General Elections (Limitation Of Expenses)

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3.55 p.m.

I beg to move,

That leave be given to bring in a Bill to limit expenditure by political parties and other organisations connected with general elections; to provide for the publication of income and expenditure of such organisations incurred in connection with general elections; and for connected purposes.

Most of the discussion about the finances of political parties in recent years has been concerned with their incomes. That is understandable in some respects, and the Houghton Report showed huge discrepancies in the incomes of political parties. In 1975 the income of the Conservative Party was about £6,290,000. That of the Labour Party was around £2,950,000, while that of the Liberals was about £863,000. It is right and proper that we should be concerned about the incomes of political parties, but in terms of the possible influence on voters expenditure is more important than income.

If we examine the expenditure of the political parties we find some strange anomalies in existing controls, particularly at General Elections. One anomaly, to which I particularly wish to draw the attention of the House, exists between the expenditure that can be made by candidates in their constituencies and the expenditure of the national party organisations.

It has long been accepted—for nearly 100 years—since the Corrupt and Illegal Practices Prevention Act of 1883—that there should be strict control over the expenditure by candidates in individual constituencies. As far as I know, nobody seriously objects to that. The need for that is self-evident. One cannot have a fair election in a constituency unless there are controls over the candidates' expenditure. At the same time, although we control local expenditure in constituencies, there is no control whatsoever over the amount that the parties and their supporting organisations can spend at a national level during a General Election campaign. This leads to all sorts of ludicrous anomalies.

In my own constituency it would mean, for example, that if an advertisement supporting the Conservative Party appeared in the Tamworth Herald, it might be liable for declaration by the Tory candidate as part of his campaign to be elected in my constituency, because the Tamworth Herald circulates in that area. If, on the other hand, the advertisement appeared in the Daily Express or the Daily Mail, urging people to Conservative as part of that party's campaign, it would not be subject to any kind of control.

I can never understand why the Tory Party bothers to advertise in the Daily Express or the Daily Mail. It seems to me that the Tories get more than they could reasonably expect free. However, this is considered to be a normal part of a national election campaign. It is a serious anomaly about which the House should be concerned.

Another anomaly concerns the support and fringe organisations that back political parties. I am thinking here particularly of organisations such as Aims of Industry, which in 1974 had an income of £607,000, most of which was used for promoting the Tory cause in two General Elections. If this were done at a local level, if an organisation in a particular constituency threw large sums of money behind a particular candidate in the hope of getting him elected, that would obviously and unarguably be part of the candidate's election expenditure and be subject to controls. However, there is no control at national level over the expenditure that organisations such as Aims of Industry may use on behalf of particular political parties.

There are only two consistent positions that hon. Members can adopt in relation to the Bill. One of them is my view, which is that there should be controls both locally and nationally. The other attitude is that there should be no controls whatsoever. I should not like to hear anyone defending that point of view, although it is at least consistent.

The present position, whereby there are controls over candidates locally but no controls nationally, is absurd—particularly as, although some of us like to think a lot of our capacities at certain times, the outcome of a General Election is now universally recognised as being far more determined by the national expenditure and national campaign of the parties than by individual campaigns in individual constituencies. We may regret that, but it is a fact. The swing is fairly consistent throughout the country and we know which seats are vulnerable if there is a swing to one party or the other.

I hope that the principle of controlling national expenditure is one that commends itself to the House. The only problem is how to do it. My proposal has at least the virtue of simplicity. At present, if a party puts a candidate in all 635 constituencies, the total allowable for all candidates to spend, assuming that each spends the maximum, is about £1 million. My proposal is that the amount that parties may spend nationally should be half that amount, so that the figure would be about £500,000.

That figure has a number of virtues. It would not be that different from what the parties have spent in recent elections. In October 1974 the Tories spent about £600,000 and the Labour Party a little less than £500,000. It also has the strong advantage of being linked to local expenditure and would therefore automatically change when we changed local expenditure.

The strongest advantage of all is that by setting it at a fairly low level we should prevent our General Elections being involved in the sort of ballyhoo and obscene expenditure that is associated with, for example, American presidential elections. I hope that everyone would wish our election expenditure to be limited in this way. The Bill would also provide for the proper publication and auditing of party accounts—we have to do this in our constituencies—and would mean that expenditure by fringe organisations supporting political parties would be included in the party accounts and subject to the maximum figure of about £500,000.

This is the main concern of the Bill, but there is one other proposal that, although it is related, could be considered separately. I wish to see the deposit that candidates have to pay at General Elections increased from £150. That figure was set when deposits were first introduced in 1918 and it has not been changed since.

There are only two positions that can be adopted on this issue. Either we get rid of the deposit or we raise it to a more realistic level—we can argue about the precise amount—bearing in mind the value of money now compared with 1918. I am aware of the suggestion that increasing the deposit would penalise certain sorts of candidates who might not have the requisite funds and some of the smaller parties, but £150 is extremely good value as a deposit for a General Election campaign.

A candidate gets a lot of benefits for his £150. There are television and radio coverage and free postage. I am surprised that commercial organisations have not taken advantage of this before. There are 100,000 electors in my constituency and the £150 deposit means that a candidate can get a delivery to every elector for 0·15p each. That is pretty good business for any organisation backing a particular cause. A candidate also has the great advantage of receiving free copies of the electoral register, for which many commercial organisations would be grateful. It is time that the deposit was increased and the proposals in the Bill would make for fairer elections in this country and would help the democratic process.

Question put and agreed to.

Bill ordered to be brought in by Mr. Bruce Grocott, Mr. Ivor Clemitson, Mr. Joseph Dean, Mr. Geoff Edge, Mr. John Garrett, Mr. Bruce George, Mr. Kevin McNamara, Mr. J. W. Rooker, Mr. Terry Walker, Mr. Ken Weetch and Mr. David Young.

Mr. Bruce Grocott accordingly presented a Bill to limit expenditure by political parties and other organisations connected with general elections; to provide for the publication of income and expenditure of such organisations incurred in connection with general elections; and for connected purposes: And the same was read the First time; and ordered to be read a Second time upon Friday 15th July and to be printed. [Bill 120.]

Orders Of The Day

Local Authorities (Restoration Of Works Powers) Bill

Order for Second Reading read.

On a point of order, Mr. Speaker. I wish to draw your attention to the fact that the Explanatory and Financial Memorandum says that the Bill will not have any additional financial or manpower effect on local authorities and that no additional Exchequer expenditure is involved. It clearly will have an additional manpower effect on local authorities, because additional men will be employed to deal with the additional works outside the boundaries of the authorities concerned.

It will almost certainly result in additional financial effects as well, because it is well known that operations of this sort result in considerable losses being made and, in due course, they will attract rate support grant. Consequently, there will also be considerable Exchequer expenditure as a result of the Bill.

I know that the memorandum has no statutory force, but, as there will be additional Exchequer expenditure, it is unreasonable that there should not be a Money Resolution on the Order Paper, and it would not be in accordance with precedents if the Bill proceeded until there is such a Money Resolution. No such resolution appears on the Order Paper today and no preparations have been made for one.

I seek your guidance, Mr. Speaker, as to the statutory effect of the words on the front of the Bill. It is clear that they are thoroughly misleading, and it is wrong that a Bill should be presented with the claim that there will be no manpower and financial effects when clearly there will be. I know that these words have no statutory force, but the House should be protected from straightforward misrepresentation of this sort. The House should not proceed to give a Second Reading to the Bill until these matters are put right.

I am obliged to the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) for the way in which he put his point of order. It is similar to one that we had a few weeks ago, and I ruled then that a Money Resolution was not necessary on Second Reading. This is a matter for the Chairman of Committees when the Bill goes to Committee, and the matter can properly be raised at that time.

I am not responsible for the words on the front of the Bill, but those who are will have heard what the hon. Gentleman has said.

4.8 p.m.

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

The purpose of the Bill is to restore to 25 district councils in England and Wales power to do certain kinds of work by direct labour. When the Local Government Act 1972 was passed, these authorities, quite by accident, were prevented from doing work within their boundaries on functions which were transferred to county authorities—mainly highways and education. When the problem was discovered, Statutory Instruments were made temporarily restoring the works powers of these authorities under Section 254 of the Local Government Act 1972.

The temporary orders expired on 31st March this year and none of the 25 authorities may continue to carry out work that it had previously been empowered to do. The only exception is the completion of agreements signed before that date.

The substantive clause of the Bill simply makes permanent the temporary orders. It would make no sense to disrupt working arrangements.

I believe that the whole House will recognise that this is a necessary and sensible measure. Unless it is enacted speedily, there might be unnecessary redundancies in these organisations, and their efficiency could be impaired.

While the Bill is essential, it is far from being a comprehensive measure of the kind needed to produce the proper framework within which direct labour organisations should operate. The Government had intended to introduce such a measure. The parliamentary situation prevented our doing it, as hon. Members know, and gave rise to the statement from my right hon. Friend the Prime Minister on 23rd March in which he undertook on behalf of the Government that

"The Local Authorities (Works) Bill will be confined to the provisions that are required to protect the existing activities of direct labour organisations, in the light of local government reorganisation"—[Official Report, 23rd March 1977; Vol. 928, c. 1308.]

It is sad that some Opposition Members should have opposed our original intentions without really knowing what the proposed Bill contained. It would have removed unnecessary restrictions on undertaking new construction work by direct labour organisations for neighbouring local authorities and for housing associations and new towns in the locality. I say "unnecessary" because it seems to me ludicrous that a local authority or another public body should be precluded from using a local DLO if that is the most efficient way of getting the work done.

In a similar vein, we would have allowed DLOs to do improvement and maintenance work on private houses in the housing action areas and general improvent areas in neighbouring authorities. It often makes sense for rehabilitation to be carried out by one organisation in such an area. We would have allowed them to work for other public bodies for the same reason—efficiency.

The extension of powers would have been tied closely to new arrangements for accounting, charging and tendering. These would have implemented statutorily the recommendations in the Chartered Institute of Public Finance and Accountancy report of June 1975 and, indeed, would have gone further. We intended to include repairs and maintenance in the accounting requirements. The DLO accounts would have been separate.

On a point of order, Mr. Speaker. I do not know whether you have been following what the Minister has been saying, but he is telling the House about a Bill that is not before the House. He is going on at great length about a Bill that he wanted to introduce but that the Prime Minister would not let him introduce. The Minister is saying absolutely nothing about the Bill that he is introducing.

Perhaps I was not giving the full attention that I ought to have given, but on a Second Reading debate we are allowed to go a little wider and state our feelings about what should be in and what is not in a Bill.

Thank you, Mr. Speaker. What is more, if I may say so, the hon. Member for Chingford (Mr. Tebbit) could not have been listening as closely as you were, Mr. Speaker, or otherwise he would have heard me describe the objective of the Bill in my introductory remarks.

Further to the point of order, Mr. Speaker. The Minister is saying what he thinks should be in the Bill, but he is the person who has introduced it. Surely it is wrong for a Minister to introduce a Bill and then criticise it strongly for not being the sort of Bill that he wants to introduce.

Order. The right hon. Gentleman does not lose his rights as a Member by being a Minister.

I am much obliged, Mr. Speaker. Indeed, if I may say so through you to the hon. Member for Cirencester and Tewkesbury (Mr. Ridley), I was not complaining about what is in the Bill before the House today. I was describing in outline the kind of Bill that the Government would have liked and had intended to introduce to the House had it not been for the parliamentary situation preventing us. If I may say so, such a Bill will be introduced in due time into this House. I shall come to that point later on.

As I was saying, we would have gone further than the Chartered Institute of Public Finance and Accountancy report of June 1975 and included repairs and maintenance in the accounting requirements. We would have required that the DLO accounts would be separate. We would have enabled charges to be made on a firm price basis—rather than being linked to actual costs as at present—so that the extent of profits and losses would be known. We would have ensured that all appropriate overheads were taken into account, including a return on capital employed. A local authority would have been under a duty to avoid making a loss, and we would have taken powers to close down activities where an organisation failed consistently to meet the financial objective.

Will the Minister tell us whether the Government intend to introduce these sorts of conditions into the Bill by amendment or by statutory order? There are fears about the inefficiency of some direct labour organisations.

I shall deal with that question, but let me say straight away that the Bill before the House, in implementing the undertaking of my right hon. Friend the Prime Minister of 23rd March, precludes any such move, because it is confined to the simple issue that was announced to the House in that statement and cannot cover any other matters. It is my regret, as I am indicating, that we have not been able to introduce the broader Bill, but I live in hope that we shall have the good sense to deal with such legislation in due time.

I was referring to the ideas with which we should have liked to deal.

rose—

I shall complete this passage, if I may, and then I shall gladly give way in due time, if the hon. Gentleman will keep a close eye on me and listen carefully and attentively to what I am saying.

We would also have required local authorities to produce a report each year on the activities of their direct labour organisations so that their performance could be judged wisely. We would also have enabled DLOs to be set up as separate trading bodies so that their competitiveness could be demonstrated without the difficulties in comparison which would remain even if the CIPFA recommendations were implemented. This provision would have been the basis, too, of sponsoring building workers' co-operatives on a commercial basis, which I believe to be essential to the future health of the construction industry and, indeed, industry generally in our country.

These things are not in the Bill. The Minister regrets it, but he appears to be in dispute with his right hon. Friend the Prime Minister over this. Has the Minister tendered his resignation to the Prime Minister as this Bill is totally out of sympathy with his own publicly declared intentions and views?

The hon. Gentleman has got it wrong again. I am fully in support of what is before the House, and it would have been included in the more broadly based Bill had we had the opportunity. I am not out of sympathy, obviously, in wishing to make sure that the accident of the Local Government Act 1972 is avoided, which is what we have done by the temporary provisions and orders in the last 18 months to two years, provisions which this Bill seeks to make permanent. The hon. Gentleman has got it wrong again.

I hope that I have said enough about the ideas that we had intended to incorporate in the more broadly based Bill to demonstrate that what we had proposed was sensible and reasonable. That could hardly be said of the attitude of some Opposition Members and some of their colleagues who control some of the local authorities in the country. They seem to have only one attitude to DLOs—to close them down, to destroy established organisations and to sack their staff.

I say to them that even if they are correct—and some of their criticism of DLOs is undoubtedly correct to a degree, but nowhere near the degree they have expressed—they have a responsibility when they are in local government. If they claim that their DLOs are inefficient, it is their job to make them efficient. Whatever their party, councillors are elected to do that, and it is the responsibility of their colleagues in this place and elsewhere to express that view.

For our part, in Government we shall go on, through my Department's working party, to work out sound procedures for direct labour organisations, some of which already, partly through our influence, have begun to adopt good accounting and tendering practices. The working party has so far concentrated on procedures for new construction, for publication of reports on performance and for competitive tendering. I hope that this part of the work will be completed by the summer.

By around the turn of the year we expect to complete similar work on repairs and maintenance which the Chartered Institute of Public Finance and Accountancy has also been studying. The institute hopes to publish its findings in the summer. Had the original Bill to which I have been referring been introduced and passed, we would have phased in the new powers with the new disciplines. Action will be limited without legislation, but we shall take whatever action lies open to us to improve the scope and efficiency of DLOs.

Direct labour organisations account for about 8 per cent. of all construction output. Most of it consists of repairs and maintenance. They employ about 173,000 people. Thus, although they are not by any means a major part of construction, the promotion of efficiency and sound practice in them would be a useful contribution to the efficiency of the industry as a whole.

Many DLOs have already given good service to their local authorities and have been of great financial benefit to the ratepayers. Such matters never reach the Press. Successful DLOs do not make good journalistic copy. District auditors' reports, for example, are often quoted to point out failings. But district auditors often point out savings that DLOs achieve. That is not to be seen published in the Press or debated or mentioned in this House. There are frequent examples of DLOs having to take over jobs when firms have gone into liquidation and the authorities have been unable to find others to take their place.

I shall give one or two examples to illustrate what I have said. On two major road contracts in the North-East, worth £4½ million, the contractor went into liquidation with the work barely started. The county DLO stepped in and completed the contracts within the original competion dates, thus avoiding a delay of at least six months if another contractor had been engaged. Not only was there no additional cost to the Department, but at least £400,000 was saved by not employing another contractor.

In another case a district auditor found that the final costs on 25 highway maintenance projects carried out by a DLO averaged 5 per cent. more than the estimate. That is the kind of figure that would have appeared in the Press. But acceptance of the next lowest tender from a private contractor would have cost another £500,000, or 19 per cent. more than the final DLO cost, including the 5 per cent. overspent. That kind of information does not get published in its proper context.

In yet another instance an authority did not have sufficient finance to accept the lowest tender of £200,000 from a private contractor for a school project, so the DLO undertook the work and completed it at a cost of £110,000; thus the authority saved £90,000. Incidentally, in that case, if the private contractor had done the job, it would have appeared that his operatives were twice as productive as those of the DLO as this type of calculation, which appears in official and published statistics, is based on the valuation of output rather than on the actual quantity of work done.

Can the Minister tell me how many direct labour organisations make a commercial return on the capital invested in them?

I am not sure whether the hon. Gentleman was present when I described the kind of legislation which we had originally intended. If so, he will recall that I said that that was one of the points with which we wished to deal in the Bill that we were unable to introduce because of the parliamentary situation. There are no requirements to impose conditions for a return on the capital invested. However, we wished to do just that, among other things, in the Bill that we could not introduce at this stage.

I was not asking whether there were any requirements, but whether the Minister could indicate any such commercial success.

The hon. Gentleman has not taken my point clearly enough. There are no such requirements, so examples cannot be quoted. We had intended to take action to remedy that situation in the Bill that Opposition Members and their colleagues in the industry and the Press opposed so vigorously, despite the explanation that we sought to give. However, I agree with the hon. Gentleman's implication. I regret that, as a result of the sustained campaign over many years, which aroused great prejudices about our intention's, we were unable to do what the hon. Gentleman would have liked us to do.

The instances that I have quoted are not exceptional. There are many examples of efficient DLOs in addition to those I have mentioned and there is plenty of evidence that they give good value for money. Direct labour organisations also have a creditable record as good employers, especially in providing training opportunities and, like the better private contractors, maintaining continuity of employment even when times are difficult.

It ill becomes certain people in the construction industry to criticise DLOs for inefficiency in the way that the rather wild campaigning has suggested in recent months. As I said in the Supply debate on the construction industry on 2nd May, there is enormous scope for improvement in the efficiency of the industry as a whole, in its building operations and in its financial structure. I forbear to list examples of the industry's failures, but public sector clients are often left picking up the pieces. I do not gloat over these failures. They are exceptions. They are not the general rule, but they are significant failures. I want something done about them. In the meantime, perhaps certain people in the industry might do better to concentrate on putting their own house in order than to waste vast sums on expensive advertising campaigns against DLOs.

I remain convinced that it is right for us to provide DLOs with a framework which allows closer comparison between them and private contractors by not only proper accounting and tendering procedures, but more freedom to use their valuable resources more flexibly and thus more efficiently. It remains our intention to legislate on these matters, but the parliamentary situation means that we must wait for another day. Today we are confined to this small but essential measure. I commend it to the House.

4.26 p.m.

First, I declare an interest. I am a consultant to a group of construction companies in the West Midlands.

I listened with interest to the Minister for Housing and Construction, who has advanced some way towards our point about the CIPFA recommendations, although he still has a long way to go.

I should point out that Conservative-controlled local authorities—they are now very much in the majority—which have direct labour organisations will see that they are efficient. I am urging upon them, and receiving a constructive response, that they should as far as possible adopt the CIPFA recommendations. The Minister will know better than I do that some of them need legislation. In certain circumstances, where authorities deem that the direct labour organisations are not doing a reasonable job, they may choose to close them down. That is their prerogative. I should not wish to stop them doing that.

The Minister quoted some examples of efficient direct labour organisations. My hon. Friend the Member for Basingstoke (Mr. Mitchell) was trying to make the point—I am sure that the Minister appreciated this, because he referred to a 5 per cent. return or whatever the figure was—that unless there is an ongoing CIPFA accounting procedure, unless we know the proportion for the chief executive, the personnel officer and everyone else, it will be difficult to get any meaningful figures of efficiency for DLOs. That is the problem facing all of us.

The Federation of Civil Engineering Contractors has made its views on the Bill perfectly clear. It says that the

"Bill is a step in quite the wrong direction. The fact that it is a very small step ought not to be enough to save it."

The National Federation of Building Trades Employers says that

"the members of the NFBTE feel that the Bill must be defeated"

and they are

"adamantly opposed to this Bill."

I have a letter today from the Opposition Leader on the Burnley Council, one of the districts affected by the Bill. Councillor Wilson writes:

"My overriding reaction to the Bill is an emphatic 'No': more especially until a method of realistic commercial accounting is introduced to the Works Department. Time and time again when a 'tender' has been received, and accepted by the Labour Group, we are subjected to estimates for extra items of equipment required for the project. Our direct works spokesman is at present preparing a detailed brief on one current contract with a view to obtaining the true cost to the Authority upon its completion.

The obvious concern regarding the right to work outside the Borough boundary is again fiscal. Should one group of ratepayers subsidise or receive support from another group?"

The history of this measure is interesting. A more comprehensive Bill, about which we have heard a great deal today, was promised by the Minister on 14th July last year. We certainly had a pretty clear indication of what was in it, because the Under-Secretary, whom I am glad to see present, gave a good trailer on 19th September in Scarborough, in a speech which was widely reported in the construction and building Press. Therefore, all of us had a very fair idea long before the Queen's Speech, about what would be in the Bill. I do not think that the Under-Secretary would retract a word of what he said then.

The Bill was forecast in the Gracious Speech on 24th November. As the Minister said, there were to be major extensions of powers for direct labour organisations. Certainly at that time there was very little talk about the CIPFA recommendations or much tougher accountancy. I read the hon. Gentleman's speech, and I recall many times in the House when I urged the Minister and the Under-Secretary even simply to endorse the CIPFA recommendations and was comstantly referred back to the working party that had been set up.

On 25th February a Press conference was fixed for the introduction of the comprehensive Bill, the bigger Bill. I understand that invitations were sent out but were suddenly cancelled on the evening of 24th February. That Press conference was cancelled because the Government at that stage had abandoned the Bill. I am sure that that is right and that the Minister knows that it is right.

That was a full month before the Lib-Lab pact and the Prime Minister's statement. As the Minister was honest enough to say, the parliamentary situation then was such that there was no majority in the House for that comprehensive Bill. The Liberals, the national parties and one or two Labour Members, as well as my own party, were adamantly opposed to the Bill, and so it died then. Let this point be quite clear. It was nothing to do with the Lib-Lab pact, which was perhaps the funeral rites over a Bill that had already been killed.

Does not my hon. Friend think that as well as he and I, and all our right hon. and hon. Friends, the Liberal Party would not have objected to adding on to the Bill the implementation of the CIPFA proposals? Is it not rather strange that the Bill we are considering does not contain powers for tightening up financial discipline? I stand to be corrected by the two Liberal Members present, but does not my hon. Friend feel that the Liberals would have welcomed the introduction of the disciplines and would not have objected to their being in this Bill?

I am grateful to my hon. Friend, who has anticipated something I intend to say in a few minutes.

As there appears to be agreement among the Minister, myself, the hon. Member for Isle of Wight (Mr. Ross) and, I suspect, most hon. Members, that we need at least the CIPFA disciplines, would it not be possible to introduce them? I can promise a safe passage on behalf of my party, and I believe that the Liberals would do the same. This would be extremely helpful. Perhaps we can explore that in a few minutes, but the grunts coming from the Under-Secretary make me suspect that it does not meet with his entire approval.

They are my hon. Friend's normal way of speaking.

I am grateful to the right hon. Gentleman for putting me right on that.

The House will have to consider this matter. In the meantime, it should note that it was on 14th October 1975, some time ago, that the working party was set up by the Minister to review the operations of direct labour organisations. I have consistently criticised and shall consistently criticise that group. I have described it as a hung jury. That is what it was. If it had had on it representatives of outside interests, the construction industry and free enterprise people, it would have been more worth while.

When we have consistently questioned the Minister about CIPFA, that group has been called in aid. The right hon. Gentleman and his hon. Friend have said that we must wait until it has reported. If I understood the right hon. Gentleman correctly today, he said that it will report in the summer, and I believe that that is correct. I presume that the report will be published and be available for all to see, but I do not know, for we have never had that matter cleared up. Does this mean that the possibility of having legislation to improve the accounting will be delayed to take account of what the group says? Will what it says have any effect upon the larger Bill, which is at present dead and buried but which might be resurrected one day?

As for the Bill, I must first tell the Minister that it was presumably possible to extend by further Statutory Instruments what were interim arrangements under the Act reorganising local government. Indeed, if there were particular problems it was possible for any one of the 25 authorities to bring forward a Bill under the Private Bill procedure. Having looked at the Statutory Instruments, I see no obvious connection between the 25 local authorities concerned, except that a majority of them are still Labour-controlled. In the current local government scene, that is remarkable.

In addition, it is clear that the Statutory Instruments and the Bill do, albeit in a small way, extend, or continue the extension of, direct labour in those 25 authorities. There is a problem when we are talking also about former county borough boundaries. These are nearly dead and gone and will be more nearly dead and gone in the years ahead, so I question whether it is wise to refer to them in such legislation.

The extension of construction powers for local authorities outside their own boundaries is certainly now finally established in a Bill, as opposed to a purely interim order. That was mentioned in the letter to me by the councillor from Burnley.

For these reasons alone we should be unhappy about the Bill, but it goes much further. There is the whole question of the accountancy, which the Minister dwelt upon at some length and which other hon. Members will no doubt wish to mention. Here at least was an opportunity for something to be tidied up. I question the way in which the Government have done their tidying up in relation to direct labour. Apparently all hon. Members agree that the present accounting principles and procedures are totally wrong. The building industry has said that in many cases fair competition is not the order of the day and that local authorities award considerable contracts without having any other kind of tender.

There are also all the various CIPFA recommendations—the importance of the contracts being put out to competitive tenders; the importance of adopting the same standards in dealing with contracts carried out by direct labour and those carried out by independent factors; the importance of valuation by an independent quantity surveyor of the value of work performance; and, something which the Minister mentioned and about which I agree with him, the importance of establishing direct labour departments as separate trading organisations so that the ratepayer and the local people can see—and, I hope, quickly, not having to wait two or three years—exactly how efficient or inefficient the organisation is.

The Minister was right to deal only with new construction. We still await the maintenance proposals. I believe that the above items and many others mentioned by CIPFA could have been introduced in this Bill. I see no reason why not. After all, there is a fair degree of time. The devolution talks are going on, and the House is not exactly overburdened with legislation. All parties are agreed upon the need for proper and fair accountancy. The vast majority of local authorities are Conservative-controlled, so it can be seen that we are not trying to be beastly to the right hon. Gentleman's party. I ask him to ask his right hon. and hon. Friends whether it is not possible, on this measure if nothing else, to have this element of agreement about accountancy, and then at a later stage we can look at the question of accountancy procedure for maintenance. This is a fair and reasonable offer which I hope the other parties may be prepared to go along with.

Why is it, then, that the hon. Gentleman's party—not so much the hon. Gentleman, but his party and others associated with it—spent so many months campaigning vigorously against our proposals when we had placed clearly on the record in speech, correspondence and statements in various quarters what our intentions were in the original Bill in relation to CIPFA? We could have had the common ground then. Why is the hon. Gentleman now, having campaigned against that Bill and having virtually compelled us to withdraw it, calling on us to join him on common ground?

The common ground was CIPFA. It was not on the major extension of direct labour proposed in the Bill and as outlined by the Under-Secretary of State at Scarborough. Such common ground will never exist. The common ground between us is on accountancy, as it is between the Government and the Liberal Party. We were asked to find common ground, and we found it on the accountancy aspect. Let us limit it to that. The Conservatives and, I believe, the Liberals, and also some hon. Members opposite, felt that the extension proposed in the Bill could not be supported. I ask the Minister to bear in mind also that two of the three local authority associations are on record in recent weeks as being opposed to any extension of direct labour at present. I am not speaking in total isolation. The Association of County Councils and the Association of District Councils are on record with their opposition.

Let us assume that we lived in a perfect world and had an accountancy system which made certain that direct labour was efficient, competitive and everything else flowing from that, and that by every yardstick possible it was shown that direct labour was worth while; would the hon. Gentleman still oppose it?

There is perhaps a fundamental philosophical point between us. The first thing to remember, as I am sure the right hon. Gentleman does, is that we have an interest as representatives of the ratepayers, who may have to pick up the tab if things go wrong. I understand that the Government wished for a major extension of direct labour powers by authorities of all kinds, including—although it has not appeared in the Bill—power for the Minister in certain circumstances to allow direct labour organisations to do all kinds of things for the private sector. We oppose that because we take the view that, at the moment, local government has more than enough to do with the things that no one else can do.

Oh.

The right hon. Gentleman says "Oh", but the fact is that, under the present Government, the local authorities have more than enough to do. They are being denied resources. Yet there are great pressures on them to carry out all sorts of statutory duties and obligations. We do not believe that there is a great abundance of talent in local government waiting to do jobs that the private sector can not only do itself but in most cases can do very much better. That is the first and fundamental point on which we disagree.

Secondly, we are not naive enough to suppose that the Government's proposals are designed merely to get more efficient direct labour organisations. I have quoted on various occasions Labour spokesmen and Labour documents showing that the main aim of extending direct labour is to get a major public stake in the construction industry. We happen to be opposed to that. That is another important reason for opposing such a comprehensive Bill. No doubt that is also the view of the Liberals and other parties, but they must speak for themselves. We are not to be taken down that path.

We shall, however, at any stage, join the Government on the question of improved accountancy. But the Government have never shown us their proposals. It was rumoured that there were to be skeleton proposals which would be filled in by order later. Their proposals may be introduced in stages, but we simply do not know. I shall be happy to have discussions about the matter. It is not unknown for me to have discussions with Ministers in the Department of the Environment and to improve Bills thereby. It happened last summer.

Is the hon. Gentleman prepared to say that he is opposed in principle to all direct labour organisations on ideological grounds, whatever the merits and however well difficulties could be overcome?

I am not prepared to say that. I have never said it, as the hon. Gentleman knows. I am opposed to any extension of the present system, which is one of the reasons why I shall vote against the Bill. I am in favour of much tougher accountancy procedures because fair competition is essential for the free enterprise industry, and we ought have proper accountancy procedures in the interests of the ratepayers, the people who have to pick up the tab at the end of the day.

Does not my hon. Friend agree that, while direct labour organisations have the ability to raise capital—and working capital, too—at non-commercial rates and with a total guarantee, buttressed by the Government at the end of the day, they can never in reality be fairly compared with other organisations in the private sector that do not have those advantages?

I accept that point, which is important. I was interested to hear the Minister say that the Government have in mind something that we, too, have in mind—the power to close down direct labour departments consistently making losses. As my hon. Friend has hinted, local government cannot go bust as such. There will always be someone, be it the Government, through the rate support grant, or the ratepayer, to bail it out. That is the difference between direct labour organisations working for local government and nationalised industries, and free enterprise contractors.

We have been talking about these CIPFA recommendations for two years. The Government say that they are prepared to do something about it—but not apparently in this Bill. We do not know when they will do something about it. They had their opportunity to do so in this Bill or in a separate measure with all-party agreement. Such proposals would take relatively little time to get through the House. That opportunity is still open to the Government.

Of the 25 councils covered by the Bill, a number have unfortunate records in recent times with direct labour. I am not sure that we shall achieve a lot by swapping experiences. The Minister gave examples of where direct labour organisations were doing well. I have pointed out the difficulty of knowing whether they are doing well unless there are proper accountancy procedures.

I can quote the example of Liverpool, where a landscaping and road-widening scheme valued at £450,000 went to Liverpool's direct labour organisation without any kind of competition. Surely the right hon. Gentleman cannot accept that sort of situation. There is another example in Gateshead. There, a housing improvement scheme by direct labour, with an agreed completion period of 80 weeks, actually took 156 weeks. Surely that is not something that the Minister would wish to go along with. These are examples taken from some of the 25 districts. There are many horror stories about direct labour. There may be success stories. But until we have proper accountancy, we shall not know the true extent of just how bad or good they are.

Therefore, we believe that the Bill, although admittedly in a marginal form, puts on a permanent basis an extension of direct labour. We believe that the Minister has forgone a good opportunity to bring in new accountancy procedures. Had he done that, the Government would have gone some little way towards restoring the vast amount of ground that they have lost with the construction and building industry. As they are not prepared to do that, we believe that the Bill in its present form is unwanted, unnecessary and unhelpful, and I ask the House to reject it.

4.48 p.m.

I was Minister of Public Building and Works in 1968, and, therefore, the sponsoring Minister for the construction industry. I take that industry seriously, and I got to know it well. I certainly do not condemn—and I do not know any hon. Friends who do—the building and construction industry in a wholesale way. The vast majority of the people in it are honourable men. The firms are desperately anxious to ensure good relations with the Government of the day, whatever their political persuasion. They are crying out for long-term planning of work.

I learned some interesting figures at that time. I shall always remember them, and I think that they more or less still apply today. Over 50 per cent. of the entire output of the building industry is obtained from the Government and over 90 per cent. of the entire output of the civil engineering industry is obtained from the Government. If, then, the Government of the day are by far the largest client of the entire building industry, it behoves the Government to be a good client, and if they want the building industry to work for them, their contracts must be of the sort that will bring out the best in the industry.

I am trying to assist the right hon. Gentleman. He should be talking of the public sector, which is slightly different from the Government as it involves other clients, including local authorities.

I agree. The Government do not build a single house. That is done through local authorities and county council which go to Government for various aids, such as the rate support grant. Therefore, the Government have the final word.

I always wanted to see a universal construction system which brought out the best for the client and for the local authority. For example, the Government are bad payers—or I should say that local authorities and county councils are bad payers. They do not pay as quickly as they might. Half-way through a contract they should hand over 50 per cent. of the sum due and settle their bills soon after a contract is completed.

One of the biggest problems for private enterprise is a shortage of money. I know that I might appear to be dealing with mundane matters. I am not anti-private enterprise. That would be foolish. There are some famous firms in the private sector that none of us could do without. They are honourable firms and employ trade unionists. This is why I find the attitude of the Opposition to direct labour bewildering. They are so bitter about this subject.

It has come shining through that the Opposition, if they had their way, would introduce a Bill to make it illegal for any local authority to employ direct labour. That came out in the speech made by the hon. Member for Ashford (Mr. Speed). Anyone who was not a Member of the House would find it hard to believe that the hon. Member thought that there was any good at all in direct labour.

rose—

If the hon. Member for Chingford (Mr. Tebbit) intends to say anything good about direct labour I shall be frightened to death. The Opposition challenge the concept of the accountancy system.

Let it be clearly understood that there are few people who believe that local authorities could exist without some direct labour workers. It would be absurd if all minor maintenance involved calling in private contractors. The right hon. Member must accept that it is difficult to organise fair competition between a public sector organisation that cannot go bankrupt and a private sector organisation that can and that has only one chance.

I understand that the hon. Member for Ashford argued that the ratepayer had to pick up the tab. I respect that argument. If it can be shown that a local authority, by the advent of direct labour, can do a particular job cheaper and better than private enterprise, I sincerely say that that local authority should be allowed to employ direct labour because in that instance direct labour has been proved to be cheaper and better. I see that the hon. Member for Chingford is nodding his head in agreement. We are coming nearer to what I want to see established.

I have lived in that part of London where direct labour matters a great deal. I was also Minister of Public Building and Works and I have seen the situation from close quarters. Direct labour began in the early 1920s. One of the pioneers was that great predecessor of mine, Dr. Alfred Salter. He began to employ people to relieve his own local employment problem. No one could work for direct labour unless he lived within the boundaries of the borough. That direct labour organisation made its own paving stones, for instance. But the idea of any local authority starting from scratch and trying to implement a direct labour force is dangerous today. No direct labour force can be efficient unless it has full use of the machinery that is essential for any good building work. Cranes, cement mixers and the whole paraphernalia of construction work machinery are required. The capital expense of setting up such equipment is enormous.

I am not one of those who say blindly that all local authorities should go for direct labour, willy-nilly, when there are many qualified building constructors who are willing and able to do the job. How ever, it is unfair that local authorities who possess all the necessary machinery should not be allowed to develop direct labour.

I find it hard to understand what the Tories are thinking on this matter. The hon. Member for Ashford said that local authorities have enough to do in coping with the terrifying cuts in public expenditure made by this Government. He said that they were unable to do a number of things because of that. But if the Tories were in power I believe that the cuts would be more severe. Everyone knows that they are completely dissatisfied with the cuts and say that the Government have not gone far enough. Some of my hon. Friends have also attacked the Government for going as far as they have gone.

Looking back at the activities of the Department of the the Environment, I believe that it has done well to salvage what is left. It comes ill from the Opposition to talk about cuts in public expenditure.

The right hon. Gentleman must not misinterpret me. I was not criticising the Government for cuts in public expenditure. I was saying that at a time when local authorities are grappling with so many difficulties because, for instance, the rate support grant has been cut back, it is a bit much to expect them to use their expertise on activities that the private sector can handle better than they. I was saying that they should concentrate instead on trying to make the social services work.

If the hon. Member is saying that it is unwise for local authorities without the necessary machinery, and because of the problems caused by the cuts, to set up direct labour organisations, I agree with him. At this moment that is right. However, I am not talking of that type of authority. With so many authorities under the control of the Tories I doubt whether any direct labour organisation will get off the ground.

My experience of direct labour is that it has been a credit. It has done a first-class job, not only on maintentance but on construction work. I know that the Opposition view is that direct labour should do all the rough work. All that the Opposition can do is to criticise and sneer at direct labour and slam it if a wallpapering job is not well done. When direct labour has been allowed to build new construction, it has done it well.

When I was Minister, one or two direct labour organisations were shut down because they were inefficient and incompetent. Many private enterprise organisations are inefficient and they lose contracts. We told the local authorities concerned that they would not be allowed to build new buildings under direct labour as long as their methods remained inefficient. In the original Bill there was no intention by the Government of the day to compel local authorities to set up direct labour departments. This Government's intention is to allow local authorities to have direct labour organisations if they can prove that they are justified and that their accountancy procedures are good.

The hon. Member for Ashford is whistling in the wind if he thinks that there will be any move towards direct labour because of the Bill. The Explanatory Memorandum states:

"The Bill restores, and gives permanent effect to, provisions in three orders under the Local Government Act 1972…".

In other words, the provisions were already there prior to 1972. We are now allowing local authorities to do what they were allowed to do previously.

What are we making all this fuss about? It is absolute rubbish. Once again, the Tory Party and Tory Members have hung their hats on this one sort of peg, to make a deliberate attack on direct labour, as though it is some foreign element from abroad.

I know that one may go fairly wide on the Second Reading of a Bill, Mr. Speaker, but I promise not to go too wide. However, why do the Tories so hate State ownership? It is something owned by Britain.

It does not work. That is why.

I make my point that State ownership means something owned by Britain, and it is sneered at and jeered at by Tory Members, who wrap themselves up in the Union Jack, almost choking themselves to death with it, when they go to bed and on every public platform. State ownership means that which is owned by Britain, but they sneer and jeer at it in principle. If it is not efficient, I am all for saying "Let us have a change where that is practicable." Of course that is right. But I shall never know why the principle is attacked in the manner in which it is attacked and why there is not a greater intent to make State ownership, and so on, work better.

I do not know what this fuss and do is all about. This is a piddling little Bill. It is only a little tiddler of what was originally in a Bill about which many people seem to know more than I have ever known. I do not know why this attack is being made—although, of course, I do really know. It is because the Tories hate direct labour in principle. They say that they will oppose the Bill. It is so unfair of the Tory Party, which used to be a great political party, to oppose simple principles that cannot be denied.

5.2 p.m.

I shall not keep the House for more than a few minutes One good reason is that I have a cold, and it would be unfair were I to do so.

Like the right hon. Member for Bermondsey (Mr. Mellish), I have no great philosophical objection to direct labour organisations. I speak as one who represents a constituency that tends to have rather monopolistic situations in regard to its construction industry. I assure hon. Members—I have said this in the House previously—that four or five years ago I should have been sold on an extension of direct labour, because at that time we could hardly get anyone to do work for the local authority. We were getting cowboys coming in and doing atrocious jobs, and it fell to direct labour afterwards to put things right.

Having said that, however, I do not think that it would have been right at this stage for the Government to bring in a Bill, such as the Minister was describing, to extend these activities into a vastly wider range. First, there is the huge unemployment situation in the construction industry generally—about 200,000. Whether that figure contains many genuinely skilled men, I do not know. At any rate, I suggest that something over 100,000 is probably nearer the mark for those with experience who are unemployed.

Undoubtedly, firms are tendering extremely competitive figures. One has only to ask local authorities and they will confirm that most tenders today are extremely competitive. In many cases they are coming from firms that are losing over the contracts that they are taking on purely to keep their work forces together.

Therefore, if the Government had brought in a Bill vastly extending direct labour, their timing would have been very bad. I am almost sure that, in his own mind, the Minister tends to agree about that.

However, I see no reason why I should not honour the agreement that the Liberal Party has with the Government, and I shall do so this evening if there is to be a Division. I support the Bill.

When one is describing the situation in the construction industry as disastrous, with so many people out of work, why should the House, if it refuses a Second Reading for the measure, take part in closing down certain direct labour organisations and putting more men out of work?

Will the hon. Gentleman explain how the size of the demand for the labour will be altered? Surely what would simply happen is that instead of something being carried out inside local authority organisations, it would be carried out in the private sector.

If the hon. Gentleman is suggesting that we should now impose conditions on some 25 authorities and that they should make a start in sacking their labour forces, I do not agree. If he is suggesting that we should give the men concerned the traumatic experience of trying to find another employer after some have worked for 30 years or more for one authority, I do not agree. I have had representations from people concerned with direct labour in my constituency. They have come to see me with lists of work that they have had to carry out. They were fearing that, because we had made clear to the Government, as a party, that we could not continue with the extension of direct labour, their jobs would be at risk. I say to the hon. Gentleman in all seriousness that that is not a proposition that I am prepared to go along with at this stage.

I should like to be sure in my own mind that the hon. Gentleman is not under the impression that a decision not to enact the Bill would cause the closing down of some of these direct labour organisations. Even if the Bill were not enacted, that would not be the case. In any case, the Minister could bring forward further orders for a further temporary extension. He does not need a Bill to make it permanent, which the hon. Gentleman is supporting.

I accept that we could go along with merely an extended period, but I do not think that it would be very satisfactory. I do not understand the quibble into which we are entering, because these are old-established direct labour organisations that were previously with the old county boroughs. I happen to think that the county borough was one of the finest forms of local government. It was a great pity that it was wiped out.

I have had the facts and figures from the accountants who have been examining this matter in relation to North Country direct labour organisations. Although I accept that there are those that do not come out very well, others come out quite well. Therefore, there are both sides to the equation.

However, I support the Conservative Opposition in their request to the Minister that the CIPFA basis of accounting should be written into the Bill. We ought to have taken the opportunity already to do that. We cannot do it on Second Reading, but perhaps it can be done in Committee or on Report. The working party appointed by the Institute of Municipal Building Management, in its summary of recommendations at paragraphs 5.10 and 5.11, wishes to see this written in. After all, that is a local authority based inquiry and one that I should have thought that we could take on board now. It seems a great pity that we cannot do it at this stage. Of course, I support that call. I think that all hon. Members, on both sides of the House, would support it. It seems that it is an opportunity that is about to be missed, if we do not take it now.

Apart from those few comments, I shall be honouring the agreement that we have with the Prime Minister, and I shall be is to be a vote later this evening, which supporting the Bill in the vote, if there I think would be a pity.

5.9 p.m.

I do not wish to take up more than a few minutes. As an old county borough man and one who was involved in local government for many years before becoming a Member of this House, I warmly welcome the Bill. I share the unhappiness about the fact that we are debating only such a limited measure and not a measure that will extend the scope of direct works departments, as many of us had hoped earlier in the Session.

The hon. Member for Ashford (Mr. Speed) spoke about ratepayers having to pick up the tab, as he called it, when anything goes wrong. I could tell him of a good many occasions when the tab has had to be picked up because of the bankruptcy of private companies and when the job has had to be taken over and the contract finished by a corporation's direct labour department. In my experience, they have finished these jobs in a most efficient way, and they have generally done a better job than those who started it.

The hon. Member also spoke at considerable length about the need for fair competition. I want to mention a few points that make competition unfair to the local authority, rather than unfair to the contractor. For one thing, it is the habit of local authority works departments to try to maintain a stability in their labour forces. They do not go in for the hire and fire policies that are so common among private contractors. That in itself creates additional costs for them.

I accept what the hon. Member for Isle of Wight (Mr. Ross) said about certain reputable firms now tendering at under-cost prices to keep their labour forces at work. I do not dispute that many firms in the industry have good industrial relations and adopt that sort of policy. However, there are many that do not. It is no good trying to hide the fact that among the smaller firms in the industry—I think that there are far too many small firms in it—the hire and fire policy operates. Local authorities are not able to do that. They do not go in for the casual labour approach. Furthermore, there is no lump in local government. The lump still lives in private enterprise building, and let us not pretend that it does not.

When it comes to talking about fair competition, the dice are loaded against the local authority rather than in its favour. It is my experience, and the experience of many others who have been in local government, that when a corporation's department has won contracts in open competition, which has happened on many occasions, it has done a good job. My authority employs tradesmen of the highest possible standard. What is more—perhaps this is the most important point that I make—it is still taking on apprentices.

Throughout the whole of 1976 the only building organisation in Rotherham that took on any apprentices was the local authority building works department. If we are concerned about the long-term future of the building industry and the training for skills, without which it cannot survive, any restriction placed upon the responsible authorities that are still appointing apprentices and training men for the future will be extremely damaging.

I suggest that the future of the industry requires an expanding and successful public sector. If we leave matters to the private sector, and if the example of 1976 is anything to go by, we shall be desperately short of skilled tradesmen for the next generation and the generation after that. I hope that the Bill will receive the support that it deserves. I hope that one day we shall have the pleasure of voting in favour of a Bill that I am sure my right hon. Friend would have loved to introduce today instead of this much more restricted measure.

5.14 p.m.

This is a Bill to make permanent the powers of certain district councils to carry out the construction of buildings or other works of certain other local authorities. It is not to extend for two years or three years but to make permanent. I was horrified to hear that, notwithstanding that fact, the Liberals have been forced to become Lobby fodder with the Government because of their new voting agreement.

It was not a matter of being forced to vote with the Government. I happen to think that the Government are taking the right course. We must not keep people in limbo. We must remember that we are talking about people who have been employed in the same job for many years. They should know whether they are to be employed permanently. It is time that we introduced permanency.

The hon. Gentleman has said that there should be permanency. I find myself unable to agree with him. As the argument develops I think he will find that there are many others who do not agree with him.

Does my hon. Friend think that the hon. Member for Isle of Wight (Mr. Ross) is worried about the permanency of his job rather than of anyone else's job, bearing in mind that he has been singularly unsuccessful in persuading the Government to live up to their part of the bargain and introduce the direct elections Bill, for example? Therefore, he is Lobby fodder, and nothing more than that.

I do not wish to detain the House with the obvious parallel of two drunks trying to prop up each other, both terrified of what would happen if the other withdrew his support. However, we have before us a Bill that is designed to continue permanently something that was originally introduced on a five-year experimental basis. Since then we have had the Layfield Report. That is a new factor that has not been properly taken into account and has not been raised in the debate.

In page 7, paragraph 22 the Layfield Committee states:

"The complaint most forcefully made to us about the control of local authority spending was a simple one. It was said that local authorities decided first what they intended to spend. Only thereafter did they consider what rates they must levy to meet the bill. This process was not considered to be budgeting in the sense that individuals understood it.

"Local authorities were accused of being concerned primarily with the expansion of services, and only secondarily with the means of financing that expansion. Large projects were said to have been undertaken in many instances without adequate thought for the effect that the capital debt incurred would have in increasing future current expenditure."

I go further into the report and quote most damningly from page 90, under the heading "Value for Money". The committee states:

"Unlike most commercial undertakings there are for most of their services no objective standards of performance or output against which costs can be measured."

That seems to be a clear indication of the situation being changed by the findings of the Layfield Committee. I return to page 7, where the committee states:

"The operations of direct labour organisations were singled out as particularly bad examples of a failure to control costs."

It is against the background of wholly changed circumstances as a result of an independent report that the House should be considering whether it should make permanent the powers contained in the original experimental Bill.

I noted with interest the examples given by my hon. Friend the Member for Ashford (Mr. Speed). I add to them the examples that the Small Business Bureau has brought to my attention. Abuse of the bonus scheme by the Manchester direct labour organisation, often held to be one of the most efficient, was said by the district auditor to have cost £680,000 in two years. In Sunderland the direct labour organisation was given, with competition, a leisure centre to construct. It increased its estimate by £1·4 million within weeks of starting the contract. I am sure that my hon. Friend the Member for Folkestone and Hythe (Mr. Costain), who has great experience of the construction industry, would not feel able to submit a tender as a private enterprise firm and then increase the price by £1·4 million when he started.

I am sorry that the right hon. Member for Bermondsey (Mr. Mellish) is no longer in the Chamber. In Southwark one of the projects that was engaged in by the direct labour organisation, in the absence of competition, escalated by 147 per cent. from £890,000 to £2,200,000. Against that background how on earth can the Minister blandly ask us to extend permanently this section of direct labour powers?

In addition to the examples that I have given from the Small Business Bureau's research and briefing there is the example of Camden, which is known only too well by many hon. Members, some of whom live in the borough. I see that one new recruit to the House, my hon. Friend the Member for City of London and Westminster, South (Mr. Brooke), is nodding in agreement. My hon. Friend is only too aware of the disastrous state of affairs of the direct labour organisation of the Camden Borough Council.

Another example is that of Glasgow, where it cost over £21,000 to build an equivalent house to others alongside that were built by private enterprise for £16,500. I am not surprised that Glasgow changed hands in the recent local elections. We have a situation in which there are endless examples of unsatisfactory direct labour organisations.

I entirely accept that some are efficient, particularly those which do undertake major construction work. Both sides of the House will agree that there is a case for retaining a limited staff for maintenance work on local authority equipment and buildings.

Would not the hon. Gentleman agree, however, that it would be difficult to keep tradesmen of high quality working for a direct labour department if all they could do was maintenance and they never got a go at new capital building?

I take that point, which is important, and I will deal with it in a moment.

I agree with those who have said that if certain work can be done most efficiently by direct labour, it should be done in that way. The question is how one measures that efficiency. What is deplorable about the Bill is that the Government have not taken this opportunity to accept the known common ground between the parties and include the CIPFA recommendations.

There are three immediate things upon which we could get agreement. First, whenever a contract is awarded, it should be in direct competition with private contractors. There is nothing sacrosanct about someone who happens to work for a local authority and no reason for him to have priority over another equally skilled man, belonging to the same union, who works for a private company.

Second, the local authority direct labour department should be established as a separate trading service. Third, its accounts, itemised and including overheads, should be properly submitted within a defined period so that we may know whether it is covering its costs, making a return on the capital investment, or simply whittling away the resources of the ratepayers.

It is important to use this opportunity to bring about changes because the extension of direct labour operations is damaging in three ways. First, it damages the ratepayers. I have given examples already of colossal losses and overspending on contracts. This causes suffering to ratepayers who are often already hard pressed.

Second, it damages the large contractor. As I have said, a member of the appropriate union, whether his employer is a private contractor or a local authority, has an equal right to opportunities for work. Equally important, most large contractors are working in the export field as well. They can tender for major export contracts, thus earning overseas currency that the country needs, only if they have a sound home market. The direct labour organisations do not take up contracts in the Middle East or in Europe, yet companies which are seeking world-wide contracts have the ground cut from under their feet by artificial and subsidised contracting by local authorities.

Third, the extension of direct labour is unfair to the small business. We all know how difficult it is to find a small contractor to do work at the moment. The number of small businesses in the building industry has been declining rapidly. Bankruptcies are an all-time record. The number is greater than at any time since the war, greater than it was in the depths of the depression, greater than it has been since records were first kept in 1914.

The number of liquidations has doubled since this Government came to office. Many firms have simply given up. These small firms are under acute pressure and they have as much right as anyone else to a fair share of the bread available.

If they are efficient.

Yes, if they are efficient. That is why it is essential to include in the Bill a requirement for proper and separate accounting and not to make this proposal permanent until that accounting has shown, over a further experimental period, whether direct labour departments are efficient.

This proposal links with the other attack on the building industry, the licences to work for small builders under the 714 certificate procedure. I should have thought that the Minister would by now be aware of the enormous damage which is being done to thousands upon thousands of small businesses. I expect that we all receive two or three examples a day in our post of these certificates to work having been withheld, without right of appeal and sometimes without the reasons being given.

They are often withheld for reasons which have nothing to do with tax. The Government contended that the 714 certificate was intended to prevent tax dodging, but they have imposed so many conditions which have nothing to do with tax that it has become a licence to work.

When the industry is squeezed by the proposal in the Bill and by the licence to work system, it is not surprising that builders, small builders particularly, are crying out for protection against unfair and oppressive treatment by this Government.

There are practical reasons for not making this experiment permanent. There are also broad and strong reasons of philosophy why we on this side do not believe in concentrating power, wealth and decision-making into the hands of the State, whether it be the Government or local authorities. We believe in spreading those things throughout the community. The Bill is a further obstacle to doing so.

All those in the building industry will note the threat in the Minister's speech, when he made it clear that he intended to extend direct labour activities at the first opportunity and made grave references to his own leader, the Prime Minister, for not having unleashed that proposal at this time.

5.28 p.m.

I am not certain whether the hon. Member for Basingstoke (Mr. Mitchell) was arguing that direct labour departments should be allowed to compete overseas with private companies or whether he was so opposed to competition that he wanted it to disappear altogether. I did notice that he argued that there were many bankruptcies among small builders. I have news for him: there have been bankruptcies among small builders ever since there has been a construction industry.

At times of crisis, small construction businesses are among the first groups to go bankrupt. I am not surprised, and anyone who is surprised does not know the first thing about the industry. One of the troubles is that everybody—I mean everybody—believes that he can be a builder. People think that it is the simplest thing in the world. We used to refer to these people on Merseyside as the "ladder and barrow" merchants. They think that if they have a ladder and a barrow they can go into construction.

As a matter of fact, during the period of the home improvements boom far too many ladder and barrow merchants, who thought they could build, made an absolute mess of the situation. One has only to think of the legal battles that have taken place about incompetence and the dreadful conditions constituents were left in after these merchants appeared on the scene. I am not surprised that people eventually got round to not employing them. Because of their inefficiency and lack of ability and knowledge of the construction industry these people went to the wall.

The hon. Gentleman knows a great deal about the industry. I do not dissent from some of the things that he has said, but does he not agree that some of the greatest companies in the country started exactly on the basis that he is describing?

Of course, because they decided to employ highly competent craftsmen. The craftsmen they employed were sufficiently able and intelligent to lift them out of the nonsensical position in which they started. If they had not employed those craftsmen they would obviously have been unable to get beyond a certain stage and would have gone out of business. It depends upon whom one employs.

I am glad that the hon. Member for Melton (Mr. Latham) raised this matter because it is a fundamental question with regard to direct works departments. We can have efficient direct works departments and inefficient ones, just as we can have efficient private enterprise companies and inefficient ones. As the hon. Member for Melton rightly says, I do know a lot about this industry. Let no one suggest to me that only the direct labour departments have come out at the end of the contract well above the price that they went in for in the first place. The number of construction companies that have gone well beyond the original price, and have had to go to the local authorities or to their clients and ask for more money, is legion. The hon. Member for Folkestone and Hythe (Mr. Costain) knows that this goes on all the time. He is nodding his head. Of course he has to agree, because he knows it happens.

For example, let us take the question of negotiating contracts and tenders. I do not know whether hon. Members are aware that for many years in the city of Liverpool, under various local political administrations, we negotiated tenders, agreements or contracts with the Unit Construction Company for two reasons: first, because the Unit Construction Company was already doing the job and had the work force; second, we felt that it was giving us a good price.

It was not unique that we actually negotiated contracts with private labour. Local authorities can and do negotiate contracts with big companies like Unit Construction and others. As a matter of fact, the money that went into building the prefabricated units by Unit Construction was underpinned by the local authority. There was a hell of a row about it because Labour people at the time objected most strongly, saying that the Tories were advancing millions of pounds in order to assist a private enterprise company. That is the reality of this sort of thing.

I only interrupt because the hon. Gentleman said that I nodded at his remark. I was nodding because I was about to say that when a private enterprise firm gets an increase over the original contract it is because the plans were wrong. The increase is not given out of charity. But a direct labour department has to be paid out of charity, otherwise something goes wrong with the rate fund.

The hon. Gentleman is surely not suggesting for a moment that the plans are never wrong with regard to direct labour departments and that they can only be wrong with the private enterprise builder. That is the most remarkable suggestion that I have ever heard. The plans can be wrong whoever the builder is. One of the problems in the industry is the rôle of the architect. That is a real problem and it is about time that we dealt with it.

The whole question of architects, surveyors and engineers is one that we need to look at. Other countries deal with this matter in a totally different way from ours. Their costs are much lower than they are in this country. It is about time that we had a look at this aspect of the industry, but I do not want to go into that matter because we are not discussing it this afternoon.

Let us look at direct labour. We can have an efficient direct labour department and an inefficient one. Believe it or not, I was chairman of a works department in Liverpool and was actually responsible for its creation. When I was chairman it made money, but when I came to the House of Commons, for some unknown reason it began to lose money. The same thing happened when I worked for the Merseyside Docks and Harbour Board. It made money, and, when I left, it went into the red. That proves beyond doubt that some of us have the ability to make money for others but no money for ourselves.

The point I am making is that we need to organise direct labour departments in an efficient way. We need the right type of management and supervisors. We also need buyers to be separate from the local treasury. If that does not happen one gets tied up with the local treasury and is unable to act independently. We are not always able to get the type of material that we need at the cheapest cost. I know much about this sort of thing. We have to be competitive, and we must run direct work departments, as far as it is humanly possible within our society, on a competitive basis, but we cannot entirely do that. Why? Hon. Members know that under local authority agreements one has to pay for sickness benefits, whereas if one is in the construction industry one gets sickness benefit on the basis of national health insurance and that is all. There are also many other overheads.

I agree with my hon. Friend the Member for Rotherham (Mr. Crowther) who pointed out that the difficulties for direct labour departments are much greater because one quite rightly has to give workers better conditions. They ought to have been a model for the whole of the construction industry. That is the truth of the position. Therefore, direct works departments are in a worse competitive position than they would have been if they had been purely a private enterprise companies. There are many other aspects as well.

Surely the hon. Gentleman is not suggesting that giving the best conditions to one's workers makes one uncompetitive? I thought his argument would have been the opposite—that by giving employees the best conditions one is competitive.

I find that an amazing argument as well. I have yet to work for an employer in the construction industry who comes along to me as a worker and says "We are going to give you the best possible conditions and this will make us more competitive than the rest of the construction industry". That is absolute rubbish. The hon. Gentleman knows that within the capitalist system, which he supports, the situation is precisely as I have said. It is the opposite. It tries to cut down wages and conditions because that makes companies more competitive than their neighbours. The point about direct labour is that one has higher overheads because one cannot compete in that way. If the private enterprise companies want to give the best possible conditions by way of full sickness benefit and so on, let them do so. Let them go to George Smith of UCATT and offer to provide all these advantages, instead of George Smith, the rest of the UCATT members and the other unions having to use their strength to wring better conditions out of the employers.

We must extend the direct labour system as quickly as possible. Why should not direct labour be able to compete with the private enterprise companies? Why should it not be able to go in for the bigger jobs and, if it has a good department, take work in other parts of the country? Direct labour departments should certainly be able to do work in neighbouring boroughs, counties and regions.

The Conservatives believe that any suggestion for setting up direct labour departments signals the end of the world. What rubbish! The same thing happened when the old-age pension was introduced. It was said that the economy would collapse, but the pension was introduced and the economy did not collapse. The economy of the construction industry will not collapse through any extension of direct labour. I wish that the Conservatives would abandon their narrow sectarian philosophy on this matter. I am glad that they are laughing because their laughter proves my point. Their outlook is so sectarian and narrow that they cannot see the wood for the trees. They cannot see when something might be good; automatically they say that, because it is direct labour, or because it is public ownership, it must be bad. I say that it could be good or bad, just as private industry can be good or bad.

I want the system extended because the time is coming for workers in the construction industry to be given greater continuity of work. We must eliminate the unemployment that constantly plagues them. We have to ensure that they have decent working conditions, and we want to eliminate the days of the ragged-trousered philanthropists once and for all. We must do that on the basis of extending direct labour.

I cannot understand the Conservative approach to this matter. The Conservative Government accepted this idea in their 1972 Act. The Labour Government now have a small majority with the support of the Liberals and so the Conservatives see their chance to embarrass us. That is political opportunism of the worst kind. I am ashamed of the Conservatives for that, although I do not know why I should be since they are only acting in their normal way. I only hope that the Bill will be passed and that later we can bring in the other Bill as soon as possible.

5.44 p.m.

It is a great privilege to be able to speak after the hon. Member for Liverpool, Walton (Mr. Heffer). I think that I have known him for 40 years. I have seen him work in private enterprise and direct labour departments. My interest in the building industry is well known, but I have no directorships now to declare. I suppose I shall be guilty of advertising if I tell the hon. Member for Walton that he worked for the wrong firm in Liverpool. I can assure him that another certain firm gives all the privileges which are available to workers under direct labour, and more—full sickness benefit and so on—but it does so at the expense not of the ratepayers but of the shareholders.

The hon. Gentleman's comments would have been germane 50 years ago. All this talk about grinding down the workers would have been appropriate then. I told him in the Tea Room the other day that the executive directors of the company that bears my name, the men who are now controlling the company, all worked as foremen. One of them, the chief executive was the hon. Gentleman's charge hand on one of the Liverpool contracts. I know a great deal about the hon. Gentleman in that way, so let us get that out of our system.

We heard a most extraordinary speech from the Minister. He appeared to me as a fisherman describing the big fish that got away but declaring that, by gosh, he would get it next time. We have also seen a wonderful example from the Liberals, who came into the debate but have now gone. They have been laying ground bait for future occasions. As I explained to a meeting of builders with whom I was lunching the other day, it is quite clear what will happen in this Parliament. If the Liberals think that by their voting with the Opposition, the Opposition will win, they will always vote with the Government. Conversely, every time it appears that in that situation the Opposition will lose, they will cast their vote with us.

In an incredible speech the hon. Member for Isle of Wight (Mr. Ross) bent his principles in such a way that he went out of the door. He talked about private enterprise and how efficient it should be. Let us get down to what is basically involved here. It will surprise the hon. Member for Walton and perhaps even the Minister himself if I say that, as one who has been in the construction industry and has built up two firms, I am in favour of direct labour in certain circumstances. It is stupid to involve all the machinery and paraphernalia that is necessary for putting work out to tender in dealing with a small maintenance contract.

It is necessary, therefore, to have a direct labour organisation to do maintenance work, but now we follow that through. The fact that the engineer or other person in charge of the contract does not have to write out a specification or go through the tender procedure makes him lazy. He has only to pick up the phone and say, "Charlie, put a new roof on that house. The old one has fallen off. I do not want the bother of going through the tender procedure".

The hon. Member for Rotherham (Mr. Crowther) says that direct labour organisations must be given more specialised work. In other words, he says that instead of getting a direct labour department merely to fix hinges it should be given the job of building a town hall, and so it goes on. As a result, glorious lavatories are built in certain areas if only to retain the tradesmen. The hon. Member for Walton said that once a direct labour department had a crane it wanted to play with it. The same goes for a concrete mixer. In that way the department builds up and up. That is how the whole concept of direct labour goes wrong. The Minister is smiling one of his happier smiles. He is not the most popular Minister in the building industry, but that will not be news to him.

We heard a most interesting speech from the right hon. Member for Bermondsey (Mr. Mellish). He was a Minister, and from time to time the sun shone and he praised private enterprise as a wonderful show. Then he would go back to his old form and get worried about the situation in which direct labour organisations did not have enough work.

I believe in direct labour where it is doing a maintenance job for a specific client. Once direct labour organisations start working for another authority they are in exactly the same position as an outside contractor. They have to be given better instructions and they should be given specification, or some sort of drawings, for larger jobs. This may not happen. If they are to do that they will be involved in direct competition.

My hon. Friend the Member for Basingstoke (Mr. Mitchell) made a very fine speech in which he set out clearly his feelings about direct labour organisations. He said that they would stop other firms from building for export. I saw the hon. Member for Walton licking his lips at that stage. Maybe he envisaged direct labour organisations in Liverpool going to the Isle of Man, Dublin or even New York.

Let us get this matter right. The Bill must be opposed. If it becomes a permanent fixture it will give direct labour organisations the opportunity to engage in direct competition with private enterprise firms. Once a direct labour organisation is working for a local authority it is working for the referee. In that event the referee and the builders are the same people and they can alter the rules without anyone else knowing. Where there is direct competition there is an independent referee who is a fair judge. We shall never get fair competition unless a direct labour department is a completely separate trading organisation with its own overheads, office and so on. In those circumstances there is a slight excuse for proceeding with direct labour organisations, but basically it is wrong, and the Bill should be opposed.

5.53 p.m.

I welcome the opportunity to join in this debate, albeit briefly. I have listened to the comments from both sides of the House with deep interest if only because of my own personal connection with the construction industry. That connection goes back some 51 years, since I first began my apprenticeship as a bricklayer. It continued until I became a Member of this House. I was a full-time officer in the Amalgamated Union of Building Trade Workers prior to 1954, and I have had experience of working in direct labour departments. Until 1965, I was a member of a local authority, having the great honour to be chairman of the housing and planning committee with responsibility for running and organising a highly successful direct labour department.

Because of my lifetime commitment to the principle of direct labour, I welcome the Bill. However, I regret deeply the necessity to withdraw the previous Bill, which would not only have consolidated direct labour, but would have given great opportunities for expansion in the field of more intensified competition with building contractors. As representatives of the Conservative Party have always claimed that they believe in free competition, I fail to understand why they are so fearful of competition from direct labour departments.

It is a tragic fact that in my connections with the construction industry I have found that private enterprise has from time to time failed abysmally to measure up to the responsibilities. I have had the misfortune to be working for private building contractors at the time when they have gone bankrupt. Although the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) may laugh, that is a fair indictment of Conservative policy. As a full-time trade union official I spent many long hours trying to recover wages for employees of firms that had gone to the wall, largely because of their own inability to organise a building site which they had won by competitive tender.

I have always believed that the principle of direct labour is absolutely right. Equally, I do not believe that inefficient direct labour organisations should be encouraged. They should be encouraged to become efficient, as efficiency is the keynote. It is well within my knowledge that there have been a great number of highly efficient direct labour departments up and down the country, particularly in the North-East.

What about Sunderland?

I could tell the hon. Member a lot about Sunderland. I suppose he has read what Aims of Industry put out, and what Mr. Malcolm Hoppe, former Lobby Correspondent of the Sunderland Echo, has written; but he only tells people what he thinks people should believe. I could tell the House a lot more about that situation, but there is no time.

The direct labour department in my old urban district, which became part of Sunderland under the Local Government Act 1973, actually came into being as a direct labour organisation because of the failure of a private firm, which left a site mid-way in a contract. The local authority decided to set up a small direct labour organisation to complete the contract. From very small beginnings an eminently, highly successful direct labour organisation has evolved. Until 1973 it was tending in competition with private builders and it never lost a contract.

I simply cannot see—providing the direct labour organisation is being run efficiently—how it can ever fail to obtain contracts in competition with private contractors. This is the way it has happened in my urban district. The enlarged borough of Sunderland, with the exception of Easington, has taken in the old urban district of Hebden. They have their own direct labour departments, all of which have had a large measure of success.

The hon. Member for Rutland and Stamford (Mr. Lewis) made a jibing remark about Sunderland, but Sunderland started its direct labour department far too late. When small authorities were working very successfully with direct labour departments Sunderland was still totally dependent on private enterprise, even for its own council house building. Once it established the department it quickly became successful, and is successful now. Recently it succeeded in obtaining the contract for the leisure centre—the biggest it has so far undertaken. Many accusations have been made against the Sunderland direct labour department because of alleged failures over the leisure centre in the city, but the problems faced by the direct labour department equally would have faced a local building contractor who had won the contract in open competition. There were delays in delivery of steel, which is not uncommon in the construction industry, and the local authority had no control over that situation. These are matters which Aims of Industry and Malcolm Hoppe did not bring out as they should have done.

I was not making a jibe at Sunderland. I was merely citing it as an example. There are-other towns and boroughs and authorities in the same situation. How does the hon. Gentleman measure the success of a direct labour department if such a department is losing a great deal of money? If it is costing the ratepayers money, it is surely not successful.

I thought that I had made clear that I would not in any circumstances support an inefficient direct labour department. Nothing I have said should be taken to indicate that Sunderland direct labour department is inefficient or unsuccessful. It is on record that in the last five or six years Sunderland has saved its ratepayers several hundred thousand pounds both in contracts in open competition and under the old two-for-one system.

There are many faults in the private sector of the construction industry. I am not referring to the all too frequent bankruptcies, but I wish to draw attention to an incident in Peterlee New Town in 1962–63 when a somewhat adventurous firm from Lancashire came to Peterlee and obtained the first contract with a ridiculously low tender price, beating all the local firms. That organisation grew like Topsy; it obtained more and more contracts, but finally it suffered an almighty crash, when many thousands pounds of deficit were incurred, and when several hundred building trade operatives had to leave without having received their wages and without having had access to holiday credits.

The private sector of the construction industry—and I echo what was said by my hon. Friend the Member for Liverpool, Walton (Mr. Heffer)—surely should not be afraid of competition with direct departments. It should now begin to put its own house in order in organisational terms.

The time is riper than ever before for a major move to decasualisation of the construction industry and towards registration of employers as well as of employees. This is one major advance for which the industry is crying out, and that opportunity should be grasped.

I look forward to the time, in the not too distant future, when my right hon. Friend the Minister for Housing and Construction will come forward with the Bill that has been dropped, but in a strengthened form, so that healthy, efficient and successful direct labour departments can exist and expand even further to the advantage of the ratepayers and people in the community generally.

6.5 p.m.

The House has just had the pleasure of hearing three very experienced contributors. We heard the hon. Member for Houghton-le-Spring (Mr. Urwin), who said that he worked in the industry 50 years ago. That means that he worked in the industry 16 years before I was born, which is a sobering thought. We also heard the contribution of my hon. Friend the Member for Folkestone and Hythe (Mr. Costain), who had experience of building an oil refinery in Persia before I was born, and that contract involved many millions of pounds in investment.

The hon. Member for Liverpool, Walton (Mr. Heffer) again spoke with great knowledge, and I always enjoy his speeches. Knowing that the hon. Gentleman is a tough fighter, I was surprised that he accused the Opposition of being political and ideological. If ever I knew somebody who was both political and ideological, it is the hon. Gentleman. That comment came somewhat oddly from a fighter such as the hon. Gentleman has always been.

The House knows that I have an interest in these matters as I am a director of Lovell Homes, part of the Y. J. Lovell Group, which may be said to be in direct competition with direct labour departments.

Let me seek to outline why I think the Bill should be opposed and why it is unfortunate that this legislation should have been brought forward. I would have been even more appalled if the original Bill had been brought forward rather than dropped, as it was, following the Lib-Lab agreement.

The Minister set up a working party to consider the subject of direct labour following a number of incidents that caused trouble in earlier years. I did not disagree with the setting up of the working party, although its membership left something to be desired. Since a number of its members had a vested interest in maintaining direct labour in certain forms, I was not happy about that feature. Nevertheless, the working party was set up.

It has not yet, as I understand it, reported. Its views may be known to the Minister, but they have not been made public. It would surely have been better if the Minister had made an order in respect of the 25 authorities for another year maintaining the existing position until he was in a position to bring before the House the results of the working party's deliberations.

What has happened since the war on the subject of direct labour? For a long time we had the one-in-three rule, which meant that one in every three contracts went to competitive tender. That rule was originally set by the post-war Labour Government. It was Aneurin Bevan who once said that direct labour was an "expensive luxury". Therefore, he brought in the one-in-three rule as part of a Ministry of Health circular after the war.

That operated until 1965 when Mr. Richard Crossman issued a circular withdrawing the one-in-three rule and allowing direct labour departments to take work on a negotiated basis whenever they wanted it. It was significant that the one-in-three rule in 1965 was followed a couple of years later by some of the most deplorable scandals, such as that in Salford to which the right hon. Member for Bermondsey (Mr. Mellish) referred, and of which he had experience when he was in the Ministry of Housing. Then Mr. Anthony Greenwood, or Lord Greenwood as he now is, produced the "Manual of Principles" for direct labour departments in 1968 and issued a circular saying that there should be more competition.

Therefore, what has happened is that the position has changed every few years. I hope that by the time the working party comes up with a clear report, firm rules will then be promulgated and will be adhered to. Unfortunately, this Bill has been brought forward before those deliberations have been completed, and the fact that no temporary order has been laid to cover the matter is good enough reason for opposing the Bill tonight.

Let me examine the wider issues. I do not deny that this is a difficult philosophical problem for both sides. The right hon. Member for Bermondsey asked whether we wanted no direct labour departments or efficient ones. My hon. Friend the Member for Ashford (Mr. Speed) gave a clear answer. He suggested that he wanted to see efficient direct labour departments, but he thought that there was no reason for increasing the scope of such departments now. I agree with my hon. Friend. We cannot ignore the direct labour departments which are now in existence; nor can we ignore the fact that tenders were difficult to obtain between 1971 and 1973.

I do not blame the building industry for that situation. It was caused by the economic position of that time and by the monetary policies of the then Government—which I have criticised in the House and which I shall continue to criticise. I hope that those policies will not be repeated. It was not the industry's fault that it became overheated, and that must be prevented from happening again. That situation has given those who believe in direct labour in principle a strong argument. They say that tenders could not be obtained at that time and that only direct labour departments could do the work. That is an argument that cannot be ignored. If, on the other hand, we say that we want not no direct labour but efficient direct labour, that assumes that direct labour departments must be on all fours with the private sector—and must be seen to be so—and have the same commercial and statistical basis.

The hon. Member for Houghton-le-Spring said that he could not understand how a direct labour department could help but have a lower price than a contractor when a contractor was trying to make a profit. However, profitability is the test of efficiency and the need to make a profit motivates a contractor in keeping his costs down to the absolute minimum and to organise production on site to the maximum effect.

It is significant that the CIPFA report says that unless there is a 4½ per cent. return by a direct labour department and unless that department shows a saving compared with the contractors, the department cannot be efficient. The test of efficiency is the profit made, because that represents a real command over resources. The hon. Member for Houghton-le-Spring has views about the statistical differences in productivity between direct labour departments and independent contractors. Many people have pointed out that there is a great difference in that productivity, but the Minister has said that statistics are misleading because relevant considerations are missing from them. That would be a more impressive argument if the Government had not changed the basis of the figures a few years ago so that they are unlike and not comparable. I am not suggesting that the basis was changed for political reasons, but it has made comparison difficult.

The overall test of efficiency in the construction industry is profit—or, in the word used by the Prime Minister at the Labour Party Conference, "surplus". It is the difference between the tender price and the eventual outcome.

The hon. Member for Melton (Mr. Latham) must know that that cannot be the entire test, because it may well be that a contract says that there should be, for example, three coats of paint and that the original paint should be burnt off. The hon. Gentleman must know that such specifications are not fulfilled on many occasions because there is a great deal of skimping. That might be regarded as quick, efficient and profitable, but it is bad for the efficiency of the work and for the end product.

I am absolutely amazed that the hon. Member for Walton has given such an example, because he must know well that those who argue against direct labour claim that the way that it produces notional savings is by changing the specifications during the course of the job. He must also know that the view has been expressed that direct labour departments use the notional benefits from their maintenance sections to offset construction losses. One needs a properly identifiable trading fund, as the CIPFA report suggested, and works committees should receive real information immediately—not years later—so that they can make direct comparisons. Certainly the Bill does not provide for that and nothing else will until the CIPFA report is implemented.

So there is a dilemma for Opposition Members about whether there should be no direct labour or efficient direct labour. There are also dilemmas for the Minister and his party. The view of the hon. Member for Walton and the right hon. Member for Bermondsey is that direct labour departments should be efficient and, presumably, that if they are not efficient, they should be closed down, just as civic restaurants were closed down, according to the provisions of the Civic Restaurants Act, if they made a loss on their trading activities for three years running. That is one point of view and it is a fair one. However, I am sure that Labour Members will not deny that not every Socialist or every person involved in direct labour thinks in that way.

Many of those people believe that direct labour should be a social service and that it therefore does not matter whether such departments make a profit. Such people claim that it is a social service to employ the men. There have been instances where this has happened, such as at Sal-ford. Some people forgot that after the critical report that was made by the district auditor about the Salford direct labour department in 1967, the then Labour authority nevertheless proposed to continue with the department because the authority was in favour of it in principle. It was only as a result of pressure from the Government and the defeat of the Socialist local authority in the 1967 elections that the closure was brought about.

There are plenty of Labour Party members who feel that an attack on direct labour is an attack on Socialism. They see direct labour as an extension of State ownership. They believe that it is a good thing in principle and do not see it as strictly a matter of efficiency or inefficiency—as apparently the hon. Members for Bermondsey and Walton see it.

I agree totally that if there is competition for new work with private enterprise, there must be a construction firm of a similar kind. However, in maintenance there is a major difference, because any sensible local authority will carry out a policy of planned maintenance: that is, an authority will decide, for example, that certain blocks of houses or flats will be painted over a period, not haphazardly but the whole work being done so that in the long run money will be saved in spite of the initial high capital cost.

I am sorry to intervene at such length, but one cannot have a profit in every aspect of direct labour work, because even if such work were put out to private enterprise, although there might be a profit on the planned maintenance initially, savings would not be made in the long run, because future costs would be high.

I am surprised that the hon. Member has made such a point. I can understand and sympathise with the argument that direct labour departments should be able to compete to undertake major planned maintenance, such as the external painting of council houses in Liverpool, which would be a planned programme over many years. That is exactly the sort of work that can be put out to contract, and this should be tested because there are plenty of painting contractors who would be perfectly able to undertake such work in competition with the direct labour department on a job-by-job profit basis. If the work is done on a job-by-job basis, such firms can tender and make a profit. The same can be done if the work is carried out over a planned period.

No doubt the hon. Member for Walton will correct me if I am wrong, but did not Liverpool City Council change politically and was not the planned painting of council houses put out to contract for the first time in many years? Did not the contractors do the job well below the price given by the direct labour department? If I am wrong, I shall withdraw that.

The future maintenance costs were higher because of it.

No doubt the hon. Member for Walton can produce the figures on a later occasion. If we are both on the Committee that will consider the Bill, perhaps we can argue about it. My general point is that such work should be put out to contract on a regular basis, and that was said by the CIPFA report.

The building industry has several basic needs. There must be a firm and coherent flow of work. That is extremely desirable but it is also extremely difficult to achieve. We are not now debating the problems of the construction industry, as we did last week, but, rightly or wrongly, when the axe is swung, it tends to hit the construction industry and when there are cuts, a firm flow of work is difficult to obtain.

The industry also needs honest and above-board tendering on a selective basis. Many reports in the past 10 or 15 years, including the Banwell and Emmerson Reports and the 1967 EDC for Building, have said that open tendering is a waste of money and that we must have selective tendering. There is nothing between us on that and successive Governments have put out similar circulars on this matter.

I know that there is sometimes negotiated tendering in the construction industry and that some people would like it to take place more often. I do not share that view. Ratepayers, particularly in the present climate of concern about corruption and scandals, have a right to be assured that jobs have been tested in proper competition with a reasonable number of firms able to put in sensible quotes for the work. It is not proper competition if tenders are invited from one firm that is capable of doing the job and seven that are not.

The trouble with negotiated tendering—and this is also an argument against the increased use of direct labour—is that the firm gets slack. It has the job and has the prospect of others to follow. The motivation falls, and that is bad for the ratepayers, the clients and the building industry. I am not satisfied with the concept, except on very similar jobs and in closely controlled conditions. The existence of negotiated tendering in the construction industry is not an argument for the increased use of direct labour.

Finally, the building industry needs the flexibility to adapt to changing situations that may occur, whether on the contracting or speculative side. Labour Members said when building controls were introduced in 1965 that it was not possible to get houses built because resources were being used up in office building. Labour in the construction industry is not all that interchangeable, but there is a certain amount of interchangeability that can be achieved swiftly and efficiently by private enterprise. For example, when a council house contract runs out and the possibility of speculative housing arises, a builder will quickly switch men from one to the other.

The same is true of the much-criticised hiring and firing that has been mentioned by the hon. Member for Walton, and the fact that there are so many small firms, as the hon. Member for Houghton-le-Spring has said. Hiring and firing and the small firms are essential to an efficient building industry. Building industries all over the world are mainly comprised of small firms that can react best to local circumstances. The fact that they are small is no criticism. It is a reality of the industry all over the world, and it is the way that it works best.

The Phelps-Brown Report of 1968 dealt with labour-only subcontracting and found that two-thirds of the hiring and firing at the end of jobs involved men who left voluntarily and were often subsequently taken on for another job by the same contractor or a nearby firm. That is how the industry works. Ratepayers should not be asked to keep on people for whom there is no work and to provide benefits such as pensions and sick pay—however desirable they may be—unless they can be justified by productivity.

There has been much talk about the lump and labour-only subcontracting, but productivity under these systems is much higher. The reason that two-thirds of the workers in the building industry do not belong to trade unions is not that they are not allowed to join unions but that they have worked out better deals for themselves on a labour-only basis.

The hon. Gentleman is paying a glowing tribute to the lump and its higher productivity, but will he not also acknowledge that labour-only subcontracting has been directly responsible for the enormous wage drift in the construction industry? If the National Federation of Building Trades Employers had seen the warning signals 10 or 15 years ago, conditions on the bona fide side of the industry would be far better now.

We could argue about that all night, but we can establish as a matter of fact that labour-only subcontracting has been so prevalent in the building industry for hundreds of years because the men concerned have preferred to make their own bargains and to have the flexibility and higher wages involved.

And the shoddier work.

It is all very well to say that direct labour departments offer men pension schemes and sick pay, but the productivity is not necessarily commensurate with those benefits and we cannot necessarily afford to provide these benefits unless profitable work is also available.

It is a shame that the Minister brought forward this unnecessary Bill in advance of the report of the working party. If the report had been published, we could have settled this matter once and for all.

6.27 p.m.

I declare my interest as a director of a building company. Before I came to the House I spent many years in the industry, finally running a company in the North-East.

I had a happy early part of the afternoon listening to the Minister and the hon. Member for the Isle of Wight (Mr. Ross), because neither appeared to like the Bill very much, despite the fact that it is a product of the Lib-Lab pact. The Minister was quite strong in his condemnation saying that it was not the Bill that he wanted, and the hon. Member for the Isle of Wight said that he would not welsh on the deal with the Government, although he did not like the Bill very much, either. They were reluctant sponsors of the Bill.

I enjoyed hearing the Minister eat humble pie, although he does not do it very gracefully. There are a strong crackling noise and a lot of crumbs flying around the Chamber when he does so, and he will have to do so increasingly. He has already had to eat humble pie over rent restrictions, and again over this Bill, and it is a pleasure to watch him.

No one has yet spoken who does not believe that the CIPFA rules should be in the Bill. Hon. Members opposite say they are in favour of efficient direct labour, but they should have said efficiently monitored direct labour. The rules do not make direct labour efficient, but they make the analysis of its performance efficient. There is not an enemy of implementation of the rules. Indeed, they have friends on all sides, and I am surprised that they are not the subject that we are debating. The extension of direct labour later would have followed logically from having introduced the rules first and seen that direct labour organisations were performing satisfactorily under them.

The hon. Gentleman speaks about efficiency in direct labour and qualifies it by saying that it should be monitored efficiently. He should know from his experience as a building employer that there is a great deal of inefficiency in the private sector, and I believe that the construction industry has the highest rate of bankruptcies in all British industry. Surely that is not a cause for expression of joy by the hon. Gentleman or his hon. Friends.

I shall be coming to the questions put by the hon. Gentleman in the course of my speech.

It has been alleged that we on the Conservative Benches are in some way doctrinally opposed to direct labour, and it is alleged by the Minister and others that they are doctrinally in favour of it. I do not think it is a question of doctrine. I entirely take the point of my hon. Friend the Member for Folkestone and Hythe (Mr. Costain) that there is every advantage in using direct labour for one's own maintenance operations. But we are moving out of the field of maintenance with this Bill and the question, surely, is whether direct labour organisations operate as efficiently as private sector building companies. I do not think the issue is employment. For every 100 jobs lost by the private sector, 100 go into the direct labour organisations, and vice versa. The question is where the employment takes place.

We must first have sure ways of measuring who is efficient. Secondly, we must have clear and unequivocal ways of removing from the scene those who are not efficient. This is the answer to the question by the hon. Member for Hough-ton-le-Spring (Mr. Urwin).

In the private sector we have efficiency because we know that private sector companies have to publish fully audited accounts. They have no way of subsidising themselves from the rates or the taxes. If they can make a profit, they are operating efficiently. We do not even know that about direct labour, because these rules have not been implemented.

The hon. Gentleman, therefore, with his great belief in direct labour, should have used his speech to demand the introduction of the CIPFA rules so that he could demonstrate the truth of what he has said—that direct labour is efficient. He did not do anything of the sort. Let us first get an impartial analysis of the state of efficiency by having these rules instituted. It is easy to cheat by sharing overheads and having all sorts of blurred lines between what goes in one account and what goes in another, but let us try to get it right for a start.

rose—

I will not give way any more. I have only a short speech to make.

My next point concerns what happens if any building organisation is not efficient. Government Members—I have heard all but one of their speeches—have said that DLOs should not continue to exist if they are inefficient. I entirely agree with them. What would happen to a direct labour organisation that after three years had demonstrated that it could never make a profit? It would have to be closed down. The hon. Member would be making the same complaints about the inefficiency of the public sector, dumping men and causing unemployment. There is no difference between the private and the public sector in this connection except for the fact that the public sector has concealed its inefficiency and has failed in nearly every instance to take the appropriate action when the appropriate action should be taken.

Let us assume that, with these rules, public sector operations show themselves to be efficient, and that there are many DLOs in the country that continue to make profits and do well. The final question, which we have every right to consider as politicians, is whether the capital of the State should be employed, even efficiently, in this type of operation.

Admittedly, there is much of doctrine in what answer is given to that question, but there is also much that is more important than doctrine. There is an economy of scale in building. There is a specialisation. I was a piling contractor, dealing with heavy foundations. The work there is almost of world-wide and certainly of country-wide specialisation. Building is not all one trade. It is everything from civil engineering to a painting maintenance contract.

The firms that prosper will not be tiny ones based in one town in Durham or another. They will be large, specialist, highly capitalised firms, down to the smallest self-employed builder, who is mobile and flexible. I do not really believe—and I do not believe the hon. Gentleman would believe—that that is really the sort of activity in which the State's capital is best employed, because the State's capital is in fact money taken from taxpayers by taxation and may well be better employed in building schools, hospitals, roads and every other sort of infrastructure of communal living.

That is why I think that the Bill is not necessary and that it is the wrong Bill at the wrong time. That is why I shall join my hon. Friends in opposing it.

6.36 p.m.

This may be a small Bill but it is still, nevertheless, another piece of fairly insidious legislation that the present minority Government are trying to get on the statute book. I say "insidious" because the original orders for the named 25 councils were temporary in order to allow those councils time to adjust to reorganisation. The Bill would make the orders permanent. Worse still—as my hon. Friend the Member for Folkestone and Hythe (Mr. Costain) spent some time explaining—it would extend their powers in terms of geographical dimensions.

Everyone in the House fully understands the reason behind the Bill, namely, that it is the start of the Labour Party's nationalisation of the building and construction industry—[Interruption.] Labour Members may laugh, but it is in Labour's programme for 1976 and it is in Labour Party propaganda. The Labour Party made quite clear what it wanted when it talked about developing and exploiting direct labour across a much wider front. We have listened to Back Bench Labour Members this afternoon who look forward to the day when they see a great extension of direct labour. They want to see the drive towards it becoming very fast indeed.

If we look at the statistics on the output of the construction and building industry we find that the Government have been quite successful already in their direct labour objectives. In 1973 just under 10 per cent. of the work was accounted for by direct labour. In 1976 the figure was about 13·4 per cent.

It is little wonder, therefore, that the builders and sub-contractors oppose the Bill so vehemently, as do Conservative Members. The builders and sub-contractors have watched, as we have, the Government's hesitation and procrastination over the CIPFA report on accounting principles, published in June 1975. This independent report—it is agreed on all sides that it was an independent and a good report—was wholeheartedly endorsed by my hon. Friend the Member for Ashford (Mr. Speed) very soon after it came out, but the Government were pretty cool about it at Question Time all through the summer of 1975, and we have only this afternoon had a firm indication that the Government would like to see these accounting methods and principles applied.

Even so, we have not had a statement from the Government Front Bench that these accounting principles are so important in regard to direct labour that the Government will bring them forward at an early date. Indeed, we are bound to ask—as my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) did—why on earth they are not a part of the Bill. I speak for my hon. Friend, I think, when I say that we hope that when we put down an amendment to the Bill in Committee for them to be included, the Government will welcome it and we shall be able to move forward jointly in getting these methods included as part of the schedule to the Bill.

As Labour Members know, many of us are opposed to large-scale direct labour, and I have been searching for some positive evidence in its favour. I was particularly delighted to see recently the Institute of Building Management's report on "Value for money in public building". I took the opportunity of reading that report in great depth. In its conclusions, in paragraph 6.1, it says:

"Perhaps the most outstanding performance by a municipal direct labour department is that achieved by the City of Manchester Direct Works Department over a period of 15 years to April 1976."

I thought "Hurray, at last we have found a successful large-scale direct labour organisation". But I was equally amazed when I looked at the district auditor's report for the year ended 31st March 1975 for, lo and behold, it was bitterly critical of the performance of that direct labour organisation, stating:

"The abuses of the bonus system are firmly established and have existed for a number of years."

The report went on to criticise at considerable length the quality control, performance, lack of financial control and heavy losses.

I think that one is bound to draw a certain conclusion. If, in a published report, that is quoted as being the best, what on earth are the rest like?

We know how some of the 25 have performed on the ground. It is a pity that the hon. Member for Liverpool, Walton (Mr. Heffer) is not in the Chamber. Liverpool is concentrating on rehabilitation and improvement work after closing its new work section for overspending. In March 1976 we learned that on a rewiring contract in 1974, split 50-50 between direct labour and private contractors, the private job was done on time and the direct labour job was only 50 per cent. done.

Mention was made of tap washers. The most frightening small example which I have found in my research is that in Liverpool the replacement of a tap washer by a private contractor cost £2·20, which seemed to be excessive, but by direct labour it cost £12·00.

I turn now to Sheffield, which tries to avoid competition. In December 1975 the Sheffield authority voted that any work could be allocated to the direct labour department without competition unless the Department of the Environment insisted on competitive tendering.

Then there is dear old Sunderland, which the hon. Member for Houghton-le-Spring (Mr. Urwin) complimented in his speech. Sunderland also does not believe in competition. It has raised its non-tendering figure to £100,000. Its leisure centre, built by the direct labour department, is 21 months late, which is quite a time. If it is so wonderful, why was Sunderland's direct labour department hauled over the coals in the district auditor's report? I do not think that it is one of the jewels in the crown of direct labour.

Clearly, the hon. Gentleman's researches into the activities of Sunderland's direct labour organisation have not carried him far enough to examine the enormous saving that it effected against the tender prices of outside contractors for house building over the past three or four years.

I was frightened off by the answer that I got from the Minister, when I asked how many district auditors' reports had been critical of direct labour organisations in the last 12 months and found that Sunderland was amongst them. I checked and found that the district auditors were highly critical of Sunderland. I believe that district auditors are well respected in local government. If they are critical of direct labour in Sunderland, there would appear to be something wrong with direct labour in Sunderland.

So it goes on through all these 25 authorities. Newcastle has lost £700,000 since the beginning of 1975. Then there are Wigan, South Tyneside, and others. It is little wonder that we are now seeing increasing numbers of district auditors' reports complaining about various aspects of direct labour organisations and how they are operating on the ground.

It is not just that the vast majority of large direct labour departments are a failure or less efficient than they should be and cost the ratepayer a great deal of money, which they do, and that, as my hon. Friend the Member for Basingstoke (Mr. Mitchell) made clear, they deprive good experienced builders and contractors, large and small, of genuine work. The problem goes deeper. As was pointed out by my hon. Friend the Member for Folkestone and Hythe, it affects industries other than the building industry.

For example, it affects lift manufacturers. There is a lift manufacturer in my constituency. Lift maintenance, as anyone who knows anything about the industry knows, is its bread and butter, but slowly and surely this base is being eroded by fictitious costings and dubious skills, all of which undermines the home market, which is the basis of export expansion. There is a serious danger there. I suggest that the Department of Environment's export group should look at that aspect in addition to direct labour.

The Bill also forgets that local authorities exist to serve their own electors, for it purports to make them into authorities with general trading powers outside their own boundaries. Why do the Government believe that these 25 authorities should be selected to continue permanently in business? Why are they using the old county borough boundaries, not more up-to-date boundaries? Why do they not tell the housing and construction industry the truth—that this is part of their programme for nationalisation and that they have managed to hoodwink hon. Member on the Liberal Bench to buy this Bill?

I find the Liberal Party's stance on this Bill most surprising. The original Bill was withdrawn on 24th February because it did not have support from both sides of the House. A month later we had the Lib-Lab deal. We understand that the Liberal Party supports this Bill tonight, although the hon. Member for the Isle of Wight (Mr. Ross), in a brief speech, criticised it. I think that Liberal Members should sort themselves out a bit.

In any case, where is the evidence that these increased powers are needed by these local authorities or, indeed, are wanted by the majority of them? My hon. Friend the Member for Basingstoke asked Why the Government flew in the face of the Layfield Report which, on page 7, paragraph 23, made it clear:

"The operations of direct labour organisations were singled out as particularly bad examples of a failure to control costs".

Finally, why will the Government not understand that the building and construction industry is facing a very severe slump at this time and that all that the Bill does is to ensure that there will be more unemployment and bankruptcies in the private sector? I believe that this Bill is an abuse of legislation. It is not well thought out. It is out of date. It is a holding operation.

I believe that the Minister should take the Bill away and come back with the Bill in which he believed, or bring back this Bill with the full CIPFA recommendations. As it is, I believe that the House should reject the Bill, and I hope that all the Opposition parties will reject it.

6.48 p.m.

In many ways this has been a disappointing debate. This afternoon we have once again heard the whole range of doctrinaire arguments that we have grown accustomed to hearing over the past year from those who are completely opposed to any form of public enterprise in the construction industry. Having listened to Opposition Members, I wonder whether they have bothered to read the Bill at all.

Perhaps I can bring the House back to earth by recalling what my right hon. Friend said at the very beginning of the debate about the purpose of the Bill. By any standards, it is a modest measure. It is virtually a one-clause Bill which has the intention simply of restoring to a relatively small number of local authorities the power to undertake new construction work for other authorities through their direct labour organisations. Problems had arisen because a number of functions newly became the responsibility of county authorities as a result of the Local Government Act 1972. Interim orders were made under a provision in the 1972 Act to give 25 authorities the necessary works powers to deal with these problems, and the necessity for the Bill arises from the expiry of those temporary orders on 31st March this year.

Much has been said by Opposition Members about making these powers permanent. We have been repeatedly asked why we did not merely extend the orders. I am advised by the legal authorities that temporary means temporary. Transitional orders are transitional. If we had merely tried to bring in the orders again, they could well have been succesfully challenged in the courts. That is the reason for the Bill.

These are the facts about this small Bill. When originally preparing our legislation on the subject last year, we were anxious to have a constructive debate about direct labour organisations and the rôle of direct labour in the construction industry as a whole. But, of course, we got nothing of the kind, nor have we had it this afternoon. The debate has always been much more closely related to political philisophy than to economic fact.

Despite all the extravagant language used by Opposition Members, the Bill deals with a sector of the construction industry that is responsible for approximately 8 per cent. of national construction output, mainly in the area of maintenance and repairs. It is therefore regrettable that the employers' organisations that are responsible for by far the major part of construction in this country should have spent so much time, energy and money in a campaign designed to pillory all direct labour departments.

The hon. Member for Ashford (Mr. Speed) spoke about horror stories. The Tory Party has aided and abetted this campaign by the builders' organisations. When there is such a constant tirade against municipal enterprise it is only natural that those who are attacked should spend a little time highlighting the failures in the private sector. There are plenty of examples. I could talk until midnight giving examples of the failures in the private sector. When the construction industry is facing the most serious recession since the war, constant emphasis on failures in both sectors gives a distorted picture of what is happening throughout the country and causes irreparable harm to the standing of this vital industry.

Of course, we need to recognise failures wherever they occur, but we have to bear in mind also that there are plenty of examples of competent management and hard-working, skilled craftsmen with pride in their job, working on improving and changing the environment in a way which brings credit to all concerned. Precious little has been said about that by Opposition Members.

Much of the propaganda in national advertisements and pamphlets produced on behalf of the private sector has been much more concerned with political ideology than with any kind of constructive debate. The campaign has been responsible for giving currency to many of the distortions, exaggerations and misconceptions that we have heard this afternoon from the Opposition. I do not claim, nor have I or my right hon. and hon. Friends ever suggested, that direct labour organisations in this country are perfect or that there is no room for improvement in their operations. We recognise that there have been examples of inefficiency among them. Nevertheless, there are many direct labour organisations throughout the country which pro- vide an effective and efficient service for authorities and their ratepayers.

Those who have been so ready today to criticise direct labour organisations have been rather quiet about the failings of private contractors. We were told by the hon. Member for Folkestone and Hythe (Mr. Costain) that private contractors are put to the test by having to sink or swim according to their own performance, but he knows that this is not the whole of the story. There have been numerous occasions when private contractors have failed to deliver the goods at the right time and at the right price and have put public sector bodies to considerable difficulty and expense as a result. We should not forget the cost to ratepayers when a contractor goes bankrupt in the middle of a job or when ex gratia payments have to be made to enable completion.

Nor is it any use for those who have over the past months opposed the Government's proposals for a far more wide-reaching Bill than the present one to complain now about the absence of provisions on direct labour organisations' accounting and charging. The Government consider that there should be a sound financial and legal framework for the operation of all local authority direct labour organisations.

The hon. Member for Northampton, South (Mr. Morris) said that for the first time this evening my right hon. Friend had stated that we agreed with CIPFA. I remind the hon. Gentleman and his hon. Friend the Member for Ashford that I gave full details in a speech at Scarborough. I quote from the periodical Building of 29th October 1976:

"Ernest Armstrong. Parliamentary Under-Secretary at the DOE went further than any other Minister has done in accepting the main recommendations of CIPFA which would bring DLO accounting procedures more in line with private contractors."

That was our statement about the intentions of the Bill, a Bill which was rejected by the Opposition before they even knew its contents.

I thank the hon. Gentleman for giving way. He is always courteous in these matters.

I agree that the hon. Gentleman said that. If that is so, if the preparations were all made and the provisions were to go into the Bill—and presumably they are sitting in Marsham Street now—and if there is all-party agreement in the House about the desirability of the CIPFA provisions, which is what we are talking about, why cannot the Government bring them forward this Session? On behalf of my hon. Friends, I can guarantee them a swift passage.

I shall come to that. A doctrinal position was taken up by the Opposition. The hon. Gentleman should consult his friends in the Shadow Cabinet about that. It was for them to decide. I am coming to the kind of provisions of which the hon. Gentleman is talking.

We hope to provide the sound financial and legal framework, but it must be done as part of a comprehensive measure. It would be illogical for us to attempt to introduce a comprehensive, new financial system applying to all local authorities in the context of a Bill to remove an anomaly which affects only 25 of them. That is what this Bill is about. If the hon. Gentleman would only bother to read it, he would know that it is concerned with new building and 25 authorities. In a Bill which sought to make a fundamental change of this kind we should also want to include provisions to free DLOs from the present excessive restrictions, which create employment problems and impede efficiency [HON. MEMBERS: "Oh."] We heard a great deal about unfair competition this afternoon. In fact, the restrictions placed on DLOs, the restriction on the work that they can do, are unfair to them.

We have also heard it claimed, both today and on other occasions, that our original proposals for legislation on direct labour would have undermined the private sector. In fact, the proportion of total

Division No. 141]	AYES	[7.00 p.m.
Abse, Leo	Boyden, James (Bish Auck)	Crowther, Stan (Rotherham)
Anderson, Donald	Bradley, Tom	Cryer, Bob
Archer, Peter	Butler, Mrs Joyce (Wood Green)	Cunningham, Dr J. (Whiteh)
Armstrong, Ernest	Callaghan, Rt Hon J. (Cardiff SE)	Davidson, Arthur
Ashton, Joe	Callaghan, Jim (Middleton & P)	Davies, Denzil (Llanelli)
Atkins, Ronald (Preston N)	Campbell, Ian	Davies, Ifor (Gower)
Atkinson, Norman	Canavan, Dennis	Davis, Clinton (Hackney C)
Bagier, Gordon A. T.	Cant, R. B.	Dean, Joseph (Leeds West)
Barnett, Guy (Greenwich)	Carter-Jones, Lewis	Dempsey, James
Barnett, Rt Hon Joel (Heywood)	Clemitson, Ivor	Doig, Peter
Bates, Alf	Cocks, Rt Hon Michael (Bristol S)	Dormand, J. D.
Beith, A. J.	Colquhoun, Ms Maureen	Douglas-Mann, Bruce
Benn, Rt Hon Anthony Wedgwood	Conlan, Bernard	Dunnett, Jack
Bennett, Andrew (Stockport N)	Corbett, Robin	Eadie, Alex
Blenkinsop, Arthur	Cowans, Harry	Edge, Geoff
Boardman, H.	Cox, Thomas (Tooting)	Ellis, John (Brigg & Scun)
Boothroyd, Miss Belly	Craigen, Jim (Maryhill)	Evans, Ioan (Aberdare)
Bottomley, Rt Hon Arthur	Crawshaw, Richard	Faulds, Andrew

construction output undertaken by direct labour organisations is very small, as hon. Members well know, and there would have been no more than a gradual expansion of efficient undertakings.

Of course, if direct labour organisations are as inefficient as some hon. Members claim, and if the horror stories that the hon. Gentleman has in his book are all true, the private sector would have little to fear, because client bodies would not want to engage them.

rose—

I shall not give way, because I am pressed for time.

In answering the debate, I have had to go much wider than the scope of the Bill. This measure, like the transitional orders, has been necessary only because those on the Opposition Benches failed to deal adequately with the position of direct labour organisations in the Local Government Act 1972. They failed to deal adequately with many other matters in that Act as well.

We are simply asking the House to restore powers which have applied to a very limited number of authorities for several years. The powers expired at the end of March. We are concerned to keep the gap in the powers as short as possible in order to avoid unnecessary problems for those authorities. I trust, therefore, that the Bill will be given a speedy passage through the House and that it will not be delayed by doctrinaire arguments such as we have heard this afternoon.

Question put, That the Bill be now read a Second time:—

The House divided: Ayes 186, Noes 161.

Fernyhough, Rt Hon E.	Lewis, Ron (Carlisle)	Silverman, Julius
Fitch, Alan (Wigan)	Lipton, Marcus	Skinner, Dennis
Flannery, Martin	Loyden, Eddie	Smith, John (N Lanarkshire)
Fletcher, Ted (Darlington)	Lyon, Alexander (York)	Snape, Peter
Foot, Rt Hon Michael	Lyons, Edward (Bradford W)	Spriggs, Leslie
Ford, Ben	Mabon, Rt Hon Dr J. Dickson	Stallard, A. W.
Forrester, John	McCartney, Hugh	Steel, Rt Hon David
Fowler, Gerald (The Wrekin)	McDonald, Dr Oonagh	Stewart, Rt Hon M. (Fulham)
Fraser, John (Lambeth, N'w'd)	McElhone, Frank	Stoddart, David
Freeson, Reginald	MacFarquhar, Roderick	Stott, Roger
Garrett, W. E. (Wallsend)	Madden, Max	Strauss, Rt Hon G. R.
Gilbert, Dr John	Marks, Kenneth	Summerskill, Hon Dr Shirley
Ginsburg, David	Marshall, Dr Edmund (Goole)	Taylor, Mrs Ann (Bolton W)
Gourlay, Harry	Marshall, Jim (Leicester S)	Thomas, Dafydd (Merioneth)
Graham, Ted	Maynard, Miss Joan	Thomas, Jeffrey (Abertillery)
Grant, George (Morpeth)	Mikardo, Ian	Thomas, Mike (Newcastle E)
Grocott, Bruce	Miller, Dr M. S. (E Kilbride)	Thomas, Ron (Bristol NW)
Hamilton, James (Bothwell)	Mitchell, Austin Vernon (Grimsby)	Thorne, Stan (Preston South)
Harrison, Walter (Wakefield)	Molloy, William	Tierney, Sydney
Hatton, Frank	Moonman, Eric	Tinn, James
Heffer, Eric S.	Morrison, Charles (Devizes)	Torney, Tom
Hooley, Frank	Murray, Rt Hon Ronald King	Tuck, Raphael
Horam, John	Newens, Stanley	Urwin, T. W.
Howells, Geraint (Cardigan)	Noble, Mike	Walker, Harold (Doncaster)
Hoyle, Doug (Nelson)	Oakes, Gordon	Walker, Terry (Kingswood)
Huckfield, Les	Orme, Rt Hon Stanley	Ward, Michael
Hughes, Mark (Durham)	Palmer, Arthur	Weetch, Ken
Hughes, Robert (Aberdeen N)	Pardoe, John	Wellbeloved, James
Hughes, Roy (Newport)	Park, George	White, Frank R. (Bury)
Hunter, Adam	Parry, Robert	White, James (Pollok)
Jackson, Colin (Brighouse)	Pavitt, Laurie	Whitehead, Phillip
Janner, Greville	Richardson, Miss Jo	Whitlock, William
Jay, Rt Hon Douglas	Roberts, Albert (Normanton)	Williams, Alan Lee (Hornch'ch)
Jenkins, Hugh (Putney)	Robinson, Geoffrey	Williams, Rt Hon Shirley (Hertford)
John, Brynmor	Roderick, Caerwyn	Williams, Sir Thomas (Warrington)
Johnson, James (Hull West)	Rodgers, George (Chorley)	Wilson, Alexander (Hamilton)
Jones, Alec (Rhondda)	Rodgers, Rt Hon William (Stockton)	Wilson, William (Coventry SE)
Jones, Barry (East Flint)	Rooker, J. W.	Wise, Mrs Audrey
Jones, Dan (Burnley)	Rose, Paul B.	Woodall, Alec
Kaufman, Gerald	Ross, Stephen (Isle of Wight)	Woof, Robert
Kelley, Richard	Ryman, John	Young, David (Bolton E)
Kilroy-Silk, Robert	Sedgemore, Brian
Lambie, David	Shaw, Arnold (Ilford South)	TELLERS FOR THE AYES:
Latham, Arthur (Paddington)	Shore, Rt Hon Peter	Mr. Joseph Harper and
Leadbitter, Ted	Silkin, Rt Hon S. C. (Dulwich)	Mr. Donald Coleman.
Lestor, Miss Joan (Eton & Slough)

NOES
Adley, Robert	Fairbairn, Nicholas	Langford-Holt, Sir John
Atkins, Rt Hon H. (Spelthorne)	Fairgrieve, Russell	Latham, Michael (Melton)
Baker, Kenneth	Farr, John	Lawrence, Ivan
Banks, Robert	Finsberg, Geoffrey	Lawson, Nigel
Bennett, Sir Frederic (Torbay)	Fisher, Sir Nigel	Le Marchant, Spencer
Benyon, W.	Fookes, Miss Janet	Lester, Jim (Beeston)
Biffen, John	Forman, Nigel	Lewis, Kenneth (Rutland)
Biggs-Davison, John	Fry, Peter	Loveridge, John
Blaker, Peter	Gardner, Edward (S Fylde)	Luce, Richard
Boscawen, Hon Robert	Gilmour, Rt Hon Sir Ian (Chesham)	Macfarlane, Neil
Bottomley, Peter	Goodhart, Philip	MacKay, Andrew James
Bowden, A. (Brighton, Kemptown)	Gorst, John	Macmillan, Rt Hon M. (Farnham)
Braine, Sir Bernard	Gray, Hamish	Marten, Neil
Brittan, Leon	Grist, Ian	Mates, Michael
Brocklebank-Fowler, C.	Grylls, Michael	Mather, Carol
Brooke, Peter	Hamilton, Michael (Salisbury)	Maude, Angus
Brown, Sir Edward (Bath)	Hampson, Dr Keith	Maudling, Rt Hon Reginald
Bryan, Sir Paul	Hannam, John	Mawby, Ray
Bulmer, Esmond	Harrison, Col Sir Harwood (Eye)	Maxwell-Hyslop, Robin
Butler, Adam (Bosworth)	Hawkins, Paul	Meyer, Sir Anthony
Carlisle, Mark	Hayhoe, Barney	Miller, Hal (Bromsgrove)
Channon, Paul	Heseltine, Michael	Miscampbell, Norman
Clark, Alan (Plymouth, Sutton)	Hodgson, Robin	Mitchell, David (Basingstoke)
Clark, William (Croydon S)	Holland, Philip	Moate, Roger
Clarke, Kenneth (Rushcliffe)	Hordern, Peter	Molyneaux, James
Clegg, Walter	Hunt, David (Wirral)	Monro, Hector
Cooke, Robert (Bristol W)	Hunt, John (Bromley)	Montgomery, Fergus
Costain, A. P.	Hutchison, Michael Clark	Moore, John (Croydon C)
Dodsworth, Geoffrey	Irving, Charles (Cheltenham)	More, Jasper (Ludlow)
Drayson, Burnaby	Jones, Arthur (Daventry)	Morgan, Geraint
Durant, Tony	Joseph, Rt Hon Sir Keith	Morris, Michael (Northampton S)
Eden, Rt Hon Sir John	Kershaw, Anthony	Morrison, Charles (Devizes)
Elliott, Sir William	King, Evelyn (South Dorset)	Morrison, Hon Peter (Chester)
Evans, Gwynfor (Carmarthen)	Kitson, Sir Timothy	Mudd, David
Eyre, Reginald	Knox, David	Nelson, Anthony

Newton, Tony	Roberts, Wyn (Conway)	Tebbit, Norman
Oppenheim, Mrs Sally	Rossi, Hugh (Hornsey)	Temple-Morris, Peter
Page, Rt Hon R. Graham (Crosby)	Rost, Peter (SE Derbyshire)	Thatcher, Rt Hon Margaret
Page, Richard (Workington)	Sainsbury, Tim	Thomas, Rt Hon P. (Hendon S)
Parkinson, Cecil	Shaw, Giles (Pudsey)	Trotter, Neville
Pattie, Geoffrey	Shepherd, Colin	van Straubenzee, W. R.
Percival, Ian	Silvester, Fred	Vaughan, Dr Gerard
Powell, Rt Hon J. Enoch	Sims, Roger	Viggers, Peter
Price, David (Eastleigh)	Skeet, T. H. H.	Walder, David (Clitheroe)
Prior, Rt Hon James	Smith, Dudley (Warwick)	Walker, Rt Hon P. (Worcester)
Pym, Rt Hon Francis	Speed, Keith	Wall, Patrick
Raison, Timothy	Spence, John	Weatherill, Bernard
Rathbone, Tim	Spicer, Michael (S Worcester)	Whitelaw, Rt Hon William
Rawlinson, Rt Hon Sir peter	Sproat, Iain	Wigley, Dafydd
Rees, Peter (Dover & Deal)	Stainton, Keith	Winterton, Nicholas
Rees-Davies, W. R.	Stanbrook, Ivor	Wood, Rt Hon Richard
Rhodes James, R.	Steen, Anthony (Wavertree)
Ridsdale, Julian	Stewart, Ian (Hitchin)	TELLERS FOR THE NOES:
Rippon, Rt Hon Geoffrey	Stradling Thomas, J.	Sir George Young and
Roberts, Michael (Cardiff NW)	Taylor, R. (Croydon NW)	Lord James Douglas-Hamilton.

Question accordingly agreed to.

Bill read a Second time.

Bill committed to a Standing Committee pursuant to Standing Order No. 40 ( Committal of Bills).

Control Of Office Development Bill

Order for Second Reading read.

7.14 p.m.

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

On 25th February last, in reply to a Question from the hon. Member for Hornsey (Mr. Rossi), I informed the House that I intended to introduce legislation to continue the office development control powers beyond 4th August next, when they would otherwise expire, and I promised to make a statement later. I am therefore taking the opportunity provided by the debate on the motion for the Second Reading of this Bill to explain to the House the Government's reasons for wishing the office development control powers to continue and to describe how I shall operate the control in the future.

The main purpose of the Bill is contained in Clause 1, which provides for the continuation of the office development control power—which I exercise at present under Sections 73–86 of the Town and Country Planning Act 1971—for a further period of five years from 5th August 1977. In presenting this Bill the Government are fully aware that there are within the House—and on both sides of the House—hon. Members who would wish to see office development control abolished without further ado. But we also know that there are many other hon. Members most anxious that the control should be not only maintained but rigorously enforced.

As the House will recall, the history of office development control goes back to 1965 when its introduction was among the first actions of the Government led by my right hon. Friend the Member for Huyton (Sir H. Wilson). It was maintained throughout the period of Labour Government and when its powers expired in 1972 they were renewed by the then Conservative Government. Office development control has enjoyed the support of Government of both major parties.

Nevertheless, the objectives stressed have changed considerably over the period, reflecting not only the different priorities of the major parties, but changing circumstances. In 1965 the general aim was to promote the better distribution of employment in Great Britain and in particular to ease the severe congestion that then existed in central London. In 1972, when the Conservative Government decided to renew the control for a further five years, the objective of steering office employment to the less favoured regions was discarded. The right hon. Member for Crosby (Mr. Page), who was then Minister for Local Government and Development, told the House:

"We have concluded that an intelligent use can be made of the control for a limited period to further the objectives of the Strategic Plan for the South-East".—[Official Report, 26th January 1972; Vol. 829, c. 1485.]

The emphasis then, as he made clear, was to concentrate growth within the South-East Region in a number of defined growth areas.

The effect was of course to reduce pressure in London and to divert employment to already prospering and growing centres all around the periphery. With the return of the Labour Government to power in 1974 the emphasis on steering firms to the assisted areas was again asserted. Throughout the whole period from 1965 there has been a gradual relaxation of the original 3,000 sq. ft. exemption limit—and in its geographical area of application—to the present exemption limit of 15,000 sq. ft. in the South-East economic planning region.

Now that the time has come for further renewal of these powers I have had to consider changed circumstances and the contemporary policy objectives that office control should serve. In coming to my conclusions four main considerations have influenced me. First, congestion is no longer a major problem in central London. In 1964 the figure for passenger traffic commuting into the central area during the rush hour was over 1,200,000. By 1976, 12 years later, this figure had declined to just over 1 million. Also, while in 1966 there were about 1·3 million people working in the central area of London there were nearly 10 per cent. fewer in 1975.

Secondly, while congestion in central London is no longer a major issue, the better distribution of employment in Great Britain remains an objective of continuing high importance. I am sure that all hon. Members who represent constituencies in the assisted areas will agree with me when I say that there are still not enough places of office employment outside the South-East of England. Although some cities have a good deal of empty office space at present, we can only improve on the position and balance of employment of many parts of the country by steering office development into them. That means diverting some firms who too readily suppose that the South-East is the only place to have an office.

Since June 1973 the Department of Industry has been paying attractive grants to firms which wish to move their offices and other service industry activities to the assisted areas. Up to the end of last February a total of 244 offers worth £8·4 million had been made under this scheme, which were expected to lead to the creation of 7,600 jobs in these areas. Only last October these incentives were increased, and since then the rate of applications has doubled. This scheme should encourage firms which cannot secure ODPs to move to the assisted areas and give local authorities in those areas a powerful means of attracting them. We rely upon the local authorities to encourage such firms to become established in locations where they can provide the best employment opportunities.

The third consideration is that the Government are determined to do all that they can to help the country's declining inner city areas—including those of London. In this we have widespread support. The relocation of offices can help here, although, naturally, the extent of help will vary from city to city. The fact that the office sector continues to expand makes it an obvious contributor to the regeneration of urban areas which have experienced an overall decline in employment opportunities.

The sort of benefits we can expect from the relocation of offices to those needy areas are: in the short term, new jobs for people living in the area—as well as office jobs these will include a proportion of jobs for unskilled manual and service workers; and in the longer term, a widening of the economic and social make-up of these areas by providing a greater range of employment opportunities. As secondary effects we can expect increased employment in services ancillary to office activities and environmental gains through the physical improvement of derelict or run-down areas. The fourth consideration is that I want to avoid unnecessary bureaucracy and to confine control to the larger and more mobile office developments.

It is with these considerations in mind that I propose to make the following policy changes. I have decided to confine the operation of this control to those office developments which are of major importance—to exempt developments in which no more than 200 to 300 people are employed. The smaller developments tend in any event to be more firmly rooted in their local economy. Accordingly, I shall shortly lay before Parliament an order increasing the exemption limit for ODPs from 15,000 to 30,000 square feet. This will lift control from some 55 per cent. of the number of applications we are currently receiving.

Not only will this confine the control to the size of development which is of most importance and most likely to be mobile but it will help the construction industry by allowing a number of small to medium projects to go ahead. I am sure this will be welcomed by the construction industry of whose problems we are—and, indeed, should be—acutely aware.

It will also help the property market. When the economy picks up again, it will be reasonable to expect an upturn in demand for new and better offices. The situation will require continuous monitoring if we are to get the policy right. In view of the time involved between seeking an office development permit and completion of the building, we must try to avoid the danger of the supply of new offices lagging behind demand, with the consequent inflationary effect upon rents.

In addition, therefore, I intend to give permits for a limited number of speculative office buildings in inner London. In selecting schemes for approval I shall be looking for those which make a strong contribution to the regeneration of the inner urban areas which require improved job opportunities and physical renewal. I have today granted an ODP for the development of 180,000 square feet of office space which forms part of the redevelopment of the approach to Clapham Junction Station in Wandsworth. This project will bring about a substantial improvement to an important inner city area and will provide—apart from the offices—new shops, a car park, a sports centre and a public square.

Will the right hon. Gentleman be extending this special consideration to the London dockland area? Is he coming to that point?

At present I should not like to nominate particular areas of London. However, from what I have been saying it will be clear that the speculative office developments at which we shall be looking with particular sympathy will be those that would help the renegeration of inner areas of London where redevelopment is required, and certainly that would not exclude dockland.

I should like to thank my right hon. Friend very cordially for this extremely sensible decision about the Clapham Junction site, although I know that he realises that it is not the only derelict site needing redevelopment in the Battersea area, where Government help will be necessary for development to go ahead.

I note what my right hon. Friend says. He is, of course, very conscious of the needs of the borough of Wandsworth. But I believe that this particular office project is thoroughly justified and will have a very good positive effect on this important part of that borough.

Apart from measured relaxations to assist inner London, the control will continue as at present—namely, ODPs will be available only to provide offices for firms that can demonstrate that they have a tie with the area.

In applying the control in the outer South-East Region we must make sure that the needs of other areas—the assisted areas and the inner cities, as I have already explained—are taken properly into account and that the development of employment opportunities does not outrun the general development of the economy. The House will recall that in my recent statement on new towns I indicated reduced population targets for third generation new towns and will be aware that the thrust to provide for over- spill in expanded towns is now somewhat abated. The provision of office space and particularly of the major developments which would come above the new 30,000 square feet threshold must be regulated accordingly in the outer parts of the South-East Region.

I turn now to the question of the place of the Location of Office Bureau in this new policy. When I made a statement just before Easter about inner city policy, I said that I had in mind a change in the direction of the bureau's activities.

As the House knows, its advisory service has provided London's management with information on all aspects of office location and office moves; and it has also provided valuable guidance to local authorities up and down the country which wish to encourage or need office employment. But up to now the emphasis of the bureau's work has been on decentralisation from London—to quote its terms of reference

"the decentralisation and diversion of office employment from congested areas in central London to suitable centres elsewhere."

This remit clearly needs revision. In particular I propose to give the bureau two new tasks: attracting international concerns so that they locate office employment in Great Britain, including London; and giving particular attention to the promotion of office employment in inner urban areas, including London. This involves broadening the bureau's terms of reference to "promoting the better distribution of office employment" throughout the country. I shall shortly lay before the House a draft Order in Council to give effect to this change.

The bureau will, of course, continue to have the general duty of assisting in the mobility and efficiency of office employment. In carrying out its wider remit it will simply be extending and giving a new emphasis to the activities and methods, which, under its founder chairman, Mr. Sturgess, and its present chairman, Mr. Prendergast, it has developed and perfected with such marked effect. In particular, I hope that it will be able to attract international concerns to establish themselves in Great Britain—whether that be in London or in other major cities.

Although it is the bureau's publicity which attracts most attention—that, too, will have to reflect the new approach—the mainspring of the bureau's success has been the collection and collation of the information that office employers need in order to consider and plan a move, for I have no doubt that the results that the LOB has achieved depend on the reputation it has earned for giving employers easy access to accurate, comprehensive, impartial and up-to-date information, and to the research studies it has done on the mobility of office employment.

The bureau's experience and research are equally valuable to local authorities interested in attracting office employment and interested to learn how they can make themselves attractive to it. The bureau will, of course, continue to give special attention to the needs of towns in the assisted areas for office employment, and to helping the inner urban areas up and down the country to attract the office employment which they need.

So much for Clause 1 and the new policies we intend to pursue if, as I hope. Parliament enacts the measure.

The remaining clauses of the Bill need not detain us long. They provide for some minor, technical amendments to the existing legislation.

Clause 2 simply makes it possible to provide that the floor space exemption limit for office development permits be expressed in terms of square feet or in terms of square metres.

Clause 3 remedies a defect in the existing statutory provisions. It provides that an order made by the Secretary of State to exclude any area from the control shall be subject to the proper parliamentary procedure. I trust that the House will welcome this proposal for greater parliamentary control over my actions and those of my successors.

Clause 4 also remedies a defect in the existing statutory provisions. It relates only to local authority development. At present, I am told that there are exceptional circumstances in which local authorities in the controlled area can develop offices without getting a permit. The purpose of the clause is to close that loophole and put them on the same footing as other developers.

Having thus explained its purpose, I commend this short Bill to the House in what I hope has been a properly short speech. I hope very much that it will be given a Second Reading.

7.32 p.m.

First, I thank the Secretary of State for the way in which he has presented the Bill and the important statement that he made in opening the debate. We welcome all that the right hon. Gentleman has said about his new policy, especially that he has recognised the difficulties of the construction industry, and the anxiety he has shown in his new policy in trying to help the industry. I noted that he has regard to the fact that he must guard against the future upward spiralling of rents in the centre of London by ensuring that there is a sufficient supply to meet demand as and when the economy boom, for which we all wait, takes place.

We welcome the right hon. Gentle man's proposals to try to revitalise the inner-city areas, whether they be in London or in other cities. We noted with great interest all that he said about the new function of the Location of Offices Bureal, which I understand will now bring back jobs into the inner cities whereas its activities were directed to ensure that they were taken out of the inner cities.

That is a great reversal of policy and one begins to wonder whether there is anything left in ODPs. There seems to be little justification or basis, with all the exemptions there are, for keeping this administrative machine, other than perhaps the difficulty of knowing what to do with the civil servants who are presently engaged upon the exercise until some other job is found for them.

Having recognised the great step forward that the Secretary of State has taken, it is appropriate to consider whether there is any justification for maintaining any ODP system. With that in mind, I have turned to see what independent commentators have said about the operation of the system. It seems that there is almost universal criticism. The right hon. Gentleman should have regard to what is being said by planners about ODPs, the effect that they have had on our economy and inner cities and whether they have been effective in giving the sort of help to the assisted areas that the Secretary of State hopes will continue.

I refer the right hon. Gentleman, first, to the book written by John Radcliffe entitled "Town and Country Planning", which was published in 1974. In the chapter on offices he wrote:

"Location theory for industry might be unsophisticated but for offices it is primitive. The policy underlying it is indiscriminate, inconsistent, tardy and heavily reliant upon trial and error. Too much emphasis is placed upon the existing stock and future supply without sufficient regard to the nature of demand. Virtually no attempt has been made to define which office functions are most appropriate to central metropolitan positions, which to peripheral positions and which to the provinces, and how a policy of decentralisation, if considered expedient, might best be implemented."

That is a heavy and formidable criticism of the ODP system. It is said that it is crude and unscientific. Mr. Radcliffe demonstrates that one of its consequences was to contribute to the spiralling increase in office rents that took place in the 10 years that he had under review in his book, with prime rents in the City of London rising from about £2 per square foot to £15. That cannot be attributed wholly to the consequences of inflation.

Compared with other commercial centres it has been demonstrated that London office rents in 1974 at £15 per square foot—they have stayed at about that level, having stagnated with our economy—were unfavourable compared with other commercial centres. For example, in Brussels, at the time Mr. Radcliffe was writing, rents were about £3 per square foot. In Zurich they were about £4 a square foot. Our economic difficulties have seen a stagnation in the rise in office rents while those on the Continent have begun to catch up.

However, London is still uncompetitive, rents ranging between £50 and £160 per square metre. I have to convert to metric terms as those are the figures that the CBI has available. That level of rents has to be compared with £36 to £47 per square metre in Brussels, £37 to £56 in Western Germany, £46 in Amsterdam and £16 to £44 in Milan. This difference in the rental of office accommodation in the centre of London exists at a time when we are so dependent upon our invisible earnings in banking, shipping and insurance to hold our balance of payments above water.

The theme of spiralling rents is taken up by Peter Townroe in his book entitled "Planning Industrial Location", which was published in 1975. In chapter 9, under the heading "The Movement of Offices", he writes:

"The ODP system has certainly contributed to the very high office rental values in Central London, thus making operations for companies forced to remain in London more expensive as their leases get renewed. The system also contributed to large increases in the wealth of individuals and companies involved in owning and leasing properties."

Thus we have it that ODPs, by artificially restricting the amount of office space available, have greatly contributed to the cost of life in London, reduced our competitiveness in the international commercial world and served to make more wealthy those who invest in office property blocks—

"they toil not, neither do they spin:

And yet I say unto you, That even Solomon in all his glory was not arrayed like one of these."

I hardly think that that is a result that the Labour Party can regard with equanimity, especially when it tends to lecture us so much concerning the evils of unearned income, non-productive activity and the need to keep down the cost of living. However, I imagine that it consoles itself with the thought, as the right hon. Gentleman has done, that this is the unhappy consequence of the need to have a fairer distribution of new employment throughout Great Britain and the important principle of ensuring a shift of employment from the relatively wealthy South-East to the more depressed and assisted areas.

If that is the case—the Secretary of State said that it was his major objective—I am afraid that I must disillusion him. I refer the right hon. Gentleman to an article written in January of this year by G. B. Goddard in "Town and Country Planning". There he comments upon the Government's "Office Location Review" which was published in April 1976. He says:

"the proposed new powers will improve only marginally on the pretty abysmal success rate of the present system that is noted in the Review. Thus of all the forty one ODPs refused to named user applicants for 10,000 sq. ft. of space in the GLC area in the period 1965–72, eleven had remained in the same premises and twenty four had subsequently obtained an ODP on the same site or on another site in London. Only six of the applicants had in the event moved out of London, and all of these stayed in the S.E."

I think that the explanation for that is to be found in the comment made in Chartered Surveyor for February 1973. It reads:

"The demand for additional floor space increased, but not because of an increasing number of jobs. The average amount of floor space per worker in offices was rising, not only because acceptable standards were rising, but also because mechanisation of many routine office jobs meant that more room was required for the machines. However, at the time, lack of information meant that this pressure from within central London for the expansion of existing offices was equated with additional employment and the interwar concept of London attracting development at the expense of other areas."

In other words, the concept of the Government in restricting office accommodation in London is destroyed if one finds, first, as the review has shown, that those refused ODPs do not move out of London and the South-East anyway, and, secondly, that their motivation is to increase their capacity within their organisaton in order to have more efficient machines and internal operation.

I think that this is borne out by the experience of the LOB, which says that over two-thirds of its recorded moves have been to distances of less than 40 miles and that only one-eighth of them have been over distances of 80 miles—a very small proportion. The majority of the relocation of offices has been to Reading, Southend, Maidenhead, Croydon, Hounslow and Richmond. Others have been to new towns or expanded town developments, such as Ashford, Basingstoke, Swindon and Harlow. Again, in spite of the LOB, the concentration remains once more within the South-East.

Thus, the ODPs have not been a signal success in terms of creating jobs in the assisted areas. The only real success attained in this area has been that of the Government in decentralising their offices. Even so, there is currently a dispute with the unions over the 31,000 civil servants whom the Government wish to move out but who do not wish to leave London.

All this must be balanced against the stultifying effect that ODPs have had on the firms wishing to expand. I remind the House of the 11 that Mr. Goddard mentioned who had decided to stay where they were in their cramped and overcrowded conditions and the 24 who, after much delay, frustration and expense, obtained ODPs for their original sites or sites nearby.

Furthermore, the assisted areas have not been assisted. The Government review admits that indigenous growth has been the principal contributor to office development, especially in the assisted towns. The growth there has taken place not because of the movement of jobs, but because of the growth in their own populations.

To cap it all, some of the decisions of the Department responsible for ODPs have been bizarre and inflexible to say the least. This has manifested itself in respect of applications for office development over central area railway stations.

Here no extra land is required. Little or no burden is placed upon local public transport. Yet 43 such schemes proposed by British Rail were frustrated by ODP refusals. One is entitled to ask what difference this might have made to the finances of British Rail had it been allowed to enjoy rental income from developments such as these.

The hon. Member has quoted the figure of 43 refusals. What period does that figure cover?

It covers the 10-year period. I am quoting from the authorities that I mentioned earlier.

The closer one examines the operation of the ODPs, the more one wonders why we have allowed the system to remain for so long. The ODPs have created more problems than they have solved. Even the relaxations we have heard of today will not go sufficiently far to help deal with some of the problems I have indicated have been created by past practices. The Opposition take the view, therefore, that the time has come to scrap the ODP system altogether, or at least to let it die a natural and unlamented death by not extending its life in the way that the Bill seeks.

Certainly London and the inner cities, facing the crises they do, they must be given the freedom to allow their commercial life to expand. At the moment there is a surplus of office accommodation in the London area. Given the costs of construction against the rents obtainable, few developers at the moment are prepared to risk capital in building new offices.

That in itself is an argument for the abolition of unnecessary restrictions and controls. But the time will come, we all hope, when our economic life will be revitalised by the nourishing flow of oil and when it will once again expand. We must then allow our commercial offices to meet the challenge and not to be constricted and limited by inefficient and insufficient accommodation. If we do not do that, I am afraid that once again we shall see an office rents spiral or explosion blunting the edge of our competitiveness.

I suggest that we leave it entirely to the local planners to determine the problems of congestion and transport that might arise out of the granting of planning permission for the building or expansion of offices. There is no case for continuing a system that has served us so badly in the past and created so many difficulties. Therefore, I regret to say to the Secretary of State that we cannot support him on the Bill.

7.48 p.m.

I, too, begin by welcoming the relaxations mentioned by the Secretary of State. I shall have two detailed questions to which I hope the Minister will be able to reply.

It is significant that the Government Front Bench is occupied by three London Members. They will find it difficult to explain to their constituents why, when unemployment in greater London has more than doubled in the past four years, they are seeking to prolong the life of a system which is still helping to keep jobs out of London. I look forward to hearing their explanations on this point.

The ODP principle in London is out of date, and I shall cite one or two authorities that I think will have the backing of all London Members. The 1965 and 1971 Acts were temporary, the latter being basically a consolidating measure. They were temporary but, alas, so was income tax when it was first introduced, and it is still with us. I do not wish to see the ODP system still with us in five years' time.

What cannot be stressed too much is that London is not asking for any preference. All London is asking for is that it should not be continually disadvan- taged, which it has been over the years. I accept what the Secretary of State says and very much welcome his response and his new terms of reference for the LOB. I join him in paying tribute to the current chairman—I did not know his predecessor—who has done a first-class job, even if it was a wrong-headed job because of the instructions given him by the Government. I am sure that now he has a different mandate he will do an even better job.

What I was not quite clear about was whether in the revised terms of reference that were being given to the LOB it was clear that under no circumstances would its job be to assist anyone to move out of London. That was not completely clear in what the Secretary of State said and perhaps it can be cleared up later.

With regard to office development permits, there is no political party divide. I would just remind the House of the resolution passed by the GLC on 12th October when all three parties, even the Liberals, who were then there, were unanimous in asking for the abolition of ODPs. I do not think I do him any injustice when I say that the one Labour Member on the Back Benches, the hon. Member for Ealing, North (Mr. Molloy) was not unsympathetic to that idea. I look forward to seeing what he does tonight should there be a Division on this issue. Of course, the Government may decide to drop the Bill.

But in the April 1976 review the GLC said:

"the following are giving cause for concern—

(1) A fall-off in employment for clerical workers. (More than 80 per cent. of female and more than a third of male office employment is in the clerical workers category.) While the numbers of administrative and professional workers continued to grow in London between 1966 and 1971, there was nevertheless a drop of over 10 per cent. in employment for male clerical workers, mainly in inner London. There was a similar drop in employment for female clerical workers in inner London though in their case the decline was counter balanced by a corresponding increase in outer London".

It went on to talk of

"Further dispersals of civil servants under the Hardman report;

Recent moves by major banks and insurance companies to move out staff; and

The effects of further progress towards automation, new methods and improved telecommunications."

The GLC continued by asking that the system of office development permits should be dropped, and added:

"in any event should not be renewed after August 1977 when the present powers expire. If it is to continue, notwithstanding the Council's representation to the contrary, then consideration should at least be given to limiting it to large developments only (say those over 100,000 sq. ft.)".

I shall be interested to hear why the Government have not found it at least possible to respond by going up to that figure of 100,000 square feet for exemption because, after all, that was the considered view of those people who know the problems of London best. The GLC knows these problems much better than does the little man sitting in his office in Marsham Street who is dealing with the ODP system throughout the country.

I reinforce what my hon. Friend the Member for Hornsey (Mr. Rossi) said about the need to transfer the examination on the question of ODPs from central Government to local government. I repeat that that was the unanimous view of the GLC on 12th October, and the same view has been re-expressed in a letter only this week from the new council. The policy is still unchanged. It is also right to quote from another document, the 1976 review "Strategy for the South-East".

In its review, The Economist described the major changes which it highlighted as follows:

"London is no longer the engine behind the expansion of the South East. It is a disaster area losing 100,000 people a year (mainly skilled workers), where more businesses fail than manage to get out in time, and pockets of unemployment as severe as in the depressed areas."

I do not think there is a single London Member of either political party who would disagree with that analysis. Yet the Secretary of State continues to believe that there is a need for office development permits in Greater London. I do not believe there is a need for them anywhere. But if there is to be some sort of control, let it be exercised, in London, at any rate, by the GLC and equivalent bodies outside London which know their own local areas and their own local problems. In a debate in which we are discussing London and elsewhere it would be—

I understand the theory which the hon. Gentleman is submitting in that local authority planning officers in London know the problems best. It would appear to be a simple fact that they are bound to know better than the officers in Marsham Street. But that does not always follow in practice. In my own area in the London borough of Ealing I have seen large parts of my constituency almost maimed for life by the behaviour of planning officers. The only hope we might have is that the appeals of ordinary people against the decisions of local planning officers may be brought to the attention of my right hon. Friend via his inspectors. I do not think we can say that in general all will be well if we simply leave things to planning officers in the borough.

That was not quite what I was saying. I was saying, let us leave it to the GLC or the Greater Manchester Council. It is, after all, for the elected members on those authorities to take the decision.

That brings me to another quote that I was going to make from Hansard of 14th January. Unlike the Minister who wound up in the previous debate, I shall not quote myself. I shall quote instead the former Government Chief Whip, who was a highly knowledgeable person, the right hon. Member for Bermondsey (Mr. Mellish). He said:

"When I was appointed a junior Minister with responsibility for London housing by my right hon. Friend the Member for Huyton (Sir H. Wilson) in 1964, we received the advice, which had also been given to the previous Conservative Government, that at all costs London had to be denuded of population and industry. We were told that it was growing fat and bloated and that the othe regions were suffering as a consequence."

That was the point the hon. Member for Ealing, North (Mr. Molloy) made.

"Foolishly enough, I believed it. I took the advice of those great planners. For many months I spent much time urging industry and people to leave London. Looking back now, I realise that it was about the worst advice that any Government were ever given."—[Official Report, 14th January 1977; Vol. 923. c. 1828.]

That reinforces the point that it is the advice given to Ministers, or the advice given to elected councillors, on which they base their decisions. If that is not so, there is no point in having an elected member. That is the point that I put to the Secretary of State for him to consider. Of course, it may be that he always takes the advice or his officials, but I have a greater respect for him and I do not think that he does.

What I have said so far demolishes much of the case—the rest was demolished by my hon. Friend the Member for Hornsey—for ODPs. I should like to know a little more about the effect of raising the limit from 15,000 square feet or metres to 30,000. The Secretary of State said this would save about 51 per cent. of applications. May we be told in actual figures what that means? Are we talking of 100 applications, 1,000 applications, or 10,000 applications? May we have it related to the 51 per cent.?

The Financial Memorandum says:

"The effect of the Bill will be to continue the cost of staff for administering the provisions, estimated at £128,000 a year, including overheads, at 1976 prices".

May we assume that when the exemption limit is raised to 30,000 sq. ft., there will be a saving of 50 per cent. of the present staff doing this work?

I said that unemployment in Greater London had more than doubled in the past four years. I believe, as I said, that those who can judge the situation best on the advice of their experts are the elected representatives. These experts are not merely planners. Some local authorities are now employing industrial officers to liaise with industry and to tell them what the employment prospects are. If local authorities can get the advice and act on it, rather than the Secretary of State, a better job will be done. I hope that even now the Government will have enough common sense not to proceed with the Bill.

8.1 p.m.

My hon. Friends the Members for Hornsey (Mr. Rossi) and Hampstead (Mr. Finsberg) have covered the ground so fully that there is little left to say to justify the Bill. I want to deal with the central bureaucracy which has been built up around office development permits, the Location of Offices Bureau, and other methods by which the Government have tried to move office and service industries from one part of the country to another.

This debate shows the tremendous change of opinion there has been since the early 1960s. In the Press and the professions there was almost universal acceptance in 1964 of these arrangements to move office employment out of London. The system was extended to the whole of the South-East, the Midlands and East Anglia two years later. Those controls were essentially removed three years later, and one wonders whether that was not an admission that things had gone too far. Since 1970 office development permit arrangements have ruled only in the South-East.

As recently as July 1974 the Secretary of State said that strict application of controls that would apply severe restrictions would be brought to bear on speculative development, even for the replacement of existing accommodation. With concrete examples, my hon. Friend the Member for Hornsey has shown what a limited effect this has had elsewhere than in London. Even some of the movement from London has not been very far afield.

There is no doubt that this system has taken up a great deal of the time of the surveying and planning professions and of the planning departments of local authorities throughout the South-East. One should therefore consider the bureaucratic consequences of what has happened hitherto and of what the Bill proposes.

The office location review, which was published in July last year—a carefully researched document in which most Departments, including the Cabinet Office, were involved—considered not only ODP control but possible alternative instruments of policy in trying to prevent what the Government saw as too much office development in the South-East. One cannot but question whether such an exercise was worth the cost, which must have been tens of thousands of pounds, of such an erudite document. I wonder what a cost-benefit analysis would reveal.

We are concerned not only with these arrangements under the Department of the Environment. The Department of Industry has its own methods of getting service industries and office development to certain locations. I know that this is not the Secretary of State's remit, but in July 1973, under the Industry Act of the previous year, incentive schemes were used to get service industries to move to assisted areas so as to encourage office job take-up in those areas. There was a grant of £800 per employee moved with his work, normally up to 50 per cent. of the number of new jobs created. That, too, was a considerable bureaucratic machine using public money to encourage people to move.

The Location of Offices Bureau, established in April 1963, has only a modest staff and budget. Expenditure of 1975–76 was about £172,000. But we must consider its effect on public and private expenditure. In its 13 years, the bureau has moved 1,976 firms—presumably mainly out of London—and provided 139,326 jobs. It has done the work that it was asked to do. Many of us have been fascinated by the octopus advertisements on the Underground—one of the most effective advertising campaigns that I have seen.

The policy has been successful, but does the bureau need a new rôle? Can that new rôle be justified when, as my hon. Friend the Member for Hornsey said, many local authorities have substantial organisations operating successfully to encourage people to develop in their areas? The development corporations are outstanding examples of what can be done. One must question the need to continue the bureau.

It is not only the firms that have moved that have been affected. Many others have been persuaded to develop for the first time elsewhere than in London, which has achieved the Government's purposes. But this has led to a progressive run-down in London. That is the remarkable change of opinion that has occurred in the past few years.

I am told that the office development permit system last year refused 57 programmes, totalling 302,000 sq. ft. It would be interesting to know where that office development was provided. Does it mean that the contracts were lost, or does it mean that they moved out of London within a comparatively short distance?

In today's circumstances different considerations must apply from those that justified the introduction of the scheme in 1964. There is no question but that the arrangements distort the normal operation of financial and economic factors. From what the Secretary of State has said, I do not think that the Government have justified the need for continuing the office development arrangements for another five years.

The Secretary of State is not anxious to wind up the arrangements, so he is struggling to alter them by increasing the development from 15,000 to 30,000 square feet and the number of employees from 200 to 300. In this way he hopes to catch only the schemes of major importance. I do not consider that this is adequate justification for retaining the scheme of office development permits.

In the context of the wish of the Government to reduce public expenditure and bring greater effectiveness into the economy here was a small but positive example of the need to act. The Government should recognise that ending the scheme would mean savings in cash terms, in manpower, and in the interference in the economy.

I wish I thought that the controls, albeit significantly reduced, were not being maintained for their own sake, but I do not. I think that there is a reluctance on the part of the Government to surrender any form of control. They are lifting the controls somewhat but they are reluctant to lose a measure of control altogether. They are determined to maintain this control despite overwhelming evidence that it no longer serves a useful purpose.

The Government must face the realities of today. I regret that in bringing this Bill before the House they appear to be unwilling to do so.

8.13 p.m.

I represent an area some 30 miles from London. We have been affected by the whole ODP policy for a long time.

I have been involved with two local authorities—at Woking and at Reading. Historically, both towns mushroomed as a result of the railway age. I moved there with my parents because in those days the fares were cheap and it paid to move out of London. These towns grew very fast. The result of that growth was a decline in availability of office accommodation and other accommodation had to be redeveloped.

Both Woking and Reading decided to redevelop and both drew up imaginative schemes. The problem of the whole concept of redevelopment—whether it is done in partnership or direct with the local authority—is that it needs to be of the type where office accommodation is on top with shops and other facilities underneath in town centres. Office development permits, therefore, became a crucial part of the development of these towns.

If a plan were drawn up that involved large sections of the town with restricted ODP development, the net result was that there were large gaps in the development in one part of the town and that another part was blighted and became a desert where nothing happened for years. That has happened in East Reading.

One of my constituents had a German guest and when this man was leaving the town he apologised that the Germans had bombed Reading so vigorously. My constituent pointed out that it had nothing to do with German bombs—the local authority had pulled half of the area down. It was not its fault, office development permit policy had brought this situation about. Therefore, I am against the continuation of this policy in the Bill.

Another problem in the outer periphery towns is the cost of travel. It now costs a phenomenal sum—about £450 a year—to get to work. This means that people are seeking office employment within Reading rather than travel to London. They prefer Reading and they want to live there, but office development policy tends to work against that. This is bad for Reading.

One of the difficulties that we do not recognise enough is that because the policies of successive Governments have attracted industry from the South-East to the North—and I am not against that in principle—different kinds of employment must be found in Reading, Woking and other parts of the South-East. My constituency was once known for beer, bulbs and biscuits. We still have the beer, but the bulbs have gone to the West Country and the biscuits have gone to the constituency of the right hon. Member for Huyton (Sir H. Wilson). Manufacturing biscuits was once a crucial part of Reading's history. A number of companies are moving out simply because of the attractiveness of placing industrial units away from London. This means that other employment must be found, but the whole ODP policy works against it.

Reading is becoming the regional headquarters for the whole of that part of the country. We have a number of regional offices being established in Reading and we have attracted one or two headquarters from London because of the easy communications and the facilities. We need this development and we welcome it tremendously, but the ODP policy tends to work against it, and that is why I want to do way with this Bill.

I welcome the relaxation of the controls. The increase to 30,000 square feet and to 200 to 300 employees sounds fine, but in any major development in a town one starts with a key block in the centre. This is still controlled by the policy of central Government and this fact may hold up development around it. Unless there is a key block of offices with shops underneath in the centre, the whole development of a major block in a town can be held up.

I welcome the relaxation, however, because it will help in areas like mine. Nevertheless I do not believe that there is any need for it at all. We can make our own decisions with the Berkshire County Council.

I have been involved in marches on Ministers. In fact I marched, as a member of the planning committee in Woking, on the right hon. Member for Crosby (Mr. Page) and sat in front of him trying to persuade him to let us have more ODP permits for Woking. He was not too keen on the idea, because we were developing rather fast. We would have liked freedom of action to do what we wanted. We wanted to get rid of the blight that is serious in many developing towns.

Although we welcome the fact that Reading has had ODPs granted, this trend must be continued. We need the opportunity to make our own decisions and our own plans for developing our own town. The only reason the Government are anxious to hang on to this bureaucratic machinery is that they hate to get rid of any planning policy.

I am slightly anti-planner. I have a great suspicion of planners, who usually meet in offices and examine charts but seldom look at what they are dealing with on the ground. Too often the planners do not understand the needs of the people. A development may look tidy, but it needs local control and responsibility and not central bureaucratic machinery. This is an out-of-date concept, we do not need it any more, and I hope that we shall vote against the Bill tonight.

8.20 p.m.

I welcome the relaxation offered in the Bill. However, it has been suggested that it does not go far enough and that there should be more relaxation, and possibly no control whatever. We must try to keep a sense of balance.

We all know that there was complete unanimity in the House 10 or 12 years ago on this subject. There had been massive office development in Greater London, and the dangers were obvious. Large office blocks of 10 or 12 storeys were built in our capital. Yet we were always being asked by constituents, particularly by young couples who wished to marry, "Why cannot Parliament see to it that new homes are built for people such as ourselves and many like us, instead of allowing the development of great tower office blocks?" Therefore, we were all agreed that we needed to control office development.

The hon. Member for Hornsey (Mr. Rossi) quoted a number of learned works written by learned gentlemen. However, we know that those learned gentlemen in 1976 were of the view that we should do away with the control of offices. But some of us have memories that go back a long time. The same learned gentlemen in 1965 told Parliament to control the mushroom development of offices in the capital. They will say anything if they can make a bit of money by selling their books. We should all be mugs if we fell for that kind of nonsense. Therefore, let us try to keep the matter in perspective.

There was a need to control that type of development, and it was right that we took action—but we took it too late. Nevertheless, that legislation was introduced by a Labour Government, and was rightly continued by a Conservative Government. All the brilliant geniuses in our universities, so busy reading books written by other people, tell us when they see something going wrong "You must change the situation". We do not want them to tell us these things. We know all about them. They could make a much greater contribution to the problem by indulging in a little silence for four or five decades, because that would help us all.

I wish to pay tribute to the hon. Member for Hampstead (Mr. Finsberg) whose knowledge of the problems of London we all appreciate. We do not always see eye to eye, but London Members recognise the hon. Gentleman's abilities. We may have disputes about solutions, but we generally know what we are talking about because we see these things happening on the ground.

The hon. Member for Reading, North (Mr. Durant) spoke of the rôle of local authority planning departments. The Opposition generally believe that this Bill is not required and suggest that we should leave it all to the planners. That was all said at about 7.50 this evening—but at 8.15 p.m. the hon. Member for Reading, North took the reverse point of view and said that he was an anti-planner. He gave good reasons for not wishing to leave everything to the planners. But we cannot have the Tory Front-Bench spokesman saying "Leave it all to the local planners" and then, a short while afterwards, being told by a Conservative "The last thing we should do is to leave it to the planners".

The wise thing for the House to do is not to listen to what is being said in this House by the Opposition, but to take full cognisance of the experience on the Labour Benches, particularly my contribution from which the House is now benefiting. I hope that that contribution will not now be spoilt by the intervention of the hon. Member for Reading, North.

The point I was trying to make was that planning gets worse the higher up one gets. I am in favour of local planners, but I sought to make the point that the higher up the structure one went, the more remote the planners appeared to be.

That may be true, and certainly the power vested by Parliament in local authorities is pretty formidable. We have all seen local planners at work on their charts, with finely drawn lines that look so impressive, but many of the plans have been drawn up merely to look pretty. If one asks "Where is that area?", the planners do not know what it is because they have drawn up their plans from somebody else's plan. Planners at local level are always desperately concerned with steel, concrete and glass, and when one seeks to question those plans it is almost regarded as a form of lèse-majesté. Many planners appear to be quite unconcerned about the needs of ordinary folk who live in the streets where the planners would like to see warehouses and large office blocks.

The three major parties in the GLC have requested the abolition of office control. I would not go as far as that. We have heard that industry is being attracted out of Greater London. Looking at the matter from a GLC standpoint, I believe that we have suffered as much as have other regions. I cannot see the sense of a policy which suggests "Because there is high unemployment in Wales or in the North or in Scotland, you in London must have your share". That is the sort of stupidity one finds handed down from youngsters from Oxford and Cambridge. It is no good saying to the ordinary man on the dole, "There is only 9 per cent. unemployment in your region". That kind of figure cuts no ice with the man with a family who is out of work. As far as he is concerned, he regards himself as 100 per cent. out of work.

I am sure that my hon. Friend as a Socialist is in favour of sharing our resources throughout the country in terms of need.

Of course I go along with that, but I do not see that kind of classification being sorted out in terms of unemployment. I shall have to work that one out. I can see the idea behind that suggestion—namely, that in certain areas one's fellow countrymen are suffering excessive unemployment, and that if industry can be attracted to those areas of large-scale unemployment, the problem in those areas will be reduced. In order to do that, it is argued, areas such as the South-East and Greater London must be told that they have enough industry and that no more can be brought into those areas because it must be spread into other areas.

However, things do not work in that way and that idea is not working. That was the intention and it was a good and honourable one, but it has not worked. Industry has been lost to London—and not only did the industry leave that we expected would leave but industry that we had believed would come to London did not come. What have we been left with? There are large shells of buildings in all parts of London that are going to rack and ruin. Men are losing their jobs.

I can give a classic example of a large factory that employed skilled men in the glass container industry. Since 1920 it had been a household name in that industry. I am referring to Rockware Glass. The firm made all sorts of clever glass containers as well as milk and beer bottles, and it sold its products to well-known firms all over the world. It then became financially attractive for the firm to say to its skilled employees, "You have done well boys, but we cannot respect your skills or crafts because the power of profit tells us that we must leave you in the lurch and shove off somewhere else." That is exactly what happened. I am anxious because the site that was used by that company is still empty.

London Members on both sides of the House want industry to be attracted back to London. I am gravely apprehensive that large industrial sites, such as the one that I have just mentioned, will be occupied by 12 to 13 warehouses. At one time about 1,500 skilled workers would have been employed on such a site, but if the area is used for warehousing there will be jobs for only about 30 to 40 clerks and a couple of fork-lift-truck drivers. That is the danger. Warehouses and offices cannot help such an area as Ealing.

As the hon. Member for Reading, North and the hon. Member for Hampstead have said, the ramifications are enormous. I support them, and I go further. The ramifications are extremely serious.

At one time in Ealing youngsters about to leave school were put in touch, through special courses, with the glass container industry. Some trained as specialists in that industry and many have travelled all over the world to sell the skilled work produced by their colleagues in England. Some school leavers became skilled fitters, carpenters, joiners or glass-blowers. All this was encouraged by the education authority in the area. When pupils were attracted to this industry their education was directed to that end. The idea was that they could become skilled artisans in this great industry. But suddenly the great industry was no longer there. Not only were the fathers of these pupils out of work but the whole educational system had to be readjusted, and there was nothing else to readjust to because no other industry came to Ealing.

Hon. Members are today pleading for more industry, but it is essential that we do not act too peremptorily because there is a danger that instead of industry we shall get warehouses and office blocks. I ask the Minister to bring to the attention of the Secretary of State the warnings that I have given about the danger of valuable land that once housed industry being taken over by either office blocks or warehouses, with the consequent threat to job creation in Greater London.

I wish to make one last point that has already been mentioned by hon. Members opposite, and it is another point that I ask the Minister to pass on to the Secretary of State. I entirely agree with the hon. Members for Hampstead and Reading, North that, as far as possible, all planning should be left to the local authority or the councils that know the area. Everybody is saying "Hear, hear" to that, but I wonder whether they will say "Hear, hear" to this: when councillors make their decisions for the benefit of the people that they represent and when pompous planning officers do not agree with those decisions and there is an appeal to the Secretary of State for a public examination, the councils know that they cannot count on the support of their own officers, whose salaries are paid by the ratepayers. Those officers will not appear at the tribunal on behalf of the ratepayers who pay their salaries because they claim that it is infra dig. That is as absurd as our wanting to send armed forces somewhere in the world and the Chiefs of Staff saying that although Parliament may have taken the decision, they did not agree with it and would therefore not carry it out.

This has been the attitude of some planners, and the problem must be seriously considered. It is no use hon. Members opposite and I agreeing in principle that local authorities should have more say in the planning of their citizens' towns if, in the final instance, too much power is vested in the local bureaucrats. That is as heinous as having too much power vested in bureaucrats at any other level, and I hope that my hon. Friend will mention this problem to the Secretary of State.

I have some apprehensions about the Bill and am not entirely happy with it. However, there is enough in it to tempt me to support it. At least we are not swimming in completely the wrong direction. There was a need for control of office building and, despite what others say to the contrary, I believe that that need still exists. For the reasons that I have mentioned, some form of control must be held at ministerial level.

8.36 p.m.

I shall not follow the arguments of the hon. Member for Ealing, North (Mr. Molloy) in his hot pursuit of pompous planning officers. Everyone who has spoken so far has come from the South-East or thereabouts, with a heavy preponderance from London. That will change when my hon. Friend the Member for Crosby (Mr. Page) speaks, but it is not surprising that there should have been so many speeches from hon. Members from the South-East since the Bill will have a direct effect upon London and the South-East.

But it should be remembered that the Bill was planned to have a powerful indirect effect on other regions and it is right to question whether we should allow this extension for another five years. It is not a clear judgment, but rather a narrowly based one.

I have never believed that there is any point in trying to build the rejuvenation of the North-West or any other area on the ashes of London, and I agreed with the reaction of the hon. Member for Ealing, North to the intervention of the hon. Member for Ormskirk (Mr. Kilroy-Silk). There is not much joy in equal shares of misery, and I do not see the joint of sharing out unemployment in that way.

The object of the exercise is to balance the various attractions of the regions so that the natural decisions of industry and office builders will be spread more evenly over the country. There is a natural gravitational pull to the South-East, and it is at this time, when there is unemployment in the South-East, that we may test whether we are serious about this policy.

It is easy to say that there should be special measures in assisted areas at times when it is a nuisance to have more business in the South-East because of the difficulty of finding labour, but the argument is more difficult when the South-East itself comes under unemployment pressure. The argument about relative levels of unemployment must be seen in the context that the whole country is sinking while the South-East is just beginning to get its feet wet. In the North-West and in other areas they are already well aswim. That is the situation with which we are faced, and the Bill is concerned not only with the present situation but with what will happen in the next five years. It is right, therefore, to look at it in a rather longer-term way than the hon. Member did.

There is a point which worries me considerably, and it is a major factor in my attitude towards the Bill. We are faced with the gradual peeling away of the traditional means of dealing with assisted areas. We lost the regional employment premium. I agreed with that because I did not think that it was very effective. Although the Government are still holding firm, the whole procedure for the transfer of civil servants is now under strong attack from the Civil Service unions, from Committees of the House and from speeches here. The whole attitude towards it is changing. I should not be surprised if the pressure continued to build up and there were an announcement that a change is to be made.

There is now the question of dropping the office permit arrangement. I think that we are in some difficulty here. It is obviously true that we do not wish to continue with something which has proved relatively ineffective. On the other hand, if we start peeling away these arrangements one by one, we shall have difficulties, because we do not thereby do away with the problem at the same time.

I entirely agree with the comment made earlier that all the evidence is conclusive that the strength of a region will come from its internal generation rather than anything we are likely to import from outside. That is true of offices, and the figures quoted confirm that. Nevertheless, it is true to say that imported jobs have made a contribution. If we examine the statistics of the Location of Offices Bureau for 1963 to 1976, we can say either that the North-West, the North, Wales and Scotland have only got 6 per cent. of the offices which have moved out of London, or, doing some quick mathematics, we can say that about 7,000 jobs have been moved out of London. If we simply quote the percentage it sounds derisory, but to areas in receipt of 7,000 jobs it is not derisory. That is the situation with which we are faced.

It so happens that in the North-West, part of which I represent, we are relatively well placed with offices. We have a rather higher proportion than the population would lead us to expect. But for other regions that is not the case, and the importance of the office element in the rejuvenation of these areas should not be underestimated.

My real concern in dealing with the Bill is not so much the office development permit system, to which I will come shortly, which I think has been ineffective. I am more concerned because it is part of the continuing erosion of the support for these areas. I think we shall soon come up against the problem at the next stage of IDC policy. I realise that it would probably be out of order for me to go into that aspect, but the IDC is the permit system relating to the industrial side, and there is quite substantial evidence from some of the academics and from others that the IDC policy has been one of the most effective ways of getting new jobs into the assisted areas. We should take that into account.

We have then to ask ourselves, given that we all agree with all these objectives, whether the office development permit policy is the right way of going about it? Clearly the answer to that must be "No". I do not think there can be any serious doubt that the statistics which were quoted, and which I think are generally accepted, show a remarkably small return for all this effort. If we were seriously setting out to get more office jobs in inner city areas or in any other part of the country, we should be disappointed by the return for what has been many years of this policy. As we have heard from London Members, we are now seeing a similarly adverse effect in London. If we pose the question—What is the trade-off between the advantage to the assisted areas and the disadvantage to inner London?—we must come to the conclusion that there is greater disincentive to inner London than any benefit to the other areas. It is for that reason only that I support my hon. Friends tonight. It is a narrow judgment.

It is most important that, having made that assessment, we undertake the next step. It is up to those of us who oppose the Bill and to others who have misgivings about it to point out that, nevertheless, we need some mechanism. The problem will not go away. The need for offices in other parts of the country is important.

One test will be the extent to which the Government hold firm to the proposals for Civil Service dispersal. I am aware that the Minister of State, Civil Service Department has emphasised that is his intention, but it is an interesting microcosm of the whole problem. It is true that people who are now employed in London in Civil Service jobs do not wish to go to Bury or somewhere else. They have their roots, like everyone else. Of course, a certain amount of inefficiency results from transfer. However, unless the Government, who in this respect have more powerful means of decision than any private firm, are prepared to take that step, we shall not get the pockets from which other satellite developments can occur.

I support rejection of the Bill, because that is right, but something must keep going in its place. A whole review of the way that we treat the regions is necessary. Many historic proposals could be demonstrated to have failed or not to have been very successful. Therefore, we must search for something new.

The most powerful argument against the Bill was adduced by my hon. Friend the Member for Hornsey (Mr. Rossi). He said that 41 firms had been checked, that of those only six moved out of London, and those six moved into the South-East. Therefore, keen though I am to find a way of channelling new resources into the assisted areas, I cannot support a Bill which will prove ineffective in achieving that end.

8.50 p.m.

It is a pleasure to follow the hon. Member for Manchester, Withington (Mr. Silvester) if only because he has attempted, with a measure of success, to lift the debate from London into the regions. As I represent a constituency in the Northern Region, I welcome his initiative. I listened with great interest to his recital of the development area incentives and his whole attitude to the Bill and the general subject of office development control.

I am sure that the hon. Gentleman will forgive me when I tell him that I dissociate myself completely from that part of his speech in which he referred to his agreement with the recent decision to abrogate the regional employment premium. The whole of the Northern Region—as the House knows and as you certainly know, Mr. Deputy Speaker—is, like most of Scotland, a development area. I hope that we have gained some benefit from the operation of office development control, although the hon. Member for Withington and the hon. Member for Hornsey (Mr. Rossi) sought to dissuade me from that belief.

I welcome the Bill, but with reservations because of the relaxation of control, to which my hon. Friend the Member for Ealing, North (Mr. Molloy) gave an unqualified welcome, and because of the whole history of office development control. I was a Member when the system was introduced, and I recall the serious and extensive arguments in this Chamber on the subject.

One cannot think about office development control without immediately thinking of that highly controversial project, Centre Point, around which many of our arguments revolved, and the fact that when the first Act was introduced it was undeniably proved that far too much office space was available in the metropolis in comparison with the regions. At that time we were deeply concerned about the absorption of sometimes scarce building materials and the fact that skilled labour was being diverted from more praiseworthy jobs, such as the construction of housing, to build the tower blocks to which my hon. Friend the Member for Ealing, North referred. In some cases it was impossible to find tenants for the blocks when they were constructed.

There is and always has been tar too great a concentration of these resources in London. When the hon. Member for Withington speaks about the North-West, I am reminded that in the North-East and the Northern Region generally we have not only a higher unemployment rate than any other region in the country, including Scotland, but far too few outlets for school-leavers. There is far too little office employment for them, no matter how good their academic qualifications. On leaving school all too few of them find that sort of employment, whether in Government offices, commerce, or other sections of private industry.

My hon. Friend the Member for Ealing, North, in a rather philosophic discourse, referred to the justice of sharing resources. Surely it is right to try to increase the woefully inadequate job opportunities available to young people in my constituency, for example, which is dominated by coal mining, where only a few handfuls of office jobs are available anyway.

The town in which I live is bordered on the north and south by the two new towns of Washington and Peterlee, where land and other facilities are available for office development. Both these new towns have much to offer to Government offices and other offices. Certainly, Washington new town has. Both of them have tremendous leeway to make up. They are admirably geographically placed in an industrial area where the catchment area for young people is large enough to justify the allocation and construction of offices, whether Government or private.

I see office development control as an integral and essential part of the regional policies which have been pursued by both Labour and Conservative Governments. It is a historic fact that the right hon. Member for Crosby (Mr. Page) had the onerous responsibility—sometimes not meeting with the full approbation of his Back Bench colleagues—of administering the office development control policy handed on by the previous Labour Government. There is everything to be said in favour of the Bill and of the extension of powers sought in it.

My final argument in favour of creating more office work in development areas has a high economic content. Office space in the centre of London is much more costly than in the Northern Region, whether it be in Newcastle, Sunderland, Durham, Washington, Peterlee, Newton Aycliffe, or elsewhere.

Despite the opposition of some civil servants to a move, it is a fact that the Northern Region has become one of the most attractive in the country. It has sweeping open spaces replacing the old colliery spoil heaps; there is the beautiful and rugged Durham and Northumberland coast; there are the North Yorkshire moors. The Lake District and the Scottish Borders are both within one and a half hour's driving distance. There are all the amenities for enjoyment by people decanted from London or other parts of the country. We can also claim to have made available by the beauties of the North more accessible by the development of a system of communications much better than ever before.

I hope that the extension of the powers contained in the Bill will provide us with more opportunities for employment, particularly for younger people, than we have ever had in the North.

8.59 p.m.

The hon. Member for Houghton-le-Spring (Mr. Urwin) said that he was pleased that the debate had been lifted away from London to the North. Perhaps I can attempt to lift it away from stale political dogma into the fresh air of reality.

As the hon. Member for Ealing, North (Mr. Molloy) says, both sides of the House are divided on the dispute about whether we should have planning restrictions and controls. That is a direct reflection of the fundamental rift between us. Members on the Government Benches believe in planning and controls. They will hold on to planinng and controls long after the need for them has passed.

The Bill provides for a layer of bureaucracy and planning which is unnecessary. I concede—as will all hon. Members—that the original legislation was justified, although by the time it was introduced in 1965 there had been a shift. The need for a restriction in commercial development had passed. That was because of the measures taken by the Conservative Government to discourage the further proliferation of commercial development.

The House often legislates just as a situation is beginning to turn against the need for legislation. That was reflected in the original legislation, which the Labour Administration intended to be temporary. Perhaps it was to our shame that we continued the temporary nature of that legislation instead of abolishing it.

The position that existed in 1965 cannot be compared with the situation today. In 1965 there was congestion of office development in London and other parts of the South-East. In 1965 there were not the same financial problems that face the Government at present. In 1965 a new Labour Government were in power after 13 years of Conservative rule. The new Government needed to flex their planning muscles and to show themselves to be a Socialist Government of the future.

The position now is different. First, the policy of rigid control in London and South-Eastern towns has begun to create more problems than it solves. Hon. Members who have become familiar with environmental matters cannot but have been impressed with the vast amount of evidence which pours into Government Departments of the rundown, the poverty and the misery of unemployment in the inner city areas. The present situation is different from that which existed in 1965 when the legislation was introduced.

Surely the central point is that the rundown is in the manufacturing base and that the office mix in London compared with that in the provinces is still favourable to London.

There is some strength in that argument. Nevertheless, there has been a rundown in employment in the inner city areas, in particular in London, even in commercial properties. About 100,000 people have moved out of London. The demand earlier this decade was to move commercial development out of London to other parts of the country. The result has been a rundown in the metropolis and the South-East area. That has caused tremendous harm and we are now experiencing massive unemployment. The situation is graver than it was in the mid 1960s. Anything that we can do to get employment back to the inner city, urban areas will cure many problems—not only the problems of unemployment and poverty but those of crime.

The second change that has come about is that in 1965 local government wanted these controls. But now we know that the new local government body in London, the Greater London Council, under Conservative control, is against them. We come back to the point that must be made time and again in debates of this kind—that we should leave development of local areas to those who understand it and know it best, and they are the local government in the particular place. If the GLC, under Conservative control or Labour control, feels that it would be better off without these controls, it ought to be allowed to make the choice, because it is the democratically elected body for the area. As far as possible, planning of this kind should be left to local authorities.

The hon. Gentleman does not seem to know anything about regional policy. The GLC is not a local authority but a regional authority. The hon. Gentleman is contradicting himself all the way through what he is saying.

I do not think that the hon. Gentleman appreciates what it is that I am saying. Anyone who argues that the GLC is not a local authority ought to study local government a little more.

It is a region, all the same.

The position is as I have stated it. It is that the GLC does not want these controls, and the GLC, being the local authority—whether or not it is a regional local authority—ought to be able to take these planning decisions.

The third change is that we have, I think, learnt a little in the 12 years or so since the passing of this legislation, and we realise that if we can make savings in bureaucracy and in public expenditure, that will be to the good of the nation. The Government have been making very strenuous efforts to cut back on public expenditure and to cut out waste, particularly bureaucratic waste. Here is an opportunity to do this and to remove a useless layer upon the bureaucratic system. It is an opportunity of which I should have thought that the Government, in the present financial straits, would have been only too delighted to take advantage.

It may be thought that the views I am expressing are the views purely of a Conservative. I am very proud of the fact that I am a Conservative. I think that we have too many of these controls, restrictions and limitations and that it is a valid criticism of Socialism that Socialists hold on to the controls and the planning long after that is necessary. However, I draw the attention of the House to what the right hon. Member for Bermondsey (Mr. Mellish) has had to say in recent months about this legislation. After all, he was a Minister in charge of London development at the time that the legislation was introduced. He has said,

"When I was appointed a junior Minister with responsibility for London housing by my right hon. Friend the Member for Huyton (Sir H. Wilson) in 1964, we received the advice, which had also been given to the previous Conservative Government, that at all costs London had to be denuded of population and industry. We were told that it was growing fat and bloated and that the other regions were suffering as a consequence. Foolishly enough, I believed it. I took the advice of those great planners. For many months I spent much time urging industry and people to leave London. Looking back now, I realise that it was about the worst advice that any Government were ever given."—[Official Report, 14th January 1977; Vol. 923, c. 1828.]

That comes out of the mouth of a London Member who had responsibility for planning and housing at the time that this legislation was introduced. Let hon. Members not think that this is just a piece of party polemics. It stretches across the party barriers. I am only sorry to see that the right hon. Member for Bermondsey is not in the Chamber at present to give support, as it were, for the Opposition's attitude to this legislation, however many concessions the Minister may already have made.

In short, therefore, I say that this sort of legislation proliferates a wholly unnecessary layer of bureaucracy and planning controls. Office development should best be left to those who know best about it—namely, the regional planning authority or other forms of local planning authority. When the present legislation expires on 4th August it should be allowed to stay expired. It has served its purpose and it should go. I am pleased that the Opposition have taken a hard line against it.

9.11 p.m.

I was extremely surprised to find the hon. Member for Burton (Mr. Lawrence) appearing to represent metropolitan London. Either the hon. Gentleman has his eye on a London seat, or he has some peculiar motivation to advance the claims of London, claims that have been advanced so frequently in the past against those of the other areas of the country.

Like my hon. Friend the Member for Houghton-le-Spring (Mr. Urwin) in the North-East and my hon. Friend the Member for Swansea, East (Mr. Anderson) in Wales, I am surprised that the hon. Gentleman should make out a whole case in terms of London, he representing an area such as Burton. But then it is not surprising that he seems to have this confusion in his mind. The hon. Gentleman obviously has no concept of what a region is when he talks of the GLC in terms of a local authority.

rose—

No, I am not giving way to the hon. Gentleman. I do not have enough time to give way.

rose—

I have not finished with the hon. Gentleman. Perhaps he will choose to intervene at a later stage.

The hon. Gentleman made his normal, expected protestations about bureaucracy and free enterprise. That is what we have learned to expect from him. What he said is what we have heard so often from the Opposition Benches. Conservatives want a Tory free-for-all. They want no attempt to determine a proper, logical, coherent plan of development that will suit the country as a whole and the regions in it—regions such as Merseyside and the North-East, which have suffered years of neglect and decline. If Tory freedom, Tory free-for-all and the loosening of controls and bureaucracy that the hon. Gentleman wants are allowed to take place, they will lead to the proliferation of office buildings in London that are built at a profit, built to stay empty, while we have dereliction, high housing costs, a lack of adequate housing, and many other deficiencies.

I am sure that the rest of the country will say with me that it wants nothing of Tory freedom. However, the hon. Gentleman learns quickly. That much has to be said for him. At least he has learned that the Labour Party believes in planning. He turns to a startled House and says "The Labour Party wants the Bill because it believes in planning". Next week the hon. Gentleman will be saying "Labour Members believe in Socialist planning". That is true.

The planning of 1½ million unemployed.

It is because of our belief in planning that many of us do not fully accept the Bill, which extends for a further period the power to control office development. The Bill does not go far enough. We do not want a continuation of the existing powers. If there are any defects in the Bill, they are not those that have been outlined by Conservative Members. There are controls over the building of offices but they do not go far enough.

Bearing in mind the speculative office building that takes place in London, the South-East and the South-West, the facilities in the North-West and the North-East and the unemployment in the construction industry in those areas, the only logical conclusion is that there is not enough control over office building in areas where there is transport congestion, congestion of houses and schools, and a great burden upon all the social services.

Those are the conditions that we have witnessed in London. At the same time there is an intolerable level of unemployment and a lack of opportunity in the North-West and the North-East, and especially upon Merseyside. There is unemployment in the construction industry and a lack of proper facilities.

Given that situation it is eminently sensible to have control and planning. It is not necessary to be a Socialist to believe in that. Surely it is sensible to consider these matters dispassionately and objectively, whether it be England and Wales or the United Kingdom, and to attempt fairly and equitably to distribute and allocate our resources where they are needed and when they are needed. That seems to be eminently sensible. One does not have to be a Socialist to believe in that approach.

That approach does not imply a sharing out of misery but a sharing of the resources available to us to alleviate misery. Of course, other Conservative Members, like the hon. Member for Burton, have spoken in favour of London even though they represent constituencies in the regions. I suppose that they have to follow what has been said from their Front Bench and adopt the same rationale if they are to be able to explain their vote to their constituents.

The important thing is that we should be allocating resources to the areas where they are needed. They are needed in the North-West and the North-East. They are not needed in the South-East or the South-West to the same extent. It is ridiculous to suggest that this is in any sense unnecessary and potentially damaging bureaucratic control.

Such control is even more important when there is a depression. It is more important to share our resources then than to share them when there is a boom. One Conservative Member said that we should share resources in a boom but not in a depression. He said that London should not share its resources in those circumstances with the North-East or the North-West. Surely that is precisely the time to allocate resources fairly and equitably.

Perhaps when there is a boom the deprivation and neglect of decades in the North-West will go by unnoticed, even though it ought not. There is a greater need than ever, however, to share out the resources now.

We hear the Conservatives talking about freedom from controls and calling for public expenditure cuts in other areas. They want freedom from bureaucracy and yet they complain about unemployment in the North-West and Merseyside. They complain also about direct works departments. I know of no direct works department that has built a block of offices that has remained empty. No such department has built a Centre Point that has remained empty for years. If there is to be control of office development, it should not just be the controls in the Bill that ensure that offices move out to areas where they are needed, but a control to ensure that far more of our capital resources are put into the building of homes.

The Conservatives have been speaking about free enterprise and are in favour of the property developer and the speculative builder. They want capital to move freely after the profits in speculative building even if the buildings are to remain empty for several years. They worship Mammon but ignore the needs of my constituents who have no homes and who desperately require extra housing, which is denied them because the necessary resources are tied up far too much in speculative building for profit.

I want my right hon. Friend the Secretary of State to start some speculative building of his own. Let him put in hand a variation of the advance factory, building advance offices instead. Merseyside desperately needs more offices and I understand from the Merseyside Development Office that it receives several inquiries a week from concerns wanting to move into the area but unable to do so because suitable accommodation is not available. They require a purpose-built office with a lease or credit guarantee. On Merseyside we provide factories and we manage to attract industry, but there is a demand for office facilities and it is not being met.

Cannot my right hon. Friend help Liverpool and Merseyside? It is a service industry area and it has all the ancillary skills and resources to meet the needs of those industries. Cannot my right hon. Friend initiate a scheme whereby the builder can build an office block because the Government are guaranteeing his credit and capital or are prepared to take the office over as an advance office and to promote its letting when it is built?

I regret that this Bill is necessary. I would have hoped that my right hon. Friend would go a little further so that we control the building of offices in future and ensure that investment is directed to the building of houses more than we have done in the past or seem prepared to do in future. Regions like Merseyside which are not affluent, and which never have been, will never be unless the Government take more positive steps than they have in the past to ensure that resources are distributed through a Socialist regional policy which will generate the movement of resources from one area of the country to another according to the criterion of need.

There should be no other criterion, neither that of profit nor of who can shout the loudest. It should not be my hon. Friend the Member for Houghton-le-Spring versus the hon. Member for Ormskirk or dog eats dog, but a Socialist policy of sharing resources. We shall achieve that only when we have public control of the construction industry and the public ownership of land. I hope that my right hon. Friend will pursue a far more positive policy in future and along with his other right hon. Friends ensure that we do not get any diminution of this policy but rather its toughening up in future.

The winding-up speeches by the Front Benches begin at 9.25 p.m. It is hoped that the hon. Member for Swansea, East (Mr. Anderson) will co-operate.

9.22 p.m.

I certainly agree that there is a case for rethinking the location of offices policy. But I do not think that now, a time of high unemployment, is the time.

This continuation Bill is opposed by the property world, by the new GLC and by the Conservatives, who are clearly trying to mend their fences as speedily as they can with the property world, having had such difficulties with the development land tax and the Community Land Act.

The Bill is opposed by the GLC totally. Both parties oppose it.

So be it. But clearly the new GLC has been particularly vocal in that respect.

No.

Conservatives at last week's conference of the Incorporated Society of Valuers and Auctioneers said that office development control had distorted the economic base of the country. That is the whole argument for regional policy as such. If, as has been argued by the hon. Member for Hornsey (Mr. Rossi), office development policy has been ineffective, the same argument can be used against regional policy. Both regional policy in general, as well as office development policy, have had some significant effects in the regions.

The London argument, as instanced by my right hon. Friend the Member for Bermondsey (Mr. Mellish), is that there are parts of London with high unemployment. What is wrong with London is the mix of employment. The manufacturing base has moved out to the regions and London is still largely over-dependent on the service sector.

But the regions, particularly my own part of Wales—the North-East, which is the area with the highest degree of unemployment currently—are over-dependent on the manufacturing base and need to attract offices. They need to attract service employment at a time when the public sector, as a result of constraint, is unable to provide it.

If we were now to start dismantling this control, although it has not been as effective as we should have liked, it would be another blow to the Government's regional policy, which by and large has been effective and will be seen as such. I, together with hon. Members representing not only Wales but the regions, ask for the continuation of this control.

9.24 p.m.

The hon. Member for Swansea, East (Mr. Anderson) will, I hope, forgive me if I do not follow the line of his speech directly, because it is appropriate that I should follow closely on the heels of my neighbour, the hon. Member for Ormskirk (Mr. Kilroy-Silk). I say "closely on his heels" because he has left the Chamber. Had he remained, he would have found that I do not argue for what he called the Tory free-for-all. In fact, I would join him in pleading for greater consideration for the difficulties of the North-West, particularly Merseyside, where both of our constituencies are situate.

However, I shall argue that there is a far better way of helping Merseyside and the other development areas and the less favoured areas than the ODP system, which hon. Member after hon. Member tonight, without always going as far as to say that it has completely outlived its purpose, has said should be thought out again because circumstances have changed. The Secretary of State himself described a number of ways in which he hopes to develop the system. I was hoping that he would drop it altogether.

It appears from the Explanatory and Financial Memorandum that office development is controlled very economically by the Department of the Environment. A sum of only £128,000 per annum is required to process about 430 applications, which I calculate to be about £300 per application. I gather that it will in future be much cheaper. My hon. Friend the Member for Hampstead (Mr. Finsberg) pointed out that the Secretary of State said that the load would be reduced, if he extended the limit, by about 51 per cent. I therefore presume that the cost, and I trust the manpower, will be halved.

If there has to be some control in addition to planning control, one might ask why this comparatively cheap system should not be continued. My answer is twofold. First, this cost is merely the tip of the iceberg. The system might be cheap to run within the Department of the Environment, but it is very expensive for commerce in preparing these applications and in the delay in obtaining planning permission because of the necessity to obtain an ODP first. Second, this control, as an addition to planning, is now ineffective in its objective. It is not only no longer necessary but is an encumbrance to planning control and development.

I should declare an interest as a director but not a shareholder of a property trust which has from time to time built offices. I am conceited enough, having declared that interest, to say that I know something about the problems which have been and will be faced by that kind of developer.

The original objective of the ODP system in 1964 was the control of office development in metropolitan London and, a few months later, in the South-East as well, so as to reduce or at least to keep static office employment in that area. No one now wishes to reduce office employment in London—at least not just for the sake of reducing it, as was the original intention. My hon. Friend the Member for Hampstead made that point effectively, as did the hon. Member for Ealing, North (Mr. Molloy), although the latter did not entirely carry with him his hon. Friend the Member for Ormskirk.

If the result were to encourage the increase in office employment in the North-West and the North-East, I imagine that London would grin and bear it, but the system has not been doing that very effectively. Incidentally, that was not the original objective of the system. That developed over the late sixties and early seventies. The ODP system has been singularly ineffective in achieving the objective of forcing development into the North or other areas—the South-West and Wales—where office employment was needed. I do not say that the system has been a complete failure; of course not. It has achieved the movement of perhaps 7,000 jobs.

The policy of dispersal of Government offices has achieved far more than the ODP system in taking office jobs to the assisted areas. The lack of success of the negative system of ODPs in bringing about a positive increase in office jobs in assisted areas was admitted by the Government when they introduced financial incentives.

My hon. Friend the Member for Reading, North (Mr. Durant) pointed out that he lost beer, bulbs and biscuits because of the success of industrial incentives, and the hon. Member for Ealing, North lost glass containers. That movement of industry was so successful that it was obvious that the same sort of idea should be applied to office movement.

The Industry Act 1972 gave an £800 grant per employee moved out and a five-year rent subsidy. On top of that there was selective employment tax and the regional employment premium, but none of these incentives succeeded in achieving the sort of movement of jobs that we had all hoped would be achieved at the time.

The need for incentives was obvious. This can be seen when one looks at the figures that were referred to by my hon. Friend the Member for Hornsey (Mr. Rossi) when he quoted from the office location review for the seven years up to 1972. This showed that of the 41 larger "named users" whose ODP applications were refused in the London area only six moved out of the capital and all of those moved to locations somewhere in the South-East. That was the sort of failure that we had to face.

My hon. Friend the Member for Daventry (Mr. Jones) asked about those firms that were refused applications last year. He asked whether they had moved out of London or just moved into the suburbs. Certainly there has been an increase in the number of office jobs in the assisted areas—some 8 to 12 per cent. But that is in line with the rest of the country. In the office location review this point is brought out very formidably in Section 5 which says:

"private sector relocation from other areas appears to have made only a very small contribution. The assisted areas have been benefiting mainly from the growth of 'indigenous' office employment, i.e. the expansion of enterprises already located in assisted areas or the establishment there of new establishments with origins in these areas."

So the increases come mainly from indigenous growth.

It is not surprising that by 1974 the then Secretary of State for the Environment set up this review of office location. When the review reported, the Secretary of State said that he would increase the limits of 10,000 sq. ft. to 15,000 sq. ft. for exemption from office development permits and that he would consider the rest of the suggestions in the review.

The whole tone of the report of the review was that the ODP system on its own had outlived its purpose and was not achieving the objectives that we all hoped would be achieved. I quote again from the review:

"The control acts on the supply of new premises. By adding to the delays imposed on the market by the planning system, it is an additional brake. Whilst the control may not be very effective in achieving relocation to the assisted areas in that firms, refused an ODP, have a choice of alternatives, it nevertheless provides an opportunity for 'steering' because the individual application identifies the firms with the accommodation problem."

So the best that the report could say was that it gave a chance to steer a firm. But it did not succeed, because the report concluded by saying:

"If a control is needed in addition to the incentive scheme…the choice would seem to lie between the occupation permit scheme"

—I hope that the Secretary of State will not adopt that—

"or continuing the simpler, more familiar ODP system."

Having recognised that the system was not successful at that time, it gave the Secretary of State no real recommendation what to put in its place.

I should like to examine how the system operates in practice within the Department of the Environment. A small unit there receives and processes the applications and receives from the Secretary of State from time to time guidelines—in the same way as he might send out a circular to local authorities telling them what applications for planning permission he would call in. They are the guidelines upon which the unit works.

The provision in the legislation which directs the Secretary of State in the exercise of the discretion which he has in issuing office development permits is wide. Obviously, such guidelines have to be given to those administering the issue of the permits, but because of those guidelines the unfortunate applicant has to do an enormous amount of work before his permit is considered.

Before it moved its 1,500 employees to Sheffield, the Midland Bank considered as possibilities 750 cities and towns. That is what has to be done by those who apply for an ODP. They have to satisfy the Department of the Environment that nowhere else outside the controlled area will do. They have to carry out a survey of the staff—who will move or who will not move. In considering going to Merseyside or to the North-East, they have to consider whether there is staff available in that area, give their reasons and all the rest of it. It is an elaborate and costly business for a firm to prepare a planning application. Furthermore, it is hopeless to expect to get an application through unless the applicant firm is the "named user" or can satisfy the Department that the property will be custom-built.

Up to the present time it has been impossible to obtain ODPs on speculation, although the Secretary of State has now said that he intends to allow that in future. I refrain from commenting upon why a Socialist Government should support speculative builders; I agree with him to some extent, and I am glad to see a reform in his ideas.

There are now four categories of areas of control. There is the City of London—and nobody wants to control development there. It is said in the office location review report that the professions, in- dustry and banking are concentrated in London because they need to be close together.

Secondly, as for the rest of central London nobody wants to depopulate its office population there. Thirdly, in suburban London there has been much building development and it has been shown that a firm that has been refused permission to build in a suburban area rarely goes far elsewhere. Such a firm might go further into the South-East but not to the North-West or the North-East. Fourthly, there is the rest of the South-East—and by that I mean the South-East regional planning area not just the South-East of London but an area that goes as far as Bedford—I am sure that there matters can safely be left to the normal planning law.

That is why I am against the Bill and why I say that the ODP system should now be scrapped and control left to the normal calling-in procedure under Section 35 of the Town and Country Planning Act 1971. Under that Act, the Secretary of State has full power to give directions about the sort of planning application with which he wishes to deal himself. Indeed, such directions have been given many times about various types of development. I can recollect one that was issued about hypermarkets, and there have been others about forestry and so on.

If the Secretary wishes to have central control or some supervision over office development in the South-East where that development would exceed 30,000 square feet, he could disband the ODP system altogether and issue a directive that he wishes to call in all such planning applications. The advantages are that there would be no need for a separate unit in the Department of the Environment and that there would be no need for such applications for permits. The consideration of such development would be carried out through a partnership between the local authority and the Secretary of State at an early stage and the Secretary of State would have flexibility in applying the limits as necessary and in phasing out the whole system in due course.

My hon. Friend the Member for Manchester, Withington (Mr. Silvester) said that if ODPs were to go, something should be put in their place. My hon Friend wants to destroy the ODP system, as I do, but I do not want to destroy the whole of planning control. I wish to see provided a far better form of control—one within the normal planning law in partnership with the local authorities. The normal planning law would be applied and the Secretary of State could call in whatever he felt was of national or regional importance. That would mean that we should do away with the bureaucracy of the present ODP system and recognise that a planning system can deal with the problems that confront us far more effectively.

Now that the hon. Member for Ormskirk has returned to the Chamber I must repeat what I said at the beginning of my speech when he was absent, that is that dealing with such matters on a planning basis rather than by ODPs would be of far greater assistance to Merseyside and the less favoured areas of the country.

9.45 p.m.

It will not be possible in the 15 minutes available to me to reply in detail to all the points made in this interesting debate, but I shall do my best at least to refer to most of them.

I start by answering the specific questions of the hon. Member for Hampstead (Mr. Finsberg), who asked how many ODP applications were received each year. In 1975 the number was 510 and last year there were 325 applications. I think that the hon. Gentleman wanted the figures because he believed that if we raised by half the figure of square feet for exemptions we could save 50 per cent. of the applications and therefore 50 per cent. of the staff who administer ODP controls in the Department.

I cannot do sums that simply, if only because of the differences in the number of applications in, for example, 1975 and 1976. However, I give the hon. Gentleman an absolute assurance that we shall, as always, adjust the number of staff to the work load with which they have to deal.

I was mildly surprised by the number of Opposition Members who raised the bureaucracy bogy. They admitted that only 14 staff in the Department coped with ODP control and that the Location of Offices Bureau spends less than £250,000 a year, yet we heard about bureaucratic control and the Government being reluctant to surrender this form of control. Hon. Members seem to be seeing if not Communists at least bureaucrats under the bed.

It may not be an effective policy of control—I shall come to that later—but it is certainly an inexpensive form of control for us. The right hon. Member for Crosby (Mr. Page) told us about the expense that property companies and others go to in preparing applications for ODPs. I shall look at the points that he raised, but we cannot be accused of continuing a highly expensive form of control.

There has been much criticism of ODPs in the 12 years of their operation. Every hon. Member opposite who took part in the debate, even the hon. Member for Manchester, Withington (Mr. Silvester), who has something to gain from it, was critical of the system as it has been operated. They suggested that it should be abolished.

I have to ask them whether they believe that there is a place for an office location policy. Obviously, the right hon. Member for Crosby thinks that there is but he believes that it should be part of general planning policy and that the Secretary of State should exercise control over the location of offices in this way. However, he was the only Opposition Member who made even that admission and we must assume from the speeches of the hon. Member for Hornsey (Mr. Rossi) and others that the Opposition want no form of control over the location of offices.

In a debate on 14th March the hon Member for Hampstead said:

"All impediments to growth must be removed—IDCs, ODPs".—[Official Report, 14th March 1977; Vol. 928, c. 110.]

I am sure that is not yet official Opposition policy, but things are moving fast in that direction.

It is important that I should try to explain why we believe that some form of office location policy must be continued. It was nowhere better illustrated than in the speeches of my hon. Friends the Members for Ormskirk (Mr. Kilroy-Silk) and for Houghton-le-Spring (Mr. Urwin), who spoke about their con stituencies and the range of opportunities for people looking for employment there I did not fully follow the speech of my hon. Friend the Member for Ealing, North (Mr. Molloy), who seemed to be referring more to manufacturing industry than office employment.

Several hon. Members drew attention to the fact that we are concerned with the balance of employment in London compared with other parts of the country. Figures from the office location review indicate that, according to the figures in the 1971 census, the percentage of people in office accommodation in the Northern Region is 18·5. In Yorkshire and Humberside, the percentage is 19·3 and in Wales 18·0. I have no reason to believe that they are all that different today. In London the percentage is 38·3. Those figures illustrate quite simply that there is a very unfair balance of employment in different parts of the country, and it is that which we need to attempt to correct first.

It is partly for that purpose that we believe that there is a need for an office location policy, apart from the fact that office development in inner cities, as my right hon. Friend has pointed out, can be an important form of assistance in the regeneration of a run-down area, whether that area is in inner London, Liverpool, Birmingham, or anywhere else.

There has been criticism of the office development permit system. A lot of it is based upon experience of the system. Perhaps on occasion it has been used insensitively. Perhaps one of the reasons for its being used insensitively to begin with is that the Government did not monitor the operation of the system as well as should be.

My right hon. Friend pointed out the great importance of monitoring the system and of using it sensitively. Over the last dozen years or so we may have learned from some of our experiences of the need to monitor demand for and supply of office accommodation and to be sensitive to local needs, such as the needs of inner city areas, which we have been too ready to neglect in the past.

Perhaps, too, we made the mistake a dozen years ago of applying too low a limit for the requirement of office development certificates. I hope that, as a consequence of that experience and as a consequence of the reappraisal which my right hon. Friend has made of the need for office location policy today, we are now moving towards a policy which is relevant and which has benefited from experience.

Office location policy cannot, it seems to me, if it is to be successful, merely be confined to operation of an office development permit system, but that has been the implication of most of the speeches made by Opposition Members. It cannot be so confined, and my right hon. Friend made this absolutely clear. It is part of three aspects of office location policy with one of which the Bill is concerned. The Bill, admittedly, is concerned with ODP control, and hon. Members were right to concentrate their attention and their criticisms on that aspect of the policy. What is it? It is a disincentive to decisions to develop in South-East England.

Perhaps it is important to recognise—because figures have been quoted on a number of occasions this evening—that it acts as a disincentive and that, therefore, there may be and almost certainly are people or firms who, because of ODP control, make decisions to locate offices away from London without even applying for office development permits. Nevertheless, that is the purpose of the ODP policy.

But that is not the end of it, because the Location of Offices Bureau has a vital part to play in policy. I know that because of its advertisements that is the respect in which LOB is perhaps best known by hon. Members and, indeed, by the public in general. But it is fair to point out that the Location of Offices Bureau provides a very useful free information service to those interested in building or setting up offices in different parts of the country. This information service is perhaps not recognised for the importance it has, because of the general prominence of the LOB's advertisements.

The bureau has available for anyone who wishes to consult it a comprehensive list of office accommodation vacant in towns all over Great Britain and corresponding information about rents being asked. On top of this it can give help concerning Government assistance, planning permission, availability of staff, housing, transport, and anything else that anyone interested in moving his office needs to know. That is a vital part of office location policy. That is why my right hon. Friend is altering and broadening the remit of the Location of Offices Bureau. We believe that it has a vital part to play in this important job that needs to be done—that of getting a better distribution of office employment in the country at large.

There is a third aspect of the policy to which the right hon. Member for Crosby referred—the grants available from the Department of Industry. The right hon. Gentleman saw that as an alternative to office development policy, but I see it as a complement or at least as the third aspect of a successful policy.

The Department of Industry has been paying grants since 1973. But since October of last year those grants have increased. In consequence, there has been a doubling in the rate of applications for assistance to move to assisted areas. I believe that those three aspects have a vital part to play in office location policy. Indeed, Government dispersal has already been mentioned. That, too, has an important part to play. Only in that context can we see the real importance and value of the Bill.

I come back to what I said earlier. Clearly, it is important that the policy should be operated sensitively. Where it can reasonably be shown that a firm has a close link with an area in which it wants to operate, or that a large percentage of its employees need to be in that area, there is a case for the policy being operated as sensitively as possible.

The hon. Member for Reading, North (Mr. Durant) gave us an interesting analysis of problems in his constituency which no doubt affect many towns round London. With the great rise in transport

Division No. 142]	AYES	[10.00 p.m.
Anderson, Donald	Callaghan, Jim (Middleton & P)	Cunningham, Dr J. (Whiteh)
Archer, Peter	Campbell, Ian	Davidson, Arthur
Armstrong, Ernest	Canavan, Dennis	Davies, Ifor (Gower)
Ashton, Joe	Carter-Jones, Lewis	Davis, Clinton (Hackney C)
Atkins, Ronald (Preston N)	Clemitson, Ivor	Dempsey, James
Atkinson, Norman	Cocks, Rt Hon Michael (Bristol S)	Doig, Peter
Barnett, Guy (Greenwich)	Coleman, Donald	Dormand, J. D.
Benn, Rt Hon Anthony Wedgwood	Conlan, Bernard	Douglas-Mann, Bruce
Bennett, Andrew (Stockport N)	Corbett, Robin	Dunnett, Jack
Blenkinsop, Arthur	Cowans, Harry	Eadie, Alex
Boardman, H.	Cox, Thomas (Tooting)	Edge, Geoff
Boothroyd, Miss Betty	Craigen, Jim (Maryhill)	Ellis, John (Brigg & Scun)
Bottomley, Rt Hon Arthur	Crawshaw, Richard	Evans, Gwynfor (Carmarthen)
Butler, Mrs Joyce (Wood Green)	Crowther, Stan (Rotherham)	Ewing, Mrs Winifred (Moray)
Callaghan, Rt Hon J. (Cardiff SE)	Cryer, Bob	Faulds, Andrew

costs, there may need to be more office jobs available in those areas. The fact that we have raised the limit makes the policy immediately more flexible and should enable towns like Reading to develop offices where they need to do so. If there is a need for development because of a serious imbalance of opportunities in certain towns, or because unemployment has developed as people can no longer afford to travel long distances to work, I hope that we shall operate the policy intelligently and sensibly to cope with the situation.

I think that I should speak to those Members who, like myself, represent London constituencies and who are clearly worried about the situation. As has been pointed out, London has lost many manufacturing jobs. It has not lost quite as many office jobs. One reason for that—I think it worth quoting this, because it appears in an advertisement in tonight's Evening Standard—is what is said by the Location of Offices Bureau:

"We have details of available office space in 375 locations throughout the UK (including Greater London). And we know about local planning policies and Government incentives and controls."

I should emphasise that one final aspect of the policy is just that, because of the policy being pursued by the Government, because of ODP control and all the rest, we are in the long term influencing public opinion. Whereas 10 or 12 years ago people might not have thought seriously of going north to an assisted area, nowadays they are more ready to consider the possibility of dispersal to areas where the opportunities of employing labour are easier than they may be in London.

Question put, That the Bill be now read a Second time:—

The House divided: Ayes 155, Noes 121.

Fernyhough, Rt Hon E.	Leadbitter, Ted	Skinner, Dennis
Flannery, Martin	Lestor, Miss Joan (Eton & Slough)	Smith, John (N Lanarkshire)
Fletcher, Ted (Darlington)	Lewis, Ron (Carlisle)	Snape, Peter
Foot, Rt Hon Michael	Loyden, Eddie	Spriggs, Leslie
Ford, Ben	Lyons, Edward (Bradford W)	Stallard, A. W.
Forrester, John	Mabon, Rt Hon Dr J. Dickson	Steel, Rt Hon David
Fraser, John (Lambeth, N'w'd)	McCartney, Hugh	Stewart, Rt Hon M. (Fulham)
Freeson, Reginald	McDonald, Dr Oonagh	Stoddart, David
Garrett, W. E. (Wallsend)	McElhone, Frank	Stott, Roger
Gilbert, Dr John	MacFarquhar, Roderick	Summerskill, Hon Dr Shirley
Gourlay, Harry	Marks, Kenneth	Taylor, Mrs Ann (Bolton W)
Graham, Ted	Marshall, Dr Edmund (Goole)	Thomas, Mike (Newcastle E)
Grant, George (Morpeth)	Marshall, Jim (Leicester S)	Thomas, Ron (Bristol NW)
Grocott, Bruce	Maynard, Miss Joan	Thorne, Stan (Preston South)
Harper, Joseph	Miller, Dr M. S. (E Kilbride)	Tierney, Sydney
Harrison, Walter (Wakefield)	Mitchell, Austin Vernon (Grimsby)	Tinn, James
Hatton, Frank	Molloy, William	Torney, Tom
Heffer, Eric S.	Moonman, Eric	Tuck, Raphael
Hooley, Frank	Morris, Charles R. (Openshaw)	Urwin, T. W.
Howells, Geraint (Cardigan)	Murray, Rt Hon Ronald King	Walker, Terry (Kingswood)
Hoyle, Doug (Nelson)	Newens, Stanley	Ward, Michael
Huckfield, Les	Noble, Mike	Weetch, Ken
Hughes, Mark (Durham)	Palmer, Arthur	Wellbeloved, James
Hughes, Robert (Aberdeen N)	Park, George	White, Frank R. (Bury)
Hughes, Roy (Newport)	Parry, Robert	White, James (Pollok)
Hunter, Adam	Pavitt, Laurie	Whitlock, William
Jackson, Colin (Brighouse)	Roberts, Albert (Normanton)	Wigley, Dafydd
Jackson, Miss Margaret (Lincoln)	Robinson, Geoffrey	Williams, Alan Lee (Hornch'ch)
Jenkins, Hugh (Putney)	Roderick, Caerwyn	Williams, Sir Thomas (Warrington)
John, Brynmor	Rodgers, George (Chorley)	Wilson, Alexander (Hamilton)
Johnson, James (Hull West)	Rodgers, Rt Hon William (Stockton)	Wilson, William (Coventry SE)
Jones, Alec (Rhondda)	Rooker, J. W.	Wise, Mrs Audrey
Jones, Barry (East Flint)	Ross, Stephen (Isle of Wight)	Woodall, Alec
Jones, Dan (Burnley)	Ryman, John	Woof, Robert
Kaufman, Gerald	Shaw, Arnold (Ilford South)
Kilroy-Silk, Robert	Shore, Rt Hon Peter	TELLERS FOR THE AYES:
Lambie, David	Silkin, Rt Hon S. C. (Dulwich)	Mr. Alf Bates and
Latham, Arthur (Paddington)	Silverman, Julius	Mr. James Hamilton.

NOES
Atkins, Rt Hon H. (Spelthorne)	Hannam, John	Rawlinson, Rt Hon Sir Peter
Baker, Kenneth	Harrison, Col Sir Harwood (Eye)	Rhodes James, R.
Banks, Robert	Hawkins, Paul	Rippon, Rt Hon Geoffrey
Bennett, Sir Frederic (Torbay)	Hayhoe, Barney	Roberts, Michael (Cardiff NW)
Benyon, W.	Heseltine, Michael	Rossi, Hugh (Hornsey)
Berry, Hon Anthony	Hodgson, Robin	Rost, Peter (SE Derbyshire)
Biffen, John	Hunt, John (Bromley)	Sainsbury, Tim
Biggs-Davison, John	Hutchison, Michael Clark	Shaw, Giles (Pudsey)
Blaker, Peter	Junes, Arthur (Daventry)	Shepherd, Colin
Boscawen, Hon Robert	Kershaw, Anthony	Silvester, Fred
Bottomley, Peter	King, Evelyn (South Dorset)	Sims, Roger
Bowden, A. (Brighton, Kemptown)	Kitson, Sir Timothy	Skeet, T. H. H.
Braine, Sir Bernard	Knox, David	Smith, Dudley (Warwick)
Brittan, Leon	Langford-Holt, Sir John	Smith, Timothy John (Ashfield)
Brocklebank-Fowler, C.	Lawrence, Ivan	Speed, Keith
Brooke, Peter	Lawson, Nigel	Spence, John
Bryan, Sir Paul	Le Marchant, Spencer	Spicer, Michael (S Worcester)
Butler, Adam (Bosworth)	Lester, Jim (Beeston)	Sproat, Iain
Carlisle, Mark	Luce, Richard	Stainton, Keith
Channon, Paul	Macfarlane, Neil	Stanbrook, Ivor
Clark, Alan (Plymouth, Sutton)	Mackay, Andrew James	Steen, Anthony (Wavertree)
Clegg, Walter	Marten, Neil	Stradling Thomas, J.
Cooke, Robert (Bristol W)	Maxwell-Hyslop, Robin	Taylor, R. (Croydon NW)
Costain, A. P.	Miller, Hal (Bromsgrove)	Tebbit, Norman
Crowder, F. P.	Moate, Roger	Temple-Morris, Peter
Douglas-Hamilton, Lord James	Molyneaux, James	Thatcher, Rt Hon Margaret
Durant, Tony	Moore, John (Croydon C)	Thomas, Rt Hon P. (Hendon S)
Eden, Rt Hon Sir John	More, Jasper (Ludlow)	Trotter, Neville
Elliott, Sir William	Morgan, Geraint	van Straubenzee, W. R.
Eyre, Reginald	Morrison, Charles (Devizes)	Vaughan, Dr Gerard
Fairbairn, Nicholas	Nelson, Anthony	Viggers, Peter
Farr, John	Newton, Tony	Walder, David (Clitheroe)
Finsberg, Geoffrey	Oppenheim, Mrs Sally	Wall, Patrick
Fisher, Sir Nigel	Page, Rt Hon R. Graham (Crosby)	Weatherill, Bernard
Fookes, Miss Janet	Page, Richard (Workington)	Wells, John
Forman, Nigel	Parkinson, Cecil	Whitelaw, Rt Hon William
Fry, Peter	Pattie, Geoffrey	Young, Sir G. (Ealing, Acton)
Goodhart, Philip	Percival, Ian	Younger, Hon George
Gorst, John	Powell, Rt Hon J. Enoch
Gray, Hamish	Pym, Rt Hon Francis	TELLERS FOR THE NOES:
Grylls, Michael	Raison, Timothy	Mr. Carol Mather and
Hampson, Dr Keith	Rathbone, Tim	Mr. Peter Morrison.

Question accordingly agreed to.

Bill read a Second time.

Bill committed to a Standing Committee pursuant to Standing Order No. 40 ( Committal of Bills).

Control Of Office Development Money

Queen's Recommendation having been signified—

Resolved,

That, for the purposes of any Act of the present Session to extend the duration of and otherwise amend certain enactments relating to the control of office development in England and Wales, it is expedient to authorise the payment out of money provided by Parliament of any increase attributable to that Act in the administrative expenses of the Secretary of State under any other enactment.—[ Mr. Snape.]

European Community (Energy Policy)

10.13 p.m.

I beg to move,

That this House takes note of Commission Documents Nos. R/75/77 (rev 1), R/477/77, R/478/77, R/479/77 and R/684/77 on EEC Energy Policy.

I shall begin with a word of introduction. The Scrutiny Committee asks that we include in our discussion Commission Document No. R/684/77 relating to refinery policy. I believe that the Leader of the House omitted to mention it when he announced the business for the week, but it is on the Order Paper.

The House will appreciate that it is right that immediately after the Summit discussed energy policy we should have another debate on Community energy policy. The Scrutiny Committee in fact recommended that we should have a debate on some of these matters before the 29th March Energy Council, and we did have a debate on 21st March on coking coal. We shall broaden the subject tonight.

At the Energy Council meeting on 29th March we had a general discussion about the energy prospects for the EEC. There was a discussion on conservation. We also agreed that Euratom loan scheme and the extension of the coking coal aids. Another decision was taken: it was decided that there should be national surveillance of coal imports from third countries. On 29th March I failed to persuade the Council that its meetings on conservation should be held in public. I attached much importance to that, and I still do.

On 14th June there will be another Energy Council meeting—the last under my presidency. We shall have proposals from the Commission for the protection of energy investments, including minimum safeguard price, with draft instruments before us. We shall have some papers on refinery policy—to which I shall refer tonight—and we shall have more on conservation. I very much hope that we shall have a general discussion on nuclear policy, rather like the discus sion that we had on conservation at the March meeting.

Perhaps I may now turn to the individual instruments that the Scrutiny Committee invited the House to consider, and then, if it is agreeable, before I finish I should like to broaden the discussion so as to set it into a wider perspective.

Document R/479/77 deals with energy saving and was, as I have mentioned, discussed. No new policy issues are involved. There are no legislative proposals brought forward. However, every country, including the United Kingdom, attaches great importance to energy conservation, and although we have indigenous fuels at present in plenty, that is no excuse for inaction on our part. We estimate that we have saved—a genuine saving—at least 2 per cent. of primary energy in the United Kingdom, and, of course, we are part of an IEA programme as well, and the United States is also involved in conservation measures, which was underlined by the President in his statement in April.

Recommendations had been accepted in May 1976 by the Council of Ministers dealing with thermal insulation of buildings, with heating systems, with information about road vehicles, with some provisions on urban transport and with appliance labelling. We have asked the Commission to elaborate these proposals, but they will require action at all levels and it would not necessarily be wise or sensible to try to standardise our procedures here. This is an area in which each country will want to adopt what seems sensible to itself, and I hope that this will not require directives.

I now turn to Documents R/75/77, which is the paper referring to coal for electricity generation, and R/478/77 on the Community coal situation. I should like to refer to each of those very briefly in turn.

In December 1974, the Council of Ministers decided to maintain coal production at 250 million tonnes per annum up to 1985 to try to reduce the dependence on imported oil and to increase the security of supplies. The importance of coal will grow. That is widely recognised in the United States, which has an objective now of over 1 billion tonnes of coal a year, which is the same as that of the Soviet Union, which also plans to expand coal production.

The present coal production in the Community is the equivalent of 166 million tonnes of oil—that is, one and a half times or one and two-third times the full production of North Sea oil. For every 1 million tonnes of coal that we can produce and use, we are saving 600,000 tonnes of oil.

However, it is a fact that the coal targets set by the Council in 1974 have not been met. There has, in fact, been a 9 per cent. fall in coal production since 1973, and in 1976 only 229 million tonnes of coal was produced in the Community compared with the target of 250 million tonnes. This is partly because of the recession, which has affected the steel industry, and partly because imports of coal have risen and, therefore, stocks have risen, too.

In order to meet this, the Commission has made two proposals. I shall deal with them one by one. Document R/75/77 is to promote 30 gigawatts of coal-fired capacity by the 1980s to burn 37 million tonnes of coal—which is the equivalent of 26 million tonnes of oil. For this purpose, 500 million units of account, or £327 million, would be made available, of which the United Kingdom would be required to pay between £70 million and £80 million over a 12-year or 15-year period. The intention is that this should be used to cover 30 per cent. of the extra cost of having coal-fired stations. That would be spread over a 12- to 15-year period at a maximum annual spend of 50 million units of account, or £32 million. The electricity authorities would be asked to make an estimate of their coal-burn seven years ahead. If they failed to meet their estimate of burn, the aid would be withdrawn.

Of the 30 gigawatts of coal-fired capacity, how much of that is attributable to the United Kingdom?

That would depend on the the extent to which we took advantage of it. We have an interest in taking advantage because we have a great deal of coal. I cannot give a specific figure as it will depend on the decision that is taken in respect of conversion or of new coal-fired stations, for example.

The programme is needed to sustain a burn of 150 million tonnes of coal by 1985 and to prevent a fall, which might otherwise occur, to 90 million tonnes of coal. It is a modest aid as proposed and the grant or assistance that is contemplated would meet 30 per cent. of the additional cost of a coal-fired station, which is normally about 20 per cent. above the cost of an oil-fired station.

Is aid available to meet the additional cost of reducing sulphur emission from a coal-fired station to the equivalent level of emission from an oil-fired station?

If I cannot give a precise answer now, I hope that the hon. Gentleman will forgive me. My understanding is that the aid is intended to cover the capital cost. Therefore, the problem of sulphur emissions would be catered for in so far as it would be involved in the capital cost of building the stations. That is my understanding. Does that sound right to the hon. Member for Bridgwater (Mr. King)?

Yes.

It does to me.

My right hon. Friend will present the House with the correct answer as he can wait for a message while I struggle on as best I can. However, I think I have it right.

The other proposal that the Commission makes is that there should be a monitoring of third-country imports. This we put under way at the March meeting. It will provide the Commission and member States with some knowledge of what is happening. That is intended to be part of our policy for increasing our own independence.

There were two other proposals that are not really for discussion tonight. One proposal has already been dealt with—namely, the coking coal subsidy, which was extended at the meeting of 29th March. The other proposal is Community aid for coal and coke stocks, which would be to meet one-third of the excess of stocks exceeding one month's supply, up to 20 million tonnes. That is under examination by the Commission, and it may come up for discussion in June. It will have to go to the European Assembly for comment before a decision can be taken. That is of considerable importance to us because of our coal interests.

I turn to the third item, R/684/77, dealing with oil refinery problems. There is estimated to be a surplus in the Community of 140 million tonnes of refinery capacity. The reason for that is partly what took place in 1973 and what followed from it and partly the recession. This is an industrial problem that confronts individual States, and the Community has decided to examine the matter. The Commission has proposed a standstill on construction and a withdrawal of marginal or less efficient plant and a monitoring and consultation process on the construction of new refineries. We share the problem because in 1976 our own refinery utilisation was at the level of only 67 per cent. Under the legislation that Parliament has passed, I have power to control new plant.

Our interest in refining policy as a major oil producer, however, is not the same as that of other member States. Since my predecessor, the present Secretary of State for Industry, made a statement on refinery objectives in December 1974, it has been an objective of United Kingdom oil policy that on average two-thirds of our oil should be refined in the United Kingdom. This is a very important national interest for us because if we are able to refine our own North Sea oil the value of that is added here, and that is a benefit.

There is therefore no question of Her Majesty's Government encouraging refinery closures. Four new projects in the United Kingdom have already received planning permission and the Commission has been notified. We cannot accept that a sensible procedure for consultation can mean a standstill on new refinery capacity if a case for it can be made out. In any case we know that more secondary processing plant is needed in the Community.

There is one other aspect of the refinery policy to which I should draw attention en passant, and that is the importation of refined products from the oil-producing countries. Clearly, it is likely that there will be an expansion of capacity in those countries, and this is a problem for the future that we shall have to watch very carefully. We want proper information, consultation and discussions with third countries about it. It is possible that some measures might be necessary.

I have given the House a brief report on the papers that the Scrutiny Committee has asked the House to examine. Perhaps I might now be allowed to set this discussion against a wider background. I think that it is increasingly understood each time we debate the subject that there seems to be a wider public acceptance of the central rôle of energy provision and energy policy in the policies of all countries. Energy is vital to the national interests of all member States of the Community. Any sensible British Minister, particularly now during our presidency of the Council, must respect the fact that we are dealing with central national interests of other member countries.

There is no question of the Community controlling EEC energy resources. Those countries that have those resources will trade in them. We shall trade in energy and our contribution will be through trade. Our great wealth in coal, oil and gas and our skill in nuclear generation put us in a very powerful position. I gave the figures in our debate on 21st March.

I have tried to build on our common interests at a sensible pace. That is to say, I have tried to discover the interests of the other member countries and gradually to put the pieces of the jigsaw puzzle together in a way that meets our common interest. But, apart from what the Council of Ministers might do, the Treaty of Rome applies in this area.

There are aspects of the matter that we did not discuss at the March meeting, so perhaps I can mention them now. For example, the Commissioner for Competition, Commissioner Vouel, came to see me two days ago to discuss the impact of the interest relief grants. These have been a part of our policy for stimulating the opportunities for British industry to take advantage of the great potential that exists for supplying equipment to the North Sea. This scheme was introduced not by the present Government but by the Conservatives, but it was made known to the Commission at the time. I think the scheme was introduced in 1973 but was brought forward under the Industry Act 1972. It is a most important interest of ours because the percentage of equipment orders won by British industry has risen from 30 per cent. to over 50 per cent., as the Brown Book revealed, and 100,000 jobs, particularly in Scotland, have derived directly and indirectly from this. The Interest Relief Grants Scheme, introduced by the previous Government, is of great importance to us. We hope that there will be further discussions about this because, as is widely known, the Commission has raised queries on it. There are other areas of possible energy—

I am not quite clear about what my right hon. Friend is saying. Is he saying that the Commission is objecting to these arrangements, which are very important for all these jobs? What exactly does my right hon. Friend mean?

In order to give the House a perspective of this I was reporting that the Treaty of Rome on State aids, which applies to all State aids, applies with regard to energy, and that the discussions we are having with the Commission represent just one aspect of this policy. Of course, in other areas of oil policy, such as refinery policy, landing provisions and power station siting, there is a Commission interest. These are things that any British oil Minister has to work on where essential interests are concerned.

Do I take it that, while bearing all these things in mind, my right hon. Friend will observe the overriding necessity to stick to the policies which we have been operating and not allow the Commission to interfere?

Discussions are in progress. I do not believe I am saying anything that the House does not already know arising from the provisions of the treaty, which are dealt with by the Commission and can ultimately be dealt with by the court, which do not lie within the authority of the United Kingdom or, indeed, any member State. I am not saying anything new to the House. I was just putting some of the aspects of membership of which the House should be aware.

I turn to the international aspects of energy policy, with which I have been particularly concerned in visits over the last few weeks. First, there are many forums in which energy policy is discussed. There is the OECD, of which we are members. There is the International Energy Agency, of which we are members. There is the CIEC, or what has loosely been known as the North-South dialogue. There are various congresses such as the World Power Congress, the World Petroleum Congress, the International Atomic Energy Agency and the London Club of Nuclear Suppliers. We are one of the three signatory States to the Non-Proliferation Treaty. There is no doubt whatever that energy is discussed worldwide and not only in a Community context.

As the House knows, I had a series of meetings to which perhaps I might briefly refer. First, there were my visits to the EEC capitals as President of the Energy Council, and then I went to the United States for discussions with Dr. Schlesinger, the Secretary-elect for Energy, in which I took the opportunity of discussing with him a range of nuclear interests including uranium demand and supply, waste reprocessing, the fast breeder, fusion, and nuclear accounting.

I followed this with a visit to Norway, where we have a strong common interest with the Norwegians, and then to Saudi Arabia, which has a massive oil capacity which can operate to the extent of three North Seas without any loss of revenue to Saudi Arabia. If the taps are open the price goes down and if the taps are closed the price goes up. More recently, last week I went to the Soviet Union. Perhaps I should put the figures on the record. The Soviet Union has 57 per cent. of world coal, 45 per cent. of its gas, 60 per cent. of its peat, 12 per cent. of its hydro power and 37 per cent. of its oil-bearing areas. There is a nuclear programme which was begun in 1970.

China is another factor of which little is known, although there are some indications, and, of course, the Third world is enormously interested in energy because those that are without oil are very much affected by high oil prices.

It is clear that Britain must play its full part as a full member in these discussions. Shortly we shall be the tenth largest oil producer in the world. We have 300 years—45 billion tonnes—of coal, and 13 per cent. of our elecricity is already generated by nuclear power. When the AGRs now under construction are completed this will rise to 20 per cent.—the maximum figure cited in the recent report published by the Massachusetts Institute of Technology. Also we have gas reserves. We are the only self-sufficient industrial country in the Western world, and we must see that we use our energy strength in a number of ways.

We must proceed with a planned United Kingdom energy policy, and use the revenues to meet our debt repayment obligations and to reindustrialise our own country through developing our oil equipment industry and our manufacturing industry.

We must make a major and independent contribution to world energy discussions, which, at the moment, do not exist. There is no real forum in which all these forecasts could be harmonised. I made this point in the United States, Saudi Arabia, the Soviet Union and Norway about the need for harmonisation of forecasts of supply and demand because it is against that background that all our planning needs to take place.

Over the weekend at Suningdale I had some discussions on this problem. If one thinks about it, one sees that this applies to Britain, the EEC and the world as a whole. The major long-term objective of energy policy, as far as we are concerned, is to see that we are able to maintain self-sufficiency of supplies in the 1990s when current projections show a shortfall in assured domestic provision at a time of projected world energy shortage.

There will need to be a large commitment, but resources will be required soon because of the long lead times in the development of alternative energy resources, whether they be nuclear, gas, conservation or other resources. Before Parliament and the public are committed to expenditure of this magnitude they need to be satisfied about the size of the energy gap within maximum and minimum margins. They also need to be satisfied on the time scale, on alternative ways of reducing or eliminating the shortfall, and on the cost and reliability of the alternative ways of doing it.

I aim to report this to the House of Commons. I aim to encourage the EEC to do the same. We all shall be feeling our way forward in the same direction. I want to see the widest world interest in these problems, because these are key questions in energy policy, in this country, worldwide, and, of course, inside the EEC. In that context I aim to play a constructive part.

Is the Secretary of State suggesting that he should publish a White Paper in the near future, or is he proposing to deal with this matter through his Energy Commission, or both?

I mentioned at the last meeting that I would try to see each draft of what we have been working on as it becomes available. I said last time that it was illegal to leak and premature to publish. It is best to let documents seep out. Working documents in my Department have seeped out with my good will. They have been conveyed to the NEDC and the chairmen of the nationalised industries. They are available quite widely, and I thought that they had been put in the Library of the House. If not, I hope that they will be available. I am reluctant to go along with one of those classic major White Papers that are published and then are out of date almost as soon as they appear. It is better that a working document should be published when the Energy Commission is set up—and the delay has been caused by the fact that everyone wants to be on it. When it is set up and these documents come to the Energy Commission, I hope that they will be made generally available at the same time so that no one will be excluded from an examination of the current thinking of the Department.

I am trying to do it in that way. It is less dramatic than the great build-up to a White Paper, but I am not sure that it is not a more sensible way of dealing with a situation in which circumstances change. In any case, we want to hear the current comment and to take decisions as they are needed rather than to hold anything up. We want to share this information as widely as possible.

10.41 p.m.

The House will be grateful to you, Mr. Deputy Speaker, for reminding us, as you put the Question, that we are talking about European policy matters and papers dealing with energy. I can well understand the confusion in the mind of the hon. Member for Coventry, South-West (Mrs. Wise) in trying to determine what the Secretary of State's attitude was to these European affairs. The House might not be aware that we have been listening to the President of the Council of Energy Ministers for the Community addressing himself to a range of policy matters since the House will have noted that, with his usual ambivalent pose, on no single occasion did the right hon. Gentleman give any indication of his attitude to the policy of which he was inviting the House to take note.

The Secretary of State is an extremely suave and articulate performer at the Dispatch Box. He charmed all of us with his description, but I imagine that I am not the only hon. Member to have noted that on no occasion when he was explaining these matters did he give any indication of the Government's views—or his own. The House it entitled to hear them.

I would certainly never accuse the hon. Member of being suave or charming and I hope he will acquit me of ever doing any such thing. If he has the opportunity of reading Hansard carefully he will see that I not only announced what the Government's position was at the 29th March meeting where the coking coal arrangements were made and when the Euratom loans were approved, but I also described in detail how we were approaching each of the policies coming forward and exactly what our view was on them. I think, with respect, that the hon. Member will not find another President of the Council of Energy Ministers who has spent as much time in discussing these problems with other member States as has been the case in the six months of our presidency.

The Secretary of State will have to read those two speeches together, if we ever get Hansard printed again. I listened extremely carefully to what he said. He explained the purposes of the papers he was presenting, but he studiously avoided any direct involvement with them or any commendation of them. My hon. Friends will have noted that. They will also have noted the enthusiasm of the Secretary of State to stray outside the terms of the papers before us and to indulge in a tour d'horizon, telling us of his trip to Moscow and other parts of the world, including Saudi Arabia.

We hope to hear of the world scene when we have the wider-ranging debate on energy policy, which I hope the right hon. Gentleman will arrange with the Leader of the House, following my request. We are tonight dealing exclusively with European policy matters. This is a suitable time to debate such matters because we are half-way through the penultimate month of the six-month presidency of the Council of Energy Ministers of the Community. It is, therefore, interesting to see just what has happened in that time. I suggest that the Secretary of State's performance has had all the marks of the performance that we might have expected of him in such a capacity.

The right hon. Gentleman started with what I understand was an extremely impressive performance before the European Parliament Committee for Energy which greatly encouraged both my Friends and other hon. Members of that Committee. At the start of his presidency the Secretary of State was impressive in answering questions from the Committee and the Committee was enormously encouraged. The right hon. Gentleman was as impressive as he always is in the House.

However, I am worried because I have been checking up today with a number of hon. Members about what they have felt about the conduct of the presidency since that impressive public relations launch. There is deep disillusion over what has happened. The first paper refers to European energy policy and it is an opportunity to review just what has happened to European energy policy since the Secretary of State took over the presidency on 1st January 1977.

The Secretary of State may like to intervene and correct me if he feels that he has more achievements than I shall now enumerate. We have unfrozen our position over Euratom—a position that has been described by some of our colleagues in the Community as an "asinine British position". It was a position that, as the right hon. Gentleman knows, was bitterly resented by other members of the Community because the British obstruction of nuclear subsidies and encouragement for additional nuclear capacity hit other countries in the Community far harder than it hit us because their position in electricity generating was different from ours. We obstructed that for our own purposes in negotiating. The right hon. Gentleman knows that that is true. We then changed our position in what must have been one of the most humiliating negotiating sessions in which any British Government have ever been involved in the Community.

There also was the tragic failure to agree on JET. I do not propose to pursue that matter, but one of the most important research projects in the Community has made absolutely no progress whatsoever. There clearly was an opportunity for resolving that matter. There is a widespread belief that the conduct and record of the right hon. Gentleman and the Minister of State at that meeting was singularly unhelpful. The JET project has made no progress.

Would the hon. Member for Bridgwater (Mr. King) care to say were the JET project should be sited?

I should like it to be sited at Culham. Hon. Members may say that it is impossible, through negotiation, to get it sited there, but do they know—and we have made inquiries—what happened at that session that night in Brussels? It was one of the most disgraceful episodes in the whole conduct of the Secretary of State in his presidency of the Council of Energy Ministers. I suggest that the hon. Member for Sheffield, Heeley (Mr. Hooley) does not know that. The Secretary of State was not in the chair but—

Not only was I not in the chair but it was not a meeting of the Energy Council. It was a meeting of the Research Council, which we are not discussing tonight. I should not dream of asking you, Mr. Deputy Speaker, to protect me, but the hon. Member for Bridgwater (Mr. King) must recognise that the Research Council discussions were entirely separate from the Energy Council discussions. I am content that this should be a general debate, but I should make it clear that that was another Council of Ministers.

I do not know what the right hon. Gentleman hoped to gain by that intervention. Is he suggesting that he had nothing to do with the siting of JET or that he did not spend considerable time trying to organise its siting? Is he saying that JET has nothing to do with future European energy policy? If so, I can understand his intervention. If not, his saying that, technically, it was not the Energy Council—

On a point of order, Mr. Deputy Speaker. We are supposed to be looking at a number of documents and our time is limited. The hon. Member for Bridgwater (Mr. King) is paying no attention to the documents and is talking about matters that should be reserved for the general energy debate mentioned by my right hon. Friend.

This is a wide-ranging debate on the whole energy issue and it would be difficult to limit it. However, I hope that we shall now get down to discussing the documents.

Further to that point of order, Mr. Deputy Speaker. The document on energy policy specifically refers to research and development in a wide context in a number of places. Surely it must be relevant to the whole concept of European energy policy to discuss research and development.

There is a time limit of two hours for the debate and, judging from the attendance in the Chamber, many hon. Members wish to take part. Points of order on matters to which I have already replied are a waste of time.

The Secretary of State talked of his discussions in Saudi Arabia and his visit to Russia. I am dealing with a European project, and this is what the papers are about. I understand that the hon. Member for Rother Valley (Mr. Hardy) wants to protect the Secretary of State, but the right hon. Gentleman can just take it for a few more minutes. I have spoken for 12 minutes so far and the right hon. Gentleman took 30 minutes. I shall try to keep my remarks brief.

We have gained no friends by unfreezing our position on Euratom—a position that we were unwise to take—and have made many enemies over our handling of JET. We have half of the coal resources in the Community, and I have heard a disturbing story that, because of our attitude over Euratom and JET, other countries may be less than wholly co-operative over some important proposals that would be helpful to us and our coal industry. I hope that this is not true, but it is the story that I have heard.

If it is true, it is an indication of how, after the bright dawn of the Secretary of State's start as President of the Council with his rush around Community capitals, subsequent results have been abysmal.

The hon. Gentleman has spoken of stories that he has heard. What does he conclude from them? Our conclusion is that because we have taken a stand on Euratom and JET in order to protect our national interest, the Community is taking retaliatory action. Is that the conduct of friends?

I suggest that the hon. Gentleman should do some homework and should talk not only to the Secretary of State but to the Minister of State, who may have a different view of developments in Europe. Let the hon. Gentleman discuss these matters further and then come back to me. I shall try to help him. The hon. Gentleman may know the background to the situation. There are difficult negotiations. Of course, there are different national interests. It is a complex matter to try to get a reasonable balance within the Community.

rose—

The tragedy of the present situation is the way in which things have been mishandled. It is not difficult to understand the motivation. I do not think that any hon. Member in the House believes that the Secretary of State is passionately keen on making a great success of Europe in any case.

There is a further and wider background to the policy papers before us. During the Secretary of State's presidency—I do not blame him for this—the European energy situation has sharply deteriorated. Oil imports are increasing rapidly. Therefore, dependence, so far from reducing, is increasing.

In the past six months the potential development of nuclear power has received a major setback within the Community. I think that hon. Members will be aware that court actions in Germany and in France have posed a major threat to the development of the thermal reactor progamme.

Will the hon. Gentleman give way?

I am sorry, but others wish to speak, and I want to be brief.

Another area where it is disappointing to see such poor results is in conservation. The Secretary of State quoted a figure of 2 per cent. That is an extremely disappointing figure. I must be critical of efforts at conservation in this country as well. Any hon. Member who addresses himself to the problem and realises the scope that is attainable must feel that our efforts at conservation are still woefully short of what should be achieved.

It is interesting to note that we are supposed to have an energy saving policy committee—the Secretary of State did not refer to this matter—to try to exchange information and to bring forward proposals for concrete action by midsummer. I am not sure whether we have had any proposals for concrete action in the first half of the year, but that is what is indicated in the papers. I am not aware that such proposals have been made.

A further area of concern to me relates to coal. We in this country are aware of the importance of coal. As I said, we have more than half the total coal reserves in the Community. What is happening to coal in the Community? The Community lays great stress on the importance of burning more coal. We have proposals for encouraging electricity generation from coal. What is happening? We have reducing domestic production and increasing imports.

The forecast in the papers is that domestic production will continue to fall and that imports will continue to rise. It will be ironic if the proposal is that, as a Community, we are to reduce our dependence on imported oil and to replace it by dependence on imported coal. That would seem to be an unsatisfactory switch.

The documents indicate that coal imports into the Community have gone up by 50 per cent. since 1973. We have the ironic situation of rising imports, falling productivity and rapidly rising stocks. These documents indicate that the level of coal stocks is expected to be 71 million tons at the end of 1977. That is virtually equivalent to the total annual coal-burn for electricity generation in this country. How much of that is expected to be the United Kingdom's stock at the end of that period? That is certainly an extremely worrying figure. The papers on these various matters indicate the need for a co-ordinated policy approach to energy. My hon. Friend the Member for Ross and Cromarty (Mr. Gray) particularly hopes to raise the question of oil refinery policy.

One of the most humiliating occasions for us was when President Carter was able to arrive at the Summit Meeting with a prepared policy position for energy in the United States, but when he asked the Summit Meeting what was the European policy approach to energy there was a fairly deafening silence. The Secretary of State has had responsibility for this matter for the past four and a half months. Such is the urgency of this matter that the paper before us tonight was prepared on 25th February, the Secretary of State wrote a letter to Parliament on 10th March, and the House actually gets round to debating it today, on 17th May, after 10 o'clock in the evening.

What is needed in Europe, and in Britain as well, is a far more impressive and far more co-ordinated approach. As has been made clear by the experience of the United States, a wide range of Departments are involved. These policies cannot be implemented by the Secretary of State for Energy alone. They are also matters for the Chancellor of the Exchequer and the Secretaries of State for Transport, Trade, and the Environment. Whatever the arguments about figures, the Secretary of State knows that the energy situation will at some time become extremely serious. If we are to respond to that serious energy situation, we need a much more dramatic, much more coordinated and much more urgent approach by the Government. The dilatory approach indicated by these documents and the passing references by the Secretary of State tonight are all indications that, as yet, the Government have totally failed to comprehend the need for a British and European energy policy.

11.2 p.m.

I am glad that the hon. Member for Bridgwater (Mr. King) referred to general European energy policy, because. I hope to do the same shortly. I think that the hon. Gentleman was far less than generous to the Government, and particularly to the energy Ministers, in his references to Culham and the European nuclear fusion developments. It cannot be doubted that the British Ministers—and I am sure that Conservative Ministers would do the same in similar circumstances—have done their utmost to get the plant sited at Culham. It was most unfair and inaccurate to suggest that our present Ministers did not do this.

I wish to say only a few words about particular EEC documents. It could be said that they are not very controversial in themselves, except perhaps the oil document Certainly the documents on coal and energy saving refer to policies that can either be operated under existing United Kingdom legislation or, in many instances, policies that are being operated already.

On energy conservation, for instance, those of my hon. Friends who share membership of the Select Committee on Science and Technology know that the Committee made about 40 separate recommendations to the Government about ways and means by which energy could be saved in this country without loss of efficiency. The question now is not about the principle of energy conservation but about how fast the savings are being made. The Select Committee, after taking a vast amount of evidence, felt that 15 per cent. could probably be saved by the end of the next decade or, more optimistically, in even six or seven years' time.

I note from these documents that that figure is not significantly different from the ideal EEC estimates. But the saving after two or three years of the "Save It" campaign by the Department is about 2 per cent. I do not think that it is particularly impressive but, to be fair, that saving should be taken in relation to the growth of the national product during that time.

In its document on conservation the EEC points out that the essential difference between reductions in consumption due to higher prices and economic recession and genuine savings because of higher efficiency of utilisation must be differentiated, because they are not the same thing. I think that that is a sentiment well understood by the Select Committee and I hope appreciated in the Department.

I turn to the general document on the West European energy situation to which the hon. Gentleman made so many references. It is certainly the document that interests me most. My right hon. Friend gave us an account of his travels to the Arabian sands and to Moscow. I do not think that he has very recently been to Washington.

Last month.

I beg my right hon. Friend's pardon. But I do not think that he has been there since President Carter made his speech. It seems to me that if that speech had been made before the EEC document was produced, the document might in itself have taken a different form or could have been seen in a different context by us. I say that because the new American view on nuclear policy, not only for the United States but for the world generally, has important implications for Western Europe and the United Kingdom. American companies have supplied most of the nuclear systems which are used in Western Europe, and on the assumption that the American companies are up to point bound to be under the influence of the American Government—if it is not the other way round—one cannot avoid the implications of some of President Carter's remarks. Indeed, several of the EEC countries, notably France, have already indicated their dissent from the Carter assumptions and deductions.

Are the British Government, as an EEC Government, formulating continuing views on the Carter approach and are those views likely to support the President of the United States, or, in view of our own energy needs, particularly nuclear, are those views likely to be different? I think that our view should be different. President Carter very properly thinks, as I imagine we all do, that the proliferation of the means to make nuclear weapons should be severely restricted. That is why there is the non- proliferation treaty, which a considerable number of countries have signed. But President Carter goes much further in his ideas and suggests that it is undesirable that sensitive technologies associated with the peaceful production of energy in power stations could also be a nuclear threat. No doubt they could be under some extreme circumstances. But I believe that such an important if oblique reference by the President to the enrichment and reprocessing of nuclear fuels, which we are able to do highly successfully at Capenhurst and Windscale, should be of major concern to the United Kingdom and its Government.

My view is that if we and the French gave up doing this work of processing, reprocessing and enrichment, it would be a great incentive to other countries poscessing reactor systems in the Third world, for example to do it themselves. Instead of there being a concentration, as there is generally at the moment, on reprocessing in the advanced Western countries, with our developed facilities and where it is controllable, the end result of Mr. Carter's ideas if applied might be an extension of nuclear processing and the availability of plutonium throughout the world rather than a contraction.

I therefore suggest that in this matter, in spite of the present wave of enthusiasm for a new President of the United States and, incidentally, I suppose for a new British Ambassador—admirable individuals as they may be—we should avoid too quickly saying "Yes" to Mr. Carter without the most careful investigation of all aspects of an admittedly very difficult problem. We should also take this view to Brussels, where again it requires the most careful consideration by the EEC nations.

I think that President Carter's speech waved aside much too easily the question of the general development of nuclear power for energy production. The American utilities are now forced to take a short-term view of nuclear power production because they are short of capital and have difficulty in raising it, and a coal-fired power station, especially with cheap American coal, is more economical and has a lower first cost. The fact that the American utilities are tending at present to turn back to coal is a reflection of their present financial problems rather than of careful choice for the future.

Energy economics have to be taken much more seriously in this country and in the other EEC countries generally than may be the case in the United States, where the fashion has been to throw everything at the target and hope that something sticks. There has been historically a vast, wasteful use of energy resources in the United States. We in this country cannot afford that kind of approach. I will give, perhaps without much comment, the latest Central Electricity Generating Board's figures. They give the nuclear cost of generation in magnox power stations, as 0·69p per kilowatt-hour, coal as 0·97p per kilowatt-hour, and oil as 10·9p per kilowatt-hour. With us nuclear power is the cheapest power.

While I am all for developing renewable sources of energy—another subject that the Select Committee is looking at, particularly the Severn Barrage—nobody can perhaps avoid the inconvenient fact that in Western Europe, once the fossil fuels run out, nuclear fission is the only certain source of energy open to us if we want the massive blocks of power that we must have to maintain our way of life. I have read and heard all the arguments, but I cannot escape that conclusion; I do not think that any expert with a fair reputation dissents from it either. My right hon. Friend, who presided so admirably at the conference at Sunning-dale last weekend, which I had the privilege to attend as Chairman of the Select Committee, will, I am sure, agree that the majority of experts then supported that view. There were those who adopted the more extreme environmentalist point of view and differed, but none of those who have the ultimate responsibility dissented.

We must consider seriously, both in this country and in the EEC, the question of uranium supplies. We have been developing successfully the fast breeder reactor for 20 years. It has not been dreamed up in the last five or 10 years. It was the keystone of British long-term nuclear policy from the beginning. I do not say this in a boastful, national spirit, but British nuclear fast breeder technology is ahead of that of the United States.

I respect my right hon. Friend's caution about the commercial fast breeder reactor, but the need for a Government decision on it becomes more urgent each month. In some ways it is sad to have to listen to the constant pleas of Sir John Hill, who is responsible for this matter and responsible for keeping his teams together, for action by the Ministry. He was promised a decision a year ago but he has not had one. It is now more and more urgent that the questioning should stop and construction be started.

At one time I was concerned about the safety doubts associated with the fast breeder reactor but largely they are now resolved. I am satisfied that the combination of the expert engineers of the Atomic Energy Authority and the Safety Inspectorate can provide full protection for the public and operators.

I must ask my right hon. Friend to make a decision reasonably soon. We should either proceed alone—whatever the Americans say—or in conjuction with the French. We certainly must proceed.

Britain should be taking the lead in Europe on these important energy questions. We are still too inclined—perhaps because of the long-drawn-out controversy about Britain's entry to the EEC—to react to events in the EEC instead of taking the initiative. I can never understand, for instance, why this country, which has some of the most successful thermal reactors in the world, has not yet been able to persuade our European neighbours that the British reactor systems have much to recommend them. I should like to see an argument of that kind deployed in a positive fashion by those who represent us in the energy councils of Europe.

11.19 p.m.

The hon. Member for Bristol, North-East (Mr. Palmer) and others with an interest in this subject will be aware of the gap that is likely to occur before the end of the century. The hon. Member must be aware that General Electric of America is thinking of pulling out of reactors.

I do not know whether the Secretary of State's visit to America was made at the appropriate time. I hope that it was. I hope that he was able to interpret the situation correctly. I was heartened when, in his speech, he appeared to be responding to the forces of supply and demand and talking about commitments for expenditure because of the long lead times. If he was saying that and believed it, I should have thought that he would come up with decisions. The Secretary of State talks a lot but decides little.

If the Minister can give answers to one or two questions, the House will probably be satisfied. I hope that he will not deviate from answering my specific questions.

What type of reactor is the Minister prepared to back now that the SGHWR has been placed on the shelf? Will he give us the size of a viable nuclear programme for the United Kingdom? This would naturally arise from Document R/477/77. Is the Secretary of State interested in developing a reactor that customers abroad will buy? In other words, is he prepared to go for the light water reactors, which several of us have recently seen in Spain? What is the future of the CFR1. The hon. Member for Bristol, North-East has implied that something should be indicated about that. He has read the Flowers Report and he knows what is required in the plutonium economy. One either stores it or one uses it. The CFR1 is one of those reactors in which it can be used.

Since President Carter has made his enunciations on nuclear fuel reprocessing and has indicated that the United States is to abandon it, will the Minister re-emphasise that he is prepared to go ahead with the Windscale functions and have a substantial plant to reprocess oxide fuels, not merely for the United Kingdom AGRs but for any other reactor that may be chosen to help fully to service the Japanese contract when that comes on stream?

Will the Minister also take a decision on whether he is prepared to stand up to environmentalists, who have had such a disruptive effect in Germany and elsewhere?

On a global stance, nuclear energy could provide 21 per cent. of the world's primary energy by 2000 AD. That would be equivalent to 43 million barrels of oil a day, which is probably what the world requires.

There are one or two other matters on which the Minister may wish to give us his views. That is what the country requires. It requires decisions, and not long talks. Is he prepared to argue in Cabinet against discriminating taxes on the production of fuels, which disrupt the energy market? Is he prepared to share North Sea oil with the European Community, provided that member countries pay the market price? What, if any, is his depletion policy?

The mistake of the Secretary of State is this: he is like Canute, sitting by the shores and allowing the tides of time to lap against him. If he only decided the issues that were relevant and if he only came to the correct decisions, he could be classified as being one of the great Secretaries of State of our time—if; but there is a lot in the "if". He has yet to substantiate it. However, I am generous by disposition.

Document R/75/77 is to promote the use of coal for electricity generation, but this will not necessarily assist the producing countries, and particularly our National Coal Board. The United Kingdom produced 122 million tons in 1976. The Federal Republic of Germany produced just under 100 million tons and France produced about 22·4 million tons. But who are the chief importers? They are France and Italy. France imported 16·6 million tons and Italy imported 10·1 million tons. But where did they buy it from? Did they buy it from other Community States? Not a bit of it. It came from the United States and Poland. In 1976, 14½ million tons came from the United States and 15·1 million tons came from Poland.

Why did France and Italy not buy it from their Community partners? They did not do so for the very simple reason that the current average price, delivered to Europe, for steam coal for power stations from Poland, the United States, Australia, South Africa and India is $30 to $33 a ton. That compares with an Immingham price for steam coal delivered to Europe of about £30 a ton—in other words, about 1·7 times as high as the price for coal from other countries. [Interruption.] It may be said that it is coal extracted in a certain way with certain advantages, but it is deliverable and the Community is not against fair trade in this commodity. Therefore, I do not see that we shall receive any alleviation in this respect.

Will the hon. Gentleman give us the German and French market figures so as to be absolutely fair?

I cannot give those figures. I am not talking about the German and French figures but about the Polish and United States figures. They are the countries that sell coal cheaply. I recognise that in Germany Ruhr coal faces a difficult situation. I am not comparing National Coal Board coal with Ruhr coal; I am comparing the figures behind the Iron Curtain.

The Secretary of State referred to R/478/77 on Community coal deliveries and coal obtained from third countries. This is purely data collecting. There are no teeth in it and it is not intended to interfere drastically with the market.

I appreciate that time is marching on but I shall quickly run through the points that I have in mind. Grants of 30 per cent. of the extra capital cost of building, converting and modernising coal power stations is implicit in R/75/77, but the funds are available to reduce oil in favour of coal secured from Community and third countries for use in power stations. That must be so, as it would be catastrophic for the Italian economy if otherwise.

There is little scope remaining to aid United Kingdom power stations, for coal accounts for over 70 per cent. of the fuel-burn in CEGB stations in 1976. There is little economic sense in increasing that ration further without making the board a subsidiary of the National Coal Board.

For the National Coal Board it is now a question of supply due to lack of availability. There is little evidence available to convince the fair-minded analyst that the Board's targets will be accomplished.

The oil-burn, now dramatically reduced, has reached critical limits for the CEGB. Oil consumption at power stations fell from 23·5 million tons oil equivalent in 1972–73 to about 11 million tons oil equivalent in the current financial year. During the same period coal has risen from 63 million tons to 70 million tons. The crucial point between coal and oil is between 10 and 12 million tons oil equivalent, and that point has now been reached. At least 4·5 million tons is sacrosanct to meet winter electricity demand.

The directive comes from the Community and it will assist Western Ger- many, which burns a great deal of natural gas in its power stations. It should not do that, but it will not and cannot aid the United Kingdom because the policy conflicts with the uranium fuelling of post-1977 stations if the United Kingdom is to have an intelligible programme in the years ahead.

Further conversions would not provide a solution for the additional supplies of fuel oil that would flood the market, particularly when its market continues to be eroded by natural gas.

The elimination of the remaining limited number of highly efficient oil-powered stations built several years ago at non-inflated prices through their replacement with new coal-fired stations built at highly inflated capital costs would do nothing to aid electricity consumers and would lead only to a rapid closure of old plant with an overall reduction in coal consumption.

I hope that the right hon. Gentleman will bear that in mind if he is running for economies. Further conversions would make nonsense of the Government's declared policy of refining two-thirds of North Sea crude oil, which is an indigenous fuel refined in the United Kingdom, if less crude would be run through inability of the industry fully to market in competitive conditions a product which comprises the largest slice of the barrel.

I suggest to the right hon. Gentleman an interesting little comparison. Post-Budget prices per delivery therm for heavy fuel oil works out at 12·3p to 12·8p. Coal averages 9p and marginal coal is 11·3p to 12·0p. There seems to be a considerable margin between the two.

Perhaps the right hon. Gentleman will take some interest in this little calculation. The CEGB's esimated fuel oil consumption for 1977 is 7 million tons. With tax at 2·5p a gallon or £5·73 a ton, the Government are imposing a levy on the CEGB of £40 million. That is roughly what the Government want to pay the Board for the Drax B power station. In other words, the Secretary of State is taking away with one hand and giving back with the other.

Before we study this European directive a little more carefully we should urge the Secretary of State to bear in mind that what he is doing is not in the interests of the coal industry. The right hon. Gentleman is simply picking its pockets in order to ensure that its expenditure is recouped in another way.

11.31 p.m.

The hon. Member for Bedford (Mr. Skeet) ranged widely in his speech, but at least it was lightened by a note of rather patronising generosity when he referred to my right hon. Friend the Secretary of State. The hon. Gentleman seems to fail to understand the difference between coking coal and steam-raising coal. I thought that the figures he gave applied in one case to the first sort and in another to the second.

His speech would have been useful in a much wider debate when we could deal with the subject of energy in broader terms and in greater detail. My right hon. Friend said that we shall have such a debate, and I hope that then the hon. Member for Bridgwater (Mr. King), who is not now in the Chamber, will be satisfied. It was clear that tonight he was irritated by having to restrict himself to documents, and he gave very little sign of having read them.

Document R/479/77, which is concerned with conservation, is welcome, but I utter a cautionary note. Bureaucracies everywhere seem to be obsessed by the work of committees and there is a great deal about expert committees in the document. I believe that the increased energy price has had rather more effect on energy saving than the work of all the expert advisory committees here and in Europe.

So high have the price increases inevitably been that I am surprised that energy saving has not been even more marked. Nevertheless, one welcomes the concern for saving, because it is important. Our resources are finite, and we should not waste them. I am glad therefore for this concern and that the Government have recently announced a further sum of money to support and finance the energy saving campaign. We must wish the campaign well.

If we are to see further progress in energy saving it might be a good idea, however, for the Government to give more serious consideration to further helpful measures which need to be taken, and I refer to the need to encourage and sup- port home insulation. The provision of flues in new homes would not go amiss. It would give people a choice and might ensure that energy use was properly balanced.

Just as support for insulation and so on would not go amiss, nor would a better-informed and broader public debate. Unfortunately, too much public debate today seems to be concerned with either the dangers of nuclear power or the cost of energy. If there were such a debate I believe that my right hon. Friend's comments on Document R/684/77 in relation to refinery policy would certainly meet with general approval in this country. It is noticeable that the Conservatives have not in any way moved away from the acceptance of that policy tonight.

The documents before us are rather more realistic than the EEC energy documents that we considered a couple of years ago. I recall the debate in which several of us on this side were critical because it seemed at the time that Europe was becoming prepared to accept a gross over-reliance on nuclear power. We warned that it still did not overcome the need to achieve public acceptance and also that it had not properly taken into account the vast capital expenditure that the rather extravagant proposals of two years before would involve.

I shall not suggest that we should not go ahead with nuclear technology. I think it is essential to go ahead. At the same time, Europe must proceed not merely with caution in regard to technology, and certainly not merely with caution in regard to non-European technology, but with caution in regard to the expenditure which will be involved, particularly if it is expenditure on maintaining excessive reliance on current nuclear technology.

I am particularly pleased that one of the ways in which European policy has changed is that there is a clear acceptance, particularly in Document No. 478/77, that a substantial coal industry should be retained. Current European production at about 220 million tonnes is less than the target that should be achieved, and I therefore believe that measures to promote the achievement of that target are necessary. The United Kingdom could, and should, be producing over half the European production in 1985, albeit that that production will remain at the modest level of 250 million tonnes.

Document No. 478/77 mentions the very high level of stocks that exist today. These stocks offer a persistent disincentive to production. The Community seems to be more aware than some Conservative Members that if miners know that there are large stocks of coal they have anxiety whether they should add to those stocks by extra enthusiasm. At Question Time yesterday Conservative Members showed that they could not comprehend that point.

One way in which the stocks could be reduced is by ensuring that there is greater use of European-produced coal and less reliance on imports. The proposal to monitor is welcome, though it may well be singularly ineffective unless it is accompanied by a much firmer arrangement to discourage imports.

One reason for the high level of imports is, perhaps, that the spot market price for coal on the world market is very low because of the recession. Indeed, that is the principal reason. The price has been low because some countries require European currencies and are prepared to sell coal to Europe at less than the cost of production.

We should not allow that policy to be sustained. It is in Europe's interests to ensure that the production of coal within the member States is encouraged. That should be ensured, either by the application of wit and common sense—that seems to be needed—or, if that fails, by firmer policies than have been announced so far.

I doubt whether the proposals in Document No. 75/77 regarding coal firing will have a massive effect, but they are to be welcomed as a sign that Europe is accepting reality. Perhaps the greatest helpfulness of these proposals is that they demonstrate an acceptance of a cause some of us have been arguing for a long time and they may assist by engendering confidence in that sector of industry that is responsible for power station construction, which certainly needs an injection of confidence.

The greatest help of all would come from a move away from the recessionary conditions which still affect the world. It is to be hoped that the latest OECD fore-case will prove to be inaccurate. However, I will not spend further time on that aspect. We certainly need an energy debate in which we can express our thoughts at much greater length than has been possible in recent months.

Europe will not achieve the required level of production of coal unless men are available who are prepared to mine it. We need to spell out our attitude to the mining industry more vigorously than we have of late. Someone said recently that this Labour Government have done very little for the miners. It is time that Tory Members were a trifle more honest and that Labour Members were more vigorous in presenting the realities. The Department of Energy and hon. Members need to spell out the facts—namely, that this Labour Government have done a great deal to secure a future for British coalfields. Anyone who recalls the folly that we inherited in 1974 and the hardship and uncertainty that prevailed then will acknowledge the tremendous transformation that has been brought about. We should ensure that the people of the coalfields realise the steps that have been taken since then. If they did they would not complain as much as some people have been complaining about the record of the Government in establishing tripartite considerations, in developing compensation for disease and in developing and introducing the earlier retirement which was spurned by the previous Government. [Interruption.] Conservative Members are now showing that they have less sympathy with the miners than they claimed before the Ashfield and South Yorkshire County Council elections recently.

The pits in my constituency at the time when I was selected Parliamentary candidate were in grave uncertainty. Several collieries were being spoken of as at risk of closure. Every one of the pits was rumoured as likely to close. But today vast sums of money have been invested to ensure that the vast reserves of coal in those pits can be extracted.

I believe that the miners have been hit by the incomes policy. They led, but did not gain from, the wage inflation of 1974. Wage rates in the pits are lower than many people represented by Conservative Members imagine. The fact remains that if we are to ensure that Europe gets the coal which it needs we have to get our wage and industrial policies right with regard to the coal industry.

In so far as these documents make a contribution to this being achieved, they are welcome, but a much more vigorous policy needs to be announced by the Department during the next few months.

11.42 p.m.

It does not help the standing of Parliament that we should have only two hours in which to debate this most important matter of EEC energy strategy and these documents in particular. Bearing in mind what little opportunity we have had in the past two years to debate energy strategy in this country, we are certainly entitled to ask the Secretary of State when, in addition to the endless conferences, meetings and discussions that he has outside Parliament, he will allow hon. Members to debate these matters as well.

I want to say a few words about these documents in particular and about energy conservation strategy indicated in the EEC proposals. There has certainly been no lack of weighty forecasts recently about the future prospects for world energy resources. We have had the EEC and OECD reports. We have had President Carter's CIA reports. There have been any number of weighty presentations, with different time scales about when we shall be in trouble.

What is common between all these expert assessments and forecasts on the long-term energy scheme is that there is no shortage of energy. There is no shortage now, nor does there need to be in the future. There is plenty of energy. That comes out clearly in all these forecasts. It is equally clear that there will be a shortage of energy unless we start doing something about it. Therefore, the solution to the problem is in our own hands. It is up to us to make the right policy decisions.

What also comes out of these forecasts, whether they are pessimistic or optimistic, is that the most vital factor is time. Time is the most valuable asset that we have in finding solutions to energy strategy. Yet it is the most crucial and intractable factor—the time scale—that is being wasted. We are wasting the most valuable asset in the solution of our enegy policies. We must get the timing right if we are to prevent an energy gap.

Of course one can understand the Government's deferring important decisions because they are not sure which nuclear strategy they should adopt, if they should adopt one at all, and they are not sure which alternative resources should be developed. One can understand why they have been slow to take decisions, but one cannot understand or justify deferring decision-taking in the one sector that can give us that longer option in which to get the rest of the strategy right—that is, to invest in a more rational use of energy in the meantime in order to get a longer lead time in which technology can help us to get the right solution in the most economical way.

The EEC energy document is most relevant to the problem today, in that it regrets that there has been too little progress towards the achievement of the initial target of a 15 per cent. saving in energy by 1985. Why has there been so little progress? In a nutshell, it is because there is no coherent strategy either in the United Kingdom or in Europe.

I quote from the document:

"Energy saving considerations have so far played little part in the formation of general economic policy, fiscal, industrial, transport and environment policy."

That is absolutely true. We have provided some stimulus for the price mechanism and this is helping, but we have not given the right incentives to allow the price mechanism to produce the solutions.

When we see the Secretary of State's comment on the document we feel that it expresses far too complacent an attitude by the Government. The Secretary of State previously said that the document raised no new policy issues, and he said that again in his opening remarks tonight. I believe that it does raise new issues. It raises the issue whether the Government have implemented conservation policies. We know that we have aims, objectives and hopes, but we also know that we have not got policies.

We should not be misled into believing that the "Save It" promotion and education campaign, with one or two other little measures thrown in, represents an energy conservation policy. It does not. There is a great deal more to be done to provide the right incentives and a little bit of a carrot to allow the price mechanism to begin to operate.

There are areas in which we are lagging far behind the satisfactory progress being made in Europe. We are bottom of the European league in the generation of electricity with combined heat and power, and we are doing nothing about it. We are bottom of the league in providing real incentives for insulation, and although we are far behind the rest of Europe we are doing nothing about it. Those are two specific areas in which criticisms by the EEC are fully justified.

If the conservation programme fails and does not get enough impetus and initiative from the Government, we shall also fail to provide the new energy resources in the long term. The two are inter-related, and we cannot separate them.

I am listening carefully to what the hon. Member is saying about our lagging behind and about conservation generally. He clearly has not read comparisons that have been published by international agencies, which give this country a good report. As for his point about combined heat and power, is he not aware of Energy Paper No. 20, published by the Department of Energy, and the fact that we are looking much more closely into this matter? Since it is a historical situation that he has described he can hardly blame us. This has built up over a number of years.

The Under-Secretary is taking advantage of me because he knows that my time is up. He should understand that I have not only read Energy Paper No. 20; I have studied it in great detail, together with many other papers. I know that this country is bottom of the European league in combined heat and power production. We are the only nationalised utility in Europe that does not produce any combined heat and power, while the thermal efficiency of our electricity generating system overall is about the lowest in Europe. In the other European countries much more combined heat and power is produced by private sector industry. The incentives for producing combined heat and power here are not in existence. I cannot develop that point because I do not have the time.

I emphasise the point that if the energy conservation programme does not get under way we shall not get the right stimulus for the production of substitute energy, for new sources of supply and for the proper competitive climate in which the price mechanism can allow new energy resources to develop. These factors are closely inter-related. It is vital that we make a greater effort to provide the investment that can be cost-effective in producing a more rational use of our energy. For those reasons I very much welcome the EEC documents and I hope that the Government will take note of them and begin to think a little more about this problem.

11.52 p.m.

One thing that the debate has proved conclusively is that there has not been nearly enough time for everyone who wished to take part in it to do so. I was glad that a number of speakers, including the Secretary of State, mentioned that we shall be having a full energy debate in the not-too-distant future. We look forward to this, so that we can outline our views on the short- and long-term aspects of energy policy and strategy.

My hon. Friend the Member for Bridgwater (Mr. King) dealt adequately with the performance of the Secretary of State and his handling of these documents. There seems to be a tendency for a great deal of talk to take place in committees, commissions or whatever, but a decided lack of decision-making. This view is held both outside and inside the House. I hope that the time is not too far distant when the right hon. Gentleman will take some positive decisions and stop putting everything off in favour of wide-ranging public discussions. They are all very well, but they can never be a substitute for decision-making.

I was sorry that the hon. Member for Rother Valley (Mr. Hardy) introduced a slightly disagreeable note into the debate, particularly when he remarked on the fact that he considered that my hon. Friend the Member for Bridgwater had not studied the documents in detail. I should point out that it was only because of my hon. Friend's representations that we have had two hours for this debate. Without his representations we should have had one and a half hours, and the hon. Member for Rother Valley might not have been able to make his remarks.

The hon. Member was worried about the future of miners in his constituency. I suggest that when Clause 11 of the Coal Industry Bill is discussed on Report he should carefully consider whether to support the proposal that the National Coal Board should be able to operate overseas. The jobs of miners in his constituency will be put at risk if the NCB is diverted from its primary task, which is the production of coal.

I turn to the document dealing with oil-refining policy. I entirely agree with what the Secretary of State said about the document. Our requirements as an oil-producing nation to some extent differ from those of our Community partners. Therefore, it is only right that although we must, of course, be good Europeans we must also remember that our own interests must not be neglected. I believe in being good Europeans, in the same way as the French. They never forget that the requirements of their own country are every bit as important as those of their neighbours.

I must say a word about nuclear policy, because that has been by far the most controversial matter mentioned tonight. It is not the first time that I have found myself in agreement with much of what was said by the Secretary of State, and that was amply confirmed by my hon. Friend the Member for Bedford (Mr. Skeet). We must give serious consideration to the future of the nuclear industry. I make a prediction now that we shall proceed with the fast breeder reactor, despite what the conservationists say—with the greatest respect to my hon. Friend the Member for Sutton and Cheam (Mr. Macfarlane), with whom I do not always agree—because there is simply no alternative for filling the gap that we shall face in the 1990s. There is no doubt that the West may face a major new energy crisis within the next decade.

I doubt whether many of the suggestions and predictions that have been made by President Carter will see the light of day because, as one well-known writer has already said, his speeches contain "a Bill in every line". That is pretty accurate. He will find it extremely difficult to obtain every one of those Bills. While I have the greatest respect for his moral integrity and his wish to do the world a service, I am afraid that I have a slight reservation about his remarks because the commerciality of certain things in America is involved and American enthusiasm could influence matters.

I also want to speak about the documents that deal with the coal industry. We obviously agree with the sentiment expressed in them, but a number of questions arise that the Minister may be able to clarify when he replies. We accept the principle behind the grants that are to be made, but how will this operate in conjunction with the terms of the present Coal Industry Bill? Will the Government be willing to accept such grants from the EEC, and do the Government consider that the amount that we shall have to contribute—which the Secretary of State said would be about £70 million—to the project will lead to a reasonable return for that money? What consideration have the Government given to nuclear power as a competitor of the coal industry? Perhaps the Minister will reply to those questions.

I know that the Minister will be pushed to answer all the points that have been raised by hon. Members tonight, but I should like him to say a word about the important subject that was raised by my hon. Friend the Member for Derbyshire, South-East (Mr. Rost) in connection with conservation. My hon Friend has made a particular study of this and I know that the whole House respects the amount of research that he has put into it. There is no doubt that what he said about the "Save It" campaign was correct. The cost involved has not been fully rewarded by success, and some of the more recent bungling of which we have read has given cause for concern. I am sure that the Minister will do all he can to ensure that detailed policy on the "Save It" campaign is handled with a little more care.

I promised to conclude at midnight to give the Minister of State 13 minutes to reply. I hope that he will respond by answering my questions.

12 midnight.

I am obliged to the hon. Member for Ross and Cromarty (Mr. Gray), who has, as usual, done a good job. I agree that two hours is inadequate for a debate on energy, but it is two hours of Government time and it is two hours more than the Opposition have provided in this Session.

Considering the indignation of the speech of the Opposition spokesman, the hon. Member for Bridgwater (Mr. King), it is remarkable that we have not had a full Supply Day on energy. Judging from the hon. Gentleman's speech, it would be worth having a full day's debate because he has misunderstood not only what has happened in the Energy Council—over which my right hon. Friend currently presides—but what will happen at the next Council meeting.

All hon. Members have welcomed the papers and there have been some most able speeches, even in this short debate. The hon. Member for Bridgwater was the only one to spoil the debate. We are going to discuss protection of investment at the next Council meeting. The hon. Member for Bridgwater will remember the so-called minimum safeguard price and why, in our fight to get that, we took a certain attitude on Euratom loans. He will remember that his hon. Friend the Member for Cheadle (Mr. Normanton) said last year:

"Has he considered a trade-off to achieve what the Government have declared to be their policy—to see the siting of JT at Culham?"—[Official Report, 15th November 1976; Vol. 919, c. 1043.]

Trade-offs are a well-known practice in the Community. The hon. Member for Ross and Cromarty, who apparently has more sense than has the hon. Member for Bridgwater, knows that this is how the Community goes about its business. Those of us who are strongly for Europe may criticise it and say that it is not right, but it is a reality of Europe and the world. Various nations pursue their legitimate interests through so-called trade-offs. I do not like them, but I remind Opposition Members that the word "trade-off" was used by an Opposition spokesman last year.

We unfroze our position on Euratom loans, and that significant act was appreciated by our collegues in the Council. We have protection of investment on the agenda. Our French friends and other colleagues have accepted the principle of a minimum selling price as worthy of discussion. That is important for this country. Even if, by some mischance, the hon. Member for Bridgwater were put in charge of the Department of Energy, I do not think that he would abandon the efforts to get the principle of MSP accepted.

In the Council we shall also have full discussion on coal policy. No one has criticised the propositions in the Commissioners' papers. All the colleagues endorsed them. The hon. Gentleman should remember what we did at the last Council meeting. At the next meeting, we shall also be discussing conservation—largely because of the presidential influence.

Everyone knows that a good president can arrange discussions, and conservation is on the agenda for the next meeting. In addition, the British have achieved an agreement to reconsider the papers submitted on refinery policy.

These are the big issues that we shall be discussing at the Council. It is incredible that the hon. Member for Bridgwater should have launched an attack on the Secretary of State. My right hon. Friend has not been renowned in this country for his advocacy of European union but no one can gainsay that he has been a most enthusiastic president of the Council.

My right hon. Friend was the first president to visit all his colleagues, the first to discuss the papers, the first to arrange that matters might be discussed in public at certain sessions, the first to try to bring the agenda together, and the first national representative to make such gestures of a community spirit at the first meeting.

I find it extraordinary and breathtaking to hear such a speech as was made by the hon. Member for Bridgwater about my right hon. Friend. Indeed, the hon. Gentleman went so far as to say that if he had anything to do with the matter JET would go to Culham. That is not what we heard before. The official Opposition have been singularly inept in supporting the British Government.

Rubbish.

It is my opinion that the hon. Member for Bedford (Mr. Skeet) is sadly misused by the Conservative Party. He should be on the Front Bench. If he were, we would probably get more support for these matters. Unfortunately, he is not on the Opposition Front Bench. That is not my fault.

The fact is that other Opposition Members who occupy singularly influential positions—for example, the hon. Member for Cheadle—make these speeches in the European Parliament on behalf of the Conservative Party. I refer to the Official Report of 16th March 1976, col. 1274. I shall not read the disgraceful words. There was no support for the Government in trying to get JET sited at Culham. On the contrary, selling the pass, letting it go to Ispra, made Ministers' lives difficult when they appeared at the Council to argue the case.

All our gestures on coking coal, Euratom loans, and so on, are obfuscated by statements of the kind made by Opposition Members. I appeal to them to realise that they are listened to just as much as we are. If there is a division of opinion in a country, it is used against us. I suggest that, far from attacking my right hon. Friend, however justified the hon. Member for Bridgwater may feel on certain occasions, we should have some unity when discussing European policy when British interests are at stake.

I think that the Minister slightly misquoted what I said about Culham. Can he cite a single instance when in this House my right hon. and hon. Friends have not given full support to the siting of JET at Culham?

I have just referred to one—16th March this year, preceding the meeting of the Council. That is not to be disregarded. The hon. Gentleman said that there were stories in Europe. I am reminded of the remark "If you keep your ear close to the ground you will inevitably get it filled full of dirt". The hon. Gentleman has listened to stories. Where does he get them from? He gets them from his colleagues, naturally, just as we get information from our colleagues in the European Parliament.

I am sorry that the debate has proceeded in this way. It was because the hon. Member for Bridgwater went on attacking my right hon. Friend. If he wants to make a real case, I suggest that he finds Opposition time to try to make it. But that will not happen. I shall get on to the real business. I was provoked. I do not think that anyone in my position could have listened to that speech and left it unanswered.

My hon. Friend the Member for Bristol. North-East (Mr. Palmer) was more than generous when he said that Conservative Ministers would behave in the same way as we are behaving. I begin to wonder. I hope that the Opposition will make it abundantly clear, in time for the next Council meeting, that there is a definite view in all sections of the House that we deserve to have JET sited at Culham. Inevitably, that development will be of great importance to Europe and to our children in future. It is important that Great Britain should be in that kind of business and should take a leading part in it. I hope that we can get absolute amity and unity on that matter. I am glad that the hon. Member for Bridgwater is now conceding that matter.

My right hon. Friend is anxious that we should go ahead with immediate decisions on nuclear energy matters which concern us now. The Government cannot make such decisions without public confidence. Public confidence can only be assured if we as Ministers and the House of Commons are willing to wait for the report of the Nuclear Inspecorate. That report is not due for another month. It would be wrong to abuse my right hon. Friend for not making a decision unless hon. Members were willing to say that they did not want to hear what the Nuclear Inspectorate had to say. If there is a hiatus after that, by all means let them attack my right hon. Friend, but I doubt that there will be.

I shall not embark on comments about the predictions of the hon. Member for Ross and Cromarty about the fast breeder reactor or anything else. It would be foolish of any Minister to do so. We are concerned about the decisions, and we hope that these decisions will be taken promptly after we have the advice of the Nuclear Inspectorate.

Will the right hon. Gentleman clarify whether he is speaking about the report on the social and political implications of an extended nuclear programme, and not just on the safety aspect? Will the report be placed in the Library?

Yes. I think that the hon. Gentleman will find the Flowers Report, which plays a large part in our thought and judgments, in the Library.

Reference has been made to an interesting one-day seminar to which we invited Conservative Members and Members of other parties. This was referred to by my hon. Friend the Member for Bristol, North-East. There was a strong representation at the conference. Sir Brian Flowers was present and members of the learned societies and all the industries concerned were there.

Where was the hon. Member for Bridgwater (Mr. King)?

It was regrettable that the hon. Gentleman could not be there, but I am sure that his hon. Friend will have reported to him what went on at the conference.

There will be a response from the Government to that Royal Commission report. That is in addition to the reference that I made to the Nuclear Inspectorate's report. It would be foolish of any Government to make a decision on this—I know that hon. Members are aware of my personal views on the matter—without the public being confident that we had taken every factor into consideration. That is only prudent.

The intervention of the Secretary of State's PPS, the hon. Member for Luton, West (Mr. Sedgemore), implied that I was not willing to attend the seminar. I appreciated the invitation and would have been more than willing to attend. If the conference had as much importance as the right hon. Gentleman claimed to attach to it, it is a pity that hon. Members were not given more than 10 days' notice.

I suggest that we should let peace break out now. It is important that we should try to keep as much in harmony as we can on these vital decisions. It would be awful if we started to quarrel on a party basis about fundamental issues which have no doctrinaire content. I am sorry that the hon. Member for Bridgwater did not receive enough notice. Perhaps next time all will be well.

I wish to make one reference to conservation. My right hon. Friend referred to the range being at least 2 per cent. of demand, going up, as the Energy Paper put it, to 10 per cent. of demand. We have concluded—indeed, we told the Council—

It being two hours after the commencement of proceedings on the motion, Mr. DEPUTY SPEAKER put the Question pursuant to Standing Order No. 3 ( Exempted Business).

Question agreed to.

Resolved,

That this House takes note of Commission Documents Nos. R/75/77 (rev 1), R/477/77, R/478/77, R/479/77 and R/684/77 on EEC Energy Policy.

Welsh Grand Committee

Ordered,

That, during the proceedings on the matter of Small Businesses in Wales, the Welsh Grand Committee have leave to sit twice on the first day on which they shall meet, and that, notwithstanding the provisions of Standing Order No. 64 (Meetings of Standing Committees), the second such sitting shall not commence before Four o'clock nor continue after Six o'clock.—[Mr. Coleman].

Business Of The House

Ordered,

That, notwithstanding the Order relating to Business of the House of 25th November, the Ballot for Private Members' Notices of Motions which are to have precedence over Government Business on Friday 17th June shall be held on Wednesday 25th May.—[Mr. Coleman.]

Works Of Art (Sales Abroad)

Motion made, and Question proposed, That this House do now adjourn.—[ Mr. Coleman.]

12.13 a.m.

I cannot believe that there is a single Member who has not heard of Christie's and Sotheby's, those two houses whose domination of the auctioneering markets of the world has been one of the great commercial successes of the post-war period. Their business flair has also been combined with scholarship, and in this latter respect some of their experts are among the world leaders in their particular fields.

If the example of the art trade and the auctioneers had been equalled by industry and commerce in this country, our economic position would be considerably healthier than it is. It would be invidious to single out any individuals in these two firms for particular praise, for it is their combined talents that have made London the unquestioned centre of the art trade of the world.

Having said that, I should like to sound some notes of warning, with particular regard to the acceleration of the dispersal of our artistic heritage. This development is sadly underlined, as we all realise, by the colossal sale at Mentmore Towers, which begins in a matter of hours, under the aegis of Sotheby's.

It cannot be disputed that when capital taxes have to be paid works of art may have to be sold. In those circumstances it is evidently the duty of the auctioneer to obtain for his client the best price possible, and many objects will unfortunately find their way abroad. Nevertheless, statutory facilities, which can be very favourable to owners, exist for the discharge in kind rather than cash of obligations for capital taxes. These apply to pre-eminent works of art, which are thus preserved in this country for public enjoyment. But the question that has now become specially relevant and, indeed, urgent is whether these provisions are being fully utilised in the interests of our national collections.

If the possibilities available by statute are to be properly implemented and so enhance our heritage, initiatives and good will are required from the four interested parties: first, the owner and his legal advisers; secondly, the art expert they consult, who is often an auctioneer; thirdly, the appropriate museum officials; and, fourthly, the Treasury, represented by the capital taxes office. Alas, those interests can well diverge and may result in the nation becoming the loser. This has indeed been the history in some sad cases.

The first essential is that the striking financial advantages that may accrue to the owner of a pre-eminent work of art upon adopting such a procedure are placed fairly before him. But if his expert adviser happens to be an auctioneer it must be admitted that the latter stands to lose financially by doing so. Since the recent much-criticised introduction of a 10 per cent. buyers' surcharge, which naturally cannot apply when works of art are accepted in satisfaction of tax, the difference between the commission charged for such negotiation and the fees that would arise from a sale by auction becomes very considerable. Nevertheless, since transactions of this kind form so relatively small a proportion of an art auctioneer's ever-increasing turnover, it is surely not unreasonable to suggest that, in these few cases, the nation's interest should take precedence over financial considerations as a matter of course rather than as a consequence of outside pressures, which is too often the case.

It is unfortunately a fact that the computations laid down by the Treasury in connection with the acceptance of a pre-eminent work of art in lieu of tax are so complex as to be daunting. Consequently it is only too easy for an owner to conclude, in spent bafflement, that the simplest course is to sell by auction and have done with it. One's tax can thus be paid from the proceeds, and if a British institution is outbid, well, that is just a risk that has to be run.

But the Director of the National Gallery, that admirable fellow, Michael Levy, whom some of us are fortunate enough to know, pointed out in a letter to The Times a couple of months ago that, taking due account of the very substantial tax concessions, the knock-down price at auction would have to be

"quite exceptionally high to realise a greater net sum for the vendor."

The nub of the private treaty sale is that not only does the owner who is selling have the concession of paying no tax, but 25 per cent. of the tax he would have paid is included in the negotiated sum which he subsequently receives. When the auctioneers do co-operate in giving such advice, is it not obviously to the benefit of all parties and, of course, in the best interests of the nation?

The only way in which a deal beneficial to our cultural heritage can then be thwarted is by the Treasury becoming somewhat difficult or intransigent. The Treasury's knowledge and understanding of works of art leaves a great deal to be desired. Such obstruction, if it should take place, entitles one to ask: What is the use of statutes being enacted in this House to protect our heritage if they are rendered ineffective in practice, not merely by the obscurity—and, my God, they are obscure—of the consequential regulations insisted upon by the Treasury, but, I am sorry to have to say, by its obvious lack of good will?

This lack of good will has been recently highlighted by the utterly unconvincing insistence of the Treasury that when capital tax obligations are discharged in kind rather than in cash, by means of qualified objects at mutually agreed valuations, public expenditure is incurred. The so-called reason adduced is that certain payments connected with such a discharge have in the past, by custom, taken place within the Treasury between the National Land Fund and the Board of Inland Revenue.

But it has recently been officially admitted—I have been chasing this matter for some time—not merely that these interdepartmental transactions do not in themselves constitute public expenditure but that they are not mandatory, in the sense that the acceptance of works of art in lieu of tax does not by statute require them to be made. Since these payments are merely optional, and if they are deemed in some mysterious way and however implausibly to involve public expenditure, why not dispense with this nonsensical ritual altogether? The answer to that seems to be that they provide a pretext for the thwarting by bureaucratic means of the intention of the statute.

Next, I turn to what I consider to be one of the most worrying developments to have arisen in recent years—the increasing number of overseas branches of the two leading London auction houses, Christie's and Sotheby's. Of course, any initiative that increases the profitability of these companies and, at the same time, ensures that British companies are world leaders is to be welcomed. But I am worried that the very competition and drive that stimulates overseas business may, in the end, lead to London taking second place to Geneva or, more probably, New York, as the centre of the art trade of the world.

Today, both auction houses have premises in New York, and they are constantly vying with each other to obtain the works of art that they must sell in order to justify their extra-territorial expansion. Overheads in America are high, far higher than here, and I believe that it cannot be long before both auction houses are tempted to draw on works of art from houses in this country for their New York branches. Once this begins—I seriously fear that it cannot be long in coming—the drain on our national heritage will be exacerbated to a very dangerous extent.

Corporate tax legislation, which is far more favourable to business in the United States than here, will naturally further encourage the financial advisers of both these firms to persuade their fellow directors that the maximum benefit of their respective shareholders lies in having their headquarters overseas, with all the resulting fiscal benefits. Can anyone who examines these developments seriously doubt that that will happen?

Now I want to discuss the most controversial innovation that I mentioned briefly earlier. Our two leading London auction houses have introduced, without consultation with the museums or, indeed, with their best clients, the art and antique dealers, the buyer's 10 per cent. surcharge, which is in addition to the normal seller's commission of 10 per cent., thus making an effective profit of 20 per cent. on each transaction. Once this was introduced, reasoned arguments were advanced against the practice by all sections of the artistic community. Fortunately, this greedy innovation was not imitated by all their rivals, and in particular I wish to praise Messrs. Phillips, the distinguished auctioneers, which held out against this practice and which has prospered without any surcharge whatever, so disproving the claim that the buyer's premium was a financial necessity, the argument adopted by those two leading auction houses, Sotheby's and Christie's.

Since it is clear from Phillips' example that the buyer's premium is unnecessary, I would have hoped that Christie's and Sotheby's would have second thoughts. Sadly, they have not. At the least, neither firm should contemplate imposing a surcharge on acquisitions by any public museum in this country, either directly or indirectly. I could not understand why Christie's insisted on applying the surcharge to the subscriptions raised by the public for the recent acquisition by the Fitzwilliam Museum of that splendid Van Dyck of the Virgin and Child from the Duke of Sutherland's collection. The efforts to raise nearly £250,000 were impeded by the knowledge that Christie's was to take an extra £20,000 in buyer's commission on top of what it charged the seller.

Surely, if the auctioneers cannot be persuaded voluntarily to help to protect our heritage it is not unreasonable for this House to debate how best to ensure that they do so.

I turn to the activities of so-called art investment trusts, most of which are nothing more than art dealers in disguise. There is one to which I must draw attention—the British Rail Pension Fund. I do not think that the Government are fully aware of the extent to which railwaymen's savings have been invested in works of art. I am damn sure that railwaymen are not. The British Rail Pension Fund has been coy in revealing not only the extent of its acquisitions, but—and this is silghtly sinister—the fact that a member of Sotheby's staff actually advises the fund about its purchases. If ever there were a conflict of interest, that must rank as one of the worst examples.

At the moment the National Gallery has at least one painting on loan from the Fund, and the Victoria and Albert Museum is negotiating the loan of a number of works of art from British Rail. What harm is there in that? Well, it does not need much imagination to see that the borrowing and display of works of art which have been bought for investment—that is, for sale at a profit at a future date—cannot be in the best interests of the museums concerned, particularly if they themselves might later wish to acquire some of the items. Foreign competition would be stimulated by the cachet that would attach to a loan to a national institution, and if a sale were eventually effected, presumably at Sotheby's, the works of art concerned would, in all likelihood, go abroad.

I hope that the Trustees of the National Gallery and the Director of the Victoria and Albert Museum will take into account the points that I have raised here before accepting loans from this source, bearing in mind their long-term responsibility for the retention of our national heritage.

One trade practice at present operated by Messrs. Sotheby's which I deprecate is the acquisition of single works of art or collections of works of art by the auctioneers themselves prior to offering them for sale in their own auction rooms. My disapproval of that practice stems from the fact that I, and others, believe that auctioneers should act as agents only and not as principals. This has been a generally accepted tradition in this country. In no circumstaces should it have been altered. The danger is that, as owners of the objects, Sotheby's must be tempted to ensure the best return.

Its new system of estimated prices, which are published before the sale and included in the catalogue, can only lend suspicion to its expectations when it is owner as well as agent.

In conclusion, to return to the auction sales starting at Mentmore today, Sotherby's and the Treasury stand to make a fortune out of the disposal of Lord Rosebery's works of art. The prospect of this auction sale ought never to have been so much as considered by the Government. The house and its contents were offered at a bargain price by Lord Rosebery nearly three years ago, and through indifference, through procrastination and bureaucratic incompetence, the opportunity was lost of retaining for the nation probably the most important collection formed in the high Victorian era of our history.

I have no doubt at all that the Government, who have to bear the opprobrium for this disgraceful dispersal, will stand condemned by those who care for our cultural heritage. Such a deliberate political act of philistinism will not readily be forgotten or forgiven. It is the Government who should be setting to all others the example of responsibility in conserving our national heritage. They have not done a very remarkable job yet in that example.

12.31 a.m.

I should like briefly to pay tribute to the energy of the hon. Member for Warley, East (Mr. Faulds) and to his efforts over many years in the House to preserve what has come to be known as the national heritage. He has rightly drawn attention to the sack of Mentmore, which begins today. I think that we might look at it—I hope that the Minister will at least acknowledge in replying to the debate that she is thinking of this aspect of the problem—from the point of view of considering those other houses that will be threatened on future occasions by the same pressures that came to bear upon Mentmore.

The real threat to the national heritage in historic houses is the threat of penal capital taxation. Thanks to the efforts of the hon. Member for Warley, East and other hon. Members in all parts of the House, great progress has been made on capital transfer tax. The hon. Member will recall how we all battled with Governments to make sure that CTT did not bear down upon a historic house, or its historically related contents or its amenity lands, provided that those were accessible to the public. From now on, under CTT, they are not to be destroyed; they are to be kept together.

The one remaining link in the chain is the supporting resources. The estate, or whatever income-producing assets are needed to support that part of the heritage, must be held exempt from CTT. From now on this House must address itself to the question of the supporting resources. There will be amendments tabled to the Finance Bill in Committee this year. This House and the Government—all of us—must face the fact that if we want to keep historic houses and the historically related contents and the amenity lands available for public access, we must leave the owners with the resources—under the most stringent conditions of supervision by the Historic Buildings Council, or whatever we like to call the necessary body. It works with CTT now on buildings and contents and gardens. It must also work for the supporting resources. The hon. Member would support us in this. That is what we must address our attention to in the coming weeks.

12.34 a.m.

As my hon. Friend the Member for Warley, East (Mr. Faulds) and, indeed, the hon. Member for Bristol, West (Mr. Cooke) have outlined, there are four ways in which the Government at present deal with the problem of protecting the national heritage against the excessive sales of works of art.

First, as the hon. Member for Bristol, West mentioned, there are the conditions for exemption from capital transfer tax, which apply on a wide range of material of national interest—exemptions that are designed to encourage owners of works of art to retain heritage property in their own possession. As the hon. Gentleman also suggested, one of these conditions is that there should be reasonable public access to such works of art.

The second arrangemnt that is available is encouragement for owners, if they decide to sell, to sell to public collections or to offer objects to the Treasury in lieu of capital taxes. I think that that, as my hon. Friend suggested, has applied, for example, in the case of Mentmore, in which I think three objects have been offered in lieu of capital taxes so far.

Thirdly, we provide £3·5 million each year—probably my hon. Friend and the hon. Member for Bristol, West will say that it is not sufficient, but at least it is something—to assist the national collections in Great Britain to buy objects of this kind. Although they may feel that more money should be provided, that sum represents an increase of 125 per cent. over the level of acquisition grants for the preceding five years. The period involved finishes this year and we shall be considering before long the level of grants that should apply for the next period.

Fourthly, we come to the system of export control in respect of works of art, which is bound up in many ways with the remarks of my hon. Friend. It is the view of my Department and, I think, of the Department of Prices and Consumer Protection, on whose behalf I am replying—my hon. Friend the Minister of State regrets that he is not able to reply but my hon. Friend will be aware of the problems with Committees elsewhere—that the system of export control has had a good measure of success over many years. We try to operate it with the minimum of red tape, fuss, staff and resources. As a result, it relies on the art trade for co-operation in the working of the system.

My hon. Friend said that perhaps recently we have had more problems with the system than in the past. In the past 21 years only 18 objects have been lost that the reviewing committee on the export of works of art felt should be retained in this country. However, we are aware and very sensitive of the fact that in the past year four objects were lost. That is a considerable increase in the number of objects lost in this way. We are equally aware that important sales such as that at Mentmore are planned for this year. Although the problem has so far been contained by the system of export control, we are aware that it is rapidly worsening.

My hon. Friend referred to the fact that the financial advantages involved in various ways of disposing works of art to the nation should be more widely known. I cannot do other than agree with him. It is not only a matter for my Department, but I shall ensure that his comments are brought to the attention of the appropriate Departments.

My hon. Friend said that the systems now operating are too complex. He said that if they were simpler it would be easier to draw them to the attention of those involved and to ensure that they understood the implications of various options, and would enable auctioneers to take a full part in giving advice to those involved in the sale of works of art. My hon. Friend argued that everyone—the sellers, to some extent the auctioneers, and certainly the nation—benefits from the fact that such people understand accurately the implications of sale that they may make.

I am sorry that my hon. Friend feels that there is a lack of good will on the part of the Treasury in interpreting part or parts of the existing arrangements. It is not a matter of which I have personal knowledge, but I am sure that I can get one of my hon. Friends to write to reassure him that whatever else may be lacking, good will is not.

I was somewhat alarmed when my hon. Friend referred to the establishment of overseas branches of firms such as Sotheby's leading to a greater draw on our works of art for sales overseas. I must admit that it is not entirely plain to me why, given our system of export licences, that should be a greater difficulty than we have experienced so far. I recognise that it would put a greater pressure on our existing system, but it seems, that if we continue to operate our existing system as in the past we shall be able to cope with that greater demand. I shall ask those involved to consider the matter and to write to my hon. Friend if there is some further point that I have not discerned and have not met.

Equally, I am somewhat at a loss to know why it should be the case that a picture or a work of art owned by the British Rail Pension Fund, for example, should be at more risk than any other work of art. If it is on show, if it has the cachet of being shown at a national gallery, why should it be at greater risk for sale abroad than is the case with our export licence system? But, again, these are matters that I shall pursue. If my hon. Friend has evidence to offer which shows that there is a greater risk, I am sure that this is something that we shall be very anxious to consider. I am certainly at one with my hon. Friend in feeling that it is perhaps not wise for firms such as Sotheby's to act as principals in disposing of works of art rather than acting merely as agents.

The principal factor to emerge from this debate has been the concern felt on both sides of the House for the preservation of items that are thought to be part of our national heritage, for the retention of works of art in this country. I do not think that there is any dispute about the aims of our procedures. There is perhaps, some minor dispute about the methods and their effect, but I am sure that these are matters that can be resolved between us.

Will the hon. Lady address herself to the cause of the dislodgement of the national heritage? This is where the hon Member for Warley, East (Mr. Faulds) and I are entirely at one. We want to avoid this dislodgement and dispersal. The reason for it is the penal taxation on everything that a man such as Lord Rosebery possesses. That is why he sells his works of art, and why Mentmore is being sacked. Will the Government address themselves to that problem?

I am not aware that the hon. Gentleman and my hon. Friend are at one in thinking that this is the root of the problem or, if it is, that this is a problem that may be dealt with in terms of the disposal of works of art rather than by means of capital taxation. If the hon. Gentleman and my hon. Friend agree on this point, I hope that my hon. Friend will indicate that fact. It is not, however, a matter on which I agree with the hon. Member for Bristol, West. Capital taxation of the kind that my Government and my party have favoured for many years carries with it complications and difficulties. I believe that we should seek to solve those difficulties rather than to avoid capital taxation.

Question put and agreed to.

Adjourned accordingly at eighteen minutes to One o'clock.

General Elections (Limitation Of Expenses)

Volume 932: debated on Tuesday 17 May 1977