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Orders Of The Day

Volume 33: debated on Tuesday 7 December 1982

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Electricity (Financial Provisions) (Scotland) Bill

Order for Second Reading read.

4.37 pm

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

The purpose of the Bill is to increase the statutory borrowing limit of the Scottish electricity boards—the South of Scotland electricity board and the North of Scotland hydro-electric board. Clause 1 increases the limit from the present level of £1,950 million to £2,700 million. Clause 2 is formal. The limit is a joint one in that it applies to the total outstanding borrowings of the two boards, including any foreign or temporary borrowings.

A joint limit has been in operation since 1963. It was introduced to help the boards in their joint planning and operation of the Scottish electricity system. As hon. Members will be aware, the boards operate a joint generating agreement to enable them to run the most efficient power stations at any one time to meet demand throughout Scotland. This allows generating costs to be kept to a minimum. Similarly, new power stations are planned on a joint basis. For this reason, it makes sense to control the combined borrowings of the two boards.

The present borrowing limit was originally laid down in the Electricity (Financial Provisions) (Scotland) Act 1976. The Act increased the borrowing powers of the boards from £1,200 million to £1,500 million, and allowed the House to increase the limit up to a maximum of £1,950 million. These limits were taken into the Electricity (Scotland) Act 1979, and earlier this year I sought, and received, the approval of the House to increase the boards' borrowing powers to the upper limit specified in the Act.

The further increase in the limit is largely because of fairly heavy borrowing at present to finance the construction of Torness nuclear power station. I shall return to this point later. If we were to delay the Bill for a year, it would not receive Royal Assent until mid-1984, which could be too late, since we expect the present limit of £1,950 million to be reached around that time. I warned the House during the debate on the Electricity (Borrowing Powers) (Scotland) Order 1982 that we would be likely to introduce legislation this Session. On 23 November the borrowings of the boards amounted to £1,544 million.

A feature of the Bill is that, as in the past, we propose to set an interim limit so that the House will have a further opportunity to consider the borrowings of the Scottish electricity boards in a few years' time. The interim limit of £2,300 million is expected to be reached during 1986. An order, subject to an affirmative resolution of the House, would then be needed to increase the limit up to or towards the maximum figure of £2,700 million. This final limit is expected to be sufficient to meet the boards' borrowing needs until 1989.

I now turn to the point I raised earlier about the underlying reasons for the increased borrowings by the boards.

Let us be absolutely clear about what the Minister is saying about the borrowing limit up to 1989. Will this increase service all foreseeable committed projects, including Torness, but no others?

If I understand the right hon. Gentleman properly, that is correct. He asked whether any other major power stations projects were envisaged. The answer is "No". Therefore, the borrowing powers that we are now proposing are sufficient for the known capital needs of the electricity boards.

As the House is well aware, the main reason for the boards' borrowings is the need to finance capital expenditure. In part, this capital expenditure is met from internal resources. The power stations are extremely expensive to build, and it would be unreasonable to assume that the Scottish boards between them could find the necessary internal resources to build large, modern power stations without resort to borrowing. The construction costs of the SSEB Torness station are the main cause of the increase in the boards' borrowings and the need for the Bill.

Some hon. Members may be opposed to the building of the power station, although I am aware that the hon. Member for Stirling, Falkirk and Grangemouth (Mr. Ewing) is not among them. I am grateful for the support that he gave for the continuation of the project during the debate on the order earlier this year.

The Government, shortly after coming to power, undertook a careful review of the economics of the Torness project in view of the overcapacity in the Scottish generating system. We came to the conclusion that there was a good commercial case for allowing Torness to go ahead, because the operating savings from the station are expected to exceed the capital costs involved. Despite the recent weakening in oil and coal prices, most commentators expect there to be real increases in those prices over the next 20 years. Without Torness, the Scottish boards would be dependent on coal and oil supplies for more than 65 per cent. of their generating capacity in the 1990s. With Torness, that dependence will be reduced to about 50 per cent., leading to lower overall generating costs. That will be of great benefit to electricity consumers throughout the country.

My hon. Friend said that most "commentators"—a strange word to use—believed that there would be real increase in oil and coal prices. In the light of the recent Select Committee report on oil depletion, will he say which commentators believe that there will be a real increase in the price of oil by the year 2000?

Of course I shall answer the question. I am surprised at the hon. Gentleman's impatience.

The Government take a wide selection of advice on these matters from various sources within, and external to, the Government. My hon. Friend the Member for Edinburgh, South (Mr. Ancram) will also be aware of the number of public statements on price forecasts. He can at least be satisfied that the Government are not taking specious advice or trying to rig the forecasts to suit any purpose that they may have in mind, and I am sure that my hon. Friend would never suggest such a thing.

It is important that these matters should be understood by the Government, the House and the public. The best advice available suggests that it would be wrong to be complacent about the prices of oil and coal merely by taking into account the state of those markets at present.

The value of the work completed at Torness by the end of September this year amounted to about £325 million. I understand that the project is generally on target against both its timetable and its budget of £1,097 million at March 1980 prices. Many jobs have also been provided in the construction of the power station. At present, there are 3,500 employees, and about 1,350 of these jobs have been filled by people from East Lothian, the Borders and Edinburgh.

I am sure that hon. Members will appreciate that new power stations are not the only capital projects undertaken by the boards. They have a continuing need to expend money on updating their existing power stations and maintaining and upgrading their various extensive transmission and distribution lines. The North of Scotland hydro-electric board is actively engaged in research and development of renewable sources of energy, the linking of the islands to the mainland grid by underwater cables—as it recently did with the Orkneys— and the continuing development of run-of-river hydro schemes where these projects can be seen to produce the required return on the capital investment.

Another important factor when considering the boards' borrowings is the level of their costs and prices. Many of the boards' costs, particularly the fuel element, are outwith their direct control, except in so far as they can increase the efficiency of their operations. The boards' record here is good, and indicators of their performance in this respect are published each year in their annual reports.

Although the boards' record in that respect may not be unreasonable, their record on forecasting electricity demand has been extremely bad. Does the Minister agree that there has been a great waste of public assets by the building of unnecessary power stations to meet a demand which has not materialised or is not likely to materialise?

We can all be extremely wise after the event, but the two power stations at Inverkip and Peterhead were commissioned before the oil crisis in 1973. The boards would be the first to admit—any reasonable Member would do the same—that, before that time, no one envisaged either the recession from which we are now suffering or that the types of oil and coal used to generate electricity would become so expensive. For those reasons, we now have over-capacity. We now have two new power stations which, frankly, are of limited value to the boards in planning ahead. That is why the capacity at Torness is so important. It will save fuel costs.

Surely the boards could have stopped work on those power stations instead of going ahead with completion, especially as they knew that they would have to close the Carolina Port B oil-fired power station in Dundee. Should not the boards also have taken into account the fact that the gas grid network was extending northwards and, therefore, that gas would make a substantial penetration into the energy market?

I reject the idea that somehow we should leave half-built power stations as some kind of monument to the 1973 oil crisis. Had the hon. Gentleman made those clever forecasts before the oil crisis in 1973, the House might have more respect for his comments.

Has not the Minister advised the South of Scotland electricity board to reconsider its gas tariffs for industrial customers, and have not less than a third of its customers renegotiated contracts? Is that not to the disadvantage of the SSEB, especially as the English boards have treated their customers reasonably well?

It is wrong to suggest that the SSEB has not treated its customers well. I am happy to admit that there has been ministerial pressure on the boards. The right hon. Gentleman should bear in mind the statutory obligations placed on the boards, which must show no favour between one customer and another. We have asked the boards to look closely at the method of supplying electricity to large users.

My right hon. and learned Friend the Chancellor of the Exchequer made extra finance available to the boards to operate these schemes. Most recently, in the important circumstances of the Ravenscraig steel works, the board has been able to reduce substantially the cost of electricity. The right hon. Gentleman has raised important matters. For these elements of cost which are under direct control, the boards are conscious of the need constantly to strive for economy and efficiency, and this is a matter that we have raised with them on a number of occasions.

The boards' prices are a matter which arouse public interest and hon. Members will be aware that my right hon. Friend has recently asked the boards not to increase the average levels of their prices next year. This follows a study of the bulk supply tariff in England and Wales. The conclusion of the study was that, when there is overcapacity in the system, prices should not contain an element based on the need to build new capacity. On present trends, new power stations in England and Scotland in the near future will be built not because of a need for new capacity, but because they are more economical and will result in lower overall costs.

Where there is overcapacity, electricity prices should not contain any element based on the need to build new capacity. I must stress that the Government continue to maintain that prices should be properly linked with the economic costs of supply.

Hon. Members will know that the Scottish boards have introduced special load management terms for those intensive users of electricity who are at a particular price disadvantage compared with some of their European competitors. A number of companies are taking part in this scheme and are enjoying significantly better terms as a result. The external financing limits of the boards were relaxed slightly to allow them to operate this scheme.

Finally, I should like to refer briefly to the recently published efficiency audit on the SSEB. The consultants who prepared the report were asked to look at management and cost information and control, control of the board's generating system, fuel purchasing and investment appraisal. A number of detailed recommendations were made. The board is considering these and will respond to them early in the new year. Overall, however, the consultants' assessment was that the board compared favourably with other organisations of similar size and kind, and the activities examined were performed and organised to a good standard. The report, therefore, confirms the general efficiency of the SSEB, and that will be welcomed by the House in considering the Bill.

I commend the Bill to the House.

I was disappointed that the Minister did not pay tribute to my noble Friend Lord Kirkhill, who has just ceased to be chairman of the North of Scotland hydro-electric board. When the hon. Gentleman paid tribute to the efficiency of that board, he might have mentioned the leadership that it received from my noble Friend.

With regard to efficiency and the fact that there is so much plural activity between the two boards, what major policy decisions does the Minister envisage the hydroelectric board taking within the next few years within the financial parameters of the Bill? I cannot see what it will do, because it seems that all its major decisions have been taken for the forseeable future.

I am delighted to pay tribute to Lord Kirkhill, whose term as chairman ends at the end of this month. My right hon. Friend and I have already paid tribute to the noble Lord privately. The hon. Member for. Dunbartonshire, East (Mr. Hogg) is right. The Bill provides an opportunity for the Government, and all hon. Members, to pay tribute to the excellent service that Lord Kirkhill has given during his chairmanship.

With regard to the future policies of the hydro-electric board, it does have work to do. I agree that it has been in existence for a long time and has effectively carried out the duties laid upon it in the 1940s. However, there are still links to be made—for example, between the mainland and the islands. As I said, I had the pleasure of opening the link between the mainland and Orkney a few months ago. That was an underwater cable stretching about 28 miles, which will bring cost savings to the generating system. The cable cost about £8 million, and some of that money, hon. Members will be pleased to know, came from the European Community.

The savings to the generating system as a whole will be between £1 million and £2 million. My hon. Friend the Member for Argyll (Mr. MacKay) may be interested to know that the hydro-electric board plans a link to Colonsay, to be completed in the summer of next year, in addition to its research on aero-generators in Orkney and elsewhere, and into peat and water power and other ways to find different methods of generating electricity. The hydro-electric board has been in business for a long time and has met the basic aims given to it. There are still outlying areas, not least of which are the islands, where the board is able to provide, and is still planning, an effective service.

What proportion of the excess capacity in the generating system of Scotland does the Minister expect to be consumed by the islands of the Orkneys and Colonsay?

That question is not helpful either to the House or to the residents of the islands. This is an expensive link-up. The hon. Gentleman should know that the hydro-electric board was set up to provide electricity to the remotest parts of the Highlands and Islands of Scotland. It is a good example of public enterprise. The hon. Member for Berwick and East Lothian (Mr. Home Robertson) should be the last to criticise.

4.57 pm

This debate gives us an opportunity to discuss in some detail the policies of the SSEB and the North of Scotland hydro-electric board. The Minister left more questions unanswered than answered.

It is a developing feature of Scottish debates that the chairman of the Conservative Party in Scotland, the hon. Member for Edinburgh, South (Mr. Ancram), is becoming more and more sceptical of his Government's policies. This is the second successive debate in which he has displayed that feeling. I take it that this is a sign of an oncoming election, and that he is hoping to be able to go to South Edinburgh and compare himself to the lapdog who represents Edinburgh, North (Mr. Fletcher). He hopes to be able to say to his constituents that he is not a yes-man, like his hon. Friend, but has been a rebellious character, especially in the steel and energy debates, and that if they want proper representation and not a yes-man it would be best to send him back here. The hon. Member for Edinburgh, South should know that this will not work because, for the second time, he is about to lose a parliamentary seat.

This is not the first time that the hon. Member for Stirling, Falkirk and Grangemouth (Mr. Ewing) has mentioned this strange idea. Perhaps he will comment on the fact that in the Conservative Party we have a Minister who listens to reason and answers questions, and we know that when we put questions to him we do not have an ideological party standpoint about which we are not allowed to ask questions.

Perhaps the hon. Member for Edinburgh, South can tell me privately which Minister it is who listens to reason and answers questions. That Minister is not on the Government Front Bench today.

It is the intention of the Opposition not to oppose the Second Reading, but to explore in some detail the policies of the SSEB and of the hydro-electric board. Before I do so, I join in paying tribute to the noble Lord Kirkhill, and to the leadership that he has given to the hydro-electric board since his appointment in early 1979.

It is a pity that we do not have more continuity in the chairmanship of these boards. It is difficult to resist the criticism that in this case the change has been made, not because Lord Kirkhill's appointment terminates at the end of this year, but for purely political reasons. It is not without notice that the replacement, Michael Joughin, is the defeated Tory candidate in the European elections in the Highland and Islands region. I accept that when Lord Kirkhill was appointed there was a vacancy for a chairman, but surely at this stage it would have been easy to reappoint him, thus providing continuity. However, it is clear that the Government did not see the matter in that way. It is typical of what the Government have done in public bodies since they came to office in 1979. As I said, it is a pity, because we need continuity in policy for both boards.

I want to place on record our tribute to Lord Kirkhill, and I wish the new chairman well, because there are many consumers in the hydro board area who will stand or fall by the success of the policies introduceed by the new chairman and the board under his guidance. Our interests on these Benches are with the consumers, and for that reason our good wishes go to the new chairman.

The Minister referred to the increase in the borrowing limits. He said that the £2,300 million is, to all intents and purposes, the top limit until the Government introduce an order increasing it from £2,300 million to £2,700 million. These are substantial increases on the existing figures. As the Minister rightly said, they reflect the cost of the construction of the Torness power station and show that much more capital will be needed to complete construction. The Minister was correct to say that I was in favour of the continuation of the construction of Torness power station, because in my view it would not be realistic to stop the construction at this stage and mothball it.

However, that raises a number of questions. There is the question of over-capacity in the generating industry in Scotland, both in the SSEB and the hydro board. The hon. Member for Dundee, East (Mr. Wilson) raised the matter of the boards' inability to estimate the demand for energy. In my view, criticism should not be levelled at the boards. Criticism should be levelled at the Government for the way in which they have managed the economy during the past four years and made it almost impossible for generating boards, both the SSEB and the hydro board, to estimate the demand for energy. Therefore, I do not criticise the boards for their inablity to estimate demand for energy, because it must be the devil's own job to do so in the context of the Government's economic policy and the downturn in Scottish industry.

There is one great worry. Let us take the steel industry as an example. Capacity there is being drastically reduced, with the Government's agreement, because of the downturn in the economy. In our steel debate last week, I referred to the British Steel Corporation's view of the future of the British economy. I am worried because at some time in the not-too-distant future the Government may bring forward proposals that would have the same effect on the generating industry in Scotland as their proposals for the steel industry in Scotland. In other words, the Government may introduce proposals drastically to reduce capacity in the generating industry in Scotland in the same way as the proposals that are now under consideration to reduce the capacity of the steel industry.

It is clear that a number of domestic matters concerning the SSEB and the hydro board need to be seriously discussed in this debate and subsequently. I shall mention a few of those matters. First, there is the standing charges. As the Minister will know—I am sure that all right hon. and hon. Members get many letters on this subject in their postbags—there is growing and serious concern about the effect of standing charges on electricity accounts—gas accounts, too, but we are not discussing that subject. I hope that the Minister, in winding up, will tell the House about the effect on the SSEB and the hydro boards' accounts if the standing charge were abolished altogether. The Prime Minister gave me the impression, in a recent letter to me, that the Government were concerned about the effect of the standing charge on the accounts. I hope, therefore, that the Minister will say something about the effect on the boards' accounts if the standing charge were abolished. If it were abolished, it would be a great advantage to many consumers throughout Scotland. Equally, of course, there would be no advantage for many consumers. However, by and large, the consumers who would benefit are old-age pensioners, people on low fixed incomes, and people who do not use the electricity that others use because, frankly, they cannot afford it.

The "can't afford it" syndrome brings me to the disconnection policy. In our last debate we went into the matter in some detail, and I was somewhat surprised that the Minister did not mention the SSEB's disconnection policy in his speech today. Thanks to my hon. Friend the Member for Clackmannan and East Stirlingshire (Mr. O'Neill), I have had some correspondence from the Fuel Poverty Action Group, which shows that there has been some improvement in the situation. If there has been an improvement, we should say so. There has been a reduction from 14,000 disconnections per annum to 12,000 in 1982. However, the figure is still high. Of the 12,000 disconnections, it appears that 80 per cent. fall within the code of practice, and that a fair number of the 12,000—about 3,500—have children under the age of 11. It appears to me that the code of practice is not being applied. In other words, it is being ignored on a fairly widespread scale if there is that number of disconnections. The Fuel Poverty Action Group, whose statistics I am using, argues that if the code of practice were fully implemented, disconnections would be about 1,200, not 12,000.

A worrying aspect of these disconnections is the number of disconnected consumers who are off supply for a fairly long time. A substantial number of disconnected consumers have been off supply for more than a year. The letter from the Fuel Poverty Action Group says that in the most severe winter this century—last winter—substantial numbers of people were off supply for a fairly long time. That is extremely serious. Of course, there are parts of Scotland where, because of the age and type of property—Edinburgh, compared with Aberdeen—it is much more expensive to heat houses. That all adds up to the disconnection problem that I seek to ventilate today. I hope, therefore, that the Minister will tell us how the Government are dealing with this problem.

The right hon. Member for Greenock and Port Glasgow (Dr. Mabon) mentioned preferential tariffs for industries taking interruptible supplies. It is a bit much for the Minister to suggest that Ministers were bringing pressure to bear on the boards. The Minister presented, if not an inaccurate picture, certainly a not wholly accurate picture, of what took place. What took place was that in the Chancellor of the Exchequer's Budget of 1980 a discount scheme for England and Wales only was introduced, which was to cost £10 million. The Treasury gave the £10 million to the Central Electricity Generating Board to finance discounted electricity rates for industries taking interruptible supplies.

I asked the Secretary of State for Scotland why that scheme had not been introduced in Scotland. I still remember the answer. The Secretary of State said that he could find no industry in Scotland that was at a disadvantage in relation to energy charges compared with its counterparts in other parts of the United Kingdom. As the year went on it became fairly obvious that a host of industries in Scotland were being placed at a serious disadvantage compared with their counterparts in England and Wales.

In the Budget of 1981 the Chancellor of the Exchequer introduced a scheme for Scotland similar to the one introduced in the previous year for England and Wales. Therefore, the Scottish industry lost a year of being able to take energy from the SSEB at a preferential rate on the basis that the industry was taking an interruptible supply.

Has any estimate been made of the damage that was done to Scottish industry in that year? Damage must have been done to Scottish industry. One of the favourite ploys of Conservative Members used to be rate comparisons and the damage that was done to industry in Scotland as a result of rates and almost everything else that they could drag up. This is a good example of where damage was done. The Secretary of State failed to persuade the Chancellor of the Exchequer that a preferential energy rate should be introduced in Scotland at the same time as in England and Wales. It was not introduced in Scotland until a year later.

A great deal more requires to be done about preferential energy rates for industry in Scotland if we are to rebuild the Scottish industrial economy. I hope that the Minister will comment upon this. We must be able to say to industry in Scotland that it will have a continuous guarantee that over a period—I am not saying that it should be for five, six or seven years; three years would do—it could depend on constant energy prices so that it could make a contribution to the rebuilding of the Scottish economic base. That is very important. I hope that pan of the increased borrowing that we shall approve today can be used for that purpose, with additions from the Treasury through the Scottish Office.

The Minister referred briefly to the construction programme when challenged by my hon. Friend the Member for Berwick and East Lothian (Mr. Home Robertson). He asked the Minister whether the SSEB or the hydro board had major construction proposals for the period covered by the proposals that we are discussing, which is between now and 1989. The Minister said that neither the SSEB nor the hydro board had any major construction plans for that period.

That brings into question a point that I am sure my hon. Friend the Member for South Ayrshire (Mr. Foulkes) will want to raise. I shall mention it without developing it. It is on the number of sites that are presently held by the SSEB. I am not sure whether any or many are held by the hydro board. I should be grateful if the Minister would tell the House exactly what discussions have been held between the Scottish Office and the SSEB about the sites that are held if there are no proposals for major construction or the construction of another power station in Scotland between now and the end of the 1980s and, I suspect, well into the 1990s.

It would be more accurate to say that it is doubtful whether, under the present Government's approach, there would be a need for another power station in Scotland during the rest of the century. It would be more accurate if the Minister were to admit it. I am not saying that that would be the position if the Labour Party were to win the next election. Things would change. We would expand the economy and there would be an upturn in the demand for energy. It is obvious that the Labour Party would take a different view of generating policy from that of the present Government. I shall leave that point. I know that my hon. Friend the Member for South Ayrshire has a particular interest in the matter and will want to raise it.

It is noticeable that the Minister did not refer to the Energy Bill on the privatisation of the electricity supply industry. My hon. Friend the Member for Midlothian (Mr. Eadie) is on the Committee considering that Bill. The Minister who was asking for substantial increases, which we are being asked to approve, has an obligation to tell the House what effect the Energy Bill, will have on the SSEB on the one hand and the hydro board on the other hand.

The Minister walked into a trap when he responded to an intervention by my hon. Friend the Member for Midlothian. He waxed eloquent about a good public enterprise and the link between Argyll, the mainland and Colonsay. The Minister hit the nail on the head. No private enterprise will pay for the social links. That is one of the main criticisms of the Government's privatisation proposals. None of the private entrepreneurs will take on the social responsibility that would be taken on to ensure that facilities that are taken for granted on the mainland can be spread to the most remote corners of constituencies that by and large are represented by Conservative Members. I forecast that the day will come when Conservative Members live to regret the privatisation proposals that are being introduced not only in the electricity supply industry but in the telecommunications industry.

We have opened up a large area of debate. It is important that we should take this opportunity to discuss and debate the important issues that are involved in the borrowing powers in the Bill. The sums of money are substantial. We are entitled to know on what they will be spent and what is the future of the generating industry.

The Minister—I say this in the kindest way—is not the best forecaster. I remember the last time we debated the smelter account, when the Minister was pointing at me across the Dispatch Box and telling me in no uncertain terms that the smelter account could not be renegotiated or bought out. That was in October 1981. By November or December 1981 the Minister who was telling me that it could not be bought out was involved in negotiations to buy it out. I caution the Minister about his forecasts. He should try to make them more accurate this time.

My final point is about the Minister's confidence about the output from Torness. I do not accept that the construction stage of Torness could be stopped. I have made my position clear on that and I shall defend it before anyone.

The Minister is naive in the extreme if he believes that Torness, or any nuclear power station, will achieve its output potential. No nuclear power station in this country has ever achieved its full load potential. Indeed, the main problem with the aluminium smelter at Invergordon was that the Hunterston B power station never approached the load factor that it was designed to achieve. Hunterston B was designed to produce 70 per cent. of its load factor, but I do not think that it ever reached even 60 per cent. Therefore, if the Minister's calculations on these borrowing limits or his forecasts of the future cost of energy are based on a belief that Torness will achieve its full load factor, I must caution him that there is no evidence in nuclear generating that these stations ever reach their full load factor.

I know that the Minister appreciates that the matters under discussion are very serious. We are discussing a whole industry in Scotland, and the Scottish economy is giving us all cause for deep concern. If we do not get the electricity generating industry right, we shall not be able to rebuild the Scottish economy. These things are all linked and intertwined; nothing is separate.

When the Minister replies I hope that he will try to give answers to the serious questions that have been and will be posed in this debate. We do not intend to oppose the Bill tonight, but we hope that our questions will be answered.

5.23 pm

Perhaps I should reassure my hon. Friend the Minister that I do not intend to oppose the Bill tonight, either. I am always fascinated to listen to the hon. Member for Stirling, Falkirk and Grangemouth (Mr. Ewing), particularly now that he does not have a piece of paper to refer to when he speaks. This makes him more entertaining, but perhaps it also makes him less accurate. It is noticeable that now that he speaks without notes the hon. Gentleman makes far fewer forecasts. However, I was delighted to hear, and I am sure that Mr. Michael Joughin will be delighted to hear, the hon. Gentleman's commitment to the effect that, whichever party is in power, the job security of Mr. Joughin will not be endangered.

Since the hon. Member for Edinburgh, South (Mr. Ancram) has a piece of paper in his hand but is not referring to it, can we assume that he will be neither entertaining nor accurate?

As I hope to talk rather more statistically than the hon. Member for Stirling, Falkirk and Grangemouth, I have provided myself with a little support, for accuracy.

I welcome the report on the efficiency of the SSEB. I have been fairly critical of the board in the past, but I accept that this report is a proper one and that the board's efficiency has improved over the past year. It should be congratulated on the fact that its net return on assets has increased by 11 per cent. Moreover, the number of units that it produces per employee—its unit cost—has also increased by nearly 6 per cent. It should be given credit for that.

Given the surplus that the SSEB has again earned, will the consumer see the advantage of that in any direct way? In providing extra borrowing powers for a nationalised industry of this kind to cover unexpected or extra expenditure, it seems reasonable that, when a surplus is made, the consumer—in this case, particularly the domestic consumer—should derive some benefit from the profits made by the industry. I hope that the Minister will comment on that.

The hon. Member for Stirling, Falkirk and Grangemouth talked about privatisation. I do not know whether he has read the Energy Bill. As I understand it, we are not denationalising the SSEB or the grid in England, which is what I understand by privatisation. We are allowing private enterprise to come into the generation market. We are allowing private generators to provide electricity—largely, I suspect, for their own industries, where they may be able to produce it more cheaply because they can produce it locally. We are also removing the disincentive that existed in the past—that they could not get rid of the excess electricity produced by selling it to the grid. They will now have the incentive to do just that. If, as I believe will happen as a result of the legislation, there is more efficient generation of electricity in Scotland, I hope that the hon. Gentleman will have the decency to admit to the House that he was wrong.

Any company generating its own electricity has always been able to sell the surplus to the grid. That has never been a problem, and it is not what the Bill is about.

The question is whether the person generating the electricity can obtain a proper return for it. As the hon. Gentleman well knows, unless that is guaranteed, as the gas-gathering pipeline proved, private industry is unlikely to take part.

I do not wish to detain the House. I have given way several times already. This will be the last time.

I did not intend to intervene, but the hon. Gentleman made certain strictures about accuracy because my hon. Friend the Member for Stirling, Falkirk and Grangemouth (Mr. Ewing) happened not to be using notes. As the hon. Member for Edinburgh, South (Mr. Ancram) has notes, he had better read and understand the Energy Bill, as he has misled the House to some extent in his interpretation of what happens when surplus electricity is generated. I hope that the hon. Gentleman will do that, even though he has notes.

I was explaining how I envisaged the results of the Bill. The position that I understand the Bill will produce is very different from that described by the hon. Member for Stirling, Falkirk and Grangemouth.

The Minster rightly said that the basic reason for the increase in the borrowing limit is to finance the Torness power station. I agree with the hon. Member for Stirling, Falkirk and Grangemouth that we must now accept that the Torness project cannot be stopped. It would be ridiculous to leave it as a half-built "Benn's folly" sitting in that part of East Lothian for all time. Nevertheless, we should remember the lessons learnt from this venture. It is all very well for the Minister to say that he is still confident of a net system saving. That was the argument used by the SSEB to justify the power station when it could no longer justify it in terms of load demand forecasting.

The Minister said blandly that he was confident of a net system saving because of predictions about the future prices of oil and coal. Since the Select Committee on Energy reported and took evidence on the projected future costs of coal and oil, the estimates have fallen considerably. When the Select Committee examined the matter a year later a number of predictions were made regarding oil prices, the lowest of which was made by Professor Odell who said that the real price of oil was likely to fall by the year 2000. The general balance of opinion appeared to be that the real price of oil would rise by only a small degree by the year 2000 and that it was only the Government who were arguing that the rise would be higher. That is why I asked where the experts or commentators came from.

We should be told where the projections are coming from, because the whole argument as to whether a net system saving is made by building a particular power station early depends on the projected cost of alternative fuels in other power stations over the lifetime of a Parliament. By setting a high enough figure, anybody can justify any project of this sort on a net system saving basis. If we are to think of having other power stations of this sort in future, we must have clearer information from the Government of the sort of projections on which they are basing their analyses.

I know that the hon. Member for Berwick and East Lothian (Mr. Home Robertson) is trying to catch your eye, Mr. Deputy Speaker. As I am speaking before him, may I welcome his conversion, after five years, to the view that Torness is not the great bonanza for his constituency that he and his party used to say that it was. When I contested his seat in 1974 I remember being told that I was trying to stop the creation of jobs for local people in the area by my opposition to Torness. I understand that that is now the hon. Gentleman's position. I am glad that he has seen that it is a case of better late than never.

I was also told that I was wrong to suggest that the power station would never be needed. I understand that that is also the hon. Gentleman's position now. Again, I welcome his conversion. I remember the days when I was slated for suggesting that that power station would ruin beautiful tracts of the hon. Gentleman's constituency by its power lines. I was told that I should not stand in the way of progress and energy production. I understand that that is also the hon. Gentleman's position now. Although it has taken the hon. Gentleman and his local party some eight years to arrive at that position, we always welcome such conversions.

My hon. Friend the Under-Secretary of State referred to the overcapacity in the Scottish electricity industry. He told the House that he was pleased to announce that his right hon. Friend the Secretary of State had arranged with the SSEB that in future prices would not contain any element that could be attributed to the creation of new capacity. Will that include the interest on the borrowing extension, which the Bill is about and which I understand will be used almost exclusively for the creation of that new capacity, or will the interest be excluded in any future price considerations of the SSEB?

Finally, may I make a general point, which I made in a similar debate last year? Whereas the internal management of the SSEB may have been found to be good, any manufacturing industry—that is what the SSEB and the hydro-electric board are—which produces, or has the capacity to produce, 60 per cent. more than anybody will ever be able to buy, even at the peak of demand which we saw last year, will affect the price being charged to the consumer. Will the Minister who is responsible for energy in Scotland continue to impress on the SSEB that there is nothing clever in having 60 per cent. overcapacity, if people are having to pay for it, particularly as production at Torness will be coming on stream fairly soon?

The most efficient form of industry in this sphere is one which has a planning margin of between 20 per cent. and 28 per cent.—which is what the CEGB aims for—and consequently gives the best deal to the customer.

5.33 pm

I have notes and I hope that the House will forgive me for referring to them as I go along. I might be more accurate. The hon. Member for Stirling, Falkirk and Grangemouth (Mr. Ewing) should give credit where it is due. It was from exchanges with me during the Minister's speech that it became clear that the Bill will apply to investment in the two boards which does not include any new project until 1989. That is significant. There are several foreseeable and possible new projects. There was a Government announcement only last week which could represent a substantial investment for the future of electricity in Scotland if it were to come about. It has clearly been postponed for a decade if we are to believe the Government. I refer, of course, to the possibility of a commercial fast breeder reactor.

There seems to be a misunderstanding. The Bill relates to the SSEB and the North of Scotland hydro-electric board. If the right hon. Gentleman is referring to a commercial demonstration fast reactor at Dounreay, that would come from an entirely different budget.

The Minister and I must disagree. Unless we are to change the rules, my understanding is that, if such a commercial station were to be established, it would have to be built by one of the existing electricity boards. I may be wrong, but that is the information. given to me by my advisers.

It is more than just a matter of bookkeeping, because the Scottish electricity boards have their own plants and are responsible for them. The Bill relates to the servicing of the generating plants in Scotland or any plans of the SSEB or the North of Scotland hydro-electric board to build additional plants. Any decision to build a CDFR at Dounreay—which comes under the auspices of the Department of Energy—would not be included in the financing arrangements that we are discussing this afternoon.

With respect, if the Government were to change their mind on the timing, it is conceivable that it could come within the compass of the moneys voted in this Bill, given that there was no specific legislation to deal with the matter de novo in respect of the commercial station. Will the Minister, who is normally extremely well informed, take advice on that? All I am complaining about is the Minister's statement that the Bill covers investment up to 1989 and includes no new projects whatever—including any commercial fast breeder reactor.

I want to be helpful and prevent any possible misunderstanding. There is no question at the moment of the SSEB of or the North of Scotland hydroelectric board, through the Bill or any other financing that may be planned, building a CDFR at Dounreay. If such a decision were made within the decade that we are discussing, it would be presented to the House under entirely different financing arrangements from those that we are discussing this evening.

We are at one. That is what I am saying. I asked the Minister for confirmation of that, and he confirmed it. He has now reconfirmed it.

All I am saying is that if the timetable which was issued last week as a written answer to a planted question by the hon. Member for Edinburgh, South (Mr. Ancram),—without the statement to the House of Commons which was promised by the Leader of the House four days previously and earlier on Second Reading of the Energy Bill—were to be changed, a new Bill, or part of the money voted under this Bill, would have to be devoted to that purpose. I do not blame the hon. Member for Edinburgh, South because, as in so many cases, he was the pliant instrument of his party carrying out the strategy of the moment.

My complaint is that we have never had the opportunity to debate that statement. The Minister has not said why the deferment is to take place. We have had statements from the Scottish Office and from other Ministers insisting that the team at Dounreay will remain intact and that the experimental and research work will continue there for another 10 years before any decision is taken in the 1990s.

That is a matter of grave concern, because since 1967 we in Scotland have been foremost in the United Kingdom in pioneering nuclear-generated electricity in Britain. We have had the first atomic stations. We have had the AGRs, and for some considerable time we have had the prototype fast reactor. There is a possibility that at some stage in this century our country will move along with the major nuclear powers in the world. I refer to the United States and France, with Russia a poor third. Scotland, however, comes a good fourth, considering its size and effort. We have a lead that we are now losing. When complaints are made about investment by the Scottish board in Torness and Hunterston, people seem to forget that there was a time when the Scots would have been up in arms at not receiving equal treatment with the board in England. Torness is a good example of that. When Torness was discussed by the Labour Government, the Scottish board, to its credit—it is small compared with the CEGB—demanded parity of treatment.

I am surprised that hon. Members are now moaning and groaning about Torness and are perhaps willing to see Scotland slip compared with England.

The cry "Rubbish" comes from an hon. Member who forgets that the original concept of expanding the nuclear power programme was achieved in an entirely different economic climate. The hon. Member for Midlothian (Mr. Eadie), who was a colleague of mine at the Department of Energy, knows that to be true. If one reads all the White Papers, published by successive Governments over the past 30 years, which sought to project the nation's energy requirements for six or 10 years ahead, one finds that they were almost all wrong. By their very nature they will be wrong. Unfortunately, however, the building of a nuclear, conventional oil-fired or coal-fired power station requires a six-year lead time for planning and construction before it is put on stream. Decisions cannot be deferred in the belief that all projections are wrong. That is why I find it disconcerting that this Bill, which will last until 1989, contains only the refurbishment of what we presently have or the completion of what we are presently building.

The nuclear power industry in our country has a remarkable record of safety.

The right hon. Gentleman must be aware of the dramatic overcapacity which was quoted by the hon. Member for Edinburgh, South (Mr. Ancram). Is he aware that every year during the 1970s saw a successive drop in the growth of power consumption in Scotland and that there was a drag before that was recognised by the electricity board. Was it not absolutely lunatic to go ahead with the order for Torness following those drops?

No, it was not. I lived through the period of scarcity. In the middle 1950s, when I first came to the House, there were serious scarcity problems. Our industrial expansion was seriously inhibited.

The hon. Gentleman must contain himself. He might even learn something for a change. He desperately needs to learn.

There was a scarcity problem in 1956, which continued well into the 1960s. If the country is to prosper, we must proceed with the belief that our need for energy will expand, not contract. The hon. Member for Stirling, Falkirk and Grangemouth did not say that the Labour Government would not worry about that because there would never be a need for increased capacity. At the end of his speech he said that he hoped that things would change and that there would be a need for increased capacity. He is optimistic. He does not believe that demand for electricity is finite and that that is the end of the matter.

I am arguing also that it is wrong to believe that this is the end of the road for nuclear power stations in Scotland. I should not like any of our friends south of the border to gain the impression that the Scots have become suddenly converted to the belief that we do not need more nuclear power stations.

Safety has been mentioned. In Britain there are 15 nuclear power stations with an output of 7,600 mW. The Minister reminded me that they have operated for 26 years and that not one member of the public has been killed, injured or suffered radiation from their operation.

If one takes not 26 years, but the 15 years between 1965 and 1979, 1,360 miners were killed in the mines. At Aberfan 144 people died. Those of us who have connections with mining families or medical practice know that 600 new cases of pneumoconiosis are diagnosed every year. During those 15 years, 9,458 people died of pneumoconiosis in its advanced state. I am not arguing against coal, but to say that nuclear energy is fearfully unsafe in contrast with the coal industry is a caricature of the facts.

Will the right hon. Gentleman direct his mind not to safety but to efficiency and the way in which the nuclear power stations have not been operating to capacity, as my hon. Friend the Member for Stirling, Falkirk and Grangemouth (Mr. Ewing) said? Will the right hon. Gentleman tell me on what occasion all parts of Hunterston have worked to full capacity? Does he recall all the difficulties that occurred, including the accident when water went in? Does he accept that power stations, such as Hunterston, have many problems that we have not yet solved?

There are many problems that we have not yet solved, and I have no doubt that other problems will arise. Problems are there to be solved. The hon. Gentleman must not convert himself into a non-nuclear or anti-nuclear warrior on the grounds of safety. The hon. Gentleman is apt to do that. He is an intelligent man and I counsel him not to fall into that trap. I do not intend to be dragged into arguments about such matters. 1 want to make a short speech in my own way.

The annual reports show that both boards have done remarkably well in extremely adverse circumstances. I agree with the criticisms of the standing charge and the boards not being as socially responsive to disconnections as they could have been, but they have done remarkably well bearing in mind the major problem of lack of demand that they face. However, that does not mean that they are perfect.

The SSEB supplies Ravenscraig, which in turn delivers 90 per cent. of its output to the English market or abroad. We should be worried by what the boards have lost from closures, such as Invergordon. What would happen to the board's income if Ravenscraig were to close? The Scottish boards must learn that they cannot treat industries north of the border less favourably than English boards treat industries south of the border. Only today we had an example of that.

I am not suggesting for a moment that the Chemicals Industries Association is necessarily accurate, but it is on record as saying that in its discussions with the SSEB during the past few weeks it has achieved improved price benefits. Indeed, the Minister urged that, and he confirmed it in his opening remarks. However, the CIA does not see any improvement in its position on the penalty clauses. All the schemes that it has discussed with the SSEB depend on the customer cutting demand during peak hours, with penalties for non-compliance. The Chemicals Industries Association concludes that the Scottish proposals include penalties which could effectively wipe out any saving on prices. Hon. Members should bear in mind that their remarks relate to Scottish plants. The CIA said that these terms
"make operation of chemical plants virtually impossible."

I am grateful to the right hon. Gentleman for giving way, as he has already been generous in that respect. Does he accept that there is no greater moaner in this country than the chemical industry? Indeed, I have extensive experience of chemical plant in my constituency, and I refer particularly to the chemical industry in Scotland. It has one moan after another about rates, energy prices, and so on. Therefore, I caution the right hon. Gentleman in that respect.

The right hon. Gentleman said that the SSEB did not treat industry in Scotland on all fours with the way in which industry in England and Wales is treated by the CEGB. Does he accept that the Government put the SSEB at a disadvantage when trying to treat Scottish industry fairly, because they did not introduce the same scheme in Scotland as was introduced a year earlier in England and Wales? Had the scheme been introduced at the same time, the SSEB would have treated industry in Scotland on the same basis as that in England and Wales. I think that the right hon. Gentleman would agree with that.

That is a very good point. Initially, that was true. If I am to believe the Minister—a tremendous question that begs many answers—he has rectified the situation. Despite the argument about the greetin' bairns of the chemical industry who are constantly complaining, we must consider the Minster's comment that, as far as the Government are concerned, the boards can treat industries equally. There is nothing in the Government's resolution—or lack of it—to say otherwise. In other words, the complaint is being passed from the Government to the SSEB.

The chemical industries complain not about the English board, but about the fact that the position in Scotland puts them at a disadvantage compared with chemical industries south of the border. However, if the SSEB feels that it is at a disadvantage because of the Government's lack of concern, it should complain to Members of Parliament. It should complain to Conservative, Labour, SDP, Liberal and Scottish Nationalist Members. It should do so without fear or favour from any party. It should say that the Government are treating the board unfairly compared with other boards. However, I have no evidence that the SSEB makes that complaint.

The chemical industries complain about the boards, and the Bill gives me an opportunity to raise that matter. Perhaps this greetin' bairn is dishonest, but a Minister's first duty—as the hon. Member for Stirling, Falkirk and Grangemouth knows from his experience—is to listen to and correct the imbalance, even if the case is only half made. I hope that the Minster will accept that. There may be industries which are not complaining and which are negotiating their contracts at present.

Reference is made to this concerning only about one-third of industrial consumers in Scotland. Are the other two-thirds content? Are all Members of Parliament content that the industries are being treated fairly? We do not know the answer, because the contracts have not been concluded. I am merely putting up a signal. We expect the Minister to ensure that, once the boards have been given the resources, they will treat our industries at least as fairly as those which come under the CEGB, south of the border.

Order. I hope that I did not hear the right hon. Member for Greenock and Port Glasgow (Dr. Mabon) describe the Minister as the bairn who was dishonest. If so, he should withdraw that remark.

With due respect, Mr. Deputy Speaker, it was a form of flattery and not at all an unparliamentary expression. In Scotland, the phrase "the greetin' bairn, aye gets fed first" means the crying child is always fed first. The hon. Member for Stirling, Falkirk and Grangemouth was trying to claim that the Chemical Industries Association is a greetin' bairn. I did not say that; he said it. I am saying that the Minister should respond to that, just as he would respond to any such complaint. By the way—

Order. The point is that the right hon. Gentleman must not describe the Minister as dishonest.

I am sorry, Mr. Deputy Speaker, if you misheard me. I was saying that the industries that made representations might not be entirely honest. The Minister may be misled, be under a misconception, be deceived by others, may not read his brief properly, may lose his place in the brief occasionally and be helped by interruptions, but he is never dishonest.

I appreciate the way in which you have looked after my interests, Mr. Deputy Speaker. The debate has been a little difficult to follow, but I understand that the right hon. Gentleman is pleading with the Government to listen when industries complain. Indeed, we do. There is no antagonism between Ministers and the electricity boards. Whenever we have a complaint from the chemical industries—as we have had—we naturally take it immediately to the boards and ask them to comment. The boards are anxious to ensure that they give the same service and prices to industry in Scotland as are available south of the border. Overall, the boards' prices—certainly for domestic consumers—have been more favourable than the average prices in England. That is of benefit and of advantage to us.

If an industry, such as the chemical industry, has a complaint, we immediately discuss it with the boards and try to provide a satisfactory solution through them. They have the statutory responsibility. They are conscious of their statutory responsibilities as well as of their commercial and industrial responsibilities to Scottish consumers.

I could be assuaged by the Minister's remarks, but I have the gnawing feeling that the saga of Invergordon does not bear that out. We do not yet know the figures associated with the smelters in Anglesey and Blyth. We do not yet know the comparisons that can be made between the contracts for Alcan and Rio Tinto-Zinc. We do not know the full story behind the British Aluminium Company's involvement in Invergordon. However, none of the information that can be gleaned will allay our fear that the Scottish Office is not fully alive to the board's fundamental role in sustaining industry in Scotland against its competitors south of the border. Scottish Members of Parliament say that Scottish industries should receive the same treatment from the SSEB as the English industries receive from their board. That is my point. My hon. Friends and I on the SDP Benches will not oppose the Bill at this or any other stage. However, I hope that the Bill will be rapidly overtaken by a considerable change in our economy so that present establishments—and the new ones that will be needed—can supply our country. A new Bill may then provide a fresh impetus to a new Scotland.

5.59 pm

The right hon. Member for Greenock and Port Glasgow (Dr. Mabon) referred to "greetin' bairns". I always thought that farmers tended to be the "greetin' bairns", but I am pleased to hear that there is another industry that feels the same way.

I warmly welcome this small Bill that gives the Scottish boards a chance to update their generating stations and to finish the new ones. As the hon. Member for Stirling, Falkirk and Grangemouth (Mr. Ewing) said, the borrowing powers that are being given are large. Like everybody else, I congratulate the boards on holding down their prices to consumers to a reasonable level. As most industries recognise, nothing is more inflationary than high energy costs. However, both boards are in a difficult position because the recession has caused a cut in demand. There is now a delicate balance between consumer prices and unemployment. Industry needs low-cost power, especially during a recession. Some help has been given, but we have seen how oil prices have completely distorted fuel input costs to power stations.

We all accept that the boards need long-term planning. I wonder how far ahead their present plans are, because in future they must not only build new power stations but they must replace old ones. I wonder which old stations are wearing out. Presumably at least 10 years planning are required before a station operates and an even longer planning period is required for nuclear power stations.

I agree with the Minister that it was impossible in the late 1960s and early 1970s to forecast that oil prices would quadruple. Oil-fired stations such as that at Inverkip in the Clyde estuary, where many of my constitutents work, are now uneconomic. The figures, which I received this morning from the South of Scotland electricity board, are frightening. The cost of producing electricity for one hour at 670 mWs at the oil-fired station at Inverkip is £12,000 more than the cost of producing electricity for one hour at Hunterston, which is nuclear powered. At Longannet, which is coal-fired, the cost is £5,000 more than at Hunterston. Those figures show the huge advantage that nuclear fuel has over coal and oil. However, I pay tribute to the staff at Inverkip power station, which now obtains little work. None the less, the staff are on an eight-hour standby and from a cold start they can go up to 680 mWs in eight hours. No other power station in Britain can do that.

I wonder whether oil-fired stations, which look as though they will be uneconomical for the rest of time, can be converted to coal. There are massive reserves of coal in Scotland and we should use that fuel to protect the jobs of pit workers even if we cannot create new jobs. The hon. Member for Stirling, Falkirk and Grangemouth pointed out that the Select Committee said that if we lost Ravenscraig the boards would lose an enormous amount of consumption. Other pits could close, not simply because they supply coking coal, but because they supply coal to other electricity stations.

The board's real success must be the Hunterston nuclear power station in my constituency. I pay tribute to everyone who works in that station for the excellence of its output as well as its safety record. Both the A and B stations are doing extremely well and output is running up to expectations, although I take the point made by the hon. Member for Stirling, Falkirk and Grangemouth that they never reached full potential. However, the lifespan of those stations is likely to be much longer than was first thought. Maintenance and reloading are performed extremely efficiently without the necessity to shut down the reactor. Output is lowered at the weekends when the cells are recharged. That means that the real production costs are low compared with those for coal and oil. It is relevant because one must take into account the capital costs.

It is interesting to compare Hunterston with the original hydro stations in the constituency of Galloway, whose Member of Parliament is sitting on the Front Bench as a Government Whip. Each generation at Hunterston has a potential output that is 50 times greater than the old hydro-powered stations in the scheme built in 1935. However, those old hydro schemes are just as efficient today as they were then. There are areas in Scotland where small hydro plants could he installed. On many private estates that are miles away from the main grid, there are ideal spots for small hydro-electricity plants. There is enormous potential in the growth industry of fish farming in the Highlands, especially in lochs that have no electricity provision at present and that are unlikely to have any such provision. Power is needed for pumps, heating and lighting and it would cost too much to provide grid lines. Perhaps my hon. Friend would say something about private generation in the future because there is some confusion in hon. Members' minds.

Many new methods of electricity production are being considered, such as wind, waves, thermal and sun, although there is not much of that in Scotland. Perhaps under the new legislation an individual can generate electricity as he wishes. Must the boards buy the excess electricity produced by that individual, because that will simply increase the present overcapacity? Will the boards have a final say in the matter?

The extra capital expenditure provided to the boards is to complete the building at Torness. I assume that, once that station is completed, the unit costs will be as low as at Hunterston, even taking into account the interest on capital.

The report states that, this year, fuel costs rose by 14·6 per cent. I assume that that is an average increase for oil, coal and nuclear power. Does my hon. Friend have a breakdown of the increases in each of those fuels so that we can have an idea of the costs? I strongly support the continued building at Torness. It would be disastrous to stop it. It provides desperately needed jobs in the area and to mothball it would simply increase the capital costs when we start to build again.

Some generators are coming to the end of their functional life and we are considering future programmes. As many hon. Members said, electricity production is undoubtedly over capacity now and it looks as though it will stay that way for the foreseeable future. The South of Scotland electricity board and the North of Scotland hydro-electric board have a delicate task to balance new nuclear power against the old coal-fired plants so that they do not destroy jobs. I accept that the extra capital expenditure is necessary for the building of new stations, but I hope that we shall not disrupt the production of electricity in Scotland by producing too much.

6.7 pm

Like the hon. Member for Bute and North Ayrshire (Mr. Currie), I welcome the opportunity to discuss the generating and other policies of the electricity boards. I shall concentrate on the South of Scotland Electricity Board and take a rather different view from that of the right hon. Member for Greenock and Port Glasgow (Dr. Mabon). It is easier to do that since he moved to another party and we do not have the same internal conflict when we disagree. I am glad that the Minister mentioned the Coopers and Lybrand efficiency audit that was commissioned by the SSEB. Reports on the production of electricity seem to be the only growth industry in Scotland nowadays under this Government. Although I am not against efficiency audits, I wish to see an audit that will consider services to the consumer as well as the internal efficiency of the boards.

The report recommends a new agreement between the SSEB and the National Coal Board. I do not know why the Secretary of State for Scotland and the Under-Secretary of State for Energy do not take a leaf out of the book of my right hon. Friend the Member for Glasgow, Craigton (Mr. Milian) and my hon. Friend the Member for Midlothian (Mr. Eadie), who helped conclude a contract between the SSEB and the National Coal Board which guaranteed both the price and stability of coal supplies to the SSEB and a market to the Coal Board. That seemed to be a sensible, equitable, fair and good contract. I do not understand why the Government are not intervening in the same way to produce a contract that benefits both the SSEB and the Coal Board. Such a contract could have been extended and developed.

I suspect that it is all part of the Government's attack on the coal industry. With one or two honourable exceptions, Conservative Members are attacking the coal industry. I was glad to hear the hon. Member for Bute and North Ayrshire make some positive comments about the coal industry. There is a doctrinaire attitude among many Conservative Members which suggests that the coal industry should be undermined. That is a short-sighted attitude.

The coal industry, which is under threat from the Government, is important to the future of the SSEB. During the 1970s there was some security and stability in the industry and the decline was reversed. That now appears to be changing. The decline is being accelerated by the actions of the Government. At last Mr. Arthur Scargill has winkled out of the Coal Board—he said it all along but the Coal Board denied it—the admission that there is a list of pits that the Coal Board has it in mind to close. The Government allege that those pits are exhausted. My hon. Friend the Member for Kilmarnock (Mr. McKelvey) and I recently went down one of those pits at Highhouse in my constituency. The Government allege that the pits are exhausted. That is nonsense.

My hon. Friend and I spoke to the miners, who know that there is coal there. The hon. Member for Bute and North Ayrshire admitted it, and, in their more rational moments, many Conservative Members will admit it. If there were a sudden upsurge in the demand for energy the coal miners would be asked to pull out all the stops and the coal, on which Conservative Members now cast a blind eye, would be suddenly rediscovered.

It is proposed that the coal should be abandoned and not exploited. That would have a devastating effect in my constituency. Earlier today I asked the Prime Minister about the closure of Ravenscraig and Strathclyde. The Select Committee on Scottish Affairs has said that the closure of Ravenscraig would have a disastrous effect. The closures of Sorn, Highhouse and Killoch, without any new investment for new pits in the area, would be equally disastrous for Ayrshire and for the west of Scotland.

Not only 2,500 jobs would be lost in the mines but there would be an effect on British Rail, whose principal freight in the west of Scotland is coal. There would be effects on the shops, the bus firms and the private contractors—the friends of Conservative Members—who take the men to the pits. We already know that demand for steel is declining rapidly but the closure of those pits would mean a decline in demand for the girders that one sees every few yards in the pits. There would be a decline in demand for pit props and switchgear produced by Wallacetown Engineering in the constituency of the Secretary of State for Scotland.

The threat is so great that we must not allow it to be carried out. Therefore, I hope that the Scottish Office Minister who has responsibility for industry will use what influence he has to persuade the Government that investment is needed in the coal industry. There is more coal at Sorn, Hurlford, Barony, Killoch and Highhouse. Reserves have already been discovered at Happendon in Lanarkshire. One of the largest coal fields in Scotland is at Canonbie. Work on that mine should be started now to provide replacement jobs for the time when the pits are genuinely exhausted.

Coal is our most secure form of energy. We have vast resources. It is not subject to the uncertainty of the political position in the Middle East or elsewhere, or the uncertainty of nuclear power. I do not wish to exaggerate the dangers of nuclear power—it would be alarmist to do so—but there are genuine worries. Such worries were seen in the United States, at Three Mile Island. There are dangers in the coal industry, which were described by the right hon. Member for Greenock and Port Glasgow. We must do everything possible to minimise those dangers, but they are minimal compared with the type of catastrophe that could occur at one of the major nuclear power stations in the United Kingdom. Such a disaster would be appalling in comparison to anything we have experienced before. We must be sure about nuclear power. I am a nuclear sceptic rather than an anti-nuclear power person.

The forecast for electricity demand is crucial to the future building of power stations. I did not oppose the continuation of Torness because it had gone so far that opposition would have been too difficult. When Torness is completed the SSEB will have about 100 per cent. overcapacity. If one allows for all types of margins of error, that is still a ridiculous amount.

Since the 1960s, there have been major changes in circumstances—the right hon. Member for Greenock and Port Glasgow was living in the 1960s when he made his speech tonight. I sometimes believe that he hankers back to the 1960s—we all do in some ways. I see that I have touched a sympathetic chord with you, Mr. Speaker. Since then, circumstances have changed. Demand for energy has not increased by as much as was expected. That is due not only to the recession. There have been substantial changes and there will be more spectacular changes in the future. The SSEB has built in a 3 per cent. margin for growth which is double the maximum growth allowed by the Central Electricity Generating Board. Even allowing for the growth that will occur when a Labour Government come to power after the next election, we will still have far too much electricity capacity.

The hon. Member for Bute and North Ayrshire rightly said that it is accepted that the working lives of power stations will be much longer than was thought 10 or 20 years ago. That fact must be taken into consideration. There are now the new microchip smart meters. The right hon. Member for Greenock and Port Glasgow will know all about them. In England, the Eastern Electricity Board has carried out extensive tests. The meters, when installed in a house, are able to cut off electricity to non-essential electrical appliances when demand is at its highest, thus reducing the peaks substantially. That has not been taken into consideration by the SSEB.

There have been major developments in conservation. Even if it were not sensible normally to invest in conservation, people are doing so because of high costs and to keep their electricity bills down.

There is also a saturation of domestic demand. After one has bought a refrigerator, a deep freeze, a washing machine and a dishwasher, one does not buy a second or a third. One reaches a saturation of domestic demand and we are reaching that point in Britain.

There are also new developments in energy generation. The district heating schemes have great potential, even if we do not consider wind energy, wave energy and solar energy which have great potential for the future.

In the light of what I have said, I should like to ask the Minister a crucial question, which is in the minds of people of all political persuasions. Why does the SSEB need to hang on to the valuable land at Chapel Donan, near Girvan? Even if it is to have nuclear power stations—I am sceptical about that—there is more room at Torness.

There is room for even two or three more nuclear power stations. There is room at Hunterston for at least two more nuclear power stations if the SSEB can get the land from the British Steel Corporation. There are these alternatives. In my view, and in the view of many others, there is no conceivable need for Chapel Donan in the next 100 years, let alone the next 10 or 20, yet the SSEB is doggedly, determinedly and stubbornly holding on to the land. As a result, £5 million of unnecessary expenditure will take place on the Girvan bypass, which will be taking a much wider route. Conservative Members always want to cut public expenditure. This is £5 million that could be saved at a stroke. Secondly, we shall be using—I say this with no disrespect to my hon. Friend the Member for Berwick and East Lothian (Mr. Home Rebertson)—some of the best farmland in Scotland that produces early Ayrshire potatoes among many other things. I know that my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) knows all about early Ayrshire potatoes. He is a gourmet and he knows about these things.

Thirdly, the town of Girvan is surrounded on three sides by the sea and hills. It can expand its housing and industrial development only in the north, but that area is sterilised because the SSEB has taken over all the land for a power station that will never be needed.

I wrote to the Secretary of State and asked for his view. I submitted all the evidence that I have put to the House this evening and more besides. I asked him to take action by telling the SSEB to give up the land because it will never need it. The SSEB will never do that on its own account. It will never admit that it made a mistake. It is over-cautious. However, the Secretary of State has an overriding responsibility and he should step in. Unfortunately, he refused to do so but in the last paragraph of his letter—I may be being overoptimistic—I detect a degree of sympathy. The right hon. Gentleman wrote:
"Should a specific proposal for industrial development come forward it would, of course, be possible for consideration to be given to the merits of the proposed alternative uses of the site."
It seems that he is willing to consider alternative uses but the trouble is that no one will come forward with proposals while the SSEB is holding on to the site so doggedly and determinedly.

There is a strong feeling in the community that is shared by all shades of political opinion—for example, Councillor Stuart Stevenson, the chairman of the South Ayrshire Conservative Association, and the Chapel Donan co-ordinating committee agree with what I have said 100 per cent.—that every effort must be made to ensure that the Secretary of State gets the SSEB to release the land. I hope that the right hon. Gentleman will give the matter some consideration.

I have not referred to standing charges and disconnections, which are issues with which my hon. Friend the Member for Stirling, Falkirk and Grangemouth dealt extremely well. I endorse what he said. I do not want anyone to think that because I have not mentioned them I do not consider them to be important.

I shall finish with a prediction. The Under-Secretary of State said that Opposition Members are always wise after the event. I believe that coal is the fuel of the future. My hon. Friend the Member for Midlothian (Mr. Eadie) has said that on a number of occasions. I think that my hon. Friend will be proved right. He and I and others will be able to remind the Minister that we said so on this occasion and that events proved us right.

6.25 pm

I welcome the opportunity to speak about Scotland's electricity boards. The hon. Member for South Ayrshire (Mr. Foulkes) said that some Conservative Members believe that the coal industry should be undermined. I have no wish to see the coal industry or any other industry undermined. We want to see it producing of its best and at its best.

If by chance the NCB should decide that mines are no longer viable—obviously its staff are the best people to make that sort of judgment because they have the necessary expertise and knowledge—I do not understand how it can be argued that it would be undermining the coal industry if mines were given to miners' co-operatives or to private enterprise. If there is coal in a mine that can be mined and those living in the area believe that it can be, it will not undermine the coal industry if we allow them to bring it to the surface in the name of a miners' co-operative or private enterprise. In my view, that would improve and enhance the industry. Any new work practices that came out of such an enterprise would increase competition and that would only be healthy and, therefore, good for the entire industry.

I hope that the hon. Member for South Ayrshire will not think that I am trying to undermine the industry. We are fortunate to be blessed with so many more years of coal. It would be foolish not to make the best possible use of a natural asset.

In some respects the boards are to be congratulated but in others one should be critical of them. First, I congratulate them on improving work force participation. The number of units of electricity that are sold has increased per employee by almost 6 per cent. That must be good by any standards and the achievement must warrant congratulations. However, when talking about the generation of electricity it is wise to remember that workpeople are not a major element in electricity generating costs. Capital and fuel costs are the major elements in generating costs.

I hope that I shall not be deemed churlish when I say that in the past the boards' relations with their customers have been highly suspect in my judgment. The hon. Member for Stirling, Falkirk and Grangemouth (Mr. Ewing) talked about this and I do not disagree with his comments on standing charges. I happen to think that standing charges could and should be abolished. That does not mean that we cannot find other ways of properly charging consumers for the units of electricity that they have used. However, the standing charge as a ratio of the charges met by individual consumers, especially those on fixed incomes, such as pensioners, is out of all proportion to the units of electricity that they use. If we are a genuine caring society, we should recognise that it is mathematically possible to introduce a system that does not have a standing charge and that therefore it should be possible to introduce such a system.

There is a need to keep a careful watch on energy costs to industry. We must be constantly aware of that need. Scotland's industry must never be disadvantaged against other parts of the United Kingdom or Europe. It is right and proper, even if it is the "greetin' bairn" of the chemical industry, to listen to industry and to pay attention to what it is saying. It is probable that it is nearer the truth than we are.

The hon. Member for South Ayrshire was right to draw attention to sites that have been earmarked for projects that may never come to fruition. The object of the debate is to draw attention to such matters and I make no criticism of him for so doing.

We have a social responsibility to those who live in remote areas, and especially to pensioners. We have a duty and social responsibility to supply electricity to remote areas. I do not understand why that means that the responsibility should be that of a State-owned monopoly. That makes no sense to me. It is possible to supply the remote areas with electricity, to meet social responsibilities and still have a balance between the private and public sectors. That is possible and it is wrong to think that the private sector or the public sector is better or worse at so doing. The balance is right. We should supply the consumer, whether a large enterprise, someone in a remote area or a pensioner, so that he can live in the way that we would expect him to live in the twentieth century. That is our responsibility. I have never been able to understand—I hope that Opposition Members will agree—why that can be done only through a State monopoly.

The hon. Gentleman's enthusiasm for private enterprise and privatisation is well known. Where, in the area covered by the North of Scotland hydro-electric board, which includes the hon. Gentleman's constituency, does he envisage that privatisation will be accepted as an option and be successful?

I have no hesitation in answering that question. There are parts of the area, certainly in my constituency, where the private generation of electricity would be possible. I see no problem in it. If I had the time, I could even name the rivers where it could be done.

Competition, both for customers and for funds in the market place, is healthy. I understood my hon. Friend the Member for Edinburgh, South (Mr. Ancram) to say that we have more capacity than we shall ever need. I am not sufficiently qualified to make a judgment on whether that is true. It does not seem to be a wise use of either our capital or our resources. Consequently, after Torness comes into production, there will be a need to examine other conventionally fired power stations.

The use of fossil fuels, especially oil, for electricity generation is a waste of those finite fuels. Aviation and transport have little option but to use oil products. The chemical industry also requires oil products for such commodities as natural gas for feedstock purposes. We do not make anything like the proper use of coal. What is more, it is available in some quantity. It should be used to produce aviation fuel. We should be looking at the possibilities of using coal for transport fuel and chemical feedstock much more than we are. [Laughter.] The Opposition may find the subject humorous but we have a responsibility to examine our nation's assets and to see what we are leaving for our children and our children's children. As yet, there is no alternative to aviation fuel. If we ever reach a state when we do not have aviation fuel there will be savage cuts in transport services.

I am not laughing at or quarrelling with what the hon. Gentleman is saying about the liquefaction of coal. I know that he does not know it, but the Government that he supports so religiously through the Lobbies have torpedoed the scheme for liquefaction that I approved. He is supporting a scheme that I as a Minister encouraged and which the Government have destroyed.

I have news for the hon. Gentleman—I am aware of that. Why does he think I am speaking? It is because I believe that we have a responsibility that goes further than the present. I am suggesting not that we should act now but that we must examine what we do tomorrow and in the future. It is important to recognise that we are using up oil products much faster than we are finding oil. We do not know how we shall meet future requirements. Thus far, we have been fortunate that exploration has kept pace with consumption. That has been lucky. We cannot continue to assume that that will be the case.

Unlike fossil fuels, nuclear power cannot at this stage be used for aviation or motor transport power. As a matter of priority and choice, it would be prudent for the bulk of future electricity power to be generated by hydro and nuclear power. There is also an advantage with regard to jobs at Torness that has been mentioned.

I should like there to be further development of hydro schemes and for much more attention to be paid to wind and wave power and solar energy as alternative sources. I welcome the opportunity to say that we should use the nation's natural assets to generate electricity rather than use fuels because we have used them in the past.

6.34 pm

It is perhaps appropriate that I should almost wind up the debate, as almost every hon. Member has referred to Torness, which is in the middle of my constituency.

I should like to correct a comment that the Minister made in response to my intervention earlier. I thought that he implied that I was being critical of the connections that are being made to some of the islands. Nothing is further from the truth. All Opposition Members want to encourage connections of electricity supplies and other services to the remote communities of Scotland. I was challenging the Minister's implication that that would lead to significant extra load for the electricity boards in Scotland. It is not true.

Much has been said about the Torness power station. As the Member of Parliament for a constituency that is heavily dependent on the electricity supply industry, I am a worried man. As my hon. Friend the Member for Midlothian (Mr. Eadie) knows, there is a coal-burning power station called Cockenzie in my constituency. It employs about 600 people, most of whom are my constituents. Moreover, many of my constituents travel to Midlothian every day or night to work at the two coalmines in the constituency of my hon. Friend the Member for Midlothian. About 4,000 miners are employed there. We are, therefore, discussing about 5,000 jobs in that neighbourhood which depend on the Cockenzie power station.

While I have consistently welcomed the employment that is created by the construction of the Torness nuclear power station, there are severe misgivings in my part of the world about the way in which the employment has been distributed.

The figures that I have are those that the Minister gave me only yesterday in a parliamentary reply. Apparently, at the most recent date for which figures are available, there were 4,124 unemployed construction workers in the area around Torness—Edinburgh, East Lothian and the Borders. It also appears that 2,207 people who work on the Torness construction site come from right outside that area. We appreciate that not everyone who works at Torness could be recruited locally but we were given a clear undertaking at the planning stage that, if jobs were required locally, suitably qualified construction workers in our neighbourhood would be given priority. It is a pity that the Secretary of State for Scotland has not seen fit, despite the pressure that has been put on him by me, the local authority and other people, to encourage the electricity board and the main contractors to carry out that undertaking.

Like other hon. Members, I am worried about the overcapacity in the South of Scotland electricity board. It is worth reflecting on the capacity figures that are given in the board's annual report. The capacity that is in commission amounts to 6,316 megawatts. There is an additional capacity of 1,510 megawatts which has been mothballed, although it exists, whether anyone likes it or not.

This mothballing of capacity is interesting. In last year's annual report of the South of Scotland electricity board, an asterisk appeared after Inverkip in the table. This year, Inverkip appears only as a footnote. It has been mothballed. Perhaps next year the board will pretend that it does not exist at all. In fact, the Inverkip power station very much exists. It is still being paid for by the South of Scotland electricity board consumers. It is no good pretending that it does not exist.

Torness power station is to come into commission in 1987. It will have a generating capacity of 1,300 megawatts. If the generating capacity that is already in commission, that which is mothballed and that which is to come into commission at Torness are added together, they amount to 9,126 megawatts. That has to be compared with an all-time peak demand of 4,717 megawatts recorded by the South of Scotland electricity board in the Arctic conditions of January 1982. With the commissioning of the Torness power station, there will be 93·5 per cent. excess capacity over maximum imaginable peak demand. It has been claimed that 28 per cent. overcapacity is justified, although the Select Committee suggested that even that was too much. It is clearly pushing matters a little when the overcapacity amounts to over 93 per cent.

The assumptions of the South of Scotland electricity board, the electricity industry and successive Governments, based on a continuing modest increase in demand for electricity, were wrong. There has been reference to the efficiency audit of the SSEB by Coopers and Lybrand. I should like to draw attention to one paragraph that is particularly relevant to the board and to the Government. Paragraph 5.23 of the report slates that the
"SSEB's reliance on external macro-economic forecasts is reasonable in view of the staff available and the extra effort that would be required to improve upon the external projections. However, there is a major disadvantage in that SSEB's load forecasts depend heavily upon projections not relating specifically to Scotland. Clearly the adjustments which are made to the United Kingdom figures are crucially important. At present, these derive from informal judgments and are not well documented, making retrospective analysis which might be used to help improve future adjustments difficult. Part of the problem lies in the limited availability of disaggregated and timely statistics for Scotland, and hence a limited availability of Scotland specific forecasts. This, we feel, is a problem that the Scottish Office should be asked to consider."

It would be interesting to know whether the Scottish Office intends to consider that significant point. It is fair enough that Coopers and Lybrand should criticise the forecasts that have been made. I have already given figures of the massive overcapacity that has been built up in the south of Scotland, which bears no relation to the demand for electricity. Why is demand not increasing at the rate that the previous Government and perhaps even this Government hoped?

It is necessary to consider the difficulties facing industry and domestic consumers in Scotland. I was interested to hear the chief executive of British Steel inform hon. Members recently that the corporation has to pay between 15 and 25 per cent. more for its electricity than its competitors overseas. It is hardly surprising that British industry and the BSC are not as competitive as hon. Members might like.

Every time that a factory closes in Scotland, electricity demand is reduced. We are caught in a vicious circle. As demand declines, the price is forced up and competitiveness is damaged because of the Government's unwillingness to manipulate—or, if that is a pejorative word, their unwillingness to adjust—electricity prices to make it possible for our industry to compete with industries overseas.

Hon. Members will have met poor constituents without jobs whose income is pathetic. They often cannot afford to switch on their electric heaters or central heating even on the coldest days. As my hon. Friend the Member for South Ayrshire (Mr. Foulkes), who takes an interest in these matters, will know, it was estimated at one stage last January that 700 old people were dying every day as a result of hypothermia and cold-related diseases. Would it not be better if those people could afford to use the electricity generating capacity that exists in Scotland? Whether we like it or not, there is a massive excess of generating capacity over demand. One way out of the problem would be to stimulate demand. I put it to the Minister that we should be using this capacity. We should be burning our way out of this problem rather than freezing our way out of it. I should like to see use of this valuable asset in Scotland promoted rather than discouraged.

I wish to express some regret that the Minister seems to be taking rather lightly the points made by my hon. Friend. I remind the Minister that my hon. Friend is supported in his views by the Convention of Scottish Local Authorities, the Association of Metropolitan Authorities and the Association of County Councils. They are concerned about people suffering during the winter. We have not yet, as a society, responded to that suffering. If the Minister listens, he may agree with the points being made.

I am grateful to my hon. Friend. All hon. Members live in hope that Ministers will listen to debates. There is little evidence that this has taken place in the past. But the hon. Member for Edinburgh, North (Mr. Fletcher) will, perhaps, make a constructive reply. I know that the hon. Gentleman is capable of it if he applies his mind to the matter. If it was my decision to say where the South of Scotland electricity board should spend more capital money, I would be thinking in terms of combined heat and power.

There is a degree of urgency about a matter affecting my constituency as well as that of the Minister. I have referred already to the Cockenzie power station. An enormous amount of coal is known to be available in the Lothian coalfield and under the Firth of Forth. The power station is almost unique in being close to the city of Edinburgh and a number of surrounding towns. The hot water pumped into the sea from the power station is more than enough to provide heat for every household, office and factory in the whole of Edinburgh and the surrounding area.

The Scottish Office is about to start constructing a new bypass around Tranent and Musselburgh which passes within one mile of the Cockenzie power station. During construction of the new road, it would be possible to instal flow and return main pipes to support a district heating scheme for the centre of Edinburgh. Much of the groundwork has already been carried out by Lothian regional council on provision of a combined heat and power scheme for Edinburgh.

If capital expenditure in the electricity industry is being encouraged, we should think less in terms of building more power stations to mothball and increasingly in terms of the more efficient use of the energy that is at present being burned.

6.49 pm

There will be a general welcome on both sides of the House for the Bill. That is an unusual event when it concerns legislation produced by this Government, and especially by the Scottish Office.

This is the first increase in public investment in the Scottish electricity boards since the Government took office. Labour Members believe that a key to our economic future is increased public investment through our nationalised industries. That is one of the ways in which we shall beat the recession which is being worsened by the Government's economic policies. Their economic policies are affecting industrial and domestic consumers, especially those on low incomes.

For the first time ever, I was in substantial agreement with much of what was said by the hon. Member for Perth and East Perthshire (Mr. Walker) about standing charges and the difficulties they create for low income consumers. On the one hand, those people cannot afford to burn electricity, deliberately attempt to keep their fuel bills low, and are absolutely stunned when they receive a bill with a standing charge which is out of all proportion to the amount of fuel consumed.

I understand that the Minister's sidekick, the Secretary of State for Energy, has said that Government consultants are due to report on this matter by Christmas. Christmas will soon be upon us. What can we expect from these Government consultants? Have they given some kind of interim report or is the Scottish Office so out of touch with the Department of Energy that it does not have a clue as to what is going on? What are these consultants likely to recommend, not just for British Gas but also for the Scottish electricity boards?

There is a very strong argument in favour of waiving standing charges for old-age pensioners and others on low incomes, such as those receiving supplementary benefit. Could the Minister say what thinking is going on in Government circles, either in his office, if thinking goes on there at all, or in the Department of Energy?

Some hon. Members mentioned the vexed question of disconnections. Last year, well over 3,000 households remained disconnected during the coldest winter this century.

Will the Minister give us the up-to-date disconnection figures for this winter? Has there been any improvement on the figures for November and December 1982 compared with the respective months for 1980 and 1981? The incidence of disconnections in Scotland, where the climate is considerably worse than in the South-East of England, is becoming a national scandal.

The code ought to be made obligatory. If that means an Act of Parliament, so be it. It is worth pointing out that, despite the slight improvements in the code which have been introduced by the Government, 90 per cent. of those disconnected in Scotland last winter were mentioned in the code of practice yet were not protected by it. What is the point of having a code of practice if it is just a piece of paper which the electricity and gas boards can simply ignore?

Recently I had a particularly bad case concerning a single parent family—a young woman with a child—whose electricity was disconnected. The way in which the boards communicate with people leaves a lot to be desired. I have here a copy of the notice which she received. Before getting to the important part, there are about a dozen lines of absolute jargon which is written in language which only civil servants can understand. At the very end it says:
"If there is no one on the premises when the Board Officer calls this time, he will force an entry to the premises."

How much longer must we tolerate this legalised vandalism of breaking and entering people's houses? In this case, there was a misunderstanding and a lack of communication between the DHSS, the local social work office and the electricity board. As a result of that lack of communication, which was no fault of the consumer, my constituent was faced with the possibility of having no lighting, heating or cooking facilities for herself and her child until I got the supply re-connected. Must we tolerate this in a society which claims to be civilised or will we get to grips with the problem? Will the Secretary of State have the guts to tell the chairmen of the electricity boards that he will not put up with this, and if necessary will take the appropriate legislation through Parliament to make the provisions of the code statutory? At present, there seems to be a voluntary go-as-you-please attitude. Quite apart from the problem of disconnections, many people, particularly those on low incomes, try desperately to pay their electricity bills on time, perhaps successfully, but they still face the chronic problem of dampness. The problem of dampness, particularly in council houses, and more particularly in council houses where families are on low incomes, is greater where there is electrical central heating. In the 1950s and 1960s experts advocated the removal of chimneys and gas fires. The experts advocated that electrical central heating was the in thing, fired by the new nuclear technology. The whole thing has been an absolute disaster. When people are building houses, whether in the public or private sector, they ought to be instructed to give future tenants or occupants a choice of the type of fuel used. People should not be shoved into electrically centrally heated houses where they cannot afford to pay the massive bills. As a result, there is extreme dampness, which is a health hazard quite apart from anything else.

My hon. Friend the Member for Berwick and East Lothian (Mr. Home Robertson) referred to the excessive generating capacity in Scotland. The recession has exacerbated this problem whereby electricity generating capacity is in excess of demand. The reason for this, primarily, is the industrial decline in Scotland, which is a direct result of the Government's industrial policies.

I know that it is very difficult for the electricity boards or their economic consultants to get forecasts right, especially when just a few years ago nobody would have dreamt that the effect of the recession would have been quite so devastating on Scottish industry and on the whole Scottish economy.

In retrospect, it is all very well to say that the timing of Torness was a mistake. I can claim that I was consistent because I remember during the last Parliament saying that I would far rather have seen the investment for Torness going into the refurbishing of Kincardine power station or the further development of the Longannet project. That would have been far cheaper and would have provided more jobs at a time when unemployment was already too high in Scotland. Unemployment has more than doubled since the present Government came into office.

The last Labour Government were persuaded to invest £35 million in increased subsidies so that the South of Scotland Electricity Board could increase the amount of coal burning in its power stations. The Government have given nothing like that by way of public investment to try to encourage increased coal burn. Partly as a result of the policies of the last Labour Government, we saw the saving of Polmaise colliery in my own constituency which was threatened with closure, but now the Kinneil colliery seems to be on the National Coal Board's hit list. I hope that the Secretary of State, his Ministers and the chairman of the Tory Party in Scotland will defend Kinneil colliery with the same determination with which they appear to be defending Ravenscraig. If any Scottish pit with viable coal reserves is closed, it is only a matter of time before the whole Scottish coalfield will be endangered.

Apart from the 200 or 300 jobs immediately at stake in Kinneil, this is an important matter of principle, because if Kinneil goes it will never be reopened and others may follow suit. This is the danger, if one of our coal mines with workable reserves is closed, yet so far the Government have hardly lifted a finger or said a word about it.

There is almost a direct linear relationship between industrial and economic growth and electricity demand. Part of the reason for the decline in electricity demand is the industrial and economic decline of recent years. Another factor is the amount and use of investment in the hands of the electricity boards. For example. British Aluminium at Invergordon collapsed because the Government were either unable or unwilling to offer an energy supply package at an acceptable cost.

The Government may argue that they cannot continue to subsidise industry for ever. However, if during a recession we are to retain capacity, be it steel-making capacity or aluminium-making capacity, we should be using the public sector to try to weather that recession. Given more generous public investment of the type mentioned in the Bill, I doubt very much whether British Aluminium would now be faced with these problems. The closure of Invergordon is already a fait accompli, and the Government are so incompetent that they could not even get an absolute guarantee from British Aluminium that it would safeguard all the jobs in Falkirk and elsewhere.

The Government seem to be reluctant to intervene in the affairs of multinational companies and even in the workings of the nationalised companies over which they have more control and which should be more accountable to the public.

The Government often claim that we face the worst international recession since the 1930s. We should not regard a recession as an act of God, such as the weather or a calamity that is caused by nature. Recessions are manmade, and we must find man-made solutions to them. The Labour Party's alternative economic strategy would use the public sector not as a whipping boy but as the means of triggering the economic and industrial regeneration that we all want to see.

Instead, the Government have carried out act after act of demolition and so-called privatisation of the public sector, with proposals now to privatise parts of the electricity generating industries, without a thought for the job security of the workers employed by the SSEB or the North of Scotland hydro-electric board. The Government seem to be motivated by doctrinaire policy making. Unfortunately, the Scottish Office seems only too willing to follow in the silly footsteps of the Departments of Energy, Industry and so on, and pays no regard to the fact that many of their policies are contrary to the real needs of workers and industrial or domestic consumers in Scotland.

Whatever good may result from the Bill—we welcome small mercies; even a modest increase in public investment should be welcomed—I fear that much of it may be destroyed by the so-called Energy Bill that is now in Committee.

7.4 pm

This small but important Bill has given us an opportunity for a fairly wide-ranging debate on the electricity industry in Scotland. That opportunity has been welcomed on both sides of the House. I shall try to deal with most of the points that have been made.

The hon. Member for Stirling, Falkirk and Grangemouth (Mr. Ewing) and some of his hon. Friends asked about disconnections. This is an important part of the Scottish boards' responsibilities. The boards have been able to achieve a significant decrease in the numbers off supply compared with the same period last year. That has been welcomed by those in Scotland who take a particular interest in these matters, especially as account should be taken of the fact that the Government have already substantially increased assistance with fuel costs and will be spending about £300 million next year on that type of aid. That is the most generous fuel allowance package that has ever been presented.

It is true that the Government are looking at the question of standing charges, particularly in England and Wales. The House will be aware that the SSEB's domestic tariff does not include a standing charge as such, although a higher unit rate for the initial block of units coupled with a minimum charge of £3·30 per bi-monthly period is introduced. However, I suggest that the serious criticisms of standing charges do not apply to the SSEB.

The SSEB has now removed its £l·50 ceiling on entry to the DHSS fuel direct scheme. That has also been welcomed. All these things have occurred in the past year or so, and this debate gives me an opportunity to put them on the record.

The hon. Member for Stirling, Falkirk and Grangemouth and the hon. Member for South Ayrshire (Mr. Foulkes) asked about Chapel Donan and suggested that the SSEB's ownership imposes a planning blight on the area. The board has made it clear to the district council that it would be glad to examine with it how any prospective development can be accommodated. Should a specific proposal for industrial development come forward, it would be possible to consider the merits of the proposed alternative use of the site. In the absence of any specific proposal, the board feels that it should continue to retain the ownership of the site and reserve it for the possible building of a power station in the future.

Does the Minister really think that anyone would take the time, trouble, effort and energy to submit all the details of industrial development in that area knowing that the SSEB intends to cling on to the land? That is quite unrealistic. Does he also accept that, on the Grangestone industrial estate, which is on the site contiguous with the power station site, there are already worries about the lack of development? People there are also worried about the possible development of food-related factories next to a future power station. Under all the circumstances, would it not be better for the SSEB to accept the reality that it will never have a power station, which will encourage industrialists to come forward?

The SSEB is entitled to make the decisions that it has about the future use of the site. The hon. Gentleman's argument is weak because no prospective developers are coming forward, and none has said it would like to go on the site. There are other sites in Scotland that are reserved in some form or another by some type of public body.

I do not dispute that there may be too many. However, if people wish to develop a site, or if they put out signals of that type, the first thing that we do is begin to discuss with the public body what prospects there are of the site becoming available.

There has been much discussion about overestimates of capacity or the actual capacity being well in excess of demand. At no time have we tried to ignore that. However, no one has suggested the steps that might be taken to reduce the capacity. Whatever protests are made, everybody knows that the two new power stations of Inverkip and Peterhead that contribute greatly to this overcapacity were built with the best intentions, and are excellent stations.

Peterhead will be using gas for two or three years, and will therefore serve a useful purpose. It can also burn oil, and there is a possibility that it will turn to coal. Unfortunately, it is not well located to be a coal-fired station. Inverkip was very much in use during last winter and was able to supply electricity not only to Scotland but to south of the border where it was badly needed.

The right hon. Member for Greenock and Port Glasgow (Dr. Mabon) asked why Scottish boards had negotiated favourable load management terms with relatively few industrial consumers compared with England and Wales. The proportion of eligible consumers taking up load management terms is about the same in Scotland as it is in England and Wales. As I told him, the questions raised by the chemical industry are ones of which we are aware, and we are examining these with the board to see whether anything further can be done.

My hon. Friend the Member for Edinburgh, South (Mr. Ancram) asked whether the consumers would benefit from the profits earned by the board. He said that they should. My hon. Friend will know that the statutory requirement of the board is to balance its revenue with its expenditure. The profits may sound substantial, but as a proportion of the turnover of revenue of the board they are not excessive, although every penny helps.

My hon. Friend the Member for Edinburgh, South asked me to clarify what I have said about the effect of the extra capacity at Torness on prices. The recent decisions on prices were concerned with the allowance for building future stations, not specifically Torness. That will have to be paid for through the prices that we are now paying. However, the board's prices should not reflect the need to build any future stations. That was the point that came out during the investigation of bulk tariffs in England and Wales. That has been applied in Scotland.

I agreed with the spirited comments made by the right hon. Member for Greenock and Port Glasgow on the need for Scotland to stay with the latest technology. We are lucky to be able to be generating electricity from coal, oil, gas, hydro-power and nuclear energy, with aerogenerators in development and likely to come on stream as well. I add to that the point that the right hon. Member made—although in another context—that we look forward in the years ahead to seeing the first commercial demonstration fast reactor in Scotland at Dounreay. There are few countries, if any, of the size of Scotland that can boast such a range of ability and facility to generate electricity. It is right to support this technology.

I also agreed with the right hon. Member for Greenock and Port Glasgow when he took the time to detail our good safety record in the nuclear industry, which is second to none. The right hon. Member compared it with the health and safety record in the coal industry. I see cars with stickers that say "Nuclear Power? No Thanks", and when people of that conviction come to see me I listen to what they have to say, but suggest to them that they should also pay at least as much attention to the hazards of coal mining and the illness and dangers faced by coal miners every day in their work. This is something that either does not occur to these people, or which they choose to ignore for their own purposes.

There has been some criticism of the load factor of Hunterston B, but the House should know that it is a prototype AGR, and Torness and Heysham could learn from experiences there.

My hon. Friend the Member for Bute and North Ayrshire (Mr. Corrie) helpfully mentioned the cost benefit of nuclear generation over oil and coal. He also mentioned the safety record, this time specifically of Hunterston, which is reassuring to all of us in Scotland, and is no justification for those who try to spread panic about the dangers involved in nuclear power. My hon. Friend also asked about the potential for new hydro installations, particularly in the private sector. Under present legislation, private hydro developments of 50 kW require the consent of my right hon. Friend. The new Energy Bill increases this limit to 1 mW. I hope that this will encourage private hydro developments. The Energy Bill also lays down the statutory procedures for the purchase of the excess supply by the boards.

I shall write to my hon. Friend the Member for Bute and North Ayrshire on the breakdown of the 14·6 per cent. increase in the cost of oil, coal and nuclear fuels.

The hon. Member for South Ayrshire asked the Government to intervene in providing a coal agreement between SSEB and the National Coal Board. The SSEB will be responding to the efficiency study early in the new year, as I said. The NCB will be providing its comments at the same time and the SSEB will be looking for a new agreement that will guarantee the consumption of Scottish coal in the board's power stations. This is all in hand, and I shall take into account the points that the hon. Member for South Ayrshire has made. However, we can, except in the most exceptional circumstances, which I cannot imagine, depend on the two organisations—SSEB and NCB—to reach a proper agreement.

The salient point that my hon. Friend the Member for South Ayrshire (Mr. Foulkes) was making, reinforced by my hon. Friend the Member for West Stirlingshire (Mr. Canavan), was that when we, as a Labour Government, assisted in the agreement for coal burn, we injected £35 million into that agreement. How much are the present Government prepared to inject into a similar type of agreement to give some guarantee for the future of the coal industry?

That may be a salient point, but it has to be answered by my right hon. Friend the Secretary of State for Energy, not by me. My right hon. Friend is the Minister responsible for the Coal Board.

The hon. Member for South Ayshire also spoke of pit closures, which are again a matter for the NCB. It must be allowed to close down any pits that it considers to be uneconomic, after consultation with the National Union of Mineworkers. It should be remembered that the NCB is investing, and has been encouraged by the Government to invest, in the development of new pits where this is found to be economic. Hon. Members cannot have it both ways.

My hon. Friend the Member for Perth and East Perthshire (Mr. Walker) referred to standing charges. I am sure that he is aware that the main problem exists in industries and organisations outside the SSEB, although the whole question is being examined. I entirely agree with him in emphasising the importance of doing all that we can, as a Government and through the public utilities, to ensure that the prices charged to industry are as low as possible so that our industries have an opportunity to compete in Europe and elsewhere in the world.

I listened attentively to the hon. Member for Berwick and East Lothian (Mr. Home Robertson), but I was not sure whether he wanted Torness to be delayed to keep Cockenzie going or the other way round. At one point he seemed to suggest that electricity should be free throughout Scotland so that we could burn the excess capacity. His complaints about the lack of local employment in his constituency at Torness sounded more like Lothian nationalism than Scottish nationism, because every effort has been made to employ local labour. At present 3,500 people are employed at the station. The estimates are that two-thirds of those people are from various parts of Scotland—I hope that we do not grudge that—and about one-third locally. I suggest that that is not all bad.

I think that I made the point that there is still a large pool of unemployed construction workers close to the site. On the point of which the Minister made light earlier, will he say how the Government propose to promote the use of all electricity generating capacity that we shall have? Many of us fear that the commissioning of Torness on top of the excess capacity that we already have will lead to the closure of other viable plants. That is what I am worried about, because of my constituency interests.

Of course, power stations do not last for ever. Power stations have been closed. Even nuclear power stations do not last for ever. They, too, have to be decommissioned. Obviously, Hunterston A would be the first. I shall not list the stations that have already been closed, because I am sure that hon. Members know them.

As I said, we have had an opportunity today to consider the electricity boards in Scotland. As I think the House will recognise, the boards have tried recently to keep their price increases below the rate of inflation. Ministers have asked the boards not to increase their average level of prices next year, and that will benefit all the boards' consumers.

I have already mentioned the independent study of standing charges and the load management scheme, which the boards have introduced for large industrial users. These are all positive steps, looking to the best possible system of managing the operation of the electricity industry in Scotland. This Bill provides the facilities to continue what is an ambitious and worthwhile capital expenditure programme in Scotland. That, if nothing else, has been welcomed by every Opposition Member, including the hon. Member for West Stirlingshire. As this is one of the few occasions when he and I are in agreement, it is an excellent time for me to commend the Bill to the House.

Question put and agreed to.

Bill accordingly read a Second time.

Bill committed to a Committee of the whole House.— [Mr. Archie Hamilton.]

Committee tomorrow.

Electricity (Financial Provisions) (Scotland) Money:

Queen's Recommendation having been signified


That, for the purposes of any Act of the present Session to make provision for increasing the statutory limits on the amounts outstanding in respect of borrowings by the Scottish Electricity Boards, it is expedient to authorise—
  • (a) payment out of the National Loans Fund under section 24 of the Electricity (Scotland) Act 1979 of any increase attributable to provisions of the said Act of the present Session which increase by not more than £750 million the greater sum which may be specified under section 29(1) of the said Act of 1979.
  • (b) payment out of the Consolidated Fund of any increase so attributable in the corresponding sums which may require to be paid by way of guarantee under section 25 of the said Act of 1979; and
  • (c) any payments into the National Loans Fund or the Consolidated Fund.—[Mr. Archie Hamilton.]
  • Commonwealth Development Corporation Bill

    Order for Second Reading read.

    7.23 pm

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

    Last week, I heard of two politicians in a foreign country who were debating between themselves who should be the next president of that country. One of them suggested a name, and the other said "Oh no, he is such a boring speaker. If he were asked as president to give a fireside chat, even the fire would go out." I fear that chunks of my speech may be in that category, because they are rather technical.

    The Bill deals with the borrowing powers of the Commonwealth Development Corporation. It has two main purposes. The first is to replace the temporary borrowing limit of £10 million, which has stood unchanged since the corporation was set up in 1948, with a more flexible provision in line with that now normally employed for statutory corporations.

    The second is to raise the corporation's borrowing limits—from both the Government and otherwise—which were last raised by the International Finance, Trade and Aid Act in 1977. The opportunity is also being taken to enable CDC to borrow from the National Loans Fund should this be thought desirable at some time in future.

    I should perhaps say that the scope and purpose of the Bill are much simpler than the text itself may at first sight suggest.

    I agree with my hon. Friend that this is a horrible piece of legislation.

    The first change to which I have referred, as to the temporary borrowing limit, involves a good deal of essentially technical rearrangement of the relevant sections of the 1978 Act which consolidated the existing legislation relating to the CDC.

    I think that all right hon. and hon. Members will agree that over the years the CDC has proved itself to be among the most important and valuable parts of the British aid programme through its role of assisting the developing countries of the world by investing in development projects which not only help to increase their wealth but yield a reasonable return on the money invested.

    A distinctive feature of the way the CDC operates is the importance that it attaches to providing and developing management and training. Its ability to provide management from within its own resources—not just brought in from outside—makes a vital contribution to the success of the projects in which it invests. As expatriate management progressively brings on and then hands over to local management, those projects are thereby firmly and soundly based in the systems and societies within which they operate. This on-the-job training is supplemented by the CDC's agricultural management training centre in Swaziland which draws students from all over the world—by no means only from CDC projects.

    The Commonwealth Development Corporation has moved with the times. In its early years much of its largest investment was in direct projects or projects in which it held all or the greater part of the equity. Much of this investment—for example, in Malaysia and Swaziland—has now been sold to local interests or to the local government. Today, although the CDC remains eager to take an equity interest in suitable projects, most of its investment is in the form of loans, and it now frequently engages in joint financing with other development agencies, both national and international. It has played a leading role in setting up INTERACT, which brings together all the European development agencies of a similar character to itself.

    I have been struck in my travels around the world by the respect—indeed, I would say almost affection—in which the CDC is held. The contribution that it has made over the years to the development of many countries, particularly in the Commonwealth in which it still has some 80 per cent. of its investments, is deeply appreciated by them, not simply as an outside aid agency, but as an integral part of the local environment.

    The work that the CDC does is well known to many in the Chamber tonight and, much as I should like to do so, I shall not take up the time of the House by describing it. Members of the Overseas Development Sub-Committee have recently had an opportunity of seeing what the CDC does in Kenya, Tanzania and Malawi. I only wish that they had gone on to Swaziland, where they would have seen a superb example of the CDC's operations.

    The Sub-Committee's report was published this morning, and I have not, therefore, yet had time to study it, but I am told that, in general, it endorses the support which the House and successive Governments have given to the work of the corporation. I look forward with great interest to reading it more carefully, and I shall, of course, reply to the report in the normal way in due course. I take this opportunity of thanking the Sub-Committee for an excellent report.

    I should like, however, at this stage to say something about the loan that the CDC has been considering for an oil palm project being undertaken by the National Development Corporation of the Philippines and Guthries—now, of course, Malaysian-owned—in Mindanao. I have seen the recent report on the situation in the project area by the Catholic Institute for International Relations and the separate report by Amnesty International on human rights in the Philippines.

    I take those reports very seriously and sincerely respect the concern of those who have written to me. I assure the House that I shall give them the most careful consideration in reaching a decision on CDC participation in the project. I take equally seriously the very valuable contribution that I believe the CDC's co-operation can make to really worth while development in the area and the benefits that CDC participation could bring to the poorest group of the inhabitants of Mindanao.

    On 30 November I met a group of concerned Members of Parliament—my hon. Friend the Member for Essex, South-East (Sir B. Braine), the right hon. Member for Lewisham, East (Mr. Moyle) and the hon. Members for Harlow (Mr. Newens) and for Lambeth, Central (Mr. Tilley)—together with representatives of voluntary organisations, and the CDC, to discuss the issue. That was a constructive and helpful meeting, at which those who have doubts and criticism of CDC's participation in the project nevertheless expressed appreciation of the openness with which the CDC had discussed the problem with them.

    In the light of the very careful consideration that I have given to the representations made to me, I have asked the CDC, if it is to go ahead, to seek to secure adequate safeguards concerning the new security arrangements and the observation of fair employment practices. Concurrently the CDC board has proposed that later stages of the project should include a significant number of outgrowers. That should limit the disturbance to local farmers whilst ensuring that they benefit in their own right from the outlets that it provides for a remunerative new cash crop. Those conditions are now being discussed by the CDC with the National Development Corporation of the Philippines and the other investors. After those discussions, I shall be in a position to reach a decision. I would not wish to go into further details at this stage while the negotiations are taking place.

    As I said earlier, I have seen elsewhere in the world—I think of my recent visit to the Low Veld in Swaziland, transformed by the CDC over the last 30 years to the lasting benefit of its inhabitants and the country as a whole—what the CDC can do in a thoroughly practical and realistic way.

    The CDC's concern for the interests of the small man is evidenced by the 325,000 smallholders it has enabled to grow their own cash crops and by innumerable uses for their land. In industry and commerce it is shown by CDC's pioneering of development finance companies looking after the smaller projects on the basis of local decision making. The CDC has helped thousands to purchase their own houses.

    For many years the CDC has drawn its investment finance largely by way of concessional loans from the aid programme and from its own self-generated funds. Its disbursements to projects totalled £72 million in the calendar year 1981. Advances from the aid programme were £30 million in the financial year 1981–82 and are expected to be £34 million in 1982–83. I have informed the CDC that, subject to parliamentary approval, I hope to he able to increase that to £37 million in 1983–84. Because of the many other claims on the aid programme, however—particularly our multilateral commitments—we cannot provide from the aid programme all that we or the CDC would wish to enable it to sustain the level of investment for which the demand exists.

    As I told the House last December, the Government have accordingly agreed that the CDC should be permitted to borrow in foreign currency on approved terms with the Government guarantee up to £15 million in this financial year and in each of the next two financial years. Such borrowing, together with loans from the aid programme and self-generated funds, should enable the CDC to continue to invest at a level broadly comparable in real terms with that which it achieved for most of the 1970s.

    I shall now deal with the Bill. Clause 1 amends section 9 of the 1978 Act to enable the CDC to borrow from the National Loans Fund. Similar provision now exists in legislation dealing with other public corporations. It would make available to the corporation an alternative source of funds, should the Government at some future date prefer borrowing to be undertaken from the NLF rather than, as at present, from the private sector. It does not mean that we envisage that the CDC should be required to borrow at market rates from the NLF instead at concessional rates from the aid programme. Perhaps the fire is beginning to go out. Clause 2 brings us to the main purposes of the Bill. Section 9 of the Commonwealth Development Corporation Act 1978 dealt with the borrowing powers of the corporation and set limits on the amounts that it may borrow temporarily and otherwise. The temporary borrowing limit has remained at £10 million since the corporation was established in 1948. The limit in respect of sums borrowed otherwise was set in 1948 at £100 million and was last raised in 1977 to £500 million, extendable by order to £570 million.

    The CDC has hitherto needed to make little use of its temporary borrowing powers, because its internal liquidity has largely been sufficient to meet short-term financing needs. The CDC has, however, sought an increase in its temporary borrowing limit, both because the original limit is now much reduced in relation to the scale of its operations and to enable it to alleviate any short-term cash problems. Such an increase should give the CDC greater freedom of manoeuvre in relation to the timing of commercial borrowing, to which I have already referred. While there is not an immediate requirement for an increase in the CDC's temporary borrowing limit, the need for such a step may arise in the near future.

    It is therefore proposed to bring the provision for temporary borrowing by the CDC into line with that now commonly used by public sector bodies by amending the Commonwealth Development Corporation Act to enable the Secretary of State, with the consent of the Treasury, to set a limit on temporary borrowing from time to time. That is effected by subsection (3) of the new section 9A.

    I propose at the same time to raise the CDC's overall borrowing limits, which were last increased in 1977. With its new power to borrow commercially, as well as under the aid programme, the CDC's estimated total borrowings could approach the £500 million limit within three years or so. Therefore, I propose that the overall borrowing limit—including temporary borrowing and borrowing by subsidiaries, or where the CDC has incurred a contingent liability—should now be raised to £750 million, extendable by order by the Secretary of State, with the consent of the Treasury, up to a maximum of £850 million. That should provide adequate borrowing powers until the end of the 1980s. Those changes are made by subsections (1) and (2) of the new section 9A.

    Subsection (4) of the new section 9A is consequent upon the decision, to which I referred earlier, that the CDC should be permitted to borrow commercially, and it provides for the sterling equivalent of such borrowing to be calculated, for the purposes of the overall borrowing limit, in a way to be determined from time to time by the Secretary of State, with the consent of the Treasury.

    Subsection (5) of the new section 9A provides that the draft of an order raising the CDC's borrowing limit has to be laid before and approved by the House of Commons, while subsection (6) provides that temporary borrowing includes overdrafts, and it defines "subsidiary".

    Clause 3 is consequential upon the proposal to raise the CDC's overall borrowing limit to £750 million—extendable by order to £850 million—and amends the 1978 Act by increasing the limits within which the CDC may borrow from the Secretary of State to £700 million and £800 million, respectively.

    The Bill will assist the CDC in continuing the valuable and distinctive contribution that it makes to overseas development in which its chairman, board and staff, to whose conspicuously successful and devoted service I should like to pay tribute, can take justifiable pride.

    I commend the Bill to the House.

    7.39 pm

    The Minister himself has paid tribute in generous terms to the late Frank McElhone, but I cannot let this moment pass without mentioning his name, knowing how much the Houe, and indeed everyone interested in aid and development will miss his presence at our debates.

    I thank the Minister for his explanation of the Bill, and in particular of its technical aspects. In general, the Opposition welcome the Bill. It increases the borrowing limits of the Commonwealth Development Corporation, and this is clearly necessary. Secondly, it provides for greater flexibility between short-term and long-term borrowing.

    Second Reading provides an opportunity to pay tribute to the remarkable progress of the CDC during its 30-odd years of existence. Set up by the Attlee Government in 1948, it earned the obloquy and sometimes the ridicule of the Conservative Party. It was a new concept. The CDC and its staff were working in a relatively untried field. There were bound to be failures—one was the Gambia poultry scheme—but the CDC learnt from its own experience and today operates according to a number of priorities which ought to commend themselves to hon. Members. Since 1955, the CDC has earned a surplus in every year of operation.

    Like the Minister, I must express my gratitude to the Overseas Development Sub-Committee for the report published this morning. Alas, the timing might have been better handled. If the Government business managers had delayed the Second Reading by a day or two hon. Members would have been able to study the report. However, some of us have studied the minutes of evidence, which in general show the CDC in a very good light, and a quick reading of the report suggests that the Sub-Committee commends highly the corporation's work.

    Although the CDC's borrowings are tied to the aid vote, it is not an aid agency. It gets its money back over a long period from projects which take time to mature in poor countries. The CDC has been described as bridging the gap between aid and investment, acting as a catalyst for those prepared to invest in developing countries. Its record in overseas development is impressive for a number of reasons.

    First, it concentrates attention on poor countries. Eighty per cent. or more of its work is done in countries eligible for International Development Association assistance. I was somewhat surprised that the interdepartmental review suggested that only half rather than two thirds of its work was devoted to the poorer countries. It is in the poorer countries that its contribution has been so very important.

    Secondly, the CDC lays special emphasis on agriculture and operates a special preference in favour of small farmers. Many years ago I visited the headquarters of the Kenya Tea Development Authority, which covers no fewer than 140,000 farmers. The Minister referred to the important concession that the CDC often provides to enable its employees to grow their own food crops.

    Thirdly, the CDC recognises the right of local people to buy into the assets which have been established. The tea development authority is a good example of this. The tea growers on the scheme have been able to buy themselves into their own factories.

    Fourthly, as the Minister also mentioned, the CDC makes a very important contribution to training in technical and managerial expertise. There has been an increasing recognition of the crucial importance of this element in development. As Mr. Bradford Morse, the administrator of the United Nations Development Programme, said last month:
    "Technical change, increased skills and knowledge, new and more efficient ways of organising and managing organisations and institutions—these go to the heart of what technical co-operation is about."

    Fifthly, the 1978 Act contains a provision designed to guarantee the interests of employees. I understand that the CDC, through the Commonwealth Trade Union Council, encourages advice to organised labour. Its aim is to be among the best employers overseas. There is deep concern among the Opposition, and, I hope, elsewhere, about the behaviour of some transnational companies in poor countries. I cannot over-emphasise the importance of this aspect of the CDC's policy and its direct relevance to development. Nor can I emphasise too strongly the importance of codes of conduct in relation to investment policy in general. I believe that the CDC could meet such codes of conduct with little difficulty. Some hon. Members will want to refer to that point in relation to the Philippines. Indeed, I shall do so myself shortly.

    The CDC's work in energy resources and water supplies already represented 23 per cent. of its total commitments in 1981. No one could doubt the relevance of that priority in the Third world today.

    In short, the CDC prides itself, with some justification, on being a pioneer. A World Bank official readily admitted the CDC's claim that it brought the World Bank into small-scale agricultural development, and the examples set by the CDC have been followed by similar bilateral and multilateral bodies.

    I therefore welcome this small Bill. It is the first time that the overall borrowing limit has been raised since 1977. I assume that the need for the increase is due largely to inflation, but I believe that it is also necessitated by new commitments.

    Clause 2 does a little tidying up to ensure that the borrowing limits include borrowing by CDC's sub-sidiaries. I take it that that is simply a technical provision to satisfy the Treasury. Perhaps the Minister will confirm that.

    In addition, the Bill transfers the fixing of short-term borrowing limits from the House to administrative action. I hope that officials will recognise that the CDC, with its world-wide activities, needs considerable flexibility in this regard. Given that its role is exclusively one of long-term investment, to equate its position with that of a nationalised industry could have serious consequences.

    The House is being asked to increase the borrowing powers. We are therefore entitled to express a view about how those powers are to be used.

    First, when the Government came to power it appeared from their actions that they harboured some doubt about the CDC. They administered a swingeing cut in the CDC's funding amounting to a decline of 34 per cent. in real terms. The CDC was forced to accept more than its fair share of cuts in an aid budget that should never have been cut at all.

    An interdepartmental review was then begun. The experience of the previous review, in 1975, should have taught us that reviews, important though they may be from time to time, tend to cast a shadow of uncertainty over organisations such as the CDC which operate through long-term planning. Therefore, such reviews should not be undertaken lightly. There is a danger that capital development programmes will lose momentum. As the general manager of the CDC put it, development is not a stop-go business.

    I am not sure what the 1980 review achieved, except perhaps to reiterate the Government's prejudice that commercial and political considerations should enter into aid priorities. As the Minister knows, the Opposition contest the relevance of such considerations to aid policy. Their appearance in the policy directions given to the CDC certainly seems otiose. Over a five-year period CDC's projects have led to procurement from Britain worth about £100 million. My advice to the Minister, therefore, is:
    "seek ye first the Kingdom of God".
    The way to ensure more commercial contracts for British industry and jobs for British workers is to fund the CDC better.

    The CDC involvement in the palm oil plantation project in Mindanao in the southern Philippines is a vexed issue. The House should recognise that the Minister faces a serious dilemma, as does the CDC.

    There is no doubt in my mind that financial backing for investment in the area is needed. The Government of the Philippines are keen to develop a desperately impoverished area. If the Minister decides against investment by the CDC it would put paid to a linked investment from the International Finance Corporation and it would prejudice the chances of any future investment in the area.

    It may not be fully appreciated that withdrawal from the Guthrie project, which the Minister has mentioned, will almost certainly prejudice the chance of CDC being permitted by the Government of the Philippines, and the National Development Corporation there, to engage in the much better project in La Paz and Loreto, where it may be possible for the corporation to pursue more enlightened policies than seem to have characterised the project in which Guthrie is involved.

    The CDC has told me that it considers itself to have a moral obligation to proceed with the project and, to quote its words,
    "to delay or abandon it would be considerably damaging, not least to the ordinary people in that exceedingly poor area."

    Further it attributes much of the present unrest in Mindanao to its extreme poverty. It believes that its participation in sound economic development in the rural areas will help to improve the lot of the poorest section of the community. In its view, the alternative would be chronic penury in that highly depressed area.

    Statements of that sort from the CDC—a body which rightly enjoys a high reputation for its project appraisal—are not to be taken lightly, particularly when they follow an on-the-site visit by Sir Peter Meinertzhagen, the general manager, in October this year. Yet the House should be disturbed by reports which have emanated from that area.

    The Minister mentioned the Catholic Institute of International Relations pamphlet "British Investment and the use of Paramilitary terrorism in Plantation Agriculture in Agusan del Sur, Philippines". I want to draw the attention of the House to several points in that pamphlet. The Philippine Government back the project. Why do they? Page 5 of the pamphlet suggests the reason:
    "The Government requires considerable flows of foreign currency to shore up its sagging foreign resources and mounting trade deficit."
    So keen are they that it appears that the foreign partners will be required to pay no export or income taxes and will be free to repatriate profits.

    I am afraid that it seems likely that the Philippine Government are not so much keen as desperate for development and are prepared to pay almost any price for it—a position which I am afraid is liable to affect Governments of many Third world countries faced with the impact of world recession. I am not criticising the Philippine Government's motives, but the House should be aware of them.

    The Minister will have seen copies of letters written to Lord Kindersley by local workers and farmers, by human rights groups, a statement by the Commission on Social Action, Justice and Peace of the Catholic Bishops' Conference of the Philippines and a petition from Loreto sent by father Ton Zwart. He says:
    "We the 70 to 80 per cent.…do not, we repeat, do not agree to the entry of CDC or any other foreign company into our place."
    Why do they say that?

    Many hon. Members will have read several disturbing reports. The CIIR pamphlet in August drew attention to the destruction of private rights in land without compensation of farmers for the loss of properties. The Presidential Assistance for National Minorities, a Government body in the Philippines, was not consulted as the law of the Philippines apparently requires. Dispossessed landowners have acted as subcontractors of labour and have been permitted to take a share of the labourers' salaries as partial compensation for the loss of their land. Perhaps most disturbing of all are the activities of the so-called Lost Command—a force of ex-soldiers and criminals which is used as hired guards. The use of 12 members of that body is a matter of great concern. There were 30 unexplained murders in 1981 and the CIIR pamphlet suggests that Lost Command may have been responsible for some of them. Murders have continued in 1982 and in July there was a case of rape. Nobody knows for sure who was responsible, but the local tale is that it was that body.

    As I mentioned, Sir Peter Meinhertzhagen visited the project. I am glad that he did. I have visited many projects myself, as have many other hon. Members on trips abroad. Frankly, I have often gone away having visited projects not feeling entirely sure that I had got hold of the truth. I want to read one of the accounts from Mindanao and I make no criticism of Sir Peter Meinhertzhagen when I say that this is presumably an account of his visit through a local person's eyes. He arrived and was greeted by the mayor:
    "The mayor explained to the people in attendance that the purpose of the white people was the land of La Paz and Loreto, to be planted with oil palm, and that the CDC from England would provide the finance. Smiling, the mayor said in Bisaya: Aren't you happy that before December we will have light (electricity) here? Aren't you happy that the last 15 kilometres of road from Veruela to Loreto will be completed by the white people who will speed up the work? Applaud!' And the people did indeed applaud. Then the mayor continued in English: 'These are all Barangay Officials and their heads … giving their hands by way of applauding, filled with joy and happiness. They are all accepting you for entering in our place, specially the CDC implementing plantations for the development of our abandoned lands here'."
    The account goes on:
    "The following day, October 28, an open forum took place and many questions about CDC's entry would have come out. (What will our livelihood be, and that of our children if CDC buys most of the land? Won't diseases multiply because of the chemical sprays plantations use?) But the facilitator declared that these questions were not relevant to the topic under discussion."

    A great deal more investigation needs to be undertaken into the views of local people. I agree entirely with the Minister that the CDC should seek to gain undertakings which it clearly has not got at the moment. I have the gravest doubts about this venture.

    Normally I would expect the Government not to become involved in the day-to-day decisions of the corporation. The corporation has demonstrated by its own record that in the great majority of cases it is capable of making good decisions, indeed, sometimes better decisions than it might have made had it had the Government breathing down its neck.

    However, this is a special situation. At one point the corporation said to me that the undertakings which it has received represent the utmost that it could expect to obtain
    "without interference in the internal affairs of the Philippine Government."

    I regard the undertakings which have so far been obtained as unsatisfactory. Therefore, I wonder whether the Government ought to take a greater measure of responsibility for negotiations with the Philippine Government so that a final decision may be made.

    I am worried that involvement in the project could do grave damage to the reputation enjoyed by the CDC both in this country and internationally. I said at the start that that reputation stands high because of the emphasis placed by the CDC on the small farmer, its respect for local people and their rights and, above all, its observance of the highest standards of conduct. I know that the hon. Member for Essex, South-East (Sir B. Braine), who cannot be here, shares those views, as do my hon. Friends the Members for Harlow (Mr. Newens) and Lambeth, Central (Mr. Tilley) who met the Minister last Monday week.

    It would be a great pity if that reputation were to be tarnished by being involved in a project which has aroused local hostility and has been marred by dubious practices and strong-arm tactics in the past and where there seems to be barely any guarantee that in the end local people will inherit the benefits of the investments—which I believe is the objective of most CDC projects.

    The reputation of the CDC in the areas in which it operates stands as high as that of any similar body. I want to see it stay that way. I welcome the Bill because it provides more resources to continue the corporation's excellent work. I want to see the corporation extend its work, mostly in the Commonwealth but also outside, for the real benefit of the poor of the Third world.

    8 pm

    I believe that the Commonwealth Development Corporation is a great British success story. We should take the opportunity of the Second Reading of such a Bill, of which we do not have as many as some of us would wish, to pay tribute to the achievements of the corporation, its board, staff and those people who work in the field and have been doing so since it was founded 34 years ago.

    During that period the corporation initiated hundreds of new enterprises in poor countries. It has made those enterprises pay and trained local people to take them over, and it has handed them over as going concerns. It has provided aid in the best possible way by helping people to help themselves. It has brought new hope and dignity to people in poor countries. The corporation has brought great benefits to this country in terms of extra trade, goodwill and prestige.

    Therefore, I support the Bill, as I assume all hon. Members will. However, I want to pose three or four questions to the Minister. The most important is that, given the effectiveness of the CDC, should it not be playing a larger part within our aid programme and should it not be expanded in the years ahead?

    I noted what the Minister said about the funds that would be available this year, next year and the following year from the aid programme—it is an expanding amount—and about the other forms of finance available to the corporation. If I heard him aright, he said that they would enable the corporation to pursue activities over those years on approximately the same scale as it did during the 1970s. The principal point that I want to put to the House is that, instead of thinking in terms of activities on an even keel in real terms, we should think of expansion.

    This is not the time to go into the general arguments on the aid programme. I put the position of the CDC against the background of the aid programme in this way: when, last Session, the Opposition initiated a Supply debate and attacked the Government for their disproportionate cuts in the aid programme I agreed with the Opposition's case to the extent that I abstained in the vote. I have felt for many years that, under both Labour and Conservative Governments, the country should have given greater priority to overseas aid programmes. The same is true of the other main aid donors in the world. There seem to be overwhelming moral reasons and reasons of self-interest why that should be so.

    Even if existing aid programmes were doubled, and they will not be, in the next few years, they still would not measure up to the needs of a world which is hungry for development assistance. The imperative requirement is that every pound, dollar, mark, franc and yen should be used to maximum advantage in development terms. We should look more stringently at the effectiveness of some institutions compared with others.

    In 1968, Sir Andrew Cohen, then permanent secretary at the Ministry of Overseas Development, gave evidence to the Estimates Committee as follows:
    "The Ministry of Overseas Development regarded the CDC as probably as efficient a form of aid as exists in this country or anywhere in the world, a view which I know the World Bank also hold."
    When the Committee reported to the House, it said:
    "This is high praise but your Committee believe it to be well founded."
    That view has been repeated in other reports since then. I quoted that report, because I was Minister for Overseas Development at the time and I certainly share the view expressed by the permanent secretary.

    That view has often been repeated and I understand from what has been said that the report just issued by one of our Select Committees also praises highly the CDC's work. However, I have not seen that report myself. Following the Estimates Committee report, the House approved a Bill in 1969 that raised the borrowing limits by £75 million to a new ceiling of £205 million. It was my privilege to introduce it.

    The CDC's success story, and the high esteem in which it is held by observers throughout the world compared with other institutions, probably has three main causes. First, it has a high success rate for choosing the right projects. That does not mean that every project has been successful. There will always be failures from time to time, but the high success rate derives partly from the degree of independence from political considerations that it enjoys, and partly from the stringent financial disciplines that it has to live within. That has led it to make sensible choices.

    Secondly, the CDC is flexible in its operations. It usually goes into operations in co-operation with others. It co-operates with private enterprise from this country, from other developed countries or from the country in which the development is taking place. It also co-operates with the Government and other public agencies in developing countries. There is usually a mixture of management which varies according to the circumstances.

    Over the years, far too much time has been wasted arguing about the relative merits of Government aid, private enterprise and self-help on the part of developing countries. Those countries need all three, and to a much greater extent at present. The CDC's merit ties in its adaptability and flexibility in matching its input, alongside other inputs, to local circumstances. It is indicative of that that it has recently developed a new form of co-operation, to which my right hon. Friend the Minister referred, with similar European institutions.

    The third reason for success is the CDC's emphasis on training. Choice of the management of projects has always been made most carefully. Once in operation, the management's main priority is the training of local people as managers, and in other necessary skills. Therefore, it has performed an invaluable training role. If possible, the CDC should expand, even though the aid programme is not expanding as much as many of us would like. I recognise that there are enormous demands on the aid programme. I have had experience as a Minister and I know that the problems surrounding priorities are great. I also know that this country has many development aid obligations that have to be fulfilled. Therefore, the scope for manoeuvre is limited. Given the overriding need to obtain the maximum value for every pound spent, there is a prima facie case to expand the Commonwealth Development Corporation's role within the greater development programme.

    The hon. Member for Greenwich (Mr. Barnett) mentioned the priority that the CDC has always given, and still gives, to agriculture. That priority is right. During all the arguments that have taken place over the years about development and the changing fashions in priorities, one lesson has emerged clearly. It is not a new lesson but a very old one—for a developing country to have an industrial revolution, it first must have an agricultural revolution. That is true of the history of Britain and of many countries that have developed in previous centuries as well as in this century. The lesson was ignored in the early development plans of many newly independent countries in the 1950s and 1960s.

    A great error was made in going for too rapid industrialisation and too many prestige projects. That error was often encouraged by the mistaken view of the aid donor countries. The lesson has now been learnt and an emphasis on agriculture has been a common feature of the policies of most developing countries, most aid donors and most international institutions in recent years.

    I have had the privilege of visiting some CDC projects overseas and the agricultural projects have impressed me most. I am thinking especially of the Lobatsi abbatoir project in Botswana and its revolutionary impact on Botswana cattle farmers. The last visit that I paid to a developing project overseas during my second term as Minister for Overseas Development was to Northern Kenya. An expansion of a sugar refinery took place there as the result of an initiative taken by the CDC in co-operation with other agencies.

    There are many other examples. The Minister mentioned the important agricultural training centre in Swaziland. I invite him to give us more details about the proportion of agricultural projects in the current CDC programmes and any information about future CDC intentions on agriculture.

    I had the privilege of introducing the Act of 1969 that extended the CDC's powers so that it could operate in non-Commonwealth countries. I know from its annual reports that it has done so in several countries. At the same time, the Commonwealth continues to receive priority and that is right. The CDC's work approximately reflects the aid programme priorities. It is right that the priorities within the British aid programme should be towards the Commonwealth countries where we have the closest ties and historical obligations and where, because of a common language and similar institutions—the fact that people know one another and their methods—our aid can be most effective. We benefit from continuity and from experience.

    At the same time, it is right that our aid programme should include other countries just as other donor countries provide assistance to the Commonwealth. We should see the point of view of the developing country. It does not wish to have all its eggs in one basket and to be over-dependent on one donor. There is a correct mix of aid donors in developing countries. The CDC should operate in non-Commonwealth countries, but the Commonwealth should have the first priority. Can my right hon. Friend tell us about the present and future priorities of the Government?

    The hon. Member for Greenwich mentioned the proposed development in Mindanao. I have not studied the matter and I shall speak about it tentatively. However, from experience, I have found that one does not improve civil liberties by depriving people of the opportunity of development. More often than not, one can make a bad position worse.

    This is a matter of great perplexity. When I was Minister I was perplexed by many such matters. The British Government gave aid to strengthen the economies of countries that had internal policies that were repugnant to us. That has been so in the past and it will happen in future. If an aid donor country says "We shall provide aid only to countries that have a totally clean bill of health on civil rights", they will not provide much aid. We must face the facts of life.

    However, one is also faced with the fact that in some extreme cases the withdrawal, or the threat of withdrawal, of economic assistance may be justified by the extremity of events. When I was Minister for the second time, the Government did not provide aid to Uganda when it was governed by Idi Amin. No one believed that we should do so. However, in that position, as in many others, two separate questions are often mixed up. One must consider the civil rights and liberties in the country and the ineptitude of some dictatorships, where the provision of money would simply be money down the drain and would not lead to effective development.

    I was perplexed by all those problems. At one stage, I initiated a discussion at ministerial level of the development assistance committee of the OECD. I found that my opposite numbers were equally perplexed by the problems. They were worried about a world in which there were too many infringements of civil rights, too many political prisoners, too many imprisoned without trial, too many people tortured and too many of the horrible atrocities that seem to be growing in this century. We wondered how we could use our leverage to influence those countries. One cannot lay down absolute guidelines. The threat to withdraw economic assistance may occasionally be relevant but, more often than not, it does more harm than good. I was satisfied with what my right hon. Friend said about the assurances that he is seeking. I shall not press the matter further, although all of us will watch the matter carefully.

    I support the Bill, but I wish to have answers to some of my points, especially the central question of whether the CDC should become a larger part of our total aid programme.

    8.17 pm

    I shall not follow the broader arguments of the right hon. Member for Daventry (Mr. Prentice), nor shall I follow his party political arguments. However, I shall take up his latter point and return to investment in the Philippines. The central and most controversial issue tonight is whether that proposed investment would put at risk the fine reputation that the CDC has acquired during the years of combining sound investment and valuable development in the Third world.

    I, too, reflect the views put forward by various agencies, including the Catholic Institute for International Relations. Investment was suspended after the CIIR drew attention last August to the abuses, symbolised by the presence, as security guards employed by the company, of members of the notorious irregular military force known as the Lost Command.

    I accept what the Minister said about the CDC taking the criticisms seriously. I am not as convinced as he appears to be that the CDC has obtained sufficient assurances about the removal of the Lost Command from the plantation site and that the CDC will win the consent of local farmers for the project that it intends to manage by methods that it has used with success elsewhere. Reports from the area show that the ending of the intimidation, racketeering, and so on, is easier said than done and that the removal of the Lost Command from the plantation, even if it happens, is only part of the solution.

    The CIIR has made available documents which contain the recent views of people in the area about the project. I do not apologise for relying on the documents because, unlike no more than a handful of hon. Members, I am not an expert on the Philippines. I should like to stress the recent nature of these documents. They reflect the views of local people not only since the CIIR report was released, but since the CDC has been there and begun to receive and negotiate some of the assurances mentioned in the debate.

    I have been supplied with a copy of a telegram from the diocesan clergy of Mindanao-Sulu to the chairman of the CDC. It refers to
    "strongly requesting the postponement of your board decision to loan NDC-Guthrie Plantations, Inc. … Farmers' sufferings continue to breed opposition. Please wait for further information from justice and human rights groups."
    The Mindanao Peasant Board sent a telegram
    "urging you with deep concern to postpone decision to loan NDC-Guthrie Plantations, Inc… heightened militarisation and harassments in the area continue to be felt. Please hold your decision until further data is available."

    There is a similar telegram from National Priests and Religious Union-Mindanao. All the telegrams are dated 18 November, only a few weeks ago and therefore since the visit of the high-ranking CDC official.

    Perhaps the most telling document is the one dated 21 November—even more recently—signed by 1,000 workers and farmers of the area. They make serious allegations about what appears to be still going on:
    "The company hired a brutal armed group … the Lost Command as its security force adding further to the problems of the populace. Lost Command members as company guards harassed and threatened landowners and forced them to sell or donate their lands to the company. Moreover, they also committed unthinkable abuses like: a. the rape of three women workers; b. the savage or summary execution of several workers; c. the mauling of suspected sympathisers of the NPA or workers because of petty personal differences."

    The complaints of the local workers have already received publicity, particularly in an article in The Sunday Times two weeks ago. The final paragraph of that article quotes a CDC official as saying:
    "These are the sort of grievances you get in most places, including Bradford, no more than the ordinary beefs of dissatisfied workers."

    I do not consider rape, intimidation and murder to be the small change of industrial relations complaints in Bradford or, indeed, anywhere else in Britain. If the quotation is genuine—I accept that being misquoted in The Sunday Times is not the lowest form of hindsight, but it is fairly low—and is still accepted by the CDC as its policy, it is a disturbing insight into the seriousness with which it views such complaints. I hope that we can be given an assurance that the quotation is not genuine or, if it is, that it does not reflect the CDC's considered view.

    The last document to which I shall draw the attention of the House embraces some of the wider questions that arise. It comes, we are told, from 17 priests of the diocese of Butuan. They make perhaps the most important general point that the
    "NGPI is a private enterprise which does not share the development philosophy of CDC"—
    the very development philosophy that we have been discussing. The document states:
    "This became perhaps at no time clearer than when NGPI decided to go ahead with the project in spite of the lack of consultation at local level"—
    my hon. Friend the Member for Greenwich (Mr. Barnett) has already referred to that—
    "and in spite of the large number of farmers it was surprised to find in occupancy of the proposed plantation site.
    NGPI is said to have learned from the wrongs committed in the past. Unlike before, they offer now payments for land that they acquire from the farmers. This is an improvement indeed, but it does not settle the land problem as NGPI seems to assure."
    The next paragraph reads:
    "NGPI has always denied that the Lost Command played a role in the corporation's land acquisition. Our info oration is different. Up to now elements of the Lost Command act as agents or middle men in contacting the farmers and persuading them to sell. At first only one Lost Command may appear, then two show up then again three or more. The arms they carry along bring out the message very clearly to the farmer. When in the end a deal is made, the Lost Command demand a commission for every agreement signed."
    That sounds as if it earns it as well. The letter adds:
    "It is important to note that these abuses take place outside the estate, on land still to be acquired by NGPI. For this reason, it is not enough that the Lost Command be replaced as company guards. They ought to be removed from a much wider area than the company premises."
    That is a demand that I hope the Minister will be passing on to the CDC. The letter declares:
    "There is no escaping the issue: the Lost Command ought to be disarmed and made harmless. At the very least, they should be out of reach of NGPI, i.e. removed from Agusan. Moreover, their replacement on and off the estate should be of a different kind. They must not be another so-called paramilitary force."
    The priests return to the broader issue and state:
    "The solution of the security problem is only a pre-requisite to the attainment of the avowed development goal of the project. Development does not automatically follow. The basic question for us is: who stands to benefit from the scheme? Will it be the farmers, a good many have been accepted on the plantation? At present, they receive a reasonable wage according to Philippine standards, but Philippine standards are very low and fall short of the basic needs requirements."
    The priests conclude:
    "Our conclusion must be that the farmer-workers are surety not the primary beneficiaries of the plantation project. Rather, they have come under the effective control of a private enterprise not adhering to the development philosophy of CDC."
    These seem to be major matters of principle that the Minister should examine.

    I accept to a degree two of the arguments advanced by the CDC in responding to the various criticisms. One of them has been repeated by the right hon. Member for Daventry. It is contended that, if there is no development, the problem will get worse and the Lost Command's grip become tighter. That might be true. Equally, if there is development, we want assurances that the Lost Command, or its equivalent, will not carry out similar activities and get richer pickings. My experience of protection rackets—it is all vicarious—is that, when the pickings get richer, the protection rackets do not necessarily fade away. The very opposite is true.

    The right hon. Member for Daventry raised a legitimate point. The CDC, like any other agency, cannot confine its activities to those Third world countries with perfect human rights records. If that were the case, it would make virtually no investments. That is not the end of the argument. It has a responsibility to examine the human rights records of the countries in which it operates, especially countries outside the Commonwealth.

    I say "especially countries outside the Common-wealth", not because Commonwealth countries are automatically all right, but because there is less awareness in Britain through the press or through parliamentary experience of what is happening in those other countries. Because of that comparative lack of awareness, it is more difficult for public opinion, Members of Parliament and the various agencies to keep an eye on what is happening and to make valid comments on proposed developments.

    The CDC has a responsibility to ensure that it is part of the answer, not an addition to it. It has a responsibility to ensure that it is not propping up abhorrent regimes, that it is not condoning land snatching, and that it is not winking at terrorism, even if it is officially sanctioned. I am not yet satisfied that the CDC has met those responsibilities fully or ensured that its proposed investments would fully meet those responsibilities.

    I attended the meeting to which the Minister referred. One could not fail to be impressed by the detail into which the CDC went. However, the detail was sometimes more worrying than the broad sweep. I shall take just one example. The CDC said that it was aware that the company involved had begun by taking land without compensation, but that the company had now seen that that was wrong. It is worrying to deal with companies which have to be told that taking land without compensation is wrong. Much remains to be answered.

    I should like the Minister to give one assurance. He is to ask the CDC to tighten up the assurances that it is receiving and to ensure that safeguards are more adequate. Before he makes his final decision, will he let those of us to whom he was kind enough to refer as concerned Members and agencies who have taken an interest in the project know the nature of those renewed and renegotiated assurances so that we may make a judgment? By "we" I mean the House and those agencies that are willing to advise us or comment.

    It is coincidental that this case has arisen when the Bill is to be given a Second Reading. May we have an assurance that the opportunity of a debate on the issue will not disappear? I hope that the final decision will not be taken on the basis of new assurances and negotiations that have not been reported to the House.

    I understand that the Minister cannot engineer a special debate on the Philippines on the day that he receives the renewed assurances. Nevertheless, will he assure those of us who attended the meeting that he held that he will reconvene that meeting to let us know what the new assurances are, thereby giving us a chance to comment on them before he makes his final decision?

    8.35 pm

    Like all hon. Members who have spoken, I welcome the Bill. It was a pleasure to listen to my right hon. Friend introducing the measure and also to hear the comments of my right hon. Friend the Member for Daventry (Mr. Prentice), who has a great fund of expertise, some of which he was good enough to place before the House. I welcome the project to extend the Government's borrowing limit from £500 million to £850 million as a maximum. In these days of financial stringency, that is a considerable sum. There is no greater supporter of the CDC and all that it stands for than myself. But every hon. Member has a duty to examine as closely as possible the purposes for which this money will be used.

    The balance sheet of the CDC at the latest available date shows an amount of £418 million invested, providing a gross income of £44 million or 10·5 per cent. The net surplus before tax was £19·5 million or 4 per cent. Those returns are low. It has been made clear by hon. Members that the CDC does not enter upon projects to make a fast buck. It helps to develop the potential of countries all over the world. That is the right approach for it to adopt. Hon. Members will, I think, understand and accept that the return is not possibly what might have been hoped for.

    An increase of 70 per cent. in the availability of public money is a massive one. Parliament has a duty to see that the money is spent in the most beneficial manner, not only for the territories involved but for the British Government who provide it. I should therefore like my right hon. Friend to answer two or three points on his general policy towards the CDC. I should like to know to what extent the Government are promoting British machinery and British capital equipment, when this is needed in projects overseas. Many of the projects take place in underdeveloped countries that have no domestic heavy machinery and certainly no domestic heavy vehicle capacity of their own. Hon. Members should seek to ensure that, wherever possible, United Kingdom equipment is used. There is a whole range of suitable United Kingdom equipment. I should like my right hon. Friend to say that United Kingdom machinery will normally be used.

    I also wish to know to what extent use is made of the extensive tropical and related knowledge that exists in Britain on animal breeding, plant breeding, plant diseases and crop control problems. We lead the world in our analysis of many tropical problems. I should like my right hon. Friend to inform the House of the extent to which British know-how, technology and scientific knowledge is used in helping to solve, in collaboration with overseas Governments, local agricultural and crop problems, matters of animal husbandry and development projects on farms, for instance, in central Africa. There exists in Britain an immense fund of experience in tropical agricultural medicine. A great part of the work that the CDC carries out relates to training. One of the things that can be imparted to a partner in a project of the CDC overseas is a knowledge of and training in the fundamental skills that we possess in Britain.

    Does my right hon. Friend have any relationship with Voluntary Service Overseas? Voluntary Service Overseas sends many people from Britain for engagements of two or two-and-a-half years. They are skilled people who are generally in their late teens. They have knowledge to impart. They are prepared to enter this deserving project and by working overseas they pass on their skilled trades, be they bricklayers, plumbers, veterinary surgeons or whatever.

    To what extent does my right hon. Friend's Department co-operate with VSO? I welcome the CDC report which I have studied with some care. I am in the fortunate position of having my own personal copy sent to me every year. I was a little disappointed this year to see that there is no sign that the CDC will play a role in the Falkland Islands. I think a reason for the invasion of the Falkland Islands by the Argentine Government was that, whatever the potential of the Falkland Islands, it was left untapped and unused for so long—gathering dust on the shelf—by successive British Governments. The first and second Shackleton reports pinpointed several projects relating to fishery and forestry development, the search for minerals and the considerable off-shore wealth which is expected to be available there. I trust that the next CDC report, which I shall receive in 11 months time, will refer to at least one pilot project for the Falkland Islands.

    My information is that many years ago the CDC put £250,000 into a project for the Falkland Islands, which the Falkland Islands did not use.

    The hon. Gentleman's intervention may be relevant, but there has been a dramatic change in the situation in the Falkland Islands since then. In my view, the Argentine junta was attracted into this venture because the potential of the Falkland Islands was allowed to lie undeveloped. The Falkland Islands are part of the British Commonwealth, yet that potential remains undeveloped as far as one can see.

    There is great potential there. It is the duty of the CDC to take part of the burden of the recommendations of the Shackleton reports upon its shoulders. Furthermore, considerable help could be given towards the restoration of a meat refrigeration plant which is in certain difficulties, as sheep are the staple commodity there. I hope that by the time we debate the next CDC report and the projects relating to other areas, we shall have at least an analysis produced by the CDC of the potential there. The CDC has a large presence in the Caribbean and a very large presence in the Pacific. It should have an important and leading presence in the South Atlantic as well.

    With those few remarks and with congratulations to my right hon. Friend, I welcome the Bill.

    8.44 pm

    I shall not delay the House with another eulogy on the CDC; suffice it to say that most of us know of its value and its tremendous record of service to development throughout the Commonwealth over many years. We support it and wish to see it prosper and develop. In that respect, I agree very much with the right hon. Member for Daventry (Mr. Prentice) who inquired whether there would be a more constructive role for the CDC in the future.

    It is singularly unfortunate that the usual channels have brought this Bill forward on the day when a Committee which has been sitting for more than a year has produced a report to the House. In doing so, they have done the House a grave disservice and have shown great discourtesy to the Overseas Development Sub-Committee of the Foreign Affairs Committee, which has studied the work of the CDC. It would have been to the benefit of the House had hon. Members had a week or two to consider that report before discussing the Bill.

    The report goes much wider than the provisions in the Bill, but one aspect is directly affected by the legislation. Indeed, had we had time, the Bill could have been amended to take account of one of the report's most important proposals.

    We must consider the Bill in the context of the Government's aid record. I agree with the hon. Member for Greenwich (Mr. Barnett), who referred to the Government's disgraceful record of cutting aid so substantially and, indeed, of cutting support to the CDC. We must also consider the Bill in the light of the sorry fact that tonight not one Conservative Member of the Foreign Affairs Committee is present. Indeed, with the exception of the hon. Member for Hertford and Stevenage (Mr. Wells), no Conservative Member present has served on the Sub-Committee. It is a national disgrace that Conservative representation on the Foreign Affairs Committee and the Sub-Committee on Overseas Development has never exceeded one, and even that one could not bother to be present tonight.

    I hope that the Minister will consult the Chief Whip and ensure that Conservative Members appointed to the Foreign Affairs Committee attend all those meetings, the meetings of the Sub-Committee and contribute to our debates on overseas development.

    It is against that background of a considerable lack of interest in overseas development that we consider the Bill, which introduces an increase in the borrowing available to the CDC.

    I am sure that the hon. Gentleman would like to give a true reflection of attendance in the Chamber. Although a number of Conservative Members are present, he is the sole representative of the Social Democratic Party and, indeed, not one of his Liberal colleagues is present.

    Order. I hope that we shall not stray too far from the Bill and into the subject of which hon. Members may or may not be present.

    My point was not how many Conservative or Labour Members are present in the Chamber, but why the people responsible for producing a report for the House that has a direct bearing on the Bill are not even paying the House the courtesy of being present. What is more, none of them made any contribution to the discussion and consideration of important matters directly related to the Bill.

    That attitude shows a lamentable lack of interest in overseas development and a lamentable lack of understanding that the world recession about which the Prime Minister complains so often is to a large extent the result of domestic policies followed not only in this country but in the other rich countries of the West. We should be considering, and the Bill is part of that consideration, how countries in the Western world., and particularly those such as Britain which have enjoyed surpluses over the past 18 months, should be playing a part in expanding world trade. We should be expanding not only world trade, but the transfer of aid, private investment and Government investment to Third world countries, to enable them to play their part in sustaining a gradual move towards a major expansion of the world economy.

    The debt and liquidity of the Third world are major constraints on our survival, and the Government do not take that seriously. The SDP believes that by combining freer trade, increasing aid and encouraging investment—the Bill provides a small move in that direction—we can begin to return to the prospects of an expanding world economy.

    We received today the Sub-Committee report, and I was particularly interested, as I hope the House will be, in recommendation 154 in the report. The Sub-Committee says:
    "We think that there may be more scope for project identification to help UK industry to invest in some of the developmentally important areas of the economies of developing countries, and we suggest that the CDC examine whether it would be possible to put more energy into this type of activity".
    It then refers the reader back to paragraph 70, which says broadly the same thing at rather greater length. It says:
    "To the extent that the CDC acts as a catalyst in promoting the activities of UK companies interested in investing overseas, we consider that it has a valuable role. We think, however, that there may be more scope for project identification to Yelp UK industry to invest in some of the more developmentally important areas of the economies of developing countries, and we suggest that the CDC examine whether it would be possible to put more energy into this type of activity."
    With great respect to members of the Sub-Committee who are in the House, the constraint is not that of lack of energy by the CDC. It has plenty of energy, and needs to put not more energy into this activity, but more money. To do so, it has to have more money from Her Majesty's Government.

    This ties up with what the right hon. Member for Daventry was saying. He spelt out the role that the CDC might have in encouraging a greater transfer of management, technology, finance and private investment to the developing world. He will probably agree that one of the principal constraints upon the private sector playing as dynamic a part as it could in developing countries is the shortage, even unavailability, in Britain of soft funds for feasibility studies.

    I realise, of course, that within his Department the Minister has the aid-trade provision, and I know that as long as one does not call it a feasibility study, or anything like that, a private firm may be lucky in getting financial support from the Department of Trade. However, there is no public body in Britain which will put forward concessionary funds or make grants available to recipient Governments to enable them to fund feasibility studies not only of industrial but agriculture processing projects, which are perhaps more in keeping with what the right hon. Member for Daventry said about the need to expand food production in the developing world. Such projects are very hard to identify in developing countries.

    A major lacuna in our aid trade investment armoury is the lack of a public sector source of finance in Britain to enable studies to take place at the instigation and with the encouragement of recipient Governments in the developing world, to enable private firms in Britain and the rest of Europe to help them to develop projects to the stage at which they become attractive to private investors and attract the best concessionary support not only from the CDC in Britain but institutions in Europe, such as the European Investment Bank.

    There is a dearth of expertise in the developing world in this respect. I believe that the right way to fill this lacuna is through the CDC. We should make funds available out of our aid programme to the CDC so that it, in conjunction with recipient Governments, can identify broad areas in which the private sector can play a more intensive part in development and thus jack up the transfer of funds from developed to developing countries. That would ensure at the same time that the CDC's high standards of management and technical assistance are carried through in an ever-widening private sector activity in the developing world. I see that the right hon. Gentleman is nodding. I hope that he agrees with me.

    If the Minister is nodding off, he should not be doing so, because this is a very serious point. Much additional wealth could be created in developing countries if this provision were made. I ask the right hon. Gentleman to consider carefully whether there is not an expanded role for the CDC, as the Sub-Committee suggested, in facilitating the transfer of private funds to what it described as "developmentally important areas of the economies" of some of the poorer countries. If he considered that point seriously and thought about giving the CDC additional funds to carry out its job, he would make a significant contribution to improving the efficacy of the private sector in developing countries.

    Finally, I want to mention the discussion that we have had about the Philippines and the CDC involvement there. I think that the Minister has taken seriously what has been said by right hon. and hon. Members on both sides. I noted the undertaking that he made in his opening statement that he would seek to ensure that security and fair employment were achieved in this Filipino development. I simply add to those who have spoken of the detail of the projects that we in the SDP are deeply concerned about the risk to the CDC's reputation which, as many have pointed out, is enviable. We think it essential that the Lost Command be removed from the area of the investment. We shall look to the Minister to ensure that the CDC can operate in the Philippines, as elsewhere, with the support of the local people and without threatening behaviour sullying its reputation and jeopardising the project. We look to him to give us assurances in due course that those safeguards will be implemented.

    9.1 pm

    I support the Second Reading of the Bill in the belief that it points towards a constructive example of the value of the Commonwealth. The unique institution of the Commonwealth is something that we should endeavour to build upon, as it contributes to the promotion of inernational understanding and world peace. No other organisation can bring together in the same way, and voluntarily, over 1,000 million people and approaching 50 independent States, with the British Crown a symbol of that unity of purpose.

    Many of the CDC's members in the less developed parts of the world can derive particular benefit from such an association, not least through the support and help of those that are more wealthy. That is equally so for remaining dependent territories of the United Kingdom, with their close links with the Commonwealth. My hon. Friend the Member for Harborough (Mr. Farr) did a great service in reminding us about the need for help in the Falkland Islands.

    The CDC has played a substantial role in assisting economic development in dependent territories and independent Commonwealth countries since 1948, and certain other nations in more recent times. However, that leads to one caveat. It is to be hoped that the expansion of activities outside the limitations of the Commonwealth will not weaken connections within the Commonwealth, because those bonds should be strengthened whenever possible.

    The essence of the CDC is that it offers not aid as such but investment in the development of resources. To give priority to economic development projects in the poorer developing countries and to schemes for the development of renewable natural resources shows a realistic appraisal of the valuable part that the corporation can play. The CDC engenders greater opportunities for emergent Commonwealth countries to secure for themselves the basic necessities for their people. The CDC disposal of assets programme, which enhances local ownership, should be further encouraged at the earliest possible moment.

    The Commonwealth has often been described as a family of nations. The stronger those family ties, the greater the importance that it has. In a world where it becomes increasingly difficult to find democracy and human rights being maintained, the Commonwealth, for the greater part, provides evidence of what can be achieved despite influences to the contrary. If our parliamentary system is to flourish abroad to the benefit of the people whom it seeks to serve, that, too, is more likely to come about via the Commonwealth.

    The CDC has proved to be a successful way of putting into practice the theory behind the Commonwealth. The whole House should support the Bill to further the CDC's dedicated work.

    9.3 pm

    The Commonwealth Development Corporation is an aid success story, as many hon. Members have said. It is probably an unlucky coincidence or an unfortunate accident that the report of the Sub-Committee on the CDC has been published and the Bill is being considered on the same day. It could have been managed better. The report of the Sub-Committee might have provided the basis for some amendments to the Bill. My hon. Friend the Member for Newham, South (Mr. Spearing) talked earlier today about the propriety of today's procedure, by which it is virtually impossible to amend the Bill. However, I shall not go too far into that matter.

    The great success of the CDC has been in the prudent and skilful management of public funds. I should point out to Conservative Members that it has been a public corporation from the word go. It has been financed entirely by public money, which has been handled with enormous skill and integrity by men and women who had nothing personally to gain from it. That is a great tribute to the effectiveness of public enterprise.

    I am sure that the hon. Member would accept at the same time that the CDC is a corporation which sells its assets.

    The CDC is required to turn its money over, but not to impoverish itself. The recycling of its funds is an important aspect of its work. Its assets now are vastly greater than they were when it began its operations.

    Not only has the CDC been enormously skilful in its handling of public funds and in its investments, but it has made valuable contributions to both social and economic development. Social projects such as housing have been very important in some countries. The CDC has also stimulated smallholder activity, thereby providing a much more solid social and economic base than would have been provided by large-scale plantations relying on hired labour for their operation. The CDC's smallholder schemes have been not only an economic but a social success.

    In the purely economic field, the CDC has invested to a considerable extent in the public utilities essential to the functioning of a modern economy. As well as playing this valuable role in the social and economic sphere, it has, through the provision of management and training expertise, given a great impetus to development. That provision distinguishes it from similar bodies in other countries. The Sub-Committee was fortunate in enjoying the co-operation of members of the Caisse Centrale, whom we visited in Paris. They admitted that they did not put in the management effort that the CDC offers, and the same is true in other countries.

    I shall refer to one or two of the Sub-Committee's findings that may interest the House. The Government will no doubt reply to the report in detail in due course, but that usually takes some time.

    We were disturbed to find that the CDC had sometimes paid back to the Exchequer rather more money than it had drawn out. In other words, the Treasury was actually making a profit out of the CDC's work. We felt that in the case of a development institution this was wrong. We felt that there should be a positive flow of funds to the CDC year by year and that it should certainly not be giving back more than it received.

    We also concluded that it would be valuable if the CDC could be given a three-year rolling programme in terms of the Government finance that it could expect to be available for investment. I think that the Government have gone some way to meet that need by stating how much money will be forthcoming for two years in advance. We hope that that will continue, as it is important that a body involved in mainly long-term investments should have some assurance of the sums available for borrowing not just for the next year but for two or three years to come.

    We also suggest that the CDC should not be liable to corporation tax, although that idea will no doubt send shivers down the spine of the Treasury or whomever is responsible there. In the past, the CDC has paid some corporation tax. We do not see why a development body of that kind should be lumbered with that burden. More importantly, we thought that the CDC might enter into investment and taxation agreements in the host country, similar to those which we understand the World Bank enjoys, which would relieve it of some local corporate taxation.

    Clearly the CDC would not be in a position to go to the Government of a country such as Tanzania or Kenya and ask to be relieved of local corporate taxation if the United Kingdom Treasury was happily levying corporation tax here. Therefore, the two suggestions go hand in hand. We hope that they will be given serious consideration.

    One matter which the Select Committee considered fairly closely was the recycling and redeployment of money made available to the CDC for investment and, in a sense, disinvestment from successful projects. We were anxious that the money provided to the CDC should not be tied up for 10, 15 or 20 years in certain projects, although we entirely accepted that the nature of some of the CDC's investments were such that realising them, and therefore having more money to reinvest and redeploy, was a difficult and tricky business.

    For one thing, in many of the countries no money market exists anyway. There is nobody on the spot, except possibly the host Government, who could buy out the investment made by the CDC, and there are similar problems.

    Nevertheless, such study as we were able to make of the accounts with the help of a distinguished accountant to guide us through the figures led us to conclude that possibly the recycling and redeployment of money made available to the corporation over the years could be done to a greater extent than in the past. It was a matter on which we felt that there should be closer study and perhaps greater effort.

    Another matter that has already been touched on is the range of countries over which the corporation operates. Obviously, as its name suggests, the origin and intention of the corporation many years ago was to operate in Commonwealth countries, and that is still its overwhelming role. The greater percentage of its effort has been, and I imagine still will be, in Commonwealth countries.

    In recent years—I think since 1969—the corporation has been empowered to operate outside the Commonwealth. I think that I am right in saying that it currently operates in 14 such countries or territories. Obviously, the Committee has no objection at all to British aid going to countries outside the Commonwealth. We have various means of helping countries all round the world. However, it was felt that, as the corporation's resources are not infinite—they are limited by various acts of Parliament—it might not be permissible to seek to extend them too far outside the Commonwealth which provided the original reason for the corporation's existence.

    On the whole, it was thought that there would have to be fairly powerful reasons for the Minister giving consent to investment in yet more non-Commonwealth countries because of the enormous need in countries such as India, Bangladesh, Tanzania and so on, where there is still immense opportunity for the CDC to operate. We were not persuaded that the range of countries should be extended ad infinitum.

    The Committee thought that investment should be checked at the present position, with one exception. The Committee deliberately made Mozambique an exception because of the land-locked position of three important Commonwealth countries—Zambia, Zimbabwe and Malawi—for which communications through Mozambique are of considerable importance. It was felt that if the Government of Mozambique requested investment or aid through the CDC, the Minister should give his consent, although the broad general proposition was held to that the list of countries for such operations should not generally be extended.

    There is one aspect of the staffing of the CDC that we found a little odd and to which some attention might be given. It was the apparent lack of women in posts either at the top or overseas. There may be some special reason for that, and we do not accuse the CDC of practising any deliberate discrimination against the employment of women. We saw no evidence of that. We found it odd that there are so few women among the fairly large numbers of staff employed by the corporation. There are none at the higher levels. The Committee considers that the corporation should look at its recruitment and career policies to see whether some hindrance had been allowed to remain over the years and which might be removed without too much difficulty.

    There was also a lack of representation from among the immigrant peoples in the United Kingdom, although we take the point that there might be problems in recruiting and employing such people overseas. Overseas countries might have views about employing certain people which could create difficulties, but we thought that the corporation should look at that problem to see whether something could be done.

    We welcomed the corporation's achievements in training. Reference has already been made to the centre in Swaziland. We felt that there might be opportunities to create a parallel centre in East Africa at some time. We were enormously impressed by the corporation's training activities and we hope that they can be expended.

    The corporation's activities have been referred to in the debate. Much of its work in tea, coffee, tourism and public utilities is well known. We felt that more attention might be paid now to the production of food instead of cash crops, and we should like to see more work done on energy resources, especially renewable energy resources, for those countries which have no local hydrocarbon supplies in the form of coal, gas or oil. We were impressed by the harnessing of geothermal power in Kenya. We believe that there are other countries where there could be similar achievements.

    In the light of the enormous debts of the poorer countries which arise from their absolute need to import oil or other forms of fuel, we thought that it would be a good idea for the CDC to investigate what could be done to harness such energy resources as might be available in the poorer countries. Likewise, we felt that the corporation might invest from time to time in experimental crops, especially in arid zones.

    We are aware that the corporation is not a research institution or an experimental body, but we felt that here and there it might launch small pilot projects for the growing of unusual cash or food crops to meet particular needs. We felt that it might be useful to give powers to experiment in that way to regional controllers whose work we admire.

    I shall take up a point that was made, I think, by the hon. Member for Harborough (Mr. Farr). We should emphasis that the CDC is of enormous value to the United Kingdom. It is valuable in terms of our prestige and standing and in terms of goodwill. It is also valuable because of the economic benefits that its work brings to British industry. My hon. Friend the Member for Greenwich (Mr. Barnett) quoted the one figure that was given to the Committee—that over a five-year period, about £100 million of goods and services had been supplied from the United Kingdom for projects operated by the CDC. I have no reason to suppose that the flow has diminished in recent years or that it is less important.

    I should be wrong to go further into the Select Committee's findings. In due course we shall no doubt receive from the Government a considered and, I hope, coherent reply to the recommendations. However, our general conclusion was, without qualification, that the CDC is an enormously important and very valuable piece of public enterprise that should be supported, developed and strengthened in the years to come.

    9.20 pm

    I declare my interest in this subject from a privileged and prejudiced viewpoint. I had the privilege to serve for more than 13 years as an employee of the CDC and also, as a member of the Sub-Committee of the Foreign Affairs Committee, to serve under the distinguished chairmanship of the hon. Member for Sheffield, Heeley (Mr. Hooley), which considered the CDC report. I congratulate my right hon. Friend the Minister on proposing an increase in the CDC's borrowing limits—from £500 million to £750 million, and by order to £850 million—and on the introduction of a flexible, temporary borrowing requirement, as that was greatly needed. It is absolutely in line with the Sub-Committee's thinking.

    I shall try to persuade and cajole my right hon. Friend into thinking about changing the structure of the Overseas Development Administration's budget slightly to accommodate more investment in the CDC, thus making use of one of the most successful of our—by common consent—aid weapons for overseas development. It seems sensible to build in a conservative way upon success. No hon. Member has claimed that the CDC is anything other than a success. Therefore, it is reasonable to build upon it. I am only disappointed that my right hon. Friend did not go further. In that, I support my right hon. Friend the Member for Daventry (Mr. Prentice). Those of us who were members of the Sub-Committee or who worked with the CDC have nothing other than the highest regard for its management. I pay a personal and public tribute to Sir Peter Meinertzhagen for his dedication, enthusiasm and meticulous work as the chief executive of the CDC for the past eight or nine years.

    Why is the CDC successful? As the hon. Member for Norfolk, North-West (Mr. Brocklebank-Fowler) said, it is successful because in the host country, on the ground, it identifies the projects that it wants to invest in. Of course, it consults the Government and gets their approval for what it wants to do, but it is the identification and working up of the projects that ensures that they are of maximum developmental value. In addition, having made the investment, it controls and monitors it locally. Its representatives sit on boards of directors. They liaise with Governments and are sensitive to the social and economic changes that take place in the country while that investment is being brought to fruition. Few other agencies, including the World Bank, have such a degree of involvement in a successful development.

    The CDC is not inhibited by the usual problems that confront either multilateral or bilateral aid agencies—that the projects must be selected on a country-by-country basis. The Barbados development division admitted to me that regional moneys were first divided between countries, and then the Governments of those countries were asked where they wished to invest. They were asked "What is your shopping list? We shall select from it." The CDC is not inhibited in such a way. Instead, it goes to the country, sees what developments it can invest in and develops from there. The CDC's investment criterion for a project is whether that project will become viable. If no such projects exist, the CDC will not invest.

    As the hon. Member for Heeley said, the Falkland Islands had no viable projects, or rather those that were viable were not used by the Falkland Islanders. Despite the Shackleton report's enthusiasm, I regret that even now there are few projects in the Falkland Islands that would merit a CDC investment. Developmental value and the ability to invest free of restrictions imposed by countries should be important criteria for aid agencies.

    We have heard a one-sided story from the Catholic Institute of International Relations about Mindanao in the Philippines and we have not heard the other side of the story, except from the CDC's point of view. The people in that very poor area of the southern Philippines have not had the opportunity to produce a cash crop and thus improve their standard of living and liberate themselves from their military oppressors, or to liberate themselves economically as they become more independent. Those people are underprivileged. By investing and by providing safeguards, the CDC will ensure that that southern island's economy will benefit.

    We have heard not just a human rights story but a one-sided political story. I am much against terrorism and violation of human rights wherever they occur, not just in the developing world. Many countries offend against human rights but we must not make human rights a condition of development aid. That is especially true of the CDC.

    Another major reason for the CDC's success is its ability to provide management for the projects. That is a distinguished and unique contribution. Management and administration and much-needed resources, are scarce, especially in the poorest countries. I hope that the CDC will take note of the Sub-Committee's recommendation that the regional organisation should be strengthened and that it should be made more flexible by being given money to invest on its own criteria without reference to head office. The monitoring, nursing and caring for projects bring them to profitable fruition.

    The CDC has also achieved success because of the discipline that it applies to the profit and loss account. A project must make sense economically before it goes ahead. Only by doing that can we contribute to the income of those who are employed on the projects or the smallholders. We can also help the Government of the country, who tax the profits, and increase their ability to meet social and other needs.

    Another major asset of the Commonwealth Development Corporation is the way in which it manages to involve the private sector in Britain and in other countries in projects in the poorest countries. Britain has a proud record of private investment overseas and we vastly increase the amount of money that other countries spend on private investment overseas. However, that money is spent mostly in the middle and higher developing countries and not in the poorest countries. Private investment needs the catalyst offered by the CDC before it will go to the poorest countries. We saw that happen in Malawi where a tobacco packing factory was started with the help of the CDC. The private tobacco company involved admitted that it would not otherwise have invested in that packing factory and, therefore, employment in Malawi would have suffered. That is another reason why the CDC must operate outside the Commonwealth. The Caisse Centrale in France invests in former British Commonwealth countries. The CDC should have the same liberty to act as a catalyst for British private investment in those countries. The CDC knows those countries in a way that private companies do not and it can help them to make the most valuable investment.

    If we give the CDC additional support from the budget, the Overseas Development Agency should come in behind the CDC and provide technical assistance. That is already happening and the Sub-Committee saw a good example of it. That is the path ahead. The Overseas Development Agency should provide support in the infrastructure, social facilities, education, health, roads and water supply. We must be able to identify the British investment and my right hon. Friend referred to the admirable CDC programme in Swaziland. The voluntary agencies can join in the effort and make their unique and special contribution.

    We were privileged to visit a fine project called the Tanganyika Wattle Company in the Southern Highlands of Tanzania, near Ndola. That is an illustration of the way in which the CDC developed and sustained a project that was slow to mature and to make profits. The project turned barren hills in southern Tanzania into a wattle forest to produce tannin for leather. It has diversified, with the agricultural expertise available on the estate and from the CDC head office, into the production of hybrid seed, maize, wheat and sorghum. It has managed to produce seeds that have more than six times the normal yield of the seeds otherwise used in that area. The benefit has been spread to the rest of Tanzania by the formation of a company called the Tanzanian Seed Company which, if it were run properly and had proper agricultural support, would have made it unnecessary for Tanzania to have to import 250,000 tonnes of wheat in the past two months.

    CDC has also trained the people to carry out the hybrid seed production. All those whom we saw producing it were Tanzanian, and very impressive they were. What is more, CDC is now diversifying the project into cattle feed with, as a result, greater production of milk and beef. Locally produced high protein cattle feed does not involve foreign exchange difficulties. This development is leading to improvements in poultry and pig farming.

    We met the Member of Parliament for Ndola when we arrived at Dar es Salaam. He welcomed with open arms the presence of CDC in Tanzania. He wanted CDC to expand and to produce a school that could train farmers to undertake the specialised form of agriculture that was being practised at Tanurat. We should put CDC on a financial basis, on which it can expand its training schools, in the same way as the Caisse Centrale in France is doing.

    It is also necessary to look after social conditions, such as housing. My right hon. Friend mentioned the contribution of CDC to housing. We saw the Buru Buru estate outside Nairobi, which is otherwise developing as a complete slum. The estate is offering a much higher quality of housing, thus improving the total stock of housing around Nairobi and preventing the creation of the type of slum that we once suffered around our cities during our developing period. CDC, having withdrawn largely from housing, played a role in the setting up of Shelter Afrique. Under the African Development Bank, Shelter Afrique is the agency through which home ownership and housing will be spread throughout the burgeoning cities of the African continent. CDC was the catalyst in bringing that about. An official of CDC will soon be in Nairobi proudly to sign that agreement and to assist with the management of the scheme.

    CDC was also involved in a number of other popular economic schemes, which should not be ignored, involving tourism and energy production, including an imaginative scheme to form a company to produce firewood as a substitute for imported paraffin and oil.

    I should like to make some suggestions to my right hon. Friend for when he comes to consider the report of the Sub-Committee. CDC should be expanded quickly. It should at least double its investment over the next five years. At the moment, its investment stands at £410 million—net of disinvestments. That figure should be doubled within the next five years. There should then be an upward projection of that figure. If my figures are correct, that will mean an investment of more than £100 million a year, and probably more, to make good the disinvestments in which CDC will be taking part during that period. That will be a major expansion and will enable CDC to cover its overheads more easily as it expands. It will also give some leeway for money to be spent in the poorest countries and allow CDC to undertake more training of management.

    This will be a great challenge. One of the things that I hope will come out of the report of the Select Committee is a cross-party belief in the CDC, which will mean that we shall not have investigation after investigation as Government succeed Government. CDC is a successful corporation. Let us expand it quickly.

    I believe that to do that the CDC will have to have some additional money from the ODA. The ODA allocates about £34 million in each year but the CDC does not draw that figure down. It draws down the net figure of what it repays to the ODA. I suggest that on 6 April every year the ODA should pay in total what it says that it will pay to the CDC. That would be a departure for the Government, but that is exactly what the French Government do.

    I admit that the money will not be drawn down by the CDC and spent on projects immediately. It will be invested by the CDC and the interest that will accrue will pay for the excellent projects such as health and social development to which we have all been paying such tribute, and especially to trade development.

    I agree with the hon. Member for Heeley that the CDC must be made tax-free for Britain. I look forward to another CDC Bill being introduced very soon that will do that. We should initiate a rolling programme so that the CDC knows how much money it will receive from the aid programme.

    The CDC does not receive a large sum from the ODA budget and I know that my right hon. Friend the Minister for Overseas Development has difficulty in choosing priorities. With a budget that is now over £1,000 million, it is not too much to ask the ODA to consider an investment of about £50 million in fresh money each year in the CDC. That would be a small amount to produce a maximum developmental result. It would draw in private investment and ensure high-quality development in the poorest countries.

    The concessional finance that the CDC receives should continue to enable it to undertake investment with poor returns in developing countries. Some of these investments take a considerable time to reach maturity. Sometimes seven or eight years pass before a rubber estate or a cocoa plantation begins to produce. Many more years pass before money starts to come into the CDC to repay it. Therefore, it needs concessional finance from the ODA to enable it to continue.

    This is a much welcomed Bill. I am only sorry that it is not possible to double the sum that my right hon. Friend announced. I think that he will have to return to the House very soon if he follows our advice. He will enable the CDC to invest at a much increased rate during the coming years. This is a success story which commends itself to both sides of the House and we should build on the success.

    9.43 pm

    I did not agree with the remarks of the hon. Member for Hertford and Stevenage (Mr. Wells) about the Philippines project but I agreed with many of his other remarks. Along with the hon. Gentleman, I believe that the Bill's objectives are entirely laudable and worthy of support. Anyone who has the slightest inkling of the developing countries' problems—the need for capital investment and opportunities for establishing new enterprises—must be in favour of raising the borrowing limits of the Commonwealth Development Corporation and the volume of overseas aid generally.

    The Minister has outlined the purposes which the CDC exists to fulfil. I am concerned about the Third world and I am deeply sympathetic to the CDC. I agree with my hon. Friend the Member for Sheffield, Heeley (Mr. Hooley) that the growth of demand in underdeveloped countries assists in the expansion of demand for the products of developed countries such as the United Kingdom.

    I wish to back the Bill's general objectives but I am concerned about the criteria on which decisions to make loans and to support specific problems are made, which are highlighted by the plan for the investment of £6 million in the palm oil plantation at Agusan del Sur in the Philippines, which has already been mentioned.

    The Guthrie Corporation, which is co-operating with the Philippine Government agency, has been chosen as the recipient of Government funds despite the fact that the methods employed to secure the land for plantation were based on intimidation, force and the refusal to pay compensation to the previous land owners.

    I am aware that the history of the Philippines has been extremely turbulent in the past 40 years and that recently the country has been under martial law. With the constitution suspended, many rights that would be upheld in Britain and Western Europe have been withdrawn and the processes of law have been set aside. I see no reason why the CDC should acquiesce in that to the extent of providing a loan for a company that has acquired lands by means that are utterly repugnant to all decent people.

    The information that we have—it has already been referred to by my hon. Friend the Member for Lambeth, Central (Mr. Tilley)—is that the National Development Corporation of the Philippines and the Guthrie Corporation commenced their activities in May 1980 when the people of San Francisco, Roseiro and Agusan del Sur were called to a meeting and promised that in return for giving up their land rights in the area of the projected plantation each would receive a house with an electricity and water supply, free medical treatment, free education for their children and compensation for their lands. They were also promised that there would be security at least for their own lifetime and probably for that of their children.

    When the small land owners did not agree, the so-called Lost Command—the special unit of armed forces—was brought in. It employed brutal strong-arm tactics to force the land owners to agree to the terms or to leave.

    There is not much doubt that that took place. It is not merely a story that has been related by the CIIR and which has not been confirmed by other sources. It is the sort of thing that is sometimes presented to us in Western films. Smallholders and settlers find that their holdings are suddenly coveted by a large organisation and that, having refused the terms offered to them for leaving, they become victims of a band of desperadoes. In the case of the Philippines, the band of desperadoes was the Lost Command.

    According to reports that we have received, many of the land owners have been badly treated. My hon. Friend the Member for Lambeth, Central gave details of that. Against that background, the CDC has arrived on the scene to finance an organisation that is associated with the villainy. Hon. Members must be deeply worried about that.

    I am sure that the hon. Gentleman knows that I do not condone the brutal tactics that he has outlined. Does he agree that the matter was agreed before the CDC was ever brought into the project? Moreover, would he confirm that the bishop of the area has supported the CDC's investment?

    I cannot confirm the hon. Gentleman's information about the bishop. I fully understand that the CDC is not responsible for all that has gone on in the past. I do not wish to give credence to the impression that that is so. That is not what I have said and it is not what I intend to say.

    I have seen no statement, written or quoted, from the bishop to that effect. I know that he is said to agree to the project but I still await a public statement that the bishop supports CDC entry into the project.

    I am grateful to my hon. Friend for making that point. I am in a similar position. If the hon. Member for Hertford and Stevenage could produce evidence that the bishop has endorsed the scheme, I am sure that many hon. Members who have taken an interest in the matter would be delighted to see it.

    It is true that the CDC has said that the practice of terrorising the dwellers employed to date must stop. I am not, however, happy that the CDC should choose to assist an organisation with such an unseemly record as a suitable enterprise to support at this stage. In these circumstances, I must say frankly that I hope that the loan will not be granted. If, however, it is granted, there will be need to monitor the performance of the company at all stages. If there is any recurrence of the practices that have undoubtedly been employed in the past to secure control of the land or if any unseemly conduct is shown towards the people involved, further moneys should be cut off forthwith.

    I fully accept the need to encourage development in these areas. At the same time, we need to be sure that the development will be in the interests of the indigenous people of the area. The possibility is raised by the example we have been considering in the Philippines that the CDC could provide loans in a number of locations to transnational companies that have no regard for democratic or fundamental rights. Some safeguards must be provided to prevent this from happening not merely in the Philippines but everywhere else.

    The invitation by the Minister to a number of lion Members to discuss the matter was very much welcomed. At the very least, I hope that the right hon. Gentleman will put it on record that money will not be provided for schemes that do not insist upon respecting fully the rights of indigenous people. I hope that all possible steps will be taken to ensure that the CDC always makes it a precondition, before entering into any agreement to provide funds for a particular project, that the rights of local people will be fully observed. On this basis, I believe that the CDC will be able to go ahead in improving the lot of desperately poor people. On any other basis, it may only serve to increase the exploitation and the misery that those people who lose their land are obliged to suffer.

    The purpose of the Bill should be supported. The issues raised by the proposed investment in Mindanao must not be overlooked or pushed to one side. I accept that it may not be possible, in all parts of the world, to demand an impeccable record on human rights before granting aid. I believe, however, that the state of human rights must always be a consideration before a loan is made.

    On those terms, I have great pleasure in supporting the Bill. Along with all hon. Members present, I believe that the measure is necessary not only in the interests of the people of our country but also in the interests of the people of the developing countries in which investments are made.

    9.55 pm

    Like others who have joined in this debate, I lend my support to the principles of the Bill. I agree that the Commonwealth Development Corporation does very good work and should be supported.

    That is not the end of the story. The House knows that this is not a subject on which I normally join in a debate, but I returned only a week ago today from the Philippines where I had an opportunity of learning at first hand about this project. In consequence, I thought it proper to speak briefly this evening. The Lost Command, with which this project is undoubtedly associated, has been accused of murder, rape, threats, confiscation of land, intimidation, and operating a retail monopoly from which the local peasantry must purchase goods at inflated prices. It does not matter whether those stories are exaggerated or whether there have been only half the number of murders, rapes, threats and so on of which the Lost Command is accused. The principle is that we are using and are associated with that organisation. This is not an organisation that the United Kingdom should back or in any way be connected with.

    There are five reasons why we should withdraw from this project. First, the Philippines is not in the Commonwealth. That is not a reason per se, because the CDC does a lot of work outside the Commonwealth. There are opportunities to assist under-developed peoples in Africa, India, and even the Falkland Islands—I support that proposal—but there is no reason why we should dabble in this project.

    Secondly, this is not a British company. It is a Malaysian company. In consequence, the opportunities or the likelihood of spin-off benefits to British industry in orders for machinery and equipment are less likely than would be the case if the company involved was British.

    Thirdly, this is not a part of the world with strong British connections. Indeed, the Philippines are very much in the sphere of influence of the United States.

    Fourthly, this is not a country with large British trade connections. Finally, the Lost Command is not an organisation with which we should be associated, and if we are, some people may distort and exaggerate that association. It is something from which we should withdraw. If the Minister does intend to proceed, I trust that he will get a firm undertaking from the Government of that country that they will ensure that this organisation plays no part either in the performance of this project or in that area.

    Secondly, no substantial investment should be made until there has been specific performance of that assurance. Just to get it is not good enough. It must be seen to be carried out before we proceed. I appreciate it could well be embarrassing to the Minister, to the CDC and to Britain to withdraw from this project at this stage. I accept that it may be said that we should not have gone thus far and then have withdrawn at the eleventh hour. However, it would be even more embarrassing to proceed if we are seen as backing and using this loathsome organisation. I ask the Minister to think very hard before he proceeds with this project.

    With that qualification, I support the principles of the Bill.

    9.59 pm

    With the leave of the House, I should like to reply to the debate. A considerable time has elapsed since this House was able to discuss at length the affairs of the Commonwealth Development Corporation. I am glad that many hon. Members have taken part. I congratulate the hon. Member for Greenwich (Mr. Barnett) on his appointment to the Front Bench and hope that he will have many years in that positon, on the Opposition Benches.

    I also thank the hon. Gentleman and other hon. Members for their kind remarks about the CDC. He asked about the interdepartmental review and thought that only half the CDC money could go to the poorer countries. That is not so. The phrase is "not less than half', and in 1981—

    It being Ten o'clock, the debate stood adjourned.


    That, at this day's sitting, the Commonwealth Development Corporation Bill may be proceeded with, though opposed, until any hour.—[Mr. Thompson.]

    Question again proposed, That the Bill be now read a Second time.

    In 1981, 76 per cent. went to the poorer countries. The hon. Member asked about borrowing by subsidiaries. Whether or not they are wholly owned, subsidiaries are under the control of their parent companies and it is therefore appropriate that their borrowing should count against the limit.

    The hon. Gentleman sympathised with me in making the decision about the proposed investment in the Philippines. It is a question of keeping a balance between helping the poor on the one hand and the odious actions of the Lost Command on the other. This is nothing new, because it must be done to a greater or lesser extent in considering aid to the developing world.

    My right hon. Friend the Member for Daventry (Mr. Prentice) experienced the same problem. One must make a judgment, and I assure the House that I have taken careful note of everything that has been said about the odious Lost Command. The CDC is now trying to negotiate assurances, and I shall consider whether one can rely upon them. However, at some time I must make up my mind, and that I shall do by taking into account everything that has been said.

    My right hon. Friend the Member for Daventry argued for an expansion of the CDC and asked whether it was up to the level of the 1970s. In fact, it has gone beyond that level. I have the figures with me, but in view of the time I shall not read them. Instead, I shall write to my right hon. Friend. He was right to state that, if developing countries want an industrial revolution, they should first have an agricultural revolution. I sincerely hope that no other types of revolution will take place, but I believe that a developing country needs agricultural development before it can achieve industrial development.

    My right hon. Friend asked what percentage of CDC investment went towards renewable natural resources. On page 16 of the 1981 annual report, he will find the distribution in percentage terms of its various activities.

    The hon. Member for Lambeth, Central (Mr. Tilley) said that he was not satisfied with the assurances that I had obtained. Nor was I in the first place, and I am now pressing the CDC to get better and further assurances. The CDC is now negotiating those assurances, and after it returns—whether or not it has succeeded—I shall have to make a judgment.

    When the Minister has got those better assurances, will he enable both the House and interested bodies in this country to consider them before he makes his final decision, or will all this happen behind closed doors?

    I shall give thought to that question. I was given a good idea of what hon. Members and the charitable organisations felt at the meeting last week. I do not think that their views have changed, and I can assess from what I have already heard what will be the right decision. I hope that the hon. Gentleman will agree with it, whatever it is.

    My hon. Friend the Member for Harborough (Mr. Farr) raised a number of points. Some of them were about the day-to-day management of the CDC, with which I should not want to interfere. No doubt the members of the CDC board will read his speech with interest, as I hope they will read the whole of the debate, and take note of the many valuable points that he made.

    The hon. Member for Norfolk, North-West (Mr. Brocklebank-Fowler) was critical of the timing of the Bill, but that is not a question for me but for the usual channels. One could equally say that if the SubCommittee report had come out a week earlier we should have had time to read it thoroughly. I do not know who is to blame. The hon. Member also criticised, uncharacteristically, the representation of the Sub-Committee. The Whips were here and heard those remarks, and I understand that there will be new Members of the Sub-Committee.

    The hon. Member for Norfolk, North-West asked about the feasibility study. This is one of the recommendations made by the Sub-Committee, and I shall comment on those in due course, after full consideration. If the hon. Member will forgive me, I shall not be drawn on that. The same goes for the speech of the hon. Member for Sheffield, Heeley (Mr. Hooley), which was almost entirely concerned with the Sub-Committee's report.

    Will the right hon. Gentleman be kind enough to undertake carefully to consider what I said both in the light of the Sub-Committee's report and of the undoubted need for the CDC to have greater flexibility to provide finance for the feasibility studies?

    I shall undertake to consider that in the course of the consideration of the many points raised by the Sub-Committee.

    My hon. Friend the Member for Welwyn and Hatfield (Mr. Murphy) paid a tribute to the Commonwealth, which I thoroughly enjoyed and entirely support. I seek to nurture the Commonwealth whenever I can because it is a valuable institution, and I am glad that my hon. Friend feels the same way.

    The hon. Member for Heeley made many points, but I am afraid that I cannot answer them. They will be studied by the Government and the replies will come in due course. It should not take long, because the points are fairly straightforward.

    My hon. Friend the Member for Hertford and Stevenage (Mr. Wells) wants to change the structure of the ODA budget. Perhaps he would like to come to talk to me about how he would like to do that, because I can see difficulties there. He presented a balanced view of the report of the Catholic Institute of International Relations. My job is to judge from those reports, the CDC and the assurances that it gets, as to whether it is to go ahead. I thank my hon. Friend for his speech, because the House knows that he has great experience and listens with interest to what he says on this subject.

    The hon. Member for Harlow (Mr. Newens) made much the same speech as his hon. Friend the Member for Heeley, dealing with the same subjects and much of the same evidence. He asked me whether the CDC takes into account the rights of indigenous people in planning its operations. I can assure the hon. Gentleman that it certainly does so. If it did not, I should be as angry as he would be.

    Finally, I thank my hon. Friend the Member for Ludlow (Mr. Cockeram) for his speech,. in which he tended to put the other point of view. We have to sort out what the bishop did or did not write, or what the bishop did say. I shall go into the matter.

    I am glad that the work of the CDC commands such wide support on all sides. Lord Kindersley, the chairman, Sir Peter Meinertzhagen, the general manager, and their staff are continuing with spirit and devotion the distinguished work of their predecessors at a time and in a situation in which they, like most of the developing countries, are faced with serious and difficult problems. The CDC has made a real, substantial and positive contribution in tackling some of the problems over the years, and I know that it will continue to do so. The Bill will assist the CDC in its work. I commend the Bill to the House, and I thank the House for the support that it has given to this measure.

    Question put and agreed to.

    Bill accordingly read a Second time.

    Bill committed to a Committee of the whole House.— [Mr. Thompson.]

    Further proceedings postponed, pursuant to order this day.

    Commonwealth Development Corporation Money

    Queen's Recommendation having been signified


    That, for the purposes of any Act of the present Session to authorise the making of loans to the Commonwealth Development Corporation by the Secretary of State our of the National Loans Fund and to impose new limits on sums borrowed by, or guaranteed by, the Corporation or any of its subsidiaries, it is expedient to authorise—
  • (a) the making of loans to the Corporation out of the National Loans Fund;
  • (b) any increase in the sums payable out of the Consolidated Fund for the purpose of fulfilling guarantees given by the Treasury which is attributable to provisions of that Act imposing a new limit of £850 million on the aggregate amount from time to time outstanding in respect of—
  • (i) sums borrowed by the Corporation or any of its subsidiaries, otherwise than from the Corporation or any of its subsidiaries; and
  • (ii) sums borrowed otherwise than by the Corporation or any of its subsidiaries but covered by guarantees given by the Corporation or any of its subsidiaries;
  • (c) any increase in—

  • (i) the sums that may be advanced under section 10(1) of the Commonwealth Development Corporation Act 1978 out of money provided by Parliament; or
  • (ii) the sums that may be remitted under Section 13(1) of the said Act of 1978; being an increase attributable to provisions of the said Act of the present Session increasing to £800 million the limit on the sums which may be advanced to the Corporation out of money provided by Parliament; and
  • (d) any payment into the Consolidated Fund or the National Loans Fund.— [Mr. Thompson.]

    Commonwealth Development Corporation Bill

    Bill immediately considered in Committee, pursuant to order this day.

    [MR. PAUL DEAN in the Chair]

    Clauses 1 to 4 ordered to stand part of the Bill.

    Bill reported, without amendment; read the Third time and passed.

    Fish Guide Prices

    10.13 pm

    The Minister of State, Ministry of Agriculture, Fisheries and Food
    (Mr. Alick Buchanan-Smith)

    I beg to move,

    That this House takes note of European Community Document No. 10701/82 on fish guide prices for 1983 and supports the Government's intention to seek to secure improvements in the level of prices proposed.

    The motion makes it clear that the Government found the Commission's proposals for guide prices to apply in 1983 under the Community's fish marketing regime unsatisfactory and that we are determined that they should be improved.

    I should like to say a word about guide prices generally, what they are and why they are a matter of so much concern to all those with interests in the fishing industry. As the House knows, guide prices have to be set by the Council each year. The Commission's proposals for 1983 are set out in the papers that we are discussing tonight. But agreeing on guide prices is not the end of the story. Once they are settled, they are used to calculated Community, or official, withdrawal prices and reference prices.

    Official withdrawal prices are operated by producers' organisations. Members of producer organisations which choose to operate the EC support system for any or all of the species covered by the EC marketing regime must withdraw fish that cannot be sold at or above the official withdrawal price from the market. They then receive FEOGA compensation for doing that.

    Reference prices apply to imports from third countries. If prices of imports into the Community market fall below the reference price level and significant quantities are being imported, measures may be taken to require that the reference price is observed. Those prices are set by decisions in the management committee, which cannot, of course, be taken before the Council has reached its own decision on guide prices. I emphasise that point because it is evident that if no agreement is reached on guide prices in reasonable time during December in each year it becomes impossible to complete all the stages in time for all the new prices—the new official withdrawal prices, and reference prices—to be applied from 1 January, the beginning of the fisheries marketing year. We are now coming up against the deadline.

    Returning now to the Commission's proposals, I have already said that we found them unsatisfactory. The proposals cover a fairly extensive list of species. Some of them are species in which our industry has no particular interest—anchovies, for example. In some cases, we found the Commission's proposals satisfactory—for example, those for herring and mackerel.

    I shall therefore confine my remarks to the proposals for the principal white fish—cod, haddock and so on—which are of particular interest to our fishermen. Our position has been—and we have pressed this very hard in negotiation—that the increases proposed for the principal white fish species were too small. The Commission's proposals originally envisaged increases ranging from 2 per cent. for haddock to 5 per cent. for cod.

    In our view, the implied corresponding increase in official withdrawal prices was far less than was needed to provide effective support for our catchers. Because withdrawal prices have in the past been set well below the normal level of prices in our market, we took the view that much bigger increases could be made without damage to the consumer's interest, which is important, and without risk of any dramatic increase in the level of withdrawals.

    I have to tell the House, however, that that view was not shared by a majority of the other member States, many of which found the Commission's proposals broadly acceptable. Some, indeed, suggested that they were over-generous.

    In the negotiations we found ourselves in a minority position in the discussion of the price changes to be made for the species of most importance to us. One of the reasons why we face such difficulties in securing agreement on withdrawal prices at a level that we would like to see operating in our market is that for some key species our prices tend to be higher than the Community average so that a price that our producer organisations could readily defend might mean increased withdrawals in some other member States. That is why we were so determined to get agreement to a new arrangement—called "a fourchette"—in the new EC marketing regulation, which we negotiated and which comes fully into effect on 1 January. That new arrangement allows a producer organisation to operate a withdrawal price somewhat higher than the official withdrawal price, without loss of title to FEOGA compensation for withdrawn fish, if the situation in its local market makes that seem sensible. I shall return to that point later.

    I have tried to outline the background for the information of the House. Against that background, I am pleased to tell the House that, despite all the difficulties, we have been successful in securing a substantial improvement in the Commission's proposals. That means that it is now proposed that the increase in the guide price for haddock should be 5 per cent. instead of 2 per cent. as originally proposed. For whiting the increase now proposed is 6 per cent. For cod we are talking about an increase of 9·5 per cent. instead of 5 per cent.

    I readily admit—I make no secret of this—that this does not give us all that we would have liked or all that we first asked for. However, I believe that if we tried to go further in the negotiations we should be unlikely to secure anything better. If we went further, we should be without effective support from other Community countries. Indeed, in the final stages of the negotiations Ireland was virtually the only country to support us.

    In my judgment, the effect of insisting on a further period of negotiation would be to delay the introduction of the new prices so that our fishermen would go into next year having to operate the current year's prices. My consultations with the industry suggest that the fishermen would rather be sure of having the new increases from 1 January than hope for a rather better but hypothetical increase later. Moreover, if we allowed the matter to continue beyond 1 January negotiations would have to be resumed under a new presidency—on the basis of the Commission's original proposals and not necessarily on the basis of the improvements that we have so far succeeded in negotiating and which are now on the table.

    My judgment, for which I ask the consideration and support of the House today, is therefore that if we pressed the matter any further there would be a real risk of losing the gains that we have managed to make. In our view, therefore—this is why we have brought the matter before the House—the time has now come to settle.

    Although I freely admit that the increases that we have negotiated are not as great as those that I should have liked, I do not think that the present proposals are particularly poor. They represent a considerable improvement on the Commission's original proposals and their value to our producer organisations is clearly enhanced by the fact that it will be open to the producer organisations, if they think that the market will take it, to add 5 per cent. to the official withdrawal prices. We are, therefore, now effectively talking about increases of 10 per cent. for haddock, for example, and 15 per cent. for cod.

    I wish to make two further points. First, in the course of this year's negotiations and in the face of widely conflicting views about where guide prices should be set, the Commission said that it was considering setting in hand an in-depth study of these prices and their effect on prices in the open market. The aim is to provide a better basis for future decisions. We welcome that proposal and we shall give the Commission all the help that we can in seeing that it is followed up. We are confident that it will help us in our future negotiations and in our efforts to see that guide prices are set at realistic levels.

    Secondly, decisions on guide prices and withdrawal prices, important as they are, are only part of the story. The withdrawal prices system can never aim to do more than to put a floor in the market. There will always be arguments about where floor prices should be set. Some want them set high, with the ever-present risk of encouraging "fishing for the guarantee", which I do not think that any of us really wants. Others want them set so low that they provide no real support for the industry. Striking the right balance can never be easy.

    Wherever the prices are set, however, the real key to improved returns and to improved profitability is for the catchers to get the best possible prices for their fish in the open market. This means paying attention to quality., the way in which the fish is handled, better phasing of landings—in short, improved marketing. These are problems that the industry has to tackle for itself. The producer organisations have a role to play which, I am glad to say, most of them accept constructively and positively. The Sea Fish Industry Authority, too, has a key role to play. At the end of the day, however, no organisation can achieve all that it could without the full-hearted and consistent support of the many thousands of individuals who go to make up the fishing industry.

    Will the Minister say a word about two items which have for the first time been brought within the marketing scheme—edible crabs and particularly nephrops, which he will be aware are an important and valuable catch for Northern Ireland? Why have those two species been brought in at this stage and do any difficulties or problems attach to them which the Minister expects to be affected one way or another by the new marketing scheme?

    I did not mention that earlier, for the sake of brevity in trying to explain the background. The new species—particularly dogfish and ling—are covered, and for the first time compensation is available for those. Salmon and lobster have also been covered. The new marketing regulations provide for compensation to community producers on the basis of a deficiency payment system.

    Details of that system have not yet been worked out and we are pressing the community on that. The right hon. Member for Down, South (Mr. Powell) mentioned two other species—edible crabs and Norwegian lobsters. Setting up guide prices for each of those species provides a basis for activating article 16 of the new marketing regulations by means of private storage aid where the price of the Community product falls below 85 per cent. of the guide price and there is a trend towards a disturbance of the market. We have not yet worked out with the producer organisations how that storage aid will work. We hope to be able to do so in consultation with them in the weeks and months ahead.

    The Government believe that this extension is worthwhile. We worked for it in relation to the original marketing regulations. However, we shall have to wait to see how it will work in practice. We want to see it working satisfactorily, if possible.

    10.27 pm

    We have had our conflicts with the Government on the fishing industry over the past few months, but I do not think that this is such an occasion. However, I do not think that it would be right merely to let matters pass without comment, especially as they concern an industry whose future is in fairly grave difficulties as a result of our presence within the EC.

    In considering the future floor for our fish prices, it is as well to keep in mind some of the difficulties which we will still have to debate before there is a satisfactory solution. It is wrong that we should be discussing fish prices today before we have had an opportunity to debate the wider issues which affect the British fishing industry. Prices, and any other aspect which affects the fishing industry, should be discussed in the exact knowledge of what will happen to the industry and with the confidence of obtaining a better deal. Both points necessitate debate.

    The Minister will understand if I first express my astonishment at the Prime Minister's remarks this afternoon. I listened carefully to what she said and I understood her to say that there would be no debate in the House on the deal that has been agreed in Brussels in relation to quotas, limits and the common fisheries policy for the next 20 years until that deal is wholly accomplished.

    The difficulty is that we do not know whether the deal will be accomplished. The Danes may not accept it and we may be placed in a tricky legal position. If there is agreement, I should have thought that at least the House, the country and our fishermen should have the same assurance that Denmark has, that the deal will be reported back to and discussed by Parliament so that a mandate may be given to the Ministers before there is agreement or otherwise.

    I was astonished to hear the Prime Minister say today that there would be no debate until agreement had been reached because the agreement might be jeopardised. The agreement was no good in the first place, and we do not mind placing it in jeopardy because then it may be improved.

    My next point is more favourable. The Opposition have always taken the view that our industry should have a proper support system. Unfortunately, however, it is difficult to have a support system for an industry that is much smaller than the one we would have had if we had received a better deal from the Common Market. Our greatly reduced fishing industry is even more keen to have a proper support system comparable to that existing for agriculture.

    I welcome the fact that the Minister has managed to improve the level of price increases. The price increase for cod has been improved by about 5 per cent. and that for haddock to 5 per cent. The Minister will understand that I give a limited welcome to his achievements. We must accept, however, that a system of minimum prices for fish has never applied to the fishing industry in the way that a price structure has applied to agriculture where support starts below market prices and occasionally below minimum prices.

    In view of the condition in which the Government have left the fishing industry at ports such as Humberside, we believe that we might have achieved more if we were not in the Common Market.

    I understood the Minister to say that he considered the prices insufficient but that he could not negotiate further because we might have lost everything. He says that the proposals were not good enough for our industry but that they had to be accepted. I congratulate him on achieving something. It was the best he could do in the circumstances.

    The Minister said that help was to be given to local areas to operate their own producer schemes. I understand that there are virtually no producer schemes operating south of the border.

    According to the Scottish Fishermen's Federation, most of the producer schemes have collapsed. When we talk about those that are left, we should talk also about what the position should have been. There is no point in reacting in the way that hon. Members have. The Scottish fishermen tell me that all autonomous producer organisation support schemes in Scotland have been abandoned because it is no longer possible to support them.

    Does the hon. Gentleman recognise that the extra 5 per cent. is new and that the industry must consider it?

    I understand that, but the Minister has not justified the claim that the new price level will make it easier for any producer-supported scheme. It is no longer possible to support producer organisation support schemes, and everyone in Scotland is now working to official withdrawal prices. I assume that that must apply even under the new scheme. However, we shall give every encouragement to any improvements.

    Certain anxieties have been expressed. Perhaps the Minister would comment on the recent incident at Stornoway, in the Hebrides. About 200 tonnes of fish were caught. FEOGA prices were paid for withdrawal and the fish were dumped in the sea. I was there when it happened. I understand that the incident was due to the inadequacy of fishmeal factories in the area. There is no point in having a withdrawal price structure if there is no means of coping with the withdrawal and if 200 tonnes of dead fish are dumped into the sea.

    We accept and support the measure for the industry, but the industry's position must be understood. I should have like to know to what extent protection is given by the minimum import effect of the support structures and prices, when there is a £250 million deficit for fish and fish products for human consumption. The figure has been high in previous years and is high now. What support can we expect to alter the position if the prices are put into operation?

    I do not want to start a major conflict now about fishing in general. We have had our say, but the Minister should communicate to his right hon. Friend the Minister and the Cabinet the imperative demand that is made by fishing organisations and by us. I refer to the demand that the deal negotiated so far should be presented to the House. We are only three weeks from the end of the derogation. We do not know whether the deal made for nine countries will stand up to European law, or whether British law will prevail. We do not know under what conditions our fishermen have to accept the prices.

    We congratulate the Minister on achieving some improvements. We recognise, however, that nothing compensates for the massive loss of potential quotas and of British waters under the deal agreed so far.

    10.35 pm

    As my right hon. Friend the Minister has said, the guide prices determine the level of withdrawal prices that are operated by the Yorkshire and Anglia Fish Producers Organisation, which is still in operation. Therefore, they are vital to fishermen in the Bridlington constituency, particularly in years such as this, when the markets have at times been unstable and in disarray. During the past year, substantial quantities of fish have been withdrawn from sale because of the failure to reach withdrawal prices. There is no sign that the instability of markets will lessen in 1983. Therefore, withdrawal prices will be just as important to my fishermen next year as they have been this year.

    Article 39 of the Treaty of Rome aims to guarantee a fair income to agricultural producers, including fishermen. One of the main ways of achieving that is through withdrawal prices. The criticism of Bridlington fishermen is that the withdrawal prices that were in existence when we entered the EEC in the 1970s were too low. Those problems have been made worse as each year, at the annual review, they have not been increased in line with inflation. Thus, they have become progressively unrelated to the market price and to the cost of production. Almost all the boats that sail from Bridlington benefit at some time from withdrawal prices, and so the low level has had an adverse effect on our fleet. Although it is very efficiently operated and catches species that are in public demand, it is in a parlous financial state and is not generating sufficient profits to finance the renewal of an ageing fleet.

    My right hon. Friend gave us details of the Commission's original proposals, which were completely unrealistic. Had they been accepted, it would undoubtedly have led to a reduction in the real earning capacity of our fishermen. During the past four years, fishermen have had to meet increased costs of almost 50 per cent. It is grossly unfair that, year after year, the Commission's proposals for increasing the guide prices are considerably lower in percentage terms than its proposals for increasing farm prices. If my right hon. Friend knows the reason for the difference, perhaps he can inform the House about it in reply.

    The fishermen of Bridlington believe that a reasonable increase in cost for the various species would be about 10 to 25 per cent. At first sight, that may seem to be a rather large increase, but, bearing in mind that it would merely bring the level of withdrawal prices back to what it was three to four years ago in real terms, it is not unreasonable. The increases would not be transferred to the consumer. Although the Government have not achieved those levels, I, too, congratulate my right hon. Friend on making significant improvements. To have almost doubled the increase in cod prices, which is an important species to Bridlington fishermen, to 9½ per cent. is much better than one may have expected. Haddock prices have been more than doubled. If one adds to that the ability of the fish producers' organisation to add a further 5 per cent. to the price when the new marketing arrangements begin on 1 January—with the FEOGA grants still being available—there will be an increase of about 14½ per cent. on North Sea cod, which is still the most important species.

    I know that my right hon. Friend would have wished to see a larger increase this year, but I accept that it is important that the new prices should be in operation by 1 January. We cannot forget the fact that we are at a critical stage in the negotiations on a common fisheries policy. My right hon. Friend has probably screwed out of our EC partners as much as anyone could manage this year. My right hon. Friend's record during the past three years has not been bad. He has secured increases that were 50 per cent. higher than the increases secured by the Labour Government in their last three years in office.

    Another matter to which my right hon. Friend might reply, because it has caused some anxiety in Bridlington, is the report in Fishing News that the number of EC inspectors who will be responsible for enforcing the new conservation regulations will be 13 and not 30, as was originally announced.

    Was the hon. Gentleman present at Prime Minister's Question Time today when she insisted that 13 was an adequate number—a view that neither he nor share?

    I was present at Prime Minister's Question Time and I shall wait with interest to hear what my right hon. Friend has to say about my point. I am sure that the hon. Gentleman will wait with equal interest.

    Despite the congratulations that are being given to the Minister, apparently by both sides of the House, I hope that he will be able to assure us that next year he will go into the negotiations determined to get an even larger price increase for our fishermen to offset the low increases in previous years. If he is able to do so, he will play a significant part in increasing the profitability of our fleet so that we can embark on a policy of progressively replacing the older boats.

    10.46 pm

    I am pleased to follow the hon. Member for Bridlington (Mr. Townend), even though I took issue with him about the inspectorate, to which I shall return in a moment, I agreed with most of what he said. Perhaps it is a good thing that from time to time some emphasis is placed from both sides of the House on the importance of the East Coast of England part of the fishing industry, where the producer organisations operate—both the one to which he referred and the Anglo-Scottish Fish Producers Organisation—and have an important part to play.

    I thank the Minister for his explanation and for the negotiating effort he has put into the business of withdrawal prices, while so much else was going on. There has been a significant improvement, although I take the view, as do most fishermen, that the withdrawal prices are ludicrously out of line with the realities of the market and compare unfavourably, as has been pointed out, with the rate increase in farm prices in a number of commodities. There does not appear to be the political steam in Europe behind the market mechanisms for fishing that there is behind the market mechanisms for farming.

    When the Minister referred to the additional 5 per cent. that the producer organisations could add to the price and seek to support out of their own funds, I assume that he was presuming that this would not lead to massive disbursements from those producer organisation funds which are still operating.

    The great difference between the new scheme and the old one is that withdrawals are then eligible for funding out of compensation under FEOGA.

    I had assumed—perhaps I shall receive the right answer by this process of exchange—that the additional 5 per cent. levels, to which the Minister referred, which would be going beyond the European price, would not be eligible for reimbursement from FEOGA funds. If I am wrong in that assumption, perhaps the Minister will clear the matter up, but if I am correct that they will have to find that money because they are going beyond what the Community considers necessary, are we to assume that this will lead to a substantial drain on funds? Alternatively, are we to assume that the gap remains so wide between real prices and withdrawal prices plus 5 per cent. that it will not have any great practical effect at all, in which case the discussion is academic?

    The Minister will not be surprised if I refer to substantial landings that take place outside the ambit of producer organisations and outside the influence that they can have on the market. If substantial numbers of non-members land catches continually below withdrawal prices, they are thereby able to influence the market in that area. Will the Minister bring us up to date on his thinking and the Government's thinking on market management, where large numbers of non-members are landing? I mention that particularly because of the extensions that have been talked about involving, for example, edible crabs. In that sector of the industry one finds a particularly large number of small fishermen—the backbone of the fishing industry in many of the smaller villages—who are often not members of producer organisations. That must be a more difficult market to manage.

    I thought for a fleeting moment that the Minister had mentioned salmon. I do not know whether I was correct in that. I have combed the documents for this reference to salmon. Perhaps, when he replies, he will say a little more about it. Operating arrangements of this type in the salmon market would be about as difficult as anything we do in salmon fishing, which is about the most controversial subject with which I have to deal in my work as a Member of Parliament. It may surprise those Members who do not have fishing interests to realise that there is no more controversial and difficult subject than that of the salmon fishery. It involves large numbers of people in different types of fishery, most of whom do not belong to producer organisations. It would be a difficult area in which to operate a withdrawal scheme. I hope that the Minister will clarify, generally, and in respect of new species, the area in which this sort of marketing system might operate.

    Earlier today we were discussing the inspectorate system which was supposed to be part of the common fisheries policy package and which was part and parcel of Britain's acceptance of it. I was worried by the announcement that the number of inspectors to be employed at the European level is to be more than halved, and by the Prime Minister's blanket endorsement of that decision this afternoon. She seemed to say that she was entirely satisfied that 13 men could do the job more than adequately. That was not the Government's view when they agreed to 30 in the first place. I ask the Minister to clarify that issue when he replies.

    10.51 pm

    I am pleased to make a brief speech on a subject that is important to my constituency. Like my hon. Friend the Member for Bridlington (Mr. Townend), I congratulate my right hon. Friend the Minister of State on staunchly supporting the British fishing industry throughout the difficult years of negotiations. I am sure—I know that there are Opposition Members who take the same view—that no one could have done any better. It is rather sad to hear an Opposition spokesman on fisheries, especially with a name such as Buchan, who represents an area from which so much fish comes—I refer to the hon. Member for Renfrewshire, West (Mr. Buchan)—representing the fishing industry's views so poorly, especially this section of the industry. I pride myself on knowing just a little about what the fishermen are saying.

    I agree with my right hon. Friend that the prices are not high enough. They will, of course, never be high enough to meet all demands. The livestock compensatory allowances are never enough and neither are the other guaranteed prices for farmers. Comparisons between farm intervention prices and fish withdrawal prices are rather curious. That is not comparing like with like and we should not try to compare the respective levels.

    The term "withdrawal prices" is rather unfortunate. I should much prefer "residual prices". I do not wish "withdrawal prices" to alienate the buyers in the market. Buyers are sometimes annoyed when there is a great amount of fish withdrawn, especially if the price is at about the market price and they do not get the benefit. That is why I welcome the sheepmeat regime that my right hon. Friend and his right hon. Friend, the Minister of Agriculture, Fisheries and Food, were able to secure in Europe. It uses a deficiency payments scheme and a similar scheme would be better for fish. I welcome my hon. Friend's statement that there is a degree of deficiency payment in the new scheme.

    Marketing is tremendously important and we must not encourage the catching of fish for withdrawal prices. That is the difficult decision that has to be made in determining the level of prices. The marketing of fish is far more important than the withdrawal scheme. It is necessary to retain something of that type to level out the fluctuations that may arise in supply and demand in the fish market. I hope that a means of doing something with the fish that are withdrawn can be found rather than good fish being made straight into fish meal. I hope that there will be some way of preserving them so that they can be put on the market at a time of more scarcity, so that their numbers do not disrupt the market.

    With those few remarks, I shall allow the hon. Member for Grimsby (Mr. Mitchell) to have his say as usual. I am sorry that it may prove not to be constructive.

    10.55 pm

    How can I live down such a claim as the hon. Member for Banff (Mr. Myles) made? Deeply moved as I am by the lemming-like loyalty of Conservative Back Benchers for untenable positions, I must express my disappointment at the Minister's statement.

    I was disappointed by the low increases of the guide prices that the right hon. Gentleman reported. I was also disappointed by his reaction, which was the ritual wringing of hands. The Minister is congratulated on his record, but that record essentially comprises a refrain as on a pop record. It goes "It is not good enough, but if we try to get anything better we shall endanger the whole thing."

    That has been the Minister's refrain throughout the Common Market negotiations. That is what he is saying now. He is saying that the prices are not good enough, that they will be of little help to the industry but that if he attempts to improve them we shall lose even the minimal gains that have been made. The fact that Conservative Back Benchers bleat their congratulations on such a dismal report shows how out of touch they are with the realities of the industry.

    We have an incomprehensible document. It is written in Eurospeak. We are given definitions of ecus per tonne for guide prices which mean nothing to the fishermen whom I represent. The terms are not adequately translated for those fishermen. Moreover, the promises in the explanatory memorandum are not kept in the text of the document. It refers to the stabilisation of market prices and support of the producer's income, neither of which will be attained by the low increases that are set out in the memorandum.

    The essential point is that the prices are too low initially and that the increase is much too low. If the market has stabilised in the past year—fortunately, it has to some extent—it is a stabilisation that is largely due to accidental factors and hardly anything to do with Common Market machinery and market management of which so much has been promised, but which has delivered so little.

    The subject is vital. It is as important as the battles that are being fought over the common fisheries agreement and the tirade of denunciation against Denmark.

    I listened with horror to the Prime Minister's announcement of the Euroforce—or the Eurofarce as it will probably be. It has been reduced from the original 40 to 13 inspectors to police so many countries, administrations, ports and square miles of ocean. It is ludicrous. She did not stop there but went on to say that, from 1 January, there would be fishing up to the beaches. She said that as a rebuke to the Opposition.

    It is the first time that that has been stated officially from the ministerial side. It denies all the promises about derogation that were made during the negotiations in 1972 by Ministers in the Government that was formed by the right hon. Member for Sidcup (Mr. Heath). What the Prime Minister said this afternoon does not accord with what the Minister has been saying throughout the negotiations—that we do not accept that position. This afternoon, the Prime Minister seemed to accept it. In doing do, she is saying that we have no means of policing Danish catches by national measures. If that is accepted as the position under the 1970 regulation, we are agreeing that there is no legal validity for national measures. I was horrified by what the Prime Minister said.

    Does my hon. Friend agree that one of the worst aspects of the Prime Minister's statement was that it was made in defence of her refusal to have a debate in the House on the grounds that this might affect the agreement and that, without an agreement, there would be fishing up to our beaches?

    My hon. Friend has underlined the point I made. In considering the guide prices, it is necessary to refer to the basic regime determined for agriculture by the Treaty of Rome. Article 39 of the Treaty states that the aim is

    "to ensure a fair standard of living for the agricultural community, in particular by increasing the individual earnings of persons engaged in agriculture"
    "to stabilise markets."

    Article 38 states that fishing is to be treated in the same way as agriculture. The result has been enormous expenditure and the turning of the EC into essentially an agricultural protection society, devoting two-thirds of its revenue and next year, following this year's harvest, more to agriculture. That has not been done for fishing. The aim of
    "increasing the individual earnings of persons engaged in agriculture"
    while achieving a fair standard of living for the fishing community has not been achieved. The amount of support given by the British Government to fishing is pathetic compared with the support given to agriculture. A book written by the hon. Member for Holland with Boston (Mr. Body) and published this week entitled "Agriculture: The Triumph and the Shame" assesses the aid given to agriculture domestically at £3·3 billion a year. The Government are pouring in two days into agriculture more than they are pouring in a year into fishing, which has been badly battered particularly by the Common Market, to which the Government attach so much importance.

    It is not only the Common Market that has failed to fulfil its promise to fishing. The Government have not fulfilled their obligations to fishing, to redress the problems caused by the Market itself. Both the Government and the Market have failed over fishing. There has been no recompense for the losses sustained in Iceland. There has been increased competition from fleets more heavily subsidised than ours for a diminishing catch in the North Sea. Fishing is in a desperate situation. The collapse within the past fortnight of Consolidated Fisheries in Grimsby is a major blow to a port where survival is becoming a house of cards scenario. More losses could endanger the whole structure of fishing and associated industries.

    The industry is burdened with debt. It is not making sufficient money to invest or to replace the old vessels that are the basis of the industry. Interest rates have also increased again. There is need for aid and restructuring. There is need for orderly marketing and assured markets, which will stabilise the income of fishermen and bring the cost of catching fish and the prices for which it is sold into sensible relationship. The regime now under discussion is totally inadequate. The guide prices are far too low. They started off too low. The industry was told that there would be an adjustment upwards. That promise has not been fulfilled. Based on a three-year moving average, the prices move up very slowly. They have not kept pace with inflation.

    The over-valuation of the pound sterling therefore makes the United Kingdom very attractive to imports. The fact that the guide prices are too low leads to other problems. It leads to official withdrawal prices that are too low. The whole structure is based on the guide prices. I am not sure how much the official withdrawal prices amount to in Grimsby, but I would be surprised if they amount to more than £20 a kit. They are totally inadequate to support the market. If the official withdrawal price is too low, it does not hold up prices but it brings them down. Prices come down towards the official withdrawal price. Far from supporting the market, it is a drag on the market.

    Our experience in Grimsby has been very unfortunate regarding withdrawal prices. We did have an autonomous scheme of withdrawal prices a decade ago, that autonomous scheme of withdrawal prices worked well. Britain was making big catches in Iceland, and the catches from British vessels contributed to the levy to support the withdrawal price scheme, as a result of which there was a good financial reserve. When the reserve had to be invoked, the money was available to pay for the scheme. In February 1980, that autonomous withdrawal scheme collapsed. The prices for withdrawal were better than those being offered in the Common Market. It collapsed because an increasing part of the market was filled by imports that were not contributing to the scheme. The domestic landings were not enough to finance it, the strain was too much and the scheme collapsed. It cannot now be revived. The Minister called it the "fourchette". I am not sure why. Will the extra 5 per cent. payable under that scheme be paid by the local producers' organisation or will it be payable out of the FEOGA grant? If it is paid by the local producers' organisation, it will face the same problems as the autonomous scheme in Grimsby, which has already failed.

    Far from being the great innovation, the fourchette may turn out to be a repetition of the scheme that has floundered already. We do not now operate an autonomous withdrawal scheme in Grimsby. We should, but without adequate withdrawal prices and the finance to back it, we cannot provide the basic support for the market.

    Each time there has been a flood of imports, Ministers have promised that they will fight hard to get official withdrawal prices pushed up, yet they are never pushed up to a level that is anywhere near adequate to support the market.

    I can see why. The Germans are interested in the processing side, which dominates the catching side, and do not want the official withdrawal prices pushed up. They are big contributors to the budget, and they do not want to spend more money. The French are interested in the fuel subsidy, which keeps down their catching costs. The French also have a central agency for fish sales, which guarantees and tops up prices. They do not want official withdrawal prices put up. Our industry desperately does. In failing to achieve that, the Minister is failing the industry. Fishing needs the same amount of provision, the same kind of adequate marketing and the same withdrawal prices as agriculture if it is to prosper in the way that agriculture is prospering. It is unreasonable that a structure so patently devoted to agriculture is not paying out benefits to fishing as an industry that has been severely hit. The same problem affects reference prices, which allow imports to come in at far too low a price for the health of the domestic catching industry.

    Fishing is not getting the support that it was promised through these pricing and marketing arrangements. We were told that the Common Market would agree to proper and orderly market support. We have not got that. It is not working. It cannot work. Having failed to get it, the responsibility falls on the Minister to compensate out of national funds for the failures of the Market.

    The Minister cannot have it both ways. If the Market, from which so much is promised, does not provide adequate prices or some relationship between the price at which the fish is sold on the market and the cost of catching that fish, the national Government must step in to redress the balance and compensate the industry for what it is not getting from the Market.

    If the European Community will not do that, the Government must. Instead, the Government have failed on both fronts. They keep telling us of their failure to get a better deal, better prices and better official withdrawal prices and then say "We have failed there, but we shall not provide adequate domestic finance either". That shows that the future for the industry will be as tough as the last two years have been.

    11.10 pm

    With the leave of the House, I should like to reply. My hon. Friend the Member for Banff (Mr. Myles) is rarely wrong, and he certainly was not wrong tonight when he predicted the speech of the hon. Member for Grimsby (Mr. Mitchell). What an absolute travesty of the truth! We heard about up-bidding, but the hon. Gentleman merely plays and toys with words. He called on the Government to help the industry through national aids, but he did not say a word about the £15 million aid scheme—

    I shall not give way. The hon. Gentleman can play with words to his heart's content, but so long as he deals only in the froth we cannot accept that he understands the industry.

    The hon. Member for Renfrewshire, West (Mr. Buchan) raised a number of wider issues. He heard what the Prime Minister said earlier today, and I stand absolutely by that. The reason he complains is because of sour grapes arising from the fact that the industry has supported the package that nine countries of the Community have agreed. It is in that sense that I respond.

    The hon. Member for Renfrewshire, West, my hon. Friend the Member for Bridlington (Mr. Townend) and others asked whether fishing and agriculture were dealt with differently. There is a different way of dealing with these two subjects, because the machinery, mechanics and institutions for dealing with fish prices are different.

    We must get this argument in perspective. If one compares different commodities in agriculture and fish, one finds that some are similar. For example, pigmeat does not enjoy the advantages of an intervention system, and I constantly receive complaints from that industry of the kind mentioned tonight. The same is true of fruits and vegetables. They enjoy a withdrawal system which in many ways is not that much different from fish. Therefore, while certain agriculture products enjoy the intervention system, other agriculture products are treated similarly to fish.

    Does my right hon. Friend concede that there are many agriculture products which do not enjoy any support system at all?

    Indeed there are. That is why it is dangerous to generalise. Here I exclude my hon. Friend the Member for Bridlington, who did not generalise but was particular in his points.

    A number of other issues were raised. The hon. Member for Renfrewshire, West talked about dumping, where fish is withdrawn and then dumped. I share his feelings. He saw it happen in Stornoway, and it was most unfortunate. I do not know the circumstances of the incident, but perhaps I can reassure him to the extent that dumping of that kind happens very rarely. Normally, when fish is withdrawn, it goes for other purposes, such as fishmeal or petfood. I do not want to be dogmatic, because I do not know the full circumstances, but I guess that a port such as Stornoway does not have the facilities. I understand that my noble Friend who is responsible at the Scottish Office is endeavouring, in conjunction with producers' organisations and others, to ensure that where there is a danger of fish being landed in excess it is landed in areas and ports where there are alternative outlets. However, I agree with the hon. Gentleman that if dumping can be avoided, it should be avoided.

    The Minister is absolutely right, and he has said some of the things that I had hoped he would say on this subject. I understand that the difficulty was getting across the Minch, and there was no fishmeal factory, or none that was open at the time. The lesson we should learn from the incident is the need to develop processing, such as the fishmeal factory that is proposed for Barra, or better freezing facilities in and around Stornoway itself.

    However, I come back to an earlier point. The Minister said that he agreed with everything that the Prime Minister said at Question Time today. Does that include the numbers of inspectors? Does it include her conception of what will happen if there is no agreement—fishing up to the beaches?

    I shall be happy to return to both those matters later. Meantime, I rest in the glory of the hon. Gentleman's support for the first time in our abhorrence of fish dumping.

    The hon. Member for Berwick-uopn-Tweed (Mr. Beith) asked for clarification of the way in which the new fourchette arrangement works in the withdrawal of fish. I do not want to mislead or confuse the House in any way. The hon. Gentleman is right that the 85 per cent. applies to the official withdrawal price. The difference between the new arrangement and the earlier one is that if the producers' organisation did not operate its withdrawal rigidly at the official price, it disqualified itself from any compensation. Now it can go five per cent. above. That gives greater discretion locally and does not disqualify the organisation from the 85 per cent. compensation of the withdrawal price. I apologise if I misled the hon. Gentleman earlier.

    The hon. Member for Renfrewshire, West spoke about the autonomous schemes collapsing. It is true that some of them have collapsed—partly, in some cases, because the prices were set too high. I hope that the new discretion that is now available to producer organisations will help. It is a matter that we shall want to monitor. We believe that it will help, and we want to know whether it does help.

    The hon. Member for Berwick-upon-Tweed mentioned extension of discipline. It is a matter that he and I have debated a number of times, both on the Floor of the House and in Committee. No final decisions have been taken. I make no apology for saying that, and I must reiterate that, although many of the producer organisations asked for this, it raises many issues of principle. There are questions of intrusion on individual freedom, in forcing them to join an organisation. Different views are held in different parts of the country. If we were to implement it, it would require primary legislation in this country. That illustrates the kind of difficulties that are involved. We cannot enter into it lightly. We would not enter into it without full consultation with the fishing industry and producer organisations. I freely admit that among producer organisations there is concern and a desire for an extension of discipline. I understand why.

    The hon. Member for Berwick-upon-Tweed also talked about additional species, which were mentioned by the right hon. Member for Down, South (Mr. Powell). I mentioned other species. There is the extension to salmon, which I mentioned earlier. It was in the original new marketing regulation. However, the implementing regulations have not yet been worked out. As my hon. Friend the Member for Banff said, it is based on a deficiency payments system. We shall wait with interest to see what the Commission's proposals are.

    Many hon. Members, particularly my hon. Friend the Member for Bridlington, raised the serious question of the inspectorate of the Commission. I am glad that the point was raised, as it is a matter of real importance, which has caused anxiety both in the House and outside. What matters is that the inspectorate should have the resources necessary for the task that it has to carry out. It is true that initially there was talk of a large inspectorate. I do not recall any specific figure, although a broad range of figures was bandied about. I do not think that hon. Members who mentioned specific figures were correct. The Commission initially had ambitions for a large inspectorate.

    The task of the inspectorate is simply to ensure that all member States enforce Community regulations with the same rigour as we do. In other words, what is to be set up is an inspectorate of inspectors, and not a core of primary inspectors, which would have required a much larger number than the number that is being discussed now.

    We in the United Kingdom have always welcomed the fact that the basis of the inspectorate is that it is an inspectorate of inspectors, because we have always maintained that a coastal state such as the United Kingdom should be primarily responsible for the policing of its own waters. That objective has been supported on all sides of the House. I am glad to say tat we have achieved that objective.

    However, the achievement of that objective has meant that a smaller inspectorate—I repeat, an inspectorate of inspectors—is needed than if the Commission set up a core of all the inspectors for all waters of the Community. As Fishing News stated last week, the Commission said that for that task 13 inspecting officers are to be appointed. It is clear from our contacts with the Commission that it believes that that number is adequate for the task.

    My right hon. Friend the Minister of Agriculture, Fisheries and Food has been speaking personally today to the commissioner for fisheries, Mr. Contogeorgis. He has impressed upon him the fact that the task must be effectively carried out. My right hon. Friend has made it clear to Mr. Contogeorgis that if the resources prove inadequate, they will have to be increased. We must make sure that the arrangement is effective. Effective policing is essential. We have the capability in our waters. That is the fundamental thing that matters. We must also ensure that the Commission has the means to require the same capability in the waters of other countries. That is what really matters. That is what we shall continue to work for.

    The Minister has just told us that 13 inspecting officers were adequate, but subsequently he said that the Minister of Agriculture, Fisheries and Food was pressing for more. Is 13 adequate, or should we press for more? What was the figure in the first place—30 or 40?

    I am sorry that the hon. Gentleman did not listen, as I was very careful in what I said. My right hon. Friend said—and I repeat it today—that the resources of the Commission and of the inspectors should be adequate for the task and that if they are not adequate they should be increased. We do not yet know what the task is, so the hon. Gentleman is really asking how long is a piece of string. It depends what the task is. Given that the task is far more limited than that envisaged when the inspectorate was first proposed, I believe that 13 is a start. The Commission believes that that number is adequate. I emphasise that we have impressed on the Commission that if the number is not adequate additional resources will have to be devoted to the task. However, it is a new task and we must see how it is carried out.

    The central question is whether the Minister regards 13 as adequate. Given that in the past there has been collusion between domestic inspectorates and fishermen, certainly on infringements of the herring ban, is any force able to police national inspectorates that collude in that way?

    Yes, I believe that the policing will be adequate. I certainly trust the Commission's word on this. It will work on an ad hoc spot check basis to see what is happening. As I have said, however, it is a new situation. I repeat that I have an open mind on this. If the policing proves inadequate, resources will have to be increased. What matters most, however, is to have the arrangements in operation as soon as possible after 1 January.

    May I console the Minister with the reflection that if he cannot solve the old conundrum "Quis custodiet ipsos custodes" it is not his fault but inherent in the logic?

    I am grateful to the right hon. Gentleman for his logic. I shall spend the rest of the evening reflecting on the hidden meanings of that, as I am sure that it is the hidden meanings that really matter.

    The hon. Member for Grimsby actually questioned the legal validity of control. This, again, shows his basic misunderstanding of the whole situation. Regardless of any further agreement by 10 or by nine countries, all 10 countries of the Community have agreed to a policing and control regulation that comes into force on 1 January. The hon. Gentleman completely ignores that agreement, which is quite separate from the other negotiations about conservation, quotas and access. Denmark is a party to that agreement, although it is not yet a party to any agreement on the other elements.

    The hon. Member for Grimsby and the hon. Member for Renfrewshire, West try to twist words and to misinterpret for their own benefit things that have actually happened. When the hon. Member for Renfrewshire, West referred to what my right hon. Friend the Prime Minister said today, he did not repeat the qualification that she made. She said that in theory—that is the qualification—there could be fishing up to the beaches. There is a world of difference between that and the actual position. If there is agreement by all 10 countries, a totally new common fisheries policy will operate from 1 January. If there is not agreement by all 10, the other nine countries have decided, and arrangements are now being worked out in co-operation with the Commission, that what has been agreed will be applied through national measures. Those are the two realities that we must face. Instead of operating in the realm of fact and practice, Labour Members operate in a cloud-cuckoo-land of theory and speculation, leading them to woe and despondency simply because they are proved wrong.

    The hon. Gentleman talks about Labour Members living in a world of theory, but it was the Prime Minister who talked about theory. What she meant by theory was the law. She is saying that practical measures can be taken, but in theory there will be fishing up to the beaches. We believe that it is time that we had a debate in the House to settle the question for good.

    Order. There may be a case for having a debate on this matter, but it cannot be tonight.

    There is all the difference between "in theory" and "in law", but the hon. Member for Renfrewshire, West is not prepared to make that distinction.

    Although I welcome Labour Members' support for some aspects of the document before us tonight, it has been extremely grudging. The Labour Party is not prepared to consider its record in the fishing industry. The hon. Member for Grimsby never likes to hear the facts of what happened under a Labour Government. Although he says how inadequate and useless these proposals are, he should compare this Government's record with that of the last Labour Government.

    Between 1976 and 1979 there was an increase in sterling terms of withdrawal prices—which is what matters to the fishermen—of 27 per cent. for cod. Between 1979 and 1982 there was an increase of 44 per cent. Between 1976 and 1979 there was an increase of 29 per cent. for haddock, compared with an increase of 49 per cent. between 1979 and 1982. I should like to hear the comments of the hon. Member for Grimsby on that.

    I should like to have seen better increases. I have explained why they could not be better. However, at least I am prepared to stand by the Government's record and not by words and froth.

    Question put and agreed to.


    That this House takes note of European Community Document No. 10701/82 on fish guide prices for 1983 and supports the Government's intention to seek to secure improvements in the level of prices proposed.

    Unemployment (Forest Of Dean)

    Motion made, and Question proposed, That this House do now adjourn.— [Mr. David Hunt.]

    11.32 pm

    I have asked for this Adjournment debate in order to focus the Government's attention once again on the plight of the Royal Forest of Dean. Its unemployment is high and rising and causing increasing concern.

    In Gloucestershire the average unemployment is 9·2 per cent. and a disproportionate amount of that is contributed by the Forest of Dean, where the unemployment rate is currently 12 per cent. That strikes me as being unacceptably high for a rural area, especially as, in the Lydney travel-to-work area, the full force of the 700 redundancies recently created by the London Rubber Company Ltd. and the 509 redundancies at Rank Xerox Ltd. has not yet been felt. When those are registered, I am led to believe that unemployment in the Lydney travel-to-work area will be about 20 per cent.

    I appreciate that other areas in Britain have a much higher rate of unemployment. However, the Government do a great deal to help such areas, but no direct help whatever is given to the Forest of Dean.

    We in the Forest are especially vulnerable as many employers are subsidiaries of larger companies. Names such as Reed Corrugated Cases Ltd., Sykes Pumps Ltd., Mallinson Denny Ltd., R. A. Listers Ltd., and Rank Xerox Ltd., immediately come to mind. In difficult times it is always the outlying operations of any organisation that get cut first. We have seen that to our cost with the removal of the London Rubber Company's operation.

    The area's position deteriorates further when its location is considered. The Forest of Dean lies between the River Severn and the River Wye. On the map that area is cut off and isolated. The infrastructure is poor. For too long the Forest of Dean has been a low priority area for spending of any sort.

    In 1979, for example, the Department of Transport decided to de-trunk the A48, the only major road that runs through the constituency. The Department sought to deprive us of a trunk road, but a new bridge is being planned over the River Wye from Chepstow. The present bridge has a weight restriction, because of old age and deterioration, which prohibits even medium-sized lorries travelling from the south. The new bridge will take many years to construct. Even the route has not yet been decided.

    Efforts are being made locally to attract new industry to the area. Under the auspice of the Finance Act 1980 the district council has initiated and developed the construction of the Forest Vale industrial estate in Cinderford. That has attracted new business. I am glad to be able to pay tribute to the efforts made by the Forest of Dean in that respect.

    The Forest of Dean district council does not always see eye to eye with me. It is dominated by the Labour Party, but we seek the same goals and on the whole I get on well with the district council. The estate has attracted new jobs and its development continues. Nevertheless, a large pool of skilled, semi-skilled and reliable people seek work in the district.

    The new threat is of existing firms relocating elsewhere. When a firm considers its plans for reorganisation or modernisation, the directors consider the assistance available in all districts. Seductive grants are offered in South Wales, Cwmbran and even Monmouth for companies to set up there. In Ludlow, to the north, three Government agencies try to put Government money into that district.

    The grants available to the ex-steel towns almost defy belief. Up to 40 per cent. of setting-up costs are available in such districts. European Community loans are available at 3 per cent. below current interest rate. That is ludicrous. The Government's policy merely moves the problem from one area to another. The policy visually robs Paul to pay Peter. I have made a tour of Government agencies operating through the Department of Industry and the Department of Employment. I had only derisory offers from the Manpower Services Commission.

    The problem cannot be put aside. I urge the Minister to consider designating the Forest of Dean as an area which is eligible for intermediate, discretionary assistance. I do not suggest blanket assistance. I do not suggest that we should reintroduce what used to be called grey areas. If we did that, everywhere north of Watford or west of Newbury would want some form of Government assistance.

    I feel that the case of the Forest of Dean deserves attention. It is not acceptable for the Minister to say that the system of grant aid that exists is cumbersome, unsuitable or under review, because it is the system in which we live and have to work.

    I am sure that the Minister will agree that it is indefensible to give aid to our near neighbours and give nothing to the Forest of Dean, an isolated community which nearly did not have a trunk road running through it. I urge the Minister not to turn his back on the Forest of Dean.

    I am grateful to my hon. Friend the Member for Gloucestershire, West (Mr. Marland) for the opportunity to debate the problems of his constituency and in particular the Forest of Dean. I know that his constituents will appreciate the assiduousness with which he pursues their interests. While I cannot agree with all the points he makes or arguments that he advances, I pay tribute to his determination to bring those problems to the attention of the House. He has been most assiduous in pressing their claims and bringing delegations to see me. We all respect the hard work that he does for his constituency.

    I assure my hon. Friend that we are well aware of the position in the area to which the debate refers. He has made representations, although we have received representations from other parts of Great Britain all of which have reasons for believing that they should receive special treatment.

    I want to explain our policy on regional assistance and why, unfortunately, I cannot go all the way with my hon. Friend and why, although I shall try to be helpful, I do not believe that the Forest of Dean can be given assisted area status.

    When we came to office we looked for ways to make regional policy more effective. We have done so by making it essentially more selective. Now that the final phase of our programme has been announced, assisted areas are being restricted to those with the greatest need. We have reduced the proportion of the working population covered by regional policy from about 44 per cent. in 1979 to 27 per cent. today. It will obviously go a long way to remove the competition for new investment that non-assisted areas such as the Forest of Dean faced previously. Although I recognise that my hon. Friend's area might be at a disadvantage, the fact that we have reduced regional assistance lessens the disadvantage that his area faces.

    We are required by the Industry Act 1972 to have regard to certain criteria in designated areas. We must consider first the overall rate of unemployment. It is important that the absolute level of long-term unemployment for any one travel-to-work area is considered relative to all other travel-to-work areas. My hon. Friend has said that the Forest of Dean comprises the Cinderford travel-to-work area and a small part of the Gloucester travel-to-work area. In October 1982 their unemployment rates were 12·6 per cent. and 10·7 per cent., respectively compared with 13·6 per cent. for Great Britain as a whole. That is well below the national average and also the average for assisted areas. Many other parts of the country, for example, the West Midlands, have higher unemployment rates without assisted area status.

    My hon. Friend referred to mounting redundancies and his fears for the future. Of course we shall continue to watch closely the situation in my hon. Friend's constituency as well as the trend of unemployment. As with other areas of the country, the unemployment rate in that constituency has risen sharply, largely due to redundancies in firms that faced difficulties. That is the main reason for the rise in unemployment in my hon. Friend's constituency. It is not so much a question of firms being tempted away by the inducements offered in other areas. The redundancies announced by Rank Xerox at Mitcheldean, together with the impending closure of the London Rubber Company's works at Lydney and its transfer to London will regrettably add to unemployment, but it is difficult for the Government to intervene in commercial decisions made by companies.

    My hon. Friend argues that Lydney is an unemployment blackspot, and that its problems have not been recognised. In the past, he has argued that the unemployment rates are hidden in the figures for the Cinderford travel-to-work area. Perhaps I should explain why a travel-to-work area is the smallest area for which the Department of Employment quotes unemployment rates. A travel-to-work area is intended to represent a self-contained labour market, where a significant majority of those who live in the area also work and vice versa. As unemployment rates reflect an area's need for jobs, it follows that such rates can be quoted only in respect of relatively self-contained labour markets that broadly include work places, the geographical source of labour supply, and demand for labour. Obviously, if people can travel within an area to find employment, it would be misleading to quote unemployment statistics on any other basis. Thus, it would be misleading to quote an unemployment rate for an area smaller than a travel-to-work area. However, as my hon. Friend has said, many travel-to-work areas have black spots within them.

    I know that my hon. Friend is concerned about the high cost of public transport for those of his constituents who travel to work. That problem is faced by many rural communities. Local authorities are responsible for deciding transport policy in their areas, but the Government have played their part, including in Gloucester, where they accepted in full the local authority bid of £625,000 for bus revenue support in 1982–83.

    Quite understandably, my hon. Friend referred to what he described as the unfair competition offered by the nearby assisted areas of Gwent. I am sure that he would be the first to accept that the enhanced assisted area status of Newport is justified on the grounds of the major effect of the unemployment at Llanwern steel works on the local economy and on employment prospects. The Monmouth travel-to-work area has had consistently high unemployment—20·4 per cent. in October—due to the "shadow effect" of industrial decline that occurred in other parts of Gwent. Thus, the status of those two areas—development and intermediate areas respectively—is fully in line with the Government's aim of concentrating aid on those areas with the greatest problems.

    My hon. Friend referred to the fact that the district is a border area. However, as he will know from our previous discussions, it is inevitable that, whatever decisions are made about where aid should go, and however narrow that aid is—we have considerably cut the amount of aid—there will always be borderline cases. That must follow if aid is to be given where the regional disadvantages and the unemployment levels are severest. However, although we shall continue to monitor the situation carefully—particularly in the light of what my hon. Friend has said tonight—the present boundaries were drawn only after the greatest and most careful consideration of all the factors.

    We cannot change the status of one travel-to-work area in isolation. We must put the question of assisted area status in a regional and national context. When unemployment is historically high and when parts of the West Midlands are suffering unemployment rates far higher than those of Cinderford—higher than many areas that have assisted area status—the problems of the Forest of Dean are, alas, not unique. Unemployment in Telford new town is 20·5 per cent., in Walsall it is 18·9 per cent. and in Birmingham it is 18 per cent. Yet we have resisted granting assisted areas status to all those areas. To grant assisted area status to Cinderford and Gloucester would give rise to claims for equal treatment by those areas as well as other areas from which assisted areas status has recently been withdrawn.

    If the areas that do not have intermediate area status were given such status, areas that are at present intermediate areas must be given development area status and development areas must then be given special development area status. The knock-on effects would be considerable and we would get away from our objective of reducing the area of Britain to be covered by regional assistance. Our objective of reducing the area from about 44 per cent. to 27 per cent. of the population would no longer be attainable. I am sure that we are right to concentrate the limited resources available on the areas of greatest need.

    I remind my hon. Friend that alternative industrial support is available to firms in the Forest of Dean, although we cannot give the automatic grants available in development areas. That takes the form of aid under section 8 of the Industry Act 1972 to assist new investment in the national interest that would otherwise not take place. Since May 1979, 30 projects in the Cinderford and Gloucester travel-to-work areas have been given £600,000, on total project costs of £2·7 million. I assure my hon. Friend, especially in the light of his strong representations, that if any projects are put forward from his constituency that might conceivably be candidates for aid under section 8, I and my colleagues will consider them most sympathetically. We are anxious to help.

    My hon. Friend will also agree with the importance of the small firms sector in the Forest of Dean. He will accept that we have done much to regenerate the sector and to assist in the creation of new businesses through a series of measures. I draw attention to the success of the loan guarantee scheme. Also of importance are aid schemes designed to assist the application and development of products, processes and the industries of tomorrow. The support for innovation scheme and the microprocessor application scheme are designed precisely to that end. Figures for expenditure in my hon. Friend's constituency are, unfortunately, not available, but I am sure that he welcomes our continued emphasis on such assistance, geared as it is to the needs of the future.

    While such investment in the future is of the greatest long-term importance, my hon. Friend is worried about his constituents who are out of work. In the Cinderford and Gloucester travel-to-work areas, 41 people are benefiting from the temporary short-time working compensation scheme, 332 from the job release scheme, 540 from the youth opportunities programme in 1981–82 and 17 joined schemes under the community enterprise programme this year.

    Such schemes are not a solution to the great problems of unemployment, but they make a positive contribution to the preparation of the unemployed for their return to work. They are clearly a necessary short-term measure in a recession, both for social and humanitarian reasons and to ensure that the work force is equipped in skill and motivation to take full advantage of the upturn and the opportunities when they come. My hon. Friend referred to what the Forest of Dean district council had done in preparing industrial estates. I agree with him that the council has done a great deal to help itself in preparing its own infrastructure.

    The Government are also aware of the importance of good communications for local economies in all parts of the country. My hon. Friend referred to the new bridge that is planned for the River Wye at Chepstow as part of the town's inner relief road scheme. The project will benefit the local infrastructure. Orders are to be published next year by the Welsh Office, which is managing the scheme in conjunction with the Department of Transport. Work is expected to begin in 1984, subject to the availability of finance and the completion of the usual statutory procedures, and the new bridge should be open by 1987. My hon. Friend has said that he is disappointed that this cannot take place sooner, but he will appreciate that an important scheme of this nature inevitably takes several years to come to fruition.

    My hon. Friend has been concerned about the status of the A48 trunk road. Although from a national point of view the A48 through West Gloucestershire is not of great significance, the Government have recognised its importance locally and have retained it as part of the trunk road system. I can assure my hon. Friend that there are no plans to change that status.

    In conclusion, despite my inability to give the Forest of Dean intermediate area status, I repeat what I have said about considering possible projects for assistance under section 8. I assure my hon. Friend that we appreciate the problems in his area. I do understand that there has been a considerable rise in unemployment in his constituency. There are no easy solutions. Our view is that prospects for all parts of the country ultimately depend on the health of the national economy. That is why it is encouraging that inflation and interest rates, so important for industrial confidence, are at their lowest level for years. The defeat of inflation is essential to provide a sound economic base for areas such as the Forest of Dean and, indeed, the country as a whole. I assure my hon. Friend that we shall keep his constituency and its problems firmly in our minds and under review. We shall examine projects that he cares to put to us for possible assistance under section 8.

    Question put and agreed to.

    Adjourned accordingly at three minutes to Twelve o'clock.