asked the Secretary of State for Trade if he will publish the export figures for the aircraft industry in the years 1970, 1971, 1972, 1973 and 1974.

Net exports of aerospace products were £201 million in 1970, £221 million in 1971, £287 million in 1972 and £343 million in 1973. Figures are not yet available for 1974. All of these figures exclude guided weapons which were not separately distinguished in the trade statistics prior to 1973. The figures quoted are net exports as they exclude the imported value of re-exports.

I thank the Minister for that answer. Does he recognise that exports by the aerospace industry represents about 50 per cent. of its output? Does he believe that this fine performance will improve under the Government's proposals for nationalisation?

The answer to that question is "Yes". On the details of what nationalisation will involve, I ask the hon. Gentleman and other hon. Members to await the announcement that is expected fairly soon by my right hon. Friend the Secretary of State for Industry.

Does the hon. Gentleman accept that that constitutes failure to the nation, in the terms that he usually uses when making the case for nationalisation?

No. I am well aware that failure to the nation is only one of the reasons for nationalisation. This industry, which has a good export record, is also highly dependent on Government assistance.

asked the Secretary of State for Trade what is the trade deficit with the EEC for 1974 to the last convenient date.

asked the Secretary of State for Trade what was the trade deficit with the EEC in 1974 up to the latest date available compared with the equivalent period in 1973.

On a balance of payments basis, the visible trade deficit with the EEC in the first nine months of 1974 was £1,368 million, seasonally adjusted, compared with £768 million in the corresponding period of 1973.

Will the Secretary of State tell us, on a balance of payments basis again, what percentage that represents of our total non-oil deficit on trade? If the figure is somewhat similar to what it was last month—that is, 96 per cent.—may I ask how long this country can go on at such a rake's progress before the myth is finally exploded that it was to our trading advantage to go into the Common Market?

The proportion of our non-oil deficit on trade, accounted for on a balance of payments basis by our deficit with the EEC, is 96 per cent.

What?

I did not mislead the hon. Gentleman last time. With my usual and characteristic understatement, I used a slightly different basis of figures which gave a more favourable result.

The whole matter of the EEC and our continued membership will, as I am sure the hon. Gentleman will be glad to know, be brought to the people of this country, I hope, within the next few months.

Will my right hon. Friend explain why he misled the House, no doubt unwittingly, a few weeks ago? This point was emphasised in the Observer which gave my right hon. Friend a chance to reply to its counterproposal, which he refused. Why did he do that and why did he mislead the House in the way that he did?

I have not misled the House either wittingly or unwittingly, except in this one small particular when I understated the reality of the situation. Frankly, it is no use my hon. Friend's seeking to bolster his case by drawing upon the statistical department of the Observer newspaper—

No. It was my right hon. Friend's Department.

—when Her Majesty's Government have rather better statistics at their command.

On the subject of myths, will the Secretary of State lay the myth that joining the EEC has somehow been detrimental to our overall visible balance of trade pattern? Does he acknowledge that for many of the products that we wish to import, particularly foodstuffs, the EEC now represents a cheaper market for us than the rest of the world, and therefore it is only prudent that our imports from that market should increase?

Finally, does the right hon. Gentleman regret the lowering of tariff barriers which has taken place between us and the remainder of the Community?

Whether or not the membership of the EEC has been detrimental to our trade is something which can be judged only by the actual outcome of our trading relations with the EEC. The onus of analysis and explanation certainly lies upon the advocates of membership rather than on those who have persistently warned against the dangers to this country's economy that could follow from our own membership of the Community. As for foodstuffs, it is true that during 1974 some foodstuffs in the EEC were cheaper than world prices—and that has been true, I should think, of about one other year in the past 30 years. But what we have to consider, surely, as a House—and certainly what the Government will consider—is not the advantage that there may or may not be in one particular year but what the expected advantages are over a longer period.

If we take selective restrictive measures to try to put right this disastrous deficit and the Common Market takes umbrage at that, will my right hon. Friend ensure that less strong-willed members of the Government do not retreat from that situation if it should make our renegotiation that much more difficult?

I do not think that my hon. Friend need be concerned about this. This is a matter of judgment, of where our interest lies. If we did come to such a view, we should of course act accordingly. But, as the House will know, my view and that of my colleagues is that we must, in this very difficult year for international trade, be guided by the pledge that we gave at the OECD not to restrict trade in any artificial way

Is the right hon. Gentleman aware that he has certainly given the impression consistently that it is his view that the overall deficit is significantly larger as a result of EEC membership and that we are therefore very glad to have his retraction this afternoon and his statement that we cannot draw that conclusion from the figures? Does he further accept that, contrary to what he has said in correspondence, it is not the case that his officials' views and the official statistics support the view that the overall deficit is greater as a result? If he has any evidence to that effect, will he publish it as early as possible?

I was invited by the right hon. Member for Down, South (Mr. Powell) to draw just such a conclusion when this matter was raised on the last occasion. What I said was that I remained genuinely puzzled at the extent of our trade collapse in relation to the EEC, but I have also said that I should be surprised if, at the end of the day, when we have analysed these things thoroughly, there were not some obvious relationship between membership and the trade out-turn.

asked the Secretary of State for Trade what estimate he has made of the effect of United Kingdom membership of the EEC on the deterioration in our visible trade balance at current prices between the first half of 1973 and the first half of 1974.

The crude trade deficit doubled between these six months' periods from £481 million to £964 million, a development brought about by a number of factors. I do not wish to reach any hasty conclusion about the effects of membership, but I am greatly concerned at the magnitude of the deterioration in our trade balance with the EEC.

Is the right hon. Gentleman aware that in the House on 18th December his right hon. Friend the Foreign Secretary expressed the view that our membership of the EEC had made very little difference to our trading deficit with the EEC countries, one way or another? Does he agree with that view? As I understand that his own preference is for a free trade area, what improvement would that make in the position?

I think that the hon. Gentleman is entirely right to emphasise that whether our future relationship with the EEC is that of member or one of free trade association, we have to improve very considerably on our economic performance in relation to trade with the Community. Of that there can be no doubt whatever.

The essence of the difference is simply that whereas under the EEC membership arrangement we have what I consider to be the ongoing and general disadvantages of having to import EEC food at the expense of food which is normally available at a lower price in other parts of the world, this would not be the case if we had a free trade area arrangement. Secondly, we should not have the same problem, about which we are now renegotiating, of having to make a large net contribution to the EEC budget and also to sustain very unwelcome capital flows.

asked the Secretary of State for Trade what was the visible trade deficit of the United Kingdom with the previous EEC Six in 1974.

Estimates on a balance of payments basis are not available. The "crude" trade deficit—that is, the difference between exports value fob and imports value cif—in the first 11 months of 1974 was £1,914 million, or £2,088 million at an annual rate.

Is my right hon. Friend aware that this huge deficit with the EEC, accounting for almost the whole of our trade deficit in 1974, contrasts with a negligible deficit with the Commonwealth preference area for the same period, and that this result is wholly contrary to the wild promises we had of a great trade surplus with the so-called great home market of the EEC?

I hope the House will take note of what the figures really are. We can have disagreements among ourselves about the way in which we interpret these figures and about the explanation of the figures, but we shall get nowhere unless we face the facts. The facts are as I have given them to the House and as my right hon. Friend has stated them. They account not for the whole of our non-oil deficit but really for by far the greater part of our non-oil deficit in our trade with the whole of the world. This is, therefore, a matter of the greatest concern to the Government, as it should be to the whole House, regardless of what view one takes on the wider question of membership.

Does the Minister appreciate that in a recent survey taken by the CBI amongst its members, 84 per cent. believed that they would gain long-term advantages by our being in the EEC, but—what is more significant—78 per cent. believed that it would be disastrous if we were to pull out?

While we should take seriously the views of business men—and I think it was the views of business men which the hon. Gentleman was quoting—and listen to them, as indeed we do on many occasions, we should bear in mind that in matters of this kind those views are not necessarily correct. Let me give the hon. Gentleman an example. Businessmen generally in Norway and Sweden were in favour of those two countries joining the EEC. I think the hon. Gentlemen will agree with me that the present outlook of both those countries is very strong indeed—and they have pursued policies of dealing commercially with the EEC but without membership.

Is my hon. Friend aware that when the discussions about entry into the EEC were going on, those who were in favour of our so doing said that membership would be immediately to our benefit? That has now been forgotten. Will my right hon. Friend ask Sir Christopher Soames, who is acting as a Tory propagandist and is holding a series of meetings—paid for by Brussels—in his propaganda drive, to ensure that these facts and figures are truly put over, instead of the false propaganda from Brussels and the Tory Central Office?

I have already made clear to Sir Christopher, and publicly, my own views on his participation in the internal debate in this country. I do not believe that in the longer-term sense, even from the point of view that he takes, he will add to the prestige of being a Commissioner by taking part in what is going to be a very strong and vehement debate in this country, and I very much wish that he would desist.

Is the right hon. Gentleman aware that while, of course, we accept the figure which he provides, we object to the superficial selection of statistics in order to draw certain conclusions? Will he study very carefully what his right hon. Friend the Foreign Secretary said when answering Questions just before Christmas, which gave a totally different impression from the one which the Secretary of State himself had given a few days before? Will the right hon. Gentleman ask his right hon. Friend who asked the original Question not to go round making wild unattributable remarks as to what was claimed before entry but, rather, to consider what was said in this House and by responsible commentators outside, which gives a very different picture?

The Foreign Secretary and I are in very close touch with each other. We study each other's speeches and remarks with the interest and attention that the House would expect.

I am afraid I have forgotten the other point in the hon. Gentleman's supplementary question.

The right hon. Gentleman who asked the original Question quoted statements alleged to have been made before the debate took place. Will the right hon. Gentleman discourage this approach—because the statements made in this House and outside by responsible commentators did not reflect the views which are now being stated?

The hon. Gentleman knows that I myself played some part in the debate. My recollection is that people whom we thought were very responsible on the then Government Front Bench gave very clear indications that, in their view, prosperity and security were secure only if this country joined the EEC. If the hon. Gentleman wants to look at the most authoritative statement of all, let him read what was said in the White Paper of July 1971—the key document which was put to this House in the debate in the following October—and see what it said about the effects upon members and their prosperity.

asked the Secretary of State for Trade whether he has any proposals designed to improve the United Kingdom's balance of trade within the EEC.

Her Majesty's Government's economic and commercial policy is directed to the improvement of United Kingdom's total balance of trade including trade with the EEC. The British Overseas Trade Board has the advice of the European Trade Committee and provides a wide range of services, in addition to those of ECGD, to assist British exporters. Particular proposals designed to improve our trade balance with the EEC would, of course, have to be consistent with our international obligations.

As the Government proposals appear to be singularly ineffective in relation to the EEC, and as the Secretary of State has agreed this afternoon that the food deficit is over 50 per cent. of the balance of trade deficit, would it not be in the interests of this country to have some specific proposals geared to the EEC very much along the lines of the suggestion that the hon. Member for Sheffield, Heeley (Mr. Hooley) made earlier?

The question of specific proposals, in terms of proposals that might directly operate upon exports and, indeed, upon imports in trade with the EEC, as the hon. Gentleman must know, are inevitably limited by the terms of the Treaty of Accession and, in turn, by the Treaty of Rome. Therefore the room for manoeuvre may not be as great as the hon. Gentleman expects.

Is it not a fact that the main reason for the increased deficit with the EEC is that we are now able to obtain from the EEC food and raw materials much more cheaply than from anywhere else? Is it not also a fact that the alternative which has been widely proposed by those who are opposed to membership of the Common Market—that is, a European free trade area—would leave us with exactly the same deficit with the Common Market as we have today?

My hon. Friend may have missed the reply that I gave a few minutes ago to a similar question. I will make just one essential point to him, namely, that the difference between a free trade area and membership of the EEC is that the ability to buy food in the markets of the world would be far greater than it is now. Further, we should not have the balance of payments burdens of the Community budget contribution, together with certain obligations in respect of capital movements.

asked the Secretary of State for Trade whether he is satisfied with the way in which his Department is discharging its statutory obligations regarding insurance companies.

Yes, Sir, although we shall all be happier when more of the detailed regulations provided for under the 1974 Act have been made and are fully effective. As regards particular companies, I cannot, for reasons of confidence, mention names, but the Department has been instrumental in protecting many thousands of policy holders in the unprecedented circumstances of the last year.

In view of the regulations under the 1974 Act, which are being published by the right hon. Gentleman's Department to prevent any further failures of insurance companies, does he not agree that it might be sensible to see how the existing regulations take effect before launching new legislation to establish a statutory fund, which could well put up the premiums of those who have made a prudent investment in their insurance?

I should certainly like a longer period to operate in full the powers provided by this House in the 1974 Act. My own assessment of the situation is that we now need an additional resource not provided by that Act and that we should bring it into play as soon as we can.

Will my right hon. Friend give special consideration to the sad plight of the many thousands of unfortunate policy holders who insured with the Nation Life Insurance Company Limited of Teddington, Middlesex, about which I have recently written to him?

Yes, I am well aware of the difficulties and worries that the policy holders of Nation Life are experiencing. We are, within the complex law affecting insurance and liquidations, doing our best to get as speedy an answer as we can for them.

asked the Secretary of State for Trade when he expects to introduce legislation to compensate those members of the public who have lost deposits as a result of the collapse of travel firms, in accordance with his undertaking following the financial failure of Court Line.

asked the Secretary of State for Trade what proposals he has to increase safeguards for holidaymakers; and if he will make a statement.

asked the Secretary of State for Trade if his proposals for the protection of holidaymakers are ready; and if he will make a statement.

I expect to be able to introduce a Bill very shortly, and I would ask hon. Members to await the submission of my proposals to the House.

As the Government have admitted liability to compensate those Court Line holidaymakers who were deceived by the Government's inept intervention, will the Secretary of State now say where the money will come from?

The hon. Gentleman knows that no such liability has been admitted or even implied. He will also know that the rôle of Government in the affair is being investigated, and no doubt will be thoroughly investigated, and that the House will, before very long, I hope, get a full report on it. But leaving that aside and turning to the question of the proposed Bill, it would be better, instead of my trying to anticipate major features of the scheme, if we waited until the details were published.

Is there not an embarrassing contrast between the alacrity with which the Government promised action before the General Election and the delay to which their proposals have since been subject? Is the right hon. Gentleman aware that, as a result, retail travel companies are outbidding one another in desperate attempts to secure the public's confidence by promising to refund within 24 hours, and then being trumped by further promises to refund within 12 hours, and so on? As we are now at the peak of the booking season, can the Minister at least tell us from what date the scheme will operate?

I cannot take it upon myself to make specific commitments in advance of the agreement of this House, but when the Bill has been published I hope that it will be found possible on both sides to make speedy progress with it, so that we can assist holidaymakers, including those who lost their holiday last year.

Does my right hon. Friend accept that it would be better to take these travel firms into public ownership, instead of propping them up? Will he explain when the Labour Party's promise to take back into public ownership those sections which were hived off by the previous Tory administration will be put into effect?

I should certainly hesitate to give any priority to the air travel industry, in terms of public ownership, if I were to decide that that was the right thing to do. But in the air travel business there is, of course, a substantial public sector, represented by the extensive holiday activities of British Airways.

Contrary to the point made by my right hon. Friend the Member for Romford (Mr. Neubert), is the right hon. Gentleman fully convinced that legislation for the future protection of holidaymakers is still the answer? Has he not seen the growing number of voluntary arrangements within the travel industry since the unfortunate Court Line situation? Would he not be better advised to have some consultations with the industry to see whether the public can be given security without the cumbersome legislation which he may be envisaging?

I remind the hon. Gentleman that the scheme which we have discussed and to which we are hoping to give legislative form in the near future was discussed very extensively with the travel organisations, and particularly with ABTA. Although it is true that one or two specially well placed travel firms can offer very generous and secure facilities to their customers, this is not something that can be reasonably expected of the great majority of travel firms.

As future holidaymakers now booking holidays will want to know where they stand, will the right hon. Gentleman give the House an assurance that they will not have to contribute any part of the cost of holidays lost by Court Line customers?

The contribution which the travelling public will be asked to make will depend entirely on the date of the coming into effect of the levies proposal.

asked the Secretary of State for Trade if he will discuss with the Export Credits Guarantee Department the possibility of providing cost escalation insurance for export contracts secured by British firms producing large scale industrial equipment.

This matter is already under discussion following representations from industry.

I am grateful to my hon. Friend for that reply. Is he aware that this industry is involved in multimillion pound contracts which by their nature cannot be fulfilled in less than a period of years, and that the lack of an insurance against cost escalation is causing the industry difficulties vis-à-vis its competitors in France and Italy which are operating such schemes?

I am well aware of the difficulties facing a number of British exporters because of the problem of inflation, but we could not provide for such a scheme on an insurance basis. It is also important not to take any action which would discourage our exporters from resisting inflation and, indeed, discourage the acceptance by overseas buyers of reasonable price increases. These are all factors which we must take into account.

asked the Secretary of State for Trade what was the total value of the export of British-made hovercraft in 1974; and how this compares with the previous three years.

The figures, which are published, show exports for civil purposes valued at £1·5 million fob during January-November 1974, and £2·3 million and £0·9 million respectively for 1972 and 1973. Hovercraft were not separately distinguished in 1971.

Does the Minister agree that those figures show the importance of the British hovercraft industry? What proposals has he for helping the further development of the industry and protecting it from unfair competition from a highly subsidised Russian hydrofoil?

On the first point, aid to British industry is a matter for my right hon. Friend the Secretary of State for Industry. On the second point, a Russian hydrofoil is operating on the Thames and there are allegations that it is being unfairly subsidised. My Department is willing to look at any allegation of dumping in respect of this service on the Thames, and so far no application has been received.

asked the Secretary of State for Trade what was the ratio of the percentage increase in exports to that in imports to and from the EEC for all goods for the following periods: (a) 1970–73, and (b) between the first half of 1973 and the first half of 1974; and what were the ratios over the same periods for Great Britain's trade with the rest of the world.

asked the Secretary of State for Trade if he will publish comparable statistics showing, since the United Kingdom joined the Common Market, the movement in the United Kingdom's export and import ratio, first, with the EEC and, secondly, in the rest of the world.

Between 1970 and 1973 the percentage increase in exports fob to the EEC(Six) was 58 per cent. of the percentage increase in imports cif; for the rest of the world it was 79 per cent. Between the first halves of 1973 and 1974 the corresponding figures were 75 per cent. and 52 per cent. for all commodities. With respect to trade with the EEC(Six) the ratios of exports fob to imports cif were 82 per cent., 73 per cent. and 67 per cent. in 1972, 1973 and the first 11 months of 1974; corresponding figures for trade with the rest of the world were 89 per cent., 80 per cent. and 72 per cent.

Does the right hon. Gentleman agree that although trade with the Community and the rest of the world has been on a downward trend, the decrease so far as the Community is concerned is much less? Will he therefore now admit that our trade with the Community is encouraging, and clearly shows the benefits of British membership in terms of both exports and employment?

I wondered what could possibly be the real meaning of this extraordinarily complicated Question, but if I have understood it correctly, the figures suggest the precisely opposite conclusion to that which the hon. Gentleman has so assiduously laboured to draw. I find no such conclusion inherent in the figures. I can only suggest that we both put on wet towels tonight and see whether we can examine them and find good sense in them.

Irrespective of the merits of the figures themselves, does my right hon. Friend agree that the ratio of percentage increase depends a great deal on the base on which one starts, and that that is a very tenuous principle on which to base any argument, wherever it may lead? In relation to the total trade with the EEC, will my right hon. Friend say whether there are any trends in any particular commodities which have caused the imbalance to which he drew the attention of the House on an earlier Question?

Leaving the statistical point on one side, on the question of the particular commodities or groups in our trade with the EEC where there has been a considerable deterioration which I would think stands out in the past two years—although there has been a fairly broad deterioration—is, first and obviously, the food trade, where we are now paying a very much larger sum for food imported from the EEC, and, second, imports of steel from the EEC.

Does the Secretary of State's inability to read these trend figures correctly show his opposition to our continued membership of the EEC on any terms? Has he concluded his consultations with his conscience, on the question whether he can remain a member of a Government who recommend the continued membership of the EEC? If so, will he advise the House of the outcome of those consultations?

The hon. Gentleman has drawn even more labyrinthine inferences from these obscure figures. I suggest again what I suggested earlier—that we should look very carefully at these figures. I should be very surprised indeed if they supported the point that the hon. Gentleman is seeking to make.

asked the Secretary of State for Trade when he now expects permission to be given for the inception of the Laker Airways Skytrain service to the United States of America.

I cannot anticipate the outcome of the review of Laker Airways' Skytrain licence which the Civil Aviation Authority has undertaken.

Setting aside the delay that is now being caused by British Airways' attempt to enforce the IATA cartel on the North Atlantic, does not the hon. Gentleman agree that the United States Government have been in breach of the Bermuda Agreement for about two years by refusing to allow services to operate? In the event that the CAA does approve it, will the hon. Gentleman say whether the Government will take firm action—if necessary, retaliatory action—against the Americans until they give permission?

The hon. Gentleman has, somewhat characteristically, distorted the position of British Airways, but in respect of delay on the part of the United States administration we have on a number of occasions made both formal and informal representations. The situation is now in the hands of the CAA and it would be quite improper for me, having regard always to the fact that my right hon. Friend may be the final arbiter of this matter under the appeals procedure—if an appeal is eventually launched—to make any comment along the line suggested by the hon. Gentleman.

Can my hon. Friend tell the House of any possible justification for allowing this Johnny-come-lately airline to cream off this part of the market at the expense of British Airways?

I must resist any temptation I may have to be drawn into this argument, having regard to the procedures now being invoked.

asked the Secretary of State for Trade whether, and by what amount, the United Kingdom is in trade imbalance with Japan; and what was the extent of the imbalance in each quarter of 1972, 1973 and 1974.

As the answer involves several figures I will, with permission, place a table in the Official Report. This shows that our "crude" trade deficit with Japan averaged £36 million a quarter in 1972, £43 million in 1973, and £57 million in the first three quarters of 1974.

Does not my hon. Friend regard that imbalance as very serious? Does he agree that there seem to be some grounds for suspicion that Japanese competition in Britain is not entirely fair? Will he look at the matter urgently?

We have had a number of representations about Japanese imports, particularly motor cars, but allegations of unfairness are completely unfounded. Our general trade with Japan is expanding very fast. This is one of our major priority markets. Japanese exports to this country have risen substantially, but, so, equally, have our exports to Japan. We believe in multilateral trade, and the fact that we may have a deficit on current account with one country does not necessarily mean that we should seek means in our power to restrict imports merely on that ground alone.

Why have West German exports of motor cars to Japan expanded by 20 times the amount that ours have? What was the reason in 1974 for extra imports from Japan of over £20 million worth of iron and steel?

I take it that the extra imports of iron and steel from Japan must have been because of a shortage of steel production in this country. Japan has, indeed, been exporting a great deal of iron and steel to the rest of the world. That helps to account for the way in which it has managed to overcome its balance of payments deficit on account of the oil price rise.

Japanese imports of motor cars have risen substantially, which shows that, in fact, there are no import restrictions on motor cars sent to Japan. It is sad that we have not been able to do rather better in comparison with Germany and the United States in terms of exporting whole vehicles to Japan, which is a growing market for motor cars.

asked the Secretary of State for Trade whether the investigation by his Department into the affairs of the London and Counties Securities Group Limited has been completed; and if he will make a statement.

The inspectors have reached the concluding stages of their inquiries and I hope to receive their report soon. I am not in a position at present to make a statement.

Would my hon. Friend care to inform us whether the report is being held up because of the failure, as yet, to interview the Leader of the Liberal Party, as one of the directors of London and Counties Securities? In view of the recent revelations about the difficulties of another secondary bank—indeed, many others, for that matter—will he also say whether there is any truth in the widely reported comments that 30 secondary banks are receiving aid from the Government, and thus from the taxpayer, and whether this fits in with Government policy of wealthy directors scooping the pool?

There is no reason to attribute the fact that the report has not yet been provided for us to any failure to interview anybody. As I have indicated to my hon. Friend in my answer today, and, indeed, as I have said on previous occasions, we are hoping to get this report quite shortly now, and it will be for my Department to consider what steps should then be taken.

My hon. Friend should table a specific Question on the wider ranging points he has made if he expects to receive a proper reply to them.

Will the Minister expedite the publication of this report, because the Leader of the Liberal Party will no doubt gain considerable electoral advantage from the personal sympathy which these monotonous and malicious attacks upon him are bound to engender?

The question of the publication of the report is one that we have to consider in the light of our findings about the report itself. If we, as a Department, consider that the situation could lead to prosecution, it could well be that we would then take the view that publication of the report should be deferred. This is in accordance with the usual practice.

Does the hon. Gentleman accept that London and Counties Securities was the first of many, and many to come? Will he say how many other companies are being investigated by his Department at present?

I am surprised that someone of the hon. Gentleman's experience apparently does not know that if he wants a detailed answer to a question of that character he should table a specific Question. I could not possibly answer that question here and now.

asked the Secretary of State for Trade if he will pay an official visit to the Christchurch and Lymington constituency to address a meeting of leading business men and industrialists on Her Majesty's Government's trade policies.

I cannot promise to make such a visit at the present time.

Is the Secretary of State aware that I have reserved 21st March for him should he decide to come? If he does come, will he please tell my constituents whether he fully supports the views expressed in the last few days by the Prime Minister and the Chancellor of the Exchequer about the need for a slightly more realistic look at the state of the economy in 1975?

I am entirely at one with my colleagues, and, indeed, with a very large body of opinion in the country, in thinking that in this most difficult year on which we are now embarking we need to have the utmost realism in all our economic policies, and that we must face, above all, the very serious problems which we know about and which we have not yet done enough to solve. I am thinking particularly of the continuing balance of payments deficit, on which this country must make greater progress, as well as the general success of our policy to maintain employment and curtail inflation.

Is it not clear from the wording of the original Question that the leading business men and industrialists in Christchurch and Lymington have no confidence in the ability of their own Member to explain the Government's trade policies or anything else?

asked the Secretary of State for Trade what meetings he has had with members of the European Commission.

I have had frequent meetings, both formal and informal, with members of the European Commission.

Does the right hon. Gentleman appreciate that when, after each of these meetings, he goes out of his way to make clear that it is his hope and intention that we should leave the EEC, it is directly discouraging to the mounting of the export drive towards Europe which he says is needed, and that he is contributing to the collapse of industrial investment and rising unemployment? We recognise the sincerity and strength of the right hon. Gentleman's views, but may I ask whether he finds this attitude possible to reconcile with his responsibilities as sponsoring Minister for trade and his need to give confidence to industry in a time of crisis?

I am, along with my colleagues, embarked upon a fundamental renegotiation of our terms of entry to the EEC, and the matter is to be put to our own people for decision. That, if you like, brings an element of uncertainty about the future of the formal relationship between Britain and the EEC. As long as the present Government—who have every intention of living up to their word—are in power the decision will be for the British people. If that causes uncertainty to British industry I can do nothing about it, but I say—as I say on all possible occasions—that whether we are in or out we shall have a very substantial continuing trading relationship with the EEC. I shall, therefore, find no difficulty in urging British industry to bend every possible effort to improving its trading performance with the EEC.

Is it not patently obvious, since we were trading much better with the EEC as it existed before we entered, that it would be far better if we got out, so that we could restore our trading position with those countries? In view of the October deadline and the serious economic situation facing this country, would it not be better if my right hon. Friend had a word with his Cabinet colleagues, perhaps this week, and suggested that we should hurry the matter along by several months—perhaps getting the Leader of the House to organise an all-night sitting, as was done on the Prevention of Terrorism Bill—so that we could get out quickly?

The issue whether it is better to get out is not to be judged solely in terms of the trading context. There are wider considerations, and I think it right that the whole business should be brought together and presented to our people for their decision. As for hurrying it along, I assure my hon. Friend that there will be no delay on our side, and I do not believe that there is now any wish to delay on the side of the EEC, either. I am, therefore, very hopeful that we shall be able to resolve the matter soon—certainly before the summer.

asked the Secretary of State for Trade what discussions he is having about trading arrangements after the decision has been taken about Great Britain's membership of the European Economic Community.

I would refer my hon. Friend to the answer which I gave to my hon. Friend the Member for Southampton, Test (Mr. Gould) on 6th December.

Does my right hon. Friend see the need for contingency plans based on whatever decision may be made, especially in the light of the appalling figures which he gave this afternoon about our trade deficit in relation to the EEC?

I certainly accept the need for forward planning to cover all kinds of situations, and not just the situation which could be expected if our people were to decide against continuing British membership of the EEC. We have to keep all possibilities and all available action under review, and that we are doing.

asked the Secretary of State for Trade if he will now make a statement about his review of civil aviation.

The review is continuing, and I hope that it will be completed in the spring.

Will the Minister say a little more about the constitution of the review board, about the way in which the airlines are to be consulted, and on the question whether Parliament is to receive any sort of Green Paper about the future of the airlines?

The consultations will be very wide, covering the whole of the industry. My right hon. Friend will consider the report when it is available, in order to determine whether the whole of the report should be published and what action we should take. Parliament will therefore be fully consulted on the matter.

Will my hon. Friend bear in mind that many of us on the Government side are still opposed to the whole concept of a second force private enterprise airline? Will he bear in mind also that many of us strongly opposed the way in which British Overseas Airways Corporation's routes were handed over to British Caledonian without compensation, and will he recognise that merely handing those routes back will only mean the collapse of an airline and, perhaps, about 5,000 redundancies? Does my hon. Friend now accept that the most sensible way out of this rather stupid dilemma is the nationalisation of British Caledonian?

We are looking carefully into the matters about which my hon. Friend and many others of my hon. Friends have expressed strong views in the past. But that goes to the very heart of the review, and it would be impossible for me at this stage to comment upon the points which my hon. Friend has raised. The question of nationalisation, of course, is a much wider issue.

Will the Under-Secretary of State give three undertakings: first, that as much as possible of the evidence which is given and of the report of the inquiry will be published; second, that we shall have it, if at all possible, in the form of a Green Paper, so that the House may discuss it without being pressurised on the issues one way or another; and third, that the whole business will be carried out as quickly as possible, in order to end some of the present uncertainty in the industry?

I have already undertaken that my right hon. Friend or I will report to the House fully on this matter once the report is in our hands. On the second point, the hon. Gentleman should not be so impatient. We shall consider the request for a Green Paper, and we shall make our decision at the appropriate time. It is not possible for us to make that decision now. I certainly undertake that the inquiry will be conducted as rapidly as possible, but it must be a thorough inquiry, and that is how it will be done.

asked the Secretary of State for Trade what was Great Britain's visible trading surplus or deficit with South Africa in the most recent annual period for which figures are available; and if he will make a statement.

The "crude" balance of trade with South Africa, that is, the difference between exports fob and imports cif, was in surplus by £47 million in the 12 months ended November 1974. In recent years, our "crude" trade balance has generally been in surplus, although in 1973 there was, unusually a deficit. The improvement in 1974 owes much to a sharp rise in our exports to the South African market.

Do not those encouraging figures show once again that South Africa is one of our most valuable and reliable trading partners? Will the Secretary of State make it clear that it is his policy to encourage the expansion of trade with South Africa?

That question was answered in plain and unambiguous terms by the Foreign Secretary just before Christmas. South Africa is a major trading market for this country, but I should add that many other countries are now strongly entrenched in the South African market.

asked the Secretary of State for Trade what action he is now taking in relation to the so-called Mole Valley minimum noise route.

Evaluation by the Civil Aviation Authority and my Department from the operational and other points of view of the various routeing proposals prompted by the Department's consultation document is nearing completion. I shall circulate a further document giving the results of this work as soon as possible. Thereafter, hon. Members, local authorities and others involved will be invited to a meeting to discuss the matter.

Is the hon. Gentleman aware that minimum noise routes are maximum noise routes for those who have the misfortune to live under them? Has the body to which he referred considered splitting the route, and, if it has, will the hon. Gentleman ensure that the route is split widely enough to ensure that people living within the split are not disturbed by noise from both sides of it?

Every time he speaks on this matter the hon. Gentleman makes the same comment about minimum noise routes. I am well aware of the difficulties imposed on certain people who happen to be affected by noise. I cannot anticipate the result of the inquiry. In my original answer I indicated the nature of the consultation which is to be undertaken, and I should have thought that that would satisfy the hon. Gentleman.

asked the Secretary of State for Trade what is his policy towards the supply of computers to foreign Governments.

Subject to our international obligations, we encourage the export of computers to both public and private purchasers.

Is the Minister satisfied with the advice which he received from the Defence Department and the Foreign Office in the case of the supply of computer specialists to aid the installation of a Univac computer for the Turkish Defence Ministry? Does the hon. Gentleman think that this is in accordance with our policy of fairness of treatment for all people in the island of Cyprus, when that installation was being used for the disposition of Turkish troops there?

The case to which the hon. Gentleman refers involved the sale of an American computer and not a British one. Her Majesty's Government were not involved, and the computer will not be supplied from the United Kingdom.

asked the Secretary of State for Trade whether he has yet reached a decision regarding the use of the EPIRB, or any similar safety device for fishing trawlers; and if he will make a statement regarding the promulgation of regulations in this matter.

There is a good case for some trawlers carrying these devices, and we are inviting the fishing industry to discuss with us the classes of vessel and the fishing areas for which they would be appropriate. We have also launched a research and development project covering alerting and locating devices related to maritime casualties.

I am obliged to my hon. Friend for his answer, but is he aware that the last time he spoke in the House—18th November, I think—was two days before we had the findings of Commissioner Barry Sheen on the "Gaul" disaster, and on that very day a demonstration was held in St. Andrew's Dock, in Hull, by Marine Electronics, showing the working of one of these new radio buoys —I shall not give the full name—with his officials present? Will my hon. Friend comment on their opinions on the efficacy of this buoy, since all others there—deckhands, union officials, vessel owners and skippers—felt that it was a huge success and would be of enormous help in avoiding such disasters as the awful loss of the "Gaul" last year?

We are always anxious, as I am sure the whole House is, to take whatever precautions we can to avoid the sort of disaster that occurred with the "Gaul" and other ships. However, it woud be wrong if I were to suggest that any one demonstration would produce a complete answer to these problems. We have undertaken profound research into the development of this sort of alerting and locating equipment. IMCO is looking very carefully at the matter and has made certain recommendations, and I can assure my hon. Friend that we are giving the highest priority to this research.

I beg to move,

That this House takes note of the First, Second, Third and Fourth Reports from the Committee of Public Accounts in the last Session of the last Parliament and of the Treasury Minutes and Northern Ireland Memorandum on those Reports (Command Papers Nos. 5786 and 5823).

Before I comment in detail on the work of the Public Accounts Committee in the last Parliament, I wish to discharge two other happy duties. First, may I pay a tribute to those who have helped the Committee to do its work, namely the Clerk, who has been its most willing servant, the Treasury Officer of Accounts, Mr. McKean, and the Comptroller and Auditor General's immediate colleagues and staff in the Exchequer and Audit Department, those unseen and, I would say, invaluable watchdogs of the public purpose, whose conscientiousness is as deep as its effect, and, not least, Sir David Pitblado, an old friend from Treasury days, and in Washington, who is a most devoted public servant, whose career has been one of continuous distinction and who is now a great servant of this House.

Second, I thank the members of the Committee in the last Parliament for their personal support and hard work, not least for their ready attendance at the sessions of the Committee.

It is always difficult for members of the Committee, a number of whom I am pleased to see in the Chamber this afternoon, to carry out all the duties required of a Member of Parliament in these onerous days, when the Committee is carrying out so much work and is meeting in so many sessions. The constant support of the members of the Committee was a great encouragement. Perhaps I might congratulate them on the penetrating analysis of their cross-examination, which was never carried out at too great a length.

Those tributes are no mere politeness. The Committee worked under a severe handicap. Due to the General Election in February last, the Committee was not appointed until half-way through April, and we did not hold our first deliberative meeting until 6th May. That meant that time for its detailed researches was extremely limited. Difficulties continued, for, though the report was agreed on 24th July, it was not printed until last December with its ancillary papers. That is the reason this motion was not moved, as is customary, of course, before Christmas. I hope the House will feel that the Committee achieved a very great deal in a very little time. How well it acquitted itself as to the quality of its work, right hon. and hon. Gentlemen will be able to judge for themselves.

I need hardly say that the Committee has carried out its work in an entirely non-party spirit. Perhaps I might remind the House of the rôle of the Public Accounts Committee as it has developed in the 113 years of its existence. As historians in this House will recall, the Committee played a major part in the 19th century in assisting and stimulating the establishment of accounting regularity and making sure that public funds were spent only for the purposes for which they had been granted by Parliament. That remains a primary duty of the Committee, but happily we do not have to spend much time upon it, because serious lapses now are rare. The knowledge that if they occurred they would be brought before the Committee perhaps fortifies the sound practices which have for so long been established in the public service under the guidance of the Treasury.

For many years, therefore, the Committee has been able to devote its time to wider aspects of economy and efficiency, dealing with such questions as the elimination of waste and extravagance, with the development of sound systems of estimating and contracting and with improvements in financial administration. In short, the Public Accounts Committee looks to see whether Departments obtain value for the taxpayers' money.

At all times, the Committee must adopt a critical attitude. But I hope that it is true to say that its members consistently aim to be constructive. I hope that we shall always be fair, never pernickety, ever ready to take a broad view, stern when there have been lapses or foolishnesses, yet supporters of innovation, encouraging of modern techniques for accounting, with perhaps an adventurous outlook in their adoption, and certainly supporters of flexibility of management. I should never wish to hear it said in this House or outside it that the Public Accounts Committee did anything other than endorse the most competent and modern administrative methods.

I have said a few words about the history of the Committee for a special reason. In my view, it is time to reappraise the system of financial control exercised by the House of Commons. However, first I wish to come to the details of our work in the last Parliament.

Our First Report, as usual, was on excess expenditure, some cases of which inevitably arise every year. We recorded that we saw no objections to the sums needed being provided by excess Votes, and the House of Commons subsequently voted those sums.

Two of our Reports, the Second and the Fourth, dealt with Northern Ireland accounts, to which I shall refer in a moment.

I turn now and mainly to the Third Report of the Committee of last Session, because that is our chief report. That is based, as usual, upon the examination of witnesses on subjects set out in the Reports of the Comptroller and Auditor General on the 1972–73 accounts.

First, I draw attention to our passages on the Industry Act. Right hon. and hon. Members will find them in paragraphs 41 to 44 in the Third Report. The control of Government assistance to industry has been a subject considered in specific instances by several previous Committees. The Committee of Session 1973–74, under the chairmanship of the present Paymaster-General—and we are delighted to see the right hon. Gentleman in attendance—had started an early and thorough examination of the administration of the various forms of Government financial assistance to industry under the 1972 Act. When Parliament was dissolved in February last year, the Committee was examining the then Department of Trade and Industry on the basis of a memorandum prepared at the Committee's request by the Comptroller and Auditor General on the measures being taken to provide effective control. The evidence was referred to us, and we completed that examination, though in the knowledge that there might be some alterations in policy resulting from the change of Government.

As we said in paragraph 44 of the Third Report, we were pleased to find that the Department had made considerable efforts to establish a sound framework of financial control. This is a matter which has attracted some notice, and perhaps I might draw the attention of those interested in the subject to the memorandum and the papers given by the Department which are published with the evidence and with our report.

The story cannot be allowed to end there. Huge sums of public money are now involved in support to industry, and, with the agreement of the Committee, we shall need to return at once both to the subject in general in order to establish the principles upon which assistance is being afforded and to specific cases as they occur. In the light of current public comment on this scene, I have no doubt that the House will expect this promptness of the Committee which the House has just reappointed.

A study of the contents table shows how wide a range of subjects was examined. There were 27 in all. To enable the House better to follow the broadest aspects of our work of surveillance, I have grouped them under five separate heads.

First, we looked at the arrangements for control of large projects such as the RB211 aero engine, where about £170 million of public money is involved. Also under this head is the multi-rôle combat aircraft, where sums amounting to many times that amount will be spent on research, on development and presumably on production.

Under a second chapter head, we considered the various systems of financial control exercised by the Government. There was the Industry Act 1972, to which I have referred, and I do so again deliberately as it is so important. Then there were other matters such as the Farm Capital Grant Scheme.

As my third example, I select the Forestry Commission, which has now produced a new form of accounts. We thought it proper to examine these in some depth, and what we had to say about the subject is recorded. To express a personal view, although I believe that the Forestry Commission does much good work, I feel that it is time that this House looked carefully at what I regard as the open-ended commitment which the Forestry Commission is allowed for the continuous acquisition of land for forestry in the United Kingdom.

We come, fourth, to cases where proper financial control and methods should be reaffirmed. We looked, for instance, at inventory control in museums and for stocktaking of Government stores. It is surprising how much money is represented in the aggregate.

Then there were cases where matters had gone wrong. One which struck the Committee was where some ocean tugs were to be constructed by the Royal Navy. Instead of the project taking two years, it took four, and the amount of additional money required, due to poor systems of control, which I am pleased to say that the Admiralty now proposes to revise, amounted to £700,000.

Those are the chapter five heads covering the chief matters into which we inquired. There were many others of importance on some of which we had no need to report.

I move to some of the subjects of inquiry into which I wish to go in detail, where there are significant lessons to be learned in the modern context. First, I take one under the head of major projects. Looking into major projects in which the Government engage is an important aspect of the Committee's work. Last year, we took evidence for the first time on the proposals for the construction of a Thames barrier as a protection against tidal flooding. We were concerned to learn that this showed a pattern of large escalating estimates of costs. The first estimate was £100 million. That became £168 million. The latest estimate was no less than £250 million, at December 1973 prices. So often in the past Committees have seen this sort of situation and how important decisions on the type and siting of the barrier, in this case, have been made on too tentative a cost estimate in the first instance. That was why, in paragraph 107, we said:

"We do not underestimate the difficulties of estimating for a project of this nature, but we consider that realistic estimates of costs should be available when such important decisions are taken."

I am sure that all my colleagues on the PAC will agree about the imperative need for realistic estimates of costs before decisions involving hundred of millions of pounds are taken. It is surely all the more necessary in present conditions where unjustified increases in costs through lack of control can be masked by those flowing inevitably from inflation. In an inflationary situation it is all the more important that Government Departments, Ministers, and this House do not approve projects unless they are certain that realistic estimates of costs have been made in the first instance.

Another important review by the Committee was its study in depth of projects for the manufacture of the MRCA, to which I have already referred, in collaboration with the Governments of Italy and the Federal Republic of Germany, and for the manufacture of three types of helicopter in collaboration with the French Government. The House will be aware of my particular if non-commercial interest in the helicopter industry. Estimates of the cost of United Kingdom participation in both projects have substantially increased for a variety of reasons. Among them were reductions in the orders of the participating countries and changes in exchange rates.

I am raising and bringing this matter especially to the notice of the House of Commons because I think it is of significance in the context of our membership of the EEC. We saw the undoubted political and defence advantages springing from the collaboration that I have described and the financial advantages to be gained from sharing development costs with others and increasing production runs. But we drew attention to the problems that can arise when one partner changes his requirements during the course of expensive development and to the administrative problems raised by cost and work-sharing arrangements against a background of differing national levels of cost and industrial productivity.

According to the Treasury Minute, both the Treasury and the Ministry of Defence are alert to these problems, but I have little doubt that a future Public Accounts Committee will wish to examine further the procedure to deal with them. Collaboration with other countries may be important—some may argue that it is vital—but I suggest that in no case will it ever be more vital than good financial common sense and control. It is easy to visualise situations where, for idealistic reasons thought to be practical, this country, in collaboration with others, embarks upon a project the nature of which, in the natural order of time, changes, involving vast increases in cost, but, because the project has been begun, people feel that, for political reasons, it is impossible to vary it. I sound a note of warning in this regard.

Last summer some of us went to Panavia in Munich. We were given a categorical assurance by Mr. Madelung and his Panavia colleagues that the collaboration did not in itself raise the unit cost of the MRCA but that a reduction in orders certainly did. Is the right hon. Gentleman denying that?

There is no "Yes" or "No" answer to that question. We can strike a balance sheet of advantage and disadvantage. Clearly it is easy to begin these projects for reasons of good will, reasons which are wholly political, and to continue them irrespective of changes which occur in partnership, design, and so on, en route and to pay too little attention to the cost as a result. The answer to the hon. Gentleman's question may be "Yes", but I should not like to be categorical, because something can be said on the other side. It is possible to argue that with a long run, for example, production costs are less, though it must be admitted that there are now fewer partners in the arrangement than was originally envisaged.

The Expenditure Committee had inquired into a number of aspects of the MRCA project in December 1973—in fact, while the report of the Comptroller and Auditor General to the PAC was being prepared—and the Committee reported to the House last February. We took that report into account while taking evidence on the Comptroller and Auditor General's Report. I think that those who had the patience to read both reports will have seen that the work of the Expenditure Committee and the PAC were, in effect, complementary to each other. As the first chairman of the Expenditure Committee it gives me much pleasure to record that fact, and I suggest that that matter is significant for a reason to which I will return later.

I come now to two particular criticisms. Another subject on which the Committee made detailed inquiries was the settlement with the receiver of Rolls-Royce Ltd for assets transferred to Rolls-Royce (1971) Ltd. We were concerned that the receiver of an apparently bankrupt firm, with substantial potential liabilities to customers for breach of contract, was subsequently able to pay all creditors in full and to distribute no less than the staggering sum of £26·9 million to stockholders. Indeed, I believe that a further sum is available for distribution.

What I have to say is analogous to the reply that I gave to the hon. Member for West Lothian (Mr. Dalyell). One cannot always have certainty in some of these matters involving judgment. We may never know whether the bargain struck by the Government was a good one, but it seems that the outcome for the creditors and stockholders has been vastly better than they could reasonably have expected. I am still of the opinion that public money was spent to excess in that matter.

Another point arises on the subject of Rolls-Royce. The Committee was concerned to learn that the flow of information from Rolls-Royce (1971) Limited to the Department of Industry had not been satisfactory and that the Department was not satisfied with the monitoring arrangements designed to safeguard the Government's considerable investment in that company. I am glad to see from the Treasury Minute that one of the items of information—the company's preliminary five-year forecast for 1975 to 1979—has been received by the Department and is being discussed with the company. But I note with regret that the Treasury Minute makes no comment on the monitoring arrangements. This simply will not do. I hope to be assured by the Financial Secretary, whom it is a pleasure to see here, that these arrangements are in good shape.

There is another matter of principle which I ought to mention which arose from another case which we examined—namely, the leasing arrangements by British Rail for the purchase of rolling stock and equipment. In paragraph 131 of our report we expressed considerable surprise at and general disapproval of the manner in which the arrangements had been introduced and operated. We thought that a point of general principle emerged. These arrangements were made privately. They were not reported to the House. In paragraph 136 we expressed ourselves as follows:

"We trust that any future government financial assistance to the Nationalised Industries will be provided by more orthodox and overt means so that Parliament are aware of the true position."

Hon. Gentlemen who were members of the Committee will recall that we felt strongly on the matter, for it seemed that the truth was being withheld from Parliament. We thought that to be serious and wrong. But I am glad to observe from the Treasury Minute:

"It is agreed that any specific Government financial assistance to nationalised industries should be provided overtly."

We also considered some of the more traditional areas of financial control on which past committees have long ago established the basic rules. Without retailing any of those, I would just comment that I am pleased to see from the Treasury minute that the Treasury and the Department of Employment accept the principle, for instance, that full account should normally be taken, in grant-in-aid negotiations, of all realisable assets held by grantees and that grants in aid should not be issued in advance of need.

I could continue to comment on many more similar matters, but I know that some of my colleagues on the Committee will wish to comment. However, I feel that I have said enough to illustrate the scope and, I hope, the value of work done.

I said that I would say something further on the work of the Committee on Northern Ireland accounts, in respect of which perhaps my right hon. Friend the Member for Down, South (Mr. Powell) will wish to comment later. For two years the committee has had the responsibility for examining Northern Ireland accounts on the basis of the reports of the Comptroller and Auditor General for Northern Ireland, and we examined Northern Ireland accounting officers in the normal way. I was always pleased during last year that this was the case; it seemed to me to emphasise, better than anything else probably could, the unity of the United Kingdom.

The Committee of 1972–73 had most valuable assistance from the Comptroller and Auditor General for Northern Ireland, Mr. Lowry, who has now retired. I should like, on behalf of the Committee, and, I am sure, of the House, to thank him for the work that he did and for all his years of service, and to wish him a happy retirement.

Our Second Report was on two cases of excess expenditure in Northern Ireland, which raised no difficulties, but in the Fourth Report we were particularly interested in a case in which the Department of Commerce set up a Northern Ireland company to take over the assets of a factory which would otherwise have closed down and later disposed of part of the shareholding to a foreign company. I regret to say, but I say plainly, that we were not satisfied that the Department made adequate inquiries or took adequate advice before disposing of part of its shareholding.

I am glad to see from the memorandum of the Northern Ireland Department of Finance on our Fourth Report that it is recognised that a greater degree of investigation may be necessary in such cases. I do not want to dwell on the matter, except to say that in my opinion much more investigation is required in matters of that sort.

So much for our work. I come back to what one can regard as matters of principle about the Committee itself. Parliament is not, nor should it seek to be, an executive authority, but it must surely have the will and the machinery to exercise, as need may require, a control over the executive of the day—and, old-fashioned people like me who believe very much in the power of the back benches would argue, to dominate it.

It is not our business, therefore, on the back benches to do the business of Government. It is our business to criticise, to check and to call to account those who act in the name of the State. I question, as I did at the beginning, whether we set about this affair as skilfully and competently as we might in the modern context. It is said that good government invariably depends on good opposition. That may be. I would say with as much emphasis that governments will always mismanage their expenditure to a greater or less degree unless the House as a whole—I underline and emphasise the words "as a whole"—is prepared to examine and scrutinise the administration in some depth and on a continuing basis. Question times and debates are of immense importance but today this other process of detailed examination has a new importance, to which I am not sure we give sufficient attention.

Any consideration of these matters invokes the history of this place. The fight for parliamentary supremacy in this country is a record of the importance of financial control, as we all know. Yet we all know, too, that in 1975 Estimates laid before this House are never reduced and that control over finance, over spending, is largely non-existent. We vote millions of pounds on the nod and our debates on Supply are excuses for topicality. These debates are important, certainly; I just say that they do not do the job and that we are not doing the job. So expenditure increases, relatively and absolutely, and economies are never made. We do not have control of the total and we have almost no control over the particular. I would even go further and say that Government expenditure now is wholly out of control.

That would be bad enough if it were not for the fact that I have the feeling—I do not know whether other hon. Members share it—that the real tragedy is that so much of our expenditure is not fully effective. If I felt that we always gave aid from the generality of the taxpayers to those who needed it most, I should have no complaints. I do not feel that. I do not feel it in my own constituency even, in which I watch thousands, ten of thousands, even hundreds of thousands of pounds spent on patching up old hospitals which smaller sums would have rebuilt just a year or two ago.

I repeat: our expenditure of the taxpayers' money is not fully effective, and that is the tragedy. If our control is to be effective, hon. Members must be well informed. That means the facility for research and, I am convinced, it means the reports of specialist committees—perhaps published more frequently than we were able to publish this document last year, for the reasons that I have explained —and it means that they must be comprehensive.

I think that we have made some progress. There is this work of the PAC—more of the category of an inquest, of course, into past affairs as a general rule—and, as I have said, if I am re-elected chairman, I hope that we shall be able to speed up its work a little. Now we have the Expenditure Committee, some attempt to look ahead, to compare actual expenditure with forecasts and to consider policy alternatives. But in spite of the devoteed work of members of that Committee and of my distinguished successors as chairman, it still has no staff worth speaking of, at any rate in terms of numbers—I do not speak of quality—and its work has not yet come fully to fruition.

It is not for me, in this speech, to point to remedies, but I say clearly that I believe that we must consider further advances in our techniques. As the right hon. Member for Birkenhead (Mr. Dell) said some time ago, perhaps we should now consider amalgamating the PAC and the Expenditure Committee; perhaps we should take lessons from the Ways and Means Committee in the United States. I am sure, too, that we should examine revenue alternatives.

All that is perhaps for the future. Meanwhile, I hope that the House will maintain the impact of the recommendations of its pre-eminent Select Committee upon the executive of the day and to this end give a non-partisan and unanimous blessing to the Committee's work in the last Parliament.

This debate allows us to consider not only the reports themselves but the wider and more important question of the scope, authority and responsibility of our system of State audit as discharged by the Public Accounts Committee and the Comptroller and Auditor General. These questions are illustrated by the Third Report.

As the right hon. Member for Taunton (Mr. du Cann) has just said, since its foundation in the 1860s the scope of our system of State audit has expanded from simply an examination of the regularity of expenditure—that is, whether the expenditure was properly authorised—into examinations of evidence of waste, of extravagance or inadequate control of spending. But the central purpose is still to ensure that funds are spent on purposes for which they are authorised and that financial procedures are generally effective. The question now is whether, given the enormous increase in public expenditures post-war, much of it in technically complex areas of construction, aerospace and industrial development, our system of State audit is adequate to cope with new demands.

I and others who have written on this subject have expressed some fairly fundamental criticisms of the system, particularly in comparison with the scope and powers of State auditors in comparable countries. I think that these criticisms are borne out by the Third Report.

These criticisms fall under three main headings. First, we who have written about and discussed the subject have been concerned about the limited powers of the Comptroller and Auditor General compared with those of other State auditors. For example, our State auditor has no power to prescribe the form of the accounts he is auditing. This represents a limitation on his investigations. It is my belief that we have singularly uninformative public accounting routines in this country. Increasingly, in other countries the arrangement of Votes and Vote sub-headings is being replaced by the analysis of public spending on a programme basis, which enables the legislature to examine the objectives of items of expenditure and their results in terms of effectiveness and efficiency. Although in this country there has been some move by the Treasury to organise the Estimates into programme categories, this has only marginally improved the situation and we are still a long way from being able to inquire into the results of public spending programmes compared with what they were intended to achieve.

It seems to me, from the Third Report of the Public Accounts Committee, that the public interest would have been better served if, in the case of the hospital contruction reports and the report on the Thames tidal defences, the Comptroller and Auditor General had had the authority to design and oversee the implementation of effective preconstruction cost control systems, rather than complain afterwards that they were inadequate.

In several of these reports the recommendation is that the sponsoring central Government Department should see to it that proper management information and cost control routines should be applied. I am not sure that these recommendations are particularly useful, given that British Government Departments themselves rarely operate any recognisable forms of budgetary control or costing, nor do they have the necessary expertise in systems design. It seems to me that it should be the responsibility of the Comptroller and Auditor General to design, for example, a system to evaluate the cost effectiveness of job creation in the regions rather than the responsibility of the Department of Industry.

Our arrangements compare unfavourably in this regard with those of the Comptroller General in the United States, who heads the General Accounting Office and has statutory powers to direct principles, standards, forms and systems on accounting and has installed management accounting, cost and project control and planning systems in American Government departments and agencies.

An audit is as effective as the information with which it is presented. We need far better management information on Government spending programmes in this country, and only an independent body such as the PAC, served by the Comptroller and Auditor General, is likely to introduce it.

Secondly, the field of activity and the scope of our State auditor is less than that of those in other countries and less than is required by today's conditions. Our State audit is excluded from large areas of public spending—from the nationalised industries and local authorities, for example. Some 66 per cent. of local authority spending is provided by central Government, yet there is no specific accountability to the House for what happens to that money. The British Museum, as we can see from paragraph 169 of the Third Report, can remove spending from public accountability by setting up a limited company for its publications. It may well be that the growing tendency to set up trading funds in Departments in order to serve managerial accountability will similarly remove more public expenditure from oversight by the PAC.

Equally important, the PAC is still primarily concerned with the regularity and propriety of expenditure and not with its efficiency or effectiveness. The Government pour money into private industry and other bodies without ever inquiring into the managerial efficiency of the spender. This is exemplified by the Rolls-Royce case. Here, the Government, in the words of the report, are

"sole shareholder, banker, principal customer for military aero-engines and provider of launching aid for civil projects."

But the Government find out, only long after the event, that the company's inventory control procedures are quite unsatisfactory. Not only that. There is still an inadequate means of monitoring the company's performance to safeguard the considerable sums of public money invested in it. It is surely not good enough to

"trust that it will not be long before arrangements are satisfactory in every respect."

The State auditors in France, Germany and the United States have powers to inquire into and improve the operating systems and management efficiency not only of Government Departments but of private companies which benefit from subsidies or other payments of public funds. The American General Accounting Office has carried out many assignments leading to major reorganisations of departments and agencies. The French Central Committee of Inquiry into the Cost and Efficiency of the Public Services has made recommendations on the organisations, structure and procedures of nationalised industries and universities. The German Federal Commissioner for Efficiency has simplified administration and paperwork and carried out cost reduction exercises and reorganisations throughout public administration.

Our State auditor should become what they are—top-level management consultants to the legislature, empowered to seek out and report on managerial malfunction wherever it exists among spenders of public funds.

It was interesting to me to read in the Third Report about the inquiry into the Forestry Commission. The discussion revolved largely around the figure of 3 per cent. as a satisfactory return on capital for a forestry enterprise, and not whether or not the Forestry Commission was properly organised or managed. This, I think, illustrates the unsatisfactory narrowness of our system of State audit. It identifies major defects in costing, project control, management information, reporting, and accounting after the event, and it does not set these in the context of the management of the bodies which are supposed to be operating these systems.

Finally, I doubt whether the Exchequer and Audit Department is sufficiently expert. It takes in school leavers and puts them through a three-year course. Unlike other State audit bodies, it does not employ qualified cost accountants, engineers, economists and management analysts. Ours is the only State audit in which the auditors are of a status inferior to that of those whose decisions are being audited. Three-quarters of the staff of the United States General Accounting Office have professional qualifications. State auditors in France have to be qualified at postgraduate level in public finance and their average age of entry into auditing is 27 compared with our auditors, whose age of entry is 18. The investigating staff of the Federal Commissioner in Germany are often postgraduates with an average entry age of 30.

The Comptroller and Auditor General's independence of the executive is frequently held up as an example of how well we do things here. Yet the Treasury prescribes the form of the accounts and the Civil Service Department decides the number, grading and status of the audit staff. Other State auditors have far more independence in these matters.

In sum, I believe that our system of State audit has not moved with the times or the requirements of the task. This is no reflection on the Public Accounts Committee or the Comptroller or his staff. It is simply that the technical environment has developed faster than our constitutional procedures. In my view, we now need a State auditor empowered to examine and report on the financial management, administrative efficiency, procedures and organisation of Government, public bodies, quasi-governmental bodies and all recipients of substantial public funds. This would give much more force to public accountability in this country, which I consider is now superficial, and would also be a powerful and positive influence on the improvement of the management of our public institutions.

I intend to refer only to the Fourth Report from the Committee of Public Accounts and shall not, therefore, enter upon the wider ground covered by the right hon. Member for Taunton (Mr. du Cann) and the hon. Member for Norwich, South (Mr. Garrett) concerned with the scope and efficiency of our Public Accounts Committee and the material which is submitted to it.

Nevertheless, the two matters on which the Committee concentrated its Northern Ireland findings in the Fourth Report are each of considerably wider bearing than might appear at first sight. The first of those was the brucellosis control scheme and the story of "so near and yet so far" which it illustrated. Beginning with high hopes, based, as the Department itself said, upon being "able to operate in a comparatively small and well-defined area", it was found at the end of the period that not only had far more expenditure been incurred than had been expected but that the result was scarcely an improvement upon the starting point.

The cautious wording of the report and of the Department does not conceal the principal reason for that, which indeed was spelt out in the reply by the departmental witness to Question 465 He said:

"Looking at the picture, when we plot a map showing the outbreaks, which tend to be concentrated almost entirely, but not quite, around the border areas, this does indicate, I think, that a good deal of our trouble is importation. Certainly some of it, indeed a good deal of it, is illegal."

The brucellosis control scheme is to a considerable extent in the position of a Danaid engaged in filling the celebrated jar of the Danaids, and the hole in it is the readiness with which, legally or illegally but without sufficient control, the international frontier is crossed not only by persons but also by animals and goods.

There has in this respect been in recent months, not to say recent weeks, the beginning of a change of attitude. I think it is likely that from now onwards the frontier between the United Kingdom and the Irish Republic will be progressively organised as an international frontier between friendly States ought to be organised—for the mutual benefit of both States; for let there be no misunderstanding: the State on each side of a frontier has an equal vested interest in the proper and lawful control of the use and passage of that frontier.

As I say, we are still in the rudimentary stages of the proper organisation of control. The initial steps taken in recent weeks, which arose, as such long-term policies often do, out of some immediate emergency—in this case, the occasion of the passing of the Prevention of Terrorism (Temporary Provisions) Act in November—are simply a start upon a process which will be continuous and constructive.

The only point in this context which I would like to emphasise is that this organisation of the frontier should not be regarded as a temporary measure related to the current dangers and difficulties in the Province. It is a measure which in many respects is justified in its own right and will continue to be fully justified after peace and normal conditions return to Northern Ireland. Perhaps we could not have a better reminder of the lasting importance of proper control of that international frontier than the comments of the Public Accounts Committee upon the brucellosis control scheme.

I pass now to what is perhaps the major matter; that is, the industrial development project with a computer firm in Belfast to which there is already a commitment of £7½ million of public money. I think that £7½ million will shortly be proved an underestimate; but at any rate that was the sum definitely committed at the time when the Northern Ireland Comptroller and Auditor General made his report.

The first thing which I find absurd—it is quite clear that the Committee too found it absurd—is the pretence of anonymity surrounding the company to which this relatively huge subvention is made. It is not acceptable that a company which receives public money on this scale should be even formally anonymous in reports tendered to the House. In any case, no person with knowledge of the circumstances or knowledge of the industry, reading the evidence tendered to the Committee, reading for example the lengthy question posed to the witness by the hon. Member for Eastleigh (Mr. Price), would have any difficulty in identifying the firm.

Nor was there any substance in the allegation at first put forward that the Department of Commerce was under some obligation to conceal the identity of the firm. In fact, the covenant was a covenant that the company itself should not disclose the terms of the offer. There was nothing, and rightly nothing, which bound the Department to conceal from the Public Accounts Committee—which it did not—nor from the House nor from the public the identity of the firm which was receiving the subvention.

The second unsatisfactory aspect was the rôle of the advisory committee. Statutory advisory committees in the context of public money made available to private firms are today very much in the news. Therefore, I think it is relevant that the report should have informed the House that the advisory mechanism clearly did not work properly in this case. What happened was—the House will find this set out on page 21 of the Fourth Report—that a mass of papers was thrown at the advisory committee before the weekend and an answer was demanded from it immediately after the weekend.

It is not good enough for an advisory committee to be made part of a statutory machinery of subvention and then for the advice to be asked and secured in so cursory and ineffective a manner. It is quite true that the chairman of the advisory committee evidently did his best—he did his best to master the facts, which were complicated enough, and to brief his committee when the members turned up and met; but I am sure that this was not the intention of the House in constituting an advisory machinery.

The intention must be that advisory bodies have adequate time and opportunity to brief themselves independently of the Department before they come to tender their advice. I do not know whether in the present case, had those conditions been fulfilled, the advisory committee would have given its assent to what the Department was proposing; but certainly an unsatisfactory aspect has been shown up by this investigation, and I trust that the lesson will have been noted for further cases and that the advisory committee will always be given adequate time and opportunity.

A third administrative aspect, which was raised by the Comptroller and the Auditor General for Northern Ireland, was the appointment of one of the Department's own civil servants as head of the joint company which was formed by the Department. I do not think the fact that the civil servant was one who was not a career civil servant alters the principle of the matter. The Comptroller and Auditor General for Northern Ireland observed in paragraph 113 of his report—he was stating an important principle—that

"… where a 'dialogue' is continuing between the Ministry and the company bargaining for the use of public funds, the question of a person acting in a dual capacity with a potential risk of conflict of interest is, I suggest, worthy of examination."

He was putting it there very mildly. It is psychologically virtually impossible—indeed, I am not sure that it is desirable—for the person who is appointed to head a company to separate his duty towards that company from his position as the official of the Ministry from which the subvention is proceeding. It is therefore right, I would have thought, as a matter of principle, that the arm's length relationship between companies receiving subsidies and the Department giving them should be carried to the point of a separation of personnel between the top management of the company and the Department's own civil servants.

Coming from those matters of administration to the economics of the individual case, there are three questions that I should like to put to the Minister, who I see is very properly in attendance this afternoon. The first is: can he give the House any further information on the financial prospects? Already the Committee was able to ascertain that the estimate of a maximum of £3 million loss had been exceeded, on the information which was before it at the time. What I should like to ask is whether he can add to the information which was given to the Committee.

For example, it turned out that the estimated loss for the year 1973, which was only £1½ million at the time of the report of the Comptroller and Auditor General, is now known to be virtually £2 million—Question 526. Yet, curiously enough, the estimate for the year 1974–75 was that it would be down from £2 million in 1973–74 to £1·3 million only.

Any indication of a lurch toward, solvency on the part of a company with this kind of history must attract the liveliest interest, and as one-third of the firm's financial year October-September—at any rate, a quarter of that financial year—is already past, I am eager to know whether the Minister has any information which would suggest that the rate of loss making is falling, and, in particular, whether it is at all realistic to suggest that in this calendar year this company will move over into profitability.

Connected with that, there is a second question which goes back to the point about the total public commitment. That public commitment of £7· million is a past commitment. It was a commitment which took account indirectly of expected total losses of £3 million over three years, but it is not a commitment which includes a prospective loss. I should therefore like the Minister to make it clear to the House, supposing losses are continuing, upon whom the liability for meeting those losses would fall. Are they not due to be added to the existing commitment of £7½ million?

The third financial question that I should like to put relates to the commitment of the American concern to take up the further 35 per cent. of shares in the joint company. Page 22 of the Fourth Report states that the transfer rights of that company have to be exercised by February 1975—that is, by next month, whether the beginning or the end of the month is not clear. Very great anxiety was rightly expressed both by the Comptroller and Auditor General in Northern Ireland and by the Committee about the circumstances in which the American company, instead of taking a 50 per cent. share as was the intention—and incidentally was the intention which was submitted to the advisory committee—was going to take up only 15 per cent. of the shares. Incidentally, the Department did not come back to the advisory committee and ask if it wished to alter its information when it heard that the American firm was going to take up only 15 per cent. of the shares.

In view of the anxiety which this change stimulated, it would surely be interesting to know whether the American company is, in fact, going to take up the remaining 35 per cent. of its 50 per cent. share in this joint company. I cannot imagine that, if it intends to do so and has to do so by next month, the Department will be unaware of the intention. I hope, therefore, that the Minister will be able to tell the House—it will be some relief at any rate—that the arrangements for the transfer are going ahead and that they will be implemented next month by the due date.

Looking back upon this whole scheme so far, this involvement of £7½ million plus of public money in this firm, what are the lessons which can already be drawn from it? It was, one knows, an extra-statutory scheme—Question 550—so that while this House in legislation and the former Northern Ireland legislature laid down in statutory form the conditions which it thought appropriate when public funds were to be infused into undertakings for the purposes of industrial development, the Department in this case went beyond its statutory entitlement. It did so, we are told, because of what was considered to be the urgency and the importance of avoiding the imminent unemployment of some 1,500 employees in the firm as it stood in 1971. The House ought to mark its keen interest in such an extra-statutory proceeding. The procedure of this House has always made arrangements for circumstances in which a Government may be called upon to act in ways not covered by statutory authority; but it is really a cause for unease if, in circumstances of the precise kind which have been envisaged in the basic legislation, a Department is found to have acted extra-statutorily. Perhaps that, too, is a point to which the Minister will refer if he intends to intervene in the debate.

I come to the fundamental fact about the whole operation. As was stated by the Department in answer to Question 525,

"there was no commercial justification"

for keeping the firm in operation at the end of 1971. Those were the words. Hon. Members who have studied the work of the Committee and the report of the Comptroller and Auditor General will have great difficulty in ascertaining that there is today any more commercial justification than there was in 1971.

So we are brought face to face with a balance, one of those balance sheets to which the right hon. Member for Taunton was referring: on the one hand, the expenditure of £7½ million plus of public money in what, on the face of it, is an operation originally without commercial justification, and highly doubtful upon the material submitted to the Committee and to the House; on the other hand, the continued employment of some 1,500 persons. But that balance sheet, thus presented, is not complete. It omits a vital fact. Paradoxically, at the same time as there are high unemployment figures in Northern Ireland there is a shortage of labour there for a large number of profitable jobs ready and waiting to be done. The movement of labour, as well as the creation of additional demand for labour, is vital for the success of the economy of Northern Ireland. There is no future for Northern Ireland, any more than there is for the economy of this country as a whole, in loss-making activities. There are circumstances in which such activities may have to be maintained, but it is not upon them—this is a truism—that the prosperity of the part or of the whole depends.

I suggest that the Department, at any rate at the time when this scheme was entered upon, too readily assumed that the continued employment, in an operation for which there was no foreseeable commercial justification, of 1,500 persons was a sufficient reason for going ahead.

Of course, the difficulty in casting up this kind of balance sheet is that one is comparing the known with the unknown. One is comparing the employment of these people, here and now, visibly at work in this factory, with what we cannot in the nature of things know; that is, what they would be doing, the use to which their knowledge, their effort and their experience would be put, if, owing to the factory's closure, they found their way, or a way was found for them, into other applications.

But if we always use the power of the State, if we always use public money, to secure continued employment in directions for which there is no commercial justification, the transfer to profit making, to creative application, will not take place. Therefore, we have to take the responsibility—the Government have to take the responsibility, and the House and individual Members have to take the responsibility of supporting them—of making commercial viability the standard from which we are determined not to depart. Thus, in my view, the considerations which the Committee in its study of this one quasi-anonymous instance put before the House have a very much wider bearing.

I shall not comment on what has been said by the right hon. Member for Down, South (Mr. Powell) because he has plainly made a deeper study of the particular instance of the 1,500 jobs in Northern Ireland than I have, although I was a member of the Committee and I remember the witnesses giving evidence. However, I think it possible that the right hon. Gentleman did not give sufficient weight to the special situation in Northern Ireland, the civil unrest there, and the feat that 1,500 people would become unemployed, would not quickly be re-employed, and would in the event be turned out on to the streets of Northern Ireland—or at least many of them would—thus possibly causing even greater civil unrest than there is at the moment. I think that that was a factor taken into account by the Committee, and pressed upon the Committee by the witnesses who gave evidence.

As the first member of the Committee to speak from this side I wish at the outset to pay a sincere tribute to our Chairman, the right hon. Member for Taunton (Mr. du Cann). I pay my tribute to him for the sincere, efficient and courteous way in which he conducted his chairmanship during the year. It was a great pleasure to serve under him. It was an excellent experience for me to do so, and I look forward to serving under him again in the coming Session.

The right hon. Member for Taunton referred briefly to the Rolls-Royce settlement, the settlement arrived at between the liquidator of the old Rolls-Royce company, the Government and the new Rolls-Royce company, and I wish to elaborate a little upon that matter because I believe that one or two lessons may be drawn from it.

As the House will recall, the receiver of the old Rolls-Royce company eventually transferred to the new Rolls-Royce company, which was under the control of the Government, the aero-engine assets and certain other assets, including the RB211 assets, of the old Rolls-Royce company. The negotiations for that transfer were conducted in the first few months of 1971, and the assets were transferred in May 1971. The whole matter is dealt with in the Committee's Third Report, paragraphs 11 to 32. As a result of that settlement the new Rolls-Royce company, the Government-controlled company, took over all the liabilities and obligations arising from the RB211 contract, and it also paid the liquidator—the Chairman of the Committee referred to this—£87½ million for certain other assets, including aero-engine assets, of the old Rolls-Royce company which were considered to be of national importance.

In consequence of that settlement the liquidator of the bankrupt company was able to pay the creditors in full, and I understand that the shareholders of the old, insolvent company were able to receive interim dividends equivalent to about 40p per share. I understand also that there may be a further final dividend, so that at the end of the day the shareholders of the bankrupt company will have received from the liquidator something equivalent to 50p per ordinary share.

To put those figures in context one should remember that on 2nd and 3rd February 1971, a few days before the storm broke and before the public realised that Rolls-Royce was in great difficulty, the shares of the old company were fluctuating on the Stock Exchange at prices between 45p and 35p a share. One can thus say that the shareholders of the old company got back all their money in the sense that they have received, or will receive, sums equivalent to the quoted value of their shares on the Stock Exchange before Rolls-Royce was pronounced insolvent.

What I find especially disturbing in that situation is that many of the shareholders, many of the persons who have been compensated, bought their shares after the news that Rolls-Royce was in great difficulty and when the shares were valued at an extremely low level on the Stock Exchange. They have thus made enormous profits from the liquidation, and many of those shareholders, I understand, are foreign companies or nonresident banks.

Commentators in the financial Press and elsewhere have sought to explain away what must be a rather embarrassing situation by attributing the result to some extent to the financial skill and negotiating prowess of the liquidator. We are told in the papers that he secured a splendid deal on behalf of the creditors and shareholders of the old company. No doubt the liquidator is a man of great skill, but I suggest that he obtained the £87½ million not only as a result of his skill but as a result of wrong and uncommercial decisions made by the British Government in the days immediately following the collapse of the old Rolls-Royce company.

If the Government had approached the matter—this is a personal view; the Committee did not find it—in a commercial way the liquidator, in my opinion, would have received far less than he did for the non-RB211 assets, and the shareholders of a bankrupt company would not have been put back into the position they held before the company was declared bankrupt. The House will wish to know how it came about that the liquidator was able to extract £87½ million from the Government.

The root cause of the difficulty—the Committee found this—lay in the heads of agreement drawn up between the liquidator, the Government and the new company right at the beginning, immediately after the Rolls-Royce collapse. Under that agreement, the Government agreed that if they were able to renegotiate the RB211 contract—the House will recall that they were able eventually to do that and to arrive at a new modified contract—the RB211 assets would be taken over by the Government from the liquidator at the nominal sum of El, ignoring any potential profits, or, more probably, ignoring any losses which might still arise for the new Rolls-Royce company; but as part of that agreement the other aero-engine assets and other profitable assets of the old company were to be transferred to the Government and the new company at full market value and no account was to be taken of any potential RB211 losses in arriving at that market value.

Therefore the receiver got a very good deal from the outset. He was relieved of the onerous RB211 contract with its possibility of heavy losses and substantial payments to be made by way of indemnity, and at the same time he was to receive full market value for the other aero-engine assets. A prudent commercial buyer would hardly have entered into negotiations on these terms and of that kind.

The prospects for the RB211 were uncertain, but the Government agreed with the liquidator to ignore that uncertainty. Any commercial buyer, instead of ignoring it, would have taken it into account in discounting the price to be paid for the profitable assets. That uncertainty should have been a factor in determining the money which the Government were to pay the liquidator for the part of the Rolls-Royce business which was profitable and which would be transferred.

Bearing in mind the constraints which the Government imposed upon themselves as a result of the heads of agreement it would not be fair to say that the figure of £87½ million, which was eventually paid, was not fair and reasonable. I do not have the information on which to base an assessment, but the Committee received a paper, which was not printed, which set out the profits of the profitable assets for 1972. It seems to me, although I am no expert in these matters, that taking one year's profits, it could be said fairly that possibly the Government did not pay too much when they paid £,87½ million. However, the damage was done previously under the heads of agreement, because these should never have provided for the RB211 to be separated from the rest of the business for the purposes of valuation.

As a secondary matter the Committee also found that the Government had paid too much attention when negotiating with the receiver to his claim that there were possibly foreign buyers who might wish to purchase the profitable assets of the Rolls-Royce company. It surprised me to discover, after we had inquired of the Treasury witness and after a paper had been submitted, that the Government do not seem to have any power to prevent non-resident persons from purchasing for cash the assets and businesses of British companies. One always assumes that under the exchange control regulations or under some section of the Income Tax Acts the Government have reserve powers to prevent such purchase if it were considered in the national interest to do so. Apparently that is not the case.

So the receiver was able to use the argument that a foreign buyer might want to buy certain assets in order to push up the price the Government had to pay him. If the heads of agreement had not separated the RB211 from the other assets such an argument would not have been open to the receiver because no foreign buyers would have wanted to buy the RB211 contract with all the complications that involved.

What lessons, therefore, can be drawn for the future from the Committee's post mortem on the purchase of the business and assets of Rolls-Royce by the last Conservative Government? It seems to me that the valuation of assets and the complex business of conducting these negotiations should not be left to hard-pressed Ministers and their civil servants—and I say that with the greatest of respect—but should be entrusted to a body which could build up an expertise in these matters. It may be that the IRC, if it had been in existence at the time, could have conducted the matter in a more satisfactory way, but I do not know because I have no experience of the IRC or of how it works. If we are to set up a National Enterprise Board I hope that it will be given power to conduct negotiations of this kind, to acquire shares and assets and to build up the necessary expertise.

Decisions on whether a company should be acquired in the national interest will always be political decisions and will always have to be taken by Ministers accountable to this House. Once that decision has been taken, however, the only way to deal with the matter is to have a body capable and equipped to purchase the assets on a sound commercial basis. I see no other way in which it can be done.

Finally, I refer to the fact that the Treasury does not seem to have the power to prevent acquisition of assets in this country for cash by foreign purchasers. The Government must look at this matter again. We are now in a world where a few countries, certainly the oil producing countries, seem to have limitless supplies of cash. May be one of these days one of these interests will want to buy in Britain assets which we consider in the national interest should be retained here. The purchaser would not have to borrow money or mortgage shares or come within the exchange control regulations. We all want to encourage investment, but there must be a point at which it would be prudent for the Government to make sure that they have the necessary reserve powers to prevent such an acquisition if that were in the national interest. The Americans seem to have these powers. Therefore I ask the Government to consider whether it would be possible to tighten up the rules to prevent such purchases.

The collapse of Rolls-Royce produced a most complex and difficult situation. It is easy to be wise after the event, but it can be fairly said that the last Conservative Government were not properly equipped to deal with the immediate situation which followed the collapse of Rolls-Royce. Wrong decisions were made at the beginning, and they cost the British taxpayer substantial sums of money, although it is difficult to come to the exact figure of how much was lost.