asked the Secretary of State for the Environment why he gave capital sanction for the purchase of the Royco site at Kings Head Hill, E.4.

Because the purchase of this development in an advanced state of construction will provide a quick addition to the housing stock available to the council to meet its serious housing needs.

Is the Minister aware that he is under some misapprehension? Is he aware that the site is not in an advanced state of construction? Does he know that a deposit of over £1 million has been paid to the developers and that no firm guarantee of completion has been given? Does he know that the council is refusing to purchase suitable property immediately available in other parts of the borough? Further, is he aware that Royco, the development company in question, has played the same game—namely, making a gross profit and getting off the hook on which it impaled itself—in the London Borough of Hillingdon at Ickenham?

I am sorry that the hon. Gentleman should cast such reflections on a private developer. I hope that the borough of Waltham Forest will pay attention to any strictures that are relevant. I would point out to the hon. Gentleman that the situation in Waltham Forest is very serious and that initiatives of this kind are important. After all, when the hon. Gentleman's party was in power the number of housing starts in Waltham Forest fell from 827 to 247.

My hon. Friend pointed out that the Minister's information was incorrect. Therefore, he has given permission on a totally incorrect set of facts. The houses are not in an advanced state of construction—indeed, far from it. Will he now withdraw sanction?

I shall certainly examine the situation to see whether there is any basis for what the hon. Member for Chingford (Mr. Tebbit) says.

asked the Secretary of State for the Environment if he can now give his decision regarding the method for relief of South Street in Lewes.

At present I can add nothing to the answer given to the hon. Member on 1st July 1974.

Is the Minister aware that many people will deplore this further delay in announcing the course of action that will be taken to relieve South Street? Many people feel that all the technical details have been available as a basis for this decision for a very long time.

It is true that we have had the details for some time, but one of the proposals involves a tunnel. That is a very costly job which needs careful examination in conjunction with the traffic figures and other matters. Many people throughout the country want new road schemes, and we have very limited resources.

In the Minister's recent speech at the annual conference of the National Union of Railwaymen he said that the financial obligations entailed in the Railways Bill might mean that other transport services would be cut or contracted. Is it in relation to the services in question that he envisages economies being made?

I am not making any comment about a particular scheme. As the hon. Gentleman knows, in the present year I am on a road programme which we took over which was very much cut by the previous Government. I think the House knows that there are great pressures on public expenditure in general, and the fact that we are rightly finding more money for the railways is undoubtedly a factor that the Government must take into account.

asked the Secretary of State for the Environment what recent representations he has received asking for retrospective relief for domestic ratepayers whose rates increased by 30 per cent. or more as a result of his action in the rate support grant order.

asked the Secretary of State for the Environment what recent representations he has received asking for help for domestic ratepayers whose rates have increased by more than 20 per cent. as a result of the rate support grant order.

I have received a large number of representations on this subject, many of them from householders whose rate increase has been unaffected or even reduced by my decision on domestic relief. However, the scheme for rate relief this year which my right hon. Friend the Chancellor of the Exchequer announced on Monday will help all ratepayers facing increases over 20 per cent. in their total rates and water charges this year.

I welcome the measure announced by the Chancellor of the Exchequer on Monday, which many of us have been urging for months, to repair the damage caused by the action of the right hon. Gentleman's Government in March. Does the Secretary of State recognise that this is a measure of short-term relief for this year's rates only, and that as matters now stand it simply postpones the day when, next year, many ratepayers will face exceptionally large increases? Will he undertake to ensure that in next year's rate support grant formula he introduces a system of similar relief for those facing exceptionally high increases, perhaps along the lines of the variable rate grant system to which in principle the Chancellor has returned?

I am happy that the hon. Gentleman is grateful for what we have done. As a result the average ratepayer in the hon. Gentleman's constituency will gain over £17. I feel that I should apologise to the Tory Party for the fact that we have shot their fox on rates. Despite that, I greatly welcome the sudden interest which the Opposition are taking in rating matters after four years of total passivity.

Is my right hon. Friend aware that many thousands of my constituents, and those of other hon. Members who have made representations on this matter will be extremely grateful for the prompt action of the Government, particularly as they intervened in a situation which initially was not of their making?

I am glad to make it clear not only that the total national increase in rates this year was inherited from the Conservative Government but also that, to put it mildly, both the volume and the intensity of the representations I have had from my hon. Friends have been at least equal to any I have had from the Opposition.

I am sure that hon. Members on both sides of the House welcome the fact that the right hon. Gentleman has changed his mind and is now responding both to the will of Parliament and to the representations of millions of ratepayers. I assure him, however, that one fox is still running very hard for Northampton-shire and similar counties with expansion schemes and new town developments, which have made a number of well-documented representations to the right hon. Gentleman and his Department on an all-party basis but have yet to see a penny of response.

I make it clear that I have not changed my mind; nor have I gone back on the change in the domestic element. That was a redistribution in favour of some places as against others. The new measure is not redistribution but a total addition to the amount of help that the Government are giving. I am aware of the problem of Northampton-shire. The hon. Gentleman or his county or both have been on two deputations to Ministers in my Department in which the point he has now expressed was put strongly and clearly.

Will my right hon. Friend accept that the problem of rating in the future is really that of rating reform? Will he set up his committee as quickly as possible so that we can get on with the job, away from the party political smearing that we have had, of reforming the rates system in the interests of the people?

I am happy to say that my hon. Friend's constituents will gain on average £7 as a result of Monday's announcement. I entirely agree with her about the need for long-term reform of the rates, and after four years of total inactivity on the subject by the Conservative Government I hope that I shall be able to announce the names of the members and the precise terms of reference of the long-term inquiry next week.

It is right that we should thank the right hon. Gentleman for acceding to the resolution of the House, but he should recall that the Government and their supporters voted against it. What advice can he give to people who are now facing rate demands showing very much above a 20 per cent. increase? In some cases the rates may represent a 100 per cent. increase. What advice has the right hon. Gentleman to give to the ordinary ratepayer who finds himself in a very difficult position? How quickly will the local authorities be dealing with the matter? Will the right hon. Gentleman give an assurance that local authorities will use the money for rate relief and will not put it to any other use?

This £150 million goes direct to the ratepayers and cannot be used by local authorities for any other purpose. The individual ratepayer is under no obligation to make a claim or get an application. The responsibility is entirely on the local authority to make a refund if the rates have already been paid in full and, if they have not, to levy a lower second-half instalment. The Parliamentary Labour Party voted against the resolution on 27th June because it was redolent of utter hypocrisy.

The Liberals sincerely congratulate the right hon. Gentleman on acceding to the wishes of the House expressed on 27th June. If it is not considered as being perhaps a slur, will he accept the title of being a good democrat, if not a good social democrat? Does he not agree that this is one of the happiest results of minority government?

Is it the case that the assistance which is to be given will extend to increased demands for water and sewerage charges as well as to the general rates? Can the right hon. Gentleman also comment on the difficulties being faced by small traders, who are experiencing an equally high increase in their rate burden?

The small traders will not benefit directly by the £150 million, although they will, I hope and think, gain indirectly from other measures announced by my right hon. Friend the Chancellor of the Exchequer. Water and sewerage charges are included in the calculation of the 20 per cent. I found the hon. Gentleman's earlier remarks rather enigmatic, although they seemed to have a generally friendly sentiment.

Is my right hon. Friend aware that many of us on this side of the House who tried for four years to get an investigation into the present unfair rating system now pay a sincere tribute to him for doing in 16 weeks what the Conservative Government failed to do in four years?

asked the Secretary of State for the Environment if he will consider a freeze on rates for the financial year 1975–76.

No, Sir.

Does not the right hon. Gentleman agree that it is essential that there must be tighter control of local government expenditure at local level, and that if that does not happen his announcement this week will be only another twist in the inflationary spiral?

There must be tight control at local level. I have made it clear to the local authorities that next year they will be operating in a very cold financial climate. If the hon. Gentleman is seriously pursuing—I doubt it—the question of a Government-imposed freeze on all rate increases, I must point out to him that this would raise matters of the gravest consequence.

asked the Secretary of State for the Environment what evidence he has that some local authorities may find it necessary to demand an increased rate for the second half of the current financial year.

Only a few authorities have told the Department that they are considering supplementary rate levies.

Does the hon. Gentleman consider that the proposals for domestic relief announced by the Chancellor of the Exchequer on Monday require some form of monitoring of rate increases in the second half of the year, in view of the fact that these concessions are to be made to the domestic ratepayer?

The rate relief scheme should have no effect on an authority's financial situation, since these payments go direct to the ratepayers. The scheme should not be used as an excuse to levy more rates.

Doubtless the hon. Gentleman is aware that the county of Staffordshire, which is Socialist-controlled, will be out of pocket by £6 million by the end of the year because of inflation. This will mean a September precept, unless the Government are prepared to make a new central authority grant. I am sure that this will apply to many other counties as inflation gathers momentum as it is doing now. What statement can the hon. Gentleman make about it?

We are aware of the problem in the right hon. Gentleman's county. Later in the year there will be an increase order dealing with some of the effects of inflation, with threshold payments and so on. I understand that I am meeting Staffordshire County Council representatives some time next week.

In cases where local authorities find that they have to increase the rates in the second half of the year, will the 60 per cent. increase for domestic ratepayers be equivalent to a 30 per cent. precept on the Government for the increases which are forced on these local authorities?

I am not altogether clear what the hon. Gentleman means. I can tell him that if an authority levies a supplementary rate it must declare the amount of assistance that it has had from the proposals which my right hon. Friend the Chancellor of the Exchequer made on Monday of this week.

Is my hon. Friend aware that because of industrial disputes about the London allowance a number of London boroughs have had great difficulty in collecting both rents and rates and have, as a result, had to borrow money at exorbitant rates of interest? Will he keep this problem under review? Some authorities may be in great difficulties in the latter part of the year.

We are aware of the considerable cash flow problems in London. This matter is under consideration.

asked the Secretary of State for the Environment what financial help he intends to give to local authorities to compensate them for loss of income once relief from sewerage rates is granted to households not connected to a public sewer.

asked the Secretary of State for the Environment whether, in view of the statements on 15th May by the Minister of State and on 3rd July by the Under-Secretary of State on the subject, he will make a further statement about his policy on sewerage rates.

asked the Secretary of State for the Environment whether he has yet received the report which he requested from the National Water Council on providing relief from sewerage charges for households without mains drainage.

asked the Secretary of State for the Environment whether he has yet formulated proposals for relieving households without mains drainage from the payment of sewerage rates; and if he will make a statement.

As my hon. Friend the Minister of State told the House on 3rd July, my right hon. Friend has asked the National Water Council for urgent advice about the various aspects of sewerage charges for premises not connected to the public sewers. I understand that the council is making very good progress in its study of this problem.

Does the hon. Gentleman now accept that the £150 million is being paid retrospectively to make adjustments because the Government would not listen in the first place to suggestions by the Opposition proposing precisely what they are now doing? Will he say whether the money will be distributed under two heads, both the general rate and the water and sewerage rate? In this way, those not on water services, for example, would not get a rebate to which they would not otherwise be entitled while at the same time those with septic tanks could be given special relief. Secondly, will the hon. Gentleman guarantee—

Order. We cannot debate these matters again. The Minister must now answer the hon. Gentleman's supplementary question.

I remind the hon. Gentleman that the iniquity of the situation arises from legislation introduced by the Conservative Government which we are busily trying to unscramble. I reinforce what my right hon. Friend has told the House already. Sewerage charges are included in the £150 million and their increase will be included in the percentage. With regard to cesspits, the difficulty is that water authorities have no power to incur or to reimburse the expenditure on that function because of the Conservative Government's legislation. It would require further legislation to deal with the matter, and the National Water Council is looking into it.

Does the hon. Gentleman recognise that we on this side, and no doubt some of his hon. Friends, have always seen in him someone who is sympathetic to this problem? Does he not find it embarrassing that he gives statements which contradict those of some of his ministerial collegues on this point?

I have not known of any contradiction on this matter. I am sympathetic to the problem and I repeat that it is iniquitous that someone not receiving sewerage service should have to pay a charge. We inherited that situation and we are endeavouring to unscramble the egg.

Is my hon. Friend aware that while many hon. Members on the Government side welcome the removal of the ludicrous anomaly introduced by the Conservative Government whereby people pay for services they never receive, there is nevertheless an urgent need to ensure that money is available for water and sewerage services so that vital housing programmes which have been neglected during the past three years can go ahead?

That raises another matter. However, I remind my hon. Friend of the cuts imposed last December which had a serious effect on this matter. With regard to the need for urgency, we are hoping that the report of the National Water Council should be available at least by early autumn.

Does not the hon. Gentleman accept that the anomaly he is dealing with has nothing to do with the Water Act and has existed for a long time under Governments of different complexions? Will he seriously consider going for self-assessment in this respect, bearing in mind that he is dealing overwhelmingly with villages with no sewerage services? Does he not agree that it would be better to have a rough-and-ready system which will work from next year rather than a perfect system for which we may have to wait for three or four years?

We hope to have a system which will work from next year. That is the reason for the urgency of the inquiry at present. It is true that this problem has existed for decades, but it is now at a much more intense level because of increases in charges and other factors. I would have thought that the last Water Act which reformed water services would have been the very means by which to have put the matter right, but it was not put right.

Does not my hon. Friend agree that a house which is not connected to a public sewer is usually given a lower rateable value than one which is connected, in order to compensate for the deficiency?

I am afraid that with the vagaries of the valuation and rating system that is not always so.

With regard to the hon. Gentleman's statement that legislation would be required to enable water authorities to pay for the emptying of individual cesspits instead of leaving it to the owner to pay the local authority, will he not admit frankly to the House that the Government had the opportunity to put that matter right in the Control of Pollution Bill both in Committee and on Report, when amendments were moved to that effect, but that the Government steadfastly set their face against giving such relief?

The Control of Pollution Bill involved a different matter from that which we are concerned with here. As I understand it, district councils have power under the Public Health Act 1936 but water authorities have no power to incur or reimburse expenditure on this function. This matter would require legislation, possibly a one-clause Bill. I am sure that at the earliest possible time after we receive the report from the National Water Council the Government will introduce legislation if required.

asked the Secretary of State for the Environment if he will consider further measures to inform the public about the responsibilities of the local ombudsmen and the procedure to be followed by the public when approaching the local ombudsman with a complaint; and if he will make a statement.

This is a matter for the Commission for Local Administration itself. I understand that the commission is already giving urgent consideration to it.

As it is vital that the public know about the local ombudsmen, will the Under-Secretary ask local authorities to circulate a leaflet to all ratepayers, possibly with the autumn rate demands, giving information about the ombudsmen? Will he look at the situa- tion in which a person with a complaint, which he has to make in the first instance through a councillor for a particular area, may not live in that area and thus may not know the councillors representing the area? Ought not the system to be changed if we are to enable the local ombudsmen to get to work to deal with local grievances?

Distribution of a leaflet to every ratepayer would be somewhat costly, although I shall look into the suggestion. Leaflets are being prepared for citizens' advice bureaux so that information about the local ombudsmen is available. With regard to pursuing a complaint through councillors for a particular area or a particular authority, if the councillors will not approach an ombudsman and flatly refuse to help a constituent, the constituent can go direct to the ombudsman with, if necessary, the assistance of his Member of Parliament.

Will my hon. Friend accept that it is becoming obvious that some councillors are reluctant to forward complaints to the ombudsmen because they think that those complaints reflect upon their councils? What is the procedure whereby a Member of Parliament can take a matter direct to a local ombudsman?

I am glad that my hon. Friend has raised this point. The position is that a complainant who believes that he has suffered injustice must approach a member of the local council first. If he is unsuccessful in persuading any councillor to forward the complaint he may approach the ombudsman direct, and in doing so he is free to seek the advice and assistance of his Member of Parliament.

Are all local ombudsmen now in position? If not, would it not be better to wait until they are all in position before the necessary publicity campaign is launched?

Three ombudsmen have been appointed but unfortunately at the moment they are operating from a temporary address, 47 Parliament Street. They are empowered to examine cases as from now and I remind the House that this relates to cases arising from 1st April 1974.

With regard to publicity, will my hon. Friend consider approaching the various local radio stations, which welcome material such as that relating to ombudsmen which they can use as a basis for their local programmes? I am sure that if he contacts the local radio stations they would welcome the opportunity of broadcasting a programme on this subject. Will he approach them?

I welcome that suggestion and I shall look into it.

asked the Secretary of State for the Environment whether it is his intention, in paragraph 30 of his Circular 70/74 to local authorities, that they should seek to purchase rented houses where the tenants have bad housing conditions because their landlords are inaccessible.

Paragraph 30(b) of Circular 70/74 authorises local authorities to buy rented accommodation where they have clear evidence that tenants are suffering bad housing conditions, including threat of harrassment and risk of homelessness. This authorisation applies whether landlords are inaccessible or not.

May I draw my hon. Friend's attention to 43 rented houses in Corona Drive, Thorne, most of which are badly in need of repair and which are owned by Corona Properties Ltd., of PO Box 439, Manchester, the staff of which are under instruction from their principal, Mr. Mark Kingsley, not to reply to any correspondence about housing, including letters sent by me on behalf of tenants?

I know that this case has attracted my hon. Friend's attention for a considerable time. I join with him in deploring the inconsiderate attitude of landlords towards tenants. I hope that the fact that he has properly used the privilege of the House to raise this matter will not go unnoticed by landlords. I hope that absentee landlords in Manchester who mistreat my hon. Friend's constituents will not reflect on the city of Manchester in the same way that absentee landlords who mistreat my constituents tend to discredit the areas to which they are making a bee-line.

With regard to Circular 70/74, will the Under-Secretary confirm that only 2,500 of the existing unsold 30,000 private houses have so far been bought by local authorities?

The hon. Gentleman's information is almost two weeks old. Further schemes have been coming forward. The many conferences that I have been holding with local authorities in various parts of the country show that the response is going well, but in the period immediately after the issuing of the circular I would not have expected the scheme to have got off the ground in the way in which we are sure it will eventually do so.

Will this provision apply to furnished as well as unfurnished houses after the end of this Session?

That depends upon the good will of Parliament and the good sense of all hon. Members.

asked the Secretary of State for the Environment whether he will make a statement on trends in house prices with special reference to the South of England.

The latest national figures based on general building society lending, as well as the latest figures for the South-East Region, excluding greater London, suggest that house prices are now stabilising.

Is my hon. Friend aware that it is welcome news that house prices are stabilising? Is not that in favourable contrast to the rapid increase in house prices which occurred under the previous administration? Will my hon. Friend say when we are to get information about the Government's policy on land, which particularly in the South of England is the key to the whole picture?

There are later Questions on that subject to which answers will be given which will I am sure be to the vast satisfaction of all hon. Members. I am sure the House would not wish the situation to persist in which, for example, in the South-East Region, which concerns my hon. Friend, house prices rose last year by 52 per cent.

When will the Minister stop tinkering with the building society system and make a constructive effort to bring down the rate of borrowing in the mortgage sector? It is no good saying that prices are stabilising if no mortgage facilities are available.

The hon. Gentleman must know that since the Government's welcome initiative, decried by the Opposition but enormously successful, mortgage funds have been coming forward very well and, unlike the situation in which the Conservative Government's £15 million bribe had no effect whatever on the building societies, our prudent and sensible loan facilities have been accepted by them and they have held down interest rates.

Is my hon. Friend aware that according to building society statistics one-third of the cost of a new house now goes to pay for the land? In London that means on average £4,300 per house. Does not this strengthen immensely the case for public acquisition of land?

The case was previously incontrovertible. It is now unanswerable.

In spite of what he said about mortgage interest rates, is the Minister aware that under his Government mortgage interest rates have been at 11 per cent. for longer than under any other Government?

That is one way of putting it. Another way of putting it is that mortgage interest rates have not risen under the present Government whereas under the previous Government they rose 2½ per cent.

asked the Secretary of State for the Environment what are his current plans for speeding up the consideration of planning appeals.

I would refer the hon. Member to the answer given on 25th June to hon. Member for Reading, North (Mr. Durant.)

Will the Minister take steps to see that the procedure for appeal by representation is speeded up since it is causing severe hardship? There would need to be only a small number of inspectors in addition to the present number to speed up the procedure. When does the Minister propose to publish the results of the Dobry inquiry?

We are aware of and concerned about the long delay in planning appeals, but I remind the hon. Gentleman that in 1971 there were just over 9,000 appeals and in 1973 there were double that number—18,326. That is one cause of delay. I am happy to tell the hon. Gentleman that I think we have now turned the corner, because all regions have had a "blitz" on appeals. We hope that the Dobry Report will be out by the end of this year.

asked the Secretary of State for the Environment if he will conduct a study of the possible effects on the environment, development and traffic in North Northumberland of the proposed power station at Dunbar before any decision to proceed with the project is taken.

No, Sir. I have no reason to suppose that such a proposal might have detrimental long-term effects on North Northumberland.

Does not the Minister recognise that answer to be extraordinary? My constituents greatly fear that the construction of such a power station would bring about a short-term boom in jobs—which would be damaging to the long-term prospects of the area to which he has referred—and might cause severe environmental damage. Is he aware that my constituents look to him to represent their interests in this matter to the Secretary of State for Scotland?

I have no doubt that my right hon. Friend the Secretary of State for Scotland is aware of the facts over the border. I will certianly draw this to his attention. We do not think that there will be a major flow of labour from the Berwick area into Scotland which would have a detrimental effect on other contracts in the Berwick area.

asked the Secretary of State for the Environment if he is satisfied with the working of the new water authorities.

It is much too early to comment on the performance of the new water authorities since they assumed executive responsibility for water services only on 1st April. However, as my right hon. Friend the Secretary of State announced to the House on 27th June, we consider that the new organisation should be reviewed in about two years' time.

I realise that the authorities are new, but is the hon. Gentleman aware that in my constituency and elsewhere the absence of sewerage facilities, largely caused by the absence of funds, means that the water authorities are usurping the position of the planners because water authorities have to decide to which sewerage scheme to give priority? Is the Minister satisfied that his Department has enough information about the priorities and the way in which water authorities are establishing their priorities?

We are gathering that information at present. I repeat that water authorities have had a very short period of life so far. Planning was a major worry which we often expressed when the Water Bill was going through Parliament. I am happy to say that in most areas considerable co-operation exists between the regional water authority and the planning authorities, and for the progress of both that is essential.

Does my hon. Friend agree that we want to keep open the possibility in the future of redressing the mistakes made in the recent past and of having an effective link with local government possibly via regional elected authorities?

That is for the more distant future. I think that we must allow the water authorities to continue for two years without disturbing their functions. My main criticism of water authorities, which is similar to the criticism made by my hon. Friend, is that they are basically undemocratic bodies. That is what is wrong with them.

After the two-year period, will the Minister extend his review to the local authorities? Is there not a strong case for some local authorities being all-purpose authorities, such as my own constituency and possibly the former county of Hereford?

If we were to conduct a major review of local authorities, I would fear for the suicide rate among the officers. The Labour Party is pledged to look at some of the more glaring anomalies that resulted from the Local Government Act 1972.

Although there is general satisfaction among ratepayers at the way in which the Government have dealt with rates, there is particular dissatisfaction about the water and sewerage rate. Could that be reviewed before the two years have elapsed? For people whose premises are not connected to the public sewer to have to pay this rate is adding insult to injury.

I said in reply to an earlier Question that this is being considered by the National Water Authority and we are hoping for a report by the early autumn so that the anomalies can be put right at least by next year.

Is the Minister aware that the new regional water authorities have one thing in common: that rural ratepayers pay considerably more for their water and drainage? Will he ensure that before next year this anomaly is taken care of in the rate support grant?

The hon. Gentleman refers to the rate support grant but I remind Opposition Members that it was the Conservative Government who removed from local authorities responsibility for sewerage and water. The hon. Gentleman asks me whether we can give help through the rate support grant. It is true, and always has been, that water supplied by a water board area of a regional water authority is more expensive in a rural than in an urban area. The water authorities will be looking into this in their pricing policies.

asked the Secretary of State for the Environment what is the estimated total cost of bringing all development land into public ownership.

No figure is available for the total value of all development land. The cost of our proposals for bringing such land into public ownership will depend on the details of the scheme which will be announced as soon as possible.

Does the right hon. Gentleman realise that the country will be amazed that this proposal should be put forward without any knowledge of the cost involved? Can he say whether he and his colleagues will be satisfied with the nationalisation of development land or whether, as many of us suspect, it will be merely the thin end of the wedge towards the nationalisation of all public land, including private homes, as advocated by many prominent members of his party?

The proposals are perfectly clear, and the hon. Gentleman has no right to misrepresent them in that way. It has been made plain again and again that these proposals will not—I repeat, not—touch the owner-occupier, and the hon. Gentleman knows it. The country will not be amazed in the way that he describes because, unlike the hon. Member, people have the sense to see that we are discussing not a public cost but public wealth.

Does my right hon. Friend realise that if there is one matter that offends millions of people in this country it is that landowners should be able to exploit human need in the way they have been doing by withholding their land until they are paid their extortionate prices? Will my right hon. Friend take it from me that if we make this one of the major issues in the forthcoming General Election there is no doubt that the vast majority of people will declare firmly that their native land should belong to them?

Landowners have made a speculative killing in recent years which has jeopardised good planning and greatly increased inequality and appropriated to themselves a rise in development values due to the actions of the community. We shall make this a major part of our election policy.

What public sector projects will be cut out so that this vast sum can be found without add- ing to the public sector borrowing requirement?

The hon. Gentleman has not realised that what we are discussing here is not a cost to the Exchequer but an investment which will be one of the best that the country and the Exchequer could make.

asked the Secretary of State for the Environment if he can make an estimate of the effects which his recent policies have had on the level of private housing starts; and if he will make a statement.

The decision of the Building Societies Association to hold the recommended mortgage rate at 11 per cent. coupled with the Government's initiatives to increase the flow of mortgage funds, should encourage the private house-building industry to undertake a higher level of building. The Government is urgently pursuing longer-term studies on how best to ensure a steady flow of funds and on related matters.

Does not the right hon. Gentleman agree that his answer is purely a political one to hide the facts? Does he not appreciate that housing starts are about half what they were this time last year and that the building industry is in a state of complete chaos? I remind the right hon. Gentleman of a statement by one of his predecessors a number of years ago when I asked whether what the Labour Party was proposing was to nationalise the building industry. He replied "No. All that we have to do is to break individual contractors and we shall get them for nothing." Is that the right hon. Gentleman's policy?

I respectfully congratulate the hon. Gentleman on his nerve, since in the last Parliament he was PPS to a Minister who left the building programme in the most disastrous state that we have seen this century. We have taken a number of important measures to encourage private house-building. Certainly I am not satisfied with the outlook at the moment, although there are now beginning, for the first time in two years, to be slightly encouraging signs that we may get a pick-up in private house-building.

Does my right hon. Friend agree that the fall in the level of private house-building occurred especially during the period in office of the previous administration and that the bad position today is directly the result of their policy?

My hon. Friend is absolutely right. While the hon. Member for Folkestone and Hythe (Mr. Costain) was ensconced in the Department of the Environment, the rate of private housing starts fell from 20,900 in the first quarter of 1973 to 11,400 by the first quarter of 1974. It was almost halved as a result of the actions of the previous Government.

Does the right hon. Gentleman agree that there is in some areas a complete breakdown in planning procedures and that this is a contributory factor to the low level of private housing starts? What is he doing about it, and what were the encouraging signs about which he spoke just now?

The encouraging signs are that an improvement of starts occurred in May, the last month for which we have figures, for the first time for very many months. As for the hon. Gentleman's planning point, there may be certain areas where that is an inhibiting factor. If he has specific examples in mind I hope that he will write to me about them. There is no doubt that the main inhibiting factor has been the lack of confidence on the part of builders that they will be able to sell their houses in 12 or 18 months' time, and the object of our policy is so to increase the supply of mortgage funds that they will feel confident about their ability to sell.

asked the Secretary of State for the Environment if he will introduce legislation to amend Section 20 of the Transport Act 1968 so as to remove the rate burden on areas with passenger transport executives in relation to local railway services.

No, Sir.

May I suggest to the Minister that it is unfair to continue with a situation where the metropolitan counties are contributing from their rates under statute for their local rail services when non-metropolitan counties do not have to meet that burden? May I also suggest that if he still feels that it is necessary—

Order. The hon. Member must ask, not suggest.

May I ask the Minister whether he agrees that it is unfair? May I also ask whether he agrees that the section requires amendment so that the marginal costs of these rail services are taken into account in the local rate burden rather than that we should still have the arbitrary system of allocation of costs which is being discarded for the rest of the railway system, I believe largely so as to bring us in line with the EEC directive No. 11/91?

I think I can satisfy the hon. Gentleman on the last point. Renegotations between the PTEs and the Railways Board are in prospect because the Cooper formula, which was hitherto the standard, will no longer be used by the Government for grants if the Bill becomes law on 1st January next. We are looking into that aspect.

There is no reason why the metropolitan counties should not make a contribution which is assessable for transport supplementary grant for rail services if, as I understand, they use them as part of their total transport pattern, particularly for travel-to-work journeys. In the non-metropolitan counties it is not usually possible to use rail services to the same extent. But under Section 203 of the Local Government Act 1972 non-metropolitan counties can, if they wish, make arrangements similar to those of the metropolitan counties.

Will my right hon. Friend assure the House that he will examine the relative costs of railway schemes as opposed to road schemes within the areas of passenger transport executives where, for example, motorway schemes are put forward? Will he also assure the House that he will examine the viability of existing railway schemes to bear the traffic burden within areas like the Aire Valley?

In the first instance it is for local authorities to form their own views on what is most appropriate for their areas. But these matters will come to us when the transport policy and programme is considered later this year.

In view of the horrifying losses recently announced by the GLC in the running of London Transport services, may I ask the Minister whether he will give any help to relieve the rate burden there?

It is open to the GLC, as to other county authorities, to include support for public transport among the items that it puts in its transport policy and programme. But as I am advised, I confess mainly from the Press, as to the size of this, I do not think it will be possible to accommodate it in what is likely to be available for TPPs. It is a matter for the local authority to determine its transport priorities, and in accordance with the money available we shall do what we can to accommodate those priorities.

asked the Secretary of State for the Environment what is the average cost, including land, of constructing (a) three-bedroom council houses and (b) three-bedroom council flats in the South-East at the latest convenient date; and what proportion of this cost receives Exchequer subsidy.

£5,700 was the average construction cost for five-bedspace houses in tenders approved in January to September 1973 by local authorities in the South-East, excluding greater London. This amount does not include land or site development works, for which reliable figures are not available. Very few five-bedspace flats are built and a similar average is not produced. Under the present subsidy arrangements in 1974–75 any deficit arising on an authority's housing revenue account from the provision of new dwellings would attract 80 per cent. subsidy.

Will the Minister confirm that the overall subsidy cost of rehousing a family in the South-East by means of a local authority tenancy is now £700 more per annum than the subsidy cost of providing the same family with the means to own its own home?

The two situations are not comparable. The subsidy provided for an owner-occupier is larger than the subsidy for a family housed in a council house. The hon. Gentleman need not shake his head. These are official figures based upon the subsidies given by the previous Government. If the hon. Gentleman is implying that, because everybody cannot yet be housed through owneroccupation—we are anxious to champion owner-occupation—by a £500 million loan facility—we shall nevertheless not provide them with council houses, it is a strange argument to deal with homelessness.

As my hon. Friend is able to give us the cost of a house but not the cost of the land, may I ask what percentage of the cost is represented by materials, labour and profit?

Not without notice and not without a pocket calculator. Under the Labour Government which went out of office in 1970 the cost of construction was falling. Under the Conservative Government the cost of construction soared from £4,050 in 1970 in greater London to £5,370 in 1972.

asked the Secretary of State for the Environment how many extra local government positions have been created in the county of Norfolk as a result of local government reorganisation including an apportionment of Anglian water authority positions relating to the county of Norfolk.

The information about local government staff is not available within my Department. As regards the employees of the Anglian Water Authority, it is not practicable to allocate these to particular county areas.

May I help the Minister by telling him that in the old county of Norfolk area at least 1,000 extra local government positions have been created as a result of local government reorganisation? Is he aware that the intention of the Local Government Act was not to create extra jobs but to reduce the number of positions and that 7,400 people were prematurely retired? As a result of the way that the Act was applied, however—[HON. MEMBERS: "Too long."]—at least 100,000 extra jobs have been created in the country.

Order. That is enough for a supplementary question.

The hon. Gentleman began his question by asking whether he could help me. He has indeed done so. He pointed out some of the difficulties which resulted from local government reorganisation and some of the difficulties which resulted from the reorganisation of water authorities, both measures having been introduced by the previous Government. I remind him and the House that the Government do not control the numbers of staff either of local authorities or of regional water authorities.

asked the Secretary of State for the Environment when he expects to publish the orders for widening the North Circular Road between the junction with the Great Cambridge Road and the junction with Bounds Green Road; and if he will make a statement.

I have recently been approached by the Greater London Council about six improvement schemes for the North Circular Road, the first four of which are included in the length mentioned in the hon. Member's Question. They are as follows: Great Cambridge Road, Green Lanes, Wilmer Way, Bounds Green Road, Golders Green Road, and Popes Lane to Western Avenue.

Having previously undertaken design work as the Department's agents, the council has suggested that there should be a joint reappraisal of the traffic requirements on which the design work has so far been based. I have agreed to this.

Is the right hon. Gentleman aware that I was told earlier in the year that a decision would be made by the late spring? Is he also aware that this further reappraisal, important though it may be, will cause great concern in my constituency particularly among the 500 to 600 householders whose homes are under threat? Will he assure the House that he will make a further statement in the near future to relieve them of their worry?

I understand the point and sympathise with the hon. Member and his constituents. All public participation exercises, public inquiries and the rest prolong the period of blight over the various routes under consideration. I was advised, however, that the statutory procedures in these cases would in any event be lengthy and strongly contested by the hon. Member's constituents among others, and that if we could reach some understanding on the proposed scale of the development, that would help.

May I support my Member of Parliament and declare an interest? The Minister will be aware, will he not, that this has been going on for years and that something should be done to get this matter moving, because hundreds of people are vitally affected and want a satisfactory answer?

I can assure my hon. Friend that I am as concerned as he is to find a satisfactory answer, but when many people are concerned they are not usually of one opinion. There are many who do not want any development and others who do. In each case it is a properly contested statutory process and I am hoping to find a compromise arrangement which will facilitate matters.

In view of the nature of the Minister's answer, I beg to give notice that I shall seek to raise the matter on the Adjournment.

Before calling the Leader of the Opposition to move the motion, I should tell the House that I have selected the amendment in the names of the Prime Minister and his right honourable Friends.

On a point of order. I should like to raise a matter on which I should be grateful for your guidance, Mr. Speaker. May I respectfully suggest that it may be a matter upon which you would like to reflect, rather than give an immediate ruling?

Early on in this Parliament it was indicated that it might be valuable for this House to be able to reflect more than one alternative viewpoint to that of the Government of the day. Despite your ruling, you will have noticed that there are amendments other than the official Opposition amendment. There are two in the names of my hon. Friends and myself: first, after 'House', insert:

'welcomes the relief for domestic ratepayers and the doubling of the regional employment premium but';

second, to leave out from 'confidence' to end and add:

'and do not include direct action to curb the excessive increase in personal incomes without which both unemployment and inflation will become uncontrollable'.

There is another in the names of Members of the Scottish National Party, to leave out from 'problems' to end and add:

'of the Scottish economy and declares that it will only be with self-government and the investment of the revenues from Scotland's oil that the Scottish people may expect full employment and a steady and continuing improvement in their standard of living'.

Without going into the merits or otherwise of those amendments, they all indicate distinctive points of view which are not contained within, or at least which differ from, the view of the official Opposition. If the Government amendment which you have called is carried, Sir, that is the end of the matter and it will be for the House to decide whether to vote for the substantive motion or the motion as amended.

But if the amendment is not carried, may I respectfully urge on you the view that the time of the House which would be needed would certainly not be very great and the House would be given an opportunity to reflect or to vote upon different opinions if it were possible for more than one amendment to be called? It seems to me that that would reflect much more than we have by the procedures of the past the particular pattern of this House of Commons.

Therefore, Mr. Speaker, although you have said that you will call only the Government amendment, if that amendment is defeated, may I respectfully urge you not to preclude the possibility of considering calling one or more of the other amendments when that moment arrives later today?

Further to that point of order, Mr. Speaker. May I, on behalf of my colleagues, support the submission by the Leader of the Liberal Party? We have felt in this Parliament of minority parties that we have not been given scope to make our point of view clear. Many of us have wished to avoid supporting certain actions of the Labour Government without assisting the Conservative Opposition. In the present circumstances, we are given no chance to do so.

The right hon. Member for Devon, North (Mr. Thorpe) said that he was not asking me to rule today. These are points which require further consideration. That is one of the difficulties with the present situation in this Parliament. Anyhow, I have selected this amendment, and I should think that there would be problems about moving other amendments after 10 o'clock.

Further to that point of order, Mr. Speaker. With great respect, I did not suggest that this was a matter for reflection upon a subsequent day. What I was asking, Mr. Speaker, respectfully, was whether, in the event of the Government amendment being defeated, you would not rule out giving further consideration tonight to calling a subsequent amendment.

Further to that point of order, Mr. Speaker. Before you reply, may I suggest that if you were to consider this matter you would be considering it without first getting the opinion of the Committee on Procedure, which at present is not in existence? Therefore, would it not be advisable not to take any action which may change the present position until such time as the Committee on Procedure is appointed, when that Committee may be able to consider the matter and help you come to a decision, which would not affect the position tonight? May I suggest, Mr. Speaker, that you would be acting in the best interests of the House if you left the matter in abeyance until the Committee on Procedure can examine it?

Further to that point of order, Mr. Speaker. You will recall, Mr. Speaker, that very early in this Parliament you said that you thought that this matter of amendments might be looked at by a Select Committee on Procedure. The hon. Member for Newham, North-West (Mr. Lewis) is quite correct. No such committee has been set up. We are now well through the Session and this matter has not been considered. Therefore, I think that we are entitled to look to you, Mr. Speaker, for protection and to ask you to reconsider your ruling.

Further to that point of order, Mr. Speaker. May I take it that there is no procedural reason for calling only the official Opposition amendment—[Hon. Members: "Government amendment."]—and that you have discretion to call several amendments? In this Parliament is it not the case that only once has an amendment tabled by the Liberal Party been called? As the Scottish National Party is in a very special situation, may we, as a minority party, look to you for assurance that tabling amendments is not just a formal matter but may lead to having them called?

I take account of these matters. In the absence of the Committee on Procedure, I have to try as best I can. I have hade my decision for today. I do not think that there is any chance of my changing it, because I do not see how it would be possible to have any new amendment called after 10 o'clock tonight.

I beg to move,

That this House regrets that the measures announced by Mr. Chancellor of the Exchequer on Monday are irrelevant to the underlying problems of the economy, make no attempt to restore business confidence, and do nothing to encourage the industrial investment which alone can safeguard the jobs and future prosperity of the nation.

I believe that the motion which I have just moved goes to the heart of people's anxieties and fears in Britain today. There are deep fears which have been reflected in the words of commentators and in the Press, and in the reports of international organisations and in the debate in the House yesterday—not least from Government supporters on the benches opposite. Indeed, as far as the Press is concerned, the statement which the right hon. Gentleman the Chancellor of the Exchequer made on Monday is already treated as irrelevant and has disappeared from the scene.

There are today the fears of so many millions of ordinary people and these fears are not less real because they cannot be precsely defined or clearly articulated, or because they cannot put forward solutions for the problems which cause their fears. There are fears of an ever-increasing rate of price increases and fears of growing unemployment, or of both. There are fears for the impact on our society of either a high rate of inflation or a high level of unemployment. Both are social evils of great magnitude, evils both for society and for those men and women who are personally affected by them.

I personally feel this, and regret that there are those who tend to treat unemployment as a purely statistical economic exercise, instead of recognising the human misery and social stress it causes. [Hon. Members: "Oh!"] I say this quite eliberately—[Interruption.] A three-day week is better than a no-day week, which may very well come under the present Chancellor—[Interpretation.]

Order. I should like to intervene at this point to ask the House whether it is not possible to have a debate. If one side shouts at the other, the other side will shout back. Is it not possible for both the Leader of the Opposition and the Prime Minister to be listened to in reasonable silence?

Tell the truth.

I should have thought that it was an agreed fact on the Government side of the House that unemployment is a social evil in human terms of which everyone in the House must take account.

There are fears that even while world commodity price increases are still working through the system, yet another wage-cost spiral will be added to the prices spiral, with all that that means internally and for our competitiveness abroad, when the increase in world trade now shows signs of slowing down drastically. There are fears that our industry is not being left with the means to provide its own investment or to secure what it needs from the market, with all that that means for the future capital backing for workers in industry and, indeed, for jobs for them.

There are instinctive fears among our people that we in Britain have not yet found out how to run our own affairs fairly and competently, in a way which will avoid either and both of these evils. There is an instinctive fear also that the countries of the Western World may well be sliding into their protective cocoons, from which we as a major trading nation could become one of the worst sufferers. Perhaps, above all, there is a fear of facing reality as it now presents itself to our country. In the face of this national mood, I thought it extraordinary that during the statement and long answers to supplementary questions on Monday and in his speech yesterday, the Chancellor had nothing of importance to say on the major aspects of the Government's economic policy in this situation which I have described, a situation characterised by many outside the House as a state of crisis. Indeed, in fairness to the Chancellor of the Exchequer, he did not claim to have said or done anything of importance in the last 48 hours.

It is not, therefore, surprising that the Government's amendment makes no attempt to counter the Opposition's basic motion but only lists again the announcement which the Chancellor made last Monday. I hope that the Prime Minister will address himself to the major questions with which I now propose to deal in this debate.

When the man in the street, with all his instinctive fears, hears and reads above a crisis, he may well ask, what is the nature of the problem which we face, which he fears, and which this country is facing? There are three serious aspects of the present situation which I should like to put before the House. I propose to take, first, the question of the balance of payments.

We have heard—I myself have spoken of it—of the oil and the non-oil deficit. My hon. Friend the Member for Horn-castle (Mr. Tapsell) said yesterday, in an intervention, that we must face the fact that the deficit is all one. With that I would agree, and I know that hon. Members on both sides of the House take this view. I agree, too, that the deficit, whatever its source or size, has to be met in one way or another.

But I personally have always believed that there are advantages to be had in breaking down the deficit for the purposes of analysis. And I believe that it was particularly useful to have done so over the past few months—first because it enables one to prescribe particular treatments for different aspects of that deficit and, secondly, because it enables one more clearly to argue with those who take the view that any deficit at any time must immediately be dealt with by deflation. I therefore propose at present to retain the terms "deficit" and "oil deficit".

First, on the non-oil deficit, the Chancellor says that this is improving largely due to our export performance, with which I agree, and—a fact which he has now acknowledged—the reason for that is that the previous administration floated the pound and therefore gave us a competitive advantage over other countries. It was part of a strategy of getting growth, and exports, especially after floating, follow imports. But the Chancellor is pursuing a policy of borrowing to deal with the oil deficit, on the basis that in due time oil will repay the deficit which is now to be incurred. I find it, therefore, difficult to understand his reiterated criticism—unless it is for political purposes—of a deficit incurred for growth on the basis that when the growth has been achieved and the pound is at the right level, the exports will repay the deficit which has been incurred during that period. That was certainly the policy of the last administration, understood and supported both by the CBI and by the TUC, and the Chancellor in his policies gives absolutely no grounds for criticism of that. Then, again, he is pursuing a policy on overseas borrowing for nationalised industries and local authorities. When the Government were in Opposition they condemned the then Government for pursuing that policy, but now they are pursuing it, too. I accept that and welcome it, but it might have been more helpful to the national interest if they had recognised the merit of the policy a year ago.

It is clear, however, that even with the improvement described by the Chancellor of the Exchequer, we shall be hard put as a nation to eliminate the oil deficit in any reasonable time, and particularly with a likely downturn in world trade which is already beginning to make itself felt. The first thing we must recognise, therefore, is the task which faces us in borrowing in connection with the non-oil deficit alone. Commentators constantly ask that this House should be realistic and face up to these matters and should tell the country the truth. It is essential to tell the people that the task of dealing with the non-oil deficit alone is a major task.

I now turn to the oil deficit, and I shall give figures showing what it involves up to the period 1979–80. If the people of this country are to understand the task which lies ahead it is essential to look at the scale of the operations upon which this country is having to work. The total indebtedness incurred by Britain in paying and borrowing for the oil deficit will be £9,500 million by 1979–80 on present production forecasts, which I suppose are the most optimistic forecasts available and which assume that everything goes right. The total interest paid on this by 1979 will be between about £3,400 million and £5,400 million, depending on world interest rates and, I judge, inclining more towards the latter figure. This assumes that we can cover not only the non-oil deficit but the interest on the borrowing to be made to pay for it. That is unlikely to be the case, but if borrowing reaches £9,500 million by the time we satisfy our own oil needs we shall still have annual interest repayments for 1980 of £1,500 million a year to be covered in our trading account.

If we are not able to pay the interest on our borrowings as we go, our total indebtedness by 1979–80 will be between £13,000 million and £15,500 million. That is the size of the task facing Britain up to 1979–80, which is the earliest anybody could foresee we should be meeting most of our oil needs from our own sources. If we borrow, which is the present policy, that is what is involved.

That was the right hon. Gentleman's policy when he was in Government.

It was certainly our policy in Government. I do not dispute that in the least.

That was before we had an oil deficit.

I have already gone over the policy of growth and the temporary deficit it involved. We must explain to the people of this country that there is now a massive transfer of claims on our resources from our people to the oil-producing countries. I do not believe that the oil deficit is normally seen in that light. Nevertheless, there will be a massive transfer of a size and speed never seen before in the world. It is a major switch of resources from the industrialised developed world to the developing world and the irony of it is that we shall now, from the figures I have just given, find ourselves in the position of many of the less-developed countries.

We have made our loans to the less-developed countries over the last 25 years, under the policies of both Governments, in the form of aid. Many of those countries have found that servicing those loans takes up the greater part of the aid which is being made to them by the Western industrialised world. That is the burden which rests upon them, a burden which some of us in the past have sought to lighten by either national or international means, an endeavour in which, to a large extent, we have failed. Britain and other Western European countries will find themselves, as the figures I have given show, in the position in which a large part of their oil resources will have to be used to service the debt we have incurred, let alone for the repayment of our obligations.

There is a further danger in that, should there be any further substantial fall in commodity prices, other groups of countries producing raw materials might form organisations comparable to OPEC in order to maintain their own position. They would say that they were doing so purely from the point of view of economic self-defence. These organisations would be designed to keep up prices to enable the countries concerned to repay their oil deficits. The danger is becoming more and more obvious, and we are therefore unlikely to see a return to the earlier levels of commodity prices of this half century as we did after the Korean war, and as some people have been expecting, and that is particularly true of foodstuffs.

On top of this situation, and to complete the picture, the present Government have decided to go for borrowings of £2,000 million sterling internally to secure a 51 per cent. participation in North Sea oil for the purpose, which we believe is entirely unnecessary, of obtaining revenues which any Government ought to have from that oil.

Does the right hon. Gentleman agree with the findings of the Public Accounts Committee which so condemned his Government for their ineptitude which made them the laughing stock of the OPEC countries in giving away licences at peanut prices?

I am afraid that the hon. Lady is wrong. There were two aspects of the report. One was the question of offsetting profits against losses made in the Gulf, and we had announced that we would introduce legislation to deal with that. Our proposals would have been in the last Finance Bill if we had been in office and would have been in time to prevent any profits from North Sea oil or any oil from around our shores being used to offset losses. The second aspect concerns revenues from our oil. There have been no revenues to the oil companies from the North Sea so far and there will be precious little in 1975. That situation, too, would have been dealt with by the Conservatives either in the last Finance Bill or in the next to ensure that the Government secured the resources they required.

The Iranian loan has been welcomed, and I am glad that the Government have welcomed it, but it is small in comparison with our total problems over the oil deficit. Nevertheless we have to contrast the loans secured by the British Government with the massive trade orders which have been secured from Iran by the French Government in their attempt to deal with its problems.

I believe that the Chancellor was right to express doubts about the capacity of the commercial banks to continue the arrangement of loans on the present scale for dealing with this international problem of the revenues of the oil-producing countries and the recycling. One knows that many commercial banks already have grave doubts about the arrangements. They are, in fact, borrowing short and lending long.

I cannot share the Chancellor's optimistic view about the international achievements in this field so far. I believe that the total involved is only 5 billion dollars. When one takes into account the revenues this year to the oil-producing countries, let alone those in the full year of 1975 of probably 60 billion dollars, one sees that it is a minute amount to be handled internationally. Therefore, this problem remains with us.

To deal with the situation, a wide range of policies is required. First, there must be economies in the use of oil and oil products in this country. In this respect the Government have done nothing. The reduction in the price of petrol announced by the Chancellor, if it has any effect, works in the opposite direction. The first thing to urge upon the Government and the country is that we should now deal with the question of economy in the use of oil and oil products.

Secondly, there must be speed in developing our own oil offshore. The Government have not helped in this respect, and because of delay over platforms they have probably missed most of a year in construction. The uncertainty that has been created about the proposals for indulging in carried interest and 51 per cent. participation, instead of saying clearly that the revenue would come through taxation, is also damaging the speed of production of offshore oil.

Thirdly, there is the need to secure trade with the oil producers and to retain our competitiveness as a nation in our dealings with them. After all, they are now one of the most powerful consuming bodies in the world. They can shop around the whole world. Their needs in style, in prices and in delivery dates must be met or we just do not get their orders.

In this respect I urge the Government to use their diplomacy in working with the oil-producing countries to achieve this objective of massively increasing trade with them, and to achieve my fourth objective, which is to get real investment from the oil producers into this country. There may be some ideological objections. They must be over-ruled. We have investment in this country from other countries—from North America and from Europe—and it is essential that we at any rate get our share of real investment from the oil-producing countries and not just loans.

Fifthly, there should be a real drive with our EEC partners and other international institutions to get recycling settled as soon as possible and a common policy adopted towards it. In this respect little has yet been achieved. The behaviour of the Secretary of State for Trade in Brussels yesterday did nothing to help the Community to achieve a common policy towards the matter or to help us to have the benefits of a common policy from our membership of the Community.

Sixthly, it is vital to explain to the country the real position, that this is the scale of our operations even over a five-year period, that it is essential to pay our way not only on the non-oil deficit but on the oil deficit as far as possible at the earliest possible moment, otherwise, the scale of indebtedness and of servicing that debt by 1980 will become an almost intolerable burden upon this country.

It means recognising that we have to achieve increased production to do this, and that most of that increased production cannot go into consumption for ourselves. That is the hard fact of the case, when there is a massive redistribution between the industrialised countries of the Western world and the oil- and raw-material-producing countries of the developing world.

We must also tell the country that we have to beat our competitors in meeting the needs of the oil producers and their prices and deliveries. That means that the organisation of our industry, management and unions, must recognise the hard facts of what we have to do to achieve that purpose.

The second aspect with which I wish to deal when speaking of the problems facing the country is that of inflation. Some would say that I should have dealt with it first.

I can agree with much of the speech of the Leader of the Opposition, but he gave estimates of what he thought our burden would be if we aimed to close the gap by 1979–80, the earliest date by which international experts think the oil-producing countries could absorb imports to the value of their exports of oil. The right hon. Gentleman is now suggesting that we should seek to bridge the whole gap very much sooner. By what date does he think it would be sensible to aim at closing the whole of our balance of payments gap?

I am not proposing a date by which we should close the whole gap. What I am saying is that we should explain to the people of this country, whether management or members of unions, the scale of the task. We should explain that the slower we are in closing the gap, the greater is the burden we shall have to carry from 1980 onwards of immense debt and servicing of that debt. It is fundamental that we explain to the country the size and scale of the problem and what is required to make any attempt to close that gap.

Some of the proposals I made about real investment in this country could be put into effect by oil-producing countries comparatively quickly, and they are being put into effect by Iran in other countries. Therefore, this matter is not concerned with a five-year period; action could be taken in that regard quickly. The speedier our industry is in meeting the needs of the oil-producing countries, the quicker they will be prepared to pay for our products.

The second aspect of the problem, to which I was turning, is inflation. I have said that many would say that one should deal with it first. I believe that it was right to deal with the scale of the problem we face in what is commonly termed a crisis, because the effect of continuing inflation on that is obviously very great.

The Chancellor said that he wanted to avoid a rate of inflation of 20 per cent. It is already 22 per cent. over a six-month period and 25 per cent. over a three-month period. There has been a considerable increase since February.

The Chancellor said that the sole purpose of his mini-Budget was to reduce the number of threshold payments. The Prime Minister openly stated that he supported the idea of thresholds. He urged it upon me and my Government constantly, as did the TUC from the time it raised it in Neddy. [Interruption.] I said "from the time the TUC raised it in Neddy". I think that that was when the Prime Minister first urged it upon me. There were discussions throughout the Chequers and No. 10 talks. The Chancellor talked about the discussions last autumn. That was before the oil crisis.

Judgments were made in discussions with the TUC and CBI as to the most likely increase in prices and what level of threshold was required. Most people thought that we had fixed the threshold of 7 per cent. at about right, and that the payment of 40p was slightly generous, because it would just more than cover the cost of an increase of one point in the retail price index.

The Chancellor tried to give the impression that that was something of which he disapproved, and for which we were responsible. Of course we accept responsibility for it. But if he did not approve of thresholds, it lay in his power when he became Chancellor to make an alternative arrangement last March. He could have done that after discussion with the trade unions and employers. It was entirely open to the Government to do it. But it was the Chancellor who was largely responsible for triggering the thresholds, and triggering them three times in one month.

I must ask the right hon. Gentleman to face this aspect of the matter honestly. He made the astonishing statement on Monday, when answering a supplementary question, that all he had done in his Budget was to increase nationalised industry prices, and then he entered into an argument about what we would or would not have done. His Government in the March Budget put up indirect taxes. They put up VAT on food, put 5p on the price of a gallon of petrol, and increased duty on wines, spirits, beer and tobacco—a total of £585 million. The impact on the RPI was between 2 per cent. and 3 per cent.

I do not understand what the Chancellor of the Exchequer meant on Monday in saying the only thing he had done to influence the thresholds was to deal with nationalised industry prices. Let him say clearly tonight that of course he triggered them off. If he wants any confirmation, here is the quotation:

"The principal contributing factors to the April increase in the cost of living were a 13 per cent. rise in tobacco, 6.7 per cent. on alcoholic drink, 3.7 per cent. increase in transport and a 5.4 per cent. increase in housing. Most of these rises came as a result of measures taken by the Chancellor of the Exchequer in his Budget."

That is from Tribune of 31st May.

The other aspect is that of the food subsidies, on which the Chancellor of the Exchequer will never be honest, because the greater part of those subsidies, as he has admitted constantly in Questions, stabilised prices but did not reduce them. Milk was an exception, and there was the EEC effect on butter. But for the rest the effect was to stabilise prices where they were on the RPI, and, therefore, the subsidies did not have any impact on reducing the increase brought about by the rest of indirect taxation.

This is the case, and this is the way in which the Chancellor of the Exchequer will never honestly admit that he was very largely responsible for the triggering of thresholds in April of this year. In that, Tribune is absolutely right.

Increases in nationalised industry prices are mostly still to come and, therefore, they will have their effect on thresholds. The Chancellor of the Exchequer seems to blame us for having held down nationalised industry prices. It was a deliberate policy. I do not recollect the Opposition criticising us on this when we were in Government. Some of my hon. Friends did so but not the official Opposition. It was in response to the CBI's 5 per cent. initiative for holding down prices, in reply to its request and that of the unions. Then, when we came to official discussions and on to incomes policy, it was done at the request of both the TUC and the employers, and quite understandably so. They said if they were having restraint in incomes and private industry prices, the same should be done with nationalised industries.

I do not see why the Chancellor of the Exchequer should complain. He is holding down prices of one list of necessities. We were doing it with another, the nationalised industries; and at least the nationalised industries were under our control, whereas world food prices are not under the Government's control. But neither is desirable in the long run in any economy if one is to avoid distortions. It was part of the counter-inflationary policy, but both the Prime Minister and the Chancellor of the Exchequer are constantly talking of a figure of £1,500 million—[An HON. MEMBER: "£1,400 million."]—of £1,400 million which they allege was never revealed at the General Election. I have had these figures carefully checked. I told the TUC and the CBI in our talks that we were contributing to the nationalised industries and that the cost of holding-down prices was £400 million. I have used that figure in the House, and it was right.

The largest estimate ever made so far as we were concerned, in February, was £750 million in support for the nationalised industries, but this included not only restraint in prices but the special measures we agreed to contribute towards coal and towards transport for other purposes; so £750 million was a much larger figure than the cost only of price restraint.

I hope, therefore, that the Chancellor of the Exchequer and the Prime Minister will now abandon this mythical figure of £1,400 million. In any case, I suspect the figure taken by both right hon. Gentleman contains an out-of-date estimate for the impact of the three-day working week on the nationalised industries, whereas, as the Chancellor of the Exchequer has now pointed out, the impact was infinitely less than any of the estimates that were given at the time. On the three-day working week, he has had to come to the House and say that the impact on production was at most 31 per cent. over the two months—and even this may be an exaggerated figure.

This is a tribute to trade unionists and employers who share a production record which was so little influenced; ½ per cent. per year is all it amounts to. It is a tribute to what they achieved during that time. What it has done is to remove any argument whatever from the Chancellor of the Exchequer that the particular problems with which he has to deal spring from that cause. When one looks at the nationalised industries, the British Steel Corporation has since announced a profit of more than £50 million, far greater than was anticipated at the time of the previous administration. It just shows how wrong were the estimates the Chancellor of the Exchequer first gave to the House.

I want to deal in the context of inflation with the measures which the Chancellor of the Exchequer has announced, the 2 per cent. reduction of VAT and the equivalent on petrol. That does not undo the harm he did in March. It is welcome, but had he followed a different policy in March the thresholds would not have been triggered in the way they have been. The rent and rate rebates are welcome because he has adopted the system we used. But what he has not had the courage to do is to say that those who can afford to pay what is right for rent and rates should do so. If he is really arguing that nationalised industry prices should be paid in full, very good; but what possibe argument can there be for saying that people should always pay lower rents and rates than they otherwise should, particularly in the case of rents?

The immediate contribution to rates is welcome. It is the greatest success the Opposition parties have yet had in this Parliament, but the wretched Secretary of State for the Environment was put up in the debate to stonewall and say that nothing whatever can be done, even to deal with the immediate problems which have emerged, partly as a result of his own creation, by altering the rate support grant in favour of the metropolitan boroughs, partly his own fault. He was put up to stonewall.

Now the Chancellor of the Exchequer, after a resolution of the House, does what the House asks, and, of course, this is to be welcomed. It will now fall to us to carry out the rest of the resolution which the House passed. Surely, the important point on inflation is that thresholds are no longer the key figure as far as inflationary pressures are concerned. It is the level of wage settlements this autumn which is causing fear in industry and fear amongst our people generally about spiralling inflation. There are already powerful indications that post-stage 3 settlements already made are very high. The Government for their part have thrown away all means of dealing with this. They have swept away all the institutions, have pledged themselves against any form of statutory policy, have pledged themselves that, no matter what happens, there will be no wage freeze and no action by Government. Therefore, the Government have no negotiating choice of any kind, either with management or with unions in industry. The Government have no means of trying to influence them or to secure an amelioration of the result, which is now causing fear amongst so many in this country. Whether anyone believes what the Government said or not on a freeze is a different matter.

What the Secretary of State for Employment constantly emphasises—and I have heard it emphasised so often by the trade unions—is that there must be an absolute and complete return to free collective bargaining. In most people's judgments there are many distortions, and unjustifiable distortions, in the wage structure of this country and most of them are not the result of incomes policy but have been brought about by free collective bargaining. Even the introduction of statute and the creation of the wages councils has not been able to take care of the interests of the lower paid in this country against the pressure of those who have strength in industry.

As the Secretary of State for Employment prides himself on his humanity and on looking after the less well off, I commend to him the need to do something to redress the balance in free collective bargaining at least to ensure that those who are less well off get a better deal than they have had in the past.

The Incomes Commission cannot influence the immediate situation that we are facing, and I do not believe anybody would suggest that. Conciliation and arbitration in this country have already led to a situation in which in negotiation the employer moves further and further towards the demand of the unions, and only when finally the employer stops moving do the unions go to arbitration. Arbitration will split the difference and following that there will be further negotiation. This bears no relationship to a viable economic policy from the point of view of keeping incomes anywhere in line with production. It bears no relationship at all to that situation—unless the Chan- cellor is prepared to ensure that there are firm and agreed guidelines about the interests to be taken into account, otherwise the exercise becomes a late operation in splitting the difference.

Can price control maintained by the Labour Government be effective on wages? There is an argument that by maintaining severe price control, wages will be kept in line with production. I doubt this and all my experience supports me in that view. In employers' minds in such a situation other things will be cut first. Understandably, employers do not want disruption, if they can avoid it. Therefore, with a very rigorous price control, it will be investment, research and sales organisations which will suffer first. That certainly will be damaging to our industry.

There remains the threat or the fact of unemployment. The question we must ask is whether the Chancellor, despite his protests in the Budget on Monday that he wishes to use all the resources of manpower, is now relying on unemployment to do the job for him on wage claims. I want an answer to that question.

You have the answer: no.

Perhaps the right how Gentleman will answer in a little more detail. What does he estimate will be the growth in the economy in 1974–75? Outside estimates put it at precious little—perhaps less than 1 per cent. by the end of 1975. With increasing productivity, what will be the effect on the level of unemployment of a growth of less than 1 per cent.? Industrialists and trade unionists will look at that point very carefully in relation to the movement of unemployment in the next 18 months.

The right hon. Gentleman asked me to answer the question. I certainly intended to imply the full use of resources and explained some of the international constraints on the economy. A number of hon. Members have argued that I have reflated too much, not too little. The right hon. Gentleman also argued on those lines. However, he must be honest with the House about his own view. Does he believe, as we do, that we should be reflating a good deal more later in the year or not? Until he answers that question, what he is now saying is academic humbug.

I have asked the right hon. Gentleman a question which he refuses to answer. I asked him what he thought would be the growth rate by the end of 1975. He refuses to answer that question. Perhaps he will answer when he winds up the debate. Let him say what he believes will be the impact on the present policy of unemployment to the end of that period. We and the country have a right to know. If he has already decided that there should be more reflation later let him tell the House. Let him say what reflation and when. Let him say how he believes this can be effective on the level of unemployment before the end of 1975.

He has already explained to the House that few realised how long it took for budgetary measures to work through the economy. It is evident in the British economy that on each occasion when budgetary methods are used the period of delay becomes greater and greater. The Chancellor should say whether he has already made up his mind on these matters. Why does he not say how much, when, and whether he believes that such a policy will have any impact before the end of 1975?

It was interesting, despite his grave concern about unemployment, to see that he got the figures wrong on Monday. How could he have such grave concern about the matter and still tell the House that the figure for additional employment would be 20,000 by the end of 1975. He came to the House yesterday and said that he had not given us the right answer. He thought that the difference lay between 100,000 and 150,000. What a multiplier! I must confess that in the years I have been dealing with these matters, I have never known a multiplier of that size in operation over such a period. The Chancellor should have been able to say what the facts were at the time.

The right hon. Gentleman is assuming an increased borrowing requirement for 1975 as the result of his action on Monday. We should like to know from the right hon. Gentleman, when he replies, what is the present estimated borrowing requirement from now to the end of 1974–75. He declined to answer that question earlier and said that there were various factors involved. Of course various factors must be taken into account.

I gave the exact figures.

We want to know the total borrowing requirement by the end of 1974–75. Will the right hon. Gentleman give an estimate now, or when he replies? He could also tell the House what will be the total borrowing requirement following the relaxations in Government expenditure, and what that requirement will be if the building societies are not able to repay the £400 million to £500 million which he was preparing to let them have. Let us have the real facts about the borrowing requirement and then we can make a judgment.

I wish to deal now with import prices. From June 1972 to June 1974, we had to deal with an increase in import prices of 108 per cent. Since February the Labour Government have seen a reduction in these prices of 10 per cent.—in five months. This is to the national advantage and also to their advantage, but what would be fatal would be if this amount were thrown away by wage inflation.

The Chancellor has now said frankly that wage inflation can damage us. That is a different story from what he said last autumn when he took the view that wage costs did not have an impact on inflation. I welcome the conversion. If the Chancellor utters that warning, it would be fatal if that improvement in the terms of trade were to be thrown away by wage-cost inflation. However, I regret that the Government have abdicated all responsibility in this matter. It is essential that in the present economic situation we should have an effective—I emphasise the word "effective"—working relationship between Government and both sides of industry in the national interest.

This brings me to the third aspect of the problem—namely, the impact of the Government's policies in general and the Chancellor of the Exchequer's policies in particular—[Interruption.] I do not mind if the Prime Minister takes over 45 minutes for his speech, but I intend to give the House and the country the situation as I see it. I was referring to the Government's policy in general, and the Chancellor's in particular, in relation to the impact on industry and their attitude to investment. It can be summed up as follows.

If I understand the right hon. Gentleman's argument correctly, he said that the Labour Government had no prices and incomes policy. He will notice that there is no reference to the need for a prices and incomes policy in the Conservative amendment. Some of us are surprised that that is so. Will he indicate what sort of prices and incomes policy he thinks the Opposition would implement were they in Government now?

Our motion seeks to make the point that the Government are lacking in policy, and I think it is quite right to say that. If the right hon. Member for Devon, North (Mr. Thorpe) is reaffirming his belief that there should be an incomes policy, then I personally and my right hon. and hon. Friends believe the same, and I shall deal with that point a little later in my remarks. I was dealing with the present economic situation and saying that any Government must be able to use all the resources at their command. We shall not be able to deal with the situation unless that happens. That is a weakness of the present Government's position.

On industry their attitude can be summed up in the words "growing uncertainty and hostility". Never before has confidence been so low as the CBI figures in July show. The Chancellor took £1,000 million out of their cash flow. REP put a little back, a comparatively small amount, concentrated in the development areas, which will cause stress in the intermediate areas which do not benefit.

I should like to draw to the House's attention a speech made by the present Foreign Secretary when he was Chancellor of the Exchequer in June 1967. Let us get straight once and for all what he said about REP:

"In our view it is right…that the scheme should exist in full for seven years and that it should then begin to phase out—obviously a review will be made nearer to the time to see how it is going—but this is our present intention—coming to an end theoretically after 10 years or so, because we could take two or three years to phase it out."—[OFFICIAL REPORT, 5th June 1967; Vol. 747, c. 750.]

That was the view of the right hon. Gentleman. It was our view, and we were, in fact, having discussions with the TUC and the CBI on the question of phasing it out. I hope that has now settled the question of the intentions of the Labour Party and what we were doing as a Government.

Will the right hon. Gentleman give way?

I am sorry, but no. I have given way so often.

What the Government do not appear to recognise is the impact on small firms. The Chancellor of the Exchequer says he hopes they will go to the banks because of the lack of cash flow: go to the banks, with high interest rates, or go to the Secretary of State for Industry. Banks, or Benn, it is not a particularly good choice for firms damaged by the Chancellor's promises.

Dividend restraint has been eased: well and good. But do not let the Labour Party ever again condemn the Conservative Party for failing to deal with the question of dividend restraint at a time of income and price restraint, for it is they themselves who have eased it, and rightly, I believe. I hope the trade unions will recognise this, because we took the action on dividends very largely in response to the view—which I believe has a certain validity—that if there is income restraint and firms are receiving very considerable increases in their resources it is wrong that dividends should be unrestrained. In these circumstances, however, I have no doubt the Chancellor of the Exchequer is right to ease it. But if firms have not got the cash flow, how are they to pay the increased dividends he has permitted? If they do pay them in an attempt to keep up their share values, which is understandable in the present state of the market, that money will come out of investment, and that will prevent their going into the investment that we want and will create long-term damage. So price control also has to be reviewed constantly to see the effects of squeezing the economy and the effect on long-term investment and the damage it may do to industry.

There is also among industry now the fear of the wage explosion and how investment can be made worth while while this fear exists. There is the threat of nationalisation hanging over whole industries and detailed Government supervision over individual firms. There is therefore, this present blight over the whole of industry. Why should major industries invest only to find that they are to be taken over if a Labour Government have the opportunity to do so?

Then there is the Government's policy in Europe, which has created uncertainty about staying in the Community and, therefore, about the wisdom of creating further markets there.

All these factors are damaging to the future of British industry, to investment, to production and to jobs.

To sum up, these are the three major aspects of the immense problem which Britain faces today: the real scale and nature of the balance of payments deficit; the real danger of renewed wage inflation on a high scale; the real damage caused to production and industry by the present Government's general policy.

To deal with these requires far more than the Chancellor of the Exchequer or the Government spokesmen have given us in this debate. It needs the real problems to be spelt out to the British people so that they can respond. It needs a far more effective working relationship between the Government and everyone in industry. It means that the Government have to use all the resources of Government, budgetary policy, monetary policy, incomes and prices policy, to obtain a balance in the economy which will deal with inflation. It needs the Government to abandon their plans for nationalisation and control and so remove the present blight over industry. It needs the Government to secure trade and investment from the oil producers and to use their diplomacy accordingly. It requires the Government to abandon any idea of getting out of the EEC, especially when we are more likely to need friends in future, not less likely. It needs the Government to work for their objectives inside the Community and to drop the threat of going outside it. Of course, to work for their objectives inside is perfectly justifiable, and if they declared they would do that they would do an immense amount to remove the uncertainty from industry. In fact, it requires a national effort of a kind never before asked of the British people in time of peace. That is what is required today.

It is clear from this debate that the present minority Labour Government have neither the will not even the desire to lead such a national effort. In that case they had better go.

I beg to move to leave out from "House" to the end of the Question and add instead thereof:

"welcomes the statement of the Chancellor of the Exchequer on 22nd July in relation to the extension of rate relief, the reduction in value added tax, the extension of food subsidies, the doubling of regional employment premium, and the easing of dividend restraint".

The motion in the name of the right hon. Member for Sidcup (Mr. Heath) and my amendment present the House with a question on which tonight we must vote. Does the House, does the Conservative Opposition, does the Liberal Opposition, do other honourable Members support the Chancellor's proposals or reject them? If they do not support them, which of his proposals do they reject?

Presumably the Opposition do not reject the proposals to bring immediate relief to domestic ratepayers, or the improvement in the needs allowance for rate and rent rebates. In so far as I could make anything of the speech by the Shadow Chancellor yesterday, he seemed to welcome these. But what he and his party cannot deny, however much they may argue—and it is a perfectly fair argument—about the distribution of the rate burden between town and country and the rate support grant, is that the total rate levy of the country until my right honourable Friend's proposals on Monday was exactly under this Government as they left it when they went out of office. It was their rate support grant, their total rate burden, their argument about redistribution: and now this Government have acted. The right hon. Member for Carshalton (Mr. Carr) in his broadcast last night referred to "this year's monstrous increase in rates". In total it was their increase. It was not changed until Monday of this week.

Apparently it is not the reduction of VAT which Conservative Members reject. In fact, our VAT standard rate is now the lowest in Europe and has a narrower coverage than most others. Certainly they have made it clear that they cannot oppose the increase in permitted dividend payments to a margin two and a half times what they imposed. So it is only the Regional Employment Premium—

Hear, hear.

I do not need that support from la tricoteuse; I can have it from the executioners.

It seems, therefore, that they would have preferred to cut it out altogether rather than nourish it as we are doing.

Not only the Opposition motion and the theme of the Chancellor's statement but the whole of this debate this week, as the right hon. Gentleman fairly said at the opening of his speech, centre on the basic economic problems Britain is facing. What I think the Opposition have really failed to say to the country is that we in this country face these problems in common with almost every other advanced non-oil country in the world. Equally, what they have certainly wished to conceal, and have concealed today, is that every problem Britain faces today it faced before they went out of office. Grave and serious though the country's problems are, as we have made clear throughout, before the election, during the election and since the election, we have a policy for dealing with those problems. This debate again confirms, and the last 50 minutes of the right hon. Gentleman's speech confirmed, that they have no policy for dealing with these grave and serious problems, unless perhaps it is a return to the three-day working week.

I start, as did the right hon. Gentleman, with the balance of payments. The overseas visible trade deficit, leaving aside oil, was £240 million per month in the last quarter of 1973. It has now fallen progressively to £144 million a month in the second quarter of 1974—a 40 per cent. reduction in six months. That is nearly £100 million a month less now than at the end of last year—an improvement which is worth nearly £1,200 million per year on our balance of payments.

The right hon. Gentleman took credit for this increase by reference to the floating of the pound. He will have noted that the pound has floated upward since the Government came into office.

There has been some reference to overseas borrowing. The right hon. Gentleman made a very important point here. Earlier in the debate we had reference to the borrowing from Iran. To be fair to them, despite the first amused reaction about the Iranian borrowing from the Leader of the Opposition and many other hon. Members, they have now stopped making much of this in the debate. That is to their credit.

Certainly they have not gone out of their way to associate themselves with the economic pronouncements of their most vehement supporter the Daily Express, whose headline yesterday was "The Shah Bales Out Healey."

It went on to say:

"To cover the cost of cutting VAT from 10 per cent. to 8 per cent.—over £500 million in a full year—he"—

that is my right hon. Friend—

"is borrowing that amount from the Shah of Persia."

No doubt right hon. and hon. Gentlemen opposite hope that this line of argument will reinvigorate their supporters in the country but they know—we had this from the right hon. Gentleman this afternoon—and the distinguished economists who produce the Daily Express equally know, that it plumbs a depth of economic illiteracy of which even I had not thought the Express to be capable.

Almost every advanced country is having to borrow to cover the oil deficit, which for the non-oil world as a whole has increased from $3,500 million in 1972 to $6,500 million last year and to about $60,000 million to $70,000 million this year. That is the measure of the problem for the non-oil-producing countries.

Without borrowing all that money the whole of the non-oil world would plunge into acute deflation and unemployment on a scale comparable with the early 1930s, which all of us in this House reject. The truth of the matter is that, given that the oil producers are sending more oil than we are able to pay for currently by exporting goods, the oil producers are lending by that very act and we are borrowing. This is inescapable for us and almost all other oil-importing countries.

Against this background the direct borrowing arrangement with the Iranians is merely a prudent way of avoiding overburdening the commercial banking system. As hon. Members know, there is a danger that the volume of funds being channelled from the oil producers through the commercial banks may need to rise faster than the capital base of these banks will allow. As the Chancellor said yesterday, the arrangements we have made with Iran are part of a precaution against this.

What neither right hon. Gentlemen nor their supporters in the Press will admit is that they were borrowing on a substantial scale last year—$2,600 million in 1973, on public sector account. Ours is on public sector account, too—public sector borrowing, local authorities, nationalised industries. But their borrowing was before the increase in oil prices, before the massive British and world oil deficit. They borrowed more last year than the Chancellor announced on Monday: and they did it to balance the record non-oil balance of payments deficit which occurred under them in place of the record balance of payments surplus we had handed over to them four years ago.

So the heading to the Express leading article yesterday, "Britain in Pawn", is a true account of Tory Britain in 1973. I do not recall such a headline when right hon. Gentlemen opposite were in office.

The right hon. Gentleman quoted estimates of borrowing from 1973 to 1978. The figures he quoted to the best of my memory are not new. They are grave figures, not serious ones. They were, as I recall, part of the currency of public comment and debate at the turn of the year as soon as the oil problem hit us on the scale described by the right hon. Gentleman. I remember seeing estimates at that time—I do not think they were official Government estimates, but certainly they were serious estimates—of a total of about $30,000 million between now and 1979–80. That is very close to the figure quoted by the right hon. Gentleman, although I agree with what he said about the effect of how far interest is carried as we go.

In the changed situation of oil deficits which the right hon. Gentleman has graphically illustrated again this afternoon, the Chancellor and I have made clear in speech after speech—and I am glad the right hon. Gentleman supported this—that we reject any attempt to solve this world problem on a national basis by physical restriction of imports or internal deflation to send the economy plunging downwards. If we and others were to follow either of those policies the only result would be a world sinking, plum- meting, into depression, as the right hon. Gentleman agreed this afternoon.

The right hon Gentleman says that he will not join any international movement to deflate. How does he account for the fact that a number of our leading industrial competitors are pursuing policies of deflation, and what is to happen to us if we alone continue to inflate?

We are not inflating. We have still to hear whether the Conservative Party thinks that the Chancellor did too much or too little. I entirely agree with the hon. Gentleman's warnings about the Germans and Americans. No one has said this more clearly than the Chancellor, both in direct talks with them and in public. The hon. Gentleman is perfectly right. We shall not help them or they us if we say we therefore have to deflate and cause unemployment. The whole world will be plunged into unemployment.

On the external side, my right hon. Friend has told the country what he is trying to achieve with other Finance Ministers to deal with the massive volume of petro-dollars so as to prevent the risk of their moving from country to country and endangering international stability and exchange rates.

We reject internal deflation and unemployment as the answer to this problem. It was against this background, as my right hon. Friend made clear on Monday, that he had to consider the best means for inducing a modest reflation of the economy—reflation as a means of dealing, with the threat, on the best forecasts available to him, of unemployment rising, not so much this year, as in 1975.

When the right hon. Gentleman complains about estimates I recall that Conservative Ministers of Labour repeatedly refused to give estimates of unemployment. My right hon. Friend was right to say what he did. What we have not got from the Opposition—not even from the Leader of the Opposition—is their appreciation of whether my right hon, Friend has done too much, or too little. or whether he has got it just right or, as one would judge from their speeches so far, whether they agree with the leading article of yesterday's Times headed, "Too Little Yet Too Much". That just about summarises the Opposition Front Bench speeches—at least, the more coherent parts of them. In the Opposition's search for a policy I commend the phrase to them. It would be a very good election slogan—" Too little yet too much." At least it would be better than the one which really lies behind their thinking—" The Conservatives will get you back to the three-day week."

rose—

The lights are on even if the music is not playing. When the right hon. Gentleman spoke about—[Interruption.] Mr. Deputy Speaker, I do not mind taking the time of the House. If Conservative right hon. and hon. Members want to waste time in this way it will take time out of the debate. I do not mind.

When Mr. Speaker left the Chair he told me that the right hon. Gentleman the Leader of the Opposition had been heard in reasonable silence and that it was reasonable to expect that such conduct would continue.

The right hon. Gentleman referred to unemployment. Of course, he did not tell us that in March, when we came into office, there were 2 million people out of work. The right hon. Member for Carshalton said yesterday—I think that I quote him correctly:

"the underlying problem of the economy is the present rapid rise in prices".

More accurately, that means the cost of living of British families. It is the cost of living which at all times provides the mainspring for wage demands and settlements, but now, with the introduction of threshold agreements, it has an even more direct and more immediate effect. That is why my right hon. Friend's proposals are so overwhelmingly relevant. The reduction of VAT, help for the ratepayer, rate and rent rebates and food subsidies are designed to act on the threshold problem and on the broader cost of living problem.

The Conservative Party in its forays into the country and even in this House, though rather more sotto voce, is engaged in a high pressure PR campaign to suggest that rising prices are the creation of this Labour Government just four and a half months in office.

I leave on one side the argument about the effect of the Budget on prices which the right hon. Gentleman still wants to conduct. My right hon. Friend has already answered that argument twice this week. Leaving aside, too, the effect of the cost of living on increased charges, rates, fares, prices of publicly-owned industries and services, on which the Opposition are singularly coy about engaging in battle, the basic fact is that most of the prices of goods in the shops this July were predetermined by what was happening before we took office. That is not the case, of course, in respect of fresh fruit and vegetables. But in the main, and particularly for manufactured goods and many others, it was the import price of seven or eight months ago which determined the wholesale price of a month or two ago and which will determine the price in the shops now and into the autumn.

The prices of materials and fuels purchased by industry last month showed the first fall for over two years. These will work through. The Institute of Purchasing and Supply in its survey for June also referred to this significant fall, but it said that

"increases already in the industrial pipeline are still sufficient to warrant more large price increases."

That has nothing to do with wages. The Retail Price Index for June, the latest that we have, showed the second smallest increase this year. The Food Price Index for June, excluding seasonal foods, rose by 0·8 per cent.—the lowest this year. The Financial Times Grocery Index for July, which is a month more up to date than the RPI figures, shows the biggest decrease for two years. Even that index has not fully reflected the recent trends in meat prices.

Some of the indices reflect world-wide commodity prices and the collapse of the speculative boom in at least certain commodities. That was a boom which, I must again remind the House, was fed in part by the unrestrained credit expansion undertaken as an article of Selsdon faith by the previous Government which found its way into the commodity markets as well as into property.

However unacceptable these matters may be to Opposition hon. Members, they also reflect the effect of food subsidies and the work of my right hon. Friend the Secretary of State for Prices and Consumer Protection in her attack on retail food prices. In one sense, what my right hon. Friend is doing is not fully reflected in any index because she has directed her activities above all to those foods which loom largest in the household budgets of pensioners and the lowest income families with a wage earner at work.

It is not only the pensions increase introduced by this Government, which takes effect this week, which has helped pensioners but the action that We have taken on prices. Old-age pensioners spend over a third of their income on food, and the food subsidies that we have introduced mean that an elderly couple will save over £17 a year on what their food bills would otherwise have been. That is apart from the increased pensions. Without the subsidies, pensioners would be paying an extra 2p on a pint of milk, an extra 2p on a standard loaf of bread, an extra 5½p a lb. for butter and an extra 7p a lb. for cheese. My right hon. Friend has announced that these subsidies are now to be extended.

Then there is meat. Since 1947—since the time of Tom Williams—British farming has had the benefit of deficiency payments providing a square deal for the farmer and for the housewife. That system was scrapped in the terms—[Interruption.] It was supported by successive Governments until last year. It was scrapped following the terms that were negotiated with the Common Market, which we condemned at the time. More recently, my right hon. Friend the Minister of Agriculture, Fisheries and Food made it clear that the permanent intervention scheme had broken down and that a new kind of system was necessary to solve the beef problem. The right hon. Gentleman the Leader of the Opposition attacked my right hon. Friend. He said that for the first time since 1947 there was no guarantee, in that the EEC guarantee no longer applied. However, what my right hon. Friend has achieved is to restore direct support for the British farmer and to do this by a change in the Community system itself which it will be open to the other members of the Community to take advantage of if they wish. My right hon. Friend has restored a situation which provides justice for the housewife and the farmer. Indeed, he has gone farther. He has convinced the EEC that the Heath-Robinson intervention and storage scheme of which the right hon. Gentleman boasted is as useless to Europe as it is to Britain. He has said that it needs changing and that the best solutions are likely to be found on the basis of his proposals.

Apart from the fact that intervention always used to be the policy of the Labour Party and Labour Governments, does the right hon. Gentleman accept that in the six years of Labour Government agriculture production rose by 1 per cent. a year and that in the three and a half years of Conservative Government it went up by 16 per cent. a year? Would it not be reasonable if the right hon. Gentleman paid credit for the fact that what his Government and the public are now enjoying—namely, more British food than ever before—comes as a result of Conservative Government policy?

I accept that the right hon. Gentleman is entitled to criticise particular price settlements in agriculture, but what he did was to destroy the system by which price reviews could be held. He handed over to Europe and chose to rely not on deficiency payments but on interventions—namely, taking meat off the market and putting it into store so that people cannot afford to buy it. That is what Conservative hon. Members rejoiced in. This Government have changed that system, and that is why we are getting cheaper beef in the shops. If the right hon. Gentleman had remained in office this change would not have been made.

Conservative policies led to the beef mountain. [Interruption.] Of course, Conservative hon. Members accepted the terms of the intervention system. We are now seeing a fall in the price of beef. One large chain announced a week or two ago a fall of 3s. a lb. That could not have happened if the right hon. Gentleman the Leader of the Opposition had remained Prime Minister. I may have misunderstood what he said, but he seemed to suggest this afternoon—not only in relation to beef but to other things—that price controls should be contained. I thought that he suggested that in general price controls should be eased. Of course, that would mean higher prices, but that is the impression that my right hon. and hon. Friends obtained. The family budget is not measured by food alone—

I said that price controls should be reviewed. The Chancellor of the Exchequer told us yesterday that his right hon. Friend is undertaking a review.

The right hon. Gentleman said that they should be reviewed, but he seemed to be making a point this afternoon that they are too little or too much, or too high or too low. Does he want them to go up or down? If he was agreeing with us, it did not sound much like it at the time.

The family budget is not measured by food alone. For example, we must consider rents. We imposed a total rent freeze for tenants of local authorities, new towns and private landlords within four days of taking office. The previous Government had deliberately forced up rents. We protected families who were buying their houses on a mortgage at a time when it appeared inevitable that building society rates would rise to 13 per cent. They would have risen to 13 per cent. if the Conservative Government had remained in power, because they did not have anyone corresponding to my right hon. Friend the Chancellor of the Duchy of Lancaster.

We also acted to stimulate house building. Fewer houses were built last year than in any year since 1959. In the public sector, the figures for completions in 1973 were the lowest since 1947, when Britain was just starting to get house building going after the war, in face of all the shortages of material and labour.

Last year, the number of houses started in the public sector was the lowest of any year since the war. When we came to office—the Opposition will have to defend this record in the country as well as in the House—starts by private builders were running at an annual rate of 120,000, which would have given the lowest figure for nearly 20 years.

In response to this situation, my right hon. Friend's Budget allocated £350 million for expanding the local authority housing programmes. Public sector hous- ing has been propping up the total housing programme, and in the first three months of the present Government local authority and new town house building starts were 25 per cent. up on the previous three months.

The right hon. Gentleman the Leader of the Opposition thus presided over the biggest slump in house building not just since the 1930s but since the 1920s. I hope that he is proud of it.

Does my right hon. Friend realise that behind these housing figures lies the great tragedy of the homeless of London, where Labour-controlled local authorities have been trying to resolve it? The actions of the Conservative Government and their allies in local government exacerbated the situation and revealed a complete lack of decency and humanity.

That was the point I was trying to make. Of course, that situation exists not only in London. The Conservative Party should be ashamed of its housing record.

I turn now to the question of nationalised industry prices. We were left to pick up the Conservative Government's bill. In December last year, the House was told that the deficit in the nationalised industries during 1974–75 would be about £500 million. That turned out not to be the case. By the beginning of March, when we took office—only 10 weeks later—the picture was very different. It was not around £500 million; it was around £1,400 million.

The Conservative Government had said that there must be no increases in the subsidies and that the nationalised industries had to pay their way, year by year. The Leader of the Opposition tells us now—we must accept it—that he was not deceiving the electorate, that no one ever told him that the figure had gone up to £1,400 million. He says that up to the very night that he left office he was not told that the figure was £1,400 million.

I have to ask myself how it was that when we took office we were told that the figure was £1,400 million. Of course I accept the right hon. Gentleman's good faith. If he says that he was not told, then he was not told. Apparently he was not told before polling day that the figure was £1,400 million, and I accept that.

Therefore, since the figure had got up to £1,400 million by 4th or 5th March, it must all have happened—£900 million of it—in that last weekend when the right hon. Gentleman was flirting with the Liberals. If that is so, that was the costliest dirty weekend in history.

I have referred to action taken to deal with food prices, rents and other essentials in the family budget as being directly relevant not only to wage claims but to threshold payments. The right hon. Gentleman was fair in what he said about threshold payments. They affect the general level of prices throughout the economy; they affect the public sector very directly, not least because so many public sector activities are labour-intensive; they affect transport and, therefore, fares and freight charges; they affect local government, from sewerage to street lighting, and, therefore, the rating system; they affect everything bought or paid for by the Government, from defence to civil servants' salaries.

My right hon. Friend the Chancellor of the Exchequer, in framing his proposals, emphasised the importance of the unemployment threat. This threat had developed long before the election. It developed when, last autumn, the frenetic panic boom set in hand by the former Chancellor of the Exchequer petered out. The boom had petered out by last autumn. There was no boom after that—and that was before stage 3 and before the miners' dispute. The right hon. Gentleman should not look so surprised. I repeat that there was no increase in production after last autumn. We drew his attention to the fact in successive debates at the time.

My right hon. Friend's reflation proposals are directly designed to offset the forecast increase in unemployment figures, which we inherited. They are an incentive to investment, and whatever may have been said in the last two days, the dividend proposals should help to produce a more orderly stock market—a point urged upon us by the Opposition.

The CBI, at the National Economic Development Council and elsewhere, has stressed the undesirability of industry being forced to finance investment on short-term borrowing. But for many months now, under both Governments, the state of the market has made it diffi- cult for business firms to raise equity capital.

To a considerable extent, the debate has centred on the need for industrial development and investment. Our failure to invest enough over so many years under successive Governments has affected our competitive position in the world. It is a fact that under the Conservative Government investment languished. They had sought, in the terms they negotiated for entry into the Common Market, a new incentive for investment. Once the terms of entry were negotiated in 1971, they believed that investment would take off into the stratosphere. The Leader of the Opposition will remember his moving and ringing speech at Guildhall in November 1971, when he said:

"Now is the time to commission new factory buildings, to order new plant and equipment…The prospect of free access to the European market, combined with a revival of demand at home, cries out for a major programme of investment in industrial expansion and modernisation….

Let industry now take the long-term view of our future in Europe. We now have the chance to bring about the regeneration and re-equipping of British industry. We must make ourselves the most modern country in the Community."

What has been the result after that speech? Investment in manufacturing industry—in plant, machinery, vehicles and building—which was £491 million in the third quarter of 1971, just before the right hon. Gentleman's speech at Guildhall, took off' on a downward path to £448 million by the second quarter of last year. These figures are at constant 1970 prices. Even the £525 million to which investment rose by the first quarter of this year was less, in total, than the figures recorded in the second quarter of 1970, under the last Labour Government. [Interruption.] The figures of investment—[Interruption.]—were lower.

Order. The hon. Member for Louth (Mr. Archer) should restrain his exuberance.

I have given the facts. The first essential to appreciating this important problem is the facts, and the facts have been concealed from the British people in every speech made by the Opposition.

The figures I have given were of investment in this country. They fell. But I have to admit, and readily acknowledge, that there was a massive response to the European negotiations in terms of investment, not in this country but from this country outward towards Europe, mainly in property. The burnt fingers of some of those responsible are now clawing back part of the capital, where it has not been actually written off.

The Government's economic strategy and, within that context, the measures which we are debating today, are also related to investment and employment in particular regions. My right hon. Friend has analysed the problems area by area and has drawn attention to what we must all agree is a difficult problem to assess and deal with—the mixed situation of labour shortage and labour surplus, even within particular regions. We have doubled the regional employment premium. Our predecessors decided to end the REP. They gave notice of that decision. They put nothing in its place. For months on end—once our predecessors had given notice—industrialists contemplating expansion in development areas had no incentive on which they could count.

My right hon. Friend yesterday challenged the Shadow Chancellor and asked what the Opposition would have put in the place of the REP. The Shadow Chancellor complained about the unfairness of such a question and finally admitted that he was not briefed on the subject. It would appear that the Leader of the Opposition has not been briefed on it today. The previous Government never put forward an alternative policy to fill the vacuum. They have not told us today what their policy would be. I believe that they had something in mind, but they have not explained it in detail. It was an utter dependence on an EEC regional policy which would bail them out, and in the event that policy was not forthcoming.

We are not prepared to play fast and loose with the livelihood of hundreds of thousands of families in the areas most requiring help. Our record over the years from 1945 onwards has been far better than anything done by the Conservative Party and far better than that of most countries in Europe. The Conservatives would end the REP and put nothing in its place. We have decided to double it, and by so doing we shall not only help the regions but help company liquidity of some of the most progressive firms in Britain, and at the same time give useful assistance to our exports. Before this debate ends I hope that right hon. Gentlemen opposite say what their policy for the regions would be.

This debate has shown a certain reticence on the part of the Opposition on the subject of statutory wages policy and industrial relations. They still hanker after a statutory wages policy, but have not found a way to formulate it. All the problems to which in Question Time and in debate, hon. Members opposite draw attention—such as those relating to wage claims and settlements—are problems of a transition from a bureaucratic wage control system which had broken down to a system based on a national consensus. The main achievement of their policy was the three-day working week, unlighted streets, unheated shops and offices. They must not think that the British people have forgotten this. Nor have they forgotten the speed with which the Government ended the three-day working week. Right hon. Gentlemen must not think that when the election comes these things will be forgotten—

On the question of wage policy, the right hon. Gentleman has not made clear to the House where he and the Government stand with regard to thresholds. He has spoken about thresholds, but he has not made his position clear. Does he believe that thresholds are a cause of inflation, or does he agree with me that they merely transmit the effect of inflation in an even and orderly manner?

My right hon. Friend dealt with this yesterday, but I can tell the hon. Gentleman that those of us on both sides of the House who pressed for threshold agreements did not calculate the effect which they have had at this time, and the fact that they are moving in the way they are, threatening prices. But it would be difficult, when 8 million or more people have accepted threshold agreements, for any Government to suggest, whether by a statutory or a consensus policy, that thresholds must now go. What we have said and hon. Gentlemen opposite have accepted, and what the TUC has said, is that if a person is safeguarded against last month's price increases by a threshold agreement, he must not ask for an allowance for this again in his next claim. He must not say that because prices have gone up by X amount last year he must have a wage claim of X amount, if there is a protection in a threshold.

The arrangement is working out unsatisfactorily, we all agree, but it would be unrealistic to suggest that it has to disappear because of the way it is working out.

I was referring earlier to what has not been forgotten. The previous Government's ideological commitment to confrontation in industry will not be forgotten. I remind the House that more than 50 million man days were lost in three and a half year, compared with less than half of that in nearly six years of the Labour Government. There were more man days lost in a single year than we lost in nearly six years.

This week sees the end of the National Industrial Relations Court. We are told it sees the end of a dream that for so long excited the mind of the Leader of the Opposition. He now tells us that so far as industrial legislation of this kind is concerned, he is trying to give it up.

In the last election the then Government tried to confine the issues to a single bogus question. But elections are not only about programmes, and I warn the right hon. Gentleman that still less will they be about the policy fantasies he is trying to erect in place of the disastrous policies which only four months ago he proclaimed to be the only road ahead.

Elections are also about fulfilment of pledges. It would be unkind to remind the right hon. Gentleman of his 1970 pledges. He is only too well aware of his almost total default. But in the month immediately before the election I set out a check list—for checking by the country two or three years from now—which we were pledged to fulfil. Let me remind him, as in due course we shall remind the country, that here is a Government who fulfil their pledges, and are prepared to be judged on their record not after three and a half years, but after only a few months.

In those months, as we pledged, we ended the coal-mining dispute and the three-day working week; we introduced a rents freeze and we raised pensions. We are, as we pledged, restoring sensible industrial relations by repealing the Industrial Relations Act. We have kept the costs of a mortgage down and, as we pledged, we have introduced food subsidies. We have started the process of renegotiation in Europe and set out the terms. We are working on our proposals for taking land for development into community ownership and on our plans for industry. We have announced plans for investment in the coal industry and plans for nuclear reactor investment. We have announced proposals for North Sea oil and gas, as we pledged. The party opposite, on some major questions, particularly North Sea gas and oil, and nuclear reactor investment, had dithered for months and on others for years. We have taken decisions—the right decisions—on these matters, within four months of coming to office.

Tonight we shall vote on the Government's record and on the Conservatives' policies whatever they may be—they have not much time in the debate to tell us—and, specifically, on the Opposition motion and the amendment which I have moved.

The Conservatives have to decide their vote on our amendment. After all their thundering in the country, their much-trumpeted three-line Whip, can they suffer in silence the passage of our amendment? The Liberal Party have to decide too. After the demise of their grand coalition, we shall see tonight whether even the petty coalition can survive.

If the Opposition tonight vote against our amendment—and if they do so they must be prepared to vote twice against it—they will proclaim to the country as their election war-cry the rejection of help for the ratepayer; opposition to the reduction in VAT; hostility to the easement of dividend restraint and, even, the increase in the needs allowances and a rejection of the doubling of the regional employment premium.

That is the challenge, they face tonight in the Division Lobby, if they get there.

The country will await with eager interest to see how they respond to that challenge, and the manner in which they respond will be proclaimed throughout the country, when the decision we take tonight is put for the ultimate democratic choice of the British people.

I have news for the Prime Minister. The election will not be about the policies of the Conservative Opposition or the policies of the Labour Government. It will be about us—the Liberals. We have had many injunctions in this debate to tell the truth to the nation, and that is what I shall seek to do.

The truth is that we face the worst economic crisis since the war. Prices and wages are likely to rise at an annual rate of 20 per cent. to 25 per cent. over the next six months. The balance of payments deficit this year is likely to be more than £4,000 million and it is still rising. In the first half of next year it will be at an annual rate of more than £3,500 million. The servicing charge on the balance of payments deficit for this year alone will be more than £400 million.

Because of increased import prices and the downward float of the pound we have to export one-third as much again as we did in 1970 to buy the same volume of imports. Our share of world trade—I do not blame the Government for this because it has happened over a long period—has fallen from 15·3 per cent. in 1963 to 9·5 per cent. in 1973. As if all that were not enough, we face the prospect of severe recession, with unemployment rising to at least 3½ per cent. by mid-1975. Company liquidity is now desperately short, and there will be mass layoffs in the near future.

The recession will be mainly and directly caused by the increase in oil prices. The cost of oil has quadrupled since the Israeli war. In 1972 the average free-on-board cost of imported oil was £6·50 per ton, in 1973 it was £8·30 per ton, and in April and May this year it was £31 per ton. These price increases are likely to add £2,300 million to our imports bill in 1974. This increase in oil prices has had a massively deflationary effect on our economy. This year it has left a hole of £2,000 million in the economy which, if it is not filled, will lead to a slump of 1929 proportions.

I presume that it was to fill the hole and to steer us clear of recession that the Chancellor of the Exchequer introduced his mini-Budget. If that was the intention, the Chancellor's measures are puny by comparison with the task. They do not begin to measure up to the task. We must conclude, therefore, that the Labour Government, faced with the worst economic crisis since the war, have settled yet again for mass employment. I remind the Prime Minister of the phrase he used when he was Prime Minister in the 1964–70 Labour Government when he referred with euphoric timing to the "shake-out of labour". That was the first time since the 1930s that any British Prime Minister had espoused unemployment as a deliberate instrument of Government economic policy. Now a Labour Government have done it again.

I welcome the rates relief. The Secretary of State for the Environment having battered the ratepayers over the head with a shovel only a few weeks ago, it is hardly surprising that the ratepayers welcome the Chancellor's nice new rôle as Florence Nightingale with a bottle of smelling salts. I welcome the doubling of the regional employment premium. I have always advocated that if it is to be effective it should keep up with average wages.

These measures, however, will not solve our basic economic problems. The Chancellor will claim that he had no alternative. As he is not allowed by the terms of his social contract with the unions to take direct action to curb the excessive rise in personal incomes he cannot reflate the economy as much as the oil deficit requires. To do so in the absence of income restraint would be to stoke the fires of inflation with a vengeance. When the social contract has gone the way of all quack remedies and lies dead and buried history will inscribe an epitaph on its tomb: "Here lies the social contract that lived on inflation and died of unemployment." That will undoubtedly come true.

It is with inflation that I wish to deal today. There have been many warnings in the debate yesterday and today about the effects of inflation and its galloping course, but we have been short of remedies. We have not had many remedies from the Leader of the Opposition, and we did not get many more from the Prime Minister. I intend to venture on somewhat dangerous ground by proposing, with humility, remedies.

In his mini-Budget Statement on Monday the Chancellor said:

"The first and main objective of the proposals I shall now describe is to attack inflation at its source."—[OFFICIAL REPORT, 22nd July 1974; Vol. 877, c. 1048.]

That is a splendid aim with which we would certainly agree, but in the context of that noble intent the Chancellor's proposals were frivolous and trivial. So inadequate are they that one must question the Government's seriousness of purpose in tackling inflation. The Chancellor has not even begun to attack inflation at its source. If he has attacked it anywhere, he has attacked it at its index. The retail price index is, no doubt, an excellent index, but it is not the source of inflation. The Government play the retail price index rather like Nero played the fiddle.

In my view and that of my colleagues, inflation is the greatest danger of the age, not just to the economy but to our savings and our exports and to the peace, stability and tranquillity of the whole nation. As surely as war unites a nation, inflation divides it. That is why it must be conquered, and conquered soon.

If we wish to know the source and course of inflation we must first realise that modern inflation is a new phenomenon and the old, textbook, classical remedies will not be of much help. I suppose that it is commonly assumed by members of my generation that inflation is the natural order of things. That is hardly surprising. I was born 40 years ago in 1934. [HON. MEMBERS: "Why?"] I ask the same question of inflation. Modern inflation and I are of the same age. In 1933 the pound was worth more than it was in 1661. The Economist of 13th July put together various price series to show what had happened to prices since the restoration of the monarchy in 1660. Over the last 300 years periods of falling prices have been far more common than have periods of rising prices. [Interruption.] There was free wine flowing from the fountains and that may have cost a little money. Until 1933 prices were generally well below the 1661 level. Until 1933 inflation was generally caused by wars, and the longest period of inflation was between 1914 and 1918. Since then we have had 40 years of uninterrupted rising prices.

If we are seeking the source of inflation, which is what the Chancellor was doing on Monday, we have to ask ourselves what has happened in these 40 years that is so different. Why is it that the historical pattern of prices have been so dramatically changed? I do not believe that it can be because of the reckless and wanton expansion of the money supply by irresponsible Governments. If that were so, all Governments before this period of modern inflation must have been peculiarly careful and peculiarly responsible in their handling of the money supply. Yet our history books are not studded with references to Government action over the money supply. Indeed, I doubt whether control of the money supply featured very large, if at all, in the deliberations of those pre-1933 Governments.

The monetarists mistake the effect for the cause, and they blame Governments and central banks for entering into commitments which necessitate the expansion of the money supply. But we have to ask ourselves what makes Governments and central banks enter into these commitments. This brings us very near to the source of modern inflation.

When Keynes invented full employment, and once he had shown us how to handle unemployment, the maintenance of full employment became an essential part of the economic policies of all political parties. If Governments could avoid unemployment, as they can now by increasing public expenditure or by cutting taxes or both, obviously they could not afford to leave it out of their manifestoes. This process of cutting taxes or raising public revenue following through the commitment to full employment in turn caused the expansion in the money supply and underwrote the wage inflation. With the commitment to full employment the bargaining power of the trade unions increased enormously.

The source and cause of modern inflation is defined quite simply. It is the wage determination process in which the trade unions have been able to exercise their monopolistic wage bargaining powers in conditions of guaranteed full employment and where the unemployed are sustained by greatly improved social security benefits.

Some people will disagree with that analysis. Others will agree with it but draw different conclusions—

Does not the hon. Gentleman agree that it is fair to say also that many awards made to skilled working men have been the result of arbitrations and inquiries and are not merely the result of their using their powers? Therefore, these matters are ones for independent judgment, and I am sure that the hon. Gentleman will accept that they are fair awards which have been conferred by independent tribunals.

Yes. I agree that much of wage bargaining has followed that course, and a great deal of it has been done through wages councils. No one can claim that the awards made by wages councils have been inflationary. They have tended towards the poverty line rather than the other way round.

Those who disagree with my analysis will say that the answer is to create unemployment through a contraction of the money supply. Liberals and, I hope, most right hon. and hon. Members, reject that solution. We reject the huge social and economic costs of unemployment. We reject the unnecessary contraction of investment. We do not believe that these costs of unemployment are possible politically since no Government who pursued them to the extent at which they would work could survive politically. For that reason there is very little point in discussing this so-called monetarist solution.

We believe that we must adopt the only conceivable alternative policy, which is to deal directly with the cause and source of modern inflation, which is the wage bargaining process. I am aware that others in the past have come to the same conclusion—the last Labour and Conservative Governments. Unfortunately, on all sides, after initial difficulties, the tendency is to hold up hands in despair.

The wage bargaining process is a sacred cow protected by powerful vested interests. The union leaders owe their positions, their jobs and their power to it. Nor can any one trade union opt out of it. It it did, it would be left behind by the others.

What is the sum total of its success? Collective wage bargaining, for all its apparent economic success, has been one of the most colossally wasteful failures of our time. The records of the past 10 years speaks for itself. From 1964 to 1974 average male earnings rose from £19·36 to £46·92, an increase of £27·56 or 142 per cent. It looks marvellous; but let us look a little deeper.

After deducting income tax, adding social security benefits such as family allowances and taking full account of the fall in the value of money, this same average worker's income, assuming that he is married and has two children, increased in those 10 years, with all the advantages of collective bargaining, from £16·64 in 1964 to £18·75 in 1974—an increase of £2·11 or 12·68 per cent. in 10 years. That is the sum total of the success. Was it for this that this average male earner paid his union dues?

The truth is that, after 10 years of collective wage bargaining, after all the union conferences, the strikes, the overtime bans and the other restrictive practices, the whole might of the British trade union movement has been able to increase the average British worker's real disposable income by 12·68 per cent. in 10 years. It is true that collective bargaining has been able to increase the share of wages in the national income, but it has done so only at the expense of investment, with the consequence that our national productivity has fallen far below the level at which it should have been.

We have made remarkably little progress in redistributing income and wealth. I believe that taxation, especially the tax credit scheme and the widespread distribution of shares to employees, would be a far more efficient way of redistributing income and wealth than this cumbersome, inefficient, free collective bargaining system. The present system of wage determination does not serve the interests of trade unionists nor those of any other member of the community, except a small minority for whom it is an end in itself.

If this is the case, what do we put in its place? I believe that monopoly power is always against the common interest and the general good. In all parts of this House we insist on the control and regulation and sometimes even the public ownership of monopoly where it exists in the product market. We must insist on control and regulation where monopoly exists in the labour market. Both sorts of monopolies must be brought under some form of Government control.

There has to be a prices and incomes policy. That is why reference to it is included in our amendment to the Opposition's motion. The Government cannot escape their responsibility for the overall increase in incomes. A prices and incomes policy is the pre-condition of a Keynesian full employment policy. If it is to be enforced there must be a method of enforcement. This is as true of a voluntary incomes policy as of a statutory policy.

The Secretary of State for Employment constantly tells us about the great advantages of his voluntary policy; but this is no more than a device for shifting responsibility for enforcement on to the TUC or on to individual union leaderships. They have no method of enforcement, any more than the Government have.

Obviously no one wants to use prison; the number of potential criminals equals the adult population. The violation of a prices and incomes policy should be not a criminal offence but a civil offence. It must be seen that the violator has broken a contract with the rest of the people and owes them damages for his anti-social behaviour—[Interruption.]—especially if he is a former Lord Mayor of London.

The right enforcement mechanism is a tax. The tax should be severe enough to act like a fine, and the Government's hope should be, as with a fine, not that they will draw revenue from it but that it will not be incurred at all.

We have proposed an anti-inflation tax. For prices, it would be a surcharge on the net post-tax profit of any enterprise which raised its prices by more than an average percentage set each year by the Government. For incomes, the tax would be a charge on the national insurance contributions of employees of firms or bargaining groups where the average labour cost per employee rose by more than the Government's norm.

There must be a separate policy for top salaries, which brings me to former Lord Mayors of London. I do not want to be held to any specific figure, but it could be, say, about £6,000 a year, or even lower, otherwise these people will be able to exact large increases under cover of the averages for their firms, and we have to guard against this specifically.

I admit immediately that the tax is not a panacea—[Interruption.]. It does not surprise me that any mention in this House of remedies for inflation causes amusement among Government supporters. The fact is that, after the Chancellor of the Exchequer announced on Monday that he proposed to tackle inflation at its source, he was greeted the following day with newspaper headlines making it clear that the Press believed that he was at his election games. Those newspaper headlines, in the context of the worst economic crisis since the war and the Chancellor's statement, have all the sniff and whiff of Weimar about them.

The hon. Gentleman has made clear his criticism of the Government's voluntary incomes policy. I understand that the criticism that he used to make about the previous Government's statutory incomes policy was that it was too bureaucratic and brought about confrontation. Will he tell us how the system that he is proposing would have avoided confrontation in the event of the miners' claim?