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House of Commons

Wednesday 15 February 1989

The House met at half-past Two o'clock


[Mr. Speaker-- in the Chair ]

Oral Answers to Questions


Companies (Political Donations)

1. Mr. Sean Hughes : To ask the Chancellor of the Duchy of Lancaster if he will make a statement on his policy towards shareholders' controls over company donations to political parties.

The Chancellor of the Duchy of Lancaster and Minister of Trade and Industry (Mr. Tony Newton) : The law requires a note of donations topolitical parties to be shown in the directors' report for a company and for the report to be circulated to all members of the company before the annual general meeting. Shareholders may then comment on the donations and put down resolutions on them in the same way as they can for other aspects of the management of the company's funds. The requirement to report political donations in this way was introduced by the then Labour Administration in the Companies Act 1967.

Mr. Hughes : Does the Minister not see even the tiniest inconsistency in the fact that whereas this Government have legislated for trade unions to ballot on the question of political donations, even though trade unionists have the option of opting out, when it comes to political donations from companies they have not legislated because shareholders have the option of opting out? Is not that inconsistency more to do with the fact that most of the shareholders' money goes to the Conservative party?

Mr. Newton : It has rather more to do with the fact that the hon. Gentleman's analogy does not stand up. It is much easier for shareholders to change the placing of their investments than for trade union members to change their union.

Dame Elaine Kellett-Bowman : Will my right hon. Friend do nothing to discourage donations from the British School of Motoring Ltd. to the Social Democrats so that the saner half of the alliance may continue to survive?

Mr. Newton : I am not sure that I would wish to intervene in other people's sorrows in quite the way that my hon. Friend suggests.

Mr. Ron Brown : Is it not unethical for Scottish and Newcastle Breweries, for example, to hand over large sums of shareholders' money to the Tory party, especially at a time when the company expects the people of Scotland,

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who are mainly Labour supporters, to back it in its struggle against Elders? Is that not an important issue of principle on which the Government should make their position known?

Mr. Newton : I described the position in my original answer. It is open to shareholders to raise such matters along the lines that I described.

Sir Geoffrey Finsberg : Does my right hon. Friend agree that it is perfectly simple for shareholders who object to seeing their companies paying political donations to sell their shares, whereas trade unionists caught in a closed shop would lose their jobs if they acted in the same way?

Mr. Newton : My hon. Friend puts with his characteristic vigour the point that I made somewhat more delicately a few moments ago.

Mr. Gould : Will the Chancellor of the Duchy of Lancaster give a clear assurance that the Government will not try to overturn a clear decision on the subject in another place? Will he accept that any attempt to do so would give the lie to the Government's protestations about shareholder democracy and reveal it to be no more than a cynical sham being manipulated by the Tory party for crude party advantage?

Mr. Newton : The hon. Gentleman mentions a point which has no doubt been in the minds of many--the fact that these matters have been the subject of consideration in another place. That consideration is not complete and I certainly would not wish to trespass on their Lordships' discussions.

Mr. Harry Greenway : Does my right hon. Friend agree that the Conservative party is the only party which truly supports free enterprise, that it is entirely in the interests of free enterprise firms to donate money to the Conservative party and that the present rules are perfectly adequate to safeguard the interests of shareholders?

Mr. Newton : Obviously, I have a good deal of sympathy with what my hon. Friend has said. It is a matter for companies to make judgments and for shareholders to raise matter if they wish to do so.

Company Accounts

2. Mr. Andrew Smith : To ask the Chancellor of the Duchy of Lancaster how many times in each of the last five years consent has been given for companies to omit details of their overseas subsidiaries from their reports and accounts.

The Parliamentary Under-Secretary of State for Corporate Affairs (Mr. Francis Maude) : One hundred and fifty-eight exemptions from disclosing the identity of subsidiaries have been granted since January 1984.

Mr. Smith : Will the Minister tell the House which companies are involved and how many of that large number involve subsidiaries in South Africa? Are not the Government throwing a cloak of secrecy over apartheid connections and thereby deceiving both markets and investors who are concerned about the ethics of what they do?

Mr. Maude : No, I will not disclose those identities nor how many of the subsidiaries relate to any particular

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country. In doing that, I am simply following the policy which has obtained for the past 22 years since the provision was introduced in the Companies Act 1967 by the then Labour Government.

Mr. Caborn : In giving companies permission to omit subsidiaries from their reports and accounts, is the Minister aware of the growing criticism about giving positive support for trade with apartheid South Africa? Is he further aware that the Commonwealth and EEC agreements to which we are party are not being observed. When will the Secretary of State honour those agreements and stop giving succour to the South African regime?

Mr. Maude : The hon. Gentleman talks about giving support to trade with South Africa. He may have forgotten that the last Labour Government sponsored, with public money, no fewer than 62 separate trade missions to South Africa. We no longer do that. As I understand it, companies follow the voluntary ban on new investment with South Africa, so there is nothing for the hon. Gentleman to get so excited about.

Internal Markets

3. Mr. Macdonald : To ask the Chancellor of the Duchy of Lancaster what proposals he has to ensure that regions other than London and the south-east benefit from the European internal market after 1992.

Mr. Maude : The completion of the single European market by the end of 1992 will affect all regions, directly or indirectly. Our Europe-Open for Business campaign is therefore aimed at encouraging all firms, wherever they are located, to take action now to ensure that they benefit from the opportunities that the single market will bring.

Mr. Macdonald : Does the Minister agree that the loss to a Dutch fabrication yard of a British Aerospace order worth £10 million, to construct six platforms in the North sea as part of an air combat training facility, is an absolute disgrace when fabrication yards in the regions, and especially in my constituency, are crying out for such orders? Does the Minister agree that that shows that the Government have done nothing to prepare Britain for the single European market? Will he undertake to consult his colleagues in the Ministry of Defence and ensure that they will not make any commitment to utilise that British Aerospace facility until they have had the time to discuss in detail with British Aerospace how elements of that order may still be subcontracted to British yards?

Mr. Maude : I hear what the hon. Gentleman says and I am aware of his local concern in this matter. However, this is a decision for British Aerospace to take in the context of the most competitive and suitable tender offered. It is not for the Government to comment or interfere in the commercial decisions of companies. As I understand it, the contract was put out to tender and, in the ordinary commercial way, the best tender was accepted.

Mr. William Powell : Does not the prospect of completion of the internal market by 1992 offer a powerful incentive for inward investment into the Community from third countries? Does my hon. Friend agree that half the

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current inward investment in the Community is in Britain and that that is having a powerful stimulus on the economic growth of the regions of our country?

Mr. Maude : My hon. Friend is entirely right. There is a great deal of investment from overseas companies in the United Kingdom, partly for reasons connected with Europe, but principally because the United Kingdom is now the most hospitable and one of the most successful environments for manufacturing business.

Mr. John Garrett : Is it not the case that so far we have not done very well out of Europe, but Europe has done very well out of Britain? Does the Minister agree that official EEC statistics show that after 1992 manufacturing will decline in Britain in nearly every sector and that our manufacturing regions will lose out? Does he also agree that the Secretary of State's recent inept briefing of journalists showed that the Government had not taken on board the regional implications of 1992?

Mr. Maude : The hon. Gentleman could scarcely be more wrong. Britain has done and is doing extremely well in Europe, and will continue to do so because manufacturing industry is now more competitive, more profitable and has a sharper competitive edge than at any time for a generation.

Mr. Anthony Coombs : Does my hon. Friend agree that, far from the south-east alone benefiting from 1992, the areas that will benefit most are those areas such as the west midlands where unemployment is falling fastest, manufacturing investment is growing fast and infrastructure investments, such as the national convention centre, are taking place, and which attract nearly one third of manufacturing investment from overseas?

Mr. Maude : My hon. Friend is right to draw attention to the considerable amounts of investment taking place in the west midlands, in which both he and I have a close constituency interest. The benefits of this massive investment boom are being felt in every part of the United Kingdom, and he is right to draw attention to that as well.

Mr. Alton : Does the Minister not understand the concern in the north-west that the south-east, which already has a bloated and overheated economy, will be the beneficiary of 1992? Well he therefore do everything possible to support the north-west regional TUC and the Merseyside chamber of commerce proposals for the Landbridge development so that the north-west may take advantage of the internal market when it is created?

Mr. Maude : I understand the concerns that are expressed, but I believe that they are mistaken. I visited Merseyside not long ago and was most encouraged by the great and widespread optimism there. The optimism and confidence coming from increased prosperity, increased investment and increased economic growth are by no means limited to London and the south- east. They are spread throughout the country. Landbridge is not a matter for me directly, but I hear what the hon. Gentleman says and I shall pass on his concerns.

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Manufacturing Productivity

4. Mr. Boswell : To ask the Chancellor of the Duchy of Lancaster what has been the growth in Britain's manufacturing productivity since 1979 ; and what information he has on the figures for other major industrial countries.

8. Mr. Cran : To ask the Chancellor of the Duchy of Lancaster by what amount productivity in the United Kingdom manufacturing industry has increased over the last 10 years ; and what has been the comparable increase among the United Kingdom's main industrial competitors.

The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Robert Atkins) : Comparable figures for major industrial countries are available only up to the third quarter of 1988. These show that in the 12 months ending September 1988 manufacturing productivity, as measured by output per person employed, in Italy increased by 38 per cent., in the United States by 37 per cent., in Japan by 31 per cent., in Canada by 27 per cent., in France by 25 per cent. and in Germany by 20 per cent. In the United Kingdom, it was 46 per cent. higher.

Mr. Boswell : Do not those excellent comparative figures, linked as they probably are with the low corporate tax rate, show that other countries will simply have to try harder? Should not the strong financial position of our companies give them adequate scope for further investment, training, research and development?

Mr. Atkins : My hon. Friend is right. I am not sure that I agree entirely with his invitation to our competitors to try harder, but the statistics prove that the other countries to which I referred have a lesson to learn from our success.

Mr. Cran : Despite the considerable progress since 1979, does not a great deal remain to be done, as evidenced by the fact that recent OECD figures show that we still have a productivity gap of 30 per cent. vis-a- vis the United States and 25 per cent. compared with the rest of Europe?

Mr. Atkins : My hon. Friend speaks with authority on these matters-- [Interruption.] Opposition Members may laugh, but my hon. Friend is regional director of the Confederation of British Industry and knows what he is talking about. In those circumstances, they should pay attention to what he says. My hon. Friend is right to draw attention to the fact that, while we have improved, we can always do better.

Mr. Hoyle : Should not the Minister, too, pay attention to the hon. Member for Beverley (Mr. Cran) as the hon. Gentleman was talking about OECD figures which show that we are 16th out of 21 in the productivity league tables and are ahead only of countries such as Spain, Portugal, Greece and Turkey? Far from being a success story, is that not a story of failure?

Mr. Atkins : I am fascinated as to why the hon. Gentleman always insists on bringing doom and gloom to all our discussions about the successful statistics that I offer to the House, which are a demonstration of what this country has achieved in 10 years of Conservative Government.

Mrs. Mahon : Does the Minister accept that those figures are no use at all to my constituents because 300 job

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losses have been announced since Christmas, and 650 jobs were lost last year after the KP closure? When will he accept that certain industries are under dire threat and that his figures mean nothing to the textile industries and the engineering and machine tool works in my constituency, all of which are under threat because the Government do not seem to have a coherent policy?

Mr. Atkins : I must take issue with the hon. Lady largely because, as she knows, I represent a northern constituency. In the north-west the signs are that while, of course, there are always problems in a competitive economy, none the less we have tried our best to ensure that the future for industry is bright. The statistics, facts and views that I have received from business men the length and breadth of the country seem to confirm that.

Mr. Batiste : Will my hon. Friend confirm that the best response by companies across the country to the challenges of 1992 is to improve productivity in the future in line with past increases so that they can face European competition not merely on equal terms but as leaders in important areas such as productivity?

Mr. Atkins : Yes, Sir.

Rev. Martin Smyth : Does the Minister accept that the recent figures from the P and A management consultancy, which show a decline in jobs in manufacturing and in the service industry in Northern Ireland, are a cause for concern? As we approach 1992, what can the Government do to improve the situation?

Mr. Atkins : Matters relating to Northern Ireland are dealt with by my right hon. Friend the Secretary of State for Northern Ireland, but I will ensure that the hon. Gentleman's concern is brought to my right hon. Friend's attention.


5. Mr. Atkinson : To ask the Chancellor of the Duchy of Lancaster if he will make a statement on the future of Hotol.

Mr. Atkins : British Aerospace and Rolls-Royce are pursuing the possibility of international collaboration on Hotol. The Government remain ready to assist in the search for potential collaborators. As I indicated in my reply to my hon. Friend the Member for Fylde (Mr. Jack) on 7 December last, I have raised this question with the United States authorities. The companies have initiated relevant contacts in the United States.

Mr. Atkinson : I am grateful that my hon. Friend accepts that such a high technology can be realised only by international collaboration. Does he agree that this country has a sad history of letting such inventions go with little return? Will he confirm that Hotol technology remains in British hands? Does he agree that a similar American project, WASP, for which Sheffield university recently received a development contract, offers a way forward for collaboration on our Hotol technology to be realised?

Mr. Atkins : My hon. Friend is quite right. The substance of my earlier answer to my hon. Friend the Member for Fylde (Mr. Jack) which I repeated today, was that the discussions that I had last year in the United States

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with the space adviser to the President were along those lines. The national aerospace plane, which the United States Government and American companies are trying to develop, is a project in which British Aerospace and Rolls-Royce are having preliminary discussions. I hope that those discussions will prove successful.

Mr. Stott : When the proof of concept study has been completed, will the Minister support the recommendations made by the House of Lords Select Committee on Science and Technology which examined United Kingdom space policy? The Committee stated :

"HOTOL development costs, perhaps of the order of £5 billion, would be far too large for its development to be a mainly private venture, indeed it could be undertaken only as a major inter-governmental collaboration project."

What are the Government's views about that? Does the Minister agree with the recommendations?

Mr. Atkins : In relation to Hotol, we have said all along that the amount of money required to keep the project going at the moment is relatively small and could be afforded by British Aerospace and Rolls- Royce. However, as the hon. Gentleman rightly says, the long-term development will require many billions of pounds. That is why the Government have said that they are happy about collaboration and are positively encouraging it. However, a limited number of countries have so far said that they want to collaborate because they are not sure of the technology being developed in those countries. We are still considering the matter although, as the hon. Gentleman is aware, we have said that we are not prepared to provide the funding because we believe that it must come from a much wider collaboration. Nevertheless, the matter is constantly under review.

Sir Ian Lloyd : My hon. Friend will be aware that the European Commission, with some justification, recently expressed grave concern that western Europe as a whole was falling behind in space matters by comparison not only with the USSR and the United States but with Japan. The Commission suggests an elaborate programme of co-operation within western Europe to remedy that deficiency. Have the Government made any response?

Mr. Atkins : I believe that my hon. Friend refers to what was previously known as Euromart and related matters. We took a decision to participate strongly in that venture, although my hon. Friend will recognise that it is a wide-ranging area and one about which it is difficult to make predictions. Since Euromart has been subsumed into Brite Euram, we are supportive of it and are monitoring developments very closely. I hope shortly to be in discussion with industry representatives who are concerned about the matter so as to ensure that we represent the British case to the best of our ability.

Not With Honour"

6. Mr. Dalyell : To ask the Chancellor of the Duchy of Lancaster if he will acquire "Not With Honour", an account of the Westland affair, by Magnus Linklater and David Leigh, for the library of his Department.

Mr. Newton : My Department already holds a copy of the book to which the hon. Gentleman refers.

Mr. Dalyell : I have two questions to ask the Secretary of State, of which I gave notice to Sir Brian Hayes' office.

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First, with reference to page 158 of "Not With Honour", is it true that Sir Brian Hayes and senior officials were against Leon Brittan going, and did they say so at any kind of official meeting? Secondly, with reference to page 143, knowing of the Prime Minister's displeasure that the Law Officer's letter had been leaked, did Leon Brittan use that information to demand a knighthood, as a token certificate of clean political health?

Mr. Newton : I am grateful to the hon. Gentleman for his courtesy in giving notice of his supplementary questions, but even with that notice I can add nothing to the full statements made to the House by my right hon. Friend the Prime Minister. If the hon. Gentleman expects otherwise, his optimism exceeds even his persistence.

Mr. Neil Hamilton : While I do not recommend that the book should be publicly burnt I hope that my right hon. Friend will take its conclusions with a pinch of salt. One of its authors, Mr. David Leigh, is hardly a dispassionate observer of the political scene but an embittered, Left-wing propagandist employed by Mr. Tiny Rowland. Mr. Leigh has just been taken to the cleaners by my hon. Friend the Member for Davyhulme (Mr. Churchill) for having written a pack of lies about my hon. Friend which were published in The Observer, which has just resulted in Mr. Leigh losing a libel action in the High Court.

Mr. Newton : The whole House will be grateful to my hon. Friend for the further intelligence that he has been able to give about that matter.


7. Mr. Kennedy : To ask the Chancellor of the Duchy of Lancaster when he last met representatives of Toyota ; what subjects were discussed ; and if he will make a statement.

Mr. Newton : My right hon. and noble Friend recently held a meeting with the vice-president of Toyota, Mr. Tatsuro Toyoda, during which he made it clear that, were the company to decide to locate its project for a car manufacturing plant in the United Kingdom, it would receive a warm welcome from the Government. Toyota has been invited to work closely with our officials in pursuing its feasibility studies.

Mr. Kennedy : Given that welcome news of Toyota's interest in locating a plant in Britain--and that, if the venture is successful, there can be only one winner in terms of the fortunate site or region of the country that is chosen--what assessment have the Government made of the likely spin-off to the components industry, for example? Has Toyota given any indication of the type of trade union agreement that it would wish to reach for such a plant? Many of us in Scotland who witnessed the sad, sorry and disgraceful episode at Dundee, do not want a repeat performance of the Ford fiasco and the lost opportunity that occurred there.

Mr. Newton : I am sure that very nearly the whole House agrees with the hon. Gentleman's concluding remark. I am not in a position to speculate about Toyota's intentions, and I cannot make any authoritative estimate of the spin-off effects, but having seen some of the spin-off effects of Nissan's plant in the north-east it is clear that there would be substantial secondary business.

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Mr. Jack : My right hon. Friend will be aware that the interest shown by Japanese companies such as Toyota in investing in the United Kingdom is a reflection of the Government's economic policies, but what advice would he give areas such as Lancashire in which the rising sun has yet to be seen?

Mr. Newton : I would give them the advice, indeed the information, that the present significant amount of overseas investment is reaching all parts of the United Kingdom, which is very encouraging for the country and for its future in the single market.

Mr. Harry Ewing : Apart from the fact that the populist hon. Member for Ross, Cromarty and Skye (Mr Kennedy) does not know the first thing about what actually happened at Dundee, will the Minister bear in mind that Toyota is the only Japanese company that sponsors a pipe band? Is that not a good basis on which to hope that, when Toyota locates its new plant in Britain, I shall be able to welcome the company to the Central region of Scotland, where I assure the Minister that they will be very welcome?

Mr. Newton : I shall ask for the position of the pipe bands in the hon. Gentleman's constituency to be drawn to Toyota's attention in any further contacts that may take place.

Mr. Dickens : Is it not encouraging that countries all over the world are considering investing in the United Kingdom? Is that not because buying British now means travelling first class? It means obtaining goods of the right quality at competitive prices, delivered on time and with a good after-sales service.

It is the Conservative Government who have put the train back on the rails. Once again, British is best, and that is why the Japanese are looking towards us. If they would like to come to Oldham and Rochdale, they will receive a big welcome.

Mr. Newton : The answer to my hon. Friend's question is, broadly speaking, yes.

Interest Rates

9. Mr. McFall : To ask the Chancellor of the Duchy of Lancaster what has been the cost to industry of the rise in base rates since April 1988.

Mr. Newton : The cost to industrial and commercial companies to date of the changes in bank base rates since April 1988, compared with the cost if bank base rates had remained the same since April 1988, is estimated to be about £0.8 billion. The hon. Member should bear in mind, however, that a 1 per cent. increase in interest rates, even if sustained for a full year, costs companies far less than a 1 per cent. increase in pay settlements.

Mr. McFall : The rate has increased from 7.5 per cent. to over 13 per cent. in nine months, and the Government's own financial statistics have shown that that has penalised British industry by over £6 billion. Does the Minister agree with the latest CBI survey, "Economic Priorities for 1989--Building on Business Success", which says that such a policy has a very detrimental effect on investment in British industry and gives an added twist to the inflationary spiral? How can the Minister possibly say that he is helping British industry with such a simplistic and blunderbuss monetary policy?

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Mr. Newton : First, there is little doubt that most people in British industry would regard a major resurgence of inflation as a significantly greater risk than the present level of interest rates. Our policy is directed at ensuring that we maintain low inflation, as the hon. Gentleman knows.

Secondly, the scale on which British companies are investing speaks for itself. I understand that in the hon. Gentleman's constituency in the past month or two there have been a number of significant proposals aimed at creating 700 new jobs--for example, from Allied Distillers and Sterling Investments.

Mr. Tim Smith : Will my right hon. Friend confirm that such has been the transformation in company liquidity since the early 1980s that many companies now have substantial amounts of cash in the bank? For instance, GEC has £1,500 million. Will my right hon. Friend confirm that the figure of £0.8 billion that he gave the House is a net figure, and that many companies are actually better off?

Mr. Newton : I can certainly confirm--without going into detail for which my hon. Friend asks--that companies' profitability overall has increased considerably. That, of course, has been one of the main sources of funds for the recent rise in investment.

Mr. Campbell-Savours : May I add a little original thinking to the right hon. Gentleman's contribution? Is it not true that penal interest rates are no more than taxes paid to financial institutions and the private sector, as distinct from direct and indirect taxes which are paid to the Government and the public sector? What is the difference? Do not interest rates constitute no more than a form of taxation?

Mr. Newton : I am having some difficulty in following precisely what the hon. Gentleman has in mind. Interest rates represent the price of borrowing money, in the same way as other prices, including taxes levied, measure the cost of acquiring products. I do not understand what conclusion the hon. Gentleman is seeking to draw.

Mr. Andrew Mitchell : Is it not true that the average gearing of British companies has fallen from a near peak nine years ago of something like 45 per cent. to little more than half that today? Is not that an eloquent testimony to the success of the Government's economic policies towards the corporate sector as well as an important identification of the fact that companies will be well able to withstand the current temporary high level of interest rates?

Mr. Newton : I certainly agree with the general proposition that underlies my hon. Friend's question.

Trade Deficits

10. Mr. Dunnachie : To ask the Chancellor of the Duchy of Lancaster which Organisation for Economic Co-operation and Development countries are running a larger trade deficit as a percentage of gross domestic product than the United Kingdom.

The Minister for Trade (Mr. Alan Clark) : In 1987 Greece, Portugal, Turkey, Spain, Austria and the United States had larger visible trade deficits than the United Kingdom in relation to their gross domestic product.

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The OECD figures for 1988 are not yet complete, but we already know that at least four countries will have deficits larger than the United Kingdom when measured on that basis.

Mr. Dunnachie : It seems strange that the noble Lord Young and the Department of Trade and Industry seem to have ignored or not noticed that our trade gap for 1988 is some £13 billion. That gap is so great that it will require a reduction in demand of about £40 billion, or about £30 per week per household to bridge the gap. Does it not follow that safe supply measures should be taken to increase the ability of British industry to meet the demands of the British economy?

Mr. Clark : I wish that the hon. Gentleman had read more copiously from his notes as I did not entirely follow his question. There is no dispute over the component elements of the deficit. Presumably the hon. Gentleman would not wish to restrict the import of semi-manufactures which feed British industry. The import of consumer goods is a function of consumer spending and it is well know that Opposition Members wish to restrict that by credit controls, wage controls and, for all I know, by exchange controls.

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