Lords Sitting of 20 December 1984

Preamble
The House met at eleven of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Bristol.

British Citizens Abroad: Franchise
Lord Gridley: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government how many British citizens resident abroad will benefit from the extension of the franchise under forthcoming legislation.
The Minister of State, Home Office (Lord Elton): About 600,000, my Lords.
Lord Gridley: My Lords, while thanking my noble friend the Minister for that Answer and while accepting that due to the speed of air travel people overseas are being brought into ever closer contact with the United Kingdom, I should like to ask him from what country overseas the largest number of votes are likely to be cast in respect of overseas voters and holidaymakers? Has my noble friend any knowledge of the number of bona fide holidaymakers who will be casting their votes?
Lord Elton: My Lords, I think that my noble friend has asked me to use my crystal ball beyond its capacity. I can give no accurate estimate about from which countries the largest number of votes are likely to be cast. But, according to the time of year, the United Kingdom is likely to be high on the list.
Lord Underhill: My Lords, I should like to ask the noble Lord the Minister to look into his crystal ball because undoubtedly while there will be a number of those 600,000 persons who will be temporarily abroad for business purposes and who will intend to come back, will he hazard a guess at how many of those 600,000 show their loyalty to this country by being tax exiles with no intention whatever of returning to this country? Also, how many will be persons who have lost all contact with the constituency in which they will be voting up to a period of seven years after leaving?
Lord Elton: My Lords, the qualifications in the Bill which we shall be discussing are residential and do not relate to the motives of the person when he chooses where to reside.
Baroness Vickers: My Lords, when voting took place in 1945 members of the services were given 14 days, I think, between the allocation of their votes and the date when the votes had to be in. Will there again be a period of time for that to happen, and will there be notice of where the applications for votes are to be sent?
Lord Elton: My Lords, I believe that there will be an extension of the period of a general election, but I would advise your Lordships to reserve questions of detail on the Bill until the Bill arrives in this House.
Lord Glenamara: My Lords, with regard to the reply which the noble Lord gave to my noble friend, is he aware that a vast number of people have now bought villas around the Mediterranean and that they have retained their British citizenship but pay no taxes to this country and have no intention of returning? Is it fair, is it constitutionally proper, that these lotus eaters should have a vote in this country?
Lord Elton: My Lords, that is a question to which we shall return when the noble Lord takes part in the proceedings on the Bill.
Lord John-Mackie: My Lords, would the noble Lord care to hazard a guess at which political party will benefit most?
Lord Elton: My Lords, I would care to do so, but I shall not.

Public Assets: Use of Sale Proceeds
11.10 a.m.
Lord Ezra: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether, in the light of the substantial sale of public assets recently undertaken, they have any proposals for adjusting the system of public accounting so as to make clear the extent to which the proceeds from such sales will be used for capital purposes.
Lord Brabazon of Tara: My Lords, the Government have no plans to change their accounting systems with regard to the sale of public assets.
Lord Ezra: My Lords, I thank the noble Lord for that not unexpected reply. However, I should like to ask him, first, whether he considers that the recent sale of British Telecom, yielding something of the order of £4 billion, does not represent a thoroughly exceptional transaction? Secondly, in those circumstances, should it not, as in the accounts of any normal enterprise, be shown as an extraordinary item? Thirdly, as the income arises from the sale of assets, should it not be reserved for the creation of new capital assets, of which the country stands sorely in need?
Lord Brabazon of Tara: My Lords, we certainly regard the sale of British Telecom as an outstanding success on the part of the privatisation programme. However, in accordance with the Consolidated Fund Act 1816 receipts are not hypothecated for specific purposes. This allows the receipts to be used in accordance with the Government's overall economic policy and gives Parliament greater control over the Government's expenditure plans. Sales of physical and financial assets have always been treated as negative public expenditure. In nearly all cases acquisitions of

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assets increase public expenditure. It is therefore symmetrical and logical that these aggregates should be reduced when assets are disposed of. This treatment is in line with the international guidelines for national and government accounting.
Lord Boyd-Carpenter: My Lords, is it not also reasonable to take into account the very heavy burden of public investment which the Government anyhow undertake, particularly in respect of the nationalised industries, including the coal industry?
Lord Brabazon of Tara: My Lords, I certainly agree with my noble friend. Capital expenditure by the Government has risen every year; in constant terms it is slightly up. Moreover, taking private and public capital expenditure together, in 1984 we expect to achieve a post-war record and we expect to do better than that in 1985.
Lord Paget of Northampton: My Lords, can the noble Lord tell us whether there is any record of private enterprise selling on the Stock Exchange a company at what was immediately recognised to be less than half its value?
Lord Brabazon of Tara: My Lords, I presume that the noble Lord is referring to the sale of British Telecom?
Lord Paget of Northampton: Yes, indeed, my Lords.
Lord Brabazon of Tara: My Lords, as I have said, we were delighted by the privatisation of British Telecom. In fact we were taken by surprise to some extent, by its success. It is obvious, with the benefit of hindsight, that it might have been possible to sell it for a little bit more. However, we have now achieved a record number of individual shareholders. More than 2 million people applied for these shares, which was considerably more than the number for which we had hoped. We regard it as very good that share-ownership should be increased by such a massive extent in this country.
Lord Bruce of Donington: My Lords, is the noble Lord aware that we are not surprised that the Government are surprised at the so-called success of this operation? Any government ought to have known perfectly well, if they are capable of reading even the figures that were put out in the prospectus, that the capital worth of British Telecom based upon the forecast projections was vastly in excess of the price at which the shares were sold. Moreover, your Lordships were told so in this House.
Is the noble Lord further aware that, although, on the Government's latest information, there may be some 2 million individual shareholders, in about six months' time the noble Lord may have a very different story to tell when the stags have had their way—which indeed they have so far. Is the noble Lord further aware that the treatment of this item in the Government's own accounts does violence to every canon of accountancy and to the proper administration applicable to an ordinary public company in this kingdom?
Lord Brabazon of Tara: My Lords, it is not for me to speculate on how many of the 2 million people who applied for British Telecom shares will or will not sell them over the next six months. Nor will it be a matter for us. It will be a matter for British Telecom. As regards the sale of assets, we are behaving no differently from how the previous Government (of which the noble Lord was a member) behaved in 1977–78 in their first privatisation exercise.
Lord Mackie of Benshie: My Lords, would the noble Lord the Minister please answer the question posed by the noble Lord, Lord Paget of Northampton? Does the noble Lord know of a single private issue which immediately doubled after the sale?
Lord Brabazon of Tara: My Lords, not without notice. However, I think that there have been several issues on the Stock Exchange which have doubled very quickly, but they have not been privatisation issues.
Lord Harmar-Nicholls: My Lords, is my noble friend aware of any advisers who have greater experience and more prestige for giving advice to the Government in the fixing of a price at which these shares should be put on offer than the advisers who were chosen and whose advice was accepted?
Lord Brabazon of Tara: My Lords, we were extremely confident in the advice that we were given. We chose the advisers who we thought were the best people to advise us.
Lord Dean of Beswick: My Lords, bearing in mind the ill-feeling and distrust that was generated and displayed in another place yesterday over the Government's action to halve the amount of money being allowed back to local authorities from their own capital receipts, will the Minister give an undertaking now that the £5 billion which has been raised by the sale of public assets by local authorities will remain untouched and will not be used by the Chancellor of the Exchequer to lower taxes in the future?
The Lord President of the Council (Viscount Whitelaw): My Lords, I think that the noble Lord knows as well as I do that that is a totally different question. During the debate yesterday I was asked to try to cut down Question Time. If I allow questions totally outside the main Question, I should not be fulfilling what the House asked me to do yesterday.
Lord Dean of Beswick: My Lords, I am sorry but I am afraid that I have to challenge the ruling of the noble Viscount. The Question is about the sale of public assets.
Noble Lords: Order!
Lord Dean of Beswick: My Lords, it is not out of order. Will the Minister answer my question?
Viscount Whitelaw: My Lords, I can only say that yesterday I was enjoined by Members of the noble Lord's own party to cut down on the amount of time that is taken at Question Time. I have sought to do so at the first opportunity, as I think the noble Lord and

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many others would expect me to do. I am sorry if the noble Lord feels aggrieved, but I think that he is asking another question, and so in his heart does he, and I hope that he will put it down on another occasion when no doubt he will receive an Answer.

Legal Aid: Rayner Report
11.17 a.m.
Lord Hatch of Lusby: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government how they will respond to the Rayner scrutiny of assessments of eligibility for legal aid.
The Lord Chancellor (Lord Hailsham of Saint Marylebone): My Lords, the Government have welcomed the scrutiny report as a useful contribution to the discussion of means assessment for civil legal aid. Good progress has been made in bringing a number of the recommendations into effect. Discussions are still continuing on the main issues raised. I expect the Government's final decision to be announced early in the New Year.
Lord Hatch of Lusby: My Lords, may I thank the noble and learned Lord for that Answer. May I also ask him whether it is the case that last June it was discovered that, under certain secret regulations known as the L Code, officials of the DHSS were being ordered to take action, which was illegal, in revealing information provided for the legal aid scheme to other members of the DHSS who were not concerned with legal aid? Is it the case that those orders were then suspended, that a rewriting of the code was ordered following the Rayner recommendations, and that the Attorney-General stated that it was under urgent consideration? Will the noble and learned Lord say that this is a sign of urgent consideration, and can he assure the House that the new regulations will be published and the public reassured over this grave breach of confidentiality?
The Lord Chancellor: My Lords, if the noble Lord had really wanted a detailed answer to that question, he should have put down that question and not the Question which he did. The facts are that the L Code is being revised and it will honour Section 22 of the Legal Aid Act 1974.
Lord Elwyn-Jones: My Lords, will the new regulations require parliamentary approval or assent of any kind?
The Lord Chancellor: My Lords, I think not; but if I am wrong I shall write to the noble and learned Lord.
Lord Hatch of Lusby: My Lords, I should like to ask the noble and learned Lord two further questions. First, so far as his understanding is concerned, is it the case that the Rayner recommendations will propose that the administration of legal aid is solely within the purview of the noble and learned Lord's own department? Secondly, are there any plans to publish
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the new code so that the public are reassured that this breach of the law is not repeated? Are there any plans to investigate who was responsible for the original breach of the law and what action is intended to be taken?
The Lord Chancellor: My Lords, two very different questions. As I said, the question of the L Code is primarily a question for the Department of Health and Social Security, and if the question is put down we shall answer it. As regards the second, the matter is under discussion within the Government and with the trade union side. There is the suggestion that the matter should be transferred to my department. I am not very keen on it, but that decision has not been taken.
Lord Hatch of Lusby: My Lords, may I take the question one stage further with the noble and learned Lord on his answer? When he says transferred, is it not the case that the administration of legal aid has always been under his department? Does he not agree that it should be quite clearly defined as under his department, particularly in view of the fact that as long ago as 1977 the DHSS ignored the views of his department's legal aid advisory committee that disclosure of legal aid information for any other purposes than legal aid administration was a criminal offence?
The Lord Chancellor: My Lords, so far as regards civil legal aid, the overriding responsibility for the administration of civil legal aid is with the Lord Chancellor's department, but it consists of two parts. One is the assessment of means to discover financial eligibility, and one is the reasonableness of the application which is made from the point of view of the merits of the proposed case or defence. The latter is dealt with by the Law Society through its area and regional committees, the former is dealt with under the DHSS because it has the means of assessing financial eligibility which at the moment my department has not. I thought that that was fairly generally known. So far as criminal legal aid is concerned, it was transferred to my department during, I think, the present Administration.

Commuter Services: Quality Improvement
11.23 a.m.
Lord Gainford: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what proposals they have for improving the quality of commuter services into London.
Lord Brabazon of Tara: My Lords, we have asked both British Rail and London Regional Transport to maintain or improve service standards in and around London at lower cost to the taxpayer. We stand ready to approve any worthwhile investment project to this end. At the same time, the liberalisation of coach licensing has improved the range of choice for many commuters.
Lord Gainford: My Lords, I thank my noble friend the Minister for that Answer. Has he any information on the proposed capital card to be issued in the New Year and its advantages, which I understand will allow a commuter to use both British Rail and London Transport on one ticket?
Lord Brabazon of Tara: My Lords, I have indeed. The new card is being introduced on 6th January. It will give access to British Rail and LRT services at a modest premium over the fares charged by either. People living outside Greater London up to about 30 miles from the centre will be able to buy a combined British Rail season ticket and capital card. This will give them unlimited access to British Rail and LRT services within Greater London plus travel by British Rail between home and the Greater London boundary.
Lord Underhill: My Lords, as this is the second occasion when we have discussed the details of London Regional Transport operations would the Minister kindly tell me whether we are going to be permitted to discuss details of the operation of what the Government call a nationalised industry, or are the usual rules to apply? Have the points that the noble Lord has mentioned been discussed with the passengers' committee and have they been, or will they be, discussed with the local authorities?
Lord Brabazon of Tara: My Lords, I am not quite sure what should have been discussed with the passengers' committee or the local authorities. Perhaps the noble Lord could put me right.
Lord Underhill: My Lords, in the Minister's reply to the supplementary he referred to an extension of travel cards. I was asking whether or not they had been discussed with the passengers' committee, which gives advice, and also with the local authorities, which have to pay when the Government ask them for money?
Lord Brabazon of Tara: My Lords, I cannot give the noble Lord an assurance that they were discussed. I have not got that information on me. I shall write to the noble Lord, if I may.
Lord Broxbourne: My Lords, would my noble friend make representations to British Rail to reinforce their good work in providing more non-smoking accommodation on their lines and by improving the standards of hygiene and cleanliness of the compartments? Would he make special representations to draw attention to the conditions at Victoria Station, which at present impose an additional and unnecessary inconvenience and difficulty on commuters and other travellers?
Finally, in a slightly wider but related context, would he urge British Rail to make a contribution to employment and the comfort of travellers alike by resuming the recruitment of porters, since luggage trolleys are a poor substitute for the needs of the elderly, the infirm and overseas visitors in varying degrees of bewilderment at the problems and unpredictability of travel by British Rail?
Lord Brabazon of Tara: My Lords, British Rail have stated that they want to do better, and we welcome that. They have set themselves quality of service targets covering cancellations, punctuality, and cleanliness. As regards the noble Lord's first supplementary about not smoking, I shall certainly draw his remarks to the attention of the British Rail Board. On the question of Victoria Station I think I shall have to do the same.
Lord John-Mackie: My Lords, referring to the noble Lord's point about trolleys and porters, one of the most important things at the station is to see that there is a slope instead of steps to push a trolley up. There are far too many steps at stations and not enough slopes.
Lord Brabazon of Tara: My Lords, this will be a matter about which I am sure British Rail will be aware when they meet, as they hope to, the quality of service targets.
Lord Somers: My Lords, may we have a short debate on this subject at some time?
Lord Brabazon of Tara: My Lords, if I understood the noble Lord correctly, I think that that would be a matter for the usual channels.
Lord Auckland: My Lords, I have used Southern Region each day for over 20 years, and may I ask whether my noble friend the Minister is aware that I think the general standard of commuting services is high? Can my noble friend say how many new drivers are being recruited annually, particularly in view of the old cri de cœur about shortage of staff?
Lord Brabazon of Tara: My Lords, I thank my noble friend for his first remark. I cannot give him a figure on the number of drivers being recruited annually. I would however say that in order to improve services on the Southern Region my honourable friend the Parliamentary Under-Secretary of State for Transport yesterday announced a new £32½ million re-signalling scheme for the Waterloo area. I hope that that will assist him in some way.

Consolidated Fund Bill
Brought from the Commons, endorsed with the Certificate from the Speaker that the Bill is a Money Bill within the meaning of the Parliament Act 1911; read a first time.
Then, Standing Order No. 44 having been dispensed with (pursuant to resolution of 19th December), Bill read a second time; Committee negatived; Bill read a third time, and passed.

British Railways Order Confirmation Bill
Read a third time, and passed.

Merchant Shipping (Liner Conferences) (Conditions for Recognition) Regulations 1984
11.31 a.m.
Lord Brabazon of Tara Lord Brabazon of Tara rose to move, That the draft regulations laid before the House on 13th November be approved. [2nd Report from the Joint Committee.]
The noble Lord said: My Lords, I beg to move that the Merchant Shipping (Liner Conferences) (Conditions for Recognition) Regulations 1984 be approved.
I hope it will be for your Lordships' convenience if I speak at the same time to the other regulations standing in my name on the Order Paper: the Merchant Shipping (Liner Conferences) (Mandatory Provisions) Regulations 1984.
The purpose of the regulations contained in these two draft statutory instruments is to give effect in United Kingdom law to the United Nations Convention on a Code of Conduct for Liner Conferences. The regulations are made under the Merchant Shipping (Liner Conferences) Act 1982. The Government wish to accede to the liner code convention early in the new year, at the same time as other European countries. The convention came into force in October last year but so far, among the OECD countries, only the Netherlands and the Federal Republic of Germany have acceded.
The liner code deals with the relationships between shipping lines who are members of conferences and the relationships between these lines and their customers, the shippers. The United Kingdom's accession to the code will be subject to EC Regulation No. 954/79, commonly referred to as the Brussels package. The Brussels package sets out the reservations that EC member states must make when they accede to the convention. These reservations will significantly modify the way the code operates, particularly in governing the relationships between conference shipping lines.
The main reason why the code was unacceptable to the United Kingdom in its original form was that it sought to impose rigid cargo-sharing between conference shipping lines. But the Brussels package modifies the code by limiting such cargo-reservation to those countries, mainly developing countries, that wish to protect their shipping. As a result of this fundamental modification the Department of Transport has calculated that the code's cargo-sharing provisions will in practice only reserve cargoes representing between 10 per cent. and 15 per cent. of the world's liner conference trade; the remainder will be free of cargo-reservation. In this way the Government have been able to meet in very large measure our objective in maintaining the widest possible freedom for our shipping to compete in the
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world's liner shipping routes. The code's basic regime concerning relations between conferences and shippers was from the outset altogether more acceptable. The Brussels package contains some modifications to certain of the code's provisions but in the main the provisions which give rights to shippers to be consulted on the basis of full information are very welcome.
Before I turn to the regulations themselves, may I also refer to a further condition which will govern the United Kingdom's accession. It has long been the policy of British Governments to accept the conference system, and to exempt conferences from our restrictive trade practices legislation, provided conferences face actual or potential competition from non-conference lines. In order that other contracting parties to the convention are left in no doubt that that remains Her Majesty's Government's position, the Government have decided that the United Kingdom's accession will be subject to the condition that the United Kingdom will be bound by the convention only while our trading partners permit non-conference lines to compete in our mutual trades.
I should now like to turn to the two draft statutory instruments. The first, the mandatory provisions regulations, identifies the code's provisions which are to give rise to rights and duties. The second defines a United Kingdom national shipping line for the purposes of the code and defines those shippers' organisations which will have rights to be consulted.
The Merchant Shipping (Liner Conferences) (Mandatory Provisions) Regulations 1984 implement the code convention. The code's provisions are a mixture of mandatory and recommendatory provisions; and some of the mandatory provisions are ambiguous. It would not therefore have been possible or desirable to import the code as a whole into our law. Regulation 3 lies at the heart of the statutory instrument and sets out in the form of a table those provisions of the code which are to be mandatory. The table identifies those people by whom and against whom these provisions may be enforced. This regulation reproduces the code's mandatory provisions as faithfully as possible. Some minor clarifications have been made to ensure that the provisions work effectively and, above all, do not inhibit competition.
The Merchant Shipping (Liner Conferences) (Conditions for Recognition) Regulations 1984 set the conditions for a national shipping line and a shippers' organisation. The code itself defines a national shipping line but allows Governments to add further criteria. During the course of our consultations with shipowners, shippers and the seafaring unions some suggestions were made which in the Government's view would have imposed unduly restrictive conditions on national shipping lines. Some groups felt that United Kingdom national shipping lines should be British-owned. Other groups felt that United Kingdom national shipping lines should be compelled to fly the British flag. The Government have decided to set criteria so as to maintain as open a market system as possible for shipping lines operating out of the United Kingdom.
Regulation 2 therefore limits national shipping line status only in the following way. Lines will be regarded

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as national shipping lines only in respect of those conferences of which they are members; and they will have to be of British nationality, which is defined as having their principal place of business in the United Kingdom. The only other limitation is that lines from countries which would refuse similar treatment for British lines will themselves be excluded.
The code also allows Governments to decide who should have the right to take part in consultations with the conferences. Here, our objective has been to ensure that those organisations who already have a key role in representing shippers' interests will have the right to be consulted under the code. We have also been concerned to avoid a position where conferences are obliged to consult so many organisations that the process becomes unmanageable. The code itself contains a basic definition of a shippers' organisation, and allows Governments to add further conditions. These conditions, set out in Regulation 3, are necessarily expressed in broad terms. All those whom we have consulted have argued against a very rigid set of conditions.
Regulation 3 allows one national organisation, which is expected usually to be the British Shippers' Council, to claim consultation rights in respect of most, if not all, conferences subject to the code. In addition, other shippers' organisations may claim consultation rights where they can show that they represent shippers of such quantities of goods with that conference that it is reasonable for them to be consulted. If the conference sought to deny that claim it would be for the conference to show either that the shippers concerned were already adequately represented by recognised shippers' organisations or that there were so many other organisations representing more cargo that recognition would be inappropriate.
The Government consider that if both shipowners and shippers operate the consultation procedure in a constructive fashion the shippers' interests will be effectively and efficiently represented. The second avenue by which consultation rights may be established is designed to benefit large individual shippers and representatives of shippers. Regulation 5 gives the Secretary of State the power to designate these groups.
The code, together with the Brussels package, is an attempt to reconcile quite different and potentially conflicting aims. The Government recognise that the code represents something of a challenge, and we have sought to mitigate its worst effects through adoption of the Brussels package. We believe it is now in our best interests to become party to this code and to ensure that it works effectively. I beg to move that these regulations be approved.
Moved, That the draft regulations laid before the House on 13th November be approved—(Lord Brabazon of Tara.)
11.40 a.m.
Lord Underhill: My Lords, may I first thank the noble Lord for his explanation of these two regulations and say that he has done this and explained them to the satisfaction of your Lordships in seven minutes,
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whereas I note that in the other place the Minister required 30 minutes out of a total debate of 50 minutes to explain this complex matter. We rely upon the consultations which the Minister said are taking place to establish that the nine pages of the schedule are satisfactory. I can assure noble Lords that I do not know whether or not they are. We assume that the consultations will bring that out.
The debate in the other place followed immediately after a three-hour debate on the general problems of the British shipping industry. Most speakers in that debate expressed their great concern at the decline of Britain's merchant fleet. Noble Lords will recall the debate in your Lordships' House on 24th November last year, initiated by the noble Viscount, Lord Rochdale, on our own EC Committee's Report on EC competition policy with regard to shipping, when most of the speakers expressed the same concern about the serious deterioration in the size of the British merchant fleet over the last decade, during a period when the world shipping fleet has been increasing. Although we are not dealing specifically with this matter this morning, we must keep this in mind when dealing with these regulations. The issues cannot be separated.
During our previous debate I made clear that the Opposition had given support to the Merchant Shipping (Liner Conferences) Act 1982. Clearly, not to accede to the code could be damaging to our shipping interests. However, I have read in the past 24 hours what my noble friend Lord Ponsonby said on that Act which paved the way for these orders. He said—I am not quoting but paraphrasing—that it was a funny measure to which the Government were lending their support. He said it was a measure creating restrictive regulations on competition. That recalled to mind what I said when we debated the Motion of the noble Viscount, Lord Rochdale, 12 months ago. I said that liner conferences, if not actually restrictive practices, took the form of cartels and that loyalty agreements are also a form of discrimination. I repeat what I said then, that I am not attacking liner conferences or loyalty agreements, but it must be emphasised that these are examples of managed trade. We have a situation where the shipping trade, particularly British shipping trade, must be regulated. It cannot be left to the free play of market forces.
The Minister has explained the Brussels package. We on these Benches recognise that it has enabled support to be given to accession to the United Nations code. I must say again, in passing, how readily the EC Commission can lift its so-called vital articles on competition when it seems appropriate for it to do so; and that is why it was considered appropriate.
These regulations arise, as I said, from the 1982 Act which the Opposition supported. Therefore, we support these regulations. However, it must be agreed that they in no way resolve the situation which Britain's shipping industry is in. Most merchant fleets receive some form of subsidy from their governments. Many countries follow some kind of protection for their shipping interests. There is also the reservation of cargoes to national flag vessels by many countries. This opens up the point to which the Minister referred—the importance of the definition of a national shipping line. He explained that these are set out in paragraphs 2 and 3 of Regulation 12 which

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provide that a national shipping line is to be so regarded if it is formed under United Kingdom law or that of another EC state and has its business address in the United Kingdom or in such an EC state.
There is no condition as to ownership. Vessels can be owned by non-British competitors. There is no requirement that vessels must be registered in the United Kingdom. A shipping line may come within these regulations even though it is owned by overseas interests and/or has its vessels registered in other countries, even under flags of convenience. The Opposition's view is that recognition of a British national line should be given only if it is British owned and its ships are registered in the United Kingdom. Without such conditions a foreign owned company could take advantage of these regulations. Vessels could be registered under another flag, be manned by non-British crews and possibly—in fact, most probably—with inferior wages and conditions. Similar views and criticisms were voiced by the Opposition spokesmen in another place.
I note that there was no reference whatever by the Minister in his reply in the other place to those complaints. The noble Lord the Minister referred to this matter but perhaps this morning we can have sound answers and a justification of why the conditions to which I have referred are not laid down in the regulation on recognition. Will the Minister tell the House what organisations have been consulted? Is the shippers' council satisfied with the conditions for recognition of shippers under Article 3? I note that the Secretary of State provided a Written Answer in Commons Hansard, col. 338, on 10th December. He said that two responses have been received on these regulations which have been considered and the points replied to. No reference was made as to from whom the two responses were received, nor to the points involved. Will the Minister elaborate on that Written Answer?
In giving support to these regulations we have reservations as to whether they are what is needed to help maintain and possibly develop our shipping industry. Is it not now the time, and necessary, for a full inquiry into British shipping in the light of world conditions, bearing in mind that the last occasion a review was carried out was 1970 when the noble Viscount, Lord Rochdale, conducted that review?
11.48 a.m.
Lord Campbell of Croy: My Lords, it is appropriate that some brief comments should be made on the regulations in these two orders especially because the United Kingdom opposed the United Nations liner code, with the full support of the British shipping industry, in 1974 when it was adopted. The code is now acceptable, in changed conditions, and as a result of the negotiations leading to special arrangements being made within the EC. Those arrangements are known as the Brussels package. As the noble Lord, Lord Underhill, said, this is a technical subject and I have no intention of trying to delve into the details of that package. I support the orders and I hope that your Lordships will give them your blessing.
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To my mind there is one overriding reason why we should support the orders. We must preserve, wherever we can, the opportunities for trade by our shipping industry in what are known as the "cross-trade routes"—that is, the business between second and third countries carrying cargoes which do not come from the United Kingdom or are to be shipped to the United Kingdom. The British shipping industry has great expertise in this area and can provide competitive services throughout the world. This is one of the legacies of our being a maritime nation. We retain the ability to carry out services of this kind in distant seas.
I do not think that this is the time for a general discussion on the state of the British merchant fleet. I shall simply draw attention to the fact that the number of vessels in the British merchant fleet has been showing an annual decline and that this is worrying. I believe that the reasons are well known to the Government and I hope that they will respond to the suggestions that are made from time to time to make sure that our merchant fleet is not put at a disadvantage in comparison with its competitors abroad. I do not think that the decline in the numbers of vessels should be interpreted as any decline in quality or necessary loss in some of the very valuable business which our merchant shipping carries out.
The United Kingdom shipping industry still excels in the cross-trade routes which I have mentioned in different parts of the world. The earnings in foreign exchange are substantial, bringing in as they do also earnings from other sources, particularly in insurance. London is a world centre for shipping transactions and for making such arrangements, at the Baltic Exchange in particular, often at short notice, and with a very high reputation for reliability in execution. British shipping lines, not necessarily large ones, specialise in particular services and on particular routes. The ones which I am familiar with are, of course, some of those based in Scotland. The Brussels package helps to preserve the cross-trade business engaged in successfully by the British industry and essential to this country's economic health. At the same time there are opportunities afforded for the developing countries to come in and provide these services if they can be competitive and supply what is needed.
There is one other point that I should like to make, and that is on the liner conference system as a whole. Cynics, quite understandably, can regard this as a restraint on trade and they question why the conferences have been exempted from our restrictive practices legislation. I was a member of the sub-committee to which the noble Lord, Lord Underhill, referred just now which, over a year ago, examined the whole question under the very able and experienced chairmanship of my noble friend Lord Rochdale. We concluded, as others have beforehand and, as I believe, others must if they look into it, that the liner conference system is not a restraint on trade. It means for the users (that is to say, the shippers) a regular and reliable service at known times. For the shipping industry it means that ships will be sailing with worthwhile cargoes and not with empty holds. If this were not so, costs would increase; they would be bound to increase, to the disadvantage of the users as well as the industry. That system therefore is still

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found to be acceptable, provided that there is competition and provided that there are alternative possibilities outside the conference for shippers, should they want to use them.
As regards the shippers—and within that term I include manufacturers and others in business who are selling their goods abroad, as well as the exporters of all kinds, including the agencies who specialise in exporting those goods—they are provided with, I believe, the opportunities to express their views in these regulations and I urge all those concerned to make sure that, through their various bodies, they get the chance of the consultation which my noble friend has described. For these reasons I think that we should continue to exempt the liner conference system from our restrictive trade practices legislation.
While supporting these orders, I take this opportunity to remind your Lordships that the British shipping industry is a vital British interest and that it contributes substantially to our economy, operating all over the world. At the same time I urge the Government to ensure that domestic burdens, imposed within the United Kingdom, do not hamper the enterprise of the industry or put it at a disadvantage in relation to its foreign competitors.
Lord Brabazon of Tara: My Lords, I should like to thank both the noble Lord, Lord Underhill, and my noble friend Lord Campbell of Croy for their general support of these Motions. Perhaps I may deal with just four points which were raised. Both the noble Lord, Lord Underhill, and my noble friend Lord Campbell of Croy wondered whether the regulations would help to arrest the decline of the British fleet. Indeed, much of the British fleet's earnings come from cross-trading on routes serving third countries. One of the key steps which the Government can take, in contrast to the steps which the industry might take, is to keep the shipping markets open to British lines. The code, together with the Brussels package, represents a very significant development in keeping these cross-trades open.
The noble Lord, Lord Underhill, mentioned protectionism, even in a modified form, of the liner conference system. Obviously, countries differ in their views about the wisdom of protecting their fleets, but each country has the ability to interfere in their market, whether or not their trading partners agree. The Government consider that an internationally-agreed regime is much less likely to lead to friction than would a variety of conflicting national protectionist measures; and the Brussels package guarantees that protectionism is contained.
The noble Lord, Lord Underhill, also mentioned the question of foreign owners flying foreign flags and employing foreign crews being defined as United Kingdom national shipping lines. The key condition governing national shipping line status is that the company has its principal place of business in the United Kingdom. This mirrors the key condition which has to be satisfied in order to fly the British flag. British Governments have a long-standing policy of welcoming foreign investment, and there is no reason why we should make an exception in this case. Of course, the Government would wish to see British shipping lines operating vessels under the British flag
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and employing British crews, but these are matters to be determined by each company on the basis of its own commercial judgment. The code convention itself is silent on this issue and the Government see no case for imposing additional conditions.
The noble Lord, Lord Underhill, also asked me whether I could expand on the response in the Written Answer supplied by my honourable friend in another place. I hope that I can satisfy him on that point. The General Council of British Shipping support the definition of the United Kingdom national shipping line and the seafaring trade unions, as I said in my original speech, were fully consulted and the responses came from the British Federation of Commodity Associations and the National Union of Seamen. If I have not answered the noble Lord's point in full, perhaps I may write to him.
On Question, Motion agreed to.

Merchant Shipping (Liner Conferences) (Mandatory Provisions) Regulations 1984
Lord Brabazon of Tara: My Lords, I beg to move the second Motion standing in my name.
Moved, That the draft regulations laid before the House on 13th November be approved. [3rd Report from the Joint Committee.]—(Lord Brabazon of Tara.)
On Question, Motion agreed to.

Royal Assent
The Lord Chancellor: My Lords, I have to notify the House, in accordance with the Royal Assent Act 1967, that the Queen has signified her Royal Assent to the following Acts:

Consolidated Fund (No. 2) Act,

Friendly Societies Act,

Lochaber Water Power Order Confirmation Act, Highland Regional Council (Uig Pier, Skye) Order Confirmation Act,

Lochmaddy and East Loch Tarbert (Improvement of Piers &c.) Order Confirmation Act,

British Railways Order Confirmation Act,

Greater London Council (Money) Act.

Companies (Share Premium Account) Regulations 1984
12 noon
The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Lucas of Chilworth)The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Lucas of Chilworth) rose to move, That the draft regulations laid before the House on 22nd November be approved. [5th Report from the Joint Committee.]
The noble Lord said: I beg to move the Motion standing in my name on the Order Paper. The regulations before the House today provide a relaxation of the requirements of the Companies Act

739
1948 as regards the setting up of share premium accounts in cases of group reconstructions. The Companies Act 1981 introduced extensive reliefs from the requirements of Section 56 of the 1948 Act, which deals with the setting up of share premium accounts.
Some noble Lords may recall that this was done as a result of demands for changes in the law following the High Court decision in the case of Shearer v. Bercain in 1980. In particular, Section 38 of the 1981 Act was designed to avoid an intra-group reconstruction resulting in a restriction of distributable profits. However, Section 38 applies only to group reconstructions which are effected by means of a share-for-share exchange. The possibility of extending Section 38 to cover group reconstructions involving exchanges of shares for assets was considered at the time of the passage of the 1981 Act. but other Bill priorities prevented its being included in the Act at the time. However, in Section 41 there was included a power for the Secretary of State to extend or restrict the relief from Section 56 if he considered it appropriate.
During 1983 the department was asked to consider the extension of Section 38 again on the grounds that there is little distinction in economic terms, or indeed in logic, between a group reconstruction achieved by means of an exchange of shares and one achieved by means of transfers of assets and liabilities. In August of last year a consultative document was issued to see if there was a general demand for such an extension of the relief. The responses were overwhelmingly in favour and these regulations have been drawn up accordingly.
Your Lordships will note that the regulations in fact substitute a new Section 38 for the existing one and that the new section refers to reconstructions brought about by the exchange of shares for non-cash assets. This will cover the transfer of shares in other subsidiaries, as provided for by the existing Section 38, but will exclude transfers of cash. This is important, since Section 41 expressly provides that the relief may not be extended to cash.
This is a complex subject, and I have sought in as short a time as I can and as simply as I can to set out the basic principles embodied in the regulations which I invite your Lordships to approve this morning.
Moved, That the draft regulations laid before the House on 22nd November be approved.—(Lord Lucas of Chilworth.)
Lord Stoddart of Swindon: My Lords, it is for me, I think, on behalf of the Opposition, merely to thank the noble Lord for the extremely concise manner in which he has explained these regulations, which certainly are complex but which, so far as we are concerned, seem to be sensible in all the circumstances. I have no questions to ask him, and, of course, we shall support the regulations.
Lord Lloyd of Kilgerran: My Lords, may I also congratulate the noble Minister on the very concise and helpful way in which he summarised, to use his words, a very complex arrangement. In my view, it is a useful arrangement which appears in these
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regulations, but I have one question and I apologise for not having put it to the noble Lord before. He has indicated that this would mean an amendment of Section 38, to which he referred. I am a member of the Select Committee on the consolidation of Bills, and this Select Committee, under the chairmanship of the noble and learned Lord. Lord Brightman, has been doing the very difficult task of consolidating the Companies Acts ever since 1948. Magnificent work has been done by the draftsmen over the last four years in tackling this tremendously complex task.
With that introduction, I was wondering whether the noble Lord would be able to say whether these regulations, having regard to the fact that they amend Section 38 of the 1948 Act, will be put before that Select Committee before its deliberations are finished in order that the matter of consolidation may be considered. It may be that, although I am ignorant of it, the matter has already been put before the Select Committee, in which case I apologise; but the amount of matter which the Select Committee has had to consider is so great that at the present time I cannot recall whether the amendment of Section 38 is before it. If it is, I apologise to the Minister and to the House for having detained them for these few minutes.
Lord Lucas of Chilworth: My Lords, I am most grateful to both noble Lords for their acceptance of my explanation and of course of the regulations before your Lordships. I appreciate, and I am sure the House also appreciates, the work which the noble and learned Lord, Lord Brightman, does in regard to the Joint Committee on Consolidation Bills. May I thank the noble Lord, Lord Lloyd of Kilgerran, for his very kind remarks, and say that I appreciate the point that he has raised, because it was only late yesterday that the Joint Committee agreed that the new provision could be inserted into the consolidation Bill—provided of course that your Lordships approve (and I am quite optimistic that your Lordships will) these regulations. In that case the regulations will become effective when they have received the approval of both Houses of Parliament.
Lord Lloyd of Kilgerran: My Lords, I thank the noble Lord for giving that information. I should like to congratulate him on being so up to date in this matter of the consolidation of the Companies Acts.
On Question, Motion agreed to.

Industrial Training Levy (Construction Board) Order 1984
12.7 p.m.
The Minister of State, Ministry of Agriculture, Fisheries and Food (Lord Belstead)The Minister of State, Ministry of Agriculture, Fisheries and Food (Lord Belstead) rose to move, That the draft order laid before the House on 3rd December be approved. [5th Report from the Joint Committee.]
The noble Lord said: My Lords, I beg to move that this order be now approved. The levy which this order would extend for a further year is expected to raise a total of some £42.5 million to meet the training needs of the construction industry. It is important to ensure that these costs are spread among employers and that

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all but very small firms contribute to the CITB for grants and training in the industry. For small firms there is an exclusion level which applies to those with an annual total payroll of less than £15,000.
The proposals before your Lordships provide for an occupational levy for the main part of the construction industry. This is a set amount for each occupation and is subject to an overall limit of 1 per cent. of employers' wages bills. These occupational rates vary according to the type of craftsman trained. The board believes that this system reflects the extent to which it has been able to meet the training needs of various categories of workers. The levy rates are set at a level by the board's industrial committees to reflect the specific training costs and needs of each occupation in the industry. I am pleased to be able to say that the occupational rates remain largely unchanged from last year.
Also again proposed is a 2 per cent. levy on labour-only subcontractors. This levy is to be applied to payments made by firms employing labour-only subcontractors who often do not contribute to craft training. This proposal is widely supported in the industry. For their other occupations such firms will pay the fixed occupational levy, subject to the overall 1 per cent. limit.
Noble Lords are aware that the construction board was retained following a general review of training arrangements in 1981 because there was—and remains—widespread support from employer organisations in the industry. The board chairman, Mr. Leslie Kemp, his staff and all board members, employers, trade union representatives and educationists have really done sterling work, particularly in making the youth training scheme such a success in the construction industry. The Government welcome the representation on the board given to the Federation of Master Builders in June last year. This seems a sensible move, since the federation has an important role in contributing to the board's efforts in training.
In previous years there has always been consensus in the industry for the board's training proposals. This was clearly demonstrated a year ago. The present order follows proposals adopted without opposition by the board, and approved by the Manpower Services Commission, who have decided that they are necessary to ensure proper training in the industry. However, the Government have had many representations about the levy. Ministers have consistently stressed that levy matters must be settled within the board, not by the Government. It is vital that employers agree because it is they who pay the levy. The Federation of Master Builders wants to change to a payroll system of levy. Other employer organisations reject this, saying that it was tried before in the 1960s and proved inequitable. I should make clear that all other employer organisations, so I am advised, represented on the board support the proposals.
This order is necessary to being in vital revenue for the board to meet the industry's training need. It will also enable the board to continue to play a significant role in the Government's new training initiative. These proposals are very similar to those put forward and approved by your Lordships a year ago. I beg to move.
Moved, That the draft order laid before the House on 3rd December be approved.—(Lord Belstead.)
Lord Dean of Beswick: My Lords, first of all, may I express my appreciation to the noble Lord, Lord Belstead, for the very sympathetic and detailed way in which he has moved this order today. He will know that when this was debated in another place on Tuesday more than an hour was spent on it. I can assure noble Lords who are present here today that I do not intend to take anything like that much time on it.
If one peruses the Hansard of another place, one sees that all aspects of this order were pretty well covered. The Minister, in moving it, has explained what it is about. It is of course an annual increase. It is a pity that there is some disagreement between the bodies that make the levy. There is no disagreement whatsoever as far as I am aware, and I am sure the Minister will agree. Everybody in the building industry involved in this matter agrees with the scheme itself.
What the Federation of Master Builders has been saying for some time is that, as it represents the smaller builders—the special system—the present system is a little unfair to it as against the other federation which represents the larger builders.
In the debate as reported in the Hansard of another place reference was made both by the Under-Secretary of State and the Opposition spokesman to the working party that has been formed to look into the building industry. It is hoped, although there is no guarantee, that this will be one of the matters that will be looked at in order to iron out any differences of opinion, so that in future there can be a universally accepted form.
I hope that that can be the case because the CITB, since it has been set up, has done a first-class job under Mr. Kemp. In another place I was one of the Members who first asked for a place to be found on the board for the Federation of Master Builders, the smaller organisation, and this has been granted. No doubt the federation will make its presence felt and put its case accordingly.
I do not think there is much more I want to say, other than that I support the acceptance of the order. It is necessary, and I hope that the disagreements which at present manifest themselves can, for the good of all the people involved—those in the building industry, the component sections, and the young people being trained by the CITB—be ironed out so that perhaps next year the Minister can come along with a package totally acceptable to the people involved. I support the order.
Lord Rochester: My Lords, I should like to join in thanking the noble Lord, Lord Belstead, for the clear way in which he has introduced the order. He has done so against a background of the announcement last Tuesday by the Secretary of State for the Environment of substantial cuts in capital expenditure by local authorities. These are a further heavy blow to the construction industry, and I fear may well lead to more unemployment in the industry. That is not a reason for opposing this order, for its objective is to finance training that we on these Benches strongly support, but against such a background I think it is

743
reasonable to ask the question: what is training in the construction industry leading to?
As to the order itself, the main point of contention, as has been said, is whether the levy should be on a per capita basis, as proposed by the Construction Industry Training Board, or should be changed to a payroll system, as advocated by the Federation of Master Builders, which, generally speaking, represents small firms. I recognise of course, as the Minister has said, that very small firms employing only a handful of people are altogether exempt from the order, but there are others coming within its scope which are affected adversely in the sense that if payments were levied on a payroll basis, as I believe is the case with all other remaining training boards, this would result in savings to most members of the Federation of Master Builders while adding to the costs of many large firms in the Building Employers Confederation. In that situation at first sight one's sympathies lie with the smaller firms, which I suspect have less say than others in determining what is ultimately decided.
It nevertheless seems to me, as it does to the noble Lord, Lord Belstead, and indeed to the noble Lord, Lord Dean, that these matters should if possible be sorted out within the board itself. I understand that a working party has been established which will be in a position to examine, among other things, the way in which the levy should be raised. Better that way, my Lords, than that politicians such as ourselves who are outside the industry should seek to do the job for them. So, like the noble Lord, Lord Dean of Beswick, I very much hope that this will be done in time for agreed arrangements to be implemented when next year's order comes before us.
I should like, if your Lordships will allow me, to take this opportunity to raise briefly a more general matter concerning the quality and funding of industrial training. When the Employment and Training Bill was passing through this House in 1981 I moved on behalf of my noble friends an amendment the purpose of which was to ensure that all sectors of industry should introduce training arrangements which would apply to statutory training boards where, as in the case of the construction industry, those remained, and operate also in other sectors where boards were abolished. The idea was that those arrangements would have to conform to certain criteria framed to encourage an approach to training of an organic, problem-solving kind which would focus on objectives and achievements. They were also to recognise that training needs were related to local labour markets and would apply across sectors rather than identifiable only on the basis of individual industries.
It is still my hope that the Manpower Services Commission and the Government will initiate something along these lines. Indeed, in my view there is a strong case for instituting what would amount to a national training levy which would apply throughout industry and be remissible to firms providing training which was adequate in quantity and conformed to criteria of the kind I have suggested. Frankly, I do not see how, otherwise, training can be provided which will give this country people having the technological skill required to match competitors in countries such
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as the United States of America, Japan and West Germany.
It would be unreasonable to expect the Minister, in replying to the discussion on this particular order, to respond in any detail to the wider point I have taken the liberty of raising, but I hope he will acknowledge that it is one which merits careful consideration and that he will therefore agree to bring it to the notice of his right honourable friend the Secretary of State for Employment. Subject to those few qualifying remarks, we are content that this order should be approved.
Lord Stallard: My Lords, it is not my intention to delay the House for very long. I will first declare an interest. I was involved in training all my working life; first as an apprentice, then as a craftsman training apprentices, and finally as a technical training officer responsible for training technicians and craftsmen. I am still a member of the Institute of Training and Development, so I have maintained an interest in the whole training field for a large number of years.
My sole interest in this particular order and the background to it is that which has been mentioned by all three noble Lords who have spoken already. It is the disagreement which appears to exist within the industry itself about the future method of financing training. My concern is that this should not affect the number of people being trained or the quality of training. But—as the noble Lord, Lord Rochester, has rightly said—while we accept and welcome the fact that smaller firms are exempt, there are thousands of firms, representing thousands of employees, in the area between the large firms and the very small firms. It appears that it is in that area that the disagreement exists.
It would seem that because such firms feel they are being unfairly treated by the per capita arrangements as they now exist, there is a reluctance on the part of some of those employers to employ as many craftsmen as they might otherwise do. This is because the more craftsmen they employ, the bigger the proportion of levy they will have to pay in relation to some of the larger firms. In fact, I understand that some smaller firms pay more in levy than they receive in grant. This is not exactly the same situation as exists for the huge firms.
There is quite a strong feeling in the industry about this matter, and we should not under-estimate it or gloss it over simply because we have been presented with an order which the Minister says enjoys a consensus of agreement. That is not quite true. I believe we ought to take more seriously the possible disruption which may exist within the industry.
We ought to take on board also the fact that the Federation of Master Builders were not involved in a previous working party, and there is no indication that they will be involved in any future working party. There was also a working party set up under a Mr. Smith. That working party did report, and it appeared to favour a return to the payroll levy.
As I understand it, that report was supported by a number of organisations within the industry, including the trade unions. The views of the Smith working party do not appear to have been adequately represented in the discussions which took place prior to the drafting of this order.

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The noble Lord the Minister states—and we all agree—that this matter ought to be settled within the industry itself; that would be the best place to settle this kind of discrepancy. But I would ask the Minister whether he will himself consider initiating some kind of conference which would involve all the parties concerned before this situation comes off the rails. In my view, he could initiate a meeting or conference to include all the appropriate parties and organisations who are at odds in respect of the payroll versus per capita arrangement, to see whether the views of organisations such as the Federation of Master Builders, who have a very strong point of view, can be more evenly and fairly represented in the document which comes before the House before the next levy is agreed.
12.25 p.m.
Lord Belstead: My Lords, I am grateful to the noble Lord, Lord Dean of Beswick, for the reception he gave to this order. I am grateful also to the noble Lords, Lord Rochester and Lord Stallard, who put their fingers on the really important points.
First, the noble Lord, Lord Dean, made the point at the start of this debate—and it was one which the noble Lord, Lord Stallard, ended by making—that it would be very desirable if, when this order again comes before your Lordships in a year's time, the method of paying the levy could be on an agreed basis. All noble Lords who have spoken made that point. The Government certainly agree with that point of view. When this order was taken in another place, my right honourable friend the Minister of State for Employment said he would do everything he and his department could do to help the working party. I hope that underlines the answer being given to the question asked of me by the noble Lord, Lord Stallard. We must hope that there will he not only discussions but also agreement in a year's time.
Before I leave that point, I believe it would be fair to say that the board, as it has been constituted, has never agreed there ought to be a change in the method of paying the levy, as it has been constituted. The other point I believe it is right to make is this: I listened with care to what was said by the noble Lord, Lord Stallard, about the position in which some smaller firms perceive to find themselves under the payment of these levies. But one must bear in mind that firms excluded from levy payment—which are those firms having a payroll of below £15,000—receive £3 million in grants, that more than 40 per cent. of companies within scope to the board are excluded from paying the levy because of their small size, and that firms with a payroll of between £15,000 and £30,000 receive 96 per cent. of the levy back in grants (the highest of any single payroll group). It can thus be reasonably said that a great deal is being done for very small firms. Nonetheless, I have no doubt that this point will be discussed in some detail by the working party.
The noble Lord, Lord Rochester, put the general point—and I am grateful to him for giving me notice of it—that it would be desirable to have a system which would lead in the end to some kind of national training levy. I will certainly draw the attention of my right honourable friend to this interesting suggestion, which the Government have indeed considered among other options.
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We instituted a major reorganisation of training between 1981 and 1983. I believe it is important that the voluntary bodies set up in place of the statutory boards which were abolished should have time to establish training arrangements suited to their industries. I am advised that there are already encouraging signs of progress. I am simply saying that another upheaval of the system at this stage would not he wise. Generally, our aim must be to reduce the tax burdens on industry and not increase them if enterprise and initiative are to flourish. In line with that aim, the Government only recently removed the national insurance surcharge. Nonetheless, I will certainly draw the attention of my right honourable friend to the noble Lord's remarks.
The noble Lord, Lord Rochester, prefaced his remarks with a brief reference to the Government announcement made earlier this week. He made the point that, in his view, that announcement would have an effect on the building industry. I would simply make the point that the Construction Industry Training Board has achieved the most incredible results so far as the placing of young people on the youth training scheme is concerned; it has recorded 90 per cent. placement at the end of youth training scheme courses. I would simply express the hope that that success will continue.
I hope that I have answered all the points noble Lords have made. I beg to move.
On Question, Motion agreed to.

Employment Protection (Variation of Limits) Order 1984
12.30 p.m.
Lord Belstead Lord Belstead rose to move, That the draft order laid before the House on 5th December he approved. [5th Report from the Joint Committee.]
The noble Lord said: My Lords, I beg to move this order, and if your Lordships will agree I shall speak to the two subsequent orders as well.
The Employment Protection (Variation of Limits) Order 1984 has been laid in accordance with Section 148 of the Employment Protection (Consolidation) Act 1978 which requires the Secretary of State for Employment to carry out an annual review of the level of guarantee payments to workers on short-time and temporary lay-off and the weekly earnings limit for the purpose of calculating redundancy payments, the basic and additional awards for unfair dismissal and certain debts in relation to the insolvency provisions of the Act.
My right honourable friend has by law to take account of three factors in carrying out the review and reaching decisions. These are first, the general level of earnings obtaining in Great Britain at the time of the review; secondly, the national economic situation as a whole; and, thirdly, such other matters as my right honourable friend thinks relevant.
As part of the autumn 1984 review, the Government consulted a wide range of organisations for their views of what changes, if any, should be made to the limits. In the light of these consultations the

747
Government have decided that all the monetary limits covered by the review ought to be increased.
At the time of the review in August 1984, the figure for average earnings in July showed an increase of 5.3 per cent. over the previous 12 months. The increase in the Retail Price Index over the same period was 4.5 per cent. We feel that this indicates increases of the order of 5 per cent., which is what the increases average over all three orders. The current weekly earnings limit for calculating redundancy payments and certain debts under the insolvency provisions of the Act is £145. The Government propose that this limit should go up to £152, which is an increase of 4.8 per cent.
Another of the payments subject to a weekly earnings limit is the basic award of compensation for unfair dismissal. This part of an unfair dismissal award is intended to reflect broadly the amount of redundancy payment which would have been received by an employee if he or she had been made redundant instead of being unfairly dismissed. For this reason we consider that the limit for calculating the basic award should remain in line with the redundancy payments earnings limit. The new maximum in the basic award therefore remains exactly the same as the maximum redundancy payments going up from £4,350 to £4,560. The additional award which an industrial tribunal may make when an employer has refused to comply with an order to reinstate or re-engage is also currently subject to a £145 weekly earnings limit, and this is also increased to £152.
So far as guarantee pay is concerned (still on the first order) the Government propose to increase this limit from £10 to £10.50, which is a 5 per cent. increase. We have decided not to increase the other limits—namely, the specified number of days in any relevant period (now five days)—and the length of the relevant period, which is three months. The reason for that decision was given in the report laid at the same time as the order, and is that the maximum number of days for which payment is required to be made still seems to strike a fair balance between the employer's obligations and the employee's rights.
If your Lordships will allow, I shall say a brief word on the second order. The Unfair Dismissal (Increase of Compensation Limit) Order 1984 has been laid again in accordance with the 1978 Act. It revokes the Unfair Dismissal (Increase of Compensation Limit) (No. 2) Order 1982, which set the limit on the compensatory award for unfair dismissal at £7,500, and raised the limit to £8,000—an increase of 6.7 per cent. Your Lordships may wonder why this higher increase has taken place; the answer is that this limit is not subject to annual review but may be reviewed from time to time. It has not been reviewed for two years so my right honourable friend thought that the slightly higher rate would be right.
The limit applies not only to unfair dismissal awards to compensate for the actual loss sustained by a person who takes a claim to an industrial tribunal but also to compensation which may be awarded in cases where complaints of discrimination under the Sex Discrimination Act or the Race Relations Act have been upheld.
May I say a brief word on the third order, that is the Unfair Dismissal (Increase of Limits of Basic and
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Special Awards) Order 1984 laid in accordance again with the principal Act. These limits apply to the basic and special awards for unfair dismissal for trade union activities or membership or non-membership of a union, which were introduced by the Employment Act 1982 and became effective from 1st December 1982.
The high limits on the basic and special awards for unfair dismissal in a closed shop stemmed from the particular injustices involved in these dismissals in that the individual concerned may find it almost impossible to get another job in the same industry. This is the first time these limits have been increased. The Government propose that the limits on the basic and special awards should be increased by what in effect is 5 per cent. respectively throughout.
There is one final thing I should say. The orders have been drafted to come into effect on 1st April next year instead of 1st February, as in previous years. The reason for this change is that it has been pointed out to the Government by a number of employers' organisations that problems and delays have arisen in the past where the limit has been changed between the date that the employee ceases work and the date his notice expired or would have expired if he had been given his statutory period of notice. This period can be up to 12 weeks. My right honourable friend therefore decided that it would be preferable to allow at least 12 weeks between the date the orders are made and the date that they come into effect. I beg to move.
Moved, That the draft order laid before the House on 5th December be approved.—(Lord Belstead.)
Lord Dean of Beswick: My Lords, first may I express once again my appreciation to the Minister for the way he has presented these three orders in his usual courteous and very informative manner. However, I have to strike a little sour note on the question of availability of the material—the time factor. I am not criticising the Minister by any means, but I always think that in this place—being a second Chamber—when these statutory instruments and orders are first placed we ought to have a little time to study what is behind the Government's thinking from what is said in Hansard reports from another place.
I was in and out of the Chamber once the business started this morning in order to try to get the reports of what the Minister had said in another place. This leaves one rather at a disadvantage. I make no criticism of anybody. I think that the noble Lord, Lord Hooson, in his speech yesterday on the role of the House of Lords, referred to this over-usage of the speed at which statutory instruments come from one place to the other and go through almost without stopping.
We are fortunate on this occasion that the three orders that the Minister has moved are not really contentious. They are acceptable, they are necessary, and are up-ratings mainly in accordance with inflation and wage increases. They are to be welcomed on that basis.
The only order which I would pick out for a brief comment was where the Minister mentioned the figure of £7,500 being raised to £8,000 for one category because it is not subject to annual review. There is a feeling that this figure is inadequate from its original

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starting point. I hope that the Minister may bring this to the notice of the Government when they are considering in future the reappraisal of these schemes so that they may consider that particular order.
Having said that, and because of the day it is, I shall rest my case on that. We accept the orders because of the business that is involved.
Lord Belstead: My Lords, I am grateful to the noble Lord. I am sorry that this order followed quickly on the order in another place. I understand his desire to see the exchanges there. It is a point that I will take on board and ask my right honourable friend to bear in mind in the future, although I cannot give any undertaking. I am grateful to the noble Lord for the way in which he spoke.
I also take on board the point that despite the fact that the increases are higher than any of the other increases the noble Lord feels that there is a case for looking benevolently on the levels of compensation given under the second draft order. With that response, I commend to your Lordships the first of these three orders standing in my name on the Order Paper.
On Question, Motion agreed to.

Unfair Dismissal (Increase of Compensation Limit) Order 1984
Lord Belstead: My Lords, I beg to move.
Moved, That the draft order laid before the House on 5th December be approved. [5th Report from the Joint Committee.]—(Lord Belstead.)
On Question, Motion agreed to.

Unfair Dismissal (Increase of Limits of Basic and Special Awards) Order 1984
Lord Belstead: My Lords, I beg to move.
Moved, That the draft order laid before the House on 5th December be approved. [5th Report from the Joint Committee.]—(Lord Belstead.)
On Question, Motion agreed to.

Hill Livestock (Compensatory Allowances) Regulations 1984
12.40 p.m.
Lord Belstead Lord Belstead rose to move, That the draft regulations laid before the House on 29th November be approved. [4th Report from the Joint Committee.]
The noble Lord said, My Lords, these regulations, which apply throughout the United Kingdom, consolidate with amendments the Hill Livestock (Compensatory Allowances) Regulations 1979 and give effect to the decisions on livestock compensatory allowances in the newly-extended less favoured area which my right honourable friend announced in
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answer to a written Parliamentary Question on 29th November.
Your Lordships are familiar with the system of headage payments on cattle and sheep kept on eligible land in the less favoured areas throughout the United Kingdom which has its earliest origins in the Hill Farming Act 1946. Your Lordships will also recall that in February of this year the Council of Ministers of the European Community accepted the case we had put forward for an extension of the less favoured area in the United Kingdom, thereby adding 1.2 million hectares to the United Kingdom's less favoured area and bringing the total area of land so designated to 9.8 million hectares. This fulfilled our long-standing objective to improve the position in what we call the marginal areas. In anticipation of this decision my right honourable friend had already made clear that, once the Community had approved the extension, he would introduce livestock compensatory allowances in the newly-added area.
The regulations laid before the House at the end of November follow a review this autumn of the economic conditions of farming in the hills and uplands. They change the definition of eligible land so as to distinguish the original less favoured area which is defined as "severely disadvantaged" and the recently added marginal area, which is defined as "disadvantaged". This paves the way for different rates of allowances in the two areas and different financial and stock ceilings. The consolidated regulations maintain the existing rates of headage payment in the original less favoured area of £44.50 per cow, £6.25 per hardy ewe in a specially qualified flock and £4.25 for other ewes. They also perpetuate the existing overall financial ceiling of£60 per hectare of land available for the herd or flock and the stocking limit of six ewes per hectare. The compensatory allowances in the existing less favoured area are paid on nearly 900,000 hill cows in the United Kingdom and some 9½million hill and upland sheep. I must make it clear to your Lordships that these moneys contribute a very significant proportion of net farm income in those areas—usually over half in the case of sheep farms. The substantial injection of funds implied reflects the importance the Government attach to the well-being of hill farming.
In the newly-added areas which are less disadvantaged than the original areas allowances are to be paid at lower rates; namely, £22.25 per cow and £2.12 per eligible ewe. That is almost exactly, to a penny or two, 50 per cent. We do not propose to make payments at a higher rate on sheep in the newly-added areas because the higher rate in the original area is for the particularly hardy breeds that are kept on especially difficult land like the high hills. My right honourable friend made clear last year that he had in mind compensatory allowances in the marginal areas at about half the level in the existing area and, having carefully reviewed the position this autumn in the two areas, we have kept to this approach. We might have adjusted the financial ceiling per hectare in the newly-added area on a proportionate basis and kept the same stocking maximum. But we thought that would be inappropriate since land in the newly-added area can reasonably take a higher level of stocking. We therefore set the financial ceiling at £45 per hectare in the new less favoured area and the stocking maximum

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at nine instead of six ewes per hectare. These levels, in our view, take full account of the need to discourage over-stocking while recognisng the higher carrying capacity of the marginal land.
In addition, the consolidated regulations set out the method of calculating payments where holdings run across the boundary between old and new less favoured areas. They also carry forward the existing safeguard which requires eligible flocks and herds to be maintained and managed in accordance with sound husbandry practice. In case any of your Lordships are concerned about a risk of over-stocking, I should add that the statutory rules governing the payment of compensatory allowances do provide a strong deterrent against this. The allowances are payable only on the number of animals that the land can carry without over-grazing. If local problems emerge, the Ministry's advisory service will investigate the circumstances and, where appropriate, allowances will not be paid on the extra stock concerned.
The new payments on compensatory allowances in the marginal areas imply new expenditure of some £4 to £5 million a year in the United Kingdom. This will be a very helpful injection of money in the marginal area, where farm incomes are generally not high and circumstances may be quite difficult. My right honourable friend is making these funds available without offsetting reductions being required in the original less favoured area. I recognise that farmers in the original areas had hoped for an increase in allowances, but in this time of financial constraint I think it is a considerable achievement to have maintained existing rates in the old less favoured area and, in addition, introduced totally new payments in the extended area. This highly satisfactory outcome is also the end of a long history of negotiations in the European Community to give the marginal areas the less favoured area status and action deriving from that success. I beg to move.
Moved, That the draft regulations laid before the House on 29th November be approved.—(Lord Belstead.)
Lord John-Mackie: My Lords, the noble Lord is having a busy morning, and I should not like to hinder him too long. He has given us a very clear explanation of the regulations, but I wonder whether a hardworking hill farmer would understand the appalling official language in the regulations. Had there been more time, I should have entertained your Lordships by quoting a few passages which I cannot understand—and I have experience of reading such documents. I hope that the noble Lord and his colleagues in the Ministry of Agriculture will see that there is an explanatory leaflet that a farmer can understand concerning what he can do, when he can do it, and so on.
Reading through the document quickly to begin with, when I came to the top of page 9 I thought, "Heavens above! This will not be paid to a pensioner". I then read it a little more closely, and I found that it means that a pensioner does not have to sign the document for five years. I should not like to be the official who tells a pensioner filling in a form, "You don't need to sign it because you will be dead within
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the five years". That is slightly tactless. I wonder whether the noble Lord would have a look at that paragraph.
Having criticised the physical nature of the regulations, I should like to ask the Minister a couple of questions on the regulations themselves. First, I note that they come into effect on 1st January. Is that the official payment date? He will recall how long people had to wait for payment last year. If I remember rightly, he said that the payments amount to over 50 per cent. of the net farm income in these areas. If the payments are not made promptly, there is a tremendous effect on rural communities in these hill areas. I hope that the Minister can tell us the date when the payments will be due and assure us that they will be made promptly. We definitely welcome the fact that it is going to be paid to these extended areas, even though it is at a reduced rate, as he said—practically within a penny of 50 per cent.
The second question that I should ask the Minister—and he made some reference to it—is: would he not have thought that there was a case for an increase in the hill cow rate? Hill cow farming in these areas has not been very profitable in the past. I believe the numbers are falling. Although we have a situation where there is a surplus of beef, mainly I think caused by the cull cow situation, it would be a pity if our true beef herds from these areas fell because of lack of profitability. If I may say so, in the less favoured areas, where probably more capital expenditure goes on than in the true hill sheep areas, hill farming areas, the capital grant reductions that there are (most of them up to 50 per cent.), would affect incomes there as well. I should like to ask the Minister whether they have given this the consideration I think it deserves. That is all I propose to say. Naturally we welcome the set-up. I should just again put in a plea for prompt payment of these moneys.
12.51 p.m.
Lord Sandford: My Lords, I listened with interest to what my noble friend had to say in explaining this statutory instrument to your Lordships, but I listened in vain for what I hoped to hear, which was some response in the context of this statutory instrument which, after all, as well as dealing with the new marginal areas also consolidates all the material that bears on the payment of hill livestock compensatory allowances under the less favoured areas Directive.
I was hoping to hear some response from Her Majesty's Government to the strictures—the rather critical strictures—which we found ourselves having to make in this report from the Select Committee on European Communities on agriculture and the environment. That was a report which was issued in the summer, in June, and debated in your Lordships' House a few months back.
That report was focused on the Directive under which these payments are made. The reason is this Directive makes it clear that the kind of farming for which these compensatory allowances are paid is, to read the words of our first article of this Directive:
"In order to ensure the continuation of farming, thereby maintaining a minimum population level or conserving the countryside."

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Further on, in Article 3 of the basic Directive, it says:
"The less favoured farming areas shall include mountain areas in which farming is necessary to protect the countryside"
and
"other areas where the maintenance of a minimum population or the conservation of the countryside are not assured."
So it is the whole basis of this Directive and the payments authorised to be made under them, that the kind of farming which ought to be encouraged is farming which is not only profitable and productive but farming which has the effect of helping to conserve the countryside, maintain the populations and sustain the local economy. That is the kind of farming which this is designed to support.
The strictures in this report of your Lordships' House were that neither MAFF nor the Department of the Environment, whose responsibility the conservation of the countryside is, were being strenuous enough, imaginative enough or effective enough in making their two policies mesh together properly for that very desirable purpose. It is disappointing not to hear anything so far—perhaps we shall hear something in a moment—from my noble friend about how that is going to be done better in the future.
I should have thought that in introducing new marginal areas, as from March or February this year, giving effect to them in December, having received this report during the summer and hearing what your Lordships had to say about it, there would by now be some signs—when it came to introduce new grants and consolidate the whole thing—that some indication would he given by my noble friend in this matter.
I may say my criticisms are somewhat muted today because, no doubt at my noble friend's instigation, the chief surveyor at the Ministry has sent me a very nice Christmas card and included a lovely map showing the new areas. I find that all very disarming and it has disarmed me to some extent. However, I think these questions remain to be asked.
As an illustration of just how important these payments are, not only to the farmers but to the areas in which they are made, I just want to make your Lordships aware of studies which were completed in January of this year, being first started back in 1980, conducted by no less a person than the previous chief surveyor of the Ministry of Agriculture, into what are the relative effects of all the forms of financial assistance in the various areas to which they are applied.
One of these areas which was particularly studied was the Radnor district in Mid-Wales. I will not go into all the details. What this shows very clearly is that something over 80 per cent. of all the financial assistance going into an area like that goes in the form of aids to hill farmers, chiefly in the form of these compensatory allowances. Eighty-two per cent. of all financial assistance—that is everything done by the Development Board for Rural Wales, everything done by the Welsh Tourist Board, everything done by the county council, everything done by the district councils, everything done in any other way—82 per cent. of all that assistance goes in the form of these allowances. That is very significant.
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The other significant factor is that something approaching half the farmers' income comes in the form of these compensatory allowances. So it certainly cannot be withdrawn or reduced; nothing I am saying is arguing for that. What I am arguing is that in making this very substantial contribution—or what is supposed to be a substantial contribution—to farmers for the conservation of the countryside and the maintenance of the population, more thought should be given, than has so far been vouchsafed by my noble friend, to the way in which the purely farm production policy meshes with conservation and rural development. I hope that my noble friend might be able to say a little bit more about that.
Lord Belstead: My Lords, I am grateful to the noble Lord, Lord John-Mackie, and my noble friend Lord Sandford for speaking on this important order. It is an important order for the reasons which were given in the very last words of my noble friend Lord Sandford because it represents a very considerable amount of the income of farmers in the high hills. Nobody would know this better than the noble Lord, Lord John-Mackie, from his ministerial experience and indeed from his knowledge of the hills and uplands North of the Border. I am sorry that the noble Lord found the explanation of these headage payments complicated. This is where the importance of having a good advisory service in this country comes into play. Of course, as the noble Lord will remember we do have the area offices as well as the divisional offices and the regional offices.
One of the most encouraging things in the year that we are now leaving is that the new Director General of ADAS has put forward a very constructive report, on which no decisions have yet been taken but which I hope is going to be a firm basis for ADAS facing the future years.
The noble Lord asked me two specific questions. The first one was this. This order comes into effect on 1st January and the noble Lord. Lord John-Mackie, asked "When are the payments made?" The bulk of the payments made under these headage payments come in the first quarter of the New Year. Again, as the noble Lord will very well remember, this is of considerable importance to the farmers concerned. Incidentally, I should just seize the opportunity to say that claimants for these allowances are shortly going to be sent to all those who received a payment in 1984 and all who have since registered new eligible land. Anyone who has not received a claim form by 6th January, who considers that he is eligible for allowances, ought to contact his local office.
The second point made by the noble Lord, Lord John-Mackie, was that if there is not a case for putting up the allowances generally for the old LFAs, there might nonetheless be a case so far as beef is concerned. I think that I should say to the noble Lord that the decline in the size of the specialist beef herd has now virtually halted. Having said that, nonetheless I agree with the noble Lord that margins have been poor in the beef sector. They continue not to be good. But we believe that producers should be able to look forward to more stable and better balanced conditions once the market has adjusted to the effects of the milk super levy. Incidentally, for those involved in this particular

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kind of rearing, my right honourable friend, some nine months ago, doubled the suckler cow subsidy. I hope that that has not only been of help specifically to the farmers concerned with suckler cows, but that it may also have helped to bolster the market.
My noble friend Lord Sandford, who kindly gave me notice of the thrust of what he would say, chided me with not saying more about the general protection of the countryside in the high hills and the new marginal areas, particularly in the light of the very important report produced by your Lordships' Select Committee of which my noble friend was a member. I would say to my noble friend that I really think that although this question comes under this particular directive, it is more a debate concerning the capital grants which again will have to be the subject of an order which my right honourable friend will be laying in the new year. When that moment comes, my noble friend will notice that we have, for instance, now proposed to withdraw grants for land reclamation generally. This is, I think, something that my noble friend will approve of. We have also made it clear that we are now considering very seriously assistance for farm diversification when the new grants next year will have to he introduced after the new structures regulations have been agreed.
So, if my noble friend will forgive me saying so, I think that this is a subject for another time and another occasion which will be coming soon. Before giving way to the noble Lord, Lord John-Mackie, I should like to underline what I said in opening because it is relevant. I know that my noble friend is concerned about over-grazing. I underline the fact that the allowances are payable only on the number of animals that the land can carry without over-grazing. Additional constraints are provided by ceilings on the total sum payable per hectare and on the number of sheep per hectare that can attract allowances. If localised problems emerge either as a result of specific representations or by coming to notice during routine inspections and visits, this is a case where the ADAS staff will investigate the circumstances and, where appropriate, allowances will not be paid on the stock concerned; in other words, the excess stock.
Lord John-Mackie: My Lords, the noble Lord said that the subject raised by the noble Lord, Lord Sandford, would be discussed when orders were brought in on the new capital grants. A very important and novel situation will arise when capital grants are used for or biased towards conservation. I hope that we can have an assurance that they will not be discussed at ten o'clock at night or just before a recess.
Lord Sandford: My Lords, if my noble friend will also allow me to intervene, I hope that he will not feel that discussion on capital grants, which is another set of payments made under the less favoured areas directive, is the only appropriate point at which to debate that matter. That is quite wrong. Easily the largest amount of financial support that goes to farmers in the hills—by far and away the largest amount—is in the form of the hill livestock compensatory allowances. Capital payments and the differential rate for capital payments are another factor, though a small one in comparison with the
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compensatory allowance, that is going all the time. It was those figures that my remarks alluded to.
Both the directive, in the terms that I read out from Articles 1 and 3, and our own legislation, notably the Countryside Act 1968, Section 11, require the Minister in the exercise of his functions—and this is one of them—to have regard to the conservation of the countryside. It is simply not appropriate for these—this is what our Select Committee report was all about—to be paid to farmers without regard to those factors. That is all.
Lord Belstead: My Lords, I have one final word. My noble friend will have noticed in his travels, I am sure, that there are really only two forms of farming that you can go in for in the high hills—either sheep or beef. It is no good my noble friend chiding me for trying to produce some other kind of farming that he has not specified. The fact is that this order deals with headage payments for sheep and for beef, but the headage payments are very closely hedged around with safeguards so far as overstocking is concerned. It is particularly because my noble friend is in the Chamber today that I have gone into some detail about it; and that is the case.
Where my noble friend has, if I may say so, a point is when he says that the Government ought to look a little wider. In that respect I had hoped that I had tried to be helpful to my noble friend by saying that although it does not arise under these regulations. I believe that, so far as capital grants are concerned, we can try to move in the direction that my noble friend urges. I gave two examples of the way we are trying to do so. With a final word that the capital grant regulations have been laid and will be debated in the new year, perhaps I may again move that these regulations be now approved.
On Question, Motion agreed to.

Statutory Sick Pay Up-rating Order 1984
1.6 p.m.
The Earl of Caithness The Earl of Caithness rose to move, That the draft order laid before the House on 10th December be approved.
The noble Earl said: My Lords, the purpose of the order is to raise the rates of statutory sick pay (known as SSP) which employers pay to people in their employment when they fall sick. The order also raises the levels of earnings which determine the rate of SSP which is payable. The new rates and earning levels will, subject to your Lordships' approval, take effect from 6th April 1985.
Section 7 of the Social Security and Housing Benefits Act 1982 requires that these amounts are reviewed annually to determine whether they have retained their value in relation to the general level of prices. In the 12 months ending October 1984 the retail price index rose by 5 per cent. The draft order now before us accordingly provides for an equivalent increase of 5 per cent. in the SSP rates and earnings levels which will apply from April 1985.
There are three rates of SSP and in accordance with normal social security practice, the new rates have been rounded up to the nearest 5p. The two earnings thresholds covered by the up-rating are also being increased by 5 per cent. These have been rounded

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down to the nearest 50p. Again, this is in line with normal practice. The lowest earnings threshold below which no SSP is payable is not subject to up-rating by this order. This is set by the Act to be the same as the lower earnings limit for Class 1 contributions, which will be £33.50 from 6th April 1985.
The effect of the order is that from next April employees who earn £71 or more a week will qualify for the new standard weekly rate of SSP of £44.35. those who earn at least £53 but less than £71 will qualify for SSP of £37.20. And those who earn at least £35.50 but less than £53 will qualify for SSP of £30. These rates represent an increase of £2.10, £1.75 and £1.45 respectively on the present rates.
The new rates, when approved by Parliament, are included in the contribution tables, which are sent to all employers in the new year. This gives employers notice of the new rates well in advance of when they come into operation. The new rates are also publicised in leaflet NI 208, a revised version of which is issued by the Department of Health and Social Security each year.
The SSP scheme has been operating smoothly since April 1983. In particular, we have no evidence that the rates of SSP have resulted in hardship or difficulties for employees or in administrative and financial difficulties for employers. The draft order provides for the SSP rates to keep pace with the rise in the general level of prices and I therefore hope that it will meet with your Lordships' approval. My Lords, I beg to move.
Moved, That the draft order laid before the House on 10th December be approved.—(The Earl of Caithness.)
Baroness Jeger: My Lords, I should like to begin by wishing the Ministers on the Government side a Happy Christmas, but I am not sure whether all the recipients of statutory sick pay will want to offer the same wishes. However, because of the time and the situation I shall only say to the noble Earl the Minister that when the Social Security Bill comes to us in the new year we shall want to go into the whole matter in more detail.
I should like to ask the noble Earl two questions. First, has the department any information from employers, and especially from small business employers, about the difficulty of implementing this complicated scheme? I have received many complaints from small business employers about the difficulties of paying out this money and the delay in getting it back from the Government. Secondly, I should also like to ask about the timing. The timing of these changes is different from the timing of the social security up-ratings. That seems to be a bit of a problem. I do not know why the Government have decided that there should be a different date for this up-rating from that for the up-rating of ordinary social security benefits.
I shall leave the matter there. I point out to the noble Earl the Minister, for whom I have the greatest respect, that though I am not pushing him any further today, I shall come back with other, more fundamental questions later. However, so far as today is concerned, I hope that the noble Earl will perhaps be able to deal
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with the two problems that I have raised and then we can leave the matter there.
Lord Banks: My Lords, I should like to join in thanking the noble Earl for his very clear explanation of this order. As he explained, the order increases the three rates of statutory sick pay to take account of inflation. It increases them by 5 per cent. We on these Benches have no objection to that; in fact, we would object if it were not done. So we support the approval of this order.
As the noble Baroness, Lady Jeger, has said, the whole question of statutory sick pay will be thoroughly discussed when the Social Security Bill comes before the House with its proposal to increase from eight weeks to 28 weeks the period during which statutory sick pay is paid.
In his report in November on the Social Security (Contributions Re-rating) Order the Government Actuary said:
"The estimates for the amounts of statutory sick pay to be recovered by employers from contributions are based, of necessity, on the sickness experience of the National Insurance Fund prior to its introduction. The first data relating to statutory sick pay is expected early next year, but until it becomes available there remains a special degree of uncertainty in the estimates".
In view of that statement by the Government Actuary, when we discussed that order I asked whether it was sensible to proceed with the increase from eight to 28 weeks in the light of what the Government Actuary had to say. The noble Lord, Lord Glenarthur, has been good enough to write to me about the matter and he says that the Government now have 75 per cent. of the data and all is in line with the Government Actuary's estimates. That is certainly fortuitous, but it remains true that the Government could not have known that that would be so when they first introduced the Bill. That change, when it comes, will eliminate sickness benefits altogether for very many, although they will remain for some.
I should like to ask the noble Earl whether he thinks it sensible to have different rates of statutory sick pay and sickness benefit—three rates of one and one of the other—and different qualifications; to have one taxed and the other not taxed; and to have families and children worse off under statutory sick pay than under sickness benefit? Is there not a need here for simplification and rationalisation?
Finally, the noble Lord, Lord Glenarthur, in the letter to which I have referred says that the mistakes which are being made by employers in providing statutory sick pay are mainly technical and of a comparatively minor character. Yet the National Federation of Self-Employed and Small Businesses recently found that one in four of small businesses were making errors over statutory sick pay. I wonder whether the noble Earl can say how thoroughly the department has monitored the operation of statutory sick pay?
I have nothing more to say today, but I look forward to a more searching examination of statutory sick pay when we discuss the Social Security Bill. In the meantime, I support the approval of the order.
The Earl of Selkirk: My Lords, my noble friend has given figures for different categories of statutory sick pay. I should like to know whether they are dealt with

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as gross income or whether they are income subject to income tax and social security payments?
The Earl of Caithness: My Lords, I am grateful to the noble Baroness, Lady Jeger, the noble Lord, Lord Banks, and my noble friend for taking part in this very useful and interesting debate which has given the House a renewed opportunity to consider some of the underlying principles of the statutory sick pay scheme in the light of its operation to date.
A number of points have been raised and I shall deal first with the point raised by my noble friend Lord Selkirk purely because it is at the forefront of my mind. I can tell my noble friend that, yes, statutory sick pay is subject to income tax; it is classed as earnings.
The noble Baroness, Lady Jeger, raised a number of points. The first concerned the implementation of the scheme and the difficulties encountered, especially by small businesses. As the noble Baroness will know, the Income Data Services Study of June 1984 stated that:
"After one year's operation it would appear that the implementation of SSP has gone remarkably smoothly. Only the Federation of Self-Employed and Small Businesses remain convinced that the scheme is not working satisfactorily".
This was also a point raised by the noble Lord, Lord Banks. There has been some difficulty for small employers, but these are mainly of a technical nature. I gather that about 20 per cent. of the company schemes of which inquiries have been made have had these difficulties. As a result there have been very minor small overpayments or underpayments.
As regards the extra administrative work, both the noble Baroness and the noble Lord will be pleased to note the amendment that is due to be introduced in another place at the Committee stage of the Social Security Bill to try to help small businesses in this way.
The noble Baroness, Lady Jeger, also raised the point as to why SSP is not up-rated at the same time as social security benefits. It is more convenient for employers to deal with an increase in SSP rates at the beginning of the tax year, rather than in November. The contribution rates change in April and the lower earnings limit for contributions concerning the lower rate of SSP also begins at that time. Therefore it is natural to start SSP in April.
The noble Lord, Lord Banks, raised the very important point—and I am grateful to him for giving me notice of it—of whether it is necessary to have two separate and different benefits for sickness. One of the major reasons for introducing the statutory sick pay scheme in April 1983 was the duplication which existed between state and private provision. The DHSS was paying some 10 million sickness benefit claims a year, but the rapid growth of occupational sick pay schemes meant that most claimants were also getting sick pay from their employers and many were on full pay. Often the employer offset the amount of sickness benefit against the sick pay he paid.
There was then duplication of both effort and provision. This was not sensible and the SSP scheme was accordingly introduced in April 1983 to cover the bulk of short-term sickness—the first eight weeks. As the noble Lord, Lord Banks, knows, from April 1986 we are proposing to extend SSP to cover the whole
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28 weeks for which sickness benefit is currently payable. This means that for most employees SSP will completely replace sickness benefit and there will be less duplication on that front. However, it will still be necessary to retain the sickness benefit scheme for those people not entitled to SSP—for example, the self-employed and unemployed are not covered. Also, some employees are excluded from SSP; people over pension age or who have been receiving state sickness or invalidity benefit within the last eight weeks are examples of these.
Thus, while I agree with the noble Lord, Lord Banks, that, with the extension of SSP to 28 weeks, two schemes for short-term sickness are not necessary, we must continue to provide state sickness benefit for those people who, for a variety of reasons, may not get SSP. I understand that those who are entitled to SSP comprise something like 90 per cent.
The statutory sick pay scheme has been launched successfully and is proceeding with remarkably few difficulties. It has successfully achieved and will continue to achieve the objectives for which it was set up. The order before the House proposes adjustments to the statutory minimum rates of sick pay so as to keep their value abreast of the general rise in prices, and I trust that it will receive your Lordships' approval. Perhaps I may conclude by wishing the noble Baroness and the noble Lord, Lord Banks, a very happy Christmas and, in spite of a Bill coming before us, a quiet New Year.
On Question, Motion agreed to.

Motion for the Adjournment
Lord Denham: My Lords, in moving the adjournment of the House, I should like to echo what my noble friend has said to noble Lords opposite and reciprocate what the noble Baroness, Lady Jeger, has said about good wishes to all parts of the House. However, I should also like to speak for the House as a whole, which I think I may, in thanking all those who help us and who have helped us so well over this last Session in all parts of the building, including outside the actual Chamber itself, and wishing them a very happy Christmas, a very pleasant Recess, and a very fortunate New Year.
Baroness David: My Lords, may I follow the Government Chief Whip by wishing all noble Lords on all sides of the House a happy Christmas and also an interesting New Year. From these Benches, we also should like to thank all staff in the Chamber, outside the Chamber—everywhere in the House—for the good service that we receive. This was mentioned in the debate yesterday but I should like to repeat it because I think that we are extremely lucky. I should like to wish all of them a very happy Christmas and prosperous New Year.
Lord Kilmarnock: My Lords, from these Benches, after wishing noble Lords opposite a very happy Christmas, I should simply like to quote what my noble friend Lord Donaldson said in yesterday's debate. At col. 676 he said:
"It is fashionable now to talk about infrastructure. I have to confess that I think that the infrastructure here is a good deal too

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good for what is above it. The place not only runs smoothly; it runs politely and with good manners. Our assistants from Black Rod through all the administrative levels to our splendid and omniscient clerks, our admirable attendants, doorkeepers and policemen, not excluding our restaurants and bars and their charming servers and the tireless cleaning ladies, are not only friendly but actually friends."
I could not put it better than that, and on behalf of my noble friends I should like to wish all members of our infrastructure a very happy Christmas and a very well earned rest before we return to our labours.
Lord McNair: My Lords, first, may I convey the apologies of my noble friend Lord Tordoff, who has had to attend a funeral this morning. I think that I have the sense of the House if I say that a long speech from me would not be particularly acceptable. Therefore, may I echo all the words that have been spoken by the Government Chief Whip and all the words that have come from the Opposition Bench and from my noble friend, and wish everybody a very happy Christmas.
House adjourned for the Christmas Recess at twenty-five minutes past one o'clock until Monday, 14th January next.