Lords Sitting of 21 October 1981

Preamble
The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Lincoln.

Railcards: The Mentally Disabled
Lord Tanlaw: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government why mentally disabled rail passengers requiring an escort are not eligible for the disabled person's railcard.
The Earl of Avon: My Lords, it is for the British Railways Board to set the conditions of eligibility for the disabled persons railcard. However, I understand that mentally handicapped persons in receipt of an attendance allowance are eligible and that the board will keep the operation under review in order to see whether its scope could be widened.
Lord Tanlaw: My Lords, I thank the noble Lord the Minister for his Answer, which I regret may not be received with thanks by a number of parents of mentally handicapped children. Can he therefore say whether in the public transport industry there is in any way discrimination in outlook between physically handicapped and mentally handicapped passengers? I understand that British Rail took advice from the Department of Health and Social Security on this matter of principle.
The Earl of Avon: My Lords, the board did indeed take advice not only from the department but also from associations dealing with the disabled. The noble Lord perhaps does not do justice to what British Rail have done. In this International Year of Disabled People they have moved quite a long way towards helping the disabled. As I said in my original Answer, they have announced that the operation is under review. I am sure that what the noble Lord has said will be taken into account.
Lord Tanlaw: My Lords, does not the noble Earl consider it to be a little unfair that customers who purchase soap powders and other sundry consumer items are offered free tickets by British Rail? Could not this possibly be extended to the escort of mentally handicapped children?
The Earl of Avon: My Lords, I understand that escorts are equally allowed half price fares. Again I can only bring this point to the attention of the British Railways Board.
Baroness Faithfull: My Lords, would not the Minister agree it is strange that under the Chronically Sick and Disabled Persons Act 1970 the mentally handicapped
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are included as disabled people but that they are not included here?
The Earl of Avon: My Lords, as I understand it, they are included. As I said in my original Answer, mentally handicapped persons in receipt of an attendance allowance are eligible. The only question arises when they are not in receipt of this attendance allowance.

UN Disarmament Committee: Attitude of UK Delegation
2.39 p.m.
Lord Brockway: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what was the attitude of the British delegation at the Disarmament Committee at Geneva (established by the UN Special Assembly on Disarmament) to proposals for international conventions banning underground nuclear weapon tests and the outlawing of chemical and radiological weapons, and to the establishment of working committees on nuclear weapons and comprehensive disarmament.
The Parliamentary Under-Secretary of State, Foreign and Commonwealth Office (Lord Trefgarne): My Lords, the British delegation to the Committee on Disarmament support the work of the committee for the conclusion of international agreements banning chemical and radiological warfare. They have resisted proposals for the establishment of a working group on nuclear weapons because nuclear disarmament is a matter best negotiated between the nuclear weapon states. The delegation have played an active part in the work of the sub-group for a comprehensive programme on disarmament.
Lord Brockway: My Lords, is there not a great contrast between what the Minister has said in this House in support of multinational disarmament and the actions of our representative on this committee? For example, is it not the case that in opposing the working committees on nuclear arms and on comprehensive disarmament they are opposing the major recommendations of the United Nations General Assembly? Is it the case that the British representative has actually proposed that all subjects now under discussion at bilateral and multilateral negotiations should not be dealt with by the United Nations until 1990?
Lord Trefgarne: My Lords, the proposals which we support are those which are best calculated, in our view, to achieve some measurable success in the area to which the noble Lord has referred. As I have said very often from this Box, our aim in this matter—and the noble Lord has acknowledged it—is to achieve balanced and verifiable measures of disarmament. Our policy within those constraints is to achieve individual elements of disarmament rather than the sort

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of scatter-gun effect which I think is advocated by the noble Lord.
Baroness Llewelyn-Davies of Hastoe: My Lords, could the noble Lord give an answer to the Question which my noble friend has put to him about whether discussion has been postponed until 1990?
Lord Trefgarne: My Lords, we certainly hope that progress will be made long before 1990 but rather along the course which I have suggested.
Lord Gisborough: My Lords, as this country has no chemical weapons and as the Soviet Union have some 50 per cent. of their forward ammunition in chemical weapons, with training designed to use it all, is it not much more apt to ask what their attitude is to this conference?
Lord Trefgarne: My Lords, there are of course a number of conferences in the disarmament fora going on at present. As for the question of chemical warfare which my noble friend has raised, we are very much in favour, as he well knows, of a convention to ban chemical warfare.
Lord Jenkins of Putney: My Lords, is it not the case that the Soviet Union and the United Kingdom have signed the convention on chemical warfare and that the United States has not done so? Will the noble Lord say what proposals the Government have for ratifying the convention on chemical warfare?
Lord Trefgarne: My Lords, the existing convention on chemical warfare dates back, I think, to 1925. A number of shortcomings have, not unnaturally, been found to exist in that particular convention. I do not think it is yet the case that we have reached the point of ratifying a new convention, but we hope that this will occur before long.
Lord Wynne-Jones: My Lords, does the noble Lord confirm the statement of his noble friend that 50 per cent. of the forward troops of the Soviet armies are armed with chemical weapons?
Lord Trefgarne: My Lords, I am not sure that that was the precise implication of my noble friend's earlier supplementary question, but it is certainly the case that the Soviet Union possesses a very substantial chemical warfare capability.
Lord Brockway: My Lords, is the Minister aware that the unaligned nations committee of 21, which is a majority in the Disarmament Committee, has accepted the principle of the treaty proposed by the world disarmament campaign and has proposed three stages? The first stage is 25 per cent. abolition of nuclear weapons and proportional for conventional weapons; 50 per cent. in the second stage, and comprehensive disarmament in the third stage? Are our Government supporting that proposal?
Lord Trefgarne: My Lords, as I said earlier, we consider that progress in these matters is best achieved by negotiations between the nuclear states themselves.
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We do not think that the intervention of the nonnuclear states is quite as constructive as the noble Lord suggests.
Lord Whaddon: My Lords, can the noble Lord confirm that the Soviet Union has proposed a ban on all new types of weapons of mass destruction? Was this raised at Geneva and, if so, what was the attitude of the British delegation?
Lord Trefgarne: My Lords, I understand that a proposal along those lines has been made by the Soviet Union, but we need to evaluate it rather more fully before we can reach a formal position on it.
The Earl of Lauderdale: My Lords, does my noble friend agree that, as against the Security Council which has the responsibility, the United Nations Assembly is in fact a popular but an irresponsible body which conserves its rights without really committing us to anything?
Lord Trefgarne: My Lords, I am afraid it would not really be appropriate for me to brand the United Nations General Assembly as an irresponsible body, although I must say we do not always agree with the conclusions it reaches.
Lord Davies of Leek: My Lords, when the noble Lord is considering treating somebody as irresponsible, will he remember that at the present moment the President of the United States might be in that group?

PLO: Source of Funds
2.45 p.m.
Lord Barnby: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether, in view of press reports that the Secretary of State for Foreign Affairs hopes, during his term as President of the Council of EEC Ministers, to meet the leader of the Palestinian Liberation Organisation, they can state or ascertain the source of the funds used by that organisation in their operations.
Lord Trefgarne: My Lords, the Palestine Liberation Organisation obviously derive their funds from a number of sources but we have no precise information on the proportion which each contributes.
Lord Barnby: My Lords, that Answer appears inconclusive. Is it not similarly the case that SWAPO is in unchallenged receipt of Russian support in its aim to develop disruption against the Republic of South Africa? Can it really be rewarding to Britain to support the bogus statehood represented by these two Marxist-funded organisations?
Lord Trefgarne: My Lords, occasionally these organisations declare the source of some of their

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funds but it is rare that any of them will admit that they get all their funds from one particular source, less still that they would announce what that source was, and I am not certain that my noble friend does not over-simplify some of the arguments.
Lord Molloy: My Lords, does the noble Lord not agree that the probability is that the Palestine Liberation Organisation look upon themselves as something similar, say, to the Free French or the Free Dutch in this country in the last war and that inevitably they will get some form of financial support? And is it not equally distressing that on the other side there are rumours, in the British press at. least, that the occupants of the settlements that the Palestinians say are their lands are also being helped financially? Would it not be right for this House to acknowledge that the British Foreign Secretary, in meeting the PLO and anyone else involved, is only trying to take out the bitterness and the hatred so that young children and perhaps even those as yet unborn will not grow up to hate and fight one another? Is not the Foreign Secretary, in following Winston Churchill's dictum that "Jaw jaw is better than war war", contributing to a civilised solution?
Lord Trefgarne: My Lords, I am grateful to the noble Lord for his kind words about my noble friend the Foreign Secretary and I would certainly agree with the last part of his supplementary.
Lord Glenamara: My Lords, will the noble Lord reaffirm that the Foreign Secretary will not meet the PLO until that organisation recognises the existence of Israel with inviolable frontiers?
Lord Trefgarne: My Lords, certainly while the PLO retain their present position about the existence of Israel, meetings between them and British Ministers will be difficult.
Lord Mayhew: My Lords, will the noble Lord confirm that the leader of the PLO has recently, explicitly and publicly, endorsed the proposal for a peaceful settlement put forward by the Government of Saudi Arabia which involves, among other things, the right of all countries in the region, including Israel, to live in peace? Will he agree that this is an important and hopeful development and that the leader of the PLO should be encouraged in the line he is taking?
Lord Trefgarne: My Lords, I am not certain that the PLO was quite as receptive to Prince Fahd's eight points as the noble Lord suggests. Certainly I have not yet heard the PLO say in public that they accept the right of Israel to exist.
Lord Paget of Northampton: My Lords, is the noble Lord aware that the conduct of foreign policy by assassination is no new thing in the Middle East, nor is this the first time that we have been asked to enter into diplomatic communication with the assassins? Is he aware that in 1193 King Richard of England was invited by Philip of France to send a delegation to the King of the Assassins whom the crusaders knew as
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"the old man of the mountains" and that he refused to do so because he considered it to be contrary to the honour of a knight, and can he ask his noble friend to take a similarly scrupulous attitude, so far as we are concerned, to organised assassinations?
Lord Trefgarne: My Lords, I cannot answer for his late Majesty King Richard I, but as for my noble friend I can say that I believe he would be willing to meet Mr. Arafat if it was clear that to do so would move forward the peace process.
Lord Wells-Pestell: My Lords, does the fact that we did not send a British delegation to the funeral of General Moshe Dayan last Sunday, but only an embassy official and not even a Minister of this Government, indicate that there is now a pro-Arab policy at Whitehall?
Lord Trefgarne: My Lords, indeed not. We would very much have liked to send a Minister to Mr. Dayan's funeral, but the administrative arrangements could not be made in the very short time available.
Lord Hankey: My Lords, is it not, however, in fact the case that until someone talks to the Palestinians we shall not succeed in getting a satisfactory settlement in the region of Israel and the West Bank?
Lord Trefgarne: My Lords, I think there is a good deal in what the noble Lord says. The PLO undoubtedly represent an important sector of Palestinian opinion, and it is inconceivable, I think, that we can achieve a lasting settlement without taking their position into account.
Lord Barnby: My Lords, since it is the repeated policy of Her Majesty's Government to aim at negotiation rather than violence, and since both these organisations appear dedicated to violence rather than negotiation, is it not regrettable that they are both in receipt of support from Marxist sources?
Lord Trefgarne: My Lords, the noble Lord clearly has other sources of information than those that I have. I was not able to give a detailed account of the sources of funds of the PLO, and of course the other organisation to which my noble friend refers, SWAPO, is not part of the Question on the Order Paper. But certainly I think we need to take a broad view of these matters. If we dismiss the PLO as being of no account, no settlement will be reached.

Coaches: Tax Revenue and Road Costs
2.52 p.m.
Viscount Sidmouth: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they are satisfied that coaches make an adequate contribution by way of licence fees towards road costs.
The Earl of Avon: My Lords, in looking at this matter it is necessary to take account not only of vehicle

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excise duty, which is what the noble Viscount, Lord Sidmouth, has particularly asked, but also of the contribution made by coach and bus operators through fuel taxation.
On that basis the Department of Transport estimates that in the present financial year buses and coaches will pay £139 million in taxation, of which £4 million is in licence fees. This is before any rebates of fuel duty payable on stage carriage operations, which amounts to £100 million. Road costs attributable to them both will be about £80 million. Separate figures for coaches are not available, but, based on a number of assumptions, the Government believe that coaches cover their road costs.
Viscount Sidmouth: My Lords, I thank the Minister for that reply. Would he not agree that it still is anomalous that a heavy goods vehicle of 9 tonnes pays over £1,000 in excise licence duty whereas a coach or a hackney carriage of similar weight pays only £50 to £60?
The Earl of Avon: My Lords, it has been for a long time now the practice of Governments to allow this vehicle excise duty concession to stage services and also to coaches, and it is particularly difficult to separate the two.
Lord Bruce of Donington: My Lords, could the noble Earl oblige the House with the calculations which he uses in arriving at his assumptions, not necessarily now but perhaps in reply to a Question for Written Answer?
The Earl of Avon: My Lords, I shall be very happy to. The figures were actually provided in answer to a Question for Written Answer in July, which may help the noble Lord.

ECC 37th Report: Employee Consultation
2.54 p.m.
Lord Wolfenden Lord Wolfenden rose to move, That this House takes note of the report of the European Communities Committee on employee consultation (37th Report, H.L. 250).
The noble Lord said: My Lords, I rise to move the Motion standing in my name on the Order Paper. This report deals with complicated and often controversial issues and I should like to express the committee's thanks to those who have guided us through them. First, our specialist adviser, Dr. Frank Heller, who has kept us informed about practice in other member states as well as enlightening us about our own country. Secondly, I would pay tribute to Mr. John Turnbull, Clerk to Sub-Committee C, whose habitual calm was never ruffled by tantalising telephone conversations throughout Europe or complicated arrangements for the attendance of elusive witnesses. Thirdly, it is right that I should acknowledge the help and information which were given to us by the British Embassies in three of the countries concerned.
But they could not have helped us as they did if the committee had not had the advantage of written and
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oral evidence from many quarters, including the Departments of Employment and of Industry, the TUC, the CBI, the Institute of Directors, the European Trade Union Confederation, and the Industrial Society. Especially we valued visits from members of the European Parliament, Mr. Roland Boyes, Mr. Amédée Turner, QC, and Mr. Aart Geurtsen, and we had the benefit of informal discussions with Mr. Grennan of the Commission. The evidence submitted to us will be found in the appendices to the report, and those of your Lordships who can find time to read it will, (a) learn a great deal, and (b) see how deeply the committee is indebted to them all.
Before I proceed to a detailed examination of the committee's report, I hope that perhaps I may have your Lordships indulgence if I mention, very briefly, another issue, slightly different but highly relevant. Almost simultaneously with their consideration of the proposal on employee information and consultation the committee had before them a separate, but obviously related, draft directive from Brussels on employee participation in asset formation. The main tenor of this document was the desirability of enabling employees to participate in the fortunes of companies, their own or others, through ownership of shares in them. This might well be considered as a special case of the general subject of employee consultation and participation. After some discussion the committee decided that, although the two issues were closely related and it might seem artificial to separate them, they should nevertheless examine them separately, since there were two separate initiatives from the Commission. Accordingly, the committee has reported separately on asset formation and on employee consultation, and it is to its report on the latter that I now turn.
My Lords, I have hinted already that we are here concerned with complicated and often controversial issues. The document with which the report deals is entitled:
"Proposal for a directive on procedures for informing and consulting the employees of undertakings with complex structures, in particular transnational undertakings".
So we are not dealing with a directive or even a draft directive but with a proposal for a directive.
There is, of course, one great advantage in having the document submitted at what I may perhaps call its embryonic stage, namely, that there is the opportunity to make comments that will be taken into account at the next stage of policy making and drafting. It sometimes happens that draft directives come before your Lordships' House at too late a stage for comments and criticisms to be able to have much effect. That is not so in the present case, where we are dealing with a proposal of great importance at a very early stage. We have reason, indeed, to believe that amendments have already been proposed in the European Parliament.
Further, there is also reason to believe that before its submission the document had already been amended in one important respect. It was originally intended that it should apply only to transnational undertakings. But it was pointed out that this would be discriminatory in relation to undertakings which were not transnational, and that the same rules must apply to all complex structures, whether transnational or confined

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to one member state. Hence the wording of the title, which is clearly intended to be universal in its application, with what is almost a postscript saying, "in particular, transnational undertakings". It may be that the balance of the proposal has been jeopardised by this change. Certainly that change introduced the vexatious issue of the Community trying to legislate outwith the Community.
I am deeply aware that there are a great many of your Lordships who are infinitely more knowledgeable in this field of industrial relations than I can ever hope to be and I hope that they will forgive me if, by contrast with their lifelong experience and accumulated wisdom, what I have to say seems naive and jejune. What I propose to do is simply to concentrate on the five headings of the summary of the committee's conclusions and expand briefly on each.
The first statement is that:
"There is a need to improve information and consultation procedures".
Naturally, the committee heard a good deal of evidence on this point from both sides of industry. I wish, incidentally, that we could stop thinking and talking about "sides" with the inevitable suggestions of opposition and conflict. But I think it would be artificial for me to import some newfangled neologism into the accepted vocabulary. Naturally, the views expressed were very diverse, ranging from a belief that everything in the garden is lovely to the complete opposite. But those extremes were rare, and as our discussions proceeded the armies embattled in their fortresses in the hills came down into the plain to talk with each other amicably and constructively. Far more frequent and authoritative were opinions that things were not all that bad but there was plenty of room for improvement and that, in so far as this might require a change of approach by employers, it need not unduly embarrass them.
The crucial questions, of course, are: What sort of improvement and how do we bring it about? Here the committee found helpful the distinctions which the Industrial Society drew in their evidence to us between briefing, consultation and negotiation. One of our witnesses reckoned that 50 per cent. of what goes wrong in industry is due to misunderstanding. So these distinctions are not merely semantic, but represent a positive analysis with a view to greater clarity in policy-making and in practice.
"Briefing" is downward communication through the management chain, including supervisors; "consultation" provides formal channels of two-way communication through representatives elected by employees: and "negotiation" is the trade union/ management procedure through which the two parties jointly agree on a course of action. Of course, those distinctions and definitions do not solve the problems, but the observance of them might lead to far less misunderstanding and therefore to greater mutual trust and increased efficiency.
Three important questions arise here. First, how much in real life do employees want to know? Obviously they want briefing and consultations about matters which affect their own business and bosoms, projected closures, plant reorganisations, working conditions and so on. But are they really interested
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in receiving information about far-flung subsidiaries in other countries of the Community, often concerned with products and fields of operation totally different from their own?
Secondly, do they want the information relevant to their own jobs to come down the line until it reaches them individually, or do they want it to be conveyed to them only by their elected representatives? Thirdly, on either route, what guarantees can be required or given about the confidentiality of information the disclosure of which might be of value to a rival firm? On those points there were marked differences of opinion among our witnesses.
That leads me to the second of the committee's conclusions: that the proposed directive, as at present drafted, is too detailed and too doctrinaire. Documents from Brussels are sometimes criticised as opaque, ambiguous, tortuous or, more succinctly, "wet". None of those adjectives could be applied to the present one. The trouble is rather the opposite: that it is too sweeping, too detailed in what it tries to cover and too rigid in its approach. The doctrinaire goal of complete harmonisation is pursued with little regard for the widely differing histories, traditions, practices and procedures which exist in member states in this highly sensitive field of industrial relations. The attempt to impose a black and white uniformity is likely to produce more problems than it solves.
Nevertheless—and this is the committee's third conclusion—things cannot be left as they are. Without going the whole hog of imposing uniform mandatory requirements throughout the Community there is a fairly general recognition that voluntary arrangements, often made piecemeal and ad hoc, are not enough. The Committee recognise that many companies do have excellent information and consultation arrangements; but unfortunately there still occur examples of poor or almost non-existent consultation on matters which may involve very serious consequences for employees. There are confusions, inconsistencies, sometimes contradictions; and there is often a reasonable complaint that, "We don't know where we stand". It is also the case, according to evidence received, that in the area of communication and consultation formal legal backing for procedures is less extensive in the United Kingdom than in other member states. What, then, can or should be done?
In its fourth conclusion the committee makes a suggestion for consideration by your Lordships' House and, it may be hoped, by the Commission. It is that instead of a detailed and all-embracing directive there should be a framework directive, supported by an agreed body of guidelines. The directive would set out clear objectives and minimum standards to be observed throughout the Community and guaranteed by legislation throughout the member states. It would be what I think is sometimes called the "rock-base".
The practical steps by which these standards should be attained would be taken in accordance with the guidelines, and would doubtless differ from one country to another in the light of its presently existing position and procedures and its legislative practices. There were, indeed, those among our witnesses who held that the existing OECD guidelines and the ILO tripartite declaration were of themselves sufficient,

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without legal underpinning. But the committee decided—some of its members with some reluctance—that a basic minimum of mandatory authority was necessary.
It would be easy to dismiss this suggestion as "a typical British compromise" or even as a piece of mugwumpery. I think that that would be unjust. If the present position is recognised as unsatisfactory, and if the root and branch approach of the Commission is recognised as insensitive, what is wrong with proposing a solution which tries to combine the advantages of each with avoidance of the disadvantages of both?
Therefore, I come to the committee's final conclusion. This, not unexpectedly, is that the Commission should pursue further consultations and arrive at a redraft which will be more acceptable to the social partners; and there are indications that the Commission itself now considers that this is necessary. Apart altogether from national Governments and legislatures, the European Parliament and the Economic and Social Committee are known to have views, some of which, I have reason to believe, are being put forward in Strasbourg at this very moment. As I have already said, there is general agreement that something positive should be done in this extremely important field, where attitudes have perhaps become unnecessarily polarised. The question is, What? I hope that this report and your Lordships' observations on it today may play some part in answering that question in a positive and fruitful way. My Lords, I beg to move.
Moved, That this House takes note of the report of the European Communities Committee on employee consultation (37th Report, H.L. 250).—(Lord Wolfenden.)
3.12 p.m.
Lord McCarthy: My Lords, I should like to begin by apologising to the House in general and to the noble Lord, Lord Wolfenden, in particular, if this debate goes on beyond six o'clock, because I am afraid that at that stage I have to leave to fulfil another engagement. Perhaps it will not, and I hope that it will not; in that context I shall try to be as brief as I can. As regards my own remarks, I should like to do four things. First, I should like to congratulate the noble Lord on another valuable report, one of many valuable reports that he has produced over the years.
Secondly, I should like to say something about the nature and significance of the draft directive as I see it today, because I do not totally agree with his view and his committee's view on the significance of the draft directive. Thirdly, I should like to say a little about the arguments of the opponents, and in particular the opponents as they are represented by the CBI and by the Government. Finally, I should like to pose one or two questions to him as a representative, if he is, of the committee's general views.
First, of course, it is an admirable summary of the position, and in general terms I think that I would agree with four out of five of his conclusions. I cannot agree—and I want to say why subsequently—that this is a too detailed and doctrinaire directive. I think that on the whole it is a rather general and modest
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directive, but I shall come to that later. Nevertheless, it is an admirable report; not least is it an admirable report in the evidence which it put in and in the very useful summary of the state of research in this subject, which is contained in the report as a part of the appendices. Indeed, I make no bones about the fact that I am always on the lookout for examination cribs, and those parts of the report will make an excellent examination crib; indeed; so far as I am concerned, that is what they will be used for. Therefore, in general terms it is an excellent report and I am sure that we should all like to thank the noble Lord and the members of the committee for producing it for us.
Secondly, on the nature and significance of this report, I should like to say that I regard it as a modest, flexible and more than justified series of proposals. It is a modest series of proposals for a number of reasons, some of which, in fact, the noble Lord mentioned. The first is the scope of what is suggested. As he rightly said, we are taking the breakdown of the industrial society; we are talking about consultation, about the passage of information, about briefing people. We are not talking about the nasty, dirty business of negotiation and collective bargaining. As a result of this draft set of proposals, nobody will be forced to agree, negotiate or bargain with any dirty trade unions. It is not that kind of thing at all; it is much more elevated, modest and moderate. So it is modest in its scope.
However, if you look at the subjects which are listed, you will see that they are relatively modest and noncontroversial. Employees are to be told about the economic and financial situation in their organisations; they are to be told about their employment prospects, about any rationalisation plans, about closures and the consequences of closures for them. So in terms of the subjects listed I would say that this is a modest and non-controversial list and that any decent employer would want to tell his employees about matters of this kind.
However, it is also modest in the details of what you need to be told under these subject headings. For example, you have to be given the reasons why the employer intends to do things. You have to be told about the impact on the workforce of these various decisions; for example, in particular, closures or partial closures. In both these respects, I would say that this is a modest, reasonable set of proposals and, as I say, it has nothing to do with collective bargaining. If anyone says that it is unusual, that, of course, cannot be sustained because in both these respects, as regards the subject matter and what needs to be told under the various headings, the Commission is following the actual model which was found to be acceptable by all member countries in the case of the draft statute for the proposed European company. There were no great outcries when these lists were put forward for the proposed European company statute, and in broad terms Article 5 and Article 6 follow those words.
Therefore, in these respects I would say that this is very modest, and it is very reasonable in respect of what is provided for the protection of confidentiality. Once again, the models here are previous EEC models. I challenge anyone to say that the proposals for confidentiality and the protection of confidentiality in this draft draft directive would rule out of account,

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for example, the kind of generally satisfactory proposals —which have caused employers very few difficulties—which we have in the Employment Protection Act at the moment. No one would suggest, for example, in the disclosure provisions that the kind of protections for confidentiality—which under the Employment Protection Act have been administered by the CAC and by Professor Woods as chairman of the CAC—would not hurt a fly. Yet these are the kind of protections which, I would suggest, could be perfectly easily encountered under Article 15 of this draft draft directive.
Finally, on grounds of modesty, the sanctions which are to be imposed, if the employer does not carry out the provisions of this draft draft directive, are also reasonable. Indeed, they are left to the country concerned. Once again, in this draft directive there is no reason why we should not have the kind of sanctions which we have at the moment for the disclosure provisions under the Employment Protection Act. No one would suggest that they are unfair, invidious or impose great fines and penalties upon employers.
Therefore, I would say, first, that this is a modest set of proposals. Secondly, undoubtedly it is flexible. I do not see how anyone can say that it is rigid and doctrinaire. It is extremely flexible. For example, there is no insistence on a particular model of consultation on the workers' side. Nobody is saying that we must have statutory works councils, as for example they have in most countries in the Common Market and on the mainland of Europe. Nobody is saying conversely, as was said for example in the majority report of the Bullock Committee, that we must have joint shop stewards' committees. You can have what you like. It is quite open. No one is insisting that these procedures of consultation should be dominated by trade unions, or that non-unionists should be excluded. All this is left to the country concerned and the way in which a particular Government might want to do this.
There is specifically stated in the draft draft directive that there should be a respect for existing practice. As I have said, you can do what you like on the question of sanctions. In any case, as the noble Lord, Lord Wolfenden, has rightly said, we are at a very early stage in this draft draft directive. All we are really being asked to do at this stage is to say whether we agree with the general approach; that there should be this general set of subjects with this general requirement to consult, the institutions to be worked out subsequently; and whether at the end of the day there should be some legal underpinning of this system. This is all we are really being asked to say at this stage.
We know that this will not yet appear before the European Parliament or its Economic and Social Committee. We know in fact that we shall be extremely lucky if this draft directive becomes a directive by the end of 1983, so no one can say that we are being rushed. The only firm commitment, I put it to the House, in this directive from which there is no real escape is that there must be a consultative committee, an information giving committee, at the level of the central authority of the enterprise. If the central
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authority of the enterprise is outside the European Economic Community, then there must be a consultative committee of some kind in the largest subsidiary of that organisation in the EEC. This is the one firm commitment in Article 7.
Again I would say that that is an eminently reasonable proposal, and anybody who does not agree with this is really not arguing in favour of the development of consultation in this country at this point of time. Therefore, for this reason I would say that the proposal is eminently justified, especially in the United Kingdom, for several reasons. First, as the noble Lord has said, the research evidence collected by the committee shows that we are in fact in a relatively poor position so far as consultation is concerned in this country as compared with our European friends, especially above the level of the plant.
There are virtually no procedures for consultation in the large private sector conglomerates in this country. No negotiation. No consultation. Most interaction between the representatives of employees and the representatives of management takes place at plant level and below. All the research indicates this, and therefore for these reasons this proposal is eminently justified, particularly in this country. But in general terms, as the noble Lord has said, we have done less than any other country in Europe to improve this situation by legislation. Indeed, very large parts of this directive are already in operation over large parts of private and public sector industry in Germany, France, Belgium, and other EEC countries.
In this country we have virtually no legislative support for consultation outside the area of redundancy and disclosure. Whereas most other countries in the EEC have some form of worker participation at board level, we no longer talk in any way about the implementation of the fifth directive. At least during the period of the previous Conservative Government from 1971 to 1974, somewhere in the basement of No. 8, St. James's Square an assistant secretary toiled away trying to produce a draft White Paper or Green Paper on industrial democracy. Now we do not hear about that any more. Nothing whatever is being done to extend consultation, or information processes, by legislation or legal support by this Government in this country.
In all these ways we contrast very sharply with virtually all other European countries. Yet the curious thing is that we prate more than almost anyone else about the virtues of consultation. We prate about our conflict ridden system of collective bargaining dominated as it is, we say, by the confrontational element of trade union and employer wage bargaining. Yet we know that this is partly at least, not entirely, the historical result of the fact that the British system of industrial relations gives great power and great influence at the bottom where the considerations on the workers' side are always sectional, always short term, and bound to be narrow in their incidence. Whereas we have virtually no dialogue going on at all at the level of the company, or the corporation, in large parts of British industry. So that all the British worker can do about a closure when he learns about it is to strike, or conduct a sit-in. So for all these reasons I would say that this is a modest, reasonable, flexible, justifiable set of proposals.

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So I come to my third point, which is the opposition. I should like to take first the opposition of the employers, and in particular the opposition of the CBI. As I understand the evidence which the CBI gave to the Select Committee, they said that the draft draft directive was a dangerous affair because of three things. First of all, they said it would lead to conflict and litigation. A strange thing for the CBI at this moment in time to be worried about. There you are—it would lead to conflict and litigation. They said it would lead to a situation in which workers were showered with unnecessary information; and they said it would undermine local management initiatives.
One could spend a lot of time going into the reasons why the employers say these things. In some ways it is quite natural that an employers' association should say these things. There are two answers to them. The first short answer is that, of course, so far as this country is concerned they said similar things about the Employment Protection Act, the Equal Pay Act, the Redundancy Payments Act, and about every attempt to introduce positive employment rights from the beginning of the Factory Acts. The second thing to say about them of course is, as our friends in the European TUC said to the committee, they are not alone, because all European employers' associations said much the same thing; in particular in Germany at each stage of the co-determination experiment since the war. They all said it would lead to conflict and litigation. They all said it would do no use to give workers this unnecessary information, and they all said it would undermine management initiative. Nowadays we know of course that you cannot move for distinguished employers from continental countries in Europe coming to seminars in this country to explain how their system of co-determination is the main reason why they are so much more productive than we are.
In fact, the central problem in consultation and information is completely the reverse. It is not that it leads to litigation. It is not that it showers workers with useless information. It is not that it undermines the employers' authority. It is that you have great difficulty in getting the workers, and even the representatives of the workers, to read what they should read—or what you think they should read—about the actual day-to-day problems of the company, and to ask the right questions about how they can make their contribution to overcoming those problems. Without the correct framework—and as the continental countries have found, without, if necessary, the correct framework underpinned by legislative provision—you cannot get the kind of information flow and the kind of dialogue at the right level in the organisation at which this whole process can begin.
Now a few words about the attitude of the Government, and it was an amazing position which was advanced to the committee by the luckless Mr. Galbraith, who I may say, I do not blame; he had his brief and he followed it through. He was asked the things we ask our civil servants to do; he was asked to advance two mutually contradictory, fallacious arguments: first, that employee involvement is essential but that it is possible only on a voluntary basis; as he put it:
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"where managements themselves want such improvements and employees are willing to respond".
That was the first proposition. The second was that, given the widely different circumstances which operate in particular companies—I ask noble Lords to pass over why that is so—it would mean that,
"the imposition by law of a single inflexible system would cause serious problems and undermine useful voluntary initiatives which are already taking place".
I ask the House to set aside the fallacy within a fallacy, to set aside the fact that this comes from the spokesman of a Government prepared to impose any inflexible system you like in relation to a whole range of EEC regulations which have affected a large area of British economic life, from settling the fate of the British kipper to the reform of British companies.
On this analysis, there could be no basis for the Factory Acts, for health and safety legislation, for race discrimination legislation and even for wages councils, because, of course, all these pieces of legislation were created in circumstances where either management or employees, and sometimes both, failed to see the need for such things. And they all created some form of legal system which the opponents of legislation at that time said was an inflexible system which prevented voluntary initiative. As I say, on this argument, the whole range of positive labour law could have been resisted, and maybe the Government will go on, on this basis, to repeal it all.
But it is not only positive labour law which would fall under this two-headed monster which the luckless Mr. Galbraith has been asked to put forward. On this basis, what becomes of the Employment Act 1980? Surely the exclusion of trade union membership, the legislation on secondary picketing and the provisions on the closed shop were all denounced by the trade unions because they said they undermined useful voluntary initiatives. And certainly we did not have a situation in which both management themselves wanted such so-called improvements and employees and trade unions were willing to respond. I leave aside what the consequences would be for what we shall no doubt in the coming months come to call Tebbit's Folly—all the proposals in the next Industrial Relations Bill for destroying the immunity of trade unions and the protection of their funds, for abolishing all forms of secondary picketing and for abolishing the present parity of compensation in respect of unfair dismissal. No doubt those will be opposed by one or other of the parties, who will say that they destroy voluntary reform and regulation. I venture to say, however, that the Government will nevertheless turn a deaf ear to those arguments on that occasion, although they would not expect us not to remind them on that occasion of the arguments they are using on this occasion.
The truth of course is that, from the mouth of the Government, talk of voluntarism in this area is like patriotism, the last refuge of the scoundrel. In fact, voluntarism in industrial relations is a name given by an academic, Professor Otto Kahn Freund, to the agreement in the 1950s of both parties, employers and trade unions, with the present state of labour law, both positive and collective labour law. On the whole, in the 1950s, and even in the early 1960s, the parties defended the status quo, and it was defence of and satisfaction with the status quo which was what volun-

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tarism meant. The fact is that we no longer have any agreement on the status quo. Developments in Europe in positive labour law, the actions of the judges in undermining the 1906 settlement and the counterattack of employers and Conservative lawyers on trade union rights have destroyed agreement about the status quo and all meaning of the word "voluntarism". A defence in terms of voluntarism means, "I don't want it" or, "My side won't have it".
The sensible man, if he wishes to criticise any set of arguments for extending the area of legal regulation, will not talk about voluntarism; he will ask, "What is the balance of rights here?", "Whose rights should and could be advanced by law?", "What is the utility, the use, of what is being suggested and will it help the progress of good industrial relations?", "What do they do in other countries?", "Is what we are doing rather insular, or can we show that in other countries things like this have been happening for some time and in fact they have had beneficial effects?" If, in terms of the balance of rights, the utility and the comparative position, he comes out in favour of an argument which supports a particular set of proposals—as I think these arguments support this set of proposals —then he will argue in favour of them and not fall back on talk about voluntarism.
Therefore, my final point to the committee is to ask the noble Lord, Lord Wolfenden, whether he will say what it is about this draft directive which his committee regarded as too detailed and doctrinaire. I cannot see it. Other than that, I wish to thank him once again for initiating this debate and for summarising, in the extremely valuable way he did, his report. Mr. Justice Wills once said to F.E. after a very long exposition of his case:
"If that is your argument, Mr. Smith, I am no wiser".
To that, F.E. replied:
"No, my Lord, but perhaps rather better informed".
I suggest that in this debate today, because of this report on employee consultation, we have been made both wiser and better informed.
3.38 p.m.
Lord Rochester: My Lords, from these Benches wish to join in thanking the noble Lord, Lord Wolfenden, for the clear way in which he introduced the debate and, for my part, to say how grateful I am to him and the members of his committee for allowing me to join in the discussions on this crucial matter. I am glad also to associate myself, subject to one important qualification to which I shall return, with the conclusions reached by the committee and expressed in the final paragraphs of the report.
It is plain that employers are at variance with trade unions on this proposed directive. I am therefore glad that the Commission are now contemplating a redrafted directive, for, in this matter of employee consultation in the Community, I am convinced that it is best to seek the widest possible support through international consensus. It follows, in my view, that the use of the law should be limited at this stage to certain clearly defined minimum standards, supported by a code of practice which recognises the complex differences between the social, legal and industrial
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systems in the various countries that comprise the Community.
Let me now get out of the way as quickly as I can the more negative parts of what I have to say. Unlike the noble Lord, Lord McCarthy—and he made a number of points with which I disagree, but I shall not spend such time as is available to me in crossing swords with him—I subscribe to the general view of the committee, expressed in paragraph 67 of the report, that as at present drafted the proposed directive is indeed too detailed and too doctrinaire, and 1 shall endeavour briefly to take up the challenge of the noble Lord, Lord McCarthy, in saying why I think so.
From Articles 4 and 5, for example, it is clear that existing national legislation would need to be supplemented in order to ensure that employees receive such additional information as would enable them to obtain a full and comprehensive picture of the activities and the results of the undertaking as a whole in the various countries in which it operated. But as one of the papers received by the committee put it, the emphasis should surely be on quality of information, rather than on quantity, and in my experience employees' representatives are normally satisfied to have that information which affects those whom they represent or is relevant to their activities.
Then again Article 5 makes it plain that if national management is unable to supply the information required, employees' representatives will be able to-request it directly from the management of the dominant undertaking, even though the headquarters of the undertaking is located in another country. But that might enable employees' representatives to seek information from the management of the dominant undertaking without first notifying the management of the subsidiary of their intention, and that it seems to me would be altogether at variance with normal consultative procedures as I have experienced them in this country.
Then in Article 6 there is a reference to employees' representatives being authorised to open consultations with central management through what are called authorised delegates. But surely, under whatever conditions consultations with central management may be opened, at the very least it should be a requirement that those undertaking that task should be elected on a democratic basis. In the same article it is not, in my view, made sufficiently clear that, although the expressed aim of such consultations is to reach agreement, the exercise would remain one of consultation rather than of decision-making. Moreover, as to the substance of the information to be provided, although I can understand, and even sympathise with, the concept that employee representatives, and for that matter employees themselves, should have rights to as much information as shareholders, I cannot for the life of me see why they should have more information.
Lastly on this aspect of the matter, there is the now notorious so-called "hostage provision" in Article 8, under which in the case of firms whose decision-making centre is located outside the Community, the management of the subsidiary employing the largest number of people in the Community may be held responsible for fulfilling the obligations imposed on the management of the whole undertaking. That criterion could lead to legal responsibility falling

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upon a company in a Community country other than that in which the offence against the directive has taken place. It might be that the subsidiary thus arbitrarily selected was excellently managed, but because it operated in a field of production different from that of the transgressor, it would not have the particular knowledge needed to obtain the appropriate response from the headquarters of the undertaking in another continent. Surely there must be some more rational means than those which could be used to deal with such a situation.
I have mentioned those points to indicate my agreement with the committee's view that the proposed directive needs extensive revision before it can be accepted. But having got all that off my chest, so to speak—and I do not doubt that other noble Lords will wish to elaborate further on some of those points—I should like now to draw on my experience in industry by making as constructive an approach as I can to some of the basic questions that the proposed directive raises.
I should perhaps first remind the House that in the view of my party British companies of the kind that we are discussing should have supervisory boards of directors and that in them employees should have equal rights with shareholders in electing to such boards directors who would thus be representative of both groups rather than of one or the other. That course is surely much to be preferred to other arrangements that have been canvassed in recent years for so-called worker-directors. However, that is a matter that has to do more with the fifth directive than with this one, and it is concerned with co-determination rather than with consultation.
In Western Germany there are already supervisory boards on which representatives of the employees sit. Indeed, the German subsidiary of the great international company for which I used to work is run in that way. My own feeling, for what it is worth, is that if the attempt were to be made immediately to transplant any such arrangement into this country, our existing culture could not tolerate the shock; and that is not to say that it is an unworthy objective at which to aim. But in my view employee participation will flourish here only through organic growth, which starts at the bottom and works upwards, rather than the other way round. Everywhere, however, the seed should surely be sown.
I am firmly of the belief that it should now be made a statutory requirement for all undertakings employing more than a certain number of people to set up consultative committees. Before decisions are taken on specified items that directly affect employees, such as investments and plant closures, in my view it should be made obligatory for management to discuss those matters with employee representatives.
And here I come to the qualification that I mentioned at the beginning of what 1 have to say. This is, I realise, to go a little farther than is envisaged in paragraph 69 of the report before us, in which it is suggested that a code of practice embodying guidelines should require organisations to set up consultative committees. But, in my view, as I endeavoured to make plain in the committee, by definition guidelines cannot have mandatory effect, and it follows that this particular requirement should form part of a revised
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directive, rather than merely be incorporated in a code of practice. Such a step would be timely because, as I see it, it would simply be a matter of building on the present practice of the most successful undertakings in the Community, including companies in the United Kingdom. For the rest I am content for the time being that guidelines concerning procedures for consulting and providing information should be put in the suggested code of practice, and of special importance, as the report recognises, is the point that such procedures should clearly be distinguished from collective bargaining.
The organic growth of which I have spoken has certainly worked well in my old company, for in this country it has had works councils since its inception 65 years ago, and there are now integrated consultative committees at divisional and company level, capped at the top by a representative central business and investment committee.
Paragraphs 24 and 25 of this report note the view of the European employers' organisation (I really dare not pronounce it by its French title) that where this proposed directive,
"draws on the legal requirement to inform and consult which already applies in some member countries, it overlooks an important factor. In those countries the law 'also defines the duties of the employee representatives'. It stipulates or implies that the Works Council's function is to' aim at co-operation between the employee representative and management in the interest of the efficient running of the enterprise'.".
The British Bankers' Association, in their evidence, argued that the proposed directive,
"is heavily influenced by the practices of countries that have 'a Works Council structure divorced from trade union machinery'. This is not the case in the United Kingdom".
To that, I think I would have to say: So what? We have to deal with the situation as it is, and not as we might like it to be. In a unionised company in the United Kingdom employee representatives will by definition be union members, often shop stewards, being consulted at one time and negotiating at another. But we cannot, on that account, get off the world.
Paragraph 66 of this report says:
"The Committee believe that employee demands are not likely to go away".
Just so. Faced with increasing demands from an educated workforce to be more fully informed and to exercise more influence in the making of decisions that affect them, we must make a positive response. The president of the CBI, Sir Ray Pennock, recognised this need long ago. If we simply stand still British employers will find, eventually, that regulations are imposed on them which are far more stringent and less acceptable than those we are now discussing. Of course, all this places a tremendous additional burden on management in this country to achieve with their employees a shared understanding of business realities, but it is only by providing relevant information and adequate facilities for consultation that that will happen.
There is one more thing that I want to say about the provision of information, and it is in strong support of the evidence given by the Industrial Society to the committee, to which the noble Lord, Lord Wolfenden, referred in introducing this debate. Providing

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information to the representatives of employees is not nearly as important, in my experience, as that management and supervisors should regularly tell employees themselves, in small groups, face to face, what is happening and why, and how what is going on in a particular department affects or is affected by happenings up or down the line. As Mr. John Garnett, a director of the society, stressed to the committee, it is no use looking to employee representatives to pass down word from management. That is not just because the message will become distorted in the telling but because employee representatives are elected to represent the views of their constituents to management and not the other way round by doing the job of management for it, and if that principle is not observed employee representatives will fall flat on their face, they will be dubbed "bosses' men" and they will simply cease to hold office. In conclusion, I would simply say that although this draft directive is not in my view acceptable in its present form it has performed a useful service in reminding us of the needs of British industry in this vital matter of employee participation.
Lord McCarthy: My Lords, before the noble Lord sits down I wonder whether he could reassure me in what I seem to see as a conflict in the direction of his criticisms. Is it not true that most of the suggestions he proposes want to make the directive more vague and imprecise—for example, what he says about Article 5—but that one or two seem to want it to be more specific? For example, in Article 8 he wants to specify a way of making external organisations responsible; and, most particularly, in Article 6, as I understand him, he wants to insist that the representatives should be democratically elected. This would make it much more precise, and surely that is in conflict with the other things he says.
Lord Rochester: My Lords, I am glad to have this opportunity to make it plain to the noble Lord, Lord McCarthy, that the whole tenor of my remarks was intended to be directed to the proposition that the law should play as little a part in all this as possible. I hoped I had made it plain that there was one exception to this, in my view; namely, that the time had now come when consultative committees should be set up in companies over and above a certain size, and that the employee representatives on those committees should have the right to be consulted about certain specified matters.
3.56 p.m.
Lord Redesdale: My Lords, may I first apologise to the House that I may have to leave before the end of this debate, and hope that your Lordships will not consider this discourteous. I am afraid, however, there is a flight that I must catch tonight, and it is the last one. I should also like, right at the outset, to thank and congratulate the noble Lord, Lord Wolfenden, on introducing this debate and in putting forward his views so clearly; and I would also congratulate his committee on preparing such an excellent report on the draft directive, which one knows so much better as the Vredeling proposal.
My Lords, I have to declare an interest in that I
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work for an American multinational bank. However, this puts me in an excellent position to know how multinational corporations actually work, which is very different in fact from the way the proposers of the draft directive believe these operations function. These misconceptions are a very serious flaw in the drafting of the proposal as it stands. However, the proposer obviously started out with the very best of intentions to produce legislation that, through greater disclosure of information, would result in greater security of employment and improved industrial relations. Let me state here and now that I know that most multinational corporations fervently wish to improve industrial relations, and also believe that good communications result in a better informed workforce that overall works to everyone's advantage.
However, what is really necessary information is the crucial point in this directive, and it would seem that Mr. Vredeling and his supporters have become somewhat over-enthusiastic as to the degree of disclosure that they require. This would result, not only in a flood of useless information but also in the disclosure of trade secrets and other sensitive information that would put companies operating within the EEC at a very dramatic disadvantage in relation to those operating outside the area. In fact, this disadvantage would be so severe that it is not an understatement to describe the directive as it stands as a recipe for European industrial disaster.
The conditions laid down in its present form (I stress "its present form") are so rigid that their imposition, when developed even further and applied by the draft directive to industries, would inevitably produce an enormous and pointless bureaucracy that would soon stifle even the strongest companies that are already having a hard time in maintaining their position in the highly competitive markets of today. The inevitable delays in decision-making, reduced competitiveness and inefficient working could regretfully result in forced closures with huge job losses. This is just the opposite of what the directive sets out to achieve.
Let us just see how tough and significant is the nut which apparently requires such a massive legal sledgehammer to crack. It would seem that the proposers believe that telegram closures of plants by multinationals are an everyday occurrence and have to be stopped whatever the cost to the rest of industry. In fact, the actual number of instances of bad industrial relations is infinitesimal when compared with the great benefits to the community that these organisations have brought. The present Commissioner, Ivor Richard, cites as the most blatant example the closure by our own nationalised British Leyland of their Belgian plant. Regrettably competitive markets sometimes do become totally uncompetitive, but most multinationals have gone to enormous trouble either to transfer work or, in the end, to ease the closure as much as possible.
The record of the multinationals overall has been excellent and, when it comes to the American multinationals, their record is particularly good. Many subscribe to the OECD guidelines and have an excellent record of industrial relations. They have invested more, contributed more to the economies of their host countries, pay higher average wages, have higher productivity rates and do their best to observe all the laws and regulations of the countries in which they operate,

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because they wish to go on operating there and, if possible, to expand; and this, in turn, necessitates good relations with national Governments and labour.
So, my Lords, a lot more could be lost by rigid disclosure legislation than could be gained. A wide range of companies and trade associations have spent a considerable amount of time looking at the draft directive and consider that it would reduce the competitiveness of EEC industry and result in a deterioration in industrial relations because of four main issues.
First, there is a requirement of the draft directive that forward plans should be disclosed in a number of areas that would normally include sensitive information valuable to competitors and therefore dangerous for an organisation to allow to become public. This sort of disclosure could well reduce the profitability of the company and consequently adversely affect employment prospects for the whole workforce. Even with the very best will in the world, the more people who know a secret the less secure it becomes. Of course not all the information that has to be disclosed is particularly sensitive, and there are very good industrial relations reasons for keeping the workforce well informed. But there is a world of difference in degree between sufficient information and total disclosure. Disclosure and consultation is much better handled by national laws that are consistent with local practice.
Secondly, over-regulation of business leads directly to inefficiency. The draft directive would certainly result in an organisation having to create a structure of information disclosure and consultation that would be extremely inefficient and costly, and that would delay decision-making and thus reduce the competitiveness of the companies. The directive requires the disclosure of so much information about other subsidiaries that much of it would be of no interest to the employees of the one subsidiary concerned. In fact, it would be vastly time-consuming and counterproductive. The OECD guidelines should be enough to provide the indisputably necessary information. As far as consultation is concerned, there the law should cover only those areas of job security such as major redundancies or plant closure. It should be specific and apply at local level, leaving all other consultation on a voluntary basis.
Thirdly, the draft directive establishes significant rights for employee representatives. This means that all workers must be represented. This is no problem in Germany or Holland but it is a problem here, where employee representation is voluntary and normally through the trades unions. Consequently, this either totally enfranchises the unions or requires a different form of representation, as in Germany.
Fourthly, the proposal diminishes local management authority by giving employee representatives the right, at their own discretion, to go over the heads of local management to a higher level for additional information and consultation. This is contrary to the OECD guidelines as well as going against national laws which are there to ensure that local management has full and proper authority to act according to the rules and regulations of the country. Everything prior to the directive was moving in the direction that good industrial relations require discussion and consultation at a local level. By encouraging employees to go
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over the heads of local management, the latter's authority is diminished, with a resultant increase in conflict between the employees' representatives and local management.
My Lords, I would respectfully point out that multinational corporations decentralise much authority to local management so that decisions can be made more quickly and can take into account local conditions. Nearly any decision affecting a subsidiary is either made locally or, if at a higher level, only after taking into account the recommendations of local management.
The directive relies primarily and very heavily on German and Dutch law, which is very, very different from that of this country. To a layman, German law seems to be based on the principle that an action has to be proved legal, whereas in the United Kingdom that action is legal unless it is actually prohibited. In Germany, for instance, you are not allowed to use your lawnmower unless you use it at certain specified times and below a certain stipulated level of noise.
But, my Lords, these rigid conditions are taken a great deal further in the directive. The evidence in the report shows that much of the proposed law is of a very innovative nature. Also, it relies heavily on other draft directives that are so controversial that they will certainly be very considerably modified before they ever take the force of law. So it seems somewhat ridiculous to stipulate and enforce such concepts as employee representatives when the proposals for revising company structure are still under discussion. It would seem that this legal egg should come after the proposed legislative chicken.
Going on from here, the way in which the employee representatives would have the right to veto any decision unless they were totally satisfied with not only the information but also the outcome of the consultation would put companies in a totally one-down position. The definition of consultation with a view to reaching agreement is itself so unclear that it could be interpreted in many different ways. In fact, it could be interpreted in any way the employees' representatives wish, producing the ultimate "Catch 22" situation.
Because of my involvement with banking I paid particular attention to the evidence submitted by the British Banks' Association, which is very clear and spells out the special dangers and problems that the directive raises in the form of total disclosure for financial institutions which are obviously dependent on confidentiality. I should like to draw your attention to page 125 of the report, in which their evidence shows the example of a US listed company being placed in the position that it might have to divulge information to its employees in Europe before it could notify the Stock Exchange in New York and thus might be deeming itself guilty of manipulation of the securities market under US law.
My Lords, I shall not weary you further with some of the other very considerable problems such as the hostage provisions or the tribunal procedures in Article 15. The draft directive has been forced through in its present very unsatisfactory state, presumably in the hope that by making it wide enough, part of it will become legislation in the end. This is not a happy state of affairs because, although the

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intentions are good, the effect would be catastrophic. The point that alarms me most is that yesterday in Brussels the Legislative Affairs Committee met and, as I understand it, the committee put through the draft directive with very minor amendments. Therefore, it goes through in an almost unchanged state. Much of the evidence put forward in this excellent report shows that it needs dramatic changes. If it goes through and is passed by the European Parliament, it will have to be vetoed by the Council of Ministers. Then the best thing is that it should be sent back to the Commission and discussed again from scratch with all the interested parties so that a more satisfactory and workable form of legislation is produced.
4.10 p.m.
Lord Seebohm: My Lords, the noble Lord, Lord Wolfenden, has explained in his normal skilful way the feelings and findings of the committee and I do not think it is necessary for me to make a long speech. I should also like to take this opportunity of congratulating the noble Lord on the skilful and charming way in which he handled our witnesses during the process of our examination. It was extremely well done and he managed to extract from these distinguished people all the information that he required.
In view of the fact that there are almost certain to be major alterations to the draft proposals that we have been studying, it may be felt that this debate is somewhat unnecessary. In fact, I believe that the opposite is the case. I understand that the Commission, and people in Brussels, pay very great attention to the reports of Select Committees of your Lordships' House and also what is said in these debates. So it is incumbent upon us to make what contribution we can from here. As has already been pointed out, the pressure for the proposed legislation has come from the trade union side and is not only concerned with the clarification of employees' rights in a capitalist society, but also to increase trade union power and influence over management decisions. As a result, there has been an almost unanimous opposition from employers and employers' associations.
Some of the main objections from the employers have already been touched upon: that the implementation of the proposals is impractical; secondly, that the importance of confidentiality has been played down far too much; thirdly, that the proposal that employees' committees should be empowered to obtain information from holding companies over the heads of the subsidiary's management is quite unacceptable—as has already been mentioned by other speakers—and in any case if the headquarters is situated outside the EEC I do not believe that it is enforceable.
While I have considerable sympathy with these views, I must admit that some clarification of the rights of employees to relevant information is desirable and I believe also that too much emphasis on the importance of confidentiality is being expressed by employers. Nevertheless, I am in considerable doubt whether any detailed legislation will have the desired effect, and the suggestion that there should be a much more modest approach accompanied by codes of practice seems to me to be the right solution.
There is another aspect of the problem which I hope
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will be seriously considered and borne in mind by those composing the redraft of the proposals. That is that one of the foremost objectives of such legislation must be to improve industrial relations and not make them more difficult. You cannot make people either love or respect each other by legislation. A successful business will not survive unless, in the long run, the workforce has confidence in the integrity and ability of the management. Nor will the management be able to entrust the consultative committees or works councils with full and meaningful information unless these bodies are democratically elected and fully representative of the workforce as a whole. The composition and method of election of these bodies seems to me absolutely vital. Furthermore, as has already been pointed out, their role must be made clear; that is, whether they are consultative or decision-making; whether they are to come to agreement or agree to differ.
In business there are great varieties of management styles. No one method of personnel management, or any other part of management for that matter, is applicable to all companies. To start with there are fundamental differences between the management of service and commercial industries as opposed to manufacturing industries. Any attempt to bring in detailed regulations applicable to all these is just not on. Then there is the question of size. The present draft brings in all companies or firms that employ 100 or more people. In my experience, very few units with 500 or fewer employees need much guidance of this matter. In one factory I visited which had some 200 to 300 employees the managing director walked round the works every day when he was available, and nearly all problems were solved on the spot. In cases like this, which must be normal for the small business, legislation could only depersonalise the management/employee relationships if it was followed to the letter, which of course it would not be.
In my own case—if I may refer to a personal experience—my first senior appointment was in charge of an area of 180 staff. I found that in a comparatively short time I was able to get acquainted with all of them individually and in those days I never had a problem. My second appointment was over a staff of 400 and it was slightly more difficult and it took rather longer to get to know people well. Nevertheless, I found the same methods I had employed with the previous management had the same effect. The next move found me in charge of 1,000 people. At that point I found my normal informal methods broke down. I had to have various forms of consultation and representative meetings. I will not go into the other forms of management that I had to develop in that situation.
My points are that size and the type of business will affect management styles and management methods which can only be covered by legislation in the very broadest sense. It is perhaps worth making the point that in the end I came to disregard confidentiality almost totally and found that what I used to term "calculated indiscretion" was the best form of lubrication for good relations that I could discover. I think in fact it is worth repeating that when I developed that theme—admittedly I had a larger command—not only did results in staff relations

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improve remarkably but performance improved dramatically. I do not believe that we are going to legislate in sufficient detail to get the relationship that we require in industry: "The letter killeth; but the spirit giveth life".
Finally, I want to stress one more fact: that is, if we are going to have different legislation for companies which happen to be subsidiaries of holding companies and for those which otherwise are completely parallel in their function and possibly what they manufacture, it is going to be a nonsense. I strongly recommend the report.
4.18 p.m.
Lord Plant: My Lords, I too wish to thank the noble Lord, Lord Wolfenden, for chairing this committee and for the report. I also want to thank Mr. Vredeling, for when he was industrial commissioner he took the initiative in creating this first draft. He has been criticised; but, none the less, I for one support his draft. The EEC is taking the issues a great deal further and in greater detail then the tripartite declaration of the International Labour Organisation on Multinational Concerns and the guidelines of the OECD —which of course is not tripartite, but the ILO is.
I am aware how slowly the employers have moved on these issues. I understand their difficulties, but we have to search for a means of bridging the gap between employers and trade unions. We must be able to equalise opportunities for meaningful consultations. Arguments will continue whether the EEC directive should have legal backing and whether there should be some form of sanctions for those corporations which flagrantly disregard moral and legal agreements.
It is not unknown for concerns in Europe to receive telephone calls from the headquarters in the United States to say that they will close immediately. That attitude, of course, is stupid but it has occurred; and we must find ways of avoiding this in the future. Mr. Vredeling told employers at the Economic and Social Committee in Brussels last September to look a little beyond their noses and take more of a long look at the issues at stake, because there is a choice, and the choice is between consultation and confrontation. Mr. Vredeling went on to counsel against confrontation on the grounds that social unrest is lowest in those countries where the best solutions to this problem have been found—Germany, Netherlands and Denmark—and highest where the worst solutions have been found. He went on to say:
"This serves as a guide for the people who oppose the EEC's sensible proposals so ferociously ".
The European TUC and the British TUC maintain that employers' organisations are wrong to say that the EEC proposals interfere with existing and well-tried communication arrangements. Transnationally, these arrangements are woefully inadequate. The TUC will continue to extend the influence of the ILO, OECD and the United Nations on the behaviour of multinationals. For the EEC not to have brought forward this draft directive would have been a grave dereliction of their responsibility to the Community.
Your committee recognise there is more work to be done to achieve an acceptable draft: issues such as
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confidentiality, legal provisions and sanctions, specific guidelines and codes of practice must be spelt out. I am sure that the report now before us, and this debate, will be of great value to the EEC in preparing a final draft after wide consultations with Governments, employers and trade unions.
What my noble friend Lord McCarthy has said indicates the urgency of finding an acceptable draft. I personally would not move greatly from the Vredeling draft. We cannot overlook the fact that 50 per cent. of transnationals are controlled from the United States, and the OECD guidelines, to which the United States subscribes, are important. The United States had withdrawn from the ILO at the time of adoption of the ILO's declaration on multinationals. That was on 16th November 1977 and it was indeed my last ILO governing body meeting. They had been represented when the committee was set up in 1973 and I understand that they have, since their return to the ILO, subscribed to the ILO declaration.
The Research and Planning Division of the Department of Employment have for some time been monitoring industrial relations and consultation at the workplace. In fact, it was started when my noble friend Lord McCarthy was research director for the Donovan Commission. I understand there is now considerable activity to obtain up-to-date figures as to the extent of genuine consultation arrangements and company-wide committees. I hope the department will make an early report to us.
I support the observations of the noble Lord, Lord Rochester on workers' consultative committees. There is a difference between bread and butter negotiations and strategic policy consultation. We must urge all speed to find a solution to the problems before us. If we do not, the future is black. I was nurtured on the Whitley Council principle. It is not without significance that the Civil Service has dropped that title, and, I think, with unfortunate results. The noble Lord, Lord Wolfenden, said there should not be two sides in consultation. I agree; but first we must create or recreate confidence and trust. Then there will be real consultation, which is in the great interest of all concerned.
I do not disagree with the principles outlined by my noble friend Lord McCarthy, but I am sure he recognises that the trade unions themselves cannot draft the document: there has to be agreement. I want the greatest common factor, and if we are in too much of a hurry we may get the least common factor. This discussion will have done much to influence the thinking of the Government, of employers and of Brussels. I fully support the evidence we received from the TUC and the European TUC. I will conclude by quoting the last paragraph of that evidence:
"The EEC proposal is clearly subject to amendment on particular points. The TUC and the ETUC would like to sec a strengthening in some respects. But the important point is that the strategic purpose should be clearly understood and supported as being of great creative significance for the future of the advanced industrial democracies working in a world competitive market environment".
I hope that the document the committee has presented to your Lordships' House, and this debate, will carry this discussion further in Brussels and among Governments, employers and trade unions, with some positive results.
4.26 p.m.
Lord Plowden: My Lords, first, I want to congratulate the noble Lord, Lord Wolfenden, and his committee on having produced this admirable report, which brings into the open much about this subject of consultation, much of it contradictory. I speak as someone who believes strongly—I might almost say passionately—in the development of consultation and discussion in industry, because without this positive development and extension we shall not get the regeneration of British industry for which we all wish. But when one turns and looks at the proposals of the Vredeling directive, it seems to me they were drawn up by people who had very little or no experience of how British enterprise is managed; nor indeed of what it is that people on the shop floor really want to know.
I do not intend to list the numbers of things that the parent company of a group would have to provide twice yearly to its subsidiary companies—noble Lords will have read that in the proposals of the draft directive—but they are really quite enormous. The company of which I was chairman until a few years ago has in this country over 100 subsidiaries or sites where more than 100 people are employed, and we would have to provide this information to those sites twice a year.
Much of the information called for is not held centrally in a group such as the one with which I was associated, and in order to provide it a new bureaucracy would have to be set up. Indeed it would, I think, go directly contrary to the policies which all enlightened management is endeavouring to follow: namely, to pass decision-making down the line as far as it can. This would force decision-making up towards the centre. The noble Lord, Lord McCarthy, I think said it would weaken local management. The very fact that representatives could appeal over their head to senior management undoubtedly would weaken the position of local management.
But is what is proposed really what the man and woman on the shop floor really want to know? My experience in industry is that people want to know what is happening and what is going to happen to the site or the company in which they work. In my company, most people seemed to me to feel that they were working for Accles and Pollock or Tubes Limited, or the Churchill Machine Tool Company—not for Tube Investments. Their loyalties were to the local establishment.
If I may reminisce, when I worked on the shop floor nearly 50 years ago for a British subsidiary of an American multinational company, I am quite sure that what I and my mates wanted was to know what was going on in our company, not what Colonel Sosthenese Behn was intriguing about in Washington, or what was happening to the subsidiaries in Germany, Hungary or South America. I may say that no one told us anything about Colonel Sosthenese Behn, the other subsidiaries or ourselves.
The committee say they consider that any attempt to create the right climate and organisation by mandatory procedures would do great damage. But, on reflection, they say that they reluctantly come to the conclusion that some legislation is necessary. When I first read the report I, too, reluctantly accepted that some directive was expedient, but since then I have
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had very considerable misgivings. How would one frame a directive which took account of the great diversity of businesses in this country, let alone in all the countries of the Community? It would introduce great rigidity and frustration and would hinder the development of different ways of communication suited to individual groups, and to the distinctive industrial relations climate and differing political, social and cultural structures of the various countries of the community.
Like the committee, I attached great importance to the evidence given by Mr. Garnett of the Industrial Society—someone for whom personally, and for his work, I have great regard. Mr. Garnett said—referring to industrial relations:
"Once it falls into the hands of judges and courts all is lost".
Later he went on to say,
"So I think it is worth laying down one or two minimum standards, just to edge things along a bit in a common sense way".
That is a general remark with which I think we would all agree. Then he said:
"I am sure that the most valuable document would be a code of practice".
And, again
"The mistake is to try to use the law to make social progress, to try to develop things that people have not actually ever done".
Despite the reluctance which I understand the committee felt—a reluctance which I share—they have suggested that a possible compromise is to be found in the suggestion made by Mr. Michael Shanks of a "framework directive", leaving considerable latitude to local legislation. If that means that we should have a law in this country that says that consultation is a good thing, coupled with a code of practice developed to suit United Kingdom conditions, that sounds simple. But I find myself in agreement with the noble Lord, Lord Rochester. I do not know how you would combine the law with a code of practice. In passing, I should like to remind noble Lords that we already have a law to require companies to give employees information—all the information they require— for collective bargaining, which is very wide. To introduce another law covering, perhaps, some of the same ground might cause confusion.
Like the committee, I reject absolutely the directive in its present form as likely to do great damage. But, unlike the committee, I have reluctantly come to the conclusion that to introduce law in this field now will hamper rather than promote good industrial relations. What I really fear is that it would reduce arrangements for consultation to the lowest common denominator and inhibit the innovation that is so desperately needed in British industrial relations. Consultation through representative systems is, of course, an essential component in employee involvement, but it has obvious limitations.
Recently, progressive firms have made major efforts to promote direct communication and rapport between managers, supervisors and those on the shop floor who are working directly to them. The key to real employee involvement lies in management attitudes, style and motivation. These imponderables are exceedingly difficult to monitor and assess, even within a company, and are no less difficult to describe and present in

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public debate about the merits and achievements of voluntary effort. This probably accounts for the preoccupation of politicians and bureaucrats—I myself used to be a bureaucrat and I blame myself—with the more tangible mechanics of consultative structures and systems, whose value is often more cosmetic than real.
I should like to come back to the evidence of Mr. Garnett of the Industrial Society. In brief, he seemed to be saying that the law is a good thing when it confirms practices in social matters which are already established. He went on to say:
"Before you discover where you are, and that is the history of the law of both parties in the 1970s, the law actually often works in the opposite direction from what the deeply sincere people who suggested it intended".
I thought that that, coming from such a wise and experienced man, was extremely pertinent.
As a sincere advocate of consultation and discussion —and I mean this—I believe that to introduce the law at this stage will set back rather than promote what we want to achieve. I say this, knowing that there are many companies in this country that pay little more than lip service to the need for consultation. This is a matter for judgment and experience and my judgment, after very careful consideration, is that we should not yet legislate until we have discussed in much more detail among ourselves what kind of legislation we should want, that will not inhibit but will promote better industrial relations.
4.38 p.m.
Lord Oram: My Lords, like other speakers, I very much welcome this report and in particular, as others have said, I welcome the attractive and helpful speech with which the noble Lord, Lord Wolfenden, introduced the debate. I welcome especially the general conclusion which his committee reached, that provision of proper consultative arrangements in industry needs to be very much improved. On the question to which several speakers have referred, of whether there is need for statutory provision or whether it is sufficient to rely on voluntarism, I believe that the conclusion of the committee could be fairly stated as being that, while any progress on a voluntary basis is to be welcomed, nevertheless a statutory provision, as in most other member states, is required in order to encourage progress on a voluntary basis.
I believe the committee concluded that there is a relationship between the two principles. These conclusions are, I suggest, of particular importance in this country—as, indeed, the committee suggested—because of the way in which Britain has been lagging behind other member states in this matter. The committee does not claim to have been dealing with the general malaise of British industry but in fact I believe that the problem that it was asked to deal with is right at the heart of that malaise. What is wrong with British industry—more clearly than anything else, in my view—is that antagonism rather than co-operation between the two sides of industry is all too evident. The "us" and "them" conflict must be eliminated if we are to move forward out of our present desperate industrial situation.
In the industrial relations field we have had only this last week two contrasting examples of major
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industries which surely point to the truth of what I have just said. One of them, British Leyland, shows the wrong way of going about it. The other, British Rail, promises to reveal the sound way of establishing a proper relationship. In the case of BL, an official strike seems now to be the inevitable consequence of the irresponsible diktat from Sir Michael Edwardes. In the case of BR, a strike was avoided because both sides got together and agreed on an improvement in communication. There are now to be further talks in a much better atmosphere about the future of the industry. I heard Mr. Ray Buckton of the train drivers' union say on radio that what was perhaps more important than the actual issue in dispute was the need for good communication between the two sides and that he now looked forward to the union playing a constructive role in the decision-making of the industry.
What I have referred to as the bad case, the bad case of BL, scarcely needs detailing in view of all that we have read, but I very much agree with the views of the Conservative Member of Parliament, Mr. Beaumont-Dark, who has many car workers in his Selly Oak constituency. He said:
"This is not the way to deal with very worried people: to say 'If you do not do what I say we are going to destroy everything'. The workers want to feel that they are helping to build a new BL and not just helping to be caretakers while it is destroyed".
He said it was important to get over to the workers what the productivity agreement meant and what their future was in BL. In other words, he was saying that there had been a serious failure of communication, a serious failure of the briefing to which the report and Lord Wolfenden have referred.
Of course, it is true that bad industrial relations in British society are attributable to faults on both sides of industry. I believe we can all agree with that. But I am glad that the committee has not fallen into the trap, as some people do, of believing that the real villains of the piece are militant trade unionists bent on pursuing the dictates of their greed. The committee recognises the value of the evidence that was submitted to it by the TUC. Among the members of the committee are two eminent trade unionists—I refer to my noble friend Lord Collison and my noble friend Lord Plant—whose very personalities, I suggest, belie the suggestion of irresponsibility in the trade union movement. Therefore, so far from trying to ascribe blame to one side of industry or the other, we should, I suggest, concentrate our minds on the benefits which good employee consultation can bestow on both sides of industry.
If good communications can be achieved, there are undoubted advantages to employers and employees alike. The employers surely stand to gain if there are fewer strikes, lower labour turnover, less absenteeism and fewer restrictive practices. All those, I believe, would flow from a better system of consultation. And all these advantages lead to higher productivity, which surely is the objective not only of the employers but of us all. But the advantages of good relationships to employees are no less significant.
Collective bargaining is, of course, a separate process. That is made clear in the report, and Lord Wolfenden also made it clear. We are talking about two separate concepts. If, however, better communication between

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the two sides is established, it is undoubtedly the case that collective bargaining can be made smoother and more effective. Moreover, if the atmosphere is good and if ideas are shared between the two sides, the decisions which are taken are better decisions. And more often than not the consequent working conditions of workers are superior.
Perhaps most important of all, however, from the workers' point of view is that their whole status in their working lives can be transformed. If a man feels that he has played a part in discussions, in consultation, in determining the shape of his working day, his sense of human dignity is greatly enhanced by comparison with the situation in which he feels himself a nonentity, a small cog in a vast wheel, and if he feels himself unable, through any process or any machinery, to help to determine the nature of his working life. Therefore, if I am right in suggesting that there are obvious advantages both to employers and to employees, surely immense efforts must be made to put this matter right. I believe that the recommendations indicated in this committee's report are admirable as a guide—only as a beginning, as has been recognised—to that end.
The report and the evidence that was given to the committee set out the arguments on both sides. It seems to me that the objections which the employers' organisations advance against the proposed directive are not really substantial. And that indeed seems to have been the conclusion of the committee itself. The employers say that the arrangements should be purely voluntary: that proposals in the proposed directive would interfere with existing arrangements and that they would undermine the authority of local managements. They raise the objection, too, that there is a security risk and that the leaking of secrets would affect the competitiveness of their undertakings. I think the committee chaired by Lord Wolfenden was right, particularly on the evidence given by the trade unionist who came from Germany, to regard these arguments as not being supported by any sufficiently hard evidence.
I am glad to see that the committee supports the opposite point of view: that particularly in relation to Britain—because, as I have said, we seriously lag behind other countries—the need for the rapid development of proper facilities is great and that because reliance on the voluntary principle has in the past proved inadequate, to say the least, it is necessary to have a legislative framework. I do not agree with the noble Lord, Lord Plowden, that it would be difficult to accommodate the variety of circumstances. I believe it would be possible to find a sufficiently flexible legislative framework which could comprehend the different national needs but at the same time would be firm enough to ensure that real progress is made in this matter and that that progress is made as soon as may be.
4.50 p.m.
The Duke of Portland: My Lords, having served on company boards in the United Kingdom, Belgium, France and Germany, I have come to the conclusion that there is much to be said for the German system of workers' and office staff representation on the supervisory boards of companies. I have had some
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28 years' experience as chairman, deputy chairman and member of supervisory boards in Germany. Before the law for the representation of workers and office staff on supervisory boards was introduced in Germany in 1952, I had participated in lobbying against this measure on behalf of foreign industrial investors in Germany. However, experience has taught me that this is a most helpful means of informing the workforce and also of learning the reasons governing their reactions.
I shall give your Lordships the following example. When the management of the chemical company Bayer, who own the photographic company Agfa, decided to merge the latter with the Belgian Gevaert company in order to be in a better position to compete with Kodak, the board of management—that is to say, the executive directors of Bayer—asked for the approval of the supervisory board where, for some years, I was one of the two deputy chairmen. Our colleagues representing the office staff and workforce raised a number of questions regarding redundancy, prospects of promotion, pension rights, et cetera, to which satisfying replies were returned and the proposed merger was approved. The representatives of the workforce then forthwith informed the works council, explaining to them how the merger would be to their advantage, thus averting the spread of mischievous rumours.
The presence of their own representatives on the board gives a workforce the feeling that they have an effective, albeit minority, voice in the direction of the company. From my experience, I am certain that this assists in producing a better understanding and in lessening the feeling of "them" and "us" between the board and the workforce. However, I fear that this proposal will not please the Confederation of British Industry nor the Institute of Directors nor the TUC. Some years ago, I spoke about this to one of the leading members of the TUC and met with the reply "If this does not give power, I am not interested". I agree that it provides for only a minority voice, but it is still a voice and it enables the workforce to obtain an insight into the position of the company and to understand the motives of the management.
I am not advocating a system of two-tier boards, which in my opinion is rather a nonsense. There is very little difference between a full board meeting of an important United Kingdom company and a meeting of a supervisory board and board of management in Germany. In the United Kingdom, executive directors have regular meetings among themselves without their non-executive colleagues and in Germany the board of management meets, as a rule, weekly and perhaps only four times a year together with the supervisory board.
The interests of the shareholders and of the employees could be safeguarded by an article in the company's statutes that the consent of a majority of the non-executive directors would be required for all decisions relating to the following: the closure or transfer of the undertaking or parts thereof; substantial curtailment of its activities; substantial organisational changes; the establishment or termination of long-term co-operation with other undertakings. In this connection, I would refer your Lordships to paragraph 14 of the committee's report.

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My Lords, the German system is not a panacea for all ills, but in my now rather long experience—and incidentally I am still on the supervisory board of a German company—it improves mutual understanding and thus furthers good feeling.
4.55 p.m.
Lord Underhill: My Lords, this is the first occasion on which I have entered into a debate on an EEC report and in this capacity today I may possibly describe myself as putting forward the viewpoint of the common man—if such a person exists. I should also like to express appreciation of the excellent manner in which the noble Lord, Lord Wolfenden, introduced this report. Anyone who may not have read the report will have had a very good summary from that introduction. Also, I should like to express appreciation to the committee because the range of evidence and the questioning of the members of the committee were extremely useful and the report is valuable for that reason alone. By and large, I accept the conclusions arrived at by the committee.
Although the report covers a somewhat limited sphere of information and consultation procedures, this is an important step towards industrial democracy. A number of noble Lords have stressed the fact that in the United Kingdom we are behind many other countries in this respect. The report gives evidence from three countries, and there is no evidence to suggest that the experience in those countries has brought some of the problems on which some noble Lords have expressed fears. I was delighted to hear what the noble Duke, the Duke of Portland, said about his experience in Germany, which I hope noble Lords will have noted.
Despite the differences, so clearly shown in the report, between the Government and the employers on the one side (because the Government seem to have taken the same view as the employers) and the employees, all are agreed that the involvement of employees in the communication and consultation procedures is an essential part of improving industrial relations. In view of some of the apprehensions about legislation, we must point out that both the Employment Protection Act and the Industry Act contain very limited provisions, but the provisions are there for the supply of information to trade unions. The proposed directive goes far beyond the supply of information and it links this with prior consultation on all major decisions affecting the employees' interests. As one of the Trade Union Congress representatives said:
"It is not the least bit of good supplying even a pantechnicon of information unless at the end of the day there is consultation upon it".
The TUC also said, "We are in the business of linking planning with industrial democracy and any consultative committees that might be set up must not be limited to teas and towels, as happens in a number of businesses".
The operations and strategic decisions of undertakings are not the concern solely of the owners of the business, and we must also keep in mind that today a very high and ever-increasing proportion of investment in this country is now in pension funds. The last figure I saw as being involved was some £55 billion.
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The interest of the employees is sometimes greater than that of the investors, because the employee's particular job is usually his only source of income and when that goes there is tragedy for the whole of his family.
This position is backed up by Paragraph 15 of the report, which refers to a Green Paper issued previously by the Commission and quotes the following extract:
"Those who will be substantially affected by decisions made by social and political institutions must be involved in the making of those decisions. In particular, employees are increasingly seen to have interests in the functioning of enterprises which can be as substantial as those of the shareholders and sometimes more so".
That was in a Commission Green Paper. For that reason I was, therefore, surprised at part of the evidence of the chairman of the National Consumers Council, which is set out on page 103 of the report:
"This Directive … could shift the balance of power in multinational companies away from management in favour of the workforce. It would make it more difficult … to rationalise operations between countries by closing down the least efficient operations".
I am certain that the suggestion that this proposed directive is making this shift of power is grossly exaggerated. The other point I would make is this: is it being suggested by this particular person who gave evidence that the employees are to have no voice whatever in the transfer of operations? I am sorry, therefore, that apparently it was not possible for Mr. Michael Shanks, the chairman of that council, to be interviewed, because his replies to any questions might have been very illuminating.
Week by week we have reports of closures, and often a plant is closed without adequate consultation. Too often there are lay-offs and redundancies without consultation until the actual decisions are taken and then there are consultations to deal with a crisis situation. We have protests, which we read about repeatedly. I would suggest that surely the workers must have a right to information on the progress, problems and proposed plans before a crisis occurs, and that does not appear to be the situation in many instances today. Multinationals must obviously be brought within this procedure. To me it seems that a body such as the EEC is a body which can deal with the multinational position, which could not be dealt with on a purely national basis.
Of course, we must remember that the proposed directive deals with not only multinationals—we have apparently a new name now, "transnationals"—but also complex undertakings in this country. The TUC suggest that there should be consultation at various levels, and in view of what has been said by one or two noble Lords, unless there is consultation at the top level of a multinational I cannot see how the employees' representatives are going to get a complete picture in order to give guidance to the particular bodies with which they are concerned.
The CBI state that a majority of employers make efforts to inform employees of the economic facts of life in their business. I wonder what the CBI have in mind when they say this? It might be suggested by Sir Michael Edwardes that he has done just that. Surely that is insufficient; surely it cannot just mean giving the limited facts of the financial position which may affect collective bargaining. That is far too

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limited an approach, and the proposed Directive goes far beyond that, as do the conclusions of your Lordship's committee.
The CBI also argued that no case is made out for a directive. They believe that the OECD guidelines and the ILO declaration are sufficient. I would suggest that if one looks carefully at both the OECD guidelines and the ILO declaration, those are woefully inadequate. They stress voluntarism, which your committee say regrettably is not sufficient in this case. Also there is no sound provision in either of those documents for consultation on the lines suggested in the proposed directive. The TUC disagrees with the view of the CBI on those issues and argues that in general multinationals do not voluntarily provide information which is essential to employees. If I may quote one part of the TUC's memorandum:
"The heart of the problem is that carefully formulated information and consultation arrangements within the enterprise are the more necessary the more complex the enterprise, but they are at the same time far more difficult to establish".
I was pleased that the Committee endeavoured to find out what was taking place. In view of the complacency, if I may say so with respect, of some noble Lords who have referred to the present situation, I would refer to paragraph 51, which deals with the Department of Employment survey of 1979. It was made quite clear that this was a limited survey of 300 manufacturing companies, and excluding what in their own words they call old established trouble-prone industries. However, the survey makes clear that the situation is far from satisfactory. That is also the view reflected by the Anglo-German Foundation survey dealt with in paragraph 53 of the report. Paragraph 66 sets out the conclusion of your committee that in at least half of the organisations that would be covered by a directive the procedures are inadequate, and that employees are very dissatisfied with the information and consultation procedures in a large number of undertakings. That would seem to justify action on the lines of the proposed directive.
The Industrial Society suggest in their evidence that what goes wrong in industry is 50 per cent. due to misunderstandings and the rest to straightforward conflict. We will not argue about the percentages, but roughly I think we would agree. The provision of information and development of consultation procedures as proposed in the draft directive would, in my view, help to remove considerable misunderstandings. The avoidance of straightforward conflict will depend, of course, on other factors, but where consultation develops towards sharing in decision-making I believe that can make a great contribution to avoiding conflict.
Far from being radical—I agree with my noble friend Lord McCarthy—I believe that the proposals in the draft directive are modest. The Commission apparently are to review the draft directive with a view to endeavouring to reduce the differences that are shown up in this report. I notice these words—"but without losing sight of the major goals". I think all of us would agree that agreement is desirable, but this must not be at the cost of producing a directive which may be of little value; in other words, in my view it is pointless leaning over backwards to produce an agreed directive which at the end of the day will
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produce few or no results. I believe the work of your Lordships' committee and the conclusions are basically ones which we can support, and I hope your Lordships agree.
5.8 p.m.
Lord Mottistone: My Lords, I should like to thank the noble Lord, Lord Wolfenden, for the way in which he produced this report and for his kindness in asking me to join Sub-Committee C for the consideration of this draft directive. Perhaps I may open by reflecting a little on the general subject rather than the particular, where I see the particular conundrum being created. It seems to me that there is no doubt whatsoever that employees in companies are increasingly wanting more and more information. I think everybody recognises that. Some companies are better than others, and some examples have been given. It may be that some companies, perhaps not very successful companies, do not do even as much as a small amount. But we are moving in that direction. Attitudes are changing, and it is really quite remarkable how much they have changed in the last 15 years or so in all sorts of areas, including this one. I think we must not be in too much of a hurry to try to push things along at a rate which is faster than the attitudes are changing. By all means let us keep it going and let us keep the momentum up, but not go too far too quickly.
Another factor concerns the notion of what sort of information needs to be released to people. This seems to vary with the types of people who are being briefed, to use Mr. Garnett's phrase. It would seem to me from my experience that the ordinary workforce in an ordinary company or ordinary factory requires as much information as it can get about the facts which affect it on a day-to-day basis, and that, of course, would include something catastrophic like closing the factory. It would need to know all about what was going on which affected it, but it is not desperately concerned, on the whole, with what is going on in the rest of the company—of course there are a few people who are concerned about that, but on the whole that is not what the demand is for. On the other hand, at what one might describe as the trade union official level there is a very sensible perception that, for there to be meaningful negotiation, the information given needs to be much more fundamental than the type which I have just been describing. That is where the difficulty arises.
Fundamental company information, whether in a multinational company or an ordinary national one, if it is meaningful needs to be safeguarded from competitors. Moreover—and I shall be coming back to this point—sometimes, more importantly, it needs to be flexible so that the optimum moment for going "firm" on a particular plan or solution can be chosen. To that extent one has to be particularly careful—and I am not casting aspersions against any particular sort of person—as regards how much this information is spread around before the right moment arises.
It is important to recollect that the purpose of development plans for companies is always to try to improve the companies' competitive position. Possibly more importantly in modern times, it is important to recollect that the benefit of the majority of employees is best served by a company's improved trading. With

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all companies, including multinational companies, benefits from improved trading may not necessarily come to all employees all the time although the trade union officials, quite naturally, would like them so to do. Sometimes some employees may lose out to the benefit of the majority, but—and this is important—most, if not all, company managements also wish their companies to be so successful that none of their employees ever suffers. Thus I suggest to your Lordships that their aims are really much closer to those of the trade union officials, and, indeed, to those of noble Lords opposite who have been speaking this afternoon, than might normally be thought to be the case. The aim is, in fact, the same.
I think that it was the noble Lord, Lord Wolfenden, who said that the "we" and "they" must be done away with. We all agree with that, but I think that a lot of it—and this was mentioned earlier—is a misconception, and an assumption about people's aims and objectives which assumes a conflict where one does not exist. I suggest that in this whole area we need forever to search for where there is not a conflict rather than seeking to search for where there is one. I should have thought that we could tackle this type of problem much better on that basis.
If plans are disclosed prematurely to outside persons, that is, to people not directly employed by the company like trade union officials; and even if, as they usually do, they respect confidentiality absolutely—and the committee was reassured on this point—the essential feature of flexibility (I call it "flexibility" although I think it was the noble Lord, Lord Seebohm, who talked about "efficiency") may be lost. I think that it was either the noble Lord, Lord Seebohm, or perhaps the noble Lord, Lord Plowden,—I hope that your Lordships will forgive me if I am wrong—who pointed out that if an outsider is taken into the confidence of the top management, then the local management will see itself bypassed. One of the biggest lessons of the last five or 10 years has been that a great deal of harm has been done to company management at the working level—the works managers and people like that—in a terrible period when the shop stewards had the greater "ear" of the company chairman than did the works manager. That was not only bad for morale, which was serious enough in this area, but also very bad for efficiency. While accepting the fact that something must be done, we must be very careful as regards whatever we devise that we make sure that the particular point about bypassing the local management is not created by whatever is built up.
Therefore, how do we view the directive under consideration? I was going to say that it is happily under reconsideration by the Commission. Indeed, paragraph 10 of the report says so and the committee was so advised. However, perhaps your Lordships may have noticed that my noble friend Lord Redesdale—who has apologised for having to leave early—made the point that he had up-to-date information that some committee, which he tried to whisper to me when I was trying to listen to the noble Lord, Lord Underhill, had made a decision yesterday which implied that the directive was not going to be revised. I find that hard to believe, but I think that it is worth us looking into it and making quite certain that the Commission is not going off at half cock, as we might
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say in naval terms. I shall, therefore, assume that the directive is under reconsideration by the Commission and that there is room and time for change.
I should also like to say at this stage that I think that the committee—although I was a member of it—made some excellent comments on how the directive might be modified and put into effect. Personally, I particularly liked the code of practice viewpoint although many noble Lords find that it is not tough enough. Your Lordships will realise from what I said earlier that I find that toughness is not the right approach at this time.
I should also like to mention to the noble Duke, the Duke of Portland, whose speech I personally found most interesting, that the CBI have just distributed within the last week or so a copy of a memorandum from their German opposite numbers, who are criticising this directive seriously in saying that the law relating to the constitution of enterprises, which I think is what the noble Duke was talking about, would be drastically affected by the directive if it were enacted in its present form. So in effect they are saying that they do not like the directive but they do like their constitution of enterprises, as indeed does the noble Duke. Therefore, it is perhaps worth noting that the Germans are not in favour of the directive in its present form.
Personally—and I speak personally now and not as a member of the committee—and because I hope that I appreciate the conflicting arguments that I have outlined, I suggest that the Commission produces another draft for the Community to consider, but that it hesitates long and hard before reaching a conclusion. There is a need for much more attitudechanging before the force of law is imposed in this area. In that respect I very much agree with the noble Lord, Lord Plowden. If the Commission needs to go through six drafts, as I have recently done in another context in another job, over a period of several years, for the Community to consider, no crystallising harm will have been done. As the report says, the subject will not go away and repeated drafts will serve to keep us all studying this very real problem. But early finalisation of this directive is almost bound to force a situation which could be disastrous for company flexibility and efficiency throughout the Community. In this day and age we must give the right priority to company efficiency, because on the success of these companies depends the wellbeing of us all, whatever side of the House or whatever position in industry we may occupy.
I beg your Lordships to accept that to have something on the table which is perpetually being updated is very much better than to have something pushed into law which, at a later stage, has to be enacted in some barbarous way in this country. I hope that your Lordships will accord with this viewpoint.
5.21 p.m.
Lord Campbell of Alloway: My Lords, anyone rising to speak in this important debate would wish to congratulate the noble Lord, Lord Wolfenden, on this useful, comprehensive and very brief report. In opening, I would wish to associate myself wholly with everything that has been said by my noble friend the Duke of Portland and the noble Lord, Lord Underhill,

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because everything that those noble Lords have said I most thoroughly endorse. Of course, having said that, it goes without saying that I welcome this report and find its conclusions wholly acceptable.
A framework directive with guidelines would not induce some sort of state of shock or terror such as was adverted to by the noble Lord, Lord Rochester. With respect, as I see it, the implementation of these proposals could only be conducive to the better ordering ofindustrial relations; and I, with other noble Lords, reject the objections, in particular those raised by the CBI. In this, I in no way wish to reflect the somewhat antipathetic attitude to the CBI evinced by the noble Lord, Lord McCarthy.
In passing, and with respect, may I say that a red herring seems to have been introduced into this otherwise constructive debate by the noble Lord, Lord McCarthy. He used this occasion to launch what I understand to be his ritualistic attack upon Her Majesty's judges, the attitude of Her Majesty's Government to statutory immunities and the Society of Conservative Lawyers, of which I happen to be a member. But is not all this wide of the mark? —because here we are not concerned with statutory immunities, secondary action or the other matters to which the noble Lord adverted; we are concerned with the obligation to supply information irrespective of the statutory régime in force at the time.
In times of inflation—and these indeed are such times—when wages are paid in paper or coin of no intrinsic worth, your Lordships may think that wage predictability lies at the heart of investment, commercial confidence and, indeed, forward industrial planning. In order to secure this recovery, I agree with the noble Lord, Lord Wolfenden, that it would be preferable to discard, and to discard once and for all, such concepts as taking sides in industry, with the TUC as some sort of designated giant for the one side and with the CBI, in league with Her Majesty's Government (I think that those were the words used by one noble Lord)—a curious concept perhaps—as the designated giant on the other side, adopting warlike postures. I apologise for it, but that is my edition.
However, this is a non-constructive nonsense. Trade union bargaining, whether nice or nasty, is very much in point and whether it is nice or nasty is, I would suggest to your Lordships, wholly irrelevant. What is relevant is that it is necessary. I adopt the view expressed by the noble Lord, Lord Oram, in this regard, that collective bargaining—trade union bargaining—is relevant to the topic under consideration and fuller information can only help to remove misunderstandings. Whatever the percentage may be—whether it is 60 per cent., or more or less—is again irrelevant, because fuller information will help to remove misunderstandings and assist in achieving realistic settlements, not only as to wages but as to closures, and in this way will greatly curtail the possible areas of industrial unrest.
I agree with another noble Lord—I hope that he will forgive me but I cannot remember his name—who stressed the force of the concept of communication as affording the key, as operating to effect the transformation of status in relation to the dignity of man, which is so important to all your Lordships. Of
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course, harmonisation is not appropriate. We have our own traditions; we have our own trade union structures; we have our own heritage, and we do not need member states to tell us much about that. But a framework directive wide enough to cater for each member state, with guidelines which would supersede not only the existing statutory provisions but existing codes of practice, could only assist in the better ordering of industrial relations and would in no way impede this.
With respect, it is for these reasons that I support the conclusions in this report, although I am uneasy about what I heard from the noble Lord, Lord Mottistone, about the goings-on at Brussels.
Lord McCarthy: My Lords, before the noble Lord sits down, will he not agree that I made no attack upon Her Majesty's judges and no attack upon Conservative lawyers, but merely described their point of view? My attack was on Her Majesty's Government. Will he not agree that it was because of what Her Majesty's Government said, or what their representatives said, before this committee?—which was that they could not agree with the committee, first, because there was no agreement on both sides to do anything and, secondly, because this would impose a single, inflexible system. All I said was that, if that was their view, I wished that they had taken that view on the Employment Act.
Lord Campbell of Alloway: My Lords, if I have misunderstood what the noble Lord, Lord McCarthy, said, I withdraw my remarks unreservedly. It was my understanding of what he said that led me to say what I said. But, if I am wrong about it, I withdraw my remarks unreservedly.
5.30 p.m.
Lord Soames: My Lords, I hope your Lordships will forgive me if I enter into this debate in spite of the fact that I was not present throughout it. I have listened with much interest to recent speeches made by your Lordships. I must say that I have been goaded into entering into the debate by what has been said, particularly by the noble Lords, Lord Oram and Lord Underhill, with particular reference to British Leyland and the name of Sir Michael Edwardes, its chairman.
I do not go along with my noble friend Lord Campbell, the last speaker. The inference he gave was, "Everything is rosy in our garden. We have got our own garden, and we have not got all that much we can learn from other people's gardens in the EEC". I disagree profoundly with that. We have all a good deal to learn from each other. If we ever could arrive at the optimum basis for consultation, then that would be lovely. I would go along with what the noble Lord, Lord Plowden, and my noble friend Lord Mottistone said, but I think we have a long way to go in all countries of the Community in changing attitudes, both from the point of view of the trade unions' side and from the point of view of the employers' side, before we can aspire to such a Utopian perfectionist position.
Consultation is all a matter of degree, is it not? Of course, everybody would like to see in industry the greatest degree of consultation. But, surely, consultation

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presupposes a high degree of responsibility on both sides. From the point of view of management it presupposes a degree of responsibility towards employees in realising where their interests lie, and having regard to their interests in taking the major decisions within the company. Where the employee is concerned it involves a highly developed degree of responsibility not just towards the interests of the employees themselves alone but towards the firm and the interests of management and the shareholders.
Until you get that degree of sense of responsibility it is just not going to be possible—it is not possible—to enter into a satisfactory degree of consultation. Some, of course, yes. I had a bit of it last year. Goodness knows! I did my best to consult—and consult, and consult—but certain things were written in the stars and events followed inexorably one after the other. I do not think it was because I failed in consultation. At least, I like to think it was not. I do not think it is for Sir Michael Edwardes, either.
This is where I want to come to what the noble Lord, Lord Oram, said. I thought that the noble Lord, Lord Underhill, was not entirely fair to him when he said, "Of course, you cannot call it consultation when someone writes a letter round to everybody saying either you must agree or else the carpet is going to be pulled out". Because that was not the beginning of it. It may be the end of it; I do not know.
But I noticed what Mr. Duffy said to the press recently. He reported the figures of production per man in British Leyland five years ago and today. I have not got the figures in my head but he reported the progress that had been made. All I can say is that it shows it was very bad indeed five years back. It shows that it is getting better, but it also shows that there is a long way yet to go. Do any of us really believe that the trouble in British Leyland has been because of lack of consultation? Is that really the key to the problem in British Leyland?
Of course, in many areas of British industry consultation has improved enormously, and the effects are there for all of us to see of employees and employers making sacrifices in order to keep alive in difficult times. This is where consultation really comes in and is effective. But, as I said, it presupposes a sense of responsibility on both sides to keep alive. While in British Leyland every employee knows that every car that comes off the end of the production line is costing the taxpayer money, and at the same time they are putting in a demand for an increase in wages which they know perfectly well the company cannot afford, which is only going to have the effect of increasing the burden on the taxpayer for every car produced, is that the interest of the firm? Is that the interest of British Leyland? Is that the interest of the shareholders, who are the taxpayers?
No, we have got to be a bit careful before we blame Sir Michael Edwardes for lack of consultation in the present situation. I hope very much indeed that the employees in British Leyland will think twice before they choose to start playing a game of bluff and hoping that they will get away with it now as they have got away with it often in the past. There must be a limit to how much Her Majesty's Government can feel it right to prop up an industry unless they are convinced
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that the employees have the interest of that firm at heart as well as the management.
5.36 p.m.
The Lord Advocate (Lord Mackay of Clashfern): My Lords, first of all on behalf of Her Majesty's Government I should like to thank the noble Lord, Lord Wolfenden, very much indeed for introducing this debate to us and for the manner in which he has done it. I should also like to join with all the others who have thanked Sub-Committee C for their careful, wideranging and even-handed consideration of the many issues which arise from the document which is the subject of this report. I should also like to join with Lord Wolfenden in thanking those whom he thanked at the beginning of his speech for the work they did which enabled the Sub-Committee to do for us the work that it has done for us.
I should also like to thank all of your Lordships who have participated in this debate this afternoon for the valuable contributions that have been made in a very constructive way, from a great variety of different experiences, to the matters which are of great importance to all of us, as my noble friend Lord Soames has just made so clear in a speech which I was very glad to hear him make. If later in my remarks a difference in emphasis is detected with the conclusions which the committee have drawn from the evidence put before them, then it springs from a desire to achieve the most effective approach to these most important issues which the Committee have so competently drawn to the attention of the House.
This proposal for a draft directive is somewhat unusual in a number of respects. First, the proposal was adopted by the Commission without even the barest minimum of consultation which might be expected when wide-ranging measures of this kind are being proposed. When the draft directive was first mooted it was aimed only at information and consultation procedures in multi- or trans-nationals.
At a meeting of officials from member states which took place in June 1980 it was pointed out that this would be discriminatory. The Commission's response was to extend the proposals to cover all undertakings of a complex structure without considering the very wide implications of an extension of this kind, and indeed without providing any evidence that such initiative warranted priority consideration in the Community institutions.
This lack of prior consultation was perhaps particularly unfortunate in view of the second unusual feature, which is that the proposals are considerably different in nature from previous action taken successfully in the Community in the field of industrial relations The two previous directives are limited in scope and application and deal with specific situations, and contain relatively straightforward requirements. They are the directive which lays down requirements about the provision of information and consultation when collective redundancies occur, to which Parliament gave effect in the Employment Protection Act 1975 in the provisions which have been referred to; and, the second, the Acquired Rights Directive, which safeguards the employment rights of individuals in the event of businesses, or parts of businesses, being transferred, and again contains specific provisions

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about information provision and consultation. This new directive draft, on the other hand, is seeking to prescribe a rigid system which would cut across the totality of information provision and consultation within all the undertakings which fall within its definition.
The third point I wish to make is that the present proposals are frequently obscure, both in their underlying intention and in the detail of the requirements. I wish to mention just two of the many examples. It is unclear whether, in Articles 7 and 13, an all-embracing consultative committee established at the level of the parent company and covering all subsidiaries and individual plants and establishments, in fact fulfils the information and consultation requirements in those places, or whether it is intended that if such a committee at the top level is established, then it must receive all the information which is sent to the subsidiaries and establishments and be involved in any consultations undertaken at local level. I understood from the way in which the noble Lord, Lord McCarthy, approached this that he took it that the central committee would, as it were, replace and obviate the necessity of transmission of the information to plant level. I submit that it is not at all clear that that is what the Commission had in mind. It is not clear whether the Commission is seeking to promote the establishment of consultation arrangements at the European level or indeed worldwide, which could have the effect of disrupting relationships at local level, or alternatively believes it necessary that a large employer should duplicate his arrangements at each level. That is to say, from the text and the explanations provided, it is not possible to decide.
On a related point, as drafted, the information which has to be provided must give a clear picture of the activities of the concern taken as a whole. It must also include information about such matters as structure and manning, rationalisation, manufacturing and working methods and all plans and all procedures liable to have a substantial effect on employees, which can meaningfully be expressed only in terms of the situation in particular subsidiaries. That is a point to which the noble Lord, Lord Rochester, referred, and again I suggest there is confusion about the objectives. Having said that, I agree with the noble Lord, Lord Wolfenden, that it is a great advantage to have an opportunity of considering the proposal at a comparatively early stage.
The three points I have mentioned are in themselves ample explanation of the controversy which this draft directive has already provoked. It also helps to explain why it appears from paragraph 10 of the report that the committee was informed that the Commission may have in mind to reformulate the proposals to take account of the views it has also received from employers and employees, even though the Economic and Social Committee, which is the official Community institution on which sit employer and employee representatives, and the European Parliament itself, have as yet to deliver their opinions on the current proposals.
Against that background, I fully understand why the committee has chosen to examine the broad issues involved in employee consultation rather than concentrate on the details of this particular proposal,
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including such related matters as whether it does indeed have a direct effect on the establishment or functioning of the Common Market and so has a proper legal basis under Article 100 of the treaty, and whether, under international law, it is in fact possible to impose sanctions on those enterprises with head offices outside the Community and so ensure equality of treatment for EC and non-EC based transnationals.
The evidence which the report has summarised for us and the views expressed by your Lordships in this debate show an encouraging degree of unanimity about the importance of involving employees and their representatives in policies and decisions which affect their working lives. I use the word "involving"; a number of words and phrases could be used in this context. The essential idea is that those who work in an enterprise should be informed of and consulted about decisions taken which may affect them at their place of work. The object should be to underline the unity of interest which all concerned have in the enterprise.
The report makes clear that both the CBI and TUC agree with the broad principle of communicating information to employees as well as the desirability of having effective consultative arrangements. The Government have also consistently stressed that effective employee involvement is an essential part of improving industrial relations in the United Kingdom and have urged continuing progress in all types of enterprise. These days employees are better educated and therefore less willing to accept the old authoritarianism and the "them and us" approach, to which the noble Lord, Lord Oram, and others referred. If they are treated as responsible individuals who have as much of an interest in the prosperity of the business as the top man, they will respond in terms of both productivity and contribution of ideas. They will accept more readily the trauma of technological change, the need for it and how best to implement it. A natural two-way communication of ideas can sometimes avoid the charged atmosphere of the negotiating room. It can be used as a valuable preliminary to collective bargaining, to identify the issues where there is a genuine difference from those where there is nothing to bargain about, thus reducing or eliminating damaging conflict of an adversarial kind.
However, the Government have taken the view that employee involvement is best developed voluntarily and not imposed by legislation. As the noble Lord, Lord Underhill, and my noble friend Lord Soames said, the essential idea is consultation. The giving of information is, in a sense, preliminary; the really essential matter is consultation. True consultation involves a degree of genuineness and open-mindedness which is very difficult to achieve by compulsion. You cannot by legislation, or indeed any form of compulsion, force a manager to think in a certain way, and how he thinks is all important to real consultation. As the noble Lord, Lord Seebohm, put it, you cannot bring a person to love or respect you by legislation. Equally, I submit, you cannot bring a person genuinely to consult with another person by legislation, unless he wishes to do so.
That is the distinction between legislation trying to enforce obligations of consultation and legislation such

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as the noble Lord, Lord McCarthy, mentioned—the Factories Act legislation and so on—in that while you can set up a standard suggesting a certain degree of safety at a place of work and enforce that, and while you can enforce provisions about the dissemination of information, the argument the Government have on this matter is quite different from the argument that would arise in spheres such as those. Incidentally—and the noble Lord explained to me that he would have to leave before the end of the debate—he went on to give us glimpses of a coming Bill. Whether his forecast is right or not we shall have to wait and see, but I was interested to see that he had to complete that forecast by suggesting that patriotism was the last refuge of the scoundrel. I felt that a very difficult proposition with which to agree.
The Government therefore believe that the right way to make progress is by persuasion and exhortation. Increasing efforts have been put into this policy over the past two years by the various organisations concerned, including for example, the CBI, the Industrial Society, the Institute of Personnel Management, the Industrial Participation Association and the British Institute of Management. There is now a wide range of guidance and example available to organisations which either lack knowledge of what is needed or doubt its value. The services of the Advisory, Conciliation and Arbitration Service are also available. The Government have made it abundantly clear that they strongly support these efforts. It is difficult to see that a governmental code of practice could add anything to all this advice.
My noble friend Lord Mottistone said that much had changed in this field, and it is perhaps worth reminding ourselves of what was said in the Donovan Report, which was not all that long ago, based on the research done for it by Dr. McCarthy, as he then was, in which it was concluded:
"joint consultative committees in the strict sense cannot survive the development of collective shop floor organisation. Either they must change their character and become essentially negotiating committees carrying out functions indistinguishable from collective bargaining or … fall into disuse".
That was not long ago. What a tremendous change has taken place even since then. That I think makes it possible to point out that the evidence on which the committee relied particularly for its findings on the stage which matters have reached in this country included the report of 1979 from the department, to which the noble Lord, Lord Underhill, referred. I think it worth pointing out that that report, though published in 1979, was the result of work done in 1976, and therefore there is considerable reason to question whether it represents the position at the present day.
In seeking to sum up the situation, I would say that I believe that the debate we have had today is not about objectives, but about methods. All appear to be very much agreed about the objectives. Accordingly, we feel that the position that the Government should take up at this stage is that the case has not yet been made out for any form of legal compulsion. So far as information and consultation procedures in multinational companies are concerned, as has already been said, there are in existence international voluntary guidelines which appear to be working well and which have not so far produced any
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evidence that legislation at the European level would be justified, and the committee has accepted that any attempt to impose a uniform pattern across national boundaries would be doomed to failure.
Our debate has therefore primarily been concerned with whether or not minimum standards should be applied in all companies above a certain size. In this connection I note that there has been no suggestion that large single-plant companies or headquarters staff of complex undertakings should be exempt which is of course the position under the present draft directive. In this connection I would respectfully endorse the very persuasive observations of the noble Lord, Lord Plowden, on the inappropriateness of legislation in this area, even of a code of practice backed by legislation. As I have already said, it is the attitude of managements which counts.
Once the present directive is reformulated, if that happens, the future of the draft European Community Fifth Directive in the company law harmonisation programme will become highly relevant. This draft directive, which was introduced in 1972 and is still being considered within the European Parliament, originally sought to acheive employee participation through the imposition of worker-directors. However, I understand that certainly in the discussions which have taken place within the committees of the European Parliament, it is now felt that this should be only one of a number of options designed to compel improved information dissemination and consultation procedure at company level. The interrelation and overlap between the draft Fifth Directive and the directive concerned with complex undertakings would therefore become much greater if the Commission accepted the recommendations of the committee's report. We understand that the opinions of the European Parliament on these draft directives might be available in the New Year. It would then be for the Commission to decide upon the proposals which it wished to put to the Council of Ministers.
It is also right to mention, as the noble Lord, Lord Plant, mentioned in the course of his speech, that the Department of Employment is presently conducting a workplace industrial relations survey, and the results of that, which should be fairly up-to-date so far as reflecting the present position is concerned, are expected early next year.
Against that background the Government believe that they must await any proposals for further action which may emerge from within the Community and consider at that time whether they are appropriate for the particular circumstances in the United Kingdom. Our primary concern will be to determine whether detailed proposals will improve the conduct of our industrial relations, or disrupt existing arrangements, and so cause unnecessary conflict. It would be quite wrong to attempt to anticipate whether that criterion would be met by any future initiative, although I foresee the greatest difficulty in any attempt at legal compulsion, for the reasons that I have sought to outline. Thus, on behalf of the Government, I join with the noble Lord, Lord Wolfenden, and other speakers in commending this report to your Lordships' House and to the Commission, but with one reservation: by the time we come to debate this matter again, I hope that voluntary efforts by management will remove

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any need in the United Kingdom for the suggestion that such a directive is necessary.
5.55 p.m.
Lord Wolfenden: My Lords, may I be allowed just a word or two of very sincere thanks, first to the noble and learned Lord the Minister for giving us a glimpse of the Government's present feeling on this matter. Whether that feeling will be altered by changes in the proposals that we have been considering remains to be seen. I should also like to be allowed to thank the noble Lords who have taken part in the debate, both colleagues of mine on the relevant sub-committee and others, and I would especially thank those noble Lords who were so generous in their references to the report itself. Finally, I should like to thank everybody who has contributed to this lively, wide-ranging and constructive, as I believe it has been, debate. Right at the beginning, I said that I was deeply aware that there are many of your Lordships who are infinitely more knowledgeable than I could ever hope to be in this field of industrial relations, and I think that that statement has been vindicated by the contributions made this afternoon.
I was particularly glad that the comments were not unanimously on one side, because the whole point of the debate, as I have understood it, as of the report itself, is that there should be opportunities for discussion for different points of view to be put in the hope, if I may presume to say so, that both Her Majesty's Government and even the Commission in Brussels might take some notice of what those of us who have been battling with this subject have presumed to say. Thank you very much indeed, my Lords; I am very happy that the debate has taken place.
On Question, Motion agreed to.

ECC 42nd Report: Cereal Substitutes
5.57 p.m.
Lord Cledwyn of Penrhos Lord Cledwyn of Penrhos rose to move, That this House takes note of the report of the European Communities Committee on cereal substitutes (42nd Report, H.L. 270).
The noble Lord said: My Lords, in presenting this report to the House, I should like to thank all those who have helped the committee to produce it, as well as the witnesses who gave evidence, both oral and in writing, who were very helpful to us. The subject under review might on the face of it seem to be one of secondary importance and of little interest to the lay observer. In this debate we must seek to correct such an impression, because the proposals that we have examined deal with an issue of important principle which affects both the Community and the developing countries. In fairness, I must say at the outset that the committee were not quite unanimous in their conclusions. My noble friend Lord Mackie of Benshie, whose experience and contributions are of great value to our committee, took a contrary view, and I hope that in due course he will present his arguments with characteristic energy.
The subject of the report is described clearly in the introduction, and I shall quote the second sentence
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because it points to the issue of principle to which I have just referred. I quote:
"… the subject provides a significant illustration of the problems of conflicting objectives, both internal and external, which arise from the operation of the Common Agricultural Policy, and of how the institutions of the Community may seek to resolve such conflicts".
The problem, or the issue, that the committee had to consider is whether the Commission's attitude and intentions towards the import of products, that is, cereal substitutes, and their competition with cereals produced in the Community in the composition of compound feedingstuffs are fair and proper. That was the cornerstone problem which we had to consider. In fact, the committee concluded that they could not agree with the Commission's approach, and they recommend other ways to resolve the dilemma.
It may be helpful if I refer your Lordships to the second paragraph, which clarifies the term "cereal substitutes". As it says, the term can be misleading because the products in question are in no way inferior to cereals. Many of them can be used as alternatives to cereals, and others as complements to cereals in compound animal feedingstuffs. Manioc, also known as cassava or tapioca, with a 95 per cent. starch content, is such a product, and there are others mentioned in this report. As we go on to say, the Community is heavily dependent on these imported proteins; the major part consists of soya beans, which come largely from the United States of America, and they enter the Community free of duties or levies. The nil rate is bound under the GATT.
Another factor is that the EEC produces more common wheat and barley than it eats. These are the cereals which provide the carbohydrates in animal feedingstuffs. The Community's production of these cereals has been growing rapidly and is estimated to have increased by over 40 per cent. for common wheat and 24 per cent. for barley during the last five years or so. Tariffs and levies are paid on the imported cereal substitutes, and they vary as between the different products. For example, cereal residues—bran, wheat offals and so on—are subject to a variable levy which now stands at a level equal to about a quarter of that on feed grains.
Molasses, which is also subject to a variable levy, in fact attracts no levy because the threshold price is set at a level which draws none. Other substitutes enter free, the rate being bound in the GATT at nil. Major exporters are the United States, Brazil, South Africa and Argentina. As to manioc, which is the main subject of the report, it is wholly imported. It comes mainly from a developing country—namely. Thailand—and is subject to an import duty not exceeding 6 per cent. ad valorem, which is also bound in the GATT. The tariff position is explained more fully in paragraph 6 of our report, and I will not go into it in any further detail at this time.
My Lords, I have tried to summarise the basic facts which were before us, but our committee's chief concern is of course the Commission's attitude to the imports of these substitutes into the Community. As the report reminds us in paragraph 7, they fired a warning shot in their paper of 11th December last, Reflections on the Common Agricultural Policy. They spoke of exercising,

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"more vigilance over the imports of certain feeding-stuffs or similar products".
This was followed by a more detailed examination in the Commission's report in 1980, which we refer to in paragraph 8 of our report. Here, the growth of imports of manioc is described dramatically as a
"destabilising factor in the cereals market".
They refer to the need to control manioc, bran and maize gluten feed—these are the three products specifically mentioned by the Commission—but it now seems that manioc alone is picked out for special attention. So far we have heard nothing of restricting maize gluten feed, and no action has resulted on bran or other milling residues. I think that is a point which your Lordships will wish to bear in mind as we proceed.
The provisions of the submission on manioc are detailed in paragraph 10 of our report, and the subsequent history in the following paragraphs. They describe the reaction of the Thai Government to the proposal and the action taken by them. Paragraph 19 enlarges on this as follows:
"It is to be particularly noted that imports of manioc into the Community increased between 1975 and 1979 by 3·2 million tonnes, or more than double; but they fell between 1978 and 1979; and they may subsequently have remained at around the 1979 level, latterly because of the actions of the government of Thailand".
It should also be noted that the imports of maize gluten feed more than doubled, and may increase further. There has been no suggestion whatsoever that this should be restricted, although, of course, the Commission could decide to control this as well in due course. It is perhaps interesting to note that this comes very largely from the United States of America.
My Lords, we seek to analyse the policy issues in Part VI of the report, and the House will note the reference again to "conflicting considerations". Our committee always listen with great care to the evidence of the National Farmers' Union, and we particularly appreciate their readiness to testify at our meetings on a range of the subjects which are drawn to our notice. On this occasion the committee are unable to accept the arguments of the National Farmers' Union, and we explain why in paragraph 30 and also in our concluson in paragraph 47. We say in the report:
"… the National Farmers' Union suggest that the conflicting considerations in the case of manioc should be resolved by bringing that product within the Common Agricultural Policy cereals régime and subjecting imports of it to variable levies. … One reason for this attitude appears to be the NFU's view that the very uneven usage of manioc … represents a distortion of competition for livestock producers".
The committee point out that "green" currency differentials have created an artificial situation, and I have no doubt that that was the case, as anyone who studies the situation at the time would agree. We argue, I believe with force, that the interests of producers and consumers of livestock, in which the Minister of State is I know concerned, should be given precedence at this time. Livestock producers have gone, and are going, through a difficult time. Livestock producers in Wales, certainly, as they said to me when I addressed the annual meeting of the Farmers' Union of Wales recently, are deeply concerned about their prospects and by the fact that the real income of livestock farmers has in no way compared with the real
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income of cereals farmers.
It seems to be self-evident, as the committee point out, that the lower the cost of animal feedingstuffs the lower the prices necessary to support livestock production; and, of course, meat prices should be lower, with a resultant improvement in demand. From this viewpoint the imports of cereals substitutes, including manioc, must in principle be beneficial to the Community, and certainly to the United Kingdom. We believe that those who want to restrict imports must prove that this would be beneficial, and we say that that proof was not provided at any time or in any of the reports which the Commission produced last year. We must also (and they must, as well) take account of the importance to a poor developing country of manioc exports.
My Lords, if it was the case that cereals producers were in financial difficulty at this time and had been in financial difficulty in the last few years, and if it was the case that cereals substitutes, including manioc, were pouring into the Community without any sort of control, then we might have to take a modified view. But as things are now we cannot accept that the proposed action is justified. I am glad to note that the National Farmers' Union, in their latest circular, which noble Lords will have received in preparation for this debate, agree that our conclusions are correct "in the short term", but they go on to say that our analysis is static rather than dynamic and:
"takes no account of the possible effects on the budget of large increases in manioc supplies in the future".
But the committee's function is to look at these proposals as they would affect a range of interest now, as things are now; and my experience of the National Farmers' Union (over a long period of appreciative observation, if I may say so to your Lordships) is that they are not slow to adopt a similar stance. They are static or dynamic as the situation demands.
We took the most careful account of all the evidence both oral and written; and I will do no more than call attention to the views of the feedingstuffs industry (GAFTA and UKASTA) and the Overseas Development Institute. The Brandt Report is very much in our minds at this time and we all hope that the talks which are starting today in Mexico will result in some hopeful initiatives for the developing countries. But we must also make sure that our Community policies do not run counter to the sympathetic expressions that we utter from time to time about the developing countries. As the committee have said in paragraph 35:
"… whilst recognising that the Thai authorities have voluntarily accepted the proposed agreement and that no Thai criticism has been seen, [the Committee] regret that the first recourse proposed to deal with an internal problem of the Community should be by restricting imports from developing countries".
The allegation that the internal cereals market might be disrupted is effectively dealt with in paragraph 38 and the effect on the budget in paragraphs 39 and 40. We say that the restriction of imports of manioc could simply have the effect of artificially promoting expansion of imports of other products or of compelling resort to an ever-widening series of restrictive measures. The Ministry of Agriculture made plain in the evidence to us that they certainly disliked this.
Our conclusions therefore in Part VII are short and

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clear. The committee are not in favour of the Commission's proposals, for reasons I have tried to explain. They believe that any benefit which might accrue would be at the expense of damage to the third world countries, to the Community's reputation as a trading partner and to its political relations. This short report therefore has far-reaching implications for the Community and for the United Kingdom and I hope that the Commission, the Council and Her Majesty's Government will give further careful consideration to the consequences of the proposals as they now stand. I beg to move.
Moved, That this House takes note of the report of the European Communities Committee on cereal substitutes (42nd Report, H.L. 270).—(Lord Cledwyn of Penrhos.)
6.12 p.m.
Lord Mackie of Benshie: My Lords, it is not often that I disagree with the noble Lord, Lord Cledwyn, and, indeed, I do not disagree too much with the other members of the committee. I think we are a very nicely balanced committee. We have every form of prejudice and self-interest within our ranks and up to now we have produced a fair balance and our reports have been acceptable to and always studied with great interest by the Government and, certainly, by the Commission. I can happily commend the report to your Lordships. It is beautifully printed, it is closely argued, well written and has a beautiful blue cover. The only thing is that I feel that the conclusions are wholly and absolutely wrong. I feel so not because I am a farmer and wholly prejudiced but for a number of reasons which I shall try to make clear to your Lordships.
The first is that we are now members of the European Economic Community. There were when we joined and are at present another eight members. The other eight members are quite happy with the system of supporting agriculture by intervention, by buying and keeping up the price to a level which would give the farmers a reasonable living and the consumers a good service; and the consumers in Europe (especially in the original Six) and the farmers have had an excellent deal. Production has risen to an enormous extent and the proportion of money spent by the public on food has fallen because of the rising incomes. There is no doubt at all that the other eight members of the Community regard the EEC, and the CAP in particular, with favour.
They look on it as needing, adjustment and tuning but not this sort of hankering that still exists in this country—and, I regret to say, in our committee—for an impossible reorganisation of the CAP which will make us once again have the enormous advantages which we think we enjoyed in the days when the members of the grain trade associations could roam the world buying their food for this country and for manufacture and resale at prices that impoverished the peon on the pampas and the "okies" in Kansas. Those days are gone and I hope that Members of this House realise it. Like it or not, we are in a Community that is wedded to the production of the major proportion of their food inside the Community and to the rewarding of the farmers by intervention buying.
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The whole point about this report of ours is that we hanker back to the days when we could buy this cheap food as and when we would and spread it around the country while we supported farming by direct payment to farmers. When we are inside the Community that system is largely gone, although remnants of it can remain and have remained.
The first thing about our report is that we totally ignore the general position that we are in and the position as felt by the other members of the Community. The second thing is that it is a wholly illogical situation that we take up. Cereal substitutes is not a good name for all the substances discussed—for example, soya bean, which is mainly protein and some of the others. But maize gluten and the manioc, tapioca, or cassava, whatever you like to call it, is a cereal substitute. It is totally illogical to have a policy for cereals whereby you exert a big levy on cereals to keep them up to the recommended price in the Community and a cereal substitute which can replace the cereals comes in at 6 per cent. of the tariff—or no tariff at all in the case of gluten—under the GATT. It may be right for other reasons, but it is wholly illogical in the face of the generally accepted policy on agriculture in the EEC; and such, indeed, appeared to be the opinion of MAFF, in parts of their evidence at least.
The position at the moment is that in 1975 96 million tonnes of cereals were grown inside the Community. That had risen to 119 million tonnes in 1980. That is a considerable achievement in the raising of production. In 1975 we imported 2.3 million tonnes of manioc. In 1978 it had gone up to 6 million tonnes and dropped to 5.5 million tonnes in 1979. There is no doubt that these imports are directly replacing the cereals which we are exporting with a big subsidy on to the world market. This export on to the world market is affecting cereal growers in the world because it is depressing the world price and cereal growers on the River Plate or on the fields of Iraq, or wherever they grow barley, are affected by the dumping of cereals on the world market with a subsidy by the EEC. So we are not really doing all that much good to the third world countries simply by taking in the manioc, which is the commodity I wish to talk about although maize gluten may be a distinct danger in the future.
Before I go on, I should like to say something about livestock producers. I have every sympathy, not so much with the farmers of Wales—for they come with the farmers of Scotland in the same bracket and deserve sympathy for other reasons—but certainly with the small farmers and the efficient stockfarmers of Northern Ireland. They were very badly hit by the EEC when we joined it. Previously they had imported their grain from the Americas into Belfast very efficiently and competently and at a reasonable price, and they converted it with great efficiency. Now instead they have an awkward and expensive route across England, more or less, through the ports and into Belfast. Therefore the cereals cost them far more than they did. The result is that an extremely efficient industry has been hard hit.
However, I do not think that the way to help is to import a cereals substitute such as manioc against the whole of the rest of the policy. In cases like that, there

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should be special help. In the case of cereals it may well be that prices are too high. If so, let us work the solution out and reduce them. If that is not the case, then let us put up the price of meat or meat products for the livestock farmer. It is wholly illogical to say, "They are having a bad time; let us break the system and import this substitute". Either you work the system, or you do not. But to say: "Somebody is suffering, let us go and bust it by buying in something from outside", in my view must be entirely wrong.
Now we come to the Third World and Thailand. I have taken a little trouble to find out about this. I asked for a report and received some figures from the FAO about Thailand. There are a number of curious things happening there. Other members of the committee may know more, and the noble Lord, Lord Walston, went to Thailand to see the situation. First, it appears to me that it is a highly dangerous road for Thailand to depend for such a large amount of its income from exports on a product which is busting the system in the EEC. It is highly dangerous and they themselves appear to think so.
Furthermore, I am told—and this is backed up by a number of people—that it is not a good product for the land in Thailand. In the North-East province, where it has been grown, there are already signs of a grave deterioration in the land. It is a very extractive crop and the Thai Government themselves are not entirely happy about it. Certainly the evidence from the overseas development body was against it and they spoke of the appallingly restrictive attitude of the EEC, and so on. But they also portrayed a remarkable ignorance of the problem and in their evidence said that they were unable to discover much about it.
I would very much doubt the long-term good to Thailand in depending on the export of manioc to the EEC. Certainly if we are to continue to be efficient and grow in this country, I would think that Thailand would be quite right to be looking voluntarily at a different attitude and to be looking at alternative measures in line with the EEC Commission's proposals. I do not think that the Commission's proposals are ungenerous or unwise; I think that they are extremely sensible. To offer to give money for development along proper lines of agriculture for the long-term good of Thailand, is certainly doing much more good to Thailand than continuing to supply a market to the detriment of the country's soil, to the detriment of the forests and very much to the detriment of the growing of rice, which is the staple food and has been a staple export. I may say that in Thailand the Government deliberately keep the price of rice 30 per cent. below the export price, I presume in order to get some money. There are a whole lot of things that could be put right.
I yield to no one in my concern for the Third World and developing countries, but I do not think that this is the way to help them. If I may come back to the conclusions of the committee—I much enjoy attending and disagreeing on occasions—I would say that the first conclusion that it is wrong is incorrect. The second conclusion that the increase,
"in imports of cereals substitutes in recent years, and of manioc in particular, has been stimulated by situations in which undervaluation of "green" conversion rates in certain Member States have made these imports relatively cheap",
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is of course right. But I very much doubt whether the Dutch or East Germans who led the way in taking in the cheaper product, have done very much good to the Commission or, long-term, to themselves by so doing.
Far from it being unimportant in Britain, I quote a headline from the Farmers' Weekly of 18th September: "Manioc pours in to feed UK mills". We are now in a position where barley is much more expensive in this country and manioc can come in. It is a distortion which will do no good in the long run.
The third conclusion is:
"Restriction of imports of cereal substitutes would be disadvantageous for Community producers and consumers of meat".
I submit that in the long term that is not so. There are other ways of putting it right. If the price of cereals is too high, then let us be courageous and say so. Do not say instead that we will nip in something which is destroying the ground in Thailand.
The fourth conclusion, that it does not benefit the budget, must be wrong. To export the amount we did—we spent £360 million or some such enormous figure—and, obviously, if we are going to dump wheat and barley on the world market as a result of importing some other cereal which we could have used here, must cost the budget very large sums of money.
That is not the major reason that I oppose this. I oppose it on the grounds of inconsistency. I think that the Commission have taken a sensible and a humane attitude, and I think that we should support them.
6.27 p.m.
Viscount Brookeborough: My Lords, I should like to start by paying a tribute—and a very genuine tribute—to our staff and to the drafters of this report. I have sent it round to a number of people in Northern Ireland to get their opinions on it. One and all have said that it is the best written report that they have ever read and explains a rather complicated subject well, especially when the phrase "cereal substitutes", which means something rather different from what we are discussing is used. My first point concerns the clarity with which this report is written.
When I came into the House I saw the television cameras filming for the "Nationwide" programme. Your Lordships have agreed that this should be done, and it was a great pleasure that I saw the noble Lord, Lord Mackie, exposing a huge expanse of his tartan waistcoat in front of the camera. I feel sure that, when the programme eventually appears on "Nationwide", everybody will feel that out committee has done credit to this House in the exposure of its various members.
I should like to pay tribute to the noble Lord, Lord Cledwyn of Penrhos, not only for his introduction but for his control uf the very many different aspects of concern of the members of his Committee. When one hears the noble Lord, Lord Mackie, explaining his particular position one knows the ability of the other members in the drawing up of the report and in taking part in the actions of this committee.
I can say that, because as regards this particular report, owing to various circumstances including nefarious problems in Northern Ireland, I do not feel that I have contributed personally as much as I should have liked to have done. Its interest to me, coming

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from Northern Ireland, is of the greatest importance.
There are three rather conflicting main arguments which are going on. The first is: Is Europe to have a "fortress" type of trade or is it to have a dynamic and expanding trade? The second is the question discussed by the noble Lord, Lord Mackie: the selfsufficiency of the EEC. Thirdly, there is the question of the imbalance between the prosperity being allowed under EEC pricing to the livestock producers and the cereal producers respectively.
While it would be unfair to talk about "barley barons" in this House, there is absolutely no doubt that the barley growers of this country have been doing extremely well compared with the livestock producers, and the CAP is for the prosperity of all producers and farmers at a proper price for the consumer. In paragraph 36 of our report there is what I believe to be a very important sentence. It says:
"The Committee are in no doubt that in present circumstances the latters"—
that is, the livestock producers—
"should be given greater weight: and … consumers' resistance to increased prices is adversely affecting consumption of meat".
Therefore it follows, to my mind, that if we are to restrict the import of anything which makes the input into livestock more expensive, unless something is done about the price of beef in the end we are going to reduce consumption in a very big way.
It is that aspect I should like to emphasise, not as regards the general high principles to which the noble Lord, Lord Mackie, referred, but coming down to the rather smaller area of Northern Ireland, for which the noble Lord, Lord Mackie, was kind enough to express sympathy. During the period of guaranteed prices, various Governments have maintained the balance between prosperity for livestock producers and cereal producers in a very careful way, and the balance was not really too wrong. But now under the CAP the balance is worse than it has ever been in my memory.
As an illustration of how it affects us in Northern Ireland, I should say that 89 per cent., or nearly 90 per cent., of the output of the Northern Ireland farmers, which is £500 million, comes from livestock. The noble Lord, Lord Mackie, has said that perhaps the price of cereals is too high, but the fact is that if the price of cereals had not been too high then cereals would have been used. Somehow the balance has become completely wrong and at the present moment the only way any prosperity can be maintained for the livestock producers of Northern Ireland is by not restricting manioc.
I am referring to manioc because it appears to be what we would call the most important cereal substitute, certainly as far as Northern Ireland is concerned. The Commission's proposal appears to be mild enough—that the import from Thailand will be 5.25 million tonnes this year, decreasing in 1983 to 4.75 million tonnes—but even that apparently minor restriction is unsatisfactory in the part of the world I come from. In paragraph 37 it says this:
"It is not possible to measure the benefit, in terms of the prices of meat, of the existing largely free access for cereal substitutes …"
The noble Lord, Lord Mackie, has explained that the livestock industry of Northern Ireland was based on an
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efficient industry importing from the Americas; but we can, with the use of manioc, say exactly how this is cheapening the price of our end products, because it is on our end products that we really have to make a decision.
In September this year, the price of grain was £14 per tonne more expensive in Belfast than in East Anglia. When that is converted into the compound feed, it works out at £5 per tonne for pigs and poultry and £8 per tonne for dairy cake. When you then translate that in terms of your end product, you find it is £1.30 per pig, ½p per pound for broilers and 1½p per gallon of milk. That is a total profit: remove that and you have a disaster. It is on that basis that I oppose even the minimum restriction of the importation of manioc.
We have other problems which I have already mentioned. Our markets, in spite of all the other problems involved in more expensive inputs, is more distant; but in spite of that the efficiency of the industry has always enabled us to overcome that particular disadvantage. Our industry is on a knife-edge, and if the pig industry alone, if I only take one part of it—and I must not get on to the ills of the pig industry, because we are talking about cereal substitutes—should collapse, we are talking in terms of 2,000 to 5,000 people becoming unemployed, which, translated into terms of unemployment benefit, would cost the country something like £20 million a year. As it is, the income of the farmers in Northern Ireland is down by 77 per cent., and out of a turnover of £500 million there is only £9 million termed as being surplus.
The proposal of the Commission may look harmless, but the problem is that if manioc is restricted at all we will not get it in Northern Ireland, because the Dutch and the Germans have invested a large amount of money in port facilities and a large amount of money in Thailand. The good manioc comes to Rotterdam in ships of 40,000 tonnes and it is then trans-shipped. The Dutch and the Germans are using vast quantities of it. If it is restricted, it will be more profitable to use all that manioc in Germany and Holland, and none will then come to Northern Ireland.
Therefore, if it is not available to Northern Ireland and if there is to be any restriction at all, I come back really to what the noble Lord, Lord Mackie, was saying: other actions must be taken in anticipation. The Government must accept that to have any restriction at all, either by quota or by raising the price of manioc, will have a disastrous effect on this industry in Northern Ireland. If restriction occurs, the Northern Ireland miller will not transfer to cereals because the cost of the compound will be too great. In fact, the amount of cereals used in Northern Ireland will decrease, because there will be no livestock industry to consume it. So I hope that the Government will read this report and agree with me that there should be no more restriction on manioc, either by quota or by price.
6.38 p.m.
Lord Sainsbury: My Lords, as is his custom, the noble Lord, Lord Cledwyn of Penrhos, has given a clear and thorough summary of the report. It is a most wide-reaching subject, but I must confine my brief remarks to two aspects of it. First, I should like to stress the importance of the cassava root, which,

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as has already been said, is also called manioc and tapioca, to the Thai economy. Secondly, I should like to ask how the Community, having encouraged the excess production of cereals through the price support system, can justify restricting competition from imports, particularly imports from a developing country. The Community cannot espouse protectionism at home while claiming to champion the interests of the third world. I cannot pretent to speak with the intimate knowledge of Thailand of my noble friend Lord Walston, but, as I understand it, cassava is an ideal crop for Thailand. My information is very different from that of the noble Lord, Lord Mackie, and perhaps my noble friend Lord Walston will adjudicate as to which view is nearer to the true facts.
As I said, cassava is an ideal crop for Thailand, and is well suited to a poor country and a poor soil. It requires little money to grow, yet can survive under soil and climatic conditions where other crops would fail. The sandy barns make harvesting this tuber particularly easy, while the pronounced wet and dry seasons make the drying and processing economic. Of more importance is the financial dependence of the country on tapioca. As a result of the demand from certain countries in the EEC, and direct encouragement in the processing, tapioca has become one of the country's main foreign currency earners. A large part of the population owes its livelihood to its production, transport, processing and export.
The Community is offering financial assistance to help Thailand diversify its agricultural production, but it will take time for new crops to become established. Even when new export crops have been produced, what guarantee will Thailand have that the markets of the European Community will stay open or, for that matter, whether satisfactory markets will be available in the rest of the world? The magazine Agribusiness Worldwide referred to a Thai merchant commenting on the aid, saying:
"If Thailand starts producing cashew nuts for export, is it not likely that the Community walnut growers will eventually seek to limit even these imports?"
From the evidence that the committee received, it has not been possible to judge the concern that Thais feel on this attempt to limit their exports. At present, the agreement is indeed informal and voluntary for Thailand. However, there is the threat of what is known under the GATT as "de-consolidation". In other words, the import levy on manioc fixed at 6 per cent. could be replaced with a much higher tax.
This brings me to another point of the increasingly protectionist stance of the Community. In my opinion, it is time that the policy makers acknowledged that the problem facing cereal farmers is that production is greater than Community demand, the reason for this being that support prices have been too high in relation to world prices for too long, although the gap between Community prices and world prices naturally fluctuates. It is this that has caused surpluses and not, as we are being led to believe, the importing of feed grain sub-substitutes. Of course, imported feedingstuffs will be attractive, if the price of feed grain grown in the Community is maintained at too high a price.
Part of the general problem of the CAP, in my view, arises from the policy of self-sufficiency which appears to be the primary aim of certain member states of the
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Community. If this is EEC policy, it seems inevitable that it will give rise to surpluses because of variations in supply and demand. There are many who argue—and I am one of them—that it would be better to aim at 80 or 90 per cent. sufficiency, buying the other 10 or 20 per cent. at a lower price from third world countries.
This proposal to restrain the imports of manioc stems from the hope of Community farmers that demand for their grain will increase. It is, therefore, valid to ask what will be the real effects of this move. The committee heard repeatedly in evidence that compound feedingstuffs are not direct substitutes for cereals. From the Grain and Feed Trades Association we learned that some ingredients in compound feedcake perform specific roles. Manioc itself is almost entirely carbohydrate, but mixed with proteins and fibre the nutritional balance and quality of feed compounds can be controlled.
The first possible result of this restriction of imports of manioc could, as we state at paragraph 44 of the report:
"…simply have the effect of artificially promoting expansion of imports of other products, or of compelling resort to an ever-widening series of restrictive measures".
The other products would include cereal residues, known as brans and sharps, wheat offals and grain screenings, fruit pulp, molasses and sugar beet pulp, and maize gluten. There is certainly no guarantee that there will be a corresponding increase in the demand for Community cereals. Manioc is the exception, but all other cereal substitutes are by-products of processing methods. They have no particular value and their price can be reduced to that which secures disposal.
Secondly, if feed prices increase as a result of the restriction on the imports of manioc, and other restrictive measures which might follow, it is bound to affect livestock producers and consumers of meat and poultry, although it is, of course, difficult to estimate the the exact increase. The Community, in their anxiety to deal with what can be an embarrassing and costly grain surplus, ignore the interests of the livestock industry which, as has already been said, has done relatively badly compared to cereal producers.
Finally, it is more than probable that there will be an increase in budgetary spending. Again there are no definite figures, but the Overseas Development Institute have estimated that the proposed financial assistance could amount to 50 million dollars. I am opposed to this attempt to restrain Thailand's exports. As the Overseas Development Institute state in their evidence:
"The story combines all those elements which so often bring the CAP into disrepute: misdirected public expenditure; insensitive protectionism and uncritical acceptance of the views of European farming interests at the expense of consumers and overseas suppliers".
On a more general level, it must make developing countries doubt the Community's commitment to aid the third world. Therefore, I believe that these proposals should be resisted.
6.51 p.m.
Lord Bishopston: My Lords, as previous speakers have indicated, I am sure your Lordships are indebted to my noble friend Lord Cledwyn of Penrhos, to the members of the European Communities Select Committee and to those who gave evidence for the report

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which we are discussing. May I add the tribute of the Opposition for the effort involved and, referring to the comments made by the noble Viscount, Lord Brooke-borough, the clarity shown in the presentation of the report by my noble friend Lord Cledwyn of Penrhos.
As the committee claims, the Commission's proposals raise important questions. It is right that we should be discussing these matters now in your Lordships' House. Some may think that it seems rather odd—the noble Lord, Lord Sainsbury, referred to it—that we are discussing manioc which is associated with cassava, a plant with tuberous roots. On the face of it, there appear to be much more important issues confronting the Community. These matters might be thought to be of less consequence. Yet, as the committee claims, matters of policy and principle are involved, affecting not only animal feedingstuffs but other aspects, too.
We are concerned not only with the composition and prices of compound animal feedingstuff but also with the constituents of the feedingstuffs, the sources and the conditions of procurement. However, the undertone of my comments this evening will be that there are much wider aspects which concern not only the effect of policies on EEC members but the wider canvas of human affairs farther afield. Reference has been made to the less developed countries. But this is not a simple matter, for as members of the Community we know that there are other considerations which we must take into account.
We were reminded by my noble friend Lord Cledwyn of Penrhos that cereal substitutes are not necessarily inferior to cereals. This is one factor, among many others, which we must take into account. There are some cereal substitutes which are alternatives, but there are also some which are complementary to cereals themselves. The EEC and its member states wish to ensure that their own producers are not undercut, that they are safeguarded, and that there is a fair trade between member states and non-member countries.
The objective of the EEC is to ensure maximum productivity with reasonable competition from inside, helped by policies to prevent internal production from being undermined or threatened by undue imports from non-EEC countries—hence the levy or the low duty system. If outside imports are not regulated, it is said, then unfair competition results. So the EEC wishes to restrict the importation of cereal substitutes. But what matters is the way in which it is done. This is one of the factors which we have to bear in mind. Yet, as the report claims, the Community is heavily dependent on imported proteins, the major part of which is derived from soya beans, the main source of these imports being the United States. But protection in the form of variable levies also keeps EEC prices high above those on world markets. As the report indicates, most of the cereal substitutes are both produced in the EEC and imported, produced as a by-product of the processing of either EEC-produced or imported raw materials, manioc, as we have been told several times, being wholly imported. Thailand is the main source of supply. Smaller amounts are obtained from Indonesia and China.
With regard to the Community's views and proposals, these are most important for they indicate the
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approach and the aims of the Community. The Community rightly points to the disadvantages of the use and input of cereal substitutes, including the disadvantageous effects on the Community budget and loss of revenue. My noble friend Lord Cledwyn of Penrhos referred to the growth of manioc imports, which has been called "spectacular". It is regarded as a
"destabilising factor in the cereals market".
Manioc gets special mention. The Community stresses that the policy objective in respect of manioc and other potential cereal substitutes must be to ensure that there is no disorderly development or growth of imports likely to cause imbalance in the cereals market or any addition to budgetary costs. It seems that it is on this basis that the Community seeks speedy action on manioc. An outline agreement text between the Community and Thailand was, as we have been told, negotiated about two years ago by Mr. Gundelach and has not yet been formally concluded. Despite non-conclusion, the Thai Government have acted, I understand voluntarily, to restrict their exports of manioc to the EEC. This restriction has caused some difficulty for the Thai Government through low farmgate prices and it has asked, quite naturally, that the Community should co-operate in overcoming some of the resulting problems. We note that the Council of Ministers' outline agreement includes provisions for the restriction of exports of manioc from Thailand to the Community—this point has been made by several speakers—the imposition of a maximum levy of 6 per cent. and the imposition, in effect, of import quotas. The aspect of help to Thailand was a proposal that Thailand's position as an exporter of manioc was not undermined by a substantial increase in manioc imports from other countries and the possibility of the Community doing its "utmost", whatever that may mean, to provide financial assistance for projects aimed at rural development and crop diversification in Thailand itself.
There is need for more orderly arrangements. We are told by MAFF that manioc production in Thailand during 1980–81 has risen substantially, with their producers suffering a significant fall in their income. This is a factor of very great importance to people in that country. In this way, Thai producers' incomes from their exports have fallen substantially below what they might have been.
With regard to the comments of the European Parliament, it seems apparent that the Parliament is also concerned and has called upon the Commission to review its trade policy to open up the Common Market to a much greater extent, not only for raw materials but for finished products as well. In addition, there is emphasis upon the need of the Community to consider trade policies which are compatible with Community development policy, particularly through long-term agreements with developing countries. This aspect is of very great importance, and reference has already been made to it.
With regard to other views which have been expressed, I am pleased to note that other agencies and bodies with not only a commercial and trading interest but with concern for the wider human aspects have commented. GAFTA/UKASTA, concerned as they are

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with the grain trade, argue that the issues in general amount to a choice between the concepts of a dynamic market economy and, as the noble Viscount, Lord Brookeborough, mentioned, the alternative of "Fortress Europe", urging the former. They go on to say that the main cause of the trouble is the high level of Community support prices for cereals. They want policies which are not piecemeal, unsound and impracticable attempts to restrict access of imported feedingstuffs but the discouraging of surplus production, and this of course is another indication of the diverse ways in which we can achieve the aims which will buttress and ensure good sound agriculture, both here and in other parts of the world.
As the report points out, there are conflicting considerations affecting policies towards cereal substitutes. They include agreements with exporting countries designed to restrict imports of manioc accompanied by financial and technical aid. This of course includes development matters, diversification and so on in Thailand. There are, of course, measures to limit budgetary costs and to discourage surplus production of EEC produced cereals. The latter aspect would be accompanied by reductions in cereal support prices if a standard quantity of production is exceeded. As I understand it, MAFF have supported the Commission's proposal for the restriction of manioc imports and would welcome further the restrictions which the Commission appear to have in mind while not contemplating very severe restrictions, and I think the House will await the comments from the noble Earl the Minister of State on this matter and to know what future policy proposals the Ministry and the Government have in mind.
The National Farmers' Union is naturally interested in some form of comprehensive protection for producers generally under the CAP while, as they say, seeking to avoid distortion and other undue factors. It is also commendably concerned with the interests of the developing countries. As one might expect, the Overseas Development Institute has commented that there are undesirable aspects in this matter including "elements which bring the CAP into disrepute". Also they speak about misdirected public expenditure, insensitive protectionism and uncritical acceptance of the views of the European farming interests at the expense of the others.
I think the point about looking at the interests of the Community overall and the CAP in particular, to see that it does not fall into disrepute or merit unwise criticism is one of great importance; but I think there is a danger in looking at one or two items in particular while ignoring the aspects of the economy of Thailand itself and indeed the economy and the conditions in non-EEC countries.
The ODI have pointed out also that other restrictions by the Community, for instance in textiles, which have adversely affected Thailand, should be borne in mind when these matters are considered in the agricultural aspect. Other countries in the South-East Asia area are also involved here. There is the danger of aggravated trade relations with that region if restrictions are clumsily applied.
The noble Lord, Lord Sainsbury, has mentioned his concern, which is a concern we all share, for the developing countries, and in your Lordships' House on
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3rd June last a debate took place on the report of the European Communities Committee on development aid policy, the 21st Report, and it was on that aspect that I made my maiden speech the day after entering your Lordships' Chamber. It is often thought that development aid, and indeed other forms of assistance, to the LDCs (or the less developed countries) in the third world have to be considered mainly in terms of what the rich North can do to help the poor and needy South. It is not a matter of what we can do for them and what we can give them; it is a matter of how we can work with them in partnership, not only in aid but in trade as well, and this surely is one of the basic points in our debate this evening.
The report to which I have just made reference considered the policies of the EEC in respect of the LDCs as a programme of assistance. But real aid must be seen not in terms of what the rich can give or do for the third world so much as what the North and South can do together for the mutual benefit of both. We do not see the interests of the South as being in conflict with our interests at all; indeed they are very much bound up together.
On that basis trade is as vital as, if not of more value than, aid. It is in negotiations with the CAP comprehensively including trade policies of the EEC with the non-EEC countries that some of the more noble aspirations can become reality. I think the danger is that we tend to look at the Brandt Report and the problems of aid in isolation and when Ministers—and I had five years as Minister of State for Agriculture in another place—enter into negotiations on occasion we tend to look at our interests and their interests, without realising sometimes that our interests may be in conflict with their interests in other respects, where we normally show much greater concern.
As the committee indicates, they have not examined the wider implications for policies in this report. It is so easy for Governments, Ministers and indeed the public to look at single issues—such as the one before us now—in a narrow way without regard to the wider perspectives. So it is no wonder that the Select Committee points out in paragraph 35 that it regrets that the first recourse proposed to deal with an internal problem of the Community should be by restricting imports from the developing countries, which is a case in point. I think also we should bear in mind, as the noble Viscount, Lord Brookeborough, from Northern Ireland has made known his concern about conditions in that country, that in many ways we are all developing countries to some extent and are deserving of the consideration of others. We know as members of the Community how often we plead our case and ask for the tolerance and understanding of our fellow Community workers.
The Committee goes on to say that lower cost of animal feedingstuffs and lower costs to support livestock production result in lower prices to the consumer, meaning of course more demand, and that means not only happier producers, workers, and processors but consumers as well, both inside and outside the Community. So fewer restrictions on international trade are therefore beneficial and preferable, especially as it represents freer trade and a valuable source of export earnings for certain developing countries, as well as for ourselves.

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Finally, to come to the conclusions of the committee, the Commission has not proposed that imports should be eliminated. The proposed draft agreement with Thailand envisages a progressive reduction in the volume of exports from that country. But I was interested to note that MAFF's evidence suggested that the Commission do not envisage doing much more than placing a lid on the present position. Perhaps the Minister may be able to give us a little more clarification of what they have in mind there. The report goes on to assert that no factual evidence has been advanced to show that imports of manioc have become "excessive" or that they involve any imbalance in the cereals market. These are points that we have to bear in mind. I was interested that the noble Viscount, Lord Brooke-borough, answered some of the points and the misgivings uttered by the noble Lord, Lord Mackie of Benshie, when he spoke as he did from his experience and as a member of the committee.
So the fact is that in these situations facing agriculture and food production in our various countries, as the noble Viscount, Lord Brooke-borough, has said, we live very much on a knife-edge and never quite know when we may need the consideration of others. Agriculture and food producing industries have many ways—we might call them weapons—by which the balance of interests can be protected. Some farmers want more money and, as I told them when I was Minister of State, and indeed since—because at that time I had both import and export responsibilities with many countries—if policies lead to higher prices, then of course consumption goes down and profits go down as well. If prices are not adequate to ensure fair returns, then farmers restrict production and shortages result, with higher prices, and so we have the swing of the pendulum there. On the other hand, if import levies protect home production unwisely or excessively then the EEC producers do not benefit from the soft breezes of competition. We want only soft breezes of competition and not the gale forces which unfair competition from outside the Community can sometimes bring. But again there are, of course, regional variations even within the Community. So a balance must be kept in all this.
I think in looking at the considerations of the report as they affect us within the Community we also must have concern for the third world. It is important that we help the third world in the ways in which they think we can help them best. On the EEC 21st Report, debated on 3rd June, in the comments made by our late noble friend Lord Goronwy-Roberts, who spoke for the Opposition, he said:
"I think it will be agreed that the paramount criterion to aid is that it must be determined by the development needs of the third world and not by the exigencies of the Community's internal agricultural policies. We must not be afraid of constructive criticism over the way in which the Community's economy is operated".—(Official Report; col. 1235.)
Having regard to the ways in which we can help other countries is one matter of great importance when we are so much involved, naturally and rightly so, with our own interests.
I go along with the committee's general conclusions, especially those in paragraph 49, which anticipates damage to the developing countries, to the Community's reputation as a trading partner and to its
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political relations, if the proposed measures were enacted. We are all grateful to the Select Committee for their work and I hope that those with responsibilities will heed their conclusions, because, as my noble friend Lord Cledwyn of Penrhos has said, their conclusions have far-reaching implications.
7.13 p.m.
Lord Stanley of Alderley: My Lords, I would like to start off by thanking the Select Committee and indeed agreeing with them that this report should be debated on the Floor of the House. After that, like the noble Lord, Lord Mackie, I fear I can find nothing else to agree with. I would like to put the points that worry and concern me. Paragraphs 45 and 50 suggest that cereal prices are relatively too high and support prices should be fixed at a lower level. If your Lordships are saying—and I think my noble friend Lord Brooke-borough was certainly saying—that livestock producers have fared worse than their cereal brothers, I would reply briefly in two ways. First, they will not achieve prosperity by improverishing their cereal brothers, and they will not achieve prosperity by throwing out lock, stock and barrel the whole of the CAP. What are they wanting? Are they wanting to go back to deficiency payments, or do they want a complete revision of the CAP, including Article 39, which I will be happy to give to any noble Lord who wants to read it afterwards? Perhaps in a lighter vein I might misquote the old beer advertisement by saying that all farming is bad but some is worse than others!
I would ask your Lordships to consider the case of a young man paying £50 an acre and 20 per cent. interest on his money, a section of our society that is so very vital to our country that the committee seem to have forgotten. I can assure your Lordships—and I am a cereal producer—that such a young man needs to average over 50 cwt. an acre merely to break even, while the national average is well below that figure. I challenge any noble Lord here regularly to exceed that figure of 50 cwt. by March.
The committee states that world cereal prices are lower than ours, to which I ask your Lordships what would be the result of dropping the support price, as was suggested, I think, by the noble Lord, Lord Sainsbury. I suggest the following would happen. First, labour would be further reduced to the detriment of our rural community. Secondly, there would be a switch to other forms of production, as indeed happened when there was an EEC subsidy to encourage dairy farmers to get rid of their cows, many of whom were forced into cereal production, so causing part of the problem we are discussing. That scheme, incidentally, was studied by this very Select Committee in 1980 in their 32nd Report. Thirdly, there would be even greater pressure on the farmer to increase his yield, which would involve a greater use of fertilisers and pesticides, rationalisation—by that I mean of field size; nothing less than 100 acres for me—causing further removal of hedges, ditches and other obstructions to the production of cereals at the lowest possible cost, because that is what we would be forced into.
That, I believe, is what your Lordships' committee is saying. I am sure I see in the eyes of my noble friend Lord Mottistone that that is what he wants us

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to do. That is what we would do. I am sure the noble Lord, Lord Cledwyn, would admit that we farmers are very easy to lead; we do exactly what we are told and we do get on with it. But, my Lords, at the back of my mind, way back in the distant past, did not your Lordships debate, maybe too briefly, a Bill called Wildlife and Countryside Bill? If my memory is not all that short and does not completely desert me, I had a feeling that somebody somewhere in this House had a different sentiment altogether over that particular point. So watch out, my Lords, if I may say so, before you force us into this very unpleasant and nasty road. If you do, I hope you will support me when those who do not want us to do these things attack me.
I ask your Lordships to accept that the prices set for cereals only conform to Article 39 of the Treaty of Rome, which among other things requires conditions for an efficient producer to earn a reasonable living. And even at today's prices he would, I believe, require an element of historic costs to achieve such a living. If substitutes are allowed in cheaply this support price will be undermined, with the consequences I have described. But they will also cause, as I believe the noble Lord, Lord Mackie, mentioned, great problems to the economics of the CAP, which would find itself paying more in restitutions. I would point out, in passing, that at the moment the EEC is only 92½ per cent. self-sufficient in feed grains without those cereal substitutes coming in.
The report suggests a greater degree of freedom for imports of cereal substitutes. Without considering the consequences I have mentioned. But my greatest criticism of the report is that such a policy is totally contrary to the CAP. While I accept that the CAP is far from perfect, this suggestion, or the suggestions in this report, completely and utterly destroy the basic concept, and worse still—and I am sorry to say it—put nothing in its place.
Your Lordships may gather that I am somewhat critical of this report, but it does not diminish my respect for the work and thought put into it by your Lordships' committee. Its controversial nature at least takes my mind off the wet weather. As the noble Lord, Lord Cledwyn, has known me all my life, though I have not known him quite all his, I am sure your committee will understand that I am not being particularly spiteful when I say that I hope its conclusions are not accepted.
7.20 p.m.
Lord Oram: My Lords, the noble Lord, Lord Stanley of Alderley, said that farmers—whose spokesman he eloquently is—are very good and do as they are told. It has been my experience in another place and here that they are very expert in making sure that they are told to do just what it is they want to do. I take a very different view from the noble Lord, Lord Stanley, about the report that we are debating. In particular, I think that it is a very good illustration—especially when we include the lucid speech of my noble friend Lord Cledwyn of Penrhos—of the great value of the work of the European committee and its subcommittees, not least because the committee procedure gives a full opportunity both for those with expert
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knowledge, such as we have heard on all sides in this debate, and laymen, such as I certainly confess myself to be on this particular question, to make contributions to the unravelling of these difficult problems.
On the question of manioc, let me admit that my only direct personal knowledge derives from the tapioca pudding that my mother used to make. As to the more abstruse statistics and analysis of the manioc situation in the report, I approach the matter without expert knowledge. However, it is clear to me, and I believe that it must now be clear to your Lordships from what we have read and from what we have heard in the debate, that there is here a very serious issue at stake, particularly—and this is the point that interests me—for the country of Thailand, and I believe it behoves us as a House to say so clearly, both to our own Government and to the powers that be in Brussels.
I do not propose to attempt more than to set this technical report against a non-technical background and to examine briefly just a few of the general principles which seem to me to be raised. The first part of the background against which I think that this proposal should be seen is the contrast between, on the one hand, the general propositions of the Treaty of Rome and its basic premises in favour of competition and freedom of trade, and, on the other hand, the restrictive practices which have emerged, particularly in relation to agricultural production. We have in the case of manioc a proposal to restrict its entry simply because it is an unwelcome competitor to some of Europe's farming interests.
Lord Mackie of Benshie: My Lords, will the noble Lord give way? I think that the freedom of trade talked about in the Treaty of Rome is a freedom of trade within the Community. The basic concept of the CAP—and we must not forget it, even if we dislike it—is that the Community has protection from outside.
Lord Oram: My Lords, I accept a good deal of what the noble Lord has said, but I am pointing to the fact that there is a contradiction of philosophy within the Treaty of Rome itself and the practices which have emerged in relation to the CAP. Of course, the whole of the common agricultural policy is subject to the criticism that I have made, but this is not the time for us to go into the general question. We have examined that through an earlier report produced under the chairmanship of my noble friend Lord Cledwyn.
Whatever may be our views about the CAP, I believe that we are entitled to insist that, so far as practicable, there should not be any unnecessary extensions of the restrictions, particularly when the well-being of third world countries is at stake. What is proposed in the principles of the agreement that we are asked to endorse would, as has been made clear by my noble friend Lord Cledwyn and others, have a detrimental effect on the basic economy of Thailand. Indeed, as the noble Lord, Lord Sainsbury, pointed out in his speech—with which I thoroughly agreed and which I admired—in paragraph 44 of the committee's report it is asserted that the restriction of imports of manioc (if we start along that road) will compel at later stages resort to an ever-widening series of restrictive measures.

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My second point is that, despite the criticisms that have hinted at about the CAP and the EEC in that respect, I am a firm admirer of much of the EEC's policies towards the third world. They do not go far enough by any means in my judgment, but what they do is soundly based. I particularly have in mind the STABEX scheme, which ensures that primary products from a wide range of third world countries are subject to the Lomé Convention's indexing arrangements, with compensatory payments to cushion those countries' economies from the vagaries of world commodity markets.
It seems to me regrettable, since the EEC has a good record in respect of its STABEX scheme, that it should now propose a quite contrary policy in respect of the import of manioc from Thailand. As my noble friend Lord Bishopston has pointed out, the evidence from the Overseas Development Institute expressed the view that this episode reflects badly on the EEC, and I think they had in mind that hitherto, as I have said, the EEC's policy in relation to developing countries has been a good one. I recognise that the proposed agreement includes some attempt to compensate Thailand, but, frankly, I doubt the wisdom of first creating a problem for a country and then trying to overcome it. In any case, in my judgment, more harm will be done to the Thai economy by the exclusion of their product than could be offset by the proposed compensation.
The proposed restriction is specific and the promise of compensation is, I would suggest, distinctly vague. The expression is that, "the EEC will do its utmost to provide financial assistance". That is a term of art that I have recognised on many earlier occasions in relation to the proposed 1 per cent. of GNP contribution that the United Nations set as a target for overseas aid programmes. In our own country the Government in which I had the privilege to serve as well as the present Government very often approach that 1 per cent. with terms of art such as, "do its utmost" and "make best endeavours". While the restriction is so specific I should like to see the compensation arrangements equally specific.
The noble Lord, Lord Mackie, made the point in his speech that it is dangerous for the Thai Government to rely as regards their agriculture so very much on one particular product. I would agree. It is a problem that is also to be found in other agricultural economies in other developing countries, be it cocoa in West Africa sugar in Mauritius, coffee in Kenya or copra in the Pacific islands. There is a widespread problem of economies relying on one commodity. I agree that long-term there is a need for their agricultural economies to be diversified. But surely we do not deliver a short-term blow at their economies and then promise them some long-term rectification of the damage that we have done.
Lord Mackie of Benshie: My Lords, the noble Lord has extraordinary courtesy in giving way. He has slightly taken my argument the wrong way. The single culture idea is, of course, very dangerous, but in this case much more dangerous than cocoa and copra, which we do not grow in this country. The point that I was making was that this is a substitute
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that we are taking in against the general policy, which is to be self-sufficient in barley, which is what it replaces. That makes it more dangerous.
Lord Oram: My Lords, I was looking at it from the point of view of the economies of the developing countries, and I think that there is a justified parallel in the instances that I have given.
It seems to me that the proposed directive which we are now considering really runs directly counter to all progressive thinking about the relationship between developing and developed countries. A theme that runs through the latest world development report, issued by the World Bank, is that industrialised countries need to keep protectionist measures under control and that they need to keep their markets open in order to help poorer countries. This theme is, of course, also a main part of the analysis of the Brandt Report, which is to be examined by Heads of Government at Cancun in Mexico tomorrow and the day following. It is also the considered view of almost all specialist bodies in this field of the welfare of developing countries, and notably, in connection with this particular report, the wise opinion of the Overseas Development Institute, which gave evidence to the committee and expressed itself in that forceful paragraph which both my noble friend Lord Bishopston and the noble Lord, Lord Sainsbury, quoted with such effect. As I say, what the EEC proposes to do in this connection runs counter to a great deal of really expert and honest opinion.
In the light of all this authoritative opinion, I suggest that we cannot let this proposed agreement pass without firmly endorsing—as I certainly do—the conclusions which the committee of the noble Lord, Lord Cledwyn, has reached, in examining this question and particularly the manioc situation.
7.33 p.m.
Lord Walston: My Lords, at the outset I should like to thank the noble Lord, Lord Cledwyn of Penrhos, not only for initiating this debate in such a clear manner, but for presiding over the work of the subcommittee, keeping us all in order—even the most difficult members of the sub-committee—and at the same time keeping his temper and enabling us to keep ours.
I support the conclusions of the committee. I believe them to be right; I believe them to be correct. However, that does not mean to say that I do not have a great deal of sympathy for the attitude of the noble Lord, Lord Stanley of Alderley, concerning the plight of the arable farmer. Some of your Lordships may know that I am one myself. So some may think that I speak with a certain amount of knowledge; others may think that I speak with a certain amount of prejudice. However, although without any doubt in the past years cereal farmers have, by and large, had a good time of it, that has been due in very large measure to the exceptionally high yields which have been obtained, which, in turn, are due both to the skill of the seed breeders and the experts, but largely to the climate. That profit has been gradually, but not very slowly, eroded by an inflation rate running at about 18½ per cent., with an increase in prices averaging about 4½ per cent. Therefore, even the

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very substantial margins which some of us enjoyed two or three years ago are now very close to disappearing, and in certain cases have already disappeared.
Therefore, I do not think that we can solve this problem simply by pushing the matter back and saying,"Let us have lower cereal prices and then everybody will be happy". That is no solution at all. I would just say to the noble Lord, Lord Stanley of Alderley, that so far as I know, nowhere in this report do we recommend that cereal prices should be lowered. In the last sentence in paragraph 45 it is stated:
"One method of dealing with such difficulties as may exist could be to fix support prices at lower levels …".
That is very different from saying that the best method, the only method, would be to fix prices. We had a certain amount of argument over that in the committee, as the noble Lord, Lord Cledwyn, will remember. So there is certainly nothing in this report which suggests or states that lower cereal prices are the answer to this problem.
I should like to deal briefly with the attitude taken by the noble Lord, Lord Mackie of Benshie. He praised the writing of the report; he praised its formation; he even praised the colour of its cover, which he said was blue. Mine happens to be red; I find that a more attractive colour. I hope that this is not a presage of any split that may jeopardise the result in Croydon tomorrow. The contents—whether they be in a blue or red cover—of our two reports are the same.
The noble Lord, Lord Mackie, took what I can only call a Luddite attitude towards this: we must not allow any new techniques, any new methods, any new materials to alter the existing balance, even though it may bring about increased efficiency, even though the price of feedingstuffs may be lower as a result of using, in this case, manioc; we must resist that because we have to protect our existing producers of cereals. It is exactly the same argument which was used in the days when the butter mountain was at its height: we must prevent people from buying cheaper margarine because, if we allow margarine to come in at lower prices or to be manufactured here at lower prices, the butter mountain will rise still higher. It has been used to keep out isoglucose—a new method of producing sweeteners—which will enable the consumer to have his or her fizzy drinks sweetened at a cheaper price than if sugar were used.
We cannot allow that sort of attitude to influence the overall workings of the common agricultural policy. Of course we need long-term, steady protection, but not the sort of protection which rigidly excludes the new techniques and the new materials which will make the overall industry of agriculture more efficient and which will benefit the consumer by lower prices. After all, if this attitude had been taken some time ago, I rather doubt whether the noble Lord, Lord Mackie of Benshie, would have gone along with it. It could well have been said that French wine is a competitor of English beer, which is made of English barley, and in order to protect the barley growers of England we must keep out claret; or, that French cognac is a competitor of Scottish whisky, also using barley, so in order to protect the barley growers we must not allow any cognac to come into this country. I do not think that the noble Lord would have taken
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exactly the same view had that arisen for the Select Committee to investigate.
Lord Mackie of Benshie: My Lords, I am sorry to keep interrupting, but I am being attacked. If the noble Lord takes that view it is slightly illogical then that we simply do not take the levy off imported barley and bring a little competition into it that way. What I object to is the total inconsistency of levying highly on imported barley, but a substitute you let in at nought or 6 per cent.
Lord Walston: My Lords, I know that is what the noble Lord expounded at considerable length with great fluency and persuasiveness earlier on in his speech. I was suggesting that the analogies I have given were not all that far-fetched. We must ensure that the Community is not restrictive in its world trading, and the proposals for those who wish to keep out manioc are undoubtedly restrictive; they are undoubtedly a blow against the third world and a blow against the general trading with the third world and improvement of conditions within the third world.
Perhaps the position of manioc in the Thai economy has got a little out of proportion. I had the opportunity of visiting Thailand in another capacity last month, during the Recess. While I was there I took the opportunity of talking with many people—the Minister of Agriculture, the Minister of Finance, the Minister of Industry, the head of the EEC delegation—and of visiting the North-East, which is the centre of the area in which manioc is grown, and has increased by the largest amount.
My noble friend Lord Sainsbury is absolutely right in recounting the merits of manioc as a crop. Is it growth suitable for that climate, and so on. The noble Lord, Lord Mackie of Benshie, is absolutely right in pointing out its drawbacks. It is bad for the soil. It puts very little back into it; far less than it takes out. It leaves it uncovered. It encourages erosion. But the important thing about manioc in this particular area is that its cultivation has increased enormously from about 1970.
Ten years ago the total exports of manioc from Thailand were 50,000 tonnes. Today, as we have heard, they are something over 500,000 tonnes. The great part of that increase has come in this particular area—not all of it, but the great part of it—of the North-East of Thailand. It has come partly from abandoning rice cultivation and growing manioc instead. About half the increase has come from that. The other half has come from cutting down trees, particularly the very valuable teak trees, and clearing the land and growing the crop on that cleared land.
This is giving great worry to the Thai Government and the Thai authorities because it is encouraging erosion, it is depleting fertility, and it is in fact already appearing to begin to change the actual climate of the area in reducing the rainfall, with devastating effects, if this continues, on the rice cultivation. So the Thai authorities themselves are just as anxious as anybody to move the farmers back into rice cultivation, which is already beginning to happen not through any action of the Community but simply by the force of market circumstances. The price has dropped significantly; the costs of transport and of handling have increased,

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and so the returns to the Thai farmer have diminished very substantially and he is now moving back towards rice cultivation.
That makes the situation easier. It does not alter the principle of the matter one iota. Therefore, I would suggest that while we are perfectly right in turning our faces against any move to prohibit the importation of manioc, or even to diminish it, any help that can be given, as is indeed being given by Brussels, to the Thai Government to diversify its crops, to find alternatives to manioc, and help it to move back into what its own experts consider to be a more balanced form of agriculture, will be very much to the advantage of Thailand, and incidentally will reduce the amount of manioc which is incorporated into the feedingstuffs in the Community as a whole.
What effect that will have on the price of feedingstuffs is another matter. My own guess is that it will have only a minimal effect. After all, the total amount consumed even at its peak was 5½ million tonnes. If that comes down to 4½ million tonnes the price differential will not be all that great, and, as we have heard, it is largely the German and Dutch compounders who make use of it, and the United Kingdom compounders to a very much smaller extent. Therefore, I do not think we need be too worried about that situation.
I shall repeat only once more my approval and support of this report and its conclusions, and to repeat again, because it is worth repeating, the overall need for us in the Community not to build a wall round "Fortress Europe" and keep out the products of foreign countries when they are likely to be permanent and cheaper, and to the advantage not only of the third world but of ourselves and of our own industry.
7.47 p.m.
Lord Mottistone: My Lords, I shall be brief. Like the noble Lord, Lord Walston, I should like first to congratulate the noble Lord, Lord Cledwyn, for his splendid chairmanship of Sub-Committee D, which is a pleasure to enjoy and indeed to be disciplined by, and also for the most clear way in which he introduced what is really quite a complicated subject. In fact, if I might say so, no other noble Lord has put it so clearly since. I should also like to extend my warm congratulations to the noble Lord, Lord Mackie, for the statesmanlike way in which he presented his case. It is so very different from how he presents his case in Sub-Committee D.
I shall not delay your Lordships because the main substance of what I have to say was, as is so often the case, said so skilfully by the noble Lord, Lord Sainsbury. If in due course you come to read the Official Report and you see what the noble Lord, Lord Sainsbury, has said you can imagine that I would have said it if he had not done so first. I am left therefore with two main ques ions which perhaps my noble friend the Minister might consider answering. They have stuck out strongly in the whole debate, and have not been really answered by subsequent speeches.
First, what is being done about the problems of Northern Ireland, so eloquently expressed by my noble friend Lord Brookeborough? It does not seem to me that we have got an answer. What this report which we
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are debating attempts to do is to push things in the direction of solving the problems of Northern Ireland, but of itself it does not. We took evidence on this at one stage during the past year. I am concerned that the whole balance of the Common Agricultural Policy and the effectiveness of this policy seem in various ways to be biased away from Northern Ireland. I feel that this is a real problem which the British Government should take up very forcefully, and I hope that my noble friend the Minister will be able to tell us they are doing so. Article 39 of the Treaty of Rome applies just as much to livestock farmers as to cereal producers, though from listening to my noble friend Lord Stanley of Alderley one would have thought that, somehow, livestock farmers were a lesser breed and excluded from Article 39.
Lord Stanley of Alderley: No.
Lord Mottistone: My Lords, my noble friend says, "no", but when he comes to read what he said, he will see that that is the sense one got from his remarks. I should therefore like reassurance that livestock farmers are ordinary people and just as worthy of receiving all the benefits from Article 39 of the Treaty of Rome as any other sort of farmer. If they ate, then the report which we are debating will be seen to have more sense to it than was implied by my noble friend.
Lord Stanley of Alderley: My Lords, if I made such a remark, it was certainly not my intention to do so. I think I said that both should be treated equally and that you do not make one rich by making the other poor. Certainly Article 39 applies to both.
Lord Mottistone: I am grateful to my noble friend, my Lords, and I am glad he has had an opportunity to correct what he said earlier. Perhaps the Minister will now give us the great wisdom he has to contribute to the debate.
7.51 p.m.
The Minister of State, Ministry of Agriculture, Fisheries and Food (Earl Ferrers): My Lords, I should hate to disappoint my noble friend Lord Mottistone after his offer that I should contribute wisdom to the debate; I do not know that I have ever contributed wisdom to anything, but I shall do my best to answer the points that have been made and put the Government's point of view on the subject. One would not think that a debate on cereals substitutes was necessarily the most stimulating of subjects on which to have a discussion, but it is extremely interesting, and we have had a fascinating debate in which a number of noble Lords have, fortunately, not always taken the same point of view.
We congratulate the noble Lord, Lord Cledwyn, and his committee for what they have done in producing this report, because they have painted a very clear picture of the issues which are raised by the European Commission's proposal for restricting imports of manioc and for identifying what issues would arise if the Community at some stage proposed to take action to control imports of the other so-called cereals substitutes. This is not the easiest of problems to

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analyse, but as usual Sub-Committee D has come out with a trenchant document and has put the matter most clearly, and for that not only the Government and your Lordships but many others throughout the agricultural world will be very grateful.
Being one who, basically, likes to find himself in a fairly harmonious existence with other people, I always like it when the department which I have the privilege to serve at the moment is in agreement with your Lordships' committee, and I do not like to find any cause for dissent. But, of course, the members of the committee were at odds with each other because of the presence of the noble Lord, Lord Mackie—I am sure the noble Lord will not take offence when I say there was nothing new in that—and he did his best this evening to make sure that your Lordships were at odds with each other as well. But, when the noble Lords, Lord Walston and Lord Mackie, had a discussion as to the relative benefits of claret and beer, I thought that that was going slightly wide of the mark, although I saw a scintilla of a thread of a connection. Nevertheless, I enjoyed the almost empirical judgment of Lord Mackie on the conclusion of the report, when he said, rather, I thought, as a teacher might have said to a schoolboy, "Wrong is wrong and right is right."
Before I explain to your Lordships what views the Government hold on the main issues, perhaps I may first recall the reasons why there is mounting concern in the Community about cereals substitutes and about manioc in particular, and I agree with the noble Lords, Lord Cledwyn and Lord Bishopston, that cereals substitutes are not inferior. There is nothing synthetic about them, rather like plastic sausage skins; they are entirely wholesome. Manioc is, as your Lordships know, the root of the tapioca plant, which in tropical countries is used for human food, but it can also be used as animal feed. It is also known as cassava.
Manioc was of little importance as an animal feedingstuff 10 years ago. Imports into the Community have increased from about 1¼ million tonnes in 1969 to between five and six million tonnes in the last year or so. The attraction of manioc is not that it has special nutrient value; it is almost pure starch or energy and it actually contains much less protein—2 to 3 per cent.—even than feedgrains like barley, which contain 9 to 11 per cent. It contributes nothing, therefore, to remedy the Community's shortage of protein. In fact it makes it worse because you have to import proteins to balance up against the manioc which has none, or virtually none. Its attraction is simply that it is not subject to the Community's cereal levy system which applies to imports and which is variable. Manioc pays a much lower and fixed import charge. It can, therefore, be imported into the Community much more cheaply than grain.
Imports of manioc at the present level have a significant effect on the Community's budget because if manioc is used in place of maize, the Community loses revenue, which is the difference between the rate of levy on maize and the much smaller import charge on manioc. If, alternatively, manioc is used in place of home-produced grain such as wheat or barley—and here I agreed with the noble Lord, Lord Mackie—the wheat or barley which is not used then has to go for export, and the Community budget incurs higher expenditure on export refunds. On the assumption
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that the main effect was on exports, my department's officials estimated in their evidence to the committee that the net cost to the Community budget might be about £150 million. The Commission have recently come up with a much higher estimate of about £280 million. This may be rather exaggerated, but it is clear that the cost is very substantial.
In addition, there is something in the argument—quoted, but somewhat dismissed, in paragraph 38 of the report—that, in so far as manioc replaces barley it makes it more difficult to maintain a stable cereals market in the Community. It is not always easy to find outlets for barley on the world market; but unless exports can be kept flowing, the market price in the Community may fall below the support level, and there will then be excessive sales into intervention, with a resulting cost to the budget and to national exchequers. We have seen this in recent seasons and it is a problem which affects the United Kingdom particularly, as a quarter of the Community's production of barley is in this country.
Then there are fears that the use of manioc, which has up till now been concentrated much more in some parts of the Community than others, may be giving an advantage to livestock producers in those areas over their competitors for whom manioc is not readily available. At different times livestock producers in this country and France have voiced this complaint.
Those, then, are the main concerns and I have related them to manioc, for it is there that the case is much stronger. My noble friend Lord Brookeborough referred to this, as did my noble friend Lord Mottistone, and Lord Brookeborough correctly drew attention to the differing prices of barley in Northern Ireland and East Anglia. He drew attention to the fact that conditions in Northern Ireland are very hard. I accept that entirely. I know that because of the special position of the livestock industry in Northern Ireland the incentive to take up cheaper feedingstuffs, such as manioc, may be even stronger there than in other parts of the United Kingdom. But the proposed agreement on manioc should not deny Northern Irish buyers the supplies that they want—
Lord Davies of Leek: My Lords, may I interrupt the noble Earl? I do so after exercising great control, since I did not put my name down to speak in this fascinating debate, in which no one has mentioned the consumer. I read all the report carefully. Can the Minister say what effect on the consumer the manioc position is creating?
Earl Ferrers: My Lords, if I may, I shall come to that point when I have finished dealing with the Northern Ireland problem. I thought that the noble Lord, Lord Davies of Leek, had temporarily transposed himself from Wales to Northern Ireland.
If I may continue to speak about the Northern Ireland position, I would say that the proposed agreement on manioc should not deny Northern Irish buyers the supplies which they want. The evidence is that even this year less than 100,000 tonnes of manioc will have been imported into Northern Ireland. Under the proposed terms the Community could still import from Thailand and elsewhere more than 5 million

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tonnes a year. That should leave ample room for imports into Northern Ireland to be maintained at recent levels, though we should remember that of course when sterling is weaker than it was earlier this year manioc might not be so attractive for our compounders in relation to other feedingstuffs.
The noble Lord, Lord Davies of Leek, asked what would be the position with regard to the consumer, and I think that the noble Lord, Lord Cledwyn of Penrhos, referred to this, too. In my judgment the position is one that would not affect the consumers greatly. The greatest effect which the introduction of a lower priced—if it is lower priced—cereal would have would be that the resultant carcase would be cheaper to produce. In that respect it would be likely to benefit the farmer more than it would benefit the consumer because of course the consumer pays the price at which the animal is purchased on the open market, which does not reflect the cost incurred in producing the animal.
The report rightly brings out the fact that similar arguments have been advanced in relation to quite a wide range of other so-called cereal substitutes. I very much agree with the Committee that the term "cereal substitutes" should be treated with great caution, for it has come to be used for a variety of different products with different properties—products of very different importance to the Community market, and with differing significance for the Community's international trading relations. Both the Commission and the French regularly use the term "cereal substitutes" to cover not only manioc but other non-cereal feedingstuffs, such as the residues from maize starch manufacture, which is known as "maize gluten feed", the by-products of the milling of wheat and other grains, citrus pulp, and molasses. All of these are referred to as "cereal substitutes", and yet the term is sometimes extended even to the residues of oilseed crushing, such as soya bean meal, which are certainly an important ingredient in feed rations but which in no normal sense could be considered as substitutes for cereals.
The noble Lord, Lord Mackie, referred to maize gluten feed as well as manioc as substitutes for cereals. I agree that manioc may be a substitute, but maize gluten is not, because that has 20 to 25 per cent. of protein, and the Community needs that. That is very different from manioc, which has under 2 per cent. of protein, and therefore I think that the noble Lord was making an error when he combined the two—
Lord Mackie of Benshie: My Lords, what I meant to say was that maize gluten, with the increased manufacture in certain countries of what I understand is called gasahol, might become an element which would be a danger to the Community policy in the future.
Earl Ferrers: My Lords, we should have the distinction that maize gluten and manioc cannot be associated together as similar properties. If these different cereal substitutes have anything in common, it is that with the exception of manioc (and molasses), they mostly contain a significantly higher percentage of protein than any cereals. The Community cannot meet the protein
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requirements of its livestock from home-produced feed, and it is therefore bound to import protein in some form. Therefore, it is not surprising if the livestock industry seeks to meet some part of its requirement for protein with the by-products of other industries, when these can be obtained at relatively low prices. Manioc is, therefore, alone among the so-called substitutes in contributing nothing towards meeting this shortage of protein. Thus it can be considered apart on that score.
Then again some, but not all, of the products concerned are imported into the Community at low import charges which are bound under the GATT. If the Community wished to vary these arrangements, it would have to enter into formal negotiations, and it would need to offer compensation to the supplying countries, or else risk retaliation by them. Those are the rules of the game, and they are important points to bear in mind.
Having drawn the picture of the problems as best I can, I should like to turn to the proposals that have been made. The noble Lord, Lord Bishopston, asked me to explain what "putting a lid on the top" means, and perhaps he will find that by the time I sit down I shall have explained it to him. The Commission has been instructed by the Council of Ministers to pursue negotiations with the countries from whom the Community imports manioc, with a view to setting some limits to that trade—the lid on the top. By last November the Commission had negotiated a draft agreement with Thailand, the country which in recent years had accounted for 85 to 95 per cent. of Community imports. The terms of the agreement were approved by the Council in the following month. It has not yet been formally signed, because it commits the Community to reaching parallel agreements with other supplying countries in order, quite understandably, to prevent them from moving in and taking advantage of the reduction in supplies from Thailand, and agreements with these other countries, such as Indonesia and Brazil, have not yet been negotiated. The Thai Government have said, however, that they will observe the terms of the draft agreement during 1981. So, evidently, they are content with their side of the bargain, provided that other suppliers accept equivalent restraints.
The effect of the agreement with Thailand, if it is concluded, will be to reduce the Community's imports of manioc over a period by perhaps 1 million tonnes. Even so, they should continue at a level which will be very much higher than had ever been reached until about three or four years ago.
The noble Lord, Lord Oram, was concerned that the agreement runs counter to attitudes which ought to be held and which are held towards developing countries. I take the noble Lord's speech as being very serious and very important, because without question we in the developed countries, and indeed the Community, have a responsibility towards developing countries, which we recognise and which we must accept. The noble Lord, Lord Oram, said that the Community is only obliged to do its utmost to provide assistance, and he did not feel that that was a very cast-iron assurance. I understand that that form of words is not unusual in international agreements and that the

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only doubt is that the specific amount of aid has not yet been agreed. The fact of the aid is not, I understand, in doubt.
My Lords, concern was expressed by the noble Lord and, indeed, by others that these proposals would deprive a developing country of a lucrative line of trade, but your Lordships will have noticed from the report that Thailand would be compensated by this aid for any loss of trade, and this does appear to be welcomed by Thailand. There are sound agricultural reasons for their attitude; and I am bound to say that I agree with the noble Lord, Lord Mackie, in his view and disagree with the noble Lord, Lord Sainsbury, if I may say so, because manioc production imposes severe stress on the land and it is not desirable for the long-term health of Thailand's agriculture that manioc should be grown too extensively or too continuously. The aid which is being offered by the Community for projects to diversify Thailand's agriculture is therefore in the best interests of Thailand's long-term agriculture.
Concern has been expressed that the cost of compensation might outweigh any possible gain to the Community's cereals budget. I think that that is probably also misplaced. It is true that the exact amount of aid to Thailand has not yet been settled, but provision for it would be found from the budget provision for aid to non-associated countries, which is large. It is about £85 million for 1981 and there is £120 million in the draft budget for 1982. It is to be expected that any new aid for Thailand under the manioc proposals would be found from this provision, which is already allocated under this budget heading, and that it would not mean higher total spending than would otherwise have occurred.
On the other side of the account, there could be distinct advantage for the Community budget if a limit were set to the imports of manioc. I respectfully think that possibly the Committee might have given too little weight to the prospect of this. I have already referred to the estimates that at current levels these imports cost the budget something in the region of £200 million a year. The proposals might reduce that, but, even if they did not, it would clearly be sensible to set a limit upon what is a fast-growing cost to the budget; and, in conjunction with the other efforts which are being made in order to contain expenditure on the common agricultural policy, any steps to limit an item of expenditure of this size must be regarded as worthwhile.
I know that the noble Lord, Lord Sainsbury, could not help taking his usual swipe at the CAP. He said that this brings the common agricultural policy into disrepute. My Lords, I do not think it is really quite as bad as that. He said, as indeed he always does, that the price of cereals is too high and that therefore we ate now producing surpluses, insisting that that was bad. The robust exposition by my noble friend Lord Stanley of the problem of cereal farmers was not totally inappropriate because, in a world which is short of food, if the European Community can contribute to alleviate that, that must be good. But, of course, the harm comes if such a disposal makes massive inroads into the common agricultural policy budget. That is the difficulty, and that is the balance which one has to try to get right. I agree with the
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noble Lord, Lord Bishopston, that our relations with developing countries should, where possible, be in the form of trade and not aid, and, if I may say so, he is quite right to refer to the Brandt Report and to underline the points which his noble friend Lord Oram made about this sensitive and highly important matter of aid and help to developing countries.
In paragraph 43 of their report the committee suggests that one reason why a limit on manioc imports might not bring budgetary savings is that it could lead to increased imports of some other substitute product rather than increased usage of Community-produced cereals. I rather doubt whether this would happen. As I have already said, the other so-called substitutes are not direct replacements for cereals in the same way as manioc. Moreover, all those which are currently imported by the Community are by-products of other processes—of flour milling, starch production, sugar manufacture and so forth. Output of the byproduct is determined by demand for the main product, and it would not therefore be increased in response to the modest reduction in manioc supplies for which the draft agreement with Thailand provides.
It will be clear to your Lordships from these remarks that Her Majesty's Government see much more of advantage than of disadvantage in what has been proposed on manioc. Clearly it is necessary—and I recognise it—to tread carefully where the interests of developing countries are concerned, and I fully understand and appreciate the concern which has been correctly expressed tonight on that issue. But I hope that I have explained why we do not think the proposals on manioc would be damaging to Thailand in the long run, or to the other suppliers; they would merely represent an attempt by the Community to set some moderate limits to a trade which has started to grow and produce problems.
If I might refer to the other so-called cereals substitutes, I would say only this. I explained that it is misleading to regard most of these as mere substitutes for cereals. They have other properties, notably a protein content, which cereals cannot match and which the Community badly needs. For that reason the Government do not see the same case for action on these other products. We share the view of the committee that the interests of the livestock sector come first here; that any proposals for constraining trade in maize gluten feed, in wheat brans or in other so-called substitutes should be looked at very cautiously indeed; and that tariff barriers should not be erected unless there is a real need for them. This is a view which many, though not all, of our Community partners share. I can assure your Lordships that the Government will continue to bear the interests of the livestock industry at heart—very much so—where this trade is concerned.
I should like, if I might, to end on a note of agreement with your Lordships' committee. It has quite rightly been said that underlying all the controversy about trade in cereals substitutes is the level of prices which the Community maintains for cereals themselves. The combination of a wide gap between the price of grain and other feedingstuffs on the world market and inside the Community, and the current recession through which the livestock industry is going, has spurred livestock feeders to look for any

831
alternative to high-cost grain. If Community grain prices were closer to those on world markets—and here I know I carry the noble Lord, Lord Sainsbury, with me, even if I get stick from my noble friend Lord Stanley behind me—many of the problems we have been discussing tonight would disappear. The Government are conscious of this, and we sought in the last CAP price review to obtain a better balance between support prices for grain and livestock. We had some success in the settlement of prices for the current year, and we shall continue to give full attention to this in the next review.
8.18 p.m.
Lord Cledwyn of Penrhos: My Lords, we have had a constructive debate on the report, and I am grateful to all noble Lords in all parts of the House for the speeches they have made and for the kind things they have said about the report which Sub-Committee D has produced. I am also grateful to the noble Earl the Minister for the speech he has just made in which he explained the attitude and policies of his department towards this subject.
I was disappointed in his attitude towards the report when lie says that he and his right honourable friend and the Government are proposing to support this negotiation which will result in a reduction of manioc exports from Thailand by 1 million tonnes. I say to him that 1 million tonnes is not particularly significant as far as the Community is concerned but for the people of Thailand the reduction of 1 million tonnes may be very serious indeed. In these negotiations which he says the Government of Thailand are likely to agree to I hope that consideration will be given to the arguments advanced by the Government of Thailand; because the one thing that the committee did not receive and the one piece of evidence which the Minister of State was unable to give to the House was the attitude of the Government of Thailand towards these negotiations. While I and the House will appreciate the contribution of the noble Earl, there are certain matters in it which, if the time were available, I should like to analyse; but no doubt at some stage the opportunity will arise again in Sub-Committee D.
I am grateful to my noble friend Lord Bishopston for his contribution, and also I should like to refer in particular to the speech of my noble friend Lord Walston following his visit to Thailand. I thought that that was an interesting and valuable speech. I trust that the Government will take note of what he said and possibly make sure that a full report of his visit to that country will be made available to officials in the Department of Agriculture.
My Lords, I turn now to the two dissidents and, first, to the noble Lord, Lord Mackie of Benshie, who made the forceful speech that I expected but showed his unwillingness to be converted on the road to Bangkok, as it were. I hope that he will think again about this. I think that he and the noble Lord, Lord Stanley of Alderley, are unduly sensitive about the recommendations of the sub-committee. The noble Lord, Lord Stanley, said that I had known him for longer than he had known me. My Lords, the margin was very small. He is, as I know, a most efficient, practical farmer
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himself and when he speaks on agriculture in this House he is always worth listening to. On this occasion he must remember that if we temper the wind to the shorn lambs of Thailand, this will not affect the fat lambs of Anglesey. What we are proposing for Thailand in this instance is something very small against the background of the resources of the Community, but something very important to them.
Therefore, my Lords, I believe that this has been a valuable debate, but I think also that we shall come back to it from time to time because there are implications in this report in relation not only to manioc but to all the other so-called cereal substitutes which are of importance to British and Community agriculture.
On Question, Motion agreed to.

Companies (No. 2) Bill [H.L.]
Returned from the Commons agreed to with amendments; the said amendments to be printed.