth successive quarter, local authority manpower is increasing, despite the savings from abolition.
  I stress again that we have provided a generous settlement for authorities which should seek to take full advantage of it. One would hardly believe, with all the complaints that we hear, including those by the hon. Member for Copeland, about the need for Labour authorities to spend more, that local authorities as a whole are already spending 13 per cent. more this year in real terms than they were in 1978–79 and have budgeted to spend even more next year. One wonders how local government survived in the austere days of the Labour Government.
  I remind the House of the two supplementary reports for which I am also seeking approval. The third supplementary report for 1985–86 will provide a further £385 million grant previously withheld, as authorities have brought their spending closer to target. It will also adjust grant to take account of provisional outturn expenditure and certain changes in education pool contributions.
  I have been obliged to make certain changes to the supplementary report for 1986–87 as a result of the judgment in the Greenwich court case, as I explained on 5 March. That report will, however, still distribute the block grant underclaim of some £618 million consequent on estimates of total expenditure received from authorities on or before 19 December. My predecessor guaranteed that £500 million of grant would be recycled in the first supplementary report for 1986–87. This report will honour that guarantee.
  Dr. Michael Clark: Will my right hon. Friend please help those of us in Essex who have noticed

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  that Essex and Hampshire have almost identical grant-related expenditure and almost identical populations but that Essex has a rateable value only 10 per cent. more than Hampshire, yet Hampshire has a 40 per cent. greater grant for 1987–88? There seem to be some inconsistencies between the two counties.
  Mr. Ridley: It is very difficult to give specific answers to problems raised in interventions. Since 1979, Essex has increased its real terms spending by 8·5 per cent. whereas Hampshire has increased it by only 1·1 per cent. That might well be the territory in which my hon. Friend's question lies, but I should like to supplement it by giving him a more detailed response when I have had time to look more carefully at the figures.
  The House will wish to know that, when I laid the reports on 20 March, the Department notified the 20 high-spending authorities of their rate limit, which flows from the formula in the Local Government Finance Act 1987. The responsible Departments have also notified the 20 joint authorities automatically selected for precept limitation of their precept limits produced by the formulae in the Bill. I ask the House to approve these three reports.
  4.5 pm
  Dr. John Cunningham: We have just heard a speech of the most sickening irrelevance to the problems of our people and the country, a speech devoid of any scintilla of understanding of the nature of the problems that people face or of the urgent need to change direction to bring new policy initiatives to our inner cities, to education, to housing and to the creation of jobs. It was at least mercifully brief by the right hon. Gentleman's standards. It was difficult to discern from what he was saying that we are debating very important issues which contain many decisions of considerable social and economic importance, and the very language of the report, the speech and the title of the debate do not convey any sense of the wide-ranging implications for essential local services, education, housing, social services and environmental health of what the Secretary of State had to say and what the Government are doing. The technical jargon often employed seems calculated to obscure those real issues, perhaps for the satisfaction of the Government, who take every opportunity to disguise the real intentions of Conservative policies.
  The debate is about why the Conservative Government refuse properly to finance services which are essential to the social and economic well being of people, young and old, employed and unemployed alike. The debate is about the Conservative Government's refusal to accept the validity of local democracy.
  Mr. Ridley: I am surprised that the hon. Gentleman is persisting with his prepared text. Did he not hear me say that since 1979 the total spending of local authorities has gone up by 13 per cent. in real terms? How can he claim that authorities are deprived now, whereas presumably they were not deprived when he left office in 1978–79, although they are spending 13 per cent. more in real terms? I cannot understand the logic of that.
  Dr. Cunningham: We are well aware that the Secretary of State does not understand the issues, nor does he seem to care about them. He does not need to tell us what we
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  know only too well. The Government have done everything to stop local authorities from investing in services. That is what the Rates Act 1984 is all about. That is what the total of £18 billion-worth of accumulated cuts in rate support grant has been all about. That is what the right hon. Gentleman was referring to in his speech when he accused authorities that spend more than he deems necessary of being "profligate". All those Government attempts have been to reduce local government's facility to support decent levels of service and provision. After all, that has been the hallmark of eight years of this Government. Is the right hon. Gentleman suddenly denying that?
  Mr. Ridley: The hon. Gentleman cannot get away with that argument. It is true that the percentage of rate support grant has been cut and that authoriries have been involved in creative accounting, but the point that I am trying to get home to him is that the net result of everything that has happened in the eight years is that local authorities are spending 13 per cent. more. The point that he cannot substantiate is that they are short of resources. If they are short of resources now, how short of resources were they in 1978?
  Dr. Cunningham: We are beginning to see the Jekyll and Hyde nature of the right hon. Gentleman's political character. Now he is apparently, on behalf of the Government taking credit for the increase in expenditure which for eight years they have been denouncing. He had better make up his mind on which side of the argument he really is. We know which side we are on. We are in favour of more investment in people, and in the services that are so essential to their economic and social well-being.
  The Secretary of State mentioned Ealing. I am sorry that his hon. Friend the Member for Ealing, North (Mr. Greenway) has disappeared. Does the right hon. Gentleman support the expenditure decisions of the now Labour-controlled Ealing council, which he was denigrating a few moments ago—the reintroduction of places for rising-fives in primary schools, the deals to acquire 600 new homes in the face of the housing crisis and the employment of extra home helps and extra staff to deal with the under-fives? The council is taking on much-needed local housing repair teams and recruiting 150 extra teachers. Does the right hon. Gentleman support those decisions? Does he support the extra expenditure about which he has been boasting in that context? What is the answer? It is that the right hon. Gentleman has not the guts to say that he does not support it. That is the reality of the Government's pathetic position.
  The proximity of this debate to the Budget reminds us of the Government's continuing policy of switching the burdens of such services from the taxpayer to the ratepayer—a policy pursued relentlessly for eight years and accompanied all the time by the crocodile tears of Tory Members about the inevitable rates increases that have resulted. Today's debate is about the Government's determination to enforce more and more central control—more powers for Ministers who abuse them all too frequently, using them to prevent and to crush sensible and sensitive public investment in people, their families and community services wherever they can.
  Yesterday's announcement about the widening health gap in our country should shame Conservative Members, especially those Ministers who have deliberately and

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  massively reduced investment in housing and employment. It should especially shame those Ministers who have planned and organised a systematic withdrawal of cash from the inner cities, where some of the worst problems in Europe persist. The reality is that the cuts in rate support grant are more than 10 times the additional support under special measures given to the inner-city authorities that are most in need. That is the damage that the Government have done to the most deprived communities in our country.
  Yesterday's attempt to suppress the report of the Health Education Council is typical of this shameless Government, who also tried to suppress the earlier report of Sir Douglas Black. The latest attempt to stifle debate contrasts embarrassingly with the weekend leaks of the Prime Minister's alleged concern for the plight of neglected inner-city areas, which is so much a legacy of eight years of Thatcherism. Those very conditions of bad housing, poor environment, inadequate social services and health care, poverty and unemployment, which has trebled under this Government, led to the widening health gap that is so damaging to individuals, families and the national wellbeing. It is the Government's failure adequately and responsibly to deal with those problems that we are debating today.
  Even worse, those Conservative failures result from the deliberate intention of policy. They are no accident. In addition, we have seen how the volume of complicated, contradictory and inconsistent local government law—the force-feeding of the Tory right with statute after statute—has reduced any attempt at sensible planning of local government finance to a shambles. We are told that the Secretary of State has been reduced to impotent rage by the stupidities of the system which his colleagues have created and which he has inherited and supported consistently over the past eight years.
  The journal Public Finance and Accountancy states:
  "Local government is suffering from a surfeit of new legislation. Each successive piece of legislation seems to increase rather than reduce uncertainty".
  But still the Government plough on into the mire. Today, Parliament is asked to accept a report first announced by the right hon. Gentleman in 1986, when he published a consultation paper and wrote to all the Conservative councillors in the country recommending his proposals.
  The Secretary of State published his first set of detailed proposals on block grant distribution on 3 October 1986. A further set of detailed proposals were published on 3 December, and another set on 13 January 1987. Following the decision on the Greenwich borough case, yet another set was published on 5 March. We understand that if the Secretary of State is successful in his appeal against the Greenwich decision a further set of proposals may be put forward for the coming financial year.
  What, we wonder, is the purpose of the right hon. Gentleman's appeal? What is he hoping to achieve by trying to obtain a decision that will yet again cause confusion and uncertainty in local government finance, when budgets will already be fixed and rates will already have been set?
  The changes in provisional block grant entitlements for some authorities alter substantially from one consultation paper to another. As the hon. Member for Ravensbourne (Mr. Hunt) and his colleagues in Bromley know only too well to their cost, and as is known in the city of Birmingham and in other towns and cities up and down
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  the country, fluctuations running into millions of pounds occur almost weekly—certainly monthly—as a result of the incompetence of the right hon. Gentleman and his policies.
  Despite the uncertainty about block grant entitlements, county councils and other precepting authorities are required by law to make their precepts for 1987–88 not later than 10 March, before the report has even been approved by the House, and rating authorities are required to make their rates not later than 1 April. Local authorities no longer have any right to make a supplementary rate or precept if their income from grant or other sources falls short of that taken into account when those rates or precepts were set. That, ' again, is the fault of the Government. The combination of lateness and uncertainty about grant entitlements for the coming financial year makes it harder for local authorities to plan sensibly, and inadequate planning leads almost inevitably to poor financial administration.
  Since July, the right hon. Gentleman has made five announcements affecting grants to councils, and during that time there have been four Acts affecting local government finance. And Ministers have the gall to criticise councils for inefficiency! The Government have demonstrated an unprecedented level of bungling incompetence, and they cannot escape responsibility for the mess.
  In a damning editorial, Local Government Chronicle, under the heading
  "Ridley in a Central Mess",
  says the position
  "typifies the woeful mess the Environment Secretary has allowed and encouraged his senior civil servants to get him into".
  In addition to the legal shambles of the Government's own creation, there has been the political fiddling of the system to buy off the much-leaked Tory revolt. How ironic it is to see Tory Members who demanded those policies being attacked by their own colleagues in local government, and by their own local Tory associations, for the capricious failures of those same policies—failures described by the editor of Local Government Chronicle as
  "mere financial gerrymandering without accuracy,"
  and, in a classic line, as the "height of loony government". How right the editor is.
  All that was too much for the staunchest of Conservatives in the borough of Bromley, who watched in bemused disbelief as their grant went up and up, only to plunge down again by £3 million this year following the Secretary of State's failure to deliver his promise to make good their loss of £3 million last year—that is £6 million in two years from the staunchest of true blue supporters. How angry they must all feel.
  Mr. John Hunt: Will the hon. Gentleman give way?
  Dr. Cunningham: I was about to refer to the hon. Gentleman, but I shall give way.
  Mr. Hunt: Does the hon. Gentleman accept the logic of Bromley's case and recognise the injustice of the court result, which has meant that Bromley is deprived of that money? Will he go on record as saying that he recognises that the court got it wrong?
  Dr. Cunningham: I recognise that the London borough of Greenwich did not act on some piece of arcane local

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  government law dug up from the middle ages. It acted on an Act of Parliament of 1986, introduced by the Government. The hon. Gentleman voted for it. Greenwich took advantage of that Act of last year, which the hon. Gentleman and his colleagues from the London borough of Bromley supported. So we are not talking about some little error. We are not talking about some computer miscalculation. We are talking about Conservative Government law. That is what has caused the problem in the borough of Bromley. That is what Greenwich acted upon, and that is what it won the court case on. That is an accurate record of what happened.
  Mr. Ridley: Will the hon. Gentleman give way?
  Dr. Cunningham: I shall give way in a moment. I have not finished with the hon. Member for Ravensbourne.
  I say to the hon. Member for Ravensbourne and his hon. Friends from Chislehurst, Orpington and Beckenham: in view of what has happened to the Conservative borough of Bromley, will they go into the Lobby and vote for the report? Will they support the taking away of that money from their borough? Will they support the incompetence of their own Government and, even worse, the failure of their own Secretary of State to honour his promises? Will they vote for that? We shall watch with interest, and so will the voters in the borough of Bromley.
  The final irony is that the hon. Member for Ravensbourne's own friends and colleagues in the local Tory association—in Tory Bromley—are now taking this Government to court to sue them because of what has happened. I can well understand the Secretary of State reaching for yet another Silk Cut and nipping out of the Cabinet Room for a quick fag, in the face of that irony and the disbelief of his colleagues around the Cabinet table.
  Mr. Ridley: The question asked by my hon. Friend the Member for Ravensbourne (Mr. Hunt) was not answered by the hon. Gentleman. I leave aside the point of law that is the subject of a legal action and will be decided on appeal. I have made it clear that I believe that the rate support grant distribution resulting from that decision is inequitable to the boroughs concerned. I ask the hon. Gentleman a straight question: does he think that it is equitable? Would he be in favour of the distribution being put back to what everybody thought it was, or would he not?
  Dr. Cunningham: The right hon. Gentleman must think that all of us in the Opposition are daft. He made an allocation of resources. He then decided to change the allocation. He was challenged by several authorities. One went to court and won. The right hon. Gentleman asks us to justify those actions. Of course we would not justify them for a moment. The right hon. Gentleman has been caught fiddling the books and now even his own side, the Conservatives, are complaining about it. It is totally unjustifiable behaviour and we would not support it for a moment. We have considerable sympathy—
  The Parliamentary Under-Secretary of State for the Environment (Mr. Christopher Chope): Does the hon. Gentleman support Greenwich?
  Dr. Cunningham: The hon. Gentleman had better keep quiet, or we shall come to him and some of his decisions and speeches.
  We have considerable sympathy with what has happened to the people of Bromley and of the borough of Greenwich. The reality is that this shambles will not be ended until the Government are out of office and new policies for local government finance are introduced. That is how I respond to the right hon. Gentleman.
  Mr. Ridley: The hon. Gentleman still has not given—
  Dr. Cunningham: The right hon. Gentleman may not have noticed. I have not given way.
  Mr. Ridley: I asked the hon. Gentleman—
  Mr. Deputy Speaker (Mr. Ernest Armstrong): Order. If the hon. Member for Copeland (Dr. Cunningham) is not giving way, the Minister cannot intervene.
  Dr. Cunningham: Astonishingly—
  Mr. Ridley: Will the hon. Gentleman give way?
  Dr. Cunningham: No.
  Astonishingly, even more legislation cannot be ruled out—
  Mr. Ridley rose—
  Dr. Cunningham: I shall give way in a moment.
  The Secretary of State is asking the House of Commons to approve the report, but he is appealing against it in the House of Lords at the same time. This is absolutely unparalleled. On the one hand the House is recommended by the right hon. Gentleman to say yes to the report, and at the same time he is taking a case through the courts to have it set aside. It is cloud-cuckoo-land in the form of benighted Tory bungling. That is the reality that the right hon. Gentleman has got himself into. If he is successful in the court case, further changes will be necessary. They will affect 13 London boroughs in a major and serious way, and many other authorities in less serious ways.
  Mr. Ridley: I should simply like to ask the right hon. Gentleman, when he has stopped waffling, whether he realises that Greenwich has benefited from an error to the tune of 3 million quid at the expense of Bromley, and whether he would be in favour of having a grant that is paid to the roads paid to the borough in which the roads are situated. That is the question which, three times, the hon. Gentleman has refused to answer—because, of course, he does not have the guts to say what is right.
  Dr. Cunningham: The right hon. Gentleman is now being less than candid with the House. He is falling back on the myth that somehow there was an error. There was no error. There was a change in the basis on which the grant was allocated. There was no error. It is a Government excuse for the cock-up that they have engineered. When the right hon. Gentleman lost in the courts, he announced his intention last year to change the law, and in doing so—[Interruption.] It is no good the right hon. Gentleman waving for his hon. Friends to intervene. They will not take any notice. It is no good sending for the Tory party equivalent of the fifth cavalry, because most of them are laughing their heads off at the predicament that the right hon. Gentleman has got himself into. I expect that some of them are even gritting their teeth at the prospect of having to walk through the Lobby to vote for this nonsense.

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  The reality is that no reasonable purpose can be served by the Secretary of State trying yet again to change all the figures. Rate-limited authorities in particular will lose cash and be unable to change their rates to make up the shortfall. Authorities could be forced into deficit as a result of the combined incompetence and gerrymandering of the right hon. Gentleman. When the Association of London Authorities asked the Department of the Environment about the matter, it was told:
  "Ministers have not yet considered the matter".
  Apparently Ministers have not even considered the implications of the changes that may result from the appeal.
  The Government have made much of an alleged increase of £1 billion in aggregate Exchequer grant. It masks an increase of 15 per cent. in specific and supplementary grants and an increase of only 6 per cent. in block grant itself. That increase in specific and supplementary grants carries with it yet more central control over local government services. Much of the remaining increase in block grant—£530 million—may not materialise because of the end to grant recycling. The right hon. Gentleman suggested that the figure might be only about £200 million. I ask the obvious question: why is his right hon. Friend the Chancellor of the Exchequer planning, in the Budget Red Book, to recoup at least £400 million? That is what the Budget document says. The right hon. Gentleman must be aware of it. Is he trying to mislead the House in what he has been saying today? Is he trying to disguise the nature of the clawback?
  The Rate Support Grants Act 1987 abolishes grant recycling, the process by which initial claims on the block grant pool are rescheduled so that all available grant is distributed. The distribution of the total block grant pool is crucially dependent upon the expenditure assumption that the Secretary of State adopts. He assumes in the report that authorities will increase their expenditure by only 2·8 per cent. in the coming financial year. This is an unrealistically low estimate. If authorities spend more than the right hon. Gentleman deems necessary, they will lose grant.
  Only last week the Chancellor of the Exchequer said that general inflation would rise to 4·5 per cent.—at least the Secretary of State got that figure right. Grant-related expenditure assessments, on which grant entitlements are based, have been set at £1 billion lower than total expenditure provision. That unallocated sum will have a serious effect on grant distribution, disbenefiting high-need authorities, many of which are metropolitan authorities. It is merely a means of reintroducing expenditure targets in another guise. Severe block grant mechanisms are designed to force expenditure restraint. This is contrary to what the Secretary of State tried to say earlier about increasing expenditure. The implication of what he said was that the Government thought that that was good and wanted it, but the mechanisms is the report deliberately act against it.
  The grant proposals include a continuation of severe financial penalties, which are made worse by the abolition of recycling. Many authorities lose £1 of grant or more for every additional £1 of spending, making a cost to the ratepayer of £2 or more. That penal regime is made worse by the loss of grant that is recycled to the pool. Instead, it will go direct to the Chancellor of the Exchequer, who
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  calculated in the Budget statement documents that he would recoup £400 million in that way. That is not the much smaller sum to which the Secretary of State referred.
  This rate support grant report does nothing to address the criticisms of Government policy failures made by the Audit Commission in its report on the management of London authorities. The authorities concerned have made positive responses to the recommendations in that report and are acting on them. Some boroughs have already established teams to work with the Audit Commission to deal with those issues. That is a much more positive response to the report that anything that has come out of the Department of the Environment to date.
  In addition to the plan to recover that £400 million from the total available to councils as set out in the Budget documents, the Chancellor and the Secretary of State outline plans in those same documents for an increased rates take of £1·5 billion. That is what the Chancellor's Red Book says. Thus, the Government are assuming that rates will rise as a result of their policies by an average of 9 per cent. The Secretary of State was trying to convey the impression that the Government were assuming that the rates increase would be 6 per cent. or less, but the Reel Book directly contradicted that. Who is telling the truth —the Chancellor, or the Secretary of State? So much for the Secretary of State's claims in the House in July, in January and again today that no rate increases—or only low ones—would be necessary.
  In the context of ministerial pronouncements anticipating lower rate rises, it is significant that the Treasury is forecasting a substantial rise in rates income for the coming financial year. Table 1·2 of the Financial Statement and Budget Report for 1987–88 shows that rate receipts are forecast to increase by 9 per cent.—that is the Chancellor's figure—compared with a 4·2 per cent. increase in income tax receipts and a 6 per cent. increase in general Government receipts.
  Why does the Secretary of State repeat his claims, knowing that his colleague in the Cabinet, the Chancellor of the Exchequer, who is in charge of running the economy, does not agree and is quoting a higher figure? Is the right hon. Gentleman trying to mislead the House?
  A key component in the mechanism to distribute grants to local authorities is the grant-related expenditure assessment that is assigned to every local authority, which provides a measurement of what the Government consider that each authority should spend to provide a similar level of services. For the coming financial year the GRE total will be £23,742 million, which is £961 million less than the total expenditure that local authorities anticipate.
  The gap between the two totals—total expenditure and GRE—is important, because spending more than the Government's assessment — particularly above threshold—leads to a high rate of grant loss for each additional pound of expenditure. Therefore, the failure to increase the total of GRE in line with total expenditure will result in many authorities running into a higher rate of grant loss for increased spending.
  Following the intense Tory lobbying from shire counties, in southern England in particular, the settlement includes a limit of 7p at ratepayer level on grant losses arising from changes in the block grant mechanism, and a limit of 12p on grant gains. The major beneficiaries of the Secretary of State's fiddling in the current financial year—compared with the Government's previous plans, as set out in October—are authorities such as Surrey,

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  which will receive £7·7 million extra, Hertfordshire, £6·4 million, and Hampshire, £3·9 million. Here again the Government are redirecting cash to areas that are least in need of it and away from many other areas that need it more.
  Mr. Timothy Wood: Is it not true that Hertfordshire and Surrey will receive less grant than this year? Does the change not mean that the reduction in grant has been alleviated, not that there is a new bonanza for the home counties?
  Dr. Cunningham: That is true. In general, those authorities have lost grant every year under this Government. I hope that the hon. Gentleman will ponder that before voting for the motion tonight and that he will make it clear to his electors that every year people in Surrey, Hertfordshire and elsewhere have lost support for essential services such as education and social services as a direct result of Government policy. That is what the policy is about.
  Dr. Michael Clark: Have not the shire counties, such as Essex, lost grant because the Government are directing more funds to the urban and metropolitan counties? That shows that they are being immensely fair in helping counties that are Labour-controlled and, unfortunately, penalising Conservative-controlled counties.
  Dr. Cunningham: I am sorry to disagree with the hon. Gentleman, because he and I are the only two hon. Members with a PhD in chemistry, but if he believes that, he will believe anything.
  The reality is that every year the Government have cut what they pay to local authorities as a percentage of their expenditure. Grant has decreased from 62 per cent. in 1979–80 to less than 46 per cent. now. Each year the amount has been lower, and all authorities have suffered. The inner cities have suffered grievously as a result of Government policies. It is not a matter of taking money from the shires and giving it to the inner cities. There may have been some adjustments within the smaller total, but all authorities have lost heavily, and I am sure that in his heart of hearts the hon. Gentleman knows that, too.
  The Government cheat local councils in another way. The assumption that total expenditure will increase by only 2·8 per cent. in the coming financial year is contradicted by the Financial Statement and Budget Report, which forecasts a rise in the gross domestic product deflator—the Government's own measure of the probably rise in costs across the economy—of 4·5 per cent.—a significantly higher figure. If the Government had been more honest, if that figure had been used, a higher total for local authority costs would have resulted. The Government, then, have deliberately planned a shortfall in what they are prepared to make available.
  We are told that the answer to all this is a new system, a medieval solution, a poll tax with a uniform business rate attached to it—proposals already widely condemned by business, commerce, local government and political parties.
  Mr. Ridley: Rubbish.
  Dr. Cunningham: The Secretary of State says, "Rubbish." I can tell him that at a very recent meeting with the London chamber of commerce, even it condemned the proposals, and it wrote to the Chancellor of the Exchequer saying so. I do not know where the right hon. Gentleman is looking for friends in support of a poll tax with a uniform business rate, but they are not too thick on the ground. The proposals have indeed been condemned not only by Opposition parties, but by the Tory Reform Group, in a massive, damning report, in page after page of it. The Tory Reform Group has such patrons as the right hon. Member for Mole Valley (Mr. Baker), the cpresent Secretary of State for Education, the right hon. and learned Member for Rushcliffe (Mr. Clarke), another current Cabinet Minister, and the right hon. Gentleman the Home Secretary.
  Mr. Chope: Will the hon. Gentleman read out the disclaimer on the second page of that report, which dissociates those patrons of the Tory reform Group from the content of that report?
  Dr. Cunningham: Is that not typical of the Tories? All their names are on the front page to give the thing credibility and standing, but in the small print they say that they want nothing to do with it. That is typical of the Tory party's approach to these matters. No doubt the Tory manifesto will say the same. If it does not, it should, because that is what it will be like.
  In addition to giving the Government effective control over almost 80 per cent. of local council finance, the social, economic and administrative implications of a poll tax are horrendous and grotesquely unfair. The veil of secrecy over the impact of a poll tax was lifted a little by the Minister of State, tantalisingly, on Monday, when apparently he embarked upon a major press briefing session about the consequencies. I am quoting the hon. Gentleman's words exactly from his Department of the Environment hand out. I have picked the one concerning Lancashire, but there are several others. This is what the Minister of State had to say about the consequences of the poll tax in Lancashire:
  "for the average two-adult household in north east Lancashire, the community charge"—
  that is, the poll tax—
  "is likely to produce a substantial increase in the amount to be paid. This is because domestic rateable values in the area at the moment are among the lowest in the country. This means that the people in north east Lancashire are getting local authority services far more cheaply than those elsewhere. Although. when community charge is fully introduced, bills will rise, the community charge will still (on the basis of 1986–87 spending) be in the range £180 to £215…
  The Government is still considering what transitional arrangement might be introduced to help those in areas where bills would rise substantially as a result of the introduction of the new system."
  This is the wonderful alternative to the rates, to help people. The answer is that they pay more, and we have that on the hon. Gentleman's own admission. The news will really buck up the Tories canvassing for local government elections throughout the country. We are grateful to the Minister of State for his candour, because in Blackburn, Darwen and Rossendale, Pendle, Hyndburn and elsewhere we intend to help him get his message across to people. We intend to ensure that in the local elections, and especially in those parliamentary constituencies that are marginal in

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  the general election, the people know exactly what the Minister of State wants them to know about the consequences of a poll tax.
  Mr. D. N. Campbell-Savours: Would my hon. Friend care to inform the Minister of the hostility that is building up in west Cumberland, in my hon. Friend's constituency and in my constituency, to the news already circulating about the level of new rates that would be paid by our constituents if this Government were to be allowed to win? Would my hon. Friend care to comment on the document which we have produced and which sets out in great detail the effects that this will have and shows that for the great majority of people in west Cumberland the new rates will mean a massive increase in what they pay? The only people who benefit from this new system are people who live in expensive property. They are the only beneficiaries. Is that not quite disgraceful?
  Dr. Cunningham: I am grateful to my hon. Friend the Member for Workington (Mr. Campbell-Savours), not only for his intervention, but for all the work that he has done on the details of the local consequences of the introduction of a poll tax, not only in his constituency in the borough of Allerdale, but in my constituency in the borough of Copeland, because the same fate awaits thousands of families in west Cumbria, as he has rightly made clear.
  The irony is that in my own constituency of Copeland, with an excellent Labour council, there has not been a single increase in rates for six years. Indeed, this year the Labour council of Copeland is reducing the rate, but it is to have this poll tax imposed upon it, which will force it to charge people more as a result of this Government's policies. It is exactly the same in my hon. Friend's constituency in the borough of Allerdale. People will be appalled to learn that a Tory Government will ensure that they pay more in local taxes, regardless of their income, the size of their property or anything else.
  Mr. John Home Robertson: At least in my hon. Friend's part of the world this is still a hypothetical question. Would he spare a thought for the predicament of the people in Scotland, for whom the Government have already got legislation, not only through this House, but on its way through the House of Lords? The people of Scotland are to be used as guinea pigs for this appalling new taxation.
  Dr. Cunningham: I agree with my hon. Friend and I think that the people of Scotland agree with him. The way things are going, the Tory party will be lucky if it is not completely wiped out in Scotland when the general election takes place. The same is likely to happen in the north of England, too.
  It is also very significant that the Government are being evasive about rebates and reductions for those families and individuals facing financial difficulties. Everyone will have to pay at least 20 per cent. of the tax, regardless of income. Even rebates may apply only to a fixed amount, less than the total tax charged, according to a recent article in New Society.
  While Ministers announce a speeding up of these unfair proposals, they operate a go-slow on the highly sensitive issue of rebates. It took the Prime Minister more than two months to reply to a letter from Councillor Jack Loyden, the leader of the Association of Metropolitan Authorities,
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  on this issue and then her reply was completely vacuous, giving no answer at all. As I have said, even the Tory Reform Group, with several existing and many former Tory Cabinet members as patrons, has rubbished the Government's own proposals.
  The country is facing a mounting crisis in housing in parts of our major cities, in education and training and., not least, in research establishments and the consequent brain drain. Local government has a crucial responsibility in many of these policy areas. Undermining local government, demeaning it, as the right hon. Gentleman does every time he speaks in the House and elsewhere, serves the nation ill. Undermining local government finance, taking more central powers, and preventing better and more effective investment in people is guaranteed to make those problems worse. As the new director-general of the Confederation of British Industries has said, city technology colleges are an irrelevance in the face of these problems, for without decent homes, good schools and better training and skills our country is doomed. No amount of manipulation of trade figures and unemployment statistics, in a post-Budget, pre-election Tory propaganda effort can solve those critical problems.
  Labour party policy on new skills, jobs and industrial strategy offers effective solutions and a clear choice to the people. A clear majority of the British people prefer investment in jobs and services to tax cuts. The majority support investment in people—in ourselves and in our communities, schools and hospitals. That cannot be achieved without effective, improved and strengthened local government, which is an urgent national requirement. Those objectives cannot be achieved by this Government, by their policies or by reports such as this. That is why we oppose it.

  Royal Assent
  Mr. Deputy Speaker (Mr. Ernest Armstrong): Order. I have to notify the House, in accordance with the Royal Assent Act 1967, that the Queen has signified Her Royal Assent to the following Act:
  Consolidated Fund Act 1987.

  Rate Support Grant
  Question again proposed.
  4.50 pm
  Sir Bernard Braine:: I do not mean to be unkind to the hon. Member for Copeland (Dr. Cunningham), but frankly I was unimpressed by his argument. He was eloquently unconvincing. The fact remains that, under the present Government—leaving aside what I am about to say about them—spending on local government services has increased substantially in real terms and they are not to be castigated for trying to impose financial restraint and introducing discipline in what is after all a massive sector of public expenditure.
  We are light years away from a Labour Chancellor going cap in hand and in frantic haste to the International Monetary Fund to beg for financial support, at a time when the average rate of inflation was 15 per cent. peaking to well over 25 per cent. at the end. That is long past and best fogotten. Methinks the hon. Gentleman was protesting too much.

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  Having said that, I feel that I must intervene, albeit briefly, to protest against the unfair distribution of grant as it affects my own county. For years, Essex has been prudently administered. It was prudently administered under the last Labour Government and it has been prudently administered under the present Government. Throughout, it has been among the lower-spending local authorities.
  Indeed, I recall a previous Secretary of State for the Environment suggesting that the county council should call in consultants to find out whether further savings could be made. The county council took that advice, and the consultants reported that everything possible was being done. Indeed, my right hon. Friend's predecessor praised Essex here in the Chamber for its prudent administration. Yet, year after year, Essex has been penalised under the grant support system and year after year the pleas of my hon. Friends who represent consituencies in the county have been ignored.
  This year's settlement is palpably unfair and unacceptable to us. As my right hon. Friend knows—it is best to be honest and straight about these matters—no Essex Back-Bench Members will go into the Division Lobby tonight in his support.
  Nor is that all. A further blow has been delivered as a result of the administrative muddle to which reference has already been made. I accept the explanation of my right hon. Friend the Secretary of State. I do not think that he personally is to blame in any way, but nevertheless the blow has fallen. As a result, Essex will lose a further £2 million on top of what it has lost in this year's distribution of grant. I find it unbelievable that we should have been penalised in favour of high-spending local authorities elsewhere. That does not make any sense. It goes against the letter and the spirit of what the Government have been seeking to do. It adds insult to injury, and we cannot accept it.
  Will my hon. Friend assure us when he answers the debate that if the court decides—as I hope it will—that the Government were right all along, then the £2 million will be repaid to Essex automatically and without further argument? If, on the other hand, the court decides otherwise—it would be quite improper for me to say whether such a decision would be right or wrong—a situation will have arisen for which Essex county council can in no way be blamed. If that should happen, will the Government make up the shortfall of £2 million in some other way? That, in my submission, is the least that should be done. The treatment of Essex is completely unacceptable to its Members of Parliament. I ask, therefore, whether the Government are now prepared to do justice to our county.
  4.58 pm
  Mr. Michael Meadowcroft: First, I shall deal with matters arising from two earlier rate support grant settlement reports. We are again dealing with retrospection and changes of the rules, although control of some councils has changed since 1985–86. That is bizarre. We are having to go back to 1985–86 to deal with matters that were fully dealt with by the councils at that time.
  There are now one or two gains for administration for that year, in that authorities could set aside money spent
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  on disaster funds and regional crime drug squads. One question that has been raised with me is the loss of interest on money wrongly withheld during the miners' strike, which affects Derbyshire and Cheshire in particular. Perhaps the Minister will address that point in his reply.
  In the 1986–87 settlement, the increase in the rate of the police-specific grant to 51 per cent. appears to be a gain to local authorities, but in fact it is a reduction of 1 per cent. in the block grant and an example of further centralisation.
  As the right hon. Member for Castle Point (Sir B. Braine) said, the Government determine central expenditure on local authorities in ways which bear capriciously on those authorities. It is strange that the Government determine centrally what is to be spent and then decide which councils have been sinners rather than saints in the administration of those resources. Whose money is it? It is certainly not the local authorities' money, but it is not the Government's either. It is public money, of which elected representatives are simply the trustees. We must consider who should be the real trustees and determine what expenditure is realistic, and where the blame lies if blame it be, or where the commendation lies if people in local government have behaved with due circumspection and attention to the balance between services and economy.
  The Government's cynicism and arrogance are reaching staggering proportions. They fix the rules centrally, they determine appropriate levels of expenditure centrally, and then they fix the penalties centrally. Finally, they castigate the councils against which they are determined to discriminate. It is reprehensible that the Government should cynically take that attitude, giving no recognition to the fact that they have caused the local authorities' problems.
  I compare that action with the attitude of the Minister of State. I disagree with him, just as Labour Members disagree with his policy, but at least we get the feeling that he understands what he is doing. The Secretary of State never gives the impression that he has a clue what he is doing. That is a great problem. His short speech today failed entirely to address the reports that he was introducing. He used his entire speech to castigate and blame the Opposition for what is his responsibility.
  In Committee on the Local Government Bill, the Minister and other Members have been grappling with the analogy of whistle blowing, as if we were discussing some kind of football match. We have enjoyed the analogy, but to fix the rules and penalties centrally is rather like the Secretary of State saying that the home team will always have 13 players and then blaming the away team for losing. Those who have lost have done so because of the Government's policies, not because of decisions taken locally in the county councils.
  Let me take some examples. In three neighbouring councils in Sussex, arbitrary assumptions about spending have meant that the Conservative-controlled council of Hove will receive from the Government £67·30 per resident, the Conservative-controlled district council of Worthing will receive £36·66 per resident, but the alliance-controlled council of Adur will receive precisely £11·86 per resident, yet the councillors in Adur are castigated for putting up the rates. If the Government determine what revenue will accrue to the district councils, it is monstrous for them to accuse councillors of being responsible for a high rate rise.

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  Again, the Secretary of State made great play of the results of rate fixing in the counties for 1987–88, but he failed to relate the variations that have occurred within the different bands of local authorities under different party control. For example, he made the point that the Conservative-administered county councils had a low average rate rise, but that hides the fact that the rate rises have varied from 2 per cent. at the lowest to 17·5 per cent. in Northamptonshire at the highest. That range is mainly caused by the different limitations imposed by the Government and the Secretary of State.
  Sir Trevor Skeet: The hon. Gentleman said that Northamptonshire had the highest rate rise. In fact, Bedfordshire had the highest, at 21·3 per cent. He must get his facts right first.
  Mr. Meadowcroft: If the hon. Gentleman had listened carefully, he would have realised that I was talking about the Conservative-administered county councils. I will come to Bedfordshire later. The hon. Gentleman need not worry about that. I was referring to the different categories mentioned by the Secretary of State.
  The Labour-controlled county councils have a rate rise which varies from as low as 7 per cent. to as high as 12·5 per cent. Therefore, the average may be higher than those in the Conservative-controlled authorities. But then the Secretary of State said that the one jewel in the alliance crown, the Isle of Wight, had a rate rise of 10 per cent. But that is the only authority with an overall alliance majority. Therefore, there is no way in which to balance one council against averages for the others. Again, that is because the Government fixed the limitation centrally. They fix the grant-related expenditure centrally and then castigate us.
  When we come to those authorities with minority administrations, we find a very different state of affairs. The county councils with a Labour minority administration have a 6·5 per cent. average rate rise, those led by the alliance a 7·75 per cent. and those led by the Conservatives a 9·5 per cent. increase. It is ludicrous, therefore, to relate those figures to one another in the way that the Secretary of State did.
  The Secretary of State was also selective. If one party opts out of its share of the administration and there is no overall majority on a council, it is ridiculous then to complain about the rate-fixing thereafter. The interesting fact about Bedfordshire is that the Conservatives opted out of any responsibility for controlling the county. If they are not prepared to negotiate and make their case for the rate levels that need to be fixed, it is wrong for the hon. Member for Bedfordshire, North (Sir T. Skeet) to complain.
  Sir Trevor Skeet: The Labour party wanted a 25 per cent. increase in rates, the Liberals wanted a 19 per cent. increase and the Conservatives wanted only a 10 per cent. increase. The alliance ganged up with the Labour party to increase the figure. That increase is due to excessive expenditure in that area, and the hon. Gentleman should know that. When the alliance has any control in an area, the situation is made much worse.
  Mr. Meadowcroft: The hon. Gentleman rests his case purely on what happened at a council meeting. He should know that for years the Conservative party has opted out of any decision-making. That is the problem. If the hon. Gentleman wants to see the difference in areas where his
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  party has not opted out, he should look at Avon county council. That is one case where we can hand out some credit. There the rate increase is 1·7 per cent., with alliance support. The hon. Gentleman cannot castigate one party alone. If the Secretary of State wants to deal with the mathematics of this and throw figures around the House, he should not be selective; Ile should look at all the different figures in the different councils.
  Let me take one more example to illustrate how ludicrous such central control is. When the Budget debate approached, Somerset county council agreed its expenditure and the amount to be taken from reserve. But then the Conservative party on the council proposed a precept. lower than that then being discussed, of 198p in the pound. That would have meant a revenue deficit of £1 million. In other words, it was proposing precisely what those in Liverpool were surcharged for—planning a deficit on the revenue account. It was not by any means on the same scale, but nevertheless the principle is the same. Such matters cannot be determined centrally in that way.
  Taking flowback out of the consideration has clobbered my city council of Leeds almost as much as any other district council. Of course, I and my colleagues have criticised spending priorities within the limitations in Leeds, but the Labour-controlled Leeds city council, with the agreement of the leader of the Liberal group, has, over the years, set increases at less than the level of inflation.
  If the Government wish to play fair by my city council, as the right hon. Member for Castle Point was saying about Essex, there should be art extra £3 million from the Government just to keep pace with inflation. It is nonsense to castigate councils for increasing rates when the amount coming from the Exchequer has declined, thus forcing up rates.
  The policy proposed by the Government is wrong both in conception and justice. Its key factor is that it separates the power to tax from the power to spend, and artificially translates those decisions from the place where they should be taken. That is not particularly new. Way back in the Municipal Review of May 1974, the city treasurer and director of finance, Mr. Fred Tolson, of my city council wrote:
  "unless some workable RSG system is evolved after due research, giving Exchequer aid related to spending needs and taxable (not just rateable) capacity, local government will decline into mere agency for whatever Government happens to be in office … there is nothing to choose between the two major parties when it comes to imposing a political solution on the complex grant issues of the day, issues that have been chewed over for weary months by officials on both sides of the negotiating table, who are more hampered by lack of hard facts about current levels of expenditure and inflation than by their affiliations."
  That is precisely what has happened. Local government is declining into a mere agency for whatever Government happen to be in office.
  I reiterate what I said earlier. If the Government are right, why on earth cannot they carry the support of their own colleagues within local government? Why has the Conservative leader of the Dorset county council had to tell the Government that they are not living in the real world?
  What has happened to the men of stature in the Conservative party in local government? Where have they gone? What has happened to the Sir Maxwell Entwistles in Liverpool? The Tory party controlled Liverpool city council for 17 years after the war, yet now it is reduced to a tiny group of seven. When I became a member of Leeds

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  city council in 1968, it had 101 Conservative members out of 120, and that was before reorganisation, when it took in more of the leafy suburbs. In the past 20 years, the Conservatives have controlled Islington and Sheffield, albeit briefly. But no one can conceive of them doing so today. The Tory party's men of stature have disappeared from local government.
  Where have the Lord Marshalls or Lord Bellwins of Leeds gone? Today, such men are nowhere to be found. The Tory party hardly exists in the urban areas. It is totally demoralised and one can see its centralising tendency not just in this House, but in local government as well. Now it is Conservatives such as the hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) who carry on the battle here for those people from the districts and the older cities.
  Every time the Government introduce measures for local government, they represent a huge vote of no confidence in Conservative councils, candidates and Conservative campaigning. If Labour-controlled local government is so bad, why is it that the Government cannot defeat Labour at local level? If alliance-controlled local government is so bad, why is it that the Government cannot defeat the alliance at local level? The Government set up political targets in local government as a diversion from their lack of policy and lack of understanding—a diversion from the true argument.
  The Government's anger and rage is synthetic. It is about time that they gave up their attempts to control local government—they will never succeed. They can only continue this campaign until the general election and not a day after.
  5.10 pm
  Mr. John Hunt: I am glad to have the opportunity to participate in this debate. The House will appreciate that it has particular significance for my constituency and the London borough of Bromley. Therefore, I propose to confine my remarks to what has become known as the "Bromley error".
  Let me say at once that my borough takes no pleasure in having become part of parliamentary vocabulary. The revised rate support grant figures now before the House follow inexorably from the bombshell that my right hon. Friend the Secretary of State dropped upon Bromley on the afternoon of 5 March. I must tell him that his statement to the House was greeted with horror and disbelief throughout my borough.
  My right hon. Friend will be aware that that statement came just four days before Bromley council's rate-fixing meeting. It meant that, at a stroke, and on the eve of the rate decision, Bromley was deprived of about 6·5 million, which until that moment it had confidently expected to receive.
  Anyone who has anything to do with local government finance will be aware of the protracted and painstaking way in which a borough's estimates are prepared and discussed for many months. They will realise the traumatic impact of a sudden last-minute decision of this nature. The leader of Bromley council, Councillor Dennis Barkway, has rightly referred to it as a
  "crippling additional financial burden"
  As a direct result, Bromley's rate has had to be increased by about 4 per cent. to meet the new circumstances.
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  I am sure that my right hon. Friend will readily concede that, over the years, the London borough of Bromley has established an outstanding reputation for prudent spending and sound administration. I believe that it is one of the best-run councils not only within greater London, but in the country. Therefore, it is especially galling that, through no fault of its own, Bromley must now impose a much heavier burden upon its ratepayers than was forecast. That burden cannot be justified by any test of logic or fairness. It has been a grave blow to Bromley and its citizens.
  I readily concede that my right hon. Friend has no personal responsibility for the situation that has arisen. The House will be aware that the original error, from which all the consequent problems have flowed, was made back in 1985, long before my right hon. Friend came to the Department.
  Dr. Cunningham: The hon. Gentleman keeps on describing this matter as an error, as though some administrative mistake had been made with pencil and paper or the wrong figures fed into the computer. That is not the case. The Government decided on one set of decisions, but they then faced objections from Bromley and others. As a result, the Government decided to do something else. They made a conscious decision to make the change. The Greenwich result in the court forced the Government to return to their initial decision. There was no error—nothing happened by accident; it was the result of deliberate acts by the Government and Ministers.
  Mr. Hunt: I am not sure that I can agree with the hon. Gentleman. In the autumn of 1985, Bromley carried out an analysis of the rate support allocation—of which it had been notified—for 1986–87. At that time, Bromley discovered that, far from taking account of its obligation to maintain 60 miles of metropolitan road that it had inherited from the GLC, the grant had been reduced. I maintain that that was an error rather than a policy decision. The commendable efforts that have been made by the Government to put that glaring error right have led to the further complications.
  With all the sophisticated computerised equipment available to the Department, one wonders how an obvious mistake of this magnitude could possibly have been made and, once made, have gone undetected. We can only hope that the official responsible is no longer in his post. If there was ever a case for dismissal or demotion, surely this is it. One can only devoutly pray that the official in question will never be allowed within a thousand miles of the draft legislation for the abolition of domestic rates.
  Mr. Jack Straw: The hon. Gentleman is known to be a reasonable man. I put to him that it is an important constitutional convention that Ministers, not officials, are responsible and answerable for decisions. Does the hon. Gentleman deny that it was Ministers who agreed the original approach to the allocation of grant-related expenditure previously held by the GLC?
  Mr. Hunt: I am merely saying that the calculations were presumably made by an official and that a mistake was made in those calculations that was not brought to the notice of the Ministers until a late stage. Once Ministers were aware of what happened, they took immediate steps to put the matter right. Those actions have since been challenged in the courts; hence the impasse that we have reached today.

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  My right hon. Friend will recall that, in the exchanges that followed his statement to the House on 5 March, I referred to the "clearest commitments" that had been given to me by Ministers. On 6 March last year, hon. Members may recall that I tabled a written question asking the Secretary of State for the Environment whether
  "he can now say how he proposes to deal with the issue raised by the London borough of Bromley regarding the level of grant payment for the upkeep of the highways to be transferred from the Greater London council to Bromley after abolition."
  My hon. Friend the Minister for Environment, Countryside and Planning outlined the way in which he intended to deal with the matter and categorically stated:
  "These changes will mean that Bromley will receive the proper amount of grant for taking over responsibility for highway maintenance in Bromley from the GLC."—[Official Report, 6 March 1986; Vol. 93, c. 280]
  Nothing could be clearer. That is why Bromley council is now so bitter about what has happened. The leader of Bromley council takes the view that, in the light of the Greenwich judgment, Ministers should simply have increased the size of the rate support grant pool and made a compensatory payment to Bromley. However, I recognise that that would have been extremely difficult and might have created further problems with the courts. On balance, therefore, I consider that it is preferable to await the result of the appeal.
  My right hon. Friend the Secretary of State is firmly on the record as saying—he said it again in the House today—that he regards the result of the High Court decision as inequitable. I certainly hope that the somewhat eccentric judgment will be set aside in due course. I wish my right hon. Friend and his lawyers every success in that endeavour. Perhaps my hon. Friend the Minister will give some sign of the likely time scale in the matter. The ratepayers of Bromley and Bromley council are anxious to have the matter resolved at the earliest possible opportunity. I hope that my hon. Friend will do whatever he can to speed up the legal process. We do not want the matter to drag on for months.
  Perhaps my hon. Friend will also confirm the anticipation that was expressed in a letter that I received yesterday from the Chartered Institute of Public Finance and Accountancy, to which the hon. Member for Copeland (Dr. Cunningham) also referred. In part, the letter states:
  "if the Secretary of State is successful in his appeal against the Greenwich decision, a further set of proposals may be put forward for 1987–88."
  Naturally, in spite of the sneering remarks made by the hon. Member for Copeland earlier in the debate, such an outcome would indeed be satisfactory from Bromley's point of view. It again underlines the immense difficulty that such continual shifts and changes in grant allocation create for local authorities. As the hon. Member for Copeland pointed out, no fewer than four consultative papers in respect of the 1987–88 settlement have been produced. An allocation on 3 October 1986 provided Bromley with £51.91 million. The allocation on 3 December 1986 gave it £53.96 million. Another allocation on 13 January pushed it up marginally to £54.1 million. On 5 March, the body blow came when the allocation was cut to £50.87 million.
  The letter from CIPFA states:
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  "Central government often stresses the need for better administration. Local government is entitled to expect central government to help rather than hinder the achievement of that objective."
  I hope that message will be learned and digested by the Department of the Environment, so that we shall never again have to go through the agony and uncertainty of the past few months that have created much heartache for my right hon. Friend.
  I pay tribute to the most courteous way in which my right hon. Friend has received representations from the four hon. Members whose constituencies are in the Bromley area. It has been a trying time for ratepayers and for the London borough of Bromley. I share my right hon. Friend's hope that the matter will soon be satisfactorily resolved, to the benefit of my borough.
  5.23 pm
  Mr. Eric S. Heffer: One thing about which I am pleased is that I have not been a member of a council for the past few years. Because of the incompetence of the Government and the Secretary of State for the Environment, problems have consistently arisen at local level which could and should have been avoided.
  I have a great deal of sympathy for the chairman of the Bromley council finance committee, as I do for all people on finance committees of various councils who have faced problems arising out of the Government's attitude. Local authorities have been thrown into total uncertainty. For example, there were six separate announcements on the 1987–88 rate support grant and five sets of grant entitlements were issued.
  The Association of Metropolitan Authorities has given me a good briefing and perhaps the facts should go on the record. On 22 July 1986 a Department of the Environment consultation paper was produced on the 1987–88 rate support grant. In October 1986 a further Department of the Environment consultation paper with provisional grant entitlements for 1987–88 was issued. On 3 December 1986 a third consultation paper, showing revised grant figures as a result of better information being available, was released. On 13 January 1987 the Secretary of State announced his firm intentions and the grant figures were again revised. On 23 February 1987 the Department of the Environment advised authorities that the grant figures issued on 13 January were incorrect because of an error in calculating the grant-related expenditure for housing revenue account, and revised figures were issued. On 5 March 1987 the Secretary of State announced that he was changing grant entitlements vet again because of the implications of the Greenwich court case.
  Over the same period there have been major legislative changes in the operation of local government finance. I refer to the Rate Support Grants Act 1986 and the Rate Support Grants Act 1987. The calculations were made illegally and legislation was required to make them legal.
  Just over a week ago 47 Liverpool Labour councillors were disqualified from holding office and are now being surcharged. Their crime was that they were late in setting a rate. They were faced with the terrible problem of interest charges that amounted to £106,000. Now they are faced with an additional bill of about £500,000. Of course, a certain number of legal people will do rather well out of it, but the fact is that the councillors are disqualified.
  The Secretary of State presented hon. Members with three documents on local government in England. He is

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  not criticised. Nobody is surcharging him. The hon. Member for Ravensbourne (Mr. Hunt) mentioned millions of pounds, the location of which Bromley council did not know. Will the Secretary of State be surcharged for the millions of pounds involved? Will he be disqualified from holding a place in the House of Commons? As a matter of fact, he is one of the Prime Minister's favourite Ministers. I am not surprised. He has done more damage to local govenment and to bus operations than any other Minister. He is an absolute disgrace. I would not only disqualify him; I would kick him out of the House of Commons right now. He should be kicked out. Those who support him should also be thrown out of the House of Commons.
  The terrible crime of the people of Liverpool is that they did what they said they would do. They said that they would build houses for the people. They have done so. They said that they would keep down the rents of those who live in local authority houses, and they have done so. They said that they would build nice sports centres to take the youngsters off the streets. They have done so. Of course they got into financial difficulties, but the reason was that since this Government have been in office the rate support grant has been reduced by over £350 million. I agree with my hon. friend the Member for Copeland (Dr. Cunningham) that the cuts apply to every local authority, but I am dealing with Liverpool and the problems that it faces.
  I am not surprised that the Secretary of State for the Environment is leaving the Chamber. He never likes to listen to the truth. He is one of the most abusive Ministers. Whenever hon. Members want to tackle him about anything, his answer is to get up and walk out of the Chamber. I am not surprised. I wish that he would walk out for good. It would be very good for this country.
  The Liverpool councillors have their counterparts in Lambeth. Lambeth councillors also fought for the people of Lambeth, yet one of the biggest disasters that this country has ever known, the Secretary of State for the Environment, is allowed to go scot-free. This is an absolute disgrace. With his free market philosophy and his narrow sectarian outlook, it is no wonder that he is one of the Prime Minister's favourites. I say again that he ought to go.
  Since 1979, the rate support grant has been reduced throughout the country, but particularly in the large cities. Those who live in the inner cities, particularly where there are high levels of unemployment, as in the north, have suffered considerable hardship. Although the services in those areas are stretched to the limit, the needs of the people who live there are being disregarded. Their needs are great. People require houses but there are long waiting lists. The result is overcrowding. Areas such as mine need additional support, but they are not getting it.
  When Liverpool went to the Government, all that it asked for was the £30 million that represented part of what it had lost because of the cut in rate support grant, but it did not get it. Why was it that the first thing that the temporary minority administration in Liverpool did was to ask the Government for £30 million? It did it because Liverpool requires that money. Additional grant aid is needed by areas with high levels of unemployment and with the problems that are caused today by life in the inner cities.
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  The rate support grant settlement ought to be based on an analysis of social and economic needs. This settlement does not even begin to do that. It is neither effective nor fair. The Government constantly tell us that local authorities are high spenders. The same record about profligate local authorities was played today, but local authority expenditure has not .been as great as Government expenditure since 1979.
  Local authorities are entitled to money for their housing investment programmes. Liverpool's housing investment programme for 1985–86, 1986–87 and 1987–88 has been cut by 9·8 per cent., but housing is required on a greater scale than ever before. In 1985–86 the HIP allocation was £31 million and in 1986–87 it was £27·5 million. For 1987–88 it is £24·8 million. That demonstrates this Government's attitude towards areas where there is high unemployment and where there are problems of the kind that are faced by Liverpool. The local authorities have not been irresponsible. It is the Government who have been completely irresponsible.
  Even if the next election is not in June or September, this Parliament will not last for very much longer. We are at the fag end of it. After the next general election, Conservative Members, in diminished numbers, will be sitting on this side of the House. [Interruption.] Many people do not believe that; they believe what they read in the newspapers. I do not believe what I read in the newspapers. I believe what I hear when I talk to my constituents and to other people.
  The days of this Government are numbered. When they have been removed from office, a Labour Government will have to introduce a completely different rate support grant system. We shall have to get rid of what I can only describe as the abortion that has been introduced by this Government. We shall have to abolish the terrible system that has been forced upon us by them. Large-scale investment in housing will be needed. Housing construction will be the way to get our people back to work, particularly in the areas of greatest need.
  After the local government elections in May, local authorities should be asked to draw up their plans for housing and other needs so that the new Labour Government will know what local authorities require and what money will he needed so that they can get on with the job. I should like a conference to be held in my area at which the local authority, Government Departments and the trade unions could discuss what is needed. When a Labour Government are returned to power, the rate support grant system will he scrapped and we shall assess the social and economic needs of each area.
  In my opinion, the Secretary of State for the Environment should go. He has the anti-Midas touch. Everything that he touches does not turn to gold; it turns to ashes.
  5.39 pm
  Mr. Timothy Wood: The hon. Members for Copeland (Dr. Cunningham) and for Liverpool, Walton (Mr. Heffer) seem to have forgotten that it was a Labour Secretary of State who first expressed major concern that local government expenditure had risen to unacceptable levels. It is fascinating how these matters are forgotten when a party is in opposition. The hon. Member for Copeland seemed anxious to defend the wholly irresponsible expenditure of some authorities. One of the problems in terms of local authority finance is that a

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  significant number of Left-wing Labour authorities have spent, spent and spent. Their failure to control expenditure has created problems for the mass of local government.
  Mr. Meadowcroft: I hold no torch for the policies of the councils to which the hon. Gentleman is referring, but why, if they are so bad, are he and his colleagues unable to defeat them locally? Why is it that in Manchester, for instance, the proportion of the Conservative vote has declined to about 20 per cent.? If Conservatives are failing locally, why should they expect help from big brother in Westminster?
  Mr. Wood: I intend to come to that point later in my speech. However, let us be quite clear why that is so. It is because only a small minority of the electorate in that area are cost losers as a result of the way in which they vote. If many people are employed by a local authority, if many people are not paying rates for one reason or another and if large amounts of money are coming from business, commerce or rate support grant, it is hardly surprising that the electorate is biased in its judgment.
  Mr. Meadowcroft: If that were true, why is the alliance in Liverpool able to outvote Labour by policies put forward in contradistinction to the spending policies of the Labour council?
  Mr. Wood: I am interested to know that the alliance has, in general, been outvoting Labour. My understanding is that the arrangement in Liverpool at the moment—in some ways, sadly—may not be permanent.
  Many of the problems which have beset local authorities over the past 10 years or more were perceived not just by the Conservative party but by the Labour Government when they were in power. That Labour Government did not succeed too well in controlling some of the madcap spending of local authorities, and it must be said that this Government have also had difficulty.
  Mr. Terry Patchett: Did that Labour Government spend money on building council houses?
  Mr. Wood: That Labour Government did build council houses. Indeed, they reduced the number of council houses being built each year.
  I shall discuss some of the aspects which are peculiar to the rate support grant in terms of Hertfordshire. I am particularly grateful for the careful hearing that the Minister of State gave to hon. Members and county councillors from Hertfordshire. He agreed to look at the particular problems of the county. He did more than provide tea and sympathy; he did something about those problems and improved the rate support grant.
  Mr. Richard Page: My hon. Friend is carrying the Hertfordshire banner in the debate, but is it not true that that was the first time that any Minister had listened to any of the Hertfordshire pleas for help over the last five or six years? We are exceedingly grateful to my hon. Friend the Member for Brent, North (Dr. Boyson) for his kind consideration and his realisation of the problems of reducing the rate support grant in Hertfordshire.
  Mr. Wood: I am grateful to the Minister of State. My attitude to making representations to Ministers is that if at first one does not succeed, one should try, try and try again.
  Mr. Straw: Will the hon. Gentleman confirm that, for every one of the previous five years, Hertfordshire Conservative Members have been shown the door and told no by Conservative Ministers?
  Mr. Wood: I shall not confirm anything of the sort. If my hon. Friend the Member for Hertfordshire, South-West (Mr. Page) makes his own speech in due course he may be able to develop that particular point. I have represented my constituency since 1983 and when I have been to see Ministers I have been given sympathetic hearings. I am glad to say that when we effectively and forcefully presented our case on this occasion, it was heard and accepted.
  When counties have been pursuing a policy of relative moderation in terms of expenditure, those local authorities have a right to expect that the rate support grant and financial support from the Government will remain satisfactory.
  It is necessary, in considering local government expenditure, for the local electorate to be able to perceive that a responsible local authority is able, as a result, to provide a low rate for people in that area. Where that does not happen the electorate have every right to be discontented and their representatives have even more right to be discontented. I am grateful for the review that was carried out of the rate support grant and for the changes that were made in safety nets and so on.
  I should now like to pursue what the prospects may be until we get the major change in local government finance that we hope to see after the general election. It would be disturbing for local authorities if they found that the rate support grant movements in the intervening years, prior to major changes in local government finance, were adverse in an unfair way. Therefore, I ask the Minister to pay particular attention in the coming two or three years to the situation that may apply to counties such as Hertfordshire, Surrey, Buckinghamshire, Berkshire and Essex, and ensure that the rate support grant position does not deteriorate in a way that would be contradictory to the situation that may exist after the change in the financing of local government.
  The difficulty is that, in terms of the rate support grant system that we now have, the principle is sound. It endeavours to make some tolerably objective measures or need in different areas. The previous system of rewarding high spenders with more grant needed replacement. That is all right so far in terms of principle; it is when we come to the practice that the difficulties arise.
  The rate support grant system—this has been said by a multitude of people before—is incomprehensible to almost everyone. It is incomprehensible to nearly all hon. Members. It is incomprehensible to all councillors. I believe that it is incomprehensible to 99·9999 per cent. of the electorate. I deliberately use six significant figures, just as we have six significant figures or more in so many of the measures of need that we see in the local government finance document appendices. Et is absurd that multipliers of various items of expenditure should run to that number of decimal places. Like the hon. Member for Copeland I was involved in science. If one conducted an experiment that was accurate to only one or two decimal places, it did not matter how good the computer or calculator was because to come up with an answer accurate to six, seven or eight decimal places was grotesquely misleading, confusing and unhelpful.
  Mr. Richard Page: Does my hon. Friend agree that in Hertfordshire there is no calculation about the ability of the ratepayers to pay? The average income of the people of Hertfordshire is not at a level to justify the high rates that will ratchet up year by year and increase the demands on ratepayers' pockets.
  Mr. Wood: My hon. Friend is right. Many of the figures presented in the tabulations before us have an apparent accuracy and objectivity that is wholly false because, quite reasonably, a variety of political judgments have been made about which things should be regarded as significant and which things should be left on one side.
  I was involved in local government and I remember a debate on the magic item E7, which relates to notional housing revenue account surplus. The decision about that item was that where local authorities charged rents that were low relative to their localities, they might be expected to transfer sums to their general revenue account. As a result, the rate support grant could be lower. The amount that followed from that move could, for some local authorities, be several million pounds. Quite rightly, the way that item was handled was changed and the change affected the support grant received by some local authorities by well over 50 per cent.
  To say, on the one hand, that we can have changes for justifiable political reasons that have an effect of 50 per cent. or more on the rate support grant that a local authority receives, and, on the other, that figures should go down to six or seven decimal places is the height of absurdity. When one reaches that number of decimal places, one can be certain that the tabulations will be placed at the bottom of a file because people will not understand them and, more significantly, the electorate will not understand them.
  If the electorate do not understand the basis on which local government finance applies, they may make rather ridiculous decisions about the merits or otherwise of local government candidates. The system must be simple and straightforward. It must also allow for a reasonable constraint on expenditure. In an ideal world, that constraint should be exercised at the wish of the local electorate rather than necessarily at the behest of central Government.
  Because of the complexities of the present rate support system and the inadequacies of local government finance in terms of who pays, we have been forced into a system where, year by year, the Government have repeatedly tried to introduce alternative means of controlling quite excessive expenditure. The Government's efforts to control that have not worked very well, because the irresponsible have continued to be irresponsible, except in cases where, because of rate capping, they have been obliged, at least to a certain degree, to toe the line.
  Mr. Richard Page: I apologise to my hon. Friend for intervening again. I promise that this will be the last time.
  Mr. Deputy Speaker: Order. Interventions should be addressed through the Chair to the House and not to the hon. Member who is speaking.
  Mr. Page: Does my hon. Friend agree that the position is even more disastrous? In Hertfordshire, some houses are cheek by jowl with houses in the London area. Authorities in the London area that are guilty of extreme over-expenditure are given a weighting in favour of their rate
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  support grant to give them more money. Herfordshire, which has the same problems, is then penalised. Is that not a further injustice in the system?
  Mr. Wood: It is a grotesque injustice that in the London area there is effectively a 25 per cent. allowance from which the home counties do not benefit in any way. For exactly equivalent services one could pay considerable lower rates in a council adjacent to Hertfordshire or one of the other home counties. That is quite unreasonable.
  In Hertfordshire the rates levied on the average person are approximately 30 per cent. higher than the national average, but the incomes of people in Hertfordshire are about 12 or 13 per cent. higher than the national average. Again, that is a massive injustice which has been provided for in London but not in the home counties. It is one of the things that hon. Members for Hertfordshire constituencies have campaigned about for years, with singular lack of success.
  These issues of discontent lead me to speak about future prospects. I welcome the prospect of a change to the community charge and to a uniform business rate. Even more, I welcome a simplification of the rate support grant system. It is perfectly reasonable in the financing of local government to provide a community charge system of paying. As has been said, the vast number of services provided by local government are related to people, not to the properties that they occupy. A very small percentage of such services relate to property. Therefore, the proposals to introduce a community charge seems wholly reasonable.
  It is also reasonable to have a level community charge rather than to have an alternative, such as a local income tax, because it is appropriate that the redistribution of incomes implicit in income tax should be on a national rather than a local basis.
  Mr. Straw: Does the hon. Gentleman think that there should be any rebate within the poll tax for people on low incomes? If so, at what level does he think it should start?
  Mr. Wood: I support the view that for those on very low incomes there should be a rebate which will allow perhaps 20 per cent. of the charge to be paid by the individual and 80 per cent. by the rebate. That seems a reasonable sort of balance because it makes the individual aware and conscious of the costs of local government and the relatively high costs of some local authorities compared with others and does not impose an unreasonable burden on people on low incomes. That is a perfectly acceptable protection for those with particularly low incomes.
  There is a strong case to be made for a uniform business rate. In the Liverpools and Newcastles, the rates being charged are such as to deter businesses from going to the very places where there are masses of people desperately seeking work.
  Mr. David Clelland: Where is the hon. Gentleman's evidence that businesses have been deterred by the rates from setting up in places such as Newcastle?
  Mr. Wood: I have no statistical evidence, but I have the evidence of business men who have spoken about rates and told me that, when they are contemplating a move, one of the major factors that they take into account is the level of rates. I know of one or two businesses that have expressed concern, when they were thinking about moving to my local authority area, about the relatively high level

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  of rates there, and in one or two other districts in the county of Hertfordshire. They have told me that that is one of the judgments that they make. I see no reason to disbelieve them.
  It would he false logic to assume that if the rates charged for businesses in, say, the Wokingham area were about half those charged in, say, the Newcastle area and one had the advantages of, say, Heathrow, people would choose to go to Newcastle rather than to Wokingham. If they had the combination of the benefit of lower rates and the convenience of an airport, other things being equal, they would go where the lower rate is. That is obvious, but we have the tragedy of many local authorities deterring businesses, and businesses may not bother to go there to have a discussion on the subject because they can see figures and statistics on the rates.
  Mr. Neil Thorne: I fully support my hon. Friend in his assessment that high rates deter businesses from opening or continuing in a particular area. However, might there not be a little difficulty when the new community charge comes in if the commercial rate is dealt with on a national rather than local basis? Will that not take away many of the advantages that businesses have of going to well-managed areas? Should we not encourage the Government to consider relating commercial rates to the locality in which they operate, and not doing this on a national basis?
  Mr. Wood: I hope that the people working in the businesses in various areas will, because of their community charge, put pressure on the local authority to operate economically. That seems an appropriate way to move. Although businesses and commerce now have a right to be consulted on the way in which local authorities are spending their money and the way in which they are going to place their rates, nevertheless, sadly, the influence that businesses and commerce have on the rates is minimal. I wish that it were otherwise. On the other hand, the impact that the community charge will have in terms of causing people to endeavour to influence their local authority will be much greater.
  As I have already said, both those things depend on a simplification of the rate support grant system. The proposals for a removal of some of the penalty arrangements seem to me to be wholly desirable. While I can understand the reasons for those penalty conditions being introduced, I believe that they serve to confuse rather than help the electorate in their judgment of the merits of a local authority.
  We have heard much today about reductions in rate support grant. Some of those reductions have followed from budgeted over-expenditure so that increased local expenditure has been combined with reduced rate support grant, and the local authority has blamed the increase in the rates on the reduction in rate support grant. The electorate become confused and the council becomes less accountable, when the whole objective of our moves on rate support grant and the financing of local government must be to make a council much more accountable.
  I hope that, in terms of the assessment of need for local authorities, we may be able to simplify the number of items that we take into account in assessment and simplify the numbers associated with those items that we take into account. I hope, too, that we make a presentation of the whole system of finance that is understandable to
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  Members of Parliament—it should be, but it is not—to local councillors and, perhaps most important of all, to the electorate. If I showed these documents to a member of the electorate, he would either laugh or cry, because he simply would not understand half the words.
  I welcome the rate support grant settlement that has been made for Hertfordshire. I welcome the fact that my hon. Friend the Minister and the Government paid attention, as they said they would, to the representations that were made by councillors, Members of Parliament and others. I urge the Government to give careful consideration to the rate support grant position in the interim years before the next Conservative Government change to the new system, so that counties such as Hertfordshire are not disadvantaged. I urge, yet again, that in the new system that we introduce the rate support grant mechanism is made simple and clear to all.
  6.7 pm
  Mr. Max Madden: We have come to this debate after eight years during which the Tory Government have launched a bitter and sustained attack on local democracy. We have seen the Government abolish metropolitan county councils, cancel elections and manipulate local government finance, with councillors disqualified and surcharged. In the absence of anything to say about the pressing social and economic problems in many parts of the country, the Government have taken refuge in making the most malicious and scurrilous attacks on many councillors—men and women who are desperately trying to serve their electorate and do something about the urgent social and economic needs that they see around them.
  In Bradford, the Government and their policy, which is centralised to a breathtaking extent, have robbed us of £70 million over the past seven years. This is despite the Government's measure of need, saying that Bradford needs to spend this money to provide services for its growing population. The Secretary of State makes considerable efforts to establish the spending needs of all local authorities, the grant-related expenditure assessment, to provide a basis for supporting rate support grant.
  Those spending needs—GREs—are determined in accordance with criteria applicable to all local authorities according to the statutory functions for which they are responsible. The rate support grant is then calculated by relating those needs to a local authority's rateable value.
  In the past, multipliers have been used by the Secretary of State to limit the amount of rate support grant payable by reference to other criteria. Thankfully, the Secretary of State has abandoned the grossly unfair system of expenditure guidance controls. However, the use of the multipliers still enables the Secretary of State to fiddle the figures in an even more unfair way. Because rate support grant is related to GRE and rateable values, the amount of grant can be affected by increases or decreases in GREs which reflect increases and decreases in a local authority's needs and increases or decreases in a local authority's rateable value.
  The Secretary of State is using the multiplier under the power available to him under section 59 of the Local Government, Planning and Land Act 1980, as amended, to limit any reductions in the amount of rate support grant to certain authorities for 1987–88, compared to the grant payable in the current financial year. In effect, the Secretary of State is subsidising those authorities which

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  have either decreasing needs or increasing rateable values. In practical terms, those local authorities are getting more rate support grant than they necessarily need in relation to their GREs and rateable values.
  The Secretary of State has belatedly decided to apply a multiplier to limit the increased grant for 1987–88, compared to the current financial year, due to those authorities with substantial increased needs or substantially decreased rateable values. Substantial decreases in rateable values do not happen and, in effect, the multiplier affects only those authorities with major increased needs. However, the multiplier penalises those authorities, in that they do not get the grant to which their GREs would otherwise entitle them.
  The operation of the two multipliers is fundamentally different in effect. In the first case, the multiplier provides an extra subsidy for those authorities which, if the Secretary of State firmly applied his needs criteria, would not otherwise get it by reference to their GREAs. In the second case, it is a penalty, penalising those authorities which clearly need the grant, having regard to their needs criteria fixed by the Secretary of State. The overall effect is to deny an element of grant needed by the poor authorities to provide a more comfortable cushion for those authorities which, on the Secretary of State's own criteria, already get their full grant entitlement. It is a classic case of robbing the poor to pay the rich.
  Mr. Wood rose—
  Mr. Madden: I would prefer to continue, particularly as the hon. Member for Stevenage (Mr. Wood) made a long contribution. I must say, my contribution is not going to be brief.
  How can the Secretary of State, committed to a platform of relating rate support grant to local authority needs, justify providing some local authorities with additional grant when they are already getting their full grant entitlement in relation to their needs, and, at the same time, take grants from other authorities so that they do not even get their entitlement in relation to their needs? The true answer is that the Secretary of State was leaned upon by those councils losing grant by reason of decreasing needs or increasing rateable values, their representations being supported by their respective Tory Members of Parliament concerned about their seats and electoral prospects.
  Therefore, between October 1986 and December 1986, the Secretary of State changed his mind. He drew back from the fair principle of giving rate support grant where it is needed. Instead, he compounded the felony of his predecessors by manipulating the system for political ends. Why did the Secretary of State change his mind?
  Mr. Wood rose—
  Mr. Madden: It is no coincidence that the authorities suffering grant reductions under his October 1986 proposals were Tory marginals. Bradford, Birmingham and a few other authorities with pressing increased needs had grant taken away from them to enable those frightened Tory marginals—Surrey, Hampshire, Hertfordshire, Bedfordshire and Oxfordshire—to get bonus grant, presumably in the hope of buying Tory votes.
  In the October 1986 proposals, the Secretary of State identified for Bradford £146·2 million of block grant—
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  for spending at settlement expenditure assumption. In the December and January proposals, that figure is reduced to £138·4 million, taking into account an adjustment of the council's GRE. Some £10 million potential grant was taken away from Bradford, despite the clearly identified needs of Bradford, to pay for the Secretary of State's extra cushioning to the wealthy southern counties. The Secretary of State teasingly waved that £10 million grant in front of Bradford, recognising Bradford's needs, then took it away. That joke on Bradford is compounded in its bad taste by the money being given publicly to wealthy southern authorities.
  There is a legal argument to suggest that that manipulation of grant is a misuse of the Secretary of State's powers. Furthermore, the Secretary of State is departing from the long-established principles of his Department, of treating all local authorities evenhandedly. It is not surprising that the Secretary of State is anxious to obtain legislation preventing challenge of his decisions before the courts. What was once a carefully devised system of allocating central Government money to local authorities in an even-handed way has now become a means of the Secretary of State manipulating grants to get votes.
  Is the Secretary of State aware that, in applying the multiplier-limiting rate support grant increases, he is forcing the affected councils either to fail to perform their statutory functions to meet the demands on those functions—which demands are clearly recognised by the Secretary of State in his own grant-related expenditure assessments — or to impose a greater burden on ratepayers than other authorities to enable those needs to be met? How can the Secretary of State demonstrate that this is an even-handed support grant distribution, when such inequities are fundamentally apparent? Will the Secretary of State give any assurance that these artificial manipulations will not be used in future years?
  Will the Secretary of State not come clean and state publicly that what he really wants to achieve by his successive changes in the legislation is absolute and unchallengable arbitrary control to determine, in whatever way he wishes, in his absolute discretion, what amounts of rate support grant should be given to each local authority, without reference to any principles or criteria applicable to all local authorities.
  I have referred to the fact that in the past seven years Bradford has been robbed of £70 million. The situation in our city is desperate. During the period 1980 to 1986, Bradford's total rateable value has increased from £42·9 million to nearly £46 million. However, that figure hides the fact that, during that period, the rateable value of industrial undertakings has fallen from £6·1 million to £5·7 million. If the rateable value from those properties had still been at the 1980 level of £6·1 million, Bradford would be receiving £900,000 more in rates income in 1987–88 than it will be receiving. That means that £900,000 extra block grant will be going to Bradford which, if the industrial base had been maintained, could have been redistributed among all the authorities.
  Since 1980 Bradford has lost £3 million in rates income from a number of major industrial concerns. Salts (Saltaire) Ltd. was empty from 1 April 1986. Its rateable value was £76,000. International Harvesters is now demolished and that had a rateable value of £75,000. GEC is part-demolished and its rateable value was reduced by £48,000. Crofts Gear Works is part-demolished and its

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  rateable value was reduced by £44,000. Bulmer and Lumb is part empty and its rateable value was reduced by £48,000. Alston Works is now demolished and its rateable value was £40,000.
  That shows the contraction of our industrial base, which has put between 30,000 and 35,000 men and women on the dole. The £70 million of which we have been robbed during the past few years has paid for tax cuts for the rich. The Government have done that again in their latest Budget, which is an insult to those who are unemployed and to the problems in our city.
  The alternative that the Government now dangle before us in the form of a poll tax—or, in their terms, the so-called community charge—presents prospects that are far from happy for my constituents and for the other citizens of Bradford. This week, the Minister for Local Government let the cat out of the bag. He issued information showing the effect of the poll tax on Bradford. He stated:
  "For the average two-adult household in Bradford, the community charge is likely to be about 20 per cent. higher than existing rates bills. Even so, on the basis of 1986–87 spending, the community charge would be less than £200—below the national average. The increase largely reflects the fact that domestic rateable values are so low at present. This means that Bradford ratepayers have been paying less than those elsewhere for the same level of service."
  On non-domestic rates, the Minister said:
  "Businesses in Bradford will gain considerably from the introduction of a national rate. On 1986–87 figures, there would be a reduction in poundages of over 20 per cent. … In total, non-domestic rate payers will save around £15 million a year in Bradford and nearly £60 million in West Yorkshire as a whole. That is very good news for existing businesses and for anyone thinking of setting up business in the area."
  Once the Prime Minister gets word of that candid admission from the Minister, and once Mr. Ingham is alerted to the fact that those interesting revelations have been made, I fear for the hon. Gentleman's future because he might find himself back in Northern Ireland. His comments about the unfavourable impact that the poll tax will have on the citizens of Bradford — if the Government are given an opportunity to introduce it—will make extremely interesting reading for my constituents.
  Mr. Straw: My hon. Friend has just informed the House that the Minister has stated that the poll tax would be about £200 per head in Bradford, and that that represents a 20 per cent. increase. As the average domestic rate bill in Bradford last year was only £251, does that not mean that the local tax bill for the average two-adult household is likely to rise from £251 to £400, which is far more than a 20 per cent. increase?
  Mr. Madden: Yes, that is likely to be the case. I shall certainly be interested to hear any further comments about those revelations when my hon. Friend replies to the debate.
  On Tuesday, there was an interesting article in The Guardian, headlined,
  "Material to bridge the great divide: Christopher Haskins suggests ways to narrow the North-South gap".
  In a most perceptive and persuasive article, Mr. Haskins who is the chairman of Northern Foods, called upon the Government to marshal their resources and priorities to lessen the gap between the north and the south. He said clearly that unless that was done, the position would deteriorate sharply and that the difficulties of allowing
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  disadvantage and deprivation to continue to worsen in the north would cause acute economic and other difficulties for the south. That is absolutely right.
  Mr. Haskins concluded his article by stating:
  "London and the South-east continue to be a source of inflationary pressure in the economy as too many people pursue too few houses. If the pressure continues, industry in the South-east will suffer from higher and higher wage costs. But if the green belt is eased, to allow the building of more houses, the environment of the South will suffer. Either way, the South will become a less pleasant place to live.
  There are many things we, as northern businesses, can do to help—by not moving our headquarters to London for a start—but only society, through government action, can radically change the position. And it must do so not so much out of altruism, but rather out of enlightened self-interest. It is in the South's interest that the North is a success."
  I agree with that view. Since returning to the House in 1983, I have tried to do what I can to persuade the Government to act on an interdepartmental basis and to marshal the resources and priorities that are available to them to help my city and the others that are enduring the same plight.
  Unlike those of the hon. Member for Stevenage, my appeals have met with a wholly negative and unhelpful response. Twice in the past 12 months, I have asked the Prime Minister to meet a deputation of representatives covering a wide spread of interest in Bradford. Those requests have been refused. I have also asked the Secretary of State for the Environment twice in the past 12 months to meet a deputation from Bradford to discuss our problems. Those requests also have been refused. The only meeting that I have had was with the Minister, who was good enough to meet a deputation from the West Yorkshire passenger transport authority, which wished to discuss the difficulties of deregulation and the precepts and grant allocations that it faced. We have not had even a dialogue with the deaf with this Government about the problems that we face in the north.
  Mr. Chope: Does the hon. Gentleman accept that the implementation of the national non-domestic rate would reduce the rates burden on businesses in Bradford by about 24 per cent.? Does he accept that that positive step by the Government will help the people of Bradford?
  Mr. Madden: As my hon. Friend the Member for Blackburn (Mr. Straw) has suggested, a revaluation would have the same effect. However, that is an attempt to divert me from this argument.
  I charge the Government with a deep uncaring complacency about the problems of the men, women and children in the north, who are desperately worried about their future and concerned also about the present. Tonight in Bradford, in 30,000 houses, people will go to bed in homes that need serious renovation. There are 8,000 people on the council housing waiting list and hundreds of families are homeless. Thousands of people who live in poor private accommodation are being harrassed and face great difficulties. However, only a few weeks ago we saw the payroll vote, in which Ministers were brought here in their limousines to vote down a measure that would have given some relief to tenants in multi-occupation.
  I make no apology for another quotation. This time, I refer to a document recently published by my own council in Bradford, entitled "The Legacy: The Challenge—Poverty, Health and Disadvantage. A portrait of the Bradford District." In the foreword to that report, the leader of Bradford council, Councillor Phil Beeley, wrote:

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  "The legacy inherited by Bradford Council is one of worn out schools, bad housing and a growing sense of despair among the poor and the unemployed.
  The challenge is to defeat this spiral of decline which has followed a chronic lack of investment, withdrawal of Government grants and massive rent and rate increases.
  The council's new policy is to Put People First in deciding how and where the money is spent. To do this, we need to know and understand the needs of the people of the district and to work with communities to regenerate areas within the inner city and outer estates. This document shows in visual terms the way in which deprivation is concentrated in certain parts of the district and pin-points vulnerable groups such as the over 85's, single parent families and young children. We are extremely concerned about the increasing division between the 'haves' and the 'have-nots' and the way in which unemployment, poor housing and overcrowded, crumbling schools deprive young people of the chance to succeed in their lives.
  We are not prepared to close our eyes to the needs of the district. We believe the Council has a responsibility to encourage local initiatives and motivate other institutions to invest in the district.
  Bradford's single most valuable resource is its people, a multi-cultural population with a wide range of skills and aptitudes unique to the area. We shall seek to use these skills both to improve the prosperity of the district and to support and protect the vulnerable members of our community."
  The Prime Minister may pay secret visits to Bradford and appear frightened to meet the people to discuss their anxieties and problems. Ministers may come to Bradford to drink our tea and give us sympathy, only to go away and do little about addressing the city's problems. We may be ignored, robbed of £70 million in seven years and denied grants to meet the urgent social and economic needs that all of us with a social conscience see around us.
  I hope that the Minister will not only look at the words in the report but heed them, instead of attempting to slur men and women who are elected to serve their communities, to defend jobs and services, and to bring a better life to our people. I hope that he will consider the reality of our plight, because our electorates know the difficulties. They know that their only hope of a genuine improvement comes when this Government are pushed from office and a Labour Government are elected.
  A Labour Government will work in partnership with local authorities to repair the damage which this Government have done to local democracy. We are committed to that, and I look forward to an early opportunity for that Labour Government to be elected.
  6.31 pm
  Mr. Kenneth Hind: In answer to the hon. Member for Bradford, West (Mr. Madden), the Prime Minister may have come to drink his tea, and he may have felt that my right hon. Friend did not meet many people from Bradford, but I assure him that the amount of notice for a visit by the Prime Minister is small, no matter which part of the country it is. Those of us who were in a hotel in Brighton three years ago understand why. Everywhere my right hon. Friend goes she risks her life and, accordingly, she is surrounded by strict security. It is most unfair of the hon. Gentleman to criticise my right hon. Friend on that basis.
  I must shoot down the conspiracy theory that in some way Ministers at the Department of the Environment have manipulated the rate support grant to improve Conservative chances in their marginal seats in the south of England. The hon. Gentleman may not be aware that
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  there is a Conservative Member in Bradford, North whose seat some would regard as marginal. Moreover, I can remember when there was a Conservative Member for Bradford, West in the 1970s. He is now the hon. Member for Ruislip-Northwood (Mr. Wilkinson) and he, too, may feel that his seat is marginal. It is absolute rubbish to suggest that there has been some conspiracy. That idea must be well and truly nailed to the floor by all Conservative Members.
  We constantly face the suggestion that local authorities have been robbed of rate support grant. It is as if the financing of local government is wholly divorced from the rest of Government spending and falls into some safe little sacred corner where it cannot be touched by the Treasury's long-term planning. Prudent, sensible financing must be a theme of local and national Government. No Government can contemplate the years ahead and not see that they must place certain cash limits on public expenditure. Indeed, Labour Members have spent much time in recent weeks issuing policy documents about how they will spend money, presumably because they have costed their policy and thought about it. They should not expect us not to do the same.
  Labour Members should not forget that in talking about robbing local authorities they are talking about the total amount of tax paid, whether through income tax, corporation tax or rates. Let us not forget that rates are a tax. They affect businesses and individuals in the community, as do more direct taxes. It is significant that businesses pay as much in rates as in corporation tax, so the effect of rates on employment prospects is fundamental and can never be forgotten.
  It is worth commenting on the increase in rate support grant and local government expenditure, as planned by the Government, of £25·2 billion—an increase of 4·1 per cent. on 1986–87, which is in line with inflation, but it does not stop there. Exchequer grant to local authorities amounts to £12·842 billion, which is an increase of 9 per cent. and is nearly three times the rate of inflation. The list of local authority spending in the shire counties shows that the vast majority of local authorities are spending more, and well above the rate of inflation. They can increase their services because the Treasury agrees to their planned expenditure. On top of the £12·842 billion of Exchequer grant, £183 million has been given to help pay for teachers' salary increases.
  The hon. Member for Bradford, West said that there was a divide between the north and south and that the north has come off worst. The figures show that £375 million extra has gone to the north, compared with £150 million to the south. In other words, the north has received more than twice as much as the south to deal with its problems in inner-city areas, high unemployment and the need to upgrade housing. The Government have tackled the so-called north-south divide realistically.
  I represent the district of Lancashire, West which has a Conservative-controlled council. Its financial policies are prudent and this time it will increase rates by only 5 per cent. The people respect that. Over the past 18 months we have been able to attract to the district an additional 500 or 600 jobs. We could not have done that if we had charged exorbitant rates, because that would have deterred potential manufacturers or service industry business managers from coming to our area. New businesses are brought in because rates are low.

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  I cannot understand, and I am sure that many hon. Members will fail to understand, why it is necessary for local authorities in London which are newly under Labour control to increase their rates as they have done. Waltham Forest has increased its rates by 62 per cent. Hammersmith and Fulham by 50 per cent. and Ealing by 65 per cent. I note that my hon. Friends the Members for Ealing, Acton (Sir G. Young) and Ealing, North (Mr. Greenway) are present in the Chamber and no doubt they will be addressing us in full on the problems facing that authority. I cannot understand, and I am certain that my hon. Friends cannot understand, why it is necessary to raise the rates in that way, effectively increasing the money drawn in on the rates by more than 25 per cent. However, I do not have to go very far to find the answer to that.
  Mr. Straw: Will the hon. Gentleman give way?
  Mr. Hind: I shall give way in a moment.
  I can find the answers to those problems in my constituency. When I reviewed the problems facing my constituency, I became aware of them. Having done that, I considered the plans of the local Labour party to deal with those problems. When those plans are costed, we find that the promises and plans will involve a rate increase next year of 150 per cent. in the district rates, irrespective of the consequences for local businesses or the fact that such a rise would drive away potential investors and so prevent the creation of new jobs. Many of those Labour-controlled local authorities never seem to understand that high rates and high unemployment go hand in hand.
  Mr. Bill Michie: Nonsense.
  Mr. Hind: Potential business is driven out if the rates are raised to ridiculous levels.
  Mr. Straw: The hon. Gentleman's figures about the local Labour party's plans are almost certainly moonshine.
  Mr. Hind: Thanks very much. Is the hon. Gentleman accusing me of being a liar?
  Mr. Speaker: I did not hear that word.
  Mr. Hind: I withdraw the word "liar".
  Mr. Straw: I am glad that the hon. Gentleman has withdrawn that word, because I made no such accusation. I said that his figures were likely to be moonshine. As the hon. Gentleman is so concerned about increases in the local tax burden, how does he feel about the fact that the poll tax will result in a significant increase in the local tax burden on the local taxpayers of Lancashire, West?
  Mr. Hind: I do not agree that there will be an increase on local taxpayers. I shall consider the poll tax in a moment. There may be increases in certain areas. However, the poll tax will be a much more equal spread of the cost of the services of local government. The changes that will come about in industrial and commercial rates in many inner-city areas that are desperately in need of new jobs and new investment will allow many businesses a tremendous degree of relief and so encourage them to invest, and will encourage new businesses to come in to tackle the problems of those communities.
  I am sorry that the hon. Member for Blackburn (Mr. Straw) is not listening to the points that I am making in response to his question, but every day I am approached by business people from Liverpool who say that they
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  would like to set up businesses in Lancashire, West, in Ormskirk, or in Skelmersdale because they recognise that the rates charged there are much lower than in Liverpool and that there is a more sensible local authority upon which they can depend.
  Mr. Peter Pike: Will the hon. Gentleman give way?
  Mr. Straw rose—
  Mr. Chope: Does my hon. Friend recognise that the point made by the hon. Member for Blackburn (Mr. Straw) in relation to Lancashire, West is not correct? At the moment the average rate bill per adult in Lancashire, West is about £200. Under the community charge, the average charge per adult will be only £170. That represents about a 14 per cent. reduction.
  Mr. Hind: I am much obliged to my hon. Friend for that and I am sure that the people of Lancashire, West will be extremely grateful for a 14 per cent. reduction in their—
  Mr. Pike: Will the hon. Gentleman give way?
  Mr. Straw: Will the hon. Gentleman give way?
  Mr. Hind: I have given way to the hon. Member for Blackburn once. He will have an opportunity to speak. I mean him no discourtesy, but other hon. Members wish to speak.
  Mr. Pike: Give way.
  Mr. Hind: We must also look very carefully at some of the decisions made in the shire counties with regard to rates. If we take the average across the board, we see that the shire counties under Conservative control have increased rates by 6·5 per cent. and have been able to increase expenditure by a further 1·1 per cent. thereby increasing the standard of their services. That is well below the average when compared to the London Labour-controlled boroughs, and below the figures for shire counties controlled by Labour councils and for others such as Lancashire.
  Lancashire is a good example to raise in this respect. The Conservatives in that authority proposed a budget, yet the Liberals and the Labour party combined to raise a rate higher than that which the Conservative group considered to be necessary to maintain proper services in the county. That is a good example of what is happening throughout the country.
  I want to consider what has happened in Liverpool. That city is on the doorstep of my constituency and reveals some of the problems faced as a result of irresponsible financing in local authorities. Last week, Sir Trevor Jones, now the Liberal leader of the council, said that the Labour councillors who had been surcharged and removed from office had set a rate of 5 per cent. However, once they had assessed the money that was needed, they found that the rate increase should have been 30 per cent. Therefore, the rate levy was 25 per cent. short of what was needed.
  Letters of intent were signed for contracts for which there was no money in the budget or in the bank. The Labour councillors left corporate debts of £800 million and, before they departed, their last-minute gesture was to increase that £800 million by spending a further £25 million on housing schemes, against the advice of the executives. That is Militant, some of the loony Left, at their worse in control of a big city. I admire the courage

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  shown by Sir Trevor Jones. He is trying to maintain the same level of housing by transferring it to co-operatives in order to build the same number of houses. Sir Trevor Jones has had to wrench back a school from a supermarket chain in order to increase parental choice and abolish Labour's rigid catchment area for schools.
  The hon. Member for Liverpool, Walton (Mr. Heifer) complains that the treatment of those Labour councillors in Liverpool was most unfair. However, he forgets that Parliament makes the law and that the law is to be obeyed. The way to change the law is through the ballot box, not by taking on the Government in direct clashes, as the Militant Labour councillors did in Liverpool in an attempt to get their way. They should not have risked 30,000 jobs by threatening to lay off staff. All that was highly irresponsible. The Labour councillors failed to recognise that the parliamentary mandate must always overrule that provided by the local electorate. That fact was ignored and, as a consequence, Liverpool's affairs were turned into a mess.
  Liverpool is a typical example of high rates leading to unemployment problems and driving out businesses. Liverpool is probably one of the finest examples of how not to run an authority in order to attract jobs into the community.
  Many Conservative Members cannot understand how certain authorities can find plenty of money to spend on anti-police propaganda, as Manchester did, of £500,000 for nuclear-free zones, as occurred in Manchester again, or for gay and lesbian units, police monitoring units, racial advisers, women's rights advisers, and so on. They all have their place, but those authorities complain about the lack of Government spending on local services. If local authorities are to act responsibly, it is no good their complaining to us about the housing budget or the social services budget when £500,000 of ratepayers' money can be found to build a nuclear-free zone in Manchester. That will not wash.
  Mr. Pike: Will the hon. Gentleman give way?
  Mr. Hind: I am sure that the hon. Gentleman will have an adequate chance to speak.
  We must all recognise that prudent, sensible financing must be an important part of central Government and local government financing. It is no good imposing it on national Government and letting local government have a runaway free ride as to how it should spend its money. That is why I shall happily vote for these reports and give them my full support.
  6.50 pm
  Mr. Willie W. Hamilton: I come directly to the point on which the hon. Member for Lancashire, West (Mr. Hind) closed his speech — the attempt to blame democratically elected local councillors and councils for all the ills that prevail in general finance, local or national. The facts need to be stated bluntly. Over the past five or six years, central Government expenditure has increased substantially more than public expenditure by local authorities. On 31 March 1986, I asked the Chancellor of the Exchequer:
  "what has been the increase in central Government's current spending in each year since 1980; and what are the corresponding figures for local government."
  The Chief Secretary to the Treasury replied:
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  "Between 1980–81 and 1984–85 central Government current spending rose by 46·3 per cent. and local authority current spending relevant for RSG by 37·5 per cent." — [Official Report, 13 March 1986; Vol. 93, c. 584.]
  Central Government expenditure has increased substantially more than local government expenditure.
  The Chief Secretary excused the increased expenditure by central Government on the grounds that there are considerably more unemployed now. Of course, we are spending £20 billion a year on dole money. Whose responsibility is that? That crass waste of public expenditure is central Government's responsibility. It has nothing to do with Liverpool or the so-called loonies of the Left. The loonies are in central Government. There is no better example of that than in the documents that we are debating. I agree that these documents are completely incomprehensible. The rate support grant report on England cost £6. Anyone who pays £6 for it is an idiot, because no one understands it. I do not understand it, nor do other hon. Members, Ministers or anyone else.
  I shall quote some of the indicators that the Government used to decide how much help to give local councils. It is unbelievable. I shall read direct from page 51 of the wretched document where an adjustment is made for road maintenance.
  "The sum in the area of the authority of Indicators B5a, B6, B7a and B8 as defined above, multiplied by the sum of the following"—
  I hope that you are following this, Mr. Deputy Speaker—
  "(i) the annual average number of days of snow-lying during 1979/80 to 1982/83 as estimated by the Secretary of State for Transport, multiplied by 9·60745"—
  is that clear to everyone?—
  "(ii) the annual average number of days of air frost during 1979/80 to 1982/83 as estimated by the Secretary of State for Transport, multiplied by 1·14303."
  Crystal clear.
  On page 50 provision is made for road maintenance for which local authorities are responsible. I shall quote paragraph B9 at length to let people understand the idiocy perpetrated by the Government on local authorities. The report says:
  "B9. Usage adjustment factor for road maintenance. The sum in the area of the authority of (i) and (ii) below:—

  (i) Indicator B5a as defined above, multiplied by 1·0;

  (ii) Indicator B7a as defined above, multiplied by 0·3283"—

  everyone is following this—
  "multiplied by the sum of the following:—

  (iii) -1209·35;

  (iv) Indicator A1 divided by the sum of Indicators B5a, B6, B7a and B8 as defined above, multiplied by 9·91626".

  Hon. Members are doing their sums; they have the calculators out. Sub-paragraph (v) is a beauty:
  "annual average vehicle kilometres on principal roads in built-up areas excluding principal motorways during 1982 and 1983 divided by the length (in kilometres) of principal roads which are subject to a speed restriction not exceeding 40 miles per hour and of principal motorways in the area of that authority as at 1 April 1984, but excluding any such roads or motorways responsibility for which passed to the Secretary of State for Transport from 1 April 1986, all as estimated by the Secretary of State for Transport, multiplied by 0·0007899357".
  That is the type of rubbish produced by civil servants and the Government to determine how much local authorities should get in rate support grant.
  Mr. Clelland: Is my hon. Friend aware that what he has just read out results from this Government's legislation which, in their words, was intended to simplify and clarify the system?
  Mr. Hamilton: Hon. Members understand that, but the poor councillors—those Left loonies—do not. If they are not loony now, they will be when they try to sort out this rubbish produced by the Government at £6 a time.
  I did not intend to take part in this debate, but then I read some of these figures and happened to receive a reply from the Under-Secretary of State for the Environment — the hon. Member for Southampton, Itchen (Mr. Chope) — who is sitting there bemused by the figures produced by his Department. He cannot understand them. He cannot tell me how that figure of 0·000 and seven other digits has been arrived at. I should like him to say who produced that figure — and give him the sack immediately-and then say why it should be that figure and not one millionth of a per cent. less or more.
  In response to popular request, down in Devon, I asked the Minister today whether he would publish in the Official Report a table showing the amount of rate support grant paid to each district council in Devon in each of the past five years. As the House knows, I shall be the new Member of Parliament for one of the Devon seats after the general election. I see that I am the only hon. Member in the Chamber representing Devon: I do not see a single Tory, Liberal or SDP Member defending local authorities in that county. Therefore, it is my responsibility to defend their interests, and I shall now proceed to do so.
  The Minister gave me the figures, and I now wish to put on record certain facts about them. They show that in 1982–83 the rate support grant for South Hams — a constituency that I shall be representing in due course—was £2·745 million. In 1986–87, it is £2·857 million. That is an increase of £ 112,000 in four years. Assuming that the rate of inflation was only 3 per cent. in each of those four years, that should have meant a 12 per cent. overall increase; and 12 per cent. of the original figure of £2,745,000 in 1982–83 would have meant that South Hams needed £329,400 just to stand still. However, the increase in cash terms, as suggested by the Minister's own figures, is £112,000. Therefore, there has been a cut in actual cash terms of at least £217,000.
  Devon is a very pretty county; that is why I am going there. However, the natural beauty of that county hides considerable deprivation in housing, education, health, transport and, not least, employment. All those services are bound to be adversely affected by what is shown in the Minister's figures.
  Mr. Straw: I am grateful to my hon. Friend, particularly for his elucidation of the way in which road maintenance grant-related expenditure assessment is calculated. Does he agree that the poll tax is even worse news for the people of South Hams? At present, the average rates bill in South Hams is about £260, while the Chartered Institute of Public Finance and Accountancy estimates that the poll tax will be about £160 per head. That means that the bill for an average two-adult household will go up from £260 to at least £320, an increase of £60 per family.
  Mr. Hamilton: I shall make sure that those facts get down to Devon. I am defending as best I can the rights and interests of the people of Devon, which are being
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  repeatedly neglected by Devon Tory Members, none of whom is present and none of whom is taking any interest in these matters. They must know the adverse effects of the poll tax on the people of Devon who are struggling away under the incomprehensible system.
  Mr. Chope: Will the hon. Gentleman take back to his constituency in west Fife the correct figures for the community charge exemplification in respect of South Hams? At present, the average rate bill per adult in South Hams is £176; in other words, a two-person household is paying about £350 in rates. However, following the implementation of the community charge, that same household would receive a 15 per cent. reduction and pay less than £300. The figures given by the hon. Member for Blackburn (Mr. Straw) were not a true representation of what would happen then.
  Mr. Hamilton: The last thing that I would do would be to accept statistics from any member of the Government. For a start, the Minister has got my constituency wrong; west Fife does not exist as a constituency. Apart from that, I would accept the figures given by my hon. Friend the Member for Blackburn (Mr. Straw) very much sooner than I would accept those given by the Minister.
  The Minister and the Government must know that the imposition of a poll tax runs against every royal commission and every authority that has examined the problem over the years. The Government are introducing the tax because they are running scared. They did the same in Scotland when we had the revaluation a year or two ago. The Tory party in Scotland will be damn lucky if it wins 10 parliamentary seats out of 70-odd in the next election, partly as a consequence of the poll tax. I suspect that when the electors in England know its implications, and realise how much it will benefit the rich rather than the poor, they will also rebel against it.
  I have said enough to show how local government finance—[Interruption.] The hon. Member for Glanford and Scunthorpe (Mr. Hickmet) is well able to make a long speech off his own bat. He still has the opportunity to do so, as we have three hours to go.
  I am sure that local government electors understand that, as a direct consequence of the Government's meddling, local government finance is in the most unholy mess that we have seen since we first had elected local councils. This is a further and, I hope, final example of the colossal mess that we are now in.
  7.8 pm
  Sir George Young: I do not quite understand why the hon. Member for Fife, Central (Mr. Hamilton) made such an impassioned speech about the impact of the rate support grant on South Hams. I am sure that his constituents will be most upset to learn that he is deserting them for South Hams because it is such a delightful area. I do not know Fife very well, but it seems a very attractive area. I wonder what the hon. Gentleman's local newspaper will say about that part of his speech when it is reported, later this week.
  I can answer the hon. Gentleman's question. The figures that he quoted will actually bring relief to the north. They show that where there is snow a local authority must spend more because it has to clear the roads. Something in the rate support grant must reflect that additional responsibility. Likewise, the reason why

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  temperature is mentioned in the figures is that the colder it is, the more damage is done to the road surface. That too must be reflected in the formula. The more roads there are, the more expenditure there must be.
  While we all enjoyed the hon. Gentleman's speech about the complicated formula, I hope that he will not say that he does not defend the principle behind it. The exemplifications that he mentioned will bring greater relief to the north than to the south.
  It makes sense to debate the rate support grant settlement just two days after debating the Budget. In the same week, we are debating the two major impacts on the pockets of our people. On Monday we debated the Budget and national taxation; today we are debating rates and local taxation, and of course the two interact.
  On Monday Opposition Members voted unanimously against the reduction of some £3 a week in income tax, and we heard their reasons. In Ealing the rates are going up by £4 a week for council house tenants and by £5 a week for home owners. Without the £3 a week reduction announced on Monday, the sums would not have begun to add up.
  Ratepayers in Ealing have got the message that if by any chance we had lost the vote on Monday, not only would their rates have gone up quite a lot, but they would not have had the reduction in national taxation with which to pay for that. Businesses in Ealing, which have been hard hit by the business rate, are looking forward to the reduction in interest rates that has been made possible by my right hon. Friend the Chancellor's Budget.
  Likewise, an integral part of the rate support grant settlement has been rate capping. The only party that believes in rate capping is the Conservative party. The alliance and the Labour party will abolish the rate-capping legislation. In areas with high-spending councils such as Ealing, which covers my constituency and that of my hon. Friend the Member for Ealing, North (Mr. Greenway), and where there will be no local elections for another three years, the only protection that ratepayers will have in those three years will be from a Conservative Government committed to rate-capping legislation.
  Mr. Piers Merchant: Does my hon. Friend agree that that situation applies also to Newcastle city, which has had large rate increases over the past three years? Rate capping has saved the situation from the point of view of the ratepayers there. Does my hon. Friend further agree that the proposed community charge will make a distinct improvement for the majority of ratepayers in Newcastle or in my constituency, who will see their present high rate bills reduced to a much more manageable level?
  Sir George Young: I welcome what my hon. Friend has said. No doubt over the next few months he will put forward those arguments with his customary vigour.
  I refer to the settlement that we are debating. I welcome what has been known as the adjustment for realism. For many years there were two sets of figures—the Treasury books, with a figure which the Treasury thought local authorities should spend, and another figure, which was what local authorities actually spent. This led to enormous complications when the annual public expenditure debate took place. It took place on two separate sets of accounts. This year we have put that right with the adjustment for realism, and I very much welcome that step forward.
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  I also welcome the end of recycling, which comes into effect on 1 April. It is essential for local authorities, when they fix their rates and budgets, to know exactly how much grant they will get. I understand the principle of recycling, but it made it impossible to forecast with any accuracy how much money would be received in the municipal year. So I welcome that innovation as well.
  I should like to raise a specific point about Ealing. As we heard earlier, at the moment we have an industrial dispute in Ealing, which has an impact on the distribution of expenditure as between this year and next year. For example, no bills are being paid. Businesses that are owed money by Ealing council are not getting paid. Inevitably, there is an accumulation of work on the housing stock and other parts of the estate. Normally that expenditure would have fallen in this year. It will now be pushed forward to next year. Expenditure, already planned to increase by a substantial amount, will be higher still. Can my hon. Friend the Under-Secretary say what the impact will be on the rate support grant settlement the year after that, or is it somehow swept up in the supplementary grants?
  My hon. Friend the Member for Ealing, North has already mentioned the hardship that is being caused by the dispute. A woman rang me this morning to say that she is to lose her job because the day centre to which she takes her child has been closed for 10 days and her employer is no longer prepared to put up with her absence. Someone who attends an adult training centre was to go on holiday last Friday, but needed his £8 pocket money to pay for his weekend. The ATC was closed, and he asked what he should do.
  In Ealing we are threatened with the highest rate increase in the country—about 65 per cent. We have a virtual absence of any services because of the industrial dispute. It has blown out of the water in a short time the argument that the Labour party gets on with the trade unions. For eight years we had a Conservative administration at Ealing town hall and we never had such a dispute with the National and Local Government Officers Association, yet within a relatively few months of the Labour party being elected we have an all-out strike by NALGO, with the problems to which my hon. Friend the member for Ealing, North and I have drawn attention.
  I return to the impact of the rate support grant on Ealing. It is always easy to blame someone else for one's problems. There has been a repetition of that from Opposition Members, who have blamed the Government's rate support grant settlement for the problems in their constituencies. We have heard emotive phrases, such as "being robbed" of £50 million, and so on. As I said, it is always easy to blame someone else rather than oneself.
  I refer to the settlement for Ealing. My hon. Friend the Member for Ealing, North and I will always argue for more money if it is around, but we must accept that if the council had budgeted to spend in line with inflation, having made allowance for the extra money needed to settle the teachers' pay dispute, Ealing's local rate need not have risen if the balances available from the London residuary body had been taken into account. In the debate on Ealing on 13 March my hon. Friend the Minister for Local Government made that clear when he said:
  "In fact, overall, Ealing's local rate need not have risen at all if the extra balances had been used in such a way."— [Official Report, 13 March 1987; Vol. 112, c. 670.]
  Instead, we are faced with a 65 per cent. rate increase because some rather extravagant decisions have been

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  taken. The only consolation is that at the moment we cannot pay our rates because the town hall is on strike and the post is not getting through, but, sadly, the day of reckoning will come.
  We have problems in Ealing at the moment, caused not by the Conservative Government, but by the Left-wing Labour administration, which, sadly, we are saddled with for three years. We hope very much that the Government will announce later this summer that Ealing will be rate-capped.
  7.16 pm
  Mr. David Clelland: I welcome the opportunity to speak again on the subject of local government. After all that has been said over the past months and years, people may well wonder whether there is anything new to say about local government and local government finance. Had they listened to what the Secretary of State said in opening the debate, they would have definitely concluded that there was nothing new to say about the subject because he said nothing new, apart from the usual venom that he spits out, in his inimitable way, about Labour-controlled local authorities.
  Today's announcement presents the opportunity to draw attention to what has happened as a result of the Government's complete ineptitude and bungling and fumbling over local government affairs. It is now well established that the Government have used the vehicle of legislation to attack Labour-controlled councils and at the same time to attempt to reward or avoid penalising councils under Conservative control—or at least that had been the Government's plan and intention. However, Labour councils are far more knowledgeable and expert in local government affairs than Ministers thought, and every attempt to punish people for voting Labour has been fought. Often the Government's plans have been frustrated or defeated.
  This Government-inspired battle between local communities and Ministers has resulted in a record number of Acts, orders and announcements such as today's on local government matters. Such is the Government's ineptitude that not only has it resulted in successful court action being taken by individual councils, but it has sometimes meant, as in the Greenwich case, that Labour councils have gained at the expense of Conservative councils — the very opposite of what the Government intended. Such a chaotic farce would be hilarious were it not for the real harm that it does to local communities, regardless of how they vote in local elections.
  Today's announcement comes not only four months late but after every local authority to which it applies has fixed its budget and its rate for the next financial year. It is the seventh announcement on the 1987–88 rate support grant and adds to the confusion and the future uncertainty, completely contrary to the Secretary of State's statement to the House on 22 July 1986, that his efforts would mean that local
  "authorities will be able to plan their budgets and rates with much greater assurance"—[Official Report, 22 July 1986; Vol. 102, c. 182.]
  The Secretary of State is a great joker, although like many of his jokes, this one was neither funny nor practical.
  Today's announcement follows the Government's consistent policy to cut the overall level of Exchequer grant to local authorities, with the result that, as a proportion of relevant expenditure, it has been reduced
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  from 60 per cent. in 1981–82 to 46 per cent. in 1987–88. I have explained the formula before to the Minister, but in case he missed it last time, I shall explain it again.
  For £100 of relevant expenditure in 1981, when the grant was running at 60 per cent., the local authority contribution from rates and charges was £40 to £60 from the Government, and £40 from local rates and charges. To spend the same £100 in 1987, with no increase in expenditure—no profligacy, no overspending, no loony Left-wing politics—the local contribution must be £54. If the Minister has his calculator, he can work it out. That amounts to a 35 per cent. increase in local contribution, and it is one of the major reasons for the rate increases of the past few years. Those are entirely the Government's responsibility, however much they may like to argue about it.
  The chaos that has ensued has been evident in the latest episode of the long-running farce. For instance, Tyne and Wear fire and civil defence authority had met and set its rate precept before it received new figures from the Government that caused it to hold another meeting to fix a new rate based on the new figures.
  Newcastle-upon-Tyne city council, which was mentioned earlier by the hon. Member for Newcastle upon Tyne, Central (Mr. Merchant)— unfortunately, he has left the Chamber, but I hope that he will return before I have finished — had to make 160 amendments to its budget documents only hours before its rate-making meeting because of late announcements by the Government.
  Gateshead councillors were faced with an amendment to the rates report on the day on which they sat to fix budgets for next year because of the Government's late announcements. And, as I have said, today's announcement comes after budget meetings have taken place.
  The letters RSG—rate support grant—should stand for "Ridley's Silly Games"; that would be a more appropriate description of the way in which the Secretary of State has dealt with local government during his term office. Those silly games lead also to contradictions. The Government have acknowledged that special assistance is necessary for the inner cities, and in recognition of that, special area grants are made via the inner-city partnerships set up by the last Labour Government. To the credit of the present Government, they have been continued.
  The inner-city areas of Newcastle upon Tyne and Gateshead have received about £100 million in inner-city grant since the Government came to power. That may be thought generous and helpful to the inner cities of Gateshead and Newcastle, and of course they are grateful for it, but the same Government during the same period have caused a loss of more than £300 million in rate support grant for the same two local authorities. Where is the sense or logic in that? Nothing could be sillier, although Conservative Members apparently think that that is prudent and sensible.
  Newcastle council spends wisely and effectively the money that it takes and, in private, many Ministers admit that. That is the expressed opinion of the Daily Mail, which could not, in any circumstances, be construed as a loony Left-wing publication.
  Funding through partnership has been used more effectively than appears to be the case elsewhere. That is the opinion that is expressed in a report by the police staff college, following a visit by its representatives to Newcastle city council last year. I should add that, in the

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  context of elections and the views of the electorate, Newcastle city councillors have to face the electorate every year, not every three years. Every year, the Labour party has been consistently supported by the people of Newcastle, despite what the hon. Member for Newcastle, Central said.
  The Government are not finished yet. Their stated intention is to introduce a community charge and a uniform business rate to replace the rates and the Minister for Local Government has had something to say about that in the past day or two. I see that he has now returned to his place on the Treasury Bench. He did a great service to the nation when he made a comment that was reported in a press interview. He said—he will correct me if I am wrong, but I am sure that I am not—that people must pay for the way in which they vote. The Minister does not object, so I presume that those were his words.
  According to the Minister's figures, however, the people of Newcastle and elsewhere will pay dearly if they vote Conservative in the next election. He has said that the introduction of the community charge will mean a 10 per cent. increase for the average ratepayer in Newcastle. Every household with two adults or more will pay more under the community charge if the Government are reelected. The average rate in Newcastle, which is now about £500, will increase to about £600, according to figures that I have received today from the Department of the Environment — a bit later than the hon. Member for Newcastle, Central, but I managed to get them. It is a prospect that will not be welcomed, despite the fact that the hon. Member for Newcastle, Central thought that it would be welcomed by the people of Newcastle. I am sure that they will have something to say about that in the general election.
  According to the Minister's figures, the uniform business rate will mean a 40 per cent. decrease in business rates in Newcastle. It would seem that the chairman of the Conservative party is asking businesses only for a loan when he appeals to them for money for the Conservative party election fund. He is not asking for grants or help, because if the Conservatives are re-elected, the businesses will be paid back their money at the expense of domestic ratepayers.
  Mr. Chope: Does the hon. Gentleman accept that that is a travesty of the truth? Under the national non-domestic rate, the revenue from the business sector will be the same as it is now from business rates.
  Mr. Clelland: The figures for Newcastle that I have state that businesses will be paying 40 per cent. less. If, as the Minister says, they will pay the same, I do not see how businesses will benefit from the uniform business rate.
  Mr. Chope: The hon. Gentleman needs to have a better understanding of these matters. There will be a redistribution throughout the country as a result of bringing in the new domestic rate. That will mean that, in general, businesses in the north will benefit substantially. The hon. Gentleman should welcome that. Businesses elsewhere will have to pay a little more, but the Government believe that that is a price worth paying to attract businesses back to the north.
  Mr. Clelland: If the Government think that that should be hailed as a boost for businesses in the area, they should
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  give some evidence. In my view, the benefits to businesses in Newcastle depend entirely on the differences between the costs of setting up businesses in Newcastle, and those of setting up elsewhere, and on considerations such as the surrounding amenities—airports and road connections, for example.
  Secondly, there is not one scrap of evidence that rates are a significant factor to be taken into account when businesses decide to settle in, or move from, a region.
  In view of the Government's appalling record in local government matters, any statement or any change that promises to improve, enhance, simplify or clarify the system has to be considered with great scepticism. I believe that the Minister's statement that people must pay for the way in which they vote will ring in his ears: that is why they will not vote Conservative at the next election.
  7.30 pm
  Mr. Harry Greenway: I take issue with the hon. Member for Tyne Bridge (Mr. Clelland) when he says that there is no substantial difference between areas, because it is clear that jobs are being sucked out of my constituency into areas where there are development grants. For example, the Hoover factory has now effectively been removed from Perivale, where it was started in the 1930s, to Scotland and Wales. The attraction is redevelopment grants and rates. Any redistribution of the rating system which strongly favours the north, where it is much cheaper to set up, could have a very damaging effect upon industry in areas such as mine, and we shall have to watch that very carefully. I ask the hon. Gentleman to take that into account.
  The rate support grant is particularly welcome because of the help that it gives to local authorities to meet the cost of the teachers' pay award and in many other ways. I particularly welcome it, apart from that, because in Ealing it would have had the effect, if the balances of the London residuary body and the former Greater London council had been properly applied, of giving us no rate increase at all, as my hon. Friend the Member for Ealing, Acton (Sir G. Young) said. I want to expand on some of the things that he said and also to make my own comments on the situation in Ealing, as well as on the national situation.
  No Member for Ealing could take part in this debate without reflecting the agonies of his constituents at the present time. Following a rate reduction of 4 per cent. last April by the outgoing Conservative council, my constituents now face an increase of 65 per cent. and a drop in local services at the same time. One cannot imagine a more appalling situation than to know that one will have to pay an extra £4 a week if one is a council tenant, and an extra £5 a week if one is in owner-occupied accommodation, that one cannot get repairs of any kind done, and that absolutely fundamental services, such as the provision of home helps even to elderly people of 96 or 98, are not available. That is the situation.
  I had a telephone call this morning from a man of 98 who is attempting very courageously to live on his own. He has had home help service for some time, and needs it, but he is not getting it now, and his meals-on-wheels are packing up at weekends too. In addition to that, he is faced with an additional £5 a week on his rates. That is where one sees the Labour party as it is, and I was interested to hear Labour Members picking up the term "loony Left".

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  I hope that they will recognise that it is a very hard and evil Left and that Members will dissociate themselves from it.
  Mr. Roland Boyes rose—
  Mr. Greenway: The hon. Gentleman will have an opportunity to speak, I am sure.
  I am deeply concerned about the disadvantaged and everybody else in my constituency because of the present situation. The National and Local Government Officers Association sent me a paper this morning which reads as follows:
  "We regret the problems you are having at present due to the council workers' strike. Important services are either closed or seriously disrupted: Housing benefits, Homeless persons, Council housing officers; Schools and colleges; Social Services; Libraries and Sports Centres."
  There are others, of course. It goes on:
  "We are striking because of a long-term grievance over London cost-of-living allowances. Our members receive less than other Council workers in Ealing—the Teachers receive £1,215 and the Manual workers receive £1,020, whereas we get £738."
  They were promised by the Ealing Labour party, the hard Left, that if it won the election last year that would be put right and NALGO workers would receive the same London weighting as teachers. Having gained control, however, it put the rates up by 65 per cent., started to throw money at everything imaginable, including homosexuals and lesbians, and made a determined drive to get the teaching of homosexuality as being as valid as heterosexuality on to the school curriculum. This is continuing in high schools but was repudiated by the chairman of the governors of a large church school in front of the Labour council which has perpetrated this evil policy, before an audience of 600 or 700 people and in the presence of the Cardinal Archbishop of Westminster.
  The council has given £10,000 for peace parks and money for nuclear-free zones, provided special birthday cakes to celebrate the first anniversary of the women's committee, and all that sort of thing. The council having thrown money about like that, it was natural for the NALGO people to say that they were waiting for the council to honour its promise and pay the London weighting promised to them, but it has refused to do so.
  That money could be paid today or tomorrow if the council would reallocate expenditure earmarked for political purposes, such as the huge payment to a firm to distribute political propaganda in the interests of the Labour council and the cost of the large number of staff taken on for that purpose. If all that were cancelled, the money could pay for the London weighting and the strike could end tomorrow and my constituents, including the elderly and many who are suffering grievously, would be able to return to normality, as they are entitled to do.
  Who is all this hitting particularly? It is hitting people in sheltered accommodation. In one place the heating has been out of action for a month and there is no sign of its being repaired while the strike continues. Indeed, some old people have not had a bath for a month. So it goes on. The wardens are on strike. One lady told me that the milkman and the postman are not allowed to come in. That is the sort of thing that is happening, and it is the responsibility of the London borough of Ealing council, which has to settle the dispute, and could settle it.
  The mother of a mentally disabled child came to see me the other day. She had managed to get a teacher whom she
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  knew well to be with her child. Otherwise, she said, she could not have left the child even to do a little shopping. The child's school is closed because of the strike and it is easy to imagine the damage to the child, to the mother and to her whole family. That is the effect of the strike, and 31) or 40 schools are closed as a result of this situation.
  Who has caused it and who is failing to sort it out? The answer is Ealing council.
  Mr. Clelland rose—
  Mr. Greenway: The hon. Gentleman made his own speech, and I am not seeking to speak for a long time.
  What is the situation for domestic ratepayers? 01' course, it is all related to the RSG, which I mentioned at the beginning of my speech and which is fundamental to all that I am saying. The RSG for Ealing, with the balances that will be coming the way of the council shortly from the London residuary body and the former GLC, could have had the effect of no rate increase at all, but we have a 65 per cent. increase, and that is what makes people so incensed about the situation.
  In industry the increase is 57·5 per cent., and of course this matters very much to people. The firm of Taylor Woodrow is to have a rate increase of £428,000. This means that it has to earn an extra £15 million. That will cost a great deal of effort and possibly jobs. It is a very enterprising firm and perhaps it will overcome the difficulties, but it is an unnecessary burden on the back of that great company.
  Mr. Boyes rose—
  Mr. Greenway: Lyons Companies have had a rate increase of £700,000, and that means that the price of tea, coffee, porridge and everything that they produce will have to go up or more people will have to be made redundant. Hon. Gentlemen say that high rates do not cost jobs. They had better come and see what is going on. Of course they cost jobs.
  Mr. Boyes rose—
  Mr. Greenway: I shall give way in a moment.
  I shall give another example. A launderette owner wrote to me yesterday to say that his rates will go up by £8,000. This means that people from the nearby flats who use the launderette will have to pay much more. That is a direct increase in the cost of living of people who cannot afford it.
  Ian Perryman runs a car repair firm and employs five people. His rates are to go up by £5,000. As a result, he will shortly have to get his five employees around the table to discuss the matter, and one of them will draw the short straw and be made redundant. High rates cost jobs, and I do not want to hear any more nonsense from the Labour party, the Liberals or anyone else to the effect that they do not.
  Mr. Boyes: The hon. Gentleman says that increasing rates cost jobs. Does he agree, therefore, that if a local authority reduces its rates, employers should be able to create more jobs? I believe that the hon. Gentleman was a school teacher before he came to the House. Does he agree that since May 1986 Ealing has recruited 150 extra school teachers? Surely that is good for Ealing. It has reintroduced admissions to schools for the rising-fives.
  Mr. Greenway: The hon. Gentleman is making a speech.
  Mr. Boyes: I am not. I am making a couple of points about education. The council has used rate increases to good effect, by creating a large number of jobs for teachers—at least 150.
  Mr. Greenway: The figure is 140. I have no objection to more teachers, but that figure has to be looked at along with the 1,235 extra jobs at the Great Western centre next to Ealing town hall which has been acquired and which costs £3·1 million a year in rent. Those staff will need secretarial and research back-up, telephones and so on. Those are non-jobs, and some of them, I am told, are jobs for the boys — for the friends of the Labour party, including Labour councillors from other boroughs. It is no good Labour Members pretending that that does not happen or using the Leader of the Opposition's tactic of trying to pretend that the Labour party is respectable and decent, when it is corrupt, disgraceful and evil.
  Mr. Boyes: On a point of order, Mr. Deputy Speaker. Is it in order for the hon. Gentleman to suggest that the Leader of the Labour party and his right hon. and hon. Friends are corrupt?
  Mr. Deputy Speaker (Sir Paul Dean): I did not understand the hon. Gentleman to be referring to hon. Members of this House. If he was, he was, of course, out of order and must withdraw his comments.
  Mr. Greenway: I referred, not to Members of this House, but to the Labour party.
  Mr. Boyes rose—
  Mr. Deputy Speaker: Order. The hon. Member should let me hear the explanation of the hon. Member for Ealing, North (Mr. Greenway) first.
  Mr. Greenway: I said that the Leader of the Labour party and others—it seems that the hon. Member for Houghton and Washington (Mr. Boyes) is joining them — are attempting to cover up some of the worst behaviour. That is deplorable. I hope that the hon. Gentleman will stop trying to intervene and wait for his own turn to speak.
  In addition to schools being closed and children, including disabled children—
  Mr. Boyes: This is a disgraceful speech.
  Mr. Greenway: Does the hon. Gentleman approve of disabled children being sent home for days on end and their families suffering? Does he approve of hospitals grinding slowly to a close because Ealing council cannot manage its staff and provide local services for discharged sick people in their homes? People cannot be discharged to their homes, which means that others cannot be taken into hospital because beds are taken up—all because of the council's inadequacy. Does the hon. Member for Houghton and Washington approve of that? What is his explanation to those who need serious hospital treatment and who face even more severe illness because they cannot get it?
  What does the Labour party say to those looking forward to jobs in a computer company to be set up in Greenford, which I personally negotiated and which will provide 100 jobs, but which cannot be established because the strike is preventing committees from meeting to give the necessary planning consents? What does the Labour party say to that? It does not care, or it would do something about it and those jobs would be saved.
  Mr. Boyes: Rubbish.
  Mr. Greenway: The hon. Gentleman had better find out the facts for himself. He does not know what he is talking about.
  The GLC forced so-called improvements costing £1·5 million on the Ault and Wiborg paint factory, which found itself struggling to meet the cost.
  Mr. Clelland: On a point of order, Mr. Deputy Speaker. I have listened carefully to the hon. Gentleman's speech, but I find it difficult to see what it has to do with the rate support grant — however regrettable the circumstances that he describes might be.
  Mr. Deputy Speaker: Perhaps I should explain to the hon. Gentleman and the House that it is customary for debates on the rate support grant to range pretty widely over local government finance, and that is what is happening.
  Mr. Greenway: The hon. Member for Tyne Bridge provides further evidence of the way in which the Labour party tries to gag those who speak the truth. It does not like it. It wants to conceal the truth.
  I have given a number of examples of the way in which jobs are lost as a result of heavy rates. There are plenty before me today and I fear that I shall be faced with more. The evidence is there. Let me give one last example.
  The Ault and Wiborg paint factory in Perivale in my constituency has always had difficulty meeting high rates—like everybody else. The money that goes on rates could be spent on research and development and in other areas. The Ault and Wiborg paint factory had forced upon it by the late GLC measures costing £1·5 million, which made it vulnerable to a takeover by the Berger paint company. It has therefore had to say no to a takeover by Manders, a paint company in Wolverhampton, because its offer falls about £1·25 million short of the price being offered by Berger.
  The difference between the two takeovers is that under the Berger takeover all the jobs will go, whereas under the Manders takeover 300 jobs will be saved. I wrote to Ealing council saying, "You are interested in industry. Out of your largesse, will you put up the £1·25 million required to save the 300 real jobs?", but the council refused. For my constituents, that sums it up. The Labour party does not care. It would rather create 1,235 non-jobs than save 300 real jobs. It is a disgrace.
  7.48 pm
  Mr. Bill Michie: I am glad that you have ruled, Mr. Deputy Speaker, that we can range widely in rate support grant debates, but unfortunately my speech will stick to the rate support grant. Had I known, I could have managed four or five more pages.
  I have listened with interest to some Conservative Members extolling the virtue of the rate support grant settlement and saying that it has been welcomed in their areas. Is it not a strange coincidence that most of the areas that seem to benefit from the rate support grant settlement seem to be under Conservative administration? Sheffield city council has not received adequate recompense for its needs. It is ranked 23rd out of 36 metropolitan district councils in terms of grant-related expenditure per head of population in 1987–88. The Minister has obviously heeded the words and warnings of some Conservative-controlled local authorities and delivered the goods, but that has

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  certainly not happened to Sheffield. Indeed, while our deputation was arguing the case with the Minister, the report was presented in its present form, and there seemed little point in continuing the discussions.
  The Government appear to ignore the needs of areas, such as Sheffield, which have very high unemployment. Before hon. Members start shouting that that is because of the high rates, I assure them that I shall come to that point later. High unemployment has been caused by the decimation of the steel and engineering industries in that part of the country. Again, that has nothing to do with local authorities but a lot to do with the Government. This afternoon the Government said that nothing could be done to stop unfair trading in Japan, yet they are prepared to stop any so-called unfair practices in local authorities. If we really want to put our house in order for the sake of industry and jobs, we should he looking across the water, not to the high rates of local authorities.
  Local authorities such as Sheffield have 40 per cent. youth unemployment. That applies not just to the poorer east end; I believe that there is 40 per cent. youth unemployment in the only Conservative constituency in Sheffield. It is affecting working-class and middle-class families alike. That has been going on since 1979, and perhaps slightly before, because of the deterioration in trade. Middle-aged craftsmen and craftswomen are now long-term unemployed. Such skilled workers will not be able to find jobs in their industries again in their lifetime. The Government have not taken such problems into account when working out Sheffield's rate support grant.
  In order to offset some of the difficulties the city council has set up educational courses which, according to my latest information, are likely to be affected by the financial constraints placed upon the local authority. Those courses could be kept at the expense of something else, but there are so many pressures on local authorities in areas such as Sheffield that moves cannot be made without causing suffering to somebody.
  Facilities have been provided for the young unemployed which have helped to maintain some contact between the younger and older generations, providing the young with some guidance in their idle hours waiting for employment. But those facilities, too, are faced with such financial constraints that some are likely to be closed or at least experience some slowing down of their activities.
  The services provided for old-age pensioners are under threat, not by the loony Left, but because we no longer have the resources to provide them at the level that we wish. They certainly cannot be increased. That is despite the fact that Sheffield, as I understand it, has the highest number of elderly people of any equivalent local authority. Again, that seems to have no effect upon the city's rate support grant.
  Despite everything that Sheffield city council has tried to do to help those in need and those caught by the misfortune of unemployment, the fact is that the heavy trades and industries are no longer needed, so the unemployed, school-leavers without jobs and the old-age pensioners who need proper accommodation have suffered. The council's attempts to help those people have been sabotaged by the Government, or the council has been penalised for doing its best in those areas.
  I have spoken in almost every local government debate in the House since 1983 and I want to repeat what I have said on many occasions. When the Audit Commission investigated Sheffield's finances, it commended the city
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  council on its efficiency and value for money. Yet that efficient service and the work force which administers it are now under threat. Despite Sheffield's high unemployment, there may be redundancies within the local authority itself if the financial squeeze continues.
  The block grant system still incorporates a penalty, whereby authorities lose substantial amounts of grant for overspending—about 79p for every pound for Sheffield city council in 1987–88. The problem is made worse by the abolition of grant recycling which means that money which would usually have gone back to local authorities will now be returned to the Treasury. The Association of County Councils has calculated that about £400 million could be involved in 1987–88. As a result, the effective level of Government support for local authorities is likely to be considerably lower than that assumed in the statement.
  The Government's assumption of local authorities' spending needs is even lower than their own spending plan and the insistence on the amount not allocated to GRE ensures that more authorities are likely to lose grant at a higher rate for spending above the threshold level. The significance of safety nets and grant caps in the determination of an individual authority's grant entitlement underlines the arbitrariness and unpredictability for the year-on-year changes in the block grant system.
  Mr. John Heddle: I am grateful to the hon. Gentleman for giving way. Are the views that he is expressing at the moment his own or those of Sheffield city council's treasurer's department?
  Mr. Michie: I am sorry that I gave way, because that is not a clever question. Of course I do not create all my own work. I have received some of the statistics from the city treasurer. I do not know what his political persuasion is, but he is a professional. I assume that the hon. Gentleman writes all his own speeches and makes all his own calculations, in which case I concede that he is a cleverer man than I am.
  The settlement is the third version that has been produced in the past three months but even so it is not definitive. The Secretary of State revised his original firm intentions in February, and again in March, following the Greenwich court case. The Secretary of State's announcement that he intends to appeal against that decision means that even this version of the settlement cannot be taken as final. Therefore, it is once again a major source of uncertainty for authorities in determining their rate requirements in 1987–88. Those uncertainties will cause all sorts of further problems for local authorities.
  Now, for the benefit of the hon. Member for Mid- Staffordshire (Mr. Heddle), who is no longer listening, what follows is my own speech; it is not written by anybody else.
  It has been said by many Conservative Members, although not by the hon. Gentleman because he has not been here long, that rates are the main cause of high unemployment. That clearly does not follow. I can give many examples. I do not have to go to strike action in Ealing; I can give straightforward examples from Sheffield. The massive job losses in steel there had nothing to do with the rates, even though the British Steel Corporation said that if the rates were lower fewer jobs would have been lost. That is nonsense because at that time energy prices were rising far higher than rates. We also had to remind the BSC that it was so big that it

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  stretched over Sheffield and Rotherham, and Rotherham's rates were much lower. Therefore, it is nonsense to say that unemployment is a result of high rates.
  Mr. Patrick McLoughlin: I accept that high rates are not the sole cause of companies moving. However, if an industry was looking for somewhere to go, would it go to Derbyshire, where the rates next year will be 262p in the pound, the highest rated shire county in the country, or to Staffordshire, whose rates next year will be 198p in the pound? It would be most likely to go to the area where cheaper rates prevail. Although that is not the be-all and end-all, it is certainly an important on-cost to any industry.
  Mr. Michie: I am glad to have given the hon. Gentleman the opportunity to make a speech. I would prefer to go to Derbyshire than anywhere in Staffordshire, but the hon. Gentleman is saying that no firm will set up in Derbyshire, which is not the case. Firms could go to Staffordshire because it is cheaper, but they do go to Derbyshire.
  Despite all the hoo-hather about the rates, Sheffield has been successful in attracting new firms. Indeed, I went to the opening of one only last Friday morning. That firm had chosen to come to Sheffield from a lower-rated authority because of the services that are offered in Sheffield. We must get away from the idea that if everyone has low rates and receives low pay there will be full employment. If that is the case, I cannot understand why everybody is not working in the Third world—that is the logic of the argument. It is claimed that if workers are paid peanuts and there is no ground rent or rates, firms will spring up. That is not the case—firms spring up for reasons other than ongoing overheads. Firms that are attracted to lower-rated authorities may find that those who own the private land will put the rents up accordingly. Perhaps there should be a policy of rent capping as well as rate capping to prevent the exploitation of people and businesses.
  Some areas, known as free enterprise zones, do not pay any rates, but I still see vacant signs in those areas. I do not see people knocking on the door saying, "For God's sake, let me go to that enterprise zone." There is an enterprise zone just across the border of my constituency, but Sheffield has attracted more firms than that enterprise zone.
  New firms and the consequent new jobs also demand the necessary services. Firms need services such as roads to the factories, education for the workers' children, housing, recreation facilities, and so on. All those are among the services required by new firms and new jobs. Sheffield has done reasonably well to achieve those objectives. Unfortunately, because Sheffield is rate-capped, the possibility of that city providing those services in advance of a new factory development is difficult because of that financial constraint.
  Rate capping and the rate support grant levels imposed on Sheffield have destroyed the progressive programmes of that local authority. They have been continuously barraged by financial constraint. The problem will not go away while we have a Government who will not listen to reason. I do not mind losing the argument with the Minister or anyone who has a different point of view, but
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  I object to losing the argument because that individual or the Minister did not listen. I object to losing the argument to the Government on the basis of their political spite.
  8.2 pm
  Mr. Bowen Wells: The purpose of my contribution to this debate is to ask my hon. Friend the Minister for Local Government if he will make certain that the rate support grant settlement that he has achieved this year is maintained in every succeeding year until he introduces the new system that will replace the present rate support system.
  We owe a great debt to my hon. Friend the Minister of State for Local Government for the way in which he has listened to the representations made to him this year. He has listened with more care and to a greater degree than any previous Minister for Local Government, and especially in relation to the difficulties faced by Hertfordshire and East Hertfordshire district council within my constituency.
  In answer to the hon. Member for Sheffield, Heeley (Mr. Michie), thank goodness our Ministers have introduced rate capping. If they had not, there would be no rate support grant available for Hertfordshire, because counties and authorities such as Sheffield eat up all the money available in a finite rate support grant. Therefore, areas such as mine would receive nothing. The rate support grant system was introduced by the previous Labour Government and ever since we have suffered, year after year, reductions in the rate support grant. At present, it is a small percentage of the total amount of money that is spent in the county.
  As a result of that declining amount of revenue, we have had to neglect the maintenance of our schools in order to maintain the staff-pupil ratio and the quality of education. We have had to neglect roads and highways, but at the same time we have been contributing a large amount to the redistribution system under the rate support grant settlement. That redistribution helps areas such as Sheffield and Ealing, but what thanks does the Minister get for that redistribution? He has met nothing but abuse and total intransigence. Local government under Labour control, rather than listening to central Government, has proved intransigent; such authorities have a great deal to answer for in the part they have played in breaking down the system of rating that the country previously enjoyed.
  If such authorities continue to follow such a policy, successive Governments will need additional resources and additional legislation to curb the overspending behaviour of such authorities. Such behaviour shows that the authorities do not listen to the national needs of the country; their behaviour is exemplified by the attitude and chaos in many Labour councils.
  I am aware that Ministers have increased the rate support grant settlement by 9 per cent. more than they did in 1986–87. I do not expect successive Governments continuously to increase the rate support grant in this manner, but I am asking the Minister to cap the rate support grant settlement at the present rate, in real terms, for the next three years until he introduces the new system.
  The changes in the system of calculation are also extremely important and I shall explain that in terms of its effects on Hertfordshire. The rate support grant settlement for Hertfordshire has fallen this year—we have had no increase. Through redistribution, Hertfordshire has contributed to the council in Sheffield and the council in

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  Ealing. Hertfordshire faces a reduction in rate support grant, but because of the intervention of my hon. Friend the Minister it is less than was originally expected.
  Mr. McLoughlin: Does my hon. Friend agree that that almost gives the lie to some of the information that certain Labour authorities have issued? This morning, I received a rate explanation leaflet from my county of Derbyshire. That leaflet tries to point out that, in some way, all the money will go to councils such as my hon. Friend's, as a reward to those in the south. My hon. Friend should underline the fact that Derbyshire had been given an increase in rate support grant this year because expenditure is under control in areas such as my hon. Friend's. Derbyshire has the highest rate in the country and is suffering from the profligate spending of the Socialist authority.
  Mr. Bowen: I am grateful to my hon. Friend, because he illustrates the way in which the people of Hertfordshire have been willing to play their part in trying to assist the poorer areas — the underprivileged and unemployed in other parts of the country such as inner-city areas in Sheffield or the poorer areas of Derbyshire. However, if the councils in those areas do not play their part to curb their expenditure, by focusing expenditure on real needs and running an efficient organisation, I believe that the people of Hertfordshire have good reason to feel extremely angry and poorly treated.
  Hertfordshire has suffered a 6·4 per cent. reduction in the rate support grant settlement this year.
  Mr. Michie rose—
  Mr. Wells: No, the hon. Gentleman has had his opportunity and, as I hope that my remarks will prove, I listened to him with great care.
  As my hon. Friend the Member for Derbyshire, West (Mr. McLouglin) is aware, the distribution of grant depends on what is described as the "need to spend". According to the extraordinary statistical system that has been developed in the Department of the Environment, Hertfordshire does not have a great needs element. That is why we continually lose the argument for getting a reasonable settlement under the rate support grant system.
  Year after year I have got angry, frustrated and furious with Ministers, officials and statisticians of the Department in an attempt to change this absurd calculation, but to no avail. Because of my experience, I do not believe that we should change the calculation until we get the new system that my right hon. Friend the Secretary of State will be able to propose when we win the next election.
  Rateable values in Hertfordshire are much higher than those in many parts of the country. That is the element on which statisticians have depended for their argument that the county has low needs. However, I have argued that Hertfordshire has a 35 per cent. higher than average rateable value, and that translates into low needs. But we have only 13 per cent. above the normal level of income. We are by no means as plush as other counties. We are only 13 per cent. above the national average, yet we are calculated to have 35 per cent. lower than average needs.
  That is the basis on which the absurd calculation always makes a low settlement in favour of Hertfordshire. I should like the hon. Member for Sheffield, Heeley (Mr. Michie) to take home to Sheffield the point that, of total
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  county expenditure, only 7·8 per cent. is met from the rate support grant. The rest must be raised in Hertfordshire — from our constituents, workers and businesses. Indeed, that results in the county paying more in rates than almost any other county.
  The county is accused by Opposition Members of being lush pastures that benefit from the Government's largesse. Indeed, the Government have been over-generous. They have ignored the abuse that has been heaped upon their heads, and have redistributed the grants. Nonetheless, they do not get much thanks for it. I do not think that they ever will be thanked. I have often pointed out that fact. Ministers have said that they need to redistribute the grant in favour of the needy. I should be delighted to make that transfer—most people in Hertfordshire will agree with me—if it went to that purpose. As my hon. Friend the Member for Ealing, North (Mr. Greenway) demonstrated, it certainly does not. To my certain knowledge, it does not go to that purpose in inner London, either. That makes us even more angry at the continuation of a system that is extremely unfair to my constituents.
  As a result of the system, we have managed to raise our rates by only 7 per cent. The rate settlement is about 3 per cent. more than it should be, simply because Hertfordshire is now afflicted by an unholy alliance between Labour and alliance members of the county council, who are inexorably pushing for higher and higher expenditure. It is only by virtue of the efforts of Conservative county councillors that we have managed to keep the increase down to 7 per cent.
  If the settlement had been made with no increase in expenditure, we could have kept the rate at 3 per cent. Because of the need to spend money after a long period of austerity and because the council had been losing rate support grant at a considerable rate, Conservative Members wanted to spend more money on maintaining our schools, some of which are in an appalling state, on increasing much-needed nursery school education, and on increasing the number of primary school teachers.
  I do not exempt my county council from the need to be efficient. Although it may point, as the hon. Member for Heeley did, to the Audit Commission giving it one or two plaudits, I am convinced that there is a great deal more to be done within the county to increase efficiency and reduce costs in all areas. For example, the borough still has an exceedingly expensive school meals service. If that service were contracted out and conducted on a proper basis, it would result in our being able to reduce the pupil-teacher ratio still further—particularly in primary schools—and open more nursery schools, which are obviously needed The county council has not tackled that matter. Indeed., there is continuous opposition from the Labour and. alliance parties on the county council to prevent that kind. of efficiency. We are criticised for proposing to contract out other services to save money.
  A great deal of efficiency and rigour is needed if we are to run the county council efficiently as people deserve in the county and in the areas that need more money. I accept that more money is needed in inner-city areas. If we do not maintain the present system of distribution to which my hon. Friend has agreed, we shall have a horrendous rise in rates next year. Counties such as Hertfordshire will go out of the rate support grant system altogether.
  Let us examine the way in which we have kept down rates in Hertfordshire this year. I should like the Minister to note that we have taken all our money out of reserves

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  to keep rates as low as we have been able to, and we have added to that money from our balances. If the system were to revert to what my hon. Friend originally proposed in July, it would mean that the county council will have no reserves or balances to put towards keeping the rate support grant down, and we will see extremely high rate increases next year. Therefore, it is essential, if we are to get any kind of justice or equity, to maintain the present distribution system, in spite of the blandishments of Opposition Members, which my hon. Friend has heard, to benefit themselves disproportionately and thus deprive my county council and its constituents from at least getting a fair amount—or even the 6·8 per cent. that we got this year—from the rate support grant settlement.
  I despair of persuading statisticians and other people in the Department of the Environment to change their incredibly stupid method of calculating needs in the rate support grant settlement. The reason for higher rateable values in Hertfordshire is that, since 1945, the county has been substantially built over. Therefore, all our rates and valuations are up to date. Thus, Hertfordshire is depicted as a much richer county than it should be. I despair of getting the system altered. I beg my hon. Friend to keep the distribution system as it is for the next few years until he can introduce a new system. I ask him also to maintain the grant in real terms. If he does that, we shall have a predictable system in the next few years. It will give him fewer headaches because he will not have me buzzing around his ears and telling him that he is doing the wrong thing and that he is depriving my constituents. Other boroughs will be able to know what they are getting. That will be the best way to proceed.
  8.18 pm
  Mr. Peter Pike: I apologise for not being in the House at the start of the debate. Unfortunately, I was on the Select Committee on the Environment, so was engaged elsewhere in the building. That is one of the unfortunate matters that afflict hon. Members from time to time.
  The matters that we are debating are regrettably similar to issues with which we have dealt many times over the past few years. Unfortunately, as yet the Government have not been prepared to see common sense and change the direction of their policies. I agree with the Government on one point. A Government of whatever party have the right to set the maximum amount that they are prepared to put into local government.
  The maximum amount that the Government are giving to local government is insufficient. Local government has the right to pursue that argument. If there is to be local democracy, local authorities should be able to raise from their ratepayers whatever amount they believe is needed and acceptable to meet the needs of the community.
  The speech of the hon. Member for Lancashire, West (Mr. Hind) showed that he has little interest in local government. He is very much against local government and local democracy. I regret that he is not in the Chamber now. However, I do believe in local government and local democracy. We should strengthen, not weaken, local government. Local government is weakened if we continue to tighten the capital and revenue constraints within which it has to work.
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  The hon. Member for Lancashire, West referred to a number of rating problems, but in 1979 the Government contributed to the problems that we are facing now. They cancelled the rating revaluation. Rating revaluation might have had an effect that I should not have liked, but the Government have compounded the problems that now face local government because of their failure to implement the rating revaluation in 1979. However, even if there were to be a rating revaluation instead of the community charge, such a long time has passed since the last rating revaluation that a realistic revaluation would have an unacceptable impact on many areas.
  Earlier this week the Minister for Local Government sent certain information to hon. Members. It has been extremely useful. It is far better that that information should have come from him rather than from me or from my hon. Friend the Member for Blackburn (Mr. Straw). His message is the same as the message that I have been giving to the people of north-east Lancashire ever since the Government proposed a move in this direction.
  The Minister for Local Government said that because of the community charge a two-adult household in northeast Lancashire will probably have to pay substantially more than it now pays. He also said that this was because domestic rateable values in the area are among the lowest in the country. I believe that Pendle, the constituency that is adjacent to mine, has the lowest domestic rateable value in the country. The domestic rateable values of Burnley, Hyndburn, Rossendale, and Blackburn are very low, too.
  The Minister then said that the people in those areas enjoy the benefit of far cheaper local authority services than can be enjoyed elsewhere. That is an amazing statement. This Government have consistently accused Burnley of being an overspender and a wasteful authority. When I was the leader of Burnley council, I disputed that statement with Department of the Environment Ministers.
  Mr. J. F. Pawsey: On a point of order, Mr. Deputy Speaker. I apologise to the hon. Member for Burnley (Mr. Pike) for interrupting him, but may I draw your attention to the total absence of members of the Social Democratic party and of the Liberal party on the Opposition Benches? Do you agree with me that it is deplorable—
  Mr. Deputy Speaker: Order. That may be a point of argument, but it is certainly not a point of order.
  Mr. Pike: The problem is largely caused by the low rateable values of residential properties. To be fair to the Minister for Local Government, he then said that on the basis of the 1986–87 figures the rate poundage for industry in Lancashire will be cut by between 5 and 12 per cent.
  The people of north-east Lancashire will not welcome this increase. The present rating system creates difficulties. At a Labour party conference before the 1959 general election we considered what could be done, but despite the anomalies and the friction that the present system creates I cannot think of a system that would not create even greater problems, or just as many problems as the existing system.
  I have studied the final supplementary report for 1985–86 but I have been unable to find in it the information that I seek, and I hope that the Minister will be able to enlighten me when he replies to the debate. I refer to the very high cost of policing the Conservative party conference at Blackpool. Lancashire county council

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  has pursued the matter with the Minister. Several of my hon. Friends and I have pursued it, and we were told that the matter would be dealt with in the final supplementary report. This is not a political issue. When the Labour party forms the next Government, I accept that the same security costs will be involved. However, we do not want Brighton and Blackpool to be penalised. Very few towns have the facilities that would enable them to accommodate Labour or Conservative party conferences. It is wrong that county ratepayers should have to meet such massive costs, following the Brighton bombing tragedy of 1985.
  Mr. Greg Knight: Does the hon. Gentleman agree that after the next election virtually any city will be able to accommodate the Labour party conference?
  Mr. Pike: I should have known better than to give way to the hon. Gentleman. Labour party conferences will always be far more democratic than Conservative party conferences, which are predetermined by the platform from day one.
  Mr. Allen McKay: Does my hon. Friend agree that according to the latest opinion polls, 140 Conservative Members will lose their seats?
  Mr. Pike: I am sure that many Conservative Members are sweating about the date of the next general election, because they know that they will lose their seats.
  The point that I am making is important and I ask the Minister to respond to it. In annex IV of the report, the Minister gives the description of further expenditure to be disregarded under section 8 of the Local Government Finance Act. Item 9 shows that total expenditure incurred under the precept of mass demonstrations on Ministry of Defence sites in respect of which a special payment has been made is to be considered, and it goes on to explain why. I argue that if that is perfectly fair, where those establishments have been bought by the Government—I do not agree with the missiles being there, but that is not an issue for today — there is no great dissimilarity between that and a county having to contend with a conference of one of the major political parties.
  I want to pursue yet again the question of the factor that is used to calculate GREA with regard to the figures that are allowed for art galleries and museums. The calculation that is used for this part of the grant is nonsense. It is based on the square footage of shops and restaurants in a local authority area. That means that a local authority which makes no provision for its citizens in those two respects, or the theatre or the arts, gets exactly the same grant as a council that is providing an excellent service. It is of significance to my local authority—which has a museum and art gallery and has opened a multi-purpose arts centre at the Mechanics in Burnley—because it is already on maximum grant, so the cost of that over the year, as it gets into full running, must be borne by the ratepayers of Burnley. I give that example, and I have given other examples over the years, but I do not intend to do so tonight because other hon. Members wish to speak in the debate.
  If we have a system which is based on all those factors, with all the complexities that are explained in the report, it is crucial that the basis on which those figures are calculated is fair and reasonable; otherwise we cannot
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  come forward with a fair solution. Although we have had this system in operation for all these years, we still do not have a system that deals with these points on a fair and equal basis for the local authorities involved.
  Before I close I wish to give an illustration of the effect of the Government's policy on rates in Burnley by the grant that they have made and the figures for Pendle. In 1981–82, the Government grant was £5,435,000. In 1986–87, it is expected to be £5,112,000. We know that it will change with the final adjustment. It will be some time before the final figure is known. I asked the Minister to give me those figures.
  In a written answer on 24 February the Under-Secretary of State, the hon. Member for Southampton, Itchen (Mr. Chope), said that in 1981–82 prices, using the same basis all the way through, the grant for that year, would have been the same—£5,435,000—but in 1986–87, using the constant price basis, it had gone down to £3,997,000. In Pendle in 1981–82 the figure was £4,430,000, in both cash and real prices. Using the same basis, it had gone down in cash terms to £4,354,000 in 1986–87, and in comparative prices it had gone down to the equivalent of £3,405,000. That means that to stand still, councils have been forced to pass on a massive burden to local ratepayers. The Government must accept that a large percentage of the rate increases that have been forced on ratepayers have been a result of the Government's action and it is the Government's responsibility.
  I omitted to mention one point with regard to the community charge when I was saying that people in my constituency will experience a substantial increase. It is also important to remember that ratepayers will be paying 20 per cent. of their rates—those on maximum housing benefit at the present time — and they will also be bearing that percentage of the community charge. Whatever adjustment is made in other forms of benefit, the areas that are bearing the worst as a result of the community charge will lose as a result of this move by the Government.
  It is time that the Government changed direction and lived up to the promise that they made when they were first elected, to give freedom to local government, and to do that they need to give local government the cash resources, both capital and revenue, to get on with the job for which they were elected.
  8.37 pm
  Mr. Neil Thorne: I was pleased to hear the hon. Member for Burnley (Mr. Pike) acknowledge that the Government should have the final word on total local government expenditure. There is no doubt that, ever since local government expenditure has been of a sufficient volume to affect the national economy, successive Governments have had to take a considerable interest in what local government is spending.
  For many years, local government was allowed to put in a bid for whatever it considered necessary for its needs, and it was then told by the Government that it had to cut back by so many percentage points. Local government that was careful with its expenditure had considerable difficulty in doing that, much more so than those authorities that were free spenders. That is where matters started to go wrong.
  The matter was compounded when some local authorities refused to accept the requests of central Government to trim their sails. They declined to do so on

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  the basis that there was no legal requirement for them to comply. Clearly no Government could accept that, because of the enormous total expenditure of local authorities in relation to total national expenditure. Local authority expenditure now has a significant effect on many matters, including interest rates and the availability of funds to spend elsewhere in the economy. Quite clearly the Government had to do something about it. That is how the Local Government, Planning and Land Act 1980 came into being.
  It is clear that throughout those many years before the Act was passed, local authorities were able to put their hands into the pockets of the Government, because Government subsidies were paid out as a proportion of total expenditure. If local authorities decided that they wanted to spend a larger amount, they could call on the Government to make a contribution to that sum. That meant that taxpayers up and down the country were paying over the odds to those authorities that had decided that they wished to spend widely. It ill becomes Opposition Members to make such a song and dance about their authorities being rate-capped and deprived of grants, when clearly local authorities had it so good for so long at the expense of everybody else. Local authorities did not draw anyone's attention to that at the time because they were only too happy to take those funds. Local authorities that are being trimmed back do not like it because they are being told that they must fall into line with everyone else.
  I participated in the system that was introduced in 1980, because I was a member of the Standing Committee on that Bill. The Committee sat for quite a long time and we went into the matter in great detail. The complexities that have arisen still leave a lot to be desired. In order to have an effective tax we must have one that can be seen to be working properly, had one that can be seen to be fair in the way in which it distributes resources. Many areas are receiving rate supports grants that are so difficult to calculate that it is not easy even for quite skilled professional people, let alone the man in the street, to understand exactly what is happening. I urge my right hon. and hon. Friends to try to make it a lot simpler to understand so that people can see how fair and equitable it is. Clearly, that is not how it looks at present.
  I hope that my hon. Friends will shortly turn their attention to creative accounting. This is creating enormous debts that are likely to be passed, without any valid excuse, to future generations. I trust that my hon. Friends are looking into the possibility of ensuring that some penalty falls upon the heads of those who indulge in this practice, which is quite unfair to succeeding generations.
  I shall now turn to the community charge. I was rather alarmed to hear my hon. Friend the Under-Secretary of State say that one of the designs of national commercial rates, is to transfer resources from the south to the north. That would not be right and it is one of the main drawbacks of the community charge. Whether we like it or not, local people become involved in commercial undertakings in their areas, especially in shopping and industrial properties.
  Although it is intended that there should no longer be a locally assessed business rate, authorities that prudently trim their charges to attract shops and businesses to their areas must continue to be encouraged. I hope that a business rate element can therefore be retained to enable
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  local authorities to reflect their desire to attract shops and industry by cutting rates so that additional employment is created. To take away such encouragement and deal with the matter only at national level would be unfortunate, and I shudder to think what it could lead to in the way of manipulation nationally. That would not be a good thing.
  I am worried about restrictions on contractors. Many contracts are now awarded at much higher figures than those that are in the interests of the ratepayers and the localities. Some local authorities have taken it into their heads to restrict the number of firms that can tender for work. They do that by way of various political requirements. That is a severe handicap. I hope that my hon. Friends will try to ensure that any extra costs incurred by this kind of behaviour can quite properly be assigned to the councillors who decide that contracts should be awarded on that basis.
  Ratepayers ought to benefit from the lowest estimates for work, and any extra charges that arise because the contractor who can give the lowest bid is excluded on political grounds should be a direct charge on councillors who impose political conditions. I hope that my hon. Friend will look into the possibility of surcharging councillors who indulge in this kind of political gerrymandering.
  I marvel at the way in which Opposition Members appear completely to disregard the effect of rates upon industry and commerce. They declare that rates have no effect upon employment. That is quite extraordinary. My local authority area is the London borough of Redbridge.
  Mr. Straw: I am grateful to the Minister for giving way.
  Mr. Thorne: I am not a Minister.
  Mr. Straw: I apologise for prematurely elevating the hon. Gentleman. I know no more than he knows about his future. The hon. Gentleman suggests that somehow we have manufactured our ideas about the relationship between rates and jobs. Our conclusions come directly from a £50,000 Department of the Environment study, which came to the same conclusion.
  Mr. Thorne: I note what the hon. Gentleman says, but the arguments advanced by the Opposition in this debate have been negative. They have tried to prove that because the steel industry was reduced in size, low rates had no effect upon saving jobs. That is an entirely false theory. We must study the effect of rates upon industry in a specific locality over a longer period than that during which an industry declines. That is where the hon. Gentleman is going wrong.
  Residential ratepayers are flocking to my area from two adjoining areas—the London boroughs of Newham and Waltham Forest—because in those areas the rates on houses are more than double the rates on similar houses in my local authority area. People are so desperate to get into my local authority area that the prices of property in my constituenty are going up considerably. That is a direct result of the rateable value differential. I must confess that that is not due only to rates, but partly because people with children are desperate to get away from the education programmes of those two local authorities. Both those authorities are in the hands of the far Left and people feel that that is doing their children a grave disservice.
  I draw my hon. Friend's attention to the need to ensure that authorities that have taken the advice of Government

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  Departments and relied upon their reserves this year, are not disappointed in the future. They have taken the Government at their word, and I hope that they will be helped.
  My main concern is the Greenwich factor. I know that this matter is now the subject of an appeal. When the judgment is given, my hon. Friends should be careful to ensure that local authority areas that have been adversely affected as a result of this factor are not penalised because of some miscalculation by a civil servant.
  It is deplorable that this has happened and I hope that in due course the matter will be put right. I hope that it will be corrected by the judgment of the court. However, there are other ways in which it could be dealt with and in that context I draw my hon. Friend's attention to, section 66 of the Local Government (Financial Provisions) Act 1963. I hope that he will explore that as a way of solving this problem through the rate equalisation scheme.
  This has been an interesting debate, especially in view of the Opposition statement that they do not believe that high rates discourage business activity. I profoundly disagree with that assumption. High rates are a definite disincentive to the creation of employment. I am delighted that the Government will he rate-capping authorities to ensure that firms do not go out of business.
  I notice that the Opposition are particularly concerned about the community charge, because it may have an effect on their election results. My hon. Friends the Members for Ealing, Acton (Sir G. Young) and for Ealing, North (Mr. Greenway), have had this matter illustrated to them extremely well in the past few months. The illustrations that they gave the House were extremely interesting. I know that the House will watch with great interest the election results of my Conservative colleagues in Ealing when the general election comes. The ballot box will show how much the electorate of Ealing disagree with the antics of the local Labour party.
  8.50 pm
  Mr. Allen McKay: I shall pick up one or two of the points made by the hon. Member for Ilford, South (Mr. Thorne) about industry and rates. It seems common sense to say that areas with low rates will attract industry, but that is too simplistic, as is shown by what has happened in my area.
  The hon. Member for Lancashire, West (Mr. Hind) said much the same thing as the hon. Member for Ilford, South. He praised his local authority for having kept to a rates increase of just over 5 per cent., and said that this would encourage industry to go to his area. That is fine, except that my authority has had a rate increase of 4·5 per cent. The average rate in west Lancashire is £331·27, but the average rate in Barnsley is £269·88. Therefore, not only have we had a lower rate increase, but we had a lower average rate to start with. However, we still have an unemployment rate of 22 per cent. How does one correlate the Conservative party's arguments about rates with that point?
  My district looked at its infrastructure because we said that if we have people available for work — it is an excellent work force—a chamber of trade and a local authority that co-operate extremely well and a network of transport north, south, east and west, by every capitalist way of thinking, industry should be flocking to our area. But it is not, and we do not know why.
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  Other factors must also be taken into consideration. There are problems. We have always had the argument about rates and services. The Secretary of State talked about value for money, but I hope that he does not think that cutting services is value for money: it is not. The people I represent are a canny lot when it comes to value for money. They do not look at the amount of rates but ask what are they getting for that expenditure.
  I can illustrate this point. When my small urban authority decided to build a swimming bath, it had to increase the rates, but the people decided whether they should have that facility. The local authority had public meetings to inform people that if they wanted the facility they would have to pay for it. They said that they did not mind paying, provided that they got value for money. The project proved to be worth while. The Secretary of State says that value for money is a cut in services, but that is not true, because people want services. Services vary from area to area, so one cannot take one area as a norm.
  In my constituency, the formula works against the local authority because of its problems and the need to increase rates to overcome those problems. When the Government decided to cut the rate support grant to local authorities, this put the local authorities in the invidious position of having either to cut the services that people wanted or to increase the rates.
  When the Government found out that their ploy was not working, they had to introduce rate capping. The council is making its fifth or sixth attempt to bring in a rate, and this is playing havoc with the way that it is trying to come to terms with rate grants. It is continually in the terrible position of making a rate and of having to make it again and again. The responsibility for that folly falls clearly on the shoulders of the Secretary of State.
  All this is about the removal of powers from local to central Government because central Government think that they know best when they do not. Ours is the central authority, and the Government are too far from the people concerned to make the decisions that they are making. I will continue to say that it is for central Government to determine what grant is sufficient. However, it is not the prerogative of central Government to take on the role of local government and decide what services should be provided. That is the power of people in local government and it is for the electors to decide what services they want from their local authority and what electoral system they should have to bring councils to power. That has nothing to do with us and the more that we try to overcome that by reversing the position and giving power to central Government, the bigger the mess we shall get into. It is time that we got away from the Government's attempts to change the system.
  8.56 pm
  Mr. John Heddle: I am grateful to you, Mr. Deputy Speaker, for allowing me to catch your eye, particularly as I have not been in the Chamber for the whole of the debate, due to a constituency engagement. I shall not dwell too much on what the hon. Member for Barnsley, West and Penistone (Mr. McKay) said, except to say that I wholeheartedly agree that local government should govern locally within the financial strictures and confines imposed by central Government as the custodian of the public purse. I served my apprenticeship in local government and have a great affection for its integrity, provided that that integrity is not abused.

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  The only way that the integrity of local government can be preserved is by increasing local accountability. I am sure that the hon. Gentleman, like many of my colleagues, will agree that there is no real local accountability in local government. If there were, the turnout at local elections would be comparable to that for general elections, but it is not. One in four, possibly fewer, turn out in local elections, as opposed to 80 per cent. in general elections.
  My hon. Friend the Member for Ilford, South (Mr. Thorne) referred particularly to creative accounting, and what he said was most interesting. In The Independent last Friday, we all read how Manchester city council has quite deviously managed to find yet another way round the Government's financial controls, by selling off and then leasing back to itself some of its property assets. It is selling them not at arm's length on the open market, but to a company that it controls. I plead with my right hon. Friend the Secretary of State to take on board that devious form of creative accounting which simply seems to drive a coach and four through prudent financial arrangements.
  The hon. Member for Burnley (Mr. Pike) reminded the House that the Conservative Government of 1970–74 decided not to carry out the quinquennial revaluation which was due in 1973. I regret that as much as he does. However, it should not be forgotten by the House that the incoming Labour Government and then the Lib-Lab pact Government also ignored the fact that the quinquennial revaluation was not carried out in 1973, and they did not carry it out in 1978. That is why there has to be a radical overhaul today of the whole structure of the foundation of local government financing.
  This debate has been useful because it has reminded us that the shire counties, which are much more prudent than many of the Labour-controlled inner-city authorities, have managed to contain their rates rise to 6·8 per cent. The Labour-controlled authorities have averaged overall an 8·7 per cent. increase and Lib-Lab councils are at 9·1 per cent. The jewel in the Liberal tiara, the Isle of Wight, has bestowed upon its ratepayers a 10 per cent. increase. However, those figures all pale into insignificance when compared with Waltham Forest—[HON. MEMBERS: "Not again."] This cannot be repeated too often. Waltham Forest has increased its rates by 67 per cent. and the London borough of Ealing has increased its rates by 72 per cent.
  I welcome and support the rate support grant settlement, for two reasons. First, on the matter of expenditure provision, the settlement is generous with public expenditure provision up to £25·2 billion, an increase of over £3 billion on last year and an increase of 4·1 per cent. over local authorities' budgets for 1986 and 1987. Secondly, I support it because the Exchequer grant to the local authorities has been increased substantially by over £1 billion to nearly £13 billion, a 9 per cent. increase on last year. Grant-related expenditure has been increased by 4 per cent. However, there is still scope for savings by local authorities. They do not have to increase their grant-related expenditure by that 4 per cent.
  I regret, as my hon. Friend the Member for Ilford, South reminded the House, that competitive tendering has not been made compulsory in the Local Government Bill now in Committee. I am sure that if that were done, many other local authorities could follow the example of Lancashire county council which, by bus deregulation, has
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  managed to save the ratepayers in that county £6 million in subsidy. The ratepayers of Arun district council in West Sussex are grateful to the Conservative-controlled council because £300,000 of their money has been saved by the deregulation and privatisation of refuse collection.
  I believe that local government has become too politicised. That politicisation and polarisation has caused an increasing number of local authorities to fall into the hands of extremists. That has caused a number of excellent directors and senior managers in local government to forsake local government as a career and go into the private sector. That is to the discredit of local government and the elected are the poorer for their absence.
  I regret that, although Opposition Members have pleaded that the settlements for their local authorities have not been generous enough, they have not turned inward to their own councils in their own constituencies to see how efficiently their departments are run. When one looks at the number of empty houses and flats and the length of time that those houses and flats have been empty, and when one looks at the rent arrears in virtually every housing authority in the country, one can see money being wasted day by day because local authorities do not have a proprietorial interest in the management of their properties. The housing stock and the management of the housing stock in our local authorities should be put out to more caring and responsible authorities such as housing associations, building societies and other financial institutions. If that happens, the housing voids and rent arrears will be reduced. I welcome the rate support grant settlement.
  9.4 pm
  Mr. Simon Coombs: It must be the profoundest hope of all hon. Members who have spoken in the debate that the days of the rate support grant system are numbered. The days of confusion and over-complication have lasted for too long and should be brought to an end. There is no doubt that during the past few years, under this Government, there has been a move towards local taxation by local government. There has been a steady reduction in central support for local government. That is entirely right if one believes that local government should be paid for locally. However local government is paid for, it accounts for between one quarter and one third of all national public expenditure and no responsible Government can afford to allow local authorities a free rein, especially when the horses are bolting mad, as we see happening in those parts of the country where the Labour party is in control — [Interruption.]
  The hon. Member for Liverpool, Walton (Mr. Heffer) may well be the successor of Lord Birkenhead, but I suggest that he has not yet learned the virtues of the pregnant pause.
  Mr. Heffer: Will the hon. Gentleman give way?
  Mr. Coombs: No. I have only four minutes left before the first of the Front Bench spokesmen rises, and I should like to make my speech, if I may.
  In the recent history of Government efforts to control local government expenditure, we have seen rate capping, capital limitations, grant-related expenditure assessments and the like. As soon as one door has been closed, another has been opened by cunning Labour councillors and those

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  who work for them. However, the borrowing, creative accountancy and deferred payments continue. I advise my hon. Friend the Minister that sooner or later the lid will blow off this pot. What are the Government going to do about it?
  My own local authority is one of those which face disaster. As one eloquent person on my local authority said recently, "It is a Labour Government or bust." There certainly will not be a Labour Government but, for the sake of the people of Thamesdown and Swindon, I hope that it will not be bust either.
  If rate capping were removed from authorities such as Thamesdown, the rates would rise catastrophically. If, at the same time, Wiltshire county council were freed from the restrictions currently imposed upon it, it is highly likely that the rates of the people of Swindon would be doubled. That would be disastrous, not only for the private residents of Swindon, but for all the companies that have moved to the town over recent years to escape the cripplingly high rates in London.
  I hope that the hon. Member for Blackburn (Mr. Straw) will reply to this point. If the Labour party still wants to win seats such as Swindon—there are still one or two people who think that that is the case—it must promise to exercise proper control over local Labour councillors to prevent inflation from hitting the pockets of ordinary people, either by rates increases or by the tax increases that would be needed to pay for the profligate expenditure that would be unleashed.
  Therefore, I hope that the hon. Gentleman will give a commitment to me, to my constituents and to the House that no future Labour Government—if there ever is one—will allow such disgraceful profligacy. I hope that he will make that commitment now so that my constituents can be reassured. I advise him that if he does not, there is no hope on earth that his party will ever win my constituency. I look to the Opposition Front Bench to give such a commitment tonight. If they do not, the writing is on the wall for the Labour party in seats such as mine.
  9.9 pm
  Mr. Jack Straw: I share the confidence of the hon. Member for Swindon (Mr. Coombs) that there will be a Labour victory at Swindon. I want to place on record my confidence in Thamesdown council. Its fine record in seeking to maintain and increase employment in a town which has been devastated by the Government's closure of British Rail Engineering Ltd. has been complimented from all quarters.
  Mr. Coombs: May I point out to the hon. Gentleman that a year after the closure of almost the whole of the BREL workshops operation in my constituency, unemployment is lower than it was the month before the closure? That demonstrates not activity by the Labour council, but the buoyancy of the local economy which would be severely devastated by massive rate rises. I asked the hon. Gentleman to promise the House that that will never happen.
  Mr. Straw: The hon. Gentleman is being far less gracious than normal. He knows that Thamesdown council's record as a job creator is one of the best in the country. Had it not been for the work of the Labour council bringing employment into the area when faced with the loss of 2,500 jobs in Swindon, unemployment
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  would have increased rather than decreased in the past two years. I know that that view is shared by the people of Thamesdown. Moreover, I understand that at the local elections the Conservative party came third, the alliance second and the Labour party first.
  In previous years there has been one statement on the rate support grant in July, another in December giving the Government's final decisions and a single debate in early January. Thanks to the unparalleled incompetence of the Secretary of State, this year has been different. This rate support grant debate takes place 15 days after the legal date by which all the major spending shire counties the ILEA and the metropolitan joint boards, had by law to make their rates, and only six days before the legal deadline for all the district and borough councils. In practice, most of the latter have already set their rates.
  In place of the usual single debate on rate support grant, scarcely a week has passed since Christmas without major debates on the latest instalment of the sad story of chaos to which the Secretary of State has reduced local government finance.
  We started the year with a Local Government Finance Bill. Its Second Reading was on 12 January, Committee stages on 21, 26 and 27 January, and before it had even started its progress through the Lords, we had the Second Reading of the Rate Support Grants Bill on 4 February. Before it had returned from Committee, the Secretary of State introduced his third Bill in six weeks, the much truncated Local Government Bill. The Minister will agree that for some of us rate support grant feels like a life sentence. It is hardly surprising that hon. Members on both sides, to whom fate has been kinder, should now be so baffled by the system and its byzantine complexity that they prefer to leave it to those who must suffer its detail.
  Although aspects of the rate support grant system are tedious beyond belief, and my hon. Friend the Member for Fife, Central (Mr. Hamilton) entertained us, this debate raises crucial issues about the financing of local services and the future of local government.
  The Secretary of State made significant claims for the increase in spending which was implied by the statement. He made much of the assertion that there had been a 30 per cent. real increase in local authority spending during the past eight years. He said nothing in answer to my hon. Friend the Member for Copeland (Dr. Cunningham) about the fact that central Government spending had increased significantly faster — 19 percentage points — than that of local government. Above all, he failed to spell out whether he was in favour of or against that increase in spending.
  In reality, in every year of this Conservative Administration, except for two pre-election years, the Government have intended that local authority spending shall be cut in that year and the following years. It is only because of the resistance of local councils — mainly Labour councils, although there are some Liberal and a number of Conservative councils—standing up for their electors that expenditure has increased rather than decreased.
  Is the Secretary of State aware that it was the Government's plan that there should be a reduction of 9 per cent. in expenditure per school pupil between 1980–81 and 1985–86? Year by year, the Government planned to cut spending per pupil. However, spending per pupil has actually increased. Who is to take the credit for that?

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  The Prime Minister, whose gall knows no bounds, in answer to a hapless Conservative candidate at a by-election that was subsequently won by the Liberals, said:
  "In education, too, this Government has a better record than any other. More money is being spent per pupil than ever before."
  That is true. However, it is only true because Labour and Liberal local authorities have refused to accept the Government's injunctions.
  Mr. Richard Ryder indicated dissent.
  Mr. Straw: I notice that the now speaking Whip from a sedentary position is shaking his head. He is one of the financial experts on the Conservative Benches. His financial acumen goes before him. Even if the hon. Gentleman cannot remember the words, perhaps he can look at the picture. I am showing the hon. Gentleman and my hon. Friends a chart which shows the path of Conservative public expenditure plans for education expenditure per pupil. I am glad to see that the speaking Whip has put his spectacles on. The line on the chart goes down with regard to planned expenditure. The other line shows the difference, revealing the record of local authorities standing up for their electors against the Conservatives' plan.
  Perhaps the Secretary of State will listen to me while he is picking his teeth. As the Secretary of State has praised the increase in expenditure, is he pleased about the line on the chart going up, or is he sorry about the fact that it has not declined? I offer the Secretary of State an opportunity to comment on that. Which is it? He cannot have it both ways.
  There is another way of underlining the record of Labour authorities. We can consider what has happened in the provision of nursery education in local authority after local authority. I must declare an interest, because I have one child in a nursery class at an ILEA primary school and another who has just left. The much abused Inner London education authority has increased the provision of nursery places within inner London by 3,600, and that is an increase of more than one sixth over the past six years. The same is true for Birmingham which in the past three years, since Labour gained control, has increased the number of nursery places by 1,000 from 7,700 to 8,700. That has been achieved against the injunctions of the Secretary of State, although the Prime Minister has given a parliamentary answer saying that she is pleased about the increased number of nursery school places.
  What about Bromley? I am sorry about the pain suffered by the hon. Member for Ravensbourne (Mr. Hunt). We have heard today about Bromley's fine record. Bromley is no different in size from Brent. Brent Labour authority — a much abused and maligned Labour authority—has 2,304 nursery school places. Bromley has 97. It is to the lasting shame of Bromley that that figure has been reduced from 101 in 1981 to 97 this year.
  What about Somerset? When that council was Conservative controlled, it reduced the number of nursery school places from a paltry 137 to a completely derisory 68.
  As the Secretary of State and the Prime Minister are so concerned about nursery school provision and claim unto themselves the record of good Labour authorities, what
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  does the Secretary of State think about Gloucestershire? Gloucestershire has no figures recorded in the parliamentary answer to which I have referred because it has no nursery school places in any maintained school. That is the reality of Conservatives in local government. It is one reason why Conservatives have done so badly in local elections during the past four years.
  Mr. Hind: Will the hon. Gentleman cast his mind back to the imaginative nursery school programme put forward by my right hon. Friend the Prime Minister when she was Secretary of State for Education and Science? In 1974, when the Labour Government came to power, they cancelled it.
  Mr. Heffer: What did she do? She took the milk away.
  Mr. Straw: I apologise for the fact that I could not hear all the question asked by the hon. Member for Lancashire, West (Mr. Hind), but I got the gist of it. I think that he was trying to resurrect the Prime Minister's record when she was Secretary of State for Education and Science. One thing I will concede is that her record in that previous incarnation was marginally better than her record as Prime Minister. As my hon. Friend the Member for Liverpool, Walton (Mr. Heffer) just pointed out, she is most remembered during that period for taking the milk away from schoolchildren.
  Mr. Hind: Labour cut it back.
  Mr. Straw: As the hon. Gentleman is so excited about this matter, I shall send him the reply which I received from the Prime Minister when I wrote to her about this increase in spending per pupil and the fine record of Labour local authorities. Nothing can detract from the reality that the Conservative Government and all Conservative Members have voted year by year for cuts in spending on education. Education has been protected only by the actions of Labour local authorities.
  When the Secretary of State first came to the House in July to announce his rate support grant decisions, he said that he anticipated that on the basis of this settlement, authorities need not increase their rates at all. He also said:
  "This will mean that if authorities spend in line with the generous provision that we have made, there should on average be no need for rate bills to increase at all." —[Official Report, 22 July 1986; Vol. 102, c. 181.]
  The howls then from many Conservative authorities told us that that statement was untrue. We can only assume that the Secretary of State reckoned that it was incorrect. In the event, and despite changes in the rate support grant, designed explicitly to help Conservative authorities and to hit Labour ones, many authorities are having to raise their rates well above the prevailing level of inflation, regardless of political control.
  We have heard a great deal about significant rates increases in the London boroughs of Ealing, Hammersmith and Waltham Forest. Each is a Labour authority which took over from a Conservative authority last year. Each authority, when Conservative-controlled, went in for creative accountancy on a grand scale in a desperate, and unsuccessful, attempt to keep its rates down in a local election year because it raised less by way of rates than it needed to meet expenditure. Those Labour councils have had to put their finances on a sound footing and have sought to provide much-needed improvements to basic services, such as schools, housing and care for the elderly, which had been badly run down by their predecessors.

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  I am glad to see the hon. Member for Ealing, Acton (Sir G. Yound) in his place. I am not surprised that the hon. Member for Ealing, North (Mr. Greenway), who made a disgraceful speech, is not here for the wind-up speeches. That is typical of the way in which he treats his local authority and the House. The Ealing issue raised by my hon. Friend the Member for Copeland remains unanswered. Ealing has recruited 150 extra teachers, employed extra home helps and under-fives staff, restored free milk to 10,000 first-year school pupils and given schools 11 per cent. more to spend on equipment and books. Are Conservative Members in favour of those improvements or against them?
  Sir George Young: As the hon. Gentleman knows, Ealing town hall is virtually closed and the switchboard operators are on strike—[HON. MEMBERS: "Answer the question."] We are faced with a 65 per cent. rates increase, but the services are simply not there.
  Mr. Straw: The hon. Gentleman evaded my question. I know that there is a strike in Ealing. Strikes sometimes take place in authorities, whether Conservative or Labour-controlled. I hope that if the hon. Gentleman is concerned about keeping public expenditure under control, he will support Ealing council in resisting the claims of the local staff who are seeking a gratuitous increase in the outer London allowance. Whom does the hon. Gentleman support? Does he support the council or does he support the staff? Is he trying to make mischief out of a situation of the kind that has affected a number of authorities? The hon. Gentleman, and those who represent Ealing, must say where they stand on those improvements to services. Their silence speaks volumes about their approach to the provision of basic services in that area.
  Many Labour authorities have not had to bear such an inheritance as that borne by Ealing, Waltham Forest and Hammersmith, and they have kept their rate rises at or below the prevailing level of inflation. Leeds has increased its rate by only 4·5 per cent., Barking and Dagenham rates have gone up by only 2·5 per cent., and a number of Labour authorities — for instance, Birmingham — have actually cut their rates.
  Mr. Greg Knight: Will the hon. Gentleman give way?
  Mr. Straw: I have given up 10 minutes of the time available for my winding-up speech to Conservative Members. I should be grateful for an opportunity to finish my speech.
  Birmingham has cut its rate by 6·1 per cent.; Sunderland by 1·5 per cent.; and the authorities in my constituency and that of my hon. Friend the Member for Copeland have also cut their rates.
  The Secretary of State wanted to compliment Solihull for cutting its rate by 1·8 per cent. Does he wish to compliment Copeland and Blackburn for cutting their-rates by an even greater amount? I shall give him the opportunity, if he wishes to do so.
  Mr. Ridley: My hon. Friend the Member for Derby, North (Mr. Knight) wishes to.
  Mr. Greg Knight: Will the hon. Gentleman tell us whether he is as proud of other areas of expenditure by Labour-controlled authorities? For example, does he welcome the expenditure by Derbyshire county council of many hundreds of thousands of pounds of ratepayers' money on items such as television advertising and the
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  publication of a civic newspaper? The latest proposal is to send a number of Socialist councillors on a television interview training course.
  Mr. Straw: My hon. Friend the Member for Copeland has just produced a copy of "Housing Matters" which is published by Conservative-controlled Portsmouth council, and I am very grateful to him—[Interruption.]
  Mr. Speaker: Order. Only one hon. Member can speak at a time.
  Mr. Straw: The hon. Member for Derby, North (Mr. Knight) says that he does not support such expenditure. I know that most of the claims against Derbyshire are fabrications, and that Mr. David Bookbinder has had to issue a writ against the chairman of the Conservative party for a total and malicious falsehood uttered against Derbyshire county council last year.
  The responsibility for the present chaos is the Minister's, and his alone. We do not criticise officials, and I hope that the Minister does not either. However, to excuse himself from the mess, the Secretary of State has tried two diversionary tactics. His first — together with the Conservative party chairman — is to heap abuse on democratically elected authorities with which he happens to disagree. His second is to suggest that the present mess is all of his predecessor's making, and that once the country adopts the idea of the poll tax, sanity and stability will return to local government. Let me deal with those in turn.
  It is a symptom of the Conservative party's desperation that most of its so-called criticism of Labour authorities is based on simple, straightforward falsehoods. The lies that have been printed about many Labour authorities could have come direct from Dr. Goebbels. Of course, we expect nothing else from newspapers that draw their inspiration from pre-war Germany, but we should he able to expect something rather better from senior Ministers charged with responsibility to the Crown and to the House for the conduct of the nations affairs.
  Indeed, we got something better from the Secretary of State's predecessors, such as the right hon. Members for Henley (Mr. Heseltine), for Wanstead and Woodford (Mr. Jenkin) and for Mole Valley (Mr. Baker). We had the most serious arguments with them, but at least we could discern some common ground of concern for the services that local government provides and for the 2·5 million people who work for those authorities. Not so from the present Secretary of State. He is a zealot who despises any institution that he cannot control, whether it be Labour or Tory local authorities, or even the High Court of Justice. When the Secretary of State loses before the High Court of Justice, he comes to the House and bleats that he has been the subject of a vendetta by judges.
  All the authorities on which such abuse has been heaped were elected less than a year ago, in the municipal elections last May. The last accusation that can be levelled against any of those authorities, especially those in London, is that they made any secret of their policies. Each of them made publicly available extensive manifestos. If the Government were serious about extending accountability and re-establishing a better consensus on local government, they would respond positively to the offer that I made on Second Reading of the Local Government Bill for the immediate and agreed introduction of annual elections in London

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  boroughs and in shire districts that do not have them. Conservative Members talk about authorities falling into the hands of people with whom they disagree. That shows their contempt for democracy. Those authorities have not fallen into anybody's hands. There have been elections. Conservative Members and their colleagues have been decisively rejected at the ballot box in towns and cities across the land.
  Mrs. Elaine Kellett-Bowman: By people who do not foot the bill.
  Mr. Straw: I shall come to that point.
  The Secretary of State's second alibi is to claim that the present system has nothing to do with him, and all will be changed under his so-called reforms. Both claims are nonsense. The Secretary of State has supported every one of the 43 Bills that have created the present chaos. This Secretary of State's hands are as stained as those of his predecessors whom he now seeks to disown.
  If it is possible to comprehend or imagine, the Secretary of State proposes—if, God forbid, the Government are re-elected to office—to substitute for this chaos an even worse chaos through the introduction of a poll tax or community charge, as Ministers would have us euphemistically describe it. I tell Ministers for their own good that as the public come to understand what the poll tax involves, support for them among middle and lower income families across the country will disappear.
  Many Conservative Members do not like us quoting the Tory Reform Group. When my hon. Friend the Member for Copeland quoted it, the Under-Secretary of State said that it did not matter and that although 10 former senior members of the Government, including the Secretary of State for Employment, the Home Secretary and the deputy Prime Minister, had signed it, there is a note on the inside disclaiming responsibility for a document written by somebody who used to be assistant director of the Conservative research department and who was adviser to the Secretary of State for the Environment when the poll tax idea was dreamed up. I have to tell the Under-Secretary that if the disclaimer is on his copy, it is not on mine. I notice that none of those senior Cabinet Ministers has decided to take his name off the front of the document. It says:
  "The proposed community charge … is misconceived and it will undermine local self-government … it will involve substantial excessive centralisation of power … isolate businesses from local government; fail to achieve the degree of accountability that is required; be administratively expensive."
  The document gives the game away at the end. It says that Ministers had to act with excessive haste, and states:
  "Suddenly, with a difficult Party Conference debate on rates coming up, Ministers went into a 180 degree turn and felt they had to find a quick alternative to rates. It was one of the rare occasions when a Party Conference actually determined Government policy."
  That is because the Conservatives are not used to democracy in their party or across parties. The document states:
  "The speed of change led the Department to bounce the key Cabinet Ministers into a poll tax".
  They will come to rue the day.
  My hon. Friends the Members for Burnley (Mr. Pike) and for Copeland have already quoted the political present that the Minister for Local Government gave all the
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  Labour candidates in the marginal seats in Lancashire. I am deeply grateful for that. I think that the Minister did it out of affection for his home ground of Rossendale and Darwen. He knows how his people will be badly hit by a poll tax which, in Rossendale, will double the burden on middle income people, so he is trying to subvert the idea before it has even got off the ground.
  I want to ask the Minister some questions about the poll tax. The Government's objection to rates is that only one third of electors pay full rates, and they propose to require every elector to pay at least 20 per cent. of their rate or poll tax bill under legislation that has already been passed. If, subject to that 20 per cent. minimum, the Government continue with the rebate system, no more families will pay the full poll tax than pay full rates. Will the Minister adhere to that, or is it the Secretary of State's intention to raise the floor from 20 per cent. to 50 per cent., or even to 80 per cent., as has been rumoured?
  In the past eight years rates have risen twice as fast as retail prices, but local government spending has grown far less than that of national Government. It is the Government, not local councils, who have deliberately forced up local rate bills and cut the rate support grant by £4,000 million a year, which means over £4 a week for every family in the land. In so doing, they have forced the public to pay more than they have gained through the cuts in income tax rates that have been announced in the past three Budgets.
  Under the settlement, rates are to be forced up again. The only way out of the bog that the Secretary of State can perceive is to introduce a poll tax that would benefit the rich at the expense of middle Britain and of the poor. This is a bad settlement from an unbelievably incompetent Secretary of State, and we shall oppose it.
  9.37 pm
  The Minister for Local Government (Dr. Rhodes Boyson): Like the hon. Member for Blackburn (Mr. Straw), I shall deal with the community charge at the end, and with the basis of the rate support grant first.
  This year's settlement is a generous one, and, as my right hon. Friend the Secretary of State said, it contains an increase of 9 per cent. on the past year—representing £12·842 billion in grant for local authorities. Similarly, Government plans for 1987–88 provide for local authority capital expenditure to increase by almost £700 million—an increase of 15 per cent.—to about £5 billion. For the full grant to be given to each authority, it is assumed that expenditure will increase by no more than 5·25 per cent. That is still above the rate of inflation—now running at about 4·5 per cent.—and the addition for teachers' pay means that local authorities' expenditure can go up by 7·75 per cent. on average without loss of the full grant from the Government.
  Opposition Members have mentioned what local authorities may not get, but authorities will lose money only if they overspend; so it is up to them whether they get grants or not. If they go over the top, they will forfeit them. If they have to hand the money back, that is on their heads. We do not claw it back intentionally.
  I shall give Opposition Members a tip to pass on to their overspending councils. If they can cut the increase in their expenditure to 4·5 per cent., they will get £100 million more. We should be delighted to see such financial sobriety. The hon. Member for Copeland (Dr. Cunningham) mentioned a figure of £400 million that

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  appears in the Red Book. I have looked for it there and have not been able to find it. Perhaps we can meet afterwards with an umpire to discuss the matter.
  Mr. Straw rose—
  Dr. Boyson: The hon. Member for Copeland claimed that the Government expected rate rises from the Exchequer that were significantly higher than the 6 per cent. that was quoted by my right hon. Friend the Secretary of State. I have tracked down the reconciliation of 8·5 per cent. and 6 per cent. in order to put the hon. Gentleman right, because what he said was erroneous.
  The reconciliation with the 6 per cent. increase in rate poundage is as follows. Of the 2·5 per cent difference, over 1 per cent. represents buoyancy in rateable values; 0·5 per cent. represents the fact that we are talking about England alone, and rate rises in Scotland are unfortunately even higher; another 0·5 per cent. is because we now have better information; the final 0·5 per cent is—[Interruption.] Right enough: hon. Members do not like it now that we are putting the figures right. They can throw figures across, but they do not like it when they are thrown back. But there the actual figures are and they are perfectly clear. We can have a look at it together afterwards. The offer is on the floor ready to be picked up. How much more generous could I be?
  One should also put on the record regarding the rate support grant the difference of increase between Conservative and Labour and Liberal authorities, as my right hon. Friend did. These figures are up to midday today, so they could not be more up to date. Conservative authorities as a whole are spending 7·5 per cent. more and are levying a rate of 5·4 per cent. more. Labour authorities not rate-capped are spending 9·6 per cent. more, which is 2 per cent. more than Conservative authorities, and they are levying rates of 12·4 per cent. More—7 per cent. on average more than Conservative authorities. In hung councils they are spending 9·4 per cent. more and levying 7 per cent. more.
  Mrs Kellett-Bowman rose—
  Dr. Boyson: I will give way in a minute. I must just give these figures in case I forget them, and I would not like to deprive the House.
  Among the shires, the Conservative authorities are spending 6·5 per cent. more and the Labour authorities are spending 8·7 per cent. more. Among London boroughs which are not rate-capped, in Conservative boroughs the increase in rates is 4·6 per cent. only. The increase in nonrate-capped Labour boroughs in London is 60·6 per cent.—15 times more. If the electorate wants to know what a Labour Government would be like, there it is.
  Reference has been made to the three London boroughs, and I shall mention them again. I know that Opposition Members do not like them mentioned. [Interruption.] I am glad to hear that they do not mind; we can tell the electors that.
  Mrs. Kellett-Bowman: Is my hon. Friend aware that Lancashire county council has shot away with rates every years since it took office? This year, with the assistance of the Liberals, the rate has doubled. [AN HON. MEMBER: "Niggers in the woodpile."] The Conservative-controlled city councils kept their rates absolutely level and the Wyre borough council's rate was barely in concert with the cost of living. So we are streets ahead of Labour and the Liberals.
  Dr. Boyson: There comes the voice of confidence from the Conservative Benches. We heard the silence from the Opposition Benches as those figures were given.
  I should like to mention again the three boroughs, as a warning to the country. The increase in the local rate in Hammersmith and Fulham is 127 per cent. My hon. Friends the Members for Ealing, North (Mr. Greenway) and for Ealing, Acton (Sir G. Young) have both talked this evening about the increase in Ealing and I believe that my hon. Friend the Member for Ealing, North was absent for only a short while because residents of Ealing were coming to see him about this increase. The increase there is 72 per cent. In Waltham Forest the increase is 67 per cent.
  The only reason that Brent has not increased similarly, when it went from basically Conservative and Liberal support to Labour this year, is the fact that it is rate-capped. I know that many people in the three other boroughs will wish that they were rate-capped as well. As hon. Members know, rate capping is on the basis of budgeted spending for the previous year in relation to GRE, not on the rate increase for the year itself.
  Indeed, 40 local authorities which are subject to rate capping and precept limitation for this coming year were responsible last year for 90 per cent. of the overspending the length and breadth of Britain. If that is not a defence of rate capping, I do not know what is.
  Time and time again Opposition Members have referred to a north-south divide, as though money were being kept in the so-called prosperous areas of the south and even being dragged away from the north. Let us look at the figures.
  Each year, about £1 billion in grant moves from the south-east and London to the north—the north-west, Yorkshire and Humberside. I am not grumbling about that, but that figure should be put on the record. Labour Members have bleeding hearts, as though Conservative Members were hard-faced and taking money from the north. That is not the case. Every year £1 billion goes up there.
  This year, 1987–88, out of the increased expenditure this year, added to last year's figure, the north will receive £375 million in grant from the Government, compared with £150 million for the south. Two and a half times more will go to the north than to the south. That should be put on the record.
  Total expenditure on urban programmes has increased from £140 million from 1978–79 to £531 million in 1987–88 —a real increase of 131 per cent. since the Government took office.
  Fifty-seven authorities now produce inner-area programmes, compared with 24 when the Government took office in 1979. Since 1979, £2·2 billion in resources has been redistributed through the urban programme. More than £2 billion of private finance has also been brought in, because that Government money has been a leader that has helped things along the way. Those figures are important and should be respected. About £1 billion is switched to Merseyside every year by various grants.
  Mr. Straw: The hon. Gentleman knows that that aid to the urban areas is dwarfed by the £18,000 million cut in rate support grant since 1979. The Minister talks about so-called overspending by Labour authorities and blames them because that has gone against Government spending plans. However, will he consider the point that I have put

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  to him? Is he in favour of the fact that that overspending has led to an increase in spending per pupil in schools, or is he against that?
  Dr. Boyson: The Government give money and local authorities should establish the priorities. Ealing is a good example of what such priorities can be.
  Dr. Cunningham: Will the hon. Gentleman give way?
  Dr. Boyson: No, I shall not give way. I have been asked two questions and I have now forgotten one of them. Hard luck—that has gone. I acted genuinely and one answer will have to be the Opposition's lot.
  Now that the hon. Gentleman has brought my attention to Ealing, let us see where the expenditure has gone. I would have forgotten about it if it had not been for his help. Expenditure in Ealing on the police co-ordinator will be £18,000 a year. A new office block to house 1,100 more staff will cost £20,000 a week. [Interruption.] I know that that is difficult to take in, but my hon. Friend the Member for Rugby and Kenilworth (Mr. Pawsey) should try. A teacher in each school paid to rid bookshelves of sexist or heterosexist material will cost £139,000. One could go on.
  Dr. Cunningham rose—
  Dr. Boyson: I shall not give way.
  Dr. Cunningham rose—
  Mr. Speaker: Order.
  Dr. Boyson rose—
  Dr. Cunningham rose—
  Dr. Boyson: No, I shall not give way. The hon. Member for Blackburn has already had two minutes more than me. I gave way to the hon. Gentleman and to my hon. Friend the Member for Lancaster (Mrs. Kellett-Bowman).
  A Labour councillor from a neighbouring borough, hired as a personal assistant to the Labour authority, will cost £40,000 a year.
  Dr. Cunningham: Will the Minister give way?
  Dr. Boyson: I shall give way for one question only.
  Dr. Cunningham: I am extremely grateful to the Minister for giving way. He is discussing additional spending in Ealing and I can do better than him with regard to the totals. Does he support the additional spending in Ealing of £500,000 on extra care for the elderly? Does he support the additional spending on education in Ealing? [Interruption.] Does he support the additional expenditure on recreation and sports facilities in Ealing? Does he support the additional expenditure on housing for the elderly?
  Dr. Boyson: The figures quoted by the hon. Member for Copeland represent a minute amount of the 65 per cent. increase in the rates. If that is the only point that the Opposition can make, they are in a bad way.
  Other hon. Members have asked questions and they expect replies. The so-called "Bromley error" has been referred to by hon. Members from both sides of the House. I would like to put on record what the position is regarding that matter, as I am aware of the concern that is felt by many hon. Friends about this matter.
  Due to an error, Bromley and certain other boroughs did not receive their due money for the necessary
  516
  maintenance of the roads that they had inherited from 1986 after the abolition of the GLC. That grant should have been worked out on the kilometre distance of the roads and the usage of the roads. However, certain costs were not worked out properly. My right hon. Friend attempted to correct the error in the first 1986–87 supplementary report by adjusting the multipliers. He was then challenged on a question of law, not on a question of equity.
  That should be made clear, because I believe that, in the ultimate, the test of equity is important in the preservation of good society. My right hon. Friend was not challenged on equity, but on law as to whether he could use the multipliers in that way. The court decided in favour of Greenwich. The hon. Member for Copeland asked why the Government are appealing while, at the same time—
  Mr. Terry Dicks rose—
  Dr. Boyson: If I may just finish this point.
  Mr. Willie W. Hamilton: Abolish the court.
  Dr. Boyson: We did not say anything about abolishing the court—that idea is usually proposed by the Left. One can see how easily the Left consider the idea of abolishing the courts and the rule of law.
  We rightly went to the Court of Appeal, but meanwhile, as a law-abiding Government — I trust that the hon. Member for Copeland would have done the same—we adjusted the figure this year. At the same time, we hoped that we would win on the appeal so that in a supplementary report, after consultation, we could rectify the inequity which existed.
  My right hon. Friend the Member for Castle Point (Sir. B. Braine) asked what would happen if the Court of Appeal's judgment was in favour of the Government. Once that happens, we will consult—
  Mr. Dicks rose—
  Dr. Boyson: I will give way when I finish. But let us get to the loud amen before we start the next hymn.
  If we win in the Court of Appeal, we will consult as quickly as we can and then make an adjustment in a supplementary report. If we do not succeed in the appeal, we shall have to reassess the situation.
  The Government believe that that issue also involves a question of equity as well as law. Eventually, we hope that the law is returned—as we trust that it will be by the Court of Appeal — to an equitable basis so that those for whom money was intended shall have that money rather than the other authorities which were not intended to have that money. I am aware that the main losing authorities were Bromley, £3·1 million; Barnet, £2·7 million; Essex, £2·4 million; Hillingdon, £2·3 million; Kingston, £1·4 million; Sutton, £1·3 million; and Bexley, £1 million.
  Mr. Dicks: I am grateful to my hon. Friend for giving way. First of all, may I correct him? The amount involved for Hillingdon is £4·6 million—£2·3 million this year and £2·3 million next year. As a result of the mess-up and incompetence in my hon. Friend's Department—[Interruption.] — wait for it — and the dishonesty of Greenwich, my local authority has lost £4·6 million. What guarantee can my hon. Friend give me that my local authority will not lose out in the long run because of that?
  Hon. Members: Answer that!
  Dr. Boyson: I shall answer, and the Opposition may listen if they are quiet.
  I have already discussed the matter over lunch with my hon. Friend. He is to see my right hon. Friend the Secretary of State and myself tomorrow. We shall obviously continue the discussion in private. We do not want to delay the matter in any way.
  Mr. Michie: Will the Minister have dinner with me? [Interruption.]
  Dr. Boyson: I am referring only to roads in London. I do not think that the hon. Gentleman's offer is on the menu at present.
  Let me refer to the community charge. [HON. MEMBERS: "Ah!"] I am delighted to refer to it. I find it astonishing that some people were amazed when they saw the figures. They show the impact of the community charge. They have been available for some time. They are in no way secret. The Government have nothing to hide.
  Journalists from various regions visited the Department on Monday. They were given figures that they could have acquired from hooks on Monday. As we had given them the figures, I felt that the least we could do was to send hon. Members of all parties — including the Liberals and the SDP—copies of what we had given the regional journalists. It seemed to me to be the way that hon. Members should he treated. There was amazement. Anybody with a ready reckoner, and knowledge of the current population level of any area and the domestic rate could work out the whole matter in three hours. Indeed, the figures are already shown in three books, two of which are in the Library. First, there is "Paying for Local Government".
  Mr. Straw: I have a copy.
  Dr. Boyson: I am glad that the hon. Gentleman is catching up at last. He is fortunate to know me. It is a great advantage.
  The other book is "The Community Charge—The Effects on English Local Authorities" by John Gibson. I do not get a commission for this. There is also a book by the Institute of Fiscal Studies. Yet there is amazement when we provide the figures. One wonders how the Opposition's Budget figures are worked out.
  Community charge figures have been published separately. Hon. Members should watch for the dates. In May 1986, CIPFA published its figures, which is, as far as I know, ten months back, the Institute of Fiscal Studies published figures in March 1986—even further back—and the Institute of Local Government Studies published figures also in March 1986. Copies of the publications exist in the Library of the House. Although none of the organisations has the figures quite right, it is quite clear that anybody who was interested could have gained a reasonably accurate idea of the impact of the Government's proposals in different parts of the country at any time.
  I make another offer to Opposition Members. We are quite willing to make available our estimates for the level of the community charge in each local authority area. Last year, the Department passed on 1984–85 figures in response to a request from the Association of Metropolitan Authorities. We are happy to provide 1985–86 figures to any hon. Member who wants them. The service that we provide is amazing. It is famous on both sides of the House. We are not even a private enterprise.
  518
  It is our intention shortly to place in the Library a complete set of community charge figures for 1986–87. The whole basis of the community charge on the universal business rate is based on a certain political view. We believe that businesses are moving around the country, not to where they should geographically be positioned, but to where the lowest rates are. That is one reason businesses are leaving the north and going to the south. Undoubtedly, business rates in the north are far higher than they are in the south. If we are to link the north-south divide—as a northerner who lives in the south, I shall like that —that is one of the best ways to do it. That is why we have the universal business rate.
  The community charge is to make sure that all people voting, even if it is on the rebate, are doing — [Interruption.] We said about 20 per cent. It has not been fixed. I shall give a figure. The whole basis of the system is that voters should pay something towards the services that they receive. They should not just be voting to spend other people's money.
  I believe that that is right and that this is a good settlement. I am glad that I have been able to give information to the Opposition that they will be able to study through the night.
  Question put:-
  The House divided: Ayes 314, Noes 173.

  Division No. 125]

  [10 pm

  AYES

  Adley, Robert

  Carlisle, Kenneth (Lincoln)

  Alexander, Richard

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

  Alison, Rt Hon Michael

  Carttiss, Michael

  Ancram, Michael

  Cash, William

  Arnold, Tom

  Chalker, Mrs Lynda

  Ashby, David

  Channon, Rt Hon Paul

  Aspinwall, Jack

  Chope, Christopher

  Atkins, Rt Hon Sir H.

  Churchill, W. S.

  Atkinson, David (B'm'th E)

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

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

  Clark, Sir W. (Croydon S)

  Baker, Nicholas (Dorset N)

  Cockeram, Eric

  Baldry, Tony

  Colvin, Michael

  Banks, Robert (Harrogate)

  Conway, Derek

  Batiste, Spencer

  Coombs, Simon

  Bellingham, Henry

  Cope, John

  Bendall, Vivian

  Couchman, James

  Benyon, William

  Critchley, Julian

  Best, Keith

  Crouch, David

  Biffen, Rt Hon John

  Currie, Mrs Edwina

  Blackburn, John

  Dickens, Geoffrey

  Blaker, Rt Hon Sir Peter

  Douglas-Hamilton, Lord J.

  Body, Sir Richard

  Dover, Den

  Bonsor, Sir Nicholas

  du Cann, Rt Hon Sir Edward

  Bottomley, Peter

  Dunn, Robert

  Bottomley, Mrs Virginia

  Durant, Tony

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

  Dykes, Hugh

  Bowden, Gerald (Dulwich)

  Edwards, Rt Hon N. (P'broke)

  Boyson, Dr Rhodes

  Eggar, Tim

  Brandon-Bravo, Martin

  Emery, Sir Peter

  Bright, Graham

  Eyre, Sir Reginald

  Brinton, Tim

  Fairbairn, Nicholas

  Brittan, Rt Hon Leon

  Fallon, Michael

  Brooke, Hon Peter

  Farr, Sir John

  Brown, M. (Brigg & Cl'thpes)

  Favell, Anthony

  Browne, John

  Fookes, Miss Janet

  Bruinvels, Peter

  Forman, Nigel

  Bryan, Sir Paul

  Forsyth, Michael (Stirling)

  Buchanan-Smith, Rt Hon A.

  Forth, Eric

  Buck, Sir Antony

  Fowler, Rt Hon Norman

  Budgen, Nick

  Fox, Sir Marcus

  Bulmer, Esmond

  Franks, Cecil

  Burt, Alistair

  Fraser, Peter (Angus East)

  Butler, Rt Hon Sir Adam

  Freeman, Roger

  Butterfill, John

  Gale, Roger

  Carlisle, John (Luton N)

  Galley, Roy

  519

  Gardiner, George (Reigate)

  Luce, Rt Hon Richard

  Garel-Jones, Tristan

  Lyell, Nicholas

  Glyn, Dr Alan

  McCurley, Mrs Anna

  Goodlad, Alastair

  Macfarlane, Neil

  Gorst, John

  MacGregor, Rt Hon John

  Gower, Sir Raymond

  MacKay, Andrew (Berkshire)

  Grant, Sir Anthony

  MacKay, John (Argyll & Bute)

  Greenway, Harry

  Maclean, David John

  Gregory, Conal

  McLoughlin, Patrick

  Griffiths, Peter (Portsm'th N)

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

  Grist, Ian

  McQuarrie, Albert

  Ground, Patrick

  Madel, David

  Grylls, Michael

  Major, John

  Gummer, Rt Hon John S

  Malins, Humfrey

  Hamilton, Hon A. (Epsom)

  Malone, Gerald

  Hamilton, Neil (Tatton)

  Maples, John

  Hampson, Dr Keith

  Marland, Paul

  Hanley, Jeremy

  Marshall, Michael (Arundel)

  Hannam, John

  Mates, Michael

  Hargreaves, Kenneth

  Mather, Sir Carol

  Harris, David

  Maude, Hon Francis

  Harvey, Robert

  Mawhinney, Dr Brian

  Havers, Rt Hon Sir Michael

  Maxwell-Hyslop, Robin

  Hawkins, C. (High Peak)

  Mayhew, Sir Patrick

  Hayhoe, Rt Hon Sir Barney

  Merchant, Piers

  Heathcoat-Amory, David

  Meyer, Sir Anthony

  Heddle, John

  Miller, Hal (B'grove)

  Henderson, Barry

  Mills, Iain (Meriden)

  Heseltine, Rt Hon Michael

  Mills, Sir Peter (West Devon)

  Hickmet, Richard

  Miscampbell, Norman

  Hicks, Robert

  Moate, Roger

  Higgins, Rt Hon Terence L.

  Monro, Sir Hector

  Hill, James

  Montgomery, Sir Fergus

  Hind, Kenneth

  Moore, Rt Hon John

  Hirst, Michael

  Morrison, Hon C. (Devizes)

  Hogg, Hon Douglas (Gr'th'm)

  Morrison, Hon P. (Chester)

  Holland, Sir Philip (Gedling)

  Moynihan, Hon C.

  Holt, Richard

  Mudd, David

  Hordern, Sir Peter

  Neale, Gerrard

  Howard, Michael

  Nelson, Anthony

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

  Newton, Tony

  Howarth, Gerald (Cannock)

  Nicholls, Patrick

  Howe, Rt Hon Sir Geoffrey

  Norris, Steven

  Howell, Rt Hon D. (G'ldford)

  Onslow, Cranley

  Hubbard-Miles, Peter

  Oppenheim, Phillip

  Hunt, David (Wirral W)

  Oppenheim, Rt Hon Mrs S.

  Hunt, John (Ravensbourne)

  Osborn, Sir John

  Hunter, Andrew

  Ottaway, Richard

  Hurd, Rt Hon Douglas

  Page, Sir John (Harrow W)

  Irving, Charles

  Page, Richard (Herts SW)

  Jackson, Robert

  Parkinson, Rt Hon Cecil

  Jenkin, Rt Hon Patrick

  Patten, Christopher (Bath)

  Jessel, Toby

  Patten, J. (Oxf W & Abgdn)

  Jones, Gwilym (Cardiff N)

  Pattie, Rt Hon Geoffrey

  Jones, Robert (Herts W)

  Pawsey, James

  Joseph, Rt Hon Sir Keith

  Percival, Rt Hon Sir Ian

  Kellett-Bowman, Mrs Elaine

  Pollock, Alexander

  Kershaw, Sir Anthony

  Porter, Barry

  Key, Robert

  Portillo, Michael

  King, Roger (B'ham N'field)

  Powley, John

  King, Rt Hon Tom

  Price, Sir David

  Knight, Greg (Derby N)

  Pym, Rt Hon Francis

  Knight, Dame Jill (Edgbaston)

  Raffan, Keith

  Knowles, Michael

  Raison, Rt Hon Timothy

  Knox, David

  Rees, Rt Hon Peter (Dover)

  Lamont, Rt Hon Norman

  Rhys Williams, Sir Brandon

  Lang, Ian

  Ridley, Rt Hon Nicholas

  Latham, Michael

  Rifkind, Rt Hon Malcolm

  Lawler, Geoffrey

  Rippon, Rt Hon Geoffrey

  Lawrence, Ivan

  Roberts, Wyn (Conwy)

  Lawson, Rt Hon Nigel

  Robinson, Mark (N'port W)

  Lee, John (Pendle)

  Roe, Mrs Marion

  Leigh, Edward (Gainsbor'gh)

  Rost, Peter

  Lester, Jim

  Rowe, Andrew

  Lewis, Sir Kenneth (Stamf'd)

  Rumbold, Mrs Angela

  Lightbown, David

  Ryder, Richard

  Lilley, Peter

  Sackville, Hon Thomas

  Lloyd, Sir Ian (Havant)

  Sainsbury, Hon Timothy

  Lloyd, Peter (Fareham)

  St. John-Stevas, Rt Hon N.

  Lord, Michael

  Sayeed, Jonathan

  520

  Shaw, Sir Michael (Scarb')

  Thurnham, Peter

  Shelton, William (Streatham)

  Townend, John (Bridlington)

  Shepherd, Colin (Hereford)

  Townsend, Cyril D. (B'heath)

  Shepherd, Richard (Aldridge)

  Tracey, Richard

  Shersby, Michael

  Trotter, Neville

  Silvester, Fred

  Twinn, Dr Ian

  Skeet, Sir Trevor

  Vaughan, Sir Gerard

  Smith, Sir Dudley (Warwick)

  Viggers, Peter

  Smith, Tim (Beaconsfield)

  Waddington, Rt Hon David

  Soames, Hon Nicholas

  Wakeham, Rt Hon John

  Speller, Tony

  Waldegrave, Hon William

  Spencer, Derek

  Walden, George

  Spicer, Jim (Dorset W)

  Walker, Bill (T'side N)

  Spicer, Michael (S Worcs)

  Walker, Rt Hon P. (W'cester)

  Squire, Robin

  Walters, Dennis

  Stanbrook, Ivor

  Wardle, C. (Bexhill)

  Stanley, Rt Hon John

  Watson, John

  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

  Winterton, Mrs Ann

  Tapsell, Sir Peter

  Winterton, Nicholas

  Taylor, John (Solihull)

  Wolfson, Mark

  Taylor, Teddy (S'end E)

  Wood, Timothy

  Tebbit, Rt Hon Norman

  Woodcock, Michael

  Temple-Morris, Peter

  Yeo, Tim

  Terlezki, Stefan

  Young, Sir George (Acton)

  Thomas, Rt Hon Peter

  Thompson, Donald (Calder V)

  Tellers for the Ayes:

  Thompson, Patrick (N'ich N)

  Mr. Robert Boscawen and

  Thorne, Neil (Ilford S)

  Mr. Michael Neubert.

  NOES

  Abse, Leo

  Dalyell, Tam

  Alton, David

  Davies, Rt Hon Denzil (L'lli)

  Anderson, Donald

  Davies, Ronald (Caerphilly)

  Archer, Rt Hon Peter

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

  Ashdown, Paddy

  Dewar, Donald

  Atkinson, N. (Tottenham)

  Dicks, Terry

  Bagier, Gordon A. T.

  Dixon, Donald

  Banks, Tony (Newham NW)

  Dobson, Frank

  Barnes, Mrs Rosemary

  Dormand, Jack

  Beckett, Mrs Margaret

  Douglas, Dick

  Beith, A. J.

  Dubs, Alfred

  Bell, Stuart

  Duffy, A. E. P.

  Benn, Rt Hon Tony

  Dunwoody, Hon Mrs G.

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

  Eadie, Alex

  Bermingham, Gerald

  Eastham, Ken

  Bidwell, Sydney

  Evans, John (St. Helens N)

  Blair, Anthony

  Fatchett, Derek

  Boothroyd, Miss Betty

  Field, Frank (Birkenhead)

  Boyes, Roland

  Fields, T. (L'pool Broad Gn)

  Bray, Dr Jeremy

  Fisher, Mark

  Brown, Gordon (D'f'mline E)

  Foot, Rt Hon Michael

  Brown, Hugh D. (Provan)

  Forrester, John

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

  Foster, Derek

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

  Foulkes, George

  Brown, Ron (E'burgh, Leith)

  Fraser, J. (Norwood)

  Caborn, Richard

  Freeson, Rt Hon Reginald

  Campbell, Ian

  Freud, Clement

  Campbell-Savours, Dale

  George, Bruce

  Carlile, Alexander (Montg'y)

  Gilbert, Rt Hon Dr John

  Carter-Jones, Lewis

  Godman, Dr Norman

  Clark, Dr David (S Shields)

  Golding, Mrs Llin

  Clarke, Thomas

  Gould, Bryan

  Clay, Robert

  Gourlay, Harry

  Clelland, David Gordon

  Hamilton, James (M'well N)

  Coleman, Donald

  Hamilton, W. W. (Fife Central)

  Conlan, Bernard

  Hancock, Michael

  Cook, Frank (Stockton North)

  Hardy, Peter

  Cook, Robin F. (Livingston)

  Harrison, Rt Hon Walter

  Corbett, Robin

  Hart, Rt Hon Dame Judith

  Corbyn, Jeremy

  Hattersley, Rt Hon Roy

  Craigen, J. M.

  Healey, Rt Hon Denis

  Crowther, Stan

  Heffer, Eric S.

  Cunliffe, Lawrence

  Hogg, N. (C'nauld & Kilsyth)

  Cunningham, Dr John

  Holland, Stuart (Vauxhall)

  521

  Howells, Geraint

  Miller, Dr M. S. (E Kilbride)

  Hoyle, Douglas

  Morris, Rt Hon J. (Aberavon)

  Hughes, Robert (Aberdeen N)

  Nellist, David

  Hughes, Roy (Newport East)

  Oakes, Rt Hon Gordon

  Hughes, Sean (Knowsley S)

  O'Brien, William

  Hughes, Simon (Southwark)

  O'Neill, Martin

  Janner, Hon Greville

  Orme, Rt Hon Stanley

  John, Brynmor

  Park, George

  Jones, Barry (Alyn & Deeside)

  Patchett, Terry

  Lambie, David

  Pendry, Tom

  Lamond, James

  Pike, Peter

  Lewis, Ron (Carlisle)

  Prescott, John

  Lewis, Terence (Worsley)

  Raynsford, Nick

  Litherland, Robert

  Redmond, Martin

  Livsey, Richard

  Richardson, Ms Jo

  Lloyd, Tony (Stretford)

  Roberts, Ernest (Hackney N)

  Lofthouse, Geoffrey

  Robertson, George

  Loyden, Edward

  Robinson, G. (Coventry NW)

  McCartney, Hugh

  Rooker, J. W.

  McDonald, Dr Oonagh

  Ross, Stephen (Isle of Wight)

  McKay, Allen (Penistone)

  Rowlands, Ted

  MacKenzie, Rt Hon Gregor

  Sedgemore, Brian

  McTaggart, Robert

  Sheerman, Barry

  Madden, Max

  Sheldon, Rt Hon R.

  Marek, Dr John

  Shields, Mrs Elizabeth

  Marshall, David (Shettleston)

  Shore, Rt Hon Peter

  Martin, Michael

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

  Maxton, John

  Silkin, Rt Hon J.

  Maynard, Miss Joan

  Skinner, Dennis

  Meacher, Michael

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

  Meadowcroft, Michael

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

  Michie, William

  Soley, Clive

  Mikardo, Ian

  Spearing, Nigel

  Millan, Rt Hon Bruce

  Steel, Rt Hon David

  522

  Stott, Roger

  Welsh, Michael

  Strang, Gavin

  White, James

  Straw, Jack

  Wigley, Dafydd

  Taylor, Matthew

  Williams, Rt Hon A.

  Thomas, Dafydd (Merioneth)

  Winnick, David

  Thomas, Dr R. (Carmarthen)

  Young, David (Bolton SE)

  Thorne, Stan (Preston)

  Tinn, James

  Tellers for the Noes:

  Torney, Tom

  Mr. Frank Haynes and

  Wardell, Gareth (Gower)

  Mr. John McWilliam.

  Weetch, Ken

  Question accordingly agreed to.
  Resolved,
  That the Rate Support Grant Report (England) 1987–88 (House of Commons Paper No. 253) which was laid before this House on 20th March, be approved.

  Rate Support Grant

    RATE SUPPORT GRANT (ENGLAND)
    Resolved,
    That the Rate Support Grant Supplementary Report (England) (No. 3) 1985–86 (House of Commons Paper No. 259), which was laid before this House on 20th March, be approved.— [Mr. Ridley.]

    RATE SUPPORT GRANT (ENGLAND)
    Resolved,
    That the Rate Support Grant Supplementary Report (England) 1986–87 (House of Commons Paper No. 258), which was laid before this House on 20th March, be approved.— [Mr. Ridley.]

  Rate Support Grant (Wales)
  10.15 pm
  The Secretary of State for Wales (Mr. Nicholas Edwards): I beg to move,
  That the Welsh Rate Support Grant Report 1987–88 (House of Commons Paper No. 221), which was laid before this House on 19th March, be approved.
  Mr. Speaker: With this, I understand we are to consider also the motion
  That the Welsh Rate Support Grant Supplementary Report 1986–87 (House of Commons Paper No. 222), which was laid before this House on 19th March.
  Mr. Edwards: The main report for the forthcoming financial year is customarily laid in the preceding December and debated in the following month. This time, difficulties over the definition of total and relevant expenditure, recently resolved by the passage of the Local Government Finance Act 1987, meant that the normal timetable for both reports could not be met. Nevertheless, in my statement to the House on 16 December I gave full details of my firm intentions for the 1987–88 settlement and the 1986–87 supplementary report, to give councils adequate time to draw up budgets and set rates. So that they could do so with certainty, I said then that no data received subsequently would alter my intentions. That is the situation.
  The reports laid before the House last week reflect, with one minor exception concerned with inter-county education pooling, precisely my intentions announced in December. These education pooling adjustments will now be made in supplementary reports following the enactment of the Local Government Bill. Until they are made, Welsh counties will have a cash flow advantage of around £7 million. I do not intend, therefore, to spell out again the details of the 1987–88 report, but it is important to set out certain of its main features, particularly to provide a context for what I shall have to say later about the spending and rating policies of some Welsh local authorities.
  The 1986–87 settlement was a good one for Wales. The 1987–88 settlement is even better. Relevant expenditure is increased by 6·1 per cent. to £1,734 million, current expenditure by 4·8 per cent. to £1,496·5 million, aggregate Exchequer grant by 8·4 per cent. to £1,157 million and block grant by 6·1 per cent. to £901·7 million. All these increases are higher than the 4·5 per cent. forecast rate of inflation. It is also important to recognise that there is provision for extra capital spending in 1987–88. Allocations for capital investment have been increased by £47 million, or 14 per cent., to a record £369 million, following a £60 in Ilion increase in the previous year. This increases the total investment in capital projects since 1979–80 to £3·5 billion, and that does not include the multiplier effects created by urban programme and urban development grant expenditure in the private sector.
  The first supplementary report for 1986–87 distributes the full amount of block grant provided under the settlement. Provision for aggregate relevant expenditure has been increased to allow for increases in police pay, expenditure on midday supervision in schools and GCSE. Block grant has therefore been increased by £1·3 million. Specific grants are now £5·2 million higher at £174·7
  524
  million. The total of local authorities' GREs for the year has been reset in line with provision, but authorities' block grant entitlements will not be affected on this account.
  On the basis of the 1987–88 settlement, ratepayers, both business and domestic, were entitled to expect very low average rate rises, and rate reductions in some cases. I am sorry to say that too many local authorities have simply ignored the opportunity that they were given to take responsible and moderate decisions which could and should have provided their ratepayers with significant benefits. Far from exercising restraint, they have chosen to budget for very high levels of spending and therefore to set rates at a much higher level than was necessary.
  The county councils together have budgeted to increase their expenditure by 9·1 per cent. compared with an increase of 7·1 per cent. allowed for in the settlement after taking into account the effect of increasing teachers' pay. In Dyfed there has been a real terms spending increase, which I have to say I regard as disgraceful and indefensible. The county council was presented with a golden opportunity to reduce its precept substantially. By spending in line with the settlement, a 6 per cent. reduction could have been achieved. Instead, Dyfed ratepayers face an increase of 7 per cent., in part to pay for a significant increase in the number of staff employed, something that other counties in Wales do not seem to find necessary. That is an astonishing performance by a council professing to be anxious to secure better employment prospects for its area, and is not the way to attract investment and extra jobs, nor to protect the interests of domestic ratepayers. Ratepayers in Gwent are also faced with similarly damaging increases in expenditure and rates, and in every county in Wales rates have been set higher than can possibly be justified on the basis of this settlement.
  Mr. D. E. Thomas: Will the Secretary of State explain to the House why he needs to persist in attacking Dyfed county council when he has now announced his retirement as a Dyfed Member of Parliament? Will he explain why it is wrong for a local authority that requires to increase employment in its area to increase its staff? Why is it only the private sector that wins plaudits from the Secretary of State?
  Mr. Edwards: If the hon. Gentleman does not yet understand that, if one increases rates by a substantial margin, one discourages private business from setting up and generating employment, I am afraid that it is much too late to start teaching him the lesson. However, it is certain that businesses understand perfectly well and they will have taken note of the damaging and unnecessary increase by the Dyfed county council.
  District spending as a whole is set to increase broadly in line with the settlement, but while many district councils have sought to hold their rates down, some have budgeted for spending increases which they will have to justify. However, they cannot possibly justify them on the ground that the resources that they have been given under the settlement are inadequate. Of the seven districts which should have been able to reduce their rates, only one has actually done so. Three of the others have expenditure and rate rises well above the average, and in Colwyn a spending increase of 8·5 per cent.— almost double the forecast rate of inflation — results in an increase in average rate bills which is almost double that of other districts in Clwyd. I warmly congratulate Cardiff, which

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  is in the middle of major and ambitious schemes, on its good management and good sense in reducing rates. Rate bills in Cardiff will go up by 3·6 per cent., which is less than half the all-Wales average of 7·8 per cent.
  Mr. Gwilym Jones: I thank my right hon. Friend for that appropriate reference to Cardiff, but I hope that he will take the opportunity to emphasise that the reverse has been achieved by South Glamorgan county council. Its precept has gone up by 4·1 per cent., but it has not followed my right hon. Friend's advice and formula in his settlement. In fact, it is levying an extra precept on the ratepayers of Cardiff, particularly business ratepayers, of effectively a 6 per cent. increase.
  Mr. Edwards: South Glamorgan undoubtedly had an opportunity to hold its precept with virtually no increase, but it has chosen to increase it by more than is necessary. That is undoubtedly true. The action of the city council in reducing expenditure below what we had expected has had the effect of pulling the total rate bill for local ratepayers down below what it would otherwise have been. I congratulate the city on that result and on its decision.
  All the councils which have set their rates and budgets above the settlement level bear a heavy responsibility for their decisions. I am sure that their ratepayers and electors will look hard at the reasons for such behaviour and draw their own conclusions in holding them accountable. The counties should know that, as a consequence of their decisions, the aggregate budget overspend for the year amounts to £24 million. This means that they have planned to underclaim available grant by a staggering £12 million.
  Ratepayers should know that under the Rate Support Grants Act 1987 each council which reduces its spending will attract additional grant directly to itself. Many districts have, in fact, done that, and as a consequence the districts as a whole can expect to receive about £0·4 million more than allowed for under the settlement. Ratepayers should know that it is entirely the responsibility of the counties to put matters right. They can do so and avoid forfeiting £12 million in grant by spending in line with the settlement, I trust that each will do so. They have only to look at more prudent councils to see the benefits that more responsible action could bring.
  We read in the Western Mail today:
  "Shadow Welsh Secretary Mr. Barry Jones is set to launch a bitter attack on the Government's record of funding Welsh councils, in a Commons debate tonight."
  I see that the hon. Gentleman is going to challenge me to justify the more than 10 per cent. cut in rate support grant to Welsh councils since the Conservative Government took office. He plans to counter criticisms of councils' rate increases. I read that "Mr. Jones" will also protest that Government grants cuts have meant that councils have had to turn to their ratepayers to raise more revenue.
  I am all for this new convention of publishing speeches in advance. I shall answer the hon. Member for Alyn and Deeside (Mr. Jones). First, on the question of the grant reduction since 1978–79, we have reduced grants to local authorities by around 6 per cent., not 10·9 per cent. The hon. Gentleman has forgotten the £40 million increase in specific and supplementary grants. We did it deliberately because we are determined to improve accountability. [AN HON. MEMBER: "It does not."] The hon. Gentleman says that it does not. However, that is the policy of the
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  Association of District Councils which, in its response to our proposals for the reform of local government finance said that
  "their long term aim is to ensure that the aggregate revenue received locally exceeds that provided by central government".
  I am afraid that I have some way to go. Such a policy would involve a reduction from the present 66·7 per cent. to less than 50 per cent.
  Now, unfortunately for the hon. Member for Alyn and Deeside, this policy cannot possibly be taken as an excuse for increases in rates this year. The reduction took place in the period before 1985–86. The grant percentage has been kept fairly constant for the last two years. As usual the hon. Gentleman is living in the past. The interesting thing is that in the period of reduction up to 1985–86, rates rose by 7 per cent. less than the retail prices index. During the last two years when the grant percentage has been stable, rates have risen by 14 per cent. more than the RPI.
  The fact is that this year, as last, grant has not been reduced. The settlement has been generous and too many local authorities have deliberately chosen to put rates up. If the hon. Gentleman now changes tack and challenges the level of service and justifies authorities that try hard to spend more, I have to remind him that Welsh local authorities are already spending 4 per cent. more in real terms than they were in 1978–79, and on present plans will be spending about 5·5 per cent. more than they were in the harsh post-IMF days of the Labour Government.
  It is a matter for regret that some authorities have chosen to increase the burden on their ratepayers instead of making better use of the many opportunities open to them to obtain savings and to ensure better value for money. The Audit Commission, whose illuminating reports have covered most of the key areas of local authority spending has made many suggestions for achieving better use of resources. Sensible cash flow management, for example, may not attract many votes or the direct attention of ratepayers, but the savings available in this area alone could lead to significant reductions in budgeted expenditure. No one could possibly argue that that would represent an assault on services. There are many other opportunities available. In pursuing them authorities should take advantage of the substantial increase in capital allocations that I have made available for 1987–88 to achieve revenue savings. Education authorities, for example, should take steps urgently to cut the number of empty school places. I have expressly provided in the increased capital allocations for 1987–88 for the capital costs to enble them to do this. Responsibility now rests with local education authorities to pay for better quality education instead of empty desks.
  Local authorities have a major responsibility to provide effective, efficient and economic services on behalf of their communities. If they do not, they will be failing in their duty towards their domestic and commercial ratepayers, who have a right to expect a fair deal and financial prudence. Councils which have not taken the opportunity provided by the settlement to maintain services and keep rate bills down will have to answer to their electorate. The councils concerned still have an opportunity to bring their spending, which is far above what they were spending under the Labour Government, back into line with the settlement and so to attract at least the full amount of

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  grant that I have made available for next year. I urge them to do so. I commend my proposals for 1986–87 and 1987–88 to the House.
  10.31 pm
  Mr. Barry Jones: We have heard tonight one of the most unpleasant speeches of any of our debates. It was full of bluster and ill-will and was a desperate attempt to rewrite history. The Secretary of State in none of his utterances showed the House that he understood that this was a debate about matters which affect the lives of many ordinary people or showed the human face that his office requires of him.
  The Secretary of State made crude, unjustifiable attacks on Welsh councils. We know that the right hon. Gentleman is playing politics and electioneering, but the truth is that he has not given sufficient money to our councils. Now the luckless councils must pick up the pieces. Today he has tried to whip up hysteria against local authorities, but with his speech he has condemned his record of eight years in office.
  Between 1979 and 1986 there were seven Acts of Parliament on local government finance. Three further Bills appeared this year, retrospective legislation and frequent changes in reports such as these. During the 1980s the Government's incompetence has destabilised local government, particularly local government finance, in Wales. The Secretary of State has been uniquely implicated in that sorry saga.
  The House of Commons research staff has told me that the cumulative cut in rate support grant since 1978–79 is £672 million at 1986–87 prices. When we take that into account, the right hon. Gentleman's vicious attack is seen to be most unjust and reprehensible.
  Having outlined the amount that local authorities have been denied since the Secretary of State took office, I must state the problems that local authorities are having to cope with. In December 1985 there were 181,000 people unemployed in Wales, yet in December 1979 there were 78,000. In effect, in a very few years, the right hon. Gentleman had pushed unemployment up by about 131 per cent. The case that the Opposition make to the Secretary of State is that the reports that we are debating tonight are insufficient to respond to the social consequences of such tragic figures. For example, there are 32,000 people unemployed in mid-Glamorgan. Blaenau Gwent has a male unemployment rate of 23 per cent. There are 15,000 people jobless in Gwynedd, and in the Shotton travel-to-work area male unemployment hovers on 21 per cent.
  Those statistics mask despair. The reports give insufficient cash to the local authorities which must pick up the pieces. The reports do not repair the damage caused by the years that have passed since the Secretary of State and his Government have been responsible for the economy and local authority matters in Wales.
  I have established that the cuts in manpower in local government have led to a deterioration of services. For example, the number of manual employees employed in the collection and disposal of refuse has dropped by 26 per cent. The number of manual council employees in building work has gone down by 31 per cent., the local authority
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  transport provision has dropped by 12·5 per cent., and the number of ancillary staff in local authority education services has fallen by 12 per cent.
  Mr. Keith Best: Will the hon. Gentleman give way?
  Mr. Jones: The reports are oblivious to the demands made by the public upon our local authorities when they have less money and manpower to respond to the services that the public demand.
  Mr. Best: The hon. Gentleman has argued his case as persuasively as he can about the problems of unemployment in Wales. Is he contending now from the Dispatch Box that the main generator of jobs in Wales will be the local authorities, which the ratepayers will have to pay for?
  Mr. Jones: I will make my speech in my own way and the hon. Gentleman will understand my points more fully by the time that I have finished.
  I was about to give an example of one of the services that have to be provided which are now very much at risk—education. I want to quote from a letter that I have received from a parent-teacher association and a headmaster:
  "However, of late, in spite of careful spending of the School Capitation money, we find ourselves supplying such basic items as paper and stationery. Recently we have paid £600; part of £1,000 spent by the school to provide basic text books in English to the Junior Department. Is this trend likely to continue? If so, what of those schools who have no PTAs or other financial support?
  The letters then states:
  "This PTA objects strongly that they are having to provide basics in the school. Surely the right of every child is to be equipped with the basic tools for education?"
  One of the results of the way in which the Secretary of State has managed local government finance since he came to office is that the vital services across the board in Wales are not delivering at the standard that parents and recipients require because they are starved of cash. Nothing that the right hon. Gentleman has said this evening will put that right.
  I want to describe the position as the counties see it. Perhaps their greatest bone of contention is the decision to end recycling because, with negative marginal rates of grant, there is a likelihood that total grant claimed according to terms set out in the RSG report will add up to less than the total of block grant. For 1987–88, both Secretaries of State have legislated to empower them to withhold any underclaimed grant that might arise if authorities spend more than Government assumptions. They say that the proposal seems to be a return to the worst aspects of the target penalty system that the Secretary of State claimed to have abolished last year.
  We now know that, because of what the right hon. Gentleman has introduced, the counties in Wales may well lose about £11 million to £12 million, but he has launched an attack on the very counties that are to lose heavily under his new dispensation; and worse, the formula for the distribution of grant still leaves all counties on negative marginal rates of grant, rising to 94p for South Glamorgan. Under the right hon. Gentleman's system, for every extra pound spent, 94p is taken away. That is a very harsh penalty. The Association of District Councils says that some districts' negative grant rates are much more severe. So it was wrong of the right hon. Gentleman to

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  launch his attack on those local authorities when what he proposes tonight is deeply injurious to the authorities that want to provide services to our people.
  For the districts, I can best exemplify the problems faced by Swansea. The council has told me that for 1987–88 it has lost £522.000 — about a 4 per cent. reduction. It has had to put up the rates by 3p, or 7·5 per cent. Without the grant loss, its rate increase would have been just 1p, or 2·5 per cent. Surely there is the answer to the unpleasant approach that the Secretary of State adopted in his typically undignified manner in his speech.
  The council in Swansea has been able to increase expenditure in cash terms by only 1·5 per cent., which, with a predicted inflation rate of 4·5 per cent. means real terms cuts. For example, it has had to use £1·2 million of prudently accumulated reserves, cut £3 million from the draft budget and cut £120,000 from job creation schemes run in conjunction with the Manpower Services Commission. That is just one small example of the havoc that the right hon. Gentleman is playing with the budgets and objectives of our local authorities.
  The district councils tell me that the Welsh districts' block grant has virtually stood still since last year, and has been reduced by £1·2 million when account is taken of the revisions in the supplementary rate support grant report for 1986–87. Furthermore, they tell me, in some anger, this year's settlement has reduced Welsh districts' block grant by £5·3 million, or 3·5 per cent., from the provisional settlement announced by the Secretary of State in July. Not only has this been a poor settlement for Welsh districts, but it has come as a severe blow, bearing in mind the detailed statements made by the Welsh Office and the Secretary of State last July of individual Welsh districts' GREs, block grant entitlements and published district rates.
  The Secretary of State has made great play about rate increases, and has denounced them, but the districts tell me that they have managed to keep their rate increases under control only because they have made further cuts in services and costs to keep their own expenditure within the Government's stringent spending guidelines for the fifth year running and by their use of scarce and valuable reserves to reduce the cost to the ratepayer.
  Therefore, the Secretary of State is wrong to launch this attack upon our local authorities. He referred to the supplementary report. I shall too, briefly. In the report the Secretary of State confirms the implementation of the full recycling of grants for 1986–87. So why did he cause so much uncertainty by threatening not to recycle grants? As legislation has had to be introduced to stop the recycling of grants in 1987·88, the right hon. Gentleman was clearly making not just an empty threat, but an illegal threat. That was a rather shabby moment in his tenure of office.
  The districts have lost £1·3 million of block grant in the supplementary report for 1986–87. In rate poundage terms, the largest grant reductions are for Blaenau Gwent, with a block grant down by £160,000 — equivalent to a 3p rate — and Taff Ely, with a block grant down by £250,000 — equivalent to a 2·7p rate. Those are the consequences of the Secretary of State's policies.
  To sum up, this is a complicated set of proposals, the system is too volatile, the districts are upset at the decrease in their block grants, the counties have exposed the iniquities of ending grant recycling, everybody in local government finance acknowledges that the system is
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  overcomplicated, and all say that high negative marginal rates of grant create major difficulties. They are, in effect, penalties by another name.
  Our people, communities and valleys need an increase in public investment in Wales to counteract the acknowledged economic and social deprivation. The settlement fails to give Welsh local authorities the opportunity to increase investment in their communities and improve the lives and livelihoods of their inhabitants.
  We say that the settlement is no relaxation of the tough controls applied by the Government since 1981–82 on the spending of local authorities. In effect, the Secretary of State's proposal is a confidence trick and some Welsh councils may find it impossibie to use the whole of their capital spending powers in the next year, because of his system and grant losses on marginal spending.
  The Government have cut back harshly on the funding of our local authorities—by at least £672 million in real terms since 1978–79. That is the scale of the damage. At the same time, the government have been content to drive up unemployment, and thus our councils have been forced to do much more with much less. The Secretary of State has been a party to an unforgivable policy, and Wales will never forgive him for that.
  Several Hon. Members rose—
  Mr. Deputy Speaker (Mr. Harold Walker): Order. This is a short debate and brief speeches would be appropriate.
  10.48 pm
  Sir Anthony Meyer: Wales has once again fared very well under the rate support grant settlement announced by my right hon. Friend the Secretary of State. It has fared substantially better than England, thanks to my right hon. Friend's powerful advocacy in Cabinet and, as he has said trenchantly, the settlement should result in low rate increases or rate reductions.
  There is certainly no reason why Clwyd should be raising its precept yet again, even though the extremely generous pay settlement given to the teachers—despite the appalling behaviour of most of their union leaders throughout the dispute — creates problems for the treasurer. Those problems could have been resolved if Clwyd had not dithered about closing half-empty schools.
  Within the rate support grant system the effect on districts is, as so often under an increasingly rickety system, unpredictable and sometimes seemingly unfair. The system is meant to ensure that decisions to increase spending should result in a reduction of RSG in most cases, and that a decision to reduce spending should result in considerable rating benefits. However, other factors are at work, applying grotesquely complicated formulae for assessing special elements, on top of an already complex system.
  That has led to the situation in which Colwyn, hitherto a prudent spender, has had to increase its rate by no less than 26 per cent. from 38p to 48p. If I were making party political points — which I am not — I might establish some connection with the fact that this year the Liberals have a firm grip on the council, whereas previously they were merely the largest political group on the council. As such they have systematically cushioned the rate increases by running down the balances. This year, however, there are no balances to run down.

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  Much of the explanation for the sharp rise in Colwyn's rates lies in the random effect of the various special factors determining rate support grant. [Interruption.] The borough treasurer said in a letter to me:
  "My members are totally bemused by the RSG system. They cannot understand that, for an authority which has kept to spending targets in the past, they are treated in this way. I find it difficult, if not impossible, to give a satisfactory answer. Then seem unimpressed with the explanation that the whole thing is a mathematical exercise"—
  [Interruption.]
  This debate is being rendered extremely difficult by a severe attack of verbal diarrhoea on the part of the hon. Member for Caerphilly (Mr. Davies), who has consistently been muttering. It would make things much easier if he would shut up.
  Mr. Stefan Terlezki: He is as green as Tom Jones's grass.
  Mr. Deputy Speaker: Order. There is too much sub-dialogue going on.
  Sir Anthony Meyer: The treasurer goes on to say:
  "They seem unimpressed with the explanation that the whole thing is a mathematical exercise, the formulae having been the subject of consultation with the local authorities associations. The whole thing appears to be a huge lottery, and the dice do not fall kindly for Colwyn."—
  [Interruption.]
  Colwyn has pointed out that this time the special needs element has operated rather more favourably for Rhuddlan. It should not be supposed that Rhuddlan is entirely happy. [Interruption.] It is concerned about the capital allocation for its housing improvement programme. Like every council, it would like a larger housing allocation. [Interruption.] Rhyl is suddenly becoming aware that it has a problem of alarming— [Interruption.] It really is extremely—
  Mr. Deputy Speaker: Order. I think that the hon. Member for Caerphilly (Mr. Davies) should take account of what I said earlier. I hope that he will.
  Sir Anthony Meyer: Perhaps a bucket of cold water would do the trick.
  Rhyl is suddenly becoming aware that it has an alarming problem of deteriorating housing, analogous to that in some of the city centres. It needs a crash housing action programme, especially in the west end of the town, where deteriorating housing, mostly in multi-occupation, is interacting with poor social conditions, aggravated by the influx of jobless youngsters from Mersyside. Some rather frightening results have been produced.
  This morning Colwyn council told the Select Committee on Welsh Affairs that it could use an extra £500,000 straight away. It said that it would have no problem in spending it wisely on housing improvement. No doubt Rhuddlan would like an equally ambitious expansion. of its programme. The present worry is the Treasury insistence on year-end accounting. The council says that that makes it impossible for it to spend its full allocation in any given year. It says that the receipts from council house sales come in throughout the year in random fashion and that the proportion of the money from those council house sales that it may spend is liable to arbitrary variation by the Government, with little notice.
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  Improvements grants authorised in one year may not be spent until the next. All this is a nightmare for the borough treasurer.
  I am not surprised that Rhuddlan should resent reproaches levelled at it by my hon. Friends on the Front Bench, who claim that it cannot need more money for housing as it is not spending its full allocation.
  Mr. Nicholas Edwards: I must say that Rhuddlan has had an exceptionally generous settlement, because GRE is up by 10 per cent. due to the projects for regional and national importance capital allocations. It budgeted to spend 3·6 per cent. above that exceptionally generous settlement.
  Sir Anthony Meyer: I was not maintaining that Rhuddlan had been particularly harshly treated. All I am saying is that it is extremely difficult for that council to plan ahead in view of the insistence that it must spend all its money by the end of the accounting year.
  I do not suppose that we will have many more of these RSG debates, in which those of us who speak from the Back Benches are probably talking through our hats, while Ministers clearly know what they are talking about.
  We are to have a new system. I have the gravest reservations about whether the community charge —excellent in principle—can possibly be made to bear the heavy load of expenditure that will be placed upon it. I also have grave doubts about the wisdom of eliminating domestic property tax. If a tax becomes unbearably heavy, that is not necessarily a good reason for sweeping it away altogether. It is an argument for shifting some of the burden that it creates.
  10.54 pm
  Mr. Geraint Howells: The Secretary of State told us, and I am prepared to believe him, that Wales has done marginally better than local authorities in England in the allocation of rate support grant for 1987–88. It may even be true that this settlement is an improvement on those we have had in the recent past. Many of my parliamentary colleagues may disagree with me, but I am sure that the Secretary of State is a reasonable man. He has been obliged to listen to representatives of local authorities, whose first concern is providing services and value for money. Having said that, I can only come to the sad conclusion that, although the right hon. Gentleman may have listened, he has been unable to deliver the goods to the satisfaction of the authorities, and especially not to those who expect and deserve the services provided by them.
  The overall effect is that, once again, the Government seem to be using the system as a means of curbing local authority expenditure, although the ratepayers invariably come out in favour of better, more efficient services.
  The majority of county and district councils are suffering negative marginal grant rates, which means that, as expenditure increases, their grant entitlement is reduced. Ceredigion district council, although it has one of the lowest district rate levies in Wales at 19p this year, increasing to 21p for 1987–88, faces a penal negative marginal rate of grant of 79 per cent. Any growth in its budget means that, for every £100 spent, the grant will be cut by £79. It is manifestly unfair that high and low-spending authorities alike are penalised, and there are no rewards for being careful.

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  Ratepayers will be asked to fund all additional expenditure in full, and a relatively small increase in expenditure can result in a disproportionately large increase in the rate levy. The problem for the majority of district councils is that, over many years of cuts in public expenditure, they have had to pare back to the bone, and there is little, if any, flesh left to cut. The only way in which many authorities have survived recently is by using substantial sums from their reserves, but those reserves are fast disappearing, as are many essential services.
  Many county councils are worried that, although the settlement in some measure takes account of past pay awards, it does not make enough provision to cope with pay settlements that are in the pipeline, at all levels, which are outside the authorities' control. Indeed, the restructuring of teachers' pay scales has not been catered for adequately.
  The Tory Government have no sympathy for local government, and this exercise in cheeseparing, as demonstrated by the Welsh rate support grant report, shows that they have no interest in maintaining support for local services or in encouraging the growth of local democracy. They relate matters only to central control and manipulation.
  However, the British electors have demonstrated many times during the past couple of years, and no doubt will do so again soon, that they want more local control and better and more efficient services, with vigorous local authorities directly answerable to the electorate, not controlled by puppetmasters in London.
  In my view, electors want to see school buildings better maintained and educational facilities improved. They want to see rural roads in good repair, better transport, vastly improved housing, and extended social services. They want to see local government involved in building up the economy of the area, making more opportunities available for jobs and generally reacting to the needs of inhabitants. Instead, they have to watch the morale of local authorities drain away while they wrestle with impossible restrictions imposed by central Government. They have been asked to preside over shrinking and inadequate budgets while demands on resources grow remorselessly.
  The time has come for a change in the attitude of central Government, and a realisation that local government matters and can contribute a great deal not only to the basic needs of the people it serves but to the health and democracy of the country.
  I was surprised that the Secretary of State was critical of Dyfed county council. From my experience as one of the ratepayers in the county, I am well aware that the chief executive and the councillors—never mind which party they represent—have given their best for many years as members of the Dyfed county council. It is a great shame that the Secretary of State has singled out one of the best local authorities in Wales, which cares for those who live within our community.
  11.1 pm
  Mr. Keith Raffan: I shall begin my remarks by making a general point. Wales's share of total grant for England and Wales has steadily increased under the Government. It is a great tribute to my right hon. Friend the Secretary of State for Wales, as the champion of Wales and the Welsh people, that although in the 1970s Wales's share of the total grant for England and Wales was 7·25
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  per cent., by 1981–82 it had risen to 7·4 per cent., and now in 1986–87 it stands at 8·3 per cent. In the coming year that will make a substantial difference of £142 million over comparable figures for the 1970s. Of course, there is also the increase in current expenditure of 4·8 per cent. above 1986–87 budgets in Wales—1 per cent. higher than in England. My right hon. Friend has been a doughty fighter for the Principality and its people. We shall greatly miss him when he retires.
  Even the shadow Secretary of State for Scotland, the hon. Member for Glasgow, Garscadden (Mr. Dewar), almost every time that Scottish business is moved on the Floor of the House, is inclined to grumble about how well my right hon. Friend is doing because of the way in which the differentials between Scotland and Wales are narrowing. I am sure that the one or two Scottish Members present can confirm that comment. That shows how well my right hon. Friend has done for Wales.
  Even Clwyd county council has been kind. In the words of the county treasurer, Ralph Greening:
  "This is not an unreasonable settlement. I am not unhappy about it."
  Coming from Clwyd, that is the equivalent of at least six curtain calls at Covent Garden.
  In the current year, the settlement has led to a lower than usual rate rise of 4·8 per cent. That is just as well when we remember that since 1984 county rates have risen from 148p to 198p. My right hon. Friend the Secretary of State put it succinctly to the House on 23 July last year when he said:
  "More than 50 per cent. of the rate income in Wales comes from non-domestic ratepayers. High and unpredictable rate rises are bad for business, hinder expansion and put jobs at risk." [Official Report, 23 July 1986; Vol.102, c. 341.]
  This excellent settlement gives the opportunity to local authorities not only to pass on low, or relatively low, rate increases to ratepayers, but also to maintain services. Whether that opportunity is taken depends of course on the decisions of those local authorities.
  I take Clwyd county council to task on that point. Too often empire building and castle converting have come before statutory services. I give three instances. The first is manpower. There is no single way more guaranteed to create unemployment in local industry than for local government to have a bloated staff. Just look at three departments in Clwyd county council. The Audit Commission profile for 1986–87 shows that the chief executive, legal and secretarial department is 128 per cent. larger than the average for the family of directly comparable authorities. The engineering department is 112 per cent. larger. The architectural department is 82 per cent. larger.
  The chief executive of Clywd county council, Mr. Mervyn Phillips, has described the Audit Commission profiles as "worthless", yet the Hay-MSL report on the opportunities for economy in the services and structure of Clwyd county council has confirmed that the Audit Commission is hitting the right targets in regard to overmanning at shire hall. It indicted Clwyd county council as "top heavy" with senior administratives—with too many chiefs in relation to Indians. The figures I have given highlight that indictment.
  The second instance is surplus places. The current number of surplus school places in Clwyd is absurdly large, standing at 22,300. That figure is made up of 11.700 at primary level and 10,600 at secondary level. The cost of keeping them empty is about £3·5 million a year—the

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  equivalent of 6p or 7p on the rates. Just meeting the Government target of removing two fifths of those places would produce substantial revenue savings that could be redeployed with great advantage elsewhere. They could be spent on the school library stock, which in 1984–85 was slashed from £75,000 to £15,000, on school building maintenance, which last year was cut by £11,000, and on providing further resources for the GCSE.
  Mr. Alex Carlile: Is the hon. Gentleman saying that in his view it is Government policy that village schools and small high schools should be closed, that children should be bussed over enormous distances and that the whole fabric and tradition of Welsh education should be dismembered, just to save a bit of money and justify this rotten rate support grant settlement?
  Mr. Raffan: The hon. and learned Gentleman made an exactly identical intervention during the speech of my right hon. Friend the Secretary of State for Wales in last year's debate. He was humiliated by my right hon. Friend, for the simple reason that it is hypocritical of the Liberal party to call for money to be spent on empty school places and at the same time to say that more money should be spent on library books, capitation and the GCSE. If the hon. and learned Gentleman thinks that he fools even some people some of the time, I have to tell him that he does not. It was a silly intervention. He has repeated last year's intervention when he was so effectively put down by my right hon. Friend.
  Mr. Carlile: Will the hon. Gentleman give way?
  Mr. Raffan: I shall certainly not give way.
  Mr. Carlile: Will the hon. Gentleman give way?
  Mr. Raffan: No, I shall not give way. I should have thought that one humiliation for the hon. and learned Gentleman would be enough.
  Mr. Carlile rose—
  Mr. Raffan: I have been saying for a long time that Clwyd has not been removing surplus school places fast enough. I am glad to have the support of the chairman of Clwyd's policy, finance and resources committee, Councillor Rhys Webb. Earlier this month he issued a statement in which he said:
  "It is not going as quickly as I would like."
  Thirdly, I refer to major capital projects, projects which have nothing to do with statutory obligations. I speak principally of Bodelwyddan castle. Even after having set aside the massive capital expenditure so far of £1,799,000 and the £1,350,000 that is to be spent in the current year, the revenue implications of the project are horrendous. The annual running costs now amount to a massive £545,000 a year, with offsetting income at a mere £11,000. How can such expenditure possibly be justified when, since 1984, the school library stock budget has been slashed? In 1984–85 it stood at £75,000 in Clwyd. In 1985–86 it was slashed to £15,000, and it has stood at that figure ever since. This year an additional £18,000 will be made available exclusively for the GCSE, although that figure has been whittled down from an original £60,000.
  The truth is that statutory services and obligations are suffering severely to pay for the Bodelwyddan castle project. That is wrong. Indeed, it is worse than wrong. In
  536
  the words of several anxious parents to whom I spoke yesterday, when they were lobbying me in the House, "it is wicked".
  At primary level, project-based work has been undermined because books can be borrowed for only a month rather than a full term as before. Non-fiction was bought for primary level for the first time in 18 months last month. The schools library service has had to abandon its support for the prepared reading schemes because the service is not buying fiction in sufficient quantities.
  At secondary level, a survy has shown a totally inadequate and deteriorating library stock. Indeed, many schools that I have visited cannot afford a decent newspaper, let alone a decent weekly magazine.
  In February 1986 Clwyd's Education (Schools and Special Services) Sub-committee adopted the LISC report—"School Libraries—Foundation of the Curriculum"—but only lip service has been paid to it ever since. Some 12 months on, the report to that sub-committee reported a further deterioration in the school library stock. This is the truth—
  Mr. Ron Davies: On a point of order, Mr. Deputy Speaker. Will you confirm that at the start of the debate you asked hon. Members to restrict their remarks to a reasonable time because so many hon. Members wished to speak? Will you confirm that the hon. Member for Delyn (Mr. Raffan) has spoken for eight minutes—
  Mr. Deputy Speaker: Order. I take the hon. Gentleman's point, but he is taking up valuable time. It is not a point of order, but it is a matter of concern. I hope that the hon. Member for Delyn will recognise that a number of hon. Members are seeking to take part in the debate.
  Mr. Raffan: I would have been a great deal quicker if I had not been subjected to the continual heckling of Opposition Members, and the pointless interventions of the hon. and learned Member for Montgomery (Mr. Carlile) and of the hon. Member for Caerphilly (Mr. Davies).
  There has been a scandalous neglect of statutory services to pay for the Bodelwyddan castle project, which the county cannot afford. I am glad that my concern about the county's cock-eyed priorities is shared by members of all political parties. It is a tragedy when so much fine work is being done by individual departments at Clwyd—by the education department under its director, Mr. Keith Evans, the social services department under its director Mr. Gledwyn Jones, and the finance department under the county treasurer, Mr. Ralph Greening. Such fine work and service are being given, but the ability to give a better service is being undermined by projects such a Bodelwyddan. The budget for the school library stock could be doubled, trebled, quadrupled, or more, out of the running costs of Bodelwyddan, and it should be.
  I and many others will continue to speak out as often and as loudly as we can until what we say is not only heard but acted on, until Clwyd county council not only reflects but acts upon the views of the people it purports to but does not represent.
  Lastly, I turn to the speech of the hon. Member for Alyn and Deeside (Mr. Jones). The best comment on it, on Labour's position—I shall continue to repeat that until Opposition Members listen—comes not from me but from the people of Clwyd—indeed, from the people in

  537
  the hon. Gentleman's own constituency. At county council by-elections last Thursday the Conservatives gained Hope, Penyffordd and Caergwrle from Labour. Labour sank from first to third place—and in Buckley Labour only just held on humiliatingly by the skin of its teeth. The hon. Gentleman's speech will not win any seats from us. I doubt whether it will even save his own.
  11.9 pm
  Mr. Donald Anderson: This has been a remarkable mini debate. We have had the usual froth and bluster from the hon. Member for Delyn (Mr. Raffan), and we have had the hon. Member for Clwyd, North-West (Sir. A. Meyer) rallying to the cause of the Government, which is a sure sign of the approach of an election. We have had the Secretary of State providing a remarkable swansong to these rate support grant debates. One would hope that the right hon. Gentleman would have a certain humility as he surveys the wreckage of Wales around him. As he sinks beneath the waves one would hope that there would at least been the cry from him,
  "I have sinned; I have been wrong,"
  but he is still a true monetarist, and that false dogma is shown to be wholly inappropriate to Wales.
  Many of the criticisms that we may have made of the Budget are equally applicable to the RSG settlement. In 1979 the Government claimed that they would institute a regime of tax cuts and protect the ratepayer, but there has been an increase in the burden of taxation on the ordinary family, and there has been an increase in the rate burden. This has been the direct result of Government policy. We know that the Government have reduced the percentage of relevant expenditure that is covered by the Exchequer. In 1981–82, the first year of the disaggregation of the England and Wales figures, the Exchequer provided 62·7 per cent. of expenditure. This has been reduced to 53·5 per cent. in the current settlement.
  The Welsh ratepayer pays a water rate, and by failing to tackle the high water rates in Wales the Welsh Office has failed the Welsh nation. In 1982–83 the differential in domestic rate relief that was intended to reflect the higher level of water rates in Wales was abolished. I should say that the domestic rate relief was halved from 36p to 18·5p. The increased burden fell directly on the consumer in Wales. On the best comparable basis, the Welsh water rate is about two thirds above the average of the other authorities in England and Wales. The Government have done nothing to carry over the interim settlement which the previous Labour Government bequeathed to them with their equalisation legislation. They seem content that the Welsh people should bear an excessive and unjust water rate burden.
  I shall not weary the House with the effects of the Government's policy on the Swansea council, as this has already been touched upon by my hon. Friend the Member for Alyn and Deeside (Mr. Jones). The reduction in central Government money would have meant a rate increase of 4 per cent. in cash terms. We know that positive Government policies could have led to increased potential for job creation by local authorities, but the Government have prevented the authorities from playing a full role at local level. At a time of mounting social problems of unemployment and homelessness, the Government have chosen to restrict expenditure.
  538
  Even with the greatest fantasy of the Conservative press, the Government cannot claim that they are dealing with loony authorities. Swansea council and other authorities in Wales are highly responsible and dedicated to the welfare of those whom they represent. The Secretary of State has frequently paid tribute to the Swansea city council for working closely with central Government and seeking to stimulate private investment in the marina project in the enterprise zone.
  The settlement and the constant turning of the screw upon Welsh local authorities reflect the prejudices and bombast of the Chancellor of the Exchequer and that of the Welsh Office, and the continuing trend of denying the local authorities the support that they need to do the job for which they are equipped and are anxious to carry out.
  11.18 pm
  Mr. Dafydd Wigley: We have seen worse rate support grant settlements than the one that is before us, but that says more about previous settlements than about the current one. The hon. Member for Swansea, East (Mr. Anderson) has spoken of the way in which services that are needed by our communities are being restricted, and that is the major problem.
  The humbug that we have from central Government gets up the nostrils of those who are engaged in local government more than anything else. Central Government have screwed down local government and have taken powers to the centre. They then tell local government that there should be no rate increases in their areas. The Government have told Gwynedd that, if expenditure can be held down to 4·8 per cent., there should be no rate increase. The Government knew, however, that the pressure on expenditure in the county was so high that there would be an increase in the rate of 7p to 8p on account of the teachers' settlement alone, and a 2p or 3p increase on account of road repairs. The costs of road repairs have been borne by capital account instead of revenue account because of the desperation of those who were responsible for the authority's funds. The impact of the police settlement is another element coming through, yet Gwynedd is castigated.
  In the context of Dyfed, which the Secretary of State mentioned rather than Gwynedd, he said that no manufacturing industry jobs were coming to Dyfed because we had increased the rates. Gwynedd has had the lowest rate in Wales in recent years, but no jobs are coining to Gwynedd. It is little wonder that local authorities are becoming desperate and saying that, if jobs are not coming in the private sector, we should try to create them as directly as we can, particularly in view of the pressure on services in the county.
  I draw the Secretary of State's attention to the increasing problems of maintaining the highways in rural counties. This is largely on account of the Government's decision to go for heavier axle weights on lorries. The pressure on bridges and roads is enormous and is leading to inevitable increases in expenditure on rural roads in the counties of Gwynedd, Dyfed and Powys. Of course, it has also led to increased expenditure on roads in urban areas.
  There is also increased pressure on the social services because of the mushroomlike growth of private nursing homes and private residential homes in our counties. That inevitably leads to a demand for services. Gwynedd is facing an increase of 15p in its rates this year, and that still leaves the county £1 million below its GRE. The Secretary

  539
  of State has a habit of castigating counties for spending less than the GRE because they are increasing rates in order to maintain services on which there is great pressure.
  Although this year's capital grant has been better than in previous years and has the smack of an election about it, one of the most difficult and frustrating matters is the lack of certainty about the future. It is not enough to say that 80 per cent. of a certain figure can be guaranteed next year. When the figure is worked out, it shows that, of the £10 million for capital expenditure in Gwynedd in the coming year, in practice there is a guarantee of only about £5·4 million. We need a rolling capital programme for several years and much greater certainty if we are to have a pattern for our capital expenditure.
  Finally, I should like to deal with the rate support grant formula. The Green Paper contains suggestions about further simplification. The formula for England is considerably more complex than that for Wales and, if the formula is over-simplified, there will be a danger that some of the necessary variations that are needed from area to area in Wales because of the diverse nature of our country will be lost. I hope that, when simplification is considered, the diverse nature of Wales will be taken into account, and that sensitivity will be maintained to ensure that the rural counties and the areas of great social deprivation in the valleys will be properly catered for in the rate support grant settlement.
  The Government should not play with figures to try to justify what they are doing this year compared to last. We need to look at the needs of our areas and compare those needs with the services that we get. We ought to have a radical new think on how we can improve those services, and we should get the finance to do so.
  11.24 pm
  Mr. Ian Grist: The plea by the hon. Member for Caernarfon (Mr. Wigley) precludes looking at the economy as a whole. Unless we get the economy right, we will not have the money to fund the things he wants. That is part and parcel of these rate settlements. I say that because I think that people sometimes lose sight of it.
  I congratulate my right hon. Friend the Secretary of State on the work that he is doing. I say that for what seems like the umpteenth year, and I am sure it seems like that to my right hon. Friend. As my hon. Friend the Member for Delyn (Mr. Raffan) said, we shall miss him in future rate support grant debates.
  I should like to take up a point that my right hon. Friend made about south Glamorgan. In the settlement, south Glamorgan was given a chance to reduce its rate. It did not reduce it but chose to put it up. In the six years that the Labour party has controlled that county, the rate has gone up by 80 per cent., including at one time a supplementary rate. The action of Cardiff city council has been rather different. It is a Conservative council and, despite the change from the provisional figures last year and the eventual outturn weighing against that council, it managed to reduce the rates. After four years in office, the council is still levying the same rate poundage that it levied when it came to power. That is a responsible attitude by a responsible council which is promoting the most exciting
  540
  city in the country, with major capital investment and the forward-looking Cardiff bay development just coming off the blocks.
  I regret to say that the populist approach of the Liberal party, confirming yet again that it is angling for any old vote that it can find, shows that it is clear that it will not have to operate power, and so can make promises where it will. Like all the Opposition parties, it wants higher public expenditure, although I do not know where it thinks that that will come from. It comes from taxation, rates, businesses and people's pockets. The whole point of this debate and all the similar ones is to control local authority expenditure, inflation and borrowing, and to bring down interest rates. The recent fall in interest rates will bring great advantage and benefit to local auhorities. If he can, I would like my right hon. Friend to estimate what the fall in interest rates is worth to Welsh local authorities, and the leeway that that gives our treasurers.
  Cardiff city council has managed to put down its rates while not cutting expenditure in any department, or any service, contrary to what the hon. Member for Ceredigion and Pembroke, North (Mr. Howells) said. Promoting industry and jobs in Wales depends on keeping costs down and making our local authorities and cities and towns more attractive to incoming industry, and able to help established businesses to grow. High rates and taxes are inimical to that, and the Government and the Conservative party are doing all that they can to bring jobs and industry to Wales. They are making a first-rate job of it.
  11.26 pm
  Dr. John Marek: I cannot understand why, from the Government Benches, we have had lots of statistics and figures about how Welsh local government is doing well and spending more money than ever before, when in Wales one can see the infrastructure deteriorating in front of one's eyes. They have said that local government expenditure is going up, but they have not said that it is going up in line with central Government expenditure, because that has been increasing even more. The Secretary of State said that local government was spending more in real terms. I have not studied these matters closely over the past two or three years, but I wonder whether that is because housing benefit is included, or the Clegg award, made by the last Labour Government. I should be interested to see what local government has to say about the Secretary of State's speech.
  The hon. Member for Delyn (Mr. Raffan) said that RSG in Wales is better than that in England. That may be so, but, in a world of diminishing resources, RSG as a proportion of total spending has been cut severely. It is not enough to make a simple proportional comparison and say that the Secretary of State has done well. I suspect that council expenditure in England has been extremely severely pruned, and both Secretaries of State have done badly. I would prefer to put it in this way: the Secretary of State for Wales has done less badly than the Secretary of State for the Environment.
  Why do we have all these figures? It is simply because the facts do not bear out any justification given by Ministers. In Wales one can see that everything is deteriorating. The roads in urban areas are full of potholes, when they were not seven years ago. One can see many people with nothing to do, standing around listlessly

  541
  on pavements because they do not have a job. The social services are creaking under the strain, with old people being shunted out into the community simply because the Government want to save money.
  Housing lists in Wales are increasing. Councils cannot afford to build new houses or do up council houses. I know that, and I think that every Opposition Member knows that. The facts belie what the Government are trying to put across in their figures and misrepresentations.
  We should look at education. I agree with the hon. Member for Delyn: hon. Members should look at the report on the state of school books in Clwyd. Clwyd is a rotten council and it has got its priorities wrong. One should look at the staffing, the low morale, the lack of teachers and the extremely had service we get in education throughout the Principality because of the policies of the Government.
  Will this be the last statement we have from the present Secretary of State? I hope so. We have had centralising Government over the past seven years and it is time that we had a change.
  11.30 pm
  Mr. Roy Hughes: This is yet another debate on rate support grant. Contrary to what the Secretary of State has told us, the concern and resentment of our local authorities is as great as ever. They feel that over the years they have suffered from the diktat of central Government. Their argument now, essentially, is that the cumulative effect of decision-making by the Government has left its mark.
  Ratepayers in Wales have certainly felt the impact of the reduction in taxpayers' contribution to local government services, as my hon. Friend the Member for Alyn and Deeside (Mr. Jones) so clearly pointed out. In line with that trend, the Government have increased the proportion of specific grants as opposed to block grants. That increases central Government influence and correspondingly diminishes local control. That is a far cry from the days when the Conservative party argued that local decisions should be taken locally.
  From a constituency standpoint, Gwent county council has announced that it proposes to increase the rate in the county by 11 per cent. It blames the teachers' pay award and cuts in Government grants. I appreciate that Gwent has budgeted for the full Advisory, Conciliation and Arbitration Service pay award. It argues that ACAS provides for extra supply teachers, whereas the Secretary of State for Education and Science's package does not. Gwent has also made provision for modest improvements in services — 50 extra police officers, a bit of extra provision for the elderly, the disabled and children in need. There is also £750,000 allocated for the new GCSE examination system. That is a worthwhile and necessary provision.
  There is nothing revolutionary about Gwent's proposals; they are examples of ordinary run-of-the-mill decision-making. What is more, before any final decisions were taken, there was wide consultation, particularly with Conservative opposition. Then, in the more formal council proceedings, there was all-party support for the proposals. Surely that is a model of how local government should function. It certainly does not need the interference of junior Ministers to tell such experienced public representatives how they should carry on their business.
  542
  The district councils cannot make rhyme nor reason of the settlement—and, I should add, not without just cause. For example, relevant expenditure increased by over 8 per cent. yet the block grant to district councils has increased by less than 1 per cent. over the 1986–87 settlement level. They are concerned about the volatility that the settlement brings about. It can result in rates varying between an increase of 20 per cent. and a reduction of 10 per cent. The Welsh District Councils Association claims that the severity of the settlement makes it difficult to maintain existing service levels.
  The entire thrust of the Government's policy is to move tax from central Government to the local community. The difficulty is that in Wales there are fewer people with high incomes, so the burden on the local community is even greater. To paraphrase Professor Galbraith's famous words, we have the public squalor but not a lot of the private affluence. Meanwhile, our local authorities strive manfully to maintain services.
  The local authorities in my area have acted responsibly throughout. However, despite their efforts—our councils would be the first to admit it—Wales has become a shabby society. That is detrimental to its interests in every way. What has happened is no accident; it is directly due to the Government's doctrinaire approach to the public sector of the economy. There is now a need for a fundamental change in approach and attitude. We need a general election before we can bring about those changes.
  11.35 pm
  Mr. Nicholas Edwards: The phrase used by the hon. Member for Newport, East (Mr. Hughes) was echoed by the hon. Member for Wrexham (Dr. Marek) at greater length. However, the hon. Member for Wrexham did not say that in Wrexham there were two priority estates programmes making a major reformation of formerly rundown local authority housing, that there has been massive restructuring of old industrial premises, a huge number of new industrial projects, a large road programme going on all around Wrexham and a new hospital. He did not mention any of those striking improvements in Wrexham.
  The hon. Member for Ceredigion and Pembroke, North (Mr. Howells) made an eloquent speech in favour of high rate burdens. In a thoroughly bad-tempered intervention the hon. and learned Member for Montgomery (Mr. Carlile) argued for educational waste and inefficiency.
  The debate started with a tear-jerking piece of charlatanism from the hon. Member for Alyn and Deeside (Mr. Jones). He said that the Government had destabilised the local government scene in Wales. That is not the view of Mr. Richard Tettenborn, the financial adviser of the Welsh Counties Committee who wrote of the absence of the extremes of political polarisation and of spending patterns.
  "it is pleasant to be able to report that consultation is alive and well and happening in Wales "
  He also said that the settlement is a significant improvement on some of its predecessors—[Interruption.] I am told that I am being selective. I accept the verdict that this is not a giveaway. I never suggested that it was. However, it is a good settlement and the hon. Member for Alyn and Deeside should acknowledge that.
  For some peculiar reason, the hon. Gentleman gave us the unemployment figures for 1985 and stopped there. I

  543
  wonder why? Clearly he did not wish to refer to the fact that, since the early part of 1986, Welsh unemployment has fallen faster than that in any other part of the United Kingdom. It has fallen for 10 out of the past 11 months, and for nine consecutive months, by a further 15,000 from its peak. The truth is that the hon. Gentleman so hates to have good news about unemployment that he has tried to stop the clock in 1985. That reveals the hypocrisy of the hon. Gentleman and the fact that he is not in the least concerned about unemployment or the welfare of the people of Wales. He is concerned only about his shallow shabby political ambition.
  Mr. Barry Jones rose—
  Mr. Edwards: No, I shall not give way. I shall not give way to a man who has revealed his contempt for the Welsh people—[Interruption.] I have no intention of giving way to the hon. Gentleman.
  Mr. Jones rose—
  Mr. Deputy Speaker: Order. The Secretary of State is clearly not giving way.
  Mr. Edwards: I have nothing but contempt for the contribution made by the hon. Member for Alyn and Deeside who wished me to give way to him. The truth is that the hon. Gentleman does not care about the unemployed; he cares only about his political skin. That truth has been revealed to the Welsh people tonight.
  Mr. Jones: Will the Secretary of State give way?
  Mr. Deputy Speaker: Order.
  Mr. Edwards: The hon. Gentleman referred to the lack of basic tools of education but failed to say that more is being spent on education in Wales than under the Labour Government, despite the substantial reduction in the number of schoolchildren. He refused to acknowledge that the failure to tackle the problem of 150,000 surplus places in schools results in a lack of resources for his priorities. That is what local government should be tackling at present.
  The hon. Gentleman referred to this as a poor settlement for the districts. It is not, which is why districts have been able to maintain their services, certainly at the level they had when the Government came to office. The increase in the rate support grant this year of 7·5 per cent., including specific grant, has allowed the districts to budget in line with the settlement and to increase average rates by less than 2p. The fact that so many districts in Wales have succeeded in reducing rate burdens and offsetting the rate increases imposed by the counties shows that it is a reasonable and a good settlement.
  My hon. Friend the Member for Clwyd, North-West (Sir A. Meyer) attacked the present system. I remind him, as I have done on previous occasions, that he also refused to consider the proposed change in the system. It is not good enough for him to attack the present system for being unworkable, to refuse to produce an alternative and to attack the Government's proposals for reform. In an intervention, I referred to the settlement in Rhuddlan. In Colwyn, the council has chosen to increase expenditure by 8·4 per cent., or 3·8 per cent. above the settlement level. As a result, it forfeited £104,000 of block grant. Its expenditure is now 8 per cent. above GRE, so it is hardly surprising that there is a large poundage increase.
  Mr. Barry Jones: Will the Secretary of State give way?
  Mr. Edwards: No. I wish to reply to the debate and to the excellent speech from my hon. Friend the Member for Delyn (Mr. Raffan) who referred to a rate increase by Clwyd of 4·8 per cent.
  It was a poundage increase of 4·8 per cent., when on the basis of the settlement there could have been a reduction. That will produce a 5·5 per cent. increase in the poundage rate. I am glad to say that, thanks to the good performance again by the Delyn district authority, the rate burden for his constituents will be reduced, so that the increase will be only 4·9 per cent. in Delyn. That is an absolutely splendid example of an authority which is doing an outstanding job of providing services while running one of the best enterprise zones, yet can reduce the rate burden. That proves conclusively the nonsense of the argument that rate burdens must be increased to improve services.
  The hon. Member for Caernarfon (Mr. Wigley) asked for a radical new look at local government finance and said that, in considering the system of allocation, we should take particular careful—
  Mr. Barry Jones: Will the Secretary of State give way?
  Mr. Edwards: No. I shall answer the hon. Gentleman who had a serious point to make.
  Mr. Jones rose—
  Mr. Edwards: I have no intention of giving way to the hon. Gentleman—not after the speech he delivered.
  The hon. Member for Caernarfon made, as he often does, a serious point about allocations to local authorities. Obviously, we shall take careful account of the varied needs of Welsh local authorities and we shall not make a change unless it is necessary. He asked for a radical new look at local government finance. I can promise him that, in the first Session of a Parliament after a general election, the next Conservative Government will introduce a radical reform Bill to put local government finance on a sounder basis and to remove the unfair burdens that this complex system has introduced. I am happy to give that pledge to the hon. Member for Caernarfon.
  Question put:—
  The House divided: Ayes 294, Noes 157.

  Division No. 126]

  [11.45 pm

  AYES

  Adley, Robert

  Bottomley, Mrs Virginia

  Aitken, Jonathan

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

  Alexander, Richard

  Boyson, Dr Rhodes

  Ancram, Michael

  Brandon-Bravo, Martin

  Arnold, Tom

  Bright, Graham

  Ashby, David

  Brinton, Tim

  Aspinwall, Jack

  Brittan, Rt Hon Leon

  Atkins, Rt Hon Sir H.

  Brooke, Hon Peter

  Atkinson, David (B'm'th E)

  Brown, M. (Brigg & Cl'thpes)

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

  Browne, John

  Baker, Nicholas (Dorset N)

  Bruinvels, Peter

  Baldry, Tony

  Bryan, Sir Paul

  Banks, Robert (Harrogate)

  Buchanan-Smith, Rt Hon A.

  Batiste, Spencer

  Buck, Sir Antony

  Beaumont-Dark, Anthony

  Bulmer, Esmond

  Bellingham, Henry

  Burt, Alistair

  Bendall, Vivian

  Butler, Rt Hon Sir Adam

  Benyon, William

  Butterfill, John

  Best, Keith

  Carlisle, John (Luton N)

  Biffen, Rt Hon John

  Carlisle, Kenneth (Lincoln)

  Blackburn, John

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

  Body, Sir Richard

  Carttiss, Michael

  Bonsor, Sir Nicholas

  Cash, William

  Bottomley, Peter

  Chalker, Mrs Lynda

  545

  Channon, Rt Hon Paul

  Hurd, Rt Hon Douglas

  Chope, Christopher

  Jackson, Robert

  Churchill, W. S.

  Jenkin, Rt Hon Patrick

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

  Jessel, Toby

  Clark, Sir W. (Croydon S)

  Jones, Gwilym (Cardiff N)

  Cockeram, Eric

  Jones, Robert (Herts W)

  Colvin, Michael

  Jopling, Rt Hon Michael

  Conway, Derek

  Joseph, Rt Hon Sir Keith

  Coombs, Simon

  Kellett-Bowman, Mrs Elaine

  Cope, John

  Kershaw, Sir Anthony

  Couchman, James

  Key, Robert

  Critchley, Julian

  King, Roger (B'ham N'field)

  Crouch, David

  King, Rt Hon Tom

  Currie, Mrs Edwina

  Knight, Greg (Derby N)

  Dickens, Geoffrey

  Knight, Dame Jill (Edgbaston)

  Dorrell, Stephen

  Knowles, Michael

  Douglas-Hamilton, Lord J.

  Knox, David

  Dover, Den

  Lamont, Rt Hon Norman

  Dunn, Robert

  Lang, Ian

  Durant, Tony

  Latham, Michael

  Edwards, Rt Hon N. (P'broke)

  Lawler, Geoffrey

  Eggar, Tim

  Lawrence, Ivan

  Emery, Sir Peter

  Lee, John (Pendle)

  Eyre, Sir Reginald

  Leigh, Edward (Gainsbor'gh)

  Fairbairn, Nicholas

  Lester, Jim

  Fallon, Michael

  Lewis, Sir Kenneth (Stamf'd)

  Farr, Sir John

  Lightbown, David

  Favell, Anthony

  Lilley, Peter

  Fookes, Miss Janet

  Lloyd, Sir Ian (Havant)

  Forman, Nigel

  Lloyd, Peter (Fareham)

  Forsyth, Michael (Stirling)

  Lord, Michael

  Forth, Eric

  Luce, Rt Hon Richard

  Fowler, Rt Hon Norman

  Lyell, Nicholas

  Franks, Cecil

  McCurley, Mrs Anna

  Fraser, Peter (Angus East)

  Macfarlane, Neil

  Freeman, Roger

  MacGregor, Rt Hon John

  Gale, Roger

  MacKay, Andrew (Berkshire)

  Galley, Roy

  MacKay, John (Argyll & Bute)

  Gardiner, George (Reigate)

  Maclean, David John

  Glyn, Dr Alan

  McLoughlin, Patrick

  Goodlad, Alastair

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

  Gorst, John

  McQuarrie, Albert

  Gower, Sir Raymond

  Madel, David

  Grant, Sir Anthony

  Major, John

  Greenway, Harry

  Malins, Humfrey

  Gregory, Conal

  Malone, Gerald

  Griffiths, Peter (Portsm'th N)

  Maples, John

  Grist, Ian

  Marland, Paul

  Ground, Patrick

  Mates, Michael

  Grylls, Michael

  Mather, Sir Carol

  Gummer, Rt Hon John S

  Maude, Hon Francis

  Hamilton, Hon A. (Epsom)

  Mawhinney, Dr Brian

  Hamilton, Neil (Tatton)

  Maxwell-Hyslop, Robin

  Hampson, Dr Keith

  Mellor, David

  Hanley, Jeremy

  Merchant, Piers

  Hannam, John

  Meyer, Sir Anthony

  Hargreaves, Kenneth

  Miller, Hal (B'grove)

  Harris, David

  Mills, Iain (Meriden)

  Harvey, Robert

  Miscampbell, Norman

  Hayhoe, Rt Hon Sir Barney

  Moate, Roger

  Heathcoat-Amory, David

  Monro, Sir Hector

  Heddle, John

  Montgomery, Sir Fergus

  Henderson, Barry

  Moore, Rt Hon John

  Hickmet, Richard

  Morrison, Hon P. (Chester)

  Hicks, Robert

  Moynihan, Hon C.

  Higgins, Rt Hon Terence L.

  Mudd, David

  Hill, James

  Neale, Gerrard

  Hind, Kenneth

  Nelson, Anthony

  Hirst, Michael

  Newton, Tony

  Hogg, Hon Douglas (Gr'th'm)

  Nicholls, Patrick

  Holland, Sir Philip (Gedling)

  Norris, Steven

  Holt, Richard

  Onslow, Cranley

  Hordern, Sir Peter

  Oppenheim, Phillip

  Howard, Michael

  Oppenheim, Rt Hon Mrs S.

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

  Osborn, Sir John

  Howarth, Gerald (Cannock)

  Ottaway, Richard

  Howell, Rt Hon D. (G'ldford)

  Page, Sir John (Harrow W)

  Hubbard-Miles, Peter

  Page, Richard (Herts SW)

  Hunt, David (Wirral W)

  Parkinson, Rt Hon Cecil

  Hunt, John (Ravensbourne)

  Patten, Christopher (Bath)

  546

  Pattie, Rt Hon Geoffrey

  Stewart, Allan (Eastwood)

  Pawsey, James

  Stewart, Andrew (Sherwood)

  Percival, Rt Hon Sir Ian

  Stokes, John

  Pollock, Alexander

  Stradling Thomas, Sir John

  Porter, Barry

  Tapsell, Sir Peter

  Portillo, Michael

  Taylor, John (Solihull)

  Powley, John

  Tebbit, Rt Hon Norman

  Price, Sir David

  Terlezki, Stefan

  Pym, Rt Hon Francis

  Thomas, Rt Hon Peter

  Raffan, Keith

  Thompson, Patrick (N'ich N)

  Raison, Rt Hon Timothy

  Thorne, Neil (Ilford S)

  Rhodes James, Robert

  Thurnham, Peter

  Rhys Williams, Sir Brandon

  Townend, John (Bridlington)

  Ridley, Rt Hon Nicholas

  Townsend, Cyril D. (B'heath)

  Rifkind, Rt Hon Malcolm

  Tracey, Richard

  Roberts, Wyn (Conwy)

  Trotter, Neville

  Robinson, Mark (N'port W)

  Twinn, Dr Ian

  Roe, Mrs Marion

  Vaughan, Sir Gerard

  Rost, Peter

  Viggers, Peter

  Rowe, Andrew

  Waddington, Rt Hon David

  Rumbold, Mrs Angela

  Wakeham, Rt Hon John

  Ryder, Richard

  Waldegrave, Hon William

  Sackville, Hon Thomas

  Walden, George

  Sainsbury, Hon Timothy

  Walker, Bill (T'side N)

  Sayeed, Jonathan

  Waller, Gary

  Shaw, Sir Michael (Scarb')

  Walters, Dennis

  Shelton, William (Streatham)

  Wardle, C. (Bexhill)

  Shepherd, Colin (Hereford)

  Watson, John

  Shepherd, Richard (Aldridge)

  Watts, John

  Shersby, Michael

  Wells, Bowen (Hertford)

  Silvester, Fred

  Wells, Sir John (Maidstone)

  Skeet, Sir Trevor

  Wheeler, John

  Smith, Sir Dudley (Warwick)

  Whitfield, John

  Smith, Tim (Beaconsfield)

  Whitney, Raymond

  Soames, Hon Nicholas

  Winterton, Mrs Ann

  Speller, Tony

  Winterton, Nicholas

  Spencer, Derek

  Wolfson, Mark

  Spicer, Jim (Dorset W)

  Wood, Timothy

  Spicer, Michael (S Worcs)

  Woodcock, Michael

  Squire, Robin

  Yeo, Tim

  Stanbrook, Ivor

  Young, Sir George (Acton)

  Stanley, Rt Hon John

  Steen, Anthony

  Tellers for the Ayes:

  Stern, Michael

  Mr. Michael Neubert and

  Stevens, Lewis (Nuneaton)

  Mr. Robert Boscawen.

  NOES

  Anderson, Donald

  Cook, Frank (Stockton North)

  Archer, Rt Hon Peter

  Cook, Robin F. (Livingston)

  Ashdown, Paddy

  Corbett, Robin

  Ashton, Joe

  Corbyn, Jeremy

  Atkinson, N. (Tottenham)

  Craigen, J. M.

  Bagier, Gordon A. T.

  Crowther, Stan

  Banks, Tony (Newham NW)

  Cunliffe, Lawrence

  Beckett, Mrs Margaret

  Cunningham, Dr John

  Beith, A. J.

  Dalyell, Tam

  Bell, Stuart

  Davies, Rt Hon Denzil (L'lli)

  Benn, Rt Hon Tony

  Davies, Ronald (Caerphilly)

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

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

  Bermingham, Gerald

  Dewar, Donald

  Bidwell, Sydney

  Dixon, Donald

  Blair, Anthony

  Dobson, Frank

  Boothroyd, Miss Betty

  Dormand, Jack

  Boyes, Roland

  Douglas, Dick

  Bray, Dr Jeremy

  Dubs, Alfred

  Brown, Gordon (D'f'mline E)

  Duffy, A. E. P.

  Brown, Hugh D. (Provan)

  Dunwoody, Hon Mrs G.

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

  Eadie, Alex

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

  Eastham, Ken

  Brown, Ron (E'burgh, Leith)

  Evans, John (St. Helens N)

  Caborn, Richard

  Fatchett, Derek

  Campbell-Savours, Dale

  Field, Frank (Birkenhead)

  Carlile, Alexander (Montg'y)

  Fields, T. (L'pool Broad Gn)

  Carter-Jones, Lewis

  Fisher, Mark

  Clark, Dr David (S Shields)

  Foot, Rt Hon Michael

  Clarke, Thomas

  Forrester, John

  Clay, Robert

  Foster, Derek

  Clelland, David Gordon

  Foulkes, George

  Coleman, Donald

  Fraser, J. (Norwood)

  Conlan, Bernard

  Freeson, Rt Hon Reginald

  547

  Freud, Clement

  Morris, Rt Hon J. (Aberavon)

  George, Bruce

  Nellist, David

  Gilbert, Rt Hon Dr John

  Oakes, Rt Hon Gordon

  Godman, Dr Norman

  O'Brien, William

  Golding, Mrs Llin

  O'Neill, Martin

  Gould, Bryan

  Orme, Rt Hon Stanley

  Hamilton, James (M'well N)

  Park, George

  Hancock, Michael

  Patchett, Terry

  Hardy, Peter

  Pendry, Tom

  Harrison, Rt Hon Walter

  Pike, Peter

  Hart, Rt Hon Dame Judith

  Raynsford, Nick

  Haynes, Frank

  Redmond, Martin

  Heffer, Eric S.

  Richardson, Ms Jo

  Hogg, N. (C'nauld & Kilsyth)

  Robertson, George

  Holland, Stuart (Vauxhall)

  Robinson, G. (Coventry NW)

  Home Robertson, John

  Rooker, J. W.

  Howells, Geraint

  Rowlands, Ted

  Hoyle, Douglas

  Sedgemore, Brian

  Hughes, Robert (Aberdeen N)

  Sheerman, Barry

  Hughes, Roy (Newport East)

  Sheldon, Rt Hon R.

  Hughes, Sean (Knowsley S)

  Shields, Mrs Elizabeth

  Hughes, Simon (Southwark)

  Shore, Rt Hon Peter

  Janner, Hon Greville

  Short, Mrs R.(Whampt'n NE)

  John, Brynmor

  Silkin, Rt Hon J.

  Jones, Barry (Alyn & Deeside)

  Skinner, Dennis

  Lambie, David

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

  Lamond, James

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

  Lewis, Terence (Worsley)

  Soley, Clive

  Litherland, Robert

  Spearing, Nigel

  Livsey, Richard

  Stott, Roger

  Lloyd, Tony (Stretford)

  Strang, Gavin

  Lofthouse, Geoffrey

  Straw, Jack

  Loyden, Edward

  Taylor, Matthew

  McDonald, Dr Oonagh

  Thomas, Dafydd (Merioneth)

  MacKenzie, Rt Hon Gregor

  Thomas, Dr R. (Carmarthen)

  McTaggart, Robert

  Thorne, Stan (Preston)

  Madden, Max

  Tinn, James

  Marek, Dr John

  Wardell, Gareth (Gower)

  Marshall, David (Shettleston)

  Welsh, Michael

  Martin, Michael

  Wigley, Dafydd

  Maxton, John

  Williams, Rt Hon A.

  Maynard, Miss Joan

  Winnick, David

  Meacher, Michael

  Young, David (Bolton SE)

  Meadowcroft, Michael

  Michie, William

  Tellers for the Noes:

  Mikardo, Ian

  Mr. Allen McKay and

  Millan, Rt Hon Bruce

  Mr. John McWilliam.

  Miller, Dr M. S. (E Kilbride)

  Question accordingly agreed to.
  Resolved,
  That the Welsh Rate Support Grant Report 1987–88 (House of Commons Paper No. 221), which was laid before this House on 19th March, be approved.

  Rate Support Grant (Wales)

    RATE SUPPORT GRANT (WALES)
    Resolved,
    That the Welsh Rate Support Grant Supplementary Report 1986–87 (House of Commons Paper No. 222), which was laid before this House on 19th March, be approved.—[Mr. Sainsbury.]

Orders of the Day

  Criminal Justice (Scotland) Bill [Lords]
  Order for Second Reading read.
  Ordered,
  That the Bill be committed to a Scottish Standing Committee.—[Mr. Sainsbury.]

  Leicester Royal Infirmary
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Sainsbury.]
  11.58 pm
  Mr. Derek Spencer: On 4 December last my hon. Friend the Member for Harborough (Sir J. Farr) and I had the pleasure of detaining our hon. Friend the Under-Secretary of State for Health and Social Security on a debate on the Trent regional health authority. Tonight my topic is much more specific—the funding of the Leicester royal infirmary in my constituency. Like everyone else in Leicester, I shall refer to it as the Royal.
  My plea is for more money to secure the upgrading of some archaic wards which have the reputation as being among the worst in the country. My plea is backed by my hon. Friends in the city and county. I am pleased to see that I have their support in massed ranks and that my hon. Friends the Members for Harborough, for Rutland and Melton (Mr. Latham), for Loughborough (Mr. Dorrell) and for Leicester, East (Mr. Bruinvels) are present. I am grateful for their support.
  My plea is also supported by the physicians' group at the Royal and by the "Fair share for health" campaign of the Leicester Mercury, which, under the executive editor, Laurie Simpkin, has done such a splendid service in highlighting the deficiencies in these wards.
  The problem that I wish to draw to the attention of the House is within limited bounds. It involves five acute medical wards and, to put the matter shortly, there is not enough money to bring those five wards up to the modern standards that are exhibited in the rest of the hospital. These wards represent a small minority of the hospital, but the high standards elsewhere throw them into stark relief. I have had the opportunity of seeing what the conditions in those wards are like, because on Friday 13 February I was shown round by Dr. Frank Nichol, chairman of the Royal's physicians group, and his colleagues, to whom I express my thanks. To put it in a nutshell, the wards present a dismal sight. There are insufficient bathrooms, too few lavatories, inadequate space and poor access. One ward has a wooden mobile ramp for access, which has to be moved.
  It is especially sad to me, with a daughter who has worked as a nurse for a number of years in the National Health Service, to see how her colleagues must care for patients in what can only be described as squalid Victorian conditions. I believe that my opinion of those wards is shared by my hon. Friends who are in the Chamber. They have taken the opportunity to see the conditions for themselves.
  I shall flesh out my remarks with a few details about the five wards in question. St. Agnes ward has one lavatory and an old sink. Where I come from it is called a slopstone. I thought that they had passed into history, but apparently one or two have been preserved for posterity. In St. Margaret's ward there is a tiny lavatory and an old bath. Both those wards appear to have had no work done on them for a long time. The three other wards have had some recent cosmetic improvements made to them, but they are still well below par. Oliver ward has only three lavatories for a considerable number of patients. Marriott ward—it will loom large in my speech—has two toilets for 34 men. The modest improvements that have been carried out

  549
  recently have been paid for by a trust fund that was set up for the benefit of patients, not for the purpose of structural repairs. Fielding Johnson ward has 34 patients—there should only be 28—and a day room is being used for beds. Those five acute medical wards are desperately in need of further upgrading.
  The problem must be seen in context—our wretched inheritance from the Labour Government and their policy of hospital building cuts. In 1974 those wards were unacceptable, and they were even more unacceptable when the Labour Government left office in 1979. It is sheer cant, humbug and hypocrisy on the part of the Opposition parties, aided and abetted by their friends in the trade union movement, to complain about Government policies or the National Health Service. Those parties, acting together, did much to damage the NHS. If they had any sensitivity, they would maintain a shamefaced silence.
  In the city and the county we are being subjected to the cynical cry of cuts in services, but in truth there has been an unprecedented growth in the Leicestershire health authority and especially the Royal. That growth has taken place since we took office in 1979. The funding of the Royal has gone up from £11·5 million in 1977–78 to £39 million in 1985–86. The Leicestershire health authority has experienced a real growth in revenue funding of 34 per cent. from 1978–79 to 1986–87.
  I shall say a few words about the history of the hospital. The Royal is an ancient and important hospital. It was founded in 1771. It is by far the largest hospital in the county, and it is an important teaching hospital for the university medical school—a school of increasing repute. Leicestershire health authority is the largest authority in the country, serving an area with a population of about 800,000, some of whom receive treatment at the Royal. The scale of the operation was brought home to me in striking detail when I visited the headquarters of the ambulance service at Carlton Hayes and saw the computerised service and the logistical problems and complexities that must be confronted by a health authority of that size and diversity.
  May I pencil in some of the more recent background. It is a cause for pride, not for grumbling. My hon. Friend the Minister had the opportunity of seeing Glenfield hospital. A hospice has been opened by LOROS. Both facilities set fine examples for others to follow, and the Royal has also had great success. Between 1980 and 1986, in-patient work load increased by 22 per cent., day cases by 50 per cent., out-patients by 14 per cent. and maternity services by 8 per cent. Using a slightly different time scale, there has been an increase from 29,000 in-patients in 1977–78 to 45,000 in 1985–86. That has been accompanied by an increase in medical staff.
  Those increased services have been delivered with more efficiency. The cost per case throws up interesting comparisons with the region and with national criteria. At the Royal the cost per case is £618. In the Trent region the average cost is £686, and the national average is £724. Inpatient throughput based on annual discharge per bed shows the same favourable picture. In the Royal it is 54, in the Trent region it is only 50, and nationally it is only 47. We have had very cost-effective growth at the Royal. It is a busy, efficient hospital, and there has been good housekeeping. I am sure that my hon. Friends who represent the city and county agree that we should pay tribute to the doctors, nurses and staff at all levels. The people of the city and county are profoundly grateful to
  550
  them. A price has had to be paid for that success, just as successful businesses sometimes have to pay a price and require additional injections of cash to cope with and promote their success.
  Having sketched in some of the recent background, .I should look to the foreground before considering the specific problem of the five wards. We expect that in the not too distant future phase 4 will be completed. When it is, it will provide a considerable increase in the number of acute beds, and we all welcome it. At least £18 million will be spent on it. Formal approval was given for the project on 22 March 1985, and it is estimated that work will begin on the site in September this year. On an optimistic estimate, it will be open in the spring of 1991. It will provide 360 general acute beds and 96 acute geriatric beds. But a blind spot has occurred between planning in the recent past and planning in the near future. This has caused the unfortunate situation in regard to the five acute medical wards of which I have spoken.
  I draw the attention of my hon. Friend the Minister to the chronology of the events that relate to the five wards. As long ago as 1982 there were plans to upgrade the Marriott ward. They were delayed through lack of funds and put back to the mid-summer of 1983. In mid-summer 1983 they were postponed again, but in January 1984, as a result of savings from the re-siting of the children's wards, it appeared that funds would be available and hopes were raised. In June 1984 the district management team agreed that £100,000 could be spent on upgrading Marriott ward and said that work would he likely to start in 1985–86. In March 1985 the news was even better. The sum that was apparently to be available was £250,000, and that was apparently confirmed by the unit administrator. Consultant architects were brought in and plans were drawn up, and in September 1985 the plans were agreed.
  In October 1985, however, a bitter blow fell. The new unit general manager informed the physicians group that, sadly, the money that was thought to be available was not available. All that has happened since then is that some minor cosmetic improvements have been carried out to Marriott ward, and something similar will be done to Spreece ward. The promised upgrading of the wards, which looked likely to come to fruition not long after 1982, has progressively retreated like a mirror. There has been promise and there has been retraction. That state of affairs, understandably, has not only undermined the morale of the staff, but has dismayed the public at large and caused widespread disappointment, which we, as hon. Members for the city and county, strongly share.
  With that background of facts, I come to the argument itself. Looking on the bright side, it will be about four years before phase 4 comes into operation. In view of the history of delay of phase 4 and of other projects at the Royal, it is feared that the additional beds will not be available in the spring of 1991, as is now being promised. The reason for that fear is that phase 4 has not yet even been put out to tender. Therefore, it is thought to be unlikely that, with such a large scheme, work can begin on site in September of this year as had originally been envisaged.
  Even when phase 4 is completed, because of the ever-increasing demands upon the facilities at the Royal, it is likely that the wards will still be needed. Therefore, the argument that they have a short life in front of them and

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  all that is required is some temporary tarting up to eke out the remainder of their existence seems not likely to be borne out by events.
  How pleased we would be if these wards were to follow into history the great string of other unsuitable premises that we inherited from the last Labour Government. We take pride in having closed them and replaced them with modern and much more suitable facilities. However, that will happen only if sufficient funds are made available. These buildings are sound and, with appropriate upgrading, could provide facilities well into the next century. But more cash is required if those urgent, long-term improvements are to be made.
  I turn to the real burden of my request to my hon. Friend the Minister. It is also made on behalf of my hon. Friends with neighbouring constituencies who are here tonight. The Royal has been a victim of its own success. It faces other problems, which I could have dwelt on tonight, but as time is limited I have limited my remarks to these five acute wards. They are a sample of a somewhat wider problem. We are convinced that, although the present level of funding, based on the resource allocation working party, has been vastly increased, it is not good enough. We are aware that RAWP is being re-examined, but some people fear that the shrill battalions from London and the home counties will succeed in persuading the Government that they should have a greater share. We shall resist that attempt most strenuously. We are not prepared to see that happen. The Royal is suffering from underfunding, and I am here tonight to ask my hon. Friend, on behalf of the Government, urgently to do something to put it right.
  12.17 am
  The Parliamentary Under-Secretary of State for Health and Social Security (Mrs. Edwina Currie): In the 10 minutes that are left to me I shall endeavour to answer some of the detailed points that have been made by my hon. and learned Friend the Member for Leicester, South (Mr. Spencer). I congratulate him on his success in Mr. Speaker's ballot for this Adjournment debate. This is the twentieth time, so far, that I have responded to an Adjournment debate, and it is the second occasion on which I have faced the formidable ordeal of addressing those of my hon. Friends representing Leicestershire constituencies, who are ranked behind me in considerable numbers. It is such a pity that the hon. and learned Member for Leicester, West (Mr. Janner) has seen fit to find something else to do tonight, despite his occasional professed interest in the health of his constituents.
  Health funding in Leicester has undoubtedly been a matter of considerable local interest for many years. I join my hon. and learned Friend in congratulating the Leicester Mercury on its campaign over many years, for the result has been a change in the whole system of funding and in a reallocation of resources throughout the country, as my hon. and learned Friend described. The efforts of the Leicester Mercury and of my hon. Friends in Leicestershire have led to a dramatic improvement in health services, particularly during the lifetime of this Government.
  The Trent region is a major growth region. It also serves my constituency of Derbyshire, South. Spending in Trent has risen by 27 per cent., compared with the average for
  552
  England of about 19 per cent., between 1978–79 and 1986–87. That is the highest increase in the country. In 1978–79 the Trent region was 8 per cent. below its target. Now it is about 3 per cent. below its target. That shows the Government's commitments to the hitherto rather less well funded regions. The benefits are then passed on to the districts.
  As for capital, of the 14 regions, Trent has received the third highest capital allocation in England, after the west midlands and the north-west. Some £58·7 million will be spent on capital projects in 1987–88. That has increased Trent's share of the capital programme substantially.
  I have taken the points that my hon. and learned Friend made about London, and it is worth reflecting that London still has twice as many acute beds for its population as does the rest of the country.
  A large number of new building projects are under way. In Trent, £80 million of new building projects are due to be started in the current year, while 21 large projects at a total cost of £125 million are under construction or have recently been completed. On 4 April I shall be visiting one of the most recent of those, the new development at the Derby city hospital in Mickleover, which is mainly staffed by my constituents, who are serving it very well.
  Money has been spent in Trent region on a 32 per cent. increase in doctors and dentists in 1985 compared with 1978. That is nearly 900 more doctors and dentists. Our constituents were neglected by the last Labour Government. That is one of the most substantial increases that has been reported around the country.
  The Leicestershire health authority, which is responsible for Leicester royal infirmary, is a major teaching district. Its funding in 1982–83, when its boundaries were first established, was £118 million. This year we will be spending £154 million, and as a result it is within 4 per cent. of RAWP. In real terms it has experienced a growth of 34 per cent. since the Government took office. Ten years ago it was perhaps 20 per cent. below what we now call the RAWP target, but it is on schedule to meet its target by 1994. Therefore, the result is much improved health care for the constituents of my hon. and learned Friend and his colleagues from Leicestershire.
  Leicester royal infirmary is one of the oldest hospitals outside London, although the buildings that we are talking about do not necessarily date from 1771. The original cost of the hospital was £2,762, which shows what happens when we have inflation.
  I take the point that my hon. and learned Friend made about wards. Five medical wards are under criticism and it has been recognised that they are unsatisfactory. Dr. Ian Pye, the chairman of the physicians group, called them old-fashioned, but the Leicester Mercury, in its edition of 20 February 1987, said:
  "Despite their problems, the wards continue efficiently, with patients being treated and discharged at a higher rate than at comparable hospitals."
  There is no question of the wards being dangerous, but they are open and crowded wards that Miss Nightingale would have recognised. However, three of those wards have been upgraded and £100,000 is to be spent on the other two. That activity is quite separate from the rebuilding that has been described. The DHA has decided not to spend further money upgrading the wards as they will be completely replaced in phase 4 of the overall development programme for Leicester royal infirmary.

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  The Leicester Mercury called the new development an antidote, which was uncharacteristically ungenerous of it. An antidote it will not be, but a full replacement it will.
  Phase 4 is due to start in September of this year, will be completed in 1990 and will be open to the first patients almost exactly four years from now in the spring of 1991. It takes some time to ensure that everything is working. I hope that they do not practise on patients. It will cost £18 million altogether.
  My hon. and learned Friend has complained about the state of some of the wards, even after some money has been spent on them. One must ask whether it makes sense to spend even more—I understand that £300,000 would be required for two wards—when they will be completely replaced shortly. The decision whether to upgrade or wait until the new facilities are ready must be a matter for the district health authority. While I recognise the force of my hon. and learned Friend's feelings, I would take issue with him when he says that the increase in demand on the LRI will mean that these wards will still be needed. Surely that is both an increase in service that would need to be argued for, and indeed which might well perpetuate the use of facilities that have now been roundly condemned.
  There are other developments under way. The bone marrow transplant unit has been brought into operation at the hospital, which will mean that up to 20 people a year will not have to travel to other centres. New monitoring equipment will be bought for intensive therapy, coronary care and theatres at the infirmary. Funding will be made available for extra nurses for cancer patients. There will be £226,000 spent on the purchase of new or replacement medical equipment in response to concern which has been expressed elsewhere about equipment, and £94,000 additional revenue will be made available for improving services for drug misusers, on top of about £360,000 that has been allocated under the drugs central funding initiative for a three-year period.
  Mr. Peter Bruinvels: Will my hon. Friend consider visiting Leicester to see the Leicester royal
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  infirmary, the wards and the bone marrow unit? The unit is in receipt of funds, but those responsible for it are keen to obtain additional moneys. There was £190,000 for the first year, and it is unfortunate that not enough space is available.
  Mrs. Currie: I understand that the unit was allocated an extra £115,000 for a full year, and extra services start half way through the year. There will be about £55,000 this year, and so on.
  As for the invitation to visit, I should like to emphasise the Health Service for the future, that we are building. I would prefer to go when the first sods are cut, then when the first foundations are laid for phase 4 or I may have the opportunity to see phases 1, 2 and 3 of the existing development.
  We want to build a Health Service for the future. We are concerned to build a service for our children and our grandchildren, and I am certain that that will happen as a result of what is being proposed. The day will come when the old wards will be phased out. That day will not be long coming, and I am sure that it cannot come quickly enough—
  Mr. Michael Latham: May I place on record the fact that Leicestershire Members are grateful to my hon. Friend the Under-Secretary of State and to my hon. Friend the Minister for Health for attending the debate?
  Mrs. Currie: It is entirely right and proper that we should be here. We have both visited Leicester recently and been enormously impressed by the efforts made by the consituents of all my hon. Friends who represent constituencies in Leicestershire to ensure that the Health Service in Leicester uses the money with which it is well supplied in the interests of all concerned.
  Question put and agreed to.
  Adjourned accordingly at twenty-six minutes past Twelve o'clock.

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THE ARTS
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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 Chelmsford.

Lord Peston
Maurice Harry Peston, Esquire, having been created Baron Peston, of Mile End in Greater London, for life—Was, in his robes, introduced between the Lord Ponsonby of Shulbrede and the Lord Cledwyn of Penrhos and made the solemn Affirmation.
Lord Irvine of Lairg
Alexander Andrew Mackay, Esquire, having been created Baron Irvine of Lairg, of Lairg in the District of Sutherland, for life—Was, in his robes, introduced between the Lord Elwyn-Jones and the Lord Ross of Marnock.

Football Grounds: Redevelopment Schemes
2.55 p.m.
Lord Graham of Edmonton: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will refuse planning permission to recently publicised schemes for the redevelopment of a number of London football grounds.
The Parliamentary Under-Secretary of State, Department of the Environment (Lord Skelmersdale): My Lords, it would be quite wrong for the Government to prejudice the outcome of any future planning applications by indicating in advance whether or not permission should be granted for the redevelopment of football grounds. Every case needs to be carefully considered on its own merits, in the first instance by the local planning authority.
Lord Graham of Edmonton: My Lords, I am grateful to the Minister for that reply. Will he accept first of all that the action announced yesterday by the Minister for Sport is welcomed not least because that Minister also has planning responsibilities? Does the Minister understand that when a property speculator buys out the shareholdings in a football club it does not merely represent the making of a quick £1 million or £2 million but is also an attack upon the heritage and culture of a community? Surely the Government have a responsibility to monitor these matters and take appropriate action.
Lord Skelmersdale: My Lords, I do not believe that the two actions to which the noble Lord pointed in his supplementary question are mutually exceptable
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because the listing of a building simply marks its special architectural and historical interest. On the other hand, the loss of a football club is clearly not a planning issue; it is a commercial decision which has to be taken by the management of the club. It is not a matter for the Government.
Lord Broxbourne: My Lords, will my noble friend confirm that whereas his general understanding of the planning position is impeccably correct, as one would expect, there is special procedure known as "call-in applications" whereby the initial jurisdiction passes directly to the Secretary of State?
Lord Skelmersdale: Yes, my Lords, I accept my noble friend's point absolutely. Of course, the call-in procedure exists for those applications—and I must point out that in this particular case to the best of my knowledge and understanding an application has not yet been made—on issues which are of more than national importance.
Lord Mellish: My Lords, may I ask the Minister to clarify one aspect of this question? I understand that it was said that the Minister of Sport had special planning permissions. Where does that statement come from? How does he have powers for planning permission? Is it not correct to say that these matters are first an issue for the local authority and then, quite rightly, if there is an appeal it is for the Minister to decide whether to call it in?
Lord Skelmersdale: My Lords, my right honourable friend the Parliamentary Under-Secretary (who has responsibilities for sport among other things) acts in the same way as I and any other Minister in the department on behalf of the Secretary of State from time to time. He was not acting in either a planning or a sports capacity when he suggested that this should be a case for listing a building on architectural and/or historical grounds.
Lord Underhill: My Lords, has the Minister seen reports today of a statement by Sebastian Coe, speaking as vice-chairman of the Sports Council, in which he contrasted the poor membership of British sports clubs with that of clubs in the Netherlands and Germany in particular? Do the Government have any ideas about getting into touch with local authorities where appropriate to ensure that professional football grounds and local authorities work together in the interests of developing sports activities for the community?
Lord Skelmersdale: My Lords, I have not seen those remarks or any reference to them, but I shall certainly draw the noble Lord's point to the attention of my honourable friend the Parliamentary Under-Secretary.
Lord Graham of Edmonton: My Lords, will the Minister accept that, as in the case of Fulham and Queen's Park Rangers, situations develop very quickly? If one accepts completely the propriety of acting in relation to planning permissions, does he think it will be helpful to urge local authorities which have football grounds in their areas to monitor events

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very closely so that the Ministry and the local authority can keep closely in touch and act quickly in these matters rather than arrive too late on the scene?
Lord Skelmersdale: My Lords, I think the general answer to that question is that local authorities are responsible, among other things, for the welfare of the people in their electoral areas. I am quite sure that they will consider all the factors should a planning application come before them.
Lord Nugent of Guildford: My Lords, will my noble friend take note that if there were stronger support from local education authorities for football and other games in schools, public opinion would be more favourable when matters of this kind come up for consideration?
Lord Skelmersdale: My Lords, I am sure that that is a very valid point, and I am grateful to my noble friend.
Lord Mishcon: My Lords, while noting the impeccable Answer given by the Minister on this occasion, may I ask him whether his recollection extends back to his Answer in regard to County Hall, and does he remember that his reply then was not so impeccable? In regard to this matter, will he take a hint from his noble friend and consider that this is an aspect of national importance and therefore a proper issue for the Minister to call in as a matter of policy if and when an application is made?
Lord Skelmersdale: My Lords, I am interested to note that the noble Lord should have such a good memory that he is able to contrast this Answer with an earlier Answer that I gave on a not dissimilar subject. Perhaps we have all learnt lessons from that occasion. So far as his real point goes, it is of course hypothetical but I have heard and listened to what my noble friend sitting behind me said earlier.
Lord Morris: My Lords, does my noble friend consider that if the real-estate assets of football clubs were invested in a trust rather than in a company, the temptation to asset strip the football clubs would disappear?
Lord Skelmersdale: My Lords, I suggest that in that event the issues would fall to be considered by a different body. I do not think that the issues would necessarily be dissimilar.

Mr. Terry Waite
3.4 p.m.
Lord Molloy: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they are taking any action to discover the whereabouts of Mr. Terry Waite.
The Minister of State, Foreign and Commonwealth Office (Baroness Young): My Lords, we are doing all we can to try to discover the whereabouts of both Mr. Waite and other Britiish citizens held in Lebanon. So far, no hard information has emerged. We will continue to press all those who may be in a position to help.
Lord Molloy: I thank the noble Baroness for that Answer. It would appear that the people holding Mr. Terry Waite captive and Tehran radio are circulating stories to the effect that he is a spy. Will the noble Baroness take the opportunity to confirm that Mr. Terry Waite is solely the envoy of the most reverend Primate, and is no one's spy?
Baroness Young: My Lords, I am glad to confirm that Mr. Terry Waite was indeed the envoy of the most reverend Primate the Archbishop of Canterbury, and that there is no truth in the allegations that have been made.
The Lord Bishop of Manchester: My Lords, does the noble Baroness agree that while sharing the deep concern felt by the noble Lord, Lord Molloy, over Mr. Terry Waite—concern which I am sure is felt by everyone in this House—it would not be helpful at this stage to go further into this matter because things may well be going on behind the scenes of which we have little knowledge? The situation is delicate, and the Government should not be pressed further upon this matter.
Baroness Young: My Lords, I am most grateful to the right reverend Prelate for his question. I entirely agree with what he has said, and I think that view will be shared by all of your Lordships.

Disarmament: UN Special Session
3.6 p.m.
Lord Brockway: 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 proposals they plan to make to the third United Nations special session on disarmament.
Baroness Young: My Lords, the precise timing of the third United Nations special session on disarmament due to be held in 1988 will be decided by the General Assembly in the Autumn. It would be premature to predict what proposals we may put forward. Our overall approach will be positive and constructive.
Lord Brockway: My Lords, does the noble Baroness recollect that four recommendations were made at the first special session? The first was the abolition of all nuclear weapons and weapons of mass destruction. The second—the phased abolition over the years of conventional weapons—led to the third: general and complete disarmament, except for internal security and contributions to the United Nations peacekeeping force. The fourth recommendation was the transference of military expenditure to development to end

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world poverty. In view of the negotiable offer which the Soviet Government have now made, do the Government think that the time is appropriate to return to those recommendations?
Baroness Young: My Lords, I am aware of the conclusions of the first conference. It is too early to say what, if any, British initiatives may be appropriate at a possible third conference. The attitudes we may take, and the attitudes of those attending the special session, will be influenced by a variety of factors. Negotiations and discussions on arms control issues, bilateral and multilateral, are currently under way in a number of fora. The progress of those negotiations and the general state of East-West relations are bound to have an effect on the climate of the special session. It would therefore be futile to speculate at this stage on what specific proposals may be appropriate.
Lord Bottomley: My Lords, will the Minister say who will represent the United Kingdom at that conference?
Baroness Young: My Lords, the date of the conference has yet to be determined by the next session of the United Nations in the autumn of this year. It is too soon to give the names of the United Kingdom representatives to a conference the date of which is not yet fixed.
Lord Graham of Edmonton: My Lords, my understanding is that there is a deadline of lst April this year for the submission of topics to be discussed at the conference. Will the Minister confirm that? If that is the case, surely the Minister and her colleagues have in mind matters to submit. Will she tell us, for instance, whether there will be a submission on chemical warfare? If so, would she care to comment on the publicity to the effect that British universities and polytechnics are currently funded by the MoD to research biological and chemical warfare?
Baroness Young: My Lords, as I hope I indicated when I answered the original Question from the noble Lord, Lord Brockway, it is too soon to say what, if any, British initiatives may be appropriate. Clearly that will depend on a number of factors, including the international climate which may pertain in the run-up to any special session. I can confirm that the Government are approaching this event in a positive, forward-looking manner. The subject of his second supplementary is wide of the Question.
Lord Mellish: My Lords, would it not be better if matters of this kind relating to disarmament were held over until we see what Mr. Gorbachev meant following the visit of our own Prime Minister and discussions with President Reagan? Let us find out, my Lords, where we all stand. Then we can perhaps talk properly.
Baroness Young: My Lords, as is usual, the whole House has listened with appreciation to the common-sense point of view put by the noble Lord, Lord Mellish.
Lord Mowbray and Stourton: My Lords, will my noble friend agree that while much has been said on this subject throughout the period I and most other noble Lords have been in this House, it has been wonderful to see the way the noble Lord, Brockway, has made such tremendous efforts in this cause, although we may think sometimes that the thrust is not in totally the right direction? Will my noble friend agree that the efforts of the noble Lord have been most impressive?
Noble Lords: Hear, hear!
Baroness Young: Yes, I agree with my noble friend. We all admire the sincerity of the noble Lord, Lord Brockway, even if we do not agree with his opinions. Speaking for myself, should I live to such an age as he, I hope that I have that amount of energy to put the causes in which I believe.
Lord Taylor of Gryfe: My Lords, will the Minister accept that her assurances that our submissions to this important conference will be both positive and constructive are extremely welcome? Can we have some assurance that we shall be made aware of these proposals so that they may be supported or criticised before submission to the conference?
Baroness Young: I can assure the noble Lord that our aim will be to ensure that the meeting focuses on measures which might make realistic and concrete contributions to the arms control and disarmament processes. I have no doubt that in the course of the run-up to the special session, should it take place, there will be opportunities to make the views of your Lordships known.
Lord Hatch of Lusby: My Lords, can the noble Baroness confirm what my noble friend Lord Graham suggested? Is the deadline for submission of topics 1st April? If so, is it not now very close to that time? Should not the Government be putting forward to this House and to another place the proposals that they intend to submit?
Can the noble Baroness say whether, in addition to the two topics that she mentioned in her first Answer, the British Government will put on the agenda the issue of transferring military expenditure to development aid—in other words, putting bread before bombs?
Baroness Young: My Lords, I am not aware that 1st April is the deadline. If I am incorrect in that information, I shall let the noble Lord, Lord Graham, know. However, the fact is that the United Nations General Assembly meeting last autumn recommended that this year's UNGA should identify a time during 1988 when the special session might be held. It is therefore by no means clear what that date would be. I do not believe that the noble Lord, Lord Hatch, expects me to agree with his second statement.
Lord Paget of Northampton: My Lords, will the noble Baronesss agree that the use by this country of the nuclear option in a dispute with a non-nuclear

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power is quite unthinkable? If the answer to that is yes—which I am sure it is—what is the point of going for an independent nuclear option?
Baroness Young: My Lords, that is an interesting question but quite wide of the Question on the Order Paper.
Lord Molloy: My Lords, is the noble Baroness not aware that although successive British Governments have been totally frustrated at disarmament conferences at the UN, primarily because of the obstinate view of the Soviet Union, there is now a totally different atmosphere? Ought we not to recognise that? Instead of wanting absolute 100 per cent. proof of everything that Mr. Gorbachev is saying, ought we not to accept, in a generous manner, what he feels he can do to create a new atmosphere in order to make these sessions of the United Nations a reasonable success?
Baroness Young: My Lords, the noble Lord, Lord Molloy, is anticipating the debate which will follow Questions today when that issue, and others I think, will arise and there will be an answer.

Broads Authority: Legislation
3.16 p.m.
Baroness Nicol: 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, in the light of the opposition to the present Norfolk and Suffolk Broads Bill, they will consider withdrawing it and replacing it with a Bill which gives the Broads Authority an overriding duty of conservation.
Lord Skelmersdale: My Lords, the Government's Bill, which is now before a Select Committee in another place, was very generally welcomed, and indeed received an unopposed Second Reading. It is a major piece of conservation legislation which balances the equally important needs of navigation, conservation and public enjoyment; and will establish for the first time an authority with powers to manage the land and water spaces in an integrated way. The Government will not therefore withdraw it.
Baroness Nicol: My Lords, I thank the Minister for that not unexpected reply. Is he aware that the disappointment which has been expressed arises from the lack of protection being offered flora and fauna? If, when the Bill concludes its passage, it does not have the comprehensive powers for which conservation societies are hoping, will the Government consider using their powers under the Control of Pollution Act 1974 to establish water protection zones?
Lord Skelmersdale: My Lords, with respect, those are two rather different issues. Obviously, the control
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powers under the Control of Pollution Act would be applicable to any area in the country where those powers are needed for a particular purpose.
With regard to the Bill, petitions were deposited against it by boating and farming interests no less than conservation ones. But all petitioners expressed support for the basic principle of the Bill. The changes to which the noble Baroness referred, strongly sought by conservation interests, were equally strongly opposed by boating interests. This is why the Government were led to the belief that they had the balance broadly right.
Baroness David: My Lords, will the Minister bear in mind that water quality is of prime importance when considering conservation on the Broads? Is he aware that the European Commission is instituting proceedings against the Government under Article 169 of the Treaty of Rome because we have not met the standards of the water directive? Would it not be a suitable gesture in the European Year of the Environment if the Government agreed to meet that directive? Can I remind the Minister that I asked him part of this question last week and he did not answer it?
Lord Skelmersdale: My Lords, with regret I am not going to answer it now because it falls wide of the Question on the Order Paper.
Lord Monkswell: My Lords, having heard the Minister's reply that the Government were not intending to withdraw the Bill, will the Minister nevertheless give an assurance that the Bill is capable of being amended to impose an overriding duty of conservation?
Lord Skelmersdale: My Lords, yes. It is a public hybrid Bill which, as I explained, is currently before a Select Committee in another place. It will then go to Standing Committee, followed by Report and Third Reading stages. It will then come before your Lordships. I should have thought that there was plenty of opportunity to discuss the Bill at such length as noble Lords require.

Business of the House: Debate, 1st April
3.18 p.m.
The Minister of State, Minister of Agriculture. Fisheries and Food (Lord Belstead): I beg to move the Motion standing in the name of the noble Viscount the Leader of the House which is on the Order Paper.
Moved, That the debate on the Motion in the name of the Lord Ennals set down for Wednesday 1st April shall be limited to 5 hours and that Standing Order 35 and paragraphs 10 to 13 of the Rules for Conduct of Short Debates shall apply to the debate with the substitution of "5 hours" for "2½ hours" and "25 minutes" for "20 minutes".—(Lord Belstead.)
On Question, Motion agreed to.

Consolidated Fund (No. 2) Bill
3.19 p.m.
Lord Beaverbrook: My Lords, I beg to move that this Bill be now read a second time.
Moved, That the Bill be now read a second time.—(Lord Beaverbrook.)
On Question, Bill read a second time; Committee negatived.
Then, Standing Orders Nos. 38 and 44 having been dispensed with (pursuant to Resolution of 23rd March), Bill read a third time, and passed.

Relations with United States and Soviet Union
3.20 p.m.
Lord Home of the Hirsel Lord Home of the Hirsel rose to call attention to the relations of the United Kingdom with the United States and with the USSR; and to move for Papers.
The noble Lord said: My Lords, I should like immediately to express my appreciation that so many noble Lords have put down their names to speak on this Motion. The issues raised have certainly turned out to be topical. In particular, I look forward with keen anticipation to the maiden speech of the noble and gallant field marshal who will give us his views.
At the end of last year I attended a lecture given by Sir Oliver Wright, who has lately been our ambassador in Washington for four years. He labelled his talk "The Atlantic Grows Wider". It was a slightly ominous title. His theme was that because we and the Americans talk the same language, and because we are recognisable democracies, we are apt to assume that understanding is automatic over a wide field of international events. He made the point—and quite truly—that over the years perspectives change, and if we want to keep in close and good relations, we have to consult together all the time.
I was lucky to serve under two Prime Ministers who took infinite trouble to cultivate an intimate relationship with the United States. I refer to Sir Winston Churchill and the late Lord Stockton. I need not recall to this House the high dividend (in particular concerning security) which their attention to this aspect of British foreign policy has paid in terms of the security of Britain and the security of the democracies of Western Europe.
We cannot all have American mothers, that is true. However, I know that there is no need to urge on our present Prime Minister the advantages of consultation. But it will be encouraging if at the end of this debate my noble friend Baroness Young is able to tell the House that it is the Government's intention to keep contacts with the United States active at every level of government during future years. That is particularly timely when the social and political gravity of the United States is moving westward towards the Pacific and towards American interests in the Far East.
Soon after Sir Oliver's talk two events claimed international attention. The first was the apparent faltering in the conduct of the Government and administration in America on foreign policy, and the
182
administration of government in the United States. The second event was the apparent readiness of the leadership of the Soviet Union to modify some of the extreme rigidities of the communist system as they are applied in that country. These events were sufficiently significant for Britain that I thought they should be reviewed by Members of your Lordships' House who are so experienced in these matters.
The United States rightly hold the reputation of being an exemplary practitioner of democracy. They are also a democracy which commands enormous physical power which—and we can thank our lucky stars for it—they have chosen to use to support other democracies who desire to maintain their freedom and their independence against those who would use their power to tyrannise. It is a pre-eminent British interest and the pre-eminent interest of the democracies of Europe that they should keep the power of the United States at their elbow. Therefore, it is of prime importance to us that America's poise and prestige should be quickly regained in international councils, if it has been lost. I am sure that my noble friend Lady Young will be able to assure the House that the United States leadership and authority in NATO councils is unimpaired.
Sometimes I see a glib comparison made to the effect that there is nothing to choose between the United States and the Soviet Union in the context of power. That is completely to misread history. For centuries Russia has been a country which has carefully calculated power, and its use, for national ends. The American Constitution emphasises restraint in the use of power, and in fact the United States have been reluctant to use their power—reluctant to the point of isolation.
I confess to a recurring nightmare on the subject of the United States and their power. The nightmare starts with the recollection that for the first part of my life the American mood was isolationist, they tried to keep clear of any entanglement in Europe's affairs at all. Noble Lords will remember that after the First World War they opted out of the League of Nations. They were so careful not to become entangled in any way.
My nightmare proceeds when I recall that neither the Kaiser nor Hitler, when they were planning their assaults on Western Europe, needed to assume that America would be an enemy. They counted America out. Luckily, the situation has changed. Now, the first assumption which any potential aggressor contemplating a conventional assault on Europe has to make is that his country will be at war with the United States within a matter of days. That is a total change. In fact, it is the first deterrent and in my view likely to be a decisive safeguard against war.
It is at this moment, curiously, that the Leader of the Opposition Party in Britain announces his intention, should the Labour Party gain power at the next election, to send the Americans home. I do not wish to rub this point into the noble Lord opposite now because many will be acutely uncomfortable at this decision. I shall only pose a couple of questions; namely, how long after the American forces are out of Britain is it thought that American forces can stay in Germany'? How can any American President ask the American people to send their soldiers to Europe when

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the bases from which they are going to be defended are going to be abolished? My Lords, he could not do it.
Over the years I have seen some of the planning of NATO councils, and I say quite clearly from what I saw that if Mr. Kinnock's plan, or proposition, is put into effect and becomes a reality it will tear the guts out of the defence plan for democracies of Western Europe. Maybe this issue will have to go to the British people and they will have to stop it. I hope when that decision is taken that it will be accepted and that will be the end of this particular proposition. But if and when that happens, I hope that we can then return to something we ought never to have left—that is, the party consensus on the conduct of foreign policy and defence in Britain. We managed that perfectly well for a good many years. There was complete harmony on policy as regards NATO, and the sooner we return to that the better.
The second part of my Motion concentrates on better relations with Moscow—which is my hope—and in particular on the Prime Minister's visit to Moscow. As I understand it, she will be going there to see whether she can sow the seeds of co-operation with communist Russia. I am bound to say that she will he going there against a pretty bleak background. because up to now the soil has been particularly sterile. The reason is not far to seek. I shall recall to your Lordships President Brezhnev's definition of détente. He defined it as a state of continuing confrontation and struggle which may need to be intensified. That is not exactly an encouragement for better relations with the democracies.
No statesman in a democracy could conceivably define détente in that way. If that is the prospect when the Prime Minister meets Mr. Gorbachev, she might have saved herself a journey. I profoundly hope that that is not the prospect because if it is there will be no business worth doing. However, Mr. Gorbachev has said that in a number of respects he intends to break with the past and he has given notice of that fact to the Russian people. Indeed, he has started and has acted in the economic field. He has told the Russian people plainly that in order to enable their agriculture and industry to earn the wealth to underpin the requirements of a modern, developed state it is necessary to introduce an element of competition—it is necessary to stimulate what we call private enterprise. That is an extremely courageous decision because it stands on its head the economic teaching of 50 years.
Mr. Gorbachev is a clever man and he has obviously taken precautions and made preparations. This is not some sudden idea; it has obviously been maturing for some considerable time and Mr. Gorbachev has taken great care to present it to the Russian people in the best way. I cannot help but reflect that it is interesting that both the great socialist states in the world—Russia and communist China—have arrived at somewhat the same conclusion at the same time. Mr. Gorbachev knows that having started the reforms the fruits of change will take a long time. Therefore I guess that he is prepared to see those changes through.
The question which will face the Prime Minister in Moscow is whether Mr. Gorbachev is prepared to introduce change on that scale and of that dimension
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into Russia's conduct of international relations. Your Lordships may have noticed that so far Mr. Gorbachev's criticisms of the past have not been extended to the conduct of foreign affairs and defence. I do not know whether or not there is any significance in that. However, I think that he probably understands very well that the only basis for satisfying relations between nations and making them productive is, on the one hand, respect for international law, which includes the sanctity of treaties.
In that context I should like to return to a point which I made in this House two years ago because it is still true. It has never been difficult to negotiate a treaty with the leaders of the Soviet Union. I have negotiated a number myself. The trouble has always been that the paper pledges have not been carried out on the ground and we have never been able to be confident that they would be carried out on the ground. In such circumstances trust cannot grow, and it did not grow.
As regards a treaty on disarmament, where governments are dealing with the lives of thousands or perhaps millions of people in these days of nuclear war, trust is absolutely imperitive. Therefore verification of any such treaty is of the first importance. I shall not deal with the particular proposal which it is advertised that the Prime Minister may try to negotiate; that is, the zero option with regard to medium-range nuclear missiles which will probably be on the agenda. However, I make the point that whether it is that particular disarmament arrangement which is negotiated or another, all of them will be useless unless Mr. Gorbachev is willing to make the fundamental change which is that Russia should observe the sanctity of treaties signed. That is what matters and I believe that the Prime Minister must tell Mr. Gorbachev that that is what matters if he wants to introduce Russia into the United Nations and other international associations and have his country accepted as wanting to make a constructive future for us all.
I do not think that there is much more to be said on the Prime Minister's visit to the Soviet Union. I believe that I have said all there is to be said on the making of treaties. Indeed, we must look forward to treaties which are honoured in the future. Therefore I greatly look forward to hearing your Lordships' views as they will be expounded over the next few hours. I believe that much will be said which will be of extreme value as we move forward in what we hope are better and happier times.
The situation in Russia is not within our control but I believe that we may be able to exercise influence on a new leader with new ideas. The relationship with America is largely within our control and therefore I trust that my noble friend will tell us that in every department of government negotiations will flourish with opposite numbers in the United States. I look forward to the debate and I beg to move for Papers.
3.37 p.m.
Lord Cledwyn of Penrhos: My Lords, like other noble Lords I am grateful to the noble Lord, Lord Home of the Hirsel, for tabling the Motion and for his opening speech. The noble Lord has been very perceptive because he could not have chosen a more appropriate moment to discuss our relations with the

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Soviet Union. In view of his great experience we listened to him with respect and interest. I agreed with some of the noble Lord's remarks, although perhaps not with their emphasis at every point. I also welcome the noble and gallant Lord, Lord Bramall, whose maiden speech we look forward to hearing.
At the outset, we wish the Prime Minister every success in her talks with Mr. Gorbachev. The state of affairs in Moscow and Washington, the mood in Western Europe and the more hopeful prospects of constructive disarmament give the visit a special significance.
It is 12 years since a British Prime Minister, then my noble friend Lord Wilson of Rievaulx, visited Russia. It appears that the Soviet Union is attaching great importance to Mrs. Thatcher's visit. This is partly because of recent critical events in Washington which were not mentioned by the noble Lord, Lord Home, and partly because I believe that Mr. Gorbachev is very anxious to establish closer links with the British Government and other governments in Western Europe.
This was underlined recently when Mr. Gerasimov, the Kremlin's chief spokesman, said that they were hoping that Mrs. Thatcher's visit would lead to a breakthrough in Anglo-Soviet relations, improved political dialogue and progress in various aspects of international disarmament. Mr. Gerasimov also expressed the hope that the talks would give, "a tangible impetus to the effective development of bilateral relations in diverse fields".
These remarks imply a desire for improved trade relations. From all one can gather, it would seem that this is the most promising time since the war for exploring all the possibilities of improved trade. Mr. Gorbachev has himself argued strongly for a new Soviet strategy on foreign trade and we know that he and his colleagues require the help of Western technology to modernise the Soviet economy. Historically we have always had good trading relations with Russia but we are at present well behind our Western partners, as well as Japan and the USA, in trade with the USSR. I shall be grateful to the noble Baroness, Lady Young, if she will let us know what our trading objectives with the USSR are and whether the Prime Minister proposes to discuss this with Mr. Gorbachev.
The noble Lord, Lord Home, in referring to Mrs. Thatcher's visit also referred to my right honourable friend Mr. Neil Kinnock's visit to the United States. I am quite sure that the House will also wish him well; knowing him as I do, I am quite certain that he will do his utmost to improve the relations of this country and mutual understanding with the United States. There is an urgent need for improved relations between our two countries and between the United States and Western Europe at this time.
East-West relations have been the central subject of our debates on foreign affairs over the last few years and the noble Lord referred to the debate which he initiated almost exactly two years ago. That was also a crucial time because Mr. Gorbachev had then just assumed the leadership and there was much speculation about the implications of a new and younger leader. I ventured to say in that debate:
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"I cannot but think that an able and comparatively young leader from a different generation may in due course develop a new approach".—[Official Report, 23/4/85; col. 1019.]
A number of noble Lords at the time in that debate were sceptical that there could possibly be any change in Soviet attitudes or policies, whoever might become leader of the Soviet Union. We must not become too euphoric, but I took then and still take a less obdurate and more optimistic view. Of course we live under a different system and there are profound differences which have been underlined by Soviet leaders, some more aggressively than others. President Brezhnev talked about the class aims of socialism and capitalism being "opposite and irreconcilable". He was then dividing the world into two, into "them" and "us".
But there is a great lesson to be learnt; namely, that capitalism, like socialism, is a profoundly misleading word. During my political career I must have met 57 varieties of socialism and an equal variety of capitalism and some are much worse than others! But what needs to be understood is the simple fact that we in this country are a parliamentary democracy based on free elections and the doctrine of freedom under the law. We are not going to abandon that system for anyone or anything. Within that framework we have made many changes, social and economic, but the principles do not change.
I have said all this because I believe that Mr. Gorbachev has begun to make changes of a significant character in the Soviet Union. I was disappointed that the noble Lord, Lord Home, did not emphasise this. Mr. Gorbachev has certainly exceeded my expectations and raised my hopes. Commentators have referred to the "Gorbachev phenomenon". The Economist on 14th February, for example, said: "Mr. Gorbachev's Russia deserves a long hard look". Mr. Hans Dietrich Genscher, West Germany's Foreign Minister, has urged the West not to assume the worst of Russia but to take Mr. Gorbachev at his word. Mr. Genscher is advocating a policy of persuading Russia to follow courses which are both friendly and favourable to the West.
Furthermore, it is not what he has said so much as what he has done at home in Russia that makes Mr. Gorbachev's first two years impressive. Talk is easy, but action, and the sort of criticism he has encountered in a community where deviation from the prescribed order is unknown, called for courage, imagination and skill. "Glasnost", of which we have heard a great deal in recent weeks, is precisely what the dissidents in Russia have been advocating for years and they are now getting a little of it.
What has Mr. Gorbachev achieved? First, he has faced up to some of the defects of the old order and to the old guard which sustained them in terms and tones which are rare in Russian history. On 28th January Mr. Gorbachev attacked, and I quote, "the sloth, incompetence and corruption of the Brezhnev years". He proposed that party secretaries should be elected by secret ballot and that more than one candidate could be put up and also that the soviets, the local government bodies, should be elected in a new and fairer way; and he referred to other reforms as well. Some people may not think much of this; they may regard it as very small beer. But those with experience of Russia say that it shows very great courage indeed.

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All of us here are deeply concerned about human rights and the fulfilment of the Helsinki proposals. We have been concerned for years about the appalling treatment of Soviet Jewry and other dissident groups. But there is today a gleam of light. Under Gorbachev, we hear with relief and joy that political prisoners have been released daily from prison camps and that others are to follow. Furthermore, we understand that as part of a general revision of the Soviet penal code the infamous Article 70, so well known to us, is under review. The Soviet media have started to be a little more open. For example, the riots in Kazakhstan and the sinking of a nuclear submarine were publicly reported. There has been less radio jamming; plays and films critical of Russian life, as we know, are now being shown to large audiences.
There are those who say that this is only window dressing, and we may hear in this debate that there are those who say it is insignificant. I believe it is more than that. I think it may be the beginning of something significant and we must show that we support these developments and the man responsible for them.
On 2nd March, Time magazine described the new mood and resistance to the changes it represents. Mr. Sakharov, Russia's best known dissident, has returned to Moscow and has been praising Mr. Gorbachev's progress on human rights. But he has also said, and said freely in Moscow, that much more needs to be done. He said that there can be no disarmament without trust, which requires still greater strides towards human rights and democracy. Time magazine reports an official from the noble Baroness's department as saying that we must not become starry eyed but we must not be churlish, and also that "something seems to be happening in Gorbachev's Soviet Union which is welcome". I am delighted that this is the view of officials in the Foreign and Commonwealth Office. This welcome tinged by caution appears to be the reaction of the United States as well, and this is understandable.
However, it must not be overlooked that Mr. Gorbachev is experiencing his greatest resistance not from abroad but at home. That is where the criticism and the opposition come. That is what makes me admire him the more. His calls for more discipline and hard work and his fight against alcoholism are not widely appreciated in Russia, according to accounts in the press. A construction foreman in Tashkent is reported as saying, "People are used to doing things in a certain way and they won't change. We don't work very hard and we can't be forced to work hard". This reaction was reflected violently in the Kazakhstan revolt. I mention these events as evidence that Mr. Gorbachev has a massive task to perform. He is up against great difficulties within the Soviet Union itself.
We hope therefore that the Prime Minister will take full advantage of these developments. I believe I can call them historic developments. There is today an opportunity that may not repeat itself. The Prime Minister will wish to discuss human rights and Afghanistan, but we hope that she will also make plain that the British people have appreciated the steps which Mr. Gorbachev has taken.
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We assume also that Mrs. Thatcher will discuss his recent disarmament proposals for a zero option in intermediate-range nuclear weapons with Mr. Gorbachev. We shall be glad to hear from the noble Baroness what the broad objectives of the British Government are at this time. I hope that the Prime Minister will not place obstacles in the way of a constructive negotiation on the Soviet proposals and that she will wish to be as flexible as the opportunity demands.
The noble Lord, Lord Home, has once again stressed the central importance of the Anglo-American special relationship. There is no doubt that it is still strong on the cultural, ethnic and social plane, but there is a growing fragility on the political level especially if we bring in all Western European countries. The United States Ambassador, Mr. Charles Price, whom we all respect, referred on 15th March to the growth of incipient anti-Americanism in Europe. He said:
"we can detect occasional grumblings on both sides of the Atlantic, a kind of petty intolerance that could threaten our unity".
There is also a perceptible shift of focus of attention from the east coast to the west coast in the United States, and from the Atlantic to the Pacific. The significance of this and its implications deserve very careful thought indeed and I am quite sure that the noble Baroness and her right honourable and learned friend are thinking about it.
There are difficulties and disagreements between Western Europe and the United States at this time, and they need to be discussed openly and resolved. For example, trade relations have been under strain. Our membership of the Community means that we are tied to the EC. But the United States was in favour of our membership of the Community in 1973, and these things were predictable at that time.
A more serious worry is that the aggressive and at times unpredictable nature of US foreign policy in a number of countries—Nicaragua is the outstanding example—has weakened the United States position as the leader of the free world and as the champion of democracy. Irangate has also weakened the American Administration, at least temporarily. That is something I do not propose to discuss today. But in this context perhaps the noble Baroness can tell the House whether Mr. Willian Casey and Colonel Oliver North did in fact meet the Prime Minister or any other government Minister recently, as has indeed been reported. If there was any such meeting will she be kind enough to tell us what subjects were discussed at that time?
But there is no doubting the importance of our relationship with the United States. I agree generally with the leading article in the Economist on 14th March. It said this:
"This century's bond between America and Western Europe has been the greatest source of property through trade and democracy through defence that mankind has ever known".
It is more or less what the noble Lord, Lord Home, said in his speech. But the continuance and survival of this bond depends on mutual respect and understanding. If we ourselves are not a super power that does not make us subordinate or a passive bystander in affairs which are of basic and profound concern to us.

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Mrs. Thatcher has a friendly relationship with President Reagan, but this has not appeared to influence the course of events from time to time. Nevertheless, a continuing close and friendly relationship with the United States should be the cornerstone of our foreign policy. Perhaps we can be less dependent on the United States, as Dr. David Owen has suggested, and indeed as the right honourable and learned gentleman the Foreign Secretary indicated in his speech on 17th March when he said that Europe should place less reliance on the United States and look to the Western European Union as a basis for a specifically European defence policy within the overall context of NATO. These are radical proposals and they must be examined and analysed very carefully indeed.
Concurrently we must also examine the Soviet initiative on disarmament, and we must examine it with care and with good will. About two years ago Mrs. Thatcher said that she could do business with Mr. Gorbachev. We hope her hope will be fulfilled over the coming days when she is in Moscow.
After the Reykjavik summit the NATO ministers issued a statement as follows:
"We reconfirm our commitment to a more co-operative East-West relationship including political dialogue, commercial relations and cultural exchanges. in which all states participate on equal terms. Respect for human rights and encouragement of human contacts remain essential".
That was a fundamental statement of view by the NATO ministers with which we agree. There is more hope for a real detente today than for many a long year, and I hope that the Government will grasp the opportunity. If they do so they will have our support. If they fail for inadequate reasons, then they must be criticised not only by us but by the rest of the civilised world.
3.56 p.m.
Lord Gladwyn: My Lords, in 10 minutes or so anything that one says on the all-important subject so appropriately raised this afternoon by the noble Lord, Lord Home of the Hirsel, can only be rather summary and dogmatic. It cannot be anything else. But perhaps I might begin in the same sort of way as the noble Lord began his speech by saying that, if I remember correctly, it was Oscar Wilde who said that Britain and the United States had everything in common—except, of course, the language!
This apparent paradox embodies a certain truth. During the past 200 years or so the United States has come a long way from being predominantly British. It is now much more Central-European, Italian, Nordic, Irish, Hispanic, Jewish and Amerindian in its composition, with a large black minority, and has developed of course a distinctive collective personality far removed from that of the Founding Fathers.
Americans are thus now very different from us, and our famous "special relationship"—if by that phrase is meant that our connection with the USA is regarded as in some way more important than the American relationship with all other countries—frankly no longer exists. We are, I hope and believe, regarded as an important and dependable ally, but that is another matter. There is no special relationship.
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If America has a special relationship with any other country it is surely with Israel; that is to say, if you exclude a rather uneasy physical juxtaposition with Canada across a 3,000 miles undefended frontier.
This is not to say that we, along with our immediate neighbours, do not have close common interests with the United States. Of course we do. You have only to look at the map for a moment to see that Western Europe on the one side and Japan on the other are the essential pillars of American world power. For only by friendly association with these two geographical entities will America be able to preserve her influence in the world as against the super power to the East, and I suppose to any potential extension of a super power which may one day emerge in the West.
Nor is it to deny that there are also close cultural links between the United States and the Western European democracies. America shares with all these countries, and no longer with only one of them, a belief in fundamental human rights and a devotion to individual liberty. It is surely the preservation of such links that must remain the chief feature of transatlantic relations in the years to come.
But, my Lords, could all this work out differently? Unfortunately, it could. The most optimistic appraisal of the results of World War III if it ever broke out, and even if it were non-nuclear, is general defeat, the triumph of anarchy, and the end of what we call western civilisation. That is the most optimistic appraisal. I do not rate the possibility of this apocalypse very highly, but it exists. What is rather less unlikely, though we must all hope that it will never happen, is some decision on the part of the United States, infuriated perhaps by the apparent ingratitude and supineness of the Europeans—a possibility alluded to by the noble Lord, Lord Home, but not referred to at all in the speech of the noble Lord, Lord Cledwyn—in other words, a decision taken as a result of such an attitude on the part of some future government here—to retreat as it were, into Fortress America. This might he consonant with a nationalistic attempt to dominate Latin America but leaving Europe to its fate, while perhaps attempting to achieve some kind of special relationship with Japan and perhaps even with emerging China.
In such distressing circumstances, short of having arrived at a credible form of European political unity, there is every reason to suppose that Western European governments would be found willing and able to enter into some arrangements which would leave the Soviet Union in a position to exercise a sort of hegemony over the whole Continent. It is even possible to imagine that the effective abandonment of Western Europe by America might be the result of some conscious act on the part of Western European governments who, perhaps fearing that the Americans were heading for war, might one day opt for a kind of neutrality in a continuing struggle between the super powers. They might also imagine, no doubt mistakenly, that some kind of European unity might also be achieved in agreement with the Russians.
There arc elements in Germany which might favour such a solution. Indeed we should probably dismiss the classic German Drang nach Osten, as they call it, at our peril. The only sure way to eliminate this danger is

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for us to favour the genuine embodiment of Western Germany in an operative European political union which, at the moment and unlike the French, we seem as a government to be far from favouring. I fear I find the present attitude of the Government in this respect to be rather dangerously shortsighted.
In view of these dreadful possibilities, what should we Europeans best do at the moment? Surely it is up to the European Community, as such, to make an early attempt to increase the contribution of Europe to Atlantic defence, thus avoiding American reproaches that too great a burden financially is being left on American shoulders. From the point of view of reciprocal effort these reproaches may not be entirely valid, but they are certainly genuine and are backed up by considerable isolationist sentiment in America.
I do not believe that the Russians have any present intention of occupying Western Europe by physical means, but they might well be tempted to do so if the Americans left, if very little real resistance could be expected in Europe and if there was small danger of the war spreading. The great thing is to make sure that the Americans stay by convincing them that we in Europe mean business.
What practical steps could we now take with this end in view? For the past 15 years or so I have been suggesting that there was nothing to prevent those members of the European Community who were so disposed from taking the necessary common action within the framework of the political wing of the Community, which as we all know comes under the aegis of the European Council and is hence in no way constrained by any treaty obligation involving unanimity. Other members who might not want to associate themselves with these activities, such as Ireland or Denmark, would thus in no way be bound to accept the decisions reached. But these sort of schemes have hitherto always foundered on the objection that they would endanger the so-called unity of the Community.
In order to get round this, mention has often been made of the possibility, alluded to in his speech by Lord Cledwyn, that we might use for this purpose the Western European Union: a rather dormant organisation consisting of six members of the Community, whose chief functions were long ago taken over by NATO. But here the alleged danger to European unity always appeared to be even greater, seeing that the only operative organ of the WEU—namely the assembly—is situated in Paris and that measures agreed there, no doubt under French auspices, might only with difficulty be reconciled with others that might be taken in Brussels or discussed in Strasbourg.
However, I now hear rumours that it might be possible, after all, to relocate the WEU in Brussels and possibly extend it to include Spain and Norway, both the assembly and the London office thus being in the same place as the Commission of the Community and, above all, NATO. which as we know in itself embodies something called Eurogroup. This seems to me to be a much more healthy idea which I warmly support, but would the French agree? Perhaps the noble Baroness,
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when she winds up, will tell us what the present position is regarding this suggestion. It would be interesting to know.
Generally speaking, we are rapidly approaching the point when crucial decisions will have to be taken. One of the dangers is that the so-called "hard Right" in America will make it impossible for the United States to conclude any meaningful arms limitation agreement with the Russians, no compromise being found on SDI research and development, to say nothing of deployment, and the arms race going merrily on. The long-term effect of such an impasse on public opinion in Europe might well, to say the least, be most unfortunate. Nobody wants to give the Soviet Union any undue advantages in the negotiations. No doubt the Soviet Union will remain, whatever happens, a redoubtable adversary to our kind of civilisation in the years to come. That can hardly be avoided. But we must all devoutly hope that the newly formed White House team under Mr. Baker, acting in agreement with Congress, will see to it that sensible solutions eventually emerge. That must be our hope and presumably it is the hope of the Government.
When and if they do, it would be splendid if the whole new international construction was, as it were, reinforced by a successful effort on the part of the Europeans, as a continuing part of NATO, to streamline and co-ordinate their entire defensive effort, even arranging for some co-operation on nuclear matters, presumably with the object, pending disarmament of course, of arriving at a credible, if modest, "second strike deterrent"—I repeat the phrase "second strike deterrent"—credible, that is, if a genuine European political community ever had to stand by itself.
But necessary as it is for the Europeans to concert their defences, the immediate thing is for the super powers to get together on arms limitation. Can the Prime Minister do something in Moscow to help bring this about? She has apparently agreed some kind of policy with the French and the Germans, but from what we hear that does not get us very far beyond recommending, very sensibly, that the agreement on the zero option for intermediate range missiles should immediately be followed by agreement on the so-called battlefield weapons as well.
I must say I doubt whether it would do much good for her to lecture Mr. Gorbachev unduly—for instance, on the need to get out of Afghanistan and the desirability of completely living up to Helsinki on human rights. She should and she will no doubt mention both but it would surely be unwise to represent complete accord on such things by both sides as a sine qua non for agreement on arms control. It looks as if Mr. Gorbachev—as was said by the noble Lord. Lord Cledwyn—is doing his best on both counts. Given the Soviet system, there are limits, however, beyond which he cannot go. In any case, agreement on arms control would probably enable him, if it happened, to make further concessions on these other two fronts rather than the reverse.
Incidentally, might I say that I do not altogether agree with the noble Lord, Lord Home, about the invariable non-regard for treaties by the Soviet Union. My impression is that when, after great difficulty, they

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sign a paper, they usually do live up to it, certainly commercially, but also, I think, politically. I may be wrong, but that is my impression.
What I feel might be of more assistance would be if the Prime Minister could at least assure Mr. Gorbachev that, so far as she is concerned, she still holds to the conditions regarding star wars which she originally negotiated some years ago with President Reagan at Camp David. I hope that we may have that assurance from the noble Baroness who will wind up. I think that it might help just as much if she suggested that the two super powers would do very well now to call a halt on both sides to ASAT—anti-satellite activity—with which of course any anti-ballistic missile projects are now inevitably linked. Indeed, if Mr. Gorbachev is right on anything, it is that the greatest efforts should now be made to avoid all possibility of war—even non-nuclear war—in space.
One final thought: I think that we must all on this side of the Atlantic welcome the fact that a rather penitent President Reagan, surrounded by what now seems to be more intelligent advisers, is apparently recovering some of his authority, or at least enough for him to participate in fresh and this time, it must be hoped, successful summit talks. We should do anything that we can do to further this end. If Mrs. Thatcher can really be seen to have assisted in this all-important process she will, I am sure, and irrespective of any party political consideration, deserve well of the nation.
4.13 p.m.
Lord Bramall: My Lords, I am sure that many noble Lords will have felt a deep sense of diffidence when addressing your Lordships' House for the first time, and I am certainly no exception. However, I feel proud that my presence in the House seems to indicate continuing recognition of the valuable and constructive role that the armed forces of the Crown play in the service of the nation in peace, which thankfully, but not accidentally, has come to be the more normal state for the British people, as well as in more war-like operations.
It is on this theme of continuing peace that I offer my initial contribution in the context of this debate. It is, of course, difficult at this time to say anything with defence connotations that is not considered controversial by some: so I know that I must proceed delicately, like Agag, and can only hope that, with your Lordships' indulgence, I avoid his subsequent fate of being hewed in pieces!
I just belong, as do so many others in the House, to the generation which experienced at first hand the realities and dangers, and not infrequently the horrors, of modern warfare both on the home front and with the field armies, in the latter case under the distinguished command of the noble and gallant Lord, Lord Carver. At the end of the war, I had the somewhat unusual experience, in a space of only a few months, of seeing for myself the ruins of both Hamburg and Hiroshima, the first no less horrifying than the second. Perhaps as a result of such experiences, I have never found myself impressed by the argument, however understandable, that if you totally removed nuclear weapons from Western
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armouries or, indeed, from both West and East, you would somehow be serving the cause of peace, because then the risks and general panoply of so-called conventional war would have become more respectable and even tolerable.
Modern warfare with modem weapons, with 40 years of improvement over those that we experienced, would be quite disastrous enough for our country's future. This is why peace, with honour and territorial integrity unimpaired, must be preserved, and why all aggressive war must be made too difficult and dangerous for rational men to contemplate and thus eradicated as a viable extension of foreign policy by other means as, we must never forget, the Kaiser held it to be in 1914 and Hitler in 1939. You started a conventional war because you believed you could win it. Even the remotest prospect of nuclear conflict encourages no such dangerous thoughts, not even—perhaps particularly not—in retired field marshals. I hope that noble Lords will not believe all those stories about field marshals never retiring. Their active duty, I assure your Lordships, is almost entirely confined to attending each other's funerals. But I am digressing.
When I was in China recently, a senior Minister said to me that the will of the people all over the world was for peace, and I am afraid that I had to take issue with him. Certainly, I said, those who lived under the protection, or, if you prefer, the shadow, of nuclear weapons undoubtedly wanted peace because the consequences of not having it were obviously too awful to contemplate. But, where such restraints did not apply, the human race seemed all too willing to fight each other, given half the chance, and local fighting can all too easily, if unrestrained by those with more to lose, lead to all-embracing conflict.
So 1 suggest, my Lords, that with man as belligerent and competitive as he naturally is in this dangerous world, there must still be strong restraints. Berlin, that outpost of a free society, is a good case in point. The West can only defend Berlin, as it must, by ensuring that it is not attacked because the price of attacking it in terms of wider proliferation within the NATO alliance, and even escalation into the realms of some just possible but unspecified nuclear release, must be, and would be seen to be, far too high, and greatly to outweigh any advantages that might accrue to those who would wish, as some undoubtedly do. to change the status quo.
That is why I have always believed that a manifest—not a precipitous trip wire, but a manifest—linkage between shop window and credible conventional forces on the one hand and some background and preferably invulnerable nuclear weapons on the other provides just that mix of commitment and restraint that is needed to be assured of maintaining peace while retaining territory and freedom of thought and action. The last 40 years of such peace, which may seem commonplace to our children but, to our generation and to our fathers' generation, constitutes no mean achievement, has not dissuaded me from that view, nor discouraged me for the future.
The question therefore that we should perhaps be asking ourselves is whether the NATO alliance, with its strategy of flexible response—which, I need hardly

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point out, not only keeps potential aggressors out but comfortably ensures that any allies remain firmly in—continues to provide that required mixture, or whether that wind, if not of change, then of more open debate and presentation, which seems to be blowing across the Soviet Union, and the somewhat erratic content of some of the policies that sadly have recently been evident across the Atlantic, should somehow be changing what we do.
In general terms, I am sure that the answer to the second question is emphatically no. With the Middle East remaining so volatile and so dangerous for miscalculated super power confrontation; with Europe still the key area in any ongoing ideological competition; with the undoubted numerical superiority and technological potential of the. Warsaw Pact, as yet undented by any balanced force reductions; and with our strongest ally in some disarray, albeit, I hope, only temporarily, this is surely no time for NATO to drop its sensible guard if we are to face the future with confidence and negotiate from a position of strength; nor, incidentally, to do anything which would risk throwing away that one great advantage that we have today over 1914 or 1939, and to which the noble Lord, Lord Home of the Hirsel, with all his experience, has so clearly drawn the attention of the House—a firm United States commitment to Europe.
What these new developments—some encouraging, some rather discouraging and even conflicting—must surely do is to make us look again most critically at the type and number of nuclear weapons that are really needed in order to meet that precise NATO aim of deterring attacks and pressures in all parts of the alliance: no more and no less. Certainly no one could possibly be satisfied with the 45,000 or so nuclear warheads which, at the last count, were available to the two power blocs, when, if only 45 were used, the consequences would be too awful to describe. As someone who has been connected with the problem for seven or eight years, I firmly believe that in the light of Mr. Gorbachev's so-called initiative—which only seems to say what many in the West have been wanting for some time—it makes considerable sense to start by mutually reducing or eliminating medium-range missiles, which have always had more useful political and bargaining potential than real military value.
Of course, it would still be necessary to maintain in our deterrent some bridge between the purely conventional and the largely strategic weapons, but there are other weapons systems which can cover this. Difficult as it is, an attempt should be made to bring chemical weapons into the equation: otherwise we could indeed find ourselves highly vulnerable. But I believe that progress can be made if the will is there. I believe that we in the United Kingdom must not only try to help bring about a significant breakthrough in regard to these missiles, as I am sure we will, but we must actually succeed.
Perhaps the greatest danger in our international relations is that if this present opportunity is not taken and if the overkill—which can only have been designed for mutual obliteration—is allowed to persist and if the escalation of the nuclear arms race is not halted or even reversed, the revulsion and impatience
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of the ordinary general public may become so great that it will start to question the whole basis of deterrence. If that were to happen, then, out with the ridiculous overkill bathwater may go a really indispensable baby in the shape of a much more modest but adequate and balanced stockpile on both sides, with the risk that the world would become not a safer place but a less safe one for future generations to grow up in.
4.23 p.m.
The Lord Bishop of Manchester: My Lords, it is my very pleasant duty to congratulate most warmly the noble and gallant Lord, Lord Bramall, on his contribution to our debate this afternoon. He speaks out of a great wealth of military experience, and indeed his presence here shows the invaluable part played by the forces of the Crown in the life of our country. He has shown this very deep concern for peace and also a perhaps not unexpected flash of Biblical knowledge. I hope it does not come from listening to all those lessons read at the funerals he has been attending! We do indeed very much welcome the noble Lord among us and we look forward to many more contributions of this kind in the years ahead.
I am very grateful indeed to the noble Lord, Lord Home of the Hirsel, for his choice of subject for this debate. As others have said, it is most timely. I have to apologise to the noble Baroness in case I am not here when she winds up at the end of the debate, because British Rail is not yet sufficiently flexible in regard to trains back to Manchester. I hope that she will forgive me, and I am encouraged by the fact that she is the next speaker on the list.
Our relations with both super powers are of course vitally important and, even though Britain's role has been changing and is not now perhaps as influential as it once was, when we co-operate with our European Community partners we can exercise a great deal of influence still. But I should like to make the point that good relations do not mean sweeping important differences between the powers under the carpet or abandoning things for which this country ought to stand in international affairs. Therefore I welcome the fact that we read in the press today that the Prime Minister is to raise issues of human rights while in Moscow, as has already been mentioned. However, although we welcome most warmly the very remarkable changes that are taking place in Soviet society, as has already been said, especially by the noble Lord, Lord Cledwyn, there is still a long way to go before the Soviet Union will develop into the kind of society where many of us would feel that basic human rights were really respected.
It is also right that the Soviet policy over Afghanistan has been very sharply criticised by the United Kingdom Government, whose voice has been strong and consistent on the issue. What I think is not so clear is whether the voice of the British Government has been sufficiently strong over certain aspects of American foreign policy; and it is on that I wish to speak.
I may perhaps mention to the noble Lord, Lord Home, that I benefit from having an American mother, but whether we have American mothers or not I think all of us are deeply concerned to have the

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very best relations possible with the United States. There is an enormous amount that brings us alongside them, even if the relationship, as the noble Lord, Lord Gladwyn, has said, is necessarily changing. We have long ties of history and friendship and a similar open and democratic system; but this should not mean silence or acquiescence on the part of our Government when the United States engages in policies which are morally wrong, counter-productive and damaging to peace.
The restrained picture of the use of American strength which the noble Lord, Lord Home, gave us at the outset of this debate would not be recognised by many people in Central America, I think. The policies which are being followed in Central America at the present time are extremely dangerous, I believe, as well as basically immoral. That applies especially to Nicaragua. Here, so far as I can see, our own Government have been remarkably silent in public. Of course things go on behind the scenes, as we well know. Representations can be made and sometimes governments are successful in keeping them out of the newspapers—though that seems to be more rare now than it was once.
However, so far as I know, there has been no strong or consistent voice from the United Kingdom Government over what has been happening in Central America and the use of the power of the United States and of the Reagan Administration there. European governments such as Sweden, France, Greece and Spain, have pressed for critical support for Nicaragua in the face of continued pressure from the Administration of President Reagan, but such policies have been opposed by Britain and West Germany, who have even sought—or so I understand—to block additional EC aid to this country which is in such desperate need.
I do not believe that this serves the cause of peace in that important region. It may be that vital British interests are not so involved there as in some other parts of the world. Nevertheless, it is a powder keg, and a most dangerous situation. It seems to me not enough to speak of United Kingdom support for the efforts of the Contadora peace initiative, which appears to have run into the sand. We need to show the depth of feeling of many people in Europe about efforts to destabilise Nicaragua by backing the Contras with continued support from the United States Administration.
It is also significant that the strongest opposition to the Reagan Administration in this matter and to American policies in Central America comes from within the United States itself. Major Protestant Churches and the Roman Catholic Church have consistently opposed what is happening and have called for critical solidarity with Nicaragua. In fact some of your Lordships may be aware of what is known in the United States as the Sanctuary Movement in certain Churches. The argument goes there, in sharp contrast to anything which could be claimed in this country, that it is in fact American policies which have been producing the flood of illegal refugees into the United States, who would face a dangerous situation if they were sent back.
So what are the facts? The facts are that the United States is a country of vast wealth and economic and military power; and on this particular issue it faces a
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very small, struggling country of approximately 3 million people, who are extremely poor and striving for survival. It was in 1979 that the Sandinista revolution achieved power, getting rid of the brutal regime of Samoza. I am sure that none in your Lordships' House would wish to defend that regime and that it was better that it should be consigned to the dustbin of history with all the suffering which it caused.
As a result of the Nicaraguan revolution, there was a genuine effort to raise the standards of the poorest in the country and to bring new hope and encouragement to many people who were suffering there. For example, there was a literacy crusade which raised literacy from 50 per cent. to more than 85 per cent. and, incidentally, won a UNESCO literacy prize. Schools and health clinics were built and imaginative efforts were made in the field of education and health. There were credit schemes for farmers and there was some attempt to introduce agrarian reform and redistribute land—something which is right at the heart of the most basic problems in Central America.
Since 1981, the Contras, made up in part of those from the old Somoza régime, have produced in that country more than 14,000 deaths and 250,000 refugees internally, in addition to all those who have been injured and handicapped. We can see pictures of these things on our television screens. This is not for one moment to suggest that no atrocities have been committed by the Nicaraguan Government—a point to which I shall come in a moment. But the weight has been all on the other side.
Why has this policy of stabilisation been followed? It is argued by the United States Administration that it is to force the Nicaraguan Government to negotiate and to stop exporting revolution to its neighbours—Honduras, El Salvador, Guatemala and Costa Rica. But I would refer your Lordships to the comments of William Walker of the United States Administration, who was seen by a group of Church leaders from this country last year. They wrote:
"We were courteously received by Mr. William Walker at the State Department, who emphasised, but failed to justify, the Government's determination to continue the war. He presented the situation entirely as one of Soviet and Cuban domination. 'The problem in Nicaragua' he said, 'is that we are involved with the proxy of a proxy. Nicaragua is a Cuban dependency. The Cubans have taken over the political and military structure of Nicaragua right down to platoon level' ".
If that is the basis of the opposition to Nicaragua—this small, struggling country—by the United States Administration, you would think that the pressure would be for negotiation. But what did Mr. John Ferch say when he was dismissed last year from his post as United States Ambassador to Honduras? He said:
"1 always thought we meant what we said. We wanted pressures so we could negotiate. I'm beginning to think I accepted something that wasn't true … our goal is something different. It's a military solution".
Chilling words—"a military solution". We already have a tragedy in Central America. It could be a great human disaster if present policies are pursued.
It is not at all anti-American to say this and I stress that to your Lordships. The best friends are those who do not keep silent when people are in danger of going astray, but who "speak the truth in love". None of this

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suggests that the Nicaraguan Government is perfect. It has been criticised by Amnesty International and it has admitted serious mistakes made in the treatment of the Mesquite Indians in the east of the country.
But I should like to quote the conclusion about atrocities of the Catholic Institute of International Relations, which produces excellent material on the whole Central American situation. It has stated:
"Recent studies, based on interviews with eye-witnesses and survivors of attacks and other incidents, conclude that abuses by Nicaraguan government forces are isolated and the consequence of individual abuse of power or the breakdown of discipline, whereas abuses committed by the 'contras' are gross and systematic violations of human rights.".
There are also tensions with the hierarchy of the Church in Nicaragua, as we know, and yet it is basically a Catholic country. The revolution has been widely supported by many, including priests, some of whom have served in the Government. You have to remember that this is a country which is now forced to spend more than half the national budget on defence. The basic reason for the hostility of the Reagan Administration is that the Nicaraguan revolution has given hope to some of the poorest people on that continent. Two-thirds of Central Americans live in poverty and it is estimated that 40 per cent. live in extreme poverty.
There have, of course, been massive injections of US aid, but it has gone in on the basis of the trickledown theory, the idea that if you strengthen certain sections of the economy, inevitably the benefit will come down to the poorest in the end. But evidence seems to show that that simply does not work and it does not benefit the poorest in the way that is needed.
So we have a desperate situation in Central America. However, there are signs of hope. Perhaps as I come to a conclusion, I may quote from the report of those from the British Churches who visited Nicaragua and those other surrounding countries last year. They said:
"We were deeply impressed by those who, under such conditions, hold a vision of a better future—who are indeed, in Saint Paul's words, more than conquerors. In Nicaragua. they are able to see, at least in part, some fulfilment of their hopes.".
May we ask, therefore, for, on the part of the British Government, critical support for Nicaragua and constructive criticism, as by one friend of another, of the United States Administration in its policies there?
4.36 p.m.
Baroness Young: My Lords, I am sure that we should all like to thank my noble friend Lord Home for introducing this important and timely debate this afternoon. He spoke, if I may say so, with his usual wisdom and clarity. I should also like to add my congratulations to the noble and gallant Lord, Lord Bramall. We all listened with great interest to what he, speaking as an expert, had to say, we support his remarks about the importance and role of the British services. We hope that we shall hear from him on many occasions in the future.
My right honourable friend the Prime Minister and my right honourable and learned friend the Secretary of State for Foreign and Commonwealth Affairs will
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shortly travel to Moscow. They will meet Mr. Gorbachev and other Soviet leaders. The first full visit by a British Prime Minister since 1975 is a major event—for our relations with the Soviet Union, and for East-West relations generally.
The wording of the Motion we are debating this afternoon might at first sight suggest that it is possible to equate our relations with the United States and the USSR. But, as your Lordships will know, they are worlds apart: our relations with the United States are deep, close and warm. This is unfortunately not the case with our relations with the Soviet Union.
We need not look beyond the innumerable contacts between British and American businessmen, financiers, sportsmen, musicians, artists, friends and relatives. Last year, 7 million people travelled between British and American airports—45 times as many as flew between Britain and the Soviet Union. In 1985, visible trade between Britain and the United States was 15 times greater than our trade with the Soviet Union. Our vast transatlantic invisible trade makes this large difference even greater.
These patterns are not coincidental—the British and American ways of life encourage contact, while the Soviet communist system discourages it. There are depressingly many examples: your Lordships will have been disappointed at the recent Soviet refusal to issue visas to two British parliamentary groups interested in the release of Soviet Jewry—scarcely a triumph for "openness". So let us remind ourselves that the United Kingdom and the United States are free—the Soviet Union is not; we and the Americans each enjoy an open, democratic system—the Soviet Union does not.
Today our relations with both super-powers must be seen in a wider, European context. This year is the 40th anniversary of the Marshall Plan. After helping to win the Second World War, the Americans generously underpinned Western Europe's recovery. The 40 years since then have brought Western Europe steadily increasing prosperity that is historically unprecedented.
Today the economic fortunes of Western Europe and the United States are intimately linked. American firms have over 80 billion dollars invested in the European Community—EC firms have 95 billion dollars invested in the United States. EC-US trade is a huge 120 billion dollars per year.
We share our freedom and prosperity—and we defend them together. That is why 16 independent nations from both sides of the Atlantic, representing over 600 million people, are in NATO. That is why over 300,000 American troops are based in Europe, committed to our joint defence.
We and our European allies have gained enormously in the past and will continue to gain in the future from our close relations with the United States. By contrast, it is precisely the Soviet Union's rejection of freedom and democracy that has shaped Anglo-Soviet relations since the 1917 revolution. We fought alongside the Russians after the nazis turned on them, but since 1945 the Soviet Union has chiefly represented a major military threat, a persistent political challenge, and alien ideological values. Nevertheless, we have continued to look for common ground.

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This picture of two markedly different systems and relationships has not changed in recent years. Yet here and in Western Europe various people and organisations now seem to see the United States and the Soviet Union as morally equivalent. Not surprisingly, this causes concern on both sides of the Atlantic; indeed, the United States ambassador addressed this very point in a recent speech in the Guildhall.
One variation of the moral equivalence thesis, warmly espoused by various elements within the Labour Party. is to seize every opportunity to criticise the United States on all counts: its leaders, policies, economic success, culture and way of life. These critics portray American leaders as hard-line and aggressive, or weak and muddled: they see American energy and inventiveness only as threats, not opportunities. American setbacks vindicate these theories, but American successes are dismissed as irrelevant or dangerous.
These critics rarely if ever turn their manufactured outrage on the Soviet Union. They try to explain away the Soviet record. They argue that the Russians' vast military might is a reasonable response to Western forces; that their economic failings are never the fault of the communist system as such; that Afghanistan cannot be taken as demonstrating Soviet expansionism—indeed, that the Russians regret their invasion; and so on. While that bizarre anti-Americanism is damaging, it is also transparent. It does not fool the British public.
A second variation of so-called moral equivalence is less obvious and possibly more dangerous. It consists not so much of denigrating the Americans as seeing the Soviet Union as a state driven by the same motives as others. Unlike the crude anti-Americans, those who subscribe to that view are usually well-meaning. They welcome each and every positive-sounding pronouncement from Soviet leaders as yet more evidence of their good intentions. They urge Western governments not to be hard-line but to take Soviet gestures at face value, making compromises for quick agreements. Maybe this appeals to our British reluctance to see the worst in people. Because we are pragmatic and ready for friendly give-and-take, we can all too easily assume that our adversaries are like us.
However, the historical record shows that the Russians are not like us. They single-mindedly exploit weakness. They will compromise, but only when they realise that their opponent is strong and determined not to give way on key issues. We cannot assume that Soviet leaders—including those like Mr. Gorbachev who seem sincere about improving East-West relations—are really motivated by the same ideals and beliefs that motivate us. The Russians themselves have no illusions on that score. Your Lordships will recall Lenin's analogy of a zigzag path up the mountain towards the top. The terrain might dictate the angle of approach, but the goal of world communism remains until specifically disavowed.
One other variety of moral equivalence lies in fatalistic pessimism, which sees Western Europe as helpless, squeezed between two enormous and cynical superpowers over which it has little if any influence. This attitude sees the United States and the Soviet
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Union as just as bad as each other; it dismisses super power rivalry as a futile game, which Britain and Europe should opt out of as quickly as possible.
The leader of the Labour Party seemed to be subscribing to that view when he said, shortly after the last election, that the Soviet Union and the US presented "an almost miserable equality of threat" to Britain. Perhaps this explains the need for his forthcoming visit to Washington in an attempt to persuade the United States leaders that the Labour Party is not set on a neutralist course.
Unfortunately our own media sometimes propagate this view when they concentrate on the nuclear balance between East and West, without explaining the basic political and moral differences between them. Such talk strikes a chord with those who are impatient with, or confused by, the complexities of East-West problems, and believe that the United Kingdom and Western Europe can stand hack from them. The British people cannot and will not stand hack. Let us reject all ideas of moral equivalence between the United States and the Soviet Union. We and our European partners do have periodic differences with the United States, but the values that bring us together are far more important.
Having indicated where Britain's basic interests lie, let me comment briefly on our relations with the two super powers, first the United States. The very fact that Britain's relations with the United States arc so wide-ranging and complex means that there have always been and always will be questions on which we do not see eye to eye; for example, the Siberian pipeline dispute, the Laker problem, and now a potential argument over Airbus. This can make the transatlantic relationship seem rather turbulent, especially if friendly European criticism of individual American policies is wrongly interpreted here or in the United States as new evidence of anti-Americanism. We should certainly see the Tower Report and the surrounding political developments in Washington in this light. They are indeed the direct result of a permanent and guaranteed state of glasnost.
However, the United Kingdom, the United States and our Western partners and allies are all sovereign nations. Differences have to be, and are, resolved by open argument and negotiation. We need to keep transatlantic disagreements in proportion and manage them sensibly. We can not afford to let them sap the strength of our alliance. That applies particularly to trade problems which these days involve the whole European Community. I have already mentioned the huge volume of trade in both directions. These disputes only affect a tiny part of it, despite their significant public effect. Nations do not find it easy to preserve an overall framework for free and fair trade while competing energetically within it: there is still strong and worrying protectionist sentiment in the United States Congress, which has its counterpart in Europe.
We and our European partners most certainly do not want any trade war. But equally we cannot do other than make it clear that moves towards greater protectionism will have their price. I hope that United States Congress members will note the message from the European Community foreign ministers on 16th

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March: Europe will respond to unilateral American restrictions on EC exports.
The spectacle of the United States and the European Community squabbling over the disposal of subsidised food surpluses—inconceivable in the 1940s and 1950s when American aid was flowing in—is unedifying. Everyone loses from protectionism; everyone gains from acknowledging our shared interest in keeping trade as free and fair as possible. The United Kingdom is working very hard indeed to that end.
Trade is a large element in our transatlantic relationship. Another is security. Transatlantic trade disputes must not be allowed to upset our shared perception of our common interest in defending Europe. This applies particularly now. It is not always appreciated that for the first time since the end of the Second World War there is now a real prospect of agreements between the super powers which would mean the reduction of the nuclear arsenals of East and West. However, real progress means real choices. Change is more challenging than stagnation; so now is the time when the Western alliance needs unity and strength of purpose.
The United Kingdom makes up its own mind on arms control and defence issues, and we are energetic in helping to co-ordinate alliance policy across the whole field of security questions. This is why my right honourable friend the Prime Minister helped crystallise a sound Western position on strategic arms reductions after the Reykjavik summit when she met President Reagan at Camp David and why we are now working hard with the Americans, as with all our allies, to produce the right Western approach to the belated Soviet response to our proposals on INF in Europe: and why we are also pressing very hard indeed to eliminate all chemical weapons, and to eliminate conventional imbalances. This approach is bringing results. Let us stick with it.
The Soviet Union's ideological hostility and ever-expanding military power have confronted Western Europe since the end of the Second World War. We and our European allies have had to work out how to maintain our security while seeking improved relations on a basis acceptable to both sides. As successive British Governments have realised, there is only one way to achieve this: to negotiate firmly from a position of strength; not to waste time on grandiose propaganda gestures but to persist with sensible proposals for realistic improvements; not to fritter away our negotiating chips with unilateral offers. As Mr. Callaghan so accurately said recently, the Russians readily pocket something for nothing; and, as my noble friend Lord Home has already emphasised, we must not accept agreements unless we can be sure of strict compliance. Our experience with the Helsinki accords is not an encouraging precedent.
Our approach may appear unspectacular. It vexes some people in the West, who believe that a simple lack of will or effort stands in the way of better East-West relations. But that is to ignore the historical sources of today's distrust between East and West. We have seen the Soviet Union suppress moves for freedom in Hungary, Czechoslovakia, and Poland;
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and, even as we speak, it is still subjecting Afghanistan to a ferocious onslaught.
Other people argue that Mr. Gorbachev is bringing in major new changes and that the West should make concessions to help him in his difficult task of reforming the Soviet Union. We do indeed hear a lot about Mr. Gorbachev's "new thinking", about "democratisation" and "glasnost" in the Soviet Union. He has a daunting task. Apart from the inherent weakness of the Soviet economy, the issues he must tackle include the release of prisoners of conscience, the easing of restrictions on emigration and foreign travel, a move forward over verification of arms control agreements, and more access for Soviet citizens to Western media. We would naturally welcome wholeheartedly changes in these areas.
There have been encouraging signs; not only within the Soviet Union. Its external policies now indicate long overdue but nonetheless welcome flexibility and realism. This is not confined to security issues. The Soviet Union is at last coming to terms with the European Community both as an economic and a political fact of life. But we cannot allow ourselves to be carried away. The fundamentals of the Soviet system remain firmly in place—government by one party. I hope Mr. Gorbachev can humanise the party. But will he loosen its grip on power? The basic structure and attitudes of today's Soviet Union will surely be with us for a good time yet.
We must—and do—encourage the sort of reforms which I have just mentioned. But we cannot sacrifice our interests to encourage the Soviet Union down the road of reform. Experience shows that the West can get results—but only by caution and patience, backed by a clear willingness to defend ourselves. On that basis the West can indeed do business with Mr. Gorbachev, as the successful conclusion of the CDE conference in Stockholm last year showed.
Of course, we want to see our bilateral relationship improve. We want trade to expand. During his visit to the United Kingdom in 1984 Mr. Gorbachev identified the target of a 40 to 50 per cent. increase in trade. We are continuing to work towards this target. We also want to see more cultural, scientific, educational, sporting and other exchanges. There is obviously scope for improvement in all these areas, and I am sure that my right honourable friend the Prime Minister will be pursuing these questions vigorously in Moscow.
Progress in all East-West issues—not just arms control but also security in its widest sense, including human rights and regional security—requires full and frank dialogue. The visit of my right honourable friend the Prime Minister to Moscow will take this dialogue forward. It is not for us today to try to prejudge what she will say. But the basic message is clear. If each side is realistic, and understands what the other thinks and why it thinks it, there is room for progress. We will all benefit from it.
As East-West relations enter a particularly challenging phase, let us be clear where the basic interests of our country lie. They lie in standing firm with our European allies, the United States and Canada to defend our shared freedom and democracy, and to devise and implement solid long-term strategies

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that enhance the security and prosperity of the West as a whole. As long as this joint commitment remains resolute, we in Britain will be well-placed to enjoy, and hopefully to develop further, relations with the Soviet Union and the countries of Eastern Europe.
The strength of the foundations of our friendship with the United States stems from long years of mutual trust and support. It is difficult to see that any structure of comparable strength could exist between countries of such markedly different social systems as Britain and the Soviet Union. But your Lordships can be confident that we shall be seeking to test and build on any area of firm ground so that our relations with the Soviet Union can develop as well.
4.56 p.m.
Lord Stewart of Fulham: My Lords, it has been argued often throughout history whether nations choose their friends and allies, or, alternatively, their rivals and enemies, on ideological grounds, or whether they do it on more materialistic grounds of desire for colonies, territory and so on. One can select examples from history to prove one thesis or the other. However, it seems to me that at the present time, ideology is the chief factor determining how nations line themselves up.
This is probably because the other matters about which nations might quarrel have ceased to be worth quarrelling about in view of the nature of modern warfare. Who is going to wage war these days in order to acquire a colony? Who would want a colony in the world as we now know it? Great powers, at any rate, do not wage war for territorial aggrandisement alone. Therefore we find ourselves in a world where what matters chiefly is ideology and where the main conflicts and disagreements are on ideological grounds.
That being so, it is apparent at once that the greatest, most powerful nation in the world is very fortunately of the same ideology as we are. Therefore, the relations between this country and the United States ought continually to be those of close friendship and understanding, and we ought to direct our energies towards the strengthening of that understanding. I do not myself believe that the special relationship is gone forever. It is true, as I have heard one lecturer put it, that we cannot expect somebody of Lithuanian extraction and the Jewish faith, born in New York, to look upon England automatically as the old country; but on the other hand, in a classroom in an American school attended by children of many different ethnic origins, I have seen a large chart on the wall saying "Ten things we owe to old England". It began with Magna Carta and the Bill of Rights, and after that my memory fails me. It was quite an impressive list.
I am quite sure that we in this country would never dream of saying that we owed anything of that sort to any other nation in the world; nor indeed do we. However, I think it is true that there is still a special feeling about this country. It was apparent, I think, during the Falklands war when we looked at the surge of popular opinion in America. While America is concerned for the health of the whole of the NATO alliance, this country is in a sense the pivot of the alliance. If we were to step aside from it a great many
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Americans might then ask themselves, "If the British do not want the alliance, what exactly are we there for?" Therefore if we are anxious to maintain those things which we and the Americans together believe in, we must seek to strengthen and make richer and deeper the understanding between ourselves and the United States.
What stands in the way? Some of the things that block Anglo-American understanding are understandable. I listened with great interest to the speech of the right reverend Prelate the Bishop of Manchester. I think many of us are worried about the situation in Nicaragua. I was sorry to note that the noble Baroness did not answer that part of the right reverend Prelate's speech. I think we all want to know what has happened to the Contadora initiative. That is something in which we could possibly have played a part. None of us can feel happy about the situation in Nicaragua or about the position of the United States in regard to it.
The right reverend Prelate mentioned—and it is important to mention it—that some of the sharpest criticism of United States policy on Nicaragua comes from Americans themselves, expressed in the American Congress. That will be the day—when we read the debates in the Supreme Soviet discussing the merits and demerits of Soviet policy in Afghanistan! The fact that we cannot do that is of course a factor of enormous importance and shows what is the vital difference between our relations with the United States on the one hand and relations with the Soviet Union on the other. However, while some of the anti-American feeling in this country is generously based on a real concern about what many must regard as the hamhanded actions, to say the least, of the United States in Central America, other streams of anti-American thought are merely contemptible.
I do not know how many of your Lordships read the comic strip in the Guardian. I think "comic strip" is the right description for it, though "comic" should imply that something is funny and this strip never seems to be; but that is by the way. Frequently this comic strip is a series of almost obscene lampoons on the President of the United States. This is a free country so why should not a British newspaper do that if it wants to? Nevertheless, I invite those responsible for the appearance of this in the Guardian to ask themselves what would happen if the Guardian published the comic strip with an obscene lampoon of Mr. Gorbachev. There would be a torrent of letters of protest pouring into the newspaper's letter-box in the following weeks. We know that the newspaper would not do any such thing.
It seems to me that that is the kind of behaviour which is in the highest degree irresponsible. The friendship and understanding between Britain and the United States is of enormous importance. It ought not to be jeopardised merely for rather unpleasant amusement, particularly when it comes from an organ which used to have great prestige in this country.
I listened with great interest to the maiden speech of the noble and gallant Lord, Lord Bramall; both to the force and energy of his argument and to what seemed to me, if I may so call it, his cautiously optimistic approach towards the prospects of some measure of agreement on disarmament. That brings me to the

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other point we have to consider—our relationship with the Soviet Union. Here, just as it is quite plain that we and the United States are on the same side in the ideological differences in the world, so we and the Soviet Union are inevitably on the opposite sides in that ideological dispute.
It is no good trying to avoid that; but it is also important to realise that there is no useful purpose served by deliberately provoking it. We have to recognise it as one of the facts of the present situation, the causes of which lie a long way back in history and which cannot be undone in a short time. I share the hopes of my noble friend Lord Cledwyn as to what we may expect from the Government and from Mr. Gorbachev, but we do not yet know how far he will be able to alter the nature of Soviet policy. We must wait to see what will happen.
Therefore in our attitude towards the Soviet Union, while recognising the inescapable differences between us we must avoid provocation and we must seek to promote, so far as possible, cultural contacts between the two nations. I am very much of the opinion that whenever there is a cultural meeting of, say, doctors or scientists, and so on, from various nations, those meetings will work in the long run to the advantage of the free societies of the world. When meetings of that kind are held it is those who have come from the free countries who go away more assured of the rightness of the system under which they live and those who come from tyrannies who go away with perhaps some doubt as to the wisdom of the way in which their own government treats the question of human liberty. Therefore I think we should maintain our beliefs.
There will be opportunities for the right honourable lady the Prime Minister when she is in Moscow to raise the question of human rights. I see that she is receiving advice from various journalists and others on the extent to which this should be done and that she must not lecture the Russians. We shall of course expect her to treat Mr. Gorbachev with more consideration than she would treat us if we were arguing with her—and that is understood. The Prime Minister should remember that, following the Helsinki conference, there is now a periodic opportunity to raise this matter because every year we have a look at what progress has been made on that part of the Helsinki Agreement which deals with human rights. There is a regular and recognised forum in which this question of human rights can be raised. I hope we shall always go on doing that.
While we must maintain our beliefs, we must also maintain our defences; and that must mean maintaining our part in nuclear defence. If we give the Soviet Union the impression that it need only wait a little longer and a British government will abandon all their nuclear defences, we greatly reduce the chance of any agreement on disarmament. Why should the Soviet Union enter into an agreement where it will have to give something when it can get it all for nothing if it is only prepared to wait a little longer? I hope we shall always keep that in mind when negotiating with the Soviet Union.
It is a difficult problem because no one can describe a sudden moving away of the clouds, so to speak—a
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sudden solution to the difficulties in which we have lived for so long. We must live in this situation in a world which is ideologically divided for as far ahead as many of us are able to see. However, it does not follow that it need not be a time of peace if we are prepared to cling firmly to our friends and to behave with dignity and with patience to those with whom we do not agree. Therefore the watchword for our relations with the United States must be good fellowship and cordial friendship; and for the Soviet Union it must be patience and courtesy.
5.10 p.m.
Lord Kennet: My Lords, it has often been my fate to speak immediately or shortly after the noble Lord, Lord Stewart, and it is always a pleasure to say how much I agree with his realism and the pacific and sensible approach that he adopts towards the world.
I should like to say a few words about Nicaragua. Is it not time that we in this country and particularly. those of us in this House were a little more worldly about the situation there? The question of what has happened to Contadora is answered very simply indeed. The United States has throttled it by means of the debt rescheduling and aid negotiations with the neighbouring countries of Costa Rica, Salvador and Honduras. It did so in February this year for the third time since Contadora began. That is the long and short of it. There is no mystery behind it at all.
Baroness Young: My Lords, I am sorry to interrupt the noble Lord, Lord Kennet, but I really do not think that I can allow his description of what has happened to Contadora to pass without comment. I went to represent the British Government at the European Community Central American Contadora Group meeting in Guatemala about three weeks ago, and agreed political and economic communiques were signed on both counts. The British Government's policy has been one of continual support for Contadora and we hope very much that the process will continue. It is continuing.
Lord Kennet: My Lords, I did not for one moment intend to imply that the British Government were faint in their support for Contadora. I think that they are just not being tremendously sharpsighted about what is going on behind the scenes, or are affecting to be not tremendously sharpsighted.
Being the longest running head of government in Western Europe has given the Prime Minister good reason to think right from its invention or inception last year that her mission to Moscow, accompanied by Sir Geoffrey Howe, would he important. Since then the United States Government have fallen to pieces in dishonour and recrimination and have not yet been fully able to pull themselves together again, so she is now also the senior head of a functioning government in NATO. Behind her she has countless links and obligations to the United States, many of her own making and some, particularly her ever feebler attitude to the maintenance of the anti-ballistic missile treaty, which put at risk her bona fides as a negotiator. Before her, she has the greatest innovator in the history of state communism.

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In their Gleneagles communique last October, NATO ministers noted:
"The Soviet side agreed last year [1985] to conclude a separate INF agreement".
The NATO ministers then called on the Soviet leadership to reaffirm its commitment not to hold an INF agreement hostage to any other agreement. They said that failure to do so would destroy the credibility of the highest Soviet assurances. Mr. Gorbachev has now obliged and there can be no question of the NATO allies backing away from the zero-zero option on INF. The credibility of our highest assurances is now at stake. The Prime Minister is indeed facing an opportunity in Moscow, and from these Benches we wish her well so long as she handles that great opportunity in a non-electoral manner.
I think that the INF negotiation is bound to dominate the scene. Mr. Gorbachev, rightly anticipating justifiable West European apprehensions, has said that the Soviet Union is,
"prepared to begin talks immediately with a view to reducing and fully eliminating"
the shorter range Soviet nuclear missiles in Eastern Europe. That is unambiguous language. It has been taken up by the Western governments correctly and optimistically and there should be no difficulty there. Of course, the more things that are grouped together in negotiation the more risk there is of those things that have not been grouped together unexpectedly rising up and hitting you on the nose half-way through the negotiation. There remains of course the question of conventional weapons.
The turning point on the road to a safer world, in so far as it lay within Mr. Gorbachev's making, came in January last year with his big general proposal which contained all the necessary elements: space, nuclear test ban, reductions of nuclear weapons of various ranges, conventional disarmament, chemical disarmament, and so on, with their relations comprehensively mapped out, and verification—national, international and on-site—promised all round. This was no more than a map and the negotiation remains to be done, but it showed—something which many in the West have long maintained is necessary—how all the various negotiations should fit together.
At that stage the Soviet Union linked all strategic weapons reductions—and let us remember that INF is strategic to both the Soviet Union and all of Europe, and is only not so to the United States—to the maintenance of the ABM treaty regime. The new proposal simply changes the relationship between one of the main sets (space weapons) and one sub-set (INF) of nuclear weaponry. However, it is in the nature of things—not of Soviet caprice—that other relationships cannot be changed. Offensive and defensive strategic weapons irremediably are related, and by all the signs this is something which Mrs. Thatcher has not yet fully understood or at least has not yet openly averred. When she sent Mr. Renton, a junior Foreign Office Minister, to Moscow in January to prepare the way for her visit, he fiercely repeated the traditional British step-by-step approach to all arms control and disarmament negotiations. He seemed simply to be turning E. M. Forster's famous dictum on its head and saying, "Never connect".
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The Prime Minister's own reaction to the Gorbachev map-making exercise has been to castigate the strategic nuclear disarmament part of it as being oversimplistic and impractical, although she has never said as much about President Reagan's dream of a world without nuclear weapons, made safe by his space shield. All that still appears to have to be faced. It will be important also to stop the United States from just walking away from the other disarmament negotiations. Indeed, Europe's own urgent need for conventional arms control alongside INF reductions should finally impel the West to get its act together and start negotiating on that issue too.
Moreover, at Gleneagles the allies fully endorsed the President's programme which was presented in Iceland and which included the idea of abolishing all ballistic missiles within 10 years. That brings me to reports this morning from Moscow about the general who apparently said that Britain and France must expect to have to surrender their independent nuclear forces to the disarmament process. Those words caused an understandable flurry. It is very odd talk and I should not be at all surprised to learn that that man had already been called to account by Mr. Gorbachev.
The reality is that it depends solely on how far ahead one looks. If one looks five years ahead when there seems to be a good chance of America and Russia agreeing to halve the strategic nuclear weapons, then of course there can be no question whatsoever of our giving up our nuclear force. We hold our nuclear force as long as anybody holds a nuclear force. But on the international table there is a proposal from each side which would approach the great ideal of the utter abolition of nuclear weapons within 10 years. Just as it is certain that we shall not give up our nuclear weapons entirely while others hold theirs, it is equally certain that we shall not insist on continuing to hold ours when others have entirely given up theirs. That is the simple truth of the matter.
There is one worry which should occupy us and about which the Government should think carefully before the Moscow visit. It is the verification of the INF reductions. We know that verification is dear to the Prime Minister's heart, and rightly so. There is a risk of our Government agreeing that the verification of the INF removals and destructions should be carried out by the Soviet Union and the United States alone. We cannot have that. We cannot have American and Russian officers walking hand in hand into the airfield at Greenham Common to declare whether, and if so, how many, missiles have been rendered inoperable, destroyed or removed, and witholding that information from our Government. Equally, I suspect, the Germans will feel the same about the removal of Pershing IIs.
Such weapons are on our soil. It has been difficult for us to live with the fact that they are under the sole physical control of a foreign government, however friendly. It would be intolerable for us to live with the truth or untruth of assertions and observations or non-observations of undertakings being verified by two foreign governments, one friendly and one hostile, without our participation in the process. Equally the other way around, the withdrawal or destruction of the SS.20s must be observed by Europeans for Europeans more than it must be observed by Americans for

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Americans. These weapons cannot hit America. It is us they can hit. Our need to have our own independent knowledge that obligations are being kept is as great as our need to have, and to have had all along, our separate nuclear weapons systems in Europe.
Arms control is not all. We hope that Mrs. Thatcher will take the opportunity to launch some forward looking and peaceful plans in which Britain, the Soviet Union, Western Europe and the United States can co-operate. Space is the obvious field. The ever-increasing militarisation of United States domestic space effort, and its overall reduction after the shuttle accident, would make it highly sensible to seek a EuroSoviet-US programme to which we could commit a large part of our national space ambitions. Our ambitions are so far commendably peaceful. The Government are realistically facing the need to increase the money for them about threefold. It would be a pity if there were a risk of any of that going down the military drain.
An old French notion, which is still alive—the International Satellite Monitoring Agency—and which the Soviet Union has accepted, could play a key role in disarmament agreements.
I think that I have noticed an interesting difference of attitude as between the Prime Minister and the Foreign Secretary. I cannot remember the Foreign Secretary having said anything of any note which was not also the policy of the SDP-Liberal Alliance, except when he is attacking it. When he attacks it, he never resorts to specifics; he is just against it. The same of course is not true of the Prime Minister. She says many things which are not in accordance with our policies. For that reason I take realistic, modest comfort from the fact that the Foreign Secretary is also going to Moscow. I feel sure that we shall be safe in the hands of both together.
The Moscow visit should not and need not be part of the British electoral campaign. If it is not, we on these Benches will welcome what the Prime Minister intends to do and whatever degree of success she has in doing it.
5.25 p.m.
Lord Boyd-Carpenter: My Lords, I am sure that your Lordships' House appreciates only too well that the subject we are discussing is the most important in the world. The relationship between the United States, the Soviet Union and ourselves bears on the question of the avoidance of war and the survival of our civilisation. No subject could be of more compelling importance.
It therefore seems particularly appropriate that the debate should have been opened by my noble friend Lord Home of the Hirsel whose experience of foreign affairs is almost the greatest of any living man. Your Lordships may not immediately recall that it was nearly half a century ago that my noble friend rushed into the other place to hand to Mr. Neville Chamberlain Herr Hitler's invitation to Munich. My noble friend's experience of the highest level of international affairs runs over that enormous period.
I hope that I may be allowed, if it is not insubordinate for one who never got beyond the rank
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of major, to congratulate a field marshal. I should like to convey respectful congratulations to the noble and gallant Lord, Lord Bramall, because his presence here indicates that your Lordships' House is likely to have the advantage of impressive and knowledgeable contributions from him over the years. And, as he said, it indicates the enormous respect which we in this country have today for the armed forces of which he was for so many years the distinguished head.
We have our relations with the two countries. With Russia, I commend to your Lordships the observation which, as the noble and gallant Lord, Lord Bramall, may remember, was printed in the manual of infantry training in 1939. It advocated that in war, officers should bear themselves with an attitude of suspicious alertness. That is probably the right approach to the USSR.
We wish the Prime Minister and the Foreign Secretary the best of luck in Moscow in the next few days. The fact that there seems to be at least a chance of a useful negotiation is the result of firmness of policy over the past few years. This may well have convinced the Russians that they are more likely to make progress by sensible negotiation than by bluffs and threats.
There are two aspects of those discussions which I should like to put for your Lordships' consideration. First, it is useless to have any agreement on nuclear restrictions unless that agreement is backed by proper and effective inspection provisions. The Soviet Union covers a vast territory in which weapons of war could most easily be concealed. Unless an agreement contains full possibilities of inspection, on a mutual basis of course, with similar inspections in our country and those of our allies, there is a danger that an agreement on nuclear limitation may prove to be dangerous self-deception.
The other aspect was mentioned, just in a word, by the noble and gallant Lord, Lord Bramall; it is Russian preparations for chemical warfare. As your Lordships may recall, we in this country stood down our preparations for chemical warfare, closed the plants and abandoned the training in the late 1950s. That example was not followed by the Russians.
The United States, for 17 years, put its provision for chemical warfare into abeyance. The Russians have continued it. Today they devote considerable resources to the production of deadly gases—nerve gases and other highly dangerous elements of chemical warfare. It would again be a mockery to seek to tie up neatly in a package provisions in respect of nuclear warfare if the possibility of chemical warfare—which is at least as dreadful—were left unchecked and uninspected. I very much hope that those who think they may have influence with the Soviet Union, those who seek to persuade it, will realise what genuine and real apprehension the existence of these powerful instruments of terror in the hands of the Soviet Union must have on the minds of all of us. There can be very little to choose between being annihilated by a nuclear bomb or gasping one's life out in an hour or two after a drop of nerve gas has fallen on one's hand. At a time when we have abandoned this type of warfare, it is a matter of some alarm and concern that the Soviet Union should be devoting so many resources to it.

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The very large resources devoted to the navy is another interesting aspect of Russian conduct. Unlike ourselves, Russia is an enormous landlocked area, hardly dependent on overseas trade for anything of very great importance to it. Yet it has brought into being a very large, expensive fleet of aircraft carriers, cruisers that are much bigger than any in our own navy, destroyers and an enormous number of submarines. Again, one is tempted to ask the question: what are they there for? They wander the oceans of the world. They are to be seen in the Pacific, the South Atlantic, and sometimes in the North Atlantic. In respect of a country which quite plainly does not need them for defence, one is rather driven to the conclusion that if they are to be produced, it is as a potential weapon of offence.
My right honourable friend the Prime Minister and my right honourable and learned friend the Foreign Secretary have some enormously difficult tasks to perform in Moscow. I am sure that they will not allow the fact that everybody wishes them well on this enterprise to cause them to enter into any agreement which was not soundly based. However, we hope that they may make some progress which will have the chance of reducing tension.
I turn to the United States. I have been listening to speeches by the noble Lord, Lord Stewart of Fulham, as he will recall, for very nearly 60 years. This afternoon was a great experience. I listened to a speech from the noble Lord with which I wholly agree. It has taken 60 years to reach that happy state of affairs. It only shows that everything comes to him who waits. I was very glad to hear the noble Lord, with the authority of a former Foreign Secretary—if he will allow me to say so, an extremely effective and efficient Foreign Secretary—speaking from those Benches, stress the enormous importance of our friendship with the United States. This is a view I have shared with him for a very long time.
My memory goes back in this context to an afternoon some 32 years ago. It was the afternoon of the day when Winston Churchill had been to the Palace to resign. He summoned to the Cabinet Room at Downing Street a number of Ministers close to Cabinet rank to say goodbye. He sat there, in the fading light of a stormy spring afternoon, in rather a sad mood; sad, because he had hoped before he resigned that he would be able to come to some settlement or arrangement with the Soviet Union and this had not proved possible; sad, too, that his tremendous career was now coming to an end. But he talked to us almost the whole time of the importance of Anglo-American relations. I recall the scene as vividly as if it were quite a short time ago. He said that if we stayed in close friendship with the United States, and in close alliance, despite all the dangers that surrounded us, and would surround us, the world would come through in peace. If, however, we fell apart; if we quarrelled; if the alliance broke up, then he took the gloomiest view of the future and suspected that wars and all their horrors would sooner or later come upon us. Noble Lords will appreciate that hearing those words from that very great man was a very moving experience which has certainly implanted in, and imprinted on, my mind the immense significance of the Anglo-American relationship.
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As the noble Lord, Lord Stewart of Fulham said, it is sad, in the circumstances, that some people in this country seem continuously to want to nag at the United States—far more than they do at Soviet Russia. We had a very good example this afternoon from the right reverend Prelate the Bishop of Manchester. I am sorry to say that he has just absented himself. The right reverend Prelate spent two-thirds of his speech talking in a critical tone about American policy in Nicaragua. I do not share his idealistic view of the way the central American governments are conducted. I think that most of us who have seen anything of them know that there is very little to choose between government and opposition.
We sympathise with the United States in having these difficult problems on its doorstep. But what was significant—and I propose to say this despite the fact that the right reverend Prelate has absented himself—was that he should devote two-thirds of his speech to a criticism of the United States for its policy in central America without saying a word of criticism of Russian policy in other countries. He ignored the fact that the Russian armies are in occupation of Poland, Czechoslovakia, Hungary, Rumania and Bulgaria, and that in none of those countries can their governments act independently because of the presence of Soviet military forces.
The right reverend Prelate hardly mentioned Afghanistan where the utmost cruelty and brutality has been used to suppress a hardy and independent people who do not wish to have a communist government imposed upon them. There was not a word of that, which would have been criticism of the Soviet Union. All the criticism was of American policy in the much more difficult, much less obviously wrong, situation in central America. This is worth pointing out because there is a world-wide tendency to nag at the United States. Of course we do not always agree. We are good friends. Those noble Lords who have many friends in this House, as I have, know that one disagrees with good friends very often but that one stands by them in times of difficulty and danger. That is why I am glad that when the Libyan crisis arose and the United States wished to use its air force based in this country, we permitted it, although this country was subjected to great criticism for doing so. We stood by an ally and friend in difficulty. I believe that we did more good to the Anglo-American relationship, and therefore to world peace, by that action than ever could be achieved with such people as Mr. Gaddafi. It was the right thing to do.
Again, there is the nagging over what are called star wars. That is of course a complete misnomer. It suggests general hostilities in space. It ignores the fact that the proposition is for a wholly defensive arrangement. It also ignores the fact that the Russians have a possibly quite impressive defensive arrangement around Moscow. They have had it for years. Nobody criticises the Russians for that. But the United States is criticised. It is extremely regrettable that the leader of Her Majesty's Opposition in another place is saying that he will freeze British co-operation in the SDI development. Quite apart from the fact that it will throw possibly 20,000 or 30,000 people out of a job; and will deprive us of immensely valuable technological knowledge, what a way to treat an ally!

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Also what a way to treat an ally to say, as the leader of the Opposition does, "You can take your equipment and your men away from this country". How can friendship and co-operation be expected when we are in difficulties—as we will be from time to time—if we seek to treat our ally in that utterly irresponsible way? I was delighted to hear that view very firmly rejected by the noble Lord, Lord Stewart, as it is by all thinking people on the Opposition Benches as well as on the government side.
The problem is in maintaining the Anglo-American alliance with sufficient nuclear power both in the United States and in this country—and I would suggest in France—to be available in case the worst should happen. I know that there is great emotion worked up about this matter but I ask your Lordships to consider the remarks of the late Dean Inge:
"It is useless for the sheep to pass resolutions in favour of vegetarianism while the wolf remains of a different opinion".
The "gloomy Dean", as he was called, talked more sense in these matters than perhaps do some contemporary prelates, absent or present.
The policy surely must be of watchful care in our discussions with the USSR, not trying to drive them into a corner, but being prepared to negotiate, so long as negotiation is backed by proper practical provisions for inspection and so long as they will proceed to tackle the ridiculous disparity in respect of chemical warfare. We should also seek to maintain the firm front with our allies which has maintained the peace of Europe over the years, and which, I think, is responsible for the apparently better attitude of the USSR today; and then to close with links of iron our contacts with the United States.
Earlier, I quoted Winston Churchill on that matter. I reaffirm the view which he then expressed; that, from the point of view of preserving the peace of the world, there is nothing as important as Anglo-American friendship. I am not suggesting that we should always agree with the Americans or always do what they want, or that they will always do what we want. But, to quarrel with them, to nag at them, and to try and raise ill will against them, is the most dangerous policy that there is. It is in the utmost interest of world peace that we and the Americans should remain close together. Your Lordships have already been reminded that the two wars of this century were entered into with the United States absent. They were only brought in after several years of warfare. Surely it is the immense gain since then that the United States is not absent but is taking a leading part in NATO, in which she should have every conceivable encouragement.
I leave your Lordships with this thought, in the form of a quotation, which is so often misquoted but I have the correct text. The following words were spoken by John Philpot Curran on the night of the election of the Lord Mayor of Dublin, on 10th July 1790:
"The condition upon which God hath given liberty to man is eternal vigilance; which condition if he break, servitude is at once the consequence of his crime, and the punishment of his guilt".
5.45 p.m.
Lord Jenkins of Putney: My Lords, I am sorry that I cannot bring to the interesting speech which we have
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just heard from the noble Lord, Lord Boyd-Carpenter, the 100 per cent. agreement which he brought to the speech of my noble friend. I would not say that I brought to his speech 100 per cent. disagreement, but it was not very far off. I do not think it impossible that my noble friend Lord Stewart could make a speech with which the noble Lord, Lord Boyd-Carpenter, and I may both agree, but it would have to be on a subject remote from that which we are discussing this afternoon.
I am not among noble Lords who find it impossible to agree with any aspect of the policy of the United States. The suggestion has been made that there are many such people, but it is not the case so far as I am concerned. The noble Lord, Lord Home, is to be congratulated on introducing the subject because I think it is an important one. Where I disagree chiefly with my noble friend Lord Stewart is with his personalisation of countries so that America is good; Russia, bad. That scene is not one which accords with reality at all. My total detestation of the present Government of the United States goes along quite easily with my total admiration for many American people. Therefore, the notion of the personalisation of nations is one of the most dangerous traps into which we can all fall if we are not careful.
I am able to say that in a few respects at least, the Government have failed to follow the example of the United States, when they ought to have done. One such incident I mentioned recently concerned the question of nuclear energy. Here they have followed slavishly in the path of the Soviet Union, even after Chernobyl, continuing with the approval of nuclear energy, while on the other hand they have the example of the United States which has not ordered a new nuclear reactor for many years. Indeed, the chairman of Georgia Power, once a pro-nuclear advocate, said that any executive ordering a new nuclear reactor today would either be certified or committed. It is in this respect that the Government choose not to follow the American example. The Government have an uncanny knack of failing to do what the Americans do when they are doing good things, but it is unfortunate that they do not point out to the Americans the error of their ways when they are going wrong.
This brings me to the second point on which the Government ought to follow the American example. There has been much argument in the other place recently and a great fuss was made about whether or not the Government had been deceiving Parliament in the matter of NATO's front line first-use nuclear capability. We should not have known anything about this matter but for the American Freedom of Information Act. As a result of that Act and the researches of a young man called Dan Plesch, who has been very active in this area, we know that as long ago as 1977 the NATO nuclear planning group set up a subcommittee called the "High Level Group" on which Britain is represented, (and still is) by a leading defence civil servant. We know that in 1978 this group recommended new American nuclear missiles in Europe. We also know that in 1979 the final deployment programme was worked out. That was approved by NATO in Brussels and was endorsed by Ministers. The same group put forward specific proposals for new battlefield weapons which were

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approved at Montebello in 1983. We know all that because of the American Freedom of Information Act. Yet, simultaneously the Government have been consistently denying time and time again that they have embarked upon that path. They have denied it asbsolutely. For example, the noble Lord, Lord Trefgarne, the then Under-Secretary of State for the Armed Forces, in writing to Mr. Wareing, Member of Parliament, on 26th March, 1985, said:
"No proposals have been made for enhanced radiation warheads to be deployed in Europe; and in the context of General Rogers' review of NATO's nuclear stockpile no specific proposals of any sort have yet been made to Alliance Ministers. You are therefore asking us to speculate about a situation which may not even arise. I do not think that would be wise".
That is going a little far considering that the decision by that time had already been taken. It had been taken 18 months before that statement was made by the noble Lord, Lord Trefgarne.
We are in danger of becoming the anti-Glasnost government in the whole scene. On the one hand, we have the Americans with freedom of information already and, on the other hand, we have the Soviet Union painfully struggling in that direction. However, we appear to be moving in the opposite direction and are trying to conceal from our people many things which are known to the citizens of the United States, and which have been announced in the American Congress. Any citizen of this country who cares to take the trouble to do so can discover that his own government are concealing information which is widely known in other parts of the world.
That is an undignified situation for the Government to place the people of this country in. Either information is secret—and if it is secret it must be secret from everybody—or else it is not secret. We cannot have a situation where matters which are widely known in the United States of America (and thereby also known in the Soviet Union) are concealed and consistently denied in this country. That will not do, and it is about time the Government said that in that respect they will follow the United States.
Before leaving that subject, in May 1984, Mr. Weinberger reported to the American Congress that NATO decisions at Montebello included improvements in shorter range INF and short range nuclear force systems and warheads. My information is that those warheads actually exist. I do not believe that they are deployed, but they are in existence in Europe and ready for deployment to the extent of at least a couple of hundred. Each one of those short range battlefield weapons is capable of inflicting the same scale of damage as that inflicted on Hiroshima. Therefore, the suggestion that we are painfully in the position of not being able to defend ourselves is utterly ludicrous. We are in a position to destroy ourselves—that is the position. As regards that point, I should like to quote Lord Mountbatten. He said:
"I cannot imagine a situation in which nuclear weapons would be used as battlefield weapons without the conflagration spreading".
That is putting it mildly.
On that point, I find myself in agreement with the impressive maiden speech of the noble and gallant Lord, Lord Bramall. I do not agree with every point that he made—I possibly do not agree with many—but there were points in his argument about which any
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rational person must say, "Yes, he has something there". I hope that we shall hear a great deal more from him in the future.
I have suggested that Ministers have over-rigidly interpreted the necessity of keeping security tight. I believe that there comes a point where if one says that everything is secret, one finishes up with the situation where nothing is secret. One must be pretty selective about secrecy and say, "These are matters which we must keep tight to ourselves". Only then can one reach the position where those secrets can be kept. Once one has reached the situation where everything is secret, one is running into a problem which will be hard to overcome.
When I asked the noble Lord, Lord Glenarthur, a supplementary question, he replied (at col. 321 of Hansard) on 26th February 1987:
"I think that the noble Lord's views are familiar to us all".
That was not an answer to my question which was about Trident missiles. It did not say anything about Trident missiles, but charitably it might be regarded as a tribute to my own assiduity. It was also a way of not answering the question. I believe that we must ask the Government to he more open to their colleagues in Parliament and more open to the public. I hope that when Mrs. Thatcher meets Mr. Gorbachev in the near future she will do what a remarkable advertisement suggests, and congratulate him. Noble Lords may have seen the advertisement published in a number of papers recently which is headed "Congratulations Mr. Gorbachev! …"
I do not know where the advertisement comes from and it would be interesting to find out. It has appeared in a number of papers. It says that a memorandum will be prepared stating the views of whoever is behind the advertisement in greater detail, and that copies will be supplied. I look forward to seeing the memorandum because, so far as concerns the summary, it seems to be something with which no reasonable person could disagree, and I think that a number of your Lordships will agree with that. One might disagree with it in detail, but the general movement is likely to secure approval, however much one may disagree with the way I, for example, set about the road to peace.
I believe that the advertisement indicates a certain amount of desperation. There is the conclusion that there is no real will to peace among the governments of the West. That conclusion appears to have been reached by the Soviet Union at the end of the latest Geneva talks on the subject of nuclear testing. It is hard to view the blank refusal of the United States to match the USSR's moratorium on nuclear testing in any other way. The pretence of the British and French Governments that their nuclear weapons are peaceful weapons about which the Soviet Union need not worry is not exactly convincing. At least, I am pretty sure that it is not very convincing in Moscow even if some people here may find it so.
When referring to Mr. Gorbachev I have developed my noble leader's habit of putting the accent on the middle syllable. I also wish to pay tribute to the speech which my noble friend made from our Front Bench. I found myself very largely in accord with it. I was rather

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encouraged by that because I was unable to find myself in accord with my noble friend Lord Stewart of Fulham. I hope that I bring the dignity and patience which he recommends for those who find themselves in an ideological disagreement. I shall always try to do so.
Finally, Moscow's main spokesman on US-Soviet relations told the Guardian's correspondent, Martin Walker, that if the Americans were to dishonour the SALT and ABM treaties:
"there is no chance for anything".
There has been some talk about the Soviet tendency not to carry out treaties, though it has been pointed out elsewhere that this is not altogether true. However, there has been little attention drawn to the fact that the United States have been very careless with their intention to honour treaties quite recently signed.
Dr. Arbatov went on to say that President Reagan had been surrounded by reckless and irresponsible people. Recklessness and irresponsibility on these matters are not confined to the United States. We have our fair share of them in this country and I think it is necessary for us all who speak on this kind of subject to recognise all the time the seriousness of the position which people on all sides and of all views have recognised in the debate today. In the period running up to the general election, we should not treat this as a subject to be used freely and easily in electioneering processes. I speak about this to all parties.
I heard a debate on the television in one of the "Any Questions?" programmes which was a disgraceful performance. The idea that some electoral advantage was to be gained upon this issue according to one's attitude to it is not in itself wrong, but it ought to be treated in the serious way which the seriousness of the subject deserves. A mutual exchange of slogans on this sort of issue is not the right way to go on.
There is much one could say about this, particularly as I find myself, perhaps not unusually, in a minority position at least in this House. But I would say finally that if Mrs. Thatcher is to carry conviction when she goes to Moscow as a leader really interested in reducing the risk of war, she will have to develop a sense of proportion and recognise that she is not there for the purpose of baiting the Russian bear. I myself have been the target of a good deal of this kind of baiting in my political life. It has never done me any harm personally, but we are in a position now where this is not a question of the personal convenience of any one of us; we are in a position in which the peace of the world is at stake and where we must face the fact that unless we solve the problem we may be the last generation to have the privilege of inhabiting this earth.
6.3 p.m.
Viscount Eccles: My Lords, I should like to thank my noble friend Lord Home of the Hirsel for giving us such an interesting speech, the kind of speech which confirms the value of your Lordships' House in public debate. I should also like to congratulate the noble and gallant Lord, Lord Bramall, on a forthright speech about defence, the kind of speech that I think we need very much to hear because defence is now a political
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football. We want people who are experts in defence and not thinking about getting any votes at the next election.
The noble Lord, Lord Home, saw some hope for better relations between the United States and the Soviets, and that must depend on the extent to which the Soviets have changed their aggressive conception of their national interest. I remember that 200 years ago George Washington said that no nation is to be trusted further than it is bound by its national interests. That is still true. However, with the passage of time we are all compelled to reconsider the nature of our national interests.
In the 1980s every country's business overlaps and is intermingled to an extent we have never known before. That must compel us all to review our national interests and foreign policies to see how far they reflect all that is new and important in our lives. British foreign policy is not what it was. I remember that we used to look on the Foreign Office as a very superior department, almost out of sight, managed by highly intelligent gentlemen with private means, either their own or their wives'. It is very different today and the main reason is that domestic issues have claimed a big place in foreign policy.
In contrast to us, it is only very recently that the United States and the USSR have begun to pay attention to what happens inside their territories when they are framing their foreign policies. Let us first take the United States. For generations the Americans practised isolationism as a real alternative to a foreign policy. At the same time, they felt that it was their duty to preach abroad the ideals enshrined in their great constitution: sacred human rights and universal suffrage. Men such as Woodrow Wilson and Foster Dulles made a mess of foreign affairs because they assumed that international institutions could produce a moral consensus where none existed. Such visions are all very well on a platform, but in a world devoted to reality they create more problems than they solve.
After the last war the Americans expressed their traditional idealism—and very great it is—in an all-out opposition to communism. That was right, but they did not see any contradiction between a passionate belief in the rights of the individual and the support of anyone who was anti-communist. Foreign policy of that kind does not owe much to the facts of life in the rest of the world. On the other hand, the British have profited from our long experience of the world beyond our shores. We may have been a trifle short of ideals at times, but we have developed a sense of the world as a whole which is of immense importance in the present circumstances.
I am so glad that my noble friend Lord Home reminded noble Lords that there is also another difference between us and the Americans. If the Americans were attacked by Russia, there would be no one strong enough to come to the defence of their country. If we are attacked by Russia, we can count on the United States coming to our rescue. That is a great difference between the two sides of the Atlantic; for over here the comfort of the feeling of protection allows certain elements in our population, whose hearts are better than their heads, to talk about freezing star wars' contracts or throwing out the

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American bases. There is no such support for wishful thinking of that kind in the United States.
I now turn to the Soviets. When Brezhnev was still in power they did not pay much attention to the internal events when they framed their foreign policy. They spent what was needed on the arms race and they proclaimed communism as a way of life which sooner or later the whole world would accept. Communism turns politics into theology with all the illusions and the horrible consequences that are permissible in the name of the true faith. That went on until it proved impossible because of the weakness of the Soviet economy, and then Mr. Gorbachev saw the connection between the Russian economy, the arms race and foreign policy.
On our side we too have to face up to the deficits on the American federal budget and on their balance of payments, which are destabilising our economies and causing us to rethink our foreign policies. For example, Mr. Baker, the Secretary of the US Treasury, is telling Japan and the European allies that independent economic policies no longer make sense. All our foreign policies, industrial policies and financial policies, he says—I think rightly—now have to be acted on a single stage, a world stage, on which although the United States has the best claim to the leading role the United States is only one in a cast of powerful actors.
For the United States to confess its inability to stand alone is very important to us and to our allies and to Soviet Russia. If you live in the United States, as I do, you feel even in the past 12 month the change of their view about the scope of their foreign policy: what happens to the dollar and the pound; how Germany and Japan deal with their surpluses; whether OPEC can hold down the output of oil; whether the standards of education right across the United States compare with those in other countries. All such questions are now beginning to be treated as part of the evolving history of North America. Are they not equally part of the history of the United Kingdom and Soviet Russia, and is not that why national interests and foreign policies are, or should be, changing very rapidly?
So one asks: how far can governments control these eruptions of change? Very little, my Lords, unless we learn to co-operate much more closely than we do now. Not ministers, not political parties but scientists and engineers are responsible for the revolution in our lives. Governments did not encircle the world with electronic communications, or double the output of an acre of farmland, or invent new drugs and new ways of treating the sick. Just as the Churches have to rethink their moral teaching to take account of contraceptives, so all governments in their foreign policies must now take account of international business, finance and technology.
Those innovations, for which they are not responsible, are throwing all governments off course, and none more clearly than the Soviet Government. Mr. Gorbachev is telling his people that Lenin's socialism is no longer in the interests of the USSR. He is the true follower of Peter the Great, who came to this country as a young man to learn how to build ships. The task, as some noble Lords have already said, which Mr. Gorbachev has set himself is simply
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tremendous—to break the spell of Marx and Lenin and to give his country a more open society.
Now we come to the real question. Is it in our interests that Mr. Gorbachev should succeed? That is the question that is being debated in Washington. There are plenty of hawks in the United States, there are a few in this country—and maybe one or two in your Lordships' House—who want to believe that the further the Russian economy falls behind the economies of the Western world the sooner communism will collapse.
Communism is collapsing before our eyes. The world sees that it cannot produce the goods. Politically it is not much of a danger now, but the old Russian nationalism could still give us great trouble. Therefore let us consider, and consider carefully against the new background, whether the failure of the Gorbachev reforms and the return of the hardliners—no doubt enthusiasts for Russian imperialism, but in charge of a weak and inefficient economy—would be more to our advantage than a prosperous and open society even though it were still expansionist as it was under the Czars. Whatever happens there will be risk and crises, but can your Lordships doubt that on balance our interest is that Mr. Gorbachev should succeed? If he does, the Russians and the Americans will understand each other better, more often speak the same language, and be less likely to believe that either wants to attack the other. Surely it would then be easier to handle the world disorders which threaten the stability of all of us.
I wonder whether the Prime Minister will discover how far Mr. Gorbachev wants to integrate the communist bloc into the world economy. She can give him some very sound reasons why he should. He knows that centralised socialism is a dead duck, but what does he want to put in its place? That is the great question. The whole House will, I am sure, wish the Prime Minister success in probing it.
In conclusion, I am tempted to remind your Lordships that when the poet Dante had finished with the Inferno he opened the Purgatorio with the famous line:
"Per correr miglior acqua alza le vele"—
to voyage in better waters, hoist the sails. That is what we have to do now.
6.18 p.m.
Lord Greenhill of Harrow: My Lords, I should like to join with others in congratulating the noble and gallant Lord, Lord Bramall, on his maiden speech. It was very good to hear his sensible views so forcibly expressed. I am glad that we have him in the House, if only to consider the prospect that we may have the chance of seeing two field marshals battle it out in peaceful debate.
It is certainly an appropriate time to discuss Anglo-American relations and to try to penetrate some of the mysteries of Russian policy, and it is a great privilege to have the debate introduced with the authority of the noble Lord, Lord Home. We are well into the second generation since the end of the war, and the conduct of affairs and the formation of public opinion in this country, and in those countries with which we most closely deal, is increasingly in the hands of those who are personally unfamiliar with many of the events

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which have determined our foreign and defence policies over the past 40 years.
Despite the astonishing revolution in worldwide communication it is questionable whether our understanding of each other has in fact increased over recent years, and I think that that is true of our relationship with the United States. We are naturally disturbed when events suddenly make us realise that new and unfamiliar factors are determining our relations with old friends.
The history of our relations with the United States, even in wartime, has not been uniformly smooth, politically or economically. There has always been beneath the surface in this country a mild envy and sometimes suspicion of America. This latent attitude is not confined to one political party or to one stratum of our society. It has occasionally spread to those with American mothers.
In recent years the United States has of course drawn ahead economically of its long-established friends. Moreover, the character of its population and that population's distribution has altered in striking ways. Who would have anticipated the eclipse of the once all-powerful East Coast establishment? Who would have imagined that the use of the English language would be seriously challenged as it is today in some parts of the American continent, or that the percentage of white Anglo-Saxon Protestants in New York would have sunk to low single figures? On this side of the Atlantic there have been profound developments in our own country, no doubt to the amazement of many Americans. These changes cannot be halted, let alone reversed.
The noble Lord, Lord Home, has quoted Sir Oliver Wright's very perceptive lecture on Anglo-American relations subtitled "The Atlantic Widens". This indeed is so and both American and British personalities worry because our stature has so diminished beside that of the Americans. But there are still multitudinous, permanent and affectionate links between our two countries—probably more numerous than between any two sovereign states—and we enjoy intimate access to the United States Government. But the fact is that in bilateral relations we are at some disadvantage and we must necessarily, where possible, bring like-minded countries into the bargaining and into the policy making. Nowadays we are most likely to find like-minded countries among our European rather than among our Commonwealth associates. But I suggest that we must resist the temptation to expect Europe to help solve all our problems and smooth out our difficulties with the Americans. There is no substitute for putting our own domestic house into better order, and this must be given the highest priority.
It happens that the areas in which we may differ most from the Americans are defence and trade. Indeed, the noble Baroness, Lady Young, pointed out that it is trade disputes that may well be the more stubborn of our difficulties, particularly if protectionist tendencies prevail in the United States. In many cases we shall need all the help we can get from a common line with our EC partners.
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On defence, the problem has, as many speakers have pointed out, been complicated by our own party disputes, in which there is an irresponsible tendency to dismiss the system that has successfully sustained us without adequate thought as to how to replace it. I found it reassuring to read the speech made by Sir Geoffrey Howe to the Belgian institute of Foreign Affairs, which pointed out the way in which a more self-reliant European Defence policy can be evolved to continue the partnership with the United States and modernise the NATO alliance, which for the time being must remain the essential basis of our security. Such an evolution would be a realistic adjustment to public opinion in the United States and in this country. I hope that the Government will persist with this line.
Whether in the long run the United States will ever wish to distance itself from direct self-interested responsibility towards European security depends, first and foremost, on developments in the Soviet Union. I cannot see it happening soon, and for this one must be thankful. If the West appears to approach the new Soviet policies with caution, the Russians have only themselves to blame. The line that Mr. Gorbachev is now taking was to be expected, but I do not think it was expected quite so soon. It is clear, and Mr. Gorbachev admits it, that there is resistance to it within his party. It is by no means certain that he will prevail, but personally I think it would be reasonable to assume that he will, as I believe time is on his side. So far he has attempted comparatively little and the emphasis must be put on the limited nature of the changes, which for the most part concern the Soviet Communist party rather than the whole of the Russian country. These changes can still be reversed.
But the situation offers opportunities to the West and to this country: first, to understand better the reasons for Soviet policies and, secondly, to seek our way towards agreements on long-standing problems, not only on arms control but agreements on what are referred to as regional problems. Above all it requires Western solidarity and consultations, constant contact with the Soviets and sustained study of the new policy.
It has been a characteristic of the British people to give the Soviet Union the benefit of the doubt and often to refuse to face facts even when their disagreeable nature is indisputable. One has only to recall the extravagant follies of generations of fellow travellers to be made aware of this, and there seem to be some signs of fellow travellers reappearing. However, Western Governments are surely right to be cautious with the Soviet Union but constructive and unprovocative. The path that Mr. Gorbachev is following may eventually lead him further than he means to go, to the ultimate advantage of the Russian people rather than the Russian Communist party, and of course to the advantage of Eastern Europe and the West.
The noble Lord, Lord Boyd-Carpenter, wished Mrs. Thatcher luck in Moscow. I am not sure that "luck" is the word I should have chosen. It is not luck that is required. It is hard study and realistic negotiation. In that, the Prime Minister has my warmest wishes.
6.29 p.m.
Lord Reay: My Lords, we must all be grateful to my noble friend Lord Home of the Hirsel for having introduced this subject for debate at such an extremely opportune moment. I have one faint criticism of the wording of the Motion, which is that a way was not found possible to include a reference in it to our Western European allies. It does not seem to me realistic today to consider relations between this country and the Soviet Union and this country and the United States in isolation from the rest of Europe.
Europe's immediate object of concern must be the negotiations over INF weapons between the Soviet Union and the United States. Should Europe be pleased, even boast, that the Soviet Union has now returned with an offer which was originally made in 1981 by the United States, or has Europe been trapped?
I must confess to having considerable misgivings about a zero-zero agreement for INF weapons in Europe. It seems to me that the withdrawal of cruise and Pershing II from Western Europe—the latter a weapon particularly feared by the Soviet Union—would chip away dangerously at two things: the credibility of NATO's flexible nuclear response to conventional attack and the United States commitment to the defence of Europe. That the INF weapons are a link in the chain of NATO's flexible nuclear response to the Soviet Union's overwhelming conventional and chemical might in Central Europe is self-evident. As United States weapons on European soil, they are also one of the chains that bind the United States to the defence of Europe. We weaken, it seems to me, both systems at our peril.
When the zero-zero offer was originally made, the Soviet Union was bound to refuse it. Why should it have agreed to withdraw missiles which it had in place in return for an American undertaking not to instal missiles which America could not yet deliver, particularly when there was a very strong chance that European public opinion might refuse, or might be induced to refuse, their installation? In the event it was a very close-run thing. I was a member of the Parliamentary Association of the Western European Union at that time, and I well remember how in session after session those of us who believed in the necessity of NATO carrying out this decision had to argue the case against objections from Dutch, German and other delegates; and how it was not at all a foregone conclusion that the decision, which had been made dependent on four countries carrying it out, would be carried out at all. Not to have done so, I believed then and I believe still, would have been a catastrophic moral defeat for NATO.
Anyway, the political gauntlet was run and the weapons were installed. That being the case, I see no reason why the Soviet Union should retain the right to treat the offer as if it had lain all these years on the table. Just as to instal the intermediate-range missiles was, for political reasons, infinitely more difficult for the United States than for the Soviet Union, so to withdraw them involves a far greater sacrifice. I have the gravest doubts whether we should risk the demoralisation of NATO and the triumphalism of the so-called peace movement by throwing into the
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negotiating ring so easily the fruits of such a hard-won struggle.
I do not believe that any agreement on INF weapons will he followed by negotiations either on short-range nuclear weapons or on conventional weapons; or, rather. negotiations will take place, but they would have no meaning and no outcome, as they never do when all the concessions have to be made by one side. Why have the MBFR talks produced nothing in 14 years, and why does the chemical weapons ban, which is promised year after year even by our own Government, never materialise if not because the Soviet Union will never negotiate away an advantage—and, anyway, why should it?
But of course the pressures for an agreement arc considerable. For the White House the temptation is a foreign policy achievement never more needed than now; moreover, one in an area in which United States strategic interests are not involved so that it would be easier to bring about. For the Soviet Union it is an opportunity to weaken the NATO alliance. The fact that this is seen by it as such an opportunity is evidenced by its great activity to win over Western opinion. Letters to The Times from the Novosti Press Agency in Moscow, television appearances by brilliant officials speaking beautiful English, announcements by negotiator Karpov in Isvetzia—these are not steps in a negotiation; they are steps in a propaganda war.
For European political leaders the temptations are to court fleeting popularity by promising peace in our time—something which I am sure our Prime Minister at least will not do. I take the point that the noble and gallant Lord, Lord Bramall. made in his most interesting maiden speech—that there is scope and possibly even political need for reduction in nuclear weapons—hut the outcome of any agreement should not be to make us more vulnerable to other imbalances, whether nuclear, chemical or conventional.
One of the concerns of Europe should be to prevent any withdrawal of cruise and Pershing turning into a more general American departure. After all, even our nuclear deterrent, about which there is no reason to suppose the Americans are naturally enthusiastic, is and will remain dependent on missiles being made available to us by the United States. In this context I hope that the remarks made last week by United States Ambassador Charles Price to the European Atlantic Group will have been widely noted. He drew graphic attention to the prevalence of offensive and unbalanced criticism of the United States from quarters which should know better. As the noble Lord, Lord Greenhill, pointed out, and here I quote Ambassador Price:
"this … insidious anti-Americanism … spreads to every segment of society and undermines the mutual respect that our alliance needs to prosper".
"This of course provokes a negative reaction in the United States, including demands that troops should be withdrawn. Criticism there can be between allies, but it has to be temperate. I agree with the noble Lord, Lord Stewart, that attacks on the United States President should not be personal. No British political leader should refer publicly, in my opinion, to President Reagan's obsession with SDI. SDI may or may not turn out to be practicable in whole or in part,

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but nobody could say that it may not have a chance of turning out in part practicable; but in any case it should not be treated as if only fools could believe in it.
Apart from doing more to nurture the trans-Atlantic relationship, Europe should do more to get its own act together. It is thoroughly unsatisfactory that when the Soviet Union, or the United States for that matter, throws an arms proposal into the public arena there should immediately be half a dozen different official European reactions. Discussions need to be more formalised and more regular than at present; and, like the noble Lord, Lord Greenhill, I welcome the recent suggestions that the Foreign Secretary has put forward for improvements in this direction.
As for Chairman Gorbachev, I do not doubt that he is trying to stimulate a stagnant society, a society which is itself responsible for a stagnant economy and which in turn threatens to deprive yet another generation of Soviet consumers of a reasonable standard of living, quite apart from eventually not being able to support the country's enormous lighting machine. Any improvements which Chairman Gorbachev manages to bring to the lives of Soviet citizens should surely be welcomed by us. It cannot be in the interests of peace for a chasm to persist in the quality of the lives led by the peoples of East and West.
Further than that, I agree with other noble Lords that we should reserve judgment. We should be cautious: we should be watchful; we should be courteous; and we should not he provocative. The one thing, however, with which we should not reward Chairman Gorbachev is an arms control agreement which diminishes our own security.
6.40 p.m.
Lord Pitt of Hampstead: My Lords, I should like to begin by congratulating the noble and gallant Lord, Lord Bramall, on his maiden speech. His brother and I are very good friends. We were colleagues in County Hall for 16 years; and I want to tell the noble Lord that his brother was sitting in County Hall when I made my maiden speech in 1961. I am very glad that I am here today to hear the noble and gallant Lord make his maiden speech. I can tell from the speech he has delivered to us this afternoon that we are going to hear a lot from him, and it will be stuff that is fully worthwhile. I would say to him: just keep it up.
We must thank the noble Lord, Lord Home of the Hirsel, for introducing this debate, which is very timely. I do not think that I know any more than anybody else about what is happening, but the sorts of changes that we seem to see happening in the Soviet Union are interesting. I hope we shall make sure that we encourage them; and in order to do that we must not be—how shall I put it?—too niggardly in the way we respond to offers from the Soviet Union.
I was glad to hear the noble and gallant Lord say that in fact we could have this agreement in regard to intermediate missiles and that it would be quite in keeping with the military strategy that he would favour. That suggests there is a step we can take towards reducing the numbers of nuclear weapons and nuclear missiles that exist. I believe all of us, regardless
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of whether we think we should all have nuclear weapons as a deterrent, feel that there are too many warheads around so that if we can get them to the lowest possible level we really should do everything we can to achieve that.
I am often worried, listening to debates, as to whether we are right in thinking that what the Americans want from us are more nuclear weapons. I perceive in all my discussions—although I must confess that I know Congressmen rather than Senators—that what Americans really want from us are more conventional weapons. What they want us to be providing are conventional forces. The Americans provide the nuclear weapons anyway. Even if we have them as our own independent deterrents to use as we wish, they are American weapons. What the Americans want from us is a bigger commitment to providing the conventional forces needed to resist any Russian advance. I must say that I look in vain for any sign that this particular message is ever accepted on this side of the Atlantic.
In a previous debate on foreign policy, I said that I never look at the world merely in terms of the East-West struggle, because there is more to it than that. There is the North-South struggle: there is what I call the black-white struggle. We spend so much of our time concentrating on the East-West struggle that we fail to do what we can about the others.
I should like to make two suggestions as to the way in which I can believe we should collaborate in dealing with these problems. First, I can see this country and the United States, plus Canada, launching a perfectly good and sound Marshall Plan for the Caribbean. The initiative should come from us rather than from the United States because the United States cannot spend its time concentrating on these small territories in the Caribbean. It has to concentrate on Central and South America and on the larger territories there, which are very important to the United States.
On the other hand, we have a responsibility for those territories. Not only were they our colonies, but some of them are still British colonies. Therefore we have a duty and a responsibility to be doing something about that area. However, what I see is that the United States and Canada would willingly join us in a properly co-ordinated programme to develop those territories. It would not he all that expensive.
What do these territories need? They need infrastructure and they need ships so that they can get easily from one place to another. They need what I would call reliable air transport and, as I said, they need infrastructure. They also need what I would describe as encouragement for the companies in the large countries to help them to develop. All these little islands produce something and if you are producing products for other countries you need marketing. So what these little islands need is a good form of marketing for what they produce. That is not calling for very elaborate financial investment but it calls for a deliberate plan—something that is agreed, envisaged and worked out—so that those territories can be helped to develop themselves and not be what they are now: a danger to the West.
They are a danger because you have there a lot of little territories, any of which can be taken over by half

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a dozen thugs. Therefore they are really a danger. What they need is to be developed in a co-operative way by the territories that matter around them, in order to make sure that they are able to develop and also to make sure that they can be safeguarded. That is about all that they need, and it is not very expensive. So that is one form of co-operation that I can see which would he a form of Anglo-American effort, and I am sure Canada would be happy to join in it. That could be done.
The other matter, as I see it, is dealing with southern Africa. There again, co-operation—not only between Britain and America this time but also bringing in the Soviet Union—is needed so that East and West on this occasion, instead of trying to have puppet governments which they regard as being on their side rather than on the other, and trying to manipulate them in their own favour, can see that the sort of development which is required can take place.
First, I am sure we all agree that the system which exists in South Africa must go but we must ask: how does it go and what is to take its place? This is something that, frankly, can be done only through the United Nations. What is required here is the cooperation by the super-powers, plus the middle powers, through the United Nations, in order to make sure that not only are we able to get rid of apartheid but that we are also able to have the sort of development in southern Africa which will allow peace to prevail. We do not only have apartheid in South Africa. What we have is South Africa, in desperation, busily destabilising all those territories around it. That is something which the world could do something about.
Therefore I thought I would take this opportunity, while this Motion is on the agenda, of suggesting that one of the things Her Majesty's Government can do is to play a major role in bringing together the United States and Canada for one piece of work, and the United States and the Soviet Union for the bigger job that is required in southern Africa. I cannot expect the Minister to get up and tell me, "Yes, the Government will do that", but I hope it is something she will take on hoard and discuss with her right honourable and learned friend the Secretary of State. I genuinely believe that this is the sort of thing that can take place in the present atmosphere, and that would be very worthwhile.
6.51 p.m.
Lord Banks: My Lords, I believe the whole House is grateful to the noble Lord, Lord Home of the Hirsel, for raising this important subject this afternoon and for throwing upon it the light of his great experience. My own first experience of United States-United Kingdom co-operation was immediately after the war when I joined the Allied military government in Trieste. The province of Venezia Giulia was at that time in dispute between Italy and Yugoslavia. Yugoslavia under Tito was lined up with the Cominform—the split had not then occurred—and we had daily demonstrations in Trieste at that time.
I remember one of the communist demonstrations which people came to take part in from well outside our territory and from far down the Istrian peninsula.
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The city was dominated by red flags, and at the end of the day I watched the fishing boats sailing away back down the Istrian peninsula flying their red flags and taking the demonstrators back. It seemed to me that Eastern Communism had spilled over into the West that afternoon.
There were few of us in Trieste at that time who would have prophesied that we were on the verge of 40 years of peace in Europe, and yet we have had those 40 years without war. A vital role in that has been played by United States-Western European co-operation, defensively through NATO and economically in the early days through Marshall Aid. I believe, too, that the nuclear threat has played a major part in preserving peace; the knowledge that war would be catastrophic. 1 cannot prove that, but I have observed that where there are no nuclear restraints governments seem prepared to enter upon conventional war, horrible though it is.
However, the continued and continual nuclear escalation is both dangerous and wasteful and I am sure we all agree in this House that it must be halted and must be reduced. I think, too, we all hope that this will be achieved through the current neogitations even if, like the noble Lord, Lord Reay, we have reservations about the precise nature of the settlement which we should like to see. I am convinced that, in the meantime at any rate, we need a nuclear deterrent and that the continuation of the North Atlantic Treat Organisation is essential into the foreseeable future.
If I had a complaint about the terms of the Motion which is before the House this afternoon, it would he the same as the one expressed by the noble Lord, Lord Reay. I think I would have preferred if it had referred to relations between Western Europe, the United States and the Soviet Union. I am fortified in saying that by the publication last week of an opinion poll which revealed, surprisingly, that most West Europeans believe that Western Europe will achieve super-power status by the year 2000. Even more surprisingly, it revealed that most British people believe that we shall eventually have a fully fledged European government.
Bearing in mind that that is the opinion of the inhabitants of Western Europe, it seems sensible to think in terms of the relations of the United Kingdom, the Soviet Union and Western Europe. But, of course, we are not yet near having the fully fledged government which, apparently, West Europeans expect. Nevertheless it is true that Europe has gained her economic independence. The European Economic Community now has a gross domestic product which is in excess of that of either the United States or the Soviet Union. The Economic Community has developed as a trade partner and indeed as a trade rival for the United States. Unhappily, there has been a conflict between protectionist trends in the United States and the protectionist nature of the common agricultural policy. There was nearly a trade war earlier in the year. Fortunately, that appears to have been averted.
The point I am making is that there has been a big change in the economic relationship between the United States and Western Europe since those now far off days of Marshall Aid. But in the realms of foreign policy and defence, Western Europe has not advanced

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correspondingly. There is no clear European entity, although there is much trotting to and fro of the heads of governments of the various states and there is, of course, regular consultation on foreign policy within the framework of the Community. Following the Single European Act, they may now discuss security as well.
Differences of outlook between Europeans and Americans place a strain on the NATO Alliance. The rhetoric of the Reagan Administration and some of the policies pursued by President Reagan—such as the bombing of Libya, adherence to SDI and arms for Iran—have alienated public opinion in Europe; and the right reverend Prelate the Bishop of Manchester referred to similar opposition to policies pursued in Central America. I understand those feelings and, in the main, I share them, but I realise that Americans also have complaints about Europe.
There may be some in Europe who consider that United States policies pose a greater threat to peace than the behaviour of the Soviet Union, and who believe that the Soviet Union is readier for arms reductions than the United States. But there are equally Americans who consider Europeans to be cowardly, indecisive and inadequate to borrow a phrase from Jan Reifenberg writing recently in the NATO Review. They believe that we are not prepared to pay our full share in defence and yet we are always demanding a greater say and then changing our mind.
When we add to this the fact that the Soviet threat is not so obvious at the moment, that there is this welcome new openness in the Gorbachev policies, that there is some attempt at democratisation within the Communist system, we see why there are strains within the NATO Alliance. In this situation, Richard Mayne writing in the European has said that Western Europe should be "forbearing and self-reliant", and I think he is right.
We must appreciate that things can look different on the other side of the Atlantic. We must appreciate that the President of the United States is only part—though a very important part—of the governmental machine; that in foreign affairs and defence Congress plays a large part, often differs from the President and sometimes counters the policies of the Administration. We must not judge the United States by President Reagan alone.
We must be forbearing and self-reliant and to be self-reliant means, in my view, providing in Western Europe a political system in foreign affairs and defence to match the political system in economic affairs. That means developing the two-pillar approach. It means having a more equal Europe, ready to take our share of the burden, seeking detente with the Soviet Union and Eastern Europe without destroying our defensive system openly critical of United States policies when we have to be, but without the continual hostile carping.
How are we to create that political system? It appears to be the received wisdom at the present time that the focal point of European defence and coordination should be the Western European Union. That has the advantage of linking the two European nuclear powers with West Germany. Furthermore, the
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seven powers involved, Britain and the original six of the Community, are pledged to assist each other in defence.
I have two reservations about WEU. First, there may be some danger in having too many councils of Ministers and assemblies playing a key role in European affairs; and secondly, Western Europe does leave out five of our EC partners, four of whom are members of the North Atlantic Treaty Organisation. In that connection I read in the press that there has been pressure for an early summit meeting of the EC heads of government to shape a united European response to Mr. Gorbachev's arms reduction initiative. President Mitterrand has made such a plea. I understand that it is supported by Belgium and by the President of the European Economic Commission, Mr. Delors.
Speaking on the 30th anniversary of the signing of the Treaty of Rome, I trust that that initiative will be followed up. In the long run—I stress the long run—I do not believe it will be possible to keep the common foreign policy and the Economic Community on the one hand separate from the defence community on the other. However we go about establishing it, I am convinced that a self-reliant, forbearing Western Europe with a political entity to match its economic entity will recognise the need to continue in a critical but friendly and more equal partnership with the United States, together seeking accommodation with the Soviet Union.
7 p.m.
The Earl of Perth: My Lords, I intend to devote most of my speech to the question of our relationship not only with the United States but also with Europe. We should not think just in terms of the United Kingdom when in fact we are part of the European Community. I should particularly like to develop the point that was put forward by the noble Lord, Lord Home, in his very fine opening speech about the importance of consultation.
I should like to stress that it is Russia's aim to divide Europe and the United States, in particular on the disarmament negotiations. Noble Lords may remember how nearly it succeeded with cruise and Pershing. Luckily the Americans stood firm, but in Europe there was considerable disarray. Now it is a question of SDI or star wars. The Soviet Union says that its aim is peace and that the United States is the warmonger. I do not blame it for that or for doing all it can in its own interests, but such propaganda must not succeed. If it does, we shall be divided and we shall fall.
Noble Lords may also remember Mr. Gorbachev's marathon six-hour speech before the Communist Central Committee. He devoted an hour or more to an expression of his faith in the communist system and how ultimately communism must prevail and how no holds were to be barred to achieve that end. I am not an expert on Russian affairs or a Russia watcher, but I well remember somebody who is so qualified telling me he was confident that the part of that speech which expressed the communist faith and the determination that communism should spread throughout the world was written by Mr. Gorbachev himself. If that be right, let us not forget it.

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How are we to ensure the necessary Western unity? How can we guard against the subtle propaganda which is naturally but wrongly spread by Russia? I suggest that we must have a regular exchange of information and constant consultation between the United States and Europe before, perhaps during, and certainly after any meetings of the super powers. Those meetings will go on for a long time. We must organise consultative machinery so that it is automatic, something which happens naturally, though that will not be easy to achieve. After the Reykjavik meeting all of Europe was alarmed that there might have been a deal between the two super powers and that the United States would leave us in the lurch and withdraw from Europe into splendid isolation. I shall not spend time developing why that was nonsense and an unnecessary fear, but we must learn a lesson from it. It is that if we had had good consultative machinery there would not have been such alarm.
I also recall how after the various disarmament meetings representatives of the Americans had to travel all over Europe. I have in mind particularly my old friend Mr. Paul Nitze, who spent much of his time going to each capital, to each individual government, explaining what they had done or what they were proposing to do. That was a waste of time. It would have been much better if there had been some consultative machinery between Europe, including ourselves, and the United States. This machinery exists in NATO for our defence. It may he difficult for it to be too formal and too organised in relation to political questions, but we must try to ensure that the European leaders meet regularly, not only on their own but with their American counterparts. I suggest that we might try to set up a permanent secretariat to that end, and I commend that idea to the noble Baroness, Lady Young.
I know that there has been talk of reviving the Western European Union. I am all in favour of that, but it must not be thought of as an independent counterweight to the two super powers. In some way the United States must be an integral part of any Western European Union. If it is not an official member, nonetheless it must be there to hear what is going on and what we are planning to do. Some will say, "Well, why bother? The Americans will go it alone anyhow. They won't really pay any attention to what we suggest, and so what's the use?" I do not agree. We have common ideals and a common system of democracy. It is by the exchange of information and by consultation that we come to common policies and make things worth while out of it.
Above all, we must act so that we trust each other. At all costs we must not break faith with America. I shall not develop what happened at Suez but I, and I am sure many of your Lordships, will never forget that that was the saddest time in the history of our relations. We then broke faith and it took a long time for America to trust us once more. My plea is that we in Europe work out some form of consultative body which can work with the Americans. While it is perfectly certain that we shall do certain things which they do not like and they will do things of which we do not approve, nonetheless when it comes to the fundamentals, the really important things, we have a common cause and can go forward together.
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For 40 years we have been under the American umbrella and leadership, and great blessings it has brought us in Europe. Let us make sure that it endures through properly organised consultative machinery. We share a common heritage amd have common ideals of liberty and of freedom of expression. Together we must not fail.
7.12 p.m.
Lord Beloff: My Lords, we must all thank the noble Lord, Lord Home of the Hirsel, not only for introducing this debate but also for the fact that he set us on the right path by pointing out that both the great countries to which we are directing our attention are in the process of change. It is variously estimated, but on the fact of change I think there is no disagreement.
The change in the United States is perhaps on the whole in a direction unfavourable to our interests. The change in the Soviet Union may turn out to be a beneficent one. In the United States there is bound to be a move to disengage from the total commitment to Europe which was its natural foreign policy in the immediate postwar years. This point has been emphasised by more than one speaker. Changes in its demographic features, in the location of industry and the direction of its trade all pull the United States away from Europe. It is surely our interest to try to limit the damage which that might bring about by convincing the United States both by emphasising the role that Europe can and should play in its own defence, as has been said by the noble Lord, Lord Banks, and others, and also by endeavouring to show that over a long period our interests in Europe and globally can be reconciled.
In this respect one must find the current visit of the Leader of Her Majesty's Opposition to Washington very peculiar. One would expect that a leader of any British political party would make the reinforcement of good relations with the United States the sine qua non of his attitude in foreign affairs. But to go to Washington and to expound a policy which invites the United States to disengage seems to be quite extraordinary and perhaps unparalleled in the history of British diplomacy. Mr. Kinnock's message will of course be well received by some people in the United States. It will be received by the isolationists as proof that they were right all the time that Europeans are ungrateful, unwilling to co-operate and unable to see beyond the ends of their noses. It will not be welcome to those in the United States, whether in the Administration or in Congress, who are fighting to maintain the traditional concern of the United States for the security of this country and of Western Europe.
It is true that within the past few days it has been announced that Mr. Kinnock is to be accompanied by a "minder", if I may borrow political language, in the person of Mr. Denis Healey. It is not quite clear what Mr. Healey's role is to be. Is he to stay behind after each interview that Mr. Kinnock gives and say, with a nudge and a wink, "Don't take it too seriously: I shall be there and nothing drastic will happen"? For a former Secretary of State for Defence that would seem to be a somewhat humiliating role. We may find that in Washington Messrs. Kinnock and Healey are familiarly described as the "zero zero option".

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Perhaps I may turn to the much more interesting aspect of this question, which is our relations with the Soviet Union. The changes in the Soviet Union, or the possible changes, are obviously much greater than those in the United States, where within an existing system—democratic, capitalist or whatever you like to call it—we are talking of changes of foreign policy, changes in the weight of particular interests, changes in commercial affairs, and so on. In the Soviet Union it is suggested in some quarters—we heard it today in this House, I think at Question Time rather than in this debate—that Mr. Gorbachev's two or so years in power mark a fundamental change and that there is every prospect of a change of real magnitude. Indeed, the noble Viscount, Lord Eccles, has said that one of the questions we must ask is: If this change is of such a magnitude, do we welcome it?
It is very difficult. Because we find a system of this kind so difficult to comprehend there has been a tendency over and over again to believe that a new leader and some change in policy and some change in circumstance might mean the whole thing becoming quite different. I tend to believe that we ought to be thinking in terms of decades and centuries, not in months and years.
Earlier today I had the opportunity to discuss with someone of international reputation from inside the Communist world, the Yugoslav dissident Milovan Djilas, the latest phase of Soviet development. He said that, when he thought about the Soviet Union and the pace of development and the nature of change, he was reminded of the Ottoman Empire, under which the country from which he comes once dwelt. As he said, from the Battle of Lepanto and the siege of Vienna to the ultimate downfall of the Ottoman Empire, we are talking of centuries. The empire retreated, various countries obtained their independence, but the real change in Turkey—and this was all I could add to his analysis—came after that empire dissolved and Attaturk was left with the Turkish nation to recreate.
When we talk about the Soviet Union and the changes which Mr. Gorbachev is bringing about, we must always remember—and perhaps now more than ever because of the demographic phenomena involved—that we are talking about an imperial system in which the ruling nation is a minority, and a diminishing minority. Some of that empire is formally within the bounds of the Soviet Union as an internationally recognised state. Other parts are nominally independent countries around the periphery, both in Western Europe and in Asia. Nor, with the example of Afghanistan before us, can we even be certain that it is an empire which has abandoned territorial expansion.
Therefore, any change that is made in the nature of the economy, in the degree of control by the Communist Party, or in the allegiance paid to the Marxist-Leninist ideology, has to be considered not only in its impact upon the Russians, the proper inhabitants in Moscow and Leningrad, but on the Ukrainians and other Slav peoples and non-Slav. peoples in Asia and in the countries of Eastern Europe. If you have a system in which the planning of the economy goes beyond the borders of the Soviet Union,
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to change the method and instil an element of market economy suggests upheavals of such grandeur and on such a scale that it would correspond not merely to, say, the withdrawal of the British, French and Dutch overseas empires in our time, but would be something more equivalent to what happened when Rome broke up.
I give one example of how difficult it is to be certain of what is happening. It has been pointed out by a number of speakers that certain eminent dissidents have been released from prison or allowed to go abroad and that there has been an advance in human rights. Nevertheless, it remains a fact that more visas were granted to Jews who wished to emigrate to Israel when Mr. Andropov was in power than have been granted since Mr. Gorbachev came to power. This is not a matter of a few, but of comparing hundreds with tens. Why is this the case? Why, at a time when Mr. Gorbachev appears to wish to impress Western opinion with his liberalism and openness—others have raised this point—is he more rigid than his predecessors? Does this correspond to a feeling that the people to be trusted, the people whose instincts he wishes to follow, are his own Russian compatriots? Does it relate to some undisclosed concern about international relations, about the role of the Soviet Union in the Middle East? We do not know and we cannot possibly know.
I have noticed, perhaps not so much in this debate but during some of our previous discussions, that one is inclined too easily to dismiss the idea of ideology. People find it difficult to believe in ideology—I move for a moment from our particular concern with the Soviet Union—despite the fact that hundreds of thousands of people have been killed and are being killed in the Gulf war over basically religious, racial and, in a sense, ideological differences. An American sociologist rather foolishly said about 30 years ago that ideology was dead. In the case of the Soviet Union the reason for the strength of ideology is simple. It is the only system of thought which legitimises the government in power.
Nobody elected Mr. Gorbachev or his friends. They did not inherit their position from ancestors, like the monarchies of the ancien régime. They are in power because they are recognised to be the bearers of the ideology. Being that—it was stressed, I believe, by the noble Earl, Lord Perth—when they speak, even if they are modifying policy, they still have to bring it within the confines of the system of thought which gives them their justification. Their trouble must be that in modifying a system of that kind—an elaborate system which has answers for everything in the economy, in society, in personal family relations and so on—and in easing censorship a little, one cannot tell what the consequences will be. The ancien régime in France looked pretty solid in 1780.
What impact will be made on Soviet readers—and the Russians are great readers—by the publication next year, legally and for the first time, of Dr. Zhivago—a description of their revolution differing altogether from that which they have been brought up to expect or understand? In those circumstances it is almost certain—to answer the question of the noble Viscount, Lord Eccles—that it is in our interest that Mr. Gorbachev's regime should not suddenly collapse

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and fail. If that happened, the chaos and the possible military consequence of a major upheaval in Eastern Europe are matters which the West, with its present disunity, is in no position to tackle.
However, I do not go on from that to put forward the argument, which one hears in some quarters, that the important thing is to give Mr. Gorbachev the support he would get by accepting any and all of the demands that he makes in the sphere of foreign policy. It is not necessary to sacrifice either our interests or our principles. It is necessary, I believe, to talk. It is necessary, in the Prime Minister's words, to do business if we can; but we must remember that in dealing with the Soviet Union and in dealing with the United States there are great forces at work which none of us is in a position altogether to comprehend.
7.28 p.m.
Lord Kagan: My Lords, two years ago, on 23rd April, the noble Lord, Lord Home of the Hirsel, rose to call attention to the desire of Britain to seek better relations with the Soviet Union and to call attention to the obstacles which stood in the way of obtaining that objective. At that point Mr. Gorbachev had already appeared on the political stage and a new dawn seemed to be rising. Change was in the air and change was, and is, taking place at an accelerating rate—for very good and compelling historical reasons.
The Soviet Union is an empire and power is its objective. Security and survival are its main concern. The assumption that ideology rules in Moscow is misleading, and dangerously so. Ideology is only accepted when it serves the purposes of the state and it is changed or abandoned when it does not. It is merely a tool that is retained as long as it serves to increase or safeguard the power of the state. However, while Bolshevik philosophy enabled the Soviet Union to keep its empire together through the political machine and the disciplines that it imposed, it was only effective up to the time of Tito. Tito was the first to crack the mould. When he got away with it, Mao Tse Tung followed and slowly the powers in the Kremlin realised that political control would not hold their empire together. Only the army might do that.
Khrushchev started discrediting the Stalinist past; Andropov tried to continue that policy. Mr. Gorbachev has now attacked the political machine. He warned the politicians that they should not rely on remaining unconditionally and safely installed in their positions. He attacked the bureaucrats and warned them that he would not stand for corruption or nepotism. This literally meant attacking every single manager in the Soviet Union. He went on to warn the workers that there would be no more money and that they would have to work twice as hard—hardly an electioneering ploy. He proceeded to antagonise the peasantry and the rest of the country by doubling the price of vodka.
Mr. Gorbachev is a very brave man. He is not a political innocent, nor is he naïve. We know that he must have some backing. It is significant that in the 18 months that he has been in power he has attacked everybody except the army. There is no trace of a single critical word being uttered against the army—not one. He has attacked the political
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commissariat of the army and its political controllers, but not the army itself. I am sure that he would not have embarked upon the wholesale antagonising of every other power centre in the Soviet Union unless he felt sure of having powerful backing. He is not a kamikaze politician.
The noble Lord, Lord Beloff, took the House through an historical explanation. After all, what happened in France during and after the French revolution? After the excesses of Robespierre, Napoleon was brought out of gaol, as a Robespierrian soldier, in order to put things right, and he then enabled the army to take control. Are we seeing the rise of another Napoleon? It is interesting to note that in 1957 Zhukov was removed for "bonapartist" tendencies.
This all leads to the question of what is to be done. The Soviet Union is no longer in a position to hope for expansion but it is concerned with the survival of its empire. The challenge to it does not come from the West—there are not thousands of dissidents queuing up in Washington for exit visas in order to go to Moscow. But there is certainly a strong pull toward Siberia from Japan and China. The Soviet Union needs a strong army on that side of its empire, but even more is it in need of a strong army for internal rather than external purposes, because it is only the army that can hold the Soviet empire together.
I believe that the Polish, Czech and Hungarian armies are allowed only a few days' supply of live ammunition. It is the Soviet army that has held the empire together. It is the Soviet army that corrected the situation in Czechoslovakia and Hungary.
For this country, the logical conclusion is to go into Europe and support a very strong Europe. There must be no power vacuum. The danger is Finlandisation. The 250 million people of the European Community will be a strong enough counterweight to Russia. The United States could be drifting into isolationism: the Soviet Union, I repeat, is preoccupied with defending itself from the East; and in my opinion the future lies in the direction of a self-contained very powerful United States of Europe. When the Prime Minister goes to Moscow she should remember that for the Soviet Union the question of safety is a matter of self interest and that where self interest is at stake the Soviet Union may be trusted. I thank your Lordships.
7.37 p.m.
Lord Thomas of Swynnerton: My Lords, like other noble Lords I wish to thank my noble friend Lord Home of the Hirsel for introducing this debate. I should like also to express my gratitude for the way in which the terms of the debate are phrased. It seems quite right to recognise the importance of our relations with those two great countries, particularly since at the moment those relations are so good.
If one travels to the United States one frequently comes across people who tell you that they consider my right honourable friend the Prime Minister to be the President's best adviser. If one goes to the Soviet Union one comes across those who say that although they do not always agree with my right honourable friend the Prime Minister they respect her, which is the case in the Soviet Union as regards strong leaders. I

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think that it is also true, as those who read the Soviet specialist military press tell us, that we are respected in this country because of the quality of our armed services over which my noble and gallant friend, Lord Bramall, has presided with such distinction for many years, and to whose maiden speech we have listened today with such interest and pleasure.
In different ways, both countries are undoubtedly changing, as my noble friend Lord Beloff has pointed out. The United States has changed in the past few years in, let us say, a long-term as well as a short-term way. In the long-term way, my noble friend Lord Home of the Hirsel reminded us of the speech made by Sir Oliver Wright. It is perfectly obvious that the United States is concerned with Mexico and the 12 million Mexicans who live in the United States, with central America including Nicaragua, with the Pacific and with the Philippines. The trade of the United States with the Pacific countries is now greater than its trade with the Atlantic countries. The Atlantic community, which has served us all so well for two generations, sometimes seems as if it is an elder sister—a respected but nevertheless elder sister to the Pacific community. Sometimes it seems to have what the noble Lord, Lord Harvey, referred to as "the faded glory of a last century toast".
The short-term way of change in the United States derives from the crisis that has come to be known with scandalous lack of imagination in language as "Irangate". That crisis turned what we had been accustomed to look on as a strong and determined presidency into an apologetic one. The apologies have now been generally accepted. In the past year or two, the United States has undoubtedly committed one serious mistake. I do not mean the Contras and the Nicaraguan crisis, to which the right reverend Prelate the Bishop of Manchester devoted such attention. That is a crisis and the United States needs a great deal of sympathy over it. It is not clear how the problem will be resolved. The mistake surely was treating with and negotiating the sale of arms to a nation which has openly and privately supported terrorism.
In that respect, I agree entirely with what Mr. Jacques Chirac said in his interview with the Washington Times in November. Nevertheless, we are all seeing the inventiveness—I think that was the word used by my noble friend Lady Young—and ingenuity of the American system in showing that that crisis will turn out to be a short-term one and not the kind of catastrophe which occurred in the 1970s at the time of President Nixon and Watergate.
I turn to the Soviet Union, to which so much attention has been paid during the debate—a country the exact reverse of the United States. It has an economy which is politically interfered with; it is over-centralised; and it is without motivation. Mr. Gorbachev, as we all know, has been saying that he will do something about it. How are we to judge what is happening? My noble friend Lord Beloff pointed out, and I am sure that he is right, that it is important to bear in mind the time element. It is unclear as to what will happen in the short term. Surely, big changes will take a long time.
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Nevertheless, some interesting things have occurred. It would be foolish as well as churlish not to recognise that. There have been changes, for example, in respect of the participation of foreign enterprises in the Soviet economy. Efforts have been made to regularise or legalise the thriving black economy. There have been changes in the press. Criticisms of corruption have been openly made in the pages of Pravda, and we may see the publication not only of Dr. Zhivago but also, according to rumour, of the Gulag Archipelago. Those and other changes are undoubtedly important. In some respects, they go further than anything upon which Khrushchev embarked. As I said, it would be foolish and churlish not to recognise their importance.
It would also be foolish not to recollect that we have seen this kind of thing before. I do not remember it myself, but it is obvious that in the immediate aftermath of the revolution, Lenin embarked on something called the new economic policy in which economic collaboration with the West was sought. It was also thought desirable to have a short period of good diplomatic relations with the West.
There is then the question of Mr. Gorbachev and ideology, to which my noble friend Lord Beloff devoted some important remarks. My noble friend Lord Eccles thought that Mr. Gorbachev had perhaps abandoned Marx, Engels and Lenin. There is not much evidence for that. Indeed, all the evidence is to the contrary. If one examines Mr. Gorbachev's latest speech to the Central Committee of the Communist Party of the Soviet Union, one sees that he insists with great care on his Leninist credentials. That may be for external consumption only, but my noble friend's assumption would be a dangerous one to make.
We are entitled to say that if there is to be a real change in the Soviet Union, we must expect some kind of demolition of the ideology and some abandonment of the language of Lenin, just as Khrushchev abandoned the language and to some extent the practices of Stalin. If that were to be done, we could begin to think we were at a new stage of history rather than at a stage of history which merely enables the Soviet Union to take stock and to reform where necessary but to continue with its basic intentions.
However, as my noble friend Lord Beloff said, those are all issues about which we cannot be certain. We notice what has not been done; for example, with regard to the regime's attitude to religion. Mr. Gorbachev has insisted on the importance of maintaining the campaign against religion. He has made no concessions towards local nationalism. In an interesting speech, the noble Lord, Lord Kagan, said that the only institution which Mr. Gorbachev had spared from his criticism was the military. That is true. He did spare it. But it is not the only institution. He has not criticised the KGB. If there is to be abandonment of the things which the Russian people want to get rid of most, criticism of the KGB should be part of the story.
We should probably concede that despite the interesting events, despite the fact that the noble Lord, Lord Greenhill, was perhaps right when he said that Mr. Gorbachev may be carried further than he desires, and despite the fact that it is necessary for him to placate some interests, we must reach the conclusion

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that the probability is that he is seeking to reform, improve and modernise the system, but not to change it.
Secondly we must remember that if Mr. Gorbachev is the great reformer, and he may well turn out to be, great reformers in Russia, like Peter and Catherine, have an uncomfortable habit of being most inconvenient to their neighbours. In a nuclear age, we are all neighbours of the Soviet Union.
These two great nations are, as we know, seeking to negotiate arms control agreements; at first INF, then perhaps short-range weapons and possibly ICBM and a range of other weapons. Unlike my noble friend Lord Reay, but like the noble and gallant Lord, Lord Bramall, I feel that such agreements, provided that verification is appropriately achieved, are worth supporting. After all, verification alone would cause such a change in the Soviet structure as to compensate for the obvious disadvantages of an INF agreement to the European countries.
Let us think about the verification system that would he necessary. I do not know how it would work. No doubt we should have to insist on international controllers—Swiss, perhaps, or some other neutrals—going at will throughout the secretive Soviet world. The advantages of that would he considerable. However, certain qualifications must be made. An armaments agreement of such dimensions may tempt the two protagonists to reach agreements on territorial and other questions.
As the noble Earl, Lord Perth, said, Reykjavik was a warning. There must be occasions when the Europeans must be involved, if that kind of dual approach between the two great powers—there are no other great powers in the old sense—is to continue and lead to other understandings. Despite our close association and deep friendship over two generations with the United States, we need to watch these developments carefully. Something like a Tocquevillean duopoly between the United States and the Soviet Union would have much to commend it were it to be confined to nuclear and other matters which might threaten the survival of the planet.
I recognise that we are Europeans. The Europeans must look to their laurels as to what they are trying to do in the future. I would suspect that my right honourable and learned friend the Foreign Secretary in his speech in Brussels last week touched a chord which many Europeans will welcome when he said that we must attend not only to trying to build the unity and power of Western Europe under the umbrella of NATO, but also in order to ensure that we are not left out of matters which are essential to us.
7.50 p.m.
Lord Rea: My Lords, I must apologise for not being here at the beginning of the debate and therefore missing the speech of the noble Lord, Lord Home of the Hirsel, and the maiden speech of the noble and gallant Lord, Lord Bramall. As a member of the Select Committee of your Lordships' House I was visiting the Medical Research Council's Clinical Research Centre.
The noble Baroness has a marathon task ahead of her in replying to some 22 speeches. I shall try to be as brief as possible. I wish to ask her a single question in
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the field of Anglo-Soviet relations; and to raise a single point regarding Anglo-US relations. I hope that she will have time to consider these.
I am aware that the Prime Minister will have a very full agenda in Moscow dealing with major questions such as nuclear disarmament. In this field, even if it is an electoral advantage to her, I wish her success. I hope that an agreement on intermediate-range nuclear weapons can he reached. Of course I should be even happier if a start on negotiations for reductions in those deadly dangerous short-range or battlefield weapons could also be made, and agreement reached on the banning of chemical weapons, which is also quite near to completion barring the verification issue. I hope that the Prime Minister does not remain totally inflexible with regard to the non negotiability of our own independent nuclear deterrent. We must have a flexible response to negotiations if they seem to be leading to a situation in which we shall not have to use the incredibly dangerous nuclear "flexible response" which is so beloved of the NATO nuclear planners.
However, even without agreements on other classes of weapons we should surely welcome the opportunity to be rid of intermediate-range nuclear weapons and start the ball rolling in ridding Europe of nuclear weapons altogether.
My question is on the topic of cultural and scientific co-operation with the USSR which is relevant to my visit earlier this afternoon to the Medical Research Council. The noble Baroness will recall that last November a protocol was signed after the fifth session of the Joint Committee of the United Kingdom and USSR on co-operation in the fields of medicine and public health. I warmly welcome that protocol. As part of this mutual "Glasnost" we hope to see an increasing number of medical exchanges in the future.
There is one aspect of co-operation in this field which I feel could usefully be added to that agreement. It is the practice of medical schools in this (and other countries) to encourage medical students to travel to other countries for two-month or three-month "electives", working in clinics and hospitals to expand their breadth of outlook and experience. When a final-year medical student last year, my son spent two very valuable months in Zimbabwe. Last month. when I was visiting a hospital in one of the smaller Fiji islands, I met an Edinburgh medical student doing a first-class and very interesting job there on his elective.
There are a number of medical students in the United Kingdom who would like to visit the USSR and other countries in Eastern Europe, as part of their electives. This could be very valuable for them and for Britain on their return in the long run. They either speak Russian already or are prepared to learn. Although there are Soviet medical colleagues and health officials prepared to help these students, the students have not been able to get through—because of administrative delays; and noble Lords will know what I mean—to the Soviet Ministry of Higher and Special Education which has to give its permission. I feel sure that an approach from the British Government here would be extremely helpful in setting up what would at first be quite a small number of student elective visits. If exchange visits from Soviet students to Britain could be arranged, I am sure that this would

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be even better, although that should not at first be necessary as a quid pro quo.
With regard to Anglo-United States relationships, my other point arises from my recent visit to Latin American countries, which included Nicaragua. The present government of Nicaragua took power as a result of the overthrow of a very unpopular dictatorship. Since then there has been an election in which any political party was able to stand. Despite some criticisms by the Government, and by the United States, these elections were regarded by independent observers as fairer and more correctly carried out than almost any election to date in Latin America; certainly more so than the most recent elections in El Salvador and Guatemala, whose governments we recognise as democratic although the main opposition parties were not allowed to field candidates.
Since 1981 the United States has through economic boycott and by openly supporting the so-called Contras (who have no territorial or political base in Nicaragua) been conducting a consistent and cruel operation, as the right reverend Prelate the Bishop of Manchester has pointed out, to destabilise and economically cripple that small country. The International Court at The Hague found against the United States last year on several counts with regard to its operations against Nicaragua. The British Government have admittedly not supported the Contra war directly although yesterday's exchange in the House of Commons was at least interesting in that respect. Perhaps the noble Baroness can add a little to the Blowpipe dicusssion.
On the other hand, the British have not condemned the American operation. We support the Contadora process or agreement which calls for a political and not a military solution to the problems in Central America. One of the paragraphs of the Contadora Agreement calls for non-interference in the affairs of neighbouring countries. This is clearly being transgressed by the United States-funded Contras, who would collapse if it were not for that support.
Nicaragua has the largest army in Central America, it is said. This may well be so, but the army exists only because of the military threat posed by the United States-backed Contra operation. It is true that some 50 per cent. of the budget in Nicaragua goes on military expenditure, so that vital measures to improve the economy are having to be postponed. It was clear to me that if they could the Nicaraguans would, with great relief, reduce military expenditure. They have a big programme of development in health, housing, education, agriculture and industry to get on with.
United States policy, as well as being illegal according to international law, is also throwing the Nicaraguans into the hands of the Soviet bloc economically, which they do not want. Their aim is to be non-aligned. Nicaraguans have many links with the United States, historically and economically, which they did not particularly want to break. The national sport is baseball; everyone drinks Coca-Cola; they love pop music and American films. Many Nicaraguan families have a member living in the United States.
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Most technically trained people in Nicaragua have lived and been trained in the United States.
It is tragic that this small, go-ahead, idealistic country should have been spurned by the United States simply because it chose to exert some independence from United States domination. The United States could still be helping it to overcome the years of neglect and exploitation of the Somoza regime and the Americans could still be making a reasonable profit out of it. There are some American enterprises which are making profits in Nicaragua at the moment.
The Reverend Martin Luther King said (I do not know whether this is a quote from the Scriptures) that if a person knows that a crime is being committed but stands idly by, in reality he is a party to that crime. Has the time not come for the British Government to tell their friends in the United States to wind up their illegal activities in Central America against Nicaragua? By so doing we will gain many friends in the United States who are now convinced that their government is on the wrong path. It will also help to end a cruel, pointless and now totally unsuccessful war against very courageous small people who are threatening nobody and trying hard to pull themselves up by their own bootstraps.
Lord Thomas of Swynnerton: My Lords, before the noble Lord sits down may I ask whether or not he would agree that the Carter Administration was helping the Nicaraguan Government with aid right up to the moment until it knew that the Nicaraguan Government was helping the El Salvadorian guerrillas?
Lord Rea: My Lords, in the first place there has never been any proof that they were helping the El Salvadorian guerrillas, and in the second place the policy of intervention by supporting the Contras in Nicaragua did not start until after the Reagan Administration came in.
8.4 p.m.
Baroness Cox: My Lords, I join all other noble Lords in congratulating my noble friend Lord Home of the Hirsel for initiating this particularly timely debate, especially timely given recent developments in the United States and the Soviet Union.
I shall say only a few words about the United States because what is happening there is well known through coverage in the Western media. It is in the very nature of the open democratic societies of the West that problems and indeed errors by leaders can be discovered, publicised and blazoned across the world's headlines. Thus culpable behaviour can be exposed and people in positions of influence can be called to public account. This is an aspect of the so-called Irangate affair which is often forgotten especially by those in this country who seem more keen to criticise the United States than to strengthen our relations with a nation, which surely, is our closest ally. Of course, historical and contemporary ties of friendship, and of economic and military co-operation should not make us condone that which should not be condoned.
However, we must never devalue our relationship with the United States or encourage our younger generation so to do. On previous occasions in your

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Lordships' House I have expressed my grave concern over much educational material which is biased with a grossly anti-American slant in subjects such as so-called peace studies or world studies. I am also concerned about the apparent anti-Americanism in many television programmes and in speeches made by some of our leading politicians.
I have just returned from a visit to the United States where I visited many towns. There I found great anxiety about anti-Americanism here. I fear that over time this could cause some of our American friends to think again about their relationship with us, as my noble friend Lord Home of the Hirsel himself suggested. I would therefore conclude my few remarks on our relations with the United States with a plea that we do not. in our education system, in our media, or in the political arena, risk devaluing and eroding our relationship with a nation to whom we owe so much historically and at the present time.
As I turn to consider the other part of the Motion dealing with the Soviet Union, I am struck by a sharp contrast, a widespread urge to believe in the most charitable and optimistic interpretation of events, and to give the benefit of the doubt sometimes against all the evidence, as the noble Lord, Lord Greenhill of Harrow, pointed out. If we look back over history we see that many people, who should have the wits and integrity to know better such as the Webbs, have eulogised the Soviet system even under the horrendous brutality of Stalin. Perhaps more disturbing for us are their present-day counterparts who are suspending their critical faculties in response to the magic word "glasnost".
In case my few words on this topic may appear harsh, I should like to forestall the criticism, which is sometimes made of those who publicly criticise the Soviet Union, that to do so is unhelpful because it stirs up fear and hatred of the Russian people. That is not my purpose—rather the opposite. I believe that it is necessary to spell out the reality of life in the Soviet Union in order to encourage sympathy for the Russian people who live under the Soviet régime and to respond in ways most helpful to them.
Given constraints of time, I shall limit myself to two aspects of our relationship with the Soviet Union related to glasnost; namely, human rights and the openness of communication. It is a welcome fact that a number of human rights activists have recently been released from prison, labour camps and exile. The Western media have widely reported Mr. Gorbachev's claim that he has released 140 political prisoners and is reviewing a further 140 cases. But I understand that according to figures available in the West only 84 have actually been released, although Dr. Sakharov, to whom everyone reports, claims that the figure is 86. Whichever is the case the release of' the full 140 is unconfirmed. Even so, 140 is a small drop in the ocean and these releases are essentially arbitrary. They are not a result of legislative changes and could easily be reversed. They are thus a far cry from the real reforms necessary if we are to believe in a significant change of policy.
The 10 Soviet dissidents who wrote the article in The Times on 16th March claim that this move:
"appears calculated to make a maximum public impression with minimum concessions. If the Kremlin is really undergoing a change
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of heart, why not declare a general amnesty for all prisoners of conscience? We still await a clear condemnation of the criminal use of psychiatry against dissidents. We have seen no progress on emigration".
I wish to say just a few words about the abuse of psychiatry for the treatment of political and religious dissidents. The December 1986 information bulletin of the International Association on the Political Use of Psychiatry gives spine-chilling information on well documented cases of Soviet citizens subjected to psychiatric torture. Time only allows me to cite one case, but it is typical of many. I will place my copy of the report in the Library of your Lordships' House, should any of your Lordships he interested in reading further evidence. I refer to Grigory Stetsyenko, who became interested in Jewish history and religion and requested permission to emigrate to Israel. He was expelled from his job at the Institute of Transport Engineering and interned in a psycho-neurological hospital. I quote:
"During my examination, the head of the hospital … and the head of the department … stated that, according to the most advanced theories of Soviet psychiatry, the desire to leave the USSR, the best country in the world, is a sympton of schizophrenia. Expressing views incompatible with official ideology, defending civil rights guaranteed by the constitution and international law, being interested in Judaism, are also symptoms of the same disorder. Therefore I am subjected to forcible treatment".
That treatment included injections of large doses of neuroleptic drugs which have intensely unpleasant physical and psychological effects, and incarceration in a ward:
"A small room with grates on the windows, not unlike a prison cell … 18 beds close to each other … some occupied by 2 or 3 patients. The room is never aired and seldom cleaned, and brightly illuminated around the clock … it is extremely dangerous as many patients are in an irresponsible condition and may commit any hostile action against others".
In other words, he was incarcerated with genuinely insane and dangerous people.
The fact that such treatment is typical of that meted out to many political patients in Soviet special psychiatric hospitals has been endorsed by the testimony of the courageous Soviet dissident psychiatrist, Dr. Koryagin. He was recently released after serving six years of a 14-year term for exposing the abuse of psychiatry as one of the methods used to silence Soviet religious and political dissidents. In an interview reported in the Daily Telegraph on 28th February, he says that he has not heard of the release of any political inmates from psychiatric hospitals and he points out:
"Now that I am free I sadly see no real shift in the Soviet people's way of life, no matter what the official propoganda organs are saying about 'democratisation' in this country. I see the same almighty power of the KGB and the Interior Ministry over ordinary people, who, in turn, are powerless, without rights".
That leads me to my second area of' concern: the asymmetry of' rights with regard to information. Many people in the West are not aware of the extent and nature of the control over the media and other forms of communication in the Soviet Union. A massive censorship organisation called Glavlet rigidly controls news, literature and art. Access to Western newspapers and broadcasts is virtually impossible for most Soviet citizens; and such newspapers as are allowed to circulate are limited to those such as the Morning Star, the British Communist Party newspaper, which is not

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likely to reveal any interpretation of events at variance with the ruling party's own propoganda, which is consistently and virulently anti-Western.
Perhaps the most telling information relates to the jamming of Western radio programmes. According to a report by the BBC External Services last year, the Soviet Union jammed all Russian language programmes transmitted by the BBC, Radio Free Europe, Radio Liberty and Voice of America, although some concessions have recently been made concerning certain religious broadcasts. Soviet jamming is also directed continuously against broadcasts in 16 languages of the Soviet Union transmitted by both Radio Liberty and Radio Free Europe, while Radio Free Europe broadcasts in Bulgarian, Czech and Polish are also heavily jammed. Such jamming requires an enormous investment in equipment, including both skywave and local jamming transmitters at an estimated cost of over £620 million a year. And despite Glasnost there is no sign that either Glavlet or these massive jamming operations are being dismantled.
The suppression of news is not confined to foreign inputs. For example, the Soviet press failed to report to its own people the declared release of the 140 dissidents so widely publicised in Western media, or Mr. Gorbachev's much publicised confession in the West that he and his wife rather like the Beatles. It appears that Glasnost is strictly controlled and caution is now being urged. For example, Pravda has warned Soviet journalists not to go too far in their criticisms; the Glasnost campaign is to support the party and the system rather than attacking it or exposing negative phenomena. According to the editor:
"We are all tired of this period of negativism".
Comparison with the openness of the media in the West is so stark as to merit little comment except that we so often forget it. We must remind ourselves of the dangers of accepting the idea of moral equivalents between the open and relatively free societies of the West and the closed, controlled societies such as the Soviet Union—a point made so well by my noble friend Lady Young.
We should also think very carefully about what has or has not been achieved following the Helsinki Final Act. In a well-argued and sober report entitled The Helsinki Agreement: Dialogue or Delusion?. Mr. Jonathan Luxmoore of the Institute of European Defence and Strategic Studies argues that the failures of the Soviet Union to comply with the provisions of the Helsinki Agreement may have such harmful effects for the West that perhaps we should reconsider our commitment to it. However, at the very least we should be pressing more actively for greater symmetry in openness, with freedom of broadcasting and access to the media within the Soviet Union comparable to that which the Soviets enjoy in the West. Until and unless we achieve that we are dangerously disadvantaged in the battle for the mind in both the national and international arenas.
I conclude with a plea that we do not ignore the message spelt out so clearly for us by those who speak with the authority of personal experience, such as Vladimir Bukovsky, now in the West, or Dr.
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Sakharov, still in the Soviet Union. They urge us to remember that the Soviet Union differs fundamentally from the West in many ways—not only in its savage repression of dissidents and its rigid censorship, which I have mentioned, but also in its denial of other freedoms such as free trade unions and free elections. Even the recent electoral reforms, so applauded in the West, are not free but limited to carefully chosen party members. However, above all, Bukovsky, Sakharov, Solzhenitsyn and many others remind us that we must always stand firm in the defence of our own freedom and our own precious and fragile inheritance of democracy.
In Bukovsky's words:
"peace has never been preserved at ari, price. Nor has it been promoted by catchy phrases or cheap slogans. There are 400 million people in Europe whose freedom was stolen from them and whose existence is miserable".
Let us as a nation do all that we can to try to help them, using the freedoms that we have been privileged to inherit. One way in which we can help is to press for a true glasnost—a true openness—both in the Soviet Union's relations with us and within the Soviet Union itself. Openness is necessary for truth to flourish, and in the end it is only the truth which will make us all free.
8.18 p.m.
Lord Bonham-Carter: My Lords, at this late stage I think that your patience must be nearly at an end. To listen to another speech is asking a great deal of your Lordships. Nonetheless, I should like to join other noble Lords in thanking the noble Lord, Lord Home of the Hirsel, for initiating this debate. I congratulate him on the exquisite timing which I understand is due to the parliamentary skills of his noble friend Lord Boyd-Carpenter. I should also like to join other noble Lords in congratulating the noble and gallant Lord, Lord Bramall, on his extremely interesting and impressive first contribution in this House.
Before I move on to the matters which I had thought I was going to deal with, I feel I must say a word or two about the comments of the noble Baroness, Lady Cox, who has just spoken. I think it is very important that one should distinguish between anti-Americanism and disagreement with President Reagan's policies. They are not the same thing. One can be profoundly pro-American, and whereas some people in this House have American mothers I do not claim that, but I have an American wife. I was educated at an American university and I claim to know America fairly well. Americans distinguish perfectly clearly, and it is incredibly patronising to think that they do not, between those who are anti-American and those who simply disagree with President Reagan's policies.
Secondly, I find extraordinary this idea that there is some kind of pro-Soviet conspiracy in this country. I happen to be chairman of an organisation called Writers' and Scholars' Educational Trust which publishes a magazine which far too few of my noble friends in this House or other noble Lords buy. I urge them to do so, declaring my interest straightaway. The magazine is concerned with censorship. Of course, the vast bulk of what we publish is profoundly to the detriment of the Soviet Union, Eastern Europe and the

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Soviet bloc. There is no conspiracy of silence about the horrors which happened in the Soviet Union under Stalin or subsequently; indeed most of them were revealed in this country. The first novel of Pasternak was published in this country, and Solzhenitsyn, Yevtuchenko, Voznesensky and a host of other Soviet dissident writers. The idea that we have not tried to open up the Soviet Union to this country because of some extraordinary pro-Soviet conspiracy is quite frankly an illusion. All we are saying, or all those who I think the noble Baroness is addressing are saying, is that a change seems to have occurred and it is one which should he welcomed. I do not think that all the dissidents have been released, but I am glad that Mr. Sakharov has been released. I do not say that there is a total absence of censorship in the Soviet Union, but I am glad that there is a prospect of Dr. Zhivago being published. This is better than it was and I think we should be thankful for small mercies.
That having been said, perhaps I may move on to the main topic of this debate. I listened naturally with great respect and interest to the speech of the noble Lord, Lord Home and there is only one point on which I feel I must disagree with him, or anyhow where I have some reservations about what he said. I am not sure that I am totally convinced by the belief which he expressed in the necessary and intrinsic virtues of a consensual foreign and defence policy because that consent depends on what the policy is. It is difficult to consent to a policy with which one disagrees. I wholly share the consent which he expressed to the policies of Sir Winston Churchill and Mr. Harold Macmillan, as he then was, in regard to Anglo-US relations. But they and, I am glad to say others, did not consent to the policy of appeasement embraced by Mr. Chamberlain. I am profoundly grateful that they did not do so.
However when the noble Lord introduced this debate almost two years ago in April 1985, he asked whether we could expect an improvement in relations with the USSR which he characterised quite rightly as an absence of trust since 1945. Therefore I think it is legitimate to ask ourselves whether the situation has changed. It seems to me, looking at the world, that changes which have been going on for some time have now suddenly become rather more apparent. For example, the relationship between the USSR and the USA in connection with arms control has become more fluid. The relationship between Europe and the USA is undergoing a change of degree but not, I would emphasise, a change of quality. There are changes in the relationship between Europe and the USSR and a symptom of that is that I understand that at last the relationship between Comecon and the European Community is now for the first time on the cards. That is very significant.
Then I would point to the extremely important speech made by the Foreign Secretary in Brussels on 16th March. It has been referred to by the noble Lord, Lord Greenhill of Harrow. But that speech was reflected in a paper, I may say, submitted by the Minister of Defence to the Wehrkunde Conference, also I think in March.
A further symptom of this change were the agreements reached between France and the United Kingdom, also in March, for the procurement of
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defence equipment, a breakthrough. Indeed, the French Minister for Defence, M. André Giraud, in impeccable Franglais which was absolutely appropriate for the occasion, is reported to have said, "Mon vieux, c'est un major breakthrough." And so I think it was, symbolising for this country that the European dimension, about which my, noble friend Lord Banks spoke, has become an assumption which is no longer in contention and which is accepted, if reluctantly, even by the Labour Party, although I should like to ask the Labour Party when Mr. Kinnock last went to Paris, Bonn or Rome, now that he is on his second visit to the United States. I also think this agreement symbolises for France possibly the first steps in a gradual escape from what someone described as the "self-ostracism" of Gaullist policy.
I believe it was Reykjavik which dramatised these changes which had been evolving over some period of time. It reflected changes in Europe and real changes in the position of the United States. For example, there is pressure to which other noble Lords have referred in the United States, of which the Nunn amendment is an example, for Europe to take a greater financial responsibility for its own defence. That was also mentioned by my noble friend Lord Gladwyn. This simply reflects the fact that one-third of the US military budget can be identified as directed towards the defence of Europe.
There is also the knowledge that after the Reagan administration, given the US deficit and the huge increase in military expenditure under the Reagan administration, military spending in the United States will be cut and an obvious area for those cuts is Europe.
These changes are also indicated by the fact which I think the noble Lord, Lord Greenhill, mentioned that the East Coast Establishment, with whom we have been used to dealing, is no longer in control and that to the United States the Pacific, Central and South America are as important as Europe. It is very possible that the Caribbean is more important to the United States than, say, Eastern Europe. Perhaps this is simply to face the facts of the situation, to recognise, as Mr. Younger recognised in his speech at Wehrkunde, that European and American interests do not always coincide. I for one would expect that within the next decade there will be fewer than 300,000 American troops in Europe. Meanwhile, the way in which Europe regards itself has also changed and is changing. It seems to me that Reykjavik crystallised those changes. For example, with Euro-missiles—they are called "Euro-missiles" because they are meant to help defend Europe—at Reykjavik we found how very little control we had over those missiles.
Another example is that despite the central importance to France of Franco-German relations, the prospects of' an agreement on arms control and the opening up of a kind of room for manoeuvre in diplomacy have, I suspect, had the effect of reviving French fears of German neutrality. This may have reminded them—which may be something to do with that agreement recently concluded to which I have already referred—of the importance of the old Anglo-French link. That was, after all, in the forefront of the minds of the founders of the European Community who hoped that the United Kingdom (had she joined)

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together with France, would balance the economic power of Germany.
It is worth recalling at this time the ideas that inspired the European Community in the first place. It was not inspired by economic ideas; it was inspired by a political motive to prevent the outbreak of a fourth European civil war by scrambling the European states into an omelette which could never be unscrambled. The means used to achieve that gastronomic feat were economic.
The European Community was inspired, in my view, by a great and important idea. Of recent years it has been bogged down in budgetary disputes and endless discussion of the CAP. The reactivation of the Western European Union—whatever the reservations some noble Lords may have about that body—the search for a common defence policy and the search for a common foreign policy, are in my view a return to the original European idea.
The Atlantic Alliance remains the linchpin, but the European pillar needs strengthening, and by strengthening it I believe that the Atlantic Alliance itself will be strengthened. This means that the development of European political co-operation is something in which this country has a crucial role to play. The speech by the Foreign Secretary to which I have referred, and by the Minister of Defence recently, give me hope that one can believe that on this occasion this country will play its full part.
8.32 p.m.
Lord Oram: My Lords, this debate has been so wide ranging that I doubt whether at this hour it would be helpful or indeed welcome if I attempted to reply to the many interesting speeches that we have heard. Rather, what I would wish to do is to put more emphasis on two matters which have not been fully dealt with by previous speakers but which I believe to be important.
The first is the internal economic changes in the Soviet Union and their significance. Those internal changes, I believe, are motivating the Gorbachev external initiative towards arms reduction. The second aspect that I wish to deal with is the need to involve other major powers in arms control negotiations. Such negotiations, in my view, should not be exclusively a super power concern.
This is not the first occasion on which the noble Lord, Lord Home, has given us the opportunity of discussing British relations with the great powers. There have already been one or two references to the debate he initiated two years ago which dealt with the growing influence of the Soviet Union in the third world and asked the question: what should be our response?
The difference between the two debates is that today's takes place soon after a major initiative by the Soviet Union and on the eve of the visit of our Prime Minister to Moscow. In that sense this debate is more urgent than that of two years ago.
The aspect of super power relationship that we discussed two years ago—namely, the third world connection—should, however, not be far from our thoughts when considering today's Motion. In
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considering the problems, as several speakers have done, of, for example, Nicaragua, or if we turn our thoughts to the Middle East or to what is going on in the Philippines or in parts of Africa, we need to see them all not only in their local or regional aspects but against a background of worldwide conflict and the ever-present danger that what starts as a local war can all too easily escalate into a global war. This was a point well made by the noble and gallant Lord, Lord Bramall, in his speech, to which so many compliments have been directed.
It is against that background that we should try to understand the Gorbachev initiatives. I shall try to indicate my understanding of Mr. Gorbachev's motives. The basic question which has run through many speeches, and which we are all asking, is whether the Gorbachev initiatives are genuine or merely a diplomatic ploy. I believe quite firmly that they are genuine and that we should respond in the same spirit.
My noble friend Lord Stewart of Fulham suggested that in the situation which has now arisen we should avoid being provocative. I thoroughly agree. With that as a guideline, I must say that I found the speech of the noble Baroness, Lady Young, disappointing and depressing. If she had been speaking, not to your Lordships' House but to Mr. Gorbachev or some of his advisers, I am sure that they would have found her speech very provocative indeed.
In my view, it is far better to take the advice given in the speech of my noble friend Lord Cledwyn that there is a new situation brought about by Mr. Gorbachev, and that this is an opportunity for us at long last to bring about a better relationship with the USSR. If we seize the opportunity now, it may well in due course lead to even greater and better changes.
The aspect of the Gorbachev initiatives which most catches the attention of public opinion both here and throughout the world is the external one. It is the offer of a zero-zero agreement in respect of intermediate-range nuclear weapons. It is what I consider to be the dramatic dc-linking of INF and SDI, and it is the new spirit that has been created, a spirit of optimism, in the Geneva negotiations.
Those are the aspects of the present situation to which most attention has been given in today's debate. But it is also true to say that despite some differences, almost all speakers—they expressed it in different ways, but I hope that this is true to say—hope that the Prime Minister's visit to Moscow can make some contribution to the breakthrough which has been initiated by Mr. Gorbachev.
But crucially important though all that external initiative is, I believe that we shall fail to understand the new opportunities which are opening up unless we understand the internal changes that Mr. Gorbachev is seeking to bring about within the Soviet Union. In my view, it is no exaggeration to say that those internal initiatives are even more fundamental than the new Soviet approach to arms control.
What has happened, I believe, is that Mr. Gorbachev has recognised that the need for radically new internal economic policies is dictated by the stagnation and the debilitating bureaucracy of the current Soviet situation. They have their problems of an enormous dimension. Mr. Gorbachev needs a

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decrease in the burden of arms expenditure in order to revive the Soviet economy. In other words, he needs relaxation to solve his internal problems, both political and economic. What so clearly and importantly distinguishes Gorbachev from his predecessors, Khrushchev, Brezhnev and Andropov, is that they were victims and to some extent were the symbols of this vast Soviet bureaucracy and economic stagnation. Although they made speeches sometimes about that situation, they completely failed to break through. Mr. Gorbachev is very different. He is clearly determined to overcome those problems of economic stagnation by this method of economic openness.
A number of the ingredients of these new economic policies arc in my judgment revolutionary by comparison with the rigid state planning and authoritarian methods which have hitherto dominated the Soviet industrial scene. The changes are being introduced cautiously because Mr. Gorbachev realises that he is up against a tremendous weight of vested interest, of rules and regulations and of people in powerful posts of privilege. He faces a tremendous task and he is an enormously courageous man, in my view, to he facing that task. He seems determined to tackle that by no means easy task by the devolution of responsibility to the lower echelons of administration, to local authorities, to individual factory managers, to co-operatives and to industrial and agricultural workers at the grass roots.
He is also in the process of letting the price and profit mechanisms take the place of arbitrary allocations by state institutions. Without daring to say so he is in fact setting out on that same path of a decentralised socialism which is proving so conspicuously successful in China, as I have had the opportunity to see on three occasions in recent years. I can assure those who have expressed the thought today when talking of these changes that they mean an abandonment of socialism that that view is very far from the truth. It is, on the example of China, a new form of socialism which gets away from the heavy bureaucracy of the previous and the existing situation into a new form of socialism which I believe is enormously successful in China already, and that is the path that the Soviet Union is also about to follow.
Indeed China, as a nuclear power with a quarter of the world's population—we sometimes forget those facts—is to my mind highly significant, not only in the way I have just mentioned in terms of economic organisation but also in relation to what I call the Gorbachev external initiative. China, Japan and indeed other Asian powers are as concerned with world security as the super powers and Europe. We are all involved in seeking international security.
My second point is that I want to suggest that there is this other grouping of nations in Asia which are as involved as Europe. Their security should not be overlooked, either in Moscow in the coming few days or in the continuing negotiations at Geneva. I notice, for example, in reviewing the press reactions worldwide to the Gorbachev pronouncements that Japan urged that Asian countries should be involved in any negotiations about nuclear weapons and world disarmament.
I recall that when Mr. Gorbachev first took his present position he included in his initial statement
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improved relations with China and he repeated it, I noticed, in his more recent Vladivostok speech. Such declarations are of great significance, in my view, but so far they are only declarations. No Soviet actions are yet discernible in relation to those issues which trouble the Chinese leaders, particularly the continuing troubled situation on the borders between China and the Soviet Union. That is why China in particular and other Asian countries, especially Japan, have a direct interest in the negotiations at Geneva. That is why I believe the Motion of the noble Lord, Lord Home, though wide enough, was too narrowly drawn because these other powers need to be considered in this context.
China will want to be assured that as intermediate nuclear weapons are withdrawn from Europe as part of a zero-zero agreement they should not be redeployed within reach of Chinese targets. If that were to be done, increased stability in Europe would be far outweighed by increased instability in Asia. I very much hope therefore that those aspects of the world security problem will be urged upon Mr. Gorbachev when the Prime Minister speaks to him.
Needless to say, what I have been suggesting and what the debate as a whole has been suggesting is that we have reached a moment in world history which calls for the utmost diplomatic and political skill. As I have said, we all hope that the Prime Minister when in Moscow will display that degree of diplomatic skill. I hope that she will be more sensitive and more successful as a diplomat than she was, for example, in the negotiations over the independence of Zimbabwe when she was wrongfooted. I hope she will be more successful than she was when she spoke in most unwise words in Peking about the delicate negotiations over the future of Hong Kong. I hope she will be more diplomatic than she has been on a number of occasions in Commonwealth circles. She has the opportunity, a supreme opportunity, of improving relations with the Soviet Union. She has said that she can work with Mr. Gorbachev. I hope that she can also listen and learn from him and that she will make a positive response to what I believe to be his positive initiatives.
Let us remember that though necessarily security and armaments dominate discussions such as we have had today, there are many other avenues that ought to be explored, many other possibilities for improving relationships between the great powers and ourselves. We should think of trade. We should think as many speakers have suggested, about the human rights questions. We should think of economic, scientific and cultural exchange. We must hope that the Moscow talks and perhaps also the Washington talks will begin to return that kind of issue to the world's agenda and that the consultations about to take place will help to bring about a much better situation in all these fields of human endeavour.
8.50 p.m.
Baroness Young: My Lords, this has indeed been a timely and valuable debate. It comes on the eve of the visit of my right honourable friend the Prime Minister to Moscow. I am sure that she will take with her the good wishes and support of all those who have an interest in building an understanding between the Soviet Union and the free world.

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We are indeed grateful to my noble friend Lord Home for introducing the debate. We have listened this evening to many excellent speeches of high quality. I think that all your Lordships have joined in paying their tribute to the excellent maiden speech of the noble and gallant Lord, Lord Bramall. We have also had a most interesting historical analysis of the present situation by my noble friend Lord Beloff.
I am sure that I am not the only Member of your Lordships' House who hopes that the speech of the noble Lord, Lord Stewart of Fulham—which, if I may say so, was characterised by his usual honesty and courage and knowledge of foreign affairs—will be read by all members of the Labour Party. I particularly commend it to the noble Lord, Lord Jenkins of Putney. But I say to him, because he commented on the NATO nuclear stockpile, that he might look at yesterday's Hansard of another place, at col. 162, when my right honourable friend the Prime Minister responded on that very point. She said:
"At the Montebello meeting of the nuclear planning group in 1983, NATO agreed both a major reduction in the number of its theatre nuclear weapons in Europe and the need for possible improvements to ensure the effectiveness of the remaining stockpile. This was clearly set out in the communiqué issued at the Montebello meeting. Since then SACEUR has put forward his proposals for these improvements. These are being pursued with the individual nations concerned, but, as Defence Ministers have made clear to the House, no decisions affecting the modernisation of the theatre nuclear weapons in service with British forces have yet been made".
Let me state again a most important fact. For the first time since the Second World War there is a prospect of agreement between the super powers which would mean actual reductions in the arsenals of East and West.
What contribution can and does the United Kingdom make to arms control? We played a full and important role in the multilateral negotiations and discussions at the Geneva conference on disarmament and the negotiations in Vienna. While we sit at these tables in our own right, we never forget that we are members of an alliance. We acknowledge close and frequent bilateral and multilateral consultations with our allies and we use our influence fully in this way, as was demonstrated by the November 1986 statement by President Reagan and my right honourable friend the Prime Minister.
We also have regular contacts with representatives of the Soviet Union. Thus the Prime Minister will be visiting Moscow after consulting President Mitterrand and Chancellor Kohl. I hope that this answers the point that was raised about co-operation in Europe by the noble Earl, Lord Perth. This is the way forward—hard work and a realistic but constructive approach shared with our allies. We should not abandon it just when it is beginning to bring results.
What is the basis of our approach to arms control? First, arms control is one of the means by which we pursue a fundamental policy of government, to maintain and enhance our security. In principle, arms control can secure this at lower levels of armament and so bring political, economic and strategic benefits. But arms control and disarmament agreements are worth having only if they are fair, balanced and verifiable, a point rightly emphasised both by the noble Lord, Lord Boyd-Carpenter, and the noble Lord, Lord Greenhill.
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Moreover, experience shows that the ideal of a once-and-for-all breakthrough is an illusion. A realistic step-by-step approach is more likely to succeed than an all-or-nothing approach. As my right honourable friend the Prime Minister agreed with President Reagan at Camp David last November:
"Reductions in nuclear weapons would increase the importance of eliminating conventional disparities. Nuclear weapons cannot be dealt with in isolation given the need for stable overall balance at all times.".
On the question of strategic defence, I can assure the noble Lord, Lord Gladwyn, that the four points that my right honourable friend the Prime Minister agreed with President Reagan at the previous meeting at Camp David in December 1984 remain the basis of the Government's policy towards this issue. My right honourable friend the Prime Minister also agreed with President Reagan last November on the need to press ahead with the SDI research programme, which is permitted by the ABM Treaty.
We welcome President Gorbachev's decision in his 28th February statement to delink the question of an INF agreement from the separate question of the United States strategic defence initiative programme. Some people hail this delinking as a major concession. In fact, it was a reversion to a position that the Russians had adopted previously but then abandoned. Nevertheless, we welcomed it as a major step towards the acceptance of our long-standing NATO position of global zero-zero for the long range in the intermediate nuclear forces. However, we also recognised that Mr. Gorbachev had not resolved all the outstanding problems, particularly the present imbalance in shorter-range INF and in verification. These are not new obstacles designed to block agreement; they are consistent Western concerns which go back to the first US-oviet negotiations on INF in 1981 to 1983.
I agree with the noble Lord, Lord Oram, when he said that no doubt the Soviet economic difficulties have had a significant influence on the Soviet approach to arms control issues. But I would not agree with him in the remarks that he made at the conclusion of his speech about my right honourable friend the Prime Minister. I think that it has been her strength and her profound convictions which have contributed to the present position in which we find ourselves and in which we are all glad the Russians have come back to the negotiating table.
The noble Lord, Lord Gladwyn, suggested that the United States might regard Europe's contribution to its own defence as inadequate. To do so would be to ignore the fact that, of the forces in place in Europe, we Europeans provide 90 per cent. of the manpower, 85 per cent. of the tanks, 95 per cent. of the artillery and 80 per cent. of the combat aircraft as well as 70 per cent. of the fighting ships in European waters and the Atlantic.
Lord Gladwyn: With respect to the noble Baroness, I think that I did not say quite that. The Americans—perhaps I had better write to her about it.
Baroness Young: My Lords, I think that we shall both have to look at Hansard tomorrow to see exactly what the noble Lord said. If I may suggest it to him, it is an important point as to what Europe's contribution to the forces in Europe actually is. I think that the

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point that he made was whether the United States regarded Europe's contribution as adequate.
The noble Lord—I hesitate to say this—I think went on to suggest that the WEU might provide a forum in which to concert European security thinking. This point was referred to also by the noble Lord, Lord Banks, and my noble friend Lord Reay. Perhaps I may draw to their attention what my right honourable and learned friend the Foreign Secretary said in Brussels on 16th March:
"A Europe which gets its own ideas straight is a far more rewarding partner for the United States and far more likely to have its views taken seriously than a Europe which speaks with a multitude of voices. If we want our particular European concerns to he clearly perceived and taken into account then we must argue them out clearly and come wherever possible to a common view".
I think that confirms an important point made by my noble friend Lord Thomas of Swynnerton.
Our aim with the WEU is to make it a forum where this process can take place. Our objective is to make a clearer and more distinctive European contribution to the alliance as a whole, but there is no question of supplanting the alliance, of taking decisions in the WEU or of bringing the collective WEU position into alliance discussions. A more effective WEU must bring more, and not less, strength to the alliance and must not divide it.
However, may I emphasise that arms control is not the only issue. The whole point of the CSCE process is to improve European security in its widest sense, to remove barriers which prevent human contacts, to allow ideas to flow freely and to abandon human rights abuses. The Soviet Union still has a long way to go to live up to its Helsinki obligations in all these areas. Perhaps I may draw to your Lordships' attention once again what my right honourable friend the Prime Minister said in another place yesterday, at col. 162 of Hansard. Again I quote:
"I shall, of course, he raising those matters under the Helsinki accords, which deal with the free movement of people and ideas. 1 am having a bigger correspondence than I have ever had from people who wish certain personal cases to be raised and from people who hope that I will raise the matter of religious freedom and freedom of speech for all in the Soviet Union".
My noble friend Lady Cox raised the question of psychiatric abuse in the Soviet Union. I can say to her that we regularly press the Soviet Union on its human rights record, including psychiatric abuse. We welcome the release of Dr. Koryagin from a labour camp and we hope that he and his sons will be allowed to emigrate. We also welcome the recent concessions by the Soviet Union in the jamming of the BBC's Russian Service and hope that it will be extended to the Polish Service and to other foreign radio stations which are still jammed. The noble Lord, Lord Rea, also made a specific point about cultural and scientific co-operation. I have taken note of it. I can say that we are working to increase co-operation both multilaterally and bilaterally, and have emphasised our own interest in increased contacts. The noble Lord, Lord Pitt, raised the question of co-operation in the Caribbean. I can reassure him that we work closely with the United States authorities, as we do with regional governments, on many aspects of relations with, and activities in, the Caribbean. Drugs and money-laundering are only two examples; but, as he
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will know, we also work together over regional defence.
The noble Lord, Lord Cledwyn, asked two important questions. The first was about trade. After a period of stagnation in the late 1970s, our exports to the USSR rose to £735 million in 1984. In the face of an overall Soviet cutback in imports from the West, British exports have held up well and the figure for 1986 was £539 million. But, as I said in my opening speech, Mr. Gorbachev set a target of a 40 per cent. to 50 per cent. increase in trade. That is a statistic we are happy to endorse. I am sure that my right honourable friend will be discussing trade during her visit to Moscow.
The noble Lord also referred to Blowpipe and the Contras. That point was also raised by the noble Lord, Lord Rea. I should like to say categorically that the suggestion that the United Kingdom has supplied Blowpipe to the Contras is nonsense and the allegations that have been made about meetings between my right honourable friend the Prime Minister and United States officials on this subject are a complete fantasy. The British Government have at no time authorised the supply of Blowpipe or any other arms for the use of the Contras. The United States Government have assured us that the Contras do not have Blowpipe and it is not their intention to supply it. Neither is there any evidence from any reliable source that the Contras have the weapon. The British Government support a peaceful and not a military solution in Central America. Our actions have been, and will continue to be, consistent with that policy. As I said in answer to the noble Lord, Lord Kennet, we support the Contadora process.
Lord Cledwyn of Penrhos: My Lords, may I say that we are extremely grateful to the noble Baroness for that information and for that reassurance. Could she go further and answer my question in full: namely, to say whether there was a meeting between Mr. Casey and Colonel North on any other subject—that is to say, a meeting with the Prime Minister or any Government Minister?
Baroness Young: My Lords, I can confirm that there was no meeting between my right honourable friend the Prime Minister and Mr. Casey and Colonel North; and I am glad to make that confirmation.
The right reverend Prelate the Bishop of Manchester also spoke about United States policy in Central America. I can only confirm to your Lordships that we remain committed to the Contadora process and to the political solution it seeks to achieve. We believe that the problems of the region cannot be solved by armed force, and we have constantly urged restraint on all sides.
Many of your Lordships—and I am thinking particularly of my noble friend Lord Eccles—have during this debate rightly emphasised the warmth and scope of our relationship with the United States, whether personal, political, economic or strategic. My noble friend Lord Home referred to the efforts of the late Sir Winston Churchill and of the late Lord Stockton to ensure intimate contact with United States leaders. If I may say so, with characteristic modesty he did not refer to his own considerable efforts and

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success in this field, to which I am glad—and I am sure I speak on behalf of all your Lordships—to pay tribute.
This special friendship is every bit as marked today. My right honourable friend the Prime Minister and President Reagan go out of their way to consult closely on the great issues of the day that affect us all. In this situation, and with NATO strong and united, I can reassure your Lordships and others about the danger of American isolationism. But we cannot ever afford to be complacent; nor can we afford to have anti-American attitudes, which I regret that I hear among members of the Labour Party and about which the noble Lord. Lord Beloff, has so convincingly argued this evening. We and our NATO allies are committed to defending ourselves, but we are also committed to dialogue.
As my right honourable friend the Prime Minister said in 1983 about the Soviet Union and Soviet communism:
"We have to live together on the same planet and that is why, when the circumstances are right, we must he ready to talk to the Soviet leadership. That is why we should grasp every genuine opportunity for dialogue and keep that dialogue going in the interests of East and West alike".
My right honourable friend will travel to Moscow in that spirit.
9.8 p.m.
Lord Home of the Hirsel: My Lords, I think your Lordships who have sat through this debate will agree that we have had an extraordinarily interesting afternoon. As each one of your Lordships has testified. the noble and gallant Lord, Lord Bramall, gave us a splendid start. But each contribution has been of the highest quality and I was most impressed by the very careful judgments which each noble Lord made on the two halves of the Motion as they were presented; the relationship between the United States and this country and between Europe—I take that correction—and the United States, and the possibilities that might be opened up for the Prime Minister's visit to Moscow.
The whole House, as the noble Lord, Lord Oram, reminded us, has wished the Prime Minister well and I know my right honourable friend will be very encouraged by that message. I should like to express particular gratitude to my noble friend Lady Young for the care and trouble she has taken with her replies, and to the noble Lord the Leader of the Opposition in this House for his courtesy and kindness in opening the debate from his side.
I will say no more this evening. I shall study Hansard because it will repay study. One thing is certain. This is not the end of the story and we shall return to the subject again, I have no doubt, in the months ahead. So, in thanking all your Lordships, I beg leave to withdraw my Motion for Papers.
Motion for Papers, by leave, withdrawn.

Royal Assent
The Chairman of Committees (Lord Aberdare): My Lords, I have to notify the House, in accordance with
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the Royal Assent Act 1967, that the Queen has signified her Royal Assent to the following Act:
Consolidated Fund Act.

Takeovers and Mergers (Employee Protection) Bill [H.L.]
9.10 p.m.
Baroness Turner of Camden: My Lords, I beg to move that this Bill be now read a second time. The Bill seeks to provide new rights to information and consultation for trade unions, their members and employees of companies involved in a takeover, merger, sale of a subsidiary or transfer or engagement. The year 1986 was a record one for takeovers. The media has aptly described what has been taking place as "merger mania".
To quote from the 6th February issue of British Business:
"In 1986 industrial and commercial companies' expenditure on acquisitions and mergers within the UK reached a record £13½ billion, which is almost double the 1985 total of £7 billion. There were 695 recorded acquisitions in 1986, almost 50 per cent. higher than in 1985, and the highest annual total since 1973. The 1986 figures are dominated by the acquisitions of Imperial Group by Hanson Trust and of Distillers Company by Guinness in the second quarter, both valued at just over £2½ billion, but even if these were excluded expenditure in 1986 would be substantially higher than in 1985".
The livelihoods of about 500,000 employees were bound up with these deals. A number of major companies escaped unwanted takeover bids, but many others succumbed after a struggle.
The background to all this is a big rise in profits, but stagnant investment in manufacturing industry. The City is finding it easy to provide finance for takeovers, but is still failing to provide investment capital in manufacturing industry. The merger activity is not producing new jobs or stimulating our manufacturing base: indeed, quite the contrary. In the last two years, something approaching one-tenth of British industry has been subject to a change in ownership. The control of whole sectors of industry, such as retailing, food and drink and mechanical engineering, has been transformed.
A number of companies not presently subject to takeover bids have been selling off subsidiaries when suitable opportunities have presented themselves. Further major changes of ownership could well be imminent, giving further cause for concern to the employees whose investment—the investment of their working lives in the companies by which they are employed—should matter as much as those whose investment is a financial one. As takeovers proceed apace, it would have been natural to assume that they must at least be in the interests of the shareholders of the companies concerned even if the other interests lose out. However, past experience does not indicate that that is necessarily so.
Looking back to the last merger wave in the early 1970s the objective then appeared to be asset stripping rather than a restructuring of industry. A study of more recent United States experience shows that the majority of mergers could not be adjudged as successes even on the narrow basis of evaluation employed by

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shareholders. In half the cases examined by the consultancy firm of McKinsey and Co. the return earned on assets taken over actually failed to exceed the cost of the capital employed in financing the takeover. Generally, it was found that the larger the merger, the less successful the outcome.
However, my intention tonight is not to raise the whole matter of mergers and takeovers but to seek to ensure that there is some protection for those who become involved. At the present time there is legislation but it seems to me to be deficient in a number of important respects.
Mergers are initially examined by the Office of Fair Trading which considers whether there arc grounds for believing they could operate against the public interest. The Director General of Fair Trading makes a confidential recommendation, as I understand it, to the Secretary of State for Trade and Industry who then decides whether to refer the merger to the Monopolies and Mergers Commission for full investigation. Mergers not referred are allowed to proceed. If a merger is referred, the Monopolies and Mergers Commission has six months in which to investigate and report. If the merger is found to be against or potentially against the public interests, the Commission will recommend either that it should not be allowed or that undertakings should be obtained about future conduct. Many bids automatically lapse if they are referred.
As I understand it, all relevant matters must be considered by the Commission, but five specific factors must be borne in mind. First, the desirability of maintaining and promoting effective competition; second, protecting the interests of consumers; third, promoting through competition a reduction in costs; fourth, maintaining and promoting the balanced distribution of industry and employment; and fifth, maintaining and promoting competitive activity in overseas markets.
The scrutiny of mergers is strongly influenced by government policy. In recent years this has put most of the emphasis on competitiveness. Indeed, it would appear to be government policy to make references to the MMC primarily on competition grounds. This narrow interpretation has been criticised recently. The Government resisted pressure to refer the BTR bid for Pilkingtons to the Commission. Eventually BTR withdrew, but only after a combined campaign conducted by the company, the unions and the local authority at St. Helens which was justifiably concerned about what might happen to the local community if a major provider of labour in the area were to he taken over by a multinational conglomerate.
Recently Sir Gordon Borrie, Director General of Fair Trading, in a speech to the Glasgow discussion group on finance and investment, indicated that other considerations should be weighed in addition to pure competitiveness. He said:
"Although I hold strongly to the view that competition should be the main consideration in merger policy and that references to the MMC should therefore usually be in cases where competition would significantly be damaged … I certainly do not take the view that where competition is not affected everything can be left to 'market forces'. I do not have complete faith in the 'invisible hand' of Adam Smith as the regulator of our economic and social affairs. I often ask who it is who drives these market forces and the answer—
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shareholders, institutional or otherwise, and a myriad of financial advisers and experts—does not encourage me to believe that their decisions whether to buy or sell particular shares at a particular price will necessarily bring about the most efficient deployment and development of the assets which those shares represent. If this is heresy to those who believe in efficient financial markets then I stand a heretic—or at least a sceptic".
I believe that competition alone is an inadequate yardstick. That is why my Bill provides for consideration of other factors. It writes in a requirement to consider the interests of the employees, to ensure that production and output in the United Kingdom is maintained to the benefit of the economy and to ensure some control of strategic industries, where these are in the interests of national security.
I return specifically to the position of employees. We have the Transfer of Undertakings (Protection of Employment) Regulations which were introduced in 1981. These were introduced in response to an EC Council directive which was designed to ensure information, consultation and continuity of employment contracts when the ownership of companies was transferred. However, the regulations were drafted in such a way as to exclude transfers affected by share purchases. The regulations therefore do not apply to the typical British merger or takeover.
Public regulation is concerned with a limited view of competition. Shareholders are concerned about the size of the offer and the prospects for future dividends. Trade union interests naturally centre on employment. Your Lordships will know that I am a trade union official, and hence my interest in this Bill. I am also a member of the TUC General Council. For a long time, the TUC has been concerned about mergers and their effects on employees.
At no stage of the merger is there an obligation on a bidder to declare details of his plans in regard to the future size and shape of the workforce. Employees in the bidding company have no rights at all. This is despite the fact that takeovers often lead directly to plant closures, redundancies and changes in terms and conditions of employment and sometimes to the termination of union recognition agreements. Indeed it is not uncommon, particularly if the buyer is an overseas conglomerate, for union agreements simply to be terminated. In contested takeovers both the predator company and its prey may be more forthcoming, particularly if they want union support, but typically will not make any commitments as to what policies will be after the takeover issue has been settled one way or another.
In the Netherlands, a merger code gives unions and their members more extensive rights. It provides for unions to be informed, first, of merger talks at an early stage; secondly, of the reasons for a merger; thirdly, of the likely social, economic and legal consequences; and, fourthly, of measures designed to alleviate their effects. Union rights in the Netherlands are, it is true, consultative only, but unions are able to give their views on the likely impact on employee interests before a merger agreement is finally signed. Works councils can appeal to the courts if companies act unreasonably'. It will therefore be seen that the provisions set forth in the Bill are not particularly radical. Such provisions exist elsewhere in Europe.

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Another aspect of concern to employees is pension rights. Pension fund surpluses can be a significant factor in encouraging bids for companies. Admittedly, the recent regulations on pension fund surpluses which become operative next month are designed to reduce surpluses and thus, incidentally, to discourage bids motivated by the desire to lay hands on large pension fund surpluses. Pension scheme members would naturally prefer to see the surpluses used to improve benefits, but it is possible for employers to take a contribution holiday, or surplus funds can be returned to the employer where they will attract a high rate of tax. Nevertheless, employees have very real worries about what will happen to their pension schemes in the event of merger or takeover. The Bill specifically mentions rights in pension schemes and seeks to give some degree of protection.
The Government may well tell the House that there is no need for a measure such as this. There is, to my knowledge, an interdepartmental review of competition policy being conducted at present. Perhaps it will be claimed that this review, which I understand is far-reaching and in some depth, will establish whether further legislative steps need to be taken, and if so, just what those should be. Nevertheless, I feel that the issues raised tonight are of such importance—to many people who are in employment and to others who have lost employment through the type of dealings I have described—that some steps need to be taken immediately in order to protect employees.
When my Bill received its First Reading I was asked to appear that evening on the television programme which customarily covers proceedings in this House. As your Lordships will know, the programme goes out fairly late. I had not expected that the audience would be very great or that there would be much response. Nevertheless, I was surprised to receive a number of letters, all of which were supportive of what I was attempting to do. Some were quite pathetic. Several pointed out that it is not only the workforce that is kept in the dark. Shareholders, said one of my correspondents, fare no better.
One correspondent told me that he had been employed as an accountant in a small manufacturing firm which happened to have a great deal of property. The manufacturing firm was, he said, profitable and successful. The firm was acquired and the manufacturing part closed down. My correspondent and his fellow employees lost their jobs. The sole aim of the exercise had been that of asset-stripping. Nothing had been done in any positive way to assist the economy—indeed, the very reverse—and further statistics were added to those of the unemployed. I sincerely believe that something should be done, and for those reasons I beg to move.
Moved, That the Bill be now read a second time.—(Baroness Turner of Camden)
9.25 p.m.
Lord Rochester: My Lords, I should like first to congratulate the noble Baroness, Lady Turner of Camden, on having, by means of the Bill and the clear way in which she has explained its provisions, enabled
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the House this evening to consider a matter which is not simply of considerable topical interest but of great public concern.
Next, I assure the noble Baroness that, along with my noble friends, I very much sympathise with the view that has prompted her to introduce the Bill; namely, that in situations where companies are involved in takeovers or mergers some means should be found by which employees who are affected should receive greater protection than has often been the case in the past.
I feel qualified to speak from experience on the Bill primarily from the industrial relations angle. I am reminded of the occasion almost five years ago when, as the noble Lord, Lord Wedderburn of Charlton, will recall—because he gave me valuable support at the time—my noble friends and I succeeded in obtaining the agreement of the House to an amendment concerned with employee involvement which, with minor modifications, became Section I of the Employment Act 1982.
That section provides that the annual reports of companies employing more than 250 people should,
"contain a statement describing the action that has been taken during the financial year to introduce, maintain or develop arrangements aimed at"—
among other things—

"(i) providing employees systematically with information on matters of concern to them as employees.

(ii) consulting employees or their representatives on a regular basis so that the views of employees can be taken into account in making decisions which are likely to affect their interests".

That is a modest provision and it does not even oblige companies to inform and consult employees or their representatives. However, it has the merit that it commanded support from all parts of the House and thus reflected a consensus which has, I like to think, enabled employee involvement in British industry to be advanced just a little.
However, I recall that in its original form that amendment referred to employees or their representatives being consulted regularly so that employees' views could be taken into account before—and I stress that word—decisions were made. At the time that wording evoked concern on the Stock Exchange and, indeed, in companies having first class records in the practice of employee participation.
I acknowledged the point at Third Reading of the Bill on 13th October 1982 in saying, as reported in Hansard at col. 829:
"Having myself been involved in industrial decision-making, I accept that problems do sometimes arise involving matters of considerable commercial sensitivity, perhaps even affecting other companies, when with the best will in the world it may not be practicable to consult employees or their representatives before a decision is taken.".
It was that consideration which led me to accept the modified wording that now forms part of Section 1 of the Act to which I have already referred.
I hope that the noble Baroness, Lady Turner, will not think it churlish of me to question, having regard to the current anxieties about insider dealing, whether this problem is dealt with adequately in Clause 1 of her Bill, which requires any company involved in a merger or takeover bid to inform any trade union representing

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employees in the company concerned at least 30 days before any binding agreements are entered into.
The other point in Clause 1 that gives me cause for concern is the emphasis which it places on informing and consulting only trade unions rather than employees or their representatives. I say that because, as the noble Baroness will know very well, employee representatives may be, but of course are not by any means always, trade unionists. I suggest that it is noteworthy too that there is no reference to shareholders in Clause I nor, so far as I can see, anywhere else in the Bill.
Incidentally, before leaving this matter I should say that I have given the noble Lord, Lord Trefgarne, notice that I should like him, in speaking for the Government, to tell the House, however briefly at this time of night, whether he is satisfied with the progress that has so far been made by companies in developing employee involvement in accordance with Section 1 of the 1982 Act.
To guard against the possibility that Clause 1 of this Bill, for the reasons that I have given, is so defective that it is not practicable to implement it in its present form. I should like to take this opportunity to explore a little further how the fundamental problem of protecting employees, and indeed the public interest, in merger and takeover situations might be dealt with in other ways.
First, I should say that my own party for the past 50 years at least has advocated a policy under which employees would join with shareholders in electing directors to the boards of companies. This has the potential advantage that the directors who are thus elected would represent exclusively neither shareholders on the one hand nor employees on the other, but would be answerable to both constituencies. So far as concerns the underlying purpose of this Bill, the adoption of such a policy would have the effect that the interests of the employees concerned would be protected by directors who owed their appointment at least partly to those employees and who would of course be in a position to receive the earliest possible intimation of mergers or takeover bids.
Next, I suggest that it is significant that in a lecture which he gave at Heriot Watt University in Edinburgh last Thursday, the president of the CBI, Mr. David Nixon, is reported to have said:
"If well run companies must fear to be swallowed by a shark who does nothing more than bring ruthlessness in practices, then may not
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the time come for the institutional investors and the banks to limit the appetite of the raiders?".
He went on to say that among ways of achieving that might be to give fund managers of investment institutions guidelines on how to behave in contested takeovers—for example, banning them from selling in the stock market, so preventing what he called "short-term operators" acquiring substantial quantities of stock.
I consider that the recent bid by BTR to take over Pilkingtons, a case to which the noble Baroness referred, was a striking example of how a firm, in the CBI president's words, "doing all the right things" might have fallen victim to a predatory takeover. For Mr. Nixon, "the right things"—this is highly relevant to Clause 3—means companies investing in their long-term future—in training, research and development and product innovation. In the case of Pilkingtons, a firm of which I have some knowledge and which enjoys relations with its employees which are of a high quality, the evenutal withdrawal of the bid must have been largely due to the spontaneous way in which the workforce expressed its outrage at the prospect of being managed by people other than those whom it had come to respect as its leaders.
Effective voluntary action to deal with the problem is preferable to legislation. But the trouble with voluntarism is that it necessitates volunteers. If they are not forthcoming, legislation is all that remains.
However, the noble Baroness, Lady Turner, must know very well that even if the Bill were permitted to pass unscathed from this House, it stands no chance of being accepted in another place.
Against that background, if there is to be resort to legislation, the best way of achieving the degree of consensus needed to make it effective may be to seek, as in Clause 8, to amend the Fair Trading Act 1973 by importing at least one or two of the additional criteria contained in Clause 3, but in so doing to provide for action to be initiated by reference merely to the public interest rather than through the more controversial trigger of consultations with trade unions alone.
In conclusion, I hope that, whatever this Bill's fate, this debate will prove helpful in focusing public attention on the need for some effective means of curbing the current excess of speculative capitalism that is directed towards short-term gain rather than the long-term improvement of our industrial performance.
9.40 p.m.
Lord Denning: My Lords, I too should like to thank the noble Baroness, Lady Turner of Camden, for introducing this Bill. Furthermore, I should like to support its principles. The fundamental point is that on any takeover or merger the employee should be protected, and entitled to the first consideration, rather than the shareholders, most of whom have not put capital into the company but have simply bought shares on the Stock Exchange and receive the glossy catalogues every year. The employees, the servants, are the people who have built up the company and given it its goodwill. Certainly, they should be consulted before any takeover of the company is effected.
I turn to a heading of The Times on 19th March of this year which states in bold, black headlines,
"The employees are a company's biggest asset, and they must always come first".
In these days of mergers and takeovers the employees do not come first or last; they do not come into the matter at all. Their interests are entirely disregarded by the operators in the stock market. We all know what happens. These operators buy up enough shares to give them control over the company's affairs. One group bids against another group until they have sufficient numbers of shares to gain control. Having gained control they can appoint new directors. They can close down plants. They can sack employees and make them redundant in the interest, they say, of efficiency.
However, in all those discussions and takeovers there is no regard whatever for the interests of the employees. Nor is there any consultation with them. Underneath those stock market dealings there are the sharks, the inside dealers who, owing to their inside knowledge, can make quick profits. They can buy the shares and get out quickly. They know that the shares are going up. Those sharks, those inside dealers, make their quick profits.
Although they may be regarded as on the sidelines, but very important when millions and billions of pounds are involved in the merger or takeover, there are the large group of professional men—the stockbrokers, accountants and lawyers—with their fees and large commissions dependent on the amount of the takeover. The larger the deal, the larger are the fees. I need only mention the Westland affair, the Guinness affair and the like. We have seen these operating in the City of London. The employee is forgotten and ignored by those operators. Yet it is the employees who have done more than anyone to build up the company and its goodwill.
In these situations what is to be done to protect the employees? We can take a leaf out of the cases where it is not merely shares that are transferred but the company's undertaking. One does not merely sell shares but the undertaking to the other company. We have a good example because this is being provided for by a directive of the Economic Community of Europe which is being imposed on all the member states in order to protect employees on such a transfer. I should like to recite two passages from the directive, which state the principles:
"Whereas economic trends are bringing in their wake, at both national and Community level, changes in the structure of
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undertakings through transfers of undertakings, businesses or parts of businesses, to other employers, as a result of legal transfers or mergers;
Whereas it is necessary to provide for the protection of employees in the event of a change of employer, in particular to ensure their rights are safeguarded".
The directive then recites many safeguards for the employees concerned in a transfer. Article 4 states:
"The transferor and transferee shall be required to inform the representatives of their respective employees of the reasons for the transfer; the legal economic and social implication of the transfer for the employees and the measures envisaged in relation to employees."
That directive was issued in 1977. It has been implemented in England by the regulations called The Transfer of Undertakings (Protection of Employment) Regulations 1981 and, if I may say so, also by Parliament in relation to the Royal Dockyards by the Dockyard Services Act 1986.
Therefore, we have provisions for the protection of employees in our law when businesses are transferred from one to the other, or the instance pending now; namely, the transfer of the Royal Dockyards to other undertakings. However, the provisions concerning the transfer of undertakings do not apply to the transfer of shares, which is why stock markets have been able to deal with the many transfers without consulting the employees. If those provisions had been in use employees would have been informed and consulted. The underlying trouble today is that the transfer of undertakings regulations do not apply to the transfer of shares and yet the result is the same. By transferring shares, or a majority of them. you have the same result as if you have transferred the undertaking itself.
In Clause 1 of the Bill they have taken the very words "legal, social, and economic consequences" from the directive and transfer regulations, and made them not only applicable to the transfer of undertakings but also to the transfer of shares.
Then a little further into the Bill we can take a leaf from the Treaty of Rome and the Common Market. The provisions in Articles 85 and 86 of the Treaty of Rome, which is part of our law, deal with unfair competition and with an abuse of a dominant position. Many takeovers are to eliminate competition—you buy up your rival's shares to take control of him so he can no longer compete with you. The object of a takeover is to eliminate competition from your rival companies, or to get into a dominant position in the market and there we take the leaf.
Are we to deal with this unfair competition? Are we to deal with the abuse of a dominant position? There we can turn to the Fair Trading Act 1973 which applies only in certain cases of unfair competition. In such cases the matter can be referred to the Secretary of State and if he thinks fit he can order an inquiry to see whether or not the merger is in the public interest.
That is a very good way of dealing with cases where there is potential unfair competition, or potential abuse of a dominant position. However, it is very limited. Noble Lords will have read in the newspapers that it was suggested that the Pilkington takeover should be referred, but the Secretary of State did not refer it. It is a very limited way of dealing with the matter.

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In the next clauses of the Bill it is suggested that we should have a wider method of dealing with unfair competition and abuse of a dominant position. It should not simply be decided by the Secretary of State. It is suggested that a trade union, along with the Director General of Fair Trading, could inquire into the matter and see whether or not the proposed merger or takeover is contrary to the public interest. In other words, the jurisdiction of the Secretary of State should be expanded to cover all those matters to see whether or not they are in the public interest.
As I understand it, those are the principles underlying this Bill. I should not say that they are right in every detail but the principles underlying it are worthy of consideration. Therefore I ask your Lordships to give a Second Reading to the Bill.
9.57 p.m.
Lord Monkswell: My Lords, I should also like to thank the noble Baroness, Lady Turner of Camden, for bringing the Bill before us. Its timing is very apposite. The hour is late and I fear that if I were to cover all the good points of the Bill we should be here far too long. Therefore, with the leave of the House, I shall concentrate my remarks on two particular aspects of the Bill. The first matter concerns Clause 1(2)(c)(i), which refers to the information that a company should supply to the trade unions about,
"the size and shape of the workforce"
and the company's intentions. Secondly, Clause 3(1)(f) refers to the consideration of the Secretary of State,
"whether the change would … secure national control of strategic industries, or be in the interests of national security".
All governments have a duty to ensure the defence of the realm. As with policing, health care and several other aspects of public policy, the defence of the realm can only be ensured with the consent, support and assistance of the people. We have only to remember the recent example of the South Atlantic campaign—the Falklands War, as it is described—to realise the importance of the support that the armed forces received from the civilian population at that time.
To enable the people to do their part they need the capacity to produce the sinews of war. In times gone by the village blacksmith would produce ploughs and scythes in times of peace. In times of war he would produce swords and battle-axes. He would depend on other local sources for his charcoal and steel. In modern times we have whole industries to supply our needs in times of peace. Those industries would also need to supply us in times of war. In peacetime, when we allow our industries to decline we risk reduction in economic prosperity. In war, we risk defeat through the same cause.
The trade unions know this. They know that in defending their industries they are defending their economic prosperity in times of peace and they are also defending their ability to support the national defence effort in time of war. The trade unions also have an expertise which is unavailable to government. They know how firms work from the inside. For example, where a takeover or merger is projected and the new managers—if one can call them that—say that
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they will rationalise the design capacity of the two original establishments, the workers within those firms will know which design capacity will be closed and which will be built up. They will be able to advise if there is going to be a loss of strategic capacity from this country or from the control of the UK.
The noble Lord, Lord Rochester, mentioned a possible problem with this Bill when he talked about what would generally be described as commercial confidentiality. I should like to give the House one example from my experience of how commercial confidentiality was dealt with by trade unions and employees. Some years ago the company for which I worked had a need to take some decisions which affected the workforce drastically. They realised that the only way they could get the consent of the workers was to explain the circumstances to them.
We had a mass meeeting of over 1,500 employees in that firm. A small number were non-union but we allowed them to come to the trade union mass meeting. At that meeting there were items of information of a highly confidential nature which were imparted to the trade unions and employees in the firm. To my knowledge, not one aspect of that confidential information leaked out in any respect. It was held privy by the workforce. I can only give that as an example to allay fears which noble Lords may have on that aspect.
I am glad to see that the noble Lord, Lord Trefgarne, is to respond to this debate on behalf of the Government. I hope that this indicates that the Government are beginning to wake up to the importance of various industries with regard to national defence. I hope that with the help of this Bill and the support of the trade unions this Government will at last take steps to ensure that vital industries, vital firms and parts of firms will remain under UK control, within the UK, in the interests of national security.
To sum up, this Bill will ensure that important information is forthcoming. It will encourage trust between management and workers and it will enable the Government to review the implications of change for national security. I commend the Bill to the House.
9.57 p.m.
Lord Wedderburn of Charlton: My Lords, the mark of a good Bill is that it never matters at what hour of the night we come to debate it. In that context, I. feel that all your Lordships will wish to thank my noble friend for bringing forward such an important matter which has indeed received remarkable support and which I apprehend the Minister will not wish wholly to reject.
We are living, to quote the Director General of the Office of Fair Trading, in years of an almost hysterical merger boom. The hyperactivity of the City in the booms of the mid-'fifties, the late 'sixties and the early 'seventies is put in the shade by the vast amount of assets, the great costs, not to be ignored, and the great risks to jobs of workers which are involved in the present wave of takeovers and mergers. It is possible to quote, not on any party basis but across the whole spectrum of those who understand the markets, those

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who say that this has now reached such proportions that the entire future of British investment and markets has to be thought about very carefully.
Two days ago the chairman of Lloyds Bank warned that the City was in danger because of the short-term outlook and the manifestation of the takeover wave. Today's Financial Times reported the newly-appointed Director General of the CBI saying that the tendency for the City to take the short-term view in these takeovers was worrying, and that,
"We must get across what havoc this causes inside the companies and how it takes management's eye off the ball".
If ever there were an issue where workers in their trade unions, and otherwise, and management had, in many cases, common cause, it is this.
My noble friend is surely to be congratulated for bringing forward a Bill the principles of which are very hard to rebut. She will not, I know, misunderstand me if I say that I would want to amend some of the terms and definitions. But we are tonight debating the principles. I apprehend that the first of the two main pillars of principle is that in takeovers and mergers, workers' interests should receive elementary safeguards in our law which they do not now receive in regard to continuity, unfair dismissal and consultation with their representatives over information and meetings called for by the Bill.
The second pillar is that in takeovers and mergers, certainly of any great size, the public interest includes the interest of employees and indeed of employment, which must be safeguarded, and that this means putting the burden of proof upon those who come with the merger to whatever bodies are set up to safeguard the public interest.
On the first area, it is now generally accepted that a modern and civilised system of employment law in these types of situation provides that contracts of employees should continue and not be ruptured by changes of ownership; that employees should be protected against unfair dismissal arising from takeovers; that new owners should continue negotiation and recognition structures with the trade unions of their employees; and that those trade unions should be informed and consulted in advance about the nature and intended consequences of the takeover, not least where major changes of the workforce are envisaged.
I say to the noble Lord, Lord Rochester, that it may be that some of the apparent disagreements between us about whether there should be negotiation with trade unions or with workers, or with both, are really rather semantic. When I and, I apprehend, most of my noble friends, use the term "trade union", we speak of representatives of a combination of workers freely chosen by them to speak on their behalf, which, in any collective matter, is almost inevitable as a matter of procedure. That, of course, is a formulation which is included with the definition of "trade union". So whereas the noble Lord might want one union when I might want another—that is a different matter—I am not sure that we are very far apart on this issue.
My noble friend's Bill addresses to us all of these issues in a timely manner. As my noble friend said, more than half a million workers were involved in the
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six most recent takeover battles of 1986–87. Many of the conditions to protect workers are indeed more fully elaborated in many of the employment law systems of western Europe.
I pause to say to the noble and learned Lord, Lord Denning, that I am not at this point following him down the road that workers must come first, although I apprehend that it is one of the first occasions that I have found myself outflanked on the left by the noble and learned Lord. I say merely that those more moderate principles for the moment are found in other employment law systems and not in ours. As the noble and learned Lord told the House, that is really very odd. The directive that he cited, No. 187 of 1977, requires the,
"safeguarding of employees' rights in transfers of undertakings, businesses or parts of businesses".
The Government's legislation to enact that directive took the form of the narrowest possible compliance in the notorious regulations of 1981, Statutory Instrument 1794.
The 1981 regulations apply, albeit narrowly, certain fundamental protections on unfair dismissal, consultation and the rest, where there is a transfer of an undertaking in the nature of a commercial venture. In most member states that bites—in France, West Germany and in Italy—because mergers there, as I am sure the Minister knows, frequently take the form of transfers of assets or of the undertaking in some recognisable form. Indeed as my noble friend Lady Turner said, one has to add to that the various rights of works councils. She cited the Netherlands, the works councils in Germany, the comités d'entreprise, different and diverse but rights superadded to the directive as applied. But here most takeovers take the form of a transfer of shares and so the regulations do not bite.
I pause to ask the Minister—not necessarily tonight but perhaps he will consult his right honourable friend—to consider further whether we really are obeying the spirit of the directive. The Luxembourg Court, as the Government know from recent equal pay matters, has gone rather strongly for the spirit of other directives. I wonder, I simply wonder, whether one day in looking at this they will think that our regulations, which catch so few mergers, really apply the spirit of that directive. To allow this fortuitous formality—made possible by the privilege of incorporation by limited liability, a much bigger immunity than the so-called immunity of a trade union—this fortuitous legislism means that the great majority of workers whose employer changes in reality have no protection in regard to the negotiation provisions, the consultation provisions, the dismissal provisions, and so on. It is manifestly absurd that this should be so and that is the first target that I submit my noble friend's Bill hits and hits in the bullseye.
The bidder's shares are issued to acquire the target company's shares or of course in a real sense the assets. Indeed, as the recent case of Barclay's Bank has shown very well, our regulations are extraordinarily narrow. On 21st March 1987 the Employment Appeal Tribunal had to decide the case of an enterprise set up by Barclay's Bank (BZW) in order to cope with the new work they would move into as, in the old

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terminology, stockbrokers and jobbers, after Big Bang. Although the bank recognised the trade union, it set up this enterprise in such a way that BZW would not recognise unions in the same way. The EAT was forced to conclude that no undertaking had been transferred and therefore the regulations did not bite even though it recognised that this might be an easy way for unscrupulous employers to evade their responsibilities under the regulations.
I see the noble and learned Lord glancing at me. If he were in the Court of Appeal I apprehend that we might have some hope of upsetting that, but I am not sure that that is so at the moment. Something that he did mention I should like to put on record from these Benches—that is, the debt we all, especially the workers, owe him, in relation to the dockyards, because it was largely by his efforts that the Government were compelled to insert provisions of this kind into the Dockyard Services Act 1986.
It therefore would seem that we need at a very elementary level some legislation of the kind that my noble friend puts forward. To the noble Lord, Lord Rochester. I say that in regard to voluntary action I preferred the first formulation of his amendment which the Government would not accept. However, we had some action from the Government. Under the Employment Act 1982 companies are required to report—no more. They are not required to do much but they must report. The situation in my perspective is rather worse than he thought because the only survey I know of company reports on this matter was conducted in 1985. It found that one-sixth of the 300 companies did not make any entry at all on this matter, and only 13 per cent. covered the various headings in any way that was substantial under each. There does not seem to be a great desire by large numbers of companies to follow the voluntary road. The interest of employees of course is part of a wider public interest, as my noble friend has said, especially in regard to longer term investment and investment in manufacturing industry that will provide secure and real jobs.
The Government's position, as I understand it, is that since 1984 they have not referred a merger under the provisions to which other noble Lords have spoken other than on the grounds of competition. That was confirmed on 15th January by the Secretary of State for Trade and Industry, Mr. Channon, in another place at col. 413 to col. 415, where he repeatedly said that he would not refer such a merger to the commission He said that the shareholders would have to decide on the best long-term prospects for the future of the company.
Mr. Channon was asked about the risk to groups of employees in their jobs, especially those engaged on research and development if the bid from BTR was successful. Indeed, there was good reason to ask the question, because the chairman of BTR had said earlier:
"We have never seen the ethical need or material reward for placing research or development to the forefront of our activities".
What did the Secretary of State say? In reply to just that question at col. 416, he said:
"Those involved have to decide. It is not for me to make a judgment between those two management philosophies."
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What I think is being said to the Government tonight is this. Those involved are not merely the shareholders. Those involved, as noble Lords have said, are certainly equally the workers, and those involved should be listened to and should have some rights.
When it comes to the wider issue of mergers, for example, the issue of how short-term activity on the stock market promotes conglomorate mergers rather than those with some industrial sense, where does one find the statements preferring those with industrial sense? Frequently they are from the trade union movement. Mr. Todd, the general secretary of the Transport and General Workers' Union, said in a speech on 20th March on conglomerate mergers:
"There is no industrial logic to them, no economies of scale, no strengthening of the potential for efficiency and collaboration."
I assert that he is saying something that is accepted by a large area of management and—I do not put this aside, although the Government are not very fond of this sort of thing—academic research. The research on mergers is now so strongly against their being, in the British context at least, efficient in the orthodox sense that it is difficult to see what the Government can do except ignore it if they wish to take a different course.
For example, Professor Julian Franks of the London Business School has recently completed surveys of 3,000 companies and comes to that kind of conclusion. Dr. Geoffrey Meeks in Cambridge has worked on mergers for 20 years; Dr. Ajit Singh for a shorter period. All come to the same conclusion, which is in accord with that which the Director General of Fair Trading put forward in a speech that my noble friend quoted earlier. The American authority Professor Edward Herman in his book Corporate Control, Corporate Power on mergers up to 1981, came to the conclusion on the balance of evidence that these led,
"to the vulnerability of small companies, the dominance of large companies and purchasers and the lack of evidence of profitability enhancement as a consequence of acquisitions".
The invisible hand of the market is not blessed with omniscient guidance. If the Government have not taken that on board, it is a sad prospect for the future. They may, of course; but I hope that the Minister will not hide behind the Government review of competition policy. I understand that that will limit what he says, but certain aspects are surely absolutely clear. I cite one final example, because it is a bridging point. A recent publication from the London Business School called Acquisitions: the Human Factor is the result of a study of a considerable number of takeovers from the inside, as it were, talking especially to the managers who were concerned. Forty-five per cent. of the managers thought the result had been unsuccessful or relatively so; 55 per cent. thought that it had been relatively successful or better. But the important thing is that—and I quote—
"In two-thirds of the acquisitions regarded as successful a senior executive from the buyer company, often the chairman, personally communicated with all levels of the organisation at in-plant meetings, area conferences or other occasions, and in two-thirds of the unsuccessful acquisiton the buyer did not do this".
The link is there with communication, information and consultation with the workforce. It is a clear one, and one that bridges the two points.

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We need a new merger policy which includes at least three things. The first is a definition of "public interest" which places greater emphasis upon the promotion of secure employment and indeed upon strategic industries for the various purposes that my noble friends Lady Turner and Lord Monkswell have mentioned. Secondly, the onus of proof must be placed upon those who promote large mergers to prove that they will be in the public interest. A case is often won or lost on the burden of proof far more than on the substantive law.
That is the policy of my party, and many things flow from it. Indeed, as the noble Lord, Lord Rochester, suggested—and I wish I had time to follow him into these matters—consequences flow for company law, for the status of the Takeover Panel and of the Securities and Investments Board, which must become public agencies in a fuller sense for the disclosure of nominees' shareholdings and indeed for insider trading. I say, as did my noble friend Lord Monkswell, that it is the general experience—and it was certainly the experience of the inquiries made (which were somewhat extensive) on this matter by the Bullock Committee, of which I happened to be a member—that it is difficult to find cases where confidentiality is broken by union officials, shop stewards or indeed representatives of workers generally. I ask your Lordships to think, for example, about the manufacture of a new car which comes out, and which is something the whole workforce knows about for a long time. It is difficult to find examples of breaches of confidentiality here. So though one must look at that, obviously one must look at other matters related to company law.
I conclude by saying two things. First, the point on company law is a wider one. I would put it in this way. Our law at the moment places certain very small obligations on employers in takeover situations, and they should be larger. But its approach is to say, "Of course if you break those obligations it will have no consequences in the merger and company law field"—that is to say, the observance of obligations in employment law is not in our orthodox thinking a condition precedent to proceeding with a merger or a takeover to the company law field. I congratulate my noble friend on the fact that her Bill approaches this area from a different aspect in Clause 4; namely, that the obligatory disclosure and consultation is to an extent a condition precedent such that if it does not take place the takeover or the merger may not be approved. That seems to me to put a different principle before your Lordships, and one that deserves support.
Finally, the Bill also takes a first step towards the protection of pension funds from company raiders in this area of the law. My noble friend has spoken about limitations in other areas of the law, and the decision on the Courage Group's pension fund by Mr. Justice Millett this year which protected the fund from the extraordinary raid which the Hanson Trust attempted to make upon it. That attempt to milk the pension fund, standing at some £70 million, of the employees was fortunately prevented by the High Court at the last ditch. Although it is true that further regulation, especially through the tax system, is now coming into
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place, I hope that the Minister will take on board the fact that we may not yet have seen the last of predatory raids on companies for the purpose of obtaining advantage from the pension fund. It may be said, "Well, the surplus will only be 5 per cent. which belongs to the employer." Nevertheless, 5 per cent. of a large pension fund can be a very large sum and it could at least pay for the costs of the bid. The Bill raises that issue and is to be commended on that ground, too.
In a global market of an internationalised economy it is not easy to execute an effective domestic policy on takeovers and mergers. But we can take the first step to a more rational policy and one that protects working people in a way which, so far, our law has more or less wholly failed to do.
10.21 p.m.
The Minister of State for Defence Procurement (Lord Trefgarne): My Lords, I have listened with interest to the debate this evening. We have seen in this country recently a considerable number of large takeovers, and the concern of the sponsors of these proposals is perhaps understandable. However, the Government have profound reservations about the Bill. It would necessitate major changes to our current legislation on mergers; namely, the Fair Trading Act 1973. I do not wish to rule out the possibility of legislative change in due course. Indeed, as your Lordships will be aware, the whole area of law and policy on mergers and restrictive trade practices is currently under review. The proposal being considered today would, however, make a number of important changes which need careful and thorough consideration and for which the review provides a proper forum.
Among the changes to current procedures proposed by the Bill would be a change in the burden of proof: that mergers henceforward would, to be allowed, need to prove themselves beneficial to the public interest rather than to be shown not to be against the public interest, as at present. If implemented, such a change, together with automatic reference of all mergers to the Monopolies and Mergers Commission, would have major implications not only for companies which would, in all cases, be subjected to an in-depth investigation by the Monopolies and Mergers Commission, but also for the commission itself, since that proposal would at the very least result in a major increase in its workforce to many times its current level.
In some respects the proposed legislation shows—and I hope the noble Baroness will not mind my saying so—a misunderstanding of the procedures for scrutinising mergers under the Fair Trading Act as they operate at present. Clause 3 of the Bill sets out certain matters which must be considered by the Monopolies and Mergers Commission in its investigation. Under Section 84(1) of the Fair Trading Act the MMC already has a wider remit than this. It has a duty to take into account all matters which appear to it in the particular circumstances to be relevant. It seems unnecessary and undesirable to narrow down that remit.

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Clause 4 gives trade unions the right to make representations about mergers to the Office of Fair Trading, the Monopolies and Mergers Commission and indeed to the Secretary of State for Trade and Industry. That right already exists. Trade unions can and often do make such representations, and these are of course taken into account. Many of the concerns which the Bill expresses are therefore already met by existing legislation. The wider question of the rights of employees in merger situations is, moreover, being considered in the context of the review to which I have already referred.
Turning to the proposed rights for employees in a little more detail, what does this Bill propose? First, it aims for an extension of trade union rights to information and consultation. As many of your Lordships will be aware, there is already legislation in this area. The Employment Protection Act 1975 places a general obligation upon employers to provide information to recognised trade unions for collective bargaining purposes. There is an ACAS code of practice giving practical guidance as to what this obligation entails. That was the purpose of the amendment to which the noble Lord, Lord Rochester, referred during his speech, and with which he was much concerned during the passage of the Bill, which is now an Act.
Furthermore, the same Act places an obligation upon employers to consult recognised unions about any proposed redundancy, and details minimum periods in which this consultation shall take place. The Government believe that these existing provisions already provide a substantial and adequate measure of statutory protection for employees. To introduce a new range of information and consultation requirements for the specific circumstance of proposed takeovers and mergers would in many instances merely serve to duplicate the existing provisions.
Furthermore, it would be impractical to require firms to give information about every aspect of the consequences of a takeover or merger. There will be many aspects of any such change that will be simply unpredictable. To require employers to give binding assurances about future plans, which must always be subject to changing circumstances in an uncertain world, is simply unrealistic. The major effect could only be to impose new and unreasonable burdens on business.
Let no one be in any doubt that the Government fully support the development of voluntary consultation arrangements between employers and employees. But when it comes to proposals for prescriptive legislation it is clear that in the real world of industry and commerce effective consultation depends upon the presence of the spirit of trust and co-operation, not upon the existence of formal structures and statutory rights. Trust is an attitude of mind and you cannot impose an attitude of mind by legislation.
Clause 5 of the Bill provides for the guarantee of continuity of employment for workers affected by a takeover or merger. The Employment Protection (Consolidation) Act 1978 preserves for the purposes of statutory employment rights the continuity of employment of employees affected by a takeover merger, or sale. And of course when a takeover is
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effected by share transfer there is no change in the legal identity of the employing company, and therefore the possibility of employees' continuity being broken will not arise.
The Bill then goes on to require the new employer to recognise any independent trade union recognised by the old employer. Furthermore, the new employer may not change employees' terms and conditions for 12 months without union agreement. I am afraid that these proposals have little to commend them. The Government firmly believe that trade union recognition is a matter for negotiation and agreement between employers and unions. Nor would I consider it appropriate to grant trade unions the power of veto over changes in terms and conditions of employment. In some cases, businesses which are the subject of takeovers are businesses which are performing badly. In the interests of everybody managements must be free to take the measures necessary to turn around an unprofitable enterprise without having their hands tied behind their backs.
Clause 6 seeks to provide unfair dismissal protection for employees if the change of ownership is the principal reason for their dismissal. The Government take the view that the existing unfair dismissal legislation provides appropriate protection for employees against unjustified dismissals by employers. Any new provision of this kind is therefore unnecessary.
As it stands, this proposal would create a legal minefield for new employers, who could be prevented from making the changes in the levels of their workforce which are necessary to rescue inefficient or unprofitable businesses which have come into their hands.
May I add in parenthesis that the Transfer of Undertakings Regulations which implement the EC acquired rights directive provide certain protections for employees when businesses are transferred other than by a share transaction. I know the noble and learned Lord, Lord Denning, is very much aware of that, and he and I exchanged a number of views on the matter during the passage of the dockyard legislation to which he has referred.
Where the Bill deals with pension rights, it proposes some rather inflexible provisions which I suggest would not always work to the best interests of the members. Occupational pension schemes are set up voluntarily by employers, almost invariably under a deed of trust. We believe that it is important to retain this voluntary principle and that trust law is a suitable basis for regulating the conduct of pensions schemes.
Trust law places a general duty on trustees to act at all times in the best interests of all the members in accordance with the trust deed and rules of the scheme. The flexibility and protection of trust law have led to a wide variety of pension schemes, tailored to the differing circumstances of individual firms and employments. We should be very wary of interfering with these provisions.
In addition, there are specific legislative provisions which provide for the protection of members. These cover matters such as the preservaton of benefit and the right to a transfer value when pensionable service

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or relevant employment ends before pension age. There are also new rights for members and their trade unions to have comprehensive information about their pension scheme.
The provisions of the Bill seem to pay little regard to the variety of circumstances in which a company may be merged with or acquired by another. If the identity of the company remains unchanged, the pension scheme remains in existence and the employees remain in membership, pensionable service continues and rights continue to accrue. In most other circumstances, pensionable service in the original scheme will terminate. Existing legislation provides either that the accrued benefits are preserved in the original scheme, or are transferred to another scheme, or are secured with an insurance company. In our view, these provisions provide adequate protection for members and are more flexible and give greater freedom of choice than the proposals in this Bill.
Perhaps I may now turn to some of the points that have been raised this evening. In opening the debate the noble Baroness, Lady Turner, made various criticisms of the operation of the Government's current policy on mergers. I must emphasise that although it is our policy to make decisions on the reference of mergers to the Monopolies and Mergers Commission primarily on competition grounds, this does not mean that they are made exclusively on competition grounds or that other considerations—for example, those of employment—are not taken into account in that decision. When a merger is referred, the Monopolies and Mergers Commission has a duty to take into account all the relevant circumstances. I cannot therefore accept that the interests of employees are disregarded under current policy.
The noble Baroness correctly referred to the review of law and policy on mergers and restrictive trade practices. That review is considering a number of important and complex issues. I can assure the noble Baroness that the question of the rights of employees in takeovers is one matter under consideration.
The noble Lord, Lord Rochester, asked me about the position of Section 1 of the Employment Act and whether we were satisfied with the operation of it. Yes, my Lords, we are indeed satisfied with progress in employee consultation and involvement, as shown by reports made under Section 1 of the 1982 Act. Perhaps it would help the noble Lord if I were to send him a copy of the latest analysis of the reports. I shall be happy to do that. The noble Lord also referred to certain policies which had, he said, been endorsed by his party for the past 50 years. I suppose I am entitled to comment that it is more or less for that period that the Liberal Party has been out of office, but whether there is any connection between the two I should not care to suggest.
The noble and learned Lord, Lord Denning, referred to the fact that the regulations do not apply where a share transfer is principally involved. But the EC directive, to which the noble and learned Lord referred, as did the noble Lord, Lord Wedderburn, applies only where there is a change in the legal identity of the employer. This is not the case in takeovers affected merely by share transactions. The
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regulations to which I have referred fully implement the directive.
The noble Lord, Lord Wedderburn, asked me why the United Kingdom lagged behind European countries on information and consultation rights for employees. I think he felt that the regulations did not fully implement at least the spirit of the directive to which he referred. As I said, there is basic provision in the Employment Protection Act. Beyond that, the Government prefer to encourage industry to develop voluntary arrangements. Experience abroad tends to confirm our view that real consultation depends not upon legal requirements but upon co-operation and trust between managers and workers.
The noble Lord, Lord Wedderburn, referred to a number of worthy and distinguished luminaries in this field. Indeed, the noble Lord is just such himself. I am told that his book The Worker and the Law is one of the standard works in this field. Of course, he has also much impressed us tonight with his knowledge of these matters. However, perhaps I may be forgiven for doubting whether he has displayed equal prowess in objectivity. I do not think that he has looked at the Bill dispassionately. No doubt I would be assisted if I were to read the noble Lord's book or even to attend one of his courses at the London School of Economics; but I am not certain whether I would qualify for admission to that august establishment
In conclusion, as regards the proposals in the Bill which would necessitate significant changes to current mergers legislation, the review currently in progress is, in the Government's view, the proper forum for consideration of any changes. As I mentioned, the rights of employees in merger situations are being considered in the context of this review but there is no doubt that some of the proposals in this Bill would, where they were not duplicating existing legislation, impose undue additional burdens upon businesses and constrain management in their right, indeed their obligation, to manage effectively. Finally, the pension proposals would reduce flexibility and freedom of choice. For those reasons, I regret I cannot commend the Bill to your Lordships.
Lord Wedderburn of Charlton: My Lords, before the noble Lord sits down, I have two questions. I did not want to interrupt the noble Lord earlier as I thought it would be better to wait; partly, as I now see, because I can welcome him to the opening of next term.
My first question is to ask the noble Lord to be so kind as to send me a breakdown of the company reports under Section 1 of the 1982 Act that he is sending to the noble Lord, Lord Rochester. My second question is rather more substantial but can be quickly put in this way. Throughout his speech the noble Lord the Minister relied on what he called, more than once, the basic protections of the Employment Protection Act 1975—the right of trade unions to consultation on redundancy and to information for the purposes of collective bargaining. He said that that was adequate and that to go further was an unnecessary duplication. I took that at least to be the thread of his argument, repeated more than once.
If that is so, the Government might be understood to be saying that although they had to go further under

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the European directive they did not see the point of doing so and that the 1981 regulations are an unnecessary duplication, or even worse. I wonder whether the noble Lord wanted that indication to remain as the Government's position.
Lord Trefgarne: My Lords, the directive was in 1977, if I remember rightly. Between 1977 and 1979 noble Lords opposite and their right honourable friends had an opportunity to do something about it, though they did not. Indeed, it remained for the Conservative Government who arrived in 1979 to do something, which we did as soon as the opportunity arose in 1981, as the noble Lord is aware.
Having said that, I think that the regulations honour the spirit of the directive. The noble and learned Lord, Lord Denning, and I exchanged a number of views on those during the passage of the dockyard legislation a few months ago. I think I was able to say at that time that we were fully satisfied that the regulations met the needs of that particular situation.
As for sending the noble Lord a copy of the papers that I send to the noble Lord, Lord Rochester, naturally I shall be happy to do that.
Baroness Turner of Camden: My Lords, I wish to thank the noble Lords who at this late hour have participated in the debate on the Bill that is before your Lordships' House. I am disappointed to hear from the Minister that he believes that legislation already exists to cover a great deal of what the Bill is seeking to do. If that is the case, I can only say that it does not seem to be to be working very effectively. Reference has been made to the need and the preference for voluntary action, and so on; but it is because there has been an absence of that kind of voluntary action that trade unions have generally become extremely concerned and why I have put this Bill before your Lordships' House.
The Trades Union Congress has had a number of meetings and discussions about the general situation. It is very concerned indeed about the threat, as it sees it, to workforces because of what has been described as "merger mania". With the exception of the Minister, I think that all noble Lords who have spoken in the debate, whether they have approached the subject from the standpoint of the provisions of my Bill or differently, as has the noble Lord, Lord Rochester, seemed to have been saying that there is a need to look again at the situation, that employees are vulnerable in takeover and merger situations, and that whether or not my Bill adequately meets the situation, there is nevertheless a need to do something different and additional to what is now provided in regulation and statute.
As for the 1981 regulations, I am very grateful to the noble and learned Lord, Lord Denning, for his very clear exposition of what they mean. Certainly when they were first issued, I remember that in my own union we sought legal opinion as to their effect and we had a very substantial opinion. The upshot seemed to be that when it came to applying those regulations to practical situations that were likely to be faced there
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would be very little protection available for the employees concerned. So I do not believe that the 1981 regulations adequately cover our situation.
As for the remarks of the noble Lord, Lord Rochester, about secrecy, I commend to him the observations of my noble friend Lord Monkswell. Quite clearly on this side of the House we do not believe that secrecy is a problem so far as concerns unions. This has never been shown to be the situation. Nevertheless, in the Netherlands code, as I understand it, there is provision which seeks to deal with secrecy, where that may be a problem. Provisions in the Netherlands legislation go beyond what is provided here for employees.
I say again to the noble and learned Lord, Lord Denning, how flattered and grateful I am that he has participated in the debate this evening, and I am deeply grateful for the experience that he has brought to bear on this situation both in regard to the docklands and so far as concerns the general legal position of employees who are threatened by takeovers and mergers. I am grateful for what he has had to say and the support that he has given.
I do not want to take up much more of your Lordships' time as it is very late. In conclusion, perhaps I may simply say that I should like my Bill to complete its Second Reading this evening.
On Question, Bill read a second time, and committed to a Committee of the Whole House.
House adjourned at sixteen minutes before eleven o'clock.

  UNEMPLOYMENT BENEFIT: EFFECTS OF APPEAL COURT DECISION
  UNEMPLOYMENT BENEFIT: EFFECTS OF APPEAL COURT DECISION
  PRISONERS: STATISTICS
  PRISONERS: STATISTICS
  BADGERS AND TUBERCULOSIS: CONSULTATIVE PANEL
  BADGERS AND TUBERCULOSIS: CONSULTATIVE PANEL
  ARTS COUNCIL LITERATURE GRANTS
  ARTS COUNCIL LITERATURE GRANTS