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Commons Chamber

Volume 873: debated on Monday 13 May 1974

House of Commons

Monday, May 13, 1974

The House met at half-past Two o'clock

Prayers

[Mr. SPEAKER in the Chair ]

South Ockendon Hospital

That an humble Address be presented to Her Majesty, that She will be graciously pleased to give directives that there be laid before this House a Return of the Report of the Committee of Inquiry into the South Ockendon Hospital.—[ Mrs. Castle. ]

Oral Answers to Questions

Industry

Steel Scrap

asked the Secretary of State for Industry what recent representations he has received on the position concerning the supply of scrap metal in the steel industry, particularly affecting the steel making areas of South Yorkshire; and whether he will make a statement.

asked the Secretary of State for Industry what is the latest position in regard to the supply of scrap to the British steel industry.

Private sector steelmakers have, in general, been obtaining adequate supplies but I am aware that supplies of scrap to the British Steel Corporation have been falling well short of requirements in past weeks; there are particular shortages in the Sheffield area which have restricted production in BSC steelmaking plant there. The procurement of raw materials is the responsibility of the corporation, but I am advised that BSC is doing everything possible to improve scrap supplies, including a substantial increase in its purchase price.

Is my hon. Friend aware that, just when the country was emerging from the difficulties and after-math of the three-day working week and steel was most needed, the shortage of scrap in South Yorkshire led to a reduction in the volume of steel production? Secondly, is he further aware that it has been impossible to persuade the British Steel Corporation to adopt a policy of long-term stocking of steel to take care of fluctuations in demand in the steel industry? Thirdly, will he undertake to review the position with a view to advising the BSC to become much more involved in both the control and possibly the ownership of the scrap supply industry?

My hon. Friend is absolutely correct in what he has said about the three-day week. It caused a great problem in scrap supplies. The situation has, however, eased. I shall take into consideration what my hon. Friend said on the other two points and, if necessary, convey his remarks to the British Steel Corporation.

Is it not necessary to make sure that the number of arc furnaces Is balanced by the availability of blast furnace production so that over a period enough scrap is produced? Will the hon. Gentleman consider this aspect?

I emphasise the point made by my hon. Friend the Member for Penistone (Mr. Mendelson) and remind my hon. Friend the Minister of State that in certain works production has been reduced to less than two-thirds capacity as a result of scrap shortage. Does he not feel that there have been quite sufficient mini-mill developments and electric are furnace developments? Therefore, will he look at this matter with urgency and, in conjunction with the British Steel Corporation, make sure that scrap supplies flow smoothly and that we have adequate iron-making capacity?

It is true that scrap became very short in supply. It is expected that because the BSC can now pay higher prices it will attract scrap more than it did in the past. The question of mini-steel mills is at present under discussion with the corporation.

Will the Minister make it clear that the scrap industry had electricity available on five days a week during the fuel emergency if it required it? What is he doing about the position which will arise at the end of December when there will be no protection for the steel makers and the industry will therefore be able to charge whatever prices it likes? Finally, will the hon. Gentleman tell the House the differential between ourselves and Europe for ordinary destructor bundles?

Perhaps the hon. Gentleman had bettter tell the House about the question of destructor bundles.

The hon. Member is trying to avoid his party's responsibilities when it was in office. He is aware that industry was put on a three-day week, and because of that the engineering industry, which produces the scrap, could not produce it.

Capital Investment

asked the Secretary of State for Industry what is the total figure for the annual capital investment programmes for 1973 and 1974 of the large British manufacturing and utility companies with a United Kingdom turnover in excess of £50 million a year.

I am afraid that information is not available in the form requested, but the recent CBI survey shows that larger firms are somewhat more optimistic than industry as a whole.

My Question refers to the 180 major companies which the Secretary of State was said in an interview in the Sunday Times two weeks ago to be intending to bring into a system of public accountability by virtue of a series of planning agreements. Will he consider the serious effect on the forward plans of those major companies as a result of this threat of a great intrusion by the State into their affairs?

If the hon. Gentleman reflects on the problem to which he has drawn attention in his supplementary question, he will find that the anxiety which Members on both sides of the House have shared over the years is that the forward plans of leading companies have been inadequate to maintain Britain's position as a major industrial power and there has been a decline in investment relative to other countries. Therefore, far from making it more difficult, one would be likely to identify areas of further growth.

Will the right hon. Gentleman consult the CBI, which, no doubt will be able to tell him what will be the effect on the investment plans of those companies of his right hon. Friend's Budget? Will he take advice from the CBI rather than exclusively from certain sections of the trade union movement which advise him or give him his orders?

As the hon. Gentleman was a Member of the previous Government, which presided over a disastrous investment record during their period in office, I certainly would not take any advice from him.

Motor Industry

asked the Secretary of State for Industry what meetings he has had with the management of British Leyland; and whether he has any plans for a future meeting.

asked the Secretary of State for Industry what recent discussions he has had with representatives of the British motor vehicle manufacturers industry on the present state of the industry and future prospects; and if he will make a statement.

There are frequent meetings between Ministers and senior officials of my Department and representatives of the motor industry, including British Leyland, and I have myself recently met the President of the Society of Motor Manufacturers and Traders. British Leyland and General Motors.

Will the Secretary of State confirm that no request for finance has been made by British Leyland and that Press reports that the Government were planning an injection of between £50 million and £70 million capital into that company were wrong? Will he also confirm that at the meeting with the President of the Society of Motor Manufacturers and Traders to which he referred the President emphasised that the lack of clarification of the Government's plans and especially the lack of clarification on nationalisation were causing immense uncertainty in the motor industry?

I certainly confirm that the Press reports were inaccurate, but my impression is that the industry is glad that there is opportunity for consultation throughout. That is derived from the fact that we were quite open in making clear our initial intentions, and we invited consultation before we published our proposals.

Does my right hon. Friend recollect Lord Stokes's comparison between the capital involved in a huge manufacturing industry employing 200,000 people and the capital involved in a single property?

I recollect that under the previous Government the values in our society were so organised that this major manufacturing capability, with a major export record and employing many hundreds of thousands of people, was valued less than property on which so much speculative effort was based.

Is the right hon. Gentleman aware that in view of the serious situation of the industry his answer is far too easy going? If his Department is not prepared to do more than that, will he undertake to discuss with his right hon. Friend the Chancellor of the Exchequer ways in which the Government might make the purchase price of a motor vehicle lower, even if the cost of operating a motor car continues to be extremely high and increasing? For example, why not ask the Chancellor of the Exchequer to reduce the car tax?

That is a matter for my right hon. Friend the Chancellor of the Exchequer, as the hon. Gentleman knows. I should put on record that the motor industry suffered more from the disaster of the three-day working week than did almost any other industry and that the responsibility for most, if not all, of its problems stems from the policy of my predecessor.

Does the right hon. Gentleman agree that under the previous Government British Leyland announced the biggest investment programme in the history of the British motor industry?

Yes, but the right hon. Gentleman will also be aware that in the culminating period in which he had stewardship for the industry he did more damage to the motor industry than had ever been done by any other Minister in history.

Employment

asked the Secretary of State for Industry if he will make a statement on his consideration of measures to reduce the level of unemployment in areas of greatest need, including the Northern Region.

As I said on 29th April in reply to a Question from my hon. Friend the Member for Rhondda (Mr. Jones), we intend to introduce a new Industry Bill to give us wider powers to promote industrial expansion. Meanwhile in the assisted areas, including the Northern region, we shall continue to apply the system of incentives contained in the Industry Act 1972.—[Vol. 872, c. 347–8. ]

Is my hon. Friend aware that his reply will be widely welcomed in the Northern Region? Is he further aware that the level of unemployment is still far too high and that a great deal more needs to be done if we are to get the right balance of job opportunities in the region?

I entirely agree that the level of unemployment in the Northern Region is far too high. A great deal needs to be done, and that is why the Government are working hard on the National Enterprise Board and the planning agreements which we feel will make a clear contribution towards regional policy.

Is it the Minister's view that the Industry Bill will contain broad powers of acquisition, and does he intend to grab shares in private companies?

The hon. Gentleman must be aware that Sections 7 and 8 of the 1972 Act provide for the possibility of the acquisition of shares. The hon. Gentleman should know his own Government's legislation. As soon as the details are available and the policies are worked out, an announcement will be made in the House.

Will the Industry Bill be used to identify the areas of growth to which the Secretary of State referred, and will those areas of growth include Beagle Aircraft, Upper Clyde Shipbuilders and Triumph Motor Cycles?

The hon. Gentleman must not continue with the Government the argument he had with his hon. Friends. I think that the Conservative Government were fully behind what was done for the Upper Clyde Shipbuilders. The hon. Gentleman must await the announcement in the House of the details.

China Clay Industry

asked the Secretary of State for Industry whether he has any immediate plans for nationalising the china clay industry.

If the hon. Gentleman has no immediate plans, may I take it that he has also no long-term plans and that he is, therefore, discontinuing the Labour Party policy announced in its published documents of nationalisation of the country's natural mineral resources?

A former Leader of the House in reply to questions of that kind used to say "Not next week". As my right hon. Friends the Prime Minister and the Secretary of State for Industry said in the debate on the Loyal Address, we are establishing a National Enterprise Board. That will be one of the matters to be covered by the Industry Bill which we shall bring before the House in due course.

European Economic Community

asked the Secretary of State for Industry what representations he has received from British industry about the Government's policy on renegotiation of the Common Market agreement.

I have received views from several representative bodies including trade unions and the CBI.

Will the Secretary of State made clear to industrialists that the industrial view is only one of many factors that have to be considered in renegotiation and that the real issue is whether or not we move towards a federal Europe? Will he at the same time say to the European Movement that if it continues to publish totally misleading economic facts about Britain and the Common Market the Government will withdraw its subsidy?

The hon. Gentleman is asking me to take responsibility either for the CBI or for the European Movement, which I can do in neither case. The great change as between the previous Government and the present Government is that our intention is that the British people shall have the final say through the ballot box, and that is an argument that finds wide acceptance throughout the country.

Does my right hon. Friend detect less optimism than there used to be in the representations from the CBI?

It is not for me to try to compare the CBI's representations to the previous Government with its representations to the present Government. It is broadly true that the CBI in coming to us was less optimistic as a result of its experience in previous years.

Mineral Resources

asked the Secretary of State for Industry when it is estimated that the known world resources of uranium, tungsten, copper, lead, zinc, tin, gold, silver and platinum will be exhausted.

Estimates vary according to assumptions about the economic potential of deposits, world demand and other factors. Many studies have been made of the long-term availability of raw materials. I would refer the hon. Member particularly to recent studies published by the United Kingdom Institute of Geological Sciences, the United States Bureau of Mines and the United States Geological Survey.

Is it not the fact that at the present rates of consumption the known resources of these minerals which can be mined by today's techniques are likely to be exhausted by the end of the century? Is there not a case for international action to deal with the problems that are likely to arise thereafter?

The hon. Gentleman must know that this is a complex subject. For example, I am informed that Sir Kingsley Dunham, the Director of the Institute of Geological Sciences, said that there were industrial data in 1948 which indicated that there were lead deposits sufficient for only 26 years ahead. Today the United States Bureau of Mines says that there are sufficient deposits for 27 years ahead. That is an indication of the complexity of the situation. In the few weeks available to me I have not yet made up my mind which indication is correct.

Do not such facts support the case which some of us have been making in Ten-Minute Bills and in other ways for the recycling of materials?

Yes, I agree with my hon. Friend that there is an urgent need for reclamation and for recycling.

If Conservative Members can contain themselves, I was about to tell the House that there is a real need for us to go ahead with these methods and that my hon. Friend made a valid point.

Where will the United Kingdom obtain its copper if the Labour Government continue their spurious quarrel with the Government of Chile? Does not the hon. Gentleman agree that since we depend largely on the Chileans for supplies of copper to keep our industries going, it is the Government's duty to keep men in employment rather than to select a quarrel the result of which could be to cut off our copper supplies?

That is a very interesting supplementary question indeed. The hon. Gentleman is fully aware of the statements made by my right hon. Friend the Foreign Secretary, and the whole question is still under review.

Despite the fact that my hon. Friend has been in office for only a comparatively short time—and we hope he will continue in that office—does he not accept that these resources are finite and that, whatever might be said about the unreliability of statistics, in a number of years' time this country might be facing shortages of materials against which the present shortage of oil will be regarded as comparatively minor? Does he not agree that the Labour Government are rather better situated than were their Conservative predecessors to initiate international action in this regard?

Naturally I agree that the Labour Government are in a better situation to expedite action than were our Conservative predecessors. I hope I have not given the impression that this is not a matter of the greatest importance, because of course it is. Anybody who is not serious about this matter must get to grips with the facts of life. The fact is that we are facing a difficulty and there is a need for international discussions. Incidentally, there is a much greater need for us to eliminate waste in this country, and I am certain that there must be recyling on a much wider scale than has been the case in recent years.

In view of the considerable anxiety about the future of copper supplies, will the hon. Gentleman confirm that he has advised his right hon. Friend the Foreign Secretary about the importance of Chilean copper supplies to this country?

The right hon. Gentleman knows the advice I have given to my right hon. Friend.

Subsidies

asked the Secretary of State for Industry how much has been paid in all forms of subsidy to private industry in the years 1970 to 1973; and if he will make a statement.

Is my right hon. Friend aware that he has shown us only the title of the book carrying the information that £3,000 million is going out in subsidies and that what Labour Members and the Labour movement are really concerned about is that he should open the book? Will he indicate where that £3,000 million went and perhaps produce a pamphlet showing precisely where it went? Will he send it to Aims of Industry so that its members may know how much of their dividends—free enterprise dividends—have come out of workers' pay packets?

The figures can be broken down in two ways: first in terms of the objectives which they were designed to serve—regional in respect of the shipbuilding and aircraft industries and so on—and secondly in respect of the firms to which the money went. In the study the figures are not dissembled in that form, but I am sure hon. Members in all parts of the House will agree that it is proper that Parliament and the public should know to whom taxpayers' money is going. That would contribute to a wider understanding of some of the policy changes that now have to be made.

May I support the hon. Member's plea for fuller and more information about where the £3,000 million has gone? Does not the Secretary of State agree that it all ended in the pockets of the wage earner and that it represents a breakdown of industrial discipline?

Without attempting, in answer to a supplementary question, to assent to the hon. Gentleman's conclusion, I agree that we ought to make public the names of the firms to which the money went. That would generally be regarded as an act of enlightenment which would help us in the pursuit of our discussions.

In view of the enormous sums involved, during the four years, will my right hon. Friend say what precisely is meant by "private enterprise"?

It is a definition that I shall not attempt to give in an answer to a supplementary question, but I think it will be helpful to those who present the case for private or free enterprise to see the extent to which all Governments have supported them in maintaining their idea that they were either private or free.

May I ask whether, in the interests of an enlightened Parliament and country, the right hon. Gentleman feels that his speech in Bristol on May Day contributed anything to this exercise? It was a speech in which he drew from his figures the most fraudulent illustrations: namely, that haif the corporation tax paid by all companies was effectively paid by the Government in grant and, furthermore, that half the dividends received by shareholders likewise came from Government grant. Was that not a complete distortion of the situation?

The hon. Gentleman may not have seen the text of what I said. I gave the broad equivalence. I was not implying from the method of Government support that there was a direct return—[ Interruption. ] If the hon. Gentleman looks at the Press release which I put out, and which I followed, he will see that what I said was neither fraudulent nor misleading. I was giving general figures about the amount of public support. I said that it would be helpful to people to have the information.

Industry Bill

asked the Secretary of State for Industry what consultations he is having with both sides of industry in the preparation of his Industry Bill.

The preparatory work is taking account of views expressed by trade unionists and industrialists. When the Government's proposals are published, there will be full consultation with all those concerned.

Will the right hon. Gentleman deny the view attributed to him that he was seeking to acquire blanket power to take equity positions in companies without reference to Parliament on each occasion when those powers are used? Is he aware that the Companies Act 1972 provides power to take equity positions only with the consent of the companies concerned?

I am fully aware of the provisions in the existing legislation. I am also aware of what my right hon. Friend the Prime Minister and I have previously said about a full legislative process. However, I hope the hon. Gentleman will recognise that there is merit—indeed great merit—in opening these issues to public consultation even before the Government have finally produced their Green Paper. It is my desire, as I made clear in my remarks, in the debate on the Queen's Speech, that these proposals should be subjected at every stage from now on to the most detailed scrutiny and joint examination.

In the preparatory work on the vitally important Industry Bill, may I ask whether due consideration will be paid to the renegotiation of Britain's entry into the EEC as this is bound to affect the preparation of that legislation?

I agree with my hon. Friend This morning I had a discussion with M Ortoli, the President of the Commission, and much of it centred on the development of our industrial policy and developments within the Commission.

Concorde

asked the Secretary of State for Industry what steps he is taking actively to promote the development of Concorde.

asked the Secretary of State for Industry what plans he has to ensure that the United Kingdom contribution to the development of supersonic air travel is maintained; and if he will make a statement about how this compares with similar work being carried out in the United States of America and the USSR.

asked the Secretary of State for Industry if he will make a further statement on his discussions concerning the Concorde project.

asked the Secretary of State for Industry when he next proposes to visit Filton.

asked the Secretary of State for Industry if he will make a statement on the progress of his review of the Concorde project.

asked the Secretary of State for Industry if he will make a further statement on the current state of the negotiations he has undertaken on the Concorde project.

The Government are pressing ahead with their review of the project and discussions are continuing with all interested parties, including the workers at Filton, which I visited on 20th March.

In the meantime the Government are supporting the manufacturers' efforts to put the aircraft into service at the earliest practicable date. Concorde and the TU144 are at similar stages of develop- ment. Current work in the United States is confined to basic research into various aspects of supersonic design and travel.

Whatever the right hon. Gentleman might say about his support for the company and the workers, he must be aware that the workers in all the factories producing the Concorde are becoming bitter and disillusioned about the Government's attitude, especially about his own failure to champion their cause, which he was so keen to do when he was in opposition. Will he say whether he sees any reason why these workers should not have taken note of his behaviour in the case of Upper Clyde Shipbuilders, and does he not feel that they would be justified in behaving in the same way in order to protect their jobs and their future?

I reject that entirely. For the first time the workers in the aircraft industry have been told the truth, which was concealed from them by the previous Government. They have also had the opportunity of submitting their representations in detail, which are now Cabinet papers for examination by Ministers who have to make the review. I do not think that the delay has caused anxiety, because the French workers know as well as I do and as well as the hon. Gentleman does that during the French presidential election it was not possible to proceed with the pattern of discussions with French Ministers. The hon. Gentleman is quite wrong.

The latter part of my right hon. Friend's answer will be welcome because it suggests that the work will continue. In his cost benefit analysis, will he bear in mind the important consideration of the smaller companies which depend on the Concorde and its production, and will he be making a statement before the Spring Recess?

As for the date of the statement, the timetable depends on our being able to resume discussions with French Ministers. As to my hon. Friend's first point about the interests of firms making components and other parts of the Concorde, I have had a number of letters from them and all the representations made by workers and industrialists are going forward to Ministers for their examination. There has never been in any major technical decision taken in this country such an atmosphere of openness before the final decisions come to be taken.

Just what are the Government playing at? Surely the right hon. Gentleman agrees that supersonic air travel is inevitable and that British industry already is making a leading contribution towards it. Why do not the Government remove this damaging uncertainty from the Anglo-French Concorde and give their wholehearted support to the project?

The right hon. Gentleman seeks to separate the project from the economic circumstances in which it was envisaged and continued. I do not believe that any right hon. or hon. Member—and certainly not the Public Accounts Committee, which has examined and reported many times on the project—will expect any Government to reach a conclusion guided solely by the considerations mentioned in the right hon. Gentleman's question. In saying that, I think that I have the support not only of the House but also that of those working on the project itself.

In view of the encouraging noises coming from Persia about possible confirmation of the order for that country, and in view of recent events in the aero-engine industry concerning deliveries of engines to other countries, will the right hon. Gentleman seek to consult Mr. Scanlon and get his permission for BAC and Sud to make sales to countries overseas, or will he wait and allow Mr. Scanlon to wreck the aircraft industry when he is ready to do so? Why does not the right hon. Gentleman do something about these orders?

The hon. Gentleman reveals his total ignorance of the productive process if he believes that the Concorde could ever have got out of the hangar without the work of the engineers who themselves elected Mr. Scanlon and their president. It was a very stupid remark for the hon. Gentleman to make.

Is my right hon. Friend aware that the workers have more confidence in the future of the Concorde as a result of the information given in the eight weeks during which he has been in control of the industry than in the three years before he took office? Will he assure the House that he will not only take into account the strong representations made by the Confederation of Shipbuilding and Engineering Unions and others about the future of the Concorde but bear in mind possible policy predictions, which may follow from the Government's defence review, because if cuts are made in defence projects, civil projects such as the Concorde will have an increasing importance?

It is true that both industrialists and trade unionists who have made representations have welcomed the openness and made their representations very clear so that Ministers might consider them. Although the defence review, as my right hon. Friend the Secretary of State announced, has not yet been completed, we have to see all these problems against wider perspectives. I am grateful to my hon. Friend for drawing attention to this matter.

In view of the right hon. Gentleman's undertakings earlier this year when he was seeking re-election, may I ask whether the proposed passenger flights across the Atlantic this summer by Concorde will have the Government's backing? Is it not time that the Government put the world's airlines on notice that the Concorde will be flying by the end of next year for BOAC and Air France?

The hon. Gentleman will know that the problems of transatlantic flights do not lend themselves to resolution in this country alone. There has to be approval by the Federal Aviation Authority. An environmental impact statement has to be made to which objection can be raised within a 60-day period. In Canada the fact that elections are pending has raised difficulties in the discussions which have gone on there. The hon. Gentleman can be assured that the British Government will look favourably upon these flights. It would be wrong to imply that we are trying to prevent them.

Reverting to the matter raised by my hon. Friend the Member for Newark (Mr. Bishop), may I ask whether my right hon. Friend is aware that some of us who are sensitive to Treasury considerations and to the fact that a major project may have to be cancelled wonder why, if it comes to a choice, we should not settle on the MRCA, even though it has been overtaken by SAM missile technology, rather than the Concorde?

My hon. Friend is inviting me to step into the shoes of my right hon. Friends the Chancellor of the Exchequer and the Secretary of State for Defence in making a choice, which it does not fall to me to make. We are reviewing a project in which a great deal of effort, money and skill has been spent, and we should confine ourselves to doing that and not introduce other considerations.

Do the Government, or that faction to which the right hon. Gentleman belongs, agree with the latest French assessment that the sale price of the Concorde has doubled in the past three years, even on the unlikely assumption that customers for 30 models can be found, or does the right hon. Gentleman think that it is good Socialism to add still further to the subsidy that the taxpayer will have to pay for every super first-class passenger that the aircraft may attract?

The hon. Gentleman is confusing ideological with economic objectives. Certainly no one can argue that the motivation of our principal partners in this matter, the French Government, has been the Socialism that the hon. Gentleman detects in the faction of the Government to which he supposes me to belong. We are examining a joint project jointly, and I think that the House wishes that to be done.

In view of the remarks that the right hon. Gentleman has made about openness in this matter, will he use his influence with his right hon. Friend the Secretary of State for Trade to ensure that we are told the assumptions behind the statement about British Airways' operating figures which he made in March and which the Secretary of State for Trade said he would do his best to let us have before the recess?

I share the hon. Gentleman's desire to see as many figures published as possible. That is a matter for my right hon. Friend the Secretary of State for Trade. But we have made it possible even now, in advance of possible publication of the figures and the assumptions underlying them, for BAC to examine some of them. To this extent a genuine discussion is going on which has never gone on before between the airline operators and the manufacturers on this matter.

Zip Fasteners

asked the Secretary of State for Industry what is the size of the United Kingdom zip fastener market.

I thank my hon. Friend for that answer. Is he aware how large a quantity of this market is taken by a Japanese company with a so-called manufacturing plant in this country which does not manufacture but packages and assembles components imported from Japan? In the end we shall have a diminishing sector of this market with our own employees involved, because the whole market will be swamped by Japanese imports. Is my hon. Friend aware of this situation?

My hon. Friend should bear in mind two points. The first is that the zip fastener plant to which he referred was set up in 1970, which was well before the recent policy. The second is that, while I am concerned about investment from Japan, the Zip Fastener Manufacturers Association has said that it would like to discuss the matter with me. [ Interruption. ] I am sorry that hon. Members opposite and on this side of the House do not regard zip fasteners as of very great importance. I regard the industry as of considerable importance. I assure the House that we are meeting representatives of the industry this week

Nationalisation

asked the Secretary of State for Industry if he is now in a position to make a statement regarding the anticipated timescale of the Government's nationalisation plans.

I shall be putting forward proposals for an extension of public ownership in due course.

Will the right hon. Gentleman tell us why engineers, shipbuilders and manufacturers throughout the country should invest in such an uncertain future? Why is he so determined to reduce the management and performance of ICI, Distillers, Shell and other successful companies in this country to the dismal level of the National Coal Board, the British Steel Corporation and British Rail? What is it about the Civil Service that convinces him that the mandarins of Whitehall can and should run British industry?

The hon. Gentleman is under a misapprehension about our proposals, as the last sentence of his supplementary question revealed. He will know as well as does the House that we put forward our proposals, notably on shipbuilding and aircraft, during the election as named industries. He will also know from a study of the figures that there have been massive injections of public money into those industries. The figures that I revealed earlier indicate that over the last four years about £550 million went into the aircraft industry in assistance. That was not to purchase aircraft but was in the form of assistance of one kind or another. There is a similar position with regard to shipbuilding. The hon. Gentleman should recognise that the problem is one of inadequate investment and that Britain must somehow remedy it.

The right hon. Gentleman confirmed that the shipbuilding and aircraft industries were in the list contained in the Labour Party's manifesto and that therefore he is proceeding with plans for their nationalisation. In the same list were the pharmaceutical industry, machine tools and road haulage. Will he confirm that those industries are also on his list?

Not all the industries to which the right hon. Gentleman referred fall within my departmental responsibility. However, I have said that I shall be putting forward proposals.

Will the right hon. Gentleman assure the House that in putting forward his proposals he will include an undertaking that there will be a chance for referenda in the various industries which may be on his shopping list to determine the true wishes of those employed in them?

I do not know whether the hon. Gentleman is putting forward the idea of national referenda or is coming out at this late stage in favour of workers' control. Anything that he said would be examined by the Government to see what merit it contained.

National Enterprise Board

asked the Secretary of State for Industry what plans he has to set up a National Enterprise Board.

The proposed Industry Bill will provide for the establishment of a National Enterprise Board.

Is the hon. Gentleman aware that this proposal will greatly widen the area in which it will be possible to strike not against the employer but against the taxpayer for more wages? Has he made any calculations of how much the pound will fall in value when he publishes his proposals on this matter?

The hon. Gentleman, like so many of his hon. Friends, has not understood what the establishment of a National Enterprise Board means. For the benefit of the hon. Gentleman, may I explain that the board will be the intervention of the State in profit-making industries. [ interruption. ] The hon. Gentleman should understand that this is a new form of public ownership. When the details have been worked out, the proposals will be put before the House at the earliest possible moment.

Is my hon. Friend in a position to speculate why the Opposition are so keen to put public money into private industry but reluctant to see the taxpayer benefit from some of that investment?

I entirely accept the point made by my hon. Friend. It is something in which I have been interested for a long time. I have never understood how Tory Members could argue so passionately for money to assist private industry but when the State is to have a stake in it be up in arms and totally oppose our proposals.

Does the Minister propose to carry out these plans for further nationalisation before or after the next election?

That depends on the date of the next election. I have said that proposals will be put before the House for its consideration.

Employee Participation

asked the Secretary of State for Industry if he has plans for the democratisation of industry by means of workers participation in decision making; and if he will make a statement.

One of the objects of the continuing discussions by my right hon. Friend with trade unions and management is the wider sharing of decision-making. This is an aspect of our more open style of Government. The Government's overall plans for advancing industrial democracy are for my right hon. Friend the Secretary of State for Employment, and the planning agreements to be provided for under our industrial policy will play a significant part.

Does my hon. Friend accept that workers' control is better achieved through workers' ownership? Does he also accept that the nationalised industries are in need of further democratisation? Will he arrange for elections to the boards of nationalised industries directly from among employees in those industries?

My hon. Friend has raised the wider question of industrial democracy. [An HON. MEMBER: "It is a good question."] I agree that it is a very good question. The point is that industrial democracy in its wider aspects is a matter for my right hon. Friend the Secretary of State for Employment.

Just in case this industrial democracy business should turn out to be a great nonsense, may I ask whether the Government are prepared to try it out in one sector before applying it throughout industry, since experiments in other countries do not lead us to believe that it is a great success?

The hon. Gentleman will be interested to know that the very point he has made is under consideration.

Will my hon. Friend immediately consider the worker-director aspect in the steel industry? Does he agree that that is a good place to start examining closer links between the trade union movement and the worker-director with perhaps the right of recall to the trade unions concerned?

I will consider all the points that have been made by hon. Members on both sides. I reiterate that the matter is under consideration.

Will the hon. Gentleman confirm that when a company is about to be nationalised he will consult the employees to see whether they agree with its nationalisation?

My right hon. Friend has made it absolutely clear that where the extension of public ownership is being considered the trade unions and workers in the industry, as well as the CBI and other sections of society, will be consulted.

Aircraft and Aerospace

asked the Secretary of State for Industry what plans he has to take into public ownership the aerospace industry, including airframes and aeroengines; and whether he will make a statement on the timetable he has in mind.

asked the Secretary of State for Industry whether it is his intention to bring the aircraft industry under public ownership.

Yes, Sir. Our intention to bring the aircraft industry into public ownership has been made clear but no decisions have yet been taken on the scope, method or timing.

While expressing gratitude for that reassurance, may I tell my right hon. Friend that it seems to me that he should possibly be able to give us a little more information about the timing of the plan? Would he care to say what discussions have taken place with the trade unions in the industry about the process of public ownership and whether that helps him to speed up the process?

I have had informal discussions with both the management and the trade union side. As my hon. Friend knows, this proposal has the support of the Confederation of Shipbuilding and Enginering Unions. I am sure that the right way to proceed is by maintaining the closest contact with those whose livelihood depends on the future of the industry.

May I ask the right hon. Gentleman to take a rather longer-term view than that given in the Labour Party's manifesto? As our aerospace industry's future is almost certainly linked with that of Western Europe, what is the point of nationalising the industry into one unit when it may be better for the sake of Western European collaboration to have two groups?

The hon. Gentleman may not be aware—or perhaps he is—that the aircraft industry in France has been under public ownership for some time. Perhaps I may tell the hon. Gentleman that from 1970–71 to 1973–74 the taxpayer put £555 million into what is allegedly, on the airframe side, a private industry at the rate of £138 million a year, or approximately £2·6 million a week or £380,000 a day. If that does not entitle the Government to look at how the industry is organising itself, I do not know what does.

Parliamentary Reporting

asked the Attorney-General if he will introduce legislation removing the privilege from actions for libel or slander enjoyed by the Press in reporting Parliamentary proceedings.

As my hon. Friend will be aware, the privilege to which his Question refers is qualified privilege. The report of the Faulks Committee on defamation is expected to be published later this year. Its recommendations will be considered before decisions are made on new legislation on defamation.

Can my right hon. and learned Friend say how many South Wales coal miners, Merseyside dockers and Luton car workers last year issued writs for libel, and will he express that as a percentage of the number of writs issued by Members, journalists and scientologists? Has not the time come to replace the concept of damages for loss of reputation by a simple public apology system? Can my right hon. and learned Friend explain why this House reserves to itself and to the Press certain privileges which it denies to other citizens?

I cannot without notice answer the first of those questions. The other questions will no doubt be matters to which the Faulks Committee will have given consideration and upon which it will report.

If the suggestion in the Question were adopted, would it not mean that the Press would report our proceedings even more scantily than it does now?

In 1970 a joint committee of both Houses of Parliament, under the chairmanship of the late Lord Donovan, recommended that the existing law should remain as it is, but it is still a matter for the Faulks Committee to look into and we shall consider what it says in its report.

Does not the right hon. and learned Gentleman agree that the last thing we want to do is to place new restrictions on the freedom of the Press to report? Can he say what progress is being made in removing the restrictions which now exist on the Press, in particular in connection with the law of contempt and official secrets?

The law of contempt is a subject on which the Phillimore Committee will report in due course. The Government are fully in support of the proposition that the freest possible comment should be available to those who criticise the activities of Parliament as well as of other places.

Courts (Photography)

asked the Attorney-General if he will refer to the Director of Public Prosecutions recent breaches of Section 41 of the Criminal Justice Act 1925—prohibiting the taking of photographs in or near the courts—by the Press and television authorities, with a view to prosecution.

I am informed that there have been no prosecutions for this offence since 1966. The purpose of the section which created the offence was to prevent any interference with parties or witnesses which might affect the administration of justice. It is for the prosecuting authorities to consider whether there should be proceedings in any specific case.

The Director of Public Prosecutions is considering whether there should be a prosecution under Section 41 of the Criminal Justice Act 1925 in respect of one recent case which has been reported to him.

Does the Attorney-General agree that this is a valuable safeguard for both defendants and witnesses and that any erosion of their rights, especially by mass exposure on television before trial, is much to be deplored?

I agree that it is an important safeguard. As I have said, the Director of Public Prosecutions is considering one case in which a prosecution may eventuate, but that I cannot foretell.

Does my right hon. and learned Friend realise that this whole photographic racket and manoeuvring is getting completely out of hand? There is no privacy for people approaching or leaving the courts. Cameras are stuck in their faces, mostly by freelance cameramen who are attached to no newspaper but rather to Hitler and who have no authority but that of Hitler. Is it not time we had an official pass for official photographers to record official court business?

Universities (Political Meetings)

asked the Attorney-General if he will instruct the Director of Public Prosecutions to prosecute the National Union of Students for incitement to a breach of the peace in respect of its proposed disruption of meetings held in universities by certain political organisations.

This is primarily a matter for the police, but if any evidence is sent to me which indicates that a criminal offence has been committed. I will ask the Director of Public Prosecutions to consider whether a prosecution is justified.

Is the right hon. and learned Gentleman aware that the Monday Club meeting addressed by Mr. Soref at Oxford University was peacefully attended not only by Conservative but by Labour students, whose conduct throughout was in the best British and university tradition of free discussion, whereas the NUS resolution and the ensuing thuggery was worthy of the Nazi student groups under the Weimar Republic? Will the Attorney-General ensure that appropriate action is taken both in this case and to prevent further such outrages?

I have seen a Press report on the meeting in question. I understand that two persons have already been charged. In those circumstances it would not be proper for me to comment further upon the matter.

I accept what my right hon. and learned Friend has said. It is wrong to allege that the NUS national executive had anything to do with the events last Friday, which everyone will deplore. [ Interruption. ] It is wrong at this stage of the investigations to make that allegation without any evidence being available to Opposition Members. Will my right hon. and learned Friend accept that, in the view of many friends of the NUS, its decision is wrong and it ought to rescind it and that nobody should support the union in its request for speakers until that decision has been rescinded?

If it be the fact that the NUS has incited a breach of the peace, I should not defend it, and in any case which came to my notice of that having happened I should ask the Director of Public Prosecutions to consider a prosecution. As regards the Oxford situation, however, it would not be right for me to give an answer which would prejudge any possible proceedings hereafter.

As the Attorney-General has rightly said that this is primarily a matter for the police, will he ask his right hon. Friend the Home Secretary to call for a report from the Chief Constable of the Thames Valley Constabulary on the circumstances in which the police who were charged with the protection of the meeting in the Union at Oxford were withdrawn at the last minute immediately before the violent disruption took place?

That is a matter for my right hon. Friend the Home Secretary, who will, I am sure, take note of what the hon. Gentleman has said.

I loathe the rubbish and nonsense which Right-wing speakers frequently emit at these meetings, but will my right hon. and learned Friend accept that many of us on the Government side are deeply disturbed by the anti-democratic and anti-libertarian decision of the NUS?

I have already expressed my view about that. The more public statements there are by the Monday Club, the more pleased I am.

The Attorney-General's announcement that the police are taking action in connection with this deplorable incident at Oxford will be welcomed by hon. Members on both sides of the House. Does he agree that it is in the interests of the vast majority of law-abiding and peaceful students that when breaches of the peace occur they should be vigorously prosecuted by the law?

On the first part of the question, I must not comment; on the second part, I have already made my view clear. I agree with the hon. Gentleman.

Northern Ireland

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

Last night I was informed by the Secretary of State for Northern Ireland, who was in conference with senior officers of the RUC and the Army, that in the last few days the security forces in Northern Ireland have come into possession of a quantity of documents, the general purport of which I must disclose to the House.

These documents reveal a specific and calculated plan by the IRA, by means of ruthless and indiscriminate violence, to foment inter-sectarian hatred and a degree of chaos with the object of enabling the IRA to achieve a position in which it could proceed to occupy and control certain pre-designated and densely populated areas in the city of Belfast and its suburbs. The plan shows a deliberate intention to manipulate the emotions of large sections of the people by inflicting violence and hardship on them in the hope of creating a situation in which the IRA could present itself as the protector of the Catholic population.

It is also clear from the documents that the IRA did not expect, even if it was initially successful, to be able to continue to hold a number of strongpoints in parts of Belfast and that its intention would have been to carry out a scorched earth policy of burning the houses of the ordinary people as it was compelled to withdraw.

Some of the information in the possession of the RUC may be important in the bringing of potential criminal charges, and the House will understand that there must be some reservation on the disclosure of documents. I can, however, say that the documents include orders to battalion commanders and the outline of the general concept, with associated maps and a draft proclamation to the civilian population.

The security authorities, together with my right hon. Friend's Department, are considering what documentation it will be right to make available. In the light of this, I will later consider what information should be made available to right hon. and hon. Members by placing it in the Library of the House or by other means.

This discovery reflects great credit on the RUC and the Army. [HON. MEMBERS: "Hear, hear."] An apparent IRA operation of potentially great danger has been brought to light. Nevertheless, the House should not readily assume that those who made these plans will not turn to other acts of ruthless violence to frustrate political advance and restore their flagging fortunes. The British Government are not to be deterred from the political course on which we have embarked in the conviction that it is right and fair.

I want to make it clear also that it is the duty of the Army and the police—not of unofficial paramilitary organisations but of the Army and the police alone—to maintain law and order in Northern Ireland. I repeat that the security forces will act against violence from whatever source it might come.

The whole House will wish to join the Prime Minister, as it has already demonstrated, in his congratulations to the Services, the security forces, the Army and the RUC on the effective operation that they have carried out. At the same time, the account that he has given of documents which the Services have found confirms what has been known to his previous administration and to ourselves—that it was one of the major objectives of the IRA to find every possible means of creating conflict between the two communities in Northern Ireland.

We therefore welcome the fact that the right hon. Gentleman will release all the documentation he can in order to demon-state this clearly not only to Northern Ireland but to the Republic and to those who take an interest in these proceedings elsewhere in the world. I hope that it will be possible for the right hon. Gentleman, after consultation with the security authorities, to release the documentation as early as possible.

We respect the fact that, if any criminal charges are likely to follow, such documentaion must be reserved, but the right hon. Gentleman will recognise that the IRA will waste no time in trying to launch a propaganda counter-offensive of accusations that this is the work of the British Government, of British Intelligence or of the Protestant community, and that therefore the publication of documentation should be as complete as possible in order to show everyone exactly what has been worked out as a specific operation by the IRA in order to try to achieve its purposes.

I thank the right hon. Gentleman for what he has said, particularly about the security authorities for which he had responsibility for so many years. As for the Republic of Ireland, my right hon. Friend the Secretary of State is not here today because he has been concerned in Northern Ireland with the events that I have been describing. Just before lunch, he informed not only Mr. Faulkner but the whole administration—that is to say, the Executive plus, as it were, the junior representatives associated with it—and then fulfilled a longstanding engagement to fly to the Irish Republic. He will, of course, bring these facts to the attention of the Government there.

The right hon. Gentleman asked for the documentation as soon as possible. I understand that it is the intention of the security authorities and the Northern Ireland Department to make available in Northern Ireland this afternoon as much information as they feel able to make available, having regard to the inhibitions I have mentioned, which the right hon. Gentleman recognised. It is in the light of all the information they can put together for this purpose that I shall have to decide how much can be made available here—certainly not less than what is made available there.

The right hon. Gentleman has rightly said that there will be an attempt to misrepresent this information—which is a genuine find by the security authorities—as a plant, as something created to discredit the IRA. I am totally satisfied, as are the security authorities, that these documents are genuine and not even put forward themselves by the IRA for any other purpose except that which it had in mind to pursue. When further documentation is available either in Northern Ireland or to right hon. and hon. Members, they will be able to form their own judgments about its validity.

Would my right hon. Friend consider making all these documents available to the European Commission on Human Rights, which at the moment is conducting an inquiry in secret into allegations by the Government of the Republic of Ireland about the activities of British troops? Does he not consider that this might be an opportunity to place before the commission this relevant evidence?

I will consider that in conjunction with my right hon. and learned Friend the Attorney-General, who, of course, is concerned with what has now been a long-standing claim before the European Commission. It will also be considered right, I think, that this documentation should be released in other countries where Britain's record under successive Governments in relation to Northern Ireland has not been fully understood.

Is the right hon. Gentleman aware that every law-abiding person in Ulster will warmly welcome the activities of the security forces that led to the capture of these documents and will congratulate all concerned upon it? We are also grateful to the right hon. Gentleman for making the documents available publicly; I am sure that will do a great deal of good. Do the documents disclose any of the origins outside Ireland of supplies of funds or plans or anything else, or preparations for activities within Great Britain itself?

I thank the hon. and gallant Gentleman for what he says about the security forces. He and other hon. Members will be able to judge the contents of the documents when they are made available.

Will the discovery of these documents get the troops out of Ireland sooner rather than later?

The whole House has agreed, and successive Governments have agreed, that, while it is essential to maintain security, there must be a political solution. I believe that in the winning of hearts and minds in Northern Ireland the publication of these documents will help to establish what the true facts are. But there is no question of withdrawing the troops until the problems with which they have to deal have been solved.

Does the documentation allow our security forces to make a better assessment of the strength of the IRA, and are the police and armed forces there adequate to meet the sort of operation that the IRA was planning to mount?

Yes, Sir. It is certainly our view that the police and the armed forces, not only in numbers but in quality, are adequate to deal with this situation. It is not for me to say what are the means available for the security forces to judge the strength of subversionary forces. They have their own means of discovering that, and it does not arise out of my statement.

Does my right hon. Friend agree that this discovery and others recently made, including some on this side of the Irish Sea, show that the work of the security forces must not be unduly inhibited because of considerations which might well suit a more peace-time occasion? These disclosures surely show the nature of the threat. We must recognise that we cannot fight a dirty enemy and keep our own hands entirely clean.

My hon. Friend will form his own views when he sees the paper—though I would not exactly go along with his last few words, because the security forces are keeping their hands clean in deciding to issue this documentation. But I certainly agree with my hon. Friend that we are not talking of a peace-time situation.

Will the right hon. Gentleman join with me in congratulating the Thames Valley Constabulary on having found a large quantity of explosives and lists containing the names of members of the IRA and other valuable information in my constituency at Maidenhead? Will he also pay credit to the security forces for their assistance in the operation to which I have referred?

Is my right hon. Friend aware that when talking about law and order one has to realise that there are other opinions about what is law and order in the Irish situation? Is he aware that there are many people in Ireland who are excluded from the normal life that one would expect British subjects to be able to enjoy because of the actions of the UDA and other people, which are probably not revealed in the document to which he has had access? Would not the proper way of approaching this problem be to have a complete reappraisal of the British Government's attitude to the various problems that are sustained in Northern Ireland?

My hon. Friend mentions law and order. That is the responsibility of the security forces. But all of, us, in all parts of the House, have said that one cannot solve these problems purely by a military or a law and order solution and that one needs a political solution. That was the purpose of various proposals put forward from both sides of the House in alternations of Government and Opposition between the two main parties, and that was the inspiration of the power-sharing Executive, which was designed to produce a political situation based on the consent of the people of Northern Ireland as a whole.

In the creation of the power-sharing Executive and, indeed, in recent expressions of opinion there, there has been no doubt that this is the desire of the people of Northern Ireland. I believe, as I think most right hon. and hon. Members believe, that the experiment in power sharing is an historic achievement, and that if that were to fail or to be destroyed by anyone, from whatever side, it would have a most devastating effect on the whole future of Northern Ireland. I can certainly say to my hon. Friend, when he mentions certain forces there which are attempting to deal with the situation not with an agreed political solution but by force, that, as I said at the end of my statement,

Bill Presented

Contingencies Fund

Mr. Chancellor of the Exchequer, supported by Mr. Joel Barnett, and Dr. John Gilbert, presented a Bill to make new provision with respect to the maximum capital of the Contingencies Fund: And the same was read the First time; and ordered to be read a Second time tomorrow and to be printed. [Bill 43.]

Orders of the Day

Supply

[5TH ALLOTTED DAY]— considered .

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

Defence

3.44 p.m.

The debate has two main objects. The first is to enable the Government to make some announcement about improved pay, amenities and conditions for our troops in Northern Ireland and, I hope, elsewhere, too. The second and even more important object is to enable the Government to clarify what they intend to do about defence and, by doing so, to remove the widespread uncertainty, concern and dismay that they have needlessly created in the Armed Services and defence industries by their half-baked pronouncements in their manifesto and elsewhere. Defence and the Armed Forces are far too important to be treated with such flippant irresponsibility.

Turning to Northern Ireland for a moment, I welcome the various campaigns by the Daily Mail and the Sun to improve the treatment of our forces there, and I am sure that the right hon. Gentleman welcomes them, too. I hope that hon. Members on the Government side of the House, in spite of their current sensitivity about the Press, also agree with them. There are difficulties, as the Secretary of State will have discovered. One of the points which occurs to the Opposition is that it may be a good idea for the Ministry of Defence to take over the making of interim payments to those who are badly injured, in an attempt to speed up payments. But it may be that the right hon. Gentleman has a better remedy of his own.

Conditions have improved gradually over the years. I shall not weary the House with a catalogue. I was particularly glad to be able to announce last year the very great improvement in pensions and lump sums for those who were injured and for the relations of those who were killed in Northern Ireland. I am sure that the Secretary of State will have some encouraging news for us today.

The pay of the Armed Forces as a whole has now fallen behind its equivalent in civilian life. I think that if there had not been a change of Government we would have dealt with that by now. I concede that it is more difficult for a new Government, but I hope very much that it will not be long before the right hon. Gentleman is able to announce a substantial increase in pay for all the forces. They undoubtedly deserve it. All of them are doing an exemplary job, and those in Northern Ireland are performing an arduous, dangerous and exacting task in a magnificent way. The least that they can expect is that they should be properly paid. I hope that the right hon. Gentleman will confirm—I know that it is so—that the pay increase will be backdated to 1st April.

Pay and conditions are very important, but they are not the only important elements in morale. I hope that this afternoon the right hon. Gentleman will not stick to the goodies that he is able to announce and ignore the wider questions, because he has a clear duty to tell the country of the Government's intentions about defence. He and his Government have every reason to be thoroughly ashamed of the uncertainty and instability that they have caused by their announcements. They did exactly the same in 1964. The cause is that they put defence very low down their list of priorities and they always put the unity of their party very much higher than the interests of the Services. It is no wonder that the Services resent such treatment; they are absolutely right to do so.

I suppose that an investigation of the Government's defence policy must be based on the paragraph on defence in their election manifesto, although it is an extremely depressing and disreputable paragraph. Its first phrase is, shall show later. The paragraph continues:

The manifesto goes on

The manifesto goes on,

The final sentence in the defence section of the manifesto is equally dubious,

I return to the question of cuts of £800 million or £900 million. It was totally irresponsible of Labour to talk about cuts of this size when it had not the slightest inkling of where or how or when it would be able to make them. The only thing which it did know was that they would have a crippling effect. The last Labour Government did it in 1964 and the damaging uncertainty they created amongst people who had decided to make the Services their career and amongst the defence industries was intolerable. It would be intolerable if the right hon. Gentleman allowed such uncertainty now to continue until the autumn. He has a duty to come to a conclusion, and if he does not we can only conclude that he and the Government are afraid to tell the people and their party the truth.

The second point is that there is already very little fat on the Services. I hope that the right hon. Gentleman is not going to argue that because we made some cuts he is entitled to make more. That would be very twisted logic. The point is that, because we made cuts, he has much less room for manoeuvre than he would otherwise have had.

In other words, the Conservative Government could make cuts but no one else must do so.

That is not the reason at all. It would be schoolboy logic to say that because we made cuts other people must not. The right reason is that we made cuts which left very little fat on the Services, so that the right hon. Gentleman has little justification for making further cuts.

Where is the axe to fall? In his speech at Newcastle-under-Lyme, the right hon. Gentleman mentioned practically every subject under the sun. He even talked to the NUM about inflation. As it happened, because of his unfortunate indiscretion about Northern Ireland, the rest of his speech did not get much publicity. He said that he was obliged by the party manifesto to examine defence expenditure so that it could be cut. He went on,

Rather more sensibly, the right hon. Gentleman said that the United Kingdom and NATO would have first call on our resources. The only trouble is that they have had first call on our resources for quite a long time. There is no change there. Over 90 per cent. of our defence expenditure goes on the United Kingdom and NATO. Once again the right hon. Gentleman does not have much room for manœuvre.

In considering the small percentage of our defence expenditure represented by spending outside NATO, I hope that the right hon. Gentleman will be able to assure us that he has no intention of cutting the garrison in Hong Kong and no intention of doing away with the Brigade of Gurkhas as the last Labour Government intended to do. The Foreign Secretary has said that it is not the intention of the Government to leave Hong Kong within the foreseeable future, and I hope, therefore, that it is not too much to ask the Defence Secretary to say that, as the commitment remains, the garrison remains, too.

The right hon. Gentleman will not save much by getting out of Singapore, where the Five-Power arrangements have in their way been extremely valuable. I hope that the right hon. Gentleman will not be motivated by spite or jealousy that our arrangements worked despite the predictions and advice of the Labour Party.

We do not yet know what the intentions of the Americans are towards Diego Garcia, but since they have offered to pay entirely for the improvements I hope that the right hon. Gentleman will confirm that, if they do wish to go ahead, the Government will not stand in their way.

Is it wise to do something against the combined wishes of Mrs. Gandhi, Mrs. Bandaranaike, Mr. Bhutto, Mr. Whitlam, President Suharto and many heads of African States which are deeply involved? Why should we go along trailing after Washington on this matter?

The United States Senate Foreign Relations Committee has more sense than the right hon. Gentleman.

The hon. Gentleman is entitled to his opinion, but I do not think that the Committee is as ordered by the hon. Gentleman's reasons as by the question of expense, and no expense will fall on this country. The fact is that the number of Soviet ship movements in the Indian Ocean has multiplied over the last few years, and it would be unwise for the West to allow the Indian Ocean to become a Soviet lake.

As the right hon. Gentleman knows, there are a number of reasons why we should not get out of Cyprus. It is not in NATO but it provides a valuable element of stability in a rather vulnerable corner of NATO. There is not much saving to be obtained by getting out of Malta and Gibraltar, and presumably even hon. Gentlemen opposite below the Gangway would not want to get out of Gibraltar because they do not mind spending money defending the country against General Franco even if they object to defending it against other people.

Even if the right hon. Gentleman withdrew from all these overseas bases, which would be a considerable folly, and even, if having done so he discharged all the men who are now there and got rid of all the equipment they now have, which would be an even greater folly, he still would not come anywhere near to making the cuts that he has been enjoined to make by his party manifesto.

Presumably at a time of enormous expansion of the Soviet Fleet, in quality and quantity, he cannot consider slashing our Fleet. It is therefore quite plain that areas outside NATO do not provide the sort of savings that the hon. Gentleman wants to make. Some money can be saved on research and development by cancelling British equipment and buying American. That was a favourite expedient of the last Labour Government. As the Secretary of State has frankly admitted, that would cause unemployment. To create unemployment and spoil British defences seems a pretty poor double, more especially as the Chancellor's Budget will evidently cause unemployment, anyway.

Even if the right hon. Gentleman commits that folly, unless he is to denude British forces totally of their equipment, that will not provide the sort of money he is looking for. The last Government brought considerable stability to the British defence industry—a stability sorely needed—through the Rayner Report. The setting-up of the Procurement Executive greatly rationalised and improved the whole process and operation of procurement policy.

It would be a tragedy if the right hon. Gentleman were to upset all that good work. There is another point to bear in mind about procurement. The right hon. Gentleman has it in his power to do irretrievable damage to the cause of international collaboration. Last month I gave the Minister of State the opportunity to allay fears about the future of the MRCA. The hon. Gentleman conspicuously did not take the opportunity. I trust that the Secretary of State will set that right. International collaboration is important, and if the right hon. Gentleman were to cancel the MRCA, as his predecessor cancelled TSR2, enormous damage would be done to the whole cause of international collaboration. It would probably be the end of it for this country because no one would trust us again.

What is the point of making such a stentorian statement when the right hon. Gentleman knows, as we all do, that through no one's fault, perhaps in the ordering, but not necessarily the fault of the last Government, the MRCA has been overtaken in technology and is vulnerable to SAM missiles? Why go to that expense when the Germans reckon that the MRCA is costing 53·8 million marks per aircraft?

There is nothing stentorian about what I say. The hon. Gentleman has perhaps the most stentorian voice in the House, which I much envy. Of course our aeroplanes are getting more expensive and there has been developments in SAM missiles. I would not agree with the suggestion that the manned aeroplane is obsolete.

Although the Government may not care much about international collaboration, there is one point to which they will pay attention. By a fortunate chance the cancellation of the MRCA would greatly affect a number of marginal seats. It may not have escaped the right hon. Gentleman's notice that there are two in Preston, at least one in Derby and some more in Bristol and elsewhere. The workers at Preston, having been deceived before about the TSR 2, will want some straight talking this afternoon from the right hon. Gentleman about the MRCA.

Since it is the evident intention of the Government to deprive our forces of much-needed and improved arms, one would have thought that any rational Government concerned with the British interest would be doing everything in their power to promote sales of British arms abroad. Not only does this greatly help the balance of payments, it also fills gaps in our factories left by our own orders, thus keeping down the price of our arms.

So far from promoting British exports the Government have done the very opposite. By their silly pin-pricking in Greece they have lost the chance of a large order for frigates for the Clyde. We have all seen the absurd and undignified squabble going on over Chile. The Secretary of State and the Foreign Secretary won on the frigates and I congratulate them on that. Now we see another row going on about the servicing of Rolls-Royce engines. It is incredible that the Government should be prepared to put party considerations before the economic and other interests of this country.

I am sure that the right hon. Gentleman is being consistent. It will be within his recollection that the Conservative Party, up to a fortnight before the outbreak of war, was still supplying wing spars to Capronis for Mussolini's aeroplanes. Is that the sort of test he would apply in considering the interests of this country?

I think that the Government may well have been wrong in 1938, just as the Liberal Party was wrong throughout in its policy of rearmament.

I remember Lord Samuel said that Churchill was a Malay run amok. I must point out that the cases are not similar. There was obviously a chance that we might fight Italy, although we tried to stop it. I do not think even the right hon. Gentleman's imagination can lead him to believe that we are about to fight Chile. The comparison is not very apt. We now read that Mr. Scanlon, to no one's surprise, is to do what he can to see that this country dishonours any contracts it has with Chile.

It is sad that English Marxists should be Marxists first and second and English right the way down, at the bottom of the line. It is a pity they do not emulate the Russian and Chinese Marxists who are Russians and Chinese first and Marxists a good second.

Does the right hon. Gentleman not care one little bit to whom weapons are supplied? There are some doubtful people throughout the world. Has he no care whatever, provided sales are made?

If the hon. Gentleman or anyone else can show that the sales are against British interests, of course I care. But I do not think that the hon. Gentleman's ideological obsessions rank as a British interest. If we are to deprive the defence industry of orders for this country and to allow arms sales only to countries of whom Labour Members approve, it seems a pretty poor lookout. I hope that the right hon. Gentleman can tell us something more reassuring today. Certainly the right hon. Gentleman cannot get the savings he wants by cancelling British equipment and buying American.

He said that NATO had the first call. He knows that the Warsaw Pact forces are larger than those of NATO. He knows that, in spite of all the talk of détente and in spite of Russian fear of China, Russia has reinforced her forces facing the West over the last few years. He knows that the Labour Government's last White Paper said that the NATO forces were just sufficient to do their job. He knows also that negotiations for mutual and balanced force reductions are going on. It is difficult to imagine greater folly and political ineptitude than the right hon. Gentleman's announcements about enormous unilateral cuts. By so doing the Government are removing the incentives for the Russians to reduce their forces. They are also making a nonsense of their manifesto in which they stated that they regarded NATO as much of an instrument of détente as of defence.

The right hon. Gentleman cannot get his cuts from outside NATO or from cancelling British equipment. He cannot even get his cuts by closing Devon-port, Portsmouth and Chatham dockyards. The only way he can get his cuts is by slashing the teeth arms in the United Kingdom and NATO. Without doing that he will get nowhere near the sort of figures he has been told to achieve. He can get those cuts only by crippling our forces, which will reduce us to a sort of Finland of Western Europe. This is why the right hon. Gentleman is refusing to publish a White Paper until the autumn. He knows that the ugly choice for him is either to cripple our Forces, thus Finlandising this country—which would certainly go very well with the current Scanlonisation which is proceeding at the moment—or to ditch Labour's manifesto and face a crippling row with the Left wing. There is no other way out. The right hon. Gentleman will not get his cuts by a few cosmetic changes and mild reductions, and that is why he has so far refused to come clean on what he is doing.

The last Government aimed at creating stability in the forces and in the defence industry. We succeeded very well, and that stability was very badly needed after the turmoil which existed under the right hon. Member for Leeds, East (Mr. Healey) between 1964 and 1970. Now everything has been thrown into chaos again by the Labour Party, and in doing this it has disregarded the interests of the Services and the nation. That behaviour is inexcusable, but the right hon. Gentleman could do something to put it right this afternoon. We all know why the Government want to conceal their intentions, but it is the duty of the Secretary of State to tell the Services what he has in store for them. The country, too, has the right to know. If the right hon. Gentleman does not come clean he will be failing in his duty and we shall have no alternative but to draw the most serious and depressing conclusion

Royal Assent

I have to notify the House, in accordance with the Royal Assent Act 1967, that the Queen has signified Her Royal Assent to the following Act:

National Insurance Act 1974.

Defence

Question again proposed, That this House do now adjourn.

4.15 p.m.

Anybody would have thought that we had never had a Conservative Government for the last three and a half years. I do not know whether the right hon. Member for Chesham and Amersham (Mr. Gilmour) was purposely being mealy-mouthed or speaking with his tongue in his cheek, or whether he was just responsible for forked-tongue verbiage when he was talking about defence cuts. I shall charge him with having cut more in one year than we have at any time we have been in office.

I shall try to indicate a little about forces' pay, although I cannot come to any conclusions about it because I do not have the report. It may be possible to suggest some improvements in compensation for our troops in Northern Ireland, and I hope on that score that my hon. Friend the Minister of State will say something when he winds up the debate.

I was astounded to hear the right hon. Gentleman talk about enormous unilateral cuts. We have no intention of making enormous unilateral cuts, and I do not think they will take place. We have indicated throughout that before we proceed consequent upon our defence review there will be discussions with all those concerned both in this country and outside it and we shall not act unilaterally.

When the Secretary of State says that there will be no unilateral cuts, does he mean that he is pledging the Government to the position that if any of our allies in NATO have any doubts about our wisdom in these matters he will not make the cuts, or does he mean that he will merely consult them and then proceed?

The hon. Member must be naïve. [An HON. MEMBER: "He is thick."] It is not possible for a Minister to give an assurance of that kind. The consequent effects of the defence review will proceed after we have consulted our allies which are involved with us in our defence commitments abroad.

On 21st March I announced that I had set in hand a review of current defence commitments compared with the resources that, given the economic prospects of the country, we can afford over the long term to devote to defence. This review should be completed by the autumn. The results will be presented in a White Paper. The review will be the most comprehensive examination of our future defence rôle and our commitments ever mounted in peace time. There is no reason why it should not be done, and it is about time it was undertaken.

As announced in the Gracious Speech, the Government's aim will be to maintain a modern and effective defence system while reducing its cost as a proportion of our national resources. An immediate reality which affects the defence programme as well as all public expenditure is the economic situation which the Government inherited on resuming office. The terms of the legacy were reviewed by my right hon. Friend the Chancellor in his Budget speech, and they are now well known. They are worth repeating because they are the backcloth to the defence review.

On the economic front there was a balance of payments deficit in 1973 on current account of nearly £1,500 million. There have been the frightening figures of recent months—£300 million deficit in January, £347 million in February and £371 million in March—and a record trade deficit for the first quarter of this year of over £1,200 million. Then there were the huge losses that the nation suffered because of the three-day working week, which have been estimated at £1,000 million for manufacturing alone and more for the economy as a whole.

The twin evils of a recurring balance of payments deficit and an unhealthy rate of inflation forced the last administration towards the end of 1973 to impose a massive cut-back on public expenditure of £1,200 million. Despite the continuing threat—which the right hon. Member has not mentioned—defence was required by the Conservative Government to contribute no less than £178 million to the squeeze of December last, and that was about 15 per cent. of the total cut of £1,200 million then imposed.

This cut-back was on top of the £60 million reduction in defence spending in an earlier round of Conservative public expenditure cuts, announced in May 1973, and that was 10 per cent. of the cuts then imposed, and there was another cut of £12 million in October. As a result of these Conservative reductions, planned defence expenditure for 1974–75 had already been cut by £250 million when we took office. The additional saving of £50 million which we decided to make has resulted in total savings for the financial year 1974–75 of £300 million at 1973 prices, or, expressed in 1974 prices, £346 million.

Do not the facts which the right hon Gentleman has just adumbrated illustrate two things —first, on the balance of payments, the need to fulfil our international obligations and honour contracts which will bring us currency from abroad, and, secondly, because there have been the cuts about which we have heard, there is precious little room for more cuts?

The hon. and learned Gentleman has yet to point out to me where we have dishonoured contracts. I hope that when he charges the present administration with not being a friend of the forces he will with shame look back at the past 12 months and see how the previous Government went on cutting defence expenditure time after time without thought of the commitment or the forces.

From these figures it looks as though defence was regarded by the last Government as a prime candidate for expenditure cuts, and on a rapidly rising scale. Unless they had intended to pursue a policy of short-term cuts—and that is always the most damaging for any long-term programme —I have the feeling that they, too, and the right hon. Gentleman the Member for Chesham and Amersham, but for the way the electorate spoke in February, would now be engaged, as I am, in a major review of defence policy and commitments.

The Defence Estimates for 1974–75, as already announced, which total £3,612 million, reflect all the savings I have just mentioned.

On this point regarding dishonouring contracts, can the right hon. Gentleman make a clear statement about frigates for Chile and say whether spare parts for frigates may or may not be delivered?

I cannot go into all the details at the moment, and in any case it is not my specific responsibility to the House to do so. It is the responsibility of my right hon. Friend the Secretary of State for Foreign and Commonwealth Affairs, who has made clear that the Chilean ships and spares concerned have been agreed and the matter is going ahead. [HON. MEMBERS: "Oh!"] The House knows that, and I do not know why hon. Members should cheer about what is, at this particular stage, tedious repetition.

As far as savings on defence are concerned, it is too early to be precise on how these can be achieved. As a result of the three-day week and its impact on the availability of material, a proportion of the saving may be taken up by slippage; that is, a falling behind in pro- grammes for which funds are available. Slippage means that the Armed Forces must accept delays in the supply of new equipments and spares which, but for the slow-down in industrial production, would be available for use and for the improvement of our military capabilities.

On top of the slippage, it will almost certainly be necessary to impose some cancellations to achieve the full savings target for 1974–75. It is right, as the Conservative Government recognised, that defence should not be immune from public expenditure cuts at a time of economic crisis. The right hon. Member for Chesham and Amersham said in the House on 18th December 1973:

In the short-term, commitments cannot be readily adjusted; and, also in the short-term, the bill for the pay of both the Armed Forces and of defence civilians, which in 1973 amounted to about 47 per cent. of the total Defence Estimates, is a fixed element in the budget. The result is that the brunt of the short-term cuts must fall on the equipment vote—that is, the ships, aircraft, tanks and other weapons and equipment needed by the Services. It is in this area that cuts have to be made—in production, in development projects and in stores for the Services. But it is in this area, too, that the short-term measures can have the most damaging and disruptive effect, so it is my firm intention that the defence review I have initiated should not suffer from this piecemeal approach.

Would not the right hon. Gentleman accept that many of the civilians are actively engaged in support services to the Services and in naval dockyards, concerned with production for the Services, and that without them there could be no forces?

I am well aware of that and I do not want to keep giving them spasms of uncertainty, such as was the case throughout the whole of the last year of the previous administration's period of office. I want us to be able to carry out a defence review which makes sense, and I do not think that we should take arbitrary decisions such as were taken by the previous administration. The review will be conducted calmly and rationally, and there must be sufficient time for adequate consultation with allies, both and outside Europe, whose interests are involved. Where major adjustments will be needed both in the nature and the extent of requirements for future weapons and other equipment, our aim will be to give industry the maximum notice possible so that an orderly transition can be made to match the new requirements. Our aim is that industry should be able to form a clear picture of whatever adjustments are needed and which we would expect to take effect from 1975–76 onwards.

The economic difficulties which form the background to our defence effort are, as I have shown, quite considerable; but so is the military threat, and this makes a defence effort necessary. In saying this I am not, of course, making a political assessment about the actions which the Warsaw Pact might take in the years ahead.

Before leaving the matter of the defence review, can the right hon. Gentleman say whether he has set a financial target for the restriction of defence expenditure?

No, I have not. I am looking over our commitment and at various levels of expenditure, and in due course I will examine the situation to find where we shall be able to make cuts of several hundred million pounds in defence.

I would be grateful if the right hon. Gentleman could clarify a point. He said earlier that cancellations would be necessary to meet his target. Now he has just said that he does not have a target.

The hon. Gentleman has not been paying attention. He has been too busy listening to the chatter around him, and to jokes about defence, and he has now fallen into the same trap. He should have listened more carefully. With regard to short-term cuts, in 1974–75, yes, there are bound to be cancellations. I am to review across the board all three Services, but I cannot give any detailed indications about this just yet.

I am not clear on one aspect of what the right hon. Gentleman said. If we are looking at our commitment and if we are deciding to maintain our commitment in certain parts of the world, whether they be, for instance, Hong Kong, Brunei or Singapore, shall we maintain that commitment by keeping forces at a rate which is correct to carry out the commitments? In other words, with regard to Hong Kong, shall we maintain the garrison at the present level?

Before the Minister answers, may I point out that 30 right hon. and hon. Members want to take part in the debate. The House must choose: it can have question and answer or a debate.

I am much obliged to you, Mr. Speaker, but I am willing to help hon. Members, especially when they get in a tangle, as one hon. Member did just now. In the short term there are bound to be cancellations. As to commitments, I said that we are examining all commitments abroad and are looking at various levels of spending. When the options are before us, we shall decide how best we can cut back several hundred million pounds on defence expenditure.

As I said, the economic difficulties form part of the background, but so does the military threat which makes that defence effort necessary.

The Soviet Union and its allies are participating in talks with the Western allies on a variety of crucial issues, notably in the Conference on Security and Co-operation in Europe, in the Strategic Arms Limitation Talks, and in the talks on mutual and balanced force reductions. Their participation in these talks is, I am sure, very serious. I am confident that they, like us, wish to achieve reductions in the burden of defence expenditure while maintaining undiminished security. I hope that they, to, recognise the advantages of genuine détente. Mutual and balanced force reductions will necessitate mutual good will and patience. They could be a move towards meaningful détente.

Both we in this country and the Soviet Union have everything to gain from putting behind us past disputes and establishing our relations on a basis of friendship, realism and co-operation. None the less, it would be wrong to ignore the military equation. As we saw six months ago in the Middle East, it can be as dangerous to close one's eyes to the facts of a military situation as to ignore political factors.

As Defence Secretary, I should be shrinking from my responsibilities if I did not ensure that full account was taken of the existence of the military threat. What are the facts about the threat? The Soviet Union continues to spend heavily on defence. Her different social structure allows her to devote much less to her service men—especially in the ranks—in pay, food, accommodation, support for the families, leave travel and so on, than we or our principal allies do for our Service men, whether volunteer or conscript. The Soviet Union can, as a result, spend a much larger proportion of its defence budget on equipment than is possible for any Western country.

In total, the Soviet Union is still spending nearly 8 per cent. of its gross national product on defence compared to less than 7 per cent. in the United States. The absolute level of spending in the Soviet Union has been rising steadily from year to year, with very little price inflation, and in 1974 will amount to the equivalent of about 80 thousand million United States dollars, roughly comparable to the current level of defence spending in the United States. I recognise, of course, that China must loom large in the Soviet Union's own calculations of her defence needs. But there is no evidence that Soviet forces deployed in central Europe have been reduced on that account.

A significant feature of Soviet defence spending over the past five years has been the very large increase in outlays on military research and development and space. These have been rising at about 10 per cent. a year, and the Soviet Union may well now be spending nearly twice as much on military research and development and space activities as the United States.

Russia has achieved parity with the United States in strategic weapons—that is, the intercontinental and submarine-launched ballistic missiles and the long-range bombers. Also, in manpower and conventional weapons the Warsaw Pact's superiority over NATO is distinctly marked. The House should be under no illusion about that. In Central Europe the disparities favour the Warsaw Pact by about two and a half to one in tanks and about two to one in field guns and aircraft; and the Warsaw Pact has some 20 per cent. more soldiers than the alliance and some 30–40 per cent. more soldiers in fighting units. These disparities do not take into account the back-up forces stationed in the Soviet Union itself. Large and well-equipped Warsaw Pact forces are also deployed on NATO's flanks.

Comparisons by numbers alone do not give the whole picture. To take one example, there are differences between East and West in the equipment and combat effectiveness of army divisions. The Warsaw Pact has more main battle tanks, but NATO—at least at present—has more anti-tank weapons. NATO's tactical air forces, though smaller than the Warsaw Pact's, are in some cases of better quality. But the great strides the Warsaw Pact is making in modernising and re-equipping its forces are gradually reducing such advantages in quality as NATO possesses; and, compared with NATO, the Warsaw Pact forces have the operational advantage of standardising almost wholly on one type of equipment —the Soviet pattern. This applies to tanks, artillery and small arms, and tactical aircraft, just to give a few examples.

We know, too, that in recent years the Soviet Union has emerged as a maritime super-Power, with all that that implies, by developing a large, modern, well-equipped ocean-going fleet of cruisers, destroyers and escorts, some 350 operational submarines of which at least 100 are nuclear-powered, and a force of over 1,000 naval aircraft. An aircraft carrier will be added to the list in the near future. While NATO's total naval strength is at present greater in terms of numbers than that of the Warsaw Pact —though not all this strength is deployed in the immediate NATO area—the trend is a decline in NATO strength and an increase in that of the Warsaw Pact. The Warsaw Pact's building rate for nuclear-powered submarines is now twice that of NATO.

Furthermore, NATO naval strength includes a higher proportion of older, less effective ships and substantially fewer sea-borne missile systems. The House must also be aware that the development of large energy resources off our shores could add a new dimension to the maritime threat and give rise to a new protection task. [HON. MEMBERS: "Hear, hear."] I do not mind the chorus of "Hear, hear" from the Opposition Benches. I do not profess to be an alarmist. Indeed, I feel that I am always more of a realist. On defence, one must face the facts—[HON. MEMBERS: "Hear, hear."]—and those happen to be the facts of the threat. I do not think that open aggression against the West is a likely possibility at present. But the military power of the Warsaw Pact is a powerful potential instrument of war, and a decisive military superiority of that nature could be employed to reinforce political pressures.

A falling-off in NATO's relative military strength and in its relative determination to fight if need be could lead to a decline in its political self-confidence, in its cohesion, and in its power to resist such pressures. If this were to happen, the freedom of Western Governments to pursue policies of their own choice, either internally or in their foreign relations, could be restricted. We would be in a situation where our own policies and actions could be, at least partly, dictated by the reactions of other Powers.

The need is, therefore, for the West to have at its disposal strong and credible conventional deterrent forces, backed by a tactical nuclear capability, and this applies particularly to the quality of NATO's forces. This is the essence of NATO's deterrent strategy. Strategic weapons represent the ultimate deterrent. But deterrence must be valid against the whole range of possible threats. This means that strategic weapons must be buttressed by tactical nuclear weapons and conventional forces, to provide NATO with a range of options in response to the degree and nature of the attack, and with the ability in the face of a major deliberate attack to secure time for negotiations before having recourse to nuclear weapons.

Both sides of the House will readily acknowledge—the right hon. Gentleman recognised it—that NATO is and must be the linchpin of our security. I can assure the right hon. Gentleman that the Government's commitment to the alliance is indeed "unequivocal", the term he has used in the past.

But, having spelt out the massive forces deployed along the Central European East-West front, I feel that it must be disturbing to many people that so much of many nations resources are diverted and spent on defence and arms. I only hope that the many talks in progress between East and West can reach conclusions which will provide a launching pad for genuine détente and a lessening of offensive postures. I am sure that the alliance, the Americans and the Russians, too, would welcome that change.

The alliance is defensive. It is celebrating its 25th anniversary. Its aim has been to preserve stability and peace by deploying military forces, trained and ready to operate together, in sufficient strength to deter aggression. I emphasise that our NATO contribution will remain the first charge on the resources that can be made available to defence.

When one is examining the impact of defence on national resources, the calculation is usually in terms of the proportion of GNP. The NATO figures for 1973 show us to be spending more in these terms than France or Germany. These figures are not, of course, the sole criterion in the assessment of relative burdens, but they certainly provide a point of departure and argument in our reassessments.

Outside Europe we shall examine the contribution made in each case by our military presence to the maintenance of peace and stability. We shall have in our minds the decision taken by the Labour Governments in 1968 that our forces should be withdrawn from South-East Asia, and we shall have to take stock of that situation.

Because of the developments since 1968 in our Far East commitments, we attach special importance to early consultation with the other Governments in the Five Power Defence Arrangements. At this stage I must inform the House that my hon. Friend the Minister of State will be leaving tomorrow for a first round of consultations with all those Governments.

Visits that I plan to make later this month to Bonn, for a first meeting with my German colleague, Herr Leber, and then to Washington for discussions with Mr. Schlesinger, and the round of NATO and Eurogroup meetings in the middle of June, will provide me with an opportunity to listen and form my own judgment of the importance attached by our NATO allies to the contribution which Britain makes within the alliance.

I am confident that I will find my colleagues sympathetic towards the economic and financial problems which many of us share in common, and a willingness to work out together solutions which will make the best use of our collective contributions to the alliance. For my part, I shall assure them that we shall consult them fully at the stage when we are examining all the options that emerge from the review and before we take final decisions.

I am looking forward in particular to discussing with my European colleagues, particularly in the forum of the Eurogroup, new ways in which we can collaborate to achieve the maximum return in military capability from the resources that we can collectively afford to devote to defence. We have already had some notable successes in this field—the Jaguar aircraft and the Gazelle, Lynx and Puma helicopters, produced in collaboration with the French; tracked reconnaissance vehicles produced with the Belgians; and others that are in the research and development phase of development.

My meeting with Mr. Schlesinger will give me an opportunity to reaffirm the importance attached by the Government to our links with the Americans. I think this link is essential for our security. It is also vital to the political cohesion of the West; and political consultation as well as military co-operation forms part of the NATO network. During the Middle East war and its aftermath there was much talk of a crisis of confidence in the alliance. In many ways this was over-dramatised at the time, but, clearly, there were strains within the alliance. The only safe lesson to draw from that time is that consultation in advance is the recipe for unity in emergency.

I think NATO really needs to look at the way it uses its crisis management machinery, and an important task for allied consultation will be to spot potential trouble areas in advance and work out agreed policies on a contingency basis.

The defence review is taking place at a time when Britain and her allies are engaged with the Warsaw Pact and other Powers in major security negotiations—multilateral in the case of mutual and balanced force reductions and the Conference on Security and Co-operation in Europe; bilateral in the case of the United States/Soviet strategic arms limitation talks. The agreements which we all hope will eventually emerge could set the pattern for European security for many years to come.

Can the right hon. Gentleman tell us in advance that when he goes to Washington he will tell Mr. Schlesinger that there is no question of the Polaris bases being removed from this country; and when he goes to Bonn will he tell Herr Leber that he has every intention of continuing with the MRCA?

The latter point will be covered completely in the defence review, as will the question of the examination of the Polaris bases. Every aspect of our defence activity will be covered in the defence review. I have already told the House in answer to Questions that the matter of our seeking to negotiate on Polaris and the Holy Loch bases will take some time. A number of international multilateral and bilateral talks are taking place and they will have to progress before we can enter into talks on Polaris.

The aim of the Western negotiators in MBFR is to rectify the disparities between the conventional forces of NATO and the Warsaw Pact which I mentioned earlier. The negotiators must also take account of the advantages in geography, mobilisation, deployment and reinforcement enjoyed by the Warsaw Pact. It would make no sense for NATO to emerge from the negotiations with less security than it has at the moment.

The West have, therefore, proposed that there should be a common ceiling for total manpower in ground forces on both sides taking into account combat capability. The West has also proposed that, as a first step, there should be a reduction of United States and Soviet ground forces in the area.

The preparation for the conduct of the MBFR negotiations has been an excellent piece of NATO co-operation and cohesion. The need to give our negotiators at Vienna every support in their complex and difficult task will be very much in our minds in the conduct of the defence review.

It would be unrealistic to expect quick results from Vienna. A lot of ground has to be covered, all of it calling for patient and painstaking negotiations. But it is very much in Britain's interests that the MBFR negotiations should, eventually, succeed, because their success could make it easier for us, as well as our allies, to reduce the burden of defence on our economies and at the same time to maintain our security undiminished. To achieve the one aim at the expense of the other would be foolish.

In tackling my tasks as Defence Secretary, I shall make the well-being and morale of the Armed Forces my special concern. This means, among other things, that they must not feel that they are being unfairly treated on the question of their pay. I am fully aware—I have been to a number of Service stations—that some in the Services are now feeling the financial pinch and that many are worried because no announcement has yet been made.

The Armed Forces Pay Review Body is well seized of the position. The time it has taken the body's members to complete their report is no fault of theirs. The fact that they have been required to work within the rigid statutory incomes policy bequeathed to us by our predeces sors has given rise to some awkward problems of interpretation and priorities. But I am pleased to say that the chairman has informed me that they will be submitting their report to the Prime Minister in the course of this week. The Government will waste no time in considering the report and in announcing their decisions. The new rates of pay will, of course, be effective from 1st April of this year and all the back payments will be made as promptly as possible. I am hopeful that a statement will be made this week.

The forces must also feel secure about the future of their chosen professions. They must both be given the right weapons and equipment to perform the tasks that the Government require of them; and the important rôle they play in the community in assuring our security must be recognised. I cannot and will not commit the cream of our youth to military conflict without feeling satisfied that they have the best equipment for their needs and for their safety in the achievement of their and our objectives.

I shall also be concerned to ensure that the Services can recruit the men they need—both officers and other ranks—in the wide range of skills that the complexity of modern warfare requires. Recruiting has not been good in recent months, particularly for the Army. It is never easy to identify the factors which at any one time have a bearing on the levels of recruitment. The raising of the school leaving age to 16 had an immediate effect, but this may prove to be only temporary. The attractions of Service life—particularly its pay and conditions —in comparison with other careers are also important considerations. I shall be looking carefully into all these problems.

The well-being of our forces in Northern Ireland is a matter of special concern. At present, 15,500 Service men are employed on security duties. To give an idea of the scale of this effort, it is equivalent to about one-quarter of the total size of the British Army of the Rhine. No one would have predicted that five years ago. It underlines the importance of our forces being ready to cope with the unforeseen and, at times, the unforeseeable.

The armed forces in Northern Ireland are performing their difficult tasks with skill, courage and a remarkable restraint which have earned them the respect and gratitude of all dispassionate observers. I emphasise that they will remain in Northern Ireland for as long and in such strength as is needed to ensure the peace. They will continue to carry out an unrelenting and severe campaign against terrorism, from whatever quarter it may arise.

We must also recognise that, apart from the risk of death or injury, service in Northern Ireland entails hardship for both troops and their families. Throughout the emergency the House has been united in its determination that no effort should be spared to better their lot. I must give due credit to the previous administration for their improvement of the Service men's lot and to the responsible authorities in the Army. Over the years, all those concerned have brought about the introduction of a large package of improvements in conditions of all kinds, including, for example, a programme of work services to improve accommodation, which has already cost £17 million.

Life under operational conditions in operational localities cannot be other than tough, and the search for betterment is continuous. I can, however, announce some immediate and important improvements to the measures that are already in force.

First, Service men who wish to take their cars home with them on leave from Northern Ireland to Great Britain will be able to do so twice a year at public expense. That is an important concession to members of the permanent garrison.

Secondly, single Service men serving on emergency tours in Northern Ireland and returning to Great Britain for their midtour rest and recuperation leave will be allowed an additional free travel warrant instead of having to use one of their annual free warrants.

Thirdly, wives of Service men left behind in Germany while their husbands are serving on emergency tours in Northern Ireland will be allowed a free return journey to the United Kingdom while their husbands are away. This will give them the opportunity to stay with parents and relatives during their husbands' Northern Ireland tour. This will be in addition to their existing entitlement to a free visit home with their husbands during each three-year tour in Germany.

Fourthly, further help will be given to Service men wishing to telephone their wives and families from Northern Ireland. In future, Service men will be able to make a limited number of free calls a week to their families on the mainland, and those with families in Germany will be able to make one free call a week to them. I cannot practically do more without overloading the telephone system.

Fifthly, discussions are taking place with the Post Office on the possibility of forces' air letters being sent free between Service men in Northern Ireland and their families in Great Britain and Germany.

Sixthly, Service men and their families travelling between Northern Ireland and Great Britain on overnight sea journeys will be provided with sleeping berths at public expense.

Finally, I am also introducing an arrangement which, while not bearing directly on Service men serving in Northern Ireland, will benefit soldiers whose homes are in the Province. I am arranging for free civil air travel to be made available to the parents of Northern Ireland soldiers and others who. because of the circumstances, find it difficult to go home—that is, back to the Province —on leave. This will enable parents to go from Northern Ireland to visit their soldier sons in Germany. I hope that the House will welcome this package of improvements.

As the right hon. Gentleman said, our gratitude is also due to the public for the generosity of their personal response to a number of campaigns for the benefit of troops involved in the Northern Ireland emergency. The Daily Mail, Sun and Daily Mirror newspapers have all been engaged in these helpful campaigns, which have supplemented the efforts which I and my predecessors over the years have exerted.

The predominance of the operations in Northern Ireland should not cause us to forget the devotion to duty and high professionalism of the rest of our armed forces, wherever they are deployed. Their primary task alongside our allies is to deter aggression wherever it may occur. For this the Army and the Royal Air Force are deployed in the front line in Germany, and the Royal Navy and the Royal Air Force keep a constant 24-hour vigil above, on and below the seas.

The Services are upholding their high and well-deserved reputation for giving military aid to the civil community both at home and abroad. There are many contributions to peace. For example, the Army and the RAF make a contribution to United Nations peace-keeping in Cyprus, the first contingent of the United Nations emergency force that was despatched to Egypt last October to hold the cease-fire line was flown in by RAF aircraft, the Royal Navy is assisting with the clearance of the Suez Canal, and so on.

I have spoken for far too long. To sum up, the Government have begun honouring their election pledge on defence. A major defence review is in progress, and I shall announce the results later in the year. But a lot of hard and careful work lies ahead on the review. Sufficient time must be allowed for consultation with allies, both in NATO and elsewhere. Throughout and beyond the review, I shall have at the top of my priority list the well being of the Armed Forces and the need to maintain their confidence in their chosen career.

I hope that the outcome of the review, conducted in the way I have described, will command support from both sides of the House and from the nation at large. Everyone knows that we are obliged to make a major effort to shift resources into exports and investment over the next few years, and several hundred million pounds should be found from our defence budget. We are also aware that major issues of security, international relations and the well being of the British defence industries are at stake. These are not matters to be plunged lightly into the political arena.

I recognise that the Opposition spokesman on defence said—no doubt on behalf of his party—that he wishes to see an unequivocal commitment to the Western Alliance and an adequate defence of Britain. That, too, must be our objective, but we may have to re-assess how best we can make our most effective contribution to that alliance. That is our aim in our defence review and we expect to achieve it. I am sure that it is also the nation's desire.

4.58 p.m.

I must declare a personal interest in that I was until recently colonel of my regiment. I am now Honorary Colonel of the Mercian Yeomanry T and AVR and Chairman of the South-East T and AVR Association of England.

The Secretary of State did little to clear the fog that surrounds the form of the proposed cuts, beyond saying that they would take the form of cancellation of equipment. There is one ray of hope, and that is that the structure of the Army, Navy and Royal Air Force will remain the same and there will be no cuts in personnel.

The value of the debate is small because of the absence of the long-overdue White Paper which should have been produced by now. Therefore, without possessing the basic information we are not in a position to argue.

During the tour of office of the Conservative Government, the Expenditure Committee set up the Defence and External Affairs Sub-Committee. That committee, of which I was a member, produced various reports and in February of this year we produced recommendations about the form the Defence White Paper should take. The right hon. Gentleman the Secretary of State for Defence said that it would be a fuller report than in the past, and I should like to quote what we said on the subject: as being one of the most expensive projects. The sub-committee, apart from taking evidence, visited the Messerschmitt works at Munich where the prototype was made. As my right hon. Friend the Member for Chesham and Amersham (Mr. Gilmour) said, we very much hope that this aircraft will not meet the same fate as did TSR2. The MRCA is a superb aircraft and is urgently needed by the Royal Air Force. It is a joint project with Germany and Italy. This means that at last there will be some form of standardisation and inter-operability of equipment and that the MRCA when flying from a British base will not be confined to a British base for servicing, repairs or replenishment. We believe that the strike reconnaissance variation of these aircraft must be maintained.

At an earlier stage the sub-committee examined things of a more mundane nature and its members were firmly of the opinion that the money allocated to the defence budget should be allocated to the Forces. For that reason, we concluded that health, education and services provided for families of the Forces should not be included in the defence budget but should be regarded as expenditure incurred by the various Departments concerned. We examined that topic in 1972 when overseas costs had reached a scale of £259 million. I have little doubt that by now these figures have escalated. I very much hope that consideration will be given to removing these matters from the defence budget.

Last March the sub-committee visited Canada where we were briefed on the interesting experiments which had been conducted in integrating and unifying the Canadian Forces. We felt that this integration was not applicable to this country but that there were lessons to be learned from the Canadian experience. For example, we discovered that economies were being made in the initial training of tradesmen among the three Services when those jobs were of a similar nature. When that initial training was carried out in one place it led to the saving of overheads. We examined tradesmen such as cooks, medical orderlies, clerks, pay clerks, physical training instructors, policemen, postmen, educational instructors, drivers, vehicle mechanics and storemen. It is obvious when one goes into details that various savings could be made at a time when it is essential to make economies where they hurt least.

The right hon. Gentleman the Secretary of State for Defence drew attention to poor recruiting, particularly in the Army. He also mentioned the nation's burden in having to provide 15,500 troops in Northern Ireland and emphasised how essential it was to maintain that figure. Therefore, it is essential that the Army is made attractive as a career. It is quite true that overseas bases, many of which are said to be threatened—one hopes that perhaps this is rumour—form part of the attraction to recruits. Therefore, we must be careful to ensure that there are other ways of attracting recruits to the Services.

I should like to ask one question about Northern Ireland. I appreciate the difficulties in retaining force levels there. We know the successes being gained in Northern Ireland, but could every effort be made to ensure that the troops can enjoy a 12-month respite before returning to the country for further service?

I should like to make a final plea on behalf of two comparatively new forms of training. I hope that these will not be regarded as trivial. The first concerns the Army alone and is military. The second is non-military and inter-Service. Both cover all ranks.

I should like to draw attention to the valuable battle group training carried out in Canada at Suffield in the Rocky Mountains. This is the biggest and best natural training area in the world. Invaluable training can be carried out using every form of modern weaponry with which the soldier is equipped. This is first-class value and I hope that, whatever happens in economic terms, that form of training will be maintained.

The second point to which I wish to draw attention is the adventurous training carried out at centres in England, Scotland, Wales and Germany. The great advantage is that they are all character-building activities. They vary from free-fall parachuting to sub-aqua diving; from rock climbing to pot holing; from off-shore sailing to gliding; from ski-ing to canoeing. At these centres last year 10,000 instructors were trained and then went back to their units. As a result of these courses 30,000 men in this country went on expeditions. All these activities have an element of risk and they bring out the powers of leadership which are so essential in young officers and men alike.

I conclude by asking first that the White Paper be issued as soon as possible, second that it contains the details for which we asked; and third—and I believe most important—that we in this House have an opportunity to debate it before final and irrevocable decisions are made.

5.10 p.m.

At this moment, men and women are being tortured to death in Chile by the Fascist secret police. Their sole crime was that they were active trade unionists, Socialists, Liberals and Democrats.

There is one word that the British Labour movement understands, and that word is "solidarity". I am proud that our movement in recent weeks has been expressing that solidarity. We believe that the best way of expressing it is to declare and to mean, "No arms for Chile". This applies especially to the Hawker Hunters because—perhaps it is symbolic—it was these aircraft which bombed the palace of the President in Santiago, and it is these aircraft which have been used to bomb a thickly populated working-class area of Chile.

Our delegate conference, which is the supreme policy-making body of our movement, demanded unanimously, with the support of the platform and of people who are now Ministers, that no arms should go to Chile. Hon. Members will remember the tremendous scene when there was a standing ovation to the ambassador who had remained loyal to his democratically elected Government, Ambassador Bunzer.

Last week the International Committee of the National Executive of our party had before it 38 resolutions from all over the country, and I understand that more have streamed in since. All express the same demand. Our committee unanimously endorsed that demand, and it will go before the national executive of our party next week.

More important, the engineers involved in overhauling the Rolls-Royce engines are "blacking" that work. Their action is a great credit to them. It is no use Opposition Members talking about jobs. The men engaged on this work are prepared to sacrifice that employment because of the principle involved.

I expect the name Scanlon to be introduced very rapidly. I was disgusted by the disgraceful cartoons which appeared in the Sunday Express and the Daily Express. No doubt they believe that it is Mr. Scanlon who dictates the policy of his union. Mr. Scanlon is carrying out the policy which was adopted recently at the annual conference of delegates representing all 26 regions of the country. In my time, I have myself been a member of the AEU. Mr. Scanlon is a far more democratic leader of that union than Lord Carron or any other president who preceded him.

Sir Kenneth Keith, the head of Rolls-Royce, said yesterday,

A similar argument has been raised, though not by Sir Kenneth. It is said that other Latin American Governments might be discouraged from buying arms from us. Good. Let them be warned that any further Fascist coup in South America will receive similar treatment from the people of this country.

Sometimes principles come before profits. This is such an occasion. The export of arms is the one kind of export that we do not want. I contrast our position with what has happened in Japan. Japan has spent less than 1 per cent. of her gross national product on defence and, because she has no arms exports, she is able to capture the markets of the world with shipbuilding, cameras, motor cars, motorcycles—the lot. That is what we should be doing.

Moreover, it will not be the first time in history that weapons manufactured in Britain have been used to kill British Service men. I can give three examples. It happened in the Dardanelles. It happened in the 1960s in Aden. More recently it has happened in Belfast. Arms manufactured here were used at the cost of British lives.

The same sordid argument that we must sell arms for money and trade were no doubt used by those who sold firearms and drink to the Red Indians. There is a principle involved, and sometimes it is more important than money. For that reason, I hope that we shall hear from the Government whether those Hawker Hunters are to go to Chile. I plead with my right hon. and hon. Friends, for the good name of Labour, that they should not go.

I want now to say a word or two about cuts in arms spending. When I say that, I am thinking of £1,000 million a year, which is the official policy of our movement.

I am staggered by the impertinence of Opposition Front Bench spokesmen who, having nearly bankrupted the nation, now press us to spend still more on so-called defence. Like John Grigg—formerly Lord Grigg—who writes in The Guardian this morning, they take the same line. I am certain that if this Government doubled its expenditure on armaments—which God forbid—the militarists on the benches opposite would say that it was still not enough and that we can negotiate only through strength.

That is exactly the argument of the Soviet Government—and we cannot both be superior in strength. It is a logical impossibility. This is a bottomless pit. I ask the Opposition how much they want to spend on arms. Are they prepared to double the bill? I think that they are and that, having done very well so far themselves in proceeding towards bankruptcy, they would have this Government complete it.

I plead with my right hon. Friend the Secretary of State to listen to the ordinary people. They are often more correct than the experts. They were right about Vietnam when they said that we should not be associated with the American war there. Unfortunately, the Labour Cabinet did not heed their words. The people were right and the Cabinet were wrong. Could not it be the same in this case?

I remind my right hon. and hon. Friends that in our election manifesto, which was supported by the people, we made it quite clear that there would be arms cuts involving hundreds of millions of pounds and an ending of the American Polaris base in Scotland. That is in our election manifesto; it has not just been rushed forward.

I welcome the fact that the Minister, who is a capable man, although some of his ideas this afternoon did not suit me, is to institute a thorough-going review and that the MRCA and the Polaris base will be considered in that review. However, I warn him that he will encounter bitter hostility over any arms reductions not only from the hon. Member for Haltemprice (Mr. Wall) but from the Press.

I am an ex-newspaper man. With some honourable exceptions, but very few, the Press will not give publicity to news, however important, that is unhelpful to big arms programmes. I do not know whether there are any links between certain newspapers and armaments firms. Defence correspondents are not corrupt men; there is no bribery on their part. However, most of them depend for their inside information on armaments firms to provide them with details of the latest developments, and so on. Naturally, they do not want to offend them.

For four years I was a defence correspondent for the Glasgow Herald. Nobody has tried to corrupt me. Perhaps nobody reads the Glasgow Herald. I got no information of any kind from arms manufacturers.

I do not think that the hon. Gentleman needed corrupting because he already supported a large arms programme to start with. He is not a very good example.

I suggest that defence correspondents, naturally depending for information on arms firms or even top brass in the forces, will not go out of their way to be critical of them.

I ask the House to contrast the treatment and space given by newspapers to someone who has obtained a few pounds more than he should from social security with that given to increases of hundreds of millions of pounds in arms expenditure. The Press does not need to tell lies to deceive the public. It decides what it will play up or play down. It will omit and conceal important news. The spending of extra hundreds of millions of pounds a year should be important news. It prevents the progress that we want in housing. health, education, and so on.

We are told that a cut of £1,000 million a year in arms spending will mean mass unemployment. I notice how suddenly the hearts of certain hon. Gentlemen opposite bleed for the poor engineers who will lose their jobs. They have not been so concerned in the past. I recall one Conservative Member of Parliament who said, "The only thing that will make Britons work is 11 men chasing 10 men's jobs". But these people are now saying, "Arms cuts are all very well, but they will mean mass unemployment."

Two points should be made. First, the Government should immediately start to plan alternative peaceful jobs. I pay tribute to my hon. Friend the new Member for Coventry, South-West (Mrs. Wise) who has put down an early-day motion signed by 60 of my hon. Friends, mostly new Members, the last part of which stresses that it means different employment, not unemployment. The two are distinct and one can he achieved without the other.

Secondly, it is completely untrue that arms reductions need cause unemployment. It is obvious that the money saved would be spent on other things. I am not referring solely to houses, schools, pensions, and so on. The firms engaged on arms work can be equally well engaged on making peaceful products. I used to turn out certain pieces of metal and it was the same operation whether they were for tractors or tanks, but I am sure that the engineers concerned would much prefer that they were for tractors, not for tanks. These firms are losing potential orders for oil rigs, ships and giant oil tankers. That is the kind of work to which the men concerned could be transferred.

There is plenty of work for electronics engineers on computers, electronic traffic control and the electronic segregation of rubbish, which has a great future.

Two inquiries have taken place, one by the United Nations under Professor Brown of Leeds University and the other by the Economist Intelligence Unit. Both proved that it would be possible to transfer men from war work to civilian work without unemployment. The far more effective proof was in 1945 when we had 9 million men and women in the forces or employed in arms factories. Within a year, under a Labour Government, those men and women were transferred to civilian work without unemployment. We are asking for a much smaller trans fer—a switch not from a war to a peace economy, but from an enormous arms programme to a small one.

It is greatly to the credit of the TUC that it demanded a £1,000 million cut in arms expenditure and it is also greatly to the credit of the AUEW because that union has more men engaged on arms production than any other union.

I ask the Government again to listen to the ordinary people, not to the arms manufacturers and militarists.

5.28 p.m.

The hon. Member for Salford, East (Mr. Allaun) began his speech by complaining about the alleged activities of the Fascist police in Chile arresting and torturing people. His complaints and principles would have been more effective if he had equally complained when Dr. Allende's Communist-controlled Government and police were arresting and torturing Christian Democrats in Chile.

We know that the hon. Gentleman wishes to destroy the British armaments industry. He speaks against it year after year. If we heeded his ideas, any arms orders from a country which either his Government or Left-wing union leaders do not like would be automatically abrogated. That is what the hon. Gentleman wants, as it would ensure no further orders.

I congratulate the Secretary of State for Defence on a strong speech. He put his argument extremely well. Even so, he must realise that the Opposition are bound to be worried about the defence review and the possibility of cuts that could severely disrupt our national defence.

History tends to repeat itself and political memories are short. Prior to the 1964 election the Labour Party hung a millstone round its neck by pledging that defence would be kept within a total cost of £2,000 million a year for five years at 1964 prices. At the last election they hung a millstone round their neck by adopting the Labour Party conference resolution to cut defence by at least £1,000 million a year.

After the 1964 election, we had to wait until January 1965 for the defence review. That was completed in 1966, and it was followed by further cuts. In that year, there was another cut of £100 million in defence. In 1967, there was a further cut of £100 million, and in 1969 there was a cut of £110 million. In other words, in almost every year of the last Labour Government's administration the Services were disrupted by continued defence cuts, and we bear in mind that precedent are naturally worried about what may happen this time.

One of the first actions of the previous Labour Government was the cancellation of the TSR2, the P1154 and the HS681, the three most advanced military aircraft projects in the world. Will they now cancel the MRCA? That has been referred to already. If the Government do cancel the MRCA, that will spell the end of any international armaments projects, because no one will want to go into partnership with Britain.

When they were last in government, the Labour Party withdrew our forces from the Gulf and from Singapore, though that decision was later reversed by the Conservative Government. The Labour Party wanted to withdraw from Malta, but there was a hell of a row with the Maltese and the Government decided to leave our troops there. The Government are now talking about withdrawing from Malta, Singapore and Cyprus, but the savings by doing so would be worth only between £50 million and £60 million, which is nothing like the kind of cuts demanded by the hon. Member for Salford, East and his friends on the Left wing of the Labour Party.

When the Labour Party was last in govornment, the Royal Navy lost its teeth because of the cancellation of the aircraft carrier programme and the withdrawal of existing aircraft carriers and fixed-wing aircraft of the Fleet Air Arm. Do the present Government intend to cut the through-deck cruisers and the sea Harriers which are vital to the antisubmarine defence of our shipping routes and which would perform a great service for NATO?

The previous Labour Government scrapped the RAF's long-range strike reconnaissance aircraft when the cancellation of the TSR2 was followed by the cancellation of the F111A, an American aircraft. The MRCA is in danger under the present Government.

The Army had the equivalent of 26 battalions disbanded by the previous Labour Government, and the Territorial Army was drastically reduced. What is to happen now? Will severe cuts be made in BAOR which will gravely affect our NATO allies?

That is all that I want to say about defence cuts. We must hope for the best as the review proceeds. I want to concentrate the burden of my speech on NATO. I am sure the House will agree that the Conservative Government set a good example in NATO by slightly increasing our defence expenditure and encouraging our NATO partners to live up to that example. The Secretary of State made a strong speech today, but he said that cuts are to come, and these will be on top of the cuts already made by the previous Conservative administration which pruned off any fat that existed.

The Secretary of State said on 24th April that the defence review aims

Or does the right hon. Gentleman mean the average of all the NATO figures less the United Kingdom figure, which is about 4 per cent. of GNP, or does he mean France and West Germany together, which average more than 4 per cent.? If the right hon. Gentleman means that, it means a cut of about £1,000 million, which is what the Left wing of the Labour Party has been asking for, and that would place NATO in severe jeopardy.

The hon. Gentleman said that it was the Left wing of the Labour Party which wanted these cuts. Perhaps I may tell him that these cuts are wanted by the whole of the Labour Party, not just the Left wing.

I was under the impression that the majority of the Labour Party stood for adequate British defence forces in the alliance within NATO. I still believe that to be true. What does the Minister mean by "equivalents of our NATO allies"? Any Socialist decision to withdraw from the EEC, which may or may not come about, plus serious defence cuts to the tune of £1,000 million would severely damage, if not wreck, the future of NATO.

Savings can be made by different methods within NATO which would considerably assist this country. I refer to the standardisation of arms. This is an old chestnut, and there has been some progress on these lines, but only last week I found that certain brigades of allied nations cannot talk to each other direct on the communications system because national systems differ and there will not be standard NATO communications until the 1990s. There is therefore still a long way to go.

There are no fewer than 17 different surface-to-surface or surface-to-air missiles in the NATO navies, so there is a long way to go there. At present, 13 different anti-tank weapons are being developed, and once again there is a long way to go before there is standardisation. The F104 Starfighter, which is the main weapon of at least four NATO air forces, is to be replaced in the near future, and as there seems to be no clear agreement on one aircraft as a replacement we may be faced with going backwards and the possibility of having three different aircraft to replace one.

There should be one European weapons system in NATO. In other words, there should be one type of battle tank, one type of frigate, one type of fighter aircraft, one type of bomber aircraft, or whatever it may be. That is possible only if NATO lays down its staff requirements and the allies accept and try to follow these requirements. That is one way of dealing with the problem.

The other possibility is to take a lead from the NATO infrastructure programme to which each nation contributes a certain percentage and leaves NATO to spend the total amount on a common programme. We should consider devoting a certain percentage of each country's budget to the NATO budget. If every nation in NATO did that we should get better value for money as it would be spent for a common purpose.

Integration and standardisation are the answer to the escalation of costs. The Committee of Nine set up by the North Atlantic Assembly in the interesting report which it produced at the end of last year, said:

I now propose to refer to the USSR. One hears about the need for détente, and both sides of the House fully support that principle if only the Soviet Union means the same as we do. However, only last year Pravda contained the following remarks:

To give an example, the Middle East is one of the flanks of NATO and is therefore an extremely tender area. Britain's withdrawal from the Gulf left a vacuum and the Soviet Union is creating client States in Iraq, Syria and Egypt. Control over oil resources, which means their control, is coming nearer and nearer. The reopening of the Suez Canal will enable them to switch their forces at will from the Mediterranean to the Indian Ocean and every effort is being made to destroy Western influence in Southern Africa. The MBFR conference and the European Security Conference drag on. One hopes that they will mean something but they may be dragging on to confuse the Western democracies. If this increases the pressures in the Western democracies for unilateral cuts in defence forces, it can only benefit the Soviets.

There are three dangers. The first danger point is Central Europe. It is the vital one, but any major engagement there would lead to nuclear escalation, which no one wants. The second danger is from the flanks. I have referred to the Middle East. There is also the Northern flank and the Cape route. After recent events no one in this country now needs to have emphasised to him the importance of oil supplies from the Middle East and the importance of our being able to protect that long and vulnerable route in time of tension.

The third danger is the danger from within. It was Lenin's view that the Western democracies, or if one likes Western capitalism, would be destroyed from within through becoming soft, greedy and lacking in will power. In 1973, the Labour Party Conference passed the following resolution:

The real lesson that we must learn is to emulate the Belgians who have just managed to put defence outside party politics and to discuss issues on their merits and not on party conference motions. If that were done here, it would be a great advantage to all future Governments.

Is it not a fact that the Belgians contribute 3·2 per cent. of their gross national product to NATO, whereas we contribute 5 per cent.? Is that what the hon. Gentleman is advocating?

No, what I am advocating is what the Belgians are doing—changing a conscript army into a professional army. All their Services in Germany will be professional and this will considerably raise their cost. I do not know to what these will rise, but it will be more like our 5 per cent. plus. They have put defence above party politics, which I am sure the right hon. Gentleman will agree is where it should be. The need is for a Select Committee on defence, on which all Members would have full security clearance. Only then shall we be able to produce a strong national defence policy agreed to by both sides of the House in the nation's interest.

5.43 p.m.

I strongly resented one thing said by the right hon. Member for Chesham and Amersham (Mr. Gilmour). It was his suggestion that Labour Governments, particularly the 1964–70 Labour Government, had no care for the forces. I was in that Government and I saw from within that, on matters of pay, working conditions and providing the forces with the equipment they needed, that Government were second to none in my lifetime. It is totally untrue that this party has no care for the defence of this country or for the people who are primarily charged with it.

I was also a little puzzled by the hon. Member for Haltemprice (Mr. Wall). He wants defence to be outside party politics. It is no way to help achieve that end to suggest that it was Labour Party policy in the 1930s which led to Dunkirk. That was a very naughty statement. When I listen to the hon. Member— goodness knows, I have been listening to him for many years now—I feel that such is his passion for defence he would be in favour of giving the Chiefs of Staff everything they asked for, regardless of economic conditions or the political situation. That is not a policy for any Government to carry out.

In defence, the Government should be guided by three principles. First, they should try to make a realistic assessment of the threat or threats against which we have to guard and the degree of immediacy of those threats. Second, they must assess—I am sure that the hon. Member for Haltemprice will agree with this—the extent to which, in facing those threats, they can rely on the efficient co-operation of allies. The third principle must surely be the extent to which we can contribute to that co-operative defence without placing unacceptable burdens on our peace-time economy.

Where and what are the possible threats at present to world peace? The correct answer to that, I suppose, is that they exist in every corner of the globe. My limited experience in the Ministry of Defence was that it was extraordinarily difficult to forecast where the next trouble would arise. Despite that fact, it is a truism that if we were to try to stand ready to intervene in every conflict anywhere that it might happen we should shortly bring ourselves to economic collapse and as a result would be unable to intervene anywhere. We should probably have to place ourselves on the footing of a war economy even if we set out as our aim, not immediately but after rapid expansion, to intervene in any part of the world. No one seriously believes that this is a sensible policy.

The first job of the Secretary of State, therefore, is to try to decide what commitments we intend to undertake and to concentrate upon those. It no longer makes sense to think of undertaking commitments east of Suez. I was rather surprised by suggestions from the Opposition Front Bench that we should contemplate the defence of Hong Kong. Hong Kong is totally indefensible. We are there merely by grace of the Chinese. They are folly glad to see us there—for matters which have nothing to do with defence. To fight a rearguard political action to maintain garrisons in Hong Kong—garrisons as distinct from a police force—seems to be totally absurd.

Does not the hon. Gentleman agree that our forces in Hong Kong are there to support the police force and that if there were serious rioting, such as occurred a year or so ago, we would need more than an ordinary police force to deal with it? Surely the hon. Gentleman would not consider it right to withdraw our guard ship, HMS "Chichester", from Hong Kong. He is a man who is devoted to the Royal Navy. Such a withdrawal would affect morale to a very great extent.

I do not think that our guard ship has an effect one way or another on our morale in Hong Kong. The one use that I have for Hong Kong in defence terms—it is a very dear use—is that it provides a marvellous run ashore for seamen and provides a good time; but we do not need a garrison to ensure that.

Much the same thing applies to Singapore. We have only a token force in Singapore now. The snag of a token force is that it raises hopes that we cannot possibly fulfil. The bases in both Singapore and Hong Kong are bases from which we could withdraw. I shall not pretend that that would produce any vast saving. It would not. I shall come later to where some savings at least might be produced.

I come now, however, to the second principle, the extent of co-operation we can expect in any commitments that we undertake from our allies. Here we are still very much in the dark. On a number of occasions in debates on Defence Estimates I have asked successive Governments to provide more and more information about NATO. We do not really know even the extent of the allied forces that are committed to NATO. I certainly do not know whether the NATO command structure, military or political, is sufficiently effective to make possible speedy and effective action. I very much hope that in the White Paper that is to come that sort of consideration will be borne in mind.

I was a little amused by a Conservative back bencher who complained bitterly that we do not already have a White Paper before the House today. He felt that the present debate, which had been called for by the Conservative Party, was, therefore, valueless. It is not valueless at all. Although the present Government have moved extraordinarily fast it is a bit much to expect them to produce a complete defence review within two months. The value of the debate is that Members of the House of Commons can give advice to the Government on the guidelines and, indeed, the details the White Paper should contain.

If, with allies, we commit ourselves to dealing with what seems to be the principal threat and if we concentrate upon that, the threat in the West, how great and how immediate do we consider that threat to be? I would not deny that there is a threat, but the emphasis on the extent and the immediacy of that threat was exaggerated by the hon. Member for Haltemprice. However, it would be certain folly to deny that that threat, at any rate, lurks in the background. A few years ago it was fashionable to base one's defence policy upon an assumption that there would be no major conflict within the next 10 years. Despite what the hon. Member for Haltemprice has said I should think that today it is possible to extend that period. I very much doubt that there will be a major conflict within my lifetime—although that is a fairly short period now.

I accept what the hon. Gentleman has said. However, he will recall that I said that I did not think there would be any war in central Europe because such a war would go nuclear and no one wants that. Will the hon. Gentleman address his thoughts to the flanks and the problems of oil supplies? Without those supplies NATO armies cannot move after 16 days.

I shall certainly come to the matter of oil supplies. The flanks are part of the West as a whole—so long as we do not outflank our flanks by going all over the world.

If we have a limit on our commitments and if we can accept that the threat of a major conflict, at any rate in the West, is less immediate than it was, perhaps 15 years ago or certainly 25 years ago, what sort of savings can we reasonably expect to make upon defence, in addition to those which have already been made by the previous administration and by the administration of 1964–70?

I want to begin by mentioning one thing on which I hope we shall not economise—research and development. Things move so fast in defence matters nowadays that anyone who leaves the Services is totally out of date within a couple of years. It would be a tragedy if an emergency were to loom larger than it does at present and we began to expand our forces but then found ourselves so far behind on weaponry that we could not equip our men satisfactorily.

Nor do I want to see indiscriminate cutting across the board. I agree with some hon. Members that we should not set a total for our cuts. To say that one-third must come from the Army, one-third from the Royal Air Force and one-third from the Royal Navy would be a stupid way of setting about it. What is essential is that we should provide ourselves with forces which are not only capable of rapid expansion but also whose shape, as opposed to size, is right. I would have thought that, in naval terms, that would mean a far greater concentration upon submarines than on surface vessels.

If we are to do this, the only area in which we shall get a real saving is in manpower, which represents the highest single item of expenditure in the defence budget. I believe that we ought to try to save on manpower. The Secretary of State is complaining, as many others are, that recruitment is not as good as it should be. I am not disturbed by that, provided that long-term re-engagements are taken in sufficient number. I would like to cut down recruitment drives at present and step up the inducements to re-engagement and to long-term service.

I am very much surprised that no mention so far has been made about oil supplies, except those coming from the Middle East. I understand that we are to have oil supplies from another area in four to six years. I hope that my right hon. Friend is paying strict attention to the ways and means by which we are going to protect those supplies. I do not think that such protection will come from conventional forces as we know them. I cannot see our frigates cruising or our aircraft flying round and round the oil fields on continuous patrol. I do not think that we shall protect our oil supplies in that way.

I do not think that, except in terms of a major conflict, they will be at risk from the sort of enemies against whom the forces of the Crown are normally deployed. I am much more concerned about the possibilities of guerrilla sabotage—not coming necessarily from Russia: I think that it is much more likely from other quarters.

I believe that it will be necessary, in order adequately to safeguard our supplies, to develop a special force which is neither army nor navy, nor air force. It will have to be a force one of whose main weapons is bound to be intelligence, finding out in the rough, hostile quarters of the world whatever information it can get about prospective descents upon our oil supplies. It will have to be a force highly skilled in using detection equipment, more likely from beneath the sea.

I hope that, in considering defence expenditure and preparing the White Paper, my right hon. Friend will give close attention to this vital interest of the country—the protection by special means of the future of our oil supplies from our own oil fields.

6.5 p.m.

I thank you sincerely, Mr. Speaker, for the opportunity to speak in this debate.

First, I congratulate the right hon. Gentleman the Prime Minister on his statement today and our security forces on the major seizure of some terrorist documents. I also congratulate the Secretary of State for Defence on his speech and on providing better facilities for our soldiers. We can do nothing greater for our soldiers than to provide them with better facilities, because they deserve nothing but the best.

I pay tribute to my predecessor, Mr. Stratton Mills, who represented Belfast, North for some years in this great House with honesty and sincerity. I wish him health and happiness in his retirement from politics. I am proud and honoured to represent Belfast, North, which has almost 73,000 electors and is an area which has suffered from violence by bomb, bullet and intimidation. The seat was once occupied by that great friend of Ulster, the late Lord Carson of Duncairn, who will not be forgotten by the people of Northern Ireland as long as memory holds her place.

Many of us in Ulster, and, with great respect, even in this House, feel that we have become specialists in our knowledge of defence problems and of the British Army. I have been in the middle of most types of situation that we have in Ulster. I have been bombed and shot at; I have seen people die in the streets; I have been present in many homes to hear the cries of loved ones for someone who has left home for work in the morning, never to return.

I remember those homes, and my thanks and prayers go to many homes throughout this great land of England from which, as we have been reminded, so many of our brave soldiers have gone to die on the soil of Ulster, giving their lives for Queen and country in an effort to bring peace there. We remember them. I have done my best at all times to back up our soldiers in every way possible. I want to say now how deeply grateful we in Ulster are for their courage, immense patience and good humour in most trying and dangerous situations, and also for the great personal kindness we have found in all ranks.

At the policy level, however, most hon. Members will know that very adverse criticism has been made of the way in which the war in Ulster has been conducted. It is not my intention to dwell on this criticism, but it amounts to this, that the policy of containment rather than of confrontation and attack, which the Army has been required to adopt, has long proved ineffective. When Captain Lord Richard Cecil resigned his commission last winter he was not only indignant that the Army was not allowed to get on effectively with running the war but distressed by the extent to which this policy had unnecessarily caused the deaths of many of our soldiers.

When one is not a soldier oneself it is all too easy to have a strong opinion about what ought to be done in a war situation, but the sort of view which Lord Richard Cecil expressed has also been expressed to me personally on many occasions by officers and men serving in my constituency. Similar views were also expressed last month by a still higher authority when Major-General Sir Walter Walker, until recently Commander-in-Chief, Northern Europe, referred to what he called the weak-kneed, wet, velvet-gloved, low profile which the Army was being required to adopt in Ulster. He urged a much tougher and urgent approach to the problem. Many soldiers of all ranks have told me that they were convinced that a short sharp operation several years ago would have saved many lives, prevented much destruction and made the embarrassment of long drawn out internment unnecessary.

I want to draw attention to other aspects of the security situation in Northern Ireland which are too much ignored by those in public life and by the news media. This is something with which I personally am very intimately acquainted in my constituency. Our security situation is often reported in terms of statistics. We are told that there have been fewer shootings this spring than last, but more bombs. Bombs and bullets make a dramatic news story, but to give attention only to them is to miss the whole nature of the war which is going on in Ulster.

Nearly every anti-democratic movement in the world today begins with the idea that the first thing to do is to destroy the orderly system of things. In the south in the 1920s the Republican movement won success more by making chaos than by winning public confidence. When the attack was once more renewed in Northern Ireland the main object was to do as much wrecking as possible—not just wrecking of buildings but the wrecking of people's lives, of social standards and the rule of law.

There are far more ways of doing this than by using bombs and bullets. Large parts of Northern Ireland are now dominated by gangs who rob, intimidate and molest people, extract protection money and engage in vandalism. For a big section of our young people a way of life has been created which involves the smashing of public and private property, the robbing of people in the street, assault, intimidation and cruelty. We have a very high truancy rate, and some of the young people have not been to school for two years. Many of our streets are not safe at night. Some of our public parks have become dangerous places, and social life has died away. Even one's home is no longer safe.

My constituency is full of wrecks of what were once scenes of happy family and social life. I will give just one example. Nearly two years ago a large gang descended on an old, long-established and rather popular cricket and hockey club in my constituency. They wrecked the pavilion and towed away the furniture. When we asked the soldiers why they did not stop what was going on they said that they were not allowed to do so because if they did it might cause a riot. The next day the same people came back and set the pavilion on fire. Ever since, the building has stood derelict. Nobody has dared to try to restore it or use it. The difficulty seems to be that the Army cannot act as a police force. At the same time, the police are not an army. Crime can fall into the wide gap between the two administrations.

I quoted the case of that cricket ground because I was present when the soldiers were there. We had the position explained to us. The soldiers were not allowed to do anything and the police could not have done anything. The same thing happens when gangs like that decide to wreck a shop or a builder's yard, or put a family out of their home. Nobody seems to be in a position to step in promptly and stop it or follow it up. Life for us was not like that a few years ago. Ours was a peaceful Province with a much higher record of success from the point of view of police prosecutions and crime than in the rest of Great Britain.

We remember how the trouble began. We remember those mobs of youngsters finding they could throw stones at our soldiers and that nothing could happen to them. The Government's motto was —and I quote a former chief constable —"Softly softly." A little later payment was obtained for stone throwing from funds donated to the IRA from America, or gained from bank robberies or racketeering. The lapse of time, and the fact that wrongdoers were not brought to justice or effectively restrained, have made this sort of thing a way of life in Northern Ireland. It is from this layer of easy, casual and permitted crime in our community that the bombers and gunmen are recruited. From that rich soil, terrorism keeps renewing itself.

Inevitably this state of affairs produces a backlash. People feel that justice is not available to them, that they have been abandoned, without protection, to those who care nothing for social morality or for what is lawful; and, naturally, people try to take the law into their own hands. People describe this as sectarianism, but the key to the situation is not anybody's religion. It is a political and social device which has been applied to the whole Ulster community by those who want to break it up and destroy it. The provocation of a backlash is part of that device.

It will be remembered that the worst kind of backlash did not occur until after March 1972 when our Parliament was first disbanded and institutions that had formed the core of our society were hijacked. There have been many arguments about this on one side and another, but the basic fact is that the majority of people in Northern Ireland do not in their hearts regard institutions which have been imposed on them as being the lawful government of their country. They have no confidence in those who run those institutions. Whatever the legality of the situation, the emotional reaction at grass roots has been the feeling that the rule of law has been overthrown, that there was lawlessness at the top and that people are free from lawful restraint and its application at all levels of society. Events since 1972 have proved that violence pays. To many people it seems that if a person holds a political objective the best way to achieve it is to bomb, burn and to kill. No one concerned with security in Ulster should leave that political background out of account.

There are these three things which need to be done. If they are not done the security position will deteriorate disastrously. First, the Government must take the people of Northern Ireland fully into their confidence. Let us have a General Election to the Northern Ireland Assembly and then free negotiating about what needs to be done next. The conferences and negotiations that we have had have largely been exercises in arm-twisting or getting signatures to blank cheques from people who have no mandate to give them. Security in Ulster must be based upon what the community wants. Democracy in handcuffs with nursemaids to supervise gives the wrong sort of answers.

Secondly, we must clean up that area of uncontrolled crime which lies behind the bombers and the gunmen and carries out their aims by other means. For that we need a substantial auxiliary police force working in its native district under a control answerable to the local people. Much has been said about the acceptability of particular police forces. In present circumstances no police force will be acceptable in certain parts of Northern Ireland till Northern Ireland is destroyed. That is a lot longer than most of us are prepared to wait. Whatever ideas we may have about peace-time conditions I cannot see how such a force can be effective under present conditions unless it is armed and is virtually of a paramilitary character.

It would be a great contribution to peace. and would certainly allay the deep uneasiness which could erupt into violence if attempts were made to push Northern Ireland into some special relationship with the country from which the attacks upon us have been master-minded and from whose territory they have in many cases been carried out.

We know that the point has often been made that nearly all those who have done violence in Northern Ireland have been natives of the Province, but in 1936 violence was done in Austria by the Austrians and in Czechoslovakia by the Czechoslovakians. That did not take away from the guilt of Nazi Germany just across the frontier. There is much between Ulster and its other neighbour which requires time to heal. Those who desire peace will give it time. We in Ulster want a good relationship with the Republic, involving security and many other matters, but something pushed through hastily behind our backs or over our heads against the express freedom of the majority is liable to be a cause of strife.

The people of Northern Ireland are being pushed to the brink of disaster. I appeal, on behalf of Ulster people, with sincerity and from the depth of my heart, please do not push us over. We ask for no special rights. We claim the same right from the United Kingdom as every other part of the United Kingdom. We ask for no more, and will accept no less.

6.23 p.m.

I am sure that the whole House will wish to congratulate the hon. Member for Belfast, North (Mr. Carson) on his maiden speech. It is always a difficult task to make that first speech in the House, and for one coming from an area of the United Kingdom which is troubled and torn it must be especially difficult. I am sure that we all admire the hon. Member's sincerity, his tribute to the Armed Forces and his moving description of the personal tragedies of the citizens of Ulster. We look forward to further contributions from him.

I shall confine myself to a particular area of defence. Obviously this debate is concerned with how our forces can be best deployed and best equipped and how we can get the best value for money. Inevitably in today's economic situation we have to be talking about the economies we can make. We have heard of the standardisation of weapons with our European allies. There is also the question of the running down of our base in Singapore. We need to make a close scrutiny of our home-based establishments to see whether savings could be made there.

I want to speak more in favour of preservation than elimination in terms of our Armed Forces in the Mediterranean. I speak specifically about Gibraltar, Malta and Cyprus. The cost of these across the exchanges is in the region of £60 million. It is not a vast sum but I do not think it could be cut further without dire consequences.

Let me take first our garrison and our air and naval installations in Gibraltar. I have had a number of letters recently from friends of mine in Gibraltar who are worried that the next defence review will mean the final crippling of the defence installations in Gibraltar. The whole House knows of the loyalty of the people of Gibraltar to this country and to the Commonwealth. The House knows the history of democracy and freedom there. We all know that these people live in an acutely claustrophobic atmosphere. To the extent that we can give to the people of Gibraltar a guarantee that their defence installations will be maintained and not cut, it will be a consolation to them.

It is particularly important that we should not attempt to emasculate the Armed Forces in Gibraltar at a moment when the Iberian Peninsula is in a grave state of flux with, first, Portugal happily moving towards a greater period of freedom but also of uncertainty. There is, however, also the régime in Madrid. Who knows what may come in the immediate aftermath following the demise of General Franco? I hope that the Secretary of State is not contemplating cuts. What we need is a reassurance. It would be a bad moment to make any reductions in our Gibraltar base. With the Suez Canal shortly to be opened again as a highway to the East, it is imperative that there should be one area of stability at the entrance to the Mediterranean upon which we can all rely.

I have known Malta for a quarter of a century. My feeling is that the people of Malta have been shabbily treated by all parties. The Malta George Cross has had a pretty shabby reward from the United Kingdom. Far too often in our lives we say that a particular territory is no longer of any use to us and, therefore, we can forget about it. The present limited defence establishment in Malta —mainly an Air Force establishment— should be maintained. It represents a very small expenditure and it is here that Britain is representing a European presence in the Mediterranean.

It has been one of my sincerest feelings over the years that Mediterranean stability has not been helped by the large United States and Soviet influence in the Mediterranean. Rather it has been hindered. We are now returning to a reunification of the Mediterranean, and Britain, as part of Europe, has a useful, constructive albeit modest rôle to play as a representative of European defence in Malta. It could well be that towards the end of the decade Malta's economy will enable it to sustain itself. Nevertheless, while Britain is in Malta the Russians are not, and it is not an annex of the United States.

The most important territory in the Mediterranean is Cyprus. We have cut as far as we can there. I can recall Cyprus in 1958 when we had 40,000 troops there, but we are now down to a very modest base at Dhekelia with the Air Force at Episkopi. Those forces perform three vital rôles. First they provide the logistic support for the United Nations presence in Cyprus. It is important for the House to recall how the United Nations, with a major British participation, has literally stopped annihilation on a massive scale between the Turks and the Greeks on the island. Withdrawal of our logistic support could undermine the whole operation. To a certain extent it is a negative operation in that we are stopping them from destroying themselves. Nevertheless it is a job which the British Army does splendidly, and it co-operates magnificently with the other United Nations forces there.

I follow and accept the general tenor of my hon. Friend's argument. However, bearing in mind that there has been hostility between those communities for countless years, which unhappily, looks like continuing indefinitely, does he regard this as an open-ended commitment to which we must send troops and on which we must spend money for ever more?

Yes, it is an open-ended commitment. I may be something of an optimist but it is interesting to note the signs of the two communities coming together. Sometimes it is necessary to live with problems that have no immediate solution, but that is one of the crosses a responsible Power has to bear. The reward for us is that we are saving people's lives and that Cyprus is now becoming the Switzerland of the Eastern Mediterranean.

A more strictly orthodox defence rôle for Cyprus, which could in time be wound up, is as a staging post to all the forces we have East of Suez. Until Hong Kong can be wound up in a satisfactory fashion we must have that air trafficking facility. Again, the number of forces deployed on it is modest and not extravagant.

The third reason why we need a guarantee by the Government to maintain our position in Cyprus is because of the extension it represents to our United Nations rôle in Cyprus. In time I should like to see Dhekelia becoming the world's first regular UN base. Our sovereign base territory there could be shared with or leased to the United Nations. Its importance arises from the continuing problem which will exist, as it exists with the Turks and the Greeks but multiplied 10 times, of the Arabs and Israelis. We need nearby a United Nations base for logistic supplies and for rest and recreation for the UN forces that will be needed to interpose themselves between the two parties. If we were to wind up our presence in Cyprus and if the base should pass out of our control, that potential United Nations facility might not be available.

I therefore simply ask that our positions in Gibraltar, Malta and Cyprus should be carefully considered. In those places we are not pursuing aggressive or extravagant rôles. They are simply an insurance for peace. They are the kind of job that Britain can do extremely well because Britain has respect, because our troops know how to behave themselves in overseas territories and because the world knows that we aim for peace and not war.

6.34 p.m.

I found the arguments of the hon. Member for Brighouse and Spenborough (Mr. Jackson) strongly convincing and worthy of a good deal of attention.

However, I must return to the Secretary of State's speech and say how much I welcome the changes he has made in favour of soldiers serving in Northern Ireland. The changes are extremely important and, if I may say it in the presence of my Front Bench, long overdue. I congratulate the Secretary of State on the second half of his speech, which was robust and well delivered with confidence —in great contrast to the first part. As I listened to the second part I felt that the arguments he put so assiduously in the first half were being neatly destroyed.

Of course the arguments between Labour and Conservative Governments are not about who can reduce defence expenditure. We reduce it and Labour Governments reduce it, as they did between 1964 and 1970. The real argument is whether the coalition which is the Labour Party, which is a mixture of Social Democrats and all sorts of Marxists, is shifting its centre of gravity. Quite clearly the Labour Government of 1964–70 were socially democratic. There is doubt, however, whether the present Government are socially democratic, and when we hear from Labour Members that there should be a cut of £1,000 million in defence expenditure we cannot be blamed for fearing that the centre of gravity has indeed shifted.

I wish to deal with the prospect of unilateral cuts in our forces in NATO. The United States administration is most anxious to preserve its position in Europe, but Senate and Congress demand increasing and unilateral cuts in American forces in Europe. There is a desire among the Germans to cut their forces, and if Britain plays this game the number of ready forces in Central Europe will be so reduced that the flexible response strategy upon which we depend will disappear and be replaced by a strategy of reliance upon warning time.

If the ready forces are reduced—at the same time, I hope, improving our ability to reinforce—and if reserves are put on a different structure, in the last analysis we must rely upon politicians deciding whether the warning is sufficiently serious for the reinforcements and the reserves to be activated, bringing the ready forces up to a level which could prevent or block an attack from the other side.

The whole trouble with a strategy which relies upon warning is that no one ever believes the warning when it comes. The examples are legion. Take Pearl Harbour in 1941. For the six months before the Japanese attack the Americans knew exactly what messages the Japanese were sending. The Americans had broken the code, but so loud was the "noise" around the transference of those messages that the Americans refused to read the record. So surprising was the attack on Pearl harbour that a large school of thought in the United States after December 1941 believed that Roosevelt knew about it all along and wanted the Americans to accept the attack in order to persuade a united United States to enter the Second World War.

A second example of the great danger of relying on warning is the German invasion of Russia in 1941. Everyone, including Russian espionage agents in Japan and the British Government, warned Stalin that invasion was imminent. The Russian Army commanders warned him, and yet he felt that attack was improbable and he took no steps to meet it. Perhaps yet another example was in 1968 with the Russian invasion of Czechoslovakia. What would have happened had the Russians, instead of stopping in Czechoslovakia, moved on into the West?

Quite clearly, all the advice to NATO from the experts was that the Russians were manoeuvring. This was a threat not against NATO but against their own people, but it was out of the question that the Russians would ever invade Czechoslovakia, so foolish a move would that have been from our interpretation of their point of view. NATO was surprised. What is more, I believe that in the early stages there should have been an urgent investigation of the messages received by the allies from the Soviet Union, but the allies sat on the information for up to 12 hours or more before passing it on one to the other and to the NATO Council itself. Thus everybody was taken completely by surprise.

I have a final example of the point I wish to illustrate. Who on earth would have thought that the Israelis of all people would be caught with their prayer books in their hands last October, even when they had received from the United States all the satellite information they needed to decide that an attack was imminent? All the lessons are that if one relies on warning in order to get soldiers into the right position or, indeed, to get enough soldiers into positions to create a strategy which works, the politicians who are responsible, of whatever party, will argue for delay and will say "Let us see what the messages are and let us be certain before we make a situation which is dangerous even more dangerous by escalating it." In consequence we should lose the game if we ever had to play it.

The point I wish to make is that unilateral reduction of British forces in Europe would be of no assistance to our allies. It would make the position of the American administration more difficult because it has the same pressures. It would also make the German position more difficult, because the Germans also are subject to these pressures.

I know that we are engaged in talks at Vienna and that the European and American view as to what should happen with MBFR is identical. We agree regarding force reductions for the super-Powers—the Americans and the Soviet Union—in the first instance. After that has been accomplished and after a period of time, we can then look for a reduction of our forces.

Let us suppose that in the aftermath of Watergate Nixon wants some success in foreign policy to prevent impeachment, and suppose that he makes a concession on SALT which may be against the European interest and obliges us to make concessions at the security conference which may be against the European interest. These two factors would be serious enough; but a combination of Soviet and American pressure for us to shift our position within the MBFR in order that the first stage should be altered and should not be confined to super-Power reduction would be a great danger to the whole of Europe and to ourselves, for I still number Great Britain as part of Europe.

6.45 p.m.

I am pleased about what has been said regarding Northern Ireland and our forces there. I have in my constituency more people from Northern Ireland than has any other hon. Member in Great Britain. Those people work mostly in the steelworks in my constituency and take a great interest in Northern Ireland and in our forces there, and they will be pleased with what has been said.

I also agree with some of the remarks about NATO, which also concerns me. What is the broadest political fact in the context of any defence debate today? I submit that it is that we have had no major war in Europe since 1945. This is a remarkable achievement, due to NATO and the Warsaw Pact. In the balance of their forces, both conventional and nuclear, NATO and the Warsaw Pact countries have built an umbrella under which we have had peace and under which we are now working towards détente. Our task is to maintain that balance and umbrella, not as an end in itself, but as a means of working towards a scaling down of arms on both sides, in East and West.

I did not agree with my hon. Friend the Member for Salford, East (Mr. Allaun) when he portrayed us as trying to work towards a position of negotiating from strength. He said that the Russians were also seeking to negotiate from strength. I do not believe that that is the way to put it; rather is it negotiating to maintain a balance.

There is an election in progress in France at the moment and we do not know who is to be President or what will be France's attitude towards NATO. Those of us who know France or who think that we know France fairly well believe that she will not necessarily return to NATO but that she will seek to work more closely with some members of NATO, particularly us. I am worried about this in relation to nuclear weapons. We see from history that France and Britain developed nuclear weapons because we were not sure that we would both always have a say in the use of the Western deterrent. Successive French Governments were concerned with the credibility of the American deterrent. That was not so much the concern of successive British Governments, but successive British Governments were worried that one day the climate of opinion in Washington would change and that we should be denied access to American military nuclear information.

However, whatever the history, the fact is that in 1974 we have reached a stage in which France and ourselves have a small nuclear capability, so small that even if the capability was merged it would have little military significance although it might upset the two major Powers. We do not go about adjusting our policies to avoid upsetting great Powers. That is not the object. But the peace of the world, and certainly the peace of Europe, depends on a balance between the United States and the Soviet Union. For France and Britain to pool resources would do no more than upset, annoy and irritate the United States and the Soviet Union and would achieve nothing of military significance. The balance is delicate, but I want us to maintain that balance so that we can achieve a true détente.

If as a result of the French election French policy is not to ask us to merge but to ask that we have special co-operation with the French, I hope that the Government will not accept this—I am talking here about nuclear weapons—because it would divide our NATO allies. Can anyone see the West German Government fitting into an alliance in which there was a Franco-British nuclear force? There are legal problems too. We are signatories to treaties that would prevent us from passing on information and equipment, and there are also partial test ban treaties and non-proliferation treaties to be considered.

The hon. and gallant Member for Lichfield and Tamworth (Major-General d'Avigdor-Goldsmid) referred to the valuable Select Committee of which he is a member and its report. Under our system, however, which is not so much a parliamentary system but a system of government, we have no parliamentary standing committee on defence with access to information and with facilities for examining Ministers. officers and officials.

My hon. Friend the Member for Huddersfield, East (Mr. Mallalieu) asked "What do we know of NATO?" We know little about our own defence structure and little about NATO. The only organisation we have for finding out about NATO is an unofficial assembly, the North Atlantic Assembly, which meets only once a year and has a secretariat of only about half-a-dozen people and little money.

At this stage in the development of the alliance it is most important that we should have a forum to discuss our common Atlantic problems. The hon. Member for Aldershot (Mr. Critchley) referred to one of the problems which should be discussed among the Members of Parliament of all the NATO countries: what would be the effect if the United States forces were severely reduced? Would that have a demoralising effect, or would it spur the Europeans to greater effort? There is no forum other than the unofficial one that I have mentioned in which United States senators and Congressmen and Members of Parliament interested in defence matters can discuss that question.

That is one illustration of the problem. I take another extreme illustration to show the wide range of discussions we could have. There has been much talk and people have been writing about what the big Western countries like the United Kingdom and especially the United States can do when natural disasters occur in places such as Africa, as happened recently. We have large air forces and we, the countries of the Atlantic Alliance, are the countries with the will to provide for the relief of the suffering resulting from natural disasters. The important point is that, regardless of the resources and the will, we have not yet discussed on a world scale how we should best deploy our national resources.

I emphasise the word "national". As was said by my hon. Friend the Member for Brighouse and Spenborough (Mr. Jackson) it is possible to have white troops in an international organisation in Cyprus or Malta. But it would be impossible to have white forces of NATO operating in Africa. I have seen the problems in the field. But we should know how best to deploy the resources of the different national Governments to the best advantage of these people. That is the sort of problem that could and should be discussed.

One fundamental question has been raised by many hon. Members, not least the hon. Member for Haltemprice (Mr. Wall). It is no accident that the present Government, like the previous Government, have not encouraged any celebration of the twenty-fifth anniversary of NATO. The reason is simple. If the public realised how much larger our contribution to the defence of Europe was in proportion to our gross national product than that of our European neighbours, they would be very annoyed. The figures show that the United Kingdom spends 5 per cent., a far greater percentage than that of any of our European allies.

Our nearest neighbours across the North Sea—Norway, Denmark, Germany, the Netherlands and Belgium—all spend less than 4 per cent. I believe that the Governments of those countries and their Members of Parliament should be continually reminded of that fact. The only way to do it is in an assembly where Ministers, but above all Members of Parliament, should be exposed to those arguments.

I am most encouraged by a letter I had from my right hon. Friend the Foreign and Commonwealth Secretary, dated 26th March which referred to the North Atlantic Assembly as providing a valuable forum for the discussion of matters relating to the alliance. He continued:

I no longer ask for an official assembly. I did so for many years but I realise now that that would require the amendment of the treaty. I am not pressing that, but I press for more financial support. It would cost only a few thousand pounds to provide a realistic forum, properly served, where we could debate these problems and let people know what was happening in our alliance.

I want to answer the question of my hon. Friend the Member for Huddersfield, East who has had much experience in this field. We should work in this way to maintain peace—though it is not the only way—through strengthening our alliance and achieving again a balance with the Warsaw Pact, which could lead to a balanced force reduction.

6.55 p.m.

I congratulate my hon. Friend the Member for Belfast, North (Mr. Carson) on a most moving and trenchant maiden speech. I also congratulate him for reminding us of the terrible situation in Northern Ireland and for making some forceful and desirable recommendations for possible remedies.

I should like to address certain questions to the Secretary of State about the strength of the Royal Navy and his plans for it. I am glad to see on the Government Front Bench the hon. Member for Stockton (Mr. Rodgers), the Minister of State, and the hon. Member for Portsmouth, North (Mr. Judd), who is responsible for the Royal Navy. I have noted the Secretary of State's engaging but at the same time evasive habit of dealing with all the questions put to him so far by saying that they will be subject to review in the White Paper. That makes all the more important the recommendation of my hon. and gallant Friend the Member for Lichfield and Tamworth (Major-General d'Avigdor-Goldsmid) that the White Paper should he thoroughly debated when it is prepared.

We have heard a great deal this afternoon about cuts. I am sorry to say that there seems to be a tacit agreement, spreading even to this side of the House, that cuts are necessary and desirable. What is there about the defence budget that is so bloated that it should be cut? What about cuts in supplementary benefit? What is it that makes a defence budget inevitably the first source for those who wish to take money for Government spending and recycle it elsewhere in the economy?

The Secretary of State spoke very convincingly about the need to switch resources into exports. No one would dispute that need. He also mentioned inflation. Experts on the subject argue that one of the great contributory causes of inflation is the velocity of the money supply. It is certainly true that that is greatly accelerated by weekly hand-outs to workshy layabouts at social security offices, compared with the spending on research and capital projects inherent in the defence budget.

I have always understood that the Royal Navy has to discharge three primary functions: it has to defend this country from invasion, to safeguard our trade routes and to discharge such other tasks as the Government call upon it to perform in the application of naval force where necessary. In spite of the tremendous loyalty and dedication of the officers and men serving in it, I believe that it is not fully capable of discharging any of those functions, not even the first.

The right hon. Member for Kettering (Sir G. de Freitas), who compared the percentage of gross national product that we spend on defence with that of other countries—he mentioned Norway and other Scandinavian countries—should reflect that one characteristic which those countries have in common and from which we do not suffer is that they have been occupied and fought over during their history. That has not happened to us. largely because of the strength of the Royal Navy and the amount of national resources devoted to equipping, training and preparing it.

What is the relevance of that in justifying the fact that the contribution of those countries to the defence of NATO is very small?

If the right hon. Gentleman wishes to compare countries which spend a small proportion of their GNP on defence with countries which spend a larger proportion—and we have always spent more on defence than Norway; the proportion has been more or less uniform —he should reflect that the countries he mentioned suffered the fate which it is the purpose of defence spending to prevent.

I cannot put it more clearly.

The House will be aware of the enormous advances in naval technology which have taken place during the last 10 years. They have led to a situation which is comparable only with the dreadnought building programme which took place at the turn of the century in which all existing naval equipment was made obsolete by technological advances. All the ships of the line and cruisers which formed the strength of navies until the early 1960s had been relegated to the category of, as American naval authorities term them, "fire support ships" whose missile, radar and control systems are so deficient that they cannot properly be put into a serious naval engagement.

The Royal Navy is extremely well equipped technologically in some of its ships, but the equipment is almost entirely defensive—that is, it is installed to defend the ships against submarines or aircraft. I should like the Secretary of State to tell us how he envisages a ship of the Royal Navy undertaking a surface engagement against a hostile vessel or group of vessels equipped with surface-to-surface missiles. There is not one ship afloat in the Royal Navy with a surface-to-surface capability, whereas the Russians have built over 150 fast patrol boats of the Nanutschka and Komar classes, all of which are equipped with surface-to-surface missiles and have a capacity for delivering the equivalent in fire-power terms of a 15-in. salvo at 35 miles range.

Such patrol boats have already been distributed to China, Cuba, Egypt, Indonesia and Syria. I fancy that the Lords of the Admiralty would not authorise an intrusion by any of Her Majesty's vessels, in their present state of equipment, into areas where those patrol boats are operating unless—and this is a very important point—they enjoyed full air support. But we have only one aircraft carrier left in commission, and the only air support we have are the ships which carry helicopters, all of which are equipped with devices solely for attacking enemy submarines and not enemy surface vessels.

Some of my constituents who serve in the Royal Navy tell me of their shame, even when they tie up alongside friendly vessels on manœuvres, at the lack of technical missile equipment which shows on their ships compared with that on ships with which they are operating. Taking a hostile ship as an example, I compare the Krivak class of Russian cruiser, displacing 4,800 tons, with the Royal Navy's county class, displacing 5,400 tons, an extra 1,000 tons to dispose of in armament and armour. Yet the Krivak class cruisers are six knots faster and deploy approximately double the fire power of the county class cruisers in surface-to surface, surface-to-air, conventional and anti-submarine devices.

In anti-submarine warfare the Royal Navy is technologically pre-eminent; but here too the idea of cuts should be utterly rejected by the House. There are 170 Soviet submarines based in Murmansk. Against them we can deploy a total of 64 frigates and escort vessels. This compares with the figures at the height of the Battle of the Atlantic, when submarines were capable of much lower speeds and were much less well armed and 41 ocean-going U-boats were opposed on our side by 257 escort vessels, excluding vessels which the United States Navy could deploy.

I turn to the question of the Royal Navy as a peace-keeping force. I ask the Secretary of State to tell us what is the projected life and replacement plans for "Hermes" and "Bulwark". There are at stake four squadrons of helicopters and 1,500 Royal Marine commandos. I have heard unfortunate rumours in my constituency and elsewhere that the possibility is under consideration of phasing out the Royal Marines altogether in the course of the declining life of the amphibious attack carriers.

I urge the Secretary of State to consider the possibility of their replacement on perhaps more economical lines, such as the Andrea Doria class which the Italians are building, or the Japanese Haruna and Hiei. It is essential, however, that proper air cover should be provided all the time even for long-range escort duties, because without it the ships of the Royal Navy will be completely defenceless.

One of the difficulties facing those who draw attention to deficiencies in the country's defences, besides the understandable reluctance of hon. Members to hear unwelcome news, is the widespread view—here I quote from The Guardian of today— in The Guardian wrote is a long time coming.

I conclude by asking the Secretary of State to confirm that he will not interfere with the building programme for the Types 21, 22 and 42 vessels. Can he assure the House that the "Invincible" through-deck cruiser will be completed, that she will in due course be joined by her two projected sister ships and that this substantial investment will not be vitiated by failure to provide vertical take-off and landing aircraft, without which they will be almost ineffective?

Will the Secretary of State confirm the answer given to me by the Minister of State that the Exocet fitting programme still holds good? What plans does the Secretary of State have for the maintenance of amphibious strike capability within the Royal Navy? In particular, will the Secretary of State quash once and for all the objectionable rumour that the Government intend to phase out the Royal Marines? I should especially appreciate an assurance from the right hon. Gentleman that he intends to preserve and develop the existing conventional warfare capability of the Royal Navy.

7.10 p.m.

I am sure that the hon. Member for Plymouth, Sutton (Mr. Clark) will forgive my not following the theme of his interesting speech, although I cannot let it pass without comment. His theme appeared to be to ask why we are talking in terms of cuts in defence expenditure. We are doing so because the Government were elected on the basis and commitment of a cut in defence expenditure. That commitment was supported by the country.

If the hon. Gentleman is ready to argue that the percentage of the electorate who voted Socialist is the same as the percentage who are in favour of cutting defence expenditure, I am prepared to allow him to do so, because that means that 37 per cent. of the electorate are in favour of cutting defence expenditure, which is not a very substantial proportion.

That is a strange argument for a member of the Conservative Party to advance. The Labour Party has the largest share of seats in the House, it therefore forms the Government and the Government will implement Labour Party policies. One of those policies is to cut defence expenditure.

The hon. Gentleman made an interesting comparison when he asked why we should cut defence expenditure and not supplementary benefits. He was extremely courageous in saying that, because it sums up Tory Party philosophy—more guns, less butter.

That was what he said —why cut defence expenditure and not supplementary benefits? If that is Tory philosophy, I suggest that it should be included in the next Tory manifesto.

I have great sympathy with my right hon. Friend the Secretary of State. He is committed to what he described as the most severe review carried out in peace time. The purpose of the review is to analyse all our military commitments. When that has been done he will come back to the House in the autumn with a White Paper and advise the House on how reductions in expenditure can be made.

We seem to have gone through this process before. My right hon. Friend's illustrious predecessor, my right hon. Friend the Member for Leeds, East (Mr. Healey), had six arduous years as Secretary of State for Defence in the previous Labour Government. He was enjoined to do precisely what the Secretary of State is now being called upon to do, namely, reduce defence expenditure. I recall that my right hon. Friend the Member for Leeds, East was not highly successful in cutting defence expenditure, although he made some marginal cuts. My right hon. Friend, who had his arm twisted many times between 1964 and 1970, has now become Chancellor of the Exchequer and will be twisting the arm of the new Secretary of State. It is a classic case of poacher turned gamekeeper.

I am not too concerned about reducing the outpost at Singapore, withdrawing troops from Hong Kong or reducing the forces in Cyprus, Malta and Gibraltar. If all those reductions were achieved they would not represent what some of my hon. Friends ask for. That is where my right hon. Friend's dilemma begins. He said that the linchpin of the Government's defence policy was NATO. That presupposes that the troops in BAOR will remain substantially as they are at present. The other savings to which I have referred are insignificant and would not satisfy some of my hon. Friends.

I detect from the speech of my right hon. Friend the Secretary of State a hint that he is considering reducing expenditure on equipment. There may be opportunity for substantial savings here. Is he thinking in terms of cutting the MRCA? One of the few matters on which I agree with Opposition Members is that if we cut the MRCA one of the few remaining European ventures—great damage will be done to our Allies in Europe. If cuts are not to he made on the MRCA, will they be made on the through-deck cruiser programme? It is far too late to cut the one that is being built in Barrow; that will have to go through. If the cut is not made there, where else in the equipment programme will it be made?

I should perhaps declare an interest. I am deeply interested in this subject because I am sponsored by the AUEW, many of whose members are engaged on producing defence equipment. My hon. Friend the Member for Salford, East (Mr. Allaun) said that if we stopped making tanks and aeroplanes we should plan to transfer to making something else instead, but it does not work that way.

My hon. Friend also referred to his membership of the AUEW. During the war he and I worked in the same factory producing guns for the Army and the Royal Air Force. As the war drew to a close, word got round that that tremendous industrial complex would be closed because there was no further need for its products. My hon. Friend and I and others campaigned against the closure. We had meetings with Ministries, meetings in Manchester and demonstrations demanding alternative work for those who were employed at that huge industrial complex. After all the demonstrations and meetings, those vast factories closed and there was unemployment in the area. The factories remained closed for many years. In other words, my point is that the theory is nice but the practice is difficult. One cannot simply change overnight from producing tanks to making motor cars or from manufacturing aircraft to producing washing machines. It is not a theoretical matter but a question of brutal reality.

When my right hon. Friend the Secretary of State for Defence undertakes his massive review, he must take account of the social consequences of his decisions. I should like him to take a long time on his review because I want his decisions to be right. I do not want him to hurry his decisions. The decisions he takes may not necessarily be correct.

It has often been said that one man's defence cut is another man's dole queue. I do not want that to happen on Tyneside. If I felt that any proposition made by my right hon. Friend was likely to affect employment on Tyneside—the male unemployment rate in the area is already over 6 per cent.—I should be knocking at his ministerial door the following morning. I want to see a high level of employment maintained. I also want to see defence expenditure reduced. and I see no conflict in these two considerations. I urge my right hon. Friend to be especially selective and to bear very much in mind the social consequences of his decisions.

7.23 p.m.

I agree with the hon. Member for Gateshead, East (Mr. Conlan) that any cuts made outside the NATO area will not come up to the figure which has been bandied about in recent months by Labour Members. The House listened with interest to the hon. Gentleman's comments when he stressed the implications for employment of cuts in defence manufacture.

I also agreed with the remarks made by the right hon. Member for Kettering (Sir G. de Freitas) who—dissenting from his hon. Friend the Member for Salford, East (Mr. Allaun)—said that the object of negotiations with the Soviet Union was to have discussions while maintaining a balance of power. I welcome wholeheartedly the improvements, announced by the right hon. Gentleman the Secretary of State for Defence, for the forces and their families in Northern Ireland. Could he give the House his estimate of the increased cost? It is interesting to note that he has started his period of office with an increase in defence expenditure and one which the whole House will welcome.

I cannot let pass what the hon. Member for Huddersfield, East (Mr. Mallalieu) said about Hong Kong. I felt that he completely misunderstood the purpose of our garrison there and certainly misjudged the moral effect which would result from its withdrawal.

The hon. Member for Salford, East asked the House to listen to ordinary people. I do not know what ordinary people the hon. Gentleman has been associating with, but my impression is that the ones I meet would agree that defence is the single most important duty of any Government of this country. The Secretary of State in the second part of his remarks was in tune with the views of ordinary people. Indeed, he could not have put them better. Incidentally, the right hon. Gentleman demolished the resolution passed at the Labour Party conference last autumn and also demolished his party's manifesto. We shall wait to see, as time passes, whose is the dominant voice—the resolution passed at Blackpool, the manifesto or the second part of the Secretary of State's speech.

The right hon. Gentleman said that it was not up to us to point the finger at the Labour Government for their proposal to cut defence spending because when the Conservative Government were in office we did the same. But there is a critical difference between the two methods of approach. Our cuts announced last December were cuts of public expenditure across the board to deal with an urgent situation arising from the suddent increase in the price of oil and the crisis in industrial relations. On the other hand, the Labour Government in their manifesto and at the Labour Party conference promised lasting cuts in defence as a matter of principle and at a time when expenditure on other aspects of Government policy is intended to increase. The Secretary of State tried to claim that the present Government's proposed defence cuts were dictated by a difficult economic situation. That was not how the matter was put at the Labour Party conference or in the Labour manifesto. It is something which has just been dreamed up by the right hon. Gentleman.

I hope we shall be told in the Government's reply to the debate what is the military assessment that lies behind the proposed cuts. We have heard nothing about that. Is it that they consider the world to be a safer place? That is not in the manifesto either. All we have heard is something about bringing our costs into line with the cost of defence for our neighbours in Europe. My right hon. Friend the Member for Chesham and Amersham (Mr. Gilmour) has already shown that that argument is spurious for a number of reasons.

There is another reason for saying that this argument is unsound, but before I go on to that aspect of the matter I should like to venture into the dangerous waters of the 1930s. I suggest that if it had been argued then that we should not pay more for defence than our friends and allies, we should now look back in the light of history and say that that argument was fatuous. Such a course would be equally fatuous at present.

The right question to ask is: what is the nature of the threat? That in turn depends on the nature of the régime with which we have to deal, because the nature of the régime affects whether it might constitute a menace to ourselves? I am constantly surprised that so many Labour Members appear to be so totally ignorant of the nature of the Soviet régime. How many of them—especially the Marxist element of the Labour Party to which my hon. Friend the Member for Aldershot (Mr. Critchley) referred—have read Alexander Solzhenitsyn's Nobel Prize speech? I warmly commend that speech to them, for it is magnificent reading. I have not time to read very much of it, but I should like to read one extract in which the author talks of the fate of other authors.

He says: peaceful, to read that letter. In the face of a régime like that which is described so magnificently by someone who has suffered at its hands, the West, including this country, would be mad to reduce its forces by several hundred billion pounds a year more than it has already.

In my experience, we shall not achieve any relaxation of tension with the Soviet Union by giving things away in advance. I am not opposed to negotiation, despite my criticisms of the Soviet régime. I support the MBFR negotiations and the CSCE. But the right technique in negotiating with the Soviet Union is to decide what is right and to stick to it, and, before we make concessions, to get matching and guaranteed concessions from the other side. One of the most serious criticisms of the Labour Party manifesto for this election is that it weakens the chances of a successful result from these negotiations.

A further point about negotiating with the Soviet Union is that it may be true that at the present time it wants relaxation but that this situation could change very rapidly. That is true of any dictatorial régime. It could change in the time that it takes the order to be given for Soviet tanks to roll into Prague. But whereas detente could disappear overnight, it would take years to rebuild our forces once we had dismantled them.

The Western world is in enough trouble at present without the extra trouble that the Labour Party manifesto threatens to cause it. Wherever we look in Western Europe or in the United States, we see a condition near turmoil. Into this situation has been catapulted a Labour Government—by luck, as the Secretary of State for Employment put it the other day.

Increasingly in the past couple of months, my party has begun to fear that this Government not only have a dangerous policy in Europe but that they have not really thought it out. We have formed the impression that they have not thought out their policy on defence and that where they have done so it is more calculated to rock the boat than to hold it steady. Therefore, to the extent that the Secretary of State has made a robust speech, in parts, I very much welcome that. But, as for the Labour Party manifesto, where stability is needed it is de-stabilising, where a firm negotiating stand is needed it is weak, and instead of setting an example of resolution, I believe that if it is followed through it could lead to a crumbling of the will of the West to defend itself.

I have no doubt that I shall be criticised for being too alarmist. I shall be told that Russian policy has changed, at least for the time being, and that the Soviet Union needs the help of the West too much to be so foolish as to attack us. That may be so—for the time being. But let us not be so foolish as to tempt them.

In any event, this is a circular argument. If the resources of Western Europe are so important, would not it be very convenient for the Soviet Union to have them under its thumb? If it had only the resources of Western Germany under its thumb, it would be incomparably the strongest nation in the world.

There are other ways in which the West could fall under the thumb of the Soviet Union, apart from military attack, and the Secretary of State was right to refer to them. If our defences fall below a level which the people of Western Europe consider to be safe or sufficient to deter aggression, we risk a crumbling of the will of the peoples of Western Europe to defend themselves and a process of "Finlandisation" of one country after another.

Will the hon. Gentleman address himself to this question? Does he think that it makes a contribution to the freedom and preservation of Western Europe to spend so much on arms that we permanently enfeeble the economies of the countries concerned?

I do not accept the hon. Gentleman's premise. He is talking complete nonsense.

I am sorry to see that the hon. Member for Salford, East is not in his place at the moment. I told him that I intended to refer to him. He wrote a letter last week to The Times describing himself as chairman of Labour Action for Peace. I do not know that organisation. It seems rather an Orwellian title. In his letter, the hon. Gentleman made two propositions. He said that the country could not afford the current level of defence spending, and he went on to say that in any case we should spend the money on better things. At first sight there seems to be a contradiction in those two propositions. But what I want to ask the hon. Gentleman who is to wind up the debate is this: let us suppose that the Government did all that the hon. Member for Salford, East and his friends want. Let us suppose that they cut our defence expenditure by hundreds of millions of pounds a year or by £1,000 million a year as the Labour Party Conference put it. Do the Government really believe that the hon. Gentleman and his friends would be satisfied?

And do the Government agree with the hon. Gentleman that there is any better thing than preserving our peace and freedom?

7.37 p.m.

Unlike the hon. Member for Blackpool, South (Mr. Blaker) and many of his right hon. and hon. Friends, I welcome the review of defence expenditure which is now taking place, just as I welcomed the commitment in the Queen's Speech to reduce defence costs as a proportion of national resources. My only criticism comes from the other side in that I believe that the cuts have not been drastic enough or speedy enough.

The Defence Estimates of February last year represented a rise in costs to £3,365 million—a 5·6 per cent. increase on the previous Estimates. Although certain cuts have taken place since then, we all know that further increases in defence costs are envisaged as the years pass. Plans are already afoot for the replacement of existing weaponry and for further research and development which will increase the bill considerably.

I do not believe in defence on the cheap. It is not right to send men to conduct a defence rôle with inferior weapons or to expect them to suffer unduly from the position in which we put them. In that respect I welcome what my right hon. Friend said today about improving the conditions of the Services. But we must reduce our commitments and scale down the nature of our concepts of what is credible and possible in defence.

I recognise that the Government are committed to the maintenance of NATO and its system of alliances. I regret that. Those alliances in many cases are not concerned with the defence of the kind of democracy that we in this country enjoy. They help to defend reaction and the suppression of rights in numerous places throughout the world.

Let us consider how much NATO has been responsible for perpetuating the system that has prevailed for many years in Portugal and the war that it has carried on in Africa. Let us consider also the present Greek régime. I do not think it is right to say that NATO automatically defends democracy and freedom. On the contrary, it often defends many things that we in this country should stand against.

I believe that not only has the time arrived when we should consider winding up the military alliances on both sides, both NATO and the Warsaw Pact, a policy which the Labour Party is committed ultimately to support, but that it is high time that we considered our own relationship with NATO. I do not share the opinions expressed by some of my hon. Friends in welcoming the fact that NATO has lasted so long. I believe, however, that within the rôle we play in NATO we must still be prepared to reduce expenditure on defence.

I am strongly committed to the idea of cutting down defence expenditure by the £1,000 million which was approved at the Labour Party Conference. This is not a doctrinaire notion. It is vital if other forms of public expenditure are not to be restricted.

Let us not forget that defence costs were estimated to go up by 10 per cent. by 1976–77 and that the White Paper last year envisaged that expenditure on housing would be reduced by 13 per cent. I consider it to be more in the interests of the people of this country that more should be spent on housing than on defence. If we on this side of the House speak out against the cuts that were made by the right hon. Member for Altrincham and Sale (Mr. Barber), when he was Chancellor of the Exchequer, in education, the social services, transport, and so on, then we must be prepared to accept the logic of that, as I do, and press for increased cuts in defence.

I should like to make one or two suggestions to my right hon. Friend. I believe that the commitment to the multi-rôle combat aircraft should be reviewed. I think I am correct in saying that last year it was estimated that each aircraft would cost over £3 million and that the total of nearly 400 ordered would cost £1,200 million over a number of years. I think that we can spend our money on something better.

My hon. Friend the Member for Gateshead, East (Mr. Conlan) referred to the through-deck cruiser programme. I do not think that we should continue ad infinitum with that programme. It should be the subject of review. Similarly, the orders for the new type 42 destroyers, the Hawk supersonic jets, and a number of other projects should come under serious consideration for review. I am not afraid to state this openly in the House. I believe that I speak for many people outside this House who are concerned about these matters.

I hope that in winding up the debate the Minister will tell us about the Government's intentions regarding the Polaris submarines. We are now approaching a state of affairs in which the present missiles are outmoded and any of the alternatives to update their equipment would be extremely expensive. I believe, as was stated at the Labour Party Conference, that we should recognise that we are not going ahead with any new generation of nuclear weaponry of this kind. I believe that we should scrap any such project.

I recognise that the largest single item of expenditure in defence is on manpower. It would be wrong to suggest that those who enter the Services should suffer personally as a result of cuts. Therefore, I do not advocate that we should criticise what my right hon. Friend has stated about improving the conditions of Service men. However, we must recognise that the time will come when we shall have to reduce the size of our commitment in terms of manpower.

We cannot indefinitely regard it as necessary to station troops in Germany. As long as we and other powers continue to maintain troops in Europe we shall provide the more hawk-like members of the Soviet administration with arguments to justify their totally undesirable decision to maintain troops in Eastern Europe. Many of the smaller countries of Europe on both sides would welcome a reduction in the commitments of both the USSR and the West. I look forward to a time when we may see troops on both sides being withdrawn.

Nearly ten years ago in this House I argued for withdrawal of our troops from east of Suez when it was not regarded as conventional wisdom. There is still a considerable commitment there—I am not referring to Hong Kong or some of the other places which have been mentioned—to give succour and support to reactionary régimes.

We should consider the present situation in the Sultanate of Oman. Prior to 1970 I pressed my right hon. Friend the Member for Fulham (Mr. Stewart), then Secretary of State for Foreign and Commonwealth Affairs, about our commitment to sustain the father of the present Sultan of Oman who not only suppressed trade unions but maintained slavery. I recognise that the present Sultan, who has succeeded his father, has ditched some of his medieval legacy, but at the same time the revolt in Dhofar is still continuing. Surely it is not for us to become involved more and more in that country, to second our soldiers to train the counter-insurgency forces of the Sultan of Oman or to use our forces directly as at Salalah and become involved in defending a system which has nothing in common with real democracy. I do not believe that that represents the aspirations of the majority of the people of this country, and if they knew what was going on many more of them would speak out much more clearly against it than they do now.

In Dhofar we are to some extent associated with the forces of the Shah of Iran who maintains at home a police State whose tentacles stretch out even into London, as one saw in an article yesterday in the Sunday Times which I commend to those hon. Members who have not yet studied it. I do not think that the Labour Party should be closely associated with reactionary régimes such as that, let alone take taxpayers' money for this purpose.

Let us remember that under the title of defence every year the world spends more and more on weapons of war. I deplore that, whether it is done by the USSR, the USA or anybody else, particularly when two-thirds of the world's population do not have enough to eat. The partial test ban treaty of August 1963 did not end or slow down the arms race. The first SALT talks of 1972 have not led to a decrease in the number of nuclear weapons deployed operationally throughout the world. In fact, both the USSR and the USA—and I blame them equally in this respect—have continued to increase their weaponry of this type.

Arms sales since 1961 have escalated, with the USSR, Czechoslovakia, Poland and China on one side, and the United States of America, the United Kingdom and France on the other in the lead in this sphere. I do not speak as a fellow traveller. I speak in the manner in which the whole of mankind ought to speak and realise that we are doing something to this planet of ours which future generations will deplore and regret.

Already we have produced the equivalent of 20 tons of TNT per head of the population of the world, and who will say that the population is safer now than it was in the Stone Age? Is this the achievement of mankind? Is this what hon. Members on both sides of the House will continue to chant about? I am not a pacifist. I believe in an efficient, small, conventional army. I pay a sincere tribute to the gallant job that is done by many members of the British Army many times in the most difficult circumstances, but it is time for us in this House to take steps to restore sanity to the world and to start cutting defence bills.

Let us not argue in the terms that we have heard in the House today about whether we are cutting defence expenditure by a certain amount in current terms, and so on. We know that arms costs will continue to escalate. We have to take the plunge. We have to try to turn back humanity, and we in this country have a right to say that we are going to try to give an example by turning back from what ultimately must be the abyss for mankind.

It would be wrong if reducing arms expenditure created chronic unemployment. I accept what was said by my hon. Friend the Member for Gateshead, East about unemployment, but I have not noticed too many people weeping about the long-term problems that have existed in his part of the world for many years—and not as a result of arms cuts. I know what has been done as a result of take-over bids, mergers, and so on, on which the House has not taken the kind of action that it should have.

It is possible to plan the redeployment of men and equipment for peaceful purposes. It should be done in consultation with the workers. The majority of them would understand and welcome it and be prepared to accept the inevitable short-term difficulties that would arise.

If we are to have long-term prosperity and security, we must turn back from the path which we have now trod for too many years. I applaud what my right hon. Friend said today about a review of defence expenditure. However, I press him not to stop at the point at which he envisages but to give a lead to the rest of the world if necessary in cutting expenditure on arms: the sort of lead which a real Socialist Government should give to a world which should be concerned about the real problems of poverty, suffering and death which exists over the whole of the globe.

7.56 p.m.

The hon. Member for Harlow (Mr. Newens) spoke with great passion, but I found much of what he said contradictory. He said that he was not a pacifist but having heard what he said prior to that, I must say that he could have fooled me.

There seems to be a great deal of confusion among Labour Members about what is the Labour Party's defence policy. The hon. Member for Harlow rightly railed against some of the dictatorships that exist abroad, but he then said that we should indulge in defence cuts of £1,000 million. I cannot help wondering what this country's position would have been in 1939 had we taken the hon. Gentleman's view. In fact, I have no doubt about what the result would have been.

Sometimes when I listen to the attacks made by Labour Members I cannot help feeling that they would not object nearly so strongly to our defence forces if we were members not of NATO but of the Warsaw Pact. In many instances that would be much more acceptable to Labour Members, and I therefore welcomed the robust speech this afternoon of the Secretary of State. However, not only will his speeches have to be robust, but he will need a thick skin and a great deal of courage if he is to pursue the course which I think he charted and which was largely in the best interests of this country's defence.

Is the hon. Gentleman suggesting that I am one of those who would not protest if our defence arrangements were with the Warsaw Pact countries rather than with NATO?

Not at all, but there are some Labour Members in that category, and I believe that Mr. Scanlon, who has a great deal of influence in the Labour Party, would be much happier if that were the case.

The Secretary of State's speech was robust, and there were some good points in it, but it was rather contradictory. At the beginning, the right hon. Gentleman leaned over backwards to show that he was trying to meet the demands of the Labour Party Conference and the Left wing of his party. He then went to great lengths to show unmistakably the danger of Russia, the enormous amount of arms they have and the way in which they are escalating them. At the end—I particularly welcomed this—he mentioned what was being done to make the lives of the men serving in Ireland and elsewhere and of their families much better.

My constituency has a tremendous tradition of connections with Her Majesty's Services, with the Navy, the Royal Engineers, the Marines and the Army. These links still exist through Chatham Dockyard and also now that we have based with us the Devonshire and Dorset Regiment and the Royal Engineers. I am sure that the men in that regiment and their wives welcome the Minister's announcements today about improving the conditions of troops and the lot of their relatives.

On Saturday, I received a letter from a padre in my constituency about the Devons and Dorsets. I hope that the Minister will look into this matter seriously. What causes concern among the men in that regiment and their wives is the fact that this year they will go on duty again in Ireland for the third successive Christmas. I am sure that arrangements can be made—I hope that the Minister will undertake that they will be made—to ensure that men serving there are not separated from their families for more than one Christmas in successive years.

I want to refer to the clamour that the Secretary of State has to resist for enormous defence cuts. The Labour Party conference demanded—it has been given support today—that Britain should cut its military expenditure initially by at least £1,000 million, in the first year. On 29th January 1974, a Commons motion on this question demanded a cut of £1,083 million and was signed by 113 Members of the Labour Party in six days. Among its sponsors were the Secretary of State for Social Services, and the Minister of Overseas Development. It was also signed by none other than the Chairman of the Parliamentary Labour Party. I am glad to know what is basically the view and intention of many hon. Members opposite. Another Commons motion calling for massive cuts appeared on 26th March, since this Government were returned. This pressure is not surprising when one remembers that on 17th October 1973, the present Chancellor of the Exchequer demanded immediate cuts of £500 million and said that he was the expert in cutting defence expenditure.

Most hon. Members on both sides will remember also that at the last two Labour Party conferences it was decided that all nuclear bases in British waters or on British soil should be abolished. About six months before the election, in a confrontation with me, the Labour candidate for Faversham made it clear that the phrase "all nuclear bases" included those in which the hunter-killer submarines were serviced. This was afterwards denied, but he definitely said it.

And what about the Secretary of State for Defence himself? At Newcastle-under-Lyme on 24th April, among other statements, he said:

It is also fairly evident that the cutting edge of the Minister's axe is poised over one or other of the Royal Naval Dockyards and it is not surprising that there is fear and apprehension in my constituency at the possibility of the closure of Chatham Dockyards. The last Minister, Lord Carrington, made it clear that cuts on anything like the scale envisaged by the Labour Party must inevitably lead to the closing of one dockyard. But of the four which are likely to get the chop, is it to be Plymouth, Rosyth, Portsmouth or Chatham? According to The Guardian on 6th May 1974, Chatham is the most likely to be threatened. I hope that the Minister will give a straightforward and unequivocal answer to this and to other questions.

In this connection, perhaps I might remind the Minister—I hope that he will convey this to his right hon. Friend—what the present Minister of Agriculture said when he was Shadow Secretary of Stale for Defence, on 15th March last year: The secretary of the local Whitley Committee, in a very interesting statement, said:

It might help the hon. Gentleman if I repeated categorically that what we are determined to see is that the resources of skilled craftsmanship and loyalty which are contained in so many defence establishments are fully utilised in one way or another for the nation's benefit.

That sounded marvellous, but said nothing. It was meaningless, airy-fairy and a cloud-cuckoo-land statement. It was a great example of that. Have the naval dockyards been profitable? Could they, by their nature and function, be profitable, any more than the Army and Royal Air Force servicing bases can be profitable? Of course they cannot. The hon. Gentleman knows that. He can be as arrogant and as forthright as he likes to the Press, but woe betide him if he tries the same attitude here and appears intolerant under very proper questioning.

What civilian work does the Under-Secretary envisage? Let us get down to basics. The hon. Gentleman did a lot of waving, weaving and wondering a few minutes ago. What work does he envisage for the workers of Chatham Dockyard if it ceases its function and some of the men there face redundancy because there is no naval work? Does the hon. Gentleman envisage building ships there? If so, what ships? From where will the orders come and which other yards will lose the orders?

I am sorry, but I shall not give way. Other hon. Members wish to speak.

Will the dockyard be making motorcars or washing machines, as the hon. Member for Easington (Mr. Dormand) mentioned when he said that it was an absolute nonsense to suggest that they could be turned over to that sort of work? Will it be oil rigs? If so, where will the rigs be wanted? What about the present production of oil rigs in Scotland? Is that insufficient or inefficient? Just what does the Under-Secretary propose shall be built at Chatham?

Does the Under-Secretary not realise that if the dockyards are to compete for civilian work and outside work they will have to be able to compete, in most instances, with industries which have been established for years, which have a close supplier-customer relationship and which have the know-how of many years' experience in the production of certain goods? Does he believe that dockyards could compete in price, quality and delivery with the products of industries which have been making those goods for many years? Does he believe that the buyers, foreigners and our nationalised industries or trading companies, would place the large orders which would be necessary to keep thousands of men in employment without proof that an exnaval dockyard can deliver the goods? How can that proof be shown unless they have already gone into production and proved their worth in operation?

The real value of the placatory cooings to the workers at Chatham last week was put in perspective by what the Secretary of State for Defence said at Newcastle-under-Lyme on 24th April:

I am grateful to the hon. Gentleman for giving way again. It would be helpful to the House if he would clarify two points about what he has been saying. Is he saying that if there were ever any reduction in terms of demands for defence programmes on the dockyards, in his view, they should be cut out and closed rather than seeing the resources of capital equipment and human skill redeployed? Secondly, referring to what he has just said, is he saying that in his view the men of the dockyards, with their great skill and craftsmanship, are unable to compete effectively with other industries?

What I am saying—I have previously said it loud and clear—is that we cannot afford to cut our naval defences any more.

The hon. Gentleman must not get arrogant with me, as he has with the local Press. He has asked a question. I did not tell him how to ask that question. I will not have him instruct me how to answer it. The hon. Gentleman knows that I believe that Chatham and the other dockyards should be retained and that we need and must have strong defences. I hope that he will give the undertaking for which I have asked today. The hon. Gentleman asks whether I believe that the men at Chatham, with all their skill and knowledge, could compete in the open market. I remind him that they will be competing against many more men in many other factories in the arms industry which will also be put in the same position of shortage because of what has happened. There will be much less work to go around if that is the case. I also remind the hon. Gentleman of what the Secretary of State has said, which I quoted previously. Large arms cuts mean large-scale unemployment. I also remind the hon. Gentleman of what his hon. Friend the Member for Easington said.

I had several more things to say, but I have said enough to establish my position and that of a great many people who have long traditions in the Services. One thing I say above all. I believe that any great cuts in the Navy must mean cuts in construction and that this would be fatal. Maritime defence has always been the crux of our military strategy. It has been the shield behind which this country for generations has been safe. Please God the Labour Party will not turn it into a paper shield.

8.20 p.m.

I congratulate my right hon. Friend the Secretary of State for Defence on his speech. It was very clear. He is right to undertake a defence review and to take his time in doing so. This debate has been very useful and I hope that my right hon. Friend will take note of many of the points raised. I am pleased to learn that he intends to have a thorough, painstaking interview because, in the present parlous economic circumstances, which are world-wide, such a review is a necessity.

I wish that the Opposition would not speak in the sour way in which so many hon. Members have spoken, particularly the hon. Member for Gillingham (Mr. Burden), who ignored the realities of the situation. They know that the Conservative Government, had they been reelected, would have faced the prospects of considering substantial defence cuts.

The hon. Member for Haltemprice (Mr. Wall) denies it, but I believe that that would have been so. We all know that the world-wide energy crisis has thrown great strains on the Atlantic Alliance. Surely no one will deny that it is not only this country which talks of cutting defence expenditure. The two super-Powers, in the SALT talks, the negotiations on mutual and balanced force reductions, and in certain aspects of the European Security Conference, also are talking about reaching accommodation so that they can save resources that they now spend on defence.

There are implications for us in this. I take the view—I do not know whether it is fashionable among my hon. Friends—that there are implications in the SALT talks for us. I think that there will be a tendency, particularly in the United States, for the two super-Powers to reach an accommodation which could well be at our expense. I am not saying it will happen, but there is a genuine problem which cannot be ignored. I think that the problem is ignored to a certain extent by my hon. Friend the Member for Harlow (Mr. Newens). He spoke, as he always does, with great eloquence and power, but if we accepted much of what he recommends the world would not be a safer place but more dangerous.

I believe that we are moving into a much more pluralistic situation—away from the bi-polar world into a more complicated, perhaps, five-centred power situation. This makes our task much more difficult. The Opposition should try to resist the temptation—although I can understand why some hon. Members do it for party reasons—to try to give the impression that Britain is still in some kind of top position in the league. The fact is that Britain is a modest-sized Power and that is why everything we do must be based firmly within the Atlantic Alliance. I believe that that is the way in which we can see ourselves through the next four or five years, which are going to be very dangerous.

I think that there are forces at work, particularly arising from the economic situation, which are reminiscent of the years 1929 to 1930. I hope that this is not so, but there are indications that it might be. Many wrong decisions were taken then. I regret the reference by the hon. Member for Haltemprice to Munich. He was not correct in trying to suggest that the Labour Party alone was responsible for the drift of policies in the 1930s which led to Munich.

What I meant to say was that in those days the Labour Party voted against rearmament. I agree that the then Conservative Government were equally guilty in not pressing forward faster than they did We can all share the blame. But the Labour Party in those days took the pacific view and voted regularly against rearmament until 1939.

The point I am making is that there are tendencies at work which at this moment could, if, for the sake of economics alone, they were pressed too far, throw away genuine opportunity of agreements arrived at not unilaterally but multilaterally. But it all depends on what assessment one makes. The hon. Member for Blackpool, South (Mr. Blaker) said that détente could be switched on and off in other words that the Soviets could at any time change from a policy of detente to a more aggressive posture and therefore that we should be exceedingly careful of anything we did in defence matters.

That argument cannot be dismissed. When one considers the way in which the Soviet Union has traditionally behaved and the way in which she is increasing her armaments, one requires some degree of caution. On the other hand, the Soviet Union herself is not without economic difficulties. A great deal of evidence suggests that she, too, for internal economic reasons, wishes to cut the level of defence expenditure. Nor is the Soviet Union entirely free from the consequences of the international oil crisis.

I would not take the view that the Soviet Union is increasing her armaments without regard to the economic situation, because I believe that she, too, has her difficulties. Nevertheless, she has greatly expanded in a number of important areas, and it is most important that we should take note and take action, because there are implications for a country like Great Britain, which has, after all, like any other power, quite legitimate interests outside Europe. Like any other power, we have every right to protect those interests where we can.

So it seems to me that the Government's policy, as I understand it to date—[ Laughter ]—and as I hope it will be confirmed in the Defence White Paper, is solidly based on the Atlantic Alliance. Indeed, my right hon. Friend the Foreign Secretary has made this perfectly clear. I know that the Opposition may find it amusing, but it also happens to be the official policy of the Labour Party. My hon. Friend the Member for Salford, East (Mr. Allaun) occasionally gives his own personal interpretation of Labour Party policy, but it does not necessarily follow that it is the correct interpretation. Although he happens to be a member of the national executive committee, that does not prevent him from time to time, in my view, misrepresenting official Labour Party policy

Labour Party policy is firmly based on the Atlantic Alliance. It was not stated in the manifesto that we would cut defence expenditure to the tune of £1,000 million. That is not official Labour Party policy. I did not fight the election on that; I do not know whether other hon. Members did, but it was not the official position of the Labour Party.

I therefore say to my right hon. Friend that he is embarking on a very important review, that he has the understanding of many Members on this side of the House, bearing in mind all the pressures which bear upon him economically and otherwise, and that if he takes his time and gets it right he may be able at long last to produce a real defence policy which has meaning in the 1970s and 1980s. That alone is a most difficult task, but I wish him well.

8.30 p.m.

The hon. Member for Hornchurch (Mr. Williams) has made an interesting speech, but it was in marked contrast to the speech a short while ago from his hon. Friend the Member for Harlow (Mr. Newens). It is difficult to imagine that they are members of the same party. Indeed, a little quarrelling was going on. Unfortunately, it seems to me that the voice which is becoming more and more predominant from the Labour benches is the voice of the hon. Member for Harlow and those who think like him. This causes me considerable alarm. I shall return later to the NATO points and some of the other matters raised by the hon. Member for Hornchurch.

As someone who has the privilege of representing a garrison constituency, may I say how much I welcomed the announcements made in the third part of the speech of the Secretary of State this afternoon. I agree that everything possible must be done for those who are fighting, so gallantly, the bitter war in the Province of Ulster. I hope also that consideration will be given to the payment of an increment to the Service men who serve there. I take the view that there is a strong case to be made for combat pay for those who serve in the Province. This suggestion has not had universal support from all senior officers and others in the Army, but I take the view that to be serving in Belfast or on the frontier is different from serving in Colchester. I know that we have had the Aldershot bombs and so on, but such things are lesser hazards.

If someone is posted from Germany to serve in Ulster, it is ridiculous that he should suffer a reduction in pay. On the face of it, that is absurd. There is no party interest in this view. My own Government considered this closely. The forces are not agreed on what should be done, but I think that the absurdity of someone being paid less when he moves from BAOR to Ulster should be corrected. although I accept that the way to do this is not easy. I urge hon. Members opposite to take a firm line and see that this is done. As I say, I welcome that part of the right hon. Gentleman's speech, and I know that it will be welcomed in my constituency where many of the soldiers are more permanently stationed.

On this first occasion when we have had the pleasure of debating defence in this new Parliament I should like to put on record my profound gratitude for all the kindness I received from the Royal Navy and Royal Marines during the past year and more when I had the privilege of being the Minister for that great Service. I shall always be grateful for it. The expertise of the Navy and its true professionalism has to be seen to be believed. Ours is now the third most powerful Navy in the world, but it is undoubtedly the best.

I know that many hon. Members, and particularly the hon. Member for Huddersfield, East (Mr. Mallalieu), will agree with me. I do not say that in any jingoistic way, but one meets our sailors in the ships and submarines, as well as the Royal Marine Commandos, and then one talks to one's NATO allies and finds that our men are without parallel. I am proud of it. I am therefore very happy to have caught your eye, Mr. Deputy Speaker, and to have had an opportunity to put that view on record.

During the debate there has been considerable reference to NATO. This is the twenty-fifth anniversary of NATO, and the lack of celebration has been commented on by the right hon. Member for Kettering (Sir G. de Freitas). I share his disappointment that more publicity has not been given to this anniversary.

I ask Labour Members, is NATO in such a condition that it will remain viable and credible if important partners make massive unilateral defence cuts? The Secretary of State said that this would be done after numerous consultations with our allies. He seems to be unable to understand what we mean by unilateral cuts. Of course he will discuss things with our allies, but at the end of the day he is pledged to cut defence expenditure. According to his hon. Friend the Member for Harlow he will be held to a figure of about £1,000 million. He may talk to our allies, but the cuts will be unilateral because there will be no question of a similar cut being made by the Warsaw Pact countries.

Another matter which has hardly been mentioned, except by the hon. Member for Harlow, is the Polaris deterrent. The Minister, and I, as a former Minister with responsibilities for the Royal Navy, are in some difficulty about this because matters dealing with Polaris and its replacement are dealt with at the highest level, White House to Downing Street. I do not know much about the details. It is right that they should be kept at the highest level.

However, when we were in government there was a great deal of talk from Labour Members about the need for open government, particularly in matters of defence. I had a certain sympathy with that view. What a lamentable lack of any openness there has been today. We have had not a word about the Polaris replacement. Have the Government any ideas? We know that the hon. Member for Harlow and many of his friends would like to see it scrapped unilaterally. When we were in government it was reiterated that the Labour Party believed in getting rid of our independent nuclear deterrent, yet there has not been a word about it today. Let us have clarification tonight.

The Under-Secretary has been rightly pressed hard about the dockyards position. As a former Minister for the Navy I am concerned about this too. If there are to be cuts anything like those suggested by the Labour Party conference, inevitably one of the dockyards must go. Which one is it to be? Are we not entitled to some hint?

We have not been told by the present Government, who believe in open government, about any of the issues raised in the great review which has been put in train. What are to be the criteria? Have the poor hard-worked civil servants and senior personnel in the Ministry of Defence simply been told to undertake a review? Surely there must be some basis for their work. Have they not been told to put forward a prognosis of what would be involved, say, with cuts of £800 million or £900 million? What brief have they been given?

The truth must come out. The hon. Member for Harlow made it clear that he would insist on the full £1,000 million cuts demanded by the Labour Party conference. Let us have some frankness about the Government's intentions. It is no good merely saying that they are having a review.

Hon. Members have referred to the Royal Marines. Woe betide the Government if they deprive us of this capability—not for any jingoistic reason but because a situation could arise in which the Marines would be vital on NATO'S flanks in the Mediterranean and in Norway. What about the shipbuilding programme? Surely we can be told more than simply that there must be cuts. What is the fate of the through-deck cruiser? It must be continued with, and there does not need to be a delay of months before this information is given.

I am bitterly disappointed that when I was Minister for the Navy we did not clear the maritime Harrier project. However, we did not stop it. If my Government had come to an unfavourable decision, I doubt whether I should have found it possible to remain in office. It is a magnificent aircraft. The military version is flying with the American Marines, who have 100 of these aircraft. What a fantastic achievement that is, bearing in mind the political barriers. Of course the maritime version is different, but it passed through its project definition studies with flying colours and it has met the Service requirement. I hope very much that whatever else the Government do they will allow the new through-deck cruiser to be equipped with the maritime Harrier. The export potential of the aircraft is tremendous.

We must have straight thinking from the Government. They must not simply say that they believe in the NATO alliance and yet make massive unilateral cuts. NATO is in something of a parlous state because some of its smaller members are cutting the proportion of their gross national product which they spend on defence. Are we to have universality of folly by following their example? I had great sympathy with the right hon. Member for Kettering. We need a strong NATO and then we can work towards détente, but by making unilateral cuts we shall never be able to contribute to détente or to MBFR, in spite of what may be said by some hon. Members who seem to feel that the way to deal with defence is to send a telegram saying "We surrender". I do not suggest that all Labour Members believe in that, but there are those who seem to do so.

The Government must come clean about the review and tell us the basis upon which it is being carried out.

8.44 p.m.

A little earlier, a Conservative Member was almost moved to tears. There was a tremor in his voice at the prospect of the redundancies that would occur if there were cuts in the armament programme. I wonder whether the hon. Member was equally emotionally stirred at the redundancies that were deliberately caused by Sir Arnold Weinstock in his so-called rationalisation of GEC. I wonder whether he is equally concerned about the workers at the Triumph motor cycle works just outside my constituency which employs many of my constituents. I wonder whether he is moved by the GKN plans to close its works at Wolverhampton. I wonder whether he is moved by the prospects of redundancy, or whether there are other motives behind his concern.

The hon. Gentleman whom I am criticising made aspersions against hon. Members on this side of the House but refused to name those Members. I consider that that was distinctly conduct unbecoming to the House and I have no compunction in counter-attacking the hon. Member.

When we on this side of the House advocate public expenditure on hospitals. schools and houses the cry goes up "Where will the money come from?" It is already apparent to me, as a new Member of the House, that that cry is conspicuously absent when the matter under discussion is armaments.

A Tory Member criticised my party by saying that we promised £1,000 million cuts in armaments in order to give goodies to the voters. I do not mind telling Members on both sides that to give goodies to the voters is exactly what I have come here to support. The sort of goodies I have in mind are, for instance. houses, hospitals, pensions, schools and ambulances.

Recently I was at a centre for disabled people in my constituency and saw an ambulance fitted with a tail hoist so that people in wheelchairs could be lifted up and down and could be taken out rather than be housebound. How much pleasanter it was to see resources used in that way rather than, for instance, used to build tanks. How much better it would be if we were to export tractors rather than military aircraft and warships.

We must be concerned about people's jobs. We on this side of the House are genuinely concerned about people's jobs because we come from among those people who have repeatedly faced and suffered from unemployment, but such experience is not noticeable among Tory Members. There is no act of God which says that skills and resources should be used only to make weapons of war. Working people refuse to accept the assumption that they must make armaments or make nothing.

My hon. Friend the Member for Gateshead. East (Mr. Conlan) said that it was not a simple matter to effect a transfer of resources. That is true. To effect such a transfer would take a great deal of consultation with the workers involved and much thought and planning. No one on this side of the House would for one moment suggest that that was a simple matter. Neither is it a simple matter to spend £3,000 million and more on armaments. That is anything but simple.

Earlier today hon. Members opposite were concerned, quite rightly, about the rundown of the world's resources, including various metals. How, therefore, can we justify the use not only of financial resources but of physical resources in weaponry? How can we justify this as a permanent feature of our economy? I am wholeheartedly in favour of cuts in the so-called defence spending. But what strikes me as the oddest thing of all to have come out of the debate, right from the opening speech, has been the recurring question of arms exports.

I can see logic in feeling that it is right to provide ourselves with weapons, but I can see no logic in supplying the rest of the world with weapons. More and more of our armaments industry is concerned with the export trade. We are led into having to consider our foreign policy not from the point of view of what is good for this country but from the point of view of what is good for our customers.

Conservative Members tell us that we must not object to the sending of warships and military aircraft to Chile and that we must honour contracts, although the contracts were signed with legitimate elected Governments of Chile, whose members have now been murdered by the present illegitimate Government. That seems to me an extraordinary interpretation of the laws of contract.

We are told about the iniquities of the régime in the Soviet Union. But I wonder how many Conservative Members are in the same position as myself. Last week I was chairman of a meeting in support of Soviet dissidents. I can always be found, as can many of my hon. Friends, condemning injustice and oppression wherever it occurs in the world. But I have noticed since coming here that many Conservative Members will defend the excesses of the regimes in Greece, South Africa, Spain and many other parts of the world. They should develop a little more consistency before they lecture us.

The export trade in arms is carried on in conditions of considerable secrecy. No information is given to the House about export licences which are granted for arms. The explanation is that the reason why no information is given is, we are told, to safeguard the customers' interests. As a rather patriotic person I should like to safeguard the interests of the House and of the British people by insisting that we are entitled at least to full knowledge of which countries are being supplied with armaments by the United Kingdom.

The sort of excesses to which that secret trade leads is shown by the fact that during the Nigeria Biafra war the situation was reached, without the knowledge of the House, of no less than 70 per cent. of Nigeria's arms imports coming from this country. That seems to me a remarkable use of our country's resources and the skills of our people. Conservative Members sometimes confuse British interests with the interests of the 50 or more large companies which do very nicely out of this trade in death.

One Conservative Member suggested that it would be very nice if defence could be taken outside party politics. I agree, but that will happen only when we start to judge arms questions by humanitarian yardsticks and when it becomes impossible for Conservative Members to talk about Britain's economic interests in terms which make it clear that they exclude any moral responsibility for the results of trade being engaged in.

The armaments which are exported include cluster bombs, which have remarkable effects on the human frame. If I were to read out the kind of effects they have on human beings, I should no doubt be accused, as a woman Member, of unbecoming emotionalism. Therefore, I shall merely read instead the terms in which these bombs are advertised—in a trade advertisement, no less. It speaks of

We need a review not only of our defence spending but of the whole armaments industry, with a view to making it more rational, more sane and of such a nature as will cease distorting our economy and foreign policy.

8.56 p.m.

Governments come and Governments go, and Deputy Speakers come and—but in every defence debate, other than those in which I have been forced to be silent, I seem to speak in the last 10 minutes. This has been a curious debate, as defence debates always are. Hon. Members ride their hobby horses, sometimes until they collapse, and we move from Clausewitzian theories to straight constituency pleading. I shall try to avoid both.

The Secretary of State has my sympathy, because it must be the most difficult job on earth to be Secretary of State for Defence in a Socialist Government. His speech today—I mean this sincerely—was in many ways excellent. It was well received, at least on this side of the House. However, may I, with due humility, extend to the right hon. Gentleman a little bit of advice which used to be given to cavalry officers when leading a charge: "Don't for heaven's sake look behind you ".

There is a disparity between the views expressed at the Labour Party conference—which I attended in a journalistic capacity for a very small sum which would not even arouse the interest, let alone the envy, of my colleagues—and Labour Government policy. There was a feeling at the conference of disarmament and the saving of money at all costs. The Secretary of State is now in the hot seat and he must face the realities of our defence position.

In what I might call Right-wing attitudes, often perhaps more Right wing than those of any representative in the House, and equally in Left-wing attitudes—more Left wing, I hope, than those of any representative in this House—there is a complete failure to realise that we live in the deterrence world. To hear some Right-wing speakers, one would think that Britain fails in her defence effort because she is unable to take on the USSR single-handed. Because we cannot do that—after all, we do not pretend to be able to do that and because our defence forces are small compared with those of the great Powers, it is asked in some Left-wing speeches "What is the point of maintaining, for instance, our nuclear weaponry?" Both extremes, almost using the same argument, fail to realise that in any conflict —Heaven forbid that there should be one —we should be taking part as members of an alliance.

It is obvious that the Secretary of State will not give us many clues about what he will look at in the defence review. It would be curious if he did. I accept that he will do as he says. He will look at our defence position, carry out a thorough review, come back to the House and explain the cuts that he proposes. In all defence reviews there is a danger of concentrating or even over-concentrating—I say this with trepidation—upon the NATO situation. There is an unreal world, whereas in Northern Ireland our defence forces are operating in a real world. As the right hon. Gentleman said, who among us five years ago would have thought of that situation arising on the other side of the Irish Channel? In a defence review one must always take into account some of the imponderables. It is impossible to produce a completely logical and rational system of defence, because every Government have a duty to bear in mind the X factor—the imponderables that may arise in future.

Like every other right hon. and hon. Member, I welcome the special provisions that the Secretary of State has announced for the Armed Services in Ulster. I am not being churlish, however, in saying that we must not consider the Armed Forces entirely in the light of cash, increases in the military salary, benefits or welfare. The men and women who enter the Armed Forces do so not to make a fortune but because that is the type of life they have chosen. I suspect that in each generation some men and women may be deterred if wages are low and conditions are poor, and others may be encouraged because wages are good and conditions are excellent. One makes a grave error, though, if one thinks that the criterion must be cash alone. Men and women in the Armed Forces must have a sense of purpose and a sense that their services are recognised by the Government and this House. It is possible that a defence review may arouse more apprehension in the breasts of Service people than the eventual results justify.

Several viewpoints have been put forward in the debate. I shall not cross swords with the hon. Member for Coventry, South-West (Mrs. Wise). She and I live in different worlds. In my world soft targets are lorries.

More seriously, the Secretary of State told us that he is embarking on a review. We all realise that we have to cut our coat according to our cloth. One could overspend and be in danger from the forces outside which threaten us and are against us. One can have economic as well as military disasters, but when the Secretary of State has completed his review I hope that if he finds it impossible, for example, in defence interests to cut the MRCA, to cancel the through-deck command cruisers or not to continue with the maritime Harrier—if indeed, having looked at the comparatively small bases we possess around the world, he takes the view that in Britain's interest he cannot recommend that they should all be abandoned—he will have the courage to come back to this House and say so. I hope that he will not yield to some of the voices which have come from behind him today suggesting that he should make his cuts, if cuts there have to be, not in the interests of this country but in the interest of party doctrine.

The hon. Member for Ayr (Mr. Younger) said that he would not rise to speak until 9.10 p.m. To call him earlier would have the effect of cutting short the debate. I call Mr. Dalyell who will remember that fact.

9.7 p.m.

In the three minutes at my disposal I should like to raise three issues. I hope that my right hon. Friend the Secretary of State for Defence will raise these matters with Mr. Schlesinger when he meets him.

The first matter which I should like him to raise is the subject of Diego Garcia. I would ask whether it is in the best interests of ourselves and of the United States to go ahead with something that is far more than a mere issue of the militarisation of a coral atoll. That is the minor argument. The major argument is whether we and the Americans should introduce nuclear policy and all that goes with it into the Indian Ocean.

I believe that there is a British obligation not to repeat the mistakes—mistakes that have been admitted by my right hon. Friend the Prime Minister in his memoirs —of our policy east of Suez. This is a very important issue and I am told that a decision has not yet been made. Therefore, I hope that the report by the diplomatic correspondent of the Sunday Telegraph has no foundation in tact and that we shall follow the critical line of the Senate Armed Services Committee in not being party to pursuing a nuclear policy in the Indian Ocean.

The second matter which hope will be raised with Mr. Schlesinger is the subject of Hong Kong. It has been assumed in this debate that somehow or other we have an obligation to maintain military forces in Hong Kong. Frankly, I would say to my right hon. Friend the Secretary of State for Defence that I should like to see savings in that base. I do not understand what operational requirement we have and what can lead us to expect that the Chinese intend to attack this small garrison. I regard that as extremely unlikely—and I make that remark as one who has had the good fortune to go to China. I believe that the prime society which is Mao's China will not risk absorbing libertarian Hong Kong with all its problems. Having said that, I hope that defence money will be saved in Hong Kong.

The third issue which I should like to see raised is the subject of Ireland. It concerns the supply of money which is undoubtedly coming from the United States, and almost certainly from Canada, to both sides in Ireland. This was a subject raised in Boston and in New York by Dr. Fitzgerald. My request is that the Government should pursue this matter with the Canadian authorities.

With the right hon. Member for Wan-stead and Woodford (Mr. Jenkin) and my hon. Friend the Member for Bristol, North-East (Mr. Palmer), I went on a delegation from this House to Canada to look at nuclear reactors. It can be well said that the people who have to deal with the Ontario hydro and sophisticated nuclear power engineering are not likely to provide funds for Ireland. but there was some serious discussion in Ontario to the effect that substantial funds were being advanced for the purchase of arms for Ireland. I therefore ask my right hon. Friend to contact in the friendliest spirit the Governments of Canada and the United States to ask them whether the sources of this money can be frustrated in some way.

I say a final word to the hon. Member for Belfast, North (Mr. Carson). I listened very carefully to his maiden speech. He will forgive me for saying that that kind of speech, going back to what Carson did and did not do, tends to confirm the prejudices which increasing numbers of Government supporters have that the historic problems of his country will be solved by the Irish and by no one else.

9.10 p.m.

It is my first pleasant task in winding up this debate on behalf of the Opposition to extend the warm congratulations of, I hope, the whole House to the hon. Member for Belfast, North (Mr. Carson). A maiden speech is never easy to make, and it must have been even more difficult in his case since quite clearly he had some very important comments to make from his own experience of the distressing events in the past few years in his constituency. Those of us who have been in this House for a while are especially grateful for the hon. Gentleman's warm tribute to his predecessor, Stratton Mills, a man who not only was very popular in this House but who was also a man of courage who never shrank from saying what he thought and standing out on a limb when he considered it necessary. We hope to hear the hon. Member for Belfast, North frequently in the future in these debates, and we welcome him warmly.

Then I must congratulate the Secretary of State on his speech—perhaps I should say on his two speeches. The first filled me with a little alarm, as clearly it did the right hon. Gentleman. The second one I warmed to, and on both sides of the House we appreciated that the right hon. Gentleman was giving us a firm and strong lead from the defence point of view which I am sure we all welcomed. At times the right hon. Gentleman appeared to be walking a tight rope. Whether he feels that he is correctly built for that activity, I do not know. But we all know now that he is very successful at it, and we are grateful to him for what he said.

We have also to thank the right hon. Gentleman sincerely for his announcements about improvements in the conditions of those of our troops serving in Northern Ireland. I welcome what he announced, and we shall look with interest at the full details of it when we can.

We are grateful to the right hon. Gentleman and his officials for their imagination in dealing with a number of different personal problems which our soldiers have clearly experienced in the past year or two in their service in Ulster. Most Service men will find that the removal of a lot of, in themselves, irritating small disadvantages, when put together makes a major difference to what has been a difficult period of service. We thank the Secretary of State for these improvements, and we hope that he will continue his search for more. We know that it is his aim to make life better for our troops serving in Northern Ireland.

I reiterate one suggestion made by my right hon. Friend the Member for Chesham and Amersham (Mr. Gilmour), to which I hope the Government will give mature consideration. There has been some concern about the speed of payments to Service men who have been disabled in the fighting. My right hon. Friend suggested that it might be that this was mostly due to sheer administrative difficulty in the Northern Ireland Office in getting through the number of cases with which it has to deal. Would not it be a good idea if those payments were made by the Ministry of Defence, which would be able to deal more quickly with the administration? That is no criticism of those at present dealing with these matters. We know that they are doing their best.

We have spent most of the debate dealing with the vexed question of the cuts which, we were told with such glee by the Secretary of State, have to be considered in this defence review.

We have seen the Government's supporters in considerable disarray in this debate. It cannot have escaped the notice of anyone that there are such wide divergencies of opinion on the Government benches that the right hon. Gentleman's task will be extremely difficult.

It is no part of our thesis or proposal to the House that there never can be cuts in defence. Some hon. Gentlemen opposite seemed to make out that that was the case. It is not. I go further and suggest that it is the responsibility of every administration dealing with defence always to search for ways of carrying out our commitments at lesser cost, if possible. The previous Government, of which I was pleased to be a member, made a number of cuts in ways which did not materially affect our ability to carry out our commitments. That is the important criterion against which all defence cuts ought to be considered.

I come now to the vexed question which has gone through a number of speeches—namely, whether the Government are aiming at a figure—many hon. Members have referred to cuts of £1,000 million per annum—and, if so, whether this is the right way to go about it.

This matter can be quickly disposed of by the words of the Under-Secretary of State for Defence for the Royal Navy who, addressing himself to the question of cuts in a speech at Portsmouth on 19th April, said:

Right hon. and hon. Members on both sides of the House must fight for defence cuts, if they are to take place, to be made within the agreed commitments that we have to undertake. There is no sense in defence cuts unless they are related to the commitments which we as a nation decide we must undertake. Therefore, the right hon. Gentleman must ensure, first, that the assessment of our commitments is right and acceptable to him and his colleagues in the Government and, secondly, that the necessary provision is made to meet those commitments.

There was a moment in an otherwise admirable speech at which I thought the right hon. Gentleman's logic was becoming a bit shaky, and I intervened to question him on one point. I am sure that, referring to the possibility of withdrawal from Hong Kong, I heard him say, "Our commitment is there." Then in another place he said, "We are examining our commitment about this matter."

If the commitment is there, then it has to be met. If it is not there, clearly it is open to the Government to decide to save the money by withdrawing troops from that area. Therefore, we must be careful that the logic goes through all these considerations.

There was a slight doubt in my mind whether it was clearly understood in the exchanges earlier that it was or was not the right hon. Gentleman's wish to withdraw permission for the Polaris base in this country. I hope it is not. It would be a disastrous decision if that were so. It cannot be part of the saving on our defence costs, because I understand that those costs are met by the United States. Therefore, if the right hon. Gentleman has to make a decision I pray that it will be the sensible one of welcoming the base where it is now. It cannot feature in the context of saving on our expenditure because it does not involve expenditure by us to any significant extent as far as I understand the matter.

What, in the hon. Gentleman's view, is the point of having British forces in Hong Kong?

I know the hon. Gentleman does not think that our forces are there to defend the colony against the Chinese. They are not there for that purpose, and they could not be. Indeed, it would be an absurd proposition if they were there for that reason. Our forces are there to provide stability and to give a sense of confidence in the area. They are there to help in an internal security rôle. If the hon. Gentleman thinks that that idea is far-fetched, he has only to look at the newspapers of a year or two ago when there was a serious situation which would have been uncontainable without the presence of those forces. I think that situation arose when the Labour Party was last in office. That is the answer to the hon. Gentleman.

The Conservative Opposition have been constructive this evening. It has not been a question of trying to prevent the right hon. Gentleman from making economies in the defence programme. My hon. and gallant Friend the Member for Lichfield and Tamworth (Major-General d'AvigdorGoldsmid) referred to the excellent recommendations that were brought out by the Select Committee report on saving money on the initial training of such people as tradesmen in the forces. It was recommended that this could be amalgamated within the three Services. That is an excellent idea, and I hope the Government will pursue that sort of aim which could save a considerable amount of money.

My hon. Friend the Member for Haltemprice (Mr. Wall) made some telling points about the benefits of standardisation, which he felt should go through to the defence procurement programme. agree with my hon. Friend on that, and I hope that the Government will press ahead with all forms of encouragement to our NATO allies to standardise as much as possible. Experience so far on standardisation should lead us to press on with it.

We have to remember that what we ought to address ourselves to in this business of whether to cut defence expenditure—whether the amount is one sum or another—is that it is fatal to cut indiscriminately. This point was made by the hon. Member for Huddersfield, East (Mr. Mallalieu) in a most telling speech in many ways. If cuts are made indiscriminately, either in total, or between individual Services or even individual projects, at the end of the day one is bound to get a nonsense situation. Any cut must be related not only to commitments but to the forward programme of procurement as a whole. It should not be made arbitrarily in the short term.

I was not sure whether the right hon. Gentleman was clear about what we mean by unilateral. My hon. and learned Friend the Member for Colchester (Mr. Buck) pointed this out in his speech. We consider that a cut in commitment is made unilaterally, even if there has been consultation with them, if our allies do not agree to its being made. Unilateral means that the decision is taken by one side without the other side agreeing to it. Therefore, we shall not be glad to accept from the right hon. Gentleman a statement that he has made no unilateral cuts unless he can tell us that they have been agreed as reasonable and sensible by our allies.

My hon. Friend the Member for Aldershot (Mr. Critchley) made an important point about the timing of this defence review. The right hon. Gentleman has made a tremendous point—obviously for special reasons—about the scope, size and fundamental nature of the review. To say that the NATO Alliance, its individual members and their defence policies are in a state of disarray is, to use a soft word. To add to that the blood-curdling phrases used by the right hon. Gentleman about this being the most fundamental review ever undertaken in peacetime is most unfortunate. I hope that the right hon. Gentleman will proceed with his review, but I hope, too, that he will get out of the habit of trying to puff it up into something that is thrilling and good for everybody. The review is a regrettable necessity, and I hope that he will get on with it and get the pain over as quickly as possible.

My use of the word pain brings me to the vexed question of the defence sales organisation and what has been happening during the last few weeks. Speeches made on that subject today have not encouraged me to feel that the nature of this problem is properly understood in the House. Nowhere have the initial actions of the Government been more disastrous than in defence sales.

The Defence Ministers have been badly treated over this short period by their supporters both without and, more seriously, within the Government. It is wholly deplorable that several members of the Government should have publicly criticised the Foreign Secretary for his courageous decision over the frigates for Chile, which were well ordered and practically delivered when they came to office. The Defence Ministers are being made unwilling partners to the possible breaking of contracts with other countries.

I shudder to think what the effect must have been on our future prospects of sales not only to those countries but to all countries which might possibly buy in this field. I can only imagine that the effect on the morale of all those concerned in the Defence Sales Organisation must be catastrophic.

I should like the House to be clear about the tremendous importance of defence sales to us all and to the programmes of defence which we are discussing. It is not just that they provide literally hundreds of millions of pounds of exports, to the great benefit of our balance of payments, although of course they do that. It is not just that they provide many thousands of jobs, many in development areas, as is the case in my part of the country in Scotland—although they do provide those jobs. The hon. Member for Salford, East (Mr Allaun) mentioned this, although he took the opposite point of view and drew the opposite conclusion.

Even more important is the fact that it makes all the difference to the economics of procurement for our own forces if there are sales to other countries to help reduce our overheads. If that is thought an unnecessary point of view, a prime example is the recently-predicted cost of the MRCA, although this is a collaborative project rather than an overseas sale as such. According to Panavia, the unit cost of the MRCA will be not much more than half the cost of the French ACF aircraft, mainly because the MRCA has an order book of 800, whereas the ACF expects to sell only 200. If the MRCA were expected to sell only 200 also, its unit cost would be nearly 2½ times as much as it is. That is a vivid example of how important it is to get a wider base for sales to reduce our unit costs.

Against that background, it is disastrously against all our interests to kill our customers' confidence everywhere for the sake of pointless gestures against some countries of which the Labour Party may disapprove. Let us not imagine that it is only sales of guns and other weapons which count. If we make some defence sales, sales of diesel and other machinery will follow This point was made well in a recent speech by Sir Kenneth Keith.

I can understand hon. Members disapproving of the internal affairs of certain countries. Indeed, just to show that I am an angel in white clothing myself on this, not long ago I did a quick study of the internal affairs, as far as I could discover them, of all the 135 nations which make up the United Nations. I found that there were no fewer than 56 of whose internal affairs I thoroughly and strongly disapproved and a further 30 of which I fairly strongly disapproved.

If we are to cut ourselves off from selling equipment, and making balance of payments benefits from those sales, from that number of countries out of the 135 that there are in the world, we might as well shut up shop and forget about being an international nation. It is intolerable that this disapproval is selective in a purely party political way—although I accept that some hon. Members, notably the hon. Member for Harlow (Mr. Newens) who made this point strongly—are not selective. He said that he disapproved of all régimes, of whatever colour, if they are tyrannical. But this is not so in the minds of the Government. The discriminations are designed against those Right-wing organisations of which we disapprove and not against those which may be equally tyrannical but which have a Left-wing base.

The argument that I have been following very closely is that these arms sales are vital to us to obtain support for our other sales. But how is it that Japan, which makes no arms sales, has been able to sweep the world market in so many commodities?

When the hon. Gentleman was speaking on that point, I was tempted to intervene. There are two answers to that. The first is for me to say that it is only one of the arguments that I have adduced for the value of these sales. The other is that many other things follow from selling arms. Secondly, concerning Japan, I was tempted to say —I do not mean it flippantly—that it may be that Japan's success is due to the fact that she has not got Hugh Scanlon whereas we have. Possibly that is too superficial a view, but it is taken by some people.

However, tyranny, imprisonment without trial or racialism are equally intolerable whatever kind of Government practise them. If we are to have these policies about them, they must be seen to be quite irrespective of the political colour of those carrying them out. I hope that that Government will see that this is so, too.

Will the hon. Gentleman say to which Left-wing régimes of which we disapprove we supply arms?

It is not, unfortunately. That is the sad thing. I have been presented with a letter written by the Under-Secretary of State for Foreign and Commonwealth Affairs to a firm in my constituency which wants to sell totally unarmed training aircraft to Chile. The aircraft have no weapons of any kind and could not be used effectively in any way. The answer to the hon. Gentleman's question is that if I were to impose any ban I would be quite indiscriminate. It is not fair to do it in the way in which it has been done. It is ridiculous and we ought to get rid of it.

I want to ask the Minister to answer one or two points tonight, or possibly later. I hope that he and his right hon. Friend will resist the temptation to make any drastic reduction in our order for the MRCA. If we were thought to be pulling out of this project now, this would do immense damage. A huge number of jobs in many parts of the country is involved, some of them in development areas. The hon. Gentleman should take it from, I think, most of the House tonight that this is something which would be very unwelcome to the House as a whole if he were to do it.

Secondly, I should like to suggest that concerning defence sales there is possibility of the need for better training facilities to be available for customers which may be buying such things as warships or aircraft. I am not talking of the difficult areas but generally. It would be helpful to the defence sales organisation if there were more help from the Services in the setting up of training facilities. If that were done, many of the contracting firms would be prepared to contribute to the costs.

Third, I make a plea that the voice of defence Ministers is used in the matter of Service voting. There was a debate in the House on Friday about representation, initiated by my hon. Friend the Member for Woking (Mr. Onslow). The answer that he was given about Service voting was that he had to wait until there was a general body of legislation for electoral reform of one sort or another following the Speaker's Conference.

That is not acceptable from the point of view of the forces. The forces have, in effect, been largely disfranchised by the new rule, which simply does not work, however well it may look on paper. I hope that the Secretary of State will make it his business to bang his fist on the table in the Cabinet to see that we have legislation to return to Service men their vote as soon as possible.

I welcome the speech of the hon. Member for Huddersfield, East who raised two most important points. I have not time to develop them but I echo what he said about them. First, I agree that if there are to be cuts in the procurement programme, research and development must be left to the last. It is R and D which 'makes up our ability to keep up in the future. Technology is moving very quickly. I hope that the research and development bodies will be preserved as far as possible in any cuts that come.

Secondly, I echo the right hon. Gentleman's warning about the defence of our newly-developing oilfields. This is a serious problem to which I hope Ministers are addressing themselves. There are many new facets of the techniques which will be required. A whole new range of problems will arise if anything goes wrong, not excluding pollution, which could be extremely serious.

We have had a most interesting debate. It has been dominated by the question of cuts. I leave it with the request to Ministers to get their review over as quickly as possible and to bear in mind the interests and rights of all those who work in association with defence, particularly those in the development areas. It will not be acceptable merely to tell them that their establishments are to close down and that they must find other work. If they have to do that, they will get that other work at the expense of other people in the development areas.

With defence cuts, someone will be out of a job somewhere and, in the uncertainty which has been created, the Government should come to a conclusion as quickly as possible. If the Government find after all that our defence commitments do not allow them to make the savage cuts which some of their supporters have called for, no one will give them more support than the Opposition.

9.36 p.m.

There will have been two maiden speeches in the debate. This is my maiden speech on defence in the House after 12 years. The other maiden speech was that of the hon. Member for Belfast, North (Mr. Carson). I hope that mine will stand up in due course as well as that of the hon. Member. His speech was marked by very great sincerity. I gather that he has already done very good and helpful work in his own community. I hope he will continue a constructive rôle of reconciliation, take full part in our future debates and think less of the past and more of the future.

My hon. Friend the Member for West Lothian (Mr. Dalyell) asked a number of typically pungent and well-informed questions right at the end of his speech. I have taken note of them. More particularly my right hon. Friend has done so, and I am sure that he will bear them in mind at the appropriate time.

The hon. Member for Ayr (Mr. Younger) made three points at the end of his speech. I hope he will forgive me if I do not touch on two of them, but I have noted what he said about the question of Service voting.

The House has given a friendly reception to the package of measures for Northern Ireland which my right hon. Friend announced. My feeling is that there has been wholehearted endorsement of them. As the hon. Member for Aldershot (Mr. Critchley) said, everyone is glad that they have come now even if they did not come sooner. My right hon. Friend the Member for Kettering (Sir G. de Freitas) and the hon. Member for Blackpool, South (Mr. Blaker) also commented favourably on the package. It was asked what the cost would be. It is expected to be less than £500,000.

I want to mention three other matters relating to Northern Ireland. The right hon. Member for Chesham and Amersham (Mr. Gilmour) and the hon. Member for Ayr asked about compensation. I want strongly to underline our concern that compensation for the relatives of members of the forces who have unfortunately suffered death or for those members of the forces who have suffered injury should be dealt with with the utmost speed. As the House will understand, for the benefit of the individual compensation needs to be precisely and carefully defined, and this can be a complicated and time-consuming business, especially in more serious cases.

It is perhaps not sufficiently appreciated that the length of time it takes for an injury claim to be finally settled may often depend on the nature of the injuries received and thus the time that elapses before a final medical prognosis is possible. Snap diagnoses and instant settlements may seriously prejudice the interests of the individuals concerned. who are in turn the concern of the House. If a claimant so requests, the courts can make an interim award when the final award is likely to be long delayed.

Other factors contribute to delay, and the hon. Member for Ayr understands and appreciates them. But the main problem is the sheer volume of the work to be done, and with, regrettably, a very large number of cases, there is considerable pressure on the medical and legal experts, advisers and staff. The Army for its part does all it can to assist all aspects of the presentation of a claim for compensation, and the official effort has been supplemented by a generous and imaginative approach on the part of the Army Benevolent Fund. My right hon. Friend intends to keep this matter under his own personal review, together with his right hon. colleagues, and I am sure the House will feel certain that this will have sympathetic attention and the greatest possible effort will be made to expedite the claims in so far as it is in the best interests of those concerned.

The House will remember that a court of inquiry, headed by Lord Seebohm, reported last year on welfare provision for naval personnel and their families. It has now been decided to set up a similar inquiry to review the welfare provision in the United Kingdom for Army personnel and their families, and we have been fortunate in securing the services of Professor J. C. Spencer, Professor of Social Administration at the University of Edinburgh, as chairman of our inquiry. We hope that the inquiry will be able to begin its task very soon and will report in the course of the next year. In the meantime we have appointed a full-time social worker with our forces in Northern Ireland.

The hon. and gallant Member for Lichfield and Tamworth (Major-General d'Avigdor-Goldsmid) raised a question which has been in the minds of many hon. Members. The hon. Member for Gillingham (Mr. Burden) raised a similar point of constituency concern related to the Devon and Dorset Regiment. I am sure he will understand if I do not give a reply to the point which he raised, but I think it is swept up, so to speak, in the context of the very difficult problem of the extent of the interval between emergency tours to Northern Ireland. We are fully aware that this frequency is bound to entail some disruption of training, as the hon. and gallant Gentleman implied, as well as some disruption of family life, a point which the hon. Member for Gillingham has very much in mind.

The point is that it cannot be right for men to be asked to serve at Christmas time in Ireland for three successive years. The tour of duty should be spread out so that they do not do it for three consecutive years.

I fully understand the point, and I am very glad that the hon. Gentleman has taken the opportunity to make it again. The aim always is to extend as much as possible the interval between tours in Northern Ireland and to get it nearer to two years than to one. The interval between tours is related directly to the level of forces which have to be maintained, and that is one of the reasons why my right hon. Friend the Secretary of State for Northern Ireland told the House on 4th April that the number of troops to be kept in Northern Ireland should be only what is strictly necessary. It is a very difficult problem indeed in which one has to weigh the advantages and problems on both sides.

Before the hon. Gentleman leaves the subject of Northern Ireland—I am sure the House welcomes what the Government are doing for the troops there—may I ask him whether he thinks it right that the troops who serve there, with all the danger and unsocial hours, should continue to draw about one-third of the pay that can be earned by a fit young miner?

As my right hon. Friend said this afternoon, we are expecting the report of the review body later this week. While I take the hon. and gallant Gentleman's point, I know he will appreciate that it would be wrong for me to forecast the report which I have not seen and about which the Government have not made a decision. However, the point is well taken and has given general concern throughout the House.

I thought that the right hon. Member for Chesham and Amersham was schizophrenic in a rather waspish way. He complained about the delay in the White Paper. He said that we would not have it before the autumn and then said that it was our duty to come clean about our proposals. I think this was, in a sense, the view also of the hon. and gallant Member for Lichfield and Tam-worth. On the other hand, I took it from him—I certainly took it from the hon. Member for Ayr—that thoroughness was required in such a review. It seems to me that it is unreasonable to ask us today to produce a White Paper and to set our proposals before the House.

In my view it would have been grossly irresponsible had we sought, after only a short period in office, to come to the House with fully-worked-out proposals. It would not have been possible. It would have been a lottery in which every resource and every item of equipment would have been put into the barrel and pulled out, with perhaps the first turn going to my right hon. Friend, the second to me and so on throughout the Department. That is the alternative to a thorough review. My guess is that the House shares the view of my hon. Friends the Member for Gateshead, East (Mr. Conlan) and Hornchurch (Mr. Williams) that it is right that we should take all necessary time.

My right hon. Friend used an effective phrase when he referred to the dangers of spasms of uncertainty, of cuts which might be inadequate and reviews that were not sufficiently extensive to embrace the whole question of commitment as well as resources. He referred to the time for consultation, orderly transition and a clear picture of the future. I am sure it would be the considered view of the House, whatever may have been said by Tory Members today, that these are important priorities and that it is better that the review should be done thoroughly than that it should be brought forward in a premature fashion.

For that reason I am sure that all hon. Members—I have in mind the long shopping list of the hon. Member for Plymouth, Sutton (Mr. Clark)—will know that it will be quite impossible for myself or my right hon. Friend to pronounce today on matters which we have not considered. It would be irresponsible to say, for example, that the MRCA is an item of equipment to which the Government are wholly and conclusively committed or to suggest that it is in any way under threat, except in so far as the defence review must be inclusive.

If it was irresponsible to come to quick conclusions on this review, surely it was far more irresponsible to announce the intention of making enormous cuts before right hon. or hon. Members had any idea of where they would be made.

Not at all. I said it would have been irresponsible to have settled as between one piece of equipment and another or one commitment and another without the review we are conducting. There is nothing contradictory between that and the assumption the Government have made that there have to be savings in defence.

I say to my hon. Friend the Member for Brighouse and Spenborough (Mr. Jackson) that it has long been the policy of successive Governments that there will be no change in the status of the people of Gibraltar without their full consent. We are aware of the importance of Gibraltar's defence facilities to its economy, as we are aware of the importance which other parts of the world attach to commitments which must necessarily be under review.

In all the matters that the Minister has to take into account, will he give special attention to the extent to which the defence commitment in Gibraltar has a rôle quite out of keeping with commitments elsewhere in view of the very unusual situation regarding Spain?

Whether or not I agree with the way the hon. Gentleman defines the situation, I can certainly give him the undertaking that all of these aspects in Gibraltar and elsewhere will be taken fully into account.

May I say to my hon. Friends the Members for Salford, East (Mr. Allaun) and Coventry, South-West (Mrs. Wise) and the hon. Member for Ayr that there is nothing else I can usefully say this evening about defence sales. No decisions have been made other than those announced in the House. I am sure there will he further opportunities, in debate and at Question Time, to raise any related matters and to refer to the implications for our relations with different parts of the world.

My hon. Friend the Member for Huddersfield, East (Mr. Mallalieu), in a typically firm and thoughtful speech, said that the Government should be guided by three principles in conducting the review. I do not quarrel with the way he put it. We start from the point that significant savings in defence expenditure must be made in view of our present and prospective economic situation. We have asked the officials of all the Departments concerned to examine various possible levels of expenditure with savings accruing over different periods of time. At the same time we are examining all our defence commitments and placing them in order of priority having regard to the national interest and the threat which may exist to it, and to our various treaty obligations. A good deal of work has been done on this.

The next stage, which is only just beginning, is to match the resources likely to be available to the commitments we shall choose to continue. Within the broad option finally chosen there will be many other options in terms of equipment to be produced for the Armed Forces. Of course we shall have full regard to prospective and existing collaborative projects and the position of British industry. Finally we shall consider all the possible consequences—political, economic and in terms of employment—of the various changes that might be made in our efforts to reduce defence expenditure. That is the logical and proper way of conducting a review, and although there will be room for argument at every stage, just as there has been proper argument in the House today, we feel that this approach is most likely to obtain the results which can be defended and which are totally consistent with our obligations.

I do not suggest that the outcome of the review will be painless or that we can escape all anxiety during it. As my hon. Friend the Member for Gateshead, East said, in theory it is nice but in practice it is difficult to carry out the sort of measures we may find it necessary to employ. However, the very thoroughness of our review and our determination not to be rushed into the premature publication of a White Paper is an indication that we have the social and human consequences of the review in mind.

When the White Paper is published there will be a clear assessment of the rôle of civilian personnel and of defence-oriented civilian industry in meeting our commitments. We fully recognise the impressive resources of expertise, craftsmanship and capital equipment in many civilan defence establishments, as my hon. Friend the Member for Portsmouth, North (Mr. Judd) said. Whatever adjustments and redeployment may be required, the Government are determined that these resources should continue to be used in the best possible way for the economic and industrial well-being of the nation.

Does not the Minister appreciate that defence security cannot be counted in terms of pounds and pence? Either we have it or we do not. If the Government go too far and destroy security, every penny they spend on defence will be wasted.

If the hon. Member had been here during the debate he would not have found support for that view even among his hon. Friends.

New arrangements have been established for debating defence, and I hope that the House will find them acceptable. I express a personal hope that the Expenditure Committee—I think it meets tomorrow morning—will again establish a sub-committee on defence and external affairs to carry on the excellent work which was done in the last Parliament under the chairmanship of the hon. and gallant Member for Eye (Sir H. Harrison).

Select Committees do not make the life of a Department more comfortable. They take a great deal of the time of officials and they even put Ministers on the spot, but I hope that I am too recently a poacher turned gamekeeper not to believe strongly that the growing work of Select Committees is an essential element in Parliament's central rôle as a check on the executive. It is right that Committees should probe and inevitably sometimes embarrass, and when I say that I hope the Defence Department will have a fruitful and harmonious relationship with the new sub-committee I am not seeking to blunt its cutting edge.

I would also like to see fewer asterisks in the sub-committee's reports. By this I mean that I remain firmly on the side of disclosure, except when clear security grounds rule it out. The habit of concealment is still too characteristic of most Departments of Government and can be taken to ridiculous lengths, as for example, over Concorde under the previous Government, but we have all been offenders.

In aviation it is commonplace that one may learn more by reading Flight International and Aviation Week than by asking questions of Ministers. I cannot promise that my own still small voice will effect a revolution overnight. To be fair, the issue is complicated, but I fought this battle in opposition and I do not propose to abandon it now. My hon. Friend the Member for Salford, East will be reassured that I am concerned to see, for example, that all the information which can be published about the MRCA should be published. The financing of the project is particularly complex and I give no undertakings, but certainly I will seek to make such information available to the House as is possible.

The hon. and learned Member for Colchester (Mr. Buck) referred to openness. I cannot answer his specific question now with only a little time left, but I believe that more openness in discussion of problems of defence is highly desirable. It should not be more dangerous for Ministers to float tenative ideas than to make dogmatic assertions about defence, but it is widely appreciated that this is not the position at the moment.

The crucial question today is simple, and I am happy to use a phrase which the right hon. Member for Chesham and Amersham used about how we strike a balance in the use of our resources in order to ensure an adequate defence. But the answer is highly complex, allows for genuine argument and leaves little room for dogmatism. It is still affected by traditional commitments and historical attitudes that have comparatively little to do directly with the defence of Britain.

There are hon. Gentlemen opposite who believe, virtually by definition—and I have in mind particularly the hon. Mem- ber for Plymouth, Sutton—that any cut in defence spending is immoral and that the needs of the Armed Forces must have a prior claim on resources all the time. But even those hon. Members must concede that there is a ceiling. related both to the immediacy and character of the threat to security and to economic strength. Unless defence spending is related to what the nation believes it can afford, the real threat to our values and to our political system will result from social stress and legitimate expectations denied. It is natural and right that people should demand improved community provision and rising personal standards of living. These cannot he withheld indefinitely.

There is in almost every Socialist the instinct of a pacifist. War is obscene, and it is a small step to believing that defence spending is obscene, too. This seems so in particular because the use of arms has so often been the prerogative of the oppressor. I confess that, within the Socialist tradition, I feel personally more in common with Keir Hardie who wept at the outbreak of the First World War than with Robert Blatchford who was keen to hang the Kaiser.

But this is not incompatible with believing that disarmament must be multilateral and that freedom in an open society does not survive simply by virtue of its merit. I would certainly not be party to a steady erosion in Britain's capacy to fight—and, in the first instance, to deter—on the assumption that we have no enemies or potential enemies to fear. I believe that the sort of economies likely to come out of the defence review will be compatible with a realistic assessment of commitments and the threat to our security. They would not otherwise be acceptable to me or to my right hon. and hon. Friends.

I beg to ask leave to withdraw the motion.

Motion, by leave, withdrawn.

Business of the House

That this day the Business of Supply may be taken after Ten o'clock and that the Motion relating to Civil Estimates, Supplementary Estimates, 1974–75, may be proceeded with, though opposed, until any hour.—[ Mr. Walter Harrison .]

Housing (Supplementary Estimates)

That a Supplementary sum, not exceeding £499,499,000, be granted to Her Majesty out of the Consolidated Fund to defray the charge which will come in course of payment during the year ending on 31st March 1975, for expenditure by the Department of the Environment on subsidies, the option mortgage scheme, improvements, the rent officer service and sundry other housing services including residual expenditure, in respect of a temporary bridging grant made in 1973–74 to certain Building Societies registered in Great Britain, and temporary loans and other payments in connection with assistance to certain Building Societies registered in Great Britain and Northern Ireland.—[ Mr. Kaufman .]

10.0 p.m.

I am somewhat surprised that the Financial Secretary did not feel it appropriate, on a motion of this kind, involving large sums of money, to give us an initial explanation of the Estimate.

I was about to volunteer a preliminary statement, which I will still make if the hon. Gentleman will allow me to do so.

If the hon. Gentleman wishes to speak, it is normal to stand up. If he had done so, you would no doubt have called him, Mr. Speaker. But provided I am not precluded from speaking again later, it will not be objectionable to me if the hon. Gentleman wishes to catch your eye.

I think we can regard what the hon. Gentleman said as interrogative.

10.1 p.m.

I am sorry the hon. Member for Worthing (Mr. Higgins) should take so amiss one of the little slip-ups that happen from time to time. He asked for a preliminary statement, and he is now getting one.

I should like to offer a short explanation about the Supplementary Estimate now presented to the House. As the House knows, the Government are determined to do all they can to avoid yet another damaging increase in mortgage costs. We are equally determined to make more funds available for house purchase. The Building Societies Association, on the other hand, took the view that a sufficient flow of mortgage funds could not be assured without an increase in its recommended mortgage rate.

Consequently, the Government decided to take action to head off such an increase. As the House will know from my right hon. Friend's statement on 10th April, and reply to questions last Wednesday, subject to the necessary Parliamentary approval, we made the following offer. First, the Government would arrange for short-term loan facilities for building societies over the month ahead of up to £100 million at a rate of 10½ per cent. The Bank of England would provide these funds at the minimum lending rate. The Government would meet the difference between this and 10½ per cent. Secondly, if necessary, we would arrange for further short-term loan facilities of up to £400 million over the following four months at an average rate of £100 million a month.

The council of the association decided at its meeting on 19th April to accept the first offer, and not to recommend any increase in the ordinary investment rate and the mortgage rate. Again on 8th May the council decided to accept one tranche of loans up to £100 million from the second offer and again not increase rates. It intended to review the position in relation to the three further tranches month by month.

The House will note that the Supplementary Estimate makes provision not only for the loans up to £400 million from public funds but also for the refinancing of any outstanding principal on the loans from the Bank of England. These loans are essentially a short-term banking operation. The Estimate, therefore, makes provision against the possible need to refinance this particular facility at an earlier date than the building societies themselves might have repaid the Bank of England under the repayment arrangements agreed between the Government and the building societies. This will not affect the agreed repayment arrangements between the Government and the societies.

The net Estimate is not for the full £500 million, because a small part of the cost is being borne by Northern Ireland in respect of loans to building societies covered by Northern Ireland legislation.

As noted in the Estimate, it is expected that the loans will be repaid later in the financial year as building society receipts continue to improve.

We believe that the loans scheme is the most effective way of stabilising the situation in the short term. It is hoped that the pressures on societies will ease if the general level of interest rates falls in accordance with expectations. Meanwhile, the scheme should enable societies to increase the level of their mortgage commitments without waiting for their receipts to build up over a period of months.

I therefore commend the Supplementary Estimate to the House.

10.9 p.m.

I express my thanks to the Under-Secretary of State for his explanation. It is right and proper that we should have had an initial explanation because the sums involved in the estimate are very large.

I am becoming concerned about the way in which recently we have debated measures involving vast sums of money late at night and with less publicity than they would perhaps have otherwise received. Only a couple of weeks ago we debate at a late hour a value added tax order raising no less than £275 million in taxation by extending VAT coverage. Tonight we are asked to authorise the expenditure of £500 million in this Estimate. I shall come later to the question whether that is or is not public expenditure, but we well understand the political background.

As I mentioned during the debates on the Finance Bill and the Budget, we are going through a period in which the Government are seeking to achieve short-term popularity by giving hand-outs to all and sundry without regard to the longer term, except that in this case the Government have been more explicit because we understand that this is a temporary arrangement. We are also told that now the Government expect rather than hope—and I noted with interest the the Under-Secretary's words—interest to fall. That was a rather curious statement by the Under-Secretary because it is very unusual for Ministers to express a view on the future course of interest rates, which have some implications for the gilt-edged market.

My words were chosen with great care and the hon. Gentleman, as a former distinguished Treasury Minister, should know that in matters of this kind words are chosen with great care. I said:

"It is hoped that the pressures on societies will ease if the general level of interest rates falls in accordance with expectations".

That perhaps gives a rather different nuance than that indicated by the hon. Gentleman.

In that case, whoever replies for the Government should tell us whose expectations cover the future course of interest rates. It is not advisable for words to be chosen so carefully and then for the House to be told that they have been chosen carefully without the hon. Gentleman realising that there are considerable pitfalls. We should therefore be told whether the expectations referred to are those of the Government, of the building societies or of someone else. The hon. Gentleman should answer that specific point, given that he made the statement in the first place.

Reports of the speech made by the Paymaster-General over the weekend to a savings organisation—I have not been able to find a copy of a hand-out of it in the Library—certainly did not seem to expect a vast reduction in the rate of inflation. The money rate of interest is closely related to the rate of inflation. If the expectations about inflation are such as those which the Paymaster-Genera' appeared to be expressing over the weekend, they seem to be a little inconsistent with the view which the Under-Secretary apparently expressed just now. The Government's policy on inflation—and I hope that the hon. Gentleman will forgive me for saying this—contains a number of measures which are likely to raise rather than lower prices.

I wish to ask some specific questions and to raise a number of technical points. As there are a large number of them, I shall go reasonably slowly because we expect specific answers before we shall feel it right to authorise the expenditure of a large sum of money.

I presume that the Financial Secretary will intervene later. Therefore, my first question is, "What are the precedents" —I cannot offhand recall a recent one" for having a Supply Estimate covering a single item, and then covering it by a Consolidated Fund Bill within a couple of days? "This strikes me as being a somewhat unusual procedure, and I should he grateful if we could be told the precedents for it.

My second question is related to the first and depends on the overall management by the Government of their affairs. Why, for this subsidy, are we presented with a Supply Estimate and told by the Leader of the House that it will be covered by a Consolidated Fund Bill next Wednesday? Why is that procedure adopted with the subsidy for the building societies, whereas the food subsidy is to be financed differently, according to the Financial Secretary, who said in answer to my question:

the two subsidies. I want to know why different procedures are being adopted.

Thirdly, there is the interesting question of the arrangement with the Bank of England. The House will note from the estimate that it is proposed that the first £100 million tranche is to be financed by the Bank of England. It is entered in page 2 of the Estimate as a temporary loan to the building societies. That is offset on the one hand by interest payments and on the other hand by the refinancing of that amount to the Bank of England by the Treasury.

I am not clear why the first £100 million is covered by this roundabout method, whereas it is intended to cover the £400 million in a more direct way. It raises some interesting questions. I was not greatly reassured by the Under-Secretary of State when he said that this was a short-term banking operation. Am I to understand that the £100 million tranche is being financed by the Bank of England and then being paid back by the Treasury because the Bank of England is lending the money to the Government? If that is right, why is not this transaction being done directly?

My fourth question concerns the position of the Bank of England and the interest. In the Estimate there is a nice round figure of £500,000 interest payment to the Bank of England to meet the difference between the Bank's minimum lending rate of 10·5 per cent. on loans up to £100 million made by the Bank to building societies. We are used to having nice round figures in Estimates, but we should like to know on what basis the £500,000 interest has been calculated. Presumably some assumptions have been made about the length of time for which the money is lent, and so on.

There is a further related point with which I should like to deal. The interest on the first £100 million is entered clearly in the Estimate, yet I understand that the object of the exercise is to reduce the rate of interest paid by the building societies in contrast with the amount of money paid in respect of the lenders. Why is it that in the case of the Bank tranche there is a sum of interest which presumably represents the differential between the one rate and the other? I refer to the 10·5 per cent. and the rate of 12·25 per cent. Why is one differential specifically reflected in the estimate whereas the other differential does not appear? No doubt there is a simple explanation, but it is worth getting the point clearly on the records.

I turn to some broader issues, the first of which relates to the effect of this measure on public expenditure and on the Budget judgment. The Government have said that they expect the money to be repaid. Nevertheless, this substantially affects the borrowing requirement. This is a matter which must be relevant to the Chancellor's Budget judgment and his general view of the management of the economy. This must also affect the money supply—and I know that this matter is of particular interest to my hon. Friends the Members for South Angus (Mr. Bruce-Gardyne) and Cirencester and Tewkesbury (Mr. Ridley) and indeed to the rest of the serried ranks behind me on the Conservative benches. I have always felt that it was the lags in the analysis which are difficult to define. At long last they seem to be working out, but this will not be the case if a sum of £500 million is inserted into the calculation in the course of a year.

There is an interesting difference of opinion—a difference which I hope will be resolved—between the view of the Financial Secretary and that of his right hon. Friend the Secretary of State for the Environment. The Secretary of State for the Environment said on 10th April expenditure. If it is all public expenditure, why is it that the Secretary of State does not realise it? There is a certain inconsistency in the argument which ought to be cleared up.

Finally, since the motion refers to "certain building societies", we should be told which societies are to receive the money and the basis on which it is to be allocated. The Under-Secretary seemed to suggest that it was the council which had accepted the money. I may be wrong, but I thought that it was the individual building societies. I am not clear whether that was a piece of careful wording, but my understanding was that it was the building societies and not the council which would accept the money from the Government.

In any event we should know which building societies are involved and on what terms the repayments are to be made. Presumably the loan has a term, and presumably it has repayment terms. Given that we have not had a statement since that of the Secretary of State on 10th April when he said that he was about to meet the building societies, I hope that we can be given an up-to-date view of the position about these discussions.

10.21 p.m.

This is the first opportunity that this House has had to debate the Government's policies towards the building societies. For that reason I hope that I shall be forgiven if I range a little over the background to the decision taken by the Secretary of State to provide this bridging loan, or whatever he terms it.

I had thought to make my contribution in the form of a series of quotations on the subject from the Secretary of State and the cautionary tales that he told about subsidising the building societies without proper control over the public funds put at their disposal. However, it would be indigestible for this House to have columns of HANSARD quoted at it, so perhaps I might confine myself to quoting one or two of the right hon. Gentleman's more apposite comments on the policy that he is now following.

In the debate on land and housing on 14th March last year, the right hon. Gentleman said: laissez faire 12 months later.

I turn to a further contribution on this subject which the right hon. Gentleman made on 6th November last year. He said: the reactions of the building societies. They were scarcely the blushing accepting bride that might have been expected as a result of the gallant and generous offer by the intending bridegroom. Indeed, I thought their reaction was not exceedingly helpful to the Government or to the policies that they were intending to pursue.

I am sure that I was not alone in expecting that, when we came back after the Easter Recess, the Secretary of State would be more specific as to what he was intending his loan should do. That surely should be the purpose of our brief debate tonight. It is not sufficient to go into the detail of the mechanics of the operation, as the hon. Member for Worthing did. We must also be convinced that the objective that the Secretary of State has set himself is right and can be achieved.

With that in mind, on 6th May I asked the Secretary of State whether he would be kind enough to

So that we can all get it clear, are we to understand that it is the Liberal Party's policy that the strings attached to this financing operation should be more extensive than those being applied by the Government?

I am grateful to the hon. Gentleman for giving me an opportunity to catch my breath. I shall be coming to that point, if he will be patient.

On 8th May, in answer to oral Questions, the Secretary of State addressed himself to the alternative ways in which mortgage facilities should be made available to those who were in particular difficulty. On this point, perhaps unusually, I agree with the hon. Member for Bolsover (Mr. Skinner) whom I am delighted to see in his place. It is not usual for hon. Members on this bench to agree with the hon. Gentleman, but I agree with him on this point. I understand that local authorities, to which the hon. Gentleman referred as being more worthy recipients of Government aid at this moment, have had a difficult time advancing finance to those whom they feel should have mortgages. I have heard of mortgages at interest rates of up to 16 per cent. which are a great deal higher than the building societies are currently asking.

The most curious feature of the whole exchange is that not all building societies appear to be in such need. Indeed, the building societies movement, when it is not cap in hand asking for funds from the Government, seems to be in remarkably fine fettle. On the very day after the Secretary of State last spoke on the subject, the Chairman of the Building Societies Association, Mr. Leonard Boyle, addressed the annual meeting of the Association. An estimable newspaper, the Daily Telegraph, which I am sure that hon. Members on this side would feel was reputable in this respect, reported as follows:

Surely the hon. Gentleman is aware that the assets of the building societies comprise not liquid cash but the value of all the houses mortgaged to them?

I am coming to that very point. I am grateful to the hon. Gentleman for mentioning it.

I should like to put two or three specific questions to the Under-Secretary of State. I hope that he will be able to answer them tonight. Alternatively, I understand there may be a second oppor- tunity later this week for him to answer specific points.

First, what is the current level of building society reserves? How much of that is liquid, and how much is fixed? Secondly, to what extent do these reserves differ from the statutory minimum which we understand the building societies are bound to maintain? Thirdly, what proportion of the current loan has gone to bolster those reserves? I ask that because Mr. Boyle was quoted during the weeks following the discussion on the loan as having said that reserves would need some support from this fund.

I do not want to detain the House for too long. In an interesting speech to the building societies last month the Secretary of State showed that he had an open mind in the long term, and therefore I should like to make what I hope will be a practical suggestion. After all, if the House passes these Supplementary Estimates and the Consolidated Fund (No. 2) Bill on Wednesday there will be a considerable kitty of about £400 million available to help house purchasers.

I should like to make one or two suggestions which I hope will be taken up by the Government. First, I hope that the Government will look again at what help they can give to local authorities. I am sure that the hon. Member for Bolsover is not alone in thinking that local authorities provide a useful vehicle for giving help to those who might not otherwise get much from building societies.

Secondly, is it not possible for the money which is given to local authorities, and possibly also that which is given to building societies, to be directed specifically towards the first-time purchaser of a first house, and possibly even to place a ceiling of £10,000 on it so that we can avoid the increase in prices that has been forecast by Mr. Boyle and others as a result of the release of greater funds for house purchase?

Thirdly, in the longer term, if the building societies do not respond—and they cannot be forced to—would it not be possible for the Government to consider an alternative choice for many of those who are seeking mortgages? Clause 9(2) of the Housing Bill provides an opportunity for the Housing Corporation to lend money to any individual who wishes to purchase a house in respect of a certain limited number of people. The extension of that clause to cover any individual making a purchase from a local authority, or perhaps from a private builder, would enable the Housing Corporation to develop as a new building society.

I see no reason why we should not welcome such a move. If that happened, it would be healthy competition. The corporation could use the existing outlets of all the housing authorities in the country as its retail arm. The social aims of the Government and of local authorities could be met, and through such a scheme the corporation could introduce pilot schemes for low-start equity-linked and index-linked mortgages.

I do not think that I have a direct interest in this matter, since I do not think that any of the sum involved is likely to come to me because my mortgage is small, I am glad to say. However, I have an interest in housing policy, and it would be a great pity if this opportunity were not taken to look further ahead at the housing objectives rather than the financial details.

I have in the past had the honour to advise the Royal Institute of British Architects on housing policy, and I retain that advisory rôle. I declare that interest, though I do not think that in this sense it is a direct one. My concern tonight is that we might at eleven o'clock pass Supplementary Estimates which have great implications for the future of housing finance, and it seems to me that we should consider not only the detailed points introduced by the hon. Member for Worthing but the housing objectives. If the building societies are as efficient and public-spirited as they always tell us they are, they have nothing to fear from a little healthy competition.

10.34 p.m.

I must congratulate the hon. Member for Bodmin (Mr. Tyler). For one so new to the House, he is like a walking computer, storing great chunks of HANSARD and quotations in his memory. But, like a computer, he seems to lack judgment. At the end of his speech, apart from a plethora of quotations and wise recollections of what others had said, he did not say whether he liked the motion or would vote for it. Nor did he put forward any policy regarding the subsidy to the building societies.

It is easy to say, as I say, that those who will be taking out mortgages will be pleased in the immediate weeks and months that their mortgages have been pegged at 11 per cent. Of course we as politicians must fear the wrath of the mortgagors if interest rates and mortgage rates rise to 12, 13, 15, 18, 20 or 25 per cent. In the short term therefore, it is superficially attractive to give the Government this money to spend.

But one has to think of the long term, too. Insufficient attention has been paid to the economic effects of the Estimate. My hon. Friend the Member for Worthing (Mr. Higgins) asked some questions which need answering about whether this is public expenditure. The Secretary of State said that it was not. I have the quotation from his statement but I will not read it again. But if it is not public expenditure, why are we being asked to pass an Estimate? That question must be answered.

Second, I should like to ask about the money supply. On the occasion of his statement, I asked the Secretary of State what effect this would have on the money supply He said:

Is it public expenditure? Is it an increase in the money supply? Where does it come from? There is a lot of mumbo-jumbo about it coming from the banking sector and therefore not being strictly public expenditure. We are being asked to pass an Estimate to provide money, but then, in a way we cannot understand—we simple little boys—it will come from nowhere. Why do not the Government tell us exactly where the money will come from?

Putting it slightly more simply, it probably comes from abroad. It comes from the massive foreign borrowing in which this Government are engaging. It finds its way through the Exchequer Equalisation Account into the Bank of England and from there it is lent on to the building societies. Its effect is that more mortgages will be taken out and more people will be able to buy houses. People who would otherwise have forgone the purchase of a house will now be able to have one, and of course the political half of us welcomes that—we are all politicians—but as a result it will push up house prices, it will be inflationary because the demand for houses will come back again and any good that is done in the Budget will be ruined at a stroke.

As politicians we must take seriously the question of coming to the rescue of whoever is afflicted by inflation. One has seen so often, be it in farming and food prices or housing and mortgage rates—in what sector of the economy it matters not —that inflation bears hard on certain sections of the population. Rates is the current example. Inflation on the rates has borne hard on ratepayers. We say that we will help them; that we will subsidise them; that we will produce money to bring down that burden upon them.

That is what we are doing in this estimate. We are producing £500 million to bring down the burden upon mortgagors. Temporarily this helps. It is an easement. But in the long term it is a direct and strong contributor to increasing the rate of inflation.

If either the hon. Gentlemen on the Treasury Bench or my right hon. and hon. Friends on the Opposition Front Bench believe that they would like to do something about inflation, they should stop attacking the symptoms. They should stop subsidising the little spots which appear on the skin and deal with the root and cause of the disease. The only way to do that is not to spend £500 million. The way is simply to adjourn passing the Estimate and to spend less, not more.

What happens, finally, if the right hon. Member for Manchester, Central (Mr. Lever) fails to talk down the rate of interest? I pay tribute to him. Since he made his brilliant, confident speech in the Budget debate, he has actually been able, by words, to influence economic indicators. He brought down the rate of interest, and he even pushed up Government securities in price, and even equities. No man has more magic or power than he to order the economic indicators of the economy to move at his command. But supposing that market forces overwhelm him, supposing that interest rates rise again, and supposing that the building societies continue to find that they are in trouble and that the £500 million begins to run out. Next year it will not be £500 million but, perhaps £1,500 million that is necessary to peg the mortgage interest rate at 11 per cent. Shall we have another Supplementary' Estimate for £1,500 million, and for £2,500 million the year after that?

As inflation mounts, so will interest rates. This Estimate is a direct contribution to their doing so. For how long are the building societies required to hold the interest rate at 11 per cent.? Let us suppose that the pressure of economic forces is such that they run out of the £500 million and then still cannot get any funds to finance future borrowing in six months' time or so. Shall we then be told that the building societies are obligated to keep their interest rate at 11 per cent. although that means that they are prevented from lending any more, or shall we have another Supplementary Estimate for more subsidy, causing, in its turn, more inflation?

It is surprising that the present Government have not learned from the previous Government that the treadmill of subsidising gas, coal and electricity leads to problems which monthly escalate in their severity. The stick that the Government will get when they increase nationalised industry prices is as nothing to the stick they will get when they try to get out of pegging the mortgage rate at 11 per cent.

The hon. Gentleman accused the hon. Member for Bodmin (Mr. Tyler) of being imprecise in his demands on the Government. Will the hon. Gentleman be a little more precise now in what he is saying? Is he advocating that the Government should allow the mortgage interest rate to rise to 14 per cent.? That is the force of what he has said. Will he be honest to the House on this matter?

I will answer that question. Yes, inflation means that certain indicators change. An indicator which is changing now is the interest rate, which is rising.

It is very hard on a large number of people who have borrowed and want to borrow that the particularly pernicious effect of inflation is to make their mortgages more expensive—too expensive. But if we are to resist inflation, we have to allow that to happen and we have to suffer it. But what is iniquitious about the situation is that, at the same time that these poor people are taking out or want to take out mortgages, and are suffering accordingly, the Labour Government are busy dishing out £10 million to the trade unions and encouraging every sort of profligate expenditure in wages. The Government are asking the middle class to take a further cut in their standard of living in order to subsidise wages.

10.46 p.m.

I heard the Under-Secretary of State say, "That is inflation", when my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) was explaining the inherent logic of allowing mortgage rates to rise. Sooner or later, the hon. Gentleman will have to learn that it is not higher prices or higher interest rates which are inflationary. They may encourage inflationary expectations but in themselves they are not inflationary.

What is inflationary is to try to obscure the consequences of inflationary pressures in the way that this order is designed to do. Therefore, I find myself entirely in agreement with my hon. Friend on the substantial point. I hope that the Financial Secretary will tonight deal with the points which have been raised—particularly those points of substance which my hon. Friend the Member for Worthing (Mr. Higgins) raised—with perhaps rather more care and diligence than he showed in replying to the Second Reading of the Finance Bill last week. The House is entitled to a serious answer on these substantial matters.

The hon. Member for Bodmin (Mr. Tyler) deplored the fact that more strings had not been attached to the provision of this loan finance to the building societies. I take the opposite view. The hon. Gentleman claimed that the building societies had been going cap in hand to the Government for funds. Nothing could be further from the truth. The criticism to be made of the building societies is not that they have been going cap in hand to the Government but that, on the contrary, they have not had the courage and determination to resist the poisoned chalice which this Government and, I am afraid, to a modest extent the Conservative Government were prepared to hand to them. But no one can say that they have been going cap in hand to the Government. If members of the Liberal Party seriously imagine that, they should study what the Secretary of State for the Environment told the House on 10th April.

The ethics of this whole proceeding are deplorable. I declare at once an interest as one should in these interest-ridden days, as the fortunate possessor of a mortgage. It is, like that of the hon. Member for Bodmin, too small. I wish it were very much bigger because the owner of a mortgage is the proud possessor of the safest hedge against inflation yet devised by man, one which already enjoys a substantial subsidy from the taxpayer, prior to this arrangement, which was running at the rate of £400 million a year.

There is, however, another side to the coin. He is someone who is never referred to in these discussions—the depositor with the building societies. We were told last year, and I doubt whether the situation has changed much, that no less than 20 per cent. of building society deposits were placed by individuals who are below the tax threshold. These people are the objects of a public fraud. They are receiving interest at a rate which ensures that their money is clipped by some 4 per cent. per annum at the present rate, and the rate is accelerating rapidly. Never a word is said about these people. The Government's action tonight is designed to ensure and, indeed, to guarantee that the rate of interest that these people receive departs even further from the accelerating curve of inflation than it would otherwise have done.

If they are below the tax threshold they are being invited, because of the composite rate, to pay income tax when they should not have to do so.

Yes, that is absolutely true. This simply compounds the fraud which has been perpetrated by the building societies for many years. In the last two years, unfortunately, the Government have themselves become accomplices to this fraud. On this occasion the Government have gone one stage further because they have browbeaten their principal in this fraud to perpetuate and widen the scale of fraud.

On 10th April the Secretary of State for the Environment said:

If we regard this proposition as wholly fraudulent in its impact upon depositors, one must consider the alternatives. One alternative which clearly was very much in the mind of the Government and the building societies was that the rate of interest paid to depositors was so unattractive that the flow of funds would continue to disappear and hence the money for house purchase would not be available. One can comment that if this situation persisted the consequence would undoubtedly be that in due course prices for houses would tend to come down to the point at which they were more nearly in balance with the supply of funds to finance their purchase.

The corollary, as my hon. Friend the Member for Cirencester and Tewkesbury pointed out, is that the consequence of Government activities must be expected to be an increase in the price of houses. While, contrary to the ideas of the hon. Member for Bebington and Ellesmere Port (Mr. Bates), that in itself would not be inflationary, the way in which the Government seek to compensate for it is directly inflationary, as my hon. Friend the Member for Worthing has pointed out.

The other alternative, as my hon. Friend the Member for Cirencester and Tewkesbury said, is to allow the rate for mortgages to rise and to recognise that, at the going rate of inflation, and after allowing for the tax concessions enjoyed by the mortgagor, the rate of interest to be paid by a mortgage holder would have to rise quite a long way further before he was paying a true rate of interest at current rates of inflation.

I know that hon. Members on both sides of the House are painfully aware that there was something of a mortgagor's rebellion during the last election. This rebellion reflected very much more the generalised effects of the way in which the prices and incomes policy had impinged most severely on those who happened to be in the new mortgage category. It was a generalised feeling that costs were rising against them and that their incomes were not keeping pace with the incomes of those immediately below them. The rising cost of mortgages was a factor.

We should look at the causes, not the symptoms, of this rebellion. What I find intolerable is the implication these Estimates have for the building society movement. Here we see one more instance of the growing saga of the Government bribing individuals with their own money but deciding how that money shall be spent, when people shall benefit from the bribe and when they shall not.

The hon. Member for Bodmin was logical in demanding that the Government should carry one more stage further—or perhaps several more stages—the process of attaching strings to the subsidies provided by the Government. He suggested that the building societies should be obliged to use this money only on first-time mortgages or on mortgages up to £10,000. How long will it be before we have the Government deciding that the money must be used only for houses constructed since 1945 or, for that matter, for houses constructed prior to 1939?

If anyone thinks this is fanciful they have only to consider the selective manner in which the Secretary of State for Prices deals with bread subsidies and the type of bread which attracts the subsidy and the type which does not. How long will it be—and this is the end result of this policy—before the building societies are allowed to use their funds for providing mortgages in Grimsby but denied the opportunity to use those funds in South Angus? Sooner or later the temptation will be irresistible and Ministers will succumb to it—to the temptation to divert the activities of the building societies to serve the crudest political purposes.

I believe that it was a tragedy that the societies, after much laudable hesitation, decided that they could not afford to resist the naked threats of the right hon. Gentleman. I understand why they took this view but still believe they are mistaken. They will find themselves increasingly embroiled in a process from which there is no escape and in which the end result will be that they will forfeit their independence and in so doing will forfeit the social purpose for which they were created.

10.59 p.m.

My hon. Friends the Members for South Angus (Mr. Bruce-Gardyne) and Cirencester and Tewkesbury (Mr. Ridley) have questioned the economic basis of these estimates in persuasive and important speeches. I will not follow them into that at this stage, although I must say that I share many of their reservations.

I will assume that the House will approve the Estimates, as it must, because £100 million has already been loaned.

At G1 the Vote says that the loan is to provide

In advancing the money presumably the Government have calculated in some way the likely number of houses which were to be started in the private sector this year. Three alternative figures have been given on this score. The first was given by the Minister for Housing and Construction on 28th February outside the House. He said that he expected the level of private starts this year to be 120,000. The National Council for Building Materials Producers referred to 130,000 private starts, and the economic development council for the industry arrives at a similar figure to that given by the Minister. That is the figure the right hon. Gentleman is saying would have been achieved had he not made the cash injection.

There is no doubt that a cash injection was necessary if it was intended to raise the level of the housing programme. However, the Government must have calculated before preparing this measure the level of mortgage finance needed to sustain the existing rates of house construction without changes in policy, and they must have discussed them with the Building Societies Association. They must also have calculated what the figure would be if the loan was made, so that they must have worked out the impact it would have on housing construction. What projections have been made by the Government as a result of their calculations?

I hope that the Minister will inform us of the Government's assumptions about interest rates, and of the cost to the building societies at different levels of interest over the next few months. What is happening in the joint committee with the Building Societies Association. which was set up by the Secretary of State's predecessor and which is presumably partly instrumental in framing measures of this sort? It is important to have bodies which can draw up statistical projections and for the information they accumulate to be published because that enables debate to be better informed when matters such as this come before the House.

The Government must have the answers that I have been seeking. If they do not have them they should not have introduced this measure tonight.

11.4 p.m.

It is possible to detect in this measure the influence of the right hon. Member for Manchester, Central (Mr. Lever), a man for whom hon. Members have enormous respect. Just imagine the thought process behind it. The right hon. Gentleman, reverting to his great experience in the financial world, saw that there was a run on the building societies and saw, too, that it had to be stopped. He planned to inject a great deal of money into them so that the figures showed an excess of deposits over withdrawals, and thought that that in itself would reassure people who did not want to be at the end of the queue for withdrawing their money.

He then said to himself, "Once people feel that money is coming back in, their confidence will be restored. The societies will not need to offer such high rates of interest, and we might bring a little stability into the present rather alarming situation. In a few months' time interest rates will fall and everybody will be happy. We shall have saved the building societies by this short-term intervention, which is a confidence-boosting operation rather than anything else."

One is forced to agree with my hon. Friends who have just spoken that the Government should have taken a cool look at their predecessor Government's initiative of a year ago, when a short-term intervention to hold down interest rates, because they were thought to be bound to reverse themselves, did not work. Three months later, when the £15 million or what ever it was had been used up, the Government of the day were forced to admit that it had not worked.

The present Government are going about the problem in a rather grander way. Committed as they are to restraining public expenditure, and refusing to accept that this is public expenditure, they offer to inject this large sum into the money market, into the building societies, in the hope of achieving what they have little likelihood of achieving.

I should like to put the other side of the coin. In a few months' time we shall get the benefits of the wages explosion. Increases in prices of basic materials are still coming through. Our balance of payments is not responding in a par- ticularly impressive way. We have to keep our interest rates high because we borrowed big sums of money, and many people are depositing funds here purely on the basis of high interest rates. Our inflation rate has not abated, and the Government have injected £500 million into the building societies.

Thousands of small depositors have had their interest rates pegged, and have not been getting a proper return on their funds. The problems which the Government are so busy helping to create, the problems of inflation, are coming home to roost, reflecting themselves in a demand for higher interest rates. All the fine words of the right hon. Member for Manchester, Central are proved to have been as nothing.

I remind the Government and the right hon. Gentleman of a story which he used to tell when he sat on the Opposition benches, the story of the gentleman who came home and found his wife in bed naked with his best friend. Before the husband could open his mouth and complain the wife said, "Now I know you don't love me." When he asked why she said that, she replied "Because you prefer to believe the evidence of your eyes rather than the evidence of your ears."

The right hon. Gentleman has been telling a fine tale to the country, and the country shows signs of believing him. It prefers at present to believe the evidence of its ears rather than the evidence of its eyes. But in a short time the effect of the right hon. Gentleman's honeyed words will start to disappear. The Government's initiative, their short-term attempt to play with the building societies as the right hon. Gentleman was able to play on the Stock Exchange in his former incarnation, will be shown to have been what we on this side of the House believe it is—a rather smart piece of financial juggling, which is an attempt to get round the problem but which in fact is accelerating and accentuating it.

I shall not vote against the Estimate—[HON. MEMBERS: "Why not?"]—because I should like the Government to learn the lesson the hard way, just as we learned it. In my view, they will learn it the hard way. I hope that an hon. Member opposite will, once a fortnight, remind the Chancellor of the Duchy of Lancaster of his amusing story and will point out that, at the end of the day, it is the evidence of our eyes and not the evidence of our ears by which we judge this measure.

11.5 p.m.

I wish to ask the Minister two questions.

We are being asked to pass what I regard as a very short-term measure. First, what longer-term measures is the Minister considering for dealing with this complex problem? Secondly, what would be the effect if he altered the tax structure of the building societies? Could he have achieved almost the same result as he will achieve by injecting about £500 million into the economy?

11.6 p.m.

Because of the lateness of the hour, I do not intend to range over the whole of this interesting debate. However, I hope that hon. Members opposite will not think that we do not require answers to the many interesting questions which have been raised.

I wish to direct my remarks to one matter, but a matter of some importance, particularly to the future of mortgage borrowing and of people wishing to buy houses. It relates simply to the question when the building societies must repay the money to the Government.

When the Secretary of State gave the House details of these arrangements on 10th April, he said:

Tonight the Under-Secretary of State mentioned that the loan would be repaid as the building society position continued to improve. He also said that what the Government proposed was a short-term arrangement. We have not been told how short is short-term. I should like to know how soon the building societies are required to repay the money because of the implications of this matter for borrowers and for the inflow and outflow of building society funds.

The Secretary of State mentioned the possibility of other sources of borrowing being found, presumably by the building societies. In other words, the building societies were to borrow, from sources other than the Bank of England or the Government, money to repay the sum we are discussing. As the Under-Secretary made no mention of these other sources but merely talked of improvement of the building societies' position, presumably in terms of their cash inflow, are we to understand that whatever other sources the Secretary of State had in mind have not fulfilled his expectations?

Some of us assumed at the time that there would be approaches, for example, to institutions or pension funds to come to long-term lending arrangements after this bridging operation had finished. If such approaches have been made, what interest rates were considered? Was it the market rate, or was it at 10·5 per cent.? That would have an obvious impact on the rates at which building societies could lend out that money in future.

I ask that question in the context of having seen in the newspapers in the past few days for the first time advertisements by building societies to borrow on a three-year term at 14·1 per cent. interest. That is an exceptionally high interest rate for building societies to offer. Are building societies seeking fixed three-year term loans to them at 14·1 per cent. because that is the only way in which they can begin to repay the amount that they are borrowing at 10·5 per cent.? If so, are we to assume that future borrowers from the building societies will have to pay more than the 14·1 per cent. at which building societies are seeking funds? That is not clear from what has been said either by the Secretary of State or the Under-Secretary of State.

If the loan by the Government to the building societies is not to be repaid by money from other sources, whatever they may be, but by the net inflow to building societies from moneys they receive from their depositors in the ordinary way, it becomes immediately of great importance to know how short term is the short term of which the Under-Secretary spoke. If the £500,000 has to be repaid in the short term out of ordinary inflow funds to the building society, at that point in time there will be a mortgage famine.

Perhaps "short term" does not mean short term, and the Under-Secretary is really speaking of a spread-over period. Perhaps he will bring the House into his confidence on that matter, which is of great relevance to the mortgage position in future, and to rates of building construction which are very much dependent on the mortgage moneys available. It will also have an impact upon the way in which the building societies will at that time go about seeking to bring in more money to pay to the Government. That could bring us back to building societies having to offer high rates to attract moneys in, and we should be back in the position we were in when we started this exercise, having achieved only a temporary respite for borrowers.

The Under-Secretary of State said that much of this scheme was dependent upon interest rates falling. It could well be that he is gambling entirely on that happening. Although he may have exuded a certain amount of confidence, it is a very great gamble, particularly as some building societies do not seem to share that confidence if they are entering into three-year commitments at 14·1 per cent.

11.35 p.m.

Any debate in which we have the privilege of listening to the hon. Members for Cirencester and Tewkesbury (Mr. Ridley) and South Angus (Mr. Bruce-Gardyne) is not entirely wasted. They are the Morecambe and Wise of the Conservative Party—Eric from Winchester and Magdalen and Ernie from Eton and Balliol. It is the true essence of Conservatism that we hear from them, and the reason that the Conservative Party sits in Opposition rather than in Government is the schizophrenia which they represent compared with that of their leaders, who have to contest the realities of the situation.

The hon. Member for Bodmin (Mr. Tyler), on the other hand, with a majority of nine, has to live in the real world. The hon. Member for Hertfordshire, South (Mr. Parkinson) told us that the test of what were are doing would be the evidence of our eyes rather than our ears. In Hertfordshire, South the test will be his majority, if he has one, at the next General Election.

The Opposition have used strong words and vicious criticism of this Supplementary Estimate. An exception was the hon. Member for Worthing (Mr. Higgins), although he bit my head off a little when I stood up earlier. Yet, despite all that hon. Members opposite have said, despite all their strong words, they are not going to divide against the order. They are not going to do so because they know what would happen to them if they prevented it from going through.

In these days of declaring interests, is the hon. Gentleman saying that his only interest is in majorities, in getting votes and winning elections? Is he never prepared in his humdrum life to think about the national interest, which is what my hon. Friend the Member for South Angus (Mr. Bruce-Gardyne) and I are trying to put in this House?

The hon. Gentleman will be pleased to learn that I believe that he and the hon. Member for South Angus do have the national interest at heart and place it first as they interpret it. I accept that, and it is one of the reasons for my considerable respect for them.

I have great respect, too, for Morecambe and Wise. They give me almost as much amusement as the right hon. Member for Penrith and The Border (Mr. Whitelaw), for example. But although the hon. Members for Cirencester and Tewkesbury and for South Angus get up and say what they believe, regardless of its electoral impact, they happen to be members of the Conservative Party, and only a year ago the Conservative Government came forward with the most trumped-up scheme—a true handout and not a loan—of £15 million which failed in both its objectives. Its primary objective was to save a few seats in the local elections that were about to take place; its second objective was to hold down interest rates, which soared within three months, with the result that the £15 million might as well have been thrown down the drain. Therefore the purity of the hon. Member for Cirencester and Tewkesbury in these matters, which I do not challenge, has not extended yet to the Opposition Front Bench from which he so wisely and frequently disassociates himself.

The hon. Member for Windsor and Maidenhead asked why we had not dealt with this matter through the tax structure. The Daily Express is always asking us to reduce the composite rate of tax. We believe that the way which we have chosen is the fairest and most effective way. In addition, we are providing a repayable loan. A tax concession of the kind that the hon. Gentleman suggests would be as much a give away as the £15 million which the right hon. Member for Altrincham and Sale (Mr. Barber) so vainly squandered just over a year ago.

The hon. Member for Worthing asked what were the precedents for this procedure, which he described as "very unusual": a Supplementary Estimate on Monday following by a Consolidated Fund Bill on Wednesday. The hon. Gentleman is right. It is an extremely unusual and perhaps an unprecedented procedure. But it was a situation in which we had to act very quickly. When we came to office 10 weeks ago today, we faced a situation in which the building societies were on the verge of increasing interest rates to 13 per cent. when they had already risen 2½ per cent. under a Government who had promised to hold them down. We had to take urgent action.

The hon. Member for Worthing then asked why we had adopted a different procedure in dealing with this matter compared with the way in which my right hon. Friend the Secretary of State for Prices and Consumer Affairs had dealt with food subsidies. The hon. Gentleman said that there was a very big difference. The answer is that it was because there was a very big difference. My right hon. Friend the Secretary of State for Prices and Consumer Affairs was dealing with a sum of £20 million. We are dealing with a sum of £500 million. There is a difference in magnitude, and therefore we felt that it was better to do it in this way.

We are sorry to be debating this motion after ten o'clock, but we are giving the House two opportunities to debate this matter, and sensibly the House has taken advantage of the first of them.

If the hon. Gentleman is engaging in this unusual procedure of having an Estimate for this subsidy followed by a Bill on Wednesday, why not use the same procedure in respect of the food subsidy?

Principally because I am not the Secretary of State for Prices and Consumer Affairs, for whom I cannot answer. I am an exceptionally humble minion of the Department of the Environment. I can just about answer for my Department. I cannot be asked to answer for other Departments of State.

We adopt a number of unusual procedures, but I am sure that the hon. Gentleman would not ask us to adopt a particularly unusual one in which one hon. Member on the Treasury Bench intervened in the speech of another.

The hon. Member for Worthing asked why we had dealt with the first tranche of £100 million in one way and proceeded to deal with the other £400 million in another. The answer is that we dealt with the first £100 million in that way because of the haste with which we had to act. Once we had got over that first hurdle, we acted on the basis that we believed that it was right for the Government to shoulder the responsibility of providing short-term loans of this magnitude in present circumstances.

A number of hon. Members, including the hon. Member for Worthing, asked why we were so confident about the movement of interest rates. With respect to the Opposition, for them to believe that we have some secret of holding down interest rates after their failure to penetrate that secret offers to us powers of augury which they never claimed to have. That is why I used the words that I employed as carefully as I did. Again using words fairly carefully, we hope that interest rates will move down rather than up, and we have already taken steps to nudge them down.

The hon. Gentleman asked how we arrived at our calculation of the £500,000 interest to the bank. That sum assumes that the loan from the bank to the societies will be repaid by the societies within six months or so and that the minimum lending rate will be about 12 per cent. But this is a broad estimate. We based it on the difference between 10½ per cent. and 12 per cent, on £100 million, equalling £125,000 a month. I am sure that the hon. Gentleman would not ask us to take it more exactly.

The hon. Gentleman asked why there was no differential for the remaining £400,000 in the way that there is for the first £100,000.

I mean £100 million. The hon. Gentleman is used to dealing with sums of such magnitude. I shall have to learn.

The answer is that it was a loan from the Bank of England at the minimum lending rate and we had to cover the difference between what was then the minimum lending rate and 10½ per cent. But now there is a direct loan from the Government who can make a loan at whatever interest rate they see fit to impose. Therefore, there is no differential.

A number of hon. Members, including the hon. Members for Worthing and Hornsey (Mr. Rossi)—and it was implicit in every sentence of the speeches by the hon. Members for Cirencester and Tewkesbury and South Angus—asked about the effect on public expenditure and the money supply. The answer is important. This matter did not seem to be accepted as well as it might have been by hon. Gentlemen. The fact that we are making £500 million available does not mean that £500 million will necessarily be taken up. We shall see at the end of the day.

That cannot be, because we are making only £500 million available.

These short-term loans are designed to help societies through their immediate problems and are to be repaid under agreed arrangements as quickly as possible. We hope that there will be little or no public expenditure outstanding at the end of this financial year. The same considerations apply to the question of the public borrowing requirement and the money supply.

We are working—I hope that this deals to some extent with the question put by the hon. Member for Hornsey—in the expectation that the loans will be repaid in the current financial year as market conditions ease. To the extent that we succeed earlier in our intention of lowering the general level of interest rates. societies may not need to take up all the loans. Building societies' net new receipts are already improving. There are indications that net new receipts in April will show an inflow of over £60 million compared with an outflow of £21 million in March. These figures are unadjusted for seasonal variation. This improvement can reasonably be attributed to Government policy of lowering the general level of interest rates and of budgetary measures which strengthened the competitive position of societies such as those affecting annuity bonds.

I was listening carefully to what the hon. Gentleman said about public expenditure. I understand him to be saying that the Secretary of State was mistaken when, in his statement on 10th April, he said that this £500 million is classified as public expenditure. Whether it is repaid later is another matter. However, it seems clear from the estimate that it is public expenditure, and that is contrary to the view expressed by the Secretary of State. We do not want to make too much of the point, but we should be clear on the facts.

I am sure that interruptions every three minutes are not making too much of the point.

It is clear that, within the context of what my right hon. Friend said on 10th April, he was drawing attention to the £15 million chucked away as a gift by the previous administration compared with the £150,000, as it was then thought to be, the £125,000 as it has turned out, which is the subsidy to the building societies between the interest rate on the money lent by the Bank of England and the money lent on to the building societies. We made it clear that in so far as the money on which the hon. Member for South Angus and I now have a wager was taken up, it would be repaid. As I have said—again, I use these words carefully—we are working in the expectation that the loans will be repaid in the current financial year as market conditions ease.

Another question that was put—

That is precisely the point the hon. Gentleman has failed to answer. It would be simpler if he would agree with what I have suggested. We do not want to make too much of this but we want to get the matter straight. The Supplementary Estimate states clearly on page 4:

"Public Expenditure: Capital £499,000,000".

On 10th April the Secretary of State said:

"The only addition to public expenditure would be that—if I may use the word—trivial sum of £150,000 a month to cover the interest rate differential."

The fact is that the Secretary of State's understanding was wrong. I hope that the Under-Secretary will agree with that.

No, I do not agree with that. If the hon. Gentleman is quoting from what my right hon. Friend said, he should look at the whole of the paragraph from which he quotes. My right hon. Friend was specifically referring not to the £500 million but to the first £100 million. He was referring specifically to the facility arranged through the Bank of England and he said that that

"will not add to public expenditure or to the public sector borrowing requirement."— [OFFICIAL REPORT, 10th April 1974; Vol. 872, c. 443.]

Opposition Members have been making a big issue of the fact that the £400 million is being made available in a different way from the first £100 million. My right hon. Friend on 10th April was dealing with the first £100 million. That is obvious from the fact that this was right at the beginning of the process we are now continuing. I hope that the hon. Gentleman will reflect on this and find that, far from my right hon. Friend being in error, he was being quite precise and specific about what he was talking about.

I have dealt with this in great detail. I have dealt with it to the enormous satisfaction of my hon. Friends. If Opposition Members in their carping way cannot accept a perfectly clear, logical and tenable explanation, I must ask them to think about it more carefully and allow me to answer the considerable number of further questions. [Interruption.] The hon. Member for Hertfordshire, South must allow the evidence of his ears to take in the explanations which I shall now provide.

If the hon. Member is intervening on a different point, he is interrupting the ordered flow of my argument. [Interruption.] I know I am not asked to talk about votes. The hon. Member won me a lot of votes in the last election by the way he attacked my building workers in Manchester. If he wants to hand me more votes, he must do it on another occasion rather than interrupt a speech with which I am determined to continue, because his hon. Friends, including those on the Front Bench, deserve answers to their questions even if they do not understand them when they get them.

The hon. Member for Worthing wanted to know who had taken up the offer made by my right hon. Friends on behalf of the Government. The answer was that it was the Council of the Building Societies Association which accepted the offer, in the sense that it decided in consequence of it not to recommend increases in the investment and mortgage rates. The council then passed the offer on to the individual societies, and it is for each society to decide whether to participate.

The hon. Member for Bodmin asked what was the present state of building society liquidity. According to the latest figures, it is about 14 per cent. to 15 per cent., compared with an average of about 16·3 per cent. in the last quarter of 1973. The hon. Gentleman also asked how the loans would be used. The primary intention of the offer of these loans is to enable building societies to increase their level of lending for house purchase without an increase in the mortgage rate. The first loans will not filter into the market for some weeks. so it is too soon to assess the results of the loans. but the Joint Advisory Committee on Building Society Mortgage Finance will review the results of the loans on the level of mortgage lending.

The hon. Gentleman also asked whether the building societies need the loans. The answer is that the Council of the Building Societies Association has accepted the first two tranches of £100 million. Individual building societies have applied for about £90 million out of the first £100 million made available.

The hon. Member for Melton (Mr. Latham) asked whether the Government could say how many extra new houses would be built as a result of what we were doing. The hon. Gentleman is experienced in the building industry, and I should have thought it was jejune for him to ask that. There are about 30,000 houses built and not sold, apart from the houses that will be built, and it is impossible to trace any direct link between the town and a calculable number of houses. It will depend on the reaction of the builders, but we hope and, indeed, expect, that this constructive move, together with the money that we have made available to local authorities to buy unsold developers' houses for their rented stock, will encourage builders to step up the number of starts from the regrettably low level to which they had fallen under the previous administration.

The hon. Member for Hornsey (Mr. Rossi) asked how the loans were to be repaid. The situation is that the terms of repayment for the Bank's £100 million reflect an intention to secure that half of any extra over net receipts of £50 million per month from September onwards from the movement as a whole will be applied to repayment, and with regard to the next £100 million, repayment will begin in October under the same formula as is applied to the Bank loans.

How does that affect individual societies? The £50 million referred to by the hon. Gentleman refers to the global inflow. Individual building societies are each taking certain tranches of the money that is being loaned to the building societies as a whole. Suppose an individual society's inflow does not increase at the same rate as the remainder do. What will be the position of that society?

There will be no repayment in that case. The position will vary from society to society.

Would the other building societies have to make up what that building society could not pay?

No, they would not.

As I was saying, the Building Societies Association has been studying possible new sources of funds for the longer-term capital market and the Government intend to pursue urgently longer-term studies on how best to ensure a steady and sufficient flow of funds for house purchase. The problems posed are complex, going beyond the scope of building societies. We are hopeful, and anxious that the offer of the £500 million loan should stabilise the position in the short term, but we are determined to find the right answers for the longer term as quickly as possible.

Question put and agreed to.

That a Supplementary sum, not exceeding £499,499,000, be granted to Her Majesty out of the Consolidated Fund to defray the charge which will come in course of payment during the year ending on 31st March 1975, for expenditure by the Department of the Environment on subsidies, the option mortgage scheme, improvements, the rent officer service and sundry other housing services including residual expenditure in respect of a temporary bridging grant made in 1973–74 to certain Building Societies registered in Great Britain, and temporary loans and other payments in connection with assistance to certain Building Societies registered in Great Britain and Northern Ireland.

Bill ordered to be brought in upon the foregoing Resolution by the Chairman of Ways and Means, the Chancellor of the Exchequer, Mr. Edmund Dell, Mr. Joel Barnett and Dr. John Gilbert.

Consolidated Fund (No. 2)

Dr. John Gilbert accordingly presented a Bill to apply a sum out of the Consolidated Fund to the service of the year ending on 31st March 1975, And the same was read the First time; and ordered to be read a Second time tomorrow and to be printed. [Bill 42.]

Family Income Supplements

11.47 p.m.

The Under-Secretary of State for Health and Social Security
(Social Security) (Mr. Robert C. Brown)

I beg to move,

As we have already made clear, the present administration does not like FIS. The scheme brings help to people in full-time work who are bringing up families on low incomes, but it does so only if the families subject themselves to a means test. For a person in work this is an unsatisfactory condition. It accounts for the low take up of this benefit, for it is clear that many people are reluctant to claim. I give the previous administration credit for attempting to improve the take up and by this means to justify their faith in an unsatisfactory and unpopular benefit. Great efforts were made and large amounts of money were spent. Despite this the take up never rose above 50 per cent

It is not our intention to leave FIS as a permanent part of the social security structure. We are working towards its elimination, but a new scheme takes a considerable time to plan and introduce. We cannot do everything at once, particularly in view of the difficult economic situation which we have inherited, although we have made a good start in social security by our generous increases in pensions and other benefits. In the meantime we must continue to help the families, who are receiving FIS. They number, on average, about 90,000.

In order that FIS can maintain its purchasing power, the upward movement of the prescribed amounts must keep pace with increases in prices. From August 1971, when FIS started, to October 1973, prices rose by 19 per cent. The prescribed amounts for one and three child families rose by 19 per cent. and 20 per cent. respectively. The increases we are now proposing represent 16 per cent. for the one-child family and 17 per cent. for the three-child family. These increases can be expected to exceed the movement in prices for the ten months from October 1973 up to July.

I turn now to the regulations and their effects. Regulation 2 increases the prescribed amount for a one-child family from £21·50 to £25. For each additional child the prescribed amount will be £3 higher, instead of £2·50 as at present. Regulation 3 raises the maximum weekly payment from £5 to £5·50 for one and two-child families. For larger families the maximum goes up from £6 to £7.

Since the FIS payment is half the difference between the gross family income and the appropriate prescribed amount the effect of the regulations will be to give an additional £1·70 or £1·80, according to rounding up, to one-child families. For each additional child the increase will be 20p or 30p greater. For the small number of families who are receiving maximum payments the immediate increase will be limited to 50p for one and two-child families, and to £1 for larger families. But these families will be helped by the higher prescribed amounts, to remain on the maximum rate when they come to renew their awards, even though their income has gone up since their previous awards were made.

The cost of FIS for the year immediately following this uprating will be about £18½ million. This compares with a cost of £12·6 million for the year 1973–74 and will thus represent an improvement in real terms.

We are arranging in the usual way to carry out the uprating with as little inconvenience to the public as possible. Beneficiaries are told by letter of the amount of the increase in their award and they are asked in stages to return their order books for over-stamping at the new rate. Claims received between 28th May and 23rd July will be considered under both sets of prescribed amounts. Awards will be at the old rate until 22nd July and at the new rate thereafter.

I have pleasure in commending these regulations to the House.

11.52 p.m.

In spite of what the hon. Gentleman has just said, I suspect that this order marks the Government's recognition that the family income supplements are not, perhaps, such a bad thing after all. They are a way of bringing direct help to those in need, and only to those in need. The Secretary of State inveighed against them when in Opposition, but I think that she now finds FIS a serviceable if modest tool.

It is fair to comment that experience shows that Labour's opposition to means testing is always a great deal more vehement when Labour Members are on the Opposition side of the House than when they are in power.—[ Interruption. ] The facts bear that out. The record shows that the previous Labour Government, so far from abolishing any means tests, managed to introduce an additional test. I suspect that the present Government, if they remain in power, will need FIS for a great deal longer than a Conservative administration would need it, owing to the fact that the present Government completely lack a policy on family poverty and family endowment. At present the Government have no alternative to either FIS or the tax credit scheme.

On 28th March, in the Budget debate, the Secretary of State said,

"We cannot leave the poorest families without help, so an increase in FIS is necessary."—[OFFICIAL REPORT, 28th March 1974; Vol. 871. c. 646.]

I believe that the right hon. Lady was then acknowledging formally that FIS is an effective measure of its kind. We, too, recognise the use of FIS in meeting present needs. Therefore, we welcome the order. The regulations, although modest, are among some of the more sensible measures in the present Government's policy—a policy which at times has been completely stupid.

I accept that it is right that the prescribed and maximum amounts should go up. However, I wish to press the hon. Gentleman on take up for he did not paint the whole picture. Although take up is at an average level of 50 per cent., it is true that among poorer families take-up level is 75 per cent. For those who need most, the level of take-up is considerably higher.

In the Budget debate the hon. Member for Kingston upon Hull. Central (Mr. McNamara) questioned the Secretary of

"I have been so busy in the last three weeks, so dizzy with the detailed statistical tables of the uprating. that I have not yet had time to give my mind to that point. However, I certainly will from now on."—[OFFICIAL REPORT, 28th March 1974; Vol. 871, c. 6471

We are entitled to begin to press the Government on whether they have any fresh proposals for improving take up —an improvement which they seem to think necessary.

There is one further important point and it relates to the poverty trap or poverty surtax. This has considerable bearing on the rates set out in the regulations.

"The combination of Mr. Healey's budget and Mrs. Castle's generous increase in family income supplement will have one quite disastrous result when the FIS increases come into effect in July. By raising the FIS eligibility limits (so that the average family on FIS will get nearly £2 more a week) very much more than the personal tax allowances, and at the same time increasing the basic rate, the Government has created a marginal tax rate for the extra £I earned by a broad band of poor families which is a good deal higher than the 83 per cent. rate it has introduced on the extra £1 earned over £20,000 a year."

It goes on:

"… what is quite disastrous is that there should be a large group of people eligible for FIS who are also above the tax threshold. The FIS limits will from July be £25 for a one-child family, £28 for a two-child family and £31 for a three-child family; the tax thresholds, for families with one, two and three children under 11 are £21·25, £25·86, and £30·48 …The effect of this is not only to create high marginal rates of 'tax' at one or two specific points, which is probably inevitable … but to allow very little net income from quite large jumps in pay. For example, the net income, after July, of a man with, say, two children, earning £30 a week, may not be much over £1 more than the net income of a similar man earning £21 a week."

I recognise that this problem is inherent in the scheme, although I would point out that when we bring in the tax credit scheme we shall be able to do a great deal to reduce it. But we are entitled to ask the Government whether they have any fresh thoughts on how to alleviate the problem of the poverty trap. A great deal was said about this matter when Labour was in opposition. It is surely fair for us now to ask for an assurance that the Treasury and the Department are working together to see that these matters are viewed in conjuction rather than in isolation. I think that the House as a whole —although we are a little thin on the ground this evening—will accept that any system that provides a disincentive to work and to improve one's income cannot be wholly right.

Has the Minister any comment to make on my one final point? He has spoken of the implementation of the order. I should like to have an assurance that the unrest that exists to such a serious extent among social security staffs will not affect the implementation of the regulations.

12 midnight

I think the hon. Member for Aylesbury (Mr. Raison) is clutching at straws when he talks about take-up in relation to the lowest income bands as being 70 per cent. The fact is that the total of those eligible for FIS take-up across the board amounts to only 50 per cent.

Would the hon. Gentleman not acknowledge that it is far more important to reach the people who are entitled to a substantial amount of help through this measure than to reach the people who are entitled to a very small amount?

I concede that those who are in the greatest need ought to have the greater take up. The fact remains that across the board the take up is only 50 per cent. The previous administration spent enormous sums of money advertising this new benefit which they introduced. There can be no doubt that it is a most unpopular benefit. Otherwise there would have been a higher take up than there is. Little as I like it—and I know that my right hon. Friend the Secretary of State dislikes it intensely, as she said from this Box—the fact remains that until we have an alternative—and we shall not arrive at an alternative overnight—we have got to advertise this benefit so that as many people as possible take it up.

The hon. Gentleman referred to the poverty trap. This is a serious issue which concerned the previous Government as much as it concerns the Government of which I am proud to be a member. The poverty trap has been used to describe a situation in which an increase in earnings is either totally absorbed or greatly reduced by increased taxes, with the loss of means-tested benefits. The means-tested benefits mainly involved are the family income supplement, some welfare meals, free school milk, rent and rate rebates and other benefits such as, for example, help with prescription charges. They do not significantly affect incomes. But hypothetical tables which sometimes appear in the type of article to which the hon. Member referred and which purport to show marginal tax effects are misleading unless used with extreme caution. I suggest, with respect to Members of another place, that they are not noted for using extreme caution when they want to knock a Government, of whatever political persuasion, about the head. They relate to one particular time. They assume that all benefits change following a rise in earnings. They ignore annual upratings and Budget changes which will often occur before benefit is reassessed, particularly where awards are made for periods of 12 months.

It may be possible to phase out the withdrawal of benefits so as to avoid the disincentive effects. The disincentive effects are becoming less obvious because the effects do not change immediately with a wage increase and the disincentive of high marginal rates is affected by personal motivation.

The hon. Gentleman referred to 22nd July. the date which we had set for this uprating. He also referred to the staff discontent. I and my right hon. Friend the Secretary of State bitterly regret the injustice to which the staff feel they were subject during the past two years, with the wage freeze and phases 1, 2 and 3. I feel rather aggrieved, as a Minister coming newly into the Department, that we are being savaged by the staff because of the discontent which was caused in the previous two years by the former administration, when the staff was unjustly treated by the provisions of the previous administration's counter-inflation policy.

I bitterly regret the decision taken by the staffs, particularly since we have been negotiating with the staff side ever since we took office. We are particularly disappointed at the decision of the CPSA to instruct its members not to undertake any work in connection with this uprating. Since our main objective must be to get this dispute settled as quickly as possible to reduce delay in payment, I will say no more. Whenever the payments are made, no one will suffer because they will be back dated to 22nd July.

Question put and agreed to.

That the Family Income Supplements (Computation) Regulations 1974, a draft of which was laid before this House on 29th April, be approved.

Supplementary Benefits

12.7 a.m.

I beg to move,

The two broad aims of our social policy are to relieve and eventually to abolish poverty and to reduce the number of people dependent on means-tested benefits. These regulations will help to relieve poverty, but we fully recognise that they will leave the numbers receiving supplementary benefit at about the same level that they are now. A reduction in dependency on means-tested benefits could have been achieved by means of smaller increases in supplementary benefit than in national insurance benefit rates, but in present circumstances we think it right not to restrict the help given to those who are dependent on supplementary benefits. Nevertheless a reduction in the numbers dependent upon means-tested benefit remains part of our long-term strategy.

As regards details of the increases, Regulation 2 provides first for increases in the supplementary benefit scale rates. These rates, as hon. Members know, cover all normal requirements other than rent, for which an addition is made to the scale rates. It is proposed that the long-term scale rates, which apply to supplementary pensioners and to people who have received a supplementary allowance continuously for two years, except the unemployed, should be increased by £2·25 for a single householder, making the new rate £10·40, and by £3·50 for a married couple giving a new rate for them of £16·35. The rates for those over 80 will remain 25p higher at each point.

The ordinary scale rates, which apply to the unemployed and to people who have received a supplementary allowance for less than two years, will be increased by £1·25 for a single householder to £8·40, and by £2 to £13·65 for a married couple.

There will also be appropriate increases in the scale rates for beneficiaries who live as members of someone else's household, and for children. The special rates which apply to the blind will go up by the same amounts as the equivalent rates for sighted persons, so that their preference will be maintained.

Regulation 2 also proposes increases in the amounts allowed for attendance requirements in calculating the supplementary benefit level appropriate to a person who receives the national insurance attendance allowance. Increases in these requirements are the same as those made to the attendance allowance itself; the higher rate will be increased to £8 and the lower rate to £5·35. Attendance allowance does not therefore normally affect the amount of supplementary benefit payable, and may do so only where there are special attendance needs for which a supplementary benefit addition would otherwise be required.

A beneficiary who is not a householder receives a standard weekly addition to his requirements for rent. This is to be increased by 10p to 90p a week. The overall effect is that, as a result of the changes made by these regulations, the income of adult non-householders will go up by £1·90 for supplementary pensioners and other long-term recipients and by £1·10 for other non-householders.

The increases we are proposing are in any terms substantial. The most recent information we have about movements in prices since supplementary benefit rates went up last October relates to March this year. The Index of Retail Prices, less housing costs, had then risen by 6.5 per cent. Our proposals will mean increases of between 27 and 28 per cent. in the long-term supplementary benefit rates and of between 17 and 18 per cent. in the ordinary rates. I am therefore confident that the proposed increases will do a great deal more than restore their purchasing power to the October 1973 levels. They will give a real measure of increased buying power to those who have been hit the hardest by price increases.

I should like now to mention some other supplementary benefit changes which are related to these regulations but which fall to be decided by the Supplementary Benefits Commission. These changes are an essential and important part of the uprating, and I am sure the House will wish to have on record how the commission has decided to exercise its discretionary powers.

First, the commission fixes the requirements of persons who pay an inclusive charge for board and lodging. These consist of the boarding charge plus an amount for personal expenses. The personal expenses allowance will be increased by 40p to £2·70 for short-term beneficiaries and by 65p to £3·05 for longterm beneficiaries. The corresponding rates for married couples will go up by 65p and £1·10 to £4·45 and £5·10 respectively. The amounts allowed for personal expenses for hospital in-patients and people in residential accommodation will be increased from £1·55 to £2.

As has previously been announced, the commission is also to increase the standard amounts for extra expenses arising from special heating and dietary needs. Additions for extra heating, at present 30p, 60p and 90p, will be increased by one-third to 40p, 80p and £1·20 a week. The amounts for special diets will go up from 40p and 92p to 50p and £1·12.

All the increases I have outlined will take effect from the week beginning 22nd July, but it will not be possible for all people to receive their increase by that date. We are justified in having an early effective date rather than a later one, and beneficiaries paid after 22nd July will have their increases backdated to then. It is not possible to make a meaningful estimate of the number of delayed increased payments, but local announcements will be made nearer 22nd July so that beneficiaries can be informed of the situation and do not have to make inquiries at the Department's local offices.

We have kept the uprating simple so that the increases can be made as quickly as possible. We have also concentrated on increasing the basic rates so that additional help will be provided for all beneficiaries. Those are our first priorities. We recognise, however, that there are other aspects of the supplementary benefits scheme which warrant consideration, and we shall be looking at these aspects of the scheme for future improvements.

Perhaps I may now turn to the cost of these proposals. If supplementary benefits were to be considered in isolation, the cost of the proposed increase would be about £380 million in a full year. But because national insurance benefit rates are being increased at the same time it is estimated that about an extra £299 million will be paid by way of national insurance benefits to supplementary benefit claimants. The net cost of these proposals will therefore be about £81 million in a full year. Our purpose, therefore. is to bring a substantial level of additional help at an early date to those who depend on supplementary benefit. The regulations achieve this and I commend them to the House.

12.16 a.m.

The Minister talked about the Government's long-term strategy for social security. I can only say that their most notable achievement so far is to throw the whole of pensions provision into chaos as a result of the Secretary of State's recent announcement.

We are again talking about a selective benefit, which is used by both sides of the House when in power. It is not only means-tested but embodies the wage stop.

We feel that the regulations are a necessary measure, which we shall not oppose. We note the Minister's remarks about the difficulties of bringing them into effect on 23rd July.

In the previous debate the hon. Gentleman said that the difficulties that were being experienced among social security staffs were to be properly laid at the door of the previous Government. That was a vary partial statement. An important part of the present problem is the great volume of work which has been generated by the new Government. I am not saying that all that work is wrong. We support a good deal of it, but it would have been more honest of the hon. Gentleman to acknowledge that that is a major contributory factor in the present situation.

My first question on the regulations must be to ask when the position will be reviewed. How long will it be before we can expect to have new regulations? The Minister talked about the rate of inflation, I remind him that the Secretary of State for Prices and Consumer Protection said in the House on 9th April that inflation could go as high as 18 per cent. or 19 per cent. by the end of the year. That has a great bearing on any social security measures of this kind. Although there is a margin to play about with, it seems to me that everything points towards the wisdom of the principle we put forward in our election manifesto of reviewing benefits at six-monthly rather than yearly intervals. When does the hon. Gentleman expect that the next regulations will be needed?

Secondly I should like to say something about the problem of disregards, which is becoming very serious in the working of supplementary benefits. Disregards are those items of income and savings which are not taken into account in assessing supplementary benefit. They have not changed since 1966. At present, £325 of capital is completely disregarded. Capital between £325 and £800 is treated on an assumed interest rate basis of 10·4 per cent., and on capital over £800 the assumed interest rate is 18·2 per cent.

Those figures are wholly unrealistic. The idea that one can expect to receive that sort of return on capital sums of that size is clearly a myth. In addition I believe that the £1 of income which is disregarded is too small a figure. It is time the Government started thinking of raising it to £2 or even more.

Those are points which have been raised in earlier debates. They are an important part of the scheme and they are causing a great deal of concern. I realise that the regulations cannot be amended and must go through as they are, but I hope that the Minister will say a word or two on these important matters.

12.20 a.m.

Successive Governments have been fairly assiduous in ensuring that supplementary benefits keep pace with increases in the cost of living. They get precious little thanks for it, because by so doing they bring many new applicants within the purview of supplementary benefits and are promptly accused by their political opponents of having increased poverty.

There is one respect in which it is true to say that Government increase poverty. As my hon. Friend the Member for Aylesbury (Mr. Raison) said, the failure to increase the rate of disregards is creating a whole new class of poor, because any means-tested benefit is bound to worsen the relative position of those who, because of small earnings or small savings, just fail to qualify for the full means-tested benefit. It is because of this disincentive effect on those who want to continue working and the bleakly discouraging effect on those who have managed to acquire savings during their working lives that more people—I suspect on both sides of the House—are becoming disenchanted with means testing as a method of giving the maximum relief to those in greatest need.

In case Labour Members think that we on this side are devoted to their point of view, may I point out that the only way in which we shall get rid of means testing altogether is by generating sufficient wealth to distribute non-means-tested benefits on an adequate scale. That means a policy of rewarding initiative, which would be anathema to hon. Members opposite.

Therefore, it seems that some form of means testing is with us to stay, even if it takes the much less objectionable and more positive form of tax credits. Any system of progressive taxation is a kind of means testing in itself. Under the tax system, however, over the years the means-testing element at least takes account of the decline in the value of money. Personal allowances increase as the value of money falls.

Therefore, it is almost incomprehensible to me that whereas at one end basic benefit rates, supplementary benefits, personal allowances and even family allowances increase—although the latter have not increased for a long time—the only thing which does not go up is the level of disregards of the maximum level of savings which a person is allowed if he is to qualify for supplementary benefit or other similar means-tested benefit, such as the capital tariff applied to residents in State homes for the aged, which means that old people in such homes with a mere £300 of savings must contribute £1 a week and people with savings of over £800 must contribute £5·50 a week.

Order. I hesitate to interrupt the hon. Gentleman, but we are not discussing the whole aspect of social policy. We are considering the desirability or otherwise of making the proposed increases.

As always, I am grateful to you, Mr. Deputy Speaker, for bringing me back to the straight and narrow path.

The disregards have remained at the same level since they were fixed by the 1966 Act, eight years ago, and in the meantime, as I ascertained from the answer to a Written Question which I put to the Minister, they have lost no less than 40 per cent. of their value. This must surely be the only social service figure which has remained unaltered for so long.

I took up this matter with the Conservative Government and again with the present Minister. I asked whether the level of disregards could be reviewed. The Minister was unable to give me any assurance. I take this opportunity of asking the hon. Gentleman whether he can give any figures of the cost of various examples of raising the level of disregards. It was always been said that if there is a choice at a time when money is short the choice must he in the direction of increasing the scale of tariffs set out in the regulations. It always seems to be more urgent to increase the scale of payments than to increase the disregards. I cannot see a time when it will be otherwise. The needs of the allegedly destitute will always have priority over the needs of the deserving.

There comes a moment when this attiture on the part of successive Governments becomes scandalous, and I believe that that moment has been reached. It is now more important to raise the level of disregards than to raise the scale of benefits. I would prefer the Government to come forward with a somewhat less generous scale of payments and to devote some of the money instead to raising the level of disregards which has stood still for the past eight years.

12.26 a.m.

The hon. Member for Aylesbury (Mr. Raison) again referred to staff bitterness and upbraided me for accusing the Conservative Government of sowing the seeds of bitterness which led to the harvest we have reaped. I do not withdraw one word of what I said in the earlier debate.

I appreciate that we are asking staff to implement an all-time record increase in pensions in one of the shortest periods ever—17 weeks. When my right hon. Friend the Secretary of State first announced the uprating she said that she was conscious of the vast amount of work she was placing on an already overburdened staff. Although I admit that the staff were not enamoured of the prospect of having to do the uprating in 17 weeks, I am convinced that had it not been for the bitterness which had built up amongst them at the treatment they had received under the previous Government's legislation they would not have been pushed into taking the attitude which, regrettably, they are taking.

The hon. Gentleman asked when supplementary benefits rates would again be reviewed and he made great play of the Tory election manifesto. There was a great deal more "codswallop" in the manifesto about a twice-yearly uprating. In spite of the great play that was made of twice-yearly uprating, the Conservatives had made no prior plans for increasing the staff for this purpose or for increasing the office accommodation by putting in hand plans for new buildings.

The scale rates have been increased at yearly intervals since 1966. We are committed in the National Insurance Bill, which is now being dealt with in another place, to uprate national insurance pensions within 12 months from July, and I assume that the scale rates will be considered then. I cannot say that the matter will not even be thought of before then, but that is the time when we shall probably do it.

The hon. Member for Aylesbury and the hon. Member for Flint, West (Sir A. Meyer) both asked about disregards. We are painfully conscious that disregards have not been increased since 1966. Disregards have only twice been increased—in 1959 and again in 1966. Between 1966 and 1974, a period of eight years, the Conservative Government did not see fit to increase the disregards.

I draw the attention of hon. Members to the statement my right hon. Friend made on 28th March when referring to interventions from the hon. Member for Hazelgrove (Dr. Winstanley) and the hon. Member for Somerset, North (Mr. Dean), my predecessor. She said:

Would the hon. Gentleman be prepared to give figures on a future occasion of the relative cost of raising the level of disregards as compared with the small rises in the general scale of benefits?

The cost of raising the level of disregards if increased by, say, 50 per cent.—the hon. Gentleman referred to 40 per cent. but 50 per cent. would be a better comparison—would be £11 million to £12 million a year. Basically it is fair to say that cost was not the major factor. The major factor was the complication. We wanted to keep the uprating as simple as possible so that those in most need would get the quickest possible help by 22nd July.

Question put and agreed to.

That the Supplementary Benefit (Determination of Requirements) Regulations 1974, a draft of which was laid before this House on 30th April, be approved.

Adjournment

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

Hospital Services (Southport)

12.32 a.m.

My topic is the need to improve the hospital services in Southport. First, I wish to make it clear that my choice of topic implies no criticism of the services now provided to the patients. I hope that what I am doing may result in an improvement of the facilities before long, but I should be sad if it were to give rise to any lack of confidence in them at this moment. There is no evidence of any danger to health or life but—and it is a big "but"—that is only because the medical staffs manage to do their work so well despite the considerable difficulties. I pay tribute at once to their devotion to duty and the immense amount of effort they put in to overcome the difficulties. I must, however, add a word of warning. We must not count on their being able to do that indefinitely. On the contrary, we must act now while there is still time.

I also wish to make it clear that I imply no criticism of the local and regional health authorities. They have taken a close interest in this problem. The regional chairman, Mr. Driver, and the area chairman, Mr. Lewis, are both well acquainted with the problem. Dr. McKee, the senior administrative medical officer of the regional authority, was good enough to come to Southport to inspect the problem on the spot and discuss it with those concerned in February. I am informed that others came last week and I know that Mr. Cunliffe the district administrator, will keep them all well-informed. I have no doubt that they all appreciate that this matter is serious and will do all they can to help. The reason why I raise the matter in this House is that the answers to the problems lie in the hands not of the local and regional administrators but of those in the Department.

In Southport we have two hospitals, the Infirmary and the Promenade. The acute services are housed partly in one and partly in the other, for historical reasons and for no other. Obviously this creates difficulties in the maintaining of an efficient service and it is very wasteful of resources. I need not dwell upon this aspect of the matter because I am probably pushing at an open door. The Minister will appreciate more than a layman that to have these services split makes it more difficult to work them and is wasteful of resources.

The difficulties have been recognised for a long time. The only question for some time has been how they should be overcome, and there have been two main proposals for overcoming them. Not many years ago the proposal was adopted that a multi-purpose building should be erected on the Infirmary site to house all those services. That would have overcome the difficulties to which I have referred. However, that proposal was shelved in favour of a proposal to build a new district general hospital. That would have combined, and will combine if it comes about, the advantages of resolving the difficulties to which I have referred, and at the same time as providing a hospital with all the facilities under one roof it would provide us and the district with a hospital of the most economical and effective size. I believe that a hospital of 500 beds was proposed, which would be one of the best buys.

It was proposed that that project should be included in the 1978–79 capital programme. On that basis it would have been perfectly reasonable to make shift until that major proposal came along and not to embark on any major building in between which would have been wasted with the building of the district general hospital.

The problem now is that it is suggested that this hospital will not come into the 1978–79 programme but may be postponed for as long as 20 to 25 years. I am not unaware of the fact that cuts in capital expenditure last year may have some bearing on this matter, but I hope that the Minister will not dwell unduly on this because I am concerned with the consequences which result from that cutback and the practical methods of dealing with those consequences.

The result is that we are in danger of having neither a district general hospital nor the multi-purpose building which was first proposed and which was over- taken by the proposal to have a district general hospital, and that instead we may be left with simply the small, piecemeal developments which we have engaged in pending the major rebuilding.

If I may give an example of the kind of wasteful expenditure to which that can lead unless this dilemma is resolved, I am told that it is proposed to spend £30,000 on the ancillary accommodation of the operating theatre complex. I am told by experts that that would be an utter waste of money in the foregoing context, that if we can simply decide what is the way to deal with the problem as it now is we can put that money to work on whatever plan might be devised, and that it would be a complete waste to go ahead with that proposal on the present makeshift basis.

I urge the Minister to say that, whatever else he can or cannot do, he will ensure that that which could result in a considerable waste of money will be stopped pending a decision on what is now to he done.

Will the hon. Gentleman give sympathetic and urgent consideration to restoring the project of a district general hospital to the 1978–79 programme or thereabouts? I understand that he cannot tie himself to a year but I ask him to give sympathetic and urgent consideration to restoring the project to that programme or thereabouts.

If regrettably that is not possible, will the hon. Gentleman say so and give us an idea of the time scale on which we must now work? If that time scale is of the order of 20 to 25 years, will he now sanction the expenditure for the multipurpose building which would have been built had that proposal not been overtaken by the proposal to build a district general hospital and which is so vital if there is not to be a district general hospital?

Will the hon. Gentleman halt any further piecemeal development until a decision has been taken on those two questions? When a decision has been taken on them, it will be possible for everybody to sit down and work out a sensible, comprehensive and cohesive plan for dealing with the situation. Unless and until we have a decision on those two major alternatives we cannot plan ahead on any sensible or comprehensive basis.

I have only one other comment to make. I appreciate that priorities come into this matter. One thing that I have learned in my 15 years as a Member of this House is that government is about priorities. There are always a hundred and one very strong cases at any time, and the Government have to decide which they can accept and advance.

My hon. Friend the Member for the City of Chester (Mr. Morrison) mentioned to me an interest in this matter. In the medical sphere there are many worthy and heart-rending cases. There are many in Southport. For example, there is a spinal unit action group which is particularly concerned with paraplegics. I urge upon the Minister the desirability of having a hostel for paraplegics so that hospital beds in the Promenade Hospital may he used for acute cases and the longterm cases, many of whom do wonderfully well with their limited physical capabilities, may at least enjoy the dignity of a communal life in a hostel rather than be condemned indefinitely to institutional life as hospital patients.

Another body which is active in Southport is the Association for Children with Heart Disorders which recently highlighted needs in this sector for special resources, needs which I support wholeheartedly.

We need only look at the report of the Merseyside Hospitals Council to see some of the competing interests in the area. I have no desire to stand in the way of any of those interests. I think that the argument I am putting forward for Southport stands on its own. Its need has been recognised for years. The difficulty has arisen from the recognition of the need and a desire to improve the services first with the multi-purpose building and then going one better. Unfortunately, that has been overtaken by difficulties in carrying out the second proposal, leaving us in the air, so to speak, the second proposal being postponed and the first possibly being abandoned.

I do not want to speak in terms of competing with other interests or other areas within the area, but I do not think I am overstating the case by saying that no one who looked at the amounts of money spent on projects within the area would say that Southport had been over-generously treated during recent years. Indeed, even looking at those sums one might deduce that the time had come when something special was required in Southport, as I hope these few words of mine have demonstrated is the case.

This is a practical problem. The need is urgent. It has been treated by many. It has been so treated by Ministers of both political parties as a real and urgent need for some time. I urge the Minister to deal with it as such and in particular to assist in arriving at a decision as to which of the two substantial proposals should go ahead and then ensuring the availability of the funds necessary for us to go ahead with whichever of the two is eventually decided upon.

12.47 a.m.

I am grateful to the hon. and learned Member for Southport (Mr. Percival) for the way he has put the case of his constituency. The reasonableness and moderation of his approach command one's respect. He started by paying a generous tribute to the existing services and did not wish to raise any undue alarm about the existing situation. He was mainly asking the Government, quite rightly, to look to the future. It is in that spirit that I shall reply.

This debate provides us with an opportunity to discuss perhaps one of the most difficult problems that we face: that of deciding on the optimum allocation of the very scarce resources available to us in the National Health Service to meet the vast needs of areas which are relatively deprived of adequate health services and also to ensure that the needs of the most pressing specialties are met.

Under the reorganised National Health Service Southport forms the northern district of the Sefton Area Health Authority. It has a total population of over 100,000, which represents one of the smaller districts. Hospital services are provided by a group of hospitals, totalling 10 in number, varying in size from the 544 beds in the mental handicap hospital at Greaves Hall through the 205 and 281 beds which the hon. and learned Member mentioned at the Promenade Hospital and Southport General Infirmary to the 16 beds at St. Catherine's Maternity Hospital. There is, therefore, considerable diversity of hospital provision.

As the hon. and learned Member mentioned, fragmentation of acute services throughout so many hospitals in that way makes it undoubtedly difficult to provide a satisfactory service by the standards of 1974, which I might say have improved substantlally since the standards in 1948. The problem, then is what we should be doing and how we should be planning for the future.

To improve the service, there is a need for hospital facilities to be brought together in larger units, but the restricted sites of each of the small hospitals in the town leave little room for manoeuvre for the development of comprehensive resources in this way at any one of the existing hospitals. Any new development will therefore require the provision of a hospital on a new site. This in turn means that substantial investment would be required to ensure that whatever was included in the first phase of the hospital represented a viable unit in itself.

The need for a development of this sort has, I understand, for some years been fully recognised by the Liverpool Regional Hospital Board, which until April of this year was responsible for the provision of hospital services in the area. I am sure that the new Mersey Regional Health Authority and the Sefton Area Health Authority are equally aware of the situation, and I am glad that representatives from the authorities have recently visited Southport and made themselves aware on the site.

The hon. and learned Gentleman recognised that government is about priorities. The requirements of Southport have to be looked at against the background of the many urgent calls on the limited resources available to the regional health authority.

The fragmentation of resources between so many hospitals inevitably means that a less than satisfactory service can be provided. The overall number of beds available in Southport in relation to its population, however, compares very favourably with the number of beds per head of population elsewhere in the region and, indeed, the country as a whole, even taking into account the high concentration of elderly people in Southport which results from its well-known attractions as a seaside resort and retirement area.

In considering where capital resources for the development of new hospitals should be concentrated, Southport has had to give way to, for example, the two new towns at Runcorn and Warrington, where the first phases of major new hospitals are now under construction. The urgent need for the new district general hospital at Arrowe Park to replace inadequate and outdated hospital facilities at Birkenhead and Wallasey also had to be given priority over the need for a new district general hospital at Southport.

I am afraid that I cannot at this stage tell the hon. and learned Gentleman when it will be possible for the new Southport hospital to start. Apart from anything else, this will be primarily for the Mersey RHA to decide in the light of the resources being made available to it. But I am sure that I do not have to tell the hon. and learned Gentleman that in the immediate future at least public expenditure on the health and personal social services is not likely to increase at the rate we should have hoped. The hon. and learned Gentleman mentioned the December cuts. The savage 20 per cent. cut imposed by his Government has had a marked effect upon the present year 1974–75, and there is no doubt that the seriousness of the economic situation overall means that some form of reduction in the capital allocation programme, which will be thought to be inadequate by many Members on both sides of the House, will continue for some years.

The Liverpool Regional Hospital Board saw more than a year ago that there was likely to be some delay before the new hospital could start, and it initiated an extensive progamme of improvements estimated to cost nearly £1 millon over a period of three years in the present Southport hospitals. The new Mersey RHA fully accepts the commitments of these improvements. These schemes include an expansion of the maternity services through the provision of a 13-bed maternity ward and antenatal clinic at the Christiana Hartley Maternity Hospital, the improvement of acute services through the provision of a new acute ward and the upgrading of two others, improvements to the pathology department and an extension to the X-ray department, and improvement to geriatric services with the construction of new day hospital facilities. Improvements are also being made to engineering and fire protection systems. I understand that the hon. and learned Gentleman's constituents, and even he himself, will not feel satisfied with these minor modifications and improvements, but they represent a significant capital sum.

The hon. and learned Gentleman mentioned the needs of paraplegics in his constituency and the recent debates that we have had about children with congenital heart diseases. There is also the general question of how much money hospital authorities spend on interim schemes which are later made redundant by major developments. I shall give particular attention to that part of the hon. and learned Gentleman's speech because there is a danger that by acting in the short term one misallocates resources by not looking to the longer term. The health service has to operate the services that exist, and it often has to take action in the short term. The clear facts of life seem to be that there is little hope of the major development in the near future for which the hon. and learned Gentleman hopes, and there is therefore a real need for some significant but minor improvements in the short term.

I should like to turn from Southport's circumstances to the general problems of resource allocation. A key difficulty for the Government and for health authorities is that we have only imperfect ways of comparing one area with another and deciding which should have priority for new health centres. One of the first decisions we had to make was whether a particular district general hospital project should proceed, weighing the priority against another bid from another region. Departmental officials put up a good case for the project. They talk about existing provision and often compare the cases. We are dealing with fragmented provision and with smaller units, some of which are old and in poor repair, but there is no objective way of assessing whether the need for a new hospital is greater in one area than in another.

At present such decisions are taken largely on subjective criteria, on advice from people with experience of the National Health Service, who try to be as impartial as possible. In the last analysis, however, the decisions tend to be value judgments. What I want is a means of identifying health-deprived areas which will enable us to make decisions across regions and areas, to ensure that scarce resources go to places most in need.

This is a difficult matter. The more I look at it, the more intractable it appears. Many factors need to be taken into account. The hon. and learned Gentleman said that because the Mersey Regional Health Authority could not authorise the early start of a new district general hospital at Southport it would spend a substantial amount on patching up and improving existing conditions. The ratio of maintenance to capital is a key factor. Another is the lack of health facilities, as evidenced by waiting lists.

This again poses problems. Waiting lists may themselves be the product of poor waiting list management and may not always reflect inadequate facilities. These issues are difficult and I am determined to try to ensure that our criteria for judgments are more objective than subjective. It is much easier then to confront hon. Members whose constituencies cannot get the facilities they want with the facts of the case. They will find our decisions easier to accept if they think they are taken on the basis of need.

There are many areas of the Health Service which do not have all the capital allocation they want. In a time of economic stringency, however, we must consider our overall allocation of resources, capital and revenue. The current controversy is evidence that people in some sectors of the service have worked for years for pay which does not compare favourably with that in outside industries. We wish to pay more attention than in the past in the balance of resource allocation to people than to buildings. The allocation of resources for capital itself tends to increase pressure on revenue.

The hon. and learned Gentleman has made the case for his constituency persuasively. In planning for the future we must ensure that we do not make decisions now which would pre-empt resources which would be better left for a short period in order to bring forward the overall allocation to which he attaches considerable importance. That is the point which I shall ask the Mersey Regional Hospital Autho- rity to bear in mind when dealing with the difficult task of making allocations.

On that note I thank the hon. and learned Gentleman for concentrating my attention on this area. While I do not believe that it faces some of the most acute pressing problems, he has certainly highlighted problems that will come to us in the future, and this gives us ample time to look at them now and to hope that we make sensible decisions.

Question put and agreed to.

Adjourned accordingly at One o'clock.