I beg to move,

That the draft Undertaking between the Secretary of State for Scotland and Gardner Shipping (Scotland) Limited and J. & A. Gardner and Company Limited, which was laid before this House on 26th April, be approved.

I do not need this evening to explain in detail the Government's policy in financial assistance to bulk shippers serving the Highlands and Islands. We do, however, recognise the importance of bulk shipping services to the local economies. That has been recognised by the entire House in previous debates. First, the bulk shippers provide essential supplies such as coal and fertilisers, which, particularly in the case of the smaller islands, could not be provided in any other way. Second, they assist industry and employment by providing for the export of island produce. It is our policy objective to ensure that basic commodities are provided to the islands, to assist in ensuring the final prices to the consumer are acceptable, and to encourage islands industry by stimulating the export of their product.

Against that background the Government sought and obtained the approval of the House in 1981 to draft undertakings with a number of bulk shippers. These are Glenlight Shipping Ltd. and Roderick Cunningham, which operate on the West Coast of Scotland, and Shetland Line, Hay and Company, William Dennison Ltd. and the Northern Shipping and Trading Company, which operate in Orkney and Shetland. In addition, asistance is given to Hugh Carmichael under arrangements that do not require the approval of the House, for the operation of a small West Coast puffer based in Mull.

In the present financial year, as my right hon. Friend the Secretary of State announced on 12 February, allowance has been made for the expenditure of £1·05 million in support of bulk shipping services in the Highlands and Islands. Assistance is generally given in the form of a rebate to customers on commercially determined charges. It is not, therefore, in general a deficit subsidy to the shipper, but direct assistance to the user of the service. The exceptions are Glenlight and Carmichael, which in addition attract deficit subsidy. That is not intended to be a permanent arrangement.

For the current year the level of rebate to customers is 30 per cent. on the West Coast, for both inward and outward services; and for services to Orkney and Shetland the rate is 15 per cent. for northbound traffic and 50 per cent. for southbound. The differential rates for traffic in and out of Orkney and Shetland reflect the wishes of the local Islands Councils. I am sure that the right hon. Member for Orkney and Shetland (Mr. Grimond) will confirm that.

Gardners, the subject of this undertaking, provides a locally significant service carrying basic commodities to the Western Isles and the West Highland littoral. It also exports sand, which is extracted at Lochaline and aggregates quarried at Bonawe. The continuation of its service assures continued employment at these two locations, which would otherwise be at risk.

It is also the case that our existing assistance to Glenlight Shipping Ltd. and to Roderick Cunningham will put Gardners at a competitive disadvantage on the West Coast if tariff assistance is not extended to that company.

In the debate last year on 22 July my hon. Friend the Member for Edinburgh, Pentlands (Mr. Rifkind) mentioned that discussions had taken place with J. & A. Gardner but that he was unable to propose any assistance for Gardners at that time since the company fell outwith the scope of the Highlands and Islands Shipping Services Act 1960, the legislation under which shipping assistance is given. That was because the company did not comply with the statutory requirement of being "wholly or mainly" engaged in serving the Highlands and Islands area. That difficulty has now been overcome by the formation of the subsidiary company Gardner Shipping (Scotland) Ltd.

Under the terms of the undertaking before the House, it is proposed to give Gardners grant to be passed on in the form of tariff reductions, in the same way as with other bulk shippers. This is provided for in clauses 2 and 3 of the undertaking. As with other bulk shippers who are assisted on the West Coast, the rate of tariff reduction for the current year would be 30 per cent.

Clause 4 of the undertaking provides that the company itself may benefit from tariff reductions when carrying on its own account—it is J. & A. Gardner and Company which owns the quarry at Bonawe to which I have referred—but ensures that in these circumstances it cannot indulge in transfer pricing to increase the Government assistance that would be paid.

We have also needed to satisfy ourselves that where the assisted traffic will be moving between ports in the Highlands and ports in England, there would be no distortion of trade or adverse effects on particular product markets. We are satisfied that the scale of operation of Gardner Shipping (Scotland) Ltd. is sufficiently limited to avoid any such distortions.

The cost of this proposal to the Exchequer in this financial year, assuming a commencing date in the early summer, will be around £135,000. Allowance for this is already made in the expenditure for 1982–83 announced by my right hon. Friend on 12 February. The cost in a full-year is estimated at approximately £160,000.

I hope that the House will approve this modest proposal to extend assistance to Gardners, which plays a significant part in assisting the survival and prosperity of the Highlands and Islands communities whom it serves and for whom the cost of sea transport is an important factor. I commend the draft undertaking to the House.

I rise briefly to welcome the undertaking. It has two considerable advantages for my constituency. First, it broadens the possibility, as it brings in another shipping line which is largely engaged in tramp cargoes and bulk. That is now an important part of the Shetland economy.

From what the Minister said, my impression was that this company did not serve the right hon. Gentleman's constituency. Is that so, or does it have a direct interest in Orkney and Shetland?

On the contrary. At least until lately Gardners shipped from Shetland. I do not believe that it has been shipping so much from Orkney, but it certainly did so for Lerwick. I do not know what the company is doing at present because it comes and goes. Essentially, it is a company that picks up cargoes where it can. It has certainly done trade with Lerwick.

As the Minister said, one of the advantages of this scheme is that grants go more or less directly to the inhabitants and not the shipping company. The undertaking may affect my constituency in the future because the company has certainly traded there in the past. The present position is, of course, dependent on the cargoes available.

At Question Time today, the road equivalent tariff was mentioned. I am in favour of the RET if it will assist shipping in Orkney and Shetland. However, like the Government I share the view that the RET is not the only method of doing that. For certain parts of the islands of Scotland it may not be the most effective method. I therefore welcome the fact that the Government are prepared to look at other ways of assisting shipping and they are not entirely waiting for the introduction of RET.

I also believe that the Government could refer some of the prices that are charged in my constituency and the Western Isles to the Office of Fair Trading. The office appears to be examining rather esoteric matters such as the commission charged to vendors at auction sales. There is considerable anxiety in my constituency about whether the higher prices for many commodities, particularly petrol, are justified.

It used to be said that these were largely due to the freight, but it is apparent that the prices of many things on which the freight is paid are still very much higher in the North of Scotland islands. This, therefore, seems to be a matter in which the Office of Fair Trading might take an interest.

I ask the Government to look into that possibility. In the meantime, in so far as it affects Shetland, I welcome this provision and the extension of the original Act. I shall not go into details, which we discussed when the Act was introduced, of another shipping company that provides services to the Highlands and Islands.

The right hon. Member for Orkney and Shetland (Mr. Grimond) seemed to be under the impression that the undertaking will extend the operation of Gardner Shipping (Scotland) Limited to his constituency. It seemed to me that the Under-Secretary made no reference to Orkney and Shetland but specific reference to the transport of goods to the Western Isles and other western islands.

If the right hon. Gentleman is correct and the company is to receive a subsidy to operate in Orkney and Shetland, that will have an effect on the Shetland Shipping Company which operates out of Grangemouth and was included in the scheme only about one year ago.

The scheme began with the whole of the subsidy going to P & O which operated at the time out of Montrose and subsequently out of Aberdeen. It is gratifying that the subsidy is to be spread and that West coast ports will be able to take part in the scheme. I welcome that improvement.

I was glad that the Minister seemed to imply that additional resources are being allocated for the subsidy and that there will not be a thinner spreading of the resources allocated to Shetland Shipping, P & O and the other companies involved in the scheme.

The Under-Secretary said that the undertaking would maintain employment in the ports affected and in le sandpits from which the gravel and sand is extracted for transport to the Western Isles. I do not understand that, because if the Western Isles need sand and gravel, they need sand and gravel. It was misleading for the Minister to say that employment would be maintained.

There is a much more serious threat to employment in Scottish ports, which is the grid system. I hope that if the Under-Secretary cannot answer the point tonight he will write to me about the effect of the grid system on Scottish ports. The system means that any exporter of goods with a Scottish origin can load them on to lorries at any point in Scotland and it costs him not a penny piece more to ship them through Grangemouth, Glasgow or Aberdeen than it would if they were taken down to Felixstowe.

The operation of that system is having a devastating effect on Scottish ports. The undertaking is welcome, but it will do nothing to safeguard the employment of dockers in ports such as Grangemouth and those on the Clyde which has been seriously affected by the grid system.

However, for the moment, I am content with what is proposed in the undertaking. It will be beneficial to one or two ports on the West coast and certainly to the Western Isles.

I apologise to the Under-Secretary for having missed his speech. I thought that the previous business would take longer than it did.

I join in the welcome given to the undertaking. It is another extension of the help that the Government have given to shipping on the West Coast and it will benefit the islands and employment on the West Coast.

I agree with what the hon. Member for Stirling, Falkirk and Grangemouth (Mr. Ewing) said about the grid system. The facts are absolutely correct. They are causing great concern in Scotland and the Scottish Office should give them serious consideration.

A greater subsidy is given to those goods exported from the islands than for imported goods. That creates higher prices on the islands. Prices are already excessively high and the islanders, the retailers, and wholesalers always blame the shipping services. The Government have never explained whether that is due to the charges made by the shipping services or arises for some other reason. If it is due to shipping charges, why do the Government not give an equal subsidy on imported and exported goods so that the islanders have better prices? Some of the islands that rely upon tourism do not export many goods. They rely on having low-priced goods. They require a subsidy on imported goods rather than on exported goods.

The company that owns the quarry will benefit as a consumer of the services of its shipping company. Will the Minister explain that point?

Another major point is the road equivalent tariff. To what extent is the subsidy close to a full road equivalent tariff? I hope that the Minister will answer that, because the islanders want the road equivalent tariff introduced as quickly as possible. We have listened to them in the Select Committee. We need to know what proportion the subsidy is and how fast the Government are moving to introduce the road equivalent tariff. It is important for the islands' survival.

Scottish Members, especially those who represent urban constituencies, are increasingly anxious when we see the effect on industry of massive Government cuts and people having to suffer poorer services, about the constant increases for the islands. The Government have a responsibility to ensure that the island communities survive, but they have an equal responsibility to communities in my constituency, where they are cutting services.

If the hon. Member for Glasgow, Cathcart (Mr. Maxton) is unpopular for keeping the House sitting late, I expect to be even more so, as an English Member representing Mid-Sussex.

My wife, who is a Scot, who was born in Ayrshire, who never came to England until she was 14 and who used to play "Scots and English" rather than "French and English", has owned a cottage in Tiree for many years. We have been lucky enough to go there for our holidays with our children. Her Member of Parliament, the Under-Secretary, my hon. Friend the Member for Argyll (Mr. MacKay), is sitting in front of me. Last summer I welcomed him to the island when he visited it, protecting the interests of his constituents. It is on the basis of his experience and mine that I intervene.

Tiree is better off than most of the Hebridean islands. In the last century it had a population of over 3,000. It was the granary for Iona. The population in now 1,300 and falling. It is a good tourist island, but, equally, the number of tourists falls each year.

We have recently gone through the horrific business of reviving a totally derelict little cottage to live in and enjoy. The cost of building materials on Tiree is at least twice that in Oban, which is about four hours away in the steamer, apart from the difficulty of getting anything done, with respect to the Hebridean representatives present. The architect has a cottage on the island. His advice is that the eventual cost of building is probably four times that on the mainland.

Without inquiring into the characteristics of the islanders and why it is so difficult to get things done, and giving all credit to my hon. Friend the Under-Secretary for the development of Argyll and the islands, it is worth remarking that the monopoly service provided by MacBrayne in bringing essential building materials from Oban has deteriorated over the years. I have many times gone into the co-operative to buy a simple item like a bag of cement—I am delighted to do the plaster work myself—to find that it is not available. No one knows when it will come. When it does, it will be three or four times what it would cost on the mainland. A monopoly transport service does not give the service and efficiency that the islanders require. The people who live on the islands know the inefficiency, and they beg for competition so that the cost of materials can be reduced.

I am grateful to the hon. Gentleman for giving way. Perhaps in the quieter hours that will be available to him after this debate he will have a word with his hon. Friend the Member for Argyll (Mr. MacKay), who will tell him about the Gourock to Dunoon ferry. He soon changed his mind about the need for competition when he came face to face with the huge local opposition to what he and his Government originally believed in.

I have no doubt that my hon. Friend the Member for Argyll is quite capable of arguing his own case much more effectively than I can, just as I know that he is much better at catching fish than I am.

I have seen the service provided by the monopoly MacBrayne deteriorate rapidly over the past 15 years. The hon. Member for Cathcart rightly talked about the importance of tourism to the islands. The tragedy is that the cost of transporting cars with MacBayne has gone up so much that tourism in Tiree has declined substantially simply because the cost for the car, allied to the cost of the ticket, has become too great.

rose—

The hon. Member for Cathcart has made his speech, and I am making mine. I get the feeling that the House would like me to sit down, and I propose to do so shortly. However, I have many friends on the island of Tiree whom I have known for many years, and I therefore want to stress how desperately dissatisfied they are with the service that is provided by MacBrayne, a monopolistic service which does not provide the basic requirements that the people on the island need. The cost of carrying cars has gone up so much that the tourist trade is falling off. I hope, therefore, that the Government, who believe in encouraging competition with nationalised industries, will seek to encourage competition in the transport to the islands so that both building materials and tourists can be brought there more cheaply.

If the hon. Member for Mid-Sussex (Mr. Renton) is under the illusion that competition could work on the merchant trade between Tiree and the mainland, he must be out of his mind. Does he really see fleets of entrepreneurs plying backwards and forwards across the sea, competing with each other to bring a bag of cement to him and people with holiday homes to decorate the walls of their houses? He has illustrated quite brilliantly the reason why the island of Tiree and many other islands off the West Coast and the North Coast of Scotland are depopulated to the extent that they are, and it is that all the houses have been taken over by architects, stockbrokers, merchant bankers and Members of Parliament from Mid-Sussex and similar areas.

However, unlike the hon. Member for land-locked Mid-Sussex, I represent a coastal constituency. I shall not argue that the Minister should be providing freight or passenger services to the Bass Rock, but I should like to ask for a specific undertaking from the Minister that if ever there is any question of negotiating the sovereignty of the Bass Rock the inhabitants should be consulted.

Hon. Members will be aware that the Select Committee on Scottish Affairs is in the process of completing a report on the question of road passenger transport and ferries in Scotland. It would be completely out of order for me to refer to that report because at this stage it is confidential.

The hon. Gentleman must not even think about it.

The hon. Gentleman was not even thinking about it when he was on the ferry from Aberdeen to Lerwick. I think that he was busy thinking of another form of liquid at the time.

On a point of order, Mr. Deputy Speaker. Surely the hon. Gentleman is casting a slur upon my person which he is certainly not entitled to do.

I am sure that the hon. Gentleman is not suggesting that there was anything strong in the liquid that was being consumed.

I am sure that the hon. Member for Aberdeenshire, East (Mr. McQuarrie) would not be ashamed of imbibing some of the produce of his own constituency from time to time.[Interruption.] I know that barley is grown in his constituency, and I suspect that there are distilleries there as well.[Interruption.] I am sorry about this sea of sedentary interruptions that I seem to be foundering in at the moment.

During our deliberations in the Select Committee, we travelled to several islands off the coast of Scotland. While we were concentrating our investigation on passenger transport, it is not surprising that we were told a great deal about the problems facing freight transport between the islands and the islands and the mainland, both off the North Coast and West Coast of Scotland.

It stands to reason that all the industries on the offshore islands rely on freight transport between the mainland and the islands. All their produce must be exported to the mainland and a high proportion of their raw materials must be imported from the mainland. With many of the industries, we are talking about bulky and heavy materials. Imports are also required for the agriculture industry, which I am concerned with, such as lime, fertiliser, seed and feeding stuffs such as hay and straw. It is important to recognise that the agriculture industry on the islands is one of the few staple industries which can sustain a permanent population. Such an industry is infinitely more worthwhile because it maintains people on the islands for 12 months of the year, unlike people from Mid-Sussex who might visit the area and use scab labour of one kind or another to build houses for one month of the year.

I seek your protection, Mr. Deputy Speaker. It is wrong for the hon. Gentleman to refer to me as "scab labour". I suspect that that is unparliamentary language. I said that I did much of the plastering myself, but I sought to buy the cement at competitive prices on the island.

If the hon. Gentleman will confirm that he is a member of the Union of Construction, Allied Trades and Technicians, I shall be happy to withdraw my remark. Otherwise, I stand by what I said.

The need to sustain an agriculture industry that will employ people all the year round on the islands must be recognised. The climate on the islands off the North and West Coasts is anything but clement. The only type of agriculture suitable to the islands tends to be the livestock industry. But livestock production requires hay and straw that cannot be produced on the islands. These are bulky items that need to be transported from the mainland. It is an irony that in constituencies such as that which I represent, which produce enormous acreages of cereals, thousands of acres of waste straw should be burnt in the fields after harvest time. If only there was—

A planned, Socialist economy.

a planned Socialist economy, as my hon. Friend says, and if only there was an efficient, subsidised system of freight transport to make possible the transportation of some of that straw to the islands, there would be more livestock, more employment and more prosperity on the islands. The island communities are totally dependent on these primary industries. It is necessary that any responsible government—a Socialist Government is the ultimate definition of a responsible Government—should be prepared to make possible the transportation of that material to the islands.

There is need for broader consideration of these problems than is possible under the terms of the undertaking. I welcome the undertaking so far as it goes. I hope, however, that the Government, after considering the report of the Select Committee, will bring forward new initiatives in passenger transport and freight transport to the Scottish islands.

Hon. Members have heard of an unlikely excursion by the hon. Member for Mid-Surrey—

Mid-Sussex.

for Mid-Sussex (Mr. Renton). My knowledge of the area is as profound as the hon. Gentleman's knowledge of the Highlands of Scotland. It was a rather unlikely excursion on what has been a rater unlikely day. The hon. Gentleman's colleague, the hon. Member for Epping Forest (Sir J. Biggs-Davison), made an incursion into Scottish Question Time to exhibit an interest in Rockall Island. I suppose, occasionally. that we must put up with this kind of thing.

I am surprised that I am the eighth hon. Member to speak in this debate. I suppose this illustrates the fact that the Highlands and Islands shipping services are a fairly sensitive area of interest. That interest is shown by the recent debates on the Gourock-Dunoon ferry. The hon. Member for the South of England—I shall not risk making another mistake—said that his hon. Friend the Member for Argyll (Mr. MacKay) had stimulated the Highlands. The only thing to which the hon. Gentleman has recently stimulated his constituents is rage over his proposals for the Gourock-Dunoon ferry. His blind loyalty to ministerial initiatives, however bat-witted, was given short shrift by his constituents. The story, from his point of view, although perhaps no one else's, had a happy ending because he has been rewarded spectacularly in another fashion for that blind loyalty.

There is never a good time to debate the Highlands and Islands shipping services. In an intervention at Question Time, the hon. Member for Renfrewshire, East (Mr. Stewart) said that hon. Members were to expect in the not too distant future a statement on road equivalent tariff. As my hon. Friend the Member for Berwick and East Lothian (Mr. Home Robertson) has remarked, we are also looking forward to the appearance of the report of the Select Committee on Scottish Affairs on transport services in the rural areas of Scotland. A great deal is to happen. What we are now discussing is, I suppose, some sort of make-and-mend arrangement and patching arrangement while the Government laboriously get their thoughts into order.

It is nevertheless important to understand what is happening. I hope that the Minister will clear up the comparitively minor but significant point of the area of operation of the newly formed subsidiary company. The Minister gave us to understand that it applied to the Western Isles and what I believe he described as the western littoral. There was no mention of Orkney and Shetland or any part of that northern domain. It is a matter of some importance. As I understand it—and I want to be clear about this—in the past the companies that have been operating to Orkney and Shetland have been working what might be called a step system; in other words, there was a reduction of 12½ per cent. in the tariff when goods were being moved to the islands and a 45½ per cent. reduction when goods were moved from the islands.

The system on the Western Isles was different. There was a flat rate tariff reduction of 25 per cent.; I understand from the Minister that it is now 30 per cent. If Gardner is operating in both areas, are we to understand that the tariff reductions will reflect the area in which it is working, or will the 30 per cent. reduction apply across the board, which would mean that it would be the only one of the companies operating into Orkney and Shetland which would be on the flat rate system as distinct from the differential system that I have described?

I suppose it is a matter of dotting the i's and crossing the t's, but can I take it from what the Minister said that the 30 per cent. reduction on the Western Isles applies to all the companies operating in that area which are covered by undertakings of this sort? They may have started out at 25 per cent. to maintain competition; I presume they are all now on the same rate of 30 per cent. I want to get the picture absolutely clear.

For the benefit of the House and in the interests of accuracy, may I ask about the total cost? The figures that the Minister gave were a little surprising. In a written answer on 17 May I was told that in 1982–83 the bulk shipping companies involved in these schemes were expected to get £1,050,000. The answer also said:

"There is also a provisional allowance within the bulk shipping total for Gardner Shipping (Scotland) Limited"—[Official Report, 17 May 1982; Vol. 24, c. 35.]

The bulk shipping companies were enumerated. When I added up the individual figures for 1982–83 I got a total of £833,000.

The gap between the individual sums allocated against the companies and the total of £1,050,000 is £217,000. The Minister said that £135,000 would go to Gardner's; I think that he said that in a full year it would be £160,000 or £170,000. In any event £135,000 or even the full year figure is well short of the £217,000 gap which appears in the written answer. If the Minister does not know offhand, no doubt there will be someone near who can explain the difference to him. I would be grateful to have that explanation.

The Minister referred to Hugh Carmichael and described him rather romantically as operating a small West Coast puffer out of Mull, a phrase identical to that used by the hon. Member for Edinburgh, Pentlands (Mr. Rifkind) in the last debate on this subject. It shows that Ministers believe in getting a good capital return on speeches. There may be some other small companies in the same position as Mr. Carmichael.

I welcome the explanation as to why the difficulties relating to Gardner's have been overcome. I should perhaps have said earlier that we on this side of the House welcome the undertaking, so far as it goes. The hon. Member for Pentlands made it clear in the last debate, which took place some months ago, that he was unable to propose any assistance. It is good that the difficulty of the statutory limitation to companies wholly or mainly engaged in the Highlands and Islands shipping services has been circumvented, although a device or a stratagem has been used. As we are all in favour of the order, I do not think anyone will complain too much about that.

In regard to the future, the Minister has said with a good deal of force that there has been a substantial rise in the amount of money that has been given to these companies. I do not deny that. It is not perhaps quite as much as a straight comparison between 1979–80 and 1982–83 would suggest. In 1979–80, no money was given for bulk shipping companies. Therefore, we are not comparing like with like. In addition, hon. Members should bear in mind the ravages of inflation. However, I accept that the Government have been making an effort.

The point of the system is that the shipping company does not benefit, while the users of its freight services do. It will be interesting to know the effect on the users of the services of increasing the amounts spent and of increasing the reduction of the tariffs. Clearly, if there is an increase in the subsidy on the tariff from 25 per cent. to 30 per cent. the benefit to the consumer will remain unclear unless the tariff increase at that time is also known. Therefore, perhaps the Minister could give us some information for the past year about companies such as P & O Ferries, Glenlight Shipping Ltd., Hay and Company Limited and Northern Shipping and Trading and Company. What has happened to the freight rates paid by the customer? Has an increase in the commercial rates been offset by the increase in tariff subsidy? That sliding scale is important to the consumer. No doubt the Minister will respond to that point.

Several hon. Members, including my hon. Friend the Member for Glasgow, Cathcart (Mr. Maxton)—who made a very useful speech—and the hon. Member for Berwick and East Lothian (Mr. Home Robertson), referred to the road equivalent tariff. This is a very long-running saga. It goes back to the Conservative manifesto at the last election. Some of the more naive thought that it made an absolute promise, but it turned out to be a very conditional promise. Since then, we have moved very slowly, in a somewhat sidewise direction, towards road equivalent tariff. As long ago as 22 July 1981—in a debate on a preceding order—we were promised an early statement and debate. The former Under-Secretary of State, the hon. Member for Pentlands made it clear that there would be a statement followed quickly by a debate. The statement took the form of a written answer on 28 July. I do not wish to sound ungracious. It told us that we were still moving slowly. However, the Government promised that they would continue to move. It promised a further statement after the recess, but that statement has not been made. It also said that the eventual scheme would involve running, rather than operating, costs. There was to be an adjustment to guard against the dangerous possibility that RET would be counter productive for the longer sea routes.

When will that statement be made and when will the debate be held? I do not wish to be churlish, but at Question Time—by coincidence—the Minister said that a statement would be made soon, so that the scheme could come into operation in time for 1983–84. April 1983 is about eleven months away. However, if we are to have a statement, a debate and time for machinery to be set up, we must hear from the Government soon. Given the restrictions of Question Time, it is difficult to be as forthcoming as the Minister might like to be. However, there is enough time left in this debate for the Minister to give us an accurate idea of the timescale, of the Government's intentions and to put a little more information on the table about what is in the Government's mind. That is only fair. RET is a controversial matter. It is not a simple but a highly technical matter. Many representations have been made, and there have been many suggestions and promptings—as well as much speculation—about how to organise the matter or vary the basic RET theme. In addition to replying to the detailed points, it would be extremely helpful if the Minister would let us know the Government's intentions on a matter of fundamental importance for sea transport in the Highlands and Islands.

I am grateful to hon. Members on both sides of the House and from all parts of Britain who have welcomed the undertaking, especially the right hon. Members for Orkney and Shetland (Mr. Grimond) and Western Isles (Mr. Stewart) who have constituency concerns.

Inevitably, we have raised one or two points that go beyond the scope of the undertaking. I take full note of them. With regard to perhaps the most important point that has been raised—the position on road equivalent tariff—I reiterated the Government's manifesto commitment earlier, in answer to the right hon. Member for Western Isles. That commitment to move towards a support system remains. Work on it is proceeding. As the hon. Member for Glasgow, Garscadden (Mr. Dewar) and others have said, it is a highly complex and technical matter. I assure them that we are not discussing a final move towards an RET system, or a final implementation of it, in the near future. Nobody has suggested that. We look forward to the Select Committee's report with keen anticipation.

The hon. Members for Stirling, Falkirk and Grangemouth (Mr. Ewing), Glasgow, Cathcart (Mr. Maxton) and Garscadden raised points about services to Orkney and Shetland. Perhaps I may make the matter clear. Gardners have not advanced any proposals with regard to shipping services to Orkney and Shetland. I assure the right hon. Member for Orkney and Shetland that the undertaking does not rule out their putting forward any such proposals to us.

The hon. Member for Cathcart, especially, raised the matter of rates. I repeat that the structure of differential rates for Orkney and Shetland—15 per cent. for imports and 50 per cent. for exports—is at the request of the Island Councils. They believe that the emphasis on productive employment is sensible.

The hon. Member for Stirling, Falkirk and Grangemouth talked about the grid system. It is complex and, if I may, I shall take up his invitation to write to him on the matter. He also raised the matter of employment. It is those who are employed in the quarrying of sand and aggregates whose employment will be safeguarded by the undertaking.

The hon. Member for Garscadden asked about figures. The figures given by my right hon. Friend the Secretary of State for bulk shipping services in the Vote for 1982–83 was £1·05 million. That figure covers several companies, plus an allowance for any claims that might be made. It might be a little tedious if I read out the entire list and the figures. I shall make the details available to the hon. Member for Garscadden. I assure him that they add up.

The hon. Member also asked me about the movement of freight rates over the past year. He will realise that we are here discussing a large number of rates and commodities. For example, the price of calor gas on Colonsay has been reduced. That has been welcomed. Broadly speaking, freight rates have moved in line with the rate of inflation during the past year.

Will the Minister also tell the House and his hon. Friend the Member for Mid-Sussex (Mr. Renton) about the movement in the rate of charges for cars on ferries in the western part of Scotland in the past few years?

We are discussing bulk shipping. We are not discussing cars.

The House has welcomed the undertaking. it is not, as the hon. Member for Garscadden implied, a patching-up job. It is a new measure. It represents additional resources and is a further demonstration of the Government's intention to ensure the viability of Scotland's island communities. On that basis, I commend the undertaking to the House.

It is just over five years since I last introduced an Adjournment debate about village schools. That was in April 1977. Since then many debates and many questions that I and other Members have asked have related to this issue, which is of great concern to rural communities.

During that period of five years, informed opinion has moved towards the rejection of size for its own sake and a greater appreciation of the positive merits of small schools in village communities. A growing body of research, particularly in America and Scandinavia, has supported the education of children in small groups, and the assumed advantages of larger schools have been questioned. The Plowden report used to be the Bible of education administrators who advocated closures, but since then Lady Plowden herself has said:

"Since the report I have come round to thinking that small country schools should be kept open because of their social value, and because of the continuing community involvement they provide."

Yet in those five years, despite the shift of opinion in favour of village schools, closures have continued. In the past year, there have been 79 closures. As education spokesman for my party, I receive many representations from parents and groups trying to support village schools. Only yesterday, I received a well-documented and superbly produced statement of objections to the closure of a village school at Dilhorne, in Staffordshire. Scarcely a week goes by without such representations coming to me, and Ministers' desks must be weighed down with cases brought to them for appeal.

In my own county and constituency, we had something of a respite in that five-year period. Of the four closures during that time in my constituency, only one was contested. The axe has now come out again, however, and closures are once again being demanded by the education administrators. Why have the pressures for closures continued throughout the country, despite the improved recognition of the merits of such schools?

One reason is that old education fashions die hard. In the depths of many education authority offices, there is always somebody ready to blow the dust off an old closure plan, especially if a new political or economic situation creates the opportunity to put it forward. The Government may therefore have to make a more positive effort to reinforce the appreciation of the merits of small schools that has developed among informed opinion during the period that I have described.

In addition to the slowness of old fashions to die out, the financial pressure of the present cuts has sent local authorities searching for economies. If they set about closing village schools, however, they will find that these are often false economies. So often they fail to consider the other side of the balance sheet, which contains a great many items. The transport costs of taking the children to a more distant school is a major item, and it increases as fuel prices increase. Closures also usually involve an increase in staffing at another school as the numbers go over the threshold for the appointment of extra staff. The loss of parental and community backing also makes the education process more expensive in a more centralised school which does not enjoy the same degree of support.

In addition, there is often the need to replace the meeting place that the building provided for the local community. In one case in my constituency, the county council openly admitted that closure would lead to the removal of a meeting place and said that it would be ready to consider offering maintenance grants to allow the building to continue as a village hall. The admission is there that yet another cost arises on the other side of the balance sheet, but out of the budget of a different department.

Social costs arise in a village that no longer has a school. There is a tendency for younger families not to stay in the village or not to move to it, so there is an ageing population more and more dependent on State services without village support and all the benefits that flow from a village that has a wide range of ages and types of people.

Education authorities have been slow to recognise the ways in which they can reduce the cost burden of village schools. They could be much more flexible about staffing arrangements than they have been. In my county there have been experiments in that area. In one case two village schools have one teacher each but share a headmaster between them. There is much more scope for experiment. It is often much easier for a teacher to get into a car and drive between two schools five miles apart than for a lot of 5-year-old children to make that journey every morning of the week through the winter months. It can also be easier to move resources, such as books and equipment, than children. Authorities have not always been ready to exploit the potential in the community support of village schools, which can help to reduce some of the financial burdens without infringing upon the responsibility of the authorities to make the basic provisions.

The falling birth rate has also increased the pressure on the authorities. The Government's response to projected falling birth rates was the requirement that surplus places should be taken out of use. However, I do not think that the Government intended that their advice on surplus school places should be taken as meaning that village schools should be closed widely.

Circular 2/81 is specific on that point. It states that the numbers will fall in many small rural schools

"whose future needs to be considered in the light of the effect of closure on the length and nature of the journey children would have to make to alternative schools. Authorities will often find, therefore, that they have to make most of their savings in larger schools … authorities may wish to consider closure of some medium-sized schools in closely built-up areas as an alternative to closure of a number of small schools."

I am not sure whether that message has got home. I ask the Minister to reinforce it and to remind the authorities that the closure of village schools was not the intention of the circular.

In my county of Northumberland and some other areas other factors have been added to the ones that I have mentioned. One is depopulation and the difficulty of young families in getting houses in our attractive coastal and country villages, which immediately starts to distort the age range in the villages. Property is in great demand for holiday homes in many of our coastal villages. In one of the Northumberland villages affected by a proposed closure, half the names on the electoral register are of nonresidents. That pressure is one of the factors that is causing greater difficulties for our village schools. It often means that young families cannot afford to stay in the area and cannot get a house that they can afford if they work locally.

A further difficulty has been created by the choice in Northumberland of a three-tier comprehensive system with children going to middle schools at 9 years of age. That has removed one-third of the pupils from every first school in the county. I opposed that system, but now that it has been established it would be difficult to change in the short term.

The only compensation is that it is easier for a very small school to operate on the 5 to 9 age range than on the 5 to 11 age range. When school numbers are reduced, as they have been by the 5 to 9 system, we must revise our judgment of what is a viable small school. It is more feasible for a one-teacher or two-teacher school to cope with a 5 to 9 age range in one or two groups of children than with the 5 to 11 range. The whole attitude to what is a viable small school must be adjusted.

In Northumberland five closures were proposed this year. One has been withdrawn. Two have been reluctantly accepted, but two are vigorously contested. One is Beadnell, which is now the subject of a statutory notice. Objections will come to the Minister as a result of the notice. It was agreed on a majority of only two votes in the county council. The vote largely followed party lines, with the Labour majority members from the urban parts of the county narrowly defeating the Liberal, Conservative and Independent members from the rural areas.

The county's projection of the Beadnell school population indicates that after a dip this year, it will return to a viable level of about 20 and will be likely to remain at that level for the forseeable future. The quality of education in the school is acknowledged to be high. Parental support for it is very strong and the parents, the governors and the parish council are determined to keep their school.

The other case that I wish to mention is Craster. Cramer is an attractive working village, traditionally a fishing village, and famous for its kippers. If the Minster is fond of kippers he will certainly have heard of Craster. The school there is only 14 years old. It is on the sea shore, and it must be one of the most beautifully situated schools in the country. The closure proposal has yet to be considered by the full county council and the full education committee, but the majority leaders on tile county council seem determined to press ahead with it. If they do, the parents have already decided that they will appeal to the Secretary of State.

Craster is another village where private property is snapped up for holiday accommodation, but 50 per cent. of its housing is council housing, and as houses now occupied by elderly people fall vacant, younger families will return and school numbers will increase in the coming years. That factor must be considered.

I realise that the Minister cannot comment on those two cases at this stage because the Secretary of State has a duty to consider the objections at a later stage in a much more formal way. I would not invite or encourage the Minister to comment on the individual cases now. The parents will have a great deal to say at that stage. I shall take the opportunity to put a more detailed case to him. I ask him to consider those two cases on their merits carefully when the time comes, to examine all the objections to closure including the narrowness of the vote in the case of Beadnell—a mere two-vote majority—and to examine the education record of the schools and their importance to the local communities.

Will the Minister give a more general indication of Government policy towards village schools which could profitably be studied by education authorities? I am encouraged by what the Minsiter of State has said in the past. When he addressed the National Association for Small Schools in 1978 he said:

"Your association must be very wary of false economic arguments. Whilst there may well be the exceptional case where a village school has become totally uneconomic, too often we find political and administrative reasons for closure cloaked in tables of figures which on close analysis show that the true savings are negligible or even non-existent. The costs of rural transport are likely to rocket further and much 'bussing' of children is disadvantageous to young children."

I hope that this robust attitude will be reflected in subsequent decisions on appeal about village schools. I hope that the Minister will confirm that circular 2/81 was not intended to signal a general policy of closing small village schools. I hope that he accepts that the positive advantages of small group teaching in the family atmosphere of a village school can, with a good teacher, outweigh any of the alleged disadvantages of small schools. A great deal depends on getting teachers of a high quality, but many teachers who want to teach in small village schools have just the abilities that are needed.

I hope that the Minister recognises that parental and community support for village schools gives them a tremendous advantage. If parents are determined to fight for a school, it is a sign that they appreciate its qualities and are ready to give that type of support. That is a powerful illustration of parental choice about which the Government have said a great deal. I hope that the Government recognise that when parents choose to back a school they deserve the Government's backing.

Village schools make an enormous contribution to the local community which is hard to replace. Closure is usually an irreversible decision. Once a school is closed, it is very hard to reopen it. I hope, therefore, that the Minister will re-examine all the cases carefully and that the Government will say that they recognise the positive value of village schools. There are many social problems in our urban areas which, thankfully, are largely absent from the rural scene. It would be tragic if we were to throw away the tremendous positive advantages that village school education can provide for the early years of childhood.

rose—

Does the hon. Gentleman have the leave of the hon. Member for Berwick-upon-Tweed (Mr. Beith) and the Minister?

indicated assent.

indicated assent.

I am grateful to my hon. Friend the Under-Secretary for allowing me to intervene briefly. He knows of my concern about this matter. Only in the last month, the schools in Tarrant Keynston, Melbury Abbas and Pamphill in my constituency have been the subject of delegations and meetings.

I urge just two points on him. First, he should view with great suspicion the concept of an area school in rural areas. In Dorset, and no doubt elsewhere, there is a concept among educationists that instead of a large number of small rural schools we should have area schools of 120 pupils. I view that with the same suspicion as the concept that, regardless of local need, all secondary education should be on comprehensive lines.

Secondly, like the hon. Member for Berwick-upon-Tweed (Mr. Beith) I urge my hon. Friend and his colleagues to devolve and produce a positive case for small village schools, which are so important educationally and economically to rural areas and communities.

I am grateful to the hon. Member for Berwick-upon-Tweed (Mr. Beith) for raising this matter. It is the second time in five years that he has done so, which is more than most hon. Members have done. I congratulate him.

I am also grateful to my hon. Friend the Member for Dorset, North (Mr. Baker) for his intervention. I know of the strength of feeling that exists in the House and the country about village schools.

I wish that it were possible to give a categoric definition and a clear line of conduct to local education authorities. Unfortunately, it is not. When it comes down to it, as my right hon. Friend the Secretary of State has said many times, each case must be decided on its merits.

I must emphasise our awareness of the value of the village school, not only to pupils but also to the rural community as a whole. It plays an important part in our heritage and in the development of the education system in England. It has played a valuable part in preserving important qualities and values of rural life—for example, stability, tolerance, friendliness and a sense of tradition.

We are today a predominantly urban or suburban society, and some of those values are under pressure. Their sustenance in rural England is, therefore, a matter of comfort and promise. I am sure that both hon. Members agree that these schools are central to the life of rural England as they play an important role in transmitting and inculcating these values.

I share the hon. Gentleman's concern for the future of village schools, and appreciate the force of what he said about the effects of village school closures on rural communities and on the children themselves.

It is vital that we should see such closures in a national context. We must recognise that one of the key factors affecting education provision today is the persistent decline in pupil numbers. By the end of this decade, the size of the school population will have fallen by a quarter, and demographic changes on that scale inevitably present new challenges and problems for the education service. Furthermore, even on the highest assumptions of numbers of births, the present school population will not be reached again before the very last years of this century, and perhaps not at all—certainly not in our lifetimes or even the lifetimes of our children or grandchildren.

This fall in the birth rate compounds the effect of the longer-term fall in the rural population. We must remember that village school closures are not a new phenomenon. Far more closures occurred in the 1950s than are taking place now, but I accept that that is not a good argument for saying that they should take place. I merely make a point of fact.

I turn for a moment to the hon. Gentleman's constituency for which he argued with such understandable vigour. He does not need me to tell him that his constituents—indeed, the inhabitants of Northumberland as a whole—seem to be a race apart. It is one of the few areas in the country where the decline in the pupil population is slow and much less severe. I understand that it is very much less than elsewhere in the country.

Of course, overall figures can be misleading. The general stability of Northumberland's population probably masks a shift away from already sparsely-populated areas and into the more industrialised districts in the South-East particularly the areas of new development. Moreover, there is in any case a considerable amount of surplus capacity in Northumberland's schools, especially in the first school sector. The upshot is that in many rural areas very small groups of children are being taught in schools designed to accommodate larger numbers.

I shall be talking about the difficult process of balancing the advantages of small local schools against some of their educational and economic disadvantages. There are two sides to the picture, but Northumberland cannot be exempt from the general principles at issue.

I have no doubt that the LEA is as aware as we are of the loyalties inspired by village schools, and of the fear that the closure of a school may mean the death of a community. I understand that it has a number of broad criteria when considering the future of schools, and that it will look closely at schools with fewer than 50 pupils where closure would achieve savings and pupils could fairly easily attend neighbouring schools. I accept that that must be a matter of judgment.

It is vital that local people should know what has been proposed and why, and I think it significant that, of the five Northumberland first schools closures implemented in the last year, four received no statutory objections from local people.

Northumberland is continuing its review of school stock, as we have asked. I am told that the Alnwick district within the hon. Member's constituency is one area currently under consideration, and that notices have recently been published for the closure of two first schools there. The hon. Member will know that I cannot comment on the details of particular cases, in view of my right hon. Friend's quasi-judicial position if objections are received, but I can assure him that we shall take very careful note of any representations that he wishes to make about these proposals or any others.

I wish to say something about the Government's policy in the light of the demographic changes that I have mentioned. These mean that, as a country, we have a large number of surplus school places. A 1977 study estimated that in 1986 there would be more than 3 million surplus primary and secondary places in England and Wales. The Government's target is to remove 1·3 million of the excess—two out of every five surplus places. This is a target that will leave schools with plenty of spare space for educational developments, plus a reserve against any future upturn in the birth rate.

The retention of unused and unwanted school places usually entails an uneconomic use of resources and can have harmful educational effects. Clearly, some action must be taken to avoid that. The Government's expenditure plans assume that, nationally, 470,000 surplus places will have been eliminated by March 1983, thus allowing savings to be made in recurrent expenditure. Most of those will be in urban and suburban areas, but rural areas will, in certain cases, also be affected.

If savings are not made by taking places out of use, local education authorities will need to look elsewhere to achieve the savings that they are all required to make. If other savings have to be made, it will affect what goes on in the classroom, far more than the closure of excess places would do. An example of the truth of that is that the cost involved in keeping two temporary classrooms open is equivalent to the cost of employing one teacher.

The savings to be made will vary from area to area, but it has been estimated that they will average about £100 per place. Conversely, every 100,000 surplus places retained will mean additional costs equivalent to one-sixth of what LEAs now spend on books. In emphasising that, I do not say that rural schools will necessarily be affected, but I draw the House's attention to the problem facing education authorities. Rural schools cannot be exempt from the solutions that have to be found to that extraordinarily difficult problem.

Debates on village schools are frequently obscured by the difficulties in defining the scale of the problem. Let me shed some light on it. The Department does not keep separate statistics on the numbers of village schools and their pupil numbers, but a useful proxy is to look at the figures for the smallest schools, the great majority of which will be schools serving village communities. In January 1981, 275,092 pupils, or 7 per cent. of the total primary population were being educated in just under 5,000 schools with fewer than 100 on roll. Of these, only about 7,000 children were in schools with 25 and fewer on roll. That gives an idea of the reduced number of very' small schools.

The hon. Gentleman spoke eloquently of the advantages of small village schools. I believe that there are benefits in smallness. Teachers can get to know their pupils well and smaller classes give more opportunity for a caring atmosphere and individual attention. However, the children can suffer educational disadvantage. The smaller number of teachers can make it difficult to provide a full curriculum. We know these arguments and we have rehearsed them on other occasions. Classes may have a wide age range. A survey of primary education in England conducted by Her Majesty's Inspectorate concluded that there was clear evidence that the performance of children suffered when classes of mixed age groups of 25 or more had to be introduced.

The HMI's report referred to wide-agerange classes of 25 children or more. As we are talking primarily of schools with only about 25 children in total, teachers who are teaching a wide age range will necessarily be teaching groups of less than 25.

Yes, the hon. Gentleman is right. However, there are some small schools where there are about 50 youngsters and, for example, two teachers. There is then a fairly wide age range with perhaps 25 children in each class. There is an enormous variation and the small school presents a host of advantages and disadvantage s, which means that it has to be considered on its merits I am trying to reinforce the hon. Gentleman's case that it is important to the community and that because it is small it is not necessarily bad. If a small school is destroyed, its replacement is not necessarily better. I accept that there are financial considerations which rest on the number of empty and unnecessary school places which have to be taken out of circulation if local education authorities are to meet their budgets. Like everything else in education, it is not an open-and-shut case.

The hon. Gentleman referred to circular 2/81 on falling rolls and surplus places that was issued last year. It underlined the educational and financial arguments for removing surplus places and asked for details of removal plans. I stress that the circular acknowledged that the scope for further village school closures was limited. That reinforces what the hon. Gentleman said.

If the matters that my hon. Friend the Member for Dorset, North raised come to the attention of my right hon. Friend the Secretary of State, I am sure that my right hon. Friend will be sympathetic and welcome any representations that my hon. Friend might like to make.

I hope that I have succeeded in the short time available to me to reassure the hon. Member for Berwick-upon-Tweed to some extent that we take a sympathetic attitude to village schools. We accept that they are important to children, parents and local communities.