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Commons Chamber

Volume 721: debated on Monday 22 November 1965

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House Of Commons

Monday, 22nd November, 1965

The House met at half-past Two o'clock


[Mr. SPEAKER in the Chair]

Oral Answers To Questions

Pensions And National Insurance

Retirement Pensions


asked the Minister of Pensions and National Insurance when legislation will be introduced giving equal retirement pensions to all pensioners over the age of 65 years regardless of deficiencies in their contribution records.

The National Insurance Scheme is a contributory one, and I have no proposals for legislation such as the hon. Member suggests.

May I ask the right hon. Lady if she is aware of the very considerable hardship caused to many elderly people? Cannot she give this matter further consideration and find some means of alleviating their very real suffering?

Yes. I am very well aware of the case which interests the hon. Member, and there are many cases like the one with which he has come in contact. It seems to me that in our review we must try to find some way of helping these people, but the National Insurance Scheme is not the one that we can use.

Is the right hon. Lady aware that many of the Civil Service pensioners who are looking forward to their increases in the New Year will still have a lower standard of living than they used to have owing to the fact that they do not get the retirement pension? Can she hold out any hope that these people will qualify at some stage for the retirement pension?

No, not for a retirement pension under the contributory scheme that we have. That is why I had to say to the hon. Member for Bodmin (Mr. Bessell) that perhaps in some other way help might be found for such people.


asked the Minister of Pensions and National Insurance what extra financial assistance she intends to give to the retirement pensioners as a Christmas bonus.

I think my hon. Friend has in mind the special payments made last December to people over retirement age receiving weekly allowances from the National Assistance Board. This was an altogether exceptional interim measure pending the very substantial increases in National Assistance which came into force in March, and there was never any intention of making payments of this kind a regular feature of the National Assistance Scheme.

Does my right hon. Friend recognise that this was very welcome last year as an earnest of the Government's sincerity to help these people, and, in view of the improving economic situation, would she not consider giving a repeat gift to these people this year?

No, for the reasons which I gave in my orginal Answer. Last year, because it was impossible to raise the pensions as quickly as all of us would have liked, we wanted to ensure that old people would not suffer unduly because of lack of fuel or perhaps because of the need for extra food. It was for that reason that we gave this extra bonus, as it was called, of £4.


asked the Minister of Pensions and National Insurance if she will give retirement pensioners additional pensions in January, February, and March, 1966.

Does the right hon. Lady realise that the old-age pensioners know that they were robbed of the increased pension for the first three months last year by the inefficiency and bad administration of the Labour Government that allowed that to happen?

No, Sir, I am not aware of that at all and neither do the old-age pensioners think so. Perhaps the hon. and gallant Gentleman will be relieved to know that in spite of the rise in the cost of living the pension today is worth far more than it was at the time of the last increase in pensions made by his own Government in May, 1963.

Income Guarantee Scheme


asked the Minister of Pensions and National Insurance what progress has been made in the formulation of proposals for the introduction of the income guarantee scheme.

As my hon. Friend knows, the introduction of an income guarantee scheme has had to be deferred. Meanwhile, I am doing what I can to make known the improved National Assistance benefits and to emphasise that they can be drawn as of right.

Can my right hon. Friend give an assurance that the administrative problems connected with this are being pursued and that the financial problems and others connected with it are being considered so that, when the time comes to introduce it, everything will be ready and in order?

Is it not a fact that the proposal for the income guarantee scheme would cost about £700 million?


asked the Minister of Pensions and National Insurance what priority Her Majesty's Government now gives to the introduction of a half-pay on retirement scheme.

Work on this scheme is proceeding as part of our long-term reconstruction of social security, but priority has been given to the needs of existing beneficiaries and to the development of a scheme of earnings-related short-term benefits.

In the meantime, can the right hon. Lady suggest what I am to say to my constituents, many of whom are convinced that they will be dead and buried before this Labour election pledge is fulfilled?

Perhaps I can help the hon. Member. He may assure his constituents that it will not take us eight years to introduce our new pension scheme as it took his own Government to introduce the half-baked graduated pension scheme.

In view of the very unsatisfactory nature of the Minister's reply, not only to this Question but to Question No. 3, I give notice that I propose to raise the matter on the Adjournment.

Retirement Pensioners (Earnings Rule)


asked the Minister of Pensions and National Insurance if she will abolish the earnings rule for old-age pensioners, in the light of the proposals of the National Plan for the augmentation of the working population.


asked the Minister of Pensions and National Insurance what changes she proposes to make in the National Insurance pension arrangements, in view of the statement in the National Plan that there are some old people who might be willing to enter or remain in the working population in certain circumstances.

The National Plan indicates the need to make more use of the services of older people who would welcome the opportunity of employment. National insurance pension arrangements taken as a whole already facilitate this, and I do not think that the abolition of the earnings rule would help.

Is not my right hon. Friend aware that there are many people who are retired and would like to carry on working but who are prevented from doing so because of the present earnings rule? My right hon. Friend the First Secretary cannot have it both ways. If we are to increase the working population by 200,000, made up of married women and retired persons, the earnings rule will have to go. Will my right hon. Friend look at this again, please?

Perhaps if I give my hon. Friend the following figures they might put this matter in perspective. At present 386,000 men between 65 and 70 are working. That is 40 per cent. of the total field, and of these, 240,000, that is, the great majority, are working full time and not taking their pensions. Another figure that might help is that a man on part-time work can earn up to £5 net and still draw his full pension. Indeed, in 1953 the Ministry carried out an inquiry among a great many men who had retired at 65 and they had the specific question put to them: if they had been able to continue to work and get their pension, how many would have continued to do so? The figures at that time showed that only 12 in every 1,000 would have done so.

Would not the right hon. Lady agree that the National Plan shows that the activity rates among older people are declining? Would not she agree that if they are to make their contribution to the economy, and indeed if they are to be happy in themselves, it is essential that she look at the earnings rule again and find some acceptable and not too expensive way of getting rid of it?

I am always willing to look at the earnings rule, and I have said on previous occasions that we keep this under constant review. Perhaps one way of getting over some of the problems is to raise the amount which a man may be able to earn before he is affected by the earnings rule, and that is what I am continually keeping under review.

Departmental Staff


asked the Minister of Pensions and National Insurance what increase or decrease there was in the staff of the Departments under her control in the period 16th October, 1964, to 15th October, 1965: and what increase or decrease she anticipates in the period up to 15th April, 1966.

The staff employed by the Ministry of Pensions and National Insurance has increased by 369 since October, 1964. It is estimated that by 15th April, 1966, the number of staff will have decreased slightly from the present level. The hon. Member may also like to have similar information for the Department of the National Assistance Board. In the period October, 1964, to October, 1965, the numbers increased by 576. The Board's staffing requirements for next year have not yet been settled in detail, but there is likely to be a further increase by April, 1966.

Sickness Benefit (Miss Byrne)


asked the Minister of Pensions and National Insurance why Miss M. J. Byrne, of 722, Borough Road, Birkenhead, has been paid no sickness benefit by the Government for the period 16th to 28th July, 1965.

The Joint Parliamentary Secretary to the Ministry of Pensions and National Insurance
(Mr. Norman Pentland)

Miss Byrne was disqualified from receiving British sickness benefit because she was outside the United Kingdom, but, under our reciprocal agreement with the Irish Republic, she qualified for disability benefit in that country by virtue of her British record of contributions.

Is my hon. Friend aware that the rate of benefit which Miss Byrne received is lower than the United Kingdom rate? Is my hon. Friend further aware that this lady went abroad to Eire for a few days' holiday to convalesce on the advice of her doctor? Is it not possible to have some scheme under which people who go abroad for a short period for these perfectly good reasons are not deprived of sickness benefits at the United Kingdom rate?

I am aware of Miss Byrne's case, but, so far as sickness benefit is concerned, under our present reciprocal agreements the main purpose is to enable an insured person to qualify for benefits from the country in which he—or she—is working if he falls ill, even if he has only recently come from the other country. None of our agreements covers Miss Byrne's type of case.

Old-Age Non-Pensioners


asked the Minister of Pensions and National Insurance if she will seek to issue a document to old-age non-pensioners which will enable them, as of right, to obtain concessions granted to old-age pensioners.

I do not think that this matter generally causes difficulty, but I am writing to the hon. Member about it.

Would not the hon. Gentleman agree that it is an absurd situation where one can have a pensioner with an income of £3,000 to £4,000 a year who is able to obtain these concessions, while an old-age non-pensioner with a very small income is unable to obtain them? Can the hon. Gentleman tell us what is the position with regard to old-age non-pensioners on National Assistance? Do they get these concessions, or not?

Yes, but this question is so involved and so wide that it would be impossible to deal satisfactorily with it by Question and Answer, and that is why I am writing to the hon. Gentleman. If he takes note of my information and he is not satisfied with it, then possibly he can come back with another Question.


asked the Minister of Pensions and National Insurance what is her estimate of the annual cost of granting retirement pensions at the present standard rate to all elderly persons in the category of non-pensioners; and what would be the approximate consequential saving on National Assistance grants.

About £95 million a year immediately, including the cost of increasing to the standard rate those pensions currently being paid at less than that rate; and about £45 million.

In view of the fact that these people are comparatively few in number and that death is reducing their number, unfortunately very rapidly, would it not be a splendid thing—and something of which the Minister could be proud—to devise some means of bringing help to at least some of them?

It is true that the number of non-pensioners decreases every year because they are old people, but the number of those with a deficiency in their pensions is added to each year. It is because we have been unable, so far, to bring in the income guarantee that I, with the National Assistance Board, have been doing everything possible to let all these people know that they can have aid through the National Assistance Board as of right.


asked the Minister of Pensions and National Insurance how many elderly persons in Wales were in the category of non-pensioners at the latest convenient date; and how many elderly Welsh people were in that category five years ago.

Can the Minister really say that it is desirable that this information should not be available? Is it not a fact that it is essential that if we are to appraise this sort of problem intelligently we should have the numbers for Wales, England and Scotland?

It seems to me that if, as the previous Question indicated, the hon. Member feels that these old people are suffering—and it is true that some of them may be—it does not matter whether they are living in Scotland, England or Wales.

Retirement Pensioners (Hospital Visits)


asked the Minister of Pensions and National Insurance whether she will take steps to provide assistance for transporting retirement pensioners wishing to visit relatives in hospital: and if she is aware that in rural areas the present situation causes distress or hardship to many retirement pensioners.

If the retirement pensioner is receiving a supplement to his pension and the relative formerly lived in the same household, the National Assistance Board will be able to provide for reasonable visiting expenses. Even where the pensioner is not receiving assistance the Board under certain circumstances may be able to help.

National Assistance (Disregards)


asked the Minister of Pensions and National Insurance what progress she has made in reviewing the disregards for National Assistance recipients.


asked the Minister of Pensions and National Insurance if she will take steps to raise the limit of £600 in cash and securities which is the maximum amount a recipient of National Assistance may at the moment hold.

The National Assistance disregards, including the treatment of capital and the capital limit of £600, are among the matters being examined as part of the Government's review of the social services.

I thank my hon. Friend for that reply, but as the last increase was made in September, 1959, may I ask whether this matter will be considered with some urgency?

Will the hon. Gentleman go a little further? The House does not know how long the review will take, and the value of money has fallen substantially since 1959. Will he undertake to ask his right hon. Friend to do something earlier about disregards?

No, Sir. As the right hon. Gentleman knows, the review in- volves a very complicated and thorough study, and it will take some time. We have said that on many occasions. But the right hon. Gentleman will be aware that when the excess over £600 is small, and would clearly be used up in a short space of time, the applicant for assistance is advised to reapply later, and if need be a National Assistance Board officer will visit him.

Blind Persons


asked the Minister of Pensions and National Insurance whether she will hold discussions with the chairman of the National Assistance Board, with a view to taking steps to change the present arrangements whereby the pensions paid by the Board to blind people are reduced or extinguished by the earnnings of their husband or wife.

No, Sir. These pensioners are non-contributory, and under the provisions of the Old Age Pensions Act the means of a person who is married are to be taken as half the combined means of the couple.

Is the hon. Gentleman aware that a blind person living with a relative gets the whole of the benefit, whereas if he is married the entire benefit can be removed because of the earnings of his wife? Is not this an anomaly which should be looked at?

This is not an anomaly. These matters in regard to blind persons have been looked at time and time again, and at the moment I am afraid the Government have no proposals to alter the blind persons scheme.

Knowing as he does the frustration and annoyance which this causes in the case of blind people, will the hon. Gentleman persuade his right hon. Friend to talk to Lord Runcorn on this subject with a view to making a particular concession in respect of the blind?

As the right hon. Gentleman is aware, we are always willing to—and we often do—have consultations with Lord Runcorn, but the right hon. Gentleman knows also the implications and the complications involved in this, and, as I said, at the present time we have no proposals to alter the scheme.

Unemployment And Sickness Benefits


asked the Minister of Pensions and National Insurance whether in order to relate unemployment and sickness benefits to earnings, as proposed in the National Plan, she intends also to relate contributions to earnings.

I must ask the hon. Member to await presentation of the Government's detailed proposals.


Hospitals, Macclesfield And Congleton

24 and 25.

asked the Minister of Health (1) when work is expected to start on the new Macclesfield General Hospital;

(2) if he will make a statement on the future and use of the Congleton War Memorial Hospital.

The future of Congleton War Memorial Hospital depends upon the provision of alternative facilities in a new district general hospital for the Macclesfield area, which is being considered in the Board's current review of their entire capital programme.

Is the Minister aware that I object very much to his answering these two Questions together? They bear no real relationship to each other. Is he further aware that the people of Congleton are very concerned about the future of their hospital, which they paid for themselves? Can he go further than his predecessor went in this matter? With regard to my first Question, is he aware that Command 1604 stated that the general hospital at Macclesfield would be commenced in 1966–67 but that the second revision makes no mention of it? As a responsible Minister, can he say when the work will begin?

In the first place, the previous Administration were responsible for the revision to which the hon. Member referred. I am sorry if I have annoyed him by answering both his Questions together, but I thought that they were to be answered together, because they are related. This is a matter for the Board, which will determine the priorities. I cannot anticipate what the result of its review is likely to be.

Ministry Of Health



asked the Minister of Health what has been the increase to date in the number and cost of prescriptions issued since the abolition of prescription charges.

In the period from 1st February to 31st August, 1965, the latest for which information is available, chemists in England and Wales dispensed 23 million more prescriptions than in the corresponding months of 1964, an increase of about 19 per cent. The cost was £13 million, or 22 per cent. higher.

Would not the right hon. Gentleman agree that this very considerable increase represents an unnecessary wastage of the nation's resources and, furthermore, a considerable additional burden on our general practitioners, who are called upon to write out these prescriptions? Does not be agree that this is one of the factors which are causing dissatisfaction with the National Health Service?

No, Sir. I do not accept either statement in the hon. Member's supplementary question. Although the increase in the number of prescriptions since the abolition of charges is a good deal higher than was expected, the average cost per prescription is lower than was expected. This seems mainly due to the prescribing of small quantities. Past experience has shown an upward trend in the drug bill, and no doubt this would have continued whether or not charges had been abolished.

Does not my right hon. Friend agree that hon. Members opposite are implying that these prescriptions were issued unnecessarily? Is not this a reflection upon the integrity of the medical profession?

That is a perfectly reasonable interpretation on the part of my hon. Friend.

Can the Minister then explain the basis of the confident estimate that he gave, when these charges were abolished, that there would be no sizeable increase?

It may be that the degree of deterrence, and perhaps the hardship which the existence of charges brought about, was underestimated, but, as I have told the House, it is very difficult to analyse the complex of causes that leads to changes in the size of the drug bill. There is no doubt that these figures are not solely the result of the abolition of the charges.

Can the Minister tell up what the figures would have been had the rate of increase in recent years been maintained?

General Practitioners


asked the Minister of Health what has been the increase or decrease in the number of general practitioners on the medical lists in the years 1963, 1964 and to date in 1965.

In the year ended 1st October, 1963, the number of principals providing full general medical services in England and Wales increased by 23; in the years ended 1st October, 1964 and 1965, it decreased by 103 and 219 respectively.

Does the Minister agree that this is a very alarming trend? Does not he also agree that, quite apart from the dissatisfaction with remuneration and conditions of service in the National Health Service, one of the reasons why the number of general practitioners is falling is that their waiting rooms are being filled more and more by people who are waiting for prescriptions, and whose only complaint is that they refuse to pay for their own aspirins or cotton wool?

No, Sir. I have no evidence that this is a significant factor. We should get this matter in proportion. Expressed as a percentage of the number of principals, the decrease in the year ended 1st October this year was 1·08 per cent. In a period when the image of general practice has suffered from the publicity given to the discontent felt by doctors, it is not surprising that the numbers have fallen.

Can my right hon. Friend say whether a high proportion of those leaving general practice are the more elderly general practitioners, possibly with small lists?

No, Sir. It is a fact that a rather disturbingly high proportion has consisted of general practitioners of under 45 years of age. I hope that when the new contract goes to the review body for pricing and is accepted—as I hope it will be—by general practitioners, this trend will be reversed.

Can the Minister say what specific steps are now being taken to increase the supply of general practitioners? This was an objective which figured extremely prominently in the Labour Party manifesto.

As I have told the right hon. Gentleman before, this matter is under urgent consideration by my right hon. Friend the Secretary of State for Education and Science, who will be making a statement to the House about it as soon as possible. The right hon. Gentleman will be glad to know that there has been a further increase in the intake of students into the medical schools in this academic year.


asked the Minister of Health if he will give an estimate of the number of general practitioners in private practice exclusively at the latest available date and in 1955.

Can the right hon. Gentleman tell the House whether in his view, as a Minister, private practice is either expanding or contracting—and say whether he would like to see an expansion in private medicine?

I should not like to make a guess at this. It could be a guess only, because information on the number of private practitioners is not required for the purposes of the National Health Service.

Sainsbury Committee (Interim Report)


asked the Minister of Health if he expects to receive an interim report from the Sainsbury Committee which is inquiring into the relationship of the pharmaceutical industry and the National Health Service.

So far as I am aware, the Committee is not at present proposing to submit an interim report.

As winter has undoubtedly started early this year, and my right hon. Friend the Chancellor of the Exchequer predicts that spring will start late, will the Minister seek to find from the Sainsbury Committee whether or not it is possible to do something about the provision of drugs for bronchitis in the winter period?

I doubt whether this would be a matter for the Sainsbury Committee. I have not suggested to the Committee that it should produce an interim report on any aspect of its deliberations, though it would no doubt do so if it thought desirable.



asked the Minister of Health if he has yet had representations from the British Dental Association on the revision of the conditions of service for dentists in the National Health Service; and if he will make a statement.

No, Sir. I have received a copy of the Association's report on their survey and expect to have early discussions with them about it.

When my right hon. Friend discusses this, will he look at the possibility of having closer integration between dentists giving general medical service, those in hospitals and those in schools? Will he, particularly, consult his right hon. Friend the Secretary of State for Education and Science on the possibility of more preventive work by dentists in schools in association with general practice?

I will certainly bear the latter point in mind. There is no limit to the scope of my discussions with the British Dental Association.

Diabetics (Syringes)


asked the Minister of Health whether he will make disposable needles for syringes available for diabetics treated under the National Health Service.

Where disposable needles are essential for a diabetic on clinical grounds, they can be supplied through the hospital and specialist services.

May I ask my hon. Friend why, if they can be supplied, as they are in the hospital which I have in mind, for clinical purposes—a child is trained on them, as it were—the child cannot receive the sharper disposable needle when he goes outside the hospital, and treats himself, rather than the blunt undisposable needle?

This is a medical matter and there is no reason why the child should not receive disposable needles. It depends on whether the hospital concerned considers that it is necessary for him to do so. I see little difference between the child going to the hospital for his needles and his going to the chemist.

Ministry Of Labour

Equal Pay


asked the Minister of Labour if he will make a statement concerning the report of the working party set up to examine the issues involved in implementing the principle of equal pay.

As the House knows from replies to previous Questions, my right hon. Friend set up an inter-departmental working party of officials to consider the economic and social consequences of implementing equal pay earlier this year. The report of this working party has now been received and is being considered. This is a large and complex subject but a further announcement will be made as soon as possible.

Will my hon. Friend accept that we are pleased that the report has now been received and hope that there will not be as long a delay in receiving the Minister's statement on it as there was in receiving the report in the first place?

Orford Tanning Company, Warrington (Redundant Employees)


asked the Minister of Labour what action he proposes to take in respect of 30 employees of the Orford Tanning Company, Warrington, who have been declared redundant and whose dismissal takes effect on 3rd December next, thus evading the provisions of the Redundancy Payments Act.

I understand that the majority of the employees would not pave been entitled to compensation under the Act. Most of these received payments in lieu of notice greater than those required under the Contracts of Employment Act. I am inviting the controlling company to consider paying compensation to the employees with long service and I shall be in touch with the hon. Member about the outcome.

Does the Parliamentary Secretary know that certainly a number of these people have many years' service, that two of them are foremen who have served as long as 23 years and that two of them, in particular, are 59 years old and are unlikely to get other employment in this area? Will he not at least accept my invitation to express his view of what I regard as a very shabby affair.

The firm has not been ungenerous in its treatment of 14 short-service people, but I agree that it has been less than generous with the 10 who have five years' service or more. I think that my hon. and learned Friend would do well to leave it with me to take the matter up with the controlling body.

Would my hon. Friend recognise that what is even more serious than these redundancy notices going out to groups of employees who can be identified and the firm exposed, is the case of the individual employee who is getting notice of this sort, expiring on 3rd December, and who can do nothing about it because he is simply the one sorted out by the firm to receive this treatment? As he knows, I have sent him a letter concerning a case of this kind.

We have had reports of a number of alleged cases of avoidance of payments under the Redundancy Payments Act, but I must say that, in the many cases which the officers of our Department have investigated, it has been found that causes which are wholly apart from redundancy occurring near the appointed day have been the primary consideration. But I have no doubt that there are numbers of individual cases like those to which my hon. Friend has referred. However, I would point out to him and the House that my right hon. Friend has no powers of compulsion until the appointed day, which is 6th December.

European Economic Community


asked the Secretary of State for Foreign Affairs if he will reopen negotiations for British membership of the European Economic Community.

I have nothing to add to the reply which my right hon. Friend the Prime Minister gave the hon. Gentleman on 3rd August.

In view of the recent shifts of opinion within the European Community, would not the Foreign Secretary agree that it is high time that Her Majesty's Government stopped beating about the bush and said straight out that, when conditions permit, it is their intention to join the European Community and to throw the weight of Britain on to the side of those who want to alter it into a more outward-looking direction?

Putting it like that, making British entry apparently a factor on one side or the other in the present disagreements in the Community, would be most unfortunate. My right hon. Friend the Prime Minister made it clear that we are ready and willing to join a European Community, provided that essential British interests can be safeguarded.

Since the hon. Member for Bury St. Edmunds (Mr. Eldon Griffiths) refers to shifts of opinion, may I ask whether my right hon. Friend has taken note of the not unamusing letter in The Times this morning, which shows that a number of Conservative Commonwealth enthusiasts have apparently shifted their opinion?

My hon. Friend will agree that that hardly lies within my sphere of responsibility.

Do the Government still feel bound by the five conditions, in particular that on national planning?

This also has been explained. The five conditions still stand: indeed, they are essential. Some of them appear much less difficult of fulfilment now than when they were formulated.

Will my right hon. Friend in the meantime make it plain that the Leader of the Opposition is not acting as his emissary today to President de Gaulle?

While accepting that now is not the moment for any formal approach to the Community, surely the right hon. Gentleman is aware—whatever he might think in terms of the Prime Minister having made his position clear —that there is a widespread feeling of lack of knowledge on the part of our friends in Europe about the present Government's intentions, about whether or not they intend to join the Community when the opportunity occurs? Would he make that clear?

I do not think that this is so. This has been explained to our friends in Europe, quite recently, at the meeting of the Western European Union.

Ussr (Talks)


asked the Secretary of State for Foreign Affairs if he will make a statement on his talks with Russian leaders.

I have had detailed discussions with Mr. Gromyko on a wide range of international and bilateral questions on a number of occasions during 1965, and I look forward to continuing our discussions in Moscow next week. I hope also to see some of the other Soviet leaders then. I expect to give the House an account of my talks when I return.

Will the Foreign Secretary, while in Moscow, make a point of exploring the Russian suggestion for a meeting to be held in Tashkent on the subject of Kashmir? Will he also attempt to discover whether the time has come when the Soviet Union might be willing to join with the United States and the United Kingdom in ensuring the security of the Himalayas against Chinese aggression?

I take note of what the hon. Gentleman says, and I have no doubt that the Russians, like ourselves, will want to discuss most of the major international problems. But we do not wish to have a formal and fixed agenda and I would rather not now anticipate the course of the discussions.

Would my right hon. Friend, in continuing the discussions he had in New York with Mr. Gromyko and which led to this meeting in Moscow, take note of the grave concern in many capitals that there might be further escalation of the war in Vietnam, particularly the dangerous statements which have been made that Hanoi and Haiphong should now come under bombing operations and bombing attack? Would he, therefore, take this opportunity to strengthen all those who are now in favour of a negotiated peace and a ceasefire?

While he is in Moscow does the right hon. Gentleman intend to discuss the question of a non-proliferation treaty? If so, will he be making the same point in Moscow that he made at the Press conference in New York in relation to the Government's present position vis-à-vis the A.N.F.?

I think I must give the right hon. Gentleman the same answer as I gave to his hon. Friend the Member for Bury St. Edmunds (Mr. Eldon Griffiths), that we expect to cover all the major international problems, but I do not want to anticipate the course of the discussions now.

Yugoslavia (European Free Trade Association)


asked the Secretary of State for Foreign Affairs what action he is taking to facilitate the admission of Yugoslavia to the European. Free Trade Association.

At the Copenhagen meeting of the European Free Trade Association, Ministers accepted the Yugoslav Government's request for exploratory talks with a view to improving trade relations with the European Free Trade Association countries. They decided that the first phase of these talks should be conducted by the Council and the Secretary-General. On the basis of these discussions member Governments would decide how to pursue the matter further.

I thank the Minister of State for his reply. Will he give a friendly reception to these approaches, which could be very beneficial to Yugoslavia and many of the rest of us?

Dr Schröder (Talks)


asked the Secretary of State for Foreign Affairs if he will make a statement on his recent discussions with the Foreign Minister of the Federal Republic of Germany.

I was particularly glad that Dr. Schröder was able to accept my invitation so soon after the formation of the new Federal German Government.

The object of our talks was to exchange views on many important problems of common concern, including the problems of nuclear organisation in the Alliance, German reunification, European relations, and various bilateral matters. We took the opportunity also to discuss ways of realising our common objective of ex- panding and intensifying existing Anglo-German consultation at all levels. Ministerial meetings—such as my talks with Dr. Schröder—form an important part of this process.

I am glad to be able to tell the House that the talks were extremely useful. They were also very timely, falling as they did shortly before my own forthcoming visit to Moscow.

Is the right hon. Gentleman aware that we on this side of the House will support his view that it was very welcome that he should have had these talks with the German Foreign Minister? Did he discuss with his visitor the view which the right hon. Gentleman himself has expressed, that we should now consider whether the proposals for the A.N.F. and the M.L.F. should be dropped; and, if so, what was his visitor's reaction, and what will be the next steps?

The hon. Gentleman is putting into my mouth rather more than I said on this matter, but we did discuss the future of the Atlantic Alliance. It was not the purpose of the talks to reach firm conclusions on this, but we did make progress in the understanding of it.

Amongst the lower level matters, did the Minister discuss with the German Foreign Minister the question of developing youth exchanges between the two countries?

Yes, and there had been very helpful discussions just before our talks occurred on that subject. I think we are making progress.

In connection with these discussions, can the Foreign Secretary give us an assurance that the Government will not contemplate suggestions that the British Polaris submarine fleet might be either returned to the United States or made the basis of a mixed-manned fleet?

That is going rather wider than my talks with Dr. Schröder. The hon. Gentleman will realise that decisions on these matters have got to be considered in a defence context as well as a foreign affairs context.

Will my right hon. Friend the Foreign Secretary take some opportunity of killing the idea that Germany can obtain any significant equality of prestige or status by any form of nuclear share and that the Germans, if they want equality, should be pressing for disarmament, to which all the nuclear Powers have been committed for so long?

I think my right hon. Friend knows that I have taken the view that we must consider the problems of the Atlantic Alliance and the problems of general disarmament simultaneously.

In the light of the confusion which has been caused by the Foreign Secretary's statement in the United States, did the Foreign Secretary make it clear to Dr. Schröder what exactly is our policy on the Atlantic Nuclear Force, and, if so, can he make it clear to the House? Is it being pushed by the Government, are they now neutral on it, or have they abandoned the scheme?

I have already made it clear. The Atlantic Nuclear Force was and still is the British Government's proposal. I drew attention in New York to a number of other factors that have to be considered in this whole problem.


asked the Secretary of State for Foreign Affairs what measure of agreement was reached in his discussions with the German Foreign Minister on the question of nuclear sharing between the North Atlantic Treaty Organisation partners.

My talks with Dr. Schröder were confidential, but we had a useful exchange of views on subjects of mutual interest. It was not the intention that any decisions should be reached at the meeting.

In the light of the right hon. Gentleman's earlier Answers, may I ask whether he foresees progress on the lines of an A.N.F. or on the McNamara Committee proposal?

This is exactly the kind of thing which one should not try rigidly to prejudge at this juncture. What I said in the reply to an earlier Question is the best way to leave the matter at present.

United Nations (Foreign Secretary's Visit)


asked the Secretary of State for Foreign Affairs if he will make a statement on his recent visit to the United Nations.

I visited the United Nations from 12th November to 17th November to take part in the debate in the Security Council on Rhodesia. My object was to seek the active support of the Council in making effective the measures we were taking to deal with the illegal declaration of independence.

There was unanimous agreement on the part of the Council on the illegality of Mr. Smith's action. This was demonstrated by the passage early in the debate of a Resolution condemning the illegal declaration of independence and calling upon all States not to recognise or to render any assistance to the illegal régime in Rhodesia. There was furthermore unanimous agreement on the need for swift and effective measures to restore constitutional government in Rhodesia, although, as hon. Members will be aware, the view was expressed that the measures which we have taken did not go far enough in this direction and we were urged to apply wider measures.

I am glad to say that, as hon. Members will no doubt have seen, we were able to resolve these difficulties and the Security Council adopted a Resolution on 20th November which was supported by all the members of the Council except France, which abstained. I am arranging for a copy to be placed in the Library.

Since Her Majesty's Government voted for the entire contents of this Resolution, does it mean, as they voted for paragraph 8, that the Government are now committed to breaking economic relations with Southern Rhodesia, including an oil embargo?

We are committed to implementing this Resolution, that is to say, to doing what is in our power in this direction. It was our view—I expressed this at the Security Council—that it would have been desirable for a working group of the Security Council to be set up to discuss the methods by which this part of the Resolution might be implemented. That proposal in that form did not commend itself to the Security Council as a whole. It will now be important for us, together with other Governments, to take counsel on the best methods of implementing this part of the Resolution.

Can my right hon. Friend say at this juncture whether he regards it as a practical proposition to impose the oil embargo on Rhodesia, and will he, if that is the case, take all steps to implement it?

My hon. Friend will realise that the pursuit of this policy involves the help and assistance of other Governments. The task now, not only for us but, in view of the Security Council Resolution, for all countries, is to take speedy counsels as to the best method of implementing this Resolution.

The text of the Resolution is of the highest possible importance. Since it appears to be inconsistent with what the Prime Minister said to this House about United Kingdom responsibility, about the 1961 Constitution, and about oil embargoes, will the Foreign Secretary ask his right hon. Friend the Prime Minister to make a full statement tomorrow to the House on where the Government now stand, and in particular what they mean to do in practical terms about oil and trade generally?

I am sure that the request the right hon. Gentleman has made for a full statement by my right hon. Friend will be noted. I do not accept that there are any inconsistencies. It seemed to me important that we should get at the Security Council the support of other nations for the measures we already had taken. We must, in view of that, take into account the desire for wider measures, and that we have done.

Can the right hon. Gentleman say whether, in response to his acceptance of a total trade embargo and an oil embargo, as far as I can see, he was able to get any reciprocal understanding that force under all circumstances, which I understand is the Government's position, is out of the question, or is this only something temporary which will be raised again tomorrow?

If the hon. Gentleman will compare the Resolution that was passed with an earlier Resolution which was tabled in the Security Council, he will see that the answer to his question is, "Yes".

One of the purposes of our being represented at the Security Council was to prevent the adoption of any resolution or measure that seemed to us to be reckless or foolish.



asked the Secretary of State for Foreign Affairs if he will seek fresh consultations with the United States Government in an attempt to secure a peaceful settlement in Vietnam, following their rejection of the offers of the Hanoi Government to meet them at Rangoon for negotiations.

We are in constant consultation with the United States Government about the prospects of negotiations on Vietnam, but the obstacle to these comes from North Vietnam and not from the United States.

Could my right hon. Friend confirm that the Hanoi Government have made several offers to negotiate during the past year or so, all of them rejected by the United States Government, for whatever reason, on my right hon. Friend's own admission? Secondly, will my right hon. Friend, in the light of this, explain to the House how he was misled into telling the S.E.A.T.O. Council in May that so far Peking and North Vietnam had contemptuously spurned all ideas of negotiations and why he subsequently said the same thing to this House?

It has been made clear now by the explicit statements of the United States Government that they are prepared to enter into unconditional discussions. [HON. MEMBERS: "No."] That was made clear some time ago and has been reiterated very recently indeed. That is still the position of the Government of the United States. It is still unhappily the position of the Government in Hanoi that they are not prepared to enter into discussions.

Was the right hon. Gentleman aware of this reputed offer from the Hanoi Government and of the conditions imposed by the Hanoi Government before Her Majesty's Government established the Commonwealth Peace Mission?

Is my right hon. Friend saying that the United States Government failed to inform Her Majesty's Government of these peace negotiations by North Vietnam? Will my right hon. Friend bear in mind the initiatives taken by Roumania and view these favourably in the coming months?

The episode referred to occurred before Her Majesty's present Government were in power. As to the moves from Roumania and elsewhere, I am constantly looking out for any method from any quarter that will enable us to get negotiations going, and whether it comes from Roumania or elsewhere if it can lead to negotiations we shall be glad of it.

Is it a fact that North Vietnam stated the conditions for negotiations to the French Government in May of this year and Her Majesty's Government were informed by the French Government or the United States Government of this approach?

All these statements on negotiations have required as a condition the withdrawal of United States troops and that is an impossible thing as a precondition to negotiation.

In view of the unsatisfactory nature of the Foreign Secretary's reply, I beg to give notice that I shall seek other ways of raising the matter in the House.


asked the Secretary of State for Foreign Affairs what discussions he had with U Thant on his recent visit to New York about fresh overtures to end the war in Vietnam.

None, Sir. The Secretary-General is already well aware of Her Majesty's Government's views and I regret that there have been no new developments which would have made it useful to hold fresh talks.

Does not my right hon. Friend think that the revelations made about United States policy in the last week or so constitute a very important new development? In view of his apparent admission, in reply to an earlier Question, that the British Government were never informed about the previous approach by the North Vietnam Government, which was passed on by U Thant to the American Government, does not my right hon. Friend think that that also raises a new situation? Does not he appreciate the very deep concern felt about this, in particular because of the apparent refusal of the Americans to offer unconditional negotiations as they had purported to offer?

It is clear that the last part of my hon. Friend's remarks will not stand up to examination. [HON. MEMBERS: "Oh."] The United States is prepared to enter into unconditional discussions on this matter. As for widespread concern, we have all been feeling that for some time, but Her Majesty's Government position is well known. I am willing at any time to join with Mr. Gromyko in recalling the Geneva Conference, and the Commonwealth Mission is ready at any time to go to Hanoi. If anyone can help us in realising either of these two objectives I shall be extremely glad.

In view of recent reports from Washington that there is pressure upon the President to extend the bombing operations to Haiphong and Hanoi and the dam which supplies necessary water to a wide area, will my right hon. Friend now look into the future in his negotiations with Mr. Gromyko and make precise proposals that the bombing operations should stop and that the President should now agree, whatever he did in the past, to negotiate with the National Liberation Front in South Vietnam and with Hanoi in order to bring this grievous and cruel war to an end?

I have repeatedly urged on Mr. Gromyko the steps which we could take as representing the two co-Chairmen to bring this war to an end. My hon. Friend will realise that I cannot very well make proposals to Mr. Gromyko on what action the United States Government might take——

—but we are in constant touch with those who are concerned about this matter. It is quite clear that the British Government have taken a great many steps to try to get negotiations going, and this we shall always be ready to do.

Middle East Embassies (Staff)


asked the Secretary of State for Foreign Affairs how many members of United Kingdom embassies in Middy East countries were born in Palestine; and whether they receive the same pensions and conditions as United Kingdom-born employees.

I regret that the information asked for in the first part of the Question is not readily available.

Place of birth is not taken into account in determining pensions and conditions of Diplomatic Service staff and accordingly Palestine-born employees receive the same pensions and conditions as United Kingdom-born employees of equivalent rank and status.

I am grateful to the hon. Gentleman for his reply. Is he aware that many Palestinian-born employees in Middle Eastern embassies are not aware of their rights and are concerned about their position? Could the hon. Gentleman make certain that their position is made clear to them in our embassies in the Middle East?

Certainly, I shall look into that, and if there are individual cases to which the hon. Gentleman wishes to draw my attention I will look into them.

Saudi Arabia (Buraimi)


asked the Secretary of State for Foreign Affairs in view of the improvement in Anglo-Saudi Arabian relations, what steps he is taking to solve the Buraimi problem.

During my recent visit to Saudi Arabia there was a frank exchange of views on the Buraimi question. I am afraid that differences of opinion persist, but I was glad to find that it was possible to discuss them in a spirit of mutual understanding and against a background of wider common interests; Her Majesty's Government—acting on behalf of the Ruler of Abu Dhabi and the Sultan of Muscat—are continuing to look for ways of making progress.

Will the Minister of State give an assurance to the House that he will press on with this matter as hard as he can? Does he have any hope of an early solution? It would be most unfortunate if relations between Her Majesty's Government and the Saudi Arabian Government deteriorated as a result of not finding a solution to this age-long problem.

I should like to think that my own visit to Saudi Arabia led to an improvement in understanding between our two Governments and offered a means of carrying forward these discussions in a spirit of mutual understanding. We are very anxious to find an agreed approach to this problem.



asked the Secretary of State for Foreign Affairs whether he will make a statement about the proposals which he has for securing further measures of disarmament.

In my address to the General Assembly of the United Nations on 7th October I explained the Government's views on the directions in which we should try to make progress in disarmament; and my noble Friend the Minister of State with special responsibility for disarmament matters gave a detailed review of the present position in another place on 18th November.

The measures which we regard as particularly urgent are an agreement to prevent the further spread of nuclear weapons and the extension of the partial Nuclear Test Ban Treaty to cover underground tests. The Government intend to make a determined effort to reach agreement on these questions.

I welcome the Government's intention but is it not rather regrettable that at the Geneva Conference the British Government neither presented their own draft treaty to the Conference nor were they prepared to sponsor the American draft treaty? In view of the smallness of the difference between the United States and ourselves, surely it was a pity that we could not reach agreement on a mutually agreed text.

The difference, although limited in scope, was nevertheless an important difference. It was in view of that that it was felt that the best way that we could make our views known was in discussion on the basis of the American draft. We did that and I think that it helped to clarify the discussion.

Bakery Industry (Dispute)

(by Private Notice) asked the Minister of Labour what action Her Majesty's Government propose to take regarding the dispute in the bakery industry.

My right hon. Friend the First Secretary of State and I will be seeing representatives of the union later today.

We hope that the meeting goes well. Will the right hon. Gentleman and his right hon. Friend bear in mind that it is no comfort to the housewife in the queue if the Government persuade employers to hold down prices unless they also persuade the unions concerned to restrain wage demands to a level which can be met by higher productivity and to pursue their demands without penalising the public?

I have already told the right hon. Gentleman that we shall be meeting the union very shortly, and I would prefer not to say anything more now.

Will the right hon. Gentleman bear in mind, and ask the First Secretary of State to bear in mind, the undesirability of trying to convert the National Board for Prices and Incomes into an abitration body, and will he and his right hon. Friend bear in mind also that, if compulsory arbitration machinery is required, it would be far better if they came to the House and asked for powers?

I can only repeat that we shall be meeting them very shortly, and I prefer to say nothing more now.

Orders Of The Day

Air Corporations Bill

Order for Second Reading read.

3.33 p.m.

I beg to move, That the Bill be now read a Second time.

The main purpose of this Bill is to give effect to the financial settlement with B.O.A.C. which I announced in the House on 1st March this year. The need for the settlement arose out of the troubles which afflicted the Corporation under the previous Government. The promise that one would be negotiated was made by my predecessor, the right hon. Member for Preston, North (Mr. J. Amery), and in the debate on 22nd July, 1964, the right hon. Member for Barnet (Mr. Maudling), the Chancellor of the Exchequer, indicated that this settlement would deal both with the accumulated deficit and with any penalties which B.O.A.C. might be thought to incur as a result of its fleet composition. The actual terms of the settlement, however, fell to be negotiated by me. B.O.A.C. submitted a very big claim, considerably in excess of any capital relief which, in my view, it needed in order to face the future without feather-bedding but with a good prospect, under firm management, of achieving financial as well as operational success. Approaching the matter from this point of view, we eventually agreed upon £110 million as the correct figure for a capital write-off.

The House should be clear what is and what is not involved in such a write-off. It is not a subsidy. It does not enable B.O.A.C. to operate more cheaply or less efficiently than other airlines, or to show an operating surplus when there would not otherwise have been one. What it does do is to ensure that the incentive to make a surplus is not dulled by the knowledge that, once made, such a surplus will be more than swallowed up in interest on dead capital. It frees the Corporation from the incubus of the past, but by so doing it should make the management more and not less responsive to the financial disciplines of the future. Nor does the write-off involve the injection of new money into B.O.A.C., or the transfer to it of real resources. The taxpayer will not next year be required to meet a bill of £110 million for a gilt to B.O.A.C. The only effect for the future upon the Exchequer and, therefore, upon the taxpayer, is that it and he will forgo the annual claim to interest upon this sum, amounting to about £5¼ million. But, as this had been met until recently only by adding to an accumulated deficit which in turn made the interest burden still higher but less meaningful, we are giving only retrospective recognition to reality.

Why £110 million? By far the greater part is accounted for by the operating deficit which had been built up in the seven years to 31st March, 1964. This then stood at £90·5 million. This was the position when we negotiated the settlement. In the year to March, 1965, however, the Corporation made a substantial profit and reduced this accumulated deficit to £82·5 million. This was to a large extent expected when the settlement was made, and I see no reason to reduce the total write-off as a result. It gives B.O.A.C. a somewhat larger reserve for the future, but I think this is justifiable —we want this to be a long-term and not a short-term solution—and, should the write-off settlement prove excessive, the Bill provides fully for possible adjustment in the shape of a claw-back to the Exchequer.

In the first place, the whole of the £110 million will be credited to reserve. Under Section 18 of the Air Corporations Act, 1949, I shall then approve the release from this sum of £82·5 million to eliminate the existing operating deficit. This will leave in reserve, as from April, 1965, the balance of £27·5 million plus the existing capital reserve of 3·3 million. B.O.A.C. will, therefore, start afresh, from a financial point of view, with a reserve of £30·8 million. What is the purpose of this'? It is not, in the view of the Government, directly geared to the fleet composition. The VC.l0, in both its standard and its super versions, is, as is accepted, a little more expensive to operate than the Boeing 707, but this is far from meaning that it is an uneconomic plane to operate. The passenger appeal and the consequent load factors which are being achieved—I shall have more to say about this later—are very powerful compensating factors. But, on general grounds, 1 believe it desirable that B.O.A.C. should have a reasonable reserve behind it. Airline operation, particularly the long-haul version, is a variable business. I distinguish at least five reasons for fluctuation against which we should legitimately guard.

First, there is intense international competition on all routes. On the North Atlantic, for example, no less than 17 airlines are competing for the traffic.

Second, the rate of growth of the traffic offering itself has fluctuated widely in recent years, and will no doubt continue to do so in the future. Yet, because advance planning of equipment and capacity is essential, no airline can quickly adjust itself to these fluctuations. Varying profitability is, therefore, inevitable —the inevitable shock absorber of this situation.

Third, there is always a grave risk of premature obsolescence of aircraft. On the threshold of their period of maximum profitability aircraft may be made out-of-date by a technical break-through. The supersonic revolution may not be—I think it will not be—as destructive of what went before as was the jet revolution, but we would be extremely foolish not to guard against some repetition of the pattern.

Fourth, international fares are determined by a machinery over which B.O.A.C., or any other single national airline, has relatively little control. These could move in a direction inimical to the immediate interests of the Corporation.

Fifth, expected results—and results which appear to have been well planned —may be upset by political developments in the world, which this country—and still less B.O.A.C.—cannot determine. The recent erupting of the Indo-Pakistan dispute, which, had it continued for long, would have been highly damaging to the Corporation, is an obvious example.

For all these reasons B.O.A.C. needs a contingency reserve, and I do not think, having regard both to the scale of its operations and to what would be considered reasonable in private industry, that the £30 million is excessive. In certain circumstances, however, it might prove to be so. Were the current strength of the market for long-haul air transport to persist, contrary to previous experience, for another three or four years and were no other unexpected troubles to arise, I think this might be the case. In these circumstances, there is provision in the Bill for the avoidance of the accumulation of excessive reserves and for the taking back of money to the Exchequer.

This provision, however, applies only after three years from the date at which the Bill comes into operation. For the immediate future B.O.A.C. will have its capital written down from £176 million to £66 million, plus a reserve account of £30·8 million. This £66 million capital will be divided into two parts—and this brings me to the second important provision of the Bill, which is new since the announcement of the settlement nine months ago. Of this £66 million, £31 million will be loan capital of the sort traditional in nationalised industries. The rate of interest which it will bear, following the precedent of the reconstruction of the transport industry in 1962, will be a weighted average of the rates applicable to the previously outstanding total of £176 million. This will probably work out at a little over 4 per cent. This is, of course appreciably below current rates, but it is, I believe, much the fairest arrangement. Otherwise a large part of the advantage to B.O.A.C. of the write-off would be dissipated by requiring the Corporation to re-borrow at the higher rates of today. Most established enterprises, public and private, enjoy the benefit of having acquired a substantial part of their fixed interest capital in the days of cheaper money. I certainly see no reason to discriminate against B.O.A.C. in this respect.

The remaining £35 million of capital will not carry a fixed rate of interest. It will be Exchequer Dividend Capital, giving a varying return according to the profitability of the Corporation. This is an experiment—I believe a valuable one and one for which B.O.A.C., unique among nationalised concerns, is particularly well suited. This is mainly for the reasons associated with the fluctuating nature of the business which I gave in justifying the size of the reserve. It is also the case that many of B.O.A.C.'s main competitors, including those substantially publicly owned—like Air France, KLM, Qantas and Air India—work with a mixture of fixed interest and variable return capital. Furthermore, B.O.A.C., once its capital liabilities have been put on a realistic basis, is peculiarly free, for a public concern, from complications which might make it difficult or undesirable for the Corporation to operate in a fully commercial way. It has no domestic obligations to provide services of a social character. It has no approach anywhere in the world to a monopoly position and no ability to fix its own fares, but neither is it in serious competition with any other British nationalised concern. For all these reasons, I am sure it is right to start this experiment with B.O.A.C. But this does not mean that it should necessarily finish there. If it is a success, it could be extended, and B.E.A. would, in my view, be a strong candidate for such an extension.

In the first instance the experiment will run for five years. At the end of that period the arrangement may, by affirmative Order, either be extended for a further experimental period or put on a permanent basis. If no affirmative Order is passed, the experiment would come to an end and the Exchequer Dividend Capital would be converted into conventional loan stock. I think that five years is in the first instance about the right period. A span of approximately this length is clearly necessary if the appropriateness of the scheme to fluctuating trading conditions is to be tested.

There is another point in relation to this new arrangement which should be mentioned. The power to determine the dividend payment in each year rests with the Minister acting
"with the approval of the Treasury and after consultation with the Corporation".
Some hon. Members may think that it should be the other way round, that the power of determining the dividend, perhaps subject to Ministerial approval, should rest with the Board of the Corporation; a position more analogous to that in an ordinary company. Although I do not think there will in practice be a great deal to the issue—clearly, for the scheme to work well there must be a reasonable consensus between the Minister and the Corporation—I am sure that the way we have put the onus is in the circumstances the right one. The amount paid out in dividends is the reverse side of the coin of the amount put to reserve. For the Minister to give up control of the one would be to abandon control over the other; and I do not think that it would be right, at a lime when the Government are accepting such a big write-off of the Corporation's debt, to give up the existing control over reserves.

The division between £35 million of dividend capital and £31 million of fixed interest capital is necessarily an arbitrary one. The intention is to effect a roughly equal split—although there is nothing magic about such an arrangement. But as loan capital is perhaps the more likely to be increased in the future it has been dole in this way, with the balance slightly in favour of the variable dividend capital. I do not, however, expect big increases in the foreseeable future in the amount of loan capital. The limit for this is being substantially reduced. Previously it stood at £260 million, which could be increased by order to £300 million. The Bill reduces these limits to £90 million and £120 million respectively. Both the £35 million and the £31 million count towards these figures. B.O.A.C. will, therefore, have a borrowing margin of only £24 million without an order, and £54 million with an order.

This, however, should be more than adequate. B.O.A.C. estimates its capital requirements, mainly on aircraft purchases, at £104 million over the next five years. It plans to find £100 million of this from its own internal resources, lea ring a balance of only £4 million to come from the Exchequer. The power to use Exchequer loans for deficit financing, which was introduced in the 1962 Act, comes to an end with this Bill. These and other changes, perhaps relatively minor ones, affecting——

The right hon. Gentleman has just said that B.O.A.C.'s capital needs over the next five years are calculated to be £104 million. I speak from memory, but surely only £70 million was provided in the Corporation's accounts for future aircraft purchases. Does this mean that the Corporation has some other aircraft purchases in mind for this period of five years?

I will come to the question of future fleet equipment in a little while. I do not think there is any contradiction here. This takes us into the complicated question of accounts and reserves as they appear in the balance sheet and the Corporation's estimated cash flow, which is a vital consideration from this point of view. Acute though the hon. Gentleman is in these matters, I do not think that he has here uncovered any change of plan by the Corporation.

I was saying that this and several other changes—affecting disclosure of information, Ministerial approval for major capital projects, the remuneration of Board members employed in an executive capacity and the Corporations' Joint pensions fund—apply equally to B.E.A. in this Bill as to B.O.A.C. In the case of B.E.A., however, there are at present, I am happy to say, no major financial problems to be solved.

B.E.A., partly because of different circumstances and partly also, I think, because of continuity of effective management, first under Lord Douglas and now under Mr. Anthony Milward, has achieved a remarkable consistency of financial success. It may not figure greatly in discussions on this Bill, but that will certainly be no lack of respect for its achievements. One is almost tempted to say, "Happy is the Corporation which has no history". That applies to the position of B.E.A. at this time, and the Bill will do little more for B.E.A. than give statutory effect to what is already the de facto position.

An example of this is the position about financial targets. In 1963 it was announced that B.E.A. would work to a target of achieving an average return of 6 per cent. on net assets over the forthcoming five years. In the first two years, the average return of 7½ per cent. has been achieved. For the current year, the expectation is that the target will again be reached or slightly bettered. This target, satisfactorily though it has worked, has hitherto had no statutory basis whatever, and there has been no statutory obligation upon B.E.A., unlike the position with most nationalised industries, to pay its way. This is remedied in Clause 5.

For B.O.A.C.—whose statutory position is dealt with in Clause 3—it has not hitherto been possible to agree to a target. In 1962 and 1963 negotiations to this end were vitiated by the financial condition of the Corporation. Now that reconstruction is taking place, however, it is urgently necessary to arrive at such a target.

The need for one is not obviated by the Exchequer Dividend arrangement. The financial target is designed to measure the rate of return on the net assets as a whole, which in B.O.A.C.'s case now amount to £117 million, and is not the same as the dividend which may be paid out on the £35 million slice of its capital. It should now be possible, I believe, to fix a target substantially in excess of the 6 per cent. which applies to B.E.A.

I turn now to a matter which does not arise directly on the Bill but which I know is of considerable interest—the position of B.O.A.C.-Cunard, the company which was set up in 1962 on the basis of a 70 per cent. B.O.A.C. and 30 per cent. Cunard shareholding to take financial responsibility for air services on the North Atlantic. I say "financial responsibility" because the actual conduct of air operations remains exclusively in the hands of B.O.A.C.

The authorised capital of this concern is £30 million, of which £28 million has been issued. Cunard, it should be said, has paid for its share either in aircraft or in cash. In the early days of this partnership it was not profitable. In the 1964–65 financial year the company made a profit before tax of £4¼ million. This year will also be a good one. Approximately one third of the total revenue earned by the activities for which B.O.A.C. is responsible are on the account of this company. Cunard therefore has an interest of a little less than one-ninth in the total operations.

Can the right hon. Gentleman tell us what the position was financially prior to 1964?

Yes, I can give the hon. Gentleman the figures. In 1962–63 the joint company made an operating loss of £460,000 and in 1963–64 a profit of £2·9 million, which turned into a profit of £4·5 million 1964–65. These profits should be adjusted, certainly in 1964–65, by a loss of £230,000 on a subsidiary owned by B.O.A.C.-Cunard, which accounts for the figure I gave for last year being £4¼ million and not £4¼ million.

I must say frankly to the House that I do not like this arrangement. This does not mean that the Government are in all circumstances opposed to partnerships between public and private enterprise. Cases must be judged on their merits. However, I see no sufficient reason why B.O.A.C. should not have continued to run its own services, on its own behalf and for its own reward, on this most important section of its routes, and had I been the Minister responsible at the time I would certainly have expressed that view in very clear terms to the Chairman of B.O.A.C.

I draw a sharp distinction, let me add, between a partnership derogating from B.O.A.C.s central purpose of running air services and one for peripheral activities such as catering, where outside expertise may be of great use to the Corporation.

However, the Cunard arrangement was made. Right hon. Gentlemen opposite who bear some part of the responsibility must decide for themselves how effectively they were acting as guardians of the nation's assets and the public purse. But, so far as B.O.A.C. was concerned, the contract was freely, even if mistakenly, entered into. I have to deal with the situation as I find it. If at some fairly early date it were possible to dissolve this partnership in a way that did no commercial harm to B.O.A.C. and was a reasonable bargain from the point of view of public property, I would welcome such a development, and I have left Sir Giles Guthrie in no doubt of this.

I warmly appreciate what my right hon. Friend has said. He said that the contract was freely entered into by B.O.A.C. Is he really saying that there was no Ministerial pressure to enter into such a contract?

Would the right hon. Gentleman have said what he has said today if the joint effort had continued to make losses?

I would not have regarded this as a desirable arrangement even had the North Atlantic route not turned out as profitable as it has. To some extent, the decision which the A.T.L.B. gave, following the Measure passed by the House, and other matters, may have had some effect on the Board of B.O.A.C., but in general the Board, possibly mistakenly, as I have said, entered into this arrangement of its own free will, and that is something which I have to recognise.

However, having said what I have said, it would not be right to delay this urgent question of the financial reconstruction of B.O.A.C. until such a dissolution might be achieved, provided—and it is an important proviso—that no part of the benefit of the write-off which we are proposing today will find its way to the pockets of the Cunard shareholders.

And the taxpayers. Surely the right hon. Gentleman would agree that half of the profits go to the taxpayers, so that the art arrangement is very advantageous to the taxpayers.

I find it extremely difficult to understand what point the hon Member is making. Is he saying that because, like every other company or individual, the Cunard Company pays taxation, we need be totally unconcerned about whether a public subsidy finds its way to that company? If so, it is a most extraordinary proposition.

I am trying to make the point that it appears that, for doctrinaire reasons, the Minister is very much against this combination of public and private enterprise. I was saying that if it makes profits, half of the profits going to Cunard go back to the taxpayers, and that is very much to the advantage of the taxpayers.

I object to this arrangement, not for doctrinaire reasons, but because it appears to me that B.O.A.C. is fully competent to run its own airline services on the North Atlantic. I see no reason at all why in this most important sector of the Corporation's activities, unlike other sectors, it should share this arrangement with a private company. I am bound to say that the further intervention of the hon. Gentleman did not give me the view that his point had any mote force than I thought it had when he first made it.

The point I was making when I was interrupted was the proviso that no part of the write-off which we are proposing would find its way to the pockets of the Cunard shareholders. Can we be assured that this is the position? I think that we can. In the first place, the arrangements proposed will not add to the profitability of B.O.A.C. There will, as a result, be no additional profit which might find its way from one company to another. What we are proposing merely reduces B.O.A.C's capital debit, and B.O.A.C.-Cunard is responsible for no part of this. Secondly, I have the explicit written assurance of the Chairman of B.O.A.C. that no benefit will flow to Cunard. Sir Giles Guthrie wrote to me on 16th November this year referring to a query about the possible indirect benefit to Cunard which I had raised and replying in the following terms:
"I can assure you that there are no circumstances in which I can foresee that this is likely to happen, or indeed, in which B.O.A.C. would permit it to happen."
I will gladly make the whole of the letter on the subject available to any hon. Member, or to the House as a whole.

I fully understand what the Minister is saying, but he has not touched specifically on the advances made by B.O.A.C. to B.O.A.C.-Cunard. On page 104 of B.O.A.C.'s Annual Report, these are given as totalling £8,514,000. What rate of interest is applied to those advances?

The rate of interest applied to the advances is a matter between the two boards, but I understand that it is a commercial rate of interest. I do not think that that has any bearing on the matter with which I have just been concerned.

I now come to the third matter which touches directly on this issue. I have asked the Corporation's auditors, who are also the auditors of B.O.A.C.-Cunard Ltd., to give me a certificate, annually or at any other moment when I might require it, that no part of the reconstruction benefit is in fact flowing to Cunard. We may retain our doubts about the advantages of this partnership, but there is not the slightest reason why this need affect our attitude to the financial reconstruction.

Can the Minister clarify what he has said by stating whether he has indicated to Sir Giles Guthrie that the response which the Board of B.O.A.C. makes to the expressed views of the Minister will not be allowed to influence the rate of Exchequer dividend which is required in future?

I very much regret that I find that intervention a little difficult to follow. Is the hon. Gentleman suggesting that some sanction would be used about the Exchequer dividend in order to lay down to B.O.A.C. what money it should retain?

Of course not. It seems an extraordinary suggestion. I intend to retain in B.O.A.C. the reserves which it needs to run itself as a thoroughly efficient concern.

In view of the fact, of which my right hon. Friend is well aware, that a major factor in the mind of B.O.A.C. when undertaking this arrangement was to get two initial Boeing 707s, can my right hon. Friend say what his policy is towards B.O.A.C. finding back-door ways in which to acquire aircraft of which he does not approve?

The point was not that the Corporation was acquiring more Boeing 707s than the Minister thought reasonable for its operation, but that the Corporation urgently wanted to lay its hands on two more aircraft of that sort. There is no question of such an arrangement as now exists derogating from the Minister's right, subject to the Corporation's commercial remit, to express his views very forcefully about what aircraft the Corporation should purchase. Indeed, under Clause 3(6) the Minister's power to control major investment projects is substantially strengthened.

I turn almost finally to a rather happier subject—B.O.A.C.'s current performance and prospects. These are very good. Between 1960 and 1962, when B.O.A.C.'s troubles were at their worst, the average world passenger load factor on inter- national services dropped from 58·8 per cent. to 52·1 per cent., but B.O.A.C.'s decline was worse than the average. Their load factor fell from 59·8 per cent. to 47·6 per cent. That, combined with rather higher than average operating costs, was the main cause of the trouble. By 1964, average world load factors were back to 55 per cent., but during this period B.O.A.C. did better than average and for the year to 31st March, 1965, it achieved a load factor of 59 per cent.

Put another way, world passenger traffic grew by 13 per cent. in 1963 and 17 per cent. in 1964. In the roughly equivalent periods B.O.A.C. saw its traffic grow by 14 per cent. and 22 per cent. That growth has continued strongly during the first half of the current financial year.

During this latter period it has been associated with the Phenomenal success of the Super VC.10. In the first six months of its operation on the New York route, this aircraft achieved an average passenger load factor of 79 per cent. In four consecutive September weeks, the average was no less than 84·6 per cent. On all routes for the first six months, the Super VC.10 achieved an average of 76·4 per cent. These figures are the most powerful possible tribute to the outstanding passenger appeal of this British aircraft.

At the same time, the new management of B.O.A.C. has proceeded with its policy of streamlining the operating costs and the labour force of the Corporation. By the end of this year the staff is likely to be down by 1,500 to fewer than 19,000. The plan is to reduce the staff to 17,000 by the end of 1966. Provided that this is done, as I believe it is being done, in a civilised and humane manner, I am sure that it is right. Compared with many of its rivals, B.O.A.C. has undoubtedly been somewhat overstaffed. The present lush days for long-haul traffic may not continue indefinitely. This year, indeed, the growth of traffic is a little less buoyant than last year and capacity is catching up. Even so, if the second six months are anything like the first, B.O.A.C. should again make a very good profit.

I turn, last, to B.O.A.C.'s future fleet composition and requirements. The present composition of the fleet is 20 Boeing 707's, 11 Comet IV's two Britannia 102's, 12 Standard VC10's and six Super VC10's. The two Britannia's and the 11 Comet IV's are not used for regular service at present but are used to some extent for charter services. They will, I think, be disposed of in the fairly near future. In addition to the aircraft which I have mentioned, two Boeing freighters and two more Super VC10's will be delivered during the next two weeks.

The House will recall that a year last summer it was agreed that B.O.A.C. would take phased delivery of 17 of the Super VC10's out of the 30 on order, while three were diverted to the R.A.F. and the manufacture of the remaining ten was put into suspense. It has now been agreed that delivery of the balance of these 17 aircraft will be spread over the period to the spring of 1969. Between 1969 and the introduction of the Concord, probably in 1972, for which B.O.A.C. has a provisional order of eight, the Corporation will have a need for further subsonic aircraft to cope with the traffic growth. I believe that these subsonic aircraft will continue to fly profitably and effectively throughout the 1970s, even after the supersonic age has begun. This need is likely to be concentrated on bigger jets, perhaps 250 seaters, with a range of up to 7,000 miles.

The British Aircraft Corporation have put forward proposals for fulfilling such a need. They have made it clear, however, that they would not themselves meet the development cost, which would be about £40 million for the airframe alone, and that it would therefore fall on public funds. If the plane were manufactured and available at a reasonable cost, B.O.A.C. would be happy to buy it. Whether such a development would be justifiable must turn on a realistic appraisal of the size of the likely market. To spend huge sums of money to manufacture such an aircraft and then to sell only to B.O.A.C. and a few closely associated companies would be a bad investment of public money. We have received, and are currently studying, a report on this market aspect of the matter from the Economist Intelligence Unit, assisted by Mr. Stephen Wheatcroft, a distinguished writer in this field.

A public investment of this size would also raise important questions touching the future capital structure and organisation of the aircraft industry. On this and other points, Lord Plowden's Committee is about to report. I hope to have their conclusions in my hands by the end of this month and to publish them before Christmas. So soon in advance of this advice, I think it would be wrong to take a final decision about the stretched version of the VC10, and this in turn means that we cannot reach a definite conclusion about the ten Super VC10's in suspense. I am most anxious to find solutions helpful to British industry, but it would be wrong, encouraged by the good recent years, to put pressure on B.O.A.C. to buy more planes than it needs. That way lies a return to the financial mess which we are endeavouring to clear up this afternoon.

I believe that we have cleared it up in the tidiest way possible and that we have given the Corporation under its new management—and it greatly needs continuity in this respect—a good financial basis for the future. On this basis I hope and believe that the airline can both maintain its outstanding record of service and operational efficiency and act as a good guardian of the nation's investment. B.O.A.C. is a very important piece of public property of which we all want to be proud.

4.15 p.m.

It is always pleasant from this side of the House to welcome a Tory Measure, even when it is introduced by a Socialist Minister, and I do that in principle wholeheartedly, because there is no doubt that in principle this is a Tory Measure—first, because it carries out the specific decision of the last Conservative Minister of Aviation, my right hon. Friend the Member for Preston, North (Mr. Amery), to write off B.O.A.C.'s accumulated deficit and, secondly, because it attempts to set out a broad legislative framework for operating the nationalised Air Corporations on a commercial basis. That, too, is in line not only with the declared purpose of my right hon. Friend the Member for Preston, North for the airlines but also with general Conservative Party policy towards all nationalised industries.

In passing, it contrasts strongly with the general attitude of the Labour Party when in Opposition, because they did not seem to like the idea, when in Opposition, that nationalised industries should be run on commercial lines. However, we welcome the conversion as far as this Bill goes, and since in principle it is a Tory Measure, I want to make it clear at the outset that we shall support the Second Reading. In Committee, however, there may be a number of Amendments which we shall wish to make to improve the Bill and also to adduce the Government's intention as to how they will operate it because, as I shall stress. so much of the Bill depends in practice on the use which the Minister will make in the future of the powers which it gives him.

If this is a Tory Measure, why should the hon. Member require to find so many Amendments for it in Committee?

I made it quite clear that we approved of the Bill in principle, but I shall also make it clear in my speech that there are a number of points on which we may wish, on consideration, to move Amendments and on which we shall certainly wish to probe in an exploratory manner in order to elucidate some information about how the Government intend to use the powers which the Bill will give the Minister.

It is interesting to note, in passing, and for the benefit of the hon. Member for Glasgow, Govan (Mr. Rankin), that the only other essay in legislation by the Minister so far, the Airports Authority Act, was also a Tory Measure. It is, of course, over his administrative acts that we come into conflict and quarrel with the Minister, because we believe that they have often been evil in their effect. We hope that the actions which he takes under this Bill will be more beneficial. In view of some of the Minister's closing remarks, perhaps I should assure him that the quarrel will quickly extend from the administrative to the legislative field and become even more intense if there turns out to be any truth in any of the leaks or other suggestions about nationalising the aircraft industry in whole or in part.

I was rather surprised to read in the Sunday newspapers a report of a speech by the hon. Member for Loughborough (Mr. Cronin), who is a member of the Plowden Committee, about the subject of this Committee and, by implication, suggesting some of the evidence given to it and before that Committee has reported, I must register our disapproval of that. I did give the hon. Member notice that I would be referring to it in the course of my remarks.

I seem to recollect that from the Opposition side of the House I and some of my hon. Friends made the same suggestions a long time ago—about two years ago. It is hardly making comment on whatever the Plowden Committee may decide to say when one refers to questions of nationalising parts of the aircraft industry.

I am prepared to leave the House to judge whether it is wise, if nothing worse, for a member of an important Committee to make public pronouncements just before that Committee's report is published.

I wish to divide what I have to say about the Bill into two parts. I want, first, to comment on some of the principal explicit provisions in the Bill and, secondly, to discuss the implications of the discretionary powers which the Bill gives the Minister and the effect that the use of those powers will have on the financial affairs of the Air Corporations.

Before I do that, I should like to say—and I am sure that hon. Members on both sides of the House will agree with me in this—how glad we are that we are able to have this debate against the background of good results from B.O.A.C. These good results seem to be justification for the present management of B.O.A.C. and for the policies of my right hon. Friend the Member for Preston, North, the previous Minister, because the pounds, shillings and pence and the financial structure which we are talking about would indeed be meaningless symbols unless we first had in B.O.A.C. a management of the right quality, properly deployed and with the right level of morale. I think that right hon. and hon. Members, regardless of party, must give praise to my right hon. Friend's courage in tackling what was a difficult and bound to be in some respects an unpopular exercise in putting this matter right.

In view of the record of the right hon. Member for Preston, North (Mr. J. Amery), how can the right hon. Gentleman reconcile his remarks in the light of the fact that the right hon. Member for Preston, North is not today even shadow Minister of Aviation?

I think that deeds speak louder than the hon. Gentleman's words. If we are talking of changes of personality at the Dispatch Box, I cannot help noticing that the hon. Member for Loughborough is not addressing the House from the Government Front Bench today.

May I turn to Clauses 1 and 2—[Interruption.]

Order. I hope that the hon. Member for Poplar (Mr. Mikardo) will refrain from speaking until he catches my eye. Honours are now even. May we get back to the Bill?

Will you please accept my deep expressions of regret, Mr. Speaker? I am very sorry.