With permission, Mr. Speaker, I should like to make a statement.

1.On 18th December I informed the House that the Government were engaged in a major review of every field of public expenditure as one of the measures necessary to achieve a progressive and massive shift of resources from home consumption, public and private, to the requirements of exports, import replacement and productive investment.

2. This review has now been completed. Our purpose in this review is to make devaluation work, because until we do, until we are earning, year in and year out, a substantial surplus on our overseas payments, we are unable internally or externally to do all the things which, as a nation, we would like to do. But what this means for the immediate future is to ensure that we cut down our demands and our ambitions at home and abroad within the limits of what we can currently earn. At home, it means cutting back on excessive demands, both as individuals and as a community, and abroad it means reassessing our rô1e in the world and realistically limiting our commitments and outgoings to our true capacities. On this basis, provided that our recovery is soundly based and lasting, we can go forward. The review we have undertaken, covering as it does our ambitions and expenditure at home, and our commitments and deployment abroad, is an essential step towards making these principles a reality.

3.Our immediate objective, first, is to release resources from home use in order to reinforce the balance of trade, and to do this in a way which realises every practicable opportunity to reduce Government expenditure overseas. Second, it is to ensure that as the economy moves into expansion, led by the priority areas I have mentioned—exports, import replacement and investment —the total level of demand, public and private, is kept in line with what the productive machine can make available without lurching into inflation and excessive strain on our national resources. Third, and immediately at a time when unemployment, contrary to widespread expectation six months ago, is falling—seasonal factors apart — and demand for labour increasing, it is to ensure that the growing consumer expansion now underway gives way to an export-led expansion.

4. Our aim is not deflation, but expansion based on the growing use of our resources at an ordered pace so that the build-up of exports and the other priority categories does not lead to undue pressure on those resources. A higher proportion of our growing national production must be shifted decisively for the benefit of the balance of payments and investment, and a smaller proportion will be left, therefore, for rising consumer demand and Government expenditure.

5. From every point of view it would be wrong to seek to achieve the necessary reduction in demand solely by restraining the growth of personal consumption, though personal consumption must be sharply restrained. But public expenditure also must make its full contribution. Indeed, if the rate of increase of public expenditure were not severely restrained in the years immediately ahead, unacceptable burdens on the personal consumption of the ordinary family would be required.

6. My statement this afternoon, therefore, relates to public expenditure. The measures will be progressively reinforced as I indicated on 18th December, by all appropriate further measures, budgetary and non-budgetary, to hold back private consumption.

7. These measures which I am announcing today follow the steps announced at the time of devaluation, aimed at restraining both private and public consumption, and are additional to the cuts in defence expenditure, the £70 million cut in the investment programmes of the nationalised industries, prospective changes in taxation, the hire purchase restrictions, Bank Rate and the tightening of bank lending.

8. These measures accord fully with the policies which we have pursued in the defence of the old parity—the restructuring of industry, the stimulation of investment, technological assistance to industry, an intensified attack on the problems of the development areas, and a policy of severe restraint in prices and incomes. Conceived as they were in the pre-devaluation period, these policies achieved a great deal of what they set out to do: they will be needed in full measure in the new situation we now face. For whatever has to be done by reductions in the growth of public expenditure and in restraining private expenditure, so that we do not spend before we earn, the solution of our problems will basically come from changes in industry and industrial attitudes which are concentrated on increasing what, as a nation we earn, at home and abroad.

9. The measures I shall announce follow a detailed and searching review of policy by the Government in every major field of expenditure, with no exceptions, on the basis that no spending programme could be sacrosanct; and, I repeat, all these are in addition to the measures announced by my right hon. Friend the Home Secretary on 20th November.

10. The House will be aware, from long experience, that the expenditure of any given year is to a very large extent committed by decisions taken two and three years before, particularly where major works such as roads, hospitals and schools and many items of defence production are involved. Because of this time-lag, and the difficulty of making an impact on many continuing projects, we have concentrated on expenditure in the financial year 1969 –70, though in some cases, particularly defence, the full saving resulting from our decisions will not be seen until 1970 –71 or even later. At the same time, substantial reductions in expenditure in 1968 –69 will be achieved. I must, however, tell the House that, so great is the proportion of expenditure governed by programme decisions taken two, three and more years ago, that there will still be a considerable rise in' public expenditure in 1968 –69 compared with 1967 –68, and a further small rise in 1969 –70.

11. I begin with defence expenditure, the whole of which has been reviewed against the background of our commitments and alliances. Our decisions have been based on two main priciples. First, the House will recognise that it is not only in our own interests but in those of our friends and allies for this country to strengthen its economic base quickly and decisively. There is no military strength whether for Britain or for our alliances except on the basis of economic strength; and it is on this basis that we best ensure the security of this country. We therefore intend to make to the alliances of which we are members a contribution related to our economic capability while recognising that our security lies fundamentally in Europe and must be based on the North Atlantic Alliance. Second, reductions in capability, whether in terms of manpower or equipment, must follow and be based on a review of the commitments the Services are required to undertake. Defence must be related to the requirements of foreign policy, but it must not be asked in the name of foreign policy to undertake commitments beyond its capability. Major foreign policy decisions, therefore, are a prior requirement of economies in defence expenditure; and in taking these decisions we have to come to terms with our rô1e in the world. It is not only at home that, these past years, we have been living beyond our means. Given the right decisions, above all given the full assertion of our economic strength, our real influence and power for peace will be strengthened by realistic priorities.

12. We have accordingly decided to accelerate the withdrawal of our forces from their stations in the Far East which was announced in the Supplementary Statement on Defence Policy of July 1967 (Cmnd. 3357) and to withdraw them by the end of 1971. We have also decided to withdraw our forces from the Persian Gulf by the same date. The broad effect is that, apart from our remaining Dependencies and certain other necessary exceptions, we shall by that date not be maintaining military bases outside Europe and the Mediterranean.

13. Again, by that date, we shall have withdrawn our forces from Malaysia and Singapore. We have told both Governments that we do not thereafter plan to retain a special military capability for use in the area. But we have assured them both, and our other Commonwealth partners and allies concerned, that we shall retain a general capability based in Europe—including the United Kingdom—which can be deployed overseas as, in our judgment, circumstances demand, including support for United Nations operations. During his recent visit to Kuala Lumpur, my right hon. Friend the Commonwealth Secretary told the Government of Malaysia that we wish to reach a new understanding with them about the Anglo1alaysian Defence Agreement so as to make it fit the changed conditions. As he House knows, the Agreement contains provisions for a review of this nature. He also assured the other Commonwealth Governments concerned of Britain's continued interest in the maintenance of security in South-East Asia, with the forces which will be available here. Meanwhile, if our Commonwealth partners so desire and mutually satisfactory arrangements can be made, we would be prepared to assist them in establishing a future joint air defence system for Malaysia and Singapore and in training personnel to operate it. We have informed the Governments of Malaysia and Singapore that we will discuss with them the aid implications of our accelerated withdrawal. We shall amend our force declarations to S.E.A.T.O. as our forces in the area are run down.

14. We shall make an early reduction in the number of aircraft based in Cyprus while maintaining our membership of C.E.N.T.O.

15. On the Gulf, we have indicated to the Governments concerned that our basic interest in the prosperity and security of the area remains; and, as I have said, the capability we shall be maintaining here will be available for deployment wherever, in our judgment, this is right having regard to the forces available.

16. As the House already knows, my right hon. Friend the Foreign Secretary has visited Washington to discuss our intentions with the United States Administration; and my right hon. Friend the Commonwealth Secretary has paid special visits to the four Commonwealth countries concerned with Far East defence so as to discuss with their Prime Ministers the intended changes in our political commitments and consequent military dispositions and the consequences flowing from them. My right hon. Friend the Minister of State, Foreign Office, has paid a special visit to the States of the Gulf for a similar purpose. Other Governments and Organisations concerned have already been made fully aware of our decisions. These decisions were taken in the knowledge, and in the light, of the views of our Commonwealth partners and of our allies directly concerned.

17. We recognise the deep feelings and anxieties of our allies and Commonwealth partners. We recognise, too, that these changes involve risks, but, in the circumstances, we believe they are risks that must be accepted. We are determined that our commitments, and the capacities of our forces to undertake them, should match and balance each other.

18. These decisions will entail major changes in the rô1e, size and shape of the forces, in the nature and scale of the equipment which they will require, and in the supporting facilities which are necessary. 'Time will be needed to work out the precise implications: these will be embodied in a White Paper to be published and, if the House so wishes, debated later in the year. Nevertheless, I can now give some specific illustrations of the effects of our decisions in advance of the further detailed work.

19. Manpower. Cmnd. 3357 envisaged withdrawal from certain east of Suez stations by the mid-1970s, and planned for a reduction by roughly the same date in the establishment of the Services of 75,000 uniformed manpower and 80,000 civilians. As a result of our decisions, and of others that will result from the further planning which is now starting, the active strength of the forces will be reduced by the end of 1971 well below the levels forecast last July in Cmnd. 3357. We would expect that, within about five years or so from now, we shall have reduced the total size of the forces below the long-term strengths we had previously planned. Thus, the eventual saving in Service manpower will be greater than the total reduction of about 75,000 forecast previously for the mid-1970s and we shall achieve it earlier. We shall also be reducing civilian manpower at a faster rate over the same period, and our aim will be to increase the forecast reduction of 80,000 civilians and to achieve this significantly earlier than previously planned.

20. The Navy. The aircraft carrier force will be phased out as soon as our withdrawal from Malaysia, Singapore and the Gulf has been completed. There will also be reductions in the rate of new naval construction, for example in the nuclear-powered Hunter/Killer submarines.

21. The Army. There will be a considerable increase in the rate of rundown of the Army and in the disbandment or amalgamation of major units. As a result of our accelerated withdrawal from Singapore and Malaysia, the rundown of the Brigade of Gurkhas to 10,000 by the end of 1969 will continue at the same rate until 1971, bringing the total strength of the Brigade to 6,000. The future of the Brigade after 1971 will depend on developments obtaining at that time there is no question of reducing the strength or effectiveness of the Hong Kong Garrison. There also be substantial savings on Army equipment and stocks and many of these will be achieved between 1969–70 and 1972–73.

22. The Royal Air Force. We have decided to cancel the order for 50 Fill aircraft. Further study is being given to the consequences of this decision on the future equipment of the Royal Air Force. Leaving out of account the results of this study, the cancellation of the Fill is estimated to yield total savings on the Defence budget of about £400 million between now and 1977–78. This figure allows for likely cancellation charges. The saving in dollar expenditure over the period, again allowing for likely cancellation charges, will be well over $700 million. Because of the credit arrangements, these savings will mature over a period of years. We are discussing with the United States Government future arrangements for offset orders and credit for the Phantom and Hercules aircraft. The reduction in our overseas commitments will make it possible to cut down the transport force.

23. Support facilities. The more rapid withdrawal of our forces from outside Europe and the changes we intend to make in their rô1e and equipment will impose a massive task on those responsible for providing the most efficient and economical logistic support for the three Services. Very substantial savings in base facilities staff overseas will follow as a consequence of withdrawal. The rundown in the forces will be increasingly reflected in reduced support facilities, such as training establishments in this country, but it is too early yet to indicate the extent of the total reduction of the United Kingdom base as a whole. In spite of the extra planning load placed upon it, we shall energetically continue the process of cutting the size of the Ministry of Defence.

24. Financial effects. The financial effects of policy changes on this scale will inevitably take time to work themselves through. The immediate effect will not be to reduce the level of defence expenditure: indeed, in 1968–69—when we have already made a saving of £110 million—the level will be increased through cancellation payments and other transitional costs. These are expected to be relatively modest thereafter. From 1969–70 onwards, accordingly. there will be an increasing relief to the Budget, accompanied by a release of valuable resources for civil production. The scale of what is involved for the economy can be measured by my expectation that in 1969–70 the Defence budget which was planned to come down to £1,970 million at 1964 prices as a result of the November devaluation economies will be reduced to about £1,860 million at 1964 prices, that is, a cut in expenditure of £110 million in the Estimates of 1969–70. By 1972–73 the Defence budget is expected to be between £1,600 million and £1,650 million, at 1964 prices, a further reduction of between £210 million and £260 million.

25. The Government are very conscious of the effect that these further cuts will have on the Services and of the upheavals they will cause. Nevertheless, they are necessary in the national interest so that we can restore the strength of our economy. The accelerated rate of rundown in the Services, and in the civilians associated with them, is bound to cut short the careers of some who would otherwise have expected to serve for some years to come. There will inevitably be a considerable amount of disruption in all three Services and one of the major problems will be to arrange this very large reorganisation so that hardship to individuals is minimised and at the same time efficiency is maintained. The Government intend to ensure that at the end of this process the Services remain cohesive and viable and still offer a good career to those who serve in them.

26. The future of the Services will then lie mainly in Europe. But we still face the problem of the heavy continuing cost in foreign exchange of stationing our troops in Germany. As the House knows, there have already been informal preliminary talks in Bonn about ways and means of meeting this after the current Anglo-German Offset Agreement expires on 31st March next. We are now ready for formal negotiations at Ministerial level. We have proposed to the Federal German Government that the talks should start early in February.

27. Now I turn to civil public expenditure. No review of planned expenditure programmes would be realistic, or adequate for the task we have set ourselves as a nation, which failed to go deeply into every aspect of home expenditure. This we have done. Our decisions reflect the national priorities we have applied and which we commend to the House. In almost every major area of expenditure economies have been made in the rising programmes which we had before us. Within each major area we have, of course, been highly selective in the cuts we have made. Our objective, a I stated a month ago, is to produce a total of economies which is coherent, credible—and fair.

28. Social Security. I begin with social security. Expenditure this year, 1967–68, is £2,909 million, an increase at current prices of 48 per cent. since 1963–64. Last year, the House approved a general uprating of National Insurance and other benefits, which took effect last autumn. In our forward planning we do not envisage that a further general uprating can be undertaken before at least the autumn of 1969.

29. In the statement made by my right hon. Friend the Home Secretary on 20th November an assurance was given that the most vulnerable classes of the community will be protected against hardship resulting from those price increases which must result from the effect of devaluation on import costs. We shall be watching price rises very carefully and we intend in the light of this to raise supplementary benefits in the autumn of this year.

30. It has already been decided that family allowances will go up by 7s. in April. But it is essential that this increase should be confined to families most in need and my right hon. Friend the Chancellor of the Exchequer intends to recover the full amount of the increase from taxpayers at the standard rate and above through the tax machinery, taking back lesser amounts from those who will pay tax only at reduced rates. I should add that my right hon. Friend is examining the possibility at a later stage of extending this principle of selectivity based on tax adjustments more generally through the family allowance system, not just the 7s. increase. To help less well-of families generally we intend to raise the income limits for the rate rebate scheme in the coming autumn. The qualifying limit for the full rebate will be raised for single persons from £8 per week to £9 per week, and from £10 to £11 for married couples; the rate for each child will be raised from 30s. to £2.

31. Education. Next education, one of the biggest and most rapidly expanding expenditure programmes. Total expenditure is estimated this year at £1,989 million, an increase at current prices of 42 per cent. since 1963–64. Here again it is a question of priorities. We have decided we have no alternative to deferring from 1971 to 1973 the raising of the school leaving age, a postponement of two years. I need not tell the House how difficult, indeed repugnant, this decision has been to my right hon. Friends and myself.

32. This decision will mean a saving of about £33 million in 1968–69, and £48 million in 1969–70, principally in the school-building programme. But the basic school-building programmes will be increased by extra starts of £8 million both in 1968–69 and in 1969–70 to ensure that comprehensive reorganisation is not held up, and to provide additional resources beyond the extra £8 million starts in each of these years announced by my right hon. Friend the Secretary of State to the House last year, for improving conditions in educational priority areas.

33. We propose to cease to provide milk free in secondary schools from September of this year. This will require legislation.

34. The capitation grants to direct grant schools will be reduced.

35. Some new capital projects in the universities, colleges of further education and elsewhere will be held back during 1968–69. Following the next review of students' awards, the increase in September will only cover half the rise in the cost of living since the last review.

36. The combined effect of all these measures in the field of education will be to make a net saving of £39 million in 1968–69 and £58 million in 1969–70.

37. Health and Welfare. I turn next to health and welfare, with a 1967–68 expenditure of £1,619 million, an increase at current prices of 45 per cent. over the past four years.

38. In the Government's view the most important way of sustaining and improving the National Health Service is to press ahead with the expanding programme of hospital building. We are, therefore, proposing no reductions in this programme which will go ahead as planned.

39. The Government have, however, decided after the most serious consideration and with the utmost reluctance, to reintroduce a system of charges for prescriptions issued under the National Health Service, at the rate of 2s. 6d. per item.

40. My right hon. Friend will immediately enter into discussions with the medical profession with a view to introducing as soon as possible a system of exemption for particular categories of patients. Those we have in mind are the elderly, over 65, children up to 15, expectant and nursing mothers and the chronic sick. While the procedure for dealing with these proposed exemptions is being negotiated, regulations will be made to bring these charges into operation in the spring which is the earliest that arrangements can be made to introduce simultaneously refund of charges to those in need on the pre-1965 basis, namely those on supplementary benefits, those with the standard of living broadly at or below supplementary benefit levels and war pensioners in respect of disabilities. This will be immediately. The scheme as initially introduced would save about £50 million in a full year. But the further exemptions, which we regard as fair and necessary, would reduce this saving to about £25 million

Then why bother?

—and we propose to make this good by increasing the National Health Service employees' contribution by 6d. as soon as possible.

41. The maximum charge for dental treatment which has not been changed since 1952 will be increased from £1 to 30s. and this will yield a further £1½ million. As the House knows, children and young people up to 21 and expectant and nursing mothers receive free treatment and people receiving supplementary benefits have the charges met for them. These arrangements will continue. In addition, some reductions in the planned growth of local health and welfare capital expenditure are being made, averaging £5 million a year over the three years 1968–69 to 1970–71.

42. I have referred to the National Health Service stamp. The House ought to know that quite apart from the expenditure review, and for quite other reasons, a further 1s., 6d. for employees, 6d. for employers, will be needed to prevent the National Insurance Fund from going into deficit. This will be done at the same time as the 6d. increase in the National Health Service contribution which is collected on the same stamp.

43. Home Department Services. Now I turn to Home Department Services, including Home Defence. We have decided to reduce Home Defence—Civil Defence —to a care and maintenance basis, with a saving of about £14 million in 1968–69, and £20 million in 1969–70 and in subsequent years. This will involve the disbandment of the Civil Defence Corps, the Auxiliary Fire Service and the Territorial and Army Volunteer Reserve Category III. The Government propose to restrain the growth of expenditure on other Home Department Services by £6 million in 1968–69 and £12 million in 1969–70.

44. Housing. Expenditure in the public sector in 1967–68 is £1,018 million. The Government have decided to reduce planned approvals of new houses by 15,000 in England and Wales and 1,500 in Scotland in both 1968 and 1969, saving in terms of public expenditure £27 million in 1968–69 and £55 million in 1969–70. But, even with these withholdings, we shall be able to maintain the momentum of the programmes for slum clearance and for the relief of serious local housing shortages. Our measures will safeguard the housing priority areas.

45. Transport. Next, roads. The estimated expenditure in 1967–68 is £560 million, an increase of 52 per cent. at current prices, compared with 1963–64. Of the present programme £300 million is on the major road programme of my right hon. Friends; and the remainder, nearly all local authority expenditure, includes about £200 million on road maintenance. The Government have decided that, overall, expenditure on roads should be reduced so as to produce savings of £53 million in 1968–69 and £69 million in 1969–70. Of this, local authorities will be asked to find £75 million over the two years out of their expenditure on the maintenance and improvement of their roads; and the planned growth of expenditure on major roads, including trunk road maintenance, will be cut by £18 million in the first year and £29 million in the second.

46. At the same time, expenditure on the new forms of assistance to public passenger transport, provided for in the Transport Bill, is being limited to £10 million in 1968–69 and £20 million in 1969–70.

47. Industry. The Government will continue to give special priority to the regeneration of the development areas, and will continue their programmes of financial assistance. They will direct this assistance towards activity which will contribute most to the economic strength of the areas and to the Government's general objectives.

48. In the Ministry of Technology's industrial programme there will be a careful selection of priorities. The reorganisation of the shipbuilding industry will continue, the work of the National Research Development Corporation will be fully maintained and programmes will go ahead for other industries including computers, electronics and machine tools. Industrial research in the Ministry of Technology's civil establishments will be kept within present limits, and there will be savings concentrated in the nuclear research and development programme of the Atomic Energy Authority. There will also be a further cut in the Ministry's defence research programme in 1968–69, part of which will be carried by Aviation Establishments. The saving on planned expenditure from all these measures will be £13 million in 1968–69 and £15 million in 1969–70, including the savings by the Atomic Energy Authority which were foreshadowed by previous announcements.

49. On investment grants, where in the current year the Board of Trade has paid grants on five quarters of investment in order to shorten the period between the incurring of expenditure and the payment of grant, the Government consider that any further shortening of this period must wait for the time being. We therefore intend that, in 1968–69, grants will be paid in respect of four quarters' past investment, so that the average time between investment and payment will remain at the 12 months which it has already reached. This compares with the interval of about 18 months between the incurring of expenditure and the receipt of investment allowances. It will reduce payments in 1968–69 by £80 million below what they would have been had there been a further acceleration. Decisions about 1969–70 will be taken in the light of circumstances nearer the time.

50. Local Authorities. The House will be well aware that a substantial area of public expenditure lies within the control of local authorities, whose expenditure has risen by £1,380 million, or 46 per cent. at current prices over the past four years. A considerable part, though by no means the whole of local authority expenditure, is in response to national programmes endorsed by this House by statutory or other provision. Much of it is, however, subject by various means, indirect and direct, to a measure of Government control or influence, and some of it will be affected by the measures I have announced. But it is vital that local authorities, no less than central Government, make their full contribution to restraint m their programmes, the release of resources for the reinforcement of our trade balance and the avoidance of inflation.

51. Taking local authority expenditure as a whole, the Government expect that, in 1969–70, local authorities as a whole will restrain the level of their expenditure so that it does not in total exceed a figure in the region of 3 per cent. in real terms above what has already been agreed for purposes of the Exchequer contribution in 1968–69; and the Government will pro-pose rate support grant for 1969–70 on this basis when the time comes. As regards 1968–69, the Government will expect local authorities to absorb any increases in cost which they cannot avoid by making savings elsewhere. Full details for England and Wales and for Scotland, where special problems arise, will be worked out with the local authorities and the House will be kept informed.

52. Northern Ireland. As regards Northern Ireland, it should be possible to realise substantial savings in public expenditure there, broadly comparable to those in Great Britain. Discussions with Northern Ireland Ministers have already started.

53. Special measures must be taken to arrest the growth in the number of people employed in public Service. Government Departments will, under the guidance of the Treasury, plan their staffing so that over the year 1968–69 there is no further net increase in the number of civil servants as a whole. This is estimated to save £15 million. The economies which we are asking local authorities to make. notably in Services assisted by the rate support grant, should produce similar results for local government staffs.

54. To avoid unduly wearying the House, I have given the facts only about the main expenditure programmes of any size. In addition, there are other reductions totalling £28 million in 1968–69 and £41 million in 1969–70. These come mainly from environmental Services. There may well be other savings as the consequences of these major decisions work through the whole field of public expenditure.

55. Summary. The results of all the changes I have announced will be to reduce planned expenditure in 1968–69 by £300 million, plus, of course, an additional £325 million income from the N.H.S. contribution, and in 1969–70 by £416 million, again plus the contribution. This implies an average annual rise in public expenditure in the period 1967–68 to 1969–70 of 2·8 per cent. I am circulating in the Official Report a table showing public expenditure in 1968–69 and 1969–70 as forecast before the reductions, and the details of the reductions themselves.

56. I must again remind the House of the severe limitations within which any expenditure review must operate, particularly so far as the period immediately ahead of the review is concerned. In many of the continuing programmes, particularly where major and lengthy capital projects are concerned, cuts which act quickly can be achieved only with great disruption and great diseconomy. Some of the Government's decisions will have an immediate and major impact on expenditure in 1968–69 and subsequently, others will have a more limited effect in 1968–69, and a growing impact on 1969–70 when a decisive switch of resources will be needed. In defence large-scale savings will be achieved only in 1970–71 and later years. But in this case, if the decisions are not taken now, they will not make any impact until well into the 1970s, and Parliament in 1970, 1971 and later years will be impotent to secure major savings in those programmes.

57. Finally, I repeat that the review whose conclusions I have announced today is only part of a continuing process which will dominate national financial and economic management for the next two years. Other measures including budgetary decisions will be required.

58. But in a wider sense, no measures of a purely financial character, however necessary, can by themselves solve our problems, and ensure that the opportunities presented to us by the decision to devalue are fully realised.

59. I must again emphasise the paramount importance of prices and incomes policy. The measures we have decided on and those which will be announced in succeeding months will be adequate if, and only if, the competitive advantages we have gained are not dissipated in increases in incomes over and above the very limited figures the country can afford. It is this which must guide us—not what the country or individual sectional interests would like or would seek to extract, but what we are earning.

60. But success in securing the massive shift we need to get from home consumption to the priority areas of exports and Import saving depends above all on the response of industry, at all levels, to the challenge of winnable export markets, import replacement and productive investment.

61. To the efforts of those industry who are responding to the challenge and opportunity which the new situation has created, the measures I have announced, cutting deep, comprehensive, but—the Government believe—balanced and fair, provide essential help and backing. What these measures cannot do is to provide a substitute for the efforts that now have to be made by all in industry, indeed by the whole nation.

Whenever in the past this nation has set out to achieve the domestic objectives it has set itself, we have been frustrated by an endemic imbalance within the economy. If we refuse to abandon these objectives—and we do refuse—then the course we must take, however great the temporary cost, is to remove that problem once and for all.

The important statement to which the House has just listened—important both for its omissions as well as for its contents—can only be fully dealt with, as I am sure the Prime Minister realizes, in the debate which is to follow tomorrow and Thursday.

Is the Prime Minister aware that we shall want to judge this statement by the extent to which it restores confidence both in industry at home and overseas; by the way in which it is choosing the priorities and in which such a heavy burden seems to have fallen on defence compared with home expenditure; by the way in which the cuts which are being made will affect the fundamental economic efficiency of this country; by the way in which the statement takes account both of short-term as well as long-term requirements of the situation following devaluation; by the way in which it will safeguard the most vulnerable sections of the community; by the way in which it enables Britain's commitments and obligations overseas to be carried out or in fact breaks them; and by the way in which it will allow British interests abroad to be protected?

I should like to put three questions to the Prime Minister. As a result of his announcement about prescription and other charges—on which we on this side of the House fought the last General Election—does he now accept a reasonable system of selectivity throughout the social services? Is that Government policy?

Secondly, what justification does the Prime Minister give for putting postponement of the raising of the school-leaving age at such a high position in Government action, rather than many other cuts or reductions in expenditure which were open to the Government?

Thirdly, do the changes being made in overseas defence expenditure mean that Britain will not in fact carry out her commitments and obligations in the Gulf and in the Far East? Is not this dishonourable and ought it not to be thoroughly condemned? Does not the right hon. Gentleman's statement about defence equipment mean that in fact any defence policy which the Government may have had in the past is in ruins?

Finally, is not the whole of the Prime Minister's statement entirely negative? There is not a positive content of any kind. There is no indication to the people of this country about how to overcome our present difficulties. What the Government have done is to announce the consequences of devaluation and three years of Socialist mismanagement.

Until right hon. Gentlemen opposite can show the country how to get out of its difficulties in a positive way, they will not achieve their objectives, and in that case they had better follow the example of the Prime Minister on prescription charges last time—let him not only resign himself, but the Government with him.

I thank the right hon. Gentleman for his very constructive comments. As he has said, this statement will need examination and I have already referred to the paper which is being circulated in the OFFICIAL REPORT and of which copies will be available this afternoon.

The right hon. Gentleman referred to the debate. I am sure that he is quite right and that the criteria which he outlined will be among the criteria which hon. Members in all parts of the House will want to apply to this statement when we come to debate it and ask the House to approve it later this week.

The first of the right hon. Gentleman's specific questions was about prescription charges. He asked whether we now accepted his nostrums—not his word—about selectivity throughout the social services. He will have noticed the extremely important announcement about the way in which we feel that family allowances should be handled in future —on a basis of selectivity according to need, through the use of the tax system. I was not quite clear whether the right hon. Gentleman approved of that particular form of selectivity, but we shall no doubt hear in the debate. This is a case of selectivity which we have accepted, but this is not the right hon. Gentleman's form of it.

In answer to the general question, we have reviewed each of the spending programmes and we have decided where more selectivity is required. As I have said, we have announced the position for major exemptions when we introduce prescription charges and we have extended that particular form of aid to less well-off families by improving the working of the rate rebate scheme.

The right hon. Gentleman wanted to know, secondly, what justification there was in education for postponing the raising of the school-leaving age. I do not need to tell the House that this is a very difficult decision, but we had to review all our priorities within education in addition to within all the social services. It was essential to maintain, as we have maintained, the main structure of our educational system and expenditure, with a very sharp increase, as we still have compared with three or four years ago, in expenditure on, for example, new building particularly on what is most pressing, the building of primary schools.

We felt that if something had to be cut, however difficult, postponing raising the school-leaving age was the right choice to make, but no doubt later in the week the right hon. Gentleman will tell us what other cuts he would have made, because we know how committed he is to reducing expenditure.

The right hon. Gentleman's final question was about overseas expenditure. I said that cuts in defence expenditure would follow reductions in commitments. As I made clear—although this will be more fully dealt with in the debate—it will mean renegotiating a whole series of arrangements, agreements and treaties—I mentioned the Anglo-Malaysian Treaty —with our allies and with our partners, including on the subject of the Gulf.

However, I must put it to the right hon. Gentlemen opposite, whose general vocal greeting of my statement suggested that they rejected 95 per cent. of all the cuts in Government expenditure which I announced, that it is impossible to attack these cuts in defence expenditure and try to maintain a credible posture of being In favour of reductions in public expenditure generally. If they attack what we have said about defence expenditure and the raising of the school-leaving age, it will be up to them this week to produce a list of other cuts, comparable in size —and even going beyond, because I do not think that they think that the total is very much good. When they do, we shall be very glad to have them examined and costed to show what they are worth.

May I, first, ask the Prime Minister a question about prescription charges, in which he showed some interest in the past? Since the net yield is £25 million only, can the right hon. Gentleman say why, by seeking to tax the sick, he wishes to return to the Conservative principles of the National Health Service in order to atone for past extravagances abroad?

Secondly, when public expenditure is running at £600 million for the 500,000 civil servants in Government Departments, why are we told only that there are to be no further increases in the coming year? Does not the right hon. Gentleman think that there is a case for setting each Minister a target for a reduction in numbers and a reduction in wastage?

Thirdly, while I recognise the right hon. Gentleman's belated conversion to realism in the Far East, is it intended that the Phantom order will be carried out in full, or can economies be made there?

Finally, as the right hon. Gentleman's Administration has reversed so many of the policies on which it was returned at the last General Election, does not the right lion. Gentleman think that this is the moment to put these proposals to the British electorate?

Of all the suggestions I have had, I can imagine none out forward with less enthusiasm with:he Liberals in their present state than that we should have an immediate General Election.

The right hon. Gentleman's question about prescription charges enables me to deal with a reference made in passing by the right hon. Gentleman the Leader of the Opposition to what happened in 1951. That was not about prescription charges. Prescription charges were not at issue at that time. They were not introduced—[HON. MEMBERS: "Oh."] Hon. Gentlemen should get their facts right—until 1952. It involved a question of priorities about social expenditure and rearmament.

When I tell the House—and this is relevant to the answer to the right hon. Gentleman's question—that at that time the total National Health Service accounted for less than a quarter of the armaments programme which some of us criticised, when I say that at present health expenditure is about two-thirds of defence expenditure, when I say that after the statement which I have made today Health Service expenditure by 1972–73 will be coming fairly close to total expenditure on defence, I think that the right hon. Gentleman will realise that we have fulfilled the priorities in the Health Service over the years which I have described.

With regard to the last of the questions, about the Civil Service, of course, if we can get further reductions beyond the target that I have mentioned, we shall be glad to do so. We are approaching this on the basis of Department by Department targets. I have seen assurances given by more than one Government of more than one party in the past that there was to be a reduction based on targets, but I have not yet seen it fulfilled. This time we are having a go.

Does my right hon. Friend realise that if successive Tory Gov- ernments during the past 13 years had faced up to the economic and financial problems which were obvious to all but the Tory Party we would not be in the present economic difficulties? Does he also appreciate that, stiff though the package is, and disturbing as some of the proposals undoubtedly are, it is far better, even if we have to reduce our commitments to people overseas, to remember that our primary commitment is to this country and to putting our economy in order, to save the position?

May I ask him why it is that, when the Leader of the Opposition complains about the Prime Minister's negative attitude, he does not propose a voluntary reduction in his salary—a sacrifice that all of us are prepared to make if other people are prepared to make sacrifices?

With regard to my right hon. Friend's opening words, I am aware of his wise comments and the ideas that he has expressed about past years. As to his second question, I thank him for what he has said in that he believes this to be a very tough and unpleasant package, but that it is balanced and reasonably fair.

With regard to the question about the Leader of the Opposition—more difficult for me to answer—the Leader of the Opposition said that my statement was a negative statement. Statements of cuts in expenditure are bound to have a pretty negative aspect about them. When my right hon. Friend and the right hon. Gentleman say what is it that the people can do positively, everyone knows what needs to be done positively in terms of winning—[HON. MEMBERS: "Resign"] Not in terms of parrot slogans. We want something a little more constructive from hon. Gentlemen opposite, such as their help with us in persuading industrialists to go out and get export orders at the right price. We need willingness by manufacturers not to shove up prices here just because import prices have gone up, when it is not necessary, but instead to get part of that home market away from their import competitors. These are the two positive things that need to be done, and I would like to see more co-operation from the other side of the House in achieving this.

The last suggestion of my right hon. Friend is, naturally, a matter to which we must give attention. So far as Her Majesty's Government are concerned—I cannot and ought not to try to speak for the House in this matter—it is a matter which at the right time will be raised. I am not sure that this would be the relevant time, but in relation to the incomes policy, and perhaps to further burdens that will be necessary, it will be relevant. I did refer to the Budget and other things. We will have to consider whether this would be the right gesture. It is a matter for all of us to consider, but I have nothing to announce this afternoon.

Is my right hon. Friend aware that about 8 million working people on lower incomes will have to bear the full brunt of the prescription charges, and that it will not be possible to exempt them under the scheme that he has announced? Will he tell the House why he has surrendered to the Tory clamour, ill-informed as usual on this matter, and why he has not resisted those members of his Cabinet who once before supported the prescription charges, and whom he once helped to keep together, with the late Aneurin Bevan?

It is a question of selectivity. My hon. Friend is a great practitioner of the pointed statement. He will pick out the one that he can attack the Government on, as he has done, because I have not heard from him what he thinks of the package as a whole.

As to the exemptions, it will be clear from the figures that I have quoted that something like one-half of the prescriptions dispensed in this country will be the subject of the exemption categories I listed, which we are now to put into effect. Since these include those in greatest need so far as the Health Service is concerned, I would hope that my hon. Friend would feel that it is fair and understand that the charges on the stamp will be on those who, in the main, are in work and who can afford it. In so far as they come in any of the categories, including the chronic sick, then they are subject to the exemptions I have mentioned.

This has been an extremely difficult decision for us, but I hope that my hon. Friends will realise that every other de- cision that we have taken has been extremely difficult for us. I would like them to look at the package as a whole and not select one item, which some of my hon. Friends have decided in advance that they would attack.

To clarify our discussions, will the Prime Minister publish in the OFFICIAL REPORT or place in the Library a list of any undertakings given by Ministers to overseas countries which, as a result of devaluation and its aftermath, can no longer be honoured?

I will certainly consider what can be done to inform the House on statements which have been made, including, and I fully accept and recognise this, certain statements made, inside this House and outside it, since last July. I will certainly consider what can be done to give a fair picture of statements which must be qualified or made the subject of fresh negotiation.

While warmly welcoming the decision finally to end our Eastern rô1e, would my right hon. Friend not agree, with reference to our home cuts, that there is a distinction to be drawn between those cuts which can subsequently be remedied as the economic position improves and a decision to postpone the school-leaving age, which will irrevocably deny to at least two years of the school population a chance to get that education, and which can never subsequently be remedied?

I know the very strong feeling about this, not only among my hon. Friends but among many hon. Members in all parts of the House, and I said with what reluctance the Government had decided to take this decision. I entirely agree that one of the main reasons for that reluctance is that two age groups of school leavers will fail, except in so far as their parents allow them to continue voluntarily, to get the benefits of the extra year's education. This is something that in their case cannot, by ordinary means, be caught up. I am also very worried, as I know my hon. Friend is, about the position whereby very many children do not stay on after the age of 15 years and the very sharp regional differentiation there is between the South and the North.

We very much regret that this postponement of two years will continue this regional differentiation rather than end it once and for all by a mandatory, statutory requirement to stay on another year. As I say, it is a choice of priorities, and it is very hard, in my mind, to balance this one above prescription charges. I know that many of my hon. Friends will have the same view about other things that might have had to be done if we had not done either of those.

The Prime Minister mentioned import replacement three times. Is he aware that British agriculture, in the form of its spokesmen, the N.F.U.s, has estimated imports' saving of £250 million a year given realistic prices instead of the present debased prices? Why did the Prime Minister deliberately omit any reference to agriculture, and its huge import' saving potential, from his lengthy statement? Will he undertake to give instructions that the February Price Review should be announced as early as possible and that all Review commodities should show a substantial post-devaluation increase in price to encourage the British farmer to produce a much larger output, of which he is so readily capable?

The reason I did not make any reference to agricultural expenditure in my statement is because we are not proposing any reduction in agricultural expenditure. I should have thought that that was quite simple.

With regard to the important contribution which agriculture, as well as many other sections of industry, can make to import replacement, this was a point made very strongly by a number of my right hon. Friends, and most right hon. Gentlemen opposite, in the debate following devaluation. It also featured in the statement made, I think it was a Written Answer, by my right hon. Friend the Minister of Agriculture, to the House just before Christmas, dealing with some of these issues, particularly in relation to cereals.

Since this matter falls to be discussed in the February Price Review, it would be better to wait until then. We are certainly doing all that we can to bring that on as early as possible, but there are difficulties about getting the necessary information from the farmers in time, but we shall do it as quickly as possible and we shall bear in mind what the hon. Gentleman has said, and the very hopeful predictions of the industry in the matter of what it can do. We must do that, like everything else we have been talking about this afternoon, with due regard to the public purse. If we can get the import replacement without fantastic expenditure, then, of course, it will be very welcome, but we have to protect the public purse in the outcome of the Price Review.

May I ask my right hon. Friend whether he realises that the country will accept the statement which he has made as fair and just having regard to the problems facing the country? What the country will want to know is this: if we support these measures, as we shall, is he satisfied that they will be adequate to put the country on its feet? Have not our problems been aggravated by, if not been due to, the fact that every time that there has been economic expansion it has led to inflation because of the maldistribution of industry? Is it not therefore absolutely essential that if these measures are to work additional measures must be taken to ensure a redistribution of industry in the country and to use the resources which are already available in the development areas?

I thank my right hon. Friend for what he said. As I said in my statement, everything done in a financial sense, whether in this way or by budgetary means, will be of no avail unless we get right the restructuring and reorganisation of industry. This means that as a very high priority we must get a higher proportion of active industry in the development areas. We have not cut that programme. Indeed, we are spending considerably more on the development areas at present than we were a year ago, and we have a very heavy programme for the next year or two. We regard this as right not only for the development areas, but for the economy of the country.

On the question of the motivation of what I have announced today, as I have explained, it is needed to release resources for import replacement. It is also needed to prevent an export-led boom, with unemployment falling, as it is now falling very substantially on a seasonally corrected basis, not getting out of hand and leading to the very inflation about which my right hon. Friend has just warned the House.

What right does the Prime Minister think he has irrevocably to abdicate Britain's rô1e in the world without even giving Parliament an opportunity beforehand to discuss the grave implications involved and without any genuine consultation with our Commonwealth partners and allies? Is not this a monstrous abuse of power?

The right to put forward this proposal to the House is the right of any Government to put forward a proposal to the House and, if supported by the House—

It is not a proposal.

It is a decision which we are putting to the House for its approval. Obviously, the House can reject it.

You have decided.

The House has the right to reject it. The right hon. Gentleman was extremely good at tying up all kinds of long-term arrangements which were disastrous, costly, irrelevant and outmoded without consulting the House. We are still trying to unravel the ones in writing, and we keep being told about them from time to time. The cost of maintaining some of them has been one of the difficulties we are facing today. We have decided that in the national interest, in the interest of a strong Britain—[HON. MEMBERS: "Speak up."]—in the interests of a strong Britain—[HON. MEMBERS: "Oh."] Yes, in the interests of a strong Britain—this is something in which all our Commonwealth partners have a very close interest with us— it was right to take the decisions we have announced today. But if the right hon. Gentleman and those who have made noises with him are against this, let us hear no more from any of them about cuts in Government expenditure.

Will my right hon. Friend look again at his proposal to axe housing in Scotland? Is he not aware that in Scotland nearly every local authority has long waiting lists and that we are finding difficulty in housing key workers to man the new industries? Why does he follow the example of his Tory predecessors of axeing housing at a time of financial crisis?

My hon. Friend, like so many of my hon. Friends, is in danger of using the word "axeing" when it is a question of restraining rapidly growing expenditure. I fully agree with what he has said about not only the long waiting lists and overcrowding in Scotland, but the number of slums which need clearance, which is equally true of the priority housing areas of England and Wales. It is for this reason that we have tempered in Scotland the 1,500 as against the 15,000 in England and Wales, being very well aware of the point which my hon. Friend has made.

But with regard to the housing programme generally, we believe that it will be able to meet the requirements of slum clearance in the housing priority areas. My hon. Friend will be glad to know that, as my right hon. Friend will be ready to announce in greater detail, for the first time we exceeded the 400,000 housing target last year, and we intend to build up and increase on that from now on.

The Prime Minister indicated that he is likely to finance the family allowances in future by a reduction in the tax allowances. Tax allowances allow a married man to keep more of his earnings, because he has greater obligations, than the family allowance, which is a payment by the State. They are totally different in principle. A reduction in the tax allowances for the married man is, in fact, a direct increase in taxation. Did he not promise the day before the last election that there would be no direct increase in taxation?

The House will no doubt be able to discuss this matter in much greater detail—because somewhat complicated tax provisions will be required—with more information than is possible on the basis of my statement today. But, certainly, we would regard this as a very fair application of the principle of selectivity, which I thought the Opposition wanted us to accept. It sounds from what the hon. Gentleman has said as though he would wish to select between Income Tax payers and the rest and that he would be prepared to draw a distinction on a needs basis between two groups of people neither of whom pays Income Tax. But if it is selectivity vertically between more well-off people and less well-off people. he thinks it a bad scheme.

While welcoming the more realistic defence commitments, may ask my right hon. Friend whether he will accept that the delay in raising the school-leaving age and the reintroduction of prescription charges will cause bitter disappointment among many people in the Labour movement? Is he aware that some people feel, rightly or wrongly, that the prescription charges have been reintroduced, not so much in order to save money, but to satisfy certain bankers at home and abroad. Are we for ever to accept the Tory line on prescription charges?

Of course, I accept what my hon. Friend says. It was a matter of deep disappointment to us to have had to take both these decisions, and that is the position of all my right hon. Friends. [Laughter.] I am sorry if hon. Members opposite regard this as a matter for frivolity. We at least have some idea of what this means. We would riot have done this lightly, frivolously or ideologically, as hon. Members opposite would do.

I therefore agree with my hon. Friend that there will be disappointment, but it would not have been possible to do what was necessary to get the economy right without making some cuts in the social services, which account for a very high proportion—and I have given the figures—of total Government expenditure. We cannot get all that we need from defence savings. There must be a balance, with some reduction in home expenditure. Of course it is disappointing. But we believe that it is fair.

The right hon. Gentleman spoke of renegotiating our defence obligations with our friends in the Near and Far East. Will he give an assurance that we shall honour those obligations and retain the power to do so until they are freely renegotiated?

We shall have to answer this case by case in the debate, and my right hon. Friend will answer it, but at this stage I have nothing to add to what I have said in my statement this afternoon. As long as we have a capability in the area and are able to do so we shall, of course, honour agreements to which we have set our name as long as we are there.

I have also referred to our general capability in cases where, in our judgment, it is right to help from our general capability. I have explained the position about that, but I certainly am not suggesting that those with whom we are negotiating should have a right of veto of Britain's freedom of action in this matter beyond the period when the capabilities might lie.

Is my right hon. Friend aware that whatever may be said against the handling and timing of the cuts in overseas commitments, these decisions were absolutely necessary and were extremely welcome and will produce a balance between our commitments and our defence capability for the first time for many years? Is he further aware that his statement as a whole will be accepted as fair by the substantial majority of Labour supporters inside this House and outside it?

I thank my hon. Friend for what he has said. It looks as though, at last, we have managed to please him in these matters, although he will be at least as clear in his mind, as are hon. Members opposite, with what difficulties we have been faced in taking these defence decisions.

How can the Prime Minister expect to be taken seriously or to restore confidence when, at the behest of his Government, within minutes of his own statement, the House is to discuss a totally frivolous and irrelevant proposal to spend £70 million on nationalising bus companies? Does not this seem to be the height of irrelevancy, even by the Prime Minister's standards?

It may seem so to the hon. Member, but in the debate we shall probably find that there will be many right hon. and hon. Members who may catch your eye, Mr. Speaker, who will be aware of the needs within our limited resources to reorganise urban transport, which is very urgently necessary. Since the hon. Member has mentioned the transport question, I shall be glad to see whether we get the usual nocturnal notice from the transport spokesman of the party opposite to say that we should not cut transport but should cut Government expenditure.

While congratulating my right hon. Friend and his Administration on being the first Prime Minister in 20 years to bring our legions home from the East—[Laughter]—

Order. We can now leave the Romans alone.

—and while we are satisfied that the measures announced by the Government will get Britain out of the foreign pawnshop, may I ask my right hon. Friend, since he has stated that due to Government expenditure being arranged the way it is, Government expenditure will rise in 1968–69, to tell the country what steps the general public can take to have a go to redress our balance of payments and to get back Britain's self-respect?

I would have thought that my hon. Friend would have been sufficiently up to date to leave the Romans alone, as you have said, Mr. Speaker, and at least to have gone as far as Kipling's "Recessional", which may be more relevant.

With regard to the way in which our accounts are presented, I think that the House continuously would want to consider whether our accounts, which successive Governments have tried to modernise, are as modern as they can be in expressing the real position of public expenditure. My right hon. Friend the Chancellor of the Exchequer will be continuously looking at this question.

As to matters outside my statement, I know that my hon. Friend and many people on both sides of industry and in other ways are indicating things that can be done by those in industry and by ordinary citizens—by us shoppers, for example—to solve the broader underlying economic problems which the country has faced for so many years.

Why does the Prime Minister leave the rump of the British forces in Europe, where there is no threat to peace, instead of in the Far East, where, according to the words of his own Foreign Secretary, the greatest threat to peace exists?

It was, I thought, the accepted view of all parties in the House that our priority commitment is to N.A.T.O. here in Europe. I know that there are different views, but that is the position of Her Majesty's Government and, I thought, of the Opposition. I have explained why it is necessary to cut down. This can only be done effectively by a total evacuation in the areas of the Far East, because we do not accept the view of the hon. and gallant Member that we should have troops fighting in Vietnam. Not only do we think that that is wrong, but we think that there is no longer any rô1e for us to remain in the Far East and the Gulf after the date I have announced.

Would my right hon. Friend agree that the reintroduction of prescription charges at a higher rate than before, with initially no greater exclusions than before, in the middle of the winter months, appears to run contrary to Government assurances that the weaker sections of the community would be protected from the full blast of the economic crisis? Would he further agree that many of us feel that to come to a fair and adequate definition of the chronic sick will be well-nigh impossible for the purpose of exclusion?

First, as to the timing, it is intended that this will happen in April and not in the winter months, as my hon. Friend suggests. With regard to the exemptions and the difficulties of the exempted categories, this depends on making rapid progress with the medical profession, of which my hon. Friend is a member. If they can co-operate in finding the answer with us—we think that there is an answer to these problems—and give their full cooperation, there is no reason why that should not be introduced very quickly indeed without any overdue delay between the introduction of the regulations and the introduction of the fuller exemption scheme.

While I am sure that everybody outside this House will be studying with interest what they cannot have which they would otherwise have liked to have, will the Prime Minister recognise that what the country is waiting for are the Government's plans to enable the country to pay its way by exporting more? Will he recognise that what is singularly and remarkably absent from his statement today is any real encouragement to exports and to the industries which can save imports? What plan has he to ensure that industrial activity and the selling of British products in the world is really boosted? That is what we want.

I fully accept that in my statement there was no reference to this fundamental problem in solving our problem. I referred to it as the underlying problem. With regard to incentives and help, both in winning export orders and in holding them and in import replacement, of course the new, lower parity gives an opportunity, and, indeed, the possibility, of much increased profits from exports and import replacement which they did not have in the past. It is our job as a Government, as a House, to see that what we hope they will do in increasing amount is not held back by resources being over-consumed in the home market. We have got to release the resources for them.

In addition, the hon. Member will be aware—if he is not, I will be glad to send him a mass of material—of what the Board of Trade is doing increasingly to help both the large and the small exporter in matters of credit, in breaking into new markets, consumer research, export research and the rest. The hon. Member will, I think, be very impressed by what is happening in that way.

Is my right hon. Friend aware that there are some of us on these benches who are gravely concerned about the effects on Commonwealth relations in South-East Asia and Australasia of the decisions which he has just announced, and that we cannot help feeling that those decisions were arrived at without any due consultation with the Governments concerned? Will he, therefore, consider the suggestion that there should be an early five-Power conference to consider the future defence of the area? Will he, in particular, consider the representations which have been made to Her Majesty's Government during the last few days by the Prime Minister of Singapore?

Yes, Sir. My right hon. Friends and I considered at very great length the representations made by the Prime Minister of Singapore, and also what was said by the other Commonwealth Governments concerned to my right hon. Friend the Commonwealth Secretary as well as what was said to my right hon. Friend the Foreign Secretary and the Minister of State on their visits. As I said this afternoon, we are prepared to co-operate with the Prime Ministers of Singapore and Malaysia in working out suitable air defence arrangements with substantial help from us in the matter of training and in other ways.

As to a five-Power conference, we have said that we are prepared to discuss such a matter with them if it is generally felt that a conference will be helpful, but it should start from the situation announced today to work out what we can do in the way of defence co-operation and understanding, but we cannot postpone any longer the decision which has been announced today.

First, will the Prime Minister say how the cancellation of the F111As will affect the offset agreement where the Americans have agreed to take British equipment?

Secondly, is the Prime Minister aware that almost everything that he said this afternoon has been printed in the Press during the past week, and particularly the last 48 hours, in the minutest detail down to the cost of the insurance stamp, and so on? Is not this treating Parliament with great discourtesy? Will he cause an inquiry to be carried out?

On the first point, we are discussing with the United States Government the position of the offset sales. There is no reason to think that offset sales already made need necessarily fall as a result of the cancellation of the F111A. I fully recognise that it places a sharp limit on the expectation of further offset sales in future. We think that this is justified. This is one of the costs of what is an important decision, which was not easy to take, but had to be taken against that background. The hon. Gentleman will recognise that this is a matter we had to consider at great length. Very many issues were affected when we took our decision—not only finance and savings, but bigger issues than those.

As to the statements which the hon. and gallant Gentleman has seen in the Press, I, too, have seen them. I regret them as much as he does, though I have noticed that—[Interruption.] I do not think that anybody particularly enjoys making a statement in the House on the basis that a lot of it has in bits and pieces appeared in the Press. Quite the contrary.

The hon. Gentleman will probably realise by now, as I knew all along, that a large number of quite specific statements in the Press were speculative and some, we now know, were wrong. Among a long list of matters some were accurate, but there were some very inaccurate ones even in this morning's papers.

Will the Prime Minister realise that, while accepting, in general, the package that he has offered to the House, the grave resentment throughout the benches on this side over prescription charges is due to the fact that this is one saving which falls only upon the sick people? No one will be required to pay these charges unless and until he is sick. Can we take it from the Prime Minister's last answer on this issue that the consultations that are going on with the medical profession about the possibility of working out a proper form of exemptions will be dependent upon a form of exemption which will be acceptable to this House?

I agree with what my hon. Friend said about the way in which any prescription charge system must work. This is why we attach so much importance to the question of exemptions, which is designed to secure for half the population, at any rate, half the cost of the prescription exemptions, because these are the least able to bear any charge at all. The chronic sick, the old or young, are less able to bear the charges than, for example, my hon. Friend and myself if we are sick. This is a question of priorities. We believe these are the right priorities. Therefore, we attach great importance to being able to get a workable system of exemptions which, as my hon. Friend said, can be commended to the House.

Will the Prime Minister tell the House whether there are to be any cuts in overseas aid and, if not, why not? Would he agree that this country pays heavy interest on some of the enormous sums that we have had to borrow? Does he think that Britain can still afford to give away money or lend it interest-free to countries which show little gratitude for receiving it?

I find it a little inconsistent for hon. Members to say what they have and obviously strongly feel about the Commonwealth, and then to make that kind of comment about the aid programme. The aid programme in cash terms will be retained next year and the following year at the same figure as in 1967–68, but the hon. Gentleman will realise that certain costs have risen substantially in some of our overseas aid expenditure because of devaluation. Those increased costs will have to be borne within the total figure of, I think, £205 million. In other words, in cash terms the aid programme remains the same, but in real terms it involves a reduction.

Is my right hon. Friend aware that his statement about prescription charges will be received with intense indignation throughout the whole Labour movement? Could he tell the House whether the figure he gave accruing from these charges is a net or a gross figure?

Is he further aware that in our propaganda to get rid of these charges we said that the collection would make it not worth while? Surely it is not worth the indignation and the sorrow and the trouble it will cause in the country to placate a few bankers either at home or abroad.

What I said in the way of propaganda was that the cost of collection and necessary exemptions would not yield the figure stated. Our estimate is that it will be £50 million. If there were only the exemptions provided for in the regulations to which I referred, that £50 million is reduced to £25 million. Hence the 6d. stamp necessary to pay for those exemptions.

I do not agree with all the strictures of my hon. Friend, strongly though I feel about the issue. I ask my hon. Friend to realise with me that our expenditure on health now at current prices is running at several times the figure it was at the time we last argued these matters in 1951. The health programme is expanding and by the end of the period covered by my statement the total expenditure will be running at something very similar to the total expenditure on defence.

That is the fault of the doctors.

I do not see how anyone can say we are betraying, emasculating or attacking the Health Service when we have increased total expenditure at that rate.

On a point of order, Mr. Speaker. Will it be possible either to ask my right hon. Friend the Leader of the House, or perhaps you, Sir, how we are to conduct our subsequent debate if we are to have an orderly debate? So far, we have got only a synopsis from the Prime Minister about global cuts. Will the Minister of Health, for example, be taking part on behalf of the Government?

The right hon. Gentleman might ask the Leader of the House when he makes his Business statement.

The Prime Minister will remember that a couple of months ago he sent a Minister to the Persian Gulf to reassure the Rulers or Government there of his Government's long-term intentions. After his statement this afternoon, what faith does he believe any Government can put in a visiting Minister belonging to his Government?

I fully recognise, as we all do, the difficulties in which my hon. Friend the Minister of State was placed. It is a fact that it is only two or three months ago that he was there discussing what we announced last July. But this is one of the costs of a decision which had to be taken. We have had to go further than we did last July. I believe that it is right to do it and that we should also explain the implications of the new situation to those with whom we discussed t last year.

In view of the widespread, catastrophic damage suffered by house property in Scotland during Sunday night's hurricane, will my right hon. Friend reconsider his decision to effect a cut in the house-building programme, and in its place recommend a substantial increase?

I think that everyone in the House has heard with deep shock what happened in Glasgow and other parts of Scotland on Sunday night. Government Ministers have gone there to see what is needed, and to discuss the situation with the civic administration. Obviously the Government must look at this as a disaster problem, and not as a question of the housing allocation for two years ahead.

This is a disaster problem, and, like every other disaster which we have unfortunately had in this country, it must be treated by the Government and Government Departments alike on that basis. I do not think that it is in a sense to be related to the long-term decisions announced this afternoon.

The Prime Minister said in his statement that for several years the people had been living beyond their means. Will he tell the House whose fault he thinks that is, whether he has only just discovered it, and if not, why he did not do something about it before?

I think that everything I said in my statement refers to what has been happening under successive Governments. The hon. Gentleman can draw his own conclusions from that.

While congratulating my right hon. Friend of giving up the self-imposed rô1e of world policeman, and accepting that some help is to be given to the lowest income groups, may I ask whether he will accept that for the lowest-paid workers there will be real harm both in the package and in the general post-devaluation situation due to increases in prices? Will he therefore consider doing something about basic food prices, through the marketing boards, either by stabilising those prices or by reducing them?

My right hon. Friend the Minister of Agriculture, in conjunction with the trade, is doing everything possible to hold down the increase in food prices to the absolute minimum required by increased import costs, with much more success than one sees in many places. There has been fine co-operation between these trades and my right hon. Friend in this matter. Publicity is given more to the small items in respect of which there have been big increases, but on the basic foods there has been fine co-operation between the trades and my right hon. Friend. This will continue, and my hon. Friend will be aware of the other ways, some of which I have indicated today, in which we intend to help those who are affected by any price increases resulting from devaluation.

As the right hon. Gentleman has now annihilated the rô1e of the Royal Navy above and on the surface, and is largely abolishing it below the surface, may I ask what plans he has for the Royal Dockyard ports, to which he promised so much in 1964?

On the more general point, as the right hon. Gentleman's programme of cuts seem to amount to about half the overspending annually of this squandering Government, does the right hon. Gentleman think that this will commend itself sufficiently to our new Chancellor of the Exchequer—I mean, of course, M. Pierre-Paul Schweitzer—when he considers our Estimates next month, and whether we shall now, on the strength of that, get a renewal of our drawing rights, or have a second Wilsonian devaluation?

In relation to the Navy, neither my right hon. Friend the Secretary of State for Defence nor I accept as in any way accurate the words used by the hon. Gentleman to describe the rô1e of the Royal Navy from now on.

With regard to the dockyard ports, my right hon. Friend will progressively, over a period, give more details as these decisions affect the individual Services. The hon. Gentleman might like to know that the dockyards have, I think my right hon. Friend said, £200 million worth of naval work at the present time, and, therefore, the hon. Gentleman will expect fuller reports about that.

With regard to the last part of the hon. Gentleman's question, I thought I heard from him, as I have heard in most of the interruptions from the other side of the House, the suggestion that our cuts in expenditure are far too small for what is needed, and yet there is opposition to every item, except about two, of the cuts that I have made. As far as I can judge, there is total opposition from the party opposite to the defence cuts, and yet, having said that, they say that the cuts are not enough.

The debate of the next two days, with which my right hon. Friend the Leader of the House will be dealing in his Business statement, will give hon. Gentlemen opposite a chance to explain how they would get bigger cuts than I have announced, because they are committed to reducing taxation while at the same time avoiding the cuts which we have announced, and to which they object.

Is my right hon. Friend aware that by taking £25 million from the Health Service, not from the superstructure from which, with difficulty, it could be taken, but by way of prescription charges, he hits at the very basis and principle on which the Service was established? Is he further aware that this reverses the pledge given by Hilary Marquand on 1st May, 1952? It makes a charade of the fight that we had in this House during Februry, March and April, 1961, and not only destroys my confidence in the Government, but destroys the faith of a lifetime?

I am sorry to hear my hon. Friend talk in those terms. Everyone knows how, for the past generation, he has dedicated himself to the work of the National Health Service. The statement by Mr. Marquand on 1st February, 1952, was a pledge to remove the charges which had been introduced in 1951, and it is only fair to say to my hon. Friend that such has been the problem that we have faced that we have not ourselves removed those charges which were made on teeth and spectacles in 1951. I do not see how my hon. Friend can say that today's announcement represents a fatal breach of principle.

I hope that my hon. Friend will recognise what has been provided for the National Health Service, and the great increase in resources which we as a Government have devoted to it over the past three years. I hope that he will recognise the great provision in real terms in the hospital building programme, which remains intact. I hope that despite his disappointment on this one aspect my hon. Friend will not feel anything but that we are maintaining the main structure of the Health Service. If my hon. Friend has economies to suggest, on top level administration, or anything like that, no one will be more glad to hear about them than my right hon. Friends the Minister of Health and the Chancellor of the Exchequer.

In view of the distressingly high unemployment in Northern Ireland, the frequent assurances given by;he Prime Minister and other Ministers that they would protect development areas, and the savage effect of the defence cuts on Northern Ireland where we depend a great deal on providing development defence equipment, will the right hon. Gentleman consider a slight increase in public expenditure, rather than a reduction of it, to offset the unemployment which this will cause?

As the hon. Gentleman knows, it is the practice that Northern Ireland expenditure should, wherever possible, following particular categories of expenditure in Great Britain. We are spending more on development areas in Great Britain, and obviously this will be the position in Northern Ireland. Therefore, on the unemployment side, I think that the hon. Gentleman can expect an increase there, but there are certain spending programmes in Northern Ireland which must be reduced and phased in the same way as spending programmes in Great Britain as a whole. It is this to which I was referring this afternoon.

rose—

Order. I must disappoint a number of hon. Members, but we have had an hour of questions to the Prime Minister.

Business has been rearranged as follows:

My right hon. Friend's statement on business seems to be something of an anti-climax to what we have previously heard from the Prime Minister about matters affecting our whole economy. Have we to wait for the Estimates speeches, or are we to debate today's statement by the Prime Minister, and, if so, how and when? It is obvious from some of the questions asked today that some hon. Members are more concerned with defence cuts and some with health cuts. So far, we have had only assertions. We are not in a position to judge the correct proportions.

I am sorry if I did not make myself clear to the House. Tomorrow and the day after we have devoted two full days to a debate on the statement that we have just heard, which will be on a Government Motion.

Can the right hon. Gentleman assist us in one matter? we have had a serious statement by the Prime Minister. In view of that, would not the right hon. Gentleman consider changing the business for today so that we can discuss, perhaps on the Adjournment, matters of importance, rather than having to deal with an irrelevant Bill which will merely add to our burdens instead of decreasing them?

I think that, on reflection, the hon. Member will agree that that is not a good idea. We came back a day early in order to give the House time to hear my right hon. Friend's statement today and to reflect on it before having the two-day debate commencing tomorrow. I would think that that is the right way to proceed.

Before the Christmas Recess, my right hon. Friend promised a specific one-day debate on Vietnam when foreign affairs came to be discussed. Because of the seriously deteriorating position there, can my right hon. Friend assure the House that one of the debates next week will be on that specific subject?

It was my intention to keep to the division that we had before, but I want to discuss through the usual channels and with all parts of the House whether that is the desire of the House. If it is, we will keep to that arrangement—but in view of the new situation, I wanted to keep the matter open for a change of plan, if that were desirable.

The right hon. Gentleman made no reference to the Industrial Expansion Bill. Are there any changes in the plans for the introduction of that Bill?

If there are no changes, I believe that the Bill is being published today.

Is my right hon. Friend really satisfied that two days is a sufficient length of time to discuss this important matter? Is he aware that by the time right hon. Gentlemen on both Front Benches and the long-winded Privy Councillors from the back benches have spoken, there will be no time for modest back benchers to add their contributions to this debate? Will he reconsider the situation?

I am always prepared to consider anything that my hon. Friend says, but I would have thought that two days was a good beginning. I have a shrewd suspicion that this topic will be discussed in other debates in the future.

The right hon. Gentleman will recall that the Second Reading of the Gaming Bill has been postponed again and again, and he will no doubt have noticed that a recent judicial decision of the House of Lords has rendered it more and more urgent to get on with it. Can he give us any news on the matter?

I hope to give the news in my next Business statement.

Will my right hon. Friend try to find time for an early debate on the serious havoc wrought in Scotland on Sunday night, in view of the fact that not only damage was done but financial liability was incurred, and in some places no medical services were available to assist the public? Can he find time fully to debate this matter?

I think that I can tell my hon. Friend that as soon as questions on business are over my right hon. Friend the Secretary of State for Scotland hopes to make a statement on this situation.

May I press the Leader of the House to see if he can find more time to debate both the economic and foreign affairs questions? Could not we have an extra hour at least? I am sure that many hon. Members will want to speak on these questions.

I think that we should measure our enthusiasm. We shall have two days on the Prime Minister's statement, followed by two days on foreign affairs, in the course of which I have no doubt that certain themes in the Prime Minister's statement will be discussed again. I would have thought that four days of our time was sufficient, but I will see what the position is when we have finished those debates.

May I press my right hon. Friend to give one full day's debate on Vietnam, which is a worrying matter to our people here and also to our friends in America?

I think that I referred not to Vietnam but to the Far East. I think that there will be an interest in the debate not exclusively on Vietnam. I would have thought that if it were to the convenience of the House we would keep to the division of the time allotted before the Christmas Recess.

In view of the new situation and the great need for economy, will the right hon. Gentleman now drop the Transport Bill and so save £1,200 million?

I think that the hon. Gentleman will not be surprised to hear that my answer is in the negative.

In view of the Prime Minister's statement about the restriction on Atomic Energy Authority expenditure, will my right hon. Friend give urgent consideration to the frequently-made request for a debate on the recommendations of the Select Committee on Technology on the nuclear reactor programme, in view of the export-earning potential?

I have considered this and discussed it with my right hon. Friend the Minister of Power. I can now tell my hon. Friend that the Minister's considered reply to that very formidable document from the Select Committee will not be ready for a few weeks, but directly it is, and is published, we shall have a very important debate on the two of them.

Is it not really somewhat absurd to discuss the Transport Bill today, in the regretted absence of the Minister, whose product it is? I should have thought that we might at least be able to afford to await her return and let her make her own statement of the case for the Government, instead of having the debate in her absence, at a time of great national crisis.

I will pass on to my right hon. Friend the sympathy of the hon. Members. I assure him that I have asked my right hon. Friend, and she would prefer to have the Bill debated today.

In view of the fact that prescription charges are bound to be a matter of controversy this week, unfortunately, will the Leader of the House bear in mind that the debate tomorrow and the next day will be across the board on the economic conditions of the country'? Does not he think it wise, in view of the importance of this subject, that it should be discussed as a health programme debate on a fresh day?

I have no doubt that it will be because, in order to introduce this change, I believe that there has to be an affirmative Order and I assume that there will be a full day's debate on that.

As the effectiveness of three-quarters of the items in the package statement that we have heard depends on wage restraint, can the right hon. Gentleman tell the House whether the Minister of Labour is likely to take part in the two-day debate, so that we can have the benefit of hearing about the consultations that have gone on in 10, Downing Street and other places, leading up to the statement? If the right hon. Gentleman is not going to take part in the two-day debate, may we have a debate in which we can have his considered view from the Dispatch Box?

Two Ministers are concerned—the Minister of Labour and the Secretary of State for Economic Affairs —but I do not expect that either will take part in the two-day debate. I have no doubt that there will be many speakers in the debate who will give full attention to what, I agree, is an extremely important part of the policies.

As the House already knows, hurricane winds of quite exceptional strength swept over central and southern Scotland and the extreme north of England in the early hours of Monday morning, leaving a trail of death and devastation. According to the latest information in my possession, 19 people lost their lives in Scotland, at least 100 were seriously injured, 300 houses were destroyed and many thousands damaged, and 700 people rendered homeless. Roads and railways were blocked by fallen trees and other debris, many parked cars were crushed, and some power lines were brought down.

Her Majesty The Queen has sent a gracious message of sympathy to those affected. This I am conveying to the civic heads of the areas concerned, along with an expression of my own sympathy on behalf of the Government, in which I am sure the whole House will wish to join.

The worst affected areas appear to be on Clydeside. I have myself been in touch with the Lord Provost of Glasgow and the Provost of Greenock, while my hon. Friend the Minister of State and my noble Friend the Joint Parliamentary Under-Secretary are now in the West of Scotland. The local authorities and voluntary organisations have risen magnificently to the task of caring for the homeless and clearing the debris, and I have offered them all practical help that Government resources can provide. The Services are also helping.

I shall keep the House informed of the progress made in the re-housing of the homeless, and in the repair and restoration of damage. I hope to fly to Glasgow later tomorrow in order to get first-hand reports on progress and see something of the situation for myself.

I thank the right hon. Gentleman for the information he has given the House so speedily and express the sympathy of all on this side to those who have suffered in this appalling disaster. I would especially, as a Member for one of the constituencies of Edinburgh, where two people were killed, sound a special note of sympathy to that other great city which took the brunt of the damage two nights ago and 'has suffered conditions in which, according to the police, chaos was even greater than in the blitz. I would also add my congratulations to all the services which have been helping in the rescue work, including all those doing jobs which are comparatively unnoticed, such as clearing fallen trees on country roads—work which seemed to me to be done with great expedition.

Although, thankfully, much of the damage has been relatively minor and will, therefore, be covered by many individual insurance policies, is the right hon. Gentleman aware that many of the most serious episodes merit assistance from us all? Is it not a fact that half Glasgow Corporation's houses, namely, 70,000 out of 140,000, suffered damage to the roofs, the plumbing or both? Is the right hon. Gentleman correct in saying that only 700 people were made homeless —

No—1,700.

I was about to say that I had read that the Glasgow police said that 1,000 were homeless in Glasgow alone. What are the prospects of speedy repairs, and what general powers does the right hon. Gentleman have to help?

Finally, what warnings of this exceptionally severe storm were given by the weather forecasting service? Does the right hon. Gentleman consider that the communication of forecasts of quite exceptional weather of this nature is adequate? I would assure him that any action he takes to help those who have endured the horror and terror of having their ceilings and floors collapse will receive all support from us on this side.

I am sorry about the slip I made. In fact, 1,700 people were rendered homeless. This was especially distressing, since it happened in darkness and was aggravated by power failures, the collapse of telephone lines and the blocking of roads. I assure the hon. Gentleman that, although chaos reigned for a time, a wonderful job has been done by all those involved in Glasgow and elsewhere in clearing the streets and restoring order. Our praise is due to all those people in the local authorities, the Services, the voluntary organisations and the rest who have co-operated so well in this.

Of course, the extent of the damage will have to be assessed. About 70,000 houses were affected, many of them in only a relatively minor way, I am glad to say, but one of the things which is worrying us is that there has been almost incessant rain today and, with roofs open or broken, more damage is being caused to furniture and furnishings. I am glad to say that the G.O.C. Scottish Command was there this morning and made an assessment, and the Army is helping with covered trucks by removing furnishings and furniture family by family to drill halls and such places.

I have arranged for one of my officers to be stationed in Greenock, one in Dumbarton and one in Glasgow, in contact with the Scottish Office, to see that everything possible can be done. An assessment of the housing damage is being made today.

I do not know that we can do very much more about weather forecasts than about the weather itself, but there is no doubt that this calamity to some extent took the weather forecasters by surprise, especially since some of the gusts of wind recorded were of a velocity higher than anything ever before experienced in Scotland. Although I have mentioned mainly Clydeside, I have had reports of damage in Fife, in Edinburgh, in Lanarkshire—particularly schools in Lanarkshire—in Ayrshire, in Lugton, with even a mention of Dumfries as well. There has been a trail of devastation, but I am glad to say that the authorities are coping very well indeed with it.

Although we appreciate the information which my right hon. Friend has given us, will he bear in mind the fact that the repair of 75,000 on the present estimate, and possibly 100,000 in the ultimate, of municipal houses alone will involve Glasgow in substantial additional expenditure? Is it the Government's intention in any way financially to repay the corporation for this additional expenditure? As these hundreds of homeless people have suffered tremendous personal and financial losses, and since the Lord Provost of Glasgow, for reasons best known to himself, has refused to open a disaster fund, will my right hon. Friend consider launching such a fund, to which I am sure there would be a most generous response?

On my hon. Friend's last comment, the launching of such a fund is generally a matter for the civic heads in the area concerned, and I will rest on that. I will be seeing Lord Provost Johnson tomorrow, I hope. As to the assessment of the cost of the damage done and questions of how this burden should fall, I think: that we must wait until we get a proper assessment of the damage. Today the Minister of-State is in Glasgow —he has been to Greenock—and is proceeding from there to Cambuslang. My noble Friend the Under-Secretary has been to Dumbarton, where he saw the county clerk, and the Vale of Leven, where severe damage was done at Bon-hill, and he is going this afternoon to Cambuslang and Edinburgh. I will be in touch with them both tomorrow and with the other civic authorities, and I will get a proper appreciation of what is involved in relation to expenditure and so on.

The right hon. Gentleman's personal visit to Glasgow tomorrow will be greatly appreciated. Will he congratulate the police and the fire service for their wonderful job? As most of the houses which collapsed were old stone dwellings, will the right hon. Gentleman do everything he can to ensure that the cuts announced today will not affect the removal of many of these old and dangerous properties?

We have been speeding up the removal of the worst of these old buildings considerably and we want to proceed with that. Quite apart from new building, we will also examine the extent to which we put resources into the improvement of our older houses. It was not only the older houses which were affected. One of the disastrous features of what happened in Greenock was that a relatively new block was involved: a chimney head fell in, with several fatalities.

I pay tribute to the police, the fire authorities and the cleansing departments for the way in which they have tackled this work. The W.V.S. and the health and welfare departments have worked wonders. As to the Army, the Cameronians are already working in Glasgow and the Royal Highland Fusiliers are moving down from Fort George and will help to clear trees in parks, and so on. This disaster has evoked a considerable spirit which redounds to the credit of Scotland.

The damage has been serious. The disaster to the bereaved families is irreparable. I am sure that the House will join me in extending our sympathy to the bereaved families.

While I recognise that the Secretary of State is active in the matter and that we cannot legislate for the elemental processes of nature, undoubtedly this has been a tremendous catastrophe for the City, and I wonder whether my right hon. Friend would expand slightly on the remit for the physical use of the Armed Forces in clearing up the damage and going in for a degree of reconstruction as a practical method of support.

There are limitations to what we can ask the Armed Forces to do within their capabilities, but I assure my hon. Friend that we have had no trouble with them or with the trade unions by reason of the fact that they are performing tasks which normally they would not perform. I shall be looking, with the authorities, tomorrow at exactly what help can be given in the way of organisation in respect of immediate and major repairs. I have authorised my hon. Friend the Minister of State and my noble Friend the Under-Secretary of State to take decisions in relation to what can be done immediately and to what is required.

As the relief work is apparently being impeded at the moment by flooding in some areas, and as there are possibilities of rain continuing, and further high winds, will the Secretary of State make sure that all this Government assistance continues to be available and is sustained? The Secretary of State mentioned the Cameronians, but they are in process of disbandment and we do not know to what extent they could continue to help. As a way of possibly helping the plight of the homeless, will the Secretary of State consider asking the Government to rescind the cut of 1,500 houses in the house-building programme for Scotland?

I appreciate the relevance of the point which the hon. Member made about keeping people on this work as long as they are needed. But in the latter part of his question he was talking about cuts in respect of approvals this year. If they are approved this year, the houses will be completed in about two years' time, and that will be of no use to meet this problem. Let us talk about that quite separately. The fact that in the past year we have been able to build more houses than have ever been built before, and that it was possible for people who were rendered homeless in Greenock to be put into new houses right away until such time as their own houses are repaired, is an indication of the greater preparedness which exists than we might have had some time before.

Is my right hon. Friend aware that the Meteorological Office for Scotland has admitted his failure to alert Scotland to this storm and that when people were given the information, belatedly, he appears seriously to have underestimated its strength? In view of that situation, will my right hon. Friend consult the Minister of Defence with a view to improving the operational activity of this unit in Scotland?

I cannot substantiate what my hon. Friend said, but I will look into it.

He announced it himself.

I known nothing about that, but I will look into it. Even with the best will in the world, we may always have mistakes of this kind. We have had them in the past, with floods in the north of Scotland, and elsewhere. The serious problem arises from the manner in which a situation can change. With the storm happening at that time, it was not possible for people to be given that kind of warning.

On the question of the warning given by the Meteorological Office, is the right hon. Gentleman aware that the storm was so violent that no amount of warning would have made any difference? Two of my windows were blown in. One of the most disastrous events occurred, involving four lives, in the Partick district of Glasgow—part of my constituency. Is the right hon. Gentleman aware that I should like to join my hon. Friends in bearing testimony to the good work which was done by the public services? Is the right hon. Gentleman aware that from a tour which I made of Glasgow yesterday it seemed to me that much of the damage was due to old property which may not have been properly maintained? If he has not the facts at the moment, will he find out to what extent that property was subject to rent control and, therefore, may not have had the right amount spent on it in maintenance? [HON. MEMBERS: "Oh."] This is an important matter.

Order. It may be important, but questions must be brief.

I have been phrasing my questions as far as I can in an interrogatory way. This is a matter of very great concern to my constituency.

Order. I am not questioning the importance of what the hon. Member says. I am questioning the longitude of it.

I am sorry, Mr. Speaker. Would the Minister look into this aspect of the matter to see whether enough maintenance work is done on this kind of building? Perhaps he would circulate in some way the number of old buildings involved and the number of new buildings.

I assure the hon. Member that I will look into all relevant factors which contributed to the catastrophe. I wonder what might have occurred if this had happened suddenly during the day and if there had been children playing around these older buildings. The disaster might have been even worse. The fact that it happened at night made it more difficult to give the kind of warning necessary. Bearing in mind the velocity of these winds, even with warning it might have been difficult to avoid a certain amount of disaster.

Because of the amount of clearing up needed among tenement buildings in Glasgow, will my right hon. Friend consider using the large number of unemployed people in these areas to clear up quickly?

I do not think that I shall have any difficulty at all in relation to getting the men to do the job. When I spoke to the Lord Provost last night his appeal to me was for equipment, such as trucks and shovels and that kind of thing. I am glad to say that we have provided all the help that has been required. The Director of Public Buildings and Works in Scotland has been on the scene today to ensure proper liaison with the private building industry in relation to all the equipment necessary.

Members of the Liberal Party would like to be associated with the expression of sympathy which the Secretary of State gave earlier. Would lie add a tribute to the engineers of the telephone and electricity services who, as far as I know, are still working in parts of my constituency, and presumably elsewhere, to restore communications? Will he not close his mind, once he has looked at the situation, to the possibility of restoring some of the cuts in housing, even though the effects are long-term?

The hon. Member knows me well enough to know that I shall never close my mind to increasing the housing programme in Scotland. He knows of the reluctance with which these cuts were made. I am satisfied with the fact that we have a building programme in Scotland of houses under construction or already approved which will enable us this coming year probably to improve on the very high housing figures which we have already achieved. That is by the way. I gladly pay tribute to the Post Office engineers, and we should also pay tribute to those in the electricity services and on the railways. I gather that 57 lines into Glasgow were blocked. I am glad to say that they are getting pretty well back to normal.

What assessment has been made of the damage to school buildings, and what lessons have been learned about the quality of school buildings?

It is too early to learn lessons about it. In Glasgow about 61 schools were affected, some of them in a minor way. I had a report sent in from Lanarkshire about 3 o'clock today, stating that quite a number of schools are affected, 20 of them seriously and involving the evacuation of whole or part of the school. There are 100 with broken glass. In view of the weather and the rain which we are having, no doubt further damage is being caused where there is broken glass. All that is being assessed.

rose—

Order. I must protect the business of the House.

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

The House will be aware of the doctor's Orders which have led to the unfortunate absence today of my right hon. Friend the Minister of Transport. I feel sure that it would be your wish, Mr. Speaker, and that of the House that we express our best wishes to my right hon. Friend for her speedy recovery from the attack of pneumonia which she has borne with great fortitude for the last fortnight.

This Bill is needed to increase the amount of money which the Transport Holding Company can borrow from the Government for the purposes of its business. The Transport Holding Company was set up under the Transport Act, 1962, to manage a wide range of nationally owned investments in road haulage, in road passenger transport and in other associated activities. It was then given power to borrow, provided that the aggregate debt outstanding, except from subsidiary companies, did not exceed £30 million. These borrowing powers have been used by the Company in the expansion of its business, and this has used up a substantial part of its borrowing powers.

As my right hon. Friend informed the House before Christmas, the T.H.C. reached agreement for the purchase of shares in the British Electric Traction group of bus companies. The cost of this acquisition is, however, too large to be met by the use of its remaining un-committed borrowing powers granted under the 1962 Act. The purpose of the Bill, therefore, is to enable it to borrow additional sums from the Minister sufficient to enable it to complete the purchase of shares in the B.E.T. bus group and still leave a sufficient margin for other contingencies which may arise.

I think that it will be convenient to the House if I set out the background to the proposed acquisition by the T.H.C. of the shares in the B.E.T. bus group. When the British Transport Commission was established under the Transport Act, 1947, it took over not only the railway companies, but the substantial investments which had been made by the railway companies many years earlier in the three big groups of bus companies. Soon after its establishment, the British Transport Commission negotiated the purchase of the shares in the Tilling group and the Scottish bus group which it did not already own. These two groups have, therefore, for the past 20 years been wholly owned by the nation and administered by the Holding Company.

At that time, discussions were held about the possible acquisition of the shares in the B.E.T. group of bus companies which were not owned by the B.T.C. But at that time the discussions did not come to completion. The B.T.C., and later the Transport Holding Company, therefore continued with a large investment in the B.E.T. group, but an investment falling short of control.

The position was that the T.H.C. had a shareholding in each of the individual bus companies, with one or two exceptions, equal to that of the British Electric Traction Company. In some cases, they each held 50 per cent. of the shares. In other companies there were outside share holdings, so that both the B.E.T. and the T.H.C. held less than 50 per cent. of the shares, but in all cases over 30 per cent. each. By agreement, however, the actual running of the bus companies was left basically in the hands of the B.E.T. group. The T.H.C. appointed directors to the boards of the individual companies, but, in all cases, effective control remained with the B.E.T. group. In effect, the State holding in these companies was treated basically as an investment.

This situation has continued for many years. However, during the past two years my right hon. Friend the Minister of Transport has been working on schemes for a substantial reorganisation of the local passenger transport services in Great Britain. The main principles were set out in the White Paper on Transport Policy in July, 1966, and the details of the various measures have been incorporated in the Transport Bill, now before the House.

While the details of this policy were being formulated, the board of the Transport Holding Company came to the conclusion that, in the changed circumstances which would be created, there would be advantages in the T.H.C. acquiring full control of the B.E.T. group of bus companies. The T.H.C. has, of course, an existing stake in the bus industry amounting to more than £100 million.

The board of the T.H.C. concluded that the value of this large public holding in the bus industry would be safeguarded during the inevitable changes in the organisation of the bus industry if the T.H.C. had full control of the B.E.T. group of bus companies as well as of the Tilling and Scottish groups. The board concluded that it would be commercially sensible to acquire the shares which it did not already hold in the B.E.T. group, if this could be done at a reasonable price by voluntary negotiation.

The board of the T.H.C. therefore approached the Minister and asked whether she agreed that this would be a sensible thing to do; and if so, whether the Government would be prepared to seek powers to extend the borrowing rights of the T.H.C. in order to complete the deal. The Minister took the view that it would be right to complete the process of bringing the main network of bus services into public ownership—a process which had been largely, though not completely, carried out in 1948–49. She therefore authorised the T.H.C. to enter into negotiations with the board of the B.E.T. Company.

Agreement was reached between the T.H.C. and the B.E.T. on the terms of acquisition. A sum was agreed of £35 million for the ordinary shares in the bus companies concerned owned by the B.E.T. This represented broadly, in the T.H.C.'s view, the value of the assets underlying the shareholding. It was also agreed that the T.H.C. would make an offer to buy the shares held by other shareholders in these companies on comparable terms which would be agreed by the financial advisers of the T.H.C. and the B.E.T. Such an offer will be made as soon as the T.H.C. has the necessary funds at its disposal.

By far the greater part of the ordinary network of bus services is, and has been for many years, in public ownership of one type or another—either municipal bus undertakings, London Transport or the T.H.C. interests. The provision of such services has become increasingly difficult in recent years. The growth of private car ownership has led to a continuous fall in the demand for bus services.

To a large extent, the provision of stage bus services must be regarded as a public service rather than a field in which there is great opportunity for the making of private profits, although that is not to say that the bus companies cannot be run except at a loss. This is far from the case. Most municipal bus undertakings have aimed at covering their costs year by year. The T.H.C. bus companies have also aimed at making a modest return on the capital employed. But one cannot expect to make large profits. Moreover, there are, clearly, significant economies to be obtained from having all the main bus companies under a single control.

As the House will realise, the bus industry is not one in which there is any substantial element of competition between the various companies. By and large, each company has operating rights over particular routes given to it by the Traffic Commissioners and on which other companies are not permitted to operate in competition. The various operating areas and routes were often settled many years ago and there would be opportunities for rationalisation arising from the full control of the B.E.T. companies by the T.H.C. Moreover, there would be substantial advantages in having a single publicly-owned company with which the new passenger transport authorities could negotiate for the provision of services in their areas. From all these points of view, the acquisition by the T.H.C. of the remaining interests in the B.E.T. group makes good commercial and operating sense. It will fit in well with the other proposals for reorganisation of local bus services. It is for these reasons that the Government believe that the purchase should be carried through.

Now that agreement has been reached between the T.H.C. and the B.E.T. on a commercial basis, it is obviously desirable that the changeover should be made as quickly as possible. A long period of uncertainty would be undesirable from every point of view. That is the reason why it hase been decided to introduce this separate Bill to deal with the position, rather than to include the Clauses in the Transport Bill itself. That would inevitably leave a long period of uncertainty which would be against the interests of the bus companies concerned and also of the minority shareholders to whom no offer can be made until after the passage of this Bill.

The House will note that we are proposing to raise the borrowing powers of the Transport Holding Company by £70 million. This, of course, is more than is needed for the completion of the British Electric Traction transaction itself, but it is obviously necessary to leave the Transport Holding Company with sufficient borrowing powers to deal with other transactions both in the bus and road haulage fields which may arise. For example, the Transport Holding Company has been carrying on negotiations with the Glasgow City Corporation which might well involve the acquisition of Glasgow's transport undertaking by the Transport Holding Company. In that case, as some hon. Members well know, Glasgow transport undertaking—

rose—

In a moment. I am dealing with the Glasgow transport question. In that case, Glasgow transport undertaking has substantial liabilities which will have to be taken over.

The hon. Member has made the point that Glasgow transport undertaking will get a much better deal than other provincial undertakings throughout the country.

I am making no such point. It was the Tory Government which devised the 1962 Act and the constitution of the Holding Company, including its power to acquire undertakings. Negotiations have been going on about this matter; it is a matter of commercial judgment, and I thought that hon. Gentlemen opposite were all in favour of commercial judgment being involved. Negotiations have been going on which may well involve the Transport Holding Company taking over these undertakings from the point of view of making a beneficial contribution to the bus services.

Am I right in thinking that under the Transport Bill these undertakings are liable to be taken over without compensation by the P.T.A.s? Why should Glasgow be picked out to be given compensation when the others are not?

I wish the hon. Member would read the Transport Bill. The hon. Member is somewhat behind. I would advise him to consult—it is available in the Vote Office—the part which deals with the powers and functions of the passenger transport authorities and also with the establishment, which is the point I am coming to, of the National Bus Company and then it will dispel from his mind any misleading impression about the matter.

In fact I am coming on to this point. Since our White Paper on passenger transport was published three private bus operators have written to the Minister of Transport offering to negotiate on the acquisition of their undertakings and others have approached the Transport Holding Company. It may well be that the acquisition of some of those undertakings would appear to the Transport Holding Company to make good commercial sense, and it is necessary, therefore, to leave some provision and scope for this.

I would say a word about Clause 1(2) of this Bill. It is intended to remove any possible doubt that the Transport Holding Company is entitled to purchase shares in transport and related undertakings. Hon. Members may well be surprised, especially those who were involved in the passage of the 1962 Act, that this is thought necessary, since the Transport Holding Company has been making such purchases for a long time under the previous Government and under the present Government. Certainly the Company has power under Section 29(6) of the Transport Act, 1962, to subscribe for and acquire securities, and generally to carry on any business usually carried on by a holding company.

It is quite clear, however, that the wording of the Section is somewhat obscure, since these powers to do these things have to be exercised with the object of holding and managing the securities "vested in them". The Minister has been advised that there is some doubt as to the precise construction to be placed on Section 29(6) of the 1962 Act in relation to transactions involving the acquisition of shares, such as, for example, the proposed purchase from the British Electric Traction. Therefore, it is right to remove any possible doubt about the legality of these transctions, both those which have already taken place and any which may be entered into subsequently.

Would the hon. Gentleman go into Section 29(6)? If the Holding Company were engaged in commercial enterprise it would have power as set out in subsection (6(a), (i) and (ii)). Is there any intention of changing this?

No. No change is made. As the hon. Gentleman will read in the Bill now before us, we have dealt with that matter for the purpose of removal of any doubt whatsoever about the construction to he put on that Section of the 1962 Act.

I have made it plain that this is limited to undertakings where the principal activities consist of

" the provision of transport services or facilities or the manufacture of road vehicles ".

It is limited to those things, and this amendment defines and makes quite clear what, frankly, I think was quite clear, certainly to those concerned with the 1962 Bill. If any hon. Member cares to examine the proceedings on that Bill I think he will see that it was quite clear what power it was intended to give, a power which has been exercised under the previous Government as well as under the present Government. Now we have spelled it out as being the activities of the undertakings with which the Holding Company may be concerned in exercising the power of acquisition; it is limited to

" the principal activities … consist of the provision of transport services or facilities or the manufacture of road vehicles ".

Thus we remove any possible doubt about the legality of those transactions.

I think the trouble is the use in the 1962 Act of this rather general expression "for those objects". They are

" (1) to form, promote and assist companies, (ii) to subscribe for, take, acquire and hold, exchange and sell securities of companies ".

I think the doubt cast upon the exercise of the powers of the Holding Company has been through the use of that rather general term "for those objects".

Yes, the hon. Gentleman is quite right, and we have felt, on account of that question of the interpretation of those words in that Section, that it should be spelt out, as it is in Clause 1(2) of this Bill. It is spelt out in the form that this is a power to acquire securities and so on, but that it is confined to undertakings where the principal activities consist.

" of the provision of transport services or facilities or the manufacture of road vehicles ".

It is confined to those objects which are the main objects of the Transport Holding Company itself.

Is the hon. Gentleman suggesting that some recent transactions made by the Holding Company may indeed be ultra vires?

I am simply saying that my right hon. Friend has been advised that there is some doubt about the interpretation of that Section. This Clause is for the removal of doubt. The words at the beginning of the subsection are, "For the removal of doubt …" I cannot say what doubts have been cast, or whether anybody has dealt with those doubts or not, but I can say that we have been advised—my right hon. Friend has been advised—that doubt exists about the interpretation of the words in the 1962 Act. I think no doubt exists about the intention of those who passed the Act. Therefore, we are simply inserting this Clause in this Bill to ensure that this doubt shall be removed by spelling out what are the purposes with which the Transport Holding Company should be concerned when exercising any powers of acquisition at all.

It is all very well for the hon. Gentleman to talk like this. I quite see what he says about the Clause spelling this out, but when he says he cannot say what doubts have been cast on past events, does he not think that there is a duty incumbent upon him to do so?

No. I think the hon. Gentleman who raised this question should address it to one of the Law Officers of the Crown. I was simply saying that I cannot give any answer to that question which he posed, quite legitimately. I cannot give, I am not in a position to give, and ought not to give, a direct answer to that question, which is one he can quite legitimately pose to the Law Officers of the Crown. We are concerned here, I think all hon. Members will agree, about Parliament's intention in the Transport Act, 1962, and about the formulation which we have made here over the power of acquisition, and its being directed and properly confined to undertakings whose principal activities are the provision of transport services or the manufacture of road vehicles.

If this Bill is passed, immediately the Government will lend to the Transport Holding Company the money necessary for the acquisition of the British Electric Traction shareholdings and, at the same time, authorise the T.H.C. to make an offer for the remaining shareholdings in these companies. The money will be advanced on the usual terms for Government loans to the Transport Holding Company at the going rate of interest. In due course, these liabilities will be transferred to the National Bus Company, which will be established under the Transport Bill. The National Bus Company will be responsible for meeting the charges on the loan, and it will have a duty to earn enough from the bus companies to enable it to meet these and other liabilities. In short, the whole matter will be treated as a commercial transaction.

I trust that the House will agree that this commercial transaction is one which is sensible, progressive and ought to be approved and, therefore, will give us the necessary authority to enable the Transport Holding Company to conclude the negotiations which it commenced with British Electric Traction.

At the outset may I ask the hon. Gentleman to convey our regrets to the right hon. Lady about her illness and wish her a speedy recovery?

May I say that I have never heard a worse explanation for spending £70 million of public money than that which has just been given by the Minister of State—[Interruption.] It ill becomes the hon. Member for Central Ayrshire (Mr. Manuel) to complain about what I say. Having heard his passionate outburst a few moments ago, I hope that he will be explaining to his constituents how the Government can take £25 million in prescription charges and spend £70 million on the nationalisation of buses and coaches.

Not only have we heard a bad explanation for spending £70 million. It is a remarkable performance for the Government, on this day of all days, to come to the House and make a statement about the necessity for numerous cuts and then to ask for £70 million to increase the nationalisation of buses and coaches. However, having done it, one notices that there is not one member of the Cabinet present to support it.

That is a good sign.

The absence of the Minister of Transport is understandable, but the Bill bears the names of two other Cabinet Ministers, in addition to the name of a Treasury Minister. Not one representative of the Treasury is present to see £70 million of public expenditure go into nationalisation.

I hope that my hon. Friend is not suggesting that the absence of a Treasury Minister is anything but colossal good fortune for us all.

What I am frightened about is what Treasury Ministers do in their absence. I fear that one of the things that they have been doing is to approve of this expenditure at a time when they are asking the country to make tremendous sacrifices in the social services, in education and-elsewhere.

I am sure that the hon. Gentleman wants to be truthful and fair in his argument, and not be just a smart alec. My hon. Friend the Minister of State said explicitly that, while powers are being asked for to borrow up to another £70 million, it may not be necessary. It may be only £20 million. The hon. Member for Worcester (Mr. Peter Walker) is saying that it is to be £70 million as a definite figure. I ask him to stick to the facts and be his age.

I admire the hon. Gentleman for not wanting to spend this money, but we understand that £52 million is already committed, £35 million on British Electric Traction interests and at least another £17 million on the minority interests. In addition, the hon. Gentleman has explained that negotiations are taking place at present in respect of the remaining £18 million. We see how reckless the Government are in the sphere of public spending when, at this moment of time, they say that it is intended to give the nationalised industries more borrowing powers than they need.

For the second time since the present Minister of Transport has held her office, we have heard today that cuts are to be made in the road building programme. Only on two occasions in post-war Britain have cuts been made in that programme, and on both occasions they have been made under the present Minister. Yet she will be able to boast that, while she had to give way to the Treasury on that issue, she was able to persuade it to continue with the nationalisation of buses and coaches. I hope that the people of this country will share her pride.

Before he goes any further, I hope that the hon. Gentleman will demonstrate that he is able to distinguish between public expenditure, which makes an extra call on the resources of the national economy, and credit which is for the purpose of transferring existing assets from private to public ownership and involves no additional call on resources.

I would welcome that opportunity. The whole trouble with the Government is that they cannot distinguish between Government borrowing for this sort of purpose and the wastage which it generally brings.

In practical economic terms, the Government will be placing into the hands of shareholders £70 million worth of cash. If the Minister of State really considers that that will not result in an increase in consumption, he must have a remarkable manner of assessing people's likely reactions. In addition, in term; of pressure upon resources, I could quote to the hon. Gentleman a number of speeches by some of his right hon. Friends who are now in the Cabinet arguing how, for example, road building created no pressure on imports and very little pressure on manpower, but that the economic return in the saving of other services as a result of road building made it a viable economic proposition. However, the Government have decided to do away with some of the investment in roads and to invest, instead, in buses and coaches.

Think of the effect of this Bill on opinion abroad. The Government have recently gone round the world explaining why our currency has had to be devalued and why those who deposited in London had to lose 14 per cent. of their savings. Within weeks of doing that, they come to the House and ask for £70 million to nationalise buses and coaches. How will they explain the effect of this to the people overseas from whom we are borrowing this money? They will have witnessed today with great interest the statement of the Prime Minister. Doubtless they will have noticed that, at the moment that he went out of the House, another of his Ministers took his place and asked for £70 million to nationalise buses and coaches. Then, to add the final insult to those who are lending the money, they announce today that they intend to publish the Industrial Expansion Bill as well. It is a remarkable combination of events.

The explanation given by the Minister of State was, to say the least, inadequate. Let us take the specific position of the B.E.T.C., including the minority interests. As I have said, I gather that a total of £52 million will be going to them, £35 million to the shareholders in B.E.T.C. and f17 million to the minority shareholders. If I am wrong in those figures, no doubt the hon. Gentleman will correct me. They are the figures which I have been able to obtain from those who know something of the dimension of the minority interests.

The current return upon those bus services is 5¼ per cent. So here we have a Government, with an 8 per cent. Bank Rate at present, having to pay well over 7 per cent. for Government borrowings, borrowing money at between 7 per cent. and 8 per cent., and investing it in industries where they get 5¼ per cent. And that is a 5¼ per cent. in relation to something that has been diminishing over the years, and not increasing; 5¼ per cent. that, on all the projections of the Government as to the future of our bus services, the manner in which the public are going over to their own motor cars, and so on, is likely to have a declining earnings power.

" But ", says the Minister of State, "the great advantage is that there will be economies; we will be joining bus companies together and thereby getting a better yield". Has he consulted the Transport Holding Company on this? Last year a paper was presented by Mr. Glassborow, who is head of economic research at the Transport Holding Company—the nationalised company that is making this purchase—to the Public Transport Association. That is well up to date.

Mr. Glassborow referred to the Government White Paper on transport, and commented particularly on the phrase in it which reads:

" In many of these areas the efficiency of bus operation is hampered by the small size of the Undertakings."

On that statement, the head of economic research at the Transport Holding Company commented:

" There is no evidence that the customer is the more satisfied with the bus services provided, the larger the size of the Undertaking. If efficiency is to be measured by costs, there is equally no evidence that larger size reduces costs. So far as the cost of municipal services are concerned, the following table, based on rather out-of-date figures. cannot be regarded as conclusive. As I have said earlier many factors other than the size of the undertaking must also affect their costs. I have confined my attention to the municipal undertakings, because of their number, wide range of size and the largely urban nature of their territories."

There then follows a table that shows the average working expenses per car mile. It shows that with a fleet of up to 30 buses the expenses are 37d., and for a fleet of between 31 and 60 buses the figure is 39·4d. So the table continues to rise until for 1,000 buses we have a figure of over 46d. The whole statement of the head of economic research at the Transport Holding Company, and the whole of his argument, was on the point that no case has been made that to increase the size of the undertaking reduces costs. Indeed, what evidence there is—and he admits that it is not conclusive—points the other way.

Therefore, we have a Government, with an economic crisis at hand, who intend to borrow £70 million, and the Minister gives no explanation where the money is to come from. His explanation is, "We shall give it to the Transport Holding Company—a good sound commercial concern—at the going rate, so we will be getting back in interest very much more from the Transport Holding Company, which will, therefore, reduce its surplus in order to meet the interest that the Government will have to pay in making more borrowings from the public."

There are only two ways in which the £70 million can be obtained by the Government: one is to increase taxation by £70 million and the other is to go to the public and borrow yet a further £70 million at the present very high rate of interest. Any commercially-minded person who wanted to go in for a transaction of this kind would not dream of doing so at a time when an 8 per cent. Bank Rate prevails. Any sensible commercial person would go in for a transaction like this when borrowing rates were at their lowest, not their highest. But not the Government when, with their gay abandon, they decide at this moment to introduce such a Bill as this and go to the public for £70 million.

For us, there was what I thought was a particularly touching remark by the Minister of State. He said that three bus companies have actually come forward to be taken over. I am surprised that only three have, because we know how the Government operate. Indeed, we know how they started this particular transaction. They published a White Paper in which they stated that within the P.T.A. areas they intended to compulsorily purchase the best routes of the bus companies. They then started negotiations with B.E.T. Likewise, they now have before Parliament the Transport Bill, in which they take power for the P.T.A.s to compulsorily purchase the best routes of private operators.

Then, of course, they are kind enough and considerate enough to say, "If, with the taking over of the best routes of private operators, the private operators' businesses are no longer viable, we will be willing to buy the whole of their businesses". What a generous Government they are! No one, in such a circumstance, with a Bill before Parliament threatening every private bus operator in the country with being taken over—the Minister of State shakes his head: can he say which bus company operating stage services will not be affected?

Everyone knows that we have to discuss all the powers and functions of the passenger transport authorities. It will be some considerable time before these authorities will take over in their areas the functions of the traffic commissioners—because I presume it is to that that the hon. Gentleman refers—and they have to negotiate with the private operators about the best routes. How this can be represented as a threat to take over all the best routes, when it will be a considerable period of time before the passenger transport authorities with these powers and functions will be established, I fail to see. It certainly has no relevance to the Bill.

There is a Bill before Parliament which the Government have put forward as their Bill. If the Minister says that the Government are quickly having second thoughts about it, and that a lot of it will be drastically amended, I will be pleased, but the Bill, in his name arid the names of his colleagues, states quite clearly that passenger transport authorities can be set up in any part of the country and that they will have power to compulsorily purchase the best routes of private operators.

Any Bill that contains those two provisions contains a threat to any private enterprise bus operator, and the Minister knows it. So all these companies are under threat. A Bill has been published to do this and, quite understandably, some of the private operators would like to have the threat executed as quickly as possible so that they can get out of the business and know where they are. The Government have published their proposals first and have undertaken to negotiate only second and in so doing are depressing the present position.

There is a price for depressing the position, and I should have thought it slightly "hot" practice on the part of any Government to negotiate to buy up the biggest private operator of buses at a time when the Government themselves had done away with investment allowances for buses. The Government do away with investment allowances for buses in 1966, and in 1967 they negotiate to buy out the biggest private operator. Then, within weeks of buying out the biggest private operator, they announce that they are restoring investment allowances for buses. I wonder what would have been the effect on the profitability of the transaction if, beforehand, the Government had informed the B.E.T. shareholders that it was their intention to bring in a 25 per cent. investment grant for buses.

Then we have the recently announced reduction in fuel duty. Was any indication given to the B.E.T. shareholders before the negotiations that if they had decided not to sell, their profitability would have increased as a result of the reduction that is taking place in fuel duty? These are ways of dealing with business which are. to say the least, somewhat suspect

The whole conception of the Bill is that of being hostile to free enterprise. The view of British Electric Traction of the Government's proposals was made perfectly clear in that concern's last annual report. The chairman of the company commented in great detail on what he considered to be the adverse effect of taking over the company and doing with it, under the Transport Bill, what the Government intend to do with it. He stated:

" I am unable to advise you of the extent to which your Company's underlying interests may be affected for so much is still uncertain. I cannot believe that this Minister, the sincerity of whose aim to improve public transport is unquestioned, would ever pursue a deliberate policy of disintegration under the public banner of ' integration '. Yet to abstract our associated companies' local carryings within the conurbations of Manchester, Liverpool, Birmingham and Tyneside would be to cut the commercial heart out of four of our healthiest units …"

That will be done under the National Bus Company.

The chairman summarised the whole matter by saying:

" It is always quicker and simpler to destroy than to build well. To my mind it would be tragic if your bus interests in the united company which, together, form a healthy and viable structure—one fit to emulate, and be emulated by, the best in other groups—were now to be sacrificed in favour of the untested fabrication of a passing Minister."

Those were the views of the B.E.T.

I have already told the House of the views of the Transport Holding Company on the advantage of size. The only group of people actually in favour of this proposal are Ministers. They view it as a straight tidying-up operation of getting rid of private enterprise in public transport. This is a tragic mistake. They made the first mistake when they decided to knock out the free enterprise element from Tartan Arrow. I wonder if then the Minister gave any thought to taking the free enterprise part out of the rest of the transport services.

The Government are trying to create a system in which no comparison has to be made with nationalised undertakings. No other sector of enterprise can show such initiatives and over the years the B.E.T. has shown considerable initiative. After this Bill has gone through and after the Transport Bill has gone through, there will be no comparison to be made with nationalised undertakings in any form of transport. Therefore, we can expect lethargy to increase.

The one reason why the Transport Holding Company has had such success is that it has been run by those who have a commercial attitude. They have built up the company in competition with free enterprise. The Minister has decided to dispense with competition and to create one big State monopoly so that no longer will the commercial element exist in this type of transport.

We have to take into consideration that this acquisition will form part of a national bus company and that the Transport Bill will give the national bus company of tomorrow power to enter almost every other form of manufacturing and repairing it wishes to enter. We know that these assets and properties in all the areas concerned will be used as part of the general invasion by the present Minister of Transport of the whole free enterprise system. The organisation will be able to open petrol stations, motor accessory shops and motor repair shops, and to operate all provisions of the Transport Act. Here we see a Bill which will increase public expenditure, a Bill which is bad in commercial terms and which will result in unnecessary increases of Government borrowing. It is a Bill which shows, once again, the Government's hostility to free enterprise and their desire to extend nationalisation.

It shows that the Government have not learned all the lessons of the last three years. This afternoon, they have been proud and happy to break our commitments to Australia, New Zealand and many other parts of the world, but to keep their commitments quite unnecessarily to nationalise a perfectly sound and viable commercial industry.

:The hon. Member for Worcester (Mr. Peter Walker) always surprises me by the agility with which he can turn his arguments at different times in different directions. Of course, he objects to this extension of borrowing power being given to the Transport Holding Company because he is afraid that certain road transport undertakings, either of passenger or freight, which at present are lucrative will pass into public ownership.

The hon. Member used the words "State monopoly" in connection with the Transport Holding Company, but he does not refer in the same way to British Railways as a State monopoly. The railways are losing money. The hon. Member would never dream of suggesting that they should go back to private ownership. The same line is followed with regard to many other activities. We have complete acceptance by the Opposition and by the Tory Party as a whole of the idea that when things are not paying or they have sunk into a situation in which they can no longer pay, they can be taken over by the State.

No hon. Member from Scotland needs any education about this situation, for today, in transport and in many other ways, Scotland is floating on State aid. All the Highland counties would have been lost and more people would have left to come down to England or go overseas if Government aid had not been so readily available in Scotland, particularly for transport. The hon. Member suggested that it was a crime for this Bill to be brought forward at this time, but my hon. Friend the Minister of State fully explained the reasons why the Minister had accepted the advice she has received.

Under the Tory Government we had the 1960 Highlands and Islands Shipping Services Act. That came after the Tories fought the 1959 election with a pledge that there would be no further extension of public ownership under any guise whatever. Yet their first act was to bring in the Highlands and Islands Shipping Services Bill. It was not a question of giving borrowing power to the Highlands and Hands and shipping services.

I have a copy of that Act with me. The then Secretary of State took power to give grants, also to lend money, and to build ships and to charter ships. There was a much wider extension of powers. To use the hon. Member's words, a much bigger "frittering away" of public money. The Bill we are now considering is much more limited and it protects the finances of the country. The hon. Member for Worcester should know the 1960 Act very well. Why did he not mention any of its provisions? If he thought at the time when the then Secretary of State for Scotland brought in that Measure that his right hon. Friend was right in doing so, why does he use such adjectives as he has used about my hon. Friend bringing in this Measure?

May I interrupt?

If the hon. Member knows anything about the Highlands and Islands Shipping Services Act, I am willing for him to intervene, but up to now that is all that I have been talking about.

The hon. Member has been talking about the use of adjectives. I want to ask a question about one of his adjectives. He described this as a limited Bill, but we have never had a more open-ended Bill than this. There is no restriction in any way. "Limited" is not the adjective he should use in speaking of the Bill.

The hon. Gentleman and I have crossed swords before. I do not want to delay the House by quoting from the 1960 Act. The hon. Gentleman knows that I am truthful in the House. I am not like some Scottish Members who make up arguments not caring whether they are factual or not. I try to be factual. I ask the hon. Gentleman to take my word for it that the Highlands and Islands Shipping Services Act, 1960, is the most open-ended Act for the disbursement of money that ever passed through the House.

In the wider concept of a larger monopoly, if the hon. Member for Worcester prefers that word, I have always believed that small concerns which struggle along with limited resources and not many vehicles will inevitably get into economic difficulties and lose money on some routes. Consequently, services are discontinued. This happens under private ownership if the concerns are too small.

I was a member of the Standing Committee which spent many months considering the 1962 Bill. If any blame is to be allocated for the fact that the Transport Holding Company came into being, I know where it should rest. The Labour Government did not bring it into being. However, I should be out of order if I were to tell the House why it came into being. I will content myself with saying that it was because of certain mistakes made by the then Tory Government.

The Government could argue in connection with bus and freight operators that, in the wider context of the financial control of certain areas, the more lucrative routes should help to pay for the less lucrative routes or routes which present difficulty or which lose money. This is my conception of a sane transport system. This is the argument we constantly hear from hon. Members opposite in connection with the closure of railway lines and stations. Hon. Members opposite want them kept open on the grounds of social priorities, and I agree with them. If this is to be so, there must be something to balance the losses.

Although the hon. Member for Worcester is very antagonistic to anything which smacks of a State monopoly, he supports a system of transport in which there is private competition but which inevitably means that there is no transport service on routes which could lose money. This is all wrong. I am not hidebound on this, but I believe that a larger scale of ownership should be encouraged by Governments, of whatever colour, so as to give the necessary social service in the less lucrative areas, because great profits are still being made in transport.

The Tory Government accepted the responsibility of putting the Highlands and Islands Shipping Services Act on to the Statute Book, an Act which gave open-ended power to the Secretary of State for Scotland. The Financial Resolution imposed no limit on the amount of money which could be spent on building ships, chartering ships, or setting up companies. We did not disagree with the principle. Although we pointed out inconsistencies, we agreed that the Orkneys and the Outer Isles should not be cut off simply because private enterprise firms which were operating there could no longer carry on and intended to shut up shop. The then Secretary of State, despite his election pledges and the statement in the Tory manifesto that there would be no further extension of public ownership, was forced to accept the belief that I have always held, so that the transport services in this area should continue.

I therefore hope that we shall hear from the hon. Member for Worcester less of the philosophy which he expounded today. If he is to speak for the Tory Party on this subject, he must keep himself better informed as to the reasons for the presence of some of the Sections in the 1962 Act. In the process of furthering his education, he should read the Highlands and Islands Shipping Services Act, 1960. If he did, he would not argue so vehemently some of the propositions which he advanced today. I have much pleasure in supporting the Second Reading.

I do not propose to follow the hon. Member for Central Ayrshire (Mr. Manuel), save to say that, if he was really seeking to protect the British taxpayer against some of the operations that take place under the Highlands and Islands umbrella, I would have some sympathy with him. I once travelled in a MacBrayne's boat, and a very unhappy experience it was, made the more bitter because of the reflection that I myself was subsidising the trip as a taxpayer.

I was very interested to hear the Minister of State say that it was necessary to introduce the extremely broad Clause 1(2,a) to cover up or to rectify any irregularities that may have taken place in the past. The Minister disappointed me considerably. Having let the cat out of the bag, he refused to say either how many cats there were or what size they were. He merely said that a Law Officer of the Crown was the right person to reply to that type of question. I am very happy to see the Solicitor-General sitting on the Treasury Bench. I do not know whether he wishes to intervene to tell a shocked House what irregularities may have occurred or who has acquired, under totally improper circumstances, what concerns.

The whole House must share the confusion and shock of my hon. Friend the Member for Worcester (Mr. Peter Walker) at hearing a Minister say that the injection of cash to the tune of £70 million would not make any difference to the economy. This is another cat of a quite different breed which comes out of the bag. We have been told with such horrifying clarity what we have always suspected—we have been learning it bitterly over the years—that Ministers simply do not understand what they are talking about. They do not seem to appreciate that the injection of cash to the tune of £70 million will tempt those who receive it immediately to spend it.

That is not what I said. I simply drew the attention of hon. Members opposite to the difference, about which there is no doubt, between public expenditure which involves an additional call on real resources in terms of capital and labour and, on the other hand, expenditure for the purpose of a transfer of existing assets between private enterprise and a publicly owned enterprise. What we are discussing today falls into the latter category, whereas the statement of my right hon. Friend the Prime Minister has focused on the former category.

Horror of horrors. The hon. Gentleman is merely magnifying his own error. The whole point is that £70 million of borrowing is to be put into people's hands. There is a difference to this extent certainly, that, instead of the Government spending it, private citizens will spend it. The Government affirm their concern to damp down purchasing power and not to put too much of a pull on imports, but this is a step in precisely the opposite direction.

I venture in a mild way to suggest that the Prime Minister's statement this afternoon does not deserve any credence, nor does it deserve to be taken seriously, so long as the Government are prepared to introduce a Measure like this.

It is, as the Prime Minister explained at length, very difficult to secure economies from policies which are in motion. The Prime Minister made clear, when he was dealing with the casualties under his axe, just how hard it had been. We are also aware of many issues which have been under threat of cuts for some time. I invite the House to compare the dimensions of the things with which the Prime Minister has been dealing this afternoon with this piffling exercise on which we are now engaged. This afternoon we were dealing with the question of our relations and our good faith with the Commonwealth, with our ability to protect our own interests. We were considering matters of grave importance to this country, such as the raising of the school-leaving age and prescriptions.

We were dealing with a whole number of issues on which many people throughout the world feel strongly. Compare the dimensions of those problems and what is involved in them with this trivial piece of nonsense, this £70 million piece of nonsense which has survived and which by its survival destroys any claim whatsoever that may be left to this wretched Government to common sense or good faith.

The proposal in this Bill is enshrined in a White Paper, Public Transport Traffic, which is simply riddled with clichés and flabby with wishful thinking to a degree which is unusual even in Government publications. Page 1 is a real masterpiece which I commend to your careful attention, Mr. Speaker. I have never seen such a piece of real—

It is quite all right; we understand.

I am sorry, but my vocabulary fails me. I must content myself by asking the House to read page 1 of this White Paper carefully. This page contains the words:

" … transport must become the servant of the planners, not their master."

Whom do these planners serve? Many people feel that had some of the people who have been responsible over the years for the planning of our affairs devoted their undoubted energies in some other direction, this country would have been a more cheerful and prosperous place today. Who are these people, anyhow? Are these the same people who plan our street widths so that when a street is redeveloped—surprise of all surprises ! —the width remains the same? Are these the people who are responsible for roundabout after roundabout? Are these the people whose brilliance obscured the vista of St. Paul's Cathedral by totally unwanted development?

On page 3 of the White Paper occurs a somewhat misplaced boast. We are told proudly:

" In all, 80 per cent. of stage bus passengers in Britain are carried by publicly owned undertakings …".

If this be so—and far be it from me to challenge the Minister's veracity—why do not the Government start trying to make something of that lot? Why do not they start working on the 80 per cent. which they already proudly claim to own? In view of the strictures in this White Paper and the strictures on passenger transport by many Socialist Ministers, why do not they improve what they already own? Are they not shouldering rather naively a large and well-deserved hunk of blame and responsibility?

Instead of that, we have in the same White Paper a silly bleat like this:

" We must also see how far public transport can offer new opportunities in the renewal of our urban areas."

What in the name of conscience does that mean? Let me refer, as an example, to the London Passenger Transport Board. This appears to me to have all the great advantages of a publicly-owned monopoly which Ministers are so often telling us about. Yet at the end of the day what could be said for this great monster? It is neither cherished by its customers nor relished by other users of the road. What has it done in the sacred cause of the renewal of our urban areas? I have already referred to the customers who do not cherish it. Other road users are only too familiar with the experience of having the roads totally blocked, in terms of way and visability, by a great solid phalanx of scarlet leviathans.

We are told on page 1 that the needs of rural areas must not be overlooked. I represent a constituency in Somerset, the needs of which are largely catered for by the Southern National Omnibus Company which resides a long way away from my constituency and the management of which takes very little interest in the affairs of the people of Somerset. The management have shown themselves over the years to be only indifferent performers of their obligations. For instance, they are now engaged in the rather tedious task of shedding those routes which they undertook and on which the railway service was suspended. This is causing my constituents a great deal of irritation and hardship and it is regarded as sharp practice.

The word "sharp" brings me to this point. They are sharp and, indeed, insolent competitors. Not very long ago a private company called Safeways Ltd. applied to renew its licence. The Southern National Omnibus Company had the insolence and the colossal presumption to contemplate and, indeed, to formalise objections to the renewal of that licence because Safeways Ltd. would not agree to put up its fares to the level demanded by the Southern National Omnibus Company. This is an example of the sort of thing that we shall face in large volume. There is no evidence whatever here that we can expect a new deal in public passenger transport. There is instead the threat of waste, incompetence and arrogance.

We are told that the Transport Holding Company is going to be transformed into a new monster called the National Bus Company. I cannot think of a more ominous start in life. It is obviously a very close cousin of the National Coal Board. Why not get Lord Robens to run it as he runs the Coal Board? That really would make a muck of it. We are told about the relations that this body will have with the railways and the passenger transport authorities. After studying the Government's own plans and expressions of intention on the subject, one can only say, "God help us all". The muddle and confusion which will emerge from this bureaucratic exercise in folly passes comprehension.

I hope that the Minister of State will not think I go too far if, with a good deal of evidence behind me, I modestly and quietly remind him that publicly owned bodies do not always get on very well together. Socialist spokesmen always happily assume that all activities owned by the public will agree and get on happily and peacefully one with another. A greater inaccuracy or delusion I cannot imagine.

We are told that there will be financial objectives, and these are piously set out in the White Paper. Here is another borrower from the Exchequer. I interpolate a thought here. In view of the country's misfortune in having had its affairs controlled from the Treasury and by the Treasury for far too many years now, I had hoped, perhaps naïvely, that there would one day be an outbreak of modesty among the great men of the Treasury and that they would, because they cannot perform the responsibility, reject it when offered to them by the Government. But here they are responsible for all the other nationalised industries and now taking the bus industry as well.

On page 13 of the White Paper, suitably enough, there is a splendid piece of English:

" In short the establishment of the N.B.C. will provide a sound basis for developing on a rational basis the provision of bus services throughout England and Wales."

What on earth is the point of putting a sound basis on a rational basis, or the other way round? There seems to be a lot of bases here but very little of any solid proposal to put upon them.

Using as polite and restrained language as I can, I regard the Bill as an expensive and vicious irrelevance, very much the same as the Government who hatched it. I greatly hope that, before long, we shall be able to destroy both.

I listened with some pleasure to the Minister, but I regret that I was not present when the Front Bench Opposition spokesman made his contribution, although I have tried to pick up his theme, a theme with which I am not very happy. I shall look at the Bill from a longer-term approach because I regard it as, so to speak, an interim Measure for financing certain amalgamations which have been made and which are likely to take place. I regard these amalgamations as desirable, and I consider that they should be done in a normal commercial way. I have no dogma about nationalisation as such I believe that, given efficiency in management and a good organisational structure, public enterprise can generally outdo private enterprise, but it needs those preconditions to start with.

Having lived with the double problem of the British Transport Holding Company and, before it, the railways, having major and minor interests in bus transport as well as in the Holding Company and the British Electric Traction Company, I am not sure which of the two has been playing the role of the elephant, but I know that it was not a happy arrangement.

In the context, mainly, of long-distance passenger transport operations, there was a lot to be said for the two getting together and the major taking over the minor partner. This has been done, and the new Transport Holding Company is the vehicle on which the Minister will rely in future in respect of her other legislation. Because this Bill, in effect, authorises another £70 million, some of which will be involved in the later legislation, I beg leave to put certain definite arguments to the Minister. I want to show why, in my view, the Transport Holding Company should disappear from the scene. I shall develop my argument in a minute.

In considering the general road passenger services of this country, one does not need to go over the economic problem of the cross-subsidising of fares, the question of rural people having to pay more than people in, say, London or South Lancashire; neither does one need to go into the problems of licensing by Traffic Commissioners, a form of licensing which has been inflexible in many ways, and neither does one need to go too deeply into whether the Traffic Commissioners are the people who should determine stages or fares. In my view, looking at the future pattern of road passenger transport in Britain, the approach expressed in the other Bill, which is by implication written into the present one, is wrong.

I put it to the House and, not least, the Minister, that, in the context of the country as a whole, the proposal that the conurbation authorities and the Transport Holding Company should work together, the latter conditioned in terms of fares at the end and the commencement of journeys, will be carried through at the peril and expense of rural Britain being sacrificed for the highly lucrative traffic during the summer months and the long-distance hauls.

This seems to me to be not quite Socialist and, if I may say so, not altogether a good administrative approach. If we are worried, as we are, about the developing use of the private car and the desire that people must have a choice in providing transport for themselves, for their wives and for old and young throughout Britain, the idea of taking the main centres of population and building round them is, in my view, false. It is false, basically, because we concentrate thereby on what is, so to speak, the most promising parts—if there be anything promising in road transport of this nature —and we leave aside the rural parts of Britain.

I may be asked why Oldham, East should express this view. I express it because I have for a long time studied transport from a national point of view. Perhaps the House will listen with interest to this point. I should have expected a Minister of Transport, looking at the needs of England and Wales, though not necessarily at Scotland, would regard the London pattern of transport as showing a good principle, provided that the region covered is sufficiently embracing. Apart from the question of efficiency of operation of the fleet, and apart from the question of the financing of vehicle purchases and so on, that principle has for 30 years proved itself to be intrinsically right. I refer to the principle of monopoly. One is able thereby to cross-subsidise fares over a very large area. One can have a good fleet doing the job and being well administered, and one can call in aid the best brains and knowledge in the industry.

Complaints can be made about the London Transport Board, but they are not about the principle but rather about its working and costing, and result from the volume of private cars. I believe that the right approach would be to make each of our major centres of population the hub or area or regional authority, ensuring that we have however many are needed—probably 10, 12 or even more—to cover the whole of Britain.

For example, it is clear that no passenger conurbation authority, such as is envisaged in the Transport Bill, will afford much succour to an area such as North Wales. It could help it and will certainly not injure it, but it will not provide the reformation that is wanted. On the other hand, a passenger conurbation authority which covered Aberystwyth, Oswestry, Wrexham, Chester and all North Wales could start with administrative "know-how" and cross-subsidisation, giving a better form and transport pattern.

It is said that one of the first authorities to be put on its feet will be in the Manchester area, and the Oldham local authority is co-operating to bring this about. I think that the hon. Member for Manchester, Withington (Sir R. Cary) will agree with me on what I have to say about this, for he knows the area as well as I do, if not better. Are we to have within 15 or 20 miles of Manchester a conurbation authority that excludes Buxton and Crewe? They are in the country and have a rural aspect. If they are excluded, will they get the benefit of what remains of mass transport in an area like Manchester or Liverpool, where one can drive for miles and never see a green field?

We should have taken the more populous parts and civic centres such as Plymouth, Manchester, Newcastle, Leeds and Hull, and built around them conurbation authorities linking up with each other, giving the rural people of those areas of subsidisation or cross-fertilisation that will make their fares tolerable. That has been going on for years, and it is a good principle. I and my hon. Friends subscribe to the principle that electricity should be as cheap in the Lake District as in Manchester, broadly speaking. That principle is accepted by many hon. Members opposite, and it also applies to the telephone service.

If it is right to enable people from the countryside to travel into the towns, as I think it is, my right hon. Friend is misguided in simply identifying selected bases for traffic areas and building around them. In the case of Manchester the authority might cover the area for 12 or 15 miles around, which is nearly as densely populated as London and has the cream of passenger transport. I beg my right hon. Friend to reconsider the whole project. The areas of her conurbation authorities should be outlined on a national pattern.

The holding company will have terminal facilities and staging arrangements with the conurbation authorities. Typical firms of this kind are are North Western Road, Car Company, the Crossville Bus Company and the East Kent Road Car Company. Each has considerable responsibilities for staging people within the towns or cities of its areas, but each also goes outside them for a large part of its work; each already partly subsidises its rural load by the better load it carries in the cities. But they and others will come into the Transport Holding Company and will be a Government agency bargaining and consulting with the conurbation authorities about letting down or picking up within the authorities' areas.

I am not happy about that kind of consultation. It is very much at arm's length, there is a sore edge, and there is not always willing and quick consultation. There is an air of looking after one's own public utility. I speak with some experience of public authorities on this kind of work. Therefore, the country should have the appropriate number of passenger conurbation authorities completely covering the country.

I now come to the problem with which the Bill will partly deal—the lucrative through-services such as those between Birmingham and London, Manchester and London, and Manchester and the North-East, which have often been carried out by those firms which were previously 50 per cent. owned by the Holding Company and in future will be totally owned by it. In the past, there was little or no consultation with the railways, but I do not complain about that.

The Holding Company will have to choose between those lucrative long distance services, such as London-Torquay, Manchester-Torquay, London-Glasgow, with little or no real consultation with the railways and on the other hand another form of traffic on which it will not be able to make up its mind. I again take the example of the North Western Road Car Company, whose headquarters are at Stockport. It will have the responsibility of carrying people in the Manchester conurbation, with fares tied down by the Traffic Commissioner and influenced by the financial activity and health of the conurbation authority, which could he helped by the rates. But the Holding Company will have a completely different base, and its fares structure outside the conurbation could be "x", "y" or "z", as it argues with the Traffic Commissioners.

I hope that my right hon. Friend will reconsider the matter and decide to start from the right basis, covering Britain with the most sensible form of conurbation authorities, based on the pivotal points such as Plymouth, Exeter, Taunton and Bristol, with those authorities having the responsibility of working the rural routes, where the buses after often only a third full. I refer to the position of this authority that could carry between the conurbation authorities. I believe that the traveller has the right of option between read, rail and air. Instead of having the Transport Holding Company, which is a piece of history—it is a legacy of the buying up of some pieces of road transport in 1932–4, that legacy being left with the, railways in 1946–9 and being carried on, by the railways in either major or minor measures of control and management—I would put on the combined passenger conurbation authorities the responsibility of having a body under their control which would deal with long-distance passenger transport.

If it had such a body under its direction and had 15 or 20 conurbation authorities owning collectively the through road transport people I should he able to feel that if profitability can be reached, as we know it can, on long distance road transport between main centres it would be canalised back from that authority to the 15 or 20 conurbation authorities owning the services and directing the policy. It would also prevent them from being directly under the Minister.

I believe that socialisation of industry is still a good thing provided that there is efficient management and flexibility to do the job. Such a national company owned by the regional conurbation authorities would be a much more flexible body and much more sensitive to feeling within the region, and, if I might say so, might be free from Ministerial interference. I am not blaming any particular Government for that, though I can think of one Minister who inter- fered in transport far too much. There is much to be said for the people running transport being allowed to do their job and this House having a broad survey of what they are doing.

Therefore, in regard to the £70 million not in the sense of buying over the B.E.T. company but in the sense of continuing the Transport Holding Company I would say "No". The Holding Company should, I believe, give way to a revised pattern of regional conurbation authorities, which should own the national system providing through transport across Britain. That is a much better pattern than the improvisation before us in this limited Bill and a better alternative to that in another Bill which the House will be considering shortly.

I want to take up one or two points made by the Minister of State, but first I would say that the hon. Member for Oldham, East (Mr. Mapp) will have much sympathy from this side of the House in asking the Minister to reconsider her plan. He is one of a long queue of people who have applied to the Minister ever since the P.T.A. proposals were propounded suggesting that they should be reconsidered. I suppose that this Bill provides us with the final chance of becoming aware that the Minister has no such intention. The hon. Member for Oldham, East may consider whether to join us in the Lobby and back the convictions which he has so eloquently expressed.

The hon. Member's principal theme was that there ought to be a comprehensive look at transport. That is one of the arguments that we have always used from this side. We believe that it is ludicrous to go ahead with a hotchpotch of transport reorganisation in anticipation of the Royal Commission on Local Government which will deal with the whole business, and will, we hope, in many ways do it in line with the proposals put by the Ministry to the Royal Commission in its evidence, with a great deal of which one cannot disagree.

I want to take five points that the Minister made and ask for some clarification. First, he said that there were advantages in the economics from the single ownership of all the buses. He said that it was good commercial sense. It would make our case rather difficult to argue if there was a single shred of evidence to substantiate what he has said. I would refrain from making the charges that I have made in many of the conurbations affected by the proposals about the costings if he could give me a single shred of evidence that he has done some homework to justify his conviction that this is good commercial sense. If it is, perhaps he would explain who has said that this is the case. Where is the evidence, and upon what authority? Let us have some facts and figures. Let us see the reasoning behind this line of thought. It would deal with many of our doubts on that aspect.

I was amazed at the Minister's account of the way in which the Transport Holding Company came to achieve the agreement of B.E.T. to the take-over. Everybody who has followed the events knows we have found the managers of the B.E.T. companies on the Voice organisations up and down the land fighting to remain an independent organisation and listened to the account given by the Minister today of the apparent amicability of the arrangement reached cannot reconcile the statement of B.E.T. to the take-over. they have been seen over recent months.

The reason why B.E.T. has decided to accept the offer is precisely the reason why the Holding Company made the offer in the first place, not because it was the right thing to do as an isolated example of reorganisation, not because it was in the national interest, but because in the wisdom of those involved in bus management it was the least bad way they could find of stopping the Minister going on with the original proposals that he was hawking round the conurbations. It was not something that they wanted to do or intended to do; it was simply a way of preventing the Minister from imposing an even worse plan on our buses. That is why the Holding Company made the offer and why B.E.T. accepted it, and those concerned particularly had in mind the fact that if they did not accept they would find themselves being bought out.

I was appalled to hear the Minister of State pooh-pooh the idea that small operators have little to fear from the proposals of the Passenger Transport Authorities. Schedule 6(10,i) of the Transport Bill says that the Executive may revoke at any time for any reason the consent that it has given to independent operators to continue to operate within the designated area. For the Minister of State to pretend that this is no threat to the private bus operators, diminished in number as they may be, is to distort the meaning of the Transport Bill.

The Minister of State also made a point which he may want to change by clarification. He gave me the impression that the fact that the Holding Company has left in the hands of the B.E.T. companies the majority control had led to conflict within its operations over the years. Can he give some examples of where there has been conflict between B.E.T. and the Holding Company in their jointly owned companies and where B.E.T. has defied the wishes of the Holding Company and acted against the public interest? We should be interested to know.

I felt it necessary to intervene in the Minister's speech—and I am grateful to him for giving way—over the question of the negotiations now going on to acquire, or possibly to acquire, Glasgow Corporation's undertaking. The point I wanted to make was that, in making available substantial capital, as one of the possible ways of using the £70 million provided under this Bill, for the assumption of the liabilities of Glasgow Corporation, there was almost a difference of principle between this proposal and the treatment being given to the other conurbation areas where there are not these substantial liabilities because the ratepayers have from time to time paid the revenue for their buses out of increased fares, with the result that there is no accumulated debt to be met by the taxpayer in the form of the extended borrowing we are discussing in this Bill.

In turning to the Bill itself I believe that the Bill is much too expensive for the purpose for which it is designed. Secondly, it is doctrinaire in its approach to the problem of managing buses. Thirdly, I believe that it is irrelevant to the solution of the problems of the reorganisation of transport. Fourthly, it is in no way costed.

We are to provide under the Bill an extension of the borrowing powers to provide a further £70 million. Of this, £35 million is to go straight to the B.E.T. companies. Another £12 million to £15 million-my hon. Friend the Member for Worcester (Mr. Peter Walker) claims that it is £17 million—is to go to minority holdings, at least by way of an offer. We are thus to spend about £50 million of the taxpayers' money in order to achieve the ownership of the buses in the four conurbations in the country.

I appreciate that the Transport Bill does not preclude the Minister from extending the Passenger Transport Authorities throughout the country but she has said that it is her intention in the early years only to extend them to the four areas with which we are all familiar. Within these four areas I have calculated the number of buses owned by B.E.T. and the proportion that number bears to the total value of the B.E.T. undertakings. Within these four areas there are four companies in B.E.T. holdings which are affected. They are Midland Red, the Ribble Group, the North-Western Car Company and the Northern General Transport Group and its subsidiaries.

These companies or groups of companies own 4,360 buses out of a total B.E.T. holding of 11,073 buses, which was the figure at 30th November, 1967. In other words, in order to get control of the buses in these conurbations, which are worth, on a proportionate basis of calculation, £13,775,000, the Government intend to spend £35 million. If, in doing the calculations, one also takes into account the minority shareholding valuation, then, in order to get £19,675,000 worth of buses, the Government are to spend £50 million.

This is an opportunity for the Minister to make a genuine concession and thus fall in with the spirit of the Prime Minister's appeal for economies. There is no case for acquiring the B.E.T. bus interests outside the four conurbations and, if my calculations are right—and they are not far wrong—if the right hon. Lady made such a concession, we would be asked to spend £19 million, including money for the minority holdings, and not £50 million.

The Prime Minister today asked for concessions. Here is a major concession which does not affect the proposals of the Government to reorganise transport, even if one disagrees with the way they intend to do it in conurbations. Without difficulty, the Government could make this major concession and save about £31 million. But the fact is that the Minister has no intention of making any concessions. We are not really talking about the reorganisation of transport in the four conurbations but the desire of the Minister to take over the ownership of the buses as quickly as she can. That is what this Bill and the P.T.A. proposals are about.

The right hon. Lady has made herself clear on this point and her opponents have also made their awareness clear. My hon. Friend referred to the statement by Mr. Spencer Wills in the latest B.E.T. Report. Mr. Spencer Wills made it clear that he regarded the right hon. Lady's proposals as being totally disastrous for the bus industry. He said so only seven or eight months ago. In her White Paper, the right hon. Lady stated that

"…the main network of public transport is no longer an appropriate activity for private companies whose prime duty must be to their shareholders …"

Whose opinion is it that this is no longer an appropriate area for private activity? I see no argument for blindly accepting that the right hon. Lady has a divine right to tell us what sort of activities are appropriate for private enterprise and what are not. This is a fundamental matter which has never been proved in any way by the Minister. What evidence has she to suggest that it is not an activity for people to make a legitimate return?

It is no argument to say that 80 per cent. of the. stage carriers are run by public organisations. The only relevant argument is whether they are being run better, more quickly or more cheaply than they would be by privately-owned operations. If we could be shown that this was the case then, of course, our arguments would be difficult to sustain. It is fair to ask whether municipal buses are run more quickly or cheaply or have been modernised more quickly or meet transport requirements any better. It has certainly not been demonstrated so far. Is there any justification for assuming that public ownership has provided a better bus service? After all, the industry is about a better service for those for whom it exists—the travelling public.

If we could be shown that the private sector had failed to provide such a service we would have to look at our arguments again but it is up to the Government to prove their case. It is not we who must prove our case. The Government wish to take this action and it is for them to show that it is in the national interest, and they must do it not with emotion or generalisations but on facts and figures based on knowledge of and research into the industry.

The organisation the Government intend to impose on the industry is irrelevant to the problems with which the Bill is supposed to deal. The relevant parts of the Transport Bill are based upon the assumption that we must find ways of dealing with congestion in our cities and it is true that we must find them. I would not pretend that there are not areas on the outskirts of our cities where there is certain overlapping or irregularity in the way the buses are organised. In such areas, a certain amount of rationalisation could come about by intelligent give and take between municipal and private operators. There will never be a human society where one cannot find some form of readjustment necessary on the fringes, as it were. But to take this mammoth Bill, backed as it is by the even bigger Transport Bill, in order to deal with the small peripheral activities of a few bus companies in one or two outlying areas is to misunderstand priorities.

Of course the Minister knows this. It is abundantly clear that she has grasped the priorities, because the main and laudable purposes of the Executive are outlined in Clause 18 of the Transport Bill, which provides that within 12 months the Authority shall produce a plan to deal with the provisions of the Bill and that within two years there shall be a further plan which is to be coupled with a structure plan for the conurbations which is being provided for in a Bill shortly to be introduced by the Minister of Housing and Local Government. This reorganisation is perfectly right and we go along with it and that is the purpose with which Ministers should be involved. But that makes irrelevant the Minister's decision to get the very men who should be involved in that planning tinkering with the ownership of the buses and trying to decide whether to paint them a different colour, or to change the emblems or mottoes. They will be buried in the detail of whether buses go up one way or down another, or whether fares should be put up a penny here or there, or whether a bus stop should be moved a yard. Ministers should see that the planners are more concerned with the long-term planning which is the prime consideration.

As soon as the National Bus Company which follows from the Transport Bill comes into being, one of the main purposes with which it will be statutorily charged is to co-operate with the Executive, and the sort of co-operation in which it will be involved will be co-ordinating and providing information and transferring assets from one organisation to another in order to help with this process of rationalisation. All of those with whom I have discussed these questions in the conurbations believe that this will involve them in an immensely complicated day-to-day probing of each other's activities which is not relevant to the main purposes with which they should be concerned. It is one of the cardinal failures of the whole concept which the Minister is now advocating that those who could do so much to reorganise and replan solutions for the problems of transport and the congestion within areas will be bogged down with a whole range of what in practice will be regarded as footling administrative details.

Although the Bill may have a fixed capital limit on the amount of money spent on this aspect of transport reorganisation, its consequences on the expenditure increases which could well follow are not in any way limited by these capital limitations. One of the problems expected throughout the conurbations is the effect on fares following from rationalisation. I asked the Minister what representations she had had from the Transport and General Workers' Union about its attitude towards the level of earnings and wages in the conurbations, particularly with regard to the differences between rates paid by municipal undertakings and those paid by private companies. I was disappointed to find that the Minister saw fit only to acknowledge that there had been representations and that she had made no attempt to explain what they had been.

One of the dilemmas which will face those dealing with re-organisation is that there will be immediate pressure to raise the levels of wages in private companies to those paid by municipal undertakings, and I should like the Minister to say precisely tonight what representations have come from the T. & G.W.U. on this matter, because the conclusion of all of those with whom I have discussed the subject is that there will immediately be pressure for an increase of wages to level the lowest with the highest. For those administering the scheme this will leave no alternative but higher fares.

Only this last weekend I have been discussing this aspect, that is, the relationship of those now employed in one of the four bus companies which we have with a possible conurbation authority. Clearly, the men concerned hope in due course to be able to get the advantages of generally better pay and overall conditions which now operate in the Manchester area. However, the same people want to continue the traditional overall earnings which they now get on runs such as Manchester-Newcastle, Manchester-London and Manchester-Birmingham, even though they often work outside the legal hours provided for them, a id I had to remind them —

Order. An intervention cannot he a second speech.

I am sorry, Mr. Speaker, I was saying that we have to be careful that they do not get the benefits of both worlds.

The hon. Gentleman has made the point extremely clearly and it is precisely in this sort of respect that the pressure from the unions will come. Although the earnings in the undertakings and the companies are now much the same, the basic rates are different, but if the basic rates in the undertakings are spread to the companies, there will be an immediate increase in the level of fares. This is precisely what we are anxious about and this is precisely the point on which the Ministry will not give us its views.

That summarises my basic anxieties about the Bill. It is irrelevant and expensive. I am appalled that the Ministry has made no attempt to cost any of its assertions in its defence. I do not believe that the Bill will lead to a more streamlined or efficient organisation and I am dismayed that the Ministry has not made any factual attempt to justify its assertions. It is opposed by the entire weight of the industry on which the Bill is to be imposed. Coming as I do from the West Country, where £70 million would provide a motorway almost from Bristol to Plymouth, a project which is shelved year in and year out by the Ministry of Transport, I am appalled that Government supporters should be prepared to accept the sort of sacrifices which have been imposed on the nation today and within minutes should propose this irrelevant Bill which will absorb so much of the money which has already been removed earlier today from the pockets of the people.

The hon. Member for Worcester (Mr. Peter Walker) and the hon. Member for Tavistock (Mr. Michael Heseltine) spoke of this as being the day of all days on which not to introduce this Bill. I would have thought that it was the day of all days to introduce it, because one of the things about which the country is concerned is getting the whole of our infrastructure, as well as our industry, more efficient so as to benefit from the industrial advantages which are gained, to have an efficient transport system instead of that which so often in the past has fallen down. This applies as much to the commuter section, to getting people to and from work, as to any other. As a demonstration of the Government's determination to get the infrastructure right, this is a very proper Measure to have today.

The hon. Member for Tavistock asked what would be the effect on wages for those in private undertakings who would now work side by side with those in municipal undertakings. I would like to believe that the Government's attitude would be that people doing similar jobs should have similar rates of pay and that the benefits received by those in municipal undertakings—superannuation, better wages, better sickness allowances and so on—should pass to those in private undertakings. This has been one of the main criticisms of those employed in private undertakings, particularly those in com- panies within the B. T.H.C. ambit, especially where the B.T.H.C. has had a 50 per cent. holding and where conditions of employment have not been as good with semi-nationalisation as for those in municipalised undertakings.

I hope that we shall see these improvements in conditions when the Bill gets through. That will take a great deal of negotiation and consideration by the parties concerned and it is not for me to prognosticate about what will happen in those industrial negotiations. However, one hopes that there will be parity of esteem and parity of treatment for those doing similar jobs. This matter has been brought vividly to my attention when people on the same bus routes in my constituency doing the same work on the same services have been getting different rates of pay and working in different conditions of employment. Such anomalies should be ended.

The other point relates not so much to the statements made this afternoon, nor to the Bill that has now gone upstairs, but to what will happen as the result of the passing of this Bill. I would like my hon. Friend the Joint Parliamentary Secretary, when he comes to reply, to say how he envisages these companies will work when the National Bus Company is established in those areas which will not go immediately into a P.T.A., and in particular what sort of co-operation he sees between the national company and municipal companies in areas where dual services operate and where there is dual administration, with less efficiency.

What does he envisage will be the role of these companies in rural areas? We have had statements about subsidies, the role of the Traffic Commissioners and so on. My experience, particularly in cases where railway services have been withdrawn, has been that the private companies have rushed in and said "Yes, we can give a comparative service "but after a year they have been asking to put up the fares and have been cutting the services that they were supplying.

There is a withering away of the transport services of the countryside. This is happening, whether they be publicly or private-owned companies. Now we are taking into public ownership a great chunk of the private section of the industry, serving many rural areas and I was hoping that we would have a more positive policy towards the social service aspect.

It always surprises me that with the Transport Holding Company holding 50 per cent. of the shares and private industry holding 50 per cent., the party opposite, when in power never sold off these shares in public ownership back to private industry. It always amuses me thinking of it preaching this policy of free enterprise, and with this wonderful opportunity of selling off the public interest to the private sector, that it never took the opportunity. Maybe it was because it felt that while this large section of public investment was within the private sector it was on to a good thing and wanted to keep it like that.

When we are in power it is right and proper for us to take these steps to give the public sector control of all these companies who are holding a large interest, and to take the whole of the transport industry into public ownership. It is to be welcomed because it brings to an end an anomalous position and it holds out a promise of future development, particularly in rural areas. I would especially like to hear from the Minister how she sees the system working out, and how the relationship will develop between municipal authorities and the national bus service in those areas where the P.T.A.'s are not to operate, and how we can have a degree of rationalisation between the municipal companies and those which are now coming into public ownership.