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Commons Chamber

Volume 977: debated on Thursday 24 January 1980

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House Of Commons

Thursday 24 January 1980

The House met at half-past Two o'clock

Prayers

[Mr. SPEAKER in the Chair]

Private Business

WEST MIDLANDS COUNTY COUNCIL BILL [ Lords]

Read the Third time, and passed.

COUNTY OF MERSEYSIDE BILL [ Lords]

Order for consideration, as amended, read.

To be considered upon Thursday 31 January.

DARTMOOR COMMONS BILL [ Lords] ( By Order)

Order for Second Reading read.

To be read a Second time upon Thursday 14 February.

Ardveenish Harbour Confirmation Bill

FORTH PORTS AUTHORITY ORDER CONFIRMATION BILL

FORTH PORTS AUTHORITY (No. 2) ORDER CONFIRMATION BILL

INVERNESS DISTRICT COUNCIL ORDER CONFIRMATION BILL

KIRKCALDY DISTRICT COUNCIL ORDER CONFIRMATION BILL

LOCHABER DISTRICT COUNCIL ORDER CONFIRMATION BILL

STRATHKELVIN DISTRICT COUNCIL ORDER CONFIRMATION BILL

WEST LOTHIAN DISTRICT COUNCIL ORDER CONFIRMATION BILL

Read the Third time, and passed.

Oral Answers To Questions

National Finance

Money Supply

1.

asked the Chancellor of the Exchequer if he is satisfied that his current instruments of control of the money supply are adequate.

The fundamental elements of monetary control are fiscal policy, that is, the public sector borrowing requirement, and the level of interest rates. Within this context, the Treasury and the Bank will shortly be publishing a consultative document discussing possible improvements to existing techniques.

In that consideration, are my hon. Friend and my right hon. and learned Friend aware that present interest rates have to take too much of the heat and burden of necessary monetary discipline? Is he further aware that there is a variety of techniques open to the authorities to widen the range of monetary control, such as the broadening of the range of public sector debt management? Will he consider a number of such options?

As I told my hon. Friend a moment ago, the Bank and the Treasury will jointly be publishing a consultative document shortly in which a number of these matters will be discussed. I have to tell my hon. Friend that the real and only way of getting the heat and the burden away from interest rates, to which he rightly alludes, is to bring down the public sector borrowing requirement. I hope that he will support us in our endeavours to do just that, by, above all, making further economies in public expenditure.

How does the hon. Gentleman reconcile what he has said with the speech he made a few days ago—reflecting, I am glad to say, the influence of the new economic adviser to the Treasury—in which he said that he is prepared to see the public sector borrowing requirement rise next year in money terms? That is sensible. We think that it should also rise in real terms. Does he really think that, in an area such as monetary policy, where it is impossible to define or monitor money in any real sense, it makes sense to change the whole system at a time when the Bank of England has said that the most important thing is firmness and consistency in present policies?

Firmness and consistency in monetary policy is exactly what we are carrying through. That is increasingly recognised in world markets. I am glad to have the approval of the Chancellor of the Exchequer—

—the ex-Chancellor of the Exchequer—for my remarks on Monday about the public sector borrowing requirement. I well remember the damage that the right hon. Gentleman did when he was Chancellor. It is difficult to forget that. As I say, I am glad to have his approval. However, I do not think that his interpretation is correct.

The hon. Gentleman indicated that he is prepared to see the public sector borrowing requirement increased in money terms next year. Is he aware that that is the first time that any Government representative has expressed that view?

My right hon. and learned Friend the Chancellor of the Exchequer will be announcing the borrowing requirement for the coming year in his Budget Statement.

Would it not be desirable to introduce mechanisms directly to limit bank lending and domestic credit so that interest rates might be expected to fall rather further and earlier than now seems likely?

I am not sure what mechanisms my hon. Friend has in mind. The main mechanism for controlling bank lending is interest rate. Fundamentally bank lending may be controlled only by controlling borrowing. Any attempt to control lending directly will lead either to other forms of lendingoutside that control being increased, or to lenders other than those who are being controlled increasing their lending. We have seen that in practice with the supplementary special deposit scheme.

Wage Increases

2.

asked the Chancellor of the Exchequer if he is satisfied with the average level of wage increases.

I shall not be satisfied until wage and price inflation has been successfully countered. That is why I am determined to continue with firm fiscal and monetary policies.

Does the Chancellor realise that the Government in general, and the right hon. and learned Gentleman especially, have been responsible for creating a rate of inflation in excess of 17 per cent.? Surely the right hon. and learned Gentleman has no right to protest about working people attempting to protect themselves by wage increases against the current level of inflation.

The level of inflation is due to many causes including, not insignificantly, the high rate of monetary growth that we inherited from the previous Labour Government. One of the central propositions that must be understood in present circumstances is that no Government can guarantee any worker, or group of workers, the right to pay increases that protect them from the consequences of increases in the retail price index. No automatic linkage has been established. The pay increases that may reasonably be expected depend upon the terms that may sensibly be bargained in the context of the resources of the employing company or the resources of the public sector that is concerned.

Does my right hon. and learned Friend agree that greater incentives for profit-sharing schemes would lead to responsible wage settlements, because the work force would know that it would benefit from the success of the firm and would therefore be likely to show greater restraint in hard times?

I agree with my hon. Friend that anything that helps employees to understand the extent to which their real reward is linked to the success of the organisation employing them must be helpful. On the other hand, pay settlements that companies cannot afford must lead inevitably to higher prices, redundancies or bankruptcies.

Does the right hon. and learned Gentleman accept that the Government have a prime role to check the disastrously high average rise in earnings in their capacity as the largest employer in the United Kingdom? To that end does the Chancellor agree that the Government should not be led astray by any findings of the Pay Research Unit indicating pay rises for civil servants that go beyond what the country can afford?

The activities and reports of the Pay Research Unit are designed to illustrate, so far as may be done, the facts that are relevant on one side of the equation. I agree with the hon. Gentleman that the other relevant issue is the amount of cash available to the public sector, in whole or in part. As those employed in the private sector must recognise the balance between the security of their employment and the scale of wage increases that they can obtain, so those in the public sector must understand that beyond a certain point higher pay must mean higher rates and taxes or fewer jobs.

Is it still the Government's view that, provided the money supply is kept under control, high wage settlements do not cause high inflation?

That is not and never has been the Government's view. It is a matter of elementary analysis that in the short run a firm monetary policy does not prevent high pay settlements which lead to higher price increases as organisations struggle to recover the cost of high wages. In the aggregate, and over the medium and long run, the ultimate penalty is the reduction of employment and the reduction of jobs.

Public Expenditure

3.

asked the Chancellor of the Exchequer if he is satisfied with that proportion of public expenditure cuts that have resulted from savings rather than increased charges to the public.

Much the greater part of the public expenditure cuts reflected in my right hon. and learned Friend's Budget Statement last year and our White Paper on public expenditure in 1980–81 comes from reductions in gross public expenditure rather than increases in charges. However, as explained in the answer I gave to my hon. Friend on 18 December, the proportion of public expenditure reductions found from increased charges will depend in part on decisions by local authorities.

While my right hon. and hon. Friends will be pleased with that answer, is the Chief Secretary aware that many of us think that there should have been far greater cuts in public expenditure as opposed to the large cuts in some areas which have been imposed on the public? For example, the increased charges for school transport is effectively a tax on those who have the misfortune to live away—

Order. The hon. Gentleman must not argue a case. He must ask a question.

Will my right hon. Friend ensure that in future the Government cut back on their own expenditure, especially the large Civil Service expenditure?

I hope that my hon. Friend will not be disappointed when the White Paper on public spending for 1980–81 is published in March.

What progress is the right hon. Gentleman making in his discussions with the Prime Minister on the proposed new health charges?

I think that the hon. Gentleman is becoming rather over-anxious. The issue will be the subject of consideration in the public expenditure review, which will be published in due course.

What charges does the right hon. Gentleman think should be increased still further?

Economic Growth

4.

asked the Chancellor of the Exchequer what effect he thinks the absence of economic growth is having on the rate of inflation.

Low productivity has certainly aggravated the problem of inflation. While firm monetary control is essential for the reduction of inflation, improvements in industrial performance would help in this process.

Does my right hon. Friend agree that there has been too much emphasis so far n restricting demand and not enough emphasis on increasing supply, which would surely make a greater contribution to reducing inflation?

No, I do not think that that is so. There is much evidence of demand in the United Kingdom that is all too readily supplied by imports rather than home production.

Does the right hon. Gentleman accept the statistics published about a week ago by the Central Statistical Office, which reveal an increase in industrial productivity of 11 per cent. in the last two years of the previous Labour Government and a collapse of any productivity increase in the first year of office of the Conservative Government? How does he explain that?

That is a myopic reading of the statistics. Anyone who considers the record of the economy when the right hon. Gentleman was Chancellor will draw the conclusion that it was manifestly mismanaged.

Will my right hon. Friend offer a further explanation of the answer given earlier this afternoon by my right hon. and learned Friend the Chancellor of the Exchequer to the effect that there was more than one cause of inflation? Will he confirm that it is the Treasury's view that there is only one cause of inflation as opposed to the consequences of inflation?

It is the view of my right hon. and learned Friend that monetary factors are the main cause, but there is certainly no question but that there are other ancillary factors that can exacerbate the influence of monetary factors.

Does the right hon. and learned Gentleman realise that his anti-inflationary policies amount to little more than old-fashioned deflation?

The breaking of the high degree of inflation that has been experienced in the United Kingdom over recent years will necessitate the sort of harsh measures that could be characterised as deflation but, in truth, they do not merit such an attack because they are dis-inflationary rather than deflationary.

Inflation

5.

asked the Chancellor of the Exchequer when he expects the rate of inflation to fall substantially.

The Government's firm fiscal and monetary policies will, over time, bring about a progressive reduction—

The right hon. Member for Leeds, East (Mr. Healey) is easily amused in his non-responsible position.

I emphasise the words "over time". The policies will bring about a progressive reduction in the rate of inflation. Nobody was more willing to assert the necessity for time to elapse between the implementation of monetary policy and its impact on inflation than the right hon. Gentleman when he held a position of responsibility.

The sooner that is appreciated by wage bargainers, and the upward pressures on costs in the United Kingdom are relieved, the sooner we can look forward to a sustained reduction in inflation and a rising trend in United Kingdom output.

Who is really in charge of the Treasury—the right hon. and learned Gentleman or the Chief Secretary? Is it not the case that it is the Government who are largely creating inflation by the constant and substantial increases in prices and charges as well as in the present minimum lending rate?

I am sure that my right hon. Friend the Chief Secretary is happy to cede to me the ultimate responsibility for management of the Treasury. I am happy to say that, together with my other right hon. and hon. Friends, we make a happy and harmonious team. The House must understand that monetary policy, effectively pursued, is fundamental and crucial to the conquest of inflation. It must take time to take effect. This will happen more effectively and more easily once people understand the consequences for pay bargaining and unemployment of failing to heed such a message.

Is the Chancellor aware that, according to my right hon. Friend the Chief Secretary, it is not only money supply that is important? Can my right hon. and learned Friend now say what other factors have become more important recently, and why?

No factor has become more or less important recently. It has been central to the case that I have asserted that monetary policy is fundamental. It is not, by itself, sufficient if people do not understand the impact of monetary policy on the environment in which they are bargaining, and seek to press for pay increases that are beyond those which the employer can afford. That would introduce an element making it more difficult for prices to fall. That is one illustration of many. All inflationary expectations have to be effected down wards by the sustained application of monetary discipline, as the right hon. Member for Leeds, East (Mr. Healey) was often in the habit of telling the House. The facts have not changed. The fundamental economic principles have not changed. We shall continue to pursue those policies so long as it is necessary for them to prevail.

Is not the Chancellor aware that since the Government came into office they have put up prices by at least 8 per cent.?

It is no good the Financial Secretary saying "Rubbish". The Government have consciously put up prices by 8 per cent. If the Government are really concerned about inflation they would not have done so. What action will the Government take to stop prices rising to 20 per cent. or more?

The figure advanced by the right hon. Gentleman, as he knows, is total and complete rubbish. If one looks at it as amatter of elementary statistics, the rate of price increases when we came into office was running just below 13 per cent. per year. The figure has not yet risen half-way beyond that to the figure suggested by the right hon. Gentleman.

The right hon. Gentleman might address his mind to the fact that a significant contribution to the retail price index increase will arise from the increase in minimum lending rate, as it manifests itself on mortgage interest rates. That is a consequence of the high size of public borrowing and public spending. I wel- come very much the prospect of the right hon. Gentleman's support in reducing excessive public spending and excessive public borrowing.

Economic Progress

6.

asked the Chancellor of the Exchequer if he is satisfied with the progress of the economy.

Of course not. It will take time—[Interruption.] Opposition Members are readily amused. It will take time, as the House should understand, for our policies to check the long-run decline of the economy.

Does the right hon. and learned Gentleman agree that there have been recent changes in two respects that might considerably affect what he has said? First, there has been the big fall in the number of notified vacancies that has occurred for the second month running. Secondly, there has been a big fall in the index of long-term indicators. Is that not further evidence that the right hon. and learned Gentleman's policies are adding to the economic recession? Is it not time that we had a U-turn? Will he deal specifically with the two points that I have mentioned?

Of course it is right that a reduction in the number of notified vacancies and a downturn in the long-term indicators are manifestations of the continuing decline in the economy. There are many causes for that, and many of those are of long standing. A most recent cause is the doubling of oil prices in the last 12 months. That will have effected a reduction of around 3 per cent. in the likely growth of our economy. There is no way that we, by the management of our economy, can, by injecting additional demand, manufacture additional job vacancies. They have to be manufactured by the skill and success of both sides of British industry.

Has my right hon. and learned Friend made any systematic studies or analyses of the probable effects of import controls on the economy?

The question of import controls is a matter that has been frequently canvassed by my hon. Friend and others. The conclusion arrived at by successive Administrations—if one addresses one's mind to it as a central recommendation—is that it is likely to be counter productive, to lead to retaliatory action and that for Britain, with such a large dependence on international trade, it is least likely to be a successful prescription.

As it is now seven months since the Chancellor's incentive Budget, does he yet detect any signs of industrial revival resulting from those incentives?

I am quite confident that, had the economy continued under its previous management, the confidence on both sides of industry, especially management, would have been significantly less than it is today. Without the consequences of the substantial reductions in personal taxation, especially at middle and higher levels, morale in industry would be a great deal worse than it is today.

Does my right hon. and learned Friend accept that there is a danger of economic progress being impeded by an exchange rate that is endangering many export orders and bringing about a position where we are losing our domestic market share?

The exchange rate can have a number of effects on the competitiveness of our goods and services. The matter raised by my hon. Friend is one of the factors, but not the only one, that justifies our decision to abolish the remaining aspects of exchange controls.

Will the right hon. and learned Gentleman explain why he did not tell the electorate eight months ago that if a Conservative Government were elected the country would be in for three years of unparalleled austerity—to quote his right hon. Friend the Chief Secretary? Why are we to face three years of unparalleled austerity when these are the first three years in British history when we are completely independent in terms of our major source of energy and when the increase in oil prices will bring us immense benefits, both in revenue and the balance of payments, which none of our competitors will enjoy?

As always, the right hon. Gentleman is capable of exaggerating benefits that he fancies he sees. He must know that the increase in oil prices world-wide—although it has some effect on us in a helpful direction, for the reasons that I have already stated—retards and depresses the market, in which we have to sell as much as any other country. In the campaign that we fought at the last election we made it entirely clear to the country that we were facing economic conditions more serious than at any time since the end of the war. We made it plain also that the task of reconstructing our economy was a task for a decade. We do not intend to be deflected from the difficult and harsh measures that are necessary.

Order. It is not fair to Back Benchers if Front Benchers rise twice to ask supplementary questions. I try to treat every hon. Member alike, and I hope that the right hon. Gentleman will accept my advice in the spirit in which it is given—but it is certainly given.

European Community

7.

asked the Chancellor of the Exchequer what is the United Kingdom contribution to the calculated one-twelfth expenditure by the European Economic Community for January 1980.

Pending clarification of the interpretation of the relevant legislation, member States have agreed that VAT contributions this month and next should be made on a provisional basis related to contributions to the 1979 Community budget, as amended by the third supplementary budget. Thus, we have paid—I hope that the hon. Gentleman will be pleased that I am able to give the figure to the nearest pound—£70,362,438 in respect of VAT contributions for January. In addition, we have contributed £105,268,401 this month in respect of full payment of levies and duties.

Does not the Financial Secretary agree that, large though those sums are, they represent approximately half the quantifiable benefits received in return? Would not any attempt to retain a short-term net change in this imbalance, by accepting an EEC common oil policy—or Cop—spell long-term disastrous consequences for the finances of the United Kingdom?

The Government are well aware of the problem of the grossly exorbitant size of the United Kingdom's net contribution to the Community budget. They are making strenuous efforts to achieve a substantial reduction, and have already achieved a great deal more than their predecessors ever did. There is no such thing as a common oil policy.

As the CAP is the major element in the European budget may I ask the Treasury to make it quite clear that there will be no price increase at this year's agricultural price-fixing meeting because any price increase will mean that we will have to pay more into the budget?

The agricultural price negotiations are, of course, a matter for my right hon. Friend the Minister of Agriculture, Fisheries and Food. However, I should have thought that the right hon. Gentleman was well aware that we are foremost in pressing for price restraint in Community policies.

In the light of the figures the Financial Secretary has given, can the hon. Gentleman say exactly what the Government's policy is with regard to our net contribution? From the reported remarks which the Lord Privy Seal made in Paris, does it not seem that the Government are already giving way on the demand that we should pay nothing at all as anet contribution to the EEC?

The hon. Gentleman will recall that what we have achieved so far is—[HON. MEMBERS: "Nothing."]—a wide measure of agreement. Our gross contributions to the European budget should be reduced by about £350 million as a result of taking all the wraps and conditions off the totally useless mechanism that was negotiated by the previous Administration. What we are now seeking is for as much as possible of the remainder of that gap to be made good on the receipt side of the budget, whether by a receipts mechanism or in some other way. There is some margin of manoeuvre. There must be in negotiations. But I can tell the hon. Gentleman that there is very little room for manoeuvre indeed.

Will my hon. Friend beware of the obvious pitfall of accepting promises with regard to the regional policy fund or, indeed, the social fund, which can be altered at a stroke, rather than actual cash benefits which all the British people can see?

I can assure my hon. Friend that when we are offered a solution to this problem, as I am confident we shall be, we shall certainly examine the small print to make sure that the sort of things of which he is afraid do not occur.

Public Expenditure

8.

asked the Chancellor of the Exchequer what plans he has now for reduction in public expenditure.

10.

asked the Chancellor of the Exchequer whether he will make a further statement on public expenditure.

18.

asked the Chancellor of the Exchequer when he now expects to publish the public expenditure White Paper.

Further decisions on our review of public expenditure will be announced in due course. We expect that the public expenditure White Paper will be published in March.

While welcoming the Government's recognition that total public expenditure in real terms must be cut substantially, and that, therefore, the 1980–81 White Paper must be scrapped, may I ask my right hon. Friend to give an assurance that the forthcoming White Paper will have a full economic analysis of the normal kind which covers the whole area which the White Paper embraces?

An economic analysis will certainly be published with the White Paper, and I hope that it will satisfy my right hon. Friend.

What is now the primary aim of Government policy on public expenditure and the PSBR? Is it to force down interest rates or is it to make room for further tax cuts?

Clearly, over the lifetime of this Parliament, it will be our policy to trim public spending to enable both reductions in taxation and a fall in interest rates to take place.

Is it not apparent that the £8·3 billion target for the PSBR this year will be exceeded? Can my right hon. Friend assure us that that will be taken into account in reducing the scale of the PSBR next year? Further, can he assure us that reports in some newspapers last weekend, which stated that he said that the objective was to secure a £2,000 million reduction in planned expenditure programmes by the end of this Parliament, underestimated the scale of his personal ambitions?

Perhaps we can leave my personal ambitions to one side so as to enable me to deal with the£8·3 billion PSBR forecast for the current year. I cannot comment as to what will be the outcome figure, but I can assure my hon. Friend that that outcome figure will be very much present in the mind of my right hon. and learned Friend the Chancellor when constructing both his budget and the public spending proposals.

Did not the Chief Secretary say last weekend that the Government were now considering proposals to ignore inflation with regard to unemployment and social security benefits as well as child benefits? Does not that mean that this year there will be a deliberate cut of about 18 per cent. in those levels, with a further cut next year and so long as inflation continues? That is something which no British Government have done since 1931.

It is certainly true that the Government are conducting a wide-ranging review of public spending. But nothing that is being contemplated in that review merits the interpretation which the hon. Gentleman has just placed upon it.

Is it not clear that the British people must fear the Conservative militants and fanatics, and that if the Government continue with their policy of cutting public expenditure, not only will there be de-industrialisation but the people will end up in dire poverty? Is it not about time that Conservative Members faced the fact that the Government's policy is leading to utter disaster?

I am happy to assure the the hon. Gentleman that we Conservatives are Nature's moderates. However, we are also Nature's realists with regard to economic planning. The fact is that we inherited a public spending programme that was wildly in excess of any likely economic performance by this country.

Can my right hon. Friend say whether the public expenditure White Paper will deal with the effect of index-linked public sector pensions and whether it will make any recommendations to deal with that problem?

Those are obviously the kind of issues that are under review, but in no sense can I anticipate the outcome of that White Paper.

Further to the right hon. Gentleman's answer to the supplementary question of my hon. Friend the Member for Salford, East (Mr. Allaun), is it not clear that further reductions in public expenditure will come from reduced social benefits, from failure to uprate benefits and from direct reductions in social benefits and pensions? Will not such cuts fall disproportionately and crucially heavily upon claimants and pensioners? Should not the right hon. Gentleman make that quite clear to the country?

I do not deny that there is a wide-ranging review of public spending policy. In those circumstances, all programmes must be subject to investigation. Any final decision must be a balance of social and economic judgment, dictated primarily by political considerations.

Income Tax

9.

asked the Chancellor of the Exchequer how many people in employment he hopes will be taken out of the income tax net during 1980.

The numbers for 1980–81 will depend on the level of the tax allowances for the year. I ask my hon. Friend to wait for my Budget Statement on that.

I recognise that the Chancellor cannot anticipate his Budget. However, will he bear in mind that many people at the lower end of the pay scale are receiving relatively less than those receving social security benefits? Is he aware that, in order to make it worth while for them to work, they will have to be offered substantial tax reductions, or, if possible, taken out of the tax net?

My hon. Friend makes an entirely valid point, which I had in mind when I raised the tax thresholds substantially last year. He underlines that it should not be overlooked that those on low pay—as much as anyone else in the country—have a powerful interest in the reduction of excessive public spending, if we are to move towards a sensible tax structure.

Since the Chief Secretary has said that we are in for three years of unparalleled austerity, will the Chancellor make clear that there will be no reduction in capital taxes in the next Budget? It will not be fair if the owners of capital get the benefit. Does he not agree that all members of the community should suffer from this "unparalleled austerity".

I shall not anticipate my next Budget Statement in any respect. The right hon. Gentleman should bear in mind that if the structure of capital taxation is one of the matters affecting the supply side of the economy—as Lord Lever believed it to be when the previous Government were in power, and as many people now believe it to be—it is a legitimate matter for consideration.

Interest Rates

13.

asked the Chancellor of the Exchequer what representations he has received regarding the level of interest rates.

I have in recent months received a number of representations on the current level of interest rates, in particular from business men and home owners.

Is it not true that the high interest rates prevailing under the Tory Government—and the intention to raise them was not included in the Tories' election manifesto—are causing grievous difficulty both to home owners and to small businesses, and are resulting in an increase in charges across the board? Is this not one of the most inflationary measures undertaken by the Government? When do they intend to reduce interest rates to help home owners, small busi- nesses and local authorities, all of whom are paying through the nose as a result of the Government's actions?

The reason why interest rates are so high is twofold. First, we inherited a money supply that was wholly out of control. We had to take measures to bring it back into control. I hope that the hon. Member for Keighley (Mr. Cryer) will support us in that. The second reason is that we have inherited a public sector borrowing requirement that is far too high. Despite the reduction we made, it remains too high. That is why we are determined to get the PSBR down, and I hope that the hon. Member will support the Government in that because of his concern for small firms, which are having to bear the high interest rates.

Is the Minister satisfied that the retail price index deals adequately with the consequences of the rise in mortgage interest rates when there are four building society investors receiving a higher income for every building society borrower who is paying a higher mortgage rate?

Whether the RPI as at present constituted deals adequately with mortgage rates is a nice question. However, it is a matter for the RPI advisory committee. It is not for the Government to interfere with the constitution of the RPI.

Does not the Minister accept that the building societies have said that, even if the Government now bring the minimum lending rate down, they will need to retain the mortgage lending rate at its present level? Is it not a fact that that level has been primarily determined bythe increase in inflation generated by the Government's actions?

That is not so.

I gave the reason for the increase in interest rates to the hon. Member for Keighley (Mr. Cryer). It is our hope that interest rates can be brought down as soon as it is safe, consistent with monetary growth. Mortgage interest rates will, in the long run, follow the course of interest rates generally.

Will the Minister say whether his Department has made any representations to the clearing banks, which are not satisfied with taking 21 per cent. from small businesmen, such as myself, but are also putting up their charges generally? Is he aware that the charge for each cheque presented is now 17½p.? Surely this is unnecessary.

I am sure that the hon. Gentleman is not suggesting that the Government should interfere with the level of bank charges, or with the level of every price or charge levied by any institution. If he wants that degree of detailed interference, he is betraying the honourable name of Liberalism.

East Kilbride

Q1

asked the Prime Minister if she will pay an official visit to East Kilbride.

If the right hon. Lady visits East Kilbride, will she accept that my constituents will expect her to take responsibility for soaring prices and the massive increase in unemployment? Does the right hon. Lady think that abolishing the Price Commission will cause escalating prices to disappear? As a corollary to her attempt to evade responsibility for the total collapse of her counter-inflation policies, does she intend to embark upon another shoddy parliamentary manoeuvre in the same vein, to try to evade responsibility for the increase in unemployment?

In answer to the hon. Gentleman's multiple question, I point out that the Price Commission did not keep down prices. Prices doubled during the lifetime of the Price Commission. Nor did the previous Government keep down unemployment. Unemployment in Scotland doubled in the lifetime of the previous Government. The hon. Gentleman knows that a large component in prices is wage and unit costs. We are doing our level best to see that the self-financing productivity about which the previous Government used to talk so much—and seem to have conveniently forgotten now—is brought back into wage negotiations.

Prime Minlster (Engagements)

Q2.

asked the Prime Minister if she will list her official engagements for 24 January.

This morning I presided at a meeting of the Cabinet. In addition to my duties in this House, I shall be having further meetings with ministerial colleagues and others.

Will the Prime Minister take time today to note that in Dundee last week there were four deaths from hypothermia? In the light of that, will she look out the report of 1976, which was suppressed by the DHSS and by the previous Labour Government, which shows that 35,000 people could die each year from hypothermia? In those circumstances, and in view of the increase in gas and electricity prices, will she take the opportunity to express to the House her wish to introduce a generous fuel discount system to help the sick and the aged?

I believe, and my right hon. Friend the Secretary of State for Energy said, that out of the increase in gas prices we shall have to make some extra provision for helping old people with fuel costs. I know that hypothermia is a serious medical condition. I am not arguing that it is not serious. Perhaps the hon. Gentleman will accept that, under our scheme of helping pensioners with their fuel bills, many pensioners receive far higher payments than they received under last year's scheme. Many people who would otherwise have suffered received payments of up to £50 this year, whereas they may have received only £7·50 last year.

At her ministerial meetings today will the Prime Minister undertake to take the Secretary of State for Scotland to one side and have a quiet word in his ear—or better still, a loud word in his ear—about the fact that, at the same time as his Department is inflicting severe cuts on local government services throughout the country, he is sanctioning capital expenditure on local government offices in my constituency and elsewhere?

I have already seen my right hon. Friend the Secretary of State for Scotland. If the right hon. Gentleman has specific points, perhaps he will take them up with the Secretary of State for Scotland.

Has the Prime Minister's attention been drawn to the quite exceptionally important report of the ACARD committee, under the chairmanship of Sir James Menter, which recommended that the central thrust of research and development and industrial expansion in the United Kingdom should be in the two areas of information technology and industrial bio-technology? Has this exceptionally important report yet been discussed by the Cabinet? Is she satisfied that that thrust is beginning to take place?

I know of the ACARD report to which my hon. Friend referred, and the extreme importance of introducing technology in general into British industry. The difficulty is not always in introducing it but in getting it accepted by those who have to work with it. We are very much aware in the Cabinet of both things.

Following the answer given by the Prime Minister to my hon. Friend the Member for East Kilbride (Dr. Miller), may I ask whether she is aware that yesterday, by means of a written answer, she reallocated the responsibility for prices questions among most members of the Government? Is it not now the case that the so-called Secretary of State for Trade, responsible for consumer affairs, has no responsibility for price control in general? Does not that mean the end of her counter-inflation policy and a total evasion of responsibility by Ministers?

The right hon. Gentleman's suggestion is absolute nonsense. Counter-inflation policy rests with the Treasury, where it should rest, and with the Cabinet as a whole. [Interruption.] Of course it does. Of course I am aware that there has been a reallocation of responsibility for prices questions. I did just that. With the ending of the Price Commission, questions about prices should go to sponsoring Departments, Is it so astonishing that questions on food prices should go to the Ministry of Agriculture, Fisheries and Food?

Later

On a point of order, Mr. Speaker, relating to the questions raised by my hon. Friend the Member for East Kilbride (Dr. Miller) and my right hon. Friend the Member for Lanarkshire, North (Mr. Smith). You may have heard the Prime Minister say that she has taken responsibility for transferring a number of items of business to other Ministers. I seek your guidance, Mr. Speaker. In the past you have made statements about the ability of hon. Members to put down questions to Ministers and have prevented hon. Members from putting down general questions to departmental Ministers for oral answer, exercising your right so to do.

Therefore, it is with some consternation that we have learned, through a written answer to a planted parliamentary question, that responsibilities in connection with prices have now been disseminated to several Ministers. Will you now, Mr. Speaker, allow general questions on prices to be put to departmental Ministers to avoid the possibility of a Department transferring a question to another Department because it does not have the responsibility? You will appreciate, Mr. Speaker, that the responsibilities are wide, and were at one stage placed with one Minister. I seek your guidance, Mr. Speaker, because I am sure that you wish to stop this sort of deceit and parliamentary humbug, which is preventing hon. Members from asking perfectly proper questions and seeking parliamentary accountability.

Order. I do not wish to give a ruling on this question. I shall deal with questions as they are submitted.

Q3.

asked the Prime Minister if she will list her official engagements for 24 January.

I congratulate my right hon. Friend and the Government on their proposals concerning industrial relations reform. Will my right hon. Friend discuss with the Secretary of State for Employment the possibility of tabling an amendment to the Employment Bill, to give effect to a proposal to allow a secret ballot to be held by a trade union where a certain percentage of trade union members in a plant requests such a ballot?

I shall discuss that with my right hon. Friend, because I am aware that there is no such proposal in the Bill. I believe that a number of my hon. Friends are concerned that people should be able to have a secret ballot either before electing their union officials or being compelled to go on strike. I shall consult further with my right hon. Friend.

Will the Prime Minister now answer the question that she failed to answer on Tuesday? Does she agree with her Chief Secretary that the next three years of the Conservative Administration will be three years of unparalleled austerity?

The unparalleled austerity came here in 1976 because the previous Government refused to take the financial steps that they should have taken. We are trying to take those financial steps to reduce public expenditure to a level that the nation can genuinely afford.

Will my right hon. Friend, in the course of today, if she has not done so already, institute an inquiry as to whether it is true that grain has been exported from the EEC since President Carter proposed a grain embargo.

As far as I am aware, no new grain is being exported from the EEC. Indeed, the EEC has agreed that no new grain shall be exported. Whether there was any on the way I could not say, but it is the policy that no new grain shall be exported to Soviet Russia. There is grain going to some of the satellite countries, but no extra grain above that which is usually ordered by them.

Will the right hon. Lady take time today to consider the great bitterness that exists on the picket lines of the British Steel Corporation, and among all employees of the British Steel Corporation, at her failure to intervene during this industrial action? Does not the right hon. Lady accept that she demeans the office of Prime Minister in failing to intervene in this industrial action, when clearly it would be in the national interest to intervene?

No, I think that the hon. Gentleman's views are completely misguided. As he knows full well, I saw the unions and the British Steel Corporation. I am always willing to see people who ask to see me when there is something very important at stake. But unless management and unions can sort out their own troubles, if need be through the ACAS machinery, there is little hope for steel in the future.

Bearing in mind my right hon. Friend's consistent efforts while in opposition to discourage strikes, may I ask whether she has noticed today, or at any other time, any appeal from any member of the Opposition Front Bench aimed at ending the present steel strike, particularly bearing in mind its effect on jobs in the public and private sectors of the steel industry and related industries?

I need hardly say that I have noticed no effort whatever from the Opposition either to encourage self-financing productivity deals or to discourage strikes. I am very concerned at the number of people who have good jobs and risk losing them by virtue of their own strike action, or who persuade or compel others to go on strike and strike themselves out of jobs.

Is the right hon. Lady aware that her policy of "do nothing" in this steel strike is leading to incalculable damage to British industry? Does she realise that the last 12 days, during which Mr. Bill Sirs has been attempting to hold in a strike by the private sector, have been utterly wasted by her and by the Government, and that his executive is meeting this afternoon in order to ratify such a strike, beginning on Sunday, because there has been no intervention?

Is the right hon. Lady further aware that on Monday in South Wales we are likely to see almost a complete stoppage of work as a result of the combination of pay disputes and closures? The elected Government of this country, of which she is the head, have no moral right to sit back while this creeping paralysis spreads across the country. She knows that it is the desire of everybody to see this strike at an end, but she must also know, and if she does not she will have some day to realise it, that she has a direct responsibility not merely to meet these people and send them away but to practise conciliation herself.

As there is no dispute whatever between the workers in the private sector of steel and their employers, I trust that the right hon. Gentleman will do everything he can to discourage those men from going on strike. If he goes ahead and encourages them, he might be encouraging them on to the dole.

It is a little ironic that the Opposition should be asked to take action when the Government do nothing. But if the right hon. Lady wants the facts, I will tell her that it was following consultation between—

I shall defer to Mr. Speaker as soon as he interrupts me. The general secretary of the Iron and Steel Trades Confederation persuaded—

The House and the country should know the facts, not this farrago of nonsense. Is the right hon. Lady aware that Mr. Sirs used his influence with his own executive 10 days ago to prevent a strike in the private sector at that time? That was what he tried to do, and the Government have thrown away those 10 days. It is time that the right hon. Lady used her influence, as well as asking me to use my influence, to stop these people from going on strike.

The House and the country should know whether it is the right hon. Gentleman's intention to encourage people to go on strike when they have no dispute with their employers.

The right hon. Lady asked me a question and I will answer in the form of an interrogative, if I may. Does not the right hon. Lady believe that my reputation in the country on matters concerning industrial disputes—[Interruption.]

Order. We are reaching the end of Prime Minister's Question Time. I think the Leader of the Opposition was in the middle of a question.

I do not think it is necessary, Mr. Speaker, for me to indicate to the right hon. Lady, who is attempting to divert responsibility from herself, that I have consistently been in favour of trying to secure industrial peace. Indeed, all my efforts on this occasion are bent towards trying to get a satisfactory solution. Is the right hon. Lady aware that she cannot run away from her responsibility in this matter and that she has a responsibility when industrial paralysis is beginning to creep across this country? She must intervene sooner or later and she had better get on with it.

Nor can people who strike run away from their responsibilities. Nor can anyone in a democracy run away from his responsibility. I am very concerned about jobs and I can see little point in workers striking when they have no dispute with their employer, or in striking to do themselves out of a good job.

Business Of The House

Will the Leader of the House please state the business for next week?

The Chancellor of the Duchy of Lancaster and Leader of the House of Commons
(Mr. St. John-Stevas)

The business for next week will be as follows:

MONDAY 28 JANUARY—Debate on East-West relations and the crisis in South-West Asia, on a motion for the Adjournment of the House.

TUESDAY 29 JANUARY—Supply [10th Allotted Day]. Until about 7 o'clock there will be a debate on an Opposition motion on gas prices.

Afterwards, there will be consideration of a timetable motion on the Education (No. 2) Bill.

Second Reading of the Residential Homes Bill [ Lords] and proceedings on the Child Care Bill [ Lords], and the Foster Children Bill [ Lords], which are consolidation measures.

Motion on the Income Tax (Excess Interest as Distributions) Order.

WEDNESDAY 30 JANUARY—Remaining stages of the National Heritage Bill.

Motions relating to the Provision of Milk and Meals (Amendment) (No. 2) Regulations and the Milk and Meals (Education) (Scotland) Regulations.

THURSDAY 31 JANUARY—Debate on the 7th report of the Royal Commission on environmental pollution relating to agriculture and pollution, Cmnd. 7644.

FRIDAY 1 FEBRUARY—Private Members' motions.

MONDAY 4 FEBRUARY—A debate on Welsh affairs.

Is the Leader of the House aware that, apart from what is set down, we do not accept the Government's attitude on the steel industry, and that we expect them to accept responsibility for the paralysis that is now spreading across our country and to give regular reports about the impact of the steel strike on British industry and the economy of the country as a whole? We shall ask for regular reports from the appropriate Minister.

Secondly, on the question of gas prices, certainly it will be our hope that we shall be given a coherent explanation of how, by putting up gas prices higher than necessary, we shall keep inflation down.

As for the timetable motion on the Education (No. 2) Bill, I suppose that the right hon. Gentleman is again trying to evade responsibility. Are we not now reaching the most sensitive parts of the Bill, relating to transport, school meals and school milk? Is the right hon. Gentleman trying to hide these sensitive clauses behind a guillotine motion? Does he realise that that will not be accepted by the country?

I thought that my right hon. Friend the Prime Minister dealt with the questions on steel very effectively during her Question Time. The right hon. Gentleman must not expect to do any better against me than he did against my right hon. Friend.

Gas prices will, of course, be debated at the appropriate time.

As for the guillotine motion, no less than 73 hours have been spent on the Biil so far, including a major debate on the assisted places scheme. If the Committee has not reached the later clauses, as from now a large part of the responsibility must rest with those who delayed proceedings by spending no less than 12 hours on points of order and 11 hours delivering extremely long speeches.

Is the Leader of the House aware that I have been told that 79½ hours have been spent on the Bill and that 16 clauses and three schedules have been completed. The Committee is now well into clause 17, and progress is being made. However, we shall return to this argument on Tuesday, because we do not believe that such a sensitive Bill should be guillotined at this stage. It should have been possible to come to an agreement.

With reference to the right hon. Gentleman's views about my doing better against him than against the Prime Minister, I well realise the heavy metal that the Leader of the House carries, and I would not expect to do well against him. We all know what a formidable opponent he is.

I shall pass over in silence the remarks of the Leader of the Opposition, save to say that he seems to be showing signs of metal fatigue.

By the time the motion is accepted by the House, if the House passes it, no fewer than 100 hours will have been spent on the Bill. There are two examples of the previous Labour Administration producing guillotine motions on Bills just as important as this Bill when only two-thirds of that time had been devoted to them.

As not everyone outside the House appreciates that the Opposition choose the subject for debate on Supply days, will my right hon. Friend confirm that despite the massive display of humbug by the Leader of the Opposition they have chosen not to debate the steel industry strike, but, instead, merely to try to make opportunist political capital out of the Government's energy policies, which are an attempt to conserve our gas supplies?

The subject for Supply days has nothing to do with me. It is entirely in the hands of the Leader of the Opposition.

For reasons of sensitivity, and out of consideration for the right hon. Gentleman, I do not want to expose his general illiteracy about the Education (No. 2) Bill, but is he aware that however long we have taken on points of order—which is considerably less than he said—three of those hours were necessary to induce from his representatives in the Committee a statement giving a general exemption to councillors who are also parents, to enable them to debate milk and transport matters? Had the Government been more forthcoming or more competent in that respect we could have saved at least three hours on that matter.

I am aware of that, because I have followed the proceedings on the Bill very closely. I point out to the hon. Gentleman that if he had restrained his supporters from raising all those points of order there could have been substantial further discussion on the issues in the Bill.

When does my right hon. Friend expect to table the motion for the establishment of the Liaison Committtee? Is he aware that many hon. Members who are concerned with the work of Select Committees believe that that work will be much facilitated when that Committee is established?

I entirely agree with my right hon. Friend. No one would be happier than I to be able to table that motion in full, but there are certain technical difficulties over names that we are still trying to iron out. As soon as that is done, the motion will be tabled. I hope that by early next week the full motion will be down.

I draw the attention of the Leader of the House to early-day motion No. 342, relating to unemployment in Scotland:

[That this House notes with alarm and anger the fact that unemployment in Scotland has now risen above 200,000, an increase of almost 40,000 since May 1979, resulting from the doctrinaire policies of the present Government; and calls on the Leader of the House to provide time for an early debate on the Floor of the House on the deepening economic crisis enveloping Scotland.]

Is the right hon. Gentleman aware of the increase last month of 5·6 per cent. in the level of unemployment in Scotland? Is he further aware that unemployment is reaching appalling levels in some areas? At Tranent, in my constituency, male unemployment stands at 24·7 per cent. Will he arrange an early debate on Scottish affairs?

It is no use saying "Do something about it". The previous Labour Government presided over a doubling of Scottish unemployment in less than a year. I am concerned about the situation in Scotland and I shall consult my right hon. Friend the Secretary of State for Scotland about it.

Has my right hon. Friend noted an early-day motion calling for a debate on the microchip revolution and its impact on industry, on the information services that it will provide in future and on unemployment?

[That this House calls upon Her Majesty's Government to provide time for an early debate on the progress and widening application of micro-computer technology in view of its likely impact onindustry and society and the investment being made from all sources in the production of silicon chips.]

Could we have a day's debate on the serious subject of the microchip industry and its possible revolutionary impact?

It is an extremely important subject. There is interest in this matter on both sides of the House. I shall certainly consider what my hon. Friend said. Perhaps I may point out that the microchip revolution may offer opportunities for fresh employment as well as threatening existing employment.

The Leader of the House will be aware of increasing concern about the prison system. When will the House have an opportunity to debate that subject, particularly as the May report on prisons is gathering dust on our shelves?

I am aware of the importance of the May report. Certain consultations are going on with my right hon. Friend the Home Secretary. I hope that before too long it will be possible to have a debate on that important report.

Does the right hon. Gentleman recall that the last time a timetable motion was introduced on an education Bill he said that it was incompetence on the part of the Government's business managers? Is that the reason this time, or is it that we are reaching clauses in the Education (No. 2) Bill that he and the Conservative Party find deeply embarrassing, because they discriminate against country and Catholic children?

The Education (No. 2) Bill in Committee has been dealt with most effectively by Ministers. It was making good progress until it was obstructed by the hon. Member for Bedwellty (Mr. Kinnock) and his followers.

Last week the Leader of the House was widely reported as having made a call, outside the House, for the publication of the mysterious Underhill report. Has he since then received a request from any source on the Opposition Benches for a debate on that subject?

My only knowledge of the present state of the Underhill report is gained from this morning's papers.

Is the Leader of the House aware of the attempt by the Secretary of State for Trade and the Minister for Consumer Affairs to avoid any responsibility for answering questions about consumer price inflation and the fact that that has been done by way of a written statement that does not yet appear in Hansard? May we have a statement that will give us a chance to explore the opportunities for asking the Department of Trade about a matter of the greatest concern to consumers, namely, the high rate of inflation?

There has been a very full written statement—[Interruption.] All right, we can read. There has been a full written statement by my right hon. Friend the Prime Minister, who also dealt with this matter orally at Question Time.

My right hon. Friend the Minister for Consumer Affairs, who dealt with this matter in the debate recently, showed the House full courtesy when she gave an advance indication of the Government's intention. Therefore, I do not think that the hon. Gentleman has any complaint.

I draw my right hon. Friend's attention to early-day motion No. 343, which would give trade unionists the opportunity of contracting in to paying the political levy:

[That this House calls upon Her Majesty's Government to consider reverting to the practice of enabling trades union members to contract-in to paying the political levy rather than having to contract out.]

Will my right hon. Friend indicate whether the sponsors of the motion will have the opportunity of an early debate on the matter?

I cannot promise an early debate on that subject. The content of my hon. Friend's motion would be right if one were to consider the matter as an abstract problem, but in the practical situation that we have today, of trade union relations, and so on, it would be difficult to implement it.

What is the significance of the Leader of the House saying that X hours have been devoted to the Education (No. 2) Bill? It must surely be related to the content of the Bill itself. For example, one would not compare that Bill with the Education Act 1944, on which literally hundreds of hours were spent. The Education (No. 2) Bill is one of the most controversial Bills to come before the House and, as my right hon Friend the Leader of the Opposition said, we are now coming to the controversial parts of it. Will the right hon. Gentleman therefore reconsider this matter?

I do not think that I should reconsider it. As I have endeavoured to make plain, the responsibility for the delay rests with the hon. Member for Bedwellty and the policy that he has adopted towards the Bill. I suggest that, as there are up to 25 hours more of debate available in Committee, he use that opportunity to debate the clauses instead of raising points of order.

Order. I should inform the House that a very large number of right hon. and hon. Members have indicated to me that they hope to speak in the debate on nuclear arms. It will be impossible to call them all. We also have a statement, and then an application under Standing Order No. 9. Therefore, I propose to call four more hon. Members from either side.

If we are to have a statement on the steel strike next week, would this not be a suitable occasion for the Leader of the Opposition to tell us whether he favours a ballot before private sector steel workers are brought out on strike?

I am sure that the Leader of the Opposition has heard that question and that he will take an opportunity to answer it.

As the Leader of the House is a renowned constitutional expert, will he advise the Prime Minitser that if she does not feel competent to take on the full responsibilities of premiership she is constitutionally entitled to visit Her Majesty the Queen and chuck her hand in?

The Prime Minister is exercising her functions as Prime Minister. It is not part of those functions to attempt to run British industry—that is for the parties concerned. We saw what happened last winter, when the Labour Government were in power. They meddled and muddled throughout the winter.

Does my right hon. Friend recognise that there is growing impatience for a debate about information processing? There is a particular and urgent need for a debate on the revelation of the Computer Sub-Committee of the Services Committee about the Library indexing system and its escalating cost to the House.

I am Chairman of the Services Committee. We keep the affairs of this House, including those mentioned by my hon. Friend, under continuous review.

Will the Leader of the House look at two early-day motions concerning vaccine-damaged children? One motion deals with the present inadequate payment scheme, which is full of anomalies.

[That this House calls for an urgent review of the vaccine damage payments scheme, noting that a mere 366 claims have been accepted out of 2,525 applicants; urges that the benefit of any doubt should be given to the claimant rather than the present requirement which states the opposite; and urges the Government to amend the provisions which exclude those children who are less than 80 per cent. disabled by the vaccines, those disabled before 1948 and the families of those children who have died.]

The other motion calls for a proper compensation scheme.

[That this House deplores the Government's refusal to establish a compensation scheme for vaccine-damaged children; endorses the view of the Pearson Royal Commission that there is a special case for paving compensation for vaccine damage where vaccination is recommended by public authority and is undertaken to protect the community; recognises that the Vaccine Damage Payment Act does not purport to provide a compensation scheme; and calls upon the Government to introduce a compensation scheme as favourable to vaccine-damaged children as the industrial injuries and war pension schemes are to the industrially injured and war disabled.]

As the parents of those children are meeting to discuss these issues at the weekend, can we have a debate on those motions some time next week?

I am well aware of the right hon. Gentleman's interest in these problems and of his contribution towards solving them. This will be one of the Government's priorities, when resources become available.

Has my right hon. Friend had an opportunity to reflect on a question that I asked before, concerning the amount of time that a Foreign Office Minister is available to answer questions in the House? With the quickening pace of international events, 30 minutes every four weeks is inadequate.

I have sympathy with that point. I have received representations from a number of hon. Members from different parts of the House and I have held conversations with them. I hope that within a reasonable time we shall be able to make an adjustment that will he satisfactory to all hon. Members.

Is the Leader of the House aware of the mounting crisis in the Lancashire textile industry? Both management and the trade unions are concerned about the future of that industry. The only major debate on textiles that we have had concerned the woollen textile industry. Will the Leader of the House consider carefully whether a debate on this industry can be arranged?

As the Services Committee is meeting next week, is my right hon. Friend more optimistic that a sensible system of agreed but limited access for Euro- pean Members can be proposed for discussion? [Hon. MEMBERS: "No."] Could such proposals be laid soon after that meeting?

I am always an optimist and I hope that reason will prevail. However, the right hon. Member for Ebbw Vale (Mr. Foot) is on record as saying that he feels that this matter should be decided on the Floor of the House. I must take that into account, together with other considerations. I hope that hon. Members will be reasonable.

Will the Leader of the House assure us that no Government time will be available for a debate on the Abortion (Amendment) Bill?

I shall certainly give no such undertaking. That is a hypothetical question. The only precedent for it was made by the Labour Government, who provided time so that the House of Commons could come to a conclusion on that issue.

Is the Leader of the House aware that in the written answer referred to earlier by the Prime Minister the allocation of responsibilities is such that hon. Members who wish to ask questions about the retail price index must address them to the Secretary of State for Employment? Does that make sense?

In her reply my right hon. Friend the Prime Minister was guided by considerations of where ministerial responsibility lies. However, if the right hon. Gentleman is dissatisfied, I shall look into the question again and see whether it is satisfactory and for the convenience of hon. Members.

Afghanistan

With your permission, Mr. Speaker, I shall make a statement on Afghanistan.

The Soviet invasion of Afghanistan is an event of the widest significance. For the first time since the Second World War, Soviet combat troops have been used in massive numbers outside Europe to establish a military hold on a sovereign, non-aligned country.

The Soviet action is a breach of all the conventions that have governed East-West relations for the past decade. It is a vivid demonstration of the Soviet drive to gain wider influence wherever possible, by propaganda, by subversion, and, where necessary, by force.

Together with the arrest of the Nobel Peace Prize Winner, Dr. Sakharov, it reflects cynical disregard for world opinion. It is bound to affect our attitude in current and future negotiations between East and West, though we naturally want these to continue where they clearly serve our interests, as well as those of the Soviet Union.

However, the present crisis is not in the first instance an East-West confrontation between super Powers. Although the significance of the Soviet action is world wide, its immediate impact has been on the region of South-West Asia and on the neighbouring Muslim countries.

Afghanistan is a strategic salient into the region. One is bound to ask oneself where the Russian drive is to stop. If the Russians are to be deterred, a sustained and significant response will be needed, not only from the West but from the countries which themselves feel threatened.

My right hon. and noble Friend the Foreign Secretary discussed these issues with the Governments of the region during his tour between 9 and 18 January. That took him to Turkey, Oman, Saudi Arabia, Pakistan and India, with a brief call at Bahrain.

Despite the obvious differences of perspective, certain important points of agreement emerged. One was that the West and the countries of the area have a common interest in the stability and integrity of the Gulf and the Straits of Hormuz.

Secondly, in the light of the Soviet threat, Pakistan must be able to count on the material and political support of its friends.

Thirdly, the real threat to Iran's recent revolution and to her future security came from the Russians.

Finally, there was of course a general repugnance in the Islamic countries that my right hon. and noble Friend visited at the Soviet onslaught on another Islamic nation.

An effective response to the Soviet threat in South-West Asia and its neighbourhood is, above all, a matter for the peoples of the region. All the statesmen with whom my right hon. and noble Friend spoke recognised the Soviet threat of intervention, by force or subversion, which now extends across the region as far as the Yemen, and they accepted the responsibilities that flowed from this assessment.

In particular, the need for solidarity among like-minded people and for a fresh effort to overcome the divisions of the past was widely recognised. That will not be easy. Conflicts of local interest have to be overcome, and in some cases the present crisis has sharpened them.

In India, where my right hon. and noble Friend was able to meet Mrs. Gandhi and some of her Ministers very soon after they took office, he found a deep concern that Western military aid to Pakistan could disturb the delicate political balance in the sub-continent. The Indians have no desire to see their part of the world become the arena for a clash between the super Powers.

My right hon. and noble Friend pointed out to Mrs. Gandhi that Western help for Pakistan was a direct consequence of the incursion of the Soviet super Power, and that Russia is, after all, the only super Power with a powerful military presence on the sub-continent.

Mrs. Gandhi made it clear that she wished to continue the process of better understanding with Pakistan that she had begun with the Simla agreement of 1972. President Zia had a ready assured my right hon. and noble Friend in Pakistan that he, too, looked forward to a development of the Simla process. My right hon. and noble Friend found this encouraging. It will be a major contribution to peace of mind in the subcontinent if each country's worries about the other can be dissolved.

The response to the Soviet invasion of Afghanistan is not, of course, the exclusive responsibility of the people of the region, even though theirs is the most immediate interest. They need—and they look for—material Western assistance, and a firm Western commitment to their security and independence.

The West itself needs to find ways to make the Russians understand that they cannot break the rules of international behaviour with impunity, either now or in the future. That entails responses by individual countries and by the West's collective organisations, above all by NATO and the European Community.

In the region itself, the first need is to help Pakistan. There are already 500,000 Afghan refugees there, and that number could soon double. Many of them bitterly oppose the Soviet invasion of their country and are determined to return. Their condition is wretched. We have already sent blankets, tents and medicines. The United Nations Commissioner for Refugees is active. Other countries, and especially the United States, are helping, too. Pakistan needs further help to tackle her political, economic and military problems. We are discussing with our allies how best to do that.

We are also considering other measures to help the countries of the region as a whole, both in the short term and in their struggle against the long-term threat of Soviet disruption and subversion. We need to develop our co-operation with Turkey both bilaterally and multilaterally. We need to strengthen our links with the countries of the Arab peninsula. We look forward to rebuilding a mutually satisfactory relationship with the people and Government of Iran once the American hostages in Tehran have been released.

Above all, we believe that one of the most important of all possible contributions to the political stability of the area would be a settlement of the Arab-Israel conflict, which recognised the rights of the Palestine people as well as Israel. [HON. MEMBERS: "Hear, hear".] Immediately after the Russian invasion, the British Government proposed that the North Atlantic Alliance and the European Community should discuss the measures that we might take, bilaterally and collectively, to impress on the Russians how seriously we view their actions. Some of our allies, notably the United States, have already acted. I expect others to follow suit.

I shall now announce the measures that the British Government have so far decided to take. These are in addition to the measures related to Afghanistan that my hon. Friend the Minister of State announced in this House on 14 January.

The British-Soviet credit agreement, concluded by the Labour Government in 1975, expires on 16 February. Its terms were too favourable to the Soviet Union, since the export credit was subsidised more than that which we extend to other countries. The Government's view is that all trade should be pursued on a basis of mutual advantage. We shall apply that principle to British-Soviet trade. We do not propose to renew the credit agreement when it expires. Credit in future will have to be considered on a case by-case basis. Assuming that other Western countries do likewise—which would be very much to our collective advantage—we shall not provide export credit to the Soviet Union at rates more favourable than those set by the international consensus on credit terms.

On technology, we are studying with other countries the tighter application of the COCOM rules for controlling the transfer of sensitive technology to the Soviet Union.

The European Community has decided not to export any food to the Soviet Union that would directly or indirectly replace supplies denied by the United States. The Community has therefore decided to curb exports of grain in the future. Britain is also pressing for an end to subsidised sales of butter, meat and sugar to the Soviet Union.

The Government have also decided to avoid high level and ministerial contacts with the Soviet Union for the time being. They will cancel military exchanges that were under consideration. They will avoid the kind of cultural and other events that would give an impression that nothing has changed and thus appear to condone Soviet aggression.

In accordance with the agreement between the Foreign and Commonwealth Office and the BBC, my right hon. and noble Friend has approved an increase in broadcasts by the external services of the BBC to listeners in the Soviet Union and Afghanistan.

I now turn to the question of the Olympic Games. Her Majesty's Government sympathise deeply with the Olympic ideal that young people from all over the world should be able to compete freely together with no overtones of politics. However, that view has never been shared by authoritarian Governments, who exploit such events for their political advantage. As in 1936 for Nazi Germany, so now for the Soviet Union, the Olympic Games are a major political undertaking designed to impress the whole world with the prestige of the system. If the games were now to be held in Moscow, it would appear to condone Soviet aggression abroad and repression at home.

However, if the games were to be cancelled entirely, it would be a bitter blow to the dedicated athletes in Britain and elsewhere who have trained so hard for so many years. That is why the British Government believe—that the summer games should be moved. That will not be easy, but it should not he beyond the capacity of the 104 countries which condemned the Soviet Union in the United Nations.

If necessary, the games could be held in more than one country. My right hon. Friend the Prime Minister has accordingly urged the British Olympic Association to approach the International Olympic Committee to propose that the summer games be moved from Moscow. The Government are fully prepared to help with arrangements for those parts of the games that might be held in this country.

Recent Soviet actions in Afghanistan and at home are not a happy augury for the future. They undermine much of what has been achieved over the past decade and more to provide the basis for a stable and mutually satisfactory relationship between East and West. They underline the need, above all, to develop political solidarity among the members of the European Community and among the members of the North Atlantic Alliance. It is from that political solidarity, and from the defensive arrange- ments that accompany it, that our dealings with the Russians have to start. However, both East and West live on one planet. The consequences of serious miscalculation could be disastrous for very many of its inhabitants.

It is right that the Russians should feel the strength of our disapproval. That should help them to avoid miscalculation in future. It is also right that we should, where possible, continue the search for arms control agreements, commercially justified trade, and other arrangements of mutual benefit. In the long run, both we and the Russians need a sound East-West relationship, but the Russians must understand that there can be no such relationship so long as they behave as outrageously as they have in Afghanistan.

The Lord Privy Seal has made a long and serious statement that we shall need to debate, but, as I understand that that opportunity will arise on Monday, I shall limit myself to a few questions.

I emphasise that our condemnation of the Soviet invasion of Afghanistan has not abated one jot since the Minister of State's first statement to the House on 14 January. Indeed, the arrest of Dr. Sakharov and other human rights protestors has only sharpened that condemnation.

Turning first to trade credits, I see no reason why the Western countries should continue to make preferential arrangements with the USSR, but can the Minister assure the House that British action will not simply be negated by trade expansion by other Western countries? Will he also make it plain that we distinguish in this matter between the Soviet Union and other countries in Eastern Europe, many of which seriously oppose current Soviet policies?

I doubt whether there is anyone who does not wish that a site for the Olympic Games other than Moscow had been chosen in the first place, but is the Minister satisfied from his approaches to the International Olympic Committee and British sporting authorities, and, indeed, from his contact with other countries, that there is a sufficient body of support to make a change of venue effective?

Dealing with the Foreign Secretary's recent tour and the Third world aspect generally, is it not clear that there is no enthusiasm for an old-fashioned policy of bases and pacts? What is needed is economic and, in certain cases, military aid, but, above all, an assurance and guarantee against attack of the kind that President Carter has enunciated in his State of the Union message today?

Will the Lord Privy Seal reaffirm that in any assistance to Pakistan—and we of course agree that refugees must be helped—we remain wholly opposed to the efforts of that Government to acquire nuclear weapons, and that we shall have special regard to the interests and advice of India, which is the one great democracy in the whole of Southern Asia?

In treading the narrow path between under-reacting and over-reacting, will the Lord Privy Seal reaffirm as one of the areas of detente, where mutual interests continue to be involved, our continued commitment to arms limitation, to SALT II and SALT III, and to the need to maintain serious political discourse between East and West?

Finally, will the Government bear in mind that destabilisation and danger in so much of the world today are due not merely to Soviet activity but to recession, mounting debt and increasing poverty? Does he not think that a major initiative to lift the economies of the industrialised West and the developing countries is now crucial to the greater political stability we all seek? Does the right hon. Gentleman agree that this lack of initiative by the British Government and the Governments of the whole Western world is the most serious omission yet?

I agree with what the right hon. Gentleman said at the end of his intervention to the extent that it may be true in general, but I do not believe that it has great application to what has been happening in Afghanistan and to dealing with that matter now. I very much welcome what the right hon. Gentleman said about maintaining the Opposition's condemnation of what happened and the fact that it had sharpened since the exile of Dr. Sakharov.

On trade credits, I said that I trusted that our partners would take the same line. The right hon. Gentleman will, however, be aware that our trade credit was taken up only to the extent of about 50 per cent. according to the last figures I saw. I confirm that we make a dis- tinction between Eastern Europe and the Soviet Union.

It remains to be seen how much support we shall gain for the stand that the United States, ourselves and other countries have taken on the Olympics. But, as I said in my statement, the fact that 104 countries condemned the Soviet Union is at least a promising start.

We are not going back to the age of bases and pacts, and I entirely agree that the danger of subversion is every bit as great as the danger of invasion. I welcome the renewed interest that the United States is taking in the area, and we shall see what comes out of its consultations with the countries concerned. We are facing a threat that we have not faced for 35 years. There must be a significant response from the West and, at the same time, we must ensure that the countries in the area are enabled by our help to react sensibly to this threat.

Does my right hon. Friend agree that the invasion of Afghanistan following the military occupation of Ethiopia and Aden implies that the threat to Southern Asia has escalated from the political and subversive to the directly military? Has my right hon. Friend noted President Carter's statement that if the need arose the United States would be prepared to defend the Gulf by force? Will he assure the House that the Government are giving consideration to the various ways in which we might help our American allies if the need should arise?

I agree with my right hon. Friend that the Soviet behaviour in Afghanistan shows a readiness to use the military weapon as opposed to the more traditional weapon of subversion. Therefore, there are the two dangers, although, as I said, in spite of what has happened in Afghanistan, the danger of subversion is still as great as that of invasion. Of course, we shall maintain the closest contact with our American allies and our friends in the area about all possible measures to contain this threat.

Whilst I join in the general condemnation of Russia and its arrogant military action in Afghanistan, I have written to the Prime Minister about credit facilities. I understand the reasons for the curtailment of credit facilities, but will the right hon. Gentleman bear in mind that in London there are several great engineering firms which are committed to supplying equipment—not military equipment—and that an immediate cancellation of credit facilities will cause harm to this country, not to Russia? May I have an assurance that in the sanctions that are being taken the right hon. Gentleman will have the sense to see that what he does will hurt Russia and not us?

I thank the right hon. Gentleman for that reminder, which was not altogether necessary. We have no intention of hurting ourselves and we are mindful of the considerations he has in mind. Of course, what we are doing will not hurt our engineering companies.

Will my right hon. Friend accept that his statement is warmly welcomed and the actions he has promised will be understood as a guarantee of international security throughout the world? Does he agree that the right hon. Member for Stepney and Poplar (Mr. Shore), in what he said about SALT II, fails to understand the change of attitude in Moscow and among the leadership of the Soviet Union, which must throw into serious question the attempt to negotiate the SALT II agreement?

In these matters, it is important to have the maximum amount of bipartisanship. I thought I detected a fair amount of bipartisan support for the position taken by the Government. Therefore, I would be very reluctant to criticise the right hon. Member for Stepney and Poplar (Mr. Shore). I have not done so and I do not do so. My hon. Friend will be aware that President Carter said that the ratification of SALT II had been postponed for the immediate future, so we do not need to come to an immediate decision on that matter.

The length of the Lord Privy Seal's statement justifiably reflects its gravity. As the Government initiated a common approach in NATO a month ago and have not yet achieved it, will the right hon. Gentleman say what hope he has of a common approach? Will he comment on the rumour that Mrs. Gandhi is prepared to make up the shortfall of United States grain?

Is the right hon. Gentleman able to say anything about the Iranian hostages? He seemed to suggest that there was hope of an early solution to the matter, and it would be useful to know what is the situation about the Shah. The right hon. Gentleman knows that his right hon. Friend the Prime Minister, like the other two party leaders, is a patron of the British Olympic Association appeal. Does she intend to seek a common approach to achieving a united view in consideration of the attitude that the Government and others have taken on the Olympic Games?

The hon. Gentleman will probably be aware that my right hon. Friend has written to the chairman of the British Olympic Association, Sir Denis Follows. He has replied, drawing attention to the practical difficulties of moving the Olympic Games from Moscow. He has agreed to ask the members of the International Olympic Committee for their observations.

I regret to say that I have nothing to add to what has been said about the hostages.

It is a little unfair to suggest that we have been trying for a month to get a common approach in NATO. As I suggested to the House last week, it is natural that an alliance should take longer to come to an agreed view than would individual countries. We are working to bring our views into alignment.

I also saw a report in a newspaper about Mrs. Gandhi agreeing to make up the grain shortfall. I have seen nothing to confirm that report, and so far as I know it is not true.

Will my right hon. Friend consider the necessary adequacy of the response to military aggression? The many actions being taken, admirable though they are, are not, in my view, adequate. Will my right hon. Friend consider, not today but after he has consulted his right hon. Friend the Prime Minister, what response he can make to President Carter's statement that he is giving a guarantee to the Gulf States and that he is reactivating the register of those liable to be drafted?

My hon. Friend's final comment is a matter not for me but for my right hon. Friend the Secretary of State for Defence. I do not think my right hon. Friend is altogether fair in talking about the inadequacy of our response. There is a limit to what any one country can do. We have reacted well. My right hon. Friend's journey was extremely valuable to this country and to the Alliance. As I said in answer to an earlier question, we are in the closest consultation with the United States about the defence of the Gulf.

The right hon. Gentleman's statement is important and serious, but we would have preferred the Foreign and Commonwealth Secretary to be a Member of the House of Commons so that he could make his statement here and be more directly accountable.

Does the right hon. Gentleman accept that the attitude of many Conservatives in condemning Russia rests uneasily on their shoulders because they supported to the hilt the American invasion of Vietnam which was far more bloody, serious and damaging? Will he emphasise the Government's making direct representations to the Russian Government rather than arming the nation to the teeth and thereby bringing into greater prominence the question of a world war?

Will the Minister accept that some of us do not regard the Olympic Games as the private property of any Government, that they can only make representations and that it is a decision not for them but for the International Olympic Committee?

Finally, does the right hon. Gentleman feel that denying food to the people of Russia, who may or may not approve of the actions of their Government, will make the people of Russia have greater or lesser regard for the West?

Of course the Olympic Games are not the property of any one Government, and that is really the basis of the action we have been taking. I fail to see any serious parallel between what happened in Vietnam and the Soviet invasion of Afghanistan. We have already made direct representations to the Russians, but that of course is in no way a substitute for helping our friends in the area to defend themselves against possible danger from the Russians.

If action must be taken which the Government can be sure will be implemented, why does my right hon. Friend's statement contain no mention at all of the ban on imports to this country of subsidised Russian goods, which compete unfairly with our own products and provide valuable foreign exchange to the foreign aggressor?

That is a matter for my right hon. Friend the Secretary of State for Trade. I will get in touch with him, and I hope my right hon. Friend will, too.

In the course of his statement the right hon. Gentleman made a brief but none the less important reference to the problems of the Middle East. Is the House to understand that it is the intention of Her Majesty's Government to seek to institute discussions with the leaders of Israel and the neighbouring Arab States, and, if so, is it also the intention of the Government to invite representatives of the Palestine Liberation Organisation?

That is going rather further than I went when I pointed out the definite fact of the importance that the countries of the area attach to the settlement of the Arab-Israeli conflict. The follow-up to the Camp David negotiations is still going on and we still hope that it will succeed. Until it can be seen that it will not succeed, we shall not take further action.

Will my righthon. Friend consider with the Americans either renewing or making territorial guarantees both to India and to Pakistan as a direct sign that no further steps by the Russians will be tolerated? In considering the aspect of sanctions, does he not accept that normally Russian embassies have been the centre of disaffection and subversion? With the very large number of Russians at their embassy in London, might it not be a positive step to ask for a major reduction of the number of diplomats here?

My hon. Friend will be well aware that we enforced a major reduction in 1970 or 1971. We have no immediate plans to do so again, but obviously we shall keep the situation under review.

On the question of guarantees, it is no good guaranteeing people's territorial integrity unless they wish a guarantee. I have no reason to believe that India does, but this is one of the many matters that we shall be keeping under review.

Does the right hon. Gentleman agree that the hopes and aspirations of mankind that peace and security might be realised on the basis of detente and disarmament have suffered a grave setback as a result of the naked and brutal invasion and occupation of Afghanistan?

With regard to the Olympic Games, would the Minister draw to the attention of the British Olympic Association that there are reasons to believe that the arrest and banishment of Dr. Sakharov and other dissidents are related to the holding of the Olympic Games in Moscow and the fear that they might communicate to the world the truth about life in the Soviet Union?

I shall certainly do what the hon. Gentleman asks. I entirely agree with what he said in both parts of his question.

I agree wholly with my right hon. Friend's call for solidarity among the Western nations in their response to the Soviet aggression, but I wonder whether he could enlarge on what Her Majesty's Government intend to do to encourage more solidarity among some of our European friends and allies.

No. I am afraid that must be a process of discussion, which may take some time. After all, after a great cataclysmic, or almost cataclysmic, event like the invasion of Afghanistan by the Russians it is not surprising that the reactions and perceptions of different Western countries should vary. It will obviously take some time before they are brought fully into line, but it is certainly our objective, through co-operation, to bring them into line.

Does my right hon. Friend accept that the gravest danger at the moment is that of miscalculation by the Soviet Union? Does he also agree that the one sure way of making certain that the Soviet Union does not miscalculate would be to establish a Western military force in the Arabian Sea and to reintroduce, or at least prepare to reintroduce, in this country as well as in the United States, selective national service?