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Commons Chamber

Volume 927: debated on Tuesday 8 March 1977

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House Of Commons

Tuesday 8th March 1977

The House met at half-past Two o'clock


[Mr. SPEAKER in the Chair]

Private Business


As amended, considered; to be read the Third time.

St Pauls Playing Field (Trust) Bill

Order for Second Reading read.

To be read a Second time upon Thursday.

Contingencies Fund 1975–76

Accounts ordered,

  • (1) The Receipts and Payments in connection with the Fund in the year ended the 31st day of March 1976;
  • (2) The Distribution of the Capital of the Fund at the commencement and close of the year; with the Report of the Comptroller and Auditor General thereon.—[Mr. Bates.]
  • Oral Answers To Questions

    Social Services

    Blind Persons


    asked the Secretary of State for Social Services what plans he has to equalise the benefits payable to persons accidentally blinded, as opposed to persons blinded from birth or as a result of disease.

    Blind people are eligible for the improved general social security benefits according to their circumstances. The war pensions and industrial injuries schemes also have their part to play in our overall provision of help for disabled people. These schemes have not prevented such advances for sick and disabled people generally as invalidity benefit, attendance allowance, noncontributory invalidity pension, mobility allowance and the new pensions schemes.

    Is the Minister aware that, under the regulations laid down in his Department's leaflet NI6, a person blinded at work receives an automatic disablement pension of £25 a week, on top of which he may get extra earnings, and that if a person is blinded as a result of disease or from birth, according to his Department's leaflet SB1 the maximum benefit is £16·95, which is reduced if he has any additional earnings? Is not this grossly unfair between the two classes of blinded people?

    I am aware of these differences. The hon. Gentleman recently wrote to me and quoted the figure of £25, which must, I think, be the 100 per cent. industrial disablement pension appropriate to total blindness. The figure of £14·95 which he also quoted in his letter appears to be a supplementary benefit assessment. Without additional details I cannot comment further on that comparison, but I shall be glad to do so if the hon. Gentleman can give me particulars.

    What study, if any, is being made of the principle of no fault liability in this context?

    The whole question of compensation for personal injury is being considered by the Royal Commission under the chairmanship of Lord Pearson which, I understand, is expected to report later this year.

    Does my hon. Friend recollect the Early-Day Motion, supported by 150 Members, in favour of all blind people being made eligible to receive the mobility allowance? Does he also recollect the deputation from the TUC General Council, which met him and my right hon. Friend to stress the importance of all blind people being given this additional benefit in order to assist their mobility? Will he now report to the House the progress that has been made?

    I am aware of my hon. Friend's strong feelings on this matter and his consistency in arguing the case. He will be aware that there is strong pressure to extend the age range of beneficiaries as well as to admit new categories, not to mention many other extensions of the mobility allowance scheme. There is an infinity of claims against, regrettably, finite resources. What may be helpful to my hon. Friend is to know that blindness can be one factor among others in deciding the award of mobility allowances.

    Disabled Persons (Vehicles)


    asked the Secretary of State for Social Services if he will bring forward a scheme for loans to help the disabled to buy cars.

    The Central Council for the Disabled is exploring various possibilities for helping disabled people to use the mobility allowance to best effect. I have been giving all the help and support I can, and I hope that it may be possible for the council to give further assistance to disabled people who wish to use the mobility allowance for the purchase of a car. My discussions with the council are continuing.

    Is the Minister aware that the Disabled Drivers' Association, of which I am proud to be a vice-president, is very angry with him about the questionnaire he has sent out to disabled drivers of three-wheeled vehicles? Is he aware that that questionnaire which they complain about provides only one question—whether or not they will take the mobility allowance in due course? It does not ask, as it should, whether they would prefer to have a vehicle. Will the hon. Gentleman look at it again?

    The hon. Gentleman, who is a successor of mine in the capacity to which he referred, will know that I have had a very close association with the DDA, whose management committee I was happy to meet recently. There is a need for a much more detailed questionnaire. It would be difficult for me at present to expand on that. What I want very much to know is what disabled people are seeking. I shall have the hon. Gentleman's point very much in mind.

    Will my hon. Friend consider asking the Treasury to advance a substantial sum to enable the commutation scheme to get off the ground? Does he agree that if it gets off the ground it will then be possible to decide how many vehicles people who are disabled want to buy for themselves? We shall then know how many people need the trike. Will my hon. Friend please give attention to this matter?

    I am very seized of the importance of my hon. Friend's point. As I have said, the Central Council for the Disabled has been exploring, with my active co-operation, a whole range of possibilities, which include favourable purchase terms and leasing arrangements. My hon. Friend is a considerable expert in making representations to the Treasury, and I have no doubt that it is fully aware of his feelings and that careful note will be taken of what he has said this afternoon.

    Does the Minister agree that the essential thing is to make disabled people mobile and that any mobility allowance that does not do that fails in its purpose? Does he not, therefore, regret his decision to phase out the invalid trike? Whether or not he regrets it, has he any plans to have discussions with GKN-Sankey about the new car for disabled people which has featured in the Press recently?

    We are giving more mobility help to assist more disabled people than has ever been given before. The hon. Gentleman may be glad to know —we have not discussed the matter recently—that I have seen two development projects in the past two weeks, and I saw the GKN-Sankey prototype a considerable time ago. The hon. Gentleman can be well assured that our commitment to tricycle drivers who will still need a specialised vehicle when we can no longer replace their tricycles after 1981 is a genuine commitment which my right hon. Friend rightly stressed in his recent letter to disabled drivers.

    Will the Minister admit that there is now widespread and mounting anxiety about the future of disabled drivers? We know what they want, which is to keep their trikes. [HON. MEMBERS: "They want cars."] Should not the Minister, therefore, reverse his policy and tell them that they can keep their trikes until there is a proper alternative?

    There is a wide diversity of opinion on this important matter. There are those who have for a very long time wanted the trike to be phased out. There are people who would like to keep the trike. We have given a commitment to tricycle drivers. I shall do the best I can further to improve the mobility of disabled people.


    asked the Secretary of State for Social Services how many representations he has received in 1977 about the future of the invalid tricycle.

    My right hon. Friend and I have received some 500 letters this year, some including petitions.

    Will not the Minister now accept that, although the mobility allowance is of general and welcome benefit to those who do not drive, the eventual withdrawal of the trike will have catastrophic consequences for those who are used to this kind of mobility? Why cannot he now give an assurance that the trike will not be withdrawn until a suitable alternative is found?

    My right hon. Friend has given the assurance that we shall look on home and world markets to supply those who will still need a specialised vehicle when we can no longer replace the tricycle after 1981. There are divided opinions on this matter. The hon. Gentleman may be well assured that I am looking at every aspect of the problem.

    Is it not the case that, while the decision to phase out the tricycle is rather regrettable, the representations that my hon. Friend has received since he made that decision are astonishingly different from those he received before the decision was made? Will he also confirm that many of the representations opposed to his decision came from organisations which condemned it before it was made?

    A number of letters take different points of view. As I have indicated, there appears to have been a change of opinion, which may, however, be more apparent than real. I am well aware that many people want to keep the invalid tricycle, but I must emphasise that we had very little option with regard to the decision to phase out.

    What comfort can the right hon. Gentleman offer to the newly disabled or to youngsters who reach the age of 16 and who now find themselves totally without mobility, completely grounded and confined to the four square walls of their rooms?

    My right hon. Friend stated to the House that the worries expressed were often the result of garbled and even grossly distorted versions of the facts. I am sure the right hon. Gentleman is aware that the Employment Service Agency scheme, for example, can be expected to increase in scope. Help over and above the mobility allowance can be made available to people who cannot use public transport and who need to go to work or higher education. I am well aware of the point that the right hon. Gentleman is making, and I shall do everything possible in future to improve the mobility of disabled people.

    In view of the importance of the mobility allowance uprating, can my hon. Friend now announce that a generous increase is to be made and how much that increase will be?

    I am afraid the answer must be that I would if I could but I cannot. I do, however, give my hon. Friend the assurance that the announcement will be made at the earliest possible date. Moreover, my hon. Friend can be assured that we shall seek to improve the allowance not only in amount but also in real value.

    Hospital Closures


    asked the Secretary of State for Social Services if he has any plans to change the procedure in relation to hospital closures.

    The procedure for closure or change of use of health buildings was notified to health authorities in October 1975, after wide consultations. The procedure appears to be working satisfactorily and I am not planning to make any changes. But I will keep the arrangements under review.

    Will my right hon. Friend in the meantime bear in mind the wishes of the people in the community, particularly the people of Nelson and Colne, who desire to retain facilities in Nelson and Colne if Reedyford Memorial Hospital has to go? I ask my right hon. Friend to bear in mind the report of the inquiry, in which the inspector said that if Reedyford had to go alternative facilities should be provided before it was demolished.

    I appreciate my hon. Friend's point. The need to demolish the Reedyford Memorial Hospital results from the decision reached on the route of the Burnley to Colne stretch of the M65 Calder Valley motorway. The Lancashire Area Health Authority has embarked on a full programme of local consultation on the closure and the replacement of facilities. When the time for the closure of the hospital approaches, further consultations with the community health council and other local interests will be carried out. The views of all concerned will be taken into account before final decisions are taken on the replacement of services.

    Has the Secretary of State anything to say about antique hospitals such as the Birmingham Accident Hospital, which should be closed? Even though there is a longstanding plan to close it, under the Government's cuts it is not to be closed. Is the right hon. Gentleman aware that at that hospital, where 50,000 seriously sick people go each year, lighting fails in the middle of operations, that the X-ray and other facilities are very bad, and that it needs to be closed quickly?

    I shall not be drawn into commenting on the particular hospital. The hon. Lady well knows that there are many old hospitals. There has been a pretty substantial programme of rebuilding and improvement, but with restraint on public expenditure, the capital programme has been slowed down. I am well aware of some of the problems. The hon. Lady will no doubt raise the matter directly with me or with the area health authority.



    asked the Secretary of State for Social Services when he last met representatives of pensioners' organisations.

    I met a deputation from the National Federation of Old-age Pensions Associations on 2nd February.

    Did the right hon. Gentleman tell them that, like the Financial Treasury to the Treasury, he is heartily ashamed of the fact that personal allowances on earnings and pensions are as low as they are? Did he explain that the increased cost of living has not been matched by a more generous death grant—indeed, that the Government have not increased the grant at all? Has not the time come, in this period of inflation, to deal with this hard-pressed section of the community far more generously than the Government have dealt with them so far?

    I did not say what the hon. Gentleman suggested. The hon. Gentleman knows, and the deputation recognised, that pensions and other long-term and short-term benefits have been totally excluded from the public expenditure cuts. Therefore, we have fulfilled our commitment to the electorate to protect the elderly, the sick, the unemployed and the disabled against the effects of the economic situation. I pointed out to the deputation that in December 1976, immediately following the uprating in November, the single person's pension rate represented 33 per cent. of the average net earnings of a male industrial manual worker and the married couple's rate was 51 per cent. It is the first time ever that we have achieved those targets—

    I shall come to the death grant. It is the first time that we have achieved those targets in relation to earnings, and that is a considerable achievement. It is not possible to increase the death grant at present.

    What excuse does the right hon. Gentleman now give for last year's pension fiddle? What do the Government intend to do to bring the real purchasing value of the pension back to what it was in April 1975?

    A matter concerning this has been brought before the High Court, and it would be improper for me to comment. I do not for a moment accept what the hon. Gentleman says about a pensions fiddle. When we raised pensions in November, we rightly fully covered pensioners against the effects of inflation over the previous 12 months.

    Does not my right hon. Friend appreciate that old-age pensioners in some areas—perhaps in all areas—are not being sheltered from the public spending cuts? Does he not read the newspapers as I do and notice that several county councils and other councils are withdrawing various benefits from pensioners and that the bus tokens which had a face value of £5 five years ago are almost worthless today? Are not these things the effects of spending cuts which local councils are having to impose? Will he not give an instruction to local authorities to do as my local council, Bolsover District Council, does and issue free television licences to all old-age pensioners?

    I welcome what my hon. Friend says about his own council, but I cannot give such an instruction as he requests. What I have clearly said is that we give high priority in the social service work of local authorities to the care and help of aged people. They take a high priority in terms of community services and the provision of nurses, home helps and meals on wheels. These are the services which are being given the highest priority. In the anouncement that I made last week about the £21 million of new money which is available for joint financing, I said that this also will be concentrated on providing services—residential and day care services—within the community for elderly people.

    Will the right hon. Gentleman give the House and the pensioners an assurance that, in the next pensions uprating, he will consider the full period over which they should be uprated so that, unlike what happened last year, the pensioners get genuine compensation for the inflation which they are bearing?

    I can give an assurance to the House and the country, as I did to the National Federation of Old-age Pensions Associations, that there will be an uprating. It will be in November, and I gave a guarantee that it will cover the change in the value of money in terms of the retail price index between the time when the uprating is made and the last uprating in November last year.

    Drugs (Home Treatment)


    asked the Secretary of State for Social Services if he will institute a survey into the amounts of drugs unused in private households after treatment has been completed.

    No, Sir. I am not satisfied that a survey would serve any useful purpose.

    May I draw to the Minister's attention the experience of one chemist whom I know personally who undertook a survey of various households and found an alarming amount of unused drugs? Does not that suggest that there is something wrong?

    We have a number of local surveys and "Return unused drugs" campaigns, and we have a substantial amount of information on this matter. I am aware that there is a need for a campaign to educate the public. My Department will probably be considering this matter with the medical profession and has approached the Health Education Council and the Pharmaceutical Society.

    Vaccine-Damaged Children


    asked the Secretary of State for Social Services whether he will conduct further research to establish more definitely the number of vaccine-damaged children.

    My Department is already supporting research intended to establish with greater precision the extent of serious reactions to vaccines. The project covers the whole of Great Britain. This research is already in progress and this Department will continue to give it support.

    In the light of the conflicting evidence which is now coming forward, particularly the revelations in The Sunday Times last weekend, will the right hon. Gentleman reconsider his decision not to institute any form of public inquiry? Will he hold one—or, rather, will he at least authorise the Joint Committee on Vaccination and Immunisation to hold a series of public meetings, particularly into the effects of the whooping cough vaccination, so that it can all be aired in public to try to alleviate some of the worries of a number of confused mothers who really do not know what is going on?

    I recognise the hon. Member's concern, which I think is widely shared, that parents are confused. With regard to the article in The Sunday Times, it must be acceped that there will always be differing shades of medical opinion on matters of this kind, but the hon. Member will know that the joint committee is a distinguished group of specialists. They have weighed all the evidence and have stated clearly and unequivocally their belief that the hazards to children from contracting whooping cough exceed the hazards associated with immunisation. The joint committee is meeting again later this month. It will again consider all the facts and evidence relevant to the vaccine. In view of the interest shown in the House and the country, I have now asked the committee to prepare for publication a review of the evidence about whooping cough vaccine and to set out in full the basis of its advice to me.

    Is my right hon. Friend aware that making public that review of evidence is a quite inadequate answer to the legitimate question posed by the hon. Member for Wirral (Mr. Hunt)? Is he aware that evidence from parliamentary answers, from medical experts and from Press investigations has revealed that his Department's case for refusing compensation and for refusing an independent inquiry is based on inadequate, unreliable and misleading data and that that has shaken public confidence in the immunisation programme? Instead of criticising Back Benchers on both sides and parents who disagree with him, will my right hon. Friend now accept a proposal from me for a meeting between himself, Back Benchers on both sides, medical experts on both sides and parents, so that we can amicably resolve these problems and seek to allay the genuine public concern about the immunisation programme?

    I have made no derogatory comments about Back Benchers. I believe that on both sides of the House this is a matter of genuine concern. I have now replied to over 100 Questions on this subject from my hon. Friend. Every answer that I have given is information which is available and which is before the joint committee. Therefore, I trust the advice which is given to me by the joint committee. However, the idea that my hon. Friend has put forward is an interesting and novel one. I shall in a day or two be meeting the chairman of the joint committee. I shall put to him my hon. Friend's suggestion that we should have a meeting in the House of Commons, with Members drawn from both sides of the House, so that the chairman and others may answer questions to try to alleviate uncertainty and. I hope, to discourage my hon. Friend from his campaign.

    May I appeal to the House? Unless we have shorter questions and answers, many hon. Members who thought that their Questions would be called will be unlucky.

    Will the Secretary of State admit that the anxiety about whooping cough vaccine is now seriously affecting other vaccination programmes? Would it not make sense temporarily to suspend the use of this vaccine while it is all looked into? Would that not make great sense for everybody?

    No, it would be wrong to do that, as, on reflection, I think the hon. Member will agree. The joint committee is appointed from among the 22 most distinguished people in this field and they are my advisers. They have considered all the evidence and the hon. Gentleman knows the conclusion that they have reached. It would not be in the interests of patients to do as the hon. Gentleman suggests, but I recognise—I am, in fact, very concerned—that uncertainty in the minds of parents about the efficacy of this vaccine is affecting the take-up of vaccine relating to diphtheria and tetanus. The double vaccine for diphtheria and tetanus is freely available for children for whom whooping cough vaccine is not appropriate. The hon. Gentleman mentioned polio. He knows that I have already appealed to the public, to parents, to make use of this safe and reasonable vaccine in order to prevent the spread of polio, which is making a disturbing return to this country.

    Under Fives


    asked the Secretary of State for Social Services if he will make a statement on the progress on the Government's new policy for the under-fives announced in October 1975.

    Our thinking on under-fives was summarised in Section IX of our consultative document—"Priorities for Health and Personal Social Services in England"—published in March 1976. A circular issued jointly by my Department and the Department of Education and Science in March 1976 emphasised the importance of co-ordination of central and local services for under-fives and the need to make maximum use of existing resources. The Government welcome the efforts that local authorities are making within the constraints imposed by the current economic situation to improve their services.

    Will the Minister confirm that DOE Circular 120–76 is now official Government policy with regard to under-fives? Does he not accept that it is shameful, even in the current economic dilemma, to cut back on further nursery provision under any circumstances?

    That question should properly be directed to my right hon. Friend the Secretary of State for Education and Science. My responsibility is only for pre-school playgroups and child minding. Our policy is not yet finalised. It is still out for consultation with the priorities document.

    In view of the evidence on the health of under-fives that has since emerged from the Court Report, will my hon. Friend, as a matter of urgency, look at the two main suggestions proposed in the report regarding child health visitors and general practitioners becoming specialists in pediatrics?

    We have recently received the Court Report. It is now out for consultation, so that we shall see how we proceed to implement it. I have to say that a number of the Court Committtee's recommendations seem to have substantial resource implications, and that will have to be borne in mind.

    Will the Minister inject a fresh degree of urgency into the consultations with his right hon. Friend the Secretary of State for Education and Science to try to get a rational and co-ordinated approach towards the needs of the under-fives, and at the same time get away from the damaging and illogical split in approach between the two Departments which now exist?

    A number of experiments are going on up and down the country into the DHSS service under the aegis of local authorities and the Department of Education to try to bring about much closer co-ordination. We have this very much in mind, and a circular urging co-ordination between education and social service activities was issued by my Department and the Department of Education and Science.

    In view of the fact that almost every question asked by Opposition Members this afternoon has demanded an increase in public expenditure, will my hon. Friend have a word with the Chancellor and tell him that it would be inappropriate to reduce income tax in his Budget on 29th March and that we would much prefer him to meet the demands with regard to public expenditure that Opposition Members have been making this afternoon?

    I am not entirely sure whether I should approach my right hon. Friend with a suggestion that income tax should not be reduced. I have noticed the phenomenon to which my right hon. Friend draws attention. Whenever Opposition Members are challenged, they say that the particular point they are urging at any particular time should be exempt from public expenditure cuts. What we have not yet discovered is where they believe that the public expenditure cuts should take place.

    Allegations Of Abuse


    asked the Secretary of State for Social Services what is the average length of time between the date information is given to a special investigator of his Department regarding alleged abuse and the date that a special investigator investigates the alleged abuse.

    An assessment of the current position on special investigation is possible at the beginning of each year. The figures for the beginning of 1977 are not yet available but an analysis of the position as at 1st January 1976 indicated that in five of the Department's 12 regions cases referred by local offices for special investigation could be allocated immediately to a special investigator. In six of the regions the average delay in doing this was between 2·1 weeks and 4·6 weeks; in the remaining region the data was not available.

    Does not the right hon. Gentleman agree that through no fault of the Department there is a delay, quite often of up to six months, between the time when an alleged incident of fraud occurs and the time when the special investigator is able to start investigating it? In view of these very long delays, and in view of the enormous backlog which develops, is not this an impossible job for many of the investigators? Will the right hon. Gentleman increase the number of special investigators, who, experience proves, recover the equivalent of their own wages within a matter of weeks?

    I find it rather strange that the hon. Gentleman should be complaining to me about the work of special investigators and about the need for more of them. For example, the 765 cases which the hon. Gentleman sent to me resulted in many of the special investigators being diverted from the work they were doing and on which they had 10 times more success than they had with regard to the cases that the hon. Gentleman submitted.

    Has my right hon. Friend noticed that one national newspaper has nicknamed the hon. Gentleman "Deep Sproat"? Does that make the hon. Gentleman the Linda Lovelace of the Tory Party since he is someone who is willing to swallow anything he is told?

    I would say to my hon. Friends and hon. Members opposite that the painstaking investigation that we had into the hon. Gentleman's complaints puts into perspective the type of campaign that the hon. Gentleman has been waging. I hope that the country will recognise that there is no basis for it.

    Is the right hon. Gentleman aware that there are many people in the House who have little respect for the views of the hon. Member for Aberdeen, South (Mr. Sproat)? Does not the right hon. Gentleman agree that much more concern should be given to the question of helping the genuine cases of people who are in need of supplementary benefit and services from the DHSS? Is it not the fact that as a result of the hon. Gentleman's campaign many cases are not being taken up as soon as they should be?

    I could not agree more with the hon. Lady. My Department and I are concerned about the genuine people who are entitled to benefit but who are not coming forward. I hope that they will not be deterred by this campaign.

    Since many of the right hon. Gentleman's answers have been about unsubstantiated allegations, does he recall that his right hon. Friend the Secretary of State made an allegation on 19th November that a number of doctors at Hammersmith Hospital had been engaging in malpractices? Does he now recognise that that allegation has been disapproved entirely?

    I believe that this has nothing to do with the Question on the Order Paper.

    I want to be fair. We are dealing with Social Services Questions, and the subject covers health. The right hon. Member for Wanstead and Woodford (Mr. Jenkin) may proceed with his supplementary question.

    As the Minister of State knows, this Question is about alleged abuse, and the Secretary of State made a very grave allegation of alleged abuse against doctors at Hammersmith Hospital. As that has now been disproved wholly, will the right hon. Gentleman now apologise?

    This is an abuse of Question Time, Mr. Speaker. My right hon. Friend made no such allegation. He said merely that he would investigate allegations which had been made. The right hon. Member for Wanstead and Woodford (Mr. Jenkin) has no right to put his supplementary question in that context.

    Would it be possible for investigators to get on to the track of real abuses more quickly if their time was not wasted by having to investigate groundless allegations made by mean-spirited and irresponsible people?

    Advertising (Medical Journals)


    asked the Secretary of State for Social Services if he will make a statement on the Government's intentions with regard to advertising in medical journals.

    The reduction in reckon-able sales promotion expenditure which I announced last July and which includes the cost of advertising in medical journals accepted as a cost under the Voluntary Price Regulation Scheme takes effect from 1st April. Consultations on the proposal to exempt from the reduction and to accept in full the cost of advertising in learned and professional journals are expected to be completed shortly.

    Can the Secretary of State tell the House what are the preliminary results of his consultations, especially with the print unions, about the possibility of having an approved list of journals and a non-approved list? I gather that the right hon. Gentleman has consulted some 30 different organisations. Can he say anything about his consultations?

    I cannot indicate the views of specific organisations. I hope that it will be possible to take a decision on this very soon. Some of the very important organisations which were consulted have not yet replied. I have urged them to do so quickly because I am anxious that a decision should be taken.

    Is my right hon. Friend aware that some of these advertisements make claims for miraculous cures? Would he care to investigate the standards of this type of advertising?

    This is one of the matters which I have under discussion with the pharmaceutical industry. I hope that before long it will be possible to make an announcement dealing precisely with this problem.

    Child Benefit Scheme


    asked the Secretary of State for Social Services whether it is administratively possible to introduce the full Child Benefit Scheme in April 1978.

    Yes, Sir, but, as my right hon. Friend announced in his reply to the hon. Member for Rushcliffe (Mr. Clark) on 26th October, we intend to phase in the full Child Benefit Scheme over the period April 1977 to April 1979 in line with the recommendation of the joint Labour Party—TUC working party.

    Will the right hon. Gentleman say whether parents who have small incomes and do not make any parental contribution towards their children's further education will receive any compensating payment for the reduction ni child tax allowances which will take place this April?

    Lower wage earners will not suffer from this decision. For the higher income groups earning more than £8,600 a year, there will be some loss in that regard.

    If there is now money available for tax reliefs—and, presumably, again next year—would not it have a bigger impact on poverty, especially among families, if some at least of this money were to be used at the earliest administratively possible moment to give a realistic level of child benefit?

    As my right hon. Friend knows, this is a matter for my right hon. Friend the Chancellor of the Exchequer. The Government see as a major priority the phasing in and, if possible, the up-rating when it is economically possible of child benefit.

    Is the right hon. Gentleman aware that still, just a month before the introduction of this scheme, nothing has been said about what is to be done to compensate the parents of students over 19 years of age under the scheme? Will he ensure that his right hon. Friend the Secretary of State for Education and Science tells us what is to happen?

    I cannot add anything to what my right hon. Friend the Chief Secretary said about this in the debate the other day.



    Is the Prime Minister aware that a very large number of policemen live in Chingford? [HON. MEMBERS: "They need them."] No comment. If the right hon. Gentleman came to Chingford, he could explain to the policemen there why their claim is outside the limits of the social contract but it appears to be possible to pay £7,000 in cash to dockers not to work at all.

    I am not surprised to hear that there are a number of policemen living in Chingford. Indeed, they live in most places. I had the opportunity of meeting the leaders of the police yesterday. I had nearly two hours with them during which time we discussed their pay claim. I told them that it would not be right to break the pay agreement, even if their case was a good one. Although I did not wish to misuse what the Leader of the Opposition said, I was glad to be able to say that it was her view, too—and therefore, I take it, the view of the House—that any claim should be settled within the limits of the pay agreement. On that basis I am prepared to go as far as possible. They produced one or two illustrations to me which I had examined, but I do not think that they really meet the limits which are laid down in this connection. They relied on the seamen's case, which is not really on all fours.

    Will my right hon. Friend use the time that he now has available as a result of not going to Chingford to visit the workers sitting in at Plessey factories on Merseyside to assure them of his support in their fight to save their jobs and that he will commit himself to speeding up the welcome investigation that he announced last Thursday?

    Only this morning I asked that the National Enterprise Board should make investigations into this matter as rapidly as posible, and I shall try to give it personal consideration.

    Will the Prime Minister say whether he agreed with the Home Secretary's advice to the police to join the TUC?

    I gather that my right hon. Friend was a little misrepresented on that. He did not advise them to join the TUC, any more than I did yesterday. He was responding in a television interview to a question about negotiation. We all know how questions on television or, indeed, in other ways can sometimes mislead one into giving answers which are not quite the kind of answers—[Interruption.] If Opposition Members have never had that experience, all I can say is that they have a lot to learn. I can assure the right hon. Lady that my right hon. Friend was not advising the police to join the TUC. I am sure that they will want to take their own decision on that matter.

    President Carter (Talks)


    asked the Prime Minister whether he will discuss defence matters with President Carter on his visit to Washington.

    I shall have wide-ranging talks with President Carter on international and bilateral issues of mutual concern including defence and in particular the world economic situation. The House will wish to know that I have recently issued invitations to the Heads of State and Heads of Government of France, the United States, Canada, the Federal Republic of Germany, Italy and Japan to attend a summit meeting at No. 10 Downing Street, on 7th and 8th May and have received acceptances from them all. I hope to discuss arrangements for this meeting with President Carter and the Prime Minister of Canada on my forthcoming visit.

    In view of the £8 billion defence cuts of the past three years and the recent warnings of Vice-President Mondale that allies must play their full part in the NATO Alliance, will the Prime Minister assure President Carter that Britain will take sufficient measures to make certain that we play our full part in the defence of the West?

    There is no doubt in the minds of either NATO or the United States about these matters. As some of these cuts in expenditure resulted from our economic policy, perhaps I should go on to add what is already known, which is that the economic policies that the Government are following have received the full support of our allies.

    Although I welcome the Prime Minister's invitations to a summit, may I ask whether the President of the European Commission, Mr. Roy Jenkins, has been invited and whether he has accepted? Secondly, since the Middle East, Cyprus and Rhodesia are three areas which are potential flashpoints where we have some influence, does he agree that the more closely we can co-operate with and co-ordinate our policies with the American Government, the better it will be for the future?

    On the first question, I understand that the Council of Foreign Ministers is discussing this matter this afternoon. Therefore, I have no statement to make at this stage. On the second question, certainly in the case of all three issues that the right hon. Gentleman mentioned it is important to coordinate our policies with those of the United States, and, of course, with those of other countries in Europe. The summit will help us to do both.

    When the Prime Minister next meets Mr. Carter, will he raise the question of Concorde? Will he bring to the American President's attention the fact that Concorde is our major national interest and that it is vital that it lands in New York in order to ensure the future viability of the project?

    I would regard it as a very great misfortune if the finest aircraft in the world was not allowed to land at one of the world's finest cities. I have indicated to President Carter in private communications that on the whole we do not like getting a verdict without a prior trial. I shall make this position clear to the President, but it must be recognised that he has limitations on his field of action in this case. We must have regard to that. I have no desire to whip up a frenzy when there are limitations placed on all parties.

    When the Prime Minister is in Washington, will he tell President Carter that an independent Scotland will not recognise nuclear bases on her soil? Will he use the opportunity of his visit to Washington to go to the IMF and tell it that the people of Scotland will not accept a substantial reduction in their standard of living as a direct result of IMF policies?

    I am not sure how far the hon. Lady is entitled to speak for an independent Scotland. But, if she wishes, I shall convey the views of the SNP to President Carter if there is a sufficient interstice in our talks. I will do so in order to let him know what the future holds. As far as the IMF is concerned, the hon. Lady will find that her view on this matter is, as on many other matters, a little jaundiced.

    When the Prime Minister discusses defence matters with President Carter, will he explain to him the strong domestic pressure in this country for the purchase of the Nimrod second-generation surveillance aircraft in view of the trend in employment in design and production in the domestic aircraft industry?

    It is becoming increasingly clear that the AWACS aircraft that is intended for NATO is unlikely to be financed, but it is time that a decision was reached. If other countries do not feel the same need for this kind of aircraft, it must be pointed out that Nimrod would supply a specific and particular British interest and would cover Europe and the Eastern Atlantic. We should not forgo this lead if other countries cannot agree on an aircraft with wider use that is not exclusively ours. I shall put this to President Carter and tell him that we cannot wait for a decision indefinitely.

    Would the Prime Minister agree that British-American relations are the cornerstone of NATO, and that if President Carter does not positively use his good offices to facilitate the landing of Concorde at New York in accordance with the agreement between the British and United States Governments it will do inestimable harm to one of the most important relationships in the Western world?

    Obviously, a decision to refuse to allow Concorde to land would have an adverse impact on the relationship. There are, however, far wider implications in the relationship than the situation on Concorde, and that is why I do not wish to be drawn into a public denouncement on such matters. These issues need careful examination, and I have invited President Carter's full co-operation. I have pointed out to him that there is a united view in the House of Commons that Concorde should be allowed to land in New York. I shall continue to represent that very strongly to him.

    Secretary Of State For Energy (Speech)


    asked the Prime Minister whether he is satisfied that no breach of the principle of collective Cabinet responsibility took place in the speech of the Secretary of State for Energy at the Press Gallery luncheon on 14th February 1977.

    Does the Prime Minister recall that in that speech the Secretary of State advocated that the Labour Cabinet should be elected by Labour Back Benchers? Since the Government have now abandoned their major policies—the Dock Work Regulation Bill, the ship repairing section of the Aircraft and Shipbuilding Industries Bill, and the Community Land Act—would he not agree that if he and his colleagues came up for election now they would not be in their present positions?

    The hon. Member is a relatively new Member of the House. Therefore, I should remind him of a little personal history. From 1951 steadily until 1964, and from 1970 until 1974, my colleagues in the Parliamentary Labour Party, for good or for ill, elected me to the Shadow Cabinet. I am very grateful to them, and I do not think that there is any reason to believe that there would be any change now. As regards the doctrine of collective responsibility, I thought that my right hon. Friend's speech would appeal to the hon. Gentleman because the whole theme concerned the elevation of the doctrine of parliamentary democracy and parliamentary supremacy in this House. If the hon. Member does not agree with that, he is not fit to be a Member of Parliament.

    Is the Prime Minister aware that the difficulty facing the Leader of the Opposition is not in recruiting people to the Shadow Cabinet but in managing to keep them once they are there? There are now six top Tories who refuse to settle in the Leader of the Opposition's political nest. Could my right hon. Friend offer any advice, or does he think that the right hon. Lady would be better advised to send a letter to Marjorie Proops?

    I have noticed my hon. Friend's keen interest in the affairs of the Conservative Party, and I hope that that is not an indirect way of applying for a position himself.

    Does the Prime Minister recognise that if the principles of the Secretary of State for Energy were extended to the election of the Leader of the Labour Party by the mass membership of the party there would be a difficulty, because the leader would then have to be elected by ghosts?

    I am very reassured by the hon. Member's touching faith in election by the full membership, in view of what happened to him.

    On the question of collective responsibility of the Cabinet, has the Prime Minister had the opportunity to discuss with his colleagues the statement he has made on three separate occasions in the last week that there will not be a General Election this year? Does he think that the British public would be wise to give as much weight to these denials as it gave to the denials he made in the summer of 1967 that there would be no devaluation that year?

    I paid for those statements in full in November 1967. If the hon. Member ever has the misfortune to be Chancellor at a time when there is a fixed exchange rate, he might find that there are occasions when he has to make a stand on a position that he is not able to justify fully. That is one of the responsibilities of being Chancellor. On the question of a General Election, what I have indicated about trends moving in the right direction for the British economy continue to be borne out by the new announcement this week that the price of materials and of fuel rose by only ½ per cent. last month. Comparing this figure with that of a year ago, this holds out considerable hope for the slackening of inflation that we all want to see. It also holds out new hope for the prospect of a new wages agreement. A year ago these prices were going up by 4 per cent. a month, and last month the figure was only ½ per cent., so this is a very remarkable improvement. Irrespective of party interests, the hon. Member should welcome the fact that inflation is bound to slow down if this trend continues.

    Statutory Instruments, &C


    That the draft Redundant Mineworkers and Concessionary Coal (Payments) (Amendment) Order 1977 be referred to a Standing Committee on Statutory Instruments, &c.—[Mr. Bales.]
    That the draft Mineworkers' Pension Scheme (Limit on Contributions) Order 1977 be referred to a Standing Committee on Statutory Instruments, &c.—[Mr. Bates.]

    Estate Agents (Agreements)

    3.31 p.m.

    I beg to move,

    That leave be given to bring in a Bill to provide protection for the vendors of real property when placing their property in the hands of estate agents, particularly, but not exclusively, those agents who advertise on a no-sale, no-fee basis.
    I wish to make two comments at the outset of my remarks. This Bill is introduced as a consequence of the experience of one of my constituents. I wish to make it clear that I do not believe that every estate agent is a disreputable shark. As in every area of activity in life, there are disreputable people and there are smart-alec estate agents. However, no reputable estate agent who acts honestly and fairly has anything to fear from my Bill. I take the view that the House should seek to defend individuals against dictatorial bureaucracy and should also defend consumers against the clever smart-alec who is out to earn quick money at the expense of others.

    The case of my constituent is a simple one. He decided to emigrate and went to see an estate agent who advertised my constituent's property on the basis of no-sale, no-fee. The constituent agreed that the agent should try to sell his house on that no-sale, no-fee basis. The agent then produced a document and told my constituent "Sign here". My constituent signed the document after questioning the no-sale, no-fee part of the advertisement. My constituent's house was then advertised for two Saturdays only and on one of those days at least the advert was wrong.

    The vendor then changed his mind and decided not to sell because he could not obtain his papers to emigrate. He then phoned the estate agent to withdraw the sale of the house. Nobody from the agency had visited the house, and there had been no notice in the garden or anything of that kind. All the agent did was to place two advertisements in a newspaper, one of which, as I have said, was in error.

    The vendor was then told that he had "broken the contract" and received a bill for £44·42p, being £3·29 VAT and—wait for it—£41·13p fees. Incidentally, the account refers to "half fees as per contract". After a little delay, my constituent received a copy of the contract eight months after he had initially signed it. He then realised the situation—despite the fact that the estate agent's advertisement said that there would be no fee without a sale, and indeed the advertisement which I have in my hand said "No sale—no fee or expenses at all", and the other advertisement said, "No sale, no fee or expenses at all—even Press advertisements". Although that was the basis on which the agent had advertised, my constituent realised that those conditions apply only if a property is left with that estate agent exclusively for six months. Because the vendor withdrew the property in a shorter period than six months, the estate agent could proceed legally to claim his fees. I shall not weary the House with all the details of the case, but I merely sum up the situation by saying that ultimately the estate agent took out a summons against the vendor for £48·92p, which included £4·50p court fee.

    I feel that this matter requires to be remedied by legislation. Therefore, I seek leave to introduce this Bill to ensure that such a thing cannot happen again.

    My Bill proposes, first, that any agreement by an estate agent to sell a property for a vendor shall have a written contract, even if the agreement is a verbal one. Secondly, the estate agent shall serve upon the vendor within seven days of such an agreement a copy of the agreement, and notice of the vendor's rights under the rest of the Bill is to be included with the copy supplied to the vendor. If the estate agent does not comply with that rule, no agreement shall be enforceable by him.

    Thirdly, under the Bill the vendor is allowed from service of the copy agreement on him 10 days in which to terminate the agreement, without liability. That is similar to the cooling-off period in a hire purchase agreement.

    Fourthly, the Bill provides that where the estate agent advertises on a no-sale, no-fee basis, he shall not be able to charge a fee if no sale is effected and notwithstanding anything in the contract.

    My Bill defines "the vendor" and defines the "estate agent" as
    "any person or legal personality which undertakes the sale of real property for reward Where that real property is used for purposes of residence".
    This Bill has been drafted for me by a good friend, Mr. Alistair Webster, a young Rochdale barrister of great ability. I assure the House that the Bill will be published, assuming that leave is granted by the House today.

    My constituent who came to see me was a Mr. Newall, of 570, Manchester Road, Rochdale. The estate agents involved, to whom I have spoken, were Kendal Estates Ltd.

    I do not believe that there is anything in the Bill to cause offence to decent, honest, fair-minded people. I cannot believe there is anything in it to cause concern to decent estate agents—although I must say, judging by my correspondence, that some of them flutter and splutter if they think an attack on their citadel is about to take place.

    I hope that the Government will find it possible to give time to my Bill. It is a consumer protection Bill, and I have very much appreciated the interest taken in it by the Minister of State, Department of Prices and Consumer Protection. The Minister has taken a voluntary interest in my Bill.

    I see my Bill as a first step in an area of activity that requires action and investigation. I believe that some of the fees charged are exorbitant. They should be related to work done and not to sale price.

    This is a decent little Bill to help the consumer and to ensure that if he is taken for a ride by an estate agent he has nobody to blame but himself. I hope that the House will agree to its introduction.

    Question put and agreed to.

    Bill ordered to be brought in by Mr. Cyril Smith, Mr. David Penhaligon, Mr. Clement Freud and Mr. John Pardoe.

    Estate Agents (Agreements)

    Mr. Cyril Smith accordingly presented a Bill to provide protection for the vendors of real property when placing their property in the hands of estate agents, particularly, but not exclusively, those agents who advertise on a no-sale, no-fee basis; And the same was read the First time; and ordered to be read a Second time upon Friday 22nd April and to be printed. [Bill 76.]

    Orders Of The Day

    International Finance, Trade And Aid Bill

    As amended (in the Standing Committee), considered.

    New Clause 1

    Limit On Borrowings From The International Monetary Fund

    '(1) Treasury borrowings from the International Monetary Fund may not exceed 145 per cent, of its quota with that Fund, except as provided in subsection (2) of this section.

    (2) The Treasury may by order raise the limit imposed by subsection (1) of this section on borrowings from the Fund.

    (3) The power of the Treasury to make orders under this section shall be exercisable by statutory instrument, and no such order shall be made until a draft has been laid before and approved by a resolution of the House of Commons.'.—[ Mr. Hordern.]

    Brought up, and read the First time.

    3.40 p.m.

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

    The purpose of the clause is to put in order, if possible, the Government's borrowing from the International Monetary Fund. As the House knows, the Government have borrowed 145 per cent. of their quota with the IMF while the permitted amount is only 125 per cent. The Government had to obtain special consent from the Jamaica Conference in order to do that. The Government's total borrowing, of which this 145 per cent. of the quota forms part, now amounts to $12·9 billion, which is a huge sum. The Financial Secretary was good enough to tell us that that was the total indebtedness for which the Government have been responsible since March 1974. Of that, $3·1 billion came from the IMF, $2·5 billion was a direct loan to the Government, and $7·3 billion has been borrowed by various sections of the public sector.

    We were told that we were allowed the temporary increase in our quota in order to accommodate the Government's appetite. This was agreed in the Standby Agreement that was signed on 3rd January 1976. We had to go above our quota of 125 per cent. I assume that we shall have to revert to 125 per cent. when we repay our loans to the IMF. We have asked the Financial Secretary on a number of occasions how this is to be done technically. I assume that the mode of operation will be that as loans are repaid we shall get down to the quota figure or when we reach the new quota at the beginning of 1978 our borrowings will form the new proportion of that quota and in those circumstances will not amount to 145 per cent. We are by far the largest borrowers from the IMF. We have been borrowing far more than the developing countries.

    I want to take up a point that was made by the Financial Secretary on Second Reading. He said:
    "The problem of dealing with surplus revenues acquired by the oil producers is still with us and is likely to remain with us for a long time. It will remain with us as long as those countries do not use this money, which comes from the sale of oil, for imports and their own development projects."—[Official Report, 31st January 1977; Vol. 925, c. 51.]
    That is typical of the Government's approach to the imbalance with the OPEC countries. It is as though it were the fault of the oil countries for being able to obtain what the market will give for their products.

    It seems quite clear that, while other developed countries—with the sole exception of Italy—have been able to get into reasonable balance with the OPEC countries, we are the only developed country unable to do so. There is no reason why we should not have put ourselves in a position similar to that of other Western European countries and the United States in relation to the OPEC countries and the balance of payments. It is as though the OPEC countries were, to some extent, held to blame for obtaining the market price for their oil. We shall not be complaining when we come into the 1980s and have a surplus of oil to export. I cannot imagine the Government—if it still is a Labour Government, and I hope that it will not be—complaining then about excess oil and the embarrassment it gives to other countries.

    We have had a chance to sell industrial goods to OPEC countries—and that is more of a chance than the developing countries have had because of their inability to produce industrial goods of the kind wanted by the OPEC countries. The developing countries built up a deficit of $31 billion in 1976.

    Now the World Bank is talking about replenishment of $9 billion for the IDA. The Government have already borrowed far more than that. So far, this problem of imbalance between developed and developing countries has been met by the Euro-currency market and not by recourse to the IMF. We now find that 40 per cent. of the Euro-currency market has been engaged with COMECON or developing countries' loans and on both accounts—both for the COMECON countries and the developing countries—according to any normal banking criteria, these must be adjudged as doubtful risks. It may be said that this is merely the market's risk and that it is the market's responsibility to decide whether to engage in such risks, but that is to ignore the extent of the existing commitments that the Euro-currency market has in developing countries and, indeed, with COME-CON countries. It seems right, therefore, that, at least for the developing countries, the IMF should be the bank of last resort.

    Turning to the IMF letter of intent, with which the new clause is inextricably bound, I ask the Financial Secretary what the Government's decision is on the sale of BP shares. In the letter of intent, the Government engaged to sell £500 million of BP shares. That was a condition of the loan. But we now hear—through the usual subterranean channels that the Government employ—that the project is in some doubt. The Financial Secretary should take this opportunity of confirming that the sale of the shares remains Government policy as one of the commitments under the letter of intent. I do not know whether the Government may change their mind about the sale of the shares. I understand that they believe that the position has changed a good deal for the better since the letter of intent was signed. There is some evidence that this is so, and it looks as though the public sector borrowing requirement may be less than was at first feared. Will the Financial Secretary tell the House what the position is?

    It would not be unusual for the Government to have second thoughts about the disposal of the shares. They have had second thoughts on a number of occasions recently, for example, about councils employing direct labour, about ship repairing and about devolution. For my part, I much prefer the Government's second thoughts to their first thoughts. But what is the position now? The House ought to be told what it is and what the Government intentions are about the letter of intent and particularly about the sale of the BP shares.

    I understand that there will be a further increase in the IMF's quota by February 1978. We do not know how large future quotas will be, but they will not require legislation by the House because of the terms of this Bill. We make it clear that we regard this as a most retrograde step. Previously, IMF Bills were introduced by the Chancellor. IMF quotas have always been increased by virtue of the passage of a Bill.

    The amounts to be provided in future will be far greater and will exceed anything that has been put before the House in the past. But they will be brought forward by affirmative resolutions that allow just one and a half hours for debate and that the House can only take or leave. It would, of course, be serious for the Opposition to turn down such a proposition. This is a most retrograde step because the House will lose the opportunity of discussing IMF policy towards quotas, the developing world, the rôle of gold, SDRs and exchange rate policy.

    There are few occasions when the House is able to discuss important aspects of these policies. These policies are not important just because of their size or content. They have importance for every person in the country. It seems to be a retrograde step if we have reached the state of affairs where huge sums of borrowed money, expressed in SDRs or in terms of exchange rates, will be brought before the House by affirmative resolution late at night. It is disgraceful that the Government should attempt to cut out all future debates on these important matters by means of this Bill.

    In Committee and on Second Reading we touched on the important question of surveillance. The Government are about to sign a formal treaty which says in Section 3 of Article 4 under the title "General obligations of members" that they will avoid manipulating exchange rates or the international monetary system in order to prevent effective balance of payments adjustment or to gain an unfair competitive advantage over other members.

    How can the Government square this undertaking with their present policy? It is difficult to know what the Government's policy is and impossible to make any sense of it. For example, they are taking out a loan to fend off hot money in the official balances, only to encourage an enormous increase in the inflow of funds over the exchanges on privately-held balances which could be just as volatile as were the old official balances.

    A few months ago, the Chancellor of the Exchequer said that an exchange rate of $1·80 was far too low for sterling. Why then is he so busily employed in keeping sterling at $1·70? It is difficult to make any sense of the Government's financial and exchange rate policy. It has the effect of keeping the exchange rate down and deliberately increasing prices far more than would otherwise have been the case. This causes higher unemployment than we would otherwise have. I am reminded of the song from "South Pacific" which goes:
    Who can explain it,
    Who can tell you why?
    Fools give you reasons,
    Wise men never try."
    That is the only piece of wisdom that the Government have so far shown in their total inability to explain their economic, monetary and exchange rate policy.?

    I do not think that they are able to make any sense of their policy. Money is still coming into this country, attracted by levels of interest rates which have been deliberately held too high in order to encourage foreign funds. I do not know why the people of this country should be expected to take on this extra burden of debt and face increased prices and unemployment because of a deliberate act of policy. I hope that the Minister will be able to make some sense of what seems to be an inexplicable policy.

    I support the important new clause. At the heart of all our considerations of the relationship between this country and the International Monetary Fund is our experience in the recent past and the way in which the Government have had to have access to the facilities of the fund in order to cope with our economic problems.

    As the rôle of the IMF has become more important in the world economy, as its means of currency—special drawing rights—have been given a greater rôle and as the new amendments, which will have United Kingdom authority if the Bill is passed, are approved, the functions of the IMF are being extended. We have no quarrel with that. We argue that alongside this increase in the significance and involvement of the IMF parliamentary control over the Government's relations with the fund is being diminished.

    If the Bill is enacted without the new clause there will be little restraint on the amount that any Government can borrow under the fund arrangements. Even now, our quota is abnormally high. It is still more than one-third above the quota of the United States and is larger than the quota of West Germany. Yet it is Government policy to reduce the rôle of sterling as a reserve currency.

    The part that sterling has played as a reserve currency in the past has been one of the main factors in ensuring that our quota has been so high. If this rôle is reduced we can expect our quota to be lower, if not in absolute terms at least in relation to the increasing quotas of other nations, whether industrialised, non-industrial or Third World countries.

    The problem affecting a country such as our own is not that we have too little credit but that we have too much. The more credit that anyone has, whether an improvident Government or an improvident person, the greater is the encouragement to spend now and pay later, and this is what has happened with our economic affairs.

    When resort to the IMF is unavoidable, it is better that it should take place sooner rather than later. Had our ability to draw from the fund not permitted an increase of 45 per cent. last year on an already high figure the Government would have had to contemplate resort to the fund much earlier, and that would probably have meant that instead of the half-baked measures of last July and another dose of the cuts in December we could have got the whole thing over in one go and saved ourselves a great deal of pain and misery in the process. Had it been necessary, because of a reduced ability to borrow from the fund, to meet the fund's loan conditions at the time of the July measures, it would have saved us from six months of worsening crisis.

    In June last year the minimum lending rate was 11½ per cent. In September it was 13 per cent., and by October it had reached 15 per cent. We are still not back to the level of interest rates that prevailed immediately before the July measures.

    Before the July measures, the sterling exchange rate against the dollar was 1·80. Following the lack of success of those measures it fell, at one point, to 1·57 and, although it had recovered to the 1·60s by December, only since the IMF measures at the end of last year has the pound achieved reasonable stability.

    We see the effect of all this in the recent performance of the retail price index. We were all pleased to note that the exceptional increase of last month has slackened off, but it is disgraceful that by July last year the increase was still double the rate that applied just before the General Election in October 1974. This is a direct result of the decline of the sterling exchange rate and the fact that the July measures, without the sanction of the IMF, were insufficient to restore financial stability and economic confidence.

    It would be a great advantage if we could tighten parliamentary control over the Executive, rather than the other way round. The fund is a lender of last resort and is not an easy-going finance house that splashes out undisciplined credit to all comers. Special drawing rights are not plastic money that can be spent by extravagant Governments without concern. The IMF is a serious institution and its purpose is to provide loans under difficult circumstances to the unfortunate and the improvident. But no one can claim that it is misfortune that has brought the Government to their IMF borowings. They have been brought there by their own mismanagement and extravagance.

    4.0 p.m.

    It is a disgrace that twice within 10 years Labour Governments have been forced to resort to conditional finance from the IMF. That is unparalleled for a trading country of our international standing. We should guard against allowing future Governments—not necessarily Labour Governments; any sort of Governments—in this country and in other countries having more credit available to them from the IMF than is good for them.

    If we do not retain more direct parliamentary control over the way in which Governments can borrow when they have resort to the IMF, it is a direct encouragement to them to overspend and to put off the evil day as long as possible. There is no doubt that had the right measures been taken in the middle of last year they would have saved us from six months of worsening unemployment, worsening inflation and a deteriorating foreign exchange position.

    I strongly support the new clause, in the hope that it will retain for the Houses of Parliament some control over the Executive in this important area.

    The hon. Member for Horsham and Crawley (Mr. Hordern) began by discussing the problems arising from the oil surplus. The hon. Gentleman considered that the difficulties occasioned by those countries with surplus funds arising from the enormous increase in the price of oil had been overstated by the Government and were wrongly attributable as a cause of our problems. I do not say that our problems are entirely due to the increase in the price of oil as that would be to take an absurd position. We have many long-term problems that have little to owe to that occurrence. At the same time, it would be a mistake to underestimate the importance to the developed and the developing countries of the enormous increase in revenues obtained by the OPEC countries as a result of oil price increases.

    I shall give some indication how the problem arose and how it is still with us. Although it is generally believed that the problem is declining—certainly it has been coped with extraordinarily successfully—we would be wrong to fail to understand the nature of the continuing problem that is still before us.

    I do not want to weary the House with figures but essentially the argument depends upon the surpluses that can be revealed only by the quotation of a selected number of figures. In 1973 the OPEC countries had a current balance of $863 million. In 1974, it rose to $60 billion. In 1975 it declined to $32 billion. In 1976 it rose again to $36 billion. The indications are that it will continue at around that level. That is a measure of the liquidity that has been created in the OPEC countries. The developed countries and the developing countries have had to absorb the surpluses and the unspent parts of the moneys that the OPEC countries have received.

    This is an international problem. We are fortunate in having a body of the reputation and expertise of the IMF. We should be wrong to assume that the problem is, as some have put it, almost on its way out because one or two of the OPEC countries have been spending an increased proportion of their surpluses.

    The hon. Member for Horsham and Crawley asked me about the letter of intent and the Government's position in respect of BP shares. As he rightly asserted, our position was spelt out in the letter of intent. The PSBR target, of which this was a part, finds its way into that letter. The Government have accepted the PSBR target but it is up to the Government to decide how to reach it. That will be among the other matters for further consideration.

    The hon. Gentleman asked that important matters such as IMF quotas and their negotiation be part of the legislative process of this House. The hon. Gentleman rightly pointed out the way in which such matters have been treated by the Chancellor of the Exchequer on previous occasions. Those occasions were quite rare. In 1944, there was the Bretton Woods Agreement. The first fundamental change came in 1968. That change came after 24 years. We know already that there will be the changes that we are now discussing and the changes that will arise from the further negotiations that will take place in a year or two.

    The pace of change reflects some of the increasing problems that we find in international monetary affairs. It seems that the pace will increase and that it is unnecessary to arrange the same provisions. At one time changes were rare and much more significant events in the life of the IMF but the conditions have changed.

    The hon. Gentleman asked about Article 4, which deals with the firm surveillance of changes in exchange rates and imposes upon member countries the rights of obtaining information and of consulting the IMF. The details have yet to be worked out, but the article lays down the principles that will be followed and the various discussions that will take place to provide the pattern that will be followed, although that is some way ahead of us.

    Although I can say something about exchange rate policy I fear that it will not come as any surprise to the hon. Gentleman to hear that it will be little more than a restatement of what I have already provided for him. The hon. Gentleman, the hon. Member for Hitchin (Mr. Stewart) and all members of the Committee will be aware that these are delicate matters and that I can speak about the Government's position only in broad outline. It will be recognised that at the end of the day exchange rate policy is determined, crucially, by the market's reaction—namely, by those overseas who want sterling and are prepared to hold it. Accordingly, the value of sterling is determined by the views of those who want it and hold it.

    The Government's rôle, which is much diminished, is to avoid excessive fluctuations, realising that ultimately the competitiveness of our goods will be determined by the exchange rate that outside forces determine.

    The hon. Member for Horsham and Crawley asked about our debt as a percentage of our quota. The hon. Gentleman will know that as foreign exchange is repaid over the period envisaged the percentage of the quota that is measured by the debt will be reduced, and that whether it is a percentage of the present or the future quota is a matter of little significance as it will be reduced as it is paid out.

    The hon. Member for Hitchin asked about the reason for borrowing. I shall try to give some explanation in terms of our own position and the position generally. It may be that if we had adopted more strongly deflationary measures at an earlier stage the deficit would have been made much less. But the hon. Gentleman must also understand that as long as these OPEC countries were not reducing their own levels of liquidity, it would only have found its way into some other country's increasing deficits.

    It was the hope, and at one time the expectation, that there would be a great concert of action by the developed countries on these matters. Unfortunately, that did not work out. The international co-operation was not as great as many of us hoped for at the time. But the problem is still with us.

    It must be hoped that both the IMF and the developed countries, bearing in mind their need to assist the developing countries which are themselves carrying the major burden of the surplus funds for OPEC, will come to some suitable arrangement which will retain the international advantages that we have had of stability in the foreign exchanges. But the future is by no means crystal clear, and the hope that I have expressed has yet to be converted into the reality which we shall need if we are to be able to obtain the kind of stability in the future that we had in the post-Bretton Woods years.

    The object of the new clause is to place a limit on the amount the Government can borrow from the International Monetary Fund. Our quota to the IMF is fixed in the Bill, under which Parliament retains the right to have a say about any increase in that quota. The Treasury can increase the quota only with the permission of Parliament.

    We have three reasons for the new clause. The first was mentioned by the Financial Secretary when he talked about the problems of the developed and the developing countries. One of the first results of the new clause, if incorporated into the Bill, would be to limit this country's call on the IMF's scarce resources without the permission of Parliament. As I said on Second Reading, we believe that this is extremely important. It is wrong that a country with such a relatively high standard of living compared with that of many countries in the developing world should be pre-empting a huge slice of the IMF's scarce resources, and we get no pleasure from the fact that Britain is the biggest borrower in the history of the IMF. The new clause would thus enable Parliament to limit the amount of borrowing by the Government from the IMF.

    Our second reason is that the new clause would limit the Government's ability to pledge the credit of the country. We believe that it has been much too easy for this Government—and Labour Governments in the past have also taken advantage of it—to pledge this country's credit without having to discuss with Parliament the amount they were trying to borrow. The third principal reason for the new clause is that it would strengthen Parliament's control over the Executive in taking vital decisions about overseas borrowing by this country.

    4.15 p.m.

    One of the features of the Bill is that it contains within it no fewer than eight separate guillotines. If the Bill becomes law, the Government will be permitted, by means of eight debates of one and a half hours each, to increase the limit of our quota to the IMF, to increase the limit of the ECGD, and to increase the lending to the Commonwealth Development Corporation. If the Bill becomes law as it stands, Parliament effectively will have surrendered its ability to have a full debate about any plan of the Government to increase any of the limits under those three headings. We have these eight individual guillotines built into the Bill because, by using Statutory Instruments, the Government will be able to avoid having a major debate about the IMF or the ECGD or the CDC for several years.

    We feel this to be slightly alraming. It is a common argument by Governments that parliamentary time is so precious that they are doing Parliament a favour by finding it ways of saving its own time. But what they are saying, in effect, is that they are finding ways to fill up our time with new legislation and to limit discussion about past decisions. We feel that this is a deplorable trend. We feel that the argument is unsound. We feel that Parliament should spend less time legislating and more time reviewing some of the Government's previous less-than-welcome decisions.

    Under our new clause, one limit would be placed on the Government. They would not be able to pledge this country's credit beyond a certain level without the approval of Parliament. It is absurd that the Government should have to come to the House should they wish to increase our quota to the IMF but not if they make arrangements with the IMF to borrow 200 per cent. of our existing quota. There is no limit in the Bill for controlling the Government's ability to borrow from the IMF, but there is an ability to control the Government's lending to or depositing with the IMF. Since, in recent years, we have been notable borrowers and not notable depositors, we think it important that our control of the Government's powers to borrow should be strengthened.

    We also believe that it is wrong that the Chancellor of the Exchequer should come to the House, having conducted his negotiations with the IMF and made all the arrangements, and say to us "This is the arrangement I have made—take it or leave it. I warn you that if you leave it, the bottom will fall out of the pound." In the words of the Godfather, the Government, under the present arrangement, have the ability to make the House an offer that it simply cannot refuse.

    We do not think that that is proper. We feel that the Government should have to come to the House and discuss with it their intention to borrow more than the amount already fixed by Parliament. We feel that, if the Government want to exceed that limit, they must explain their motives and get parliamentary approval before they do it. Anyone treating with the Government would then know that only if they got approval could the limit be changed.

    My hon. Friend the Member for Blaby (Mr. Lawson), in an interesting speech in Committee, pointed out that there is a gap in our parliamentary controls. I know that the Financial Secretary does not agree, but he has not produced a convincing answer. My hon. Friend pointed out that in theory Parliament is in control of expenditure, that in theory it fixes the taxes, and that in theory it therefore controls the gap—the difference between the Government's expenditure and the Government's income. But, as he also pointed out, Parliament's methods or ability to control that gap are severely circumscribed.

    In fact it is very difficult for Parliament to be able to claim that is is in control of Government spending plans, as the Financial Secretary pointed out to the House over and over again in his previous incarnation as Chairman of the General Sub-Committee of the Expenditure Committee. He knew just how inadequate Parliament's controls of Government expenditure were. It is said that Parliament fixes taxes, but Parliament does not control expenditure, although it tries to do so. Parliament has no control at all on how the Government fund the gap. We feel that Parliament should have some control.

    We do not think that it is any sort of measure of Parliament's control of the Government and of the Executive that the Financial Secretary should be able to come to the Committee two weeks ago to tell us that the present Government have increased this country's overseas borrowing from £7 billion to £20 billion in under three years. Parliament was not consulted about the borrowing. This debate, on the Floor of the House, is the first chance that Parliament has had to comment.

    Were our new clause to be accepted by the House it certainly would not be a perfect system for extending Parliament's control over a wide range of Government activity, but we suggest that it would be one way of controlling one element in the Government's plans which is at present outside Parliament's control, namely, the ability of the Government to pledge this country's credit overseas.

    Question put and negatived.

    New Clause 2

    Report On Research Work Of The International Monetary Fund

    'The Treasury shall lay before Parliament each year a report on the research work of the International Monetary Fund, on the application of the research to the Fund's operations, on the economic theories underlying those operations, and on the accumulation of evidence for and against those theories'.—[Dr. Bray.]

    Brought up, and read the First time.

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

    With this we may take Amendment No. 10, in the title, line 4, after '1962', insert:

    to provide for the presentation of certain information with respect to the Fund to Parliament'.

    My reason for tabling the new clause is to give us a further opportunity to discuss a matter which was ventilated in Committee, with echoes of it from Second Reading, but I do not think that we have adequately disposed of the matter.

    I confess that I had the impression of an uncritical response to the IMF conditions in the recent drawing, not from the point of view of disliking conditions of any kind, which is an understandable attitude on the part of a debtor, but uncritical in the sense that the conditions were wrongly conceived. The conditions were working in the IMF's traditional monetarist framework, which would be an embarrassment to any serious monetary economist and an excrescence to economists who are not in any way monetary economists. The device imposed on us in the IMF conditions was that of domestic credit expansion.

    This adds up to the fact that, if we fall behind in our recovery in the balance of payments along the path projected by the Treasury at the time when the conditions were negotiated, we shall have to squeeze our money supply. The further behind that we fall in our balance of payments, the tighter we shall have to squeeze our money supply. The idea that our balance of payments and money supply are directly reciprocal in nature, so that we can reduce the balance of payments by reducing our money supply, is unbelievably naïve in the real world.

    The matter is not academic. It can be argued that the course projected by the Treasury was the best calculated course to take us out of an extremely difficult position in which we should never have landed ourselves, and that the best calculated course was to increase the constraints on public expenditure and so on.

    Let us suppose that that course was the best-judged course for the recovery of the economy. If we then depart from that course in any way, the judgment on how we are correcting our policies to take account of the changed circumstances is crucial. The correction that we have had imposed on us is that of the formula of domestic credit expansion which I have outlined. We are bound to depart from the trajectory projected by the Treasury. We are already doing so. We do not know how it will develop later in the year.

    We are faced with having this curious weapon of domestic credit expansion used against us. It can be argued that, if we come well within the IMF requirements on domestic credit expansion, it does not matter because we are free to run our policies as we like. If, however, we come comfortably within those figures, that will indicate room for a relaxation of policies in some way but within the specific IMF constraints.

    It was suggested earlier that our rate of interest, for example, could come down, which would help investment and help to reduce the rate of inflation. I thoroughly agree that it would have a desirable effect in reducing the inflow of hot money into the country, but presumably one reason why the Chancellor is not reducing interest rates is that he is having to watch the targets set by the IMF, because strange things can happen to those variables in the coming months. Perhaps there is some hankering in his mind which tells him that if we get into a strong enough position we can somehow escape from the IMF conditions altogether.

    It seems to me too hazardous a course to suspect any Chancellor or any Government to plan to repay the IMF loan with hot money and then transgress the IMF conditions, so that if we were in an exposed position next July, with a rewinding of leads and lags, and there was a rush of hot money out of the country, we should have no defence at all. I cannot believe that that is the strategy in the Chancellor's mind. It, must, therefore, be some worry about having to fulfil the conditions of the IMF loan as they are. The reason why we have had that strange halter of domestic credit expansion put round our necks is that it first appeared in the IMF staff papers by Mr. Polak, now director of research for the IMF, which seems to have been the basis of IMF operations in many countries for the past 20 years. That is one thing that I should like to see examined.

    But another example of the uncritical attitude to the IMF's work has landed not only us but the international community generally in a less-than-happy situation. On Second Reading I asked the Minister whether, in the light of the integrated programme on commodities, the drawings by developing countries to finance their contribution to buffer stocks would affect their right to draw on other IMF facilities. I was assured that any drawing by any country to finance buffer stock facilities would not be taken into account in assessing its general credit position. I find that incredible. If it is true, all that the developing countries have to do is to set up a series of paper commodity schemes and open up a line of credit for themselves through the IMF to finance their contribution to a commodity scheme which in that event could be wholly producer-financed.

    Presumably, a more considered reply would bring out that this was hedged about in various ways not only in UNCTAD but also in the IMF as it would operate in practice. But whatever the true position, the IMF has a crucial rôle to play through its buffer stock facility in the integrated programme on commodities. This is of grave economic importance to us, because one reason suggested for a certain softening of the attitude of industrial countries to the concept of a common fund is that they are worried about the possibility of a world recession. They see the financing of buffer stocks as a sensible means of enabling the developed countries to contribute to the reflation of the world economy in a way which has a sound economic basis. We would therefore be able to serve our own economic interests better as well as adopting a more constructive rôle in the common fund negotiations at the IMF, the World Bank or UNCTAD, by pursuing the appropriate studies and integrating them with policy to put us in a clearer position concerning the views of others about differing interests.

    4.30 p.m.

    To make it quite clear that it is in order in this debate to refer to the IMF's facilitiy to finance buffer stocks in terms of the current negotiation conference on the common fund, I have set out the background to why the IMF should put more effort into this research. The background to the current negotiations on the common fund was the Nairobi Conference in May 1976 which launched the integrated programme on commodities.

    The idea behind the common fund is that the developing countries felt that progress on individual commodity schemes was held up because there was a reluctance to finance an individual scheme. However, they felt that if some source of funds through a common fund was available it would be more easy to finance the individual schemes as they came along. The UNCTAD IV resolution on the common fund does not lay down any principles for the common fund or for individual schemes, but these were considered in earlier reports by the secretary-general.

    The pattern that emerges is that the case made by the secretariat recognised all the problems of setting up commodity schemes and argued that they were eased by having a common fund facility. But we do not have too much detail about how the schemes would work or about what tests would be imposed on a particular scheme to see whether it was eligibile for financing from the common fund.

    Under great political pressure from the developing countries and the Group of 77, UNCTAD agreed to have this negotiating conference on the setting up of the common fund here in March 1977 before there had been any definition of the concept of the common fund, let alone any measure of agreement reached between the differing interests as to what the common fund would be. One can see the difficulties when one gets down to examining the preparatory meetings which have taken place on the particular commodities.

    For example, the preparatory meeting on copper was followed by a meeting of intergovernmental experts on copper. That meeting listed some 27 different studies which needed to be carried out before anyone could say what a sensible copper stabilisation scheme would look like. The developing countries may well have assumed that this was mere procrastination, but when one looks at what the actual studies are about it is difficult to argue that they are not relevant to a copper stabilisation scheme.

    For example, the list included a study of the structure of trade in copper, including the amount of copper moving through integrated operations, barter, long-term contracts and commodity markets. It went on to a description of marketing and pricing methods and the effects on the patterns of trade and the rôle of terminal markets, the capital requirements of new mining operations and related costs of production and long-term trends in demand and supply. These are all highly relevant to the design of a copper stabilisation scheme.

    It is interesting that the reaction of the Secretary-General of UNCTAD after the meeting was to say:
    "It is premature to draw any conclusions of a general nature from the two preparatory meetings and the one expert group meeting so far held. However, while the Secretary-General of UNCTAD fully appreciates the importance which governments attach to detailed studies and the fact that the amount of relevant preparatory work done prior to adoption of the Integrated Programme varies from commodity to commodity, he would like to stress the need to balance requests for additional studies against the need to move expeditiously towards negotiations within the time-frame set by the Conference in resolution 93(IV)."
    That is a very understandable reaction. However, it is not clear what would be done when the studies were completed. Instead of simply pursuing a purely political programme of discussion on commodities, UNCTAD, or the IMF standing behind it with its financing facilities, or the World Bank or national Governments could have initiated a series of policy optimisation studies designed to see how commodity stabilisation schemes would operate. The practicalities of such policy optimisation studies might be illustrated from work on other commodities.

    Smith and Schink, in the current issue of the Economic Journal, have done work on the International Tin Agreement. They say that the International Tin Council has had only the most marginal effect on the movement of tin prices or their stabilisation and that the larger pressures have been exerted by the United States strategic stockpile. They also show that the objectives of the stabilisation of income and prices are not necessarily mutually compatible.

    Further work of a more wide-ranging character was done by Kim, Goreux and Kendrick for the World Bank, in this case on cocoa stabilisation. The main point brought out was that there is a conflict in the different objectives of stabilisation of price and incomes. The cost of such studies, which no doubt has been a factor in the mind of the secretariat, which can only pay its own salaries, is minute compared with the £6 billion that UNCTAD is asking effectively from the IMF in order to finance the common fund.

    We therefore have the situation in which we go into the negotiations with grossly under-researched attitudes. One talks to Ministers who say that they have had the best possible briefing. The best possible briefing that I would want for commodities in London would probably, be from a body like the Commodities Research Unit. That body was commissioned by the State Department to give the American Government a briefing on copper in particular. It was not asked for any briefing by any Department in Whitehall. Let us consider the composition of the United Kingdom delegation to the UNCTAD expert meeting on copper, because one can then understand why no briefing was sought.

    I do not believe in the conspiracy theory on any aspect of Government, and I do not take a sinister view of the operations of Rio Tinto-Zinc. It is interesting, however, that of the three non-governmental representatives on the British delegation, two came from Rio Tinto. The deputy chairman of that company is Lord Shackleton, a former Labour Minister and Leader of the House of Lords. It was Rio Tinto-Zinc which proposed the quite disastrous aluminium smelter scheme which was negotiated by the present Secretary of State for Trade in the late 1960s and was in my right hon. Friend's very interesting book as a prime illustration of how to handle relations between Government and industry.

    It is natural that my right hon. Friend the Secretary of State for Trade, in looking for supposed experts on commodity stabilisation, should look to his friends in Rio Tinto-Zinc. But, frankly, that is not the source of the best guidance in terms either of the national interest or of the technical design of commodity stabilisation schemes. One should be able to expect from the British Government, and certainly from a Labour Government, a rather more critical attitude in the shaping of policy than we have seen displayed so far in the UNCTAD common fund and commodity negotiations.

    Before leaving the subject of the British mining finance companies, would it not be appropriate to pay a tribute to the work they have done in ensuring supplies from some of the least-developed countries to consumers in this country of commodities such as copper?

    It is also pertinent to refer to Rio Tinto-Zinc's experience in Bougainville. That company went through the whole gamut of developing a large copper deposit and putting a lot of money into it, and then found that the conditions under which it was operating in the host country were dramatically changed just as the loans had been paid and the mines were reaching production. Rio Tinto-Zinc has a wide spectrum of experience upon which to call when advising the Government on schemes for the stabilisation of copper.

    I accept what the hon. Member has said, but there is more than one mining company. The staff of Rio Tinto-Zinc would be the first to say that they are not the only experts. Indeed, the company buys studies from the Commodities Research Unit. It is not self-evident that one should take as advisers the executives of one company. Other mining companies have contributed to the world economy. I am asking for a more critical attitude from the Government. The present system involves using the "old boy" network. There are other sources of advice available which the Government have not yet tapped.

    I have made that point in correspondence with Ministers. It was suggested that I might have discussions with officials. One of them assured me of his wide experience through having been in charge of the commodities division of the World Bank. I referred to a study which was done in the World Bank. That official did not even know of its existence although he was in charge of the commodities division. There is a lack of communication between the study and research that goes on and the actual making of policy.

    People do not do research just for the birds. They do it because they are concerned about seeking the best solution to the difficult problems that we face. But they are ignored by the people who are sent along by the British Government to the negotiating conferences. It is no wonder that we are floundering around in the dark.

    This is immediately relevant to our current situation because the Prime Minister is going to Washington this week. He will not get much change from President Carter by any softening of the IMF conditions. He should say to President Carter that the United States places great emphasis on energy policy, which is a major commodity problem, and the stabilisation of some commodities—admittedly temperate cereals, including wheat and peanuts—but that there are also the problems of tropical and mineral products. The Prime Minister might ask about those. He should say that both the United States and the United Kingdom face the underlying problem of the stabilisation of exchange rates and ask how that is to be tackled. If the Government were to pick up their skirts and get down to the job of discussing these problems in the light of the academic analysis that is widely canvassed, and if they made that the basis of policy, we should not be floundering as we are today wondering about where we should go.

    It has been suggested that if the new clause were passed some slight embarrassment would be caused to the Treasury. That is precisely the point. It would cause embarrassment if the Treasury were to maintain its present posture towards the use of research. That policy needs changing, and it is in the best interests not only of the Government but of the Treasury in particular to pay more attention to the underlying logic of the argument.

    4.45 p.m.

    We should be grateful to the hon. Member for Motherwell and Wishaw (Dr. Bray) for New Clause 2. Whenever I see the hon. Member I also see macro-economic models because I remember that in the long debate on the Industry Bill one of the few changes—perhaps the only one—made in the Bill was thanks to him. From the Gvernment Benches the hon. Member suggested that a macro-economic model should be produced by the Treasury each year and this was accepted. It was the only positive outcome of 140 hours of debate on the Industry Bill.

    When I read in New Clause 2 on coming into the Chamber today:
    "The Treasury shall lay before Parliament each year a report on the research work of the International Monetary Fund, on the application of the research to the Fund's operations, on the economic theories underlying those operations, and on the accumulation of evidence for and against those theories'."
    I assumed that the hon. Gentleman would tell us about the advantages of having a semi-public disputation each year between the monetarists and the non-monetarists, between Friedman and Galbraith. I welcome the idea and I thought that it would be a useful public debate to have. I was all set to support the new clause, which I shall still do. But I did not realise that the hon. Member would lead us into a discussion on the common fund—a matter in which both he and I have an interest.

    I shall make a few remarks in amplification of some of the hon. Members' comments about the common fund. It is particularly appropriate that we should be doing this today because a debate on the common fund opened in Geneva yesterday. Unfortunately, it broke up after 20 minutes because there was no agreement on who should be the chairman. Let us hope that that is not a presage of things to come.

    There was an interesting conference in the Grand Committee Room last week at which the Under-Secretary of State for Trade spoke on the subject of the common fund. The kernel of the speeches made—although we heard a great deal for and against the technicalities of the common fund—came when the gentleman from the Commonwealth Secretariat referred to a remark by William Simon, late of the American Treasury, at a World Bank meeting last autumn.

    Mr. Simon said words to the effect that the present world order system had served the world well for 25 years, so why should we change it. The gentleman from the Commonwealth Secretariat made it obvious that he was totally dissatisfied with that statement by William Simon. He and others in the Group of 77 wished to change the world order system because they wanted to transfer power and resources from the industrialised world to the less developed countries.

    In all our discussions about the common fund, it is clear that we are entering the stage when we shall have to face the determination of the less developed countries to have more power, more wealth and more of the world's resources transferred to them. The mechanics of how that is done is less important than the end in itself. We could get bogged down in discussions about the mechanics when we should in fact be concentrating on the aim and on the ends that the Group of 77 wish to achieve.

    That said, I very much agree with the remarks made by the hon. Member for Motherwell and Wishaw about the difficulties of the common fund and the difficulties of operating it. I do not believe—perhaps the Minister will refer to this matter—that there is any intention that present quotas within the IMF should be used for financing buffer stocks. It surely is the underlying theme that it is a new financial facility that must be made available, initially of $3 billion and, in the end, up to $6 billion. The purpose of this lies not only in financing buffer stocks, but in using the common fund as a means for arranging the mutual financing of stocks between individual commodities rather than creating 18 separate individual commodity agreements.

    However, the difficulty here lies in the fact that, of the 18 commodities suggested, only five are suitable for buffer stock purposes, Most of the others, if not all, would be damaged in storage, are unsuitable for transport to a central storage point, or would wither away if stored in the country of production. I do not believe, therefore, that the basic concept of buffer stocks being financed through the common fund has been thought through.

    In the particular commodity of copper—and here I must declare an interest as a member of the London Metal Exchange and a director of a mining finance company—it is a fact that the CIPEC countries have sought means of achieving a copper commodity stabilisation scheme for so many years now that I forget how man)—18 or 20. They have met continuously, notably in Paris. They have never reached agreement. Why? It is because the fundamental differences between the South American members of CIPEC, Peru and Chile, and the African members, Zambia and Zaire, are very great indeed. They wish to achieve different objectives through CIPEC. That is quite apart from the historic dislike and the different national characteristics that exist between the South American countries and the African countries.

    Copper is one of the five commodities that I have mentioned that could be easily stocked. It has relatively few prodcuers. Very little copper is reclaimed from scrap, so the recycling problems of operating a buffer stock where much of one's material comes from scrap do not exist. Nonetheless, it has proved impossible over the years to arrange even one commodity stabilisation scheme, for copper alone.

    Then there is the question of cost. It is said or copper alone that the cost would be about £600 million. We must stand back and ask ourselves whether this is the best way of using £600 million of international money.

    I know that it is commonly said that we must not think of the common fund in aid terms. However, the fact is that at the end of the day, if commodity stabilisation agreements lead to higher prices—which I believe they do—it is the less developed countries which are producers of those commodities which will benefit most, and thus there is an aid element in this. If there is an aid element, we must pause and consider whether this is the best way to use £600 million that one wants to pass on, in any shape or form, to the less developed countries.

    The hon. Gentleman is powerfully reinforcing the point that I tried to get across, namely, that the variety of instruments that have to be used in any commodity stabilisation scheme, incorporating not only the buffer stock but also policy towards production policy—if one does not talk of production control—and regulation of exports, and the regulation of investment, must go into the overall design concept of the scheme. The conflict of objectives can be clearly formulated only in the light of an optimal commodity stabilisation scheme. That has never been done in copper, despite all the negotiations within CIPEC. Finally, we do not know whether the cost is £600 million or a great deal more, or, taking into account its rôle within the common fund, possibly even less, because we need to look at how it interacts with other commodities and the overall timing of the trade cycle.

    As the hon. Gentleman will know, a great deal of work has been done on the cost of financing copper stock. More study has been done on this single commodity—perhaps I say that because I know this commodity better than soft commodities—by, for example, economists of the Institute for International Studies at Sussex University than on any other. Therefore, we are further down the road in exploring the financing cost of copper stock than perhaps that of any other commodity. Yet, as the hon. Gentleman said, no one has been able to come up with a firm answer on the cost. It is estimated that it would be £600 million. We cannot be sure.

    That is a pretty strong argument for not going with our eyes closed into a common fund. If we do not know the cost for one commodity, what will be the cost for 18?

    Having been very much a bear of the common fund up to now, I must repeat what I have said previously. I believe that in the present negotiations this is a matter that we should look at with open eyes, and we should not have a totally closed mind about it. No other scheme has been put forward. Whatever the imperfections or unexplained aspects of the common fund, no other scheme that seems to have any chance of unifying the interests of the northern and southern hemispheres has been brought forward.

    I hope, however—and here I support the view of the hon. Member for Motherwell and Wishaw—that British Ministers who will be taking part in these negotiations are very much better briefed than those at UNCTAD IV in Nairobi last year, and that they have not gone there with totally closed minds.

    None of us can know what will be the attitude of President Carter and his Administration to this subject. I suspect that it will be very different from that of President Ford's Administration. That is another reason why we should not yet have made up our minds as to how in the end we wish to play the situation. I hope that we are keeping an open mind.

    Above all, I hope that Ministers are properly briefed.

    I hope that you will not be disappointed, Mr. Deputy Speaker, if I refer to New Clause 2. In passing, however, I should like to say that I found the discussion about UNCTAD and the common fund of great interest, although I did not come here briefed to take part. Perhaps I may be permitted a personal comment on it nevertheless as we seem to have turned our attention it it.

    I think that there is a greater need for moves to be made, by whatever means, towards price stabilisation in the soft commodities than has been accepted by the industrial countries in recent years. I am not at all sure whether separate commodity agreements are really a satisfactory alternative to a common fund. However, I do not think that it would be very helpful to pursue that, except to say that I welcome the UNCTAD discussions that are now taking place and I hope that they will lead to more practical suggestions than the rather long-drawn-out theoretical approach which this problem has received.

    The new clause appears to suggest that we should place a requirement on the Treasury to provide information which it would not of itself have at hand but which it would have to obtain from the IMF. I do not know what the 1MF's reaction would be if we were to pass the new clause and then the Treasury would be bound to produce each year a report on research work on economic theories and how they relate to the operations of the IMF.

    It would be useful, and to that extent it is helpful that we have the opportunity to discuss it in this debate. It might even be a great deal more useful were the Treasury to indicate some of its own research and ideas on this subject. It would be to the enlightenment of all of us if we knew what research it was conducting into the relevance of its own policies and advice as to the conduct of economic affairs in this country. However, the new clause proposes that we should require the Treasury to provide information for which it would have to rely on the IMF. Therefore, to that extent the hon. Member for Motherwell and Wirhaw (Dr. Bray) knows that this is a theoretical new clause for the purpose of this discussion.

    5.0 p.m.

    The hon. Gentleman said he felt that, if the economic theories underlying some of the IMF's research work were applied to the IMF's policies on lending, we would not have the present arrangements for domestic credit expansion. The hon. Gentleman suggested that this was not a suitable instrument for accompanying the credit and financial facilities which the IMF would provide to countries in difficulty. Also, he suggested that this did not necessarily provide the best or even a suitable means of enabling countries to make the right economic recovery.

    I agree with the hon. Gentleman up to that point, but I cannot go further with the assumption behind those suggestions because the IMF does not control our economic policy. I hope that it never will. However incompetent or irresponsible national Governments may be, they should ultimately, within a framework, have discretion on how they operate the economy of the countries for which they are responsible.

    The only reason why any country has to resort to the IMF and has to satisfy exacting conditions about DCE is if, up to that point, it has mismanaged its financial affairs in such a way as to give rise to a particular crisis. That crisis is usually a balance of payments crisis which leads to and is almost inevitably part of a foreign exchange crisis. Therefore, the country in question needs foreign exchange facilities to get itself out of a critical position. In those circumstances, it is not unreasonable that the IMF, in providing those foreign exchange facilities, should impose conditions which may be counter-productive in other areas of economic development but which will at least restore credit in the area where the immediate crisis is situated, which is the current account on the balance of payments and on the foreign exchange market. It may be that over the years DCE restrictions will rot achieve that result.

    Does the hon. Gentleman mean current account on the balance of payments or capital account, taking into account leads and lags? All that money supply operates on in the short term are leads and lags, which are in the capital account.

    I said and meant current account. Usually, in my experience, movements on capital account respond more than anything to movements on current account. It is not usually difficult for a country with a sound current account balance to obtain proper funding for any temporary deficit on capital account. The factor at which the IMF must continue to look is the ability of a country to pay its way on its trading account and to sustain its currency at a reasonable level in world markets.

    I do not think that I have in any way convinced the hon. Gentleman. However, I believe that the IMF should not get away from its fundamental objective of providing financial facilities for dealing with specific crises which drive countries and their Governments into its hands.

    We have been driven into the IMF's hands because we have a persistent deficit on our balance of payments current account, which has encouraged leads and lags in sterling and which has been exacerbated by capital account movements. That has brought about a situation in our exchange rate over the past year which could not be corrected unless some supporting financial facility were provided by the IMF. It does not strike me as strange or improper that the conditions imposed by the provider of that facility should be designed to correct that defect in our economic performance.

    It may be that over the years the DCE formula will not achieve that result. On the whole, experience in industrial countries has shown that it is a blunt but effective weapon. Therefore the IMF is right to continue to impose conditions which will solve the problems which it was designed to meet.

    My hon. Friend the Member for Motherwell and Wishaw (Dr. Bray) again referred to the level of the research undertaken and the need to question the research carried out by a number of organisations and institutions which impinge upon Government agencies. My hon. Friend's record in the examination of these matters is probably unparalleled in the House. That is the tribute that we must pay to him for bringing these matters to our attention.

    In the new clause my hon. Friend seeks to repeat the arguments, although I notice the change and widening of those arguments, which he used in Committee. My hon. Friend pointed to the relationship between the staff papers of 20 years ago relating to domestic credit expansion and the examination of the matter by Mr. Polak in one of those seminal staff papers. My hon. Friend pointed out that if those papers are to have any influence on action by the IMF, clearly they need to be examined with great care. So far, I am sure that the whole House will he in agreement with my hon. Friend. The difficulty comes in distinguishing the theories in those research documents from those which may be taken over and, to some extent, implemented by Government agencies and by the IMF.

    I am sure that few will be better aware that my hon. Friend of the change which takes place when any document of that kind is translated into action. If one tries to see the reasoning behind the decisions arrived at by the Government, it is sometimes difficult to be sure just which theory they may be following because of the interaction between the various contending views which may originally have made their debut in a particular staff paper.

    If my hon. Friend looks at the occasional papers which the Government Economic Service provides, or even those contributions made by the National Institute and other bodies, he will see that it is difficult for the Government to undertake to examine these various theoretical papers without at the same time getting into difficulties.

    It is not easy to deal with the transition from theory to practice. I think that both my hon. Friend and the House will accept the advantage which we have seen in recent years of the Government taking note of the wide interchange of views which now takes place compared with what was available in the early 1950s. I suggest that it would be as hard for the Government to comment on the research work of the IMF, of which they are a member, as it would be for them to comment on the research work of the National Institute or on the occasional papers of the Government Economic Service. OF course, these are studied; lessons are drawn from them. But that is different from the Government engaging in direct controversy of a kind which would be a result of accepting the new clause.

    Will not the Financial Secretary agree that there is this difference between the IMF and, say, the National Institute, that the IMF has agreed certain courses of action, certain criteria, which the British economy should follow, and which the Chancellor of the Exchequer has accepted? Presumably the IMF measures were based on a theory which the Chancellor accepts, because otherwise he would not have accepted the IMF remedies. Will the Financial Secretary confirm that the Government accept the IMF theories, for otherwise they would not have accepted the domestic credit expansion constraints and other measures? All that is being asked is that the Government should spell out the theories which lie behind their policies.

    I had the advantage of reading through that paper by Polak a number of years ago and I addressed the House on one occasion—I think the attendance was about as thin as that which we have today—when I questioned the thinking behind it in a way which is not dissimilar to that which my hon. Friend the Member for Motherwell and Wishaw has in mind.

    We are seeing not the implementation of the theory of Mr. Polak, as he enunciated it in 1957, but the IMF coming to an arrangement and specifying the ways in which repayment of those funds ought to be undertaken on the basis of a number of different factors, of which this one is hard to assess. It is hard to be able to determine the influence of any of the economists that lie behind a decision of this kind. I think that the main point of my hon. Friend the Member for Motherwell and Wishaw was the need for an active and wide debate, and he has contributed largely to bringing this about.

    The hon. Member for Mid-Sussex (Mr. Renton) asked about the position of buffer stocks and dealt with this in some detail, as did my hon. Friend the Member for Motherwell and Wishaw. Clearly, none of us expected that this would be the main part of the debate, but I think that I can usefully inform the House of some of the problems which we see in this connection. Perhaps I might belatedly reply to my hon. Friend's question about the buffer stocks facility, because he was a little concerned that, if interpreted correctly, it might indicate unlimited credit for developing countries. Although he might be glad to see this, he understood that this clearly was not the position, so there was something wrong and some misunderstanding. Perhaps I can help to clear it up.

    There used to be a limit on the quotas of kind that my hon. Friend knows and that have been removed. The position now is that the maximum drawing on the buffer stock facility is 50 per cent. of the quota, and there is, of course, the ability to make use of other drawing rights, such as credit tranches. The buffer stock discussions which are taking place at present are complicated by the fact that there are a number of problems of which we have seen echoes in the problems facing the European Community in its dealings with some of the stocks it has acquired in ever-increasing quantities. There are problems of perish-ability and the limited numbers of products which can be stocked.

    There is the question of the intervention points, of surpluses, and the need, fundamental in all these matters, to avoid what might become, rather than a stabilising force, a destabilising force, as excessive stocks might be built up. I mention this merely to show some of the complexities that need to be discussed, because we are dealing with a much larger number of countries than there are in the Community, and the problems there have by no means been solved.

    Perhaps I might deal finally with the position of the Treasury's own research work. I have mentioned that the Treasury undertakes a certain amount of its own research, but it also makes use of other bodies. Debates of this kind, and of the kind we had in Committee, help in the examination and questioning of some of the relationships involved in these matters. I think that we are now at a point where it is difficult to obtain the kind of relationship between the various variables which we used to take more for granted. The problem today is the control of the economy when there are large deficits year after year. They make the control of the economy much more difficult, because we can less readily operate surpluses and deficits, and through them demand management, in a way that used to be possible.

    The debate continues here. I look forward to hearing more results arising from the activities of universities, the research bodies and so on, which will contribute to our understanding of these major problems.

    5.15 p.m.

    I wish to reply briefly to one or two points made by my hon. Friend the Financial Secretary and other hon. Members.

    I entirely accept what my hon. Friend said about the complexity of the transition from theoretical argument to practicality. He himself quoted Keynes about being practical men and defunct economats. I am sure that he would agree that the more we can do to clarify the link between whatever theoretical concepts we may have and the making of policy, the happpier will be our position.

    The hon. Member for Blaby (Mr. Lawson) is right in saying that implicitly, by accepting the framework of our IMF conditions, the Government are basically following their concept of how the economy works. The hon. Member for Hitchin (Mr. Stewart) said that he wanted to contain the rôle of the IMF, but to do that within one particular framework of economic theory would extend the rôle of the IMF unnecessarily and unwittingly into all sorts of areas of public and economic policy which it does not need to interfere at all.

    My hon. Friend referred to the complexities of considerations which had to be taken into account in the design of commodity stabilisation schemes. They are precisely the complexities which can be related to each other in a policy optimisation study and in no other way. He referred to developments in our national economic policy, through the publication of Treasury forecasts and access to the Treasury model. I should be straying out of order if I went into that. But this illustrates the hazards of keeping things under wraps.

    A committee of able academics which advises the Treasury has been working for a year on developments to the model, but the work is being kept secret by the Treasury despite the academics' wish that it be made public and the advice published with reference to tests on the Treasury model. The Treasury is making unnecessary difficulties for itself by preserving this secretive attitude at a time when Parliament has asked it to be more open.

    Tomorrow there will be a meeting of the users of the Treasury model at which I imagine there will be interesting requests to the Government on their management of this facility. It is a continuing story and there will be further opportunities to debate this and other matters. I appreciate the care taken by my hon. Friend the Financial Secretary and his interest in these matters. I hope that he will continue to exert pressure in a constructive direction.

    Question put and negatived:

    Clause 4

    Amendments Of Export Guarantee Act 1975

    I beg to move Amendment No. 2, in page 3, line 10, leave out 'and' and insert:

    (c) to fix a limit on the commitments entered into by ECGD with those countries described in its annual accounts as "centrally controlled economies," and '.

    With this amendment we may take the following amendments: No. 4, in Schedule 1, page 6, line 27, at end insert:

    'of which no more than 10 per cent. shall be with those countries described in the annual accounts of ECGD as centrally controlled economies'.
    No. 5, in Schedule 1, page 6, line 38, at end insert:
    'of which no more than 10 per cent. shall be with those countries described in the annual accounts of ECGD as centrally controlled economies'.
    No. 7, in Schedule 1, page 6, line 43, at end insert:
    'of which no more than 10 per cent. shall be with those countries described in the annual accounts of ECGD as centrally controlled economies'.
    No. 8, in Schedule 1, page 7, line 4, at end insert:
    'of which no more than 10 per cent. shall be with those countries described in the annual accounts of ECGD as centrally controlled economies'.

    Here we are suggesting that the "centrally controlled economies" should be restricted in the amount of ECGD support they obtain to 10 per cent. of all ECGD loans. The extent of ECGD credit extended to the Comecon countries and the centrally controlled economies has risen quite fast in recent years. Two years ago it was 10·3 per cent., in 1975 it was 11·4 per cent., and last year it reached 12·1 per cent., according to the ECGD report. It appears to be a proportion which is rising significantly.

    Before we allow the new credits to be given under the Bill, we should ask ourselves whether we are happy about the trend that that proportion shows. For example, the credits that we now give to the centrally controlled economics are now greater in proportion than the amount of credit we extend to the rest of Western Europe, and greater than the credit we extend to North America. The credit that we extend to the centrally directed economies amounts to 43 per cent. of the total volume of exports from this country supported by ECGD credits. The proportion of the volume of exports supported by the ECGD is greater to the centrally directed economies than it is to the EEC and greater than to North America. While we give considerable support to our trade with the centrally directed economies, we get nothing back from their side. They are not extending credits to us. In all probability the position with other European countries or North America would not be the same.

    It is right to ask whether the centrally directed economies are now such good risks. I understand that the hard currency debt of the USSR now amounts to 14 billion dollars. It could be said that that is not huge in relation to the USSR's total assets, although its indebtedness is greater even than that of this country, which takes some doing. The Soviet Union has not been in surplus with the West since the 1960s. It looks as though there will be a net deficit on its balance of payments for last year of about $3·5 billion, These are large sums. The debt servicing ratio in Russia now amounts to 21 per cent., which is a significant figure.

    Russia is by no means the country with the largest proportion of debt with the West of all the Comecon countries. Poland, for example, is in an even worse position. I understand that Western credits extended to Poland now amount to about $9 billion, and that Poland's debt service ratio is even higher than the Soviet Union's, at about 25 per cent. We have a picture of a deteriorating trade position in the centrally controlled economies, and it is right to ask whether we are wise to extend such large credits towards those economies rather than to the rest of the world, including the developing countries.

    Apart from these export credits, what are we to make of the separate credit that the right hon. Member for Huyton (Sir H. Wilson) arranged on his last visit to Moscow? Why should we be subsidising the Russians in that way? It will be interesting to hear the Minister's reply. He told us in Committee that it was the Government's objective to switch as much as possible of the financing of the ECGD from sterling to dollars. He felt confident that a good deal of our trade would be switched in that way, and I hope that he is right. It is difficult to know, because we do not have much direct experience, but the hon. Gentleman knows—because I have shown him the letter concerned and sent it to the Treasury—that at least one company is finding great difficulty in trading with the Russians in dollars. So far the Russians have refused to negotiate on any terms other than sterling. This matter lies at the root of the Bill, certainly the export credit side of it.

    The whole idea of the export credit scheme is to save public expenditure by switching the financing of ECGD from sterling to dollars, but the Russians, who are getting an increasing part of our ECGD business, are refusing to trade in anything other than sterling. The Minister, who knows this is true, should tell us what our companies will have to do if they want to use the big line of credit which was negotiated by the right hon. Member for Huyton and of which the hon. Gentleman has boasted so much himself. How will they be able to trade if the Russians will not deal in dollars, and if they are to deal in sterling what will happen to the increase in the public sector debt, which will be the inevitable result?

    I understand that the rate of interest offered to the Russians under the credit is 7 per cent. We had quite an amusing time in Committee discussing with the Minister what the rate was. He said that he was not prepared to disclose it, that it was all very confidential, but we now know that it is 7 per cent. I also understand that part of this line of credit has been drawn at 7 per cent. and deposited in London at 14 per cent.

    The Minister must come clean about this and make a clear statement. Though I find it very difficult to believe, this is what I have been told. It is one thing to give the Russians generous credit to buy our goods. It is another thing to give them a present, a sort of unrequited overseas aid of large sums of money. This is a very important matter. We want to know whether a penny of the money has been drawn without being used to buy British goods. I hope that the hon. Gentleman will be able to deny what I have been told.

    We do not know how long the Russian credit lasts. It may be for as long as seven years. If that is so, and if the rate of interest is 7 per cent., we are effectively selling the Russians our goods at half price. I do not know how wise that is. I believe that there are many other countries to which we could give generous terms, although I am personally against such concessions of any kind. I believe that we should trade in proper terms and without large subsidies on every side.

    The COMECON countries largely depend on the Euro-currency market. There are considerable strains within those countries' economies, and it seems to me extraordinary that we should deliberately lighten the task of the Soviet Union and the other COMECON countries by offering them such generous rates of interest, both through ECGD and the line of credit negotiated by the right hon. Member for Huyton. The Minister told us in Committee that it was difficult to draw a distinction between aid to the developing countries and to the centrally directed economies. The fact is that the centrally directed economies, notably Russia, are spending a great deal of money on increasing their armaments. The developing countries are doing no such thing and even if they were they would be no particular danger to us.

    5.30 p.m.

    Therefore, we are giving substantial sums, selling goods at half price, to the Russians, while they are increasing their expenditure on armaments every year. Of course we are not the only country that does this—many other Western countries extend aid to the Russians—but we should have a sensible initiative. Why do we not get together with other Western countries, perhaps within OECD, and come up with a sensible policy on trade with Russia? What can be the point of giving the Russians generous terms of trade from which they can benefit directly by increasing their arms?

    Surely it would be better to frame a common policy of trade with the centrally directed economies, so that they trade with us without any advantage. Such a policy would mean that the Russians and the other Communist countries had to think carefully about their future policy. It is likely that they would have to reduce their overall level of defence expenditure and increase their expenditure on other products.

    Might it not also have the effect of obliging the Russians to reduce their expenditure on maintaining a police State? While we complain about the lack of liberties enjoyed by Russian citizens within their own borders, are we not in this area effectively subsidising the kind of State terrorism which is maintained in Moscow?

    My hon. Friend makes a valuable point. It is true that the centrally controlled economies are under great strain at present. Certainly the satellite countries are. It is becoming increasingly clear that the Russians are insisting that those countries become more and more dependent on the Russian economy. If the Russian economy—as is the case—looks as if it will be consistently in debt with the West, I see no prima facie case for the West to help it out.

    It would be much more to the point if we got together with our Western allies and other countries with a common interest in these matters so that the Russians and the other centrally directed economies then had to look carefully at their policy and possibly reduce their defence expenditure. That seems a positive way of getting a reduction in their arms spending, and this group of amendments would help to secure that objective.

    At the very least we should be careful about continuing to give ever-increasing credits to Iron Curtain countries. We know where their extra expenditure is going—not on peaceful trade but on armaments. The purpose of that spending is to make life much more difficult for us in the West, and I see no reason why we should help the process.

    I agree with what has been said by my hon. Friend the Member for Horsham and Crawley (Mr. Hordern) and wish only to amplify it a little.

    When I was in the position that the Minister now holds, in what was then the Department of Trade and Industry, I was sent to Moscow to negotiate some great deal with the Russians, which so far as I can remember involved our supplying the plant for a large factory, for which we were going to pay with ECGD credits on impossibly soft terms and for which the Russians intended to pay with tomatoes over a period of years, plus some of the factory's products.

    I tried to protest about the deal but I was told that it was marvellous business. I was astonished to discover that the Russian Minister of Trade felt that he was getting the worst of the bargain. In fact, he abused me. The meeting had to be called off because cordial relations no longer obtained. I was hoping to be able to catch the next aeroplane back to London, having reported success, in my terms, or failure, in the terms of my brief. But I was hauled back. A humble apology came from the Russian Minister, and I think that the deal was eventually signed.

    I remember another such visit that I made to Czechoslovakia. There I managed to divert my salesmanship activities into a discussion of industrial relations in the factory that I visited. I was amazed to find that they had no strikes and that there had been no industrial relations problems of any sort. I probed and said that perhaps I could meet the unions. There was an embarrassed silence. Finally I was told that, since the trade unions were armed, perhaps it would not be a good idea for me to meet them because I might get the wrong impression—or the right impression, whichever way one looks at it.

    Why do we go on with these deals, and why are they shrouded in secrecy? How much has been drawn in credits by the Russians and the satellites, and how much of what I might call the special offer of the right hon. Member for Huyton (Sir H. Wilson) has been taken up? I have asked ECGD for these figures, but it says that it is not the custom to publish details of transactions with individual countries. Why not? I thought that we now had open government and that we believed that it was right for us to know everything that the Government did.

    The Minister owes us at least an explanation of exactly how much of our money has been lent or pledged to the satellite countries and to Russia in the way that my hon. Friend described. I hope he will also confirm that we are lending at 7 per cent. That is the figure that one hears on all sides, and I am sure that it is true. Certainly the Government should confirm that that is the figure of these long-term credits to the Communist bloc.

    I have frequently heard Ministers say that British industry desperately needs investment and that the private City markets have let it down by not providing adequate long-term capital. I do not believe that that is true, but what sort of a Government are they who are prepared to lend £1,200 million to Russia at 7 per cent. but are not prepared to make such terms available for their own home industry, which instead they castigate for not investing?

    If we could provide credits at 7 per cent. for British industry, hundreds of small and medium-size businesses could get off the ground and grow. Hundreds of large firms could expand. It would indeed be one of the keys to unlock the industrial deadlock in this country. But no—it has to go to Russia.

    There are several reasons why this is not only economically damaging but also bad for British industry. In the deal in which I was involved, part of the contract was that the English manufacturers of the plant would take a proportion of the product—in this case, I think, tractors. So the credit and the capital goes abroad, in return for which we get a large number of tractors dumped on the market, thus reducing the opportunities for British workers to make tractors and to remain employed. I do not know what the results of that deal were, but the very concept is obviously counter-productive to our own economic interests.

    I have with me a booklet published by the Institute for the Study of Conflict, which goes into what each of the varying countries has recently afforded in credit to the Communist bloc. It concludes that in 1975 the Soviet indebtedness to the West had reached $11,000 million, of which our share was probably about $2,000 million at that time. Since then it has grown a great deal. The effect is to remove both from this country and from other Western countries capital which could be made available for more fruitful purposes. It gives to the Russians technology which for some extraordinary reason they are totally incapable of inventing for themselves. Many of the things they buy from us are bought in order to take them to pieces to see how they are made.

    One of the extraordinary things is that the centrally-controlled and immensely disciplined economy which is the USSR has always had to buy its technology, mainly from the Americans but in many cases from us. I wonder whether we should go on helping them and financing them in this way. There is the example of an American space suit which was sold to the Russians for $180,000 although it had taken over $20 million in research and other costs to develop. This crazy policy of giving them everything we can as cheap as possible must surely be wrong.

    The argument of my hon. Friend the Member for Horsham and Crawley that this helps the Russians to build up their military potential is a strong one with which I would agree. Certainly the cheap loans, the manufacturing capacity and the ability to export the products through the contract to buy is highly beneficial to the Russian economy and highly inimical to our interests. My hon. Friend was quite right when he said that it allows the Russians to develop their war potential against us and is of considerable aid and comfort to them.

    It seems odd that successive British Governments have operated this policy. We should now like to know the full figures and the full facts. They should be brought out for public examination. I also find it odd that none of the Labour supporters of this policy have come today to cheer. I thought that we would be a small group on the Opposition Benches pressing this unpopular point of view upon the serried ranks opposite who believed that this was the right thing to do. Imagine, for instance, if a Conservative Government were to give undisclosed sums of credit at 7 per cent. to the Greek colonels, or perhaps to Ian Smith or to whatever bogy man is at present uppermost in Labour mythology. But when it comes to giving aid to the Russians, it is assumed that this is perfectly right and proper.

    The Minister will probably use the argument that this is the only way we can get the business. I have heard that argument often. It is a fallacious argument, because there comes a time when it is not worth getting the business. If some mug is prepared to offer long-term credit at cheap rates of interest to take part of the product of the factory that he is financing, that mug had better be given the job and pay the price of buying the work.

    In our parlous state, borrowing heavily from the IMF and short of surplus foreign exchange, it cannot be right that we should buy work under the sort of terms that my hon. Friend has outlined. There are many other ways for us to earn our living rather than giving away, at advantageous terms, that which has been made in this country and which has cost us to import the raw materials to make.

    5.45 p.m.

    I say to the Government in all sincerity that this is an opportunity for them to come clean about the facts. Perhaps the facts stated by my hon. Friend and myself are wrong. If the Minister wants the House to accept the policy followed by the right hon. Member for Huyton and by successive Governments before that of making these cheap loans to the Russians, we should have a full statement and all the information that the Department of Trade can give us. Perhaps independent business advisers should be asked to assess whether this is in the commercial interests of the United Kingdom. I am certain that the answer would be "No".

    I speak as one who has been engaged in trying to negotiate some of it. I can only tell the House that my conclusion, from that particular poignant and personal experience, was that what we were doing was wholly in the commercial interests of the Russians and that it was only the innate conservatism of the policy that we inherited which allowed it to be pursued. I hope that the Government will take this opportunity to agree that it has been a mistake.

    I am delighted to support my hon. Friends. A month ago I had a talk, which lasted a couple of hours, with the very distinguished Russian dissident recently exiled from the Soviet Union, Andrei Amalrik. I asked him what advice he would give us about our policies towards the Soviet Union. He replied " The first thing is to look at your policies for extending credit and selling technology to the Soviet Union. It looks to me, and to a lot of my friends, as if you are absolutely mad. You should realise that only if you use the weapons available to you in the economic sphere can you put pressure on the Soviet Union to liberalise its internal repressive régime. The Soviet Union is a command economy which involves the loss of liberty. Only when we force it to liberalise that economy can it become more efficient, and only if it is liberalised will there be more freedom for the individual."

    He regarded our policies as absolutely mad. If he had heard what my hon. Friend the Member for Horsham and Crawley (Mr. Hordern) said about the Russians having drawn part of their credit at 7 per cent. and deposited it back here at 14 per cent., he would have thought we were even madder still. I find it astonishing that successive Prime Ministers—the right hon. Member for Huyton (Sir H. Wilson) and later the present Prime Minister—have pressed this £950 million credit on the Russians. There is no doubt that that is what they have done.

    In March last year, when Mr. Gromyko was in this country, a statement was issued saying that the then Prime Minister had urged him to see that his Government took up the full £950 million. Just before last Christmas a report appeared in the Press that the present Prime Minister had urged the Russian Ambassador that his Government should make greater efforts to take up this amount of credit. That seems quite extraordinary when the balance of advantage is so clearly in favour of the Russians.

    I hope that when replying the Minister will tell us more details about the terms. My hon. Friend said that the rate of interest charged is 7 per cent. That recently appeared in the Press. We know that it cannot be more than 8 per cent. because it was stated by the Secretary of State for Trade in a Written Answer that
    "The terms and conditions on which support is made available for exports to the COMECON countries are broadly competitive with those available from our major competitors".—[Official Report, 12th July 1976; Vol. 915, c. 48.]
    The White Paper Command 5924, issued in February 1975, after the then Prime Minister had come back from Moscow, said that it was agreed that the United Kingdom would make every effort to provide these credits on the most favourable terms possible. That means in practice that it must be between 7 per cent. and 8 per cent. I should like confirmation of that from the Minister. I should also like to know from him whether it is in fact 7 per cent.

    My hon. Friends and I are drawing a distinction between the centrally-controlled economies, meaning, for my purposes, the Soviet Union and Eastern Europe, and those of the rest of the world. This is a valid distinction to draw. After all, the object of the Soviet Union, which it repeats weekly, is to destroy us, our economy and our way of life. Therefore, we are entitled to make sure that we do not help the Soviet Union to do this.

    I believe that this sort of credit is of great assistance to the Soviet Union in its objectives. It is a good bargain for Russia, for a number of reasons. The first is that Russia is now a deficit country. My hon. Friends have quoted figures. My hon. Friend the Member for Horsham and Crawley quoted the figure of a hard currency accumulated debt of $14 billion at present by the Soviet Union.

    The second reason why it is a good bargain for Russia is that Russia has a very inefficient economy. I am told that, as of April last year, the average industrial wage in the Soviet Union, making the conversion at the official rouble rate, was £12·50 a week, on top of which had to be added a social wage of £2·60 a week, which is a very small social wage compared with our own.

    I do not think that there are many contracts between the Government of the Soviet Union and the rest of the community there.

    We saw a couple of years ago the grain disaster in the Soviet Union when the grain harvest fell 70 million tons below target. It was about one-third down on the target. What is true of Soviet agriculture is true of Soviet industry as well.

    There are only a few sectors in which the Soviet Union is efficient. They are the military sector, the space programme and the winning of medals at the Olympic Games. They are efficient in the military sector because they are exposed to competition. Internally, they have a controlled economy and there is no competition. Hence the difference between the two sectors. In the space programme they have competition from the United States. The winning of Olympic gold medals is done for prestige purposes with the object of giving the rest of the world the impression that Russia is a wonderful place in which to live.

    If we export our technology to the Russians, we are helping them to get over this inefficiency. We are helping to compensate them—for example, with the Rolls-Royce deal for £100 million recently signed for compressor plans for the pipeline in the Soviet Union—for their inefficiency.

    Recently, I have been looking at a study made by the Stamford Research Institute in the United States, which is a highly respected body. It concerns the benefits to the Soviet Union of exports of technology from the West. The institute has made a calculation based on an economic model of the Soviet economy. Its conclusion is that in 1968 there was a sudden increase in exports of techno- logy from the West to the Soviet Union associated with the beginning of detente. That increase in exports continued over the next few years. In the five years between 1968 and 1973, what the institute described as "the detente effect" meant that Soviet industrial production increased by 33 per cent. as opposed to 28 per cent., which was the previous record. There we have a significant increase in Soviet industrial production.

    The institute estimates in the same study that the efficiency of installed machinery imported from the West is three to four times greater on average than that of Soviet-produced machinery, even after allowing for the additional costs of installation of imported machinery.

    There has been another interesting study by Philip Hanson, of the University of Birmingham, of the manufacture of mineral fertilisers in the Soviet Union. He shows that, over the period from 1960 to 1975, $2 billion worth of Western equipment and associated know-how imported into the Soviet Union was producing, by the mid–1970s, $4 billion worth of output per year. That is a very high rate of return on imported Western machinery. Not only are we improving the efficiency of that very creaky Soviet industry; we are also helping the Soviet Union to give the impression abroad of efficiency which is so appealing to undergraduates in Asia, Africa and this country as well.

    Conversely, this bargain is bad for us, for the reason that my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) mentioned. We are lending to the Soviet Union at 7 per cent. when our own manufacturers have to borrow at 14 per cent. or 15 per cent. It is bad for us because it enables the Soviet Union to build up a base from which to compete, very often at unfair prices, with our own industry.

    I was interested to learn that at a NATO meeting in December the then Secretary of State for Foreign Affairs, whose death I regret greatly, pointed out that there was a great danger when the West transferred resources to the Soviet Union that not only would it enable the Soviet Union to carry out its objectives in the Third World but it would also enable the Russians to sell goods back to us at unfair prices. Looking at the White Paper issued in February 1975, we see that it provides expressly for buy-back deals in such sectors as polyester fibres and knitted outerwear. I can imagine what will be thought of that arrangement in Yorkshire when knitted outerwear starts to come back from the Soviet Union at unfair prices.

    The next reason why this is a bad bargain for us is the cost to the taxpayer resulting from the interest rate differential. My hon. Friend the Member for Horsham and Crawley said that he thought it might even amount to half the cost of the goods over the period of an average credit. I do not find that my sums produce such a very large figure. My own calculations, which I mentioned to the Under-Secretary in Committee on another occasion last year, is about £250 million. That is based on a simple calculation of an interest rate differential of 4·5 per cent. over a mean period of five and a half years. assuming that the average length of credit is nine years. The fact that I have arrived at a lower figure than my hon. Friend is possibly due to the fact that I am assuming that the rate of interest would be paid only on the reducing balance, and I am not sure that my hon. Friend makes the same assumption.

    I should like the Under-Secretary to come back to this. Last year he said in Committee that my figure of £250 million was wildly out of the target area and that the total cost to the taxpayer of the interest rate differential could not amount to anything like that. I wonder whether there was a misunderstanding. Did he imagine that I was talking about the figure per annum? I am not talking about that. I am talking about the total interest rate subsidy for the total £950 million over the total length of the credit. I do not see how it can be very much less than £200 million, if not £250 million.

    6.0 p.m.

    The other reason why this is a bad bargain for us is that it helps the Soviet Union put more into arms. That means that the Soviet Union becomes more dangerous to us and that we have to put more into arms as well. The Government's argument is that the business men like it. Of course they love it; they get taxpayers' money. But it is up to the Government to set out the terms in the national interest. The Government should say that they do not intend to spend taxpayers' money in this way.

    I have seen quotations from the Prime Minister which make it clear that he believes that trade prevents war and that it we have more trade with the Russians we are less likely to have war with them. That is nonsense. One has only to look at history to see that the opposite is very often true and that war occurs between nations which have a great deal of trade with each other. Examples of this are Germany and the rest of Europe in 1939, Japan and the United States before 1941, and England and Spain in the sixteenth century. Therefore, the Government's argument does not stand up.

    The Government also say that if we do not extend these credits to the Soviet Union other countries will do so. We must get together with our allies and friends to work out more sensible arrangements. The Russians are openly contemptuous of the inability of the capitalist world to regulate competition between its own members with the result that the Soviet Unon is the beneficiary.

    Last year in Standing Committee I quoted something from Lenin. I shall quote it again because it is a remarkable quotation. Lenin said in a memorandum to Chicherin, who was the commissar for external affairs in 1921:
    that is, the capitalists—
    "will open up credits for us, which will serve us for the purpose of supporting Communist parties in other countries. They will supply us with the materials and technology which we lack and will restore our military industry, which we need for our future victorious attacks upon our suppliers. In other words, they will work hard in order to prepare their own suicide."
    That is what is happening. It is up to us to take the lead because this trend is more damaging to us because of our high interest rates. We should make it perfectly clear to the Russians that we will not be so stupid in the future and that we will stand up for ourselves.

    I hope that the House will accept that in making these remarks I am not being offensive or oppressive to the Russian people. I want to show respect and friendship to those people, but not to the regime directing them. I think that the attitude of my hon. Friends is right.

    When we talk about a subsidy to the Russian people, we should also consider the effect on the Soviet Union's banking interests. While we may be supporting Russian arms, we are also supporting the Russian banking industry and encouraging the Moscow Narodny Bank to build up its staff in London. It is worth noting that the last time a change was made in the staff of that bank was when Lord Home asked a large number of Russians to leave this country. One wonders to what extent the bank's needs have been built up at the expense of the British people.

    We are talking about a huge amount of money—an overall increase in the export credit guarantee buiness of 40 per cent. in 1976 compared with 26.6 per cent. in 1975. We are talking about limits of £40,000 million and £25,000 million in special drawing rights. That amount is astronomical and it deserves a packed Chamber to discuss it, not the thin attendance we have this afternoon, justifying Parkinson's law on the matter.

    I should like to quote from an article in the Financial Times of 18th February 1975. It said:
    "Export finance is a way of bribing goods into exports. It is a system of subsidising credit geared to exporting at the public expense, of inviting the customer to buy cheap money rather than to pay the going rate for the goods which meet his specifications for performance, delivery and price."
    We should bear that in mind before greatly increasing the growth of the export credit business. In fact, we should ponder on whether we should increase it all.

    That question was posed by the person who was responsible for running the Export Credits Guarantee Department and is now Chief Executive of the Stock Exchange, Mr. Robert Fell. I quote from a speech by Mr. Fell reported in the Financial Times:"
    Export credit has become the servant of industrial and political objectives, with the cost to the taxpayer and the country almost forgotten."
    He went on to say that he had found over the years two myths among British Ministers. He said:
    "The first is that there is a bonanza for British industry in Russia. The second is that there is a bonanza for British industry in Latin America. Some Ministers have been able to support both myths at the same time."
    He pointed out that the desire to give special terms to Russia had caused the "gentlemen's agreement" on export credit to falter at its most hopeful point He went on to say:
    "Export credit has reached a dangerous stage in the terms being offered, partly for the balance of payments of the donor country and partly from the point of view of the debt being assumed by the recipient country."
    We are entitled to ask why there should be this love affair between the Labour Government and East-West trade. Why should trade be given to Russia with love? The cost escalation cover is a straight subsidy from Government to exporter. We cannot continue to see export credit expand in this way, and we must look at ways of reducing it. Why should the Russians and the Eastern bloc countries be considered for the greatest-ever trade initiative that has been mounted in export credit? Why should we give support to the regimes of the Eastern bloc when there is such benefit from the difference between export credit terms of 7 and 8 per cent and a current borrowing rate of 15 per cent.? Why should the benefit of the interest differential go to the Russians and other Eastern bloc countries? There is a real need for disarmament of export credit.

    The countries to which we are referring here are those with centrally-planned economies—the Soviet Union, the German Democratic Republic, Poland, Czechoslovakia, Hungary, Romania, Bulgaria, Albania, North Vietnam, Mongolia, China and North Korea. My hon. Friends have spoken particularly of the Soviet Union, but if we are to trade with these countries we should consider directing that trade towards Eastern bloc countries other than the Russians. Why direct trade towards a country that is the linchpin and controller of the whole Eastern bloc? What has Russia to offer us, and why should we support that country instead of Namibia, Chile, Bangladesh, India and Turkey? Why should the Russians receive special treatment?

    I support the amendments that have been put forward. I consider that £4,000 million, and £2,500 million in special drawing rights—that is 10 per cent. of the total limits of the ECGD—is quite sufficient, and I urge the House to accept the amendments.

    I was most impressed by the powerful way in which my hon. Friend and neighbour the Member for Horsham and Crawley (Mr. Hordern) moved the amendment. Finance for Industry, the bank specifically formed in this country to provide medium-term finance for industry, issued its most recent loan stock at a rate of interest of 14 per cent. It is astonishing to compare that rate with the 7 per cent. which, we are told, the Russians are paying on this large credit which was pressed on them by the right hon. Member for Huyton (Sir H. Wilson). There could be no more immediate incentive for the recovery of industrial investment in this country than to be able to say to British manufacturers "We will now, through Finance for Industry and other institutions, make money available to you for industrial investment purposes at a rate of 7 per cent." The Russian interest rate must seem to any outsider an absurd paradox when domestic interest rates are so high. Finance for Industry must be lending to industry at a rate of 15 or 16 per cent. It is absurd that the interest rates to the domestic market should remain so high while at the same time we provide such a large loan on cheap credit to a major competitor—a nation that competes with us in the market for exports and which, as we have heard from my hon. Friends, is building up its military might in potential confrontation with ourselves.

    On the question of the interest rate on the credit line with Russia, I hope that the Minister will say what it is. He will remember that in this Chamber last week we took note of an ECGD document particularly on the guidelines for export credits in which the interest rate for rich countries—and I presume that Russia comes within that category—is stated to be a minimum of 7¾ per cent. for credits of between two and five years and 8 per cent. on credits of over five years.

    We took note of that document, and it is understood that Ministers of Finance in the EEC at their meeting on 14th March are likely to approve those guidelines. Can the Minister say whether the rate offered to Russia was below the guidelines to which we are now agreed, and, if so, whether it will be raised? It would be wrong at one and the same time to offer Russia credit at 7 per cent. and to say to no other industrialised nation that we shall make offers of export credit at below 7¾ per cent.

    My hon. Friend also touched on the question of bad debt exposure with the centrally-controlled economies. I believe that that is a most important point. In a centrally-controlled economy, if the system goes sour, all goes sour. That was the notable result recently in North Korea where too much credit had been accepted by the North Koreans. All the Western banks offering credit to North Korea found themselves in severe trouble in respect of North Korea. There had to be a moratorium in respect not only of debt repayment but also of interest. That is typical of a centrally-controlled economy, because if one pulls out one card from the pack the whole stack of cards will collapse.

    It would help the House to know what is the bad debt experience in ECGD in terms of the centrally-controlled economies and to be given the percentage of bad debts to liabilities and to know whether it is increasing or diminishing over the years.

    My hon. Friend the Member for Horsham and Crawley pointed to the extent to which the liabilities in centrally-controlled economies have grown as a percentage of ECGD totals from 10·3 per cent. of total liabilities in May 1974 to 12·4 per cent. in March 1976. This is clearly due to the fact that contracts with centrally-controlled economies tend to be credit contracts. We could expect this trend to continue to be upward unless there were a limit of 10 per cent. on total liabilities. I do not know whether that suggestion would be accepted by the Government. One can only hope that it will be.

    6.15 p.m.

    In this debate it is proper to ask whether the availability of guarantees from ECGD should be used as a means of exerting political pressure—and, indeed, of favouring certain export markets in preference to others. I think that this is a proper form of pressure to exert, because export credit has become a means above all of achieving political aims. We as free traders may regret this but it is a sad fact of life. Therefore, I support the amendment.

    I only regret that I cannot add to the amendment, because the amendments that I tabled with my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) were not selected. Therefore, I cannot add to the centrally-controlled economies the markets of Uganda and Cambodia. Cambodia is suffering under a brutal Communist regime, and I include Uganda for reasons I need hardly state. Uganda is under the rule of an extraordinary man—the Flashman of the African world, somebody who shows all the bullying characteristics of Flashman in his early days but who displays none of the enduring characteristics that Flashman showed afterwards.

    There are very few means available to this country of exerting pressure on Uganda at the present time. I think we should say that the ECGD should guarantee no further export contracts to Uganda for a period of a year. It would be in order to use that sort of pressure as a means of obtaining political change in Uganda. Furthermore, it could be vital for the Government to do this because Uganda must now be a bad credit risk. I hope the Minister will suggest to ECGD that it should think about putting such a moratorium on the guarantees to Uganda at present.

    I shall not take up the remarks of my hon. Friend the Member for Mid-Sussex (Mr. Renton) dealing with "Tom Brown's School Days".

    I rise briefly to support the amendment, which seeks to limit the credits available to centrally-controlled economies. I do not propose to elaborate on arguments which the House has already considered on this subject, but I wish to raise a matter that I suspect may be in the minds of the Minister and some of his colleagues who feel that the credits we supply to the Soviet Union and other centrally-controlled economies, bear some similarity to the credits we supply to the developing world. Indeed, it has been asked why we should be against credits on advantageous terms to the Soviets and their satellites and yet be in favour of credits to the developing world. The answer is simple. Most countries in the developing world are either non-committed and non-aligned or are members of the Commonwealth, and almost all of them pose no threat to Britain's national security.

    What worries many Opposition Members is the fact that the United Kingdom proposes to continue offering advantageous credits to people who are our potential enemies. In his technical and very able speech, my hon. Friend the Member for Gosport (Mr. Viggers) mentioned the desirability of curtailing the cost escalation insurance scheme.

    I wish to draw attention to a document which has recently been circulated to some hon. Members by the British Electrical and Allied Manufacturers Association which touches precisely this point. We read, on page 4 of that document:
    "While your Association strongly supports the need for immediate action to restore incentives, profitability and industrial confidence in the United Kingdom, there must still he adequate recognition of the need to stimulate the United Kingdom export effort if British industries are to obtain a larger share of the world markets."
    The document continues:
    "Government support schemes, such as aid to exports, need to be continually reviewed,"
    the Association will be glad that we are taking that line today—
    "but also they should be minded to match the degree of aid provided by the Governments of competing nations."
    The Association acknowledges that some improvements have been made to a number of ECGD guarantee schemes but suggests that further changes are necessary to provide a wider band of cover.

    It adds:
    "There is an acute need for streamlining and simplification of ECGD administrative processes."
    It says that the Government should give consideration to
    "a reduction in the minimum qualifying contract value for all demand band export and for buyer credit arrangements."
    It asserts baldly that the cost escalation insurance scheme should be retained and, where possible, improvements should be introduced. I wonder whether my hon. Friend the Member for Gosport would care to comment on that assertion of what policy should be.

    This is not a conspiracy, but I was warned by my hon. Friend that he proposed to raise that point. I agree with my good friends on BEAMA—whom I know in my capacity as the link between the electronics industry and the Tory Party—that as long as inflation rages away at the rate that has been allowed to operate over the last year or so cost escalation schemes are necessary. One would like inflation to be reduced and then to have disarmament in export credits—including the cost escalation schemes with other countries—brought in as soon as possible.

    I am entirely satisfied with that explanation. I thought that my hon. Friend did well at short notice. I wanted to get on record BEAMA's comments on this subject because they are a valuable contribution to the debate on the clause.

    What has been remarkable about this debate is the schizophrenia that exists among the Opposition in their attitude to Eastern bloc countries and their attitude to the injection of a political interest into the handling of ECGD matters. Several hon. Members have made clear that they believe that we should inject a new and essentially political direction into ECGD operations. I suggest that that is distinctly contrary to the other selected amendment in which the Opposition take the view that it is not in the national interest and is undesirable that there should be political implications. One cannot have it both ways.

    There is a particular contradiction in what has been said by some members of the Opposition. The hon. Member for Cirencester and Tewkesbury (Mr. Ridley) fulminated against any credit agreement with the USSR and indeed, if I understood him aright, said that credit agreements should be done away with. Yet the hon. Member for Horsham and Crawley (Mr. Hordern), in introducing the amendment, made clear that, so far from agreeing with his hon. Friend he took the opposite view. He said that there was a risk of a firm in his constituency losing business under the credit agreement as a result of the switch to foreign currency financing. I shall come back to this in a moment.

    The Minister is trying to create a distinction between my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) and myself when none exists. In two separate parts of my speech I was talking about the special arrangements made by the Government on dollar support for the ECGD and sterling. That was one point. The other point in my speech—with which my hon. Friend agreed—is that it is wrong to provide massive credit for a country that is building up armaments against us.

    The hon. Gentleman cannot escape so easily. The import of his remarks about the firm in his constituency—about which he has spoken to me—was that he is extremely anxious for good constituency reasons that the business should go ahead and that the advantages of the export agreement should be available. That is an argument than can be understood by every hon. Member, but it is contrary to the view that he was seeking to promulgate in the rest of his speech, as was the hon. Member for Cirencester and Tewkesbury, who waxed eloquent in saying that we should do away with the export agreement altogether, either because we are dealing specifically with the USSR—and the Opposition have well known views on that subject—or because the credit terms are too generous.

    The hon. Gentleman had better wait until I return to that point, as I shall later.

    The hon. Member for Horsham and Crawley also drew attention to the rise in volume of credit extended to the Eastern bloc. There certainly has been a substantial increase. It partly reflects the increase in trade with them, but, more particularly, as the hon. Member for Mid-Sussex (Mr. Renton) rightly said, it reflects to a large extent the kind of commodities that are being sold. Large capital goods contracts require longer credit than consumer goods. There are, of course, international terms for such trade and, to a large degree, the figures reflect that.

    I should also like to comment on what was said by the hon. Member for Gosport (Mr. Viggers). He made the point that is often heard that the growth of export credit in general is a bad thing. He quoted the new ceilings of commitments under the Bill. I cannot stress too often that 90 per cent. of British exports and 80 per cent. of business insured with ECGD are on a cash or short-term credit basis on which there is no public expenditure or interest rate support. One needs to bear that in mind.

    I turn to the concentration of the amendment on the Eastern bloc countries—the COMECON countries. The hon. Member for Horsham and Crawley drew attention to the risk factor involved in increased trading with them. He said that the cumulative indebtedness of the USSR was $14 billion. For all the COMECON countries, it is about $40 billion. I acknowledge the significance of those figures but point out that in the case of the non-oil less developed countries the figure for 1976—and 1976 figures were quoted for the COMECON countries—are about $112 billion.

    I fully appreciate that we must watch the development of this debt carefully but in looking at the risk factor specifically—and that is the point of the amendment—it would be wrong to concentrate exclusively on COMECON on these grounds, because the risks in terms of the increase in debt servicing ratios are greater in respect of other countries. Indeed, COMECON countries have been good payers.

    Of course, the hon. Member for Horsham and Crawley was referring to the future. Further commitments by Eastern bloc countries, as with other countries, are taken on only after an assessment has been made of the country's ability to service its debts. It is not considered that Eastern countries' present levels of borrowings from Western countries are likely to present insoluble repayment problems. It is significant that that is not the view of the Government only. The Euro-currency market, which is sometimes regarded as having a more independent view, also shares that view.

    The Eastern bloc countries' record of repayment has been impeccable and on strict commercial and underwriting terms—the grounds on which we operate—the extension of further credit is justified. But a careful watch has been kept and will be kept on the developing situation in the light of such figures as were quoted by the hon. Member for Horsham and Crawley. This will include close consultation and co-operation with Western colleagues. There is evidence that the Eastern European countries themselves are taking steps to reduce the level of indebtedness in their plans for the next five years.

    The Minister cannot say that the record of North Korea—one of the centrally controlled economies—has been impeccable. Far from it. North Korea has declared a moratorium on all debt and interest repayment for some time. How much ECGD credit was extended to North Korea, and how much has it lost?

    6.30 p.m.

    I was quoting figures for all the Eastern bloc countries. Those are the significant figures. I cannot quote figures for North Korea or for any other countries, either inside or outside Comecon, for reasons which have already been revealed to the House—for the sake of commercial confidentiality for the companies that are seeking to export to those countries. Nevertheless, wherever there is default on payment of debt or a moratorium, whether within COMECON or outside, this would be taken into account in considering the future extension of cover for the country concerned.

    It has been suggested that giving help to the USSR which is involved in the credit agreement that we are debating is aiding Soviet defence expenditure. It is not self-evident that East-West trade has made a difference to the degree of Soviet determination or ability to maintain its defence expenditure or its arms programme. That cannot be proved. In the case of the USSR or any other country, it is notional within its budget how the benefits of export credit are utilised. Access to Western technology may have created a degree of Soviet dependence on that access if progress in the civilian sector is to be maintained, and it could be argued that this is highly significant in terms of political leverage.

    Contrary to the suggestion of the hon. Member for Blackpool, South (Mr. Blaker), the general experience is that trade tends to encourage trade rather than war. He quoted some instances, but I suggest that they show only that trade rivalries may lead to war. Trade between opposed blocs tends, if anything, to ease international tension rather than the reverse. Indeed, the Soviet bloc's willingness to increase trade with the West is something that we ought to welcome as a form of closer integration of the world economies, with all the opportunities that it brings in terms of closer political understanding.

    The hon. Member for Blackpool, South also suggested that export credits had brought us in return only dumped goods. The hon. Gentleman mentioned polyester fibres. But I can tell him that we recently introduced anti-dumping provisions in respect of polyester fibre tops from Romania. If he says that these are not Russian goods, he might like to know that we have also achieved a satisfactory price undertaking from the Russians in respect of large dumper trucks.

    Can the Minister quote some examples to support his claim that trade is a barrier to war?

    That is the general experience. Historically, it has been found that where there are divisions between blocs and there is not the lubrication of trade to bring them closer, emnities and suspicions are likely to arise, both politically and economically. Such separation is likely to be inimical to the prospects of peace rather than the reverse.

    In that case, why are the Government bringing sanctions against Rhodesia? If the Minister wants a better relationship and to ease the situation, surely he should be trading with Rhodesia.

    The hon. Gentleman knows the answer to that. There was an illegal declaration of independence. The hon. Gentleman is trailing a red herring, and I shall not follow it.

    If we enforced the 10 per cent. ceiling suggested in the amendment, some contracts currently under negotiation would be lost. I wonder whether this is what the hon. Member for Horsham and Crawley intends since one of the firms that would suffer is the company in his constituency that is so eager to take advantage of the terms under the agreement.

    I am happy to answer that question. It presents me with no problem. We are concerned with the total level of trade under the present agreement. I am anxious that companies in my constituency should secure as large a proportion of it as possible, but I am happy, in the wider interests of our nation and the West as a whole, that we should seek to achieve a sensible limitation of the amount of credit extended to Russia. That would be the most satisfactory solution of all.

    The hon. Gentleman should talk to the management and work force of the firm in his constituency and ask whether they agree with what he has just said. I am convinced that they would not.

    Will the Minister answer a question that has been put to him in this debate and on many other occasions? Is it true that a trader seeking to do business with Eastern European countries can go to the ECGD and be told the rate of interest involved, yet the House is not allowed to know that rate? Is this not either absurd or very wrong?

    That is a remarkable question from the Opposition's spokesman on trade. The hon. Gentleman must realise that if the terms of the provision of credit and the interest rates were known generally, it would be more difficult for exporters to negotiate the best terms and would make it a great deal easier for buyers to bid up the terms in their own interests.

    If I exported capital goods to Russia, could I not go to the ECGD and ask what rates of interest would be involved, and would I not be given the answer? Why cannot Parliament be told that answer?

    I have already given the answer to that question. It is not in the interests of exporters in the hon. Gentleman's constituency or elsewhere that this information should be general knowledge. It is commercially confidential, not only in respect of Russia and the credit agreements that are the subject of this debate, but generally. It is in the interests of British exporters that this should be so. No disregard for Parliament is being shown, but it would not be in the national interest for these details to be disclosed.

    Is my hon. Friend aware that, if the Opposition are suggesting that all the information should be revealed in these cases, there are many things that I should like to know, particularly about the loans and grants made to companies in the private sector? I am always told that these are matters of commercial confidentiality, but if the Opposition are now asking that everything should be revealed, I am all for it.

    That is an interesting proposition, and I am sure that my hon. Friend will pursue it with the Opposition.

    I was asked about the switch to foreign currency financing and the effect that it would have on our credit agreements with the USSR. I explained in earlier debates on the Bill that the revised public expenditure and PESC figures make it necessary for there to be a significant switch from sterling financing to foreign currency financing. The active efforts that will be necessary from all parties to bring about this switch are being made. This will be true for Russia as for other countries.

    The new policy will be implemented across the board as flexibly as possible to minimise the risk of disrupting exports—I am sure that the hon. Member for Horsham and Crawley will be glad to hear that. The extent to which access to sterling financing for any particular contract or any particular overseas countries will be controlled will depend on the total levels of business being put to the ECGD and the extent of the switch to foreign currency financing which has taken place and is taking place. A significant switch will be necessary, and active steps will be needed to bring this about. But if hon. Members are concerned about particular contracts, I will be glad to discuss them with them if they would like to send me details.

    I was asked about the terms of the credit agreement. A great deal of heat but not very much light was generated. First, it is and always has been the case that these matters are commercially con- fidential, and for very good reasons. I can therefore neither confirm nor deny the 7 per cent. figure which has been widely bandied about in the debate.

    Why, then, is the premium that the ECGD quotes for particular countries not commercially confidential material as well? It is available. Why is it that the rate of interest on a bilateral negotiation between two Governments is a matter of commercial confidentiality, whereas it is possible to find out the premium quoted by the ECGD in any one of 100 markets? What is the distinction in terms of commercial confidentiality between these two cases?

    I repeat that neither in this case nor in others is it in the interests of British exporters that these things should be widely known in terms of the competition that they face internationally. We have made it clear that we were not initiating any special terms with the Russians, but were following the competition already set by France, Italy and Japan. It is not in Britain's interest that these things should be widely discussed.

    I was asked also what was the value of the credit agreement in terms of business that has already been contracted for under it. The total value of contracts placed under the credit agreement is £188 million, but substantial further items are advanced in negotiation under the credit agreement within the total of £950 million. The total is not £1,200 million as suggested by the hon. Member for Cirencester and Tewkesbury.

    At 31st March last year, the ECGD had at risk with centrally planned economies a total of £1,263 million, or 12 per cent. of its total amount at risk. The value of the credit agreement with the Russians cannot, as I have said, be quantified, for the very good reason that so many variables are involved that realistic calculations cannot he made, with the best will in the world.

    The key variables are, first, the size and nature of the contracts involved, and these affect the length of credit and the rate of interest. The return received by the banks providing the finance is also important. This is related to the levels of commercial interest rates, the level of the deposits of the financing banks and the level of their fixed-rate export lending, against the background of the refinancing arrangements which will apply through the life of the contract. All of these are subject to change over the life of the contract.

    But the Anglo-Russian credit agreement covers large single contracts for capital equipment. We do not normally obtain such contracts in highly industrialised countries. If one is to do net present value comparisons, the correct basis of comparison is with the terms that we and others normally give to capital contracts in the more credit-worthy developing countries. In this comparison, there is virtually no difference between the net present value of a typical contract under the Anglo-Russian credit agreement and a broadly similar contract elsewhere.

    6.45 p.m.

    I was, however, asked whether there had been drawings on the credit for purposes other than the purchase of British goods. I do not know what source of information the hon. Member for Horsham and Crawley had for that idea. Loan drawings under the credit agreement are not made to the Russians. They are made to pay the exporters in respect of work carried out. The payments are made direct to the exporters and not to buyers to invest in London for any other purpose.

    It was also suggested that goods were being sold to the Russians at roughly half the actual price on the basis of the difference, it was suggested, between 7 per cent. and 12 per cent. Without in any way conceding that either of these figures is correct, the simple answer is that the general point being made applies to all exports sold on credit. Obviously, it is better to sell on cash terms, but we cannot ignore what our competitors are doing; and credit is a fact of international life, although I agree with the hon. Member for Gosport (Mr. Viggers) that our aim should be to level up and harden the credit terms, interest rates, deposits, the time period, and so on, Some steps have been taken in this respect in the Washington agreement, under the general consensus, and most recently, under the EEC's draft directive.

    I mentioned the total figure for the ECGD of £40,000 million and also £25,000 million special drawing rights. The hon. Gentleman has pointed out that 90 per cent. of this is self-financing business, but the remaining 10 per cent. is an enormous amount. I am sure that the hon. Gentleman would not wish to leave the debate without telling us exactly what initiatives the Government are taking to harden up export credit internationally. I think that the EEC initiative, useful though it may be, is not enough at this time. We must see more action.

    I am not quite sure what the hon. Gentleman is suggesting. The Government are doing all they can in this respect. It is our hope that, if the Council of Finance Ministers agrees at its meeting on 14th March on the terms of the Community draft directive, it will be the basis for hardening the terms further in future and for extending the coverage of the existing consensus. All the main exporting countries are members of it. But a number, particularly the so-called super-competitive developing countries, are outside it and ought to be brought within it. It is our intention to do all we can to extend it in that way.

    The hon. Member for Mid-Sussex asked me what the effect of the Community draft directive would be on the terms of the credit agreement with the Russians. There is a provision that preexisting credit agreements are not affected by the new agreement, but nevertheless I assure the hon. Gentleman that there is a provision for a review of the terms of the credit agreement with Russia later this year, and we will be taking into account international developments such as those I have just mentioned.

    The hon. Member for Cirencester and Tewkesbury suggested in particular that we were not sufficiently taking into account the fact that we were giving assistance technologically as well as in credit to Russia. The hon. Gentleman will know, from his own late tenure at the Department of Trade and Industry, that COCOM covers matters of technology as well as military hardware, and that full care is taken to ensure that advanced technology which would be of interest to the Russians or to other Eastern bloc countries is not handed on. There is a firmly-held international agreement to that effect.

    I return more specifically to the proposed amendment, on the question of the risk of indebtedness. The ECGD, when issuing guarantees, intends to operate at no net cost to public funds. Business is underwritten on the basis of credit insurance judgments of the political, economic and buyer risks involved. Ceilings are placed on Section 1 commitments precisely in accordance with that.

    I believe therefore that it would he wrong for the House to reduce artificially and arbitrarily the limit within the total ECGD commitment for any particular bloc of countries, for political or any other reasons, when the full details of the country to which export credit is being extended are very carefully assessed in economic and commercial underwriting terms.

    I hope that I have dealt with all the points raised. I conclude by saying that it would be unwise to proceed with the amendment.

    When my hon. Friend the Member for Horsham and Crawley (Mr. Hordern) introduced the debate, he pointed out that the proportion of our trade with Eastern bloc countries had risen very substantially in the two years following 1974 and that in money terms the sums outstanding in March 1976 had almost doubled compared with the figures of less than two years earlier. He also pointed out that it is estimated that the Eastern bloc countries now owe the West a total of $45 billion.

    We had variants of this debate in Committee, and again today we have had a very full and interesting debate on the subject. We on this side argued—and no one has argued more forcibly than my hon. Friend the Member for Blackpool, South (Mr. Blaker)—that the West is engaged on a slightly mad race to give the Eastern bloc countries credit which has implictions that go far beyond the commercial. That is the point on which we have failed to carry the Minister with us.

    The Minister demonstrated again today in his closing speech that he has not understood the major point that we have been trying to make. His answer is always the same. He argued that if we did not do the business someone else would; therefore, we must not put British exporters at a disadvantage, and so we must give the Russians and other Eastern bloc countries cheap credit.

    The Minister was extremely coy, and I confess to thinking that he makes problems for himself in his coyness about the interest rate for the Russians. We are getting nearer to knowing it. We know that it is approaching the limits agreed in the EEC guidelines, and later this year there is every chance that it will be brought within those guidelines. We are getting near to the answer. We can only assume that the credit rate was so absurdly low and generous that the Minister was reluctant to admit it, hence the convolutions into which he gets himself.

    We on this side have presented an argument which I find compelling and which the Minister seems totally incapable of understanding. He should consider our own domestic situation. He and his colleagues spend hours arguing to the House that we must cut Government spending, including defence expenditure, so that we can release resources for exports and industry. The Prime Minister argues almost hourly that we must cut expenditure so that more money will be available to industry and to finance exports. He argues that we must cut our defence expenditure—and the Government have cut it—because we cannot afford to maintain a sensible level of defence expenditure and at the same time finance trade and modernise our industry.

    My hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) and others have been saying today that we are giving the Eastern bloc countries an opportunity that we are denying ourselves. We are saying to the Eastern bloc countries "You can continue to expand your defence expenditure and maintain and expand your defences, and we shall enable you at the same time, by cheap credit, to finance your industrial development". We are actually making sure that the Eastern bloc countries have an option that our own policies are denying to us, yet Ministers come to the House day after day and argue that we have to continue to do this.

    We are not saying that the Government should put British exporters at a disadvantage. What we are saying is much more significant. We believe that it is time for the OECD countries to get together and realise the long-term implications of the mad policy they are pursuing. We urge the Government to call the OECD countries together and ask whether it is really in our interests to give the Russians an option that we are denying ourselves. That is the point we have been trying to make in the hours of debate that we have had on this subject.

    My hon. Friend the Member for Blackpool, South talked about the amazement of Mr. Amalrik, Mr. Solzhenitsyn and other Russian dissidents living in the West at the fact that the West does not seem to understand the dangerous situation that it is creating. It is allowing its industrial competitors to finance their development on the cheap and is enabling the Eastern bloc countries, who by no stretch of the imagination are friends of ours, to continue to finance their gigantic aggressive war machines.

    We are saying in our amendment—we do not intend to press it to a vote—that there is a problem here which goes far beyond the short-term trade implications, which seem to be all that the Government are capable of thinking of. We urge the Government, before it is to late, to take the initiative with the OECD counries and end this mad credit race.

    Amendment negatived.

    I beg to move Amendment No. 3, in page 3, line 30, at end insert—

    '(4) In section 2 of the Export Guarantees Act 1975, the following subsection shall be substituted for subsection (2):—
    "(2) For either of the purposes mentioned in subsection (1) above, the Secretary of State may. after consultation with the Export Guarantees Advisory Council and with the consent of the Treasury, make arrangements for facilitating, in cases in which it appears to him expedient in the national interest so to do, the payment of sums payable under contracts with persons carrying on business in the United Kingdom.".'
    It is no secret that when the Bill becomes law the ECGD will have a huge range of credit facilities at its disposal and very substantial sums of credit available to it. It is also no secret that, before the Government can enter into major business under Section 1, the Department and Ministers have to take the advice of an advisory board of experts who look at the commercial implications of the proposed business.

    In this amendment we are arguing that in the Section 2 business, the so-called national interest business, there should be a similar process of consultation. At the moment there is no need whatsoever for the Secretary of State to take advice from anyone except the Treasury in deciding whether ECGD should undertake business under Section 2. The Minister can take decisions without consulting Parliament or any outside agency. I know that this is a traditional complaint of Opposition trade spokesmen, and that every spokesman in such debates in recent years has highlighted this problem and complained about it.

    Today we are arguing that there are three new features that call for changes in the arrangements. The first is the size of the total national interest business. It is growing fast and it is a considerable sum. The second is the size of the individual contracts and deals which are done under Section 2. The biggest deal so far written by ECGD is for £212 million, a very large sum. Only a few years ago that would have been almost inconceivable, even for ECGD.

    The third reason why we believe that steps should be taken is that there have been examples recently of politically motivated decisions, and the House has had one or two of those in recent years which give it cause at least for concern and make most of us feel that it is time that the Secretary of State had to take the advice of outside experts, as he does in almost every field for which he is responsible, before he underwrites Section 2 business.

    7.0 p.m.

    In Committee we pointed as an example to a transaction which cause us great concern involving the Meriden Co-operative. Two or three years ago the right hon. Member for Bristol, South-East (Mr. Benn), as Secretary of State for Industry, made it clear to Mr. Dennis Poore, who was chairman and managing director of Norton Villiers Triumph, that unless he, through his company, agreed to distribute motor cycles made by the Meriden Co-operative, the Secretary of State would refuse Mr. Poore's company its export credit facilities. Whatever else one says about the Secretary of State for Energy, one has to confess that he is absolutely open in his actions. He made no secret of his motives. He said he knew that Mr. Poore did not agree with him about his vision of the future of the British motor cycle industry but that unless he accepted the right hon. Gentleman's vision of it Mr. Poore would not be allowed to have the export credit which was absolutely vital to his other business.

    The ECGD facility was used by the then Secretary of State as a lever to make Mr. Poore do something he did not want to do, to make him take a decision which he regarded as strictly uncommercial. Mr. Poore did not believe that there was room in this country for three motor cycle factories. By agreeing to be responsible for the sales of the Meriden Co-operative motor cycles, he ensured that there were still three motor cycle factories, which he believed was one too many.

    The net result is that Mr. Poore's two factories are in a very bad state. His company is almost out of the motor cycle industry, and that industry in Britain has been effectively killed, or at least damaged beyond repair. Mr. Poore was forced to do something uncommercial by a politically motivated Secretary of State, and the results have been disastrous. The lever which was used to promote this totally uncommercial and disastrous decision was the ECGD facility.

    A month ago the present Secretary of State announced a bizarre bailing out for the Meriden Co-operative. He announced that Sir Arnold Weinstock, at a fairly advanced age, had decided to become a motor cyclist, and since Sir Arnold never does anything by half he decided to buy £1 million worth of motor cycles from the Meriden Co-operative. Sir Arnold is answerable to his shareholders in GEC for that decision. I am almost tempted to buy a share in the company and go along to the annual general meeting and ask Sir Arnold to explain that decision. He would have to do so if I asked him. Even Sir Arnold is answerable to his shareholders.

    The Secretary of State also announced that under the Industry Act £500,000 would be made available to the co-operative so that it could purchase the distribution facilities of NVT. Again, Parliament had to be consulted about that decision and an order will have to be laid before the House and will have to be debated before that money can be made available to the co-operative.

    A third commitment in the bailing out was that the £6 million ECGD facility which had previously been given to NVT would be transferred to the Meriden Co-operative. We suggest that this is a hopelessly uncommercial political decision. In case the Minister says that we were arguing for political decisions in the last debate and against them in this one, let me explain the point to him.

    We never had any commercial doubts about the ECGD facilities with the Eastern bloc countries. My hon. Friend the Member for Mid-Sussex (Mr. Renton) pointed out one centrally-controlled economy which has welshed on its debts, but I would not suggest that there was any likelihood of the COMECON countries doing that. Commercially the decision is quite reasonable, but politically and strategically it has enormous implications for the West.

    We say also that the two decisions that were taken in connection with the cooperative were purely politically-motivated and could have no commercial justification. The Meriden Co-operative has been a consistent loss-maker and has a huge accumulated loss on its balance sheet. It is solvent only because the Government have agreed not to ask for nearly £5 million of their money back and have agreed to defer any payment of that money.

    The co-operative has a record of unremitting loss. I agree that, thanks to enormous efforts by the work force—I pay credit to them for this—the company is now probably just about breaking even. But it has been a consistent loss-maker, and by commercial standards its balance sheet must look appalling. It would certainly have no chance of getting the facility which it has were it not the co-operative and were the decision not politically-motivated. If I took 100 private companies with such balance sheets to ECGD, it simply would not entertain the idea of doing business with them.

    Yesterday, in a debate on the Consolidated Fund (No. 2) Bill, we discussed the problems arising in development areas from the closure of the Plessey factories. In a slightly ominous intervention, one Labour Member asked what the Minister's attitude would be if one of the factories became a workers' cooperative. Immediately my heart sank and I thought "Oh dear, some more strictly-less-than-commercial business is looming on the skyline for ECGD."

    I have used the Meriden Co-operative's experiences with ECGD to show how it can be pressured by politically-motivated Ministers into taking uncommercial decisions which are unfair to the private sector, which would have no hope of obtaining similar facilities. We believe that because of the increase in the volume of ECGD business, because of the increased size of individual deals done by ECGD and because of the rather ominous examples that I have quoted of politically-motivated uncommercial decisions, it is time that in its Section 2 business ECGD had to take the advice of independent outside experts. That is the motive behind our amendment.

    I support my hon. Friend the Member for Hertfordshire, South (Mr. Parkinson) in this important amendment. I am horrified at the example he gave of the way in which the application of the Secretary of State's judgment can be used in favour of companies which should not have finance supplied to them by the Department. We are talking about the Section 2 business. If we are to get this into perspective we must look at Section 1, which allows the Secretary of State to provide money for the purposes of encouraging trade with other countries.

    When I turn to Section 2(2), I see that the Secretary of State may also, with the consent of Parliament, make arrangements for giving guarantees
    "for facilitating, in cases in which it appears to him expedient in the national interest so to do".
    It is obvious that Section 2 business will not fall within Section 1. Under Section 2 the Secretary of State may apply his own subjective judgment if he thinks that something is in the national interest, but if it is for the purpose of encouraging trade with other countries the matter will be dealt with under Section 1. Section 2 allows the Secretary of State to provide money in the national interest, but it must be for business that is not for the purpose of encouraging trade with other countries.

    The volume of business under Section 2 has expanded from £2,600 million in January 1975 to an estimated £4,900 million in January 1977. The volume has about doubled in a two-year period, and the amounts involved are extremely large.

    What disturbs me and my hon. Friends is that the judgment which is applied to Section 2 business is the subjective judgment of the Secretary of State for Trade. It should be possible to apply another criterion. We suggest that it should be comparable to the criterion suggested in the Industry Act in which a panel of judges was set up to act as a check on the Secretary of State's subjective judgment.

    The former chief of the Export Credits Guarantee Department, Mr. Robert Fell, has referred to export credit guarantees being clearly ahead of Government expenditure and beyond parliamentary control. The Minister indicated—and it is acceptable—that it is not possible for Parliament to control the minutiae of export credit guarantees even when they are large. It is not possible for Parliament to vet or monitor them all. However, there should be some control other than parliamentary control. I respect the ability of those who have experience in industrial and commercial matters to apply proper judgments to commercial and exporting decisions.

    I should like to see an export credit advisory board set up to deal with the subjective judgment of the Secretary of State under Section 2. I would not expect such a board to monitor but I would expect it to deal with appropriate points of principle and with the larger decisions that are made. I would also expect it to give advice, which it would publish, on applications for export credit in such cases as the Meriden Co-operative, for instance.

    As someone who must refer to himself as a politician, I have to admit that I lack respect for the judgment of politicians. The pressures upon them are intense. The pressures when they involve employment in different areas can be so heavy that politicians, who are answerable to the House of Commons, cannot say the most difficult thing—that they will take no action. The pressures are so intense that politicians are often forced into bad decisions.

    I should like the politicians to be able to refer to an export credit advisory board, take its advice and stand up in the House to defy the pressures. They would then be able to say that a panel of experts had advised them against a course of action that would otherwise be forced upon them. I should like the Minister to feel that he could tell the House that he was taking such advice.

    Perhaps it is not right for us to seek increased parliamentary control over the export credit business, but control of some sort should be exercised over Section 2 business. Ideally, we should be able to apply business judgments to Section 2 criteria by taking the advice of a panel such as that suggested in the amendment. I support the amendment.

    7.15 p.m.

    One of the more engaging things about the hon. Member for Hertfordshire, South (Mr. Parkinson) is his ability to make fluent speeches that have little to do with the amendment under discussion. In the previous debate I resisted the temptation to interrupt him to point out that he was saying that the Opposition's aim was to raise in OECD ECGD credit terms, whereas his amendment said nothing of the kind. It was aimed at putting an arbitrary ceiling on credit to COMECON countries. The hon. Member has done the same thing again. The amendment concerns Section 2(2) of the Act, which has a highly specific use and to which I shall come later. That section has never been used in practice.

    More than half the hon. Member's speech was about Meriden, which in terms of Section 2 business amounted to £6 million out of a total section 2 cover of £4,000 million.

    The section has a potential use but has never been applied. Assurances have been given to the House by my right hon. and hon. Friends in the past that the power to match unusual credit terms will be used sparingly and only where it is clearly in the national interest. The United Kingdom is opposed to the principle of credit mixte arrangement because they disturb commercial credit terms. They blur the distinction between commercial credit and aid and tend to attract aid away from the countries that most need it. We have not, however, been successful in persuading other countries to cease making available such terms in the past and it has therefore remained a necessary weapon.

    The other use of the power is, as my right hon. Friend the Secretary of State said on 15th December, to make arrangements to enable loans to be made in connection with the foreign currency financing of export credit. This is a contingency provision. We hope that the market will be able and willing to provide the necessary finance for this business Those are the purposes for which Section 2 is designed. They are for specific purposes.

    The concept of the national interest is not new. It has been used by successive Governments in different measures. For example, it was used by the last Conservative Government in their Industrial Relations Act.

    Consultation with an advisory council or an export credit guarantees board, as the hon. Member for Gosport (Mr Viggers) suggested, would not be favoured by the Export Guarantees Advisory Council itself. I argue that it is unnecessary on the basis on which powers are exercised. It is not for the council to judge what is in the national interest. That is not its rôle. Judging what is in the national interest is clearly a function of the Government, and I hope that that will be accepted. The Government are the institution that is able to judge an issue of national interest. although I am aware that there must be criteria by which they do so.

    The use of Section 2—the national interest section—is misunderstood. I do not blame the hon. Member for Hertfordshire, South for the emphasis he put on Meriden, but he got the issue out of perspective. I shall spell out why. Section 2 really constitutes what is conservatively construed as non-commercial risk insurance rather than being involved with Meriden-type insurance cases. These are extremely few and far between. One can count on the fingers of one hand the number of such cases that have been given Section 2 cover over the last decade. As I say, the amount in the Meriden case is infinitesimal as compared with the total commitments under Section 2. These are the criteria that are used.

    I am slightly puzzled by what the Minister is saying. I am not reading from the departmental brief but looking at the accounts of the Exports Credits Guarantee Department, in which it is said that the remaining 5 per cent. of ECGD's export credit insurance business, for instance, is underwritten in the national interest under Section 2 of the Act. I do not quite understand what the Minister is saying. Is he saying that the Section 2 business is a tiny element or that it is a considerable element? This is a point of information.

    I was coming on to a clarification of Section 2. I was saying that the "political" kind of case that the hon. Gentleman was citing, illustrating his case with Meriden, is exceedingly rare. I was saying that Meriden, with its total of £6 million, is a minute proportion of the £4,000 million which is the total Section 2 commitment at present. Section 2 is quite considerable, but it is not to be construed using the example of Meriden.

    The point I was making is that the hon. Gentleman gave much of his speech to talking of Meriden, which is not indicative of Section 2 at all. Perhaps I could spell out the criteria used for Section 2 commitments. Business taken under Section 2 can include very sound business which is not taken under Section 1 simply because in commercial terms it does not offer an adequate spread of risk, or because of the size of the contract or the horizon of risk involved—for example, where there may be a credit period of seven to 10 years.

    Of course, this explains precisely why the hon. Member rightly drew attention to the fact that very large contracts are found under Section 2. He cited one of £212 million. They are, of course, par excellence the buyer credit contracts, and most of these are very large. They are relatively few out of the total number of contracts with which ECGD deals. They are very large items that form the great bulk under Section 2.

    New facilities—these are further criteria that I am giving that lead to inclusion within the Section 2 category—are also operated under Section 2 until experience has been gained of them. Thus, in the early days of the scheme all buyer credits were taken under Section 2, but many are now taken under Section 1. That does not indicate that they have suddenly become less political. Of course, it would be quite wrong to construe them in that way. At present all performance bond guarantees are taken under Section 2, but the advisory council will no doubt be reviewing the position in due course.

    I think that this explains why Section 2 is so large. It also explains why it would be quite wrong to see it as indicating in any way at all the extent to which the Government were using political criteria for the provision of export credit cover. However, where this is thought to be the case, in the example of Meriden that the hon. Gentleman cited, for example, it was precisely because it was exceptional that a full statement was made to the House, first by my right hon. Friend who is now Secretary of State for Energy and then again, on the transfer of cover from NVT to the Meriden Cooperative, by my right hon. Friend the Secretary of State for Industry.

    I conclude by saying that obviously it is not the intention that ECGD should underwrite—to use the phrase coined by my right hon. Friend the Member for Huyton (Sir H. Wilson) in 1949, I think, when he stood at the Dispatch Box as President of the Board of Trade—unduly hazardous or quite crazy risks. I think that that is a striking phrase and quite a good illustrative phrase.

    In covering business under Section 2 in the national interest, ECGD has access to the advice of other Departments and, of course, to outside sources, as may be necessary, and it operates such credit insurance at no net cost to public funds. The very fact that that goal is very substantially met, indicates the constraints in the use of Section 2 just as much as in the case of Section 1.

    I hope, therefore, on the basis of these arguments, that the hon. Gentleman will withdraw the amendment.

    The Minister said that I had an engaging ability to make very strong speeches which had nothing to do with the amendment. I should like to reciprocate the compliment and say that he has an engaging ability to misunderstand the argument that I am putting forward. His answers are very often to points that I have not made and are very rarely to those that I have made.

    I gave three reasons why I believe that the amendment made sense: the volume of business and the fact that it was growing so rapidly, the size of the individual business that we being done under Section 2, and the political flavour in one or two of the recent decisions, particularly those affecting Merdian.

    The Minister chose to answer only the last of those points. He seemed to suggest that that was the only argument I had used. He said himself that quite often now business which was previously written under Section 2 is transferred to Section 1 and, therefore, comes under the aegis of the Export Credits Advisory Board. He seems to imply, therefore, that the business is almost interchangeaable, but he says that we should have a board giving advice in one area and that the same board should not give advice in another area, although the business could have been taken under either heading. That is not consistent and it is certainly unconvincing.

    Mr. Meacher