Lords Sitting of 22 April 1985

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

Minimum Wages: ILO Requirements
Lord Davies of Leek: 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 effort they will make to maintain minimum wage rates in industry as required by ILO Convention No. 26, if the wages councils machinery is abolished.
The Minister of State, Ministry of Agriculture, Fisheries and Food (Lord Belstead): My Lords, our adherence to International Labour Convention 26 limits the Government's ability to promote employment opportunities and we therefore propose to deratify the convention subject to the consultations required by ILO rules. In the event that we proceed with deratification, our obligations on minimum wage-fixing will in due course come to an end.
Lord Davies of Leek: My Lords, I thank the Minister for that Answer. Is he aware that modern Conservatism has moved many miles away from the old compassionate Conservatism of the past history of its great movement? Does he not realise that the labourer is worthy of his hire, and that the road that we are taking means that we shall have cheap labour which will not give us the best value for money?
Lord Belstead: My Lords, I do not agree with that. The Government do not agree with that. People need to price themselves into jobs, and wages councils almost certainly are not helping with that process at the present time.
Lord Dean of Beswick: My Lords, can the Minister tell the House why the Government continue with this fallacy of lowering wage rates at the bottom end of the scale, among the poorest paid section of our community, when in fact they are already lower-paid than most of their contemporaries in Europe?
Lord Belstead: My Lords, there are a lot of different surveys and views on this. Surveys by the Institute of Directors and Industrial Relations Review Report indicate that employment is jeopardised by wages council pay rates, particularly for young people. Indeed, the consultation paper which my right honourable friend the Secretary of State issued on 21st March referred to a growing body of evidence on this. What is certain is that youth rates in wages councils are higher in relation to adult rates than outside wages councils' settlements. This has an adverse effect on jobs.
Lord Boyd-Carpenter: My Lords, is my noble friend aware that the true compassion for the unemployed is
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to take every measure possible to increase employment, and that the step which the Minister has announced will undoubtedly help this and is in the true tradition of Conservative compassion?
Lord Belstead: My Lords, may I make it clear that what the Government are saying is that they intend, after consultation, or subject to consultation, to deratify the convention. The consultation paper which my right honourable friend has put out has made clear that there are two main options after that. There could be abolition of the wages councils or there could be fairly fundamental reform. Either way I would guess that we would be going along a road which my noble friend Lord Boyd-Carpenter would approve, and the Government most certainly agree with my noble friend.
Lord Cledwyn of Penrhos: My Lords, is the noble Lord aware that the policy of pricing into jobs was the policy of successive Conservative Governments over a period of a century and more, and that the result was lower wages and poor conditions? Is he aware that that was the case, and is that what he means by "pricing into jobs"?
Lord Belstead: No, my Lords; we do not mean that, but we do mean that the rigidity and inflexibility of the wages councils' system is something which needs to be looked at fundamentally. That is why my right honourable friend has put out his consultation paper and now awaits reactions to that by 31st May.
Viscount St. Davids: My Lords, has the noble Lord any figures to show the percentage of apprentices' wages to adult wages in this country as compared to those of other countries? If he has, would it not be of great interest if he could tell the House? If he has not, can he put them somewhere where they will be obtainable to the House?
Lord Belstead: My Lords, I shall certainly see whether I can do that for the noble Viscount. I must apologise in that I do not have those figures with me.
Lord Wallace of Coslany: My Lords, is the noble Lord aware that he said that workers must price themselves into a job? Is it a fact then that the Government think that the workers should shop around on their bikes? Is he further aware that what he has said is a certain recipe for considerable industrial unrest?
Lord Belstead: My Lords, I would not accept for one moment the last assertion which the noble Lord has made. On the first part of his question, the Government believe that either the route of reform or possibly the route of abolition—and we genuinely are waiting to see what interested parties think about these in the consultation period—provides benefits in the creation of employment.
Baroness Seear: My Lords, does the noble Lord not agree that the rates for young people should be distinguished from rates for adults? A large number of wages councils are concerned with rates of pay for women, which are at an extremely low level already. Does he agree that in reviewing the question of wages

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councils the two issues, including the appropriate rates for youngsters, especially if they are in the process of learning a job, and the rates that apply for adult women on unskilled and semi-skilled work, which are already at a low level, should be considered separately?
Lord Belstead: My Lords, that is precisely the sort of matter which the Government would wish to take into account during the consultation period.
The Earl of Onslow: My Lords, is my noble friend aware that there is an enormous difference between the cost of employing somebody and the cost of what that person receives? At certain low wage levels the cost of what that person receives in real take-home pay can go down with an increase in his monetary wage. This has a disastrous effect, first, on the inflationary costs of the company and, secondly, on labour relations. Is my noble friend not aware that it is vitally important that the review of tax and social security which is being undertaken at the moment by the Government should be expedited and should be as thorough as possible?
Lord Belstead: My Lords, we are getting a little wide of the original Question, but I agree with my noble friend.
Lord Gallacher: My Lords, can the Minister tell the House whether, if the Government decide to take the route of abolition, that will include the Agricultural Wages Council?
Lord Belstead: My Lords, a statement was made that the Agricultural Wages Council, which falls under a different convention, will be continuing for the next 10 years.
Lord Brockway: My Lords, in applying their policy of lower wages can the Government not have consideration for those who are on the lowest level? Would the Minister not agree that the wages councils have saved thousands of people from being driven below the hunger level?
Lord Belstead: My Lords, I am bound to say to the noble Lord that, as the consultative paper makes clear, the opposite appears to be happening at present. A great number of workers who fall within the scope of the wages board are apparently content with the minimum being offered statutorily. In other words, there is no competition, either from those who are employed or from those who are employers, to try to offer better wages in some cases than those that are being set down statutorily. This is yet another reason why the Government believe that the present situation is unsatisfactory. It needs to be looked at. We have not said definitely what we wish or think we ought to do. My right honourable friend has put out this consultative document. It came out on 21st March and I know that he genuinely wants views to be given on the paper.
Lord Elwyn-Jones: My Lords, was not the purpose of the wages councils to prevent exploitation of workers? If the councils are to go, what steps do the Government intend to take to prevent exploitation in the way that used to be prevented by wages councils?
Lord Belstead: My Lords, this is precisely the kind of point on which we wish to hear views during the period that I have mentioned.

Regional Aid and Inward Investment
2.46 p.m.
Lord Diamond: 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 steps are being taken to monitor the effects on inward investment of the recent reductions in regional aid.
The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Lucas of Chilworth): My Lords, from the beginning of this year we are collecting statistics on a quarterly basis from the relevant industrial development agencies in the United Kingdom in respect of both active projects and investment decisions within their localities.
Lord Diamond: My Lords, can the noble Lord the Minister tell me whether the press is correct in asserting that it is the reduction in regional aid which has enabled West Germany to outbid the offer made by the Welsh Development Agency to an American chip manufacturer who was going to invest in Cwmbran no less than £40 million, leading to the creation of 600 new jobs?
Lord Lucas of Chilworth: My Lords, I do not believe that the report to which the noble Lord, Lord Diamond, refers is, in fact, correct. My understanding is that the company decided to locate in Germany because most of its customers were in Germany. I should add that I have recently returned from Germany, where I did not hear any comment from potential investors in this country that would give rise to the thought in my mind that the change in assisted area incentive grants is the first and only consideration of inward investment plans.
Lord Diamond: My Lords, in view of the lack of competition, may I ask yet another question? Will the noble Lord the Minister be good enough to look into this himself? It is a serious allegation; 600 jobs are a lot of jobs. I should be grateful if he would look into it.
Lord Lucas of Chilworth: My Lords, I reiterate what I said in answer to the noble Lord's first supplementary question. However, I should be glad to have a further look. If I find on considering it further that the information I have given is not correct, I will write to him; if it is correct, I will not.
Lord Cledwyn of Penrhos: My Lords, in view of the severe unemployment situation in that area, can the noble Lord tell the House what consultations took place with the Welsh Development Agency on this issue? Can he say whether the agency was fully consulted and, if so, what was its reaction to the present situation?
Lord Lucas of Chilworth: My Lords, I very much regret that I cannot give the noble Lord the Leader of the Opposition that information. It is a little wide of the original Question. If he would particularly like an answer, I will certainly investigate it.

Diet Guidance
2.48 p.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 whether any guidance is being prepared for the public on the importance of a healthy diet.
The Parliamentary Under-Secretary of State, Department of Health and Social Security (Baroness Trumpington): Yes, my Lords. We expect guidance from the Joint Advisory Committee on Nutrition Education to be available later this year.
Lord Gainford: My Lords, arising out of that reply, for which I thank my noble friend the Minister, will Her Majesty's Government encourage the producers of food wherever it is practical to state the calorific value on labels on their cans and products?
Baroness Trumpington: My Lords, in answer to my noble friend, last month, following a request by food industry representatives, the Ministry of Agriculture, Fisheries and Food circulated consultation guidelines for a voluntary scheme which would indicate calorific values.
Lord Shinwell: My Lords, if I may ask for information, can the noble Baroness tell us whether, when the Government decide what is a healthy diet, we can be assured that everybody in the country is going to get it?
Baroness Trumpington: My Lords, the noble Lord's supplementary question is very wide. We cannot ensure anything in a free country where people can make their own choices.
Lord Annan: My Lords, would not the noble Baroness agree that there is no lack of guidance and that every newspaper and every magazine has guidance on the question of diet? Would not the noble Baroness agree that the difficulty for certain Members of your Lordships' House, such as myself, is how to follow it?
Baroness Trumpington: My Lords, I have been thinking that there must be a reason why I should be working at a place called the Elephant. I agree with the noble Lord.
The Earl of Radnor: My Lords, on a more serious note, is my noble friend aware that there are great differences within the medical world on diet and that any precipitous action taken on the lines of the Question originally asked could do damage to certain sections of the farming industry and should not be undertaken lightly at all? Is she further aware that a little of what you fancy does you good?
Baroness Trumpington: My Lords, I should have thought that I was the living example of that.
Lord Wallace of Coslany: My Lords, can the noble Baroness say whether the Government might consider stressing the value of home-grown vegetables and, in addition to that, give a little more positive effort in the provision of allotment gardens?
Baroness Trumpington: My Lords, the noble Lord is well known for the interest he takes in the growing of vegetables. I am sure that he produces excellent quality.
Lord Rea: My Lords, can the noble Baroness give us a few more details as to the progress of the food-labelling recommendations by the Ministry of Agriculture, Fisheries and Food which she mentioned in her first reply?
Baroness Trumpington: My Lords, the guidelines which I mentioned would complement the proposed statutory requirement for fat-content labelling. The Government are considering whether to prescribe by regulation a standard format for the voluntary information so as to avoid the possible confusion among consumers that differing formats might cause.

National Bank of New Zealand Limited Bill
2.53 p.m.
Read a third time, and passed, and returned to the Commons with amendments.

Lloyds Bank (Merger) Bill
Read a third time, and passed, and returned to the Commons with amendments.

House of Lords Offices
The Chairman of Committees (Lord Aberdare): My Lords, I beg to move that the Second Report from the Select Committee be agreed to.
Moved, That the Second Report from the Select Committee be agreed to.—(Lord Aberdare.)
The report was as follows:
1. Staff of the House
A report from the Sub-Committee was received.
The Committee were informed that reviews of the work of the Hansard editors and reporters and of the doorkeepers and attendants had been concluded. The Committee agree the Sub-Committee's recommendations for a restructuring within the grades and authorised revised rates of pay.
2. Library
A report from the Sub-Committee for the year 1984 was laid before the Committee.
3. Refreshment Department
A report from the Sub-Committee was received.
The Committee agreed to the Sub-Committee's recommendation that the Hotel and Catering Workers' Union be granted representative capacity for members of the Union employed in the House of Lords Refreshment Department and approved the terms of a recognition agreement.
4. Insurance for Lords
The Committee approved an increase in the personal accident insurance cover for Lords whilst on Parliamentary duty.
5. Speakers' Conferences
The Committee authorised provision for the reimbursement of additional costs incurred when the wife of a Lord Chancellor, or his representative as Speaker, accompanies her husband on official duties.
6. Parliamentary Delegations
The Committee approved a change in the conditions relating to the costs of travel by members of U.K. Delegations to European Assemblies and authorised a revised daily rate of subsistence.
7. Parliament Office
The Committee were informed that Mr. B. P. Keith had been promoted to Chief Clerk, Committee Office and that Mr. E. J. J. Wells had been appointed Clerk to fill the vacancy resulting from the retirement of Mr. E. D. Graham, C.B.
8. Hansard Reporting Staff
The Clerk of the Parliaments informed the Committee of the following changes in the Editorial staff on the retirement of Mr. D. A. Dumbreck, O.B.E., the Editor of Debates, on 1st April 1984:—

Mrs. M. E. E. C. Villiers to be Editor,

Mr. W. Frensham to be Deputy Editor,

Mr. W. J. Reid to replace Mr. Frensham as an Assistant Editor.

The Committee expressed their appreciation of Mr. Dumbreck's long and valuable service to the House.
The Committee also authorised the payment of revised attendance fees and charges for temporary reporters and agency typists.
9. Revised Scales of Pay
The Committee confirmed the application of the following Civil Service memoranda to applicable staff of the House of Lords:—

CM/674

Revised rates of pay for certain Clerical Executive grades

CM/676

GM/336

Fees for Academic Consultants.

10. Official Shorthand Writer
The Committee authorised the restructuring of the scale of fees paid to the Official Shorthand Writer and provision for a share of the cost of word processor training expenses.
11. Superannuation
The Committee were notified of the following awards made under the House of Lords Staff Pension Scheme:—

(a) Pension and lump sum to Sir David House, G.C.B., K.C.V.O., C.B.E., M.C., Gentleman Usher of the Black Rod, who retired on 14th January 1985.

(b) Pension and lump sum to Mr. E. D. Graham, C.B., Principal Clerk, who retired on 1st January 1985.

(c) Pension and lump sum to Mr. D. A. Dumbreck, O.B.E., Editor of Debates, who retires on 1st April 1985.

(d) Pension and lump sum to Mr. A. J. Phelps, C.B., Committee Clerk, who retires on 6th April 1985.

(e) Pension and lump sum to Mr. F. W. Guy, Clerical Officer, who retired on grounds of ill-health on 1st January 1985.

(f) Widow's Pension and lump sum death benefit to Mrs. J. Healey, valid nominee of A. J. Healey, former Senior Attendant, who died on 25th December 1984.

(g) Widow's Pension and lump sum death benefit to Mrs. J. P. Codling, valid nominee of R. H. Codling, former Attendant, who died on 3rd March 1985.

(h) Pension and lump sum to Mrs. S. E. Austin, Housemaid, who retired on 3rd February 1985.

(i) Revised Pension and lump sum to Mrs. L. Hall, B.E.M., Housemaid, who retired after re-employed service in 13th January 1985.

(j) Preserved pension and lump sum to Miss V. J. Charrington, Personal Secretary, who resigned on 21st September 1984.

(k) Preserved pension and lump sum to Mr. P. C. Neary, Attendant, who resigned on 13th July 1984.

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(l) Preserved pension and lump sum to Mrs. D. L. Stokes, Housemaid, who resigned on 7th September 1984.

(m) Preserved pension and lump sum to Mrs. N. E. Diflley, Shorthand typist, who resigned on 22nd February 1985.

(n) Short service payment to Miss C. J. Brace, Personal Secretary, who resigned on 20th March 1985.

(o) Short service payment to Mrs. S. M. King, Cashier, who resigned on 30th November 1984.

(p) Short service payment to Miss E. Titmarsh, Clerical Officer, who resigned on 1st February 1985.

(q) Short service payment to Miss J. V. Davey, Housemaid, who resigned on 11th January 1985.

(r) Short service payment to Miss J. M. Cowan, Housemaid, who resigned on 15th February 1985.

(s) Short service payment to Mrs. P. M. Manson, Housemaid, who resigned on 2nd March 1985.

(t) Notional Transfer Value in respect of Mr. D. R. Beamish, Senior Clerk, who was seconded to the Treasury on 1st April 1983.

(u) Notional Transfer Value in respect of Miss M. B. E. Babington, Reporter, who transferred to the House of Commons on 3rd December 1984.

On Question, Motion agreed to.

The Falkland Islands
2.55 p.m.
Lord Shackleton Lord Shackleton rose to call attention to the development of the Falkland Islands and dependencies, the new constitution and future prospects; and to move for Papers.
The noble Lord said: My Lords, I rise to move the Motion for Papers standing in my name. Perhaps I may begin by apologising to your Lordships for the fact that an article I planned two months ago has appeared in The Times today, the day of the actual debate. I cannot blame the The Times because I was very late in submitting it; although the editing that made reference to today's debate was not mine, but was intelligence on the part of The Times. I must say that if anyone else had done it, I should have been critical. I apologise to your Lordships. I think that one wants to be careful that one does not use the public press to debate in advance what is being debated in this House. I hope that your Lordships will accept this apology. I was faced with a problem: either to say, "Do not publish it at all" or to be out of date. The only advantage I can see, since there are a number of speakers who are taking part in this debate, is that if enough of your Lordships have read the article, that will perhaps shorten by my speech.
Secondly, I should like to say that I am extremely sorry that the noble Baroness, Lady Young, through no fault of her own, is almost on her way now to Brazil, to attend the funeral of the President-Elect of Brazil. I know that she was very anxious to take part in this debate and has taken a deep interest in the Falklands. I am sure that we shall all miss her and certainly we exonerate her from any discourtesy to your Lordships' House because she clearly had to go. At the same time I am very glad that the noble Lord, Lord Trefgarne, who has been to the Falklands and has taken an interest, will be replying, aided no doubt by the speech that the noble Baroness, Lady Young, would otherwise have delivered.
Let me also say—and this may also be a comfort to your Lordships—that I do not propose to make any

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reference to the "Belgrano" on this occasion. The Motion is worded in terms wide enough to enable us to discuss (to use a word that I confess I do not like) the geopolitics of that part of the world. It is a word that is used frequently by the Argentines in relation to the Antarctic. Because there are many more of your Lordships taking part in the debate than I expected, I propose to try to shorten my speech and certainly not to go into some of the arguments which appear in The Times today, for which I again apologise.
As I say, the Motion is wide enough to cover any aspect of that part of the world. There is, in fact, an argument as to what the word "dependencies" means, because South Georgia and the South Sandwich Islands, I understand, have been dependencies of the Falklands and still are so, but will not be so in a few months' time when the new orders are introduced.
In a sense they have been separate from the Falklands; and it is worth reminding your Lordships of the geography of that part of the world. Whereas the Falklands is the same latitude South as London is North and is the ultimate temperate place, never very cold, never very hot, South Georgia—a mere 100 miles further south, although 700 miles to the south-east—is on the same latitude as Manchester, but is sub-Antarctic, with glaciers going down to the sea. It is in that area that there are to be found, in perhaps the richest part of Antarctic waters, the krill, the squid and those fish which have not already been fished out in the absence of proper control and the operation of proper fishing limits.
Let me deal very briefly with the constitution because, in a sense, it has been a trigger for this debate. It was proposed that there should be an Unstarred Question to discuss the constitution and the noble Baroness, Lady Vickers, would have put that down. I am very grateful to her for letting us widen this now and I am grateful to the Government for providing time so that we can debate the whole subject. The noble Baroness, Lady Vickers, has played a very important role in relation to the Falklands. She was responsible for the matter of nationality in the Falklands and I am very glad that she is taking part in this debate.
As I say, the debate is wide enough to cover any issue, but the constitution itself is not unimportant. It has built into it the provision of human rights, and although this is contained in an international convention, I think it is a pity that the Argentine has not yet subscribed to that particular convention. The fact remains that the power with regard to the future of the Falklands rests ultimately with the Secretary of State, with the Government and with Parliament. No position in that has been altered, though it has been thought that by building in, very properly, the rights of the islanders under the UN provisions, this alters the British position.
I shall want briefly to say something about the relationship of the Falklands to that area, including the Antarctic, but first of all I should like to make some comments on the report of the Select Committee of the Commons. I am bound to say that in certain respects they have got it right and in other respects they got it wrong. I think they were wrong in criticising the excellent chief executive of the Falkland Islands Development Corporation and indeed the concept of
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the Falkland Islands Development Corporation. We originally called it the Falkland Islands Development Agency in our report because we thought the word "Corporation" might frighten the Government since it could have sounded too much like nationalisation. The Government changed it back to "Corporation".
The intention was not only to provide a capability which was carefully clued-in to the Government because the chief executive of the Falkland Islands Development Corporation is also the Government chief executive under the Governor and is answerable directly to the Governor and to the Executive and Legislative Councils. Mr. Taylor, Mr. Simon Armstrong and others have done a first-class job in a very short time. One has to remember that setting up an institution of this kind with very little resources, in an island with a population of only 1,800, is not easy; and a degree of progress is being made.
However, there is one area where I would wish to be critical and that is the failure to move more rapidly on land reform. I was quoted by the Foreign Secretary when I said in an earlier debate that no other author of a report had had quite so much carried out by a Government. But the fact is that there has been a failure to tackle, on a radical basis, the whole question of land reform. This is partly because the English do not really understand reform in the way that the Scots and the Irish do. The object was twofold. One was to stop the drain of profits from the islands back to this country. As we pointed out, those profits had produced tax revenue to the British Government greater than the sums we were giving in the way of aid. That is certainly not so now.
Secondly, we needed to establish a degree of independence, pride and self-sufficiency among the islanders by enabling them to own their own farms. The degree of progress that has been made, though limited, has shown some success. But I would urge on the Government that the policy of gradualism is not sufficient at the moment to ensure the long-term viability of the Falklands. After all, it is for the Falkland islanders, in the first instance, that we are spending the money that we are spending on defence, though of course it is also in the interests of international peace. Such farms that have been broken up and sold are working successfully and I would hope to see more rapid progress.
It has been argued by the Government that there are not the people in the Falkands who are capable of taking over these farms; but I beg to differ on this and I should like to see the evidence on which that statement is made. The fact is that if the Falklands are to survive and if there is to be a degree of independence and an opportunity for development in the Falklands, possibly also with the help of emigration, then more progress is needed in making farms available. I would beg the Falkland Islands Company, a subsidiary of Coalite, whose record in maintaining their farms has been good—let me stress that I am not wholly critical, but they have not recently made any farms available in this connection—to bear this in mind. I would beg them, as the principal owners in the Falklands, to give some thought to the need. We argued in our report that there must be a response from the Falkland islanders and the companies if the continuing

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occupation by the genuine totally British people in the Falkland Islands was to survive and be justified.
I should now like to deal with a number of points, though I do not propose to take very long because I know that a number of my colleagues who have themselves been to the Falklands will contribute. I should like briefly to refer to the use that may be made of the airfield. We recommended that Stanley airfield, which was being built with a permanent runway in 1976, should have been enlarged to enable its use by wide-bodies jets and international aircraft. At that time it would have cost about £5 million. Against that, the cost will now be somewhere around £250 million. We recommended that because we saw the future value and development of the Falkland Islands depending very much in the long run—though we were unable, I admit (and we made this clear), to provide an analysis of costs—upon an improvement in communication.
Next month this new airfield is going to be opened. It is extremely important that it plays a major role (and the Ministry of Defence have paid for it) in the defence of the Falklands, but we hope that it will lead to a reduction in the costs of the defence forces and that it also has a role in support of civilian activities. I would only briefly mention tourism, about which the noble Lord, Lord Mountevans, will be speaking, the support of our Antarctic developments and, above all, fisheries. Other noble Lords will be able to talk at length on the development of fisheries, which are of the greatest importance. I shall briefly touch on this later.
At the moment the Ministry of Defence are not showing the degree of co-operation that I would have hoped for in encouraging and developing the use of the airfield for civilian purposes. The prices they are prepared to charge are excessive, in the view of experts, and it is absolutely vital that some civilian use should be made of the airfield. I would say to the noble Lord, Lord Trefgarne, who I know well understands this, that the Government and the Ministry of Defence should be more forthcoming over the development of civilian use of the airfield.
There are certain aspects of military use which would be worth looking at. Sketchleys, the dry cleaners, were prepared to set up a cleaning establishment in the Falklands and they hoped to get service from the military. I understand that now the military are going to put their own cleaning facilities there. It is important that some of these smaller developments should be encouraged. That is not to say that relations with the military in the Falklands are bad; they are in fact very satisfactory and in particular where there is good leadership in the units. Nevertheless, there is the same argument about co-operation with the military which we always hoped would bring in revenue and development as regards the civilian population. This applies to horticulture, and there are other important projects of a kind which in any case need to be pressed forward. There is the spinning and weaving at Fox Bay which is coming along quite well. This is not of course an argument in relation to the military. There is even the possibility of some co-operation with St. Helena. There is tourism and there is the possibility of selling food, whether it be mutton or fish, to the military.
I should like briefly to turn to the fisheries side. It is probable—and other noble Lords will know more about this subject than I do—that one of the wealthiest fishing grounds in the world is to be found off the Falklands and South Georgia. It is calculated that the present fishing, already employing over 100 fishing vessels—there are 25 in Berkeley Sound alone, just to the north of Stanley—is yielding profits of several hundred million pounds. There is a prospect, once a fishing limit is introduced, of a revenue of something like £50 million which would come to the Falklands and which would be a tremendous bonus, bearing in mind that the present revenue of the Falklands Islands Government is something like £4 million or £5 million.
Therefore, I urge the Government—and indeed the Foreign Secretary mentioned this in another place—to show a willingness to press on, despite the difficulties and the fact that they are confronted by a possibility of complaints from the Argentine. Already the Argentine industry is calling for these limits and saying that, if the British claim to operate a limit around the Falklands and to command those waters they should enforce fishery limits. This has been agreed by fishery interests, whether they be Soviet, Polish, Japanese or, especially, Spanish. There is a vital need not only from the standpoint of revenue, but from the standpoint of conservation, since otherwise these rich fishing grounds may be fished out. I hope that when the Government hear the arguments of my colleagues in this debate they will move rather more rapidly than they have so far done. Already there are signs that some of the fish off South Georgia, such as the notothenia and the Antarctic cod, have been destroyed.
Let me now turn briefly to the question of British possession in the Antarctic and in the Falklands. I have argued on several occasions that the overlapping claims of the British, the Argentines and the Chileans are a possible source of danger. When the Antarctic Treaty was first signed, it dealt with a situation of great danger as between those three countries and indeed between the super-powers. I hope that we shall see the Falklands as playing a role not just to hold the British interest there but in maintaining peace in a part of the world where in another 25 or 50 years' time there could be a real threat to peace, and therefore to the peace of the world.
The present defence costs are something less—and perhaps the noble Lord, Lord Trefgarne, can help us on this—than 3 per cent. of the defence budget. Although we have given up our responsibilities for Pax Britannica, this is one area that we can afford. If we were to withdraw at this moment, it would weaken our own claims, our stabilising role and our scientific development. One has only to think if General Galtieri had not been removed from the Falklands how far these Antarctic treaties would be endangered.
It is a pity that the Select Committee in the Commons failed to take a view on whether the British claims were good. They said, in effect, that they were not competent to do so. But if one looks at the authorities, whether they are people like Professor Fawcett, Professor Medford or Professor Higgins, all of whom are leading international lawyers of great distinction, one can see that the claims are pretty good.

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It has been suggested that the Duke of Wellington was doubtful about the claims but, after all, that was 150 years ago and we have been there for 150 years since then, so he might have taken a different view today.
I ask your Lordships to regard the Falklands not as a source of loss and a drain on our resources, but in the sense of our duty, our obligation, to people who are wholly British, and furthermore as a possible opportunity of enriching this country. Would it be too much to hope that the British distant water fishing industry might be revived? Other countries are down there in very large numbers. I hope therefore that when we have a reply from the Government we shall hear that they will move on the fisheries side, that they sustain the British position and indeed that they will even be willing to open talks with the Argentines about a possible agreed fishery plan.
This would not be popular in the Falklands or in the Argentine, but those who urge us to talk to the Argentines would say that this is an opportunity of achieving some co-operation. But it will call for an initiative from the Government. This is not to say that we differ, any more than the all-party Select Committee did, about the validity of sovereignty and the possibility of discussing it at this moment; but this is a step that could be brought forward. The value of this co-operation—which incidentally was sustained all the time during the Falklands war so far as the Antarctic was concerned—might be extended northwards to take in the fisheries, but I make no constitutional suggestion for this.
We have to bear in mind that the Argentines still talk about the Antarctic as Argentine and the Chileans talk about it as Chilean. I hope therefore that if we sustain a strong position in the interests of the Falkland islanders and in British interests, we shall make a contribution to peace in that part of the world. Otherwise in 25 or 50 years' time we shall be regretting that we failed to take the necessary steps. My Lords, I beg to move for Papers.
3.16 p.m.
Lord Kennet: My Lords, the House is indebted to the noble Lord, Lord Shackleton, for bringing forward this Motion. Not the first time he has made it possible for us to discuss the Falklands in recent years. We are sorry that the noble Baroness, Lady Young, is not here to answer and even sorrier to know of the cause of her absence. It is indeed a bitter thing that President Neves should have been removed by death, thereby perhaps in some sense weakening the chances of another Latin American country to be able to fight its way out of military dictatorship and into democracy, I hope not too much weakening it. The House will welcome the presence of the noble Lord, Lord Trefgarne, in her stead.
I start with fisheries, and with a contentious remark. I shall not be making many so I hope that the noble Lord, Lord Trefgarne, will not be sharpening his knife too audibly. The record of this Government and of other Community governments over the past 20 years in fisheries matters has been very poor, sometimes disastrous. We went wrong time after time. We went wrong in those pathetic cod wars with Iceland when we thought it was more important to uphold international law than to face the realities of nature. We were proved
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wrong on that and partly as a result have largely lost our fishing fleet, or at least the distant water part of it. The fact that Norway did not adhere to the Community when it could have done—and what an accession of geo-political strength that would have been—was very largely due to wrong policies on fish. We have lost Greenland to the Community—which is an even greater geo-political loss—on fish. When we ourselves came in, there were convulsions for eight or 10 years about getting our own fisheries regime accommodated to the virtually non-existent one in the Common Market. We now face the virtual certainty of the same again with the accession of Spain with its, in European terms, super-colossal fishing fleet. It is of interest that it was only last year, 1984, that the European Commission completed its study of the 512 national laws in effect among member states controlling fisheries. Only now does it know what was there before it came on the scene.
A fisheries regime around the Falkland Islands need not be extremely onerous in terms of enforcement. The Government should study—I am sure that they have—the regimes in force now around Papua-New Guinea and around the Solomons—hardly mighty military powers, and neither of them enjoying the automatic protection of a mighty military power. They have diplomatic and administrative fishery regimes which I am informed work reasonably well. If they can, so can the Falklands. Such a regime, if it was properly constructed, could help to reduce the potentially lethal effect of the Spanish fishing fleet on the European ponds.
In order to construct this properly—there is a lot of talk about this these days, and here I wish to ask a question of the Government—the possible role of the European Community down there in the South Atlantic comes in. What is the law about Community administration, Community regulations, around the extra-European dependencies and possessions of member states of the Community? What is the experience of France in the Caribbean and in the Pacific? What is our own experience in the Caribbean? Is it true that the Government would favour a Community arrangement for Falkland fisheries? There are many good things about this. If they did, it would be extremely difficult. But there are now so many rumours that it is perhaps nearing the time when the Government ought to say something about their intentions, one way or the other. The phrase has been used that there should be a "multilaterally based" fisheries regime. So there should, that is clear, but what sort? Should it be a Community arrangement, or would it be a South Atlantic Fisheries Committee like the North Atlantic one—that is a poor precedent. Let us hope to learn something from the noble Lord, Lord Trefgarne, at the end of the debate.
Perhaps I may now turn to relations with Argentina. There is routine support for Argentina from all the Latin American countries, but they cannot do much to support Argentina in their policy because they are too broke to do it. I want to focus attention upon China, because China is another matter. There has recently returned a Chinese Antarctic expedition of 500 people. It was in Antarctica for some time. While it was there it enjoyed Chilean and Argentine logistic support. China has entered a nuclear energy arrange-

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ment with Argentina. Of course, neither Argentina nor China has signed the test ban and China in point of fact looks like edging closer towards it than does Argentina, which is still a completely undisciplined power in the nuclear field. It accepts none of the international treaties.
Now China also supports the Argentine claim against Britain to the Falklands. This is rather a serious matter and the Government ought in my submission—perhaps they are—to be keeping fairly close to China and taking every opportunity to explain to them that it is not like Taiwan. It may be that China thinks it is, and it should not be difficult to talk about that with China before things get any worse.
I should like to say one word about the new constitution of the Falklands. I hope also that the noble Lord, Lord Trefgarne, may be able to say something about this at the end of the debate. In the Commons debate of 14th March the Foreign Secretary said—and this is visible for all to read—that the new constitution confirms and enshrines the right of self-determination for the islanders. He then went on to say that it had been suggested that this might mean that the British Parliament was no longer master of the situation, and he assured the House that that was not the case and that Parliament was still the ultimate arbiter of the fate of the Falkland islanders.
I do not say that it is impossible, but it is a little difficult for the layman to reconcile those two statements. I expect it can be done. Let us suppose that the Falkland islanders decided to exercise the right of self-determination conferred upon them by Britain in their new constitution in a way which is unwelcome to Britain. Is it thinkable that they should do that? Let us suppose that they refused to do something which we think they ought to do in future. How is it that those two statements can be reconciled? I am sure that it can be done by the greater skill of the noble Lord.
As to the long-term settlement of the Falkland Islands themselves, there are so many intelligent, constructive and sensible solutions to it. There could be a trusteeship under the United Nations, as has been argued before from these Benches both in this House and in the other place. My right honourable friend Dr. Owen has urged it with strength in one of its versions. One version would be under the General Assembly, which has its advantages; another, and I think preferable, version would be under the Security Council, under Articles 82 and 83 of the Charter. We could do that and that would be good.
There is the possibility of shared sovereignty. This is something not unfamiliar in Argentina. They share the sovereignty of an island with Uruguay; it is called Martin Garcia, and the experiment has evidently been a success. This might be sensible at the end of the day. There is the possibility of lease-back. I fear that this would not be sensible because it would involve the cession of sovereignty to the other side. It is a solution which was advanced by the Government to the House of Commons before the Falklands War and was rejected by the House of Commons at that time, and it is difficult to imagine that it could be accepted now. That is, it is difficult to imagine how it could be accepted without the islanders' consent. With their consent, anything could be done in time.
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For two years now many of us have been urging on the Government these very sensible, moderately sensible and less sensible solutions. The Government have not been saying much, and we have been biding our time. It now seems to me that the difficulties of simply commencing communication with Argentina are beginning to bulk dangerously large. It is quite simply impossible to get them to talk about any of the preliminary things which have to be talked about before we can come to the main issue. You cannot talk unless you talk; they will not talk unless we agree to talk about the main issue at once. I have to say that I do not think that the Government are to blame for this. It was not quite clear at first to an outsider. It now is clear after attempts at various levels have come either to grief or to nugatory results. It is serious and I want to say that I at least sympathise with the Government in the difficulties they have and to which they can find no very obvious solution. You cannot leap a wall of political weakness on the other side.
There have been new staff appointments in Argentina, involving chiefs of the military staff. We do not know the people because we have no diplomatic representation there. Foreigners do not know them because it is difficult to get there. They do not come here. It is alleged that these are extreme Right-wingers; militarists and highly anti-British, and that the appointments are a victory for the military wing which is still so strong in Argentine politics. I do not know; I cannot know; it may be that those appointments were the cost of permission to President Alfonsin to continue for a while longer. Clouds are gathering. Today, after two years of military trials of the alleged war criminals in Argentina, trials carried out by their own people within the Armed Forces, civilian trials are beginning—actually today, this Monday. There is a list of 2,000 witnesses to be heard in that series of trials. It may be that the trials will be more notable for duration than for results. The internal situation is becoming cloudier and tenser day by day.
Meanwhile, the Argentine Government are beginning to lean perceptibly towards one of the longterm solutions, lease-back, which I described a moment ago as moderately sensible but probably not very, and probably not acceptable. Those of us who have been to Buenos Aires since the war and have talked to Argentine politicians know that the names of senators and congressmen Storani, Gass, and Berhongaray are powerful names in that hesitant democracy. They have all leaned to lease-back. I regret it. I am afraid that there are in our Parliament those who have proferred lease-back to them, unofficially of course—everyone understands that it is unofficial—as if it were on a par with more acceptable solutions, such as United Nations trusteeship or even shared sovereignty. It could be that that will cloud the domestic scene in Argentina yet more.
But now there is little we can do. British parliamentarians have been down there; I was one of them, 10 months ago. It was not very pleasant; our lives were threatened; we were pelted with eggs, which was less important, and the lives of some other people were lost. There were explosions for which the so-called credit was claimed by a nationalist organisation protesting against our presence. We learnt later that there had been an inquiry into the explosion, in which

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there were eight dead. It was found that that claim had been falsely made and that the explosions were an accident—so it was asserted. I am merely making the point that it was not a very pleasant visit. It is an unfortunate fact that since then no Argentinian parliamentarians have been willing to come to Britain on a return visit. There have even been among them those who have denied that any British parliamentarians have been down there; but such things happen in darkening scenes.
I believe that all that the British public and Parliament can do at the moment is to wish strength and luck indeed to President Alfonsin in holding his country on a democratic even keel, and to wish that he may continue to endure in a situation which is by no means becoming easier from the point of view of an early and beneficial solution to the Falklands problem.
Baroness Gaitskell: My Lords, may I ask the Minister a question that might be considered plainly naïve? I was in America when the Falklanders first wanted to stay there years ago. I should like to know whether it is really fair now that we should say that the Falklands belong to us. What gives us the right or the reason to say that that should be so?
The Parliamentary Under-Secretary of State for the Armed Forces (Lord Trefgarne): My Lords, as that question was specifically directed to me, perhaps this is hardly the moment for me to answer it. If it was, I fear that I could not do so except at inordinate length.
3.31 p.m.
Baroness Vickers: My Lords, I certainly agree straight away with the noble Baroness, in the question that she put. Perhaps I may first thank the noble Lord, Lord Shackleton, for so kindly referring to me and also for introducing this debate. He is the expert on this subject in this House and we were very pleased to hear what he had to say. I was also glad to hear the noble Lord, Lord Kennet, because, although he sometimes takes a different view from me, he has been to Argentina as well and so he has seen both sides. I should like to thank the Chief Whip for giving us time for this debate, and the Falklanders for their fortitude during the invasion and for the way in which they have helped to build up their country since. They deserve the greatest praise possible.
I agree with some of the suggestions made by the Foreign Affairs Committee. However, some—which have been mentioned already by the noble Lord, Lord Shackleton—are not so pleasing. The Government's agreement to the suggestions made by the Falklanders concerning their own constitution was very welcome, and I thank them for that.
It is curious that in this age of technology, which brings the furthest corners of the world together, we always worry about instant communication. We persistently hear the suggestion that the Falkland Islands are so far away. They are not really so far away. We have international links with them by phone and telex, and there will soon be regular air flights. But despite those achievements, the islanders need somebody to speak for them in this House. I hope that we shall have a debate on the Falklands at least once a year in order to keep in constant contact with them.
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Successive Governments in this country have been criticised, particularly in the recriminations following the Falklands war, for not reaching—as the noble Lord has just mentioned—an understanding with Argentina over the islands. In my view, the phrase "an understanding" is a cosy term for a transfer of sovereignty. Argentina has never been prepared to enter into discussions except on the basis of the transfer of sovereignty. I cannot agree with the idea of lease lend because it will only lead to the same troubles we now have in Hong Kong, and that would be very unfortunate.
There will be no changes under a civilian Government, as we saw, regrettably, at the Berne meeting. The present Argentine policy towards the Falklands does not differ, as I understand it, from that of its predecessors except in one respect. I believe that the likelihood of Argentina resorting to armed invasion has definitely retarded and I do not imagine that they will suggest taking that action again. But their ideas have not changed.
Democracy is so deep-rooted in this country that we tend to believe that it is so in many other countries which say that they are to become democratic—hut in the sunny climate of Argentina, democracy has often wilted. No elected Government in Argentina since the 1930s has served their full term of office without military intervention.
I shall illustrate that point by reference to a recent poll in the Argentinian newspaper Clarin published on the 2nd April in which Argentine armed forces personnel were asked questions regarding democracy. Some 61 per cent. said that they would support a coup if the Government there made a sharp turn to the Left; 78 per cent. did not believe in elections as a means of deciding the future of the country; 63 per cent. believed that a strong leader would run the country better than all laws and discussions; 38 per cent. thought that there was a large possibility of war with one of Argentina's neighbours; and 54 per cent. believed that there was a chance of internal conflict in Argentina. Those figures do not speak very well for future relations with the Argentines.
Members of your Lordships' House have a proud record in sustaining and encouraging fundamental freedoms. Your Lordships have fought extremes in all their repulsive guises; for the rights of individuals, for the rights of great countries, and for the rights of little nations. I do not believe that anyone in this House would wish to cast the Falklanders adrift into the fierce political currents of Argentina's political extremes.
I hope, as everyone in this House hopes, for the success of President Alfonsin's experiments with democracy. I hope for peace and security in the South-West Atlantic and on the Latin American mainland. But one cannot buy democracy for Argentina by handing over the Falklands. That is a price we cannot afford and must not pay.
There is one matter in which we could accede to the requests of the Argentine Government. It is a matter we should have dealt with years ago. On 19th March this year, the Argentine Maritime Resources Secretariat issued a statement that it had pointed out the conservation threat posed by Britain allowing uncontrolled fishing in Falkland waters. This was reported in the Buenos Aires Herald of 20th March.

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As the noble Lord, Lord Shackleton, said, the present position with regard to a fisheries policy around the islands is nothing short of a national scandal; that is not the word he used, but I shall say it.
In 1977, the Falkland Islands Council passed a resolution requesting the setting up of a licensed fishing zone. They did not get it. In 1983 they again passed a similar resolution. Still nothing has been agreed. We hear that the Government are discussing a multilateral approach. Why not a unilateral approach that leaves control and profits in British hands?
I shall not go into all the details as the noble Lord, Lord Shaclkleton, has already given so many. But if the Navy cannot do the job of policing the area I should be most surprised. I suggest that two surveillance ships and back-up aircraft would be needed, which I understand would cost between £5 million and £6 million per annum. This sum could be easily found out of the profits on fishing licensing.
The question of the different catches has already been mentioned, so I shall not deal with that point. However, I should like to make one other suggestion. I understand—and I have only received this information recently—that the European Commission has been dealing with the question of community-associated status for Greenland, thus putting that country on a similar footing to the Falklands. The treatment of fisheries is a key feature, as we know, of Greenland's disengagement, if it wants to leave the EEC. Article I of the protocol on special arrangements for Greenland links the import treatment of fishery products from Greenland with the possibilities of access to Greenland fishing waters granted to the Community.
The recent growth of fishing activity in the Falklands area has significant potential for both the islands and the common fisheries policy. It is suggested that the control development of the fishery could help to reduce a threat to the future of the CFP, provide a secure future for a number of Community-distant water vessels, provide much needed employment and development in the Falklands, and tie them much closer to the European Community. So I hope that noble Lords will agree that this is a fairly useful suggestion. I shall cut out the rest of my comments in that regard because I do not want to repeat what was said by the noble Lord, Lord Shackleton.
A further reason for the zone for which we are asking is in regard to the future of the islands. Following the Falklands war the sum of £31 million was given to the islands for various purposes. This £31 million assumed within it all pre-war funding. Out of it the development corporation received a mere £4·5 million. This money is likely to run out in approximately two years. For various reasons costs have risen, as was mentioned by the noble Lord, Lord Shackleton, as regards the air strip. The roads, hospitals, better health and education all require paying for. The Falkland Islands are not a grant-in-aid colony. They take pride in being self-sufficient and run a local budget. Therefore, unless they are given means by which they can raise sufficient revenue to cover the additional costs, they will be in a very difficult position. The cost of maintaining the new infrastructure falls naturally on local resources.
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Notwithstanding the extra work of the development corporation under the leadership of David Taylor, which has initiated many new projects, a major new source of income must be found, and found quickly. It is in British and international interests that a fishing zone should be established as a matter of high priority.
I should like to mention the new constitution. I am very concerned—perhaps too late—about the separation of South Georgia from the Falkland Islands under the new constitution. I have examined the Laws of the Falklands, a Falkland Islands government publication, which shows quite clearly that the dependencies were dependencies of the Falkland Islands. To suggest that they have always been administered separately from the Falkland Islands, but administered from Port Stanley merely as a matter of convenience, is not, I understand, legally true. There appears to be no good reason for separation of the Falkland Islands from their dependencies and there are a number of reasons why that is a thoroughly bad arrangement. I understand—and this is why I say that I may be rather late in raising this matter—that statutory instruments were laid before Parliament without anyone making an objection and, therefore, they will stand. This happened on 18th April. Perhaps the Minister will confirm that.
In-shore fishing is doing extremely well on crabs, scallops, clams and mussels, which I believe will provide a good revenue for the future. However, as mentioned by the noble Lord, Lord Shackleton, there are people who want land. I understand that there are between 16 and 20 young farmers who are anxious to obtain land. I hope something can be done about that. As I suggested some time ago, there is a need to start market gardening. If these young farmers can obtain the land—and market gardening does not take a great deal of land, with the methods it is suggested they should use—they could negotiate a contract with the military which would be of great value to them. It is unfortunate that the sons of the farmers who are there cannot have an opportunity to obtain land. I realise there is the difficulty of payment. I was told that, roughly, payment for land is based on the number of sheep that you have; between £12 and £14 for each animal is paid for the land you want. I do not know how true that is, but it seems to be a good way of making the calculation.
There are two further points I wish to make. The first concerns the wild-life. There is tremendous wildlife on these islands which will be a great thrill for the tourists when the tourist season starts, as I am sure it will. People will want to see these various specimens and also the wild flowers, and so on. I hope that the tourists will realise that many of these animals, penguins, and so on, will be very nervous and frightened. I do not want them disturbed so that they go to other islands. That would be a great pity.
Perhaps one arrangement we might make with the Argentines is to see whether they will go to the graves of those who are buried at Goose Green. I think it would be an advantage if this could be arranged with the International Red Cross, as was at one time suggested.
There is one further point, which is not a political point. The noble Lord, Lord Strathcona, is, I am told, arranging a dance which I understand I can advertise.

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It is to be held on 5th June for the trust fund for the Falklands. I expect that the noble Lord will have something more to say about that.
Finally, I thank the retiring Governor, Sir Rex Hunt, for all the work he has done in the past. I wish him success in his retirement. I also hope that the new Governor will be welcomed and that he will be successful in keeping the island happy and peaceful.
3.46 p.m.
Lord Mountevans: My Lords, I too, open my remarks by thanking the noble Lord, Lord Shackleton, not only for introducing his Motion but also for the wide-ranging way in which he did so. I have to confess that my own little axe to grind is that I feel almost humble in the context; at the same time I feel somewhat enchanted that three of the first four speakers in the debate represent families which have an extensive and long connection with the Antarctic.
The preceding speakers have already shown what a wide-ranging debate we are likely to have this afternoon. I shall take up but a few moments of your Lordships' time on the topic of tourism. Having studied the subject in the context of the Falkland Islands for some 18 months, I believe that tourism is an industry which can make a significant contribution to the achievement of what the noble Lord, Lord Shackleton, called a degree of self-sufficiency and independency.
There is considerable potential in the Falkland Islands as a tourist destination. There are no small number of people who will wish to go there because no one has ever gone before. In the tourism business we call them the blue-rinse set and we tend to think of "Dallas". But they are affluent people who, if they can reach the islands and if, when they are there, there are ways in which they can spend their money, will leave a significant quantity of it behind. There are also those who wish to go because of the outstanding flora and fauna to be found in the Falklands. Not only are there the marine mammals, the penguins and the land birds; there is also the sheer collective environment in which they find themselves. There are those people who will go for the game fishing which, I am told, is almost too good to be true. There are those people who will go for the wrecks; wreck diving and the opportunities that the wrecks offer. The legacy of the gold rush and the Cape Horn route could make the Falklands a scuba divers' Everest—if that is not an appallingly mixed metaphor.
We must not overlook the military historians. We fought an extremely inspired war in liberating the islands and there are many people who should like to see the ground on which the war was won. Finally, we must not forget the friends and relatives of not only those who died in liberating the islands but also those who are now serving there.
So much for potential, but there are constraints. There is the access problem, which was touched upon by the noble Lord, Lord Shackleton. Whoever operates the planes, and whatever sort of agreement the long-haul aircraft operate under, I hope that opportunity will be found to encourage tour operators to take seats on the planes, not least because by paying their fares and taking up capacity tourists will, after all, be subsidising the cost to the Ministry of Defence, which is actually operating the flights.
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There is a problem of internal communication. There is a problem of accommodation. Work is being done on exploring the possibilities of an international standard hotel, of developing guest houses. It was my pleasure to take the general manager of the Development Corporation down to the Isles of Scilly last February, partly because in terms of Europe the Isles of Scilly most closely resemble the Falkland Islands, and also because I thought that they had a guest house concept to show him which could economically be transferred to the Falklands Islands.
I would ask the noble Lord the Minister to encourage and support the Development Corporation and, indeed, the islanders in the steps which they are taking to capitalise on the marvellous tourist opportunities to be found in the Falklands. With Government support I am sure that a product will emerge. It will be an attractive product and, as I have said earlier, it will make a contribution to the viability of the islands. More importantly, I would beg the Minister to use his good offices to ensure that whatever product emerges does not fail for want of long-haul access.
We know that there will be aircraft from Britain. It has been suggested that there could be aircraft flying from southern Chile, involving a five-hour great circuit avoiding Argentinian airspace. However, in regard to the numbers of tourists that the Falkland Islands can and will be able to accommodate I cannot think of a plane that has the ability to stay in the air for long enough to run such a circuit. While I would not urge, ever, that we should indulge the Falklands in what one might call subsidised tourism in pursuit of foreign currency earnings, there are difficulties between the civilian interests which are seeking to develop a tourist industry and the Ministry of Defence over access in regard to the aircraft and I hope that the Minister will work towards a rational solution of these difficulities.
It is often said—and the noble Baroness, Lady Vickers, touched on this—that tourism destroys the very things which it seeks to enjoy. Because we have constraints in developing a tourist product in the Falkland Islands, we can look for a controlled growth of a tourism industry. I hope that we shall be able to give it every opportunity, and in doing so strengthen not only the islands and the islanders' pride in themselves, but also the image that the islands enjoy among the great public around the world.
3.52 p.m.
Lord Buxton of Alsa: My Lords, I, too, should like to thank the noble Lord, Lord Shackleton, very much for initiating this debate. He and I have long been associated together and indeed we have a friendship brought about by these matters. We have been to the Falklands together. I am very glad that he is going to wind up the debate and no doubt he will round off many of the points that some of us are making.
I should like to add only one or two points since so much has been said, and I am sure is going to be said, about the fisheries, but it is an aspect which I believe to be valid. It is not true to say that we cannot police fishing zones. This has been said in the Government's reply to the report of the Foreign Affairs Committee. Fishing rights are jeolously wardened and guarded by

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those who pay for them, and poachers are almost invariably reported by the rightful parties. This happens everywhere. Most of the permit holders prefer to have things properly regulated rather than to have a free-for-all which only hastens the exhaustion of stocks. Therefore, I do not believe that there will be difficulties with other nations; I am sure that most will welcome it.
The noble Baroness, Lady Vickers, has referred to the question of wildlife. The noble Lord, Lord Mountevans, referred to tourism. I should like to add my own points on that. There is a further grave consequence of the absence of fisheries control which has long-term dangers for the Falkland Islands' economy. I have always felt inhibited about mentioning wildlife in a Falkland Islands debate. I was very careful in all the debates during the time of the journey of the task force in the war not to mention penguins because it would have sounded so superficial in the light of the human and political overtones that seem to overwhelm this whole subject. Whereas the human race may want to exploit to the full the resources of fish and krill for commercial advantage, the beings that also are totally dependent on them for their existence are the wild creatures—the seals, the sea lions, the penguins, the albatrosses, and the huge colonies of sea birds. In the long term these may constitute the Falkland Islands' most important resource. If hordes of foreign vessels are allowed to scoop out marine food stocks to exhaustion, the Falkland Islands' main potential for tourism will be strangled before birth.
In connection with the new airport I have been asked many times: is it really true that there are so many rich American birdwatchers who will go all the way down there, who can afford to fly to the new airport to see penguins? That is exactly the sort of question that would have been asked about Kenya and Tanzania in the 'thirties and 'forties when safaris were major adventures, expensively arranged for opulent visitors from America and Europe. Today holidaymakers in their tens of thousands go on charter flights and tour all over the game parks. Wildlife tourism is one of the most important sources of revenue for the East African countries that have managed to conserve their wildlife.
It is not a digression to say that last month I was in the Galapagos Islands in the Pacific, for the first time since 1964. Then in five days we saw only one Ecuadorian tuna fishing boat. There were no arrangements for tourists, and no accommodation. Last month, 21 years later, there were swarms of tourist boats, including two large cruise ships, served by daily flights from Ecuador to an American war-time air strip on one of the islands. There are one or two hotels and other facilities, and every single one of the 25,000 visitors who go every year at the moment—they are expecting it to rise—go to see the birds, strange animals and reptiles. Compared with 21 years ago, Academy Bay, where the Darwin research station is established, looks like a miniature Cowes, or Cannes, in the South of France.
If they are well organised—and the Galapagos are—there is no harm whatever to wildlife. Ecuador, possessing a wildlife situation of international prestige
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and renown, was prepared to spend serious money on conservation. By wardening and sound organisation, and by control of access, but also primarily by especially controlling fishing and fishery limits, Ecuador has an iron grip over the whole situation and are doing very well out of it.
I feel sufficiently familiar with this subject to say that the differences in climate between East Africa, the Galapagos and the Falkland Islands are irrelevant so far as birdwatchers interested in strange breeds and naturalists are concerned. They expect to endure exactly the same conditions as the wildlife enjoy or thrive in.
Before long, and as soon as it is made practical, the new airport in the Falkland Islands will throng with charter parties, just like Nairobi or the Galapagos. Wildlife conservation is, therefore, an excellent investment. Unless we are prepared to invest in conservation and national parks, as in Kenya and Ecuador, and unless we first conserve the fisheries and marine resources on which the wildlife depends by means of established fishing limits, much of the Falklands' best prospects of economic viability will disappear.
I hope that I have said enough on fishing limits. I believe that there is practically only one solution. The Foreign Affairs Committee has suggested that on certain subjects there should be unilateral declarations. I believe, quite honestly, that the only way to deal with fishing limits is to have a unilateral declaration.
If I may return to my oft-repeated argument on defence, whatever the national instincts in reacting to the evil invasion and coming to the rescue of the British citizens in the Falkland Islands, I believe that that is not in the long term the most vital significance of the vast and costly effort. It is the defence of our sea lanes and security for the free world. What was at stake fundamentally was the protection of the free world in certain circumstances. On those grounds it is imperative that the Falkland Islands are always in safe and sound hands. I need not even go so far as to be partisan and say, "in British hands", though of course that is the only solution. But they must be in safe and secure hands. I do not believe that anybody in this House would claim that at present or in the foreseeable future Argentine hands are safe and sound.
We know that the Falklands probably saved our lifelines in two world wars—and then it was not even apparent that the Panama Canal might ever be closed. Since the Second World War the Suez Canal has been closed once and could well be again by the look of things, so we have proof and precedent that strategic canals are vulnerable to closure.
If anything, the Panama looks the more likely of the two to be closed at the present time against the current political trends in Central America. If that happens, a secure base in the Falklands would become crucial to sustaining the free world. Obviously the United States is aware of that, and its intervention in Grenada was clearly related to such a possibility. As I mentioned, I was in the Galapagos the other day, 600 miles west of Panama, where the American-built tarmac strip has proved providential for tourists. That was laid down by the United States in the Second World War to protect the Panama Canal from the possibility of

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attack by Japan. The threat posed to the canal today from inside Central America is far more menacing than it ever was from Japan.
I have explained this before, but I trust that your Lordships will forgive me: the tip of South America is not far from the Antarctic peninsula. There is therefore a narrow channel between the two, called the Great Passage. South of that, on the Antarctic peninsula, or the islands by the peninsula, Russia and others have large scientific bases in the South Shetland Islands. Whatever the Antarctic Treaty says, those are thinly disguised strategic bases, and if Argentina was not a totally dependable ally of the democracies the sea lanes round Cape Horn could be seriously menaced in certain circumstances, if not made unsafe. That would definitely threaten the survival of Europe and the free world. Only the Falkland Islands could then provide the West with surveillance, early warning and some security for its vital supplies by sea. Whatever developments there are in the air, we shall always be totally dependent on vital supplies by sea.
The other factor which makes the Falklands and its new airport possibly the greatest prize of all—and this has been referred to by previous speakers--is secure access in the future to the Antarctic. Most industrial nations are now looking south. Even India is putting down a marker and establishing a scientific base on the Antarctic continent. Any of those nations would give their eye-teeth for the Falklands and particularly for its new airport, and none would dream of giving it up to a vociferous and bellicose neighbour. It may sound fanciful but it is my belief that the new airport may one day appear as of as much significance as Suez did to Disraeli.
As a conservationist I am instinctively against development, especially in the Antarctic, but I have been in the wildlife game around the world too long not to know and accept that the human race will never be prevented from exploiting valuable resources, wherever they are. All we can do—and what we have to do—is take every conceivable step to protect and conserve the natural systems in advance, before the machinery moves in and not, as was the case over the Falkland fisheries, wait until it is all over.
Finally, I believe that if we had not given the wrong signals, first to Peron and then to the junta, but had maintained our traditional and successful stance, which lasted for over 130 years, Sr. Alfonsin would not now be demanding sovereignty. He is merely compelled to do so politically because of the head of steam given to Malvinas mythology over the past 18 years. We have only ourselves to blame. But after the invasion it is really time that we cleared our minds about the best interests of the free world, about the unique prize that we possess and about the possibly spectacular potential that the new airport may offer to future generations.
4.5 p.m.
Lord Strathcona and Mount Royal: My Lords, I am always lost in admiration for my noble friend Lord Buxton for never saying, "I told you so". I well remember the warnings that he gave us before the Falklands conflict developed. Of course we are all lost in admiration for the authority with which the noble Lord, Lord Shackleton, introduced the debate and the
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tour d'horizon, if one can call it that, of the Falkland Islands which he gave us and in which he touched on so many issues.
My connections with the Falkland Islands were almost exactly 15 years ago when I arrived on a small trawler in the normal force 10 gale that was blowing at the time. That visit has left a more or less indelible mark upon me in that I grew my beard at the time and have had it ever since. Indeed, it has been alleged in a newspaper that the present Prime Minister does not care for Ministers with beards. Perhaps that is how I come to be speaking from the Back-Benches on this occasion.
Since then I have become president of a small trust—the Falkland Islands Trust—which is not to be confused with other more grandiose organisations. That small trust antedates the conflict. Indeed, my noble friend Lady Vickers was kind enough to say that we are having a fund-raising occasion in about a month or six weeks' time. Finally, in order just to clear it out of the way, I tell your Lordships that I speak as a member of the fish and fishery interests of the Fishmongers' Company here in the City of London.
On the occasion when I went down to the Falkland Islands we were salvaging a ship—one more commercial ship. It was possibly one of the most significant ships ever built, and it is now being restored in Bristol. It was built by a forebear of the wife of the noble Lord, Lord Campbell, if I may say so. The striking thing about Port Stanley is that there are something like 70 wrecks littered around. There may be a good many more since I was last there. That is not historical accident. It is precisely because of the significance of the Falkland Islands. Particularly in the days of the Cape Horn route, they were the only refuge of so many ships. It is that which brings home to me the area about which I want to talk, which concerns the sea resources surrounding those islands.
Again to relate the situation in the Falkland Islands to something a little closer to home, at any rate as far as I am concerned, one is talking of an area of islands which, if they were plonked down off the west coast of Scotland, would stretch somewhere from Islay to Skye, be inhabited by a population half that of the island of Islay alone. It is a very thinly populated area and the sea is a crucial resource.
I believe that we are in danger, literally, of missing the boat. First, it is shaming to have to admit after all these years that we frankly do not know what the quantity and value are of the fish resources around the Falkland Islands. Some facts are known. Luckily I think that the parameters and percentages are such that, even if the suppositions are wrong by substantial percentages, the argument still holds good. I am told that at this moment there are some 22 Japanese vessels of the charmingly called Kanagawa Fish Jiggers Association. I understand the jiggers are so called because when they fish they literally jig the lines up and down off the vessel. Being Japanese, of course they do it mechanically; they would not do it in a good old-fashioned way. These ships are catching 16 tonnes of fish per day each in one area some 70 miles north of the Falkland Islands. They expect to catch £30 million-worth of fish this season. Next year they intend to expand their fleet by a factor of four, largely because of the restrictions being imposed in the fishing

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areas of the exclusive economic zone around New Zealand.
One other fact that we can cling on to is that the Minister in another place, John Stanley, said in answer to a question that there was an average of 40 to 60 ships fishing in the Falklands EEZ area at any one time and sometimes the number went up to 100. It is here that the figures become a little more vague. However, if you extrapolate those figures it looks as if the value of the potential catch around the Falkland Islands is of the order of £200 million to £400 million a year—and what is a couple of hundred millions when you are arguing about figures like this? This is thought to be a conservative estimate of the total sustainable yield of fish from the area but one has to emphasise that we do not really know.
The worry about these resources that has already been referred to by a number of noble Lords is twofold. First there is the international, ecological and commercial concern at the overfishing which is taking place due to a total absence of any control. It is worth bearing in mind that if this situation exists, even if you are a responsible commercial concern with an ecological viewpoint, the temptation to go out and grab everything you can before somebody else comes and grabs it from under your nose is almost irresistible. Of course it is highly unsatisfactory in the long term. However, it has happened all over the place. In particular I am told that it has happened with the cod in South Georgia.
The second unhappiness about this situation is that neither the Falklands nor the United Kingdom are deriving any benefit from what is going on. Here we have resources which are almost certainly being overexploited by others. Indeed, by a complicated train of trading relationships, I understand that it is highly probable that the squid exports by the Japanese and others from the Falklands area are ultimately having an adverse effect on the export price which our own fishermen are receiving from their mackerel sales. That is a complicated chain which needs to be developed. Possibly other noble Lords may care to refer to it.
Licence fees in the order of £100 per tonne of fish, or perhaps 10 per cent. of the value being fished, are quite an accepted norm in the industry. This is the way one gets at the potential licence value of the fishery round the Falkland Islands being of the order of £20 million to £40 million per annum. As the noble Lord, Lord Shackleton, said, one has to set this against a total budget for the island of the order of £5 million.
As a number of noble Lords—I believe in particular the noble Lord, Lord Buxton—emphasised, the nations which are already fishing there would themselves welcome some degree of regulatory regime so that they would not be forced to go into what they know is an over-exploiting situation because there simply is no way out. Thus we should not imagine ourselves necessarily meeting all that much opposition so far as the regulation is concerned. I hardly think we can expect these fishing interests to be totally welcoming towards paying a licence of 10 per cent. of what they take. However, if that means continuity for their business, I believe they will be prepared to accept it.
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I have no doubt at all that when the noble Lord comes to answer he will tell us that the cost of policing a fishery zone of this kind would be prohibitive. I am quite sure that the Ministry of Defence, with a little help from the Treasury, will produce figures to show that this policing would be unacceptably expensive. I have to tell the noble Lord right now that I am sure that I am not alone in saying that we will take a fairly jaundiced view of these figures and a very large pinch of salt. The Treasury can prove almost anything if they put their minds to it.
However, to be more realistic, those who have given some thought to this matter have suggested a figure of around £5 million a year for the cost of policing with airplanes and perhaps two ships. Again, bear in mind that it is likely that there will be at least a degree of co-operation from those nations already fishing in the area. Thus it should not be necessary to put an inspector on every ship. However, there may have to be a series of visiting inspectors who check periodically that the ships which are fishing in the area do what they have undertaken to do.
Furthermore, we have, for perfectly respectable and understandable—but perhaps unfortunate—reasons, a massive military presence of all three elements of the forces in the area at the present time: we have radar; once the airport is opened we shall increasingly have surveillance aircraft; and we have a naval presence. We should remember that fishery protection around our own waters is undertaken by ships which are our own. Thus, not only is the task of fishery protection by no means unprecedented for the Royal Navy but also I would suggest that we should look carefully to make sure that we are talking about the incremental costs that would be added if fishery protection was added to the duties already being undertaken around the island. It is not as though we were starting out to police a new EEZ from scratch.
It certainly has been alleged—and indeed the Argentinians are alleging—that if we shout so loud about our sovereignty of the islands, then surely, even if they are expensive, we should discharge responsibly the duties that go with the sovereignty—that is to say, the responsible management of the sea resources surrounding the island. Thus, if one can accept a figure of £5 million to police the area, one sets it against a total income of £20 million and one is left with £15 million for contributing towards the infrastructure to support the kind of fishing industry that one would hope to build up in the islands.
Here, as the noble Lord, Lord Shackleton, has already pointed out, the new airport, which is due to open next month, will be an invaluable asset, provided the military are not too possessive of it or, again, the Treasury does not get too deeply into the costing of the landing fees for the use of it. In addition to the value of the airport for personnel and for urgently needed parts for communications generally, it is quite clear that a fishing industry established in this area would require all the usual infrastructure of port facilities, fuelling, maintenance and ultimately a factory and freezer facilities.
I believe that I am right in saying that at present large quantities of refrigerated containers are being shipped out to the islands with stores, equipment and food for the people and the troops living there. These

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containers are then coming back empty. The same is true of merchant vessels going out there. Would it not be very satisfactory if we were able to provide a return cargo for ships which were making the trip anyway and which thereby would get payment for the two-way trip in the traditional tramp steamer manner? I believe that I am also right in saying that there are a number of fishery and commercial undertakings in this country which have expressed a serious interest in developing this kind of activity provided that they have the protection of the control that the exclusive fisheries zone or the exclusive economic zone would give them.
In passing, one should emphasise that it is not a complete 200-mile limit all around the islands. The distance to the Argentine mainland is a little less than 200 miles. There would be a median line between the two. If, as a result of this activity, we could see a revival of our deep sea trawler fleet, this would not only be very satisfactory to distressed areas in this country, especially the North-East coasts of both England and Scotland, but it would also go some way to giving a little comfort to those who worry, as I do, about the decline in the size of our merchant fleet, the numbers of men who run it and the possible need for those resources in times of crisis. A revived trawler fishing industry would not only have commercial benefit but would also have potential military benefit.
The final pressure for getting on with doing something about the fishery problem is the political dimension, which has already been mentioned. No one wants to minimise the difficulty and the delicacy of negotiating with the Argentinians on the regime that is to apply in the South Atlantic. I would suggest, however, that exploitation of these fishery resources is the unique common interest that we share with the Argentine. There is evidence, already quoted by the noble Lord, Lord Shackleton, in a report from the Eurofish Group—it is, as a matter of fact, a very inaccurate report—according to which it is said that the Argentine is complaining that Britain, in declaring a 200-mile exclusion zone around the islands, has failed to take responsibility for making rational use of the waters' resources. The report goes on to say that the number of ships using these waters for fishery purposes, primarily from the Soviet bloc, Japan and Spain, has quadrupled since the conflict with Britain.
Argentina is therefore aware of the problem just as much as we are. Surely, it is not beyond the wit of man to find some way, without prejudice to the question of sovereignty, to establish a common interest with Argentina in protecting what is a mutual resource. Let us go ahead and do it unilaterally if necessary, but let us extend the hand of commercial friendship and let us show the magnanimity in victory for which we are traditionally supposed to be famous by encouraging the Argentinians even if, on a cold and cynical point, you want to be able to say, "At least we tried but all that happened is that we got kicked in the teeth. So we had to go it alone in the end".
I would urge the Government to do three things at their earliest convenience, not that I place a great deal of faith in how they might interpret that. Nevertheless, I say it. First, they should announce their intention to declare an exclusive fishery zone up to 200-miles or the median line between the Falklands and the Argentine. There is, of course, ample legal precedent
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for this. It is a practice widely adopted by many nations and one which, incidentally, I believe started among the South American nations many years ago.
Secondly, and perhaps even more urgently, they should establish a major research programme, probably with the collaboration of the Navy, to establish what is the sustainable fishery level of yield in this area. Thirdly, they should invite Argentina to join in a collaborative control regime for the fishery without prejudice to the issue of sovereignty.
Uniquely, among political arrangements, this seems to be likely to benefit the Falklands, Argentina, the international fishery interests and the United Kingdom. What more, my Lords, can one ask? Let us get on with it.
4.26 p.m.
Lord Energlyn: My Lords, engraved on my mind is the second speech I made in your Lordships' House, when the noble Lord, Lord Shackleton, with his usual courtesy but nevertheless crystalline clarity, showed me the distinction that one has to make between geopolitics and geology. I shall therefore make my position clear. It is as a geologist that I speak at the moment. When the noble Lord's father was on his way to the South Pole he called in to see his old friend, the man who became Sir Edgworth David, the son of the Bishop of Llandaff who at the age of 16 was declared an incurable tubercular and who was advised to take up geology as an out-of-door occupation.
He went out as a young fellow and discovered the margin of the Ice Age for the first time in South Wales. He then went to Australia and founded the New South Wales coalfield. He was also the chief geologist of the Australian army. The noble Lord's father and Edgworth David were great friends. Sir Ernest persuaded Edgworth David to go with him to the South Pole for the ride. He went unprepared. When he reached Antarctica he saw Mount Erebus. Here was a volcano blowing its head off. Without any equipment, up goes David, in typical British fashion—I might almost be tempted to say Welsh fashion, but be that as it may—to discover how the volcano works. That was the first time that it had ever been done. He came down to find that he was marooned, along with the noble Lord's father. They put their heads together. This is my understanding of the sort of conversation that took place. Edgworth David said, "Now look, Ernest. You go off to the South Pole. We have both worked out where the magnetic South Pole is. When you get there pop across and meet me."
That is what they did. It was the first time that anyone had ever reached the magnetic South Pole. It was an enormous achievement, and it illustrates the point that I am trying to make—the great involvement of British geologists, British scientists and British geographers in Antarctica. This is a point that the noble Lord, Lord Shackleton, was seeking to establish in his remarkable speech.
Staying within that theme, one has to remember that Antarctica is a fragment of the earth's crust that has been divorced from Africa. About 250 million years ago, during the split-up of the continents, this fragment of Africa was forced southwards. It therefore contains much of the mineral matter that we now know exists in South Africa. No diamonds, so far as I

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know, have yet been discovered in Antarctica. But most of the other minerals exist. On the other hand, one must not be too flamboyant in one's assessment of the mineral resources of the Falkland Islands. They are not particularly spectacular. As the noble Lord pointed out, it is to South Georgia that perhaps we must look in the future to the mineral developments in Antarctica.
At the time of the Scott expedition there was a geologist called Raymond Priestley, who eventually became Sir Raymond Priestley. He was a very famous geologist. It is a long story, but eventually he endowed me with some of the specimens collected on that ill-fated expedition. Among the specimens was a lump of sandstone which he had derived from a huge bluff of sandstone which ran several hundreds of miles, which he called the "Beacon sandstone", for obvious reasons. I took this sandstone. At that time I had invented a technique for looking at the potential of oil in rocks, and Dr. Elliot and I were able to establish for the first time that there was a potential of oil-bearing rocks in Antarctica. That is the kind of picture that we geologists have. You have few exposures to look at. You have to extrapolate bits and pieces of evidence, and from this draw conclusions.
We have heard talk quite widely of potential oil fields, and so on. In the islands themselves there might be pockets of natural gas, but they will be very limited indeed. What is important in the islands, as has been pointed out by the previous speaker, is the enormous reserves of fish. As these are cropped, naturally one would look for by-products to be derived from these fish in situ as distinct from exporting them as frozen food. In addition to that you have the flora of the sea floor, and from these we now know quite well that they could be a major source of alginates. Again this is a small industry but nevertheless an important industry which could provide considerable income for the islanders.
Above all, the islands have clean air. Although they have a small population they could develop clean air activities, namely electronics. One could have developed on the islands electronic factories which would produce extremely lucrative exports all over the world. This of course raises the issue of the airfield. In my opinion the airfield should be used for the dual purpose of defence and air freight. Therefore it would begin to pay for itself in a short period of time.
The other thing that the islands need is water. Before you can make alginates, or before you can have an electronics industry, or before you can have water, you need energy. At the moment, so far as we know, there are no resources of solid fuels or liquid fuels in any quantity. They would have to be imported. Therefore you turn your mind to the possibility of harnessing wave power, which is difficult and chancy. One might put one's thoughts to the harnessing of wind power. That is another difficult and complicated engineering matter.
One thing to which I should like to draw your Lordships' attention is the picture of Sir Edgworth David climbing in his plimsolls up the side of Mount Erebus, seeing it spouting out hot steam indicating that underneath there must be hot rocks. It is these hot rocks which allow the fish to breed in such enormous
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quantities. Therefore what it means is that if one sank a bore hole into these hot rocks one could develop a geothermal power station. This could be the source of energy which the islands need for their future development.
One of the best contributions we could make while we have our engineers there constructing the aerodrome is to sink a few deep bore holes—it would not cost very much—to see whether the hot rocks are capable of producing steam and giving to the islanders that which they need: namely, electrical geothermal energy.
4.34 p.m.
The Earl of Onslow: My Lords, that must be the most original speech, in the best possible sense, that we have heard about the Falkland Islands. When the Suez crisis was on Lady Eden complained that she felt that the Suez Canal was running through her drawing room. I have a feeling that the noble Lord, Lord Trefgarne, is going to have a feeling that fish are swimming about his. I am not going to be original in my speech, like the noble Lord, Lord Energlyn, but I am going to hammer home the point about fish and the Falkland Islands' natural resources.
Those of us who have actually had Falkland Islands' snipe walking around our feet; those of us who have stood within five feet of a spitting, brawling, messmaking, fish smelling, arguing colony of penguins; those of us who have seen elephant seals huffing and puffing and flipping sand all over themselves; those of us who have seen the enormous variety of the Falklands Islands' bird life and sea life will remember that it is totally and utterly engraved upon our minds. It is something which is very special at a world level.
As the noble Lord, Lord Buxton, said, that wildlife is totally dependent upon fish. If we destroy the fish life we shall destroy the wildlife. If we destroy that, we shall make the Falkland Islands uninhabitable, and all there will be will be a totally useless airfield on an uninhabited island. If, however, we take sensible actions to conserve the fish and equally sensible actions to conserve the wildlife, we then have a development potential for the Falkland Islands which makes sense economically, socially and strategically.
It is impossible to underline too much the importance of the Government's now—preferably yesterday, or better still the day before yesterday—imposing a 200-mile fishing limit. To say that it is going to offend somebody is not good enough; if you say that we have to negotiate a multilateral limit, we know how long that will take. It also, I would suggest to Her Majesty's Government, shows a doubt on the rights which the British have to the Falkland Islands. To go and correctly reconquer the Falklands because you have no doubt, and then to signal doubt in the next breath in failing to put down your 200-mile fishing limit in such a way that even the Argentinians are complaining about it, seems to me to show lack of a certain drive. There is also, I believe, no conservation input in the Falkland Islands' Government. In other words, when a development is planned there is not conservation advice immediately available.
This is no criticism of the Falkland Islands' Government. I think it is a criticism of the Overseas

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Development Authority. The Falkland Islands are in an almost virginal state from the wildlife and natural resource point of view. It is now that one should put in the conservation input before it is ruined, before we have dug out all the hedges in Leicestershire, before we have prairie-farmed some of it. Before we do something we want to know what effect it is going to have in the long term and on conservation. Of course we want wool developed. Of course we want the idea of a clear air electronics industry, but that can only be developed if there is a proper conservation input at the beginning rather than letting black Birmingham-type smoke stacks belch away. I am not suggesting that that is going to happen, but it is important that we should have that in mind.
We have had reference to the possibility of £20 million a year, at its most conservative, being the cost of a licence fee on the 200-mile limit. The Ministry of Defence suggests that it would cost £13 million to police that 200-mile limit. I would suggest that a profit of £7 million is better than no profit at all. It has been suggested by equally intelligent people that it is not going to cost £13 million but nearer £5 million, and that the take on the licence fee could possibly be as much as £40 million. I believe, for instance, that the Japanese chomp their way through 500,000 tonnes of squid a year. I am tempted not to read out the bit about the Kanagawa Squid Jiggers Association, but it is worth repeating. It has 22 vessels reporting some 16 tonnes of squid per day, and the squid is worth some 1,300 US dollars per tonne. This is one company of one country.
To return for one brief moment to the conservation aspect: on Ministerial initiative taken in 1983 Professor Dunnet of Aberdeen University was asked to report to the ODA on conservation aspects in the Falkland Islands. Professor Dunnet has acted for some time as an adviser to the ODA. He duly reported back in 1983, but the report has vanished; no one has seen it. Can my noble friend tell us something about it? Judging by the look on his face it comes as a total surprise to him; but can he please find out for us and let us know?
I think that I have said enough about the fact that the whole ecology rests on fish. This is obvious and can only be further underlined. My World Wildlife brief reads:
"This is the single most important conservation problem. Fishing vessels from 16 countries operated within 150 miles of the Falklands in 1984, according to John Stanley in a written Commons Answer on 14th December 1984 (Bulgaria, Denmark, East Germany, Finland, Italy, Japan, Liberia, Norway, Panama, Philippines, Poland, Spain, Sweden, Taiwan, USSR and West Germany)".—
not a single British trawler!
"Of these, Polish and Spanish vessels are fishing the area most intensively. Nobody knows how much fish is being caught because only the Poles submit catch statistics, but the Poles alone are catching about 250,000 tonnes a year. The total catch is almost certainly over 500,000 tonnes and may be much more. Nobody knows whether this level of exploitation is sustainable because almost nothing is known of the size of the stocks, but if catches of similar levels around South Georgia are anything to go by (which almost eradicated stocks of Antarctic Cod in the early 1970s) it almost certainly is not".
There are, for instance, no regulations within the three-mile limit regarding net size or how fishing should be carried out, which any sensible fishery regime should apply.
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There is little more to say. The non-introduction of a fishery regime with established total allowable catches and the continuation of the present free for all allows two bad problems: the early decimation of the fish and the effect upon world prices and trading. The noble Lord, Lord Strathcona, mentioned this. He said that he hoped that somebody else would take it up, and as I have the same brief that he had I shall try to develop it a little. The brief says:
"The 'knock-on' aspect of item 2 is such that severe difficulties will arise in trading positions such as the Scottish mackerel and herring, as prices will be lower due to trade off values dropping. For instance Marr (Seafoods) … have already drawn up contracts to take squid products from the South Atlantic primarily to the Falklands of up to 60,000 tonnes. This will be marketed worldwide, but especially to Japan. A large part of this product has been exchanged for Scottish mackerel and herring with Eastern bloc countries who play a major role in Falkland fishing operations. They are now pressing us"—
that is Marr—
"to accept much lower values for UK mackerel and herring. For our government to allow such a situation to continue shows a complete lack of understanding, is financially ridiculous for UK interests and would we believe be totally unacceptable to the British taxpayer"—
that is, if it were totally understood, which I do not think it is. It certainly came as a surprise to me.
There is one further matter arising on the airport. It will enable rapid turn-rounds of trawler crews, provided they are established out there. This means that the Ministry of Defence have to think of it not purely as a military base. I suggest that also they have to put themselves in the minds of Thomas Cook and set themselves the task of providing a proper airfield. The noble Lord is wincing with horror at the thought, but it is true; this has to be done. Otherwise we shall not have the proper civilian development on the island. After all, the military are present for the service of the civilians—not the other way round.
I make this one final point. Except for the two noble Lords sitting either side of the noble Lord, Lord Trefgarne, grouse shooting is out of fashion in this Government. I suggest that if either the noble Viscount, Lord Whitelaw, or the noble Earl, Lord Swinton, ran their grouse moors in the way that the British are at the moment running the Falkland Island fisheries they would not be able to have the marvellous crop of grouse that they have for their own and everybody's economic enjoyment.
4.45 p.m.
Lord Campbell of Croy: My Lords, I am sure we all are grateful to the noble Lord, Lord Shackleton, for this debate and also for the way in which he so helpfully introduced it in his admirable speech. At his suggestion, I intend to address my remarks to sea fisheries as a subject on its own. This is because its importance has increased greatly since the Shackleton Report on the Falkland Islands and, as I hope to show, within the last two years. There are certain valuable fishing opportunities in the seas around the Falklands which have a significance for fishing countries throughout the world. These opportunities can be improved if continuing stocks of fish can be assured and if some facilities on shore are provided and guaranteed. They can be helpful to those European countries which still have elements of distant water fleets remaining. The opportunities in the Falkland Islands could take pressure off European waters,

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pressure which was considered recently in a debate in your Lordships' House on 11th March. I need hardly say that, if properly taken up, these opportunities would also lead to very helpful development on the Falkland Islands.
The House will know from the concern which I have expressed on several occasions during the past year that I have Spain particularly in mind. I take this opportunity of congratulating the Government on obtaining what seems to be a realistic agreement on sea fisheries on the accession of Spain on 1st January. We do not know the details, but from what we have heard the Government appear to have achieved about the best deal that was possible. Nonetheless, I still foresee that there will be more catching power within the EC than can be deployed in European waters without serious risk to fish stocks there. Spain, I should remind your Lordships, has a fleet which has been operating off the African countries and I hope that Spanish vessels will continue as long and as much as possible to fish off those shores. However, there are still elements of the Spanish distant water fleet needing worthwhile fishing grounds elsewhere. Bearing in mind size and freezing capacity, those Spanish vessels can fish a long way from home.
A significant factor is that Spanish ships are accustomed to fishing for hake and blue whiting, species which are in abundance round the Falkland Islands. They have found and retained markets for those fish also in Spain and elsewhere. If we compare the sizes of fleets in Europe in tonnage—which I suggest is the best method of comparison—the Spanish fleet is about 60 per cent. of the size of the present EC members' fleets put together. It is sometimes stated that the Spanish fleet is as large as or larger than the EC members' fleets, but that is in numbers. Tonnage is a better guide because many of the Spanish boats are small, operating locally, mostly for shellfish for which there is a large market within Spain. They are not competing with British fishing vessels because they are never far from their home port.
At the other extreme, there are very large and mostly modern distant water vessels. Although the world's distant water fleets, including Britain's, have been disappearing fast, Spain's has contracted little because of agreements and joint ventures with many other countries in Africa and elsewhere.
Those distant water vessels should not expect to compete in waters round the United Kingdom unless opportunities elsewhere are denied to them. It is in Britain's interest that opportunities should not be denied elsewhere to those Spanish vessels. Some have been fishing round the Falkland Islands and are fishing there now, but without a proper system of conservation and management and without facilities on the islands which would transform this into a regular and substantial fishing operation. The remaining part of the Spanish fleet, some 300 to 400 vessels, are the middle section which do expect to fish in European and North African waters and are the potential competitors of other EC fishermen in the EC pond.
To try to ensure that I am not misunderstood or misquoted by over-simplification, I must make it clear that I am not suggesting that these vessels, the middle
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section, should be sent forthwith to fish over 7,000 miles away off the Falkland Islands. Some in due course might find that profitable, but only with much preparation beforehand and in concert with their big brothers of the distant water fleet. Even after Spain and Portugal join the EC in January, the EC fleet will be third in size in the world after Japan and the Soviet Union.
This brings me to the present position in the seas round the Falkland Islands. No fishing limits are observed; not only Spain but several other nations, notably the Soviet Union, Japan and Poland, have fishing vessels operating there, clearly to their financial advantage. Without any supervision or co-ordination, there is a danger that stocks may be seriously damaged; and this happened some years ago after a concentration of Soviet fishing effort round the Falkland Islands. I recognise that there is some difficulty for the United Kingdom Government in declaring and controlling a 200-mile fisheries limit. The whole question of relations with Argentina and other South American countries is involved. But I would remind your Lordships that the rest of the world accepted de facto the extension of fishing limits to 200 miles in 1976 and 1977. From the Opposition Front Bench, I was dealing with the Bill on this which passed through your Lordships' House at that time, and I remember it well. That de facto establishment throughout the world of 200-mile fishing limits was established by customary law in anticipation of the United Nations Law of the Sea Convention.
As a result, 200 miles is now universally accepted for fishing limits and it would be expected for substantial, inhabited islands like the Falkland Islands, whatever is the sovereignty position. I would not press the Government to take action which they calculated would be regarded as highly provocative. What I would point out is that it is in everyone's interest to reach the kinds of agreements which would normally accompany 200-mile fishing limits. In addition, fishing vessels of other countries would be able to use land-based facilities which would greatly help them as they are having to operate far from home. It would be very beneficial to the development of the Falkland Islands and would add employment for the islanders. Such agreements would also provide arrangements which would ensure conservation while opening opportunities for valuable catches. The 200-mile fishing limit may not immediately be possible though I hope it will be possible soon, but in the meantime beneficial agreements, agreements of the kind that I have suggested, should not be delayed.
I should like to ask the Government—for reply this evening if possible—whether they are actively seeking such agreements. It has been mentioned during the debate so far that the Argentines, presumably the Argentine fishermen's organisation, are complaining that there is no fisheries' limit arrangement and that there is no supervision of such a zone. Can my noble friend, when he replies, confirm this and say what is the position of the Argentine Government themselves if their views are known?
It is clear that there are extensive resources of fish in the waters round the Falklands Islands and round South Georgia. They are being exploited now by the fleets of other countries in a haphazard way which

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would deplete and in due course decimate the stocks. Some of these species are not familiar to British housewives but there is no reason why British fishermen should not in due course join in the fishing in that area. For example, British fishmongers' slabs do not often have squid on them. Very large quantities are now being caught around the Falkland Islands. There seems an inexhaustible demand for squid in Japan. Squid has been an export from Britain for years. It is a by-catch for British fishermen.
I recall 25 years ago that fishermen in the Moray Firth, when they caught squid with their other catch, would simply throw it over the side. Then they discovered it was a delicacy in Mediterranean countries, and I am glad to say that exports were arranged. I had a picture in my mind then of British holidaymakers in Rome or Florence sitting down perhaps to a very expensive meal and not realising that the squid they were eating had been landed at Lossiemouth and flown to Italy. In the same way, squid is a valuable catch and the squid fishery alone around the Falklands Islands is a source of this species for parts of the world which at present cannot get enough of it. The potential for the Falklands' economy in the fisheries round the Falklands and South Georgia is very great, but I would tell the Government that I think that action is necessary soon.
4.58 p.m.
Lord Elibank: My Lords, I find myself in this debate in the unhappy position of being in a minority, I think probably of one, in viewing the plans of the Government and their many supporters round the House with an increasing measure of incredulity. I propose to take advantage of the point made by the noble Lord, Lord Shackleton, that we should treat this debate in the broad, general sense. I know that some of the points that I may have to make may be unpopular but at least I can offer your Lordships the consolation that I shall make no further mention of fish.
My difficulties start with the campaign itself two years ago and the objectives of the various parties who went into that campaign. The objective of the Government, as far as I can see, has always been consistent and clear. It was to protect the democratic right of the inhabitants of the Falklands to decide their own future as they thought best. The difficulty that I see is that, in my view, the British people went into this debate with another objective which was, quite simply, revenge. They were appalled by the sight of a foreign army on their island, by the molestation of their citizens, by the taking prisoner of their troops and by the hauling down of the Union Jack over Port Stanley. The relevance of this seems to me that when the war was finished, when our troops had gloriously completed their campaign, the objective of the people of this country was met in full. Their interest in and commitment to the Falkland Islands sharply diminished and in many cases it disappeared all together. It is against that background that one ought to try to look at some of the proposals which have been put forward and to attempt to weigh what measure of support they would have in this country.
As I understand it, the Government have two main pillars in their policy towards the Falklands. One is quite obviously defence—defence of the people and
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their rights, defence of the mineral and fishing resources and so on, in the area—and also the protection of such mineral rights as exist in Antarctica, assuming that we can maintain our interest in that area. The other pillar, as I see it, is an attempt to promote the economic viability of the Falklands now and in the future by means of whatever sensible investments are available.
If we look at defence—and a number of speakers have touched on this during the debate—one or two points strike us straight away. The first and the most obvious is the outlay of money. The noble Lord, Lord Shackleton, if I am quoting him correctly, mentioned 3 per cent. of the defence budget. That is a pretty miserable percentage of anything, but of course when it is 3 per cent. of an enormous lot of money it still becomes quite a strain on the Exchequer.
The other undoubted effect of our concentration on these islands is the distraction of our resources, military, material and intellectual, from the theatre in which our life depends: the European theatre. I think that is wholly wrong for a country with the limited resources, both military and financial, that we can command.
There has been a certain reference during this debate to the usefulness of the Falklands as a defence outpost in any future conflagration. I would put it to your Lordships that any such conflagration, which I suppose is more likely to take place in Antarctica than elsewhere, will be settled either under the aegis of the United Nations in a peaceful atmosphere of some compromise, or by means of some eyeball-to-eyeball confrontation between the great powers, if we are as unfortunate as that. I cannot really believe, in either case, that a few battalions of British troops, a squadron or two of ships and the equivalent number of Hawker Harriers is really going to be able to play an important role in the determination of the outcome of such a conflagration. I believe we deceive ourselves if we think that the success we won in the modest war fought in the Falklands will ensure our success in any similar venture. I would suggest to your Lordships that the mini-war we fought in the Falklands was the last one of that sort. The next conflagration will be more serious and will involve more powers; and our military resources will be marginal to the achievement of success in it.
So far as the mineral rights are concerned, some reference has been made to oil, of which there is undoubtedly a large quantity around the Falkland Islands, but of course in the current state of the world market, with prices falling and the market in a state of over supply, the commercial viability of the exploitation of oil around the Falklands is very limited. In fact, in my submission it is simply not realistic in the immediate future and probably not in the long-term future. I suspect that broadly the same would be true of the minerals of Antarctica.
To look again at the economic viability, I think there is one basic fact to be borne in mind about the population of the Falklands; that is, that prior to this campaign it had been in more or less steady decline for a number of decades. That, it seems to me, is the fate of outlying, isolated islands and locations throughout the world, not only British, but of any other nationality. The attraction of city life, if may one put

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it that way, is so great, particularly to the young, that I cannot envisage the younger generation wishing to live and farm in the Falklands for a number of decades in the future. I believe that had it not been for the campaign, it is quite likely that the decline in the population that we have seen would have continued until the islands were finally depopulated and the only presence on them would be either a British or an Argentine garrison.
The injection of the cash which Her Majesty's Government are putting into the Falklands at the present time surely can arrest and possibly reverse this trend for a period of time, but, I would respectfully suggest to your Lordships, in the end the Falkland Islands are doomed to depopulation. One thinks that only 400 miles away is the land of the Argentine which, whatever may be said about her international currency failings, is a glorious country, rich in agricultural resources, and offering a way of life which one would have thought was far more attractive than life on a somewhat barren island.
Lord Shackleton: My Lords, may I interrupt the noble Lord?
Lord Elibank: Yes, my Lords.
Lord Shackleton: My Lords, I am mystified by the noble Lord's reference to a "campaign". I am not sure what he is talking about.
Lord Elibank: My Lords, when I said "the campaign", I was referring of course in the first instance to the military campaign of two years ago. I thought I had made that abundantly clear. If I have misled the noble Lord in any way, I should be happy to clarify it. That is the only campaign to which I intended to make reference. I had no other purpose in mind.
What I have said is all by way of criticism, and I think it behoves anyone in my position, who has criticised the tremendous efforts made by the Government and others to further the cause of the Falklands, at least to put forward his alternative views. I believe—and this may be an unpopular thing to say—that we should hand over the Falkland Islands in toto, with sovereignty and full control, to the Argentine Government within a measurable space of time. If we try to assess what that time should be, personally I would say that five years is ample time for the inhabitants to consider their position and whether they wish to stay or to go. At the end of that time it would be for the British Government to offer a generous measure of compensation both to those who stay and to those who wish to go.
I would not be in favour, as has been mentioned by one or two speakers today, of an elaborate treaty, attempting to safeguard the rights of our citizens, whether it be in relation to language or law, or economically. I am afraid that I have insufficient confidence in the integrity of future Argentine governments to suppose that any such agreement would be worth the paper on which it was written. That is why I favour a clean break.
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I believe that if we did that, we would satisfactorily honour our commitment to the inhabitants and I believe that we would also restore our very damaged relations with the Argentine and, to a lesser extent, with the rest of South America. I also believe that we would relieve the British Exchequer of an intolerable burden.
Lord Somers: My Lords, may I just point out one thing to the noble Lord? Has he remembered that the Falklands are within a fairly short distance of a large and powerful country which is only too anxious to take them over and which regards them already as her own property? If they were to have their own sovereignty and we were completely to wash our hands of the Falkland islanders, how on earth would they ever be able to defend themselves?
Lord Elibank: My Lords, the answer to that is that if we handed over complete sovereignty of the Falklands to the Argentines, it would clearly no longer be our responsibility. It would give this warning period of five years for them to make up their minds, but any Falkland islander who stayed would become subject to Argentine foreign policy and system of law.
Lord Buxton of Alsa: My Lords, may I clarify to the noble Lord—although I do not think it is necessary for anybody else—that I never said anything about a conflagration in the South Atlantic. I was saying that in the event of a conflagration in the northern hemisphere, where it is most likely to be, it is then vital to have safe and secure maritime communications in the south.
Lord Elibank: My Lords, I can only accept the noble Lord's clarification. I did not have his speech particularly in mind when I was talking about a conflagration. It was my thought that any relevant conflagration would be in Antarctica or around south America. But I take his point that we do not want one to originate anywhere.
5.11 p.m.
Lord Morris: My Lords, I do not think it will come as any surprise to the House, least of all to the noble Lord, Lord Shackleton, if I do not follow the noble Lord who has just spoken, except to say that there are values other than economic, and also that expediency is ever the enemy of justice. But I should like to say that to take part in a debate led by the noble Lord, Lord Shackleton, is both a daunting experience and an extremely stimulating privilege. It is my suggestion that it would take a brave and indeed arrogant Government to ignore his views. Those two previous Governments who ignored the major recommendation of the first report of the noble Lord, Lord Shackleton, in 1976, to lengthen and improve the runway at Stanley—so major a recommendation that it was telegraphed to Her Majesty's Government well in advance of the publication of the report—have both learned to live with the knowledge that the cost of ignoring that advice was not just in money but also in lives.
As long ago as 1977 the noble Lord, Lord Shackleton, wrote to me a letter suggesting inter alia,

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no doubt with tongue in cheek, that the older he became, the more he was convinced that all Governments, of whatever colour, are nothing other than thoroughly dishonest. As a parliamentarian, I believe that this healthy scepticism is as good a premise to start with as any. Indeed, one of the first actions of the Conservative Administration in May 1979 was to tell a barefaced fib that,
"the majority of the Shackleton recommendations"—
that is, the 1976 recommendastions—
"have now been implemented".
Lord Trefgarne: My Lords, I remember very well the case that the noble Lord describes. It was I who made that assertion on behalf of the Government and I stand by it to this very day.
Lord Morris: My Lords, my memory serves me that it was one of my noble friend's colleagues who originally made the assertion in reply to a Question for Written Answer in another place. I am surprised that my noble friend takes credit for that statement, because it is one for which I myself should not like to take credit.
Lord Trefgarne: My Lords, in that case my noble friend cannot count.
Lord Morris: My Lords, that is as may be. The point is that I well remember his response on that occasion, when he rather airy-fairily suggested that he did not want to get into the qualitative and quantitative argument. But that is a detailed point. The major dishonesty of which we must be very careful is that of any Government if they are so vague, so vacillating and so insecure in their convictions that predators of one's own interests, and indeed of the free world's, are encouraged to feed off those interests.
For years now we have been reminded on numerous occasions that the Foreign Office, rather like Mae West, "just love foreign affairs". What I ask is: what of their love of a clearly stated foreign policy? As we have been reminded by the noble Lord, Lord Buxton, on a previous occcasion, there is no such confusion between strategy and tactics by the Soviets, who have stationed their major scientific posts in the Antarctic smack opposite Cape Horn, the Cape of Good Hope and the toe of the South Island of New Zealand—the three nearest landfalls to Antarctica.
One is reminded of a famous chapter in A. G. McDonnell's England their England, which I might add was written in 1925, where the raconteur is working as a personal assistant to a United Kingdom delegate to the League of Nations, who is planning to deliver a speech of the greatest importance to the League of Nations in plenary session. Upon asking two beautifully dressed young men from the Foreign Office what was the policy of Her Majesty's Government on this subject, the personal assistant received looks of astonishment that are reserved only for congenital idiots and the reply:
"Her Majesty's Government do not have a foreign policy, except maybe for one—that we must be nice to the French".
It is for this reason that I most warmly welcome the new constitution of the Falkland Islands, in that it is a major statement of foreign policy and, as such, I
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congratulate Her Majesty's Government on having the courage to resist the pleadings of those who suggest on so many occasions that we must not upset the Argentinians.
Similarly, I welcome the continued assurances of Her Majesty's Government that they are confident and secure in their case for sovereignty of the Falkland Islands and the dependencies, and that such a subject is not for debate with those who table claims, all of which must be spurious by their very nature. But I believe that this firm statement as such by Her Majesty's Government is not enough. Her Majesty's Government must be aware that for decades the history of Argentina has been written and re-written by Argentinians for Argentinian hearts and minds. True security in the whole of the south-west Atlantic lies in the success of successive Governments to state the United Kingdom's case to the people of Argentina, not just government to government but, to borrow the motto of the BBC, nation unto nation.
Your Lordships will recall the truly magnificent diplomatic endeavours of our representatives in Washington and the United Nations in the spring of 1982. However, I have strong reasons to believe that our most powerful allies believe that our on-going interest in the south-west Atlantic is at best eccentric and at worst positively Gilbertian. I ask my noble friend to tell your Lordships' House what is being done in this direction. In case my noble friend thinks that I ask this question lightly, may I ask him whether he has counted, or has lost count of, how many times the leader of the new democratic Argentina, President Alfonsin, has taken the opportunity to state the purity of the Argentinian claim and to insist upon negotiations, upon the unnegotiable?
Furthermore, I ask my noble friend, and other noble Lords who have so far been so patient with me, to consider this short extract. It comes from a quasi-official publication written by an Argentine Admiral, Admiral Fraga, as recently as 1984, if I recall rightly, and it is called Introduction to Antarctic Geopolitics. This short extract reads:
"this"—
this is Argentinian ambitions in that area—
"will also be achieved with permanent and effective presence in all our waters and our Antarctica, upholding our rights and our titles but accompanying them with extensive scientific/technical and logistic activity, so that wherever the Argenine flag may flutter one may know of our irrevocable spirit of struggle at all times in order to satisfy as far as possible Argentine aspirations and interest in Antarctica".
5.19 p.m.
Lord Cledwyn of Penrhos: My Lords, we are extremely grateful to my noble friend Lord Shackleton, for enabling us to have this debate and for his opening speech, which again showed his great knowledge of the South Atlantic and its problems. The economic study of the Falklands, published in 1982, over which my noble friend presided, is of very great value, as indeed the Government themselves have recognised.
No one is more entitled than my noble friend to look critically at the progress which has been achieved and the problems which remain. As he made clear in his remarks, these are formidable indeed. Other noble

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Lords who have spoken have also shown a great knowledge of the area and I think that by now all the topics of importance and also of controversy have been covered. I should like at this stage to add my good wishes to the retiring Governor, Sir Rex Hunt, who conducted himself with courage and dignity at a time of crisis.
I shall try to deal very briefly with what I see as the main issues raised in this debate. They come under three headings. The first is the current state of the Falkland Islands. The Foreign Affairs Committee of another place described the Government's responsibilities quite clearly. The report is in my view an extremely important document. It said:
"The islanders went through a traumatic experience which they will not forget in a hurry. The infrastructure of the islands was badly damaged".
The report of the Select Committee goes into this in great detail. I do not propose to quote from it at length but one paragraph summarises the position. Paragraph 167 contains the final assessment of the committee:
"As an urgent response to an allegedly critical situation it is difficult to imagine any enterprise being proceeded with at a more funereal pace. The Falkland Islands Government representative, Mr. Monk, described the ODA's approach to the establishment of the FIDC as 'very sluggish'. It had tended to hold up all sorts of small development. This sluggishness has undoubtedly given rise to understandable, and in our view, justified resentment in the Falkland Islands".
Those were the conclusions of the All Party Committee in another place. Perhaps the noble Lord will be good enough to comment on this when he replies.
The noble Baroness, Lady Young, whose absence we regret but understand, recognised that the recommendation of my noble friend in relation to the land reform programme, to which my noble friend referred in his speech, was one of the most important in his report. Yet it has been given very low priority by the Government. This again is something on which the noble Lord may wish to comment. The £4.6 million out of a total development grant of £31 million indicates the true importance attached to the corporation by the Government, as the committee itself pointed out.
My noble friend mentioned the importance to the economy of the fishing industry. This has been underlined in some very impressive speeches by a number of noble Lords. My noble friend's study recommended a 200-mile limit. It is only fair to remind ourselves that this recommendation was in fact backed up with a great deal of detailed argument. We also know about the extensive operations of foreign fishing fleets around the Falklands and also further south around the dependencies. The Select Committee in another place, while agreeing that there is a strong case for the regulation and licensing of fishing, does not favour the 200-mile limit in view of what it calls:
"the considerable political and practical problems to be overcome".
I do not dismiss these arguments lightly and I do see merit in their recommendation for an indigenous fishing fleet in the Falkland Islands, but it would be interesting to know the Government's views and intentions at this time. I think that they will need to
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take very careful account of the important speech made by the noble Lord, Lord Buxton, who is also one of the experts in this area, and of the detailed recommendations of the noble Lord, Lord Strathcona, and of the remarks of the noble Earl, Lord Onslow, and the noble Lord, Lord Campbell of Croy.
The right honourable and learned Gentleman the Foreign Secretary has spoken in another place of what he described as a,
"multilaterally based conservation and management scheme".
It would be helpful if we could be told today what precisely that means. Have any other countries been approached about this proposal, and if so, which countries and what has been their response? The noble Lord, Lord Kennet, asked about possible European Community involvement. Perhaps we could be told if any or all of our Community partners have been consulted by us on the question.
Other matters upon which we would appreciate comment are the reported granting of prospecting rights in the Falklands to the company known as Firstland Oil and Gas. What is the scope of the rights granted to this company and what potential revenues and taxes have the Government agreed with the company? I do not know a great deal about this company; perhaps the noble Lord can enlighten us about that as well.
My noble friend referred, as did other noble Lords, to the new airfield. There is as the House will know some concern about the latest estimated cost of the airfield and also the army base, especially given the overall expenditure there compared with the severe stringencies we have to endure here at home. There are reports which put the cost up substantially by as much as £70 million. We should be grateful if the noble Lord could clarify the position and also tell us the latest position about the civilian use of the airport.
We have heard from my noble friend and others about the constitutional development. This is of the first importance both to the islanders and to ourselves. No one can argue that the proposed new arrangement is a great constitutional advance, and we noted with interest the Foreign Secretary's remark in another place on 14th March when he said:
"The ultimate authority in matters affecting any dependent territory is of course this Parliament".—[Official Report, Commons 14/3/85. col. 494.]
That is something that we and others must always bear in mind.
I should be grateful if the noble Lord would clarify one matter about the separate constitutions. We understand that the Governor of the Falklands will be Commissioner for South Georgia and the South Sandwich Islands and will consult the Falklands Executive Council about matters relating to the dependencies. It must be doubtful whether it is prudent in the longer term to establish this kind of relationship between the two territories. They are not and never have been one constitutional entity. To establish this link could prejudice the position later on. The Government may be well advised to think again about the implications of this new move.
In parenthesis, I should like to ask—and I should really know the answer—why the two Orders in Council which set up the new constitution are not

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subject to the normal affirmative or negative procedure, which would enable us to debate the orders in another place and here as well. There must be a good explanation and perhaps this was written into a statute at some stage. I understand from my noble friend that in the absence of a debate on the orders, the Government have been good enough to allow time for this debate, and we of course appreciate that.
There are several other internal problems. We have heard several most interesting speeches, including one on tourism by my noble friend Lord Mountevans, and by the noble Baroness, Lady Vickers, who raised a number of interesting points. However, I shall move quickly to my second heading; namely, the future of Antarctica, in which my noble friend Lord Shackleton has a deep interest.
We know that in due course the Antarctic Treaty will be reviewed, with all that implies. It is clearly vital that any final solution should be based on international agreement. The alternative is a dangerous free-for-all—an Antarctic Klondike rush; although my noble friend Lord Energlyn was cautious about the possibility of that and about the range and volume of resources in the Antarctic. Renegotiation of the treaty at this time does not seem to be practicable; but we and other countries should be thinking in the longer term and preparing for talks when the moment is right. The Falklands, South Georgia and the Sandwich Islands are obviously important in this context. As I have suggested, the Government should not commit us in advance or box Britain into an awkward situation, in view of the implications for the islands generally.
My third heading is our relations with Argentina and the possibilities of improving them. Given the change of Government in Buenos Aires and the genuine goodwill which I believe exists in this country for President Alfonsin—goodwill which is reciprocated, I understand, by many elements in the Argentine itself and certainly, as I well know by the Welsh colony in Patagonia—it is tragic that we have not been able to make more progress by now. We much regret the collapse of the Berne talks. They should never have broken down as they did, although we understand the reasons. The one word that stands between the Argentine and ourselves, between success and failure, is, as we all know, the word "sovereignty".
President Alfonsin cannot and should not forget the responsibility of his predecessors. The British Government must not forget the feelings of Argentinians about the islands. Nor must they forget the comparative fragility of the new Government, which every democracy in the world must try to sustain. We must find a way to include this issue on an agenda for debate at some stage, and we hope that will be at an early date. The Argentinians must not make sovereignty so urgent and strident a clarion call at this time. They must remember the history of the past few years, the illegal invasion under the Galtieri Government and the blood that was shed. A failure to appreciate that was the weakness in the courageous speech made by the noble Lord, Lord Elibank.
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Sir Nicholas Henderson, our former ambassador in Washington, gave good advice when he said:
"Let us sit down together with an open agenda so that we can define what we are going to discuss later on".
And in paragraph 96 of the Select Committee Report, the same point is made:
"This does not mean that the United Kingdom Government should not agree to the inclusion of the 'sovereignty issue', as at present defined by Argentina, on the agenda for talks in the immediate future, but it does mean that they should be willing to discuss the means by which progress can be made to try to find a negotiated settlement with Argentina as requested by the United Nations. Unilateral moves by the United Kingdom Government, not related to the question of sovereignty, should also, however, be considered".
That was the recommendation of the multi-party Select Committee in another place.
This country has had a good deal of experience in these matters. I notice that in the context of the Falklands both Hong Kong and Gibraltar have been mentioned from time to time by noble Lords and by others outside. The Government deserve all praise for their conduct of the Hong Kong negotiations but I do not believe that the situation there is analogous to the Falklands. We held Hong Kong on a lease which ends in 1997, and that is that. Yet for all that Government spokesmen have demurred, I believe that Gibraltar is a different case. It is an example of the Government's ability to conduct negotiations with Spain on a range of crucial matters, and to discuss them successfully, while not excluding sovereignty absolutely from the agenda.
I note that in The Times last Friday the Government have suggested a resumption of talks with the Government of Argentina. If that report is true then we warmly welcome the Government's initiative. I hope that the Argentine will respond constructively. An end must be brought to public recrimination and propaganda if any settlement is to be reached, and if success is to accompany talks. The first step must be for us to lift the exclusion zone and for the Argentine formally to end hostilities. But once that is done—and with goodwill it can be done—I believe we can then make progress.
5.37 p.m.
Lord Trefgarne: My Lords, perhaps I may add my vote of thanks to the noble Lord, Lord Shackleton, for introducing this debate this afternoon. Since the last major debate in this House on a broadly similar theme in December 1983, there have been major advances in the development of the islands. The new constitutions have been promulgated for the Falklands and for the dependencies, which are to be known as South Georgia and the South Sandwich Islands.
We stand firmly by our commitments to enable the islanders to live in peace and security under a government of their own choosing, and in that setting to promote their political, social and economic development. These commitments govern our approach to all the issues under discussion today. I wish I could report advances in improving our bilateral relations with Argentina, which, traditionally, had been comparable with the good relations we continue to enjoy with the rest of South America. Noble Lords will, I am sure, like the

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Government, be thinking particularly of Brazil. It was with great sorrow that we learned of the tragic death of the Brazilian president-elect, Dr. Tancredo Neves. His long experience in Brazilian political life and his talent for reconciliation will be sorely missed. My right honourable friends the Prime Minister and the Secretary of State for Foreign and Commonwealth Affairs, and the Lord President of the Council, have sent messages of condolence. Indeed, my noble friend Lady Young has left this afternoon for the funeral, and that is why I stand before your Lordships tonight.
I should like to pay tribute to Lord Shackleton's contribution to the development of the islands. His two economic studies of the Falklands, drawn up in 1976 and 1982, remain basic texts for any discussion of this subject. As the noble Lord himself recognised in the debate last December, the Government have implemented the great majority of his recommendations.
One of our first tasks after liberating the islands in June 1982 was a rehabilitation programme. A total of £15 million was allocated for this. The tasks were daunting. The larger projects in particular were hampered because of factors such as shipping congestion in Port Stanley and overburdened local resources. Although port handling facilities have been immeasurably improved since then, other constraints remain and will inevitably influence the pace of future economic and social development.
The Government responded in December 1982 to the recommendations in the noble Lord's study of that year, by making an allocation of £31 million for the development of the islands' economy over a five- or six-year period. This has been used to take forward a number of the noble Lord's recommendations. A central element in these was the establishment of an agency to co-ordinate and stimulate development. The Falkland Islands Development Corporation began to operate last summer and has made an encouraging start under the management of David Taylor as chief executive and Simon Armstrong as general manager. I had the privilege of meeting both these gentlemen when I visited the Falklands earlier this year and was able to be briefed at first hand on the activities of the corporation.
Several of the noble Lord's recommendations related to the development of the islands' natural resources, especially wool, inshore fisheries and tourist potential. These are being implemented under the auspices of the corporation, and I shall have more to say on some of them in a moment. The noble Lord's study also touched upon infrastructure needs. Our allocation included provision for upgrading essential services, such as Stanley's electricity and water supply, which were not dealt with explicitly in the report, as well as proposals for harbour improvements.
In a few areas, however, the Government do not share the noble Lord's views. Land transfer, which he has raised again today, is one of these. The Government still consider a gradual approach to land redistribution, under the auspices of the Falkland Islands Development Corporation, to be more in keeping with the capacity of the islands' existing agricultural population and more consistent with
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realistic immigration prospects, than the scale and rate of redistribution recommended by the noble Lord.
Before the conflict in 1982, the Falkland Islands Government had virtually completed the subdivision of one farm, Green Patch on East Falkland, into six smaller units. The subdivision of a second farm, Roy Cove on West Falkland, again into six units, was interrupted by the invasion. Over the past two years, as well as completing the formalities on these earlier subdivisions, the Falkland Islands Government have been involved with arrangements for the subdivision of two further properties. These are Packe Brothers Farm on West Falklands in 1983, which has been split into eight units; and, most recently, San Carlos on East Falkland, whose sections have been purchased by seven individuals.
Twenty-seven farms have been created from these four subdivided properties—over half since the end of 1982. They account for about 408,000 acres of the total acreage and farmland and roughly one-fifth of the islands' livestock. In addition, there are about 10 independently-owned small farms, mainly small islands; and the Falkland Islands Company is encouraging share farming on some of its farms. There is still much to learn about the process of land redistribution. The administrative and legal problems are considerable and there are many issues relating to the existing subdivisions to be resolved.
Detailed statistics are not yet available for production on the most recent subdivisions. The evidence suggests that productivity on the Green Patch holdings, however, has increased by some 15 per cent. since subdivision, and the trend is still rising. If this pattern repeats itself elsewhere the prospects for small farming appear good. The higher rural incomes generated could, in time, encourage opportunities for specialisation, such as contract shepherding or the provision of mechanised services. At the same time, the evidence about the number of islanders wishing to own their own land is not easy to assess with precision. Some islanders prefer to be employed on a large farm rather than be self-employed. Others perhaps lack the necessary managerial and entrepreneurial skills, or the necessary finance. Yet others are interested only in specific parcels of land. These are among the reasons why the process of land redistribution should be a gradual one.
The Falkland Islands Development Corporation has an important role to play in fostering a land redistribution programme which keeps pace with demand. The corporation has already prepared a package of measures to assist farmers with land and livestock improvement. Roughly three-quarters of the small farmers have applied for assistance under this scheme. The main priority is fencing, which is essential for proper management and productivity improvements on the subdivisions. A farm management adviser has now taken up post, and will be working in close co-operation with the Agricultural Research Centre.
The main aim of the development corporation is to identify and support small-scale commercial enterprises, including those based on the islands' chief natural resources, and to promote some diversification in their economy. A wool mill, which will produce yarn and knitted goods, has been established at Fox

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Bay East on West Falkland, and should be opened next month. Fox Bay East is also the base for a pilot inshore fisheries project which is examining the commercial potential of shellfish resources. The initial results have been encouraging. The corporation is also working on proposals for the development of small-scale industry and services, including tourism, and has commissioned a survey of the islands' transportation needs. It is meanwhile heartening to be receiving reports that various individual islanders are engaging in successful small-scale enterprises.
I turn now to the question of fisheries. Many noble Lords have today talked, quite rightly, about their concern over the depletion of fish stocks. The Government are fully aware of the increasing need for an appropriate conservation and management regime in the south-west Atlantic. Under normal conditions the unilateral declaration of a 200-mile limit could have been an appropriate response to the problem. But there are particular political and practical difficulties involved in the circumstances of the Falklands. We have therefore decided to adopt a different approach. As my right honourable and learned friend the Foreign Secretary said in another place on 14th March, we have decided to explore the possible ways in which a multilaterally-based regime for fisheries conservation and management might be established. We are taking steps to develop that approach. Noble Lords will appreciate that it would not be helpful to go into greater detail at this stage. This is an important and complex subject which we need to follow up on a confidential basis.
I hope your Lordships will not underestimate the difficulty of policing such a unilateral zone if it were to be declared. My own view is that the costs, for example, would be substantially greater than some of the figures which have been mentioned in your Lordship's House this evening. It is perhaps worth recalling that a number of the nations whose vessels are fishing in the zone now are among those who do not support our claim to the sovereignty of the Falkland Islands and thus, if we were to declare a unilateral limit, we might find ourselves in much greater difficulties in policing it than noble Lords imagine.
The Earl of Onslow: My Lords, before the noble Lord leaves that point, can he say what will happen if we do not get multilateral agreement? Will he consider putting a time limit on getting multilateral agreement?
Lord Trefgarne: My Lords, my noble friend is putting what I regard as a hypothetical question. We have embarked upon a policy of securing a multilateral regime for the area concerned. I hope and believe that that is attainable, and I would rather not speculate on a course that we might seek to adopt if, in the end, that was not possible. We have not yet determined that it is not possible. On the contrary, I hope and believe that it will be.
Lord Strathcona and Mount Royal: My Lords, may I ask my noble friend again whether he has put a timescale on how long he thinks it will take him to decide either that it is possible or that it is not possible? If it is more than couple of years what we are being told
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is that he can forget it because there will not be anything left.
Lord Trefgarne: My Lords, again I hesitate to put a rigorous time barrier on such discussions. My own experience in these matters, such as it is, leads me to suppose that a barrier of that kind is not the way to achieve the aims that we all want to achieve. Therefore, I hope my noble friend will forgive me if I do not answer his question in a specific way.
A key element in the development of the islands is the new airport at Mount Pleasant, 30 miles from Port Stanley. This meets another of the recommendations of the noble Lord, Lord Shackleton. We expect the civil and developmental role of the airport to become progressively more important. From the beginning it will be used by civilian passengers travelling on internal flights and on airbridge flights to Britain. When completed, it will be available for commercial operators wishing to establish external air services. Meanwhile, it will retain the function of enhancing our rapid reinforcement capability. As my right honourable friend the Secretary of State for Defence has explained, once the airport is completed in 1986 it should be possible to reduce the level of forces permanently stationed on the Islands.
The main, 8,500-foot runway will opened by HRH the Prince Andrew next month. The airport is due to become fully operational in early 1986, after the second runway, needed for all-weather facilities, is completed. In this context I should once again make clear that allegations that we are establising a strategic or NATO base in the Falklands are totally without foundation.
Another important achievement to which the Motion draws attention has been the introduction of new constitutions for the Falkland Islands and for the dependencies, replacing the constitutions dating from 1948. A Select Committee of the Falkland Islands Legislative Council had embarked on a review of the constitution before the Argentine invasion of 1982. Her Majesty's Government accepted all the Select Committee's main recommendations, which enhance the democratic nature of the islands' administration, and have since taken full account of other views expressed by island councillors.
Orders in Council containing the new constitutions were made by Her Majesty on 20th March and laid before Parliament on 28th March. The constitutions will come into effect on the day of the general election to be held in the Falkland Islands later this year. The noble Lord, Lord Cledwyn, asked me specifically about the legislative provisions which provided for this parliamentary procedure. It is the British Settlement Act 1887.
Lord Kennet: My Lords, before the noble Lord leaves the constitution, can he tell the House anything about the apparent contradiction between the islanders having self-determination—which is enshrined in the constitution—and this Parliament remaining the arbiter of their fate? Have they a veto over their future? If not, can the noble Lord explain why?
Lord Trefgarne: My Lords, no, In the last resort, decisions as to the constitutional disposition in the

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Falkland Islands remain for the Westminster Parliament. The Falkland islanders do not have a veto, but of course we take their views very closely into account.
Lord Kennet: My Lords, what then is the meaning of "self-determination" in this context?
Lord Trefgarne: My Lords, I think that it therefore devolves upon us to take account of the views of the Falkland islanders, as we have been doing ever since we became responsible for these things some years ago. We also keep in mind the conclusions of the noble Lord, Lord Shackleton, in his reports on the dependencies' potential, particularly in terms of marine resources. We have noted the noble Lord's view that further investigation into this potential is necessary. The British Antarctic Survey continues its important activities.
As for the importance of the Falkland Islands and dependencies in relation to Britain's activities in Antarctica, Mount Pleasant's role would clearly include use as a stepping stone to Antarctica, though both Chile and Argentina have well-equipped airports and harbours nearer to Antarctica than the Falklands. Facilities in the dependencies, on the other hand, would have to be developed almost from scratch.
Your Lordships will I am sure agree that it is important to prevent our dispute with Argentina over the Falkland Islands affecting the operation of the Antarctic Treaty. We do of course continue to take part in Antarctic Treaty system meetings at which the Argentines are also present. We are aware that this most valuable treaty may be reviewed in 1991, and we shall work constructively in that context.
I should now like to turn to the question of our relations with Argentina. During the last debate on the Falklands in this House my noble friend Lady Young expressed the hope that the new Argentine Government under President Alfonsin would respond contructively to our proposals for the improvement of these relations. So far they have adopted a position on sovereignty every bit as unyielding as that of their predecessors. Members of the Argentine Government suggest that Britain is intransigent in refusing to discuss sovereignty over the islands. But the fact is that it is Argentine insistence on making agreement to discuss sovereignty a precondition to talks on any other aspects of our bilateral relations that prevents any movement out of the present impasse.
We, the islanders, have noted statements by President Alfonsin and other members of the Argentine Government that they intend to pursue their claim to the Falklands by peaceful means. But the Alfonsin Government have refused to declare a definitive cessation of hostilities and continue to make it clear that discussion of sovereignty, however extensively it may be disguised, could only have one outcome: the transfer of sovereignty to Argentina irrespective of the wishes of the islanders. We cannot simply ignore the events of 1982—and our commitments to the islanders—by engaging in discussion of sovereignty.
We are persevering in our efforts to persuade the Argentine Government that the only realistic way
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ahead is through discussion of practical measures where progress would be of benefit to both sides. Earlier this year we transmitted the latest in the series of messages that we have been exchanging with the Argentines through the protecting powers. The details must remain confidential, but that message once again put forward practical steps that would enable confidence to be re-established between our two peoples. We look to the Argentines for a constructive reply.
The Government continue to believe that an improvement of commercial and economic relations would be the natural starting point in the improvement of bilateral relations. Both sides have an interest in improved trade, and the Argentine Government have publicly stressed the need to increase their exports as a contribution to tackling their daunting economic problems. Both Her Majesty's Government and the European Community have several times proposed a reciprocal lifting of the trade embargo that has been in place since the conflict. I should add that the British Government have also taken a consistently constructive approach to the international arrangements for the rescheduling of Argentina's official debt in the Paris club context. I would also remind your Lordships—as we have reminded the Argentine Government—of our continuing readiness to see a properly supervised visit to the Falklands by the next-of-kin of Argentine servicemen who died there in 1982.
I now turn to some of the other points that have been raised during the course of the debate this evening. The noble Lord, Lord Shackleton, in his opening remarks, and several other noble Lords referred to the fact that we had separate constitutions for the dependencies. The dependencies are a separate, United Kingdom-dependent territory with their own laws and revenues. They will continue to be administered from Port Stanley purely as a matter of convenience. They have no indigenous or permanent population. The detailed provisions of the new constitution for the Falkland Islands—revising and developing the representative government there—would be far in excess of the needs of the dependencies. That is why we decided to proceed in the separate ways that we did.
The noble Lord, Lord Cledwyn, asked me about the Firstland Oil and Gas Company. The licence granted to Firstland Oil and Gas confines the company to onshore exploration only. It has no implications for possible off-shore activity. Details of the licence were given in a letter from my honourable friend the Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs to the honourable Member for Linlithgow, which was published in Hansard on 25th October. Further details were given in a letter from my right honourable friend the Prime Minister to the honourable Member for Carrick, Cumnock and Doon Valley, which was also published in Hansard—this time on 4th February.
The noble Lord, Lord Shackleton, in his remarks referred to the possibility of extending the provisions of the Antarctic Treaty. As my noble friend Lady Young told your Lordships on 6th December 1983, the extension of the Antarctic Treaty area to include the Falklands and the Falkland Island dependencies

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would require the unanimous consent of all 16 consultative parties. It would give not only Argentina but also the Soviet Union and Poland the right to establish scientific stations on sites of their choosing and to man them with military, though unarmed, personnel. The Antarctic Treaty is—
Lord Shackleton: My Lords, I made no such recommendation for the reasons that the noble Lord is now giving.
Lord Trefgarne: My Lords, I apologise if I misinterpreted the remarks of the noble Lord. Perhaps it is of benefit to other noble Lords that I can explain the difficulties of that proposition. As I said, the Antarctic Treaty is geared to territory where there is no permanent population. Its direct application would therefore not meet the situation of the Falkland Islands.
May I make another point about the fishing problem which was in the mind of many noble Lords who spoke? It is worth recalling that on 22nd July 1982 when we announced the lifting of the 200-mile total exclusion zone, we established and replaced it with a protection zone of 150 miles radius. Through the protecting powers we asked the Argentine authorities to ensure that their warships and military aircraft did not enter the zone, but Argentine civil aircraft and shipping were also requested not to enter the zone unless they had the prior agreement of the British Government. It is interesting to note that not one of them has applied for that permission since that time.
The noble Lord, Lord Shackleton, asked me too about interim operations at the Mount Pleasant aerodrome, I think with particular reference to civilian facilities. Operations in the period up to the completion of the aerodrome will have to be restricted to minimise disruption to the continuing works; but there will be at least as many places available for civilians on the wide bodied Airbridge as on the present Hercules and airsea services combined. I know that that was very much a matter in the minds of Falkland Islanders when I was there a few months ago. I hope that I was able to reassure them along those lines in the remarks that I made.
I believe that I have covered the point about the separate constitutions. I have recited the Act of Parliament under which they were made. Drafts of both orders were placed in both Libraries of Parliament for the benefit of your Lordships and Members of the other place.
The noble Lord, Lord Mountevans, referred to tourism. The Falkland Islands Development Corporation recognises the importance of tourism in diversifying the economy of the Falkland Islands. It agrees with the noble Lord that specialist tourism—wildlife, historic shipwrecks, and so on—offers the greatest potential. The guesthouse concept to which he referred is being developed. Spare accommodation on two farms is being converted into guesthouses. The development corporation has also commissioned the British Tourist Authority to undertake a market survey in Western Europe and North America to assess the market potential more accurately.
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My noble friend Lord Onslow referred to Professor Dunnet's report on conservation. It is true, as my noble friend explained, that he prepared a report on the conservation and ecology needs of the Falkland Islands Government. That was commissioned by the Overseas Development Administration on behalf of the Falkland Islands Government who have had to consider the implications of implementing his recommendations in the light of other calls on their financial resources. Other expenditure has had to take priority, anyway for the time being.
Several noble Lords have referred to the strategic importance, as they see it, of the Falkland Islands, particularly if, for example, the Panama Canal were to be closed. Your Lordships may be influenced by recollection of the exploits of Her Majesty's ships using the Falklands' harbours in both world wars and point to the Falkland Islands' continuing significance if it becomes necessary to ensure security of passage in that area for the defence of freedom. But advocates of that view must recognise that changes in many aspects of naval warfare since the Second World War make it much less likely that Falkland harbours would play the same role in any future period of crisis, tension or war.
I say again, as I said earlier in my remarks, that there is no question of turning the Falkland Islands into some sort of NATO fortress. That is most certainly not the purpose of our military presence there. For the future, we prefer to think in terms of the islands role in facilitating access to economic resources in the South West Atlantic and Antarctica, particularly through civilian use of the new all-weather airport at Mount Pleasant.
My noble friend Lord Elibank suggested that we should hand the Falkland Islands over to Argentina. Needless to say, I profoundly disagree wtith my noble friend. Has he considered, I wonder, the rights and wishes of the Falkland Islanders themselves? If he has been there, as a number of your Lordships have, he will know very well that that does not for a moment comply with their view. Has he considered the implications of what he suggests for the rule of international law? I do not for a moment think that we could acquiesce in a suggestion that any country could have what it has sought to take by force. Has he considered the implications of the views of the Scecurity Council of the United Nations in this matter when it passed its resolution following the Argentine invasion in 1982? Above all perhaps, has he considered the feelings of the relatives of 256 or so British men who give their lives in that conflict?
My noble friend Lord Morris made an interesting speech, as he always does, but I hope perhaps that he will take a little more care with the drafting of some of his remarks in the future. He also explained how President Alfonsin so often repeats his claims to the sovereignty of the Falkland Islanders. I think he compared that unfavourably with the remarks of the British Government. Perhaps he was thinking that we do not declare our claim often enough. As far as concerns President Alfonsin, methinks he does complain too much.
I have been asked, too, about the cost of the airport which is presently under construction. As The Times reported on 6th April, the PSA's present estimate of the cost of the works at Mount Pleasant is £395

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million updated to September 1984 prices. That is made up of £276 million for the airport and £119 million for the additional garrison works which were announced by my right honourable friend the Secretary of State for Defence on 21st September last year. That is the expenditure which the Treasury has approved. Suggestions that the cost of the works will turn out to be higher are therefore purely speculative. Indeed there was no evidence of that when I was there recently.
Our efforts to improve relations with Argentina are in no way incompatible with our commitments to the islanders: I have described the progress made on a wide range of development projects currently under way in the islands. A reduction in tension in the South Atlantic would allow us to reduce our defensive military presence in the Falklands and to concentrate on its economic and social development. We would also hope to see increased co-operation with Argentina and others in the development of the resources of the wider region. A report on the Falklands by the Foreign Affairs Committee of another place recently endorsed these twin themes of Government policy. I hope that they will also receive the approval of your Lordships.
6.7 p.m.
Lord Shackleton: My Lords, I am conscious that we have had a certain refreshment in numbers of Peers who have now joined us, no doubt not to take part in the debate on the Falklands or even to listen to us, but to proceed onto the other very important business that follows. None the less, in winding up I should like to make a few remarks. I again repeat my apologies for the fact that the article which I planned for The Times two months ago not by my deliberate intention appeared today. I again repeat that I think that it is undesirable for noble Lords to use the public media to further their arguments in a debate which is to take place, and I censure myself. But it meant that I was able to make a rather shorter speech, with somewhat regrettable consequences, as I was not able to deal with some of the arguments on the Antarctic, and I think that I must say something on that. I must say something also to the noble Lord, Lord Elibank, whose speech I admired. It was a brave speech in the circumstances.
The BBC correspondent, Robert Fox, when he returned from the Falklands complained to me that one of the difficulties was that the Shackleton reports were now treated as holy writ and that therefore it was a matter of interpretation. Who am I to quarrel with the different interpretations that may be put upon the words that I utter? But I am bound to say to the noble Lord, Lord Trefgarne, who has done extraordinarily well at very short notice in the absence of his noble friend, that I have never myself said that the great majority of my recommendations have been carried out. What I said—and it was quoted in another place; I cannot remember the exact words—was that no other author of a report had had so much carried out by a Government.
However, as I shall seek to show, there are certain quite important omissions from my original report. The main one is the absence still of any encouraging noises on conservation from the Government. This is
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very relevant to the argument both on fisheries and on conservation generally. I think this is a tragedy. This was one of the recommendations in our 1976 report and in our 1982 report. The noble Lord refers to the progress that has been made. It is nine years since the first report and we still have Green Patch brought up as an argument for progress.
I said on that occasion, and I have said more recently, that unless the Government proceed with more vigour in the development of the Falklands and the reform of the land tenure there is no point in our seeking to hold on to the Falklands because the numbers will go. The noble Lord, Lord Elibank, will be proved right unless there is some progress on this.
As has been made clear, the fisheries in particular could provide for the Falklands revenue vastly in excess of what they are receiving at the moment from farming. This has been shown courageously and the same recommendations have been made as were made by Gordon Eddie in my report in 1976. Marr and Sons and a number of others including the noble Lord, Lord Strathcona, have indicated that we can now proceed more forcefully than in the past. I would ask the noble Lord to urge his officials, to consult his colleagues, to consult those with expert knowledge on this matter and to proceed with greater vigour on the development of the fisheries.
There have been several references to the Antarctic. I think there is some misunderstanding about the Antarctic Treaty. It is a treaty without limit. It is an indefinite treaty. In relation to the 1991 review date, so many subscribing nations could ask for a review but it does not mean that that treaty will not go on. However, what we were arguing, and what I was arguing, is this. For want of (if I dare use the word) "geopolitical" gain, which has certainly been used by the Argentines, I want to see a solution, not to bring the Antarctic Treaty to cover the Falklands, for various reasons, but a degree of co-operation between the Argentine, Britain and Chile. I particularly stress Chile because the Chilean Ambassador, who had read my article (and I apologise again about that) said that the Chileans are not seeking, in their little colony of children and a school in the Antarctic, to disrupt the Antarctic Treaty. Would that the Argentine Ambassador had been here to say the same thing!
I commend the Government for their determination to go on trying to find some kind of accommodation with the Argentine. I am sure that those of us who have talked with them in the past will find great friendliness. Certainly after the previous break in relations, for which I inadvertently was responsible in 1976, I was a welcome visitor to every party at the Argentine Embassy, when the chargé d'affaires attributed the fact that he had been left for an extra three years in London entirely to my doing; and this suited his children's education. There is no basic hostility between the Argentine people and the British people. I urge the Government to look, in the context of possible negotiations, on the fisheries and on conservation to see whether we should not make a gesture and try to make a proposal of the kind that I have mentioned.
I shall not proceed to debate further with the noble Lord, Lord Elibank. I ask him to consider that there is a point of view such as he holds and many people hold.

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I think it would be wrong. Nor do I think it necessary, quite apart from the fact that it is arguably dishonourable, to hand over the Falklands without a determined effort to do the duty that I think we can do. I am grateful to the many noble Lords who have taken part in this debate. It has been a useful one. I am certainly grateful to the Government for providing the time, and I ask leave to withdraw the Motion.
Motion for Papers, by leave, withdrawn.

Agricultural Training Board Bill
Brought from the Commons; read a first time, and to be printed.
Hill Farming Bill
Brought from the Commons; read a first time, and to be printed.

Lead in Petrol: ECC Report
6.16 p.m.
Lord Nathan Lord Nathan rose to move, That this House takes note of the report of the European Communities Committee on Lead in Petrol and Vehicle Emissions (5th Report, 1984–85, H.L. 96).
The noble Lord said: My Lords, this report deals with two directives, one concerned with lead in petrol, No. 7805/84, supplemented by 9613/84, and one concerned with vehicle emissions; that again is under 7805, supplemented by 10080/84. The latter—that is, the emissions directive—relates to both petrol and diesel vehicles of less than 3,500 kg in weight.
Notwithstanding the compromise agreement reached at the meeting of the Council of Ministers on 20th March—that is, after our report was completed but before it was published (to which I shall refer later)—the issues to be addressed remain those which we considered in our report. They represent a further step in the control of vehicle emissions, which started in 1970, by the adoption of Regulation 15 of the United Nations Economic Commission for Europe, implemented in the European Community by directives.
The United States has adopted legislation similar in type to Regulation 15 but specifies a different test drive cycle and more stringent emission limits. The Japanese have adopted similar controls to combat severe pollution in their cities. In recent years Switzerland, Sweden and Australia have adopted standards based on those of the United States. The proposals which are the subject of our report represent a further step to contol pollution from vehicle exhausts, leading to the adoption of standards similar to those applicable in the United States.
Concern about this pollution originally arose from its local effects in the form of photo-chemical smog, particularly in areas such as Los Angeles, Tokyo and the Ruhr Valley. These problems also exist to some extent in the United Kingdom, as was noted in the tenth report of the Royal Commission on Environmental Pollution, where its effects are also illustrated by photographs. We received evidence that the development of photo-chemical smog could be
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forecast as it occurs in certain climatic conditions; and in the Ruhr Valley, when these conditions are imminent, warnings are given requiring cars to stay home. As we mentioned in our report on air pollution, there is substantial though not conclusive evidence that ozone (O3) contributes to the formation of acid deposition. Ozone in high concentrations is usually the result of exhaust emissions of motor vehicles. Thus pollution and the pollution effects of vehicle emissions are matters of importance.
The lead directive largely arises from firm initiatives taken by the Government following acceptance of the recommendations of the ninth report of the Royal Commission in which it was recommended that by 1990 at the latest new cars should be required to run on lead-free petrol. There is little I wish to say about the lead directive, not least because a directive was made by the Council of Ministers on 20th March this year—No. 85/210/EEC. I have just received a copy of that directive and I have had no proper opportunity of considering its terms. However, at first glance it seems to me there is a difference between that and the lead directive which was under consideration by us, For our consideration we had before us a directive which prescribed that vehicles of new types (which is a technical term) registered after 1989 would be required to run on lead-free petrol, and that all cars registered after 1991 would be required to run on lead-free petrol. As I understand the council directive, which has just come before me, there is no such provision; merely provision that lead-free petrol shall be available in all countries of the Community from 1989. This is a matter that may require consideration in conjunction with the emissions directive where the way perhaps is still open.
The use of lead-free petrol is an essential prerequisite to the introduction of emission controls according to existing technology. This is because lead in petrol makes the catalysts, which are an essential element in emission controls, useless. Catalysts are required not only where three-way catalytic converters are fitted but also in the case of lean burn engines to which an oxidation catalyst must be fitted to control emissions of hydrocarbons.
With regard to emission controls, the directive proposes that these be introduced in two stages. The second stage, which would result in emission controls roughly equal to the standards required in the United States, are to be introduced in 1995. The first stage, involving less stringent standards, is to be introduced for new types of vehicle—"new type" is a technical term—in 1989 and for all registrations from 1991. The Stage II standard, that is the United States standard, has been applied in the United States and Japan for some 10 years past, and has been, or is being adopted, by Australia, Switzerland, and Sweden. The means of achieving these standards are well known and involve the use of catalytic converters. It is tried and tested technology.
The first question that the Committee had to consider was why it was proposed that there should be a less stringent Stage I standard, with introduction of the Stage II standard being deferred until 1995. It appeared to us that the reason for this proposal was to encourage the manufacture of lean-burn engines which are likely to be able to achieve Stage I standards.

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There is, however, no evidence that lean-burn will, by 1995, be capable of achieving Stage II standards. We were therefore concerned that the motor industry would gear itself up to producing lean-burn engines which would be costly and to which their manufacturing facilities would be devoted. If, therefore, it turned out that lean-burn engines were incapable of meeting the Stage II standards by 1995, the industry would naturally apply the greatest pressure to modify the Stage II standards to enable them to comply with whatever standards were adopted. We therefore foresaw the possibility that Stage II standards, that is, the United States standards, might not be achieved, at any rate by the time envisaged.
Since the objective of the directive is to establish the lowest practicable and economic emission levels at an early date, we did not believe that the introduction of the Stage I standards would be helpful. Rather, we considered that it would be better to defer until 1991 from 1989 the introduction of emission controls and that when they are introduced in 1991 they should be in respect of all new registrations of vehicles and that the Stage II standards, the United States standards, should apply. We recognised that this might well mean that the catalytic converter route would have to be followed on the basis that the lean-burn engine might be incapable of achieving Stage II standards by that date.
Questions have been raised with regard to the additional cost arising from the use of catalytic converters. These costs represent, first, the cost of the catalytic converters; secondly, the control mechanisms for the engine, primarily mixture controls; and, thirdly, installation costs, different exhaust types and floor pan shapes. The cost of the catalytic converters themselves is said to be around £50 per car. The rest of the system, it is suggested, might add an additional £500 per car. However, some of this cost will be once only at the start of production. This system cost which stems from the European quality car export models in limited production is likely to decline with volume production in the family car ranges. It will still, of course, result in an additional cost. If, however, these costs are compared with the additional costs of lean-burn over a normal engine, we arrived at a very similar figure. This is because the lean-burn engine requires at least equally sophisticated control mechanisms to maintain good driveability and an oxidation catalyst is required.
The directive is, of course, concerned with controlling vehicle emissions and certain limits are prescribed both for Stage I and for Stage II. There is, however, currently, as we found, no method of measuring the actual emissions of vehicles in use. For this reason, test cycles are established that should be designed to reflect in the laboratory use to which a car on the road would actually be put. Therefore, the actual emissions of vehicles in use are a projection of the result of such tests, the crucial element of which is the validity of the test cycle. The United States test cycle has been developed over several years and appears reasonably to reflect the actual use of a car kept in the surburb of a city and includes an element of acceleration, high
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speed on motorways, traffic congestion in cities, and so forth.
The present test cycle under the United Nations Economic Commission for Europe, Regulation 15, however, appears to us to have little relationship to the use of a car in service in that there is no adequate provision relating to acceleration, which is in Europe generally much more severe than in the United States, nor to high speed motoring, to which the same applies. On the contrary, it has been said that the European test cycle reflects a car going down the Champs Elysées at an average speed of 11 miles per hour. The validity of a test cycle is therefore a crucial element to ensure that the emission standards desired are likely actually to be achieved. Much work requires to be done in Europe to develop an appropriate test cycle unless, indeed, the United States test cycle, with any appropriate modifications for European conditions, were to be adopted. Such modifications might include the addition of an element of motorway cruising at 70 miles an hour, since the United States test cycle stops at 57 miles an hour. This is, indeed, the course that we recommend in our report as being appropriate in the context of adoption of the Stage II, United States, emission standards.
While it is known that the catalytic converter system will achieve Stage II standards in accordance with the United States test cycle, it is vital for the industry, particularly if it adopts the lean-burn route, to know at the earliest date what test cycle is to be adopted in order to ascertain whether it can achieve the required limits in accordance with it. The Brussels Commission, in the Vehicle Emissions Directive, expressly refrains from prescribing the means, whether by catalytic converter, lean-burn or otherwise, by which the prescribed emission standards shall be achieved. The Committee does so, too.
Following completion of our report and just before its publication, there was a meeting of the Council of Ministers on 20th March last at which the Council agreed in particular the framework for a new directive relating to emission controls to be substituted for the one which is the subject of our report.
According to the Minister in a written reply in another place (House of Commons, Official Report, 25th March, 1985, Written Answers, col. 5) it appears that it is intended that catalytic converters would be required for vehicles over 2,000 cc—that is, two litres—while vehicles of between 1,400 and 2,000 cc would have engines based on "simple lean-burn technology", combined with oxidation catalysts (not three-way catalysts) or comparable cost-effective technology; and present limits for small cars (below 1,400 cc will be tightened from 1990 as an interim stage before further emission reductions to be agreed in 1987. The agreement by the Council of Ministers means that the existing proposed directive considered in our report will be referred back to the Commission, who are required to produce a fresh directive by June of this year.
It is clear that this new agreement starts from the proposition that different technical criteria shall apply to engines of different cubic capacities. There is no indication of what emission standards are to be achieved by any of these classes of engine, including engines of "simple lean-burn type". It appears to

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undermine the main purpose of the original proposed directive, which was to reduce emissions to specified limits by specified dates and thus to remove the thrust of the proposed measures from environmental concern to concern about the development of the motor industry.
We shall no doubt be studying that new directive when it is available. We shall consider particularly what emission standards are proposed; the legality of the arrangement will also require consideration and no doubt will its effect on imports and exports to and from the Community.
We have noted in our report that departmental responsibility in this country in relation to the proposed Emission Control Directive was vested in the Department of Transport, whereas the Lead Directive was in the hands of the Department of the Environment. For the reasons stated in our report we regard the further control of vehicle emissions as important, and the apparent change of direction brought about at the Council meeting on 20th March gives cause for concern.
There is a further point to which I draw your Lordships' attention. The Federal Republic of Germany had proposed some time ago to introduce financial incentives to encourage the purchase in Germany of vehicles meeting the equivalent of the United States' emission standards prior to the dates specified in the original draft directive. We expressed in our report our concern that such financial incentives could affect the internal market of the Community.
In the written reply to which I have referred the Minister states that,
"individual member states—such as the Federal Republic of Germany—with serious environmental problems will be able to start a limited incentive scheme from July this year to encourage the voluntary purchase of cars meeting the new limits".
It seems that the same result will ensue from this agreement as that about which we expressed concern.
In conclusion, we consider that the directives under review in our report represent a desirable step forward in pollution control, and our criticisms and recommendations are limited to points of detail in an approach which we consider to be fundamentally sound. They lead to the introduction into the Community of emission standards equivalent to those applicable in the United States.
There are certain questions arising out of the agreement of 20th March which I think it reasonable to put to the noble Lord the Minister for his consideration and, I hope, his answer. They are as follows. First, with regard to the intermediate size of engine (that is, between 1,400 and 2,000 cc) are the Government satisfied that engines based on "simple lean-burn technology", to use their own words, will be available at a price, and with a performance, acceptable to the public? Secondly, what is the Government's assessment of the effect of the agreement on imports of cars of this category into the Community and the prospects of exports from the Community? Thirdly, what is the Government's assessment of the reductions in pollution from the proposed controls over emissions in respect of all three categories of engine size? My Lords, I beg to move.
Moved, That this House takes note of the Report of the European Communities Committee on Lead in Petrol and Vehicle Emissions (5th Report, 1984–85, H.L. 96).—(Lord Nathan.).
6.36 p.m.
Lord Strathcarron: My Lords, I am grateful to the noble Lord, Lord Nathan, for initiating this debate on what is a complex subject on which many points have still to be decided. While fully appreciating the need to reduce harmful emissions I feel that the damage caused should be put in proper perspective. Last month the Bureau Permanent International des Constructeurs d'Automobiles held a meeting in Paris and issued a full report on their findings. I shall not read from it, but their conclusion was that motor vehicles are only responsible for about 6 per cent. of acid rain.
However, feelings on the Continent run high, particularly in Germany and Sweden. I was at the Geneva Motor Show last month and was in conversation with some German environmentalists who were absolutely convinced that we in Britain were destroying their forests. I pointed out that more harmful deposits come from factories and power stations than from motor car exhausts, and that we in this country have a good record in controlling factory pollution.
Vehicle exhaust emissions have been the subject of increasingly severe legislation in Europe since the 1970s, but manufacturers have been able to meet the tougher standards as technology has advanced. The effect on vehicle prices has been small and has been more than compensated for by better economy.
Research has narrowed the problem of exhaust emissions down to three main constituents. There is carbon monoxide, which even in diluted form is poisonous; there are unburnt hydrocarbons, which strong sunlight can turn into atmospheric smog, in conjunction with oxides of nitrogen, which can also contribute to what is known as acid rain.
The problems of emissions have been seen as more pressing in some countries than in others due to local traffic and weather conditions: hence, the regulations in the United States of America and Japan—and Los Angeles and Tokyo were particularly bad in this respect—have been much stricter and necessitated the fitting of catalytic converters and complex engine control systems.
In Europe, regulations have been introduced stage by stage and have been met by progressive technological innovation. The effects have been such that new petrol driven cars are now emitting some 70 per cent. less carbon monoxide and 50 per cent. less hydrocarbons and oxides of nitrogen than pre-1970 cars. It was originally proposed by the European Commission that further reductions should be applied in two stages, 1989–91, and 1995, but pressure from West Germany forced a general review of the situation in March of this year.
The German government was under heavy political pressure from the Green parties to apply more stringent emission controls much more quickly. This was largely due to the theory—still not substantiated—that damage to forests was being

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caused mostly by car exhausts. In effect, Germany wanted the emissions programme accelerated under the threat that they would "go it alone" if other member states did not fall into line.
The levels proposed by West Germany were such that they could only be met by fitting three-way catalytic converters. It was the contention of most other European Community member states that to adopt this solution as the only way was not satisfactory, being expensive, wasteful of fuel and of doubtful efficiency over the total life of the vehicle. Led by Britain, they maintained that levels set should be slightly less stringent and achievable by the so-called "lean-burn" engines, which were already well advanced and thus provided an alternative technical solution. Several examples of these engines are already in production.
On costs, a three-way catalytic converter could add up to £500 more to the cost of a car, whereas simple lean-burn engines would cost only about £75 to £150. Looking ahead to 1990 the total amount paid by British new car purchasers would rise by about £1,000 million should catalytic converters become compulsory on all new cars. They would also increase petrol consumption by about 5 to 10 per cent., which would mean an additional consumption of up to 500 million gallons or up to £1 billion on annual fuel costs at today's petrol prices.
When lead-free petrol is finally introduced in Europe large supplies of the leaded fuel will still have to be available for the enormous number of cars which are on the road already. In America, after many years of using unleaded petrol, three qualities are still in general use. These are low octane unleaded petrol, high octane unleaded petrol, which is considerably more expensive, and the old type of leaded petrol.
On 20th and 21st March the EEC Environmental Council reached agreement on future car emission standards for the European Community. Larger cars, that is over 2 litres, would have catalytic converters on new models by 1st October 1988. These would have to run on unleaded fuel which would have to be available by that date in all European countries. For medium cars of 1400 cc to 2000 cc lean-burn engines would be acceptable as a compromise after 1st October 1991 and Stage I for the smallest cars up to 1400 cc. The second stage for this category will be agreed by January 1987.
United Kingdom acceptance is conditional on limits proving acceptable. Denmark and Greece have minor reservations; France, Germany and Italy have accepted the proposals.
Tax incentives to encourage the use of catalytic converters may not start before 1st July 1985. However incentives given will have to be less than the costs involved in equipping a car to meet the new European standards. In Germany catalytic converters are available as an after-market sales item for cars that are already running. By the end of 1985, the Commission will advance further proposals about emissions from vehicles over 3·5 tons, diesel engines and possible speed limits in countries where these do not apply, such as Germany. The motor industry has done well in steadily reducing harmful emissions in the
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last 15 years. Let us hope that, before the new regulations become compulsory, the motor industry will be ingenious enough to come up with a satisfactory alternative solution to the catalytic converter and the tremendous cost involved, which will ultimately have to be borne by the British motoring public.
6.45 p.m.
The Earl of Shannon: My Lords, I wish to speak most strongly in support of the points which have already been made most admirably by the noble Lord, Lord Nathan. In considering the draft directives, the sub-committee, of which I had the privilege of being a member, was faced with deliberating on a three-fold problem. I apologise for repeating some of these points, but they are essential to the argument.
The first problem was lead. That is easily overcome; one merely removes it. Secondly, the other combustion products, as the noble Lord, Lord Strathcarron, has told us—carbon monoxide, oxides of nitrogen and unburnt hydrocarbons—are difficult to remove totally unless the engine is turned off. Thirdly, there are the economic implications of any regulations that might be made.
Let us consider for a moment the magnitude of the problem. The evidence submitted to the sub-committee varied widely. Having had slight experience of this before, I noticed that it is in common with the evidence submitted on many environmental problems and they are not easy of definition. The effects of lead particularly are difficult to quantify. Clearly there is a risk although experts seem to disagree on the amount of lead which does damage to the human system. The effect of the other pollutants is extremely difficult to quantify. But, above all, one must try to keep in perspective how much comes from each particular source compared with other sources. One does not wish to become hysterical and insist on restrictions way beyond what is normally practicable. We do not wish to be seen to be straining after a gnat, if this is not a major source. The committee was quite right to point out in its report that it considered that the probable risks should be avoided and that it would be prudent to take further regulatory action.
To take the pollutants individually, starting with lead, it might be advantageous to consider the history of how it got there in the first place in order to enable one to appreciate the implications of its removal. Before the war, unless the motor fuel was particularly well and carefully refined, using it in a motor car engine could lead to what was known as pre-ignition, pinking or knocking. The fuel companies adopted various additives, including such things as alcohol, to overcome this. The compression ratio of engines in those days was about 6:1 and sometimes as high as 7:1. However, the efficiency of an internal combustion engine is directly related to its compression ratio; that is how much one can squeeze the charge before it is fired. The higher the compression ratio, the more it can be squeezed and the more efficient will be the engine. But if the fuel is not good enough to take squeezing, the result will be pre-ignition and this knocking.

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Since the 1940s, it has been discovered that lead compounds raise what is called the octane level of fuel considerably and enable higher compression ratios to be used, and therefore more efficient engines. I seem to remember in my days when I ran a petrol point for the Army during the war, that the bulk of the petrol in those days was round about 70 octane. We had some special 80 octane for armoured cars and tanks. Now we enjoy octane ratings in the very high 90s, and the compression ratios of engines today are round about 10:1 and, sometimes, 14:1, making these engines much more efficient compared to their predecessors.
However, engine design nowadays has advanced considerably since those days so that we would not necessarily be dropping back to our pre-war efficiency; but the extra refining that would be needed to raise the octane level of this unleaded fuel could bring in its wake an increase in the benzine content which itself is another harmful pollutant. It looks now as though we shall have to accept a marginally lower performance from our engines with unleaded fuel; but, on balance, there is no doubt that it will be worth it. I agree with the committee's view that unleaded petrol should be made available at the earliest reasonable period before 1989 when it becomes compulsory and also that all newly-registered vehicles after that date should run or he able to run on unleaded fuels. I disagree that it should only be new models being type-approved that should meet this requirement.
It may be (although I think that it is probably unlikely) that, in view of the very intensive research which has been carried out by the oil companies, another "lead" will be discovered as a suitable antiknock agent. But if this new wonder product is discovered, then, before it is used, I think that it should be subject to the most stringent checks on any possible effects—which of course was not done with lead—so that we do not bequeath to succeeding generations the difficulties in which we now find ourselves.
Leaving lead aside for a moment, may we look to the other combustion products. These are not so simple and cannot be removed just like that. Here, as your Lordships have heard, the committee received evidence on two main methods of reduction for these pollutants. The first of these, was the lean-burn engine or simple lean-burn technology. I think it is simple. Basically, for those who do not already know, it means running an engine on a selectively lean mixture at certain speeds and loadings. It is effective at reducing pollutants within its own limitations of speed and load. It requires a re-design of the combustion chamber of the engine to achieve turbulence more effectively to create the full combustion of a weak mixture and avoid the flame-out that can happen if, for instance, on a cold morning the choke is let in too early and the engine is liable to splutter and stop. When the engine is at its normal operating temperature it will run quite well on that mixture. It also requires accurate metering of the fuel and air consumed. Obviously, it provides very good fuel economy but only when well adjusted.
However, the whole system falls down completely when you wish to get the maximum power out of your engine for acceleration, perhaps in an emergency, when the whole system requires that you revert to the normal mixture with the normal pollutants on those occasions. Lean burn will no doubt reduce emissions
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overall; but I suggest that it will do little in the place where it is most required: that is, in the urban drive cycle where one is continuously accelerating and braking. I am therefore driven to the view that in spite of the strong support of the motor industry and their issued briefs, lean burn is only a partial preventive. Unless there is a quantum leap in lean-burn technology, which is at present only trying to run your engine as well as possible on too weak a mixture, the motor industry could well find themselves going up a technological blind alley. If they feel that they can just scrape by now, any later tightening up of the emission standards will put this course right out of court, even with an oxidation catalyst.
From the evidence produced to the committee, I am of the opinion that the most promising and probably the only really effective course to follow is that of the three-way catalytic converter. This is in spite of its cost which I think has been somewhat overrated on subjective evidence because much of the ancillary equipment cannot be too different from that required for the lean-burn engine, anyway. However, this course requires that urgent steps should be taken to define an appropriate European drive cycle, so that we do not just blindly adopt the American drive cycle with possibly one or two small adjustments. We must also have regular tests to ensure that emission standards are being properly adhered to. If this is to form part of an expanded Ministry of Transport test, then it may be of great interest to note from evidence produced to the committee that the Japanese already include emission monitoring in their annual tests—the charge for which is well below the current charge for a similar test without emission monitoring in this country. Therefore, there can be no justification for increasing the charge in this country should emission monitoring be introduced.
Furthermore, as even the smallest use of unleaded fuel will poison a catalytic converter, the strictest precautions must be introduced to ensure that leaded fuel is not used, even inadvertently, in cars so equipped. Unleaded fuel must be cheaper than leaded. No doubt fiscal arrangements can be made to ensure this for the desirable fuel so that we do not end up with the trouble that the Americans got into when they made unleaded fuel more expensive than leaded fuel, with the result that everybody was quite happily poisoning their converters and not worrying about it.
To turn to the economic effect in the European Community, the respective motor industries are nationally very important both economically and as employers of the national work forces. Harmonisation of standards is therefore essential from the point of view of a European market. And that market should be harmonised with the other world markets which are increasingly adopting standards similar to the Stage H proposals of the European Commission. There is no use in having a home European market requiring a different product from the other world export markets. I therefore agree with the Committee in their recommendation that the earliest possible decision should be made to adopt the Stage II proposals and not have any misleading Stage I interim standards. Industry must have the maximum time to prepare and to make their decision whether to adopt the three-way catalyst or to achieve the great leap required in lean-

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burn technology, which, for my part, I very much doubt can be done.
7 p.m.
Lord Nugent of Guildford: My Lords, I have listened, fascinated, to the noble Earl, Lord Shannon, giving his technical explanation of the very complex situation which we had revealed to us in evidence with, I should record, the maximum assistance from the very able technical advisor and the extra technical advisor for the occasion.
I should like to begin by congratulating my noble friend Lord Nathan on his lucid exposition of this very complex affair and also to thank him for his leadership of our committee. It is a major undertaking, because it means that he really has to understand all the arguments whereas we can just listen and take them in gradually, according to how we feel. However, he has led us most admirably in a very difficult field and I believe we have produced a useful report, although in the event it seems to have been turned on its head by the Minister.
I was convinced, as was the noble Earl, Lord Shannon, that what we were recommending was the right course and I certainly do not intend to go over the technical arguments which the noble Earl has so brilliantly exposed as to why we thought it was desirable to go straight to Stage II so that we could give industry the maximum time to adapt its techniques to meet this requirement. Also, although the lean-burn technology certainly appeals strongly to me as being a preventive rather than a cure, which is attractive in itself, and is also a major economiser of fuel, it is evident that the technology of the lean burn is very far from fully developed and adequate yet and indeed it needs the oxidation catalyst for the smaller engines and the platinum catalyst for the larger ones. It is not certain—and I was very interested to hear it so convincingly said that it is not certain—that they will find a solution, although the motor industry is of course very convincing.
I certainly took the point, which has been so convincingly made, that a large part of the market for the world—the USA, Japan, Sweden, Switzerland and Australia—has already gone to the Stage II standard. Therefore it does not seem to be very good sense, in market terms, to set that off for another 10 years, and I thought there were strong market considerations as well as environmental ones. It was against that background that I went along with the burden of the report that we should recommend that Stage II standards should be reached by 1991 in one stage rather than in two, although that would create difficulties for the lean-burn techique, and catalysts would be required as well.
Turning to what has happened since, there was the Minister's statement (of which the noble Lord, Lord Nathan, reminded us) in the Commons on 25th March on the decision by the Council of Environment Ministers meeting in Brussels on 20th March. They really have decided to take a completely different approach. Their decision in effect says that the pace of progress is to be dicated by the mechanical and engineering technology available rather than by the environmental requirements of improving the
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emissions which the original proposal from the Commission had put before us.
Of course, one understands that the three-way catalyst is a good deal more expensive than the lean-burn technique, but, in terms of aiming for an improvement in standards of emission and a reduction in pollution of the atmosphere, it must be regrettable that this decision has been made, and all the more so in the light of the bargain that was made with the Germans to allow this financial tax incentive, which is clearly a regrettable distortion of trade.
I suppose one can see that, while conserving the atmosphere has perhaps not received the emphasis that it should, there is some consolation in the ministerial decision in terms of resources of finance and engineering. I would hope that when the Commission come up with their redraft, which they have been asked to give by, I think, June, they will produce a new set of proposals which will be rather more convincing than the sort of compromise we have in front of us now, and that they will give a clear lead as regards the improvement in the environment and the reduction of pollution which we all wish to see, in the stage which is to come after this rather "compromise" arrangement.
There are three short points that I should like to make. I think it is important to put on the record the point made by the noble Earl, Lord Shannon, that the injury to health from lead, although one thinks that there probably is a case, is not proven. However, I go along with the general policy of avoiding further pollution of the atmosphere wherever possible. Coming back to the three-way catalyst, we were assured that supplies of platinum are adequate, so one of the anxieties that had been put before us was removed.
I entirely go along with the necessity to have an improved drive-cycle for Europe. Whether it should be the American drive-cycle, which seems to me to be considerably better than the European, I would not be sure. But of course I do take the point that the European pattern of driving is different from the American one, and of course the drive-cycle is a crucial factor in this picture. We must try to get it right. But, again, when these new standards are established it is evident that there will need to be annual monitoring of the condition of catalysts in order to keep them in good condition.
I conclude by again thanking the noble Lord, Lord Nathan, for his admirable leadership and would say that, although our recommendations are not immediately to be accepted, I feel certain that they will be valuable and influential for the future.
7.8 p.m.
Lord Energlyn: My Lords, the noble Lord, Lord Nathan, has led a brilliant investigation into this very controversial and complex subject. I should like to congratulate him and his committee on producing a brilliant report, which in fact goes beyond a report really. It will become a kind of textbook, to which people such as myself will refer for important and ongoing information. It also seems as though I am to be in the honourable position of having a running duet with the noble Lord, Lord Nugent, as we are going to move very smoothly from hydrocarbons now to water

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in a moment. Certainly I agree with his masterly summing up and with the cautionary words at the end of his speech; I agree with him entirely.
On this business of lead poisoning it is so easy to advocate how virile a poison it is, but it is extremely difficult to know how it behaves. So I think that one should introduce elements of caution in analysing medical statistics which concern things such as lead in the atmosphere.
I should like to take the report as a textbook, because it raises some very fascinating conclusions. For example, I would commend to your Lordships the part of the evidence given by Johnson Matthey on catalysts. You have there a remarkable exposition of how catalysts work, and do not forget, my Lords, that we do not know precisely how a catalyst works, although we know how it behaves. So the behaviour of catalysts is brilliantly explained in the evidence given by Johnson Matthey. To someone such as myself what it says is that at long last we now appreciate the importance of catalysis in the internal combustion engine, so that it brings into prominence some of the adventurous things that are destined to be done in the future.
For example, if round about 1920 Diesel had known about catalysis, he might well have succeeded in maintaining coal as the fuel for the first diesel engine. If he had known that he could have had a triple catalytic event, he would have solved most of his problems, because the trouble with the original diesel engine was that the coal combusted beautifully by compression, as was explained so brilliantly by my noble friend, Lord Shannon, as it does in a coalmine explosion—but the coal contained inert inorganic matter, which simply wore out the bearings of the engine. That is why he turned to an oil and that is how diesel oil was born.
As the noble Earl knows, he and I have been involved in experiments connected with mixing oil and water. If we could find the right catalyst for oil and water, we should get an entirely different internal combustion engine and, moreover, a source of fuel that is quite different from anything that we are using at the present time. So this report could well give encouragement to people who are thinking into the future and the future of engines. For example, the toroidal engine might come into its own, because of the findings of this report. So I really congratulate the noble Lord, Lord Nathan, and his Committee, and I also commend this report to all the experts in this country who are concerned with fuel and fuel technology.
7.12 p.m.
Lord Rugby: My Lords, I cannot claim any very great knowledge of chemistry and my recent introduction to the Committee has brought me face to face with a new chemical terminology, with mnemonics, with which many people are familiar but which were unfamiliar to me, and with quite a considerable degree of technical jargon. Therefore, to begin with I have had to adjust myself to this unfamiliar language, in order that I could start thinking in the wider context of the European and the global problem of lead pollution and the gas emissions with which it is concerned.
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It is more as a farmer perhaps that my awareness of environmental changes has made its main impact, because over the last 30 or 40 years the evidence of change is enormous and the change in our environment has probably been manifesting itself very largely because of the gas emissions which cars give out and which are now in need of positive and decisive legislation. Failure to act now must surely lead a serious indictment onto those whose task it is to safeguard the future of the environment for our children and our children's children.
The difficulties of obtaining concerted action are immense, when one is dealing across the borders with national chauvinistic attitudes, with the large consortiums which are able to exert considerable commercial pressure and with all the conflicting opinions. Neverthless, the orders must come down from the bridge of the ship in response to a chorus of alarm from below decks. To disregard those voices would be a failure to realise icebergs lie in our path and instead of our changing course, which apparently we are not prepared to do, according to the most recent Directive, we are just carrying on as before. It strikes me as being the typical Titanic action of the captain saying, "Carry on on and disregard any alarm bells from below." It is a dangerous situation. An instance could be seen on our screens last night at the national racing grand prix. In one fell swoop, it demonstrated hideous noise pollution and souped-up engines delivering both lead and toxic pollutants into the atmosphere on a grand scale. And to what purpose?—speed for speed's sake.
The motor industry will move only if and when it is given a stringent deadline to which to work, such as has been done in other countries, notably Japan. Our motor industry is an innovative industry and such challenges are well within its capability. The Japanese motor industry is already geared to a 90-octane fuel level without any lead input in all but 1 per cent. of its vehicles, and that 1 per cent. is purely and simply for imported vehicles. If they can do it, so can we. The petroleum industry will, by definition, be bound to object on economic grounds. But it is they, and they alone, who must come up with a new fuel. Inevitably, there will be competition from alternative and less toxic energy sources and the challenge is one of overwhelming responsibility to the community at large.
Having begun my association with this Committee with an uncommitted mind, I find myself responding to the sheer weight of facts in a positive way and the facts are here lucidly marshalled in this 5th report. Although I was unable to be present at one meeting, I have read the submission by Mr. Russell Jones on behalf of the Campaign for Lead-free Air, and I should like to quote what he said. He referred to the speech by Lord Asquith,
"who once said that the motor car is a luxury that is apt to degenerate into a nuisance. My view is that the motor car is a necessity that is rapidly turning into a menace from both the health, and the environmental point of view".
He went on to say:
"To put that into perspective, the percentage of trees showing damage in West Germany has gone up from 8 per cent. in 1982 to 50 per cent. in 1984. It seems to me that the scale and speed of that change is quite appalling. I think that any solution that does not propose to do anything about that until 1995 is inappropriate, to say the least".

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I should like to thank the noble Lord, Lord Nathan. He steered us through these Committee meetings in a most admirable way and he had to do it under the very great duress of having a major operation on his eyes, which is a quite remarkable achievement. Also, his deposition today was most splendidly given. It was very heartbreaking to have been told at the last moment that practically all of his deliberations have been overturned by a more recent edict from the EEC. It appears now that the motto for the EEC is festina lente; in other words, Go slow. Unfortunately, this is a compromise and I do not know whether it is acceptable. But my own belief is that the report which has been produced by the Committee is a most excellent one and apart from the timing, which we have now been told to accept—and I think that we must accept it very reluctantly—I must agree with everything that is stated in the report, and I commend it.
7.19 p.m.
Lord Carmichael of Kelvingrove: My Lords, I think everyone will pay tribute to the noble Lord, Lord Nathan, for initiating this debate this evening. It is interesting that the debate is being handled by the Ministry of Transport although at least four Ministries are involved in the issue. I am sure that, like me, the noble Lord will have looked at this report with great care and will realise that it is not the normal run we have in transport when we discuss congestion in towns, accident rates or matters requiring less expert and less detailed knowledge.
I think that from the speeches we have heard and from the report itself it is clear that an amazing job was done by members of the committee in simplifying as much as they were able the very many points and the highly technical difficulties that arise when petrol, leaded or unleaded, is burned in an internal combustion engine. There is no doubt that the internal combustion engine has been a real boon to mankind in many ways, but it has also caused a great many problems.
Noble Lords who have read the report of the Select Committee will be well aware that it is highly technical We are very grateful for the work that has been done. Many organisations have written in, some perhaps in response to the report and some perhaps because they did not feel that they had put their message across properly in the evidence they gave to the committee; or perhaps because they had had second thoughts on it, or because they are extremely involved in the motor car industry. These organisations have a part to play as well in helping us to try to make up our minds. I agree of course that the Society of Motor Manufacturers and Traders, the various motor companies, the various motoring organisations and the chemical companies all write from their own point of view and try to stress in various ways their interest in the timing and the implementation of these controls. That is as it should be. All the groups which have written have a very material interest in the internal combustion engine and most of them have great experience.
The Select Committee report deals with a great many of their points. The conclusions of the report appear to dismiss those points, though not lightly; but
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a decision had to be made and the Select Committee made a decision contrary to most of the feelings in the motor industry and in motoring circles. That was how I read the report. An answer in paragraph 36 on page 16 was to me the crux of the way I read the rest of the report. Towards the end of that answer, this statement is made:
"To go for the 3-way catalyst system would be to adopt technology which is probably on the way out anyhow and would be extremely expensive to introduce in Europe, for what might be only a temporary stage".
It goes on to say:
"It simply impedes a number of developments in engine technology which everyone wants to see for other reasons, mainly in terms of energy conservation".
I have been on many committees with the noble Lord, Lord Nugent; I think that actually he was the chairman of one of the committees of which I was a member. When you produce a report after sitting for hours and it is handed down to people who have not been sitting on the committee as long, there is always a slight feeling of being let down when they take the opposite point of view. But one of the reasons the report is produced is to explain to people the wide-ranging possibilities. Then when you throw it into a wider circle of Members of Parliament and Members of this House they put their own interpretation on it, and that interpretation is just as valid from their point of view.
Many of the points that have so far been made have been about the timing of the different stages. Perhaps the Minister can tell us whether there is a possibility of improving the timing that has been suggested. After the marathon meeting in Brussels on 20th March the Minister for the Environment—not, incidentally, the Minister for Transport—in reply to a Written Question in another place said:
"Each category of vehicle will have standards appropriate to that category. In industrial terms this means that expensive three-way catalytic converter technology may now be required only for large vehicles over 2,000 cc".—[Official Report, Commons, 25/3/85; col. 5.]
Is the Minister uncertain whether the smaller vehicles will need converters as well, which would push the whole question back even further, or is he confident that in the immediate future only the larger vehicles will need the converters?
We are reaching out to the comparative layman. We are really at the point of saying that we want emissions controlled, that we want them controlled as fast as possible, and the question is whether the lean-burn engine or the converter is the best way. I tend to lean towards the converter at this stage where there is promise. From some of the material I have received there seems to be a great deal of promise of highly efficient lean-burn engines ready to come on to the market. I understand that Ford already have a number of engines on the market. Some British Leyland cars are fitted with lean-burn engines. It is the first stage, I agree, but Ford expect that by the end of the year they will have a more efficient engine. The second stage of the lean-burn engine will be on the market at the end of the year. Toyota are also at an advanced stage in lean burn in Japan. Full lean burn later this decade should come from Ford of Europe.
On the question of costs, I accept the fact that we have perhaps been given by the commercial

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companies the best dressed presentation that is possible, but it appears that the lean-burn engine is much cheaper than using the catalyst system. It is cheaper to operate and there are no additional costs. Fuel consumption should be slightly better. The catalyst system, on the other hand, shows a deterioration of anything up to 10 per cent.
I agree that I do not have the knowledge and information on performance which was given by one noble Lord. This may alter things entirely. That perhaps is one of the points that may have come out more clearly in general discussions in the committee—that the systems which are being spoken about, the lean burn, will not give the same performance. I would argue that many of our engines probably have a performance far beyond what we really need for the conditions that exist in Britain. There are production cars now capable of being driven at well over 100 miles per hour, and one wonders just how many drivers are able to handle a car that can be driven at that speed. But it is a matter of choice.
I wonder not about the Minister's reply tonight but about the considered reply of the combined Ministries to the report, which I believe has not yet been officially published. It is normal for departments to reply to a report. We shall certainly look forward to hearing the considered reply of the four Ministries concerned—those covering transport, the environment, energy and industry. I suggest that both British and European manufacturers would not wish to tool up unnecessarily. I can quote from an article in the New Scientist recently, which dealt most succinctly with this subject:
"Manufacturers do not want to have to tool up production lines to fit catalytic converters when they may soon be able to reduce emission with a new design of engine, combined with a leaner mix of fuel and air".
I realise that the information I have is probably very lean (if I may use that word) compared with that available to the members of the sub-committee, but still it seems to suggest that we would be better off not to let ourselves, if I may quote from The Times of 22nd March:
"be shamed into adopting flawed and expensive solutions against our better judgment, when far more satisfactory ones may well be found just round the corner, either with motor exhausts or"
because the article was dealing with the whole question of pollution—
"with power station fumes".
New limits have been set and the public are now unwilling to accept the old pollution limits. If political pressure continues the industry will surely gear itself to meet the problem. To me, the idea of going for a lean-burn engine is much more practical, despite the great work of the sub-committee, than going up what I consider to be the cul-de-sac represented by the three-way catalytic converter.
7.32 p.m.
Lord Brabazon of Tara: My Lords, I too should like to thank the noble Lord, Lord Nathan, for initiating what has been a most interesting and important debate on a very topical subject. I am grateful also to the members of Sub-Committee G of the Select Committee on the European Communities for all their work. The report assembles a great deal of up-to-date
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information from experts in the field of lead in petrol and vehicle emissions. It is a mine of information on these subjects. As the noble Lord, Lord Carmichael of Kelvingrove, has said, it is an extremely technical subject and, in parts certainly, beyond my knowledge.
The sub-committee took as their starting point the proposals made last summer by the European Commission. In the normal course of events, one would not have expected decisions on those proposals to have been made for a considerable period of time, certainly going beyond the four or five months the sub-committee have taken to assemble the evidence, draft and publish their report. But on this occasion the Community has moved fast. The main decisions have been taken by the Council of Ministers, though the details on vehicles emission standards have still to be worked out and incorporated into a directive which can be formally adopted. I shall try later in my speech to set out what the Council of Ministers did decide last month, how the work is being taken forward and its long-term implications.
First, lead. At the time when the sub-committee took evidence the Community had already decided in principle to move to unleaded petrol for new vehicles after a suitable lead time to allow the oil and motor industries to make the necessary investments. The main decisions required were as to the number of grades of unleaded petrol and their octane number, and the precise timing for introducing the changes. The sub-committee received a range of views on this aspect from the industries and other organisations concerned.
In the event, the Council decided last December that a single mandatory grade of unleaded petrol, at 95 RON octane rating, must be generally available at the pump throughout the Community by October 1989: though another lower octane grade of unleaded may be introduced as well. The new lead in petrol directive incorporating this was adopted on 20th March as Directive 85/210/EEC. I am sure the House will agree that this is a very satisfactory result for the United Kingdom.
The precise phasing-in arrangements for new cars have not yet been decided. The Commission proposed that all new type approvals from 1st October 1989 and all new registrations from 1st October 1991 should be capable of running on unleaded petrol. The Government are pleased that the sub-committee accept their view that it would be sensible for the vehicle directive to enable member states to require all new cars with petrol engines registered from October 1989 to be capable of running on 95 octane unleaded petrol.
Of course we would not expect the motor industry to change every engine on its whole production on the same day; nor can manufacturers control the dates at which new vehicles are first registered. What is important is that we should be put in a position to settle arrangements with our manufacturers to phase out old designs and bring in new designs over as short a period as is practicable, around the second half of 1989, when the new petrol will be becoming increasingly available. It is our objective to get the necessary provisions in the vehicle directive to enable us to do just that.

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I turn now to the vehicle emission proposals applying to the three gases—carbon monoxide, hydrocarbons and nitrogen oxides. The Commission's proposals cover emissions of these gases from the exhausts of all vehicles of up to 3.5 tonnes in gross weight, including vehicles with diesel engines. But they do not address the problem of diesel smoke either from light vehicles with diesel engines, or from heavy trucks and buses of more than 3.5 tonnes weight. The Government regard diesel smoke as a serious environmental problem, and we look forward to commission proposals to tighten up the standard in the present directive on smoke from diesel engines.
Before describing the agreement reached last month, it is important to put vehicle emissions in a historic perspective, and this is helped a lot by some of the evidence which was produced for the subcommittee. Carbon monoxide is produced in much greater volume than the other pollutants in car exhausts, and the original legislation on vehicle emission control was directed specifically at carbon monoxide. The underlying reason was concern about possible effects on public health in urban areas where traffic build up could cause, especially in windless conditions, substantial kerbside concentrations of CO.
The particular concern is now much diminished as CO levels have come down with the more efficient combustion techiques used in engines developed by the motor industry during the 1970s. Carbon monoxide is, of course, rapidly dispersed and eventually oxidised to carbon dioxide—the effect of motor vehicle control is merely to increase CO2 formed in the engine, rather than in the outside air. It follows that further control of carbon monoxide from car exhaust, though helping in some special circumstances will make little difference to atmospheric environmental problems such as acid rain or the formation of ozone or other pollutants causing haze or possible damage to trees.
It is the nitrogen oxides and hydrocarbons which may contribute to these environmental problems which are of such concern at the present time. The expert bodies and interested organisations submitting evidence to the sub-committee were rightly cautious about the way in which these gases in the atmosphere gave rise to damaging pollution. But one important fact came through quite clearly. It is clear that cars and other light vehicles in use at the present time contribute only a proportion of the total of nitrogen oxides and hydrocarbons in the atmosphere.
The most authoritative figures for the United Kingdom were presented to the sub-committee by Warren Spring Laboratory. They estimate that United Kingdom petrol engine vehicles are responsible for 29 per cent. of national emissions of nitrogen oxides from man-made sources. Warren Spring estimate that exhaust emissions from petrol engined vehicles contribute 11 per cent. of the national total of hydrocarbons—but, eliminating natural gas leakage (which is mainly unreactive methane) from the national total, that percentage would approximately treble.
In round terms then, exhaust emissions from cars and other petrol engine vehicles in current use in the United Kingdom are contributing around one-third of
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the reactive hydrocarbons and nitrogen oxides in our atmoshere. That proportion is based on car use as it was in 1984 with cars of all ages on our roads but with the newer ones built to conform with the technical standard known as ECE Regulation 15/03. The estimates do not take account of improvements to that standard already agreed and due to be implemented in the Community next year; nor do they take account of the improvements proposed by the Commission for 1989 and achievable without the use of catalyst technology for the great majority of cars. The potential improvement from these uncontroversial changes, agreed by the motor industry, are set out in Table 6 shown on page 91 of the Select Committee's report. Those two measures alone will achieve, by the end of the decade, a 43 per cent. reduction in the combined total of nitrogen oxides and hydrocarbons permitted under the standard.
So that is the perspective against which we should view the current controversy. We are already at a position in 1985 when the effect of 15 years' work has been to take carbon monoxide off the agenda as a significant problem and to reduce hydrocarbons and nitrogen oxides from motor vehicles to a level representing roundly one-third of the totals in our atmosphere. And we have in the pipeline measures that, without the use of expensive catalyst technology, will produce a very substantial further reduction in emissions of these gases over the next few years. These improvements are all achievable by better control of the combustion process in petrol engines—and in particular the use of leaner air fuel mixtures—with substantial advantages in fuel economy and at modest cost to the consumer.
The Government's view remains that this is the sensible way forward as regards car emission control in this country. We are obviously fortunate in not suffering the problems of smog or forest damage that have caused some other countries to take a much more severe view of car exhaust emissions. For these reasons, the Government do not intend to impose standards on vehicles sold or used in this country which would require manufacturers to use catalyst technology. We shall do nothing in the United Kingdom to stand in the way of our manufacturers developing technology to make the most efficient use of fuel, and at the same time bringing about an estimated average 43 per cent. reduction in exhaust emissions permitted from each new car by the end of this decade.
I must emphasise that this policy is fully consistent with the directive which we expect to be agreed this June following the guidelines agreed by the Council of Ministers last month. That directive will be, like all the directives governing vehicle standards, a permissive directive enabling member states to apply standards to various categories of vehicles from specified dates in the future, but leaving member states free to apply less strict standards if they so choose.
We expect the directive to contain the following specific provisions. For cars of above 2-litres member states will be allowed to require emission levels of equivalent severity to those applied in the United States of America by the federal 1983 standard. The earliest date of any such requirement in Europe will be 1st October 1988 for new type approvals and 1st

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October 1989 for newly-registered vehicles. It seems that at least three member states—Germany, Luxembourg and Denmark—will take advantage of this provision; the cars likely to be sold in those markets will be models based on ones that have been developed for export to the United States of America and are fitted with the three-way catalyst system.
For medium size cars of 1.4 to 2-litres, a technologically more satisfactory route will be possible. The agreement specifies that for these medium size cars the standard should be achievable by simple (that is single point fuelling) lean-burn techniques combined with oxidation catalysts or comparable cost effective techniques. We expect the additional costs of this type of technology to average £150 per car, compared with £500 for the three-way catalyst system. The fuel economy savings of lean-burn technology will be largely preserved, and the relative simplicity of the control system will increase the likelihood of it remaining effective in service and will keep down maintenance costs. Lean-burn engines are more than just the pious hope of boffins in laboratories far removed from production reality. We have had "first generation" lean-burn engines actually in production for some time; take the Jaguar V12, for example. I understand that later this year Ford Motor Company will be producing a "second generation" engine—that is, an engine running consistently with an air-fuel ratio in the range 18:1 to 20:1—at their Bridgend plant at a rate of half a million units per year. I can say to the noble Lord, Lord Nathan, that I am in no doubt that the advantages of lean-burn will mean that almost all manufacturers will have to adopt this technology sooner or later; but I am pleased to report that United Kingdom engineers from several organisations are in the forefront of these developments. Of course, the extra work to adapt these engines so that oxidation catalysts can work effectively will take some time, and therefore the earliest applications dates for this standard are 1st October 1991 for new type approvals and 1st October 1993 for all new registrations. A single path of engine development will serve both for markets which demand this standard and for those parts of Europe in which there is no demand on environmental grounds for cars to be equipped with catalysts. I hope that answers the second question of the noble Lord, Lord Nathan.
For small cars of up to 1·4-litres the agreement provides for the Commission's Stage I limits to be applied to new type approvals from October 1990 and for new registrations from October 1991. The Council has agreed that this standard should be tightened three years later—the tighter standard has to be worked out over the next two years for an amendment to the Directive to be made in 1987. No particular technology or other conditions are specified as regards this tighter standard.
Those are the main features of the agreement as regards the future emission standards which member states will be permitted to apply to vehicles sold and registered in their territories. Apart from the Stage I limits for small cars, precise emission values have yet to be agreed; and this is the major task over the next two months. These emission values will in the first place be specified in relation to the existing European test cycle. It is widely recognised that as it stands this test cycle is too orientated to driving conditions on
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unimproved urban roads. The actual cycle is represented on page 187 of the sub-committee's report, from which it can be seen that there are some peaks of 31 miles per hour, but an average speed of only 12 miles per hour. Several noble Lords mentioned that. The United States' federal test cycle is similarly urban but, reflecting the existence of some high class urban roads in American cities 20 years ago, there is one peak of 55 miles per hour and an average speed of nearly 20 miles per hour. The urban character of both cycles reflect the concern of 15 years ago with carbon monoxide in congested urban areas and, in the United States of America, with photo-chemical smog which afflicted, and still afflicts, the Los Angeles urban area.
Several noble Lords, and expert witnesses to the sub-committee, pointed out the weakness in these test cycles. To meet concern about forest damage or acid rain it is necessary to control pollution from cars on motorways and other inter-urban roads as well as in the urban areas. This can only be done effectively and surely if the test cycle includes simulated driving at typical high speeds. So the council have agreed that work should be done over the next two years to formulate additional non-urban driving sequences which, with appropriate emission limit values, can be added to the standard. This way of proceeding differs from that recommended by the sub-committee in paragraph 79 of its report, but we believe that it meets the objective more effectively.
Although not part of the Commission's proposals, the German proposed legislation has led the Council to consider the question of fiscal incentives for purchasers of cars that achieve lower emissions than those prescribed in the legal standard. I do not propose to say anything about the legal arguments surrounding this question of fiscal incentives. In effect the Council has taken a political view on those difficult questions in the context of their overall agreement by laying down a set of conditions for the incentives which limit their value so as to reduce the extent to which they are likely to distort the internal market. The conditions are as follows: the incentive should relate to achievement of an agreed standard, but before the standard can be made mandatory; the starting date for compensation may not be earlier than 1st July 1985; the compensation must be significantly less than the additional costs involved in equipping a car to meet the new mandatory standards; and, in the period before the adoption of the second stage standard for small cars, compensation to the purchaser of a small car is payable for emission levels no more than 15 per cent. better than the first stage standard for carbon monoxide and for the total of hydrocarbons and nitrogen oxides; and the value of the compensation which may be paid over three years should not exceed in total the equivalent of 750 Deutschmarks.
It remains to be seen how fiscal incentives will work in practice. There is no doubt that a number of cars fitted with the three-way catalyst system will soon be made available in Germany at a competitive price, when account is taken of the tax remission made available to the purchaser. But how extensive the consumer demand is, and how the cars actually perform, remains to be seen.
The noble Lord, Lord Nathan, asked what our assessment would be on the reduction of pollution as

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a result of the 20th March agreement. We cannot be precise about that yet because the exact limits are still to be settled. We do not know which other member states will choose to implement this permissive Directive. As I have already indicated in my speech, pollution from cars is falling at a considerable pace. Without using any catalyst technology at all, we can expect a reduction of around 40 per cent. over a period of six or seven years. Where catalysts are used, the reduction could be even greater if the catalysts are properly maintained.
Several noble Lords have suggested that the US Federal Standard is being adopted throughout the world as compared with the United Nations-ECE standard. This is not so. In most of the world, the ECE standard is accepted, and in particular in those developing countries where the major future markets lie. In fact, only one country—the USA—at present requires the so-called Stage II standard, and adoption of this in Australia and Sweden is only a future intention which may or may not be realised.
My Lords, I hope that I have covered most of the main points which noble Lords have raised. I should once again like to thank the noble Lord, Lord Nathan, for initiating this debate.
Lord Nathan: My Lords, it remains for me to thank most warmly those who have participated in this debate. We have had from the noble Lord, Lord Strathcarron, an interesting survey of the history of the motor industry an its achievements over the years. We have had from the noble Earl, Lord Shannon, an expert assessment of the technical factors with which we have been confronted. We have had wisdom from the noble Lord, Lord Nugent, which of course we also enjoyed on the Committee. With regard to the noble Lord, Lord Energlyn, I must disclaim any intention on the part of the Committee under my chairmanship of going into oil and water mixtures. This is the sort of thinking which I have been trying to avoid with my own car, but it is nice to know that our report, innocently though it was composed, has led your Lordships into these remote pastures. We look forward to ever new fields.
I have also to thank the noble Lord, Lord Rugby, a member of the Committee, who participated very fully, for his contribution to the debate. I was interested in the comments of the noble Lord. Lord Carmichael, and I hope that he did not feel—which was certainly not the case—that the Committee was in any way biased against the motor industry. That was, indeed, far from our thoughts. We came to our conclusions on the evidence before us, be it right or wrong, and we were greatly assisted by the evidence which was provided to us by the motor industry.
I am grateful for the detailed and careful reply of the noble Lord, Lord Brabazon of Tara, on behalf of the Government. He will not expect me, nor would it be right of me, to comment on his statement. It is something which I and I know all other Members of the Committee will wish to read and consider in great detail. It is, therefore, my task to thank your Lordships for noting the contents of our report, and I hope that in some respects at least it may have been helpful.
On Question, Motion agreed to.

The Water Supply
7.55 p.m.
Lord Nugent of Guildford Lord Nugent of Guildford rose to ask Her Majesty's Government what provision they propose to make for maintaining existing safeguards for the purity of water supply and the protection of the environment in the event of privatisation of the water industry.
The noble Lord said: My Lords, this Question concerns the discussion paper which has been issued by the Department of the Environment with regard to the possibility of water authority privatisation. There are some critical questions to ask.
First, I should declare my support for private enterprise for the very best possible reason: that it has always supported me. My background is that when I started between 50 and 60 years ago I worked on a farm without resources other than what I earned. From scratch I managed to get together the resources by one means and another to get a farm and start on my own and make a success of it. Therefore, I know the virtues of private enterprise. I believe that any aspect of life which has to meet trade in the market is best handled by private enterprise where the incentive is really with the person running it.
I therefore support my noble friends in their general policy in returning to private enterprise a number of large industries, many of which were wrongly nationalised in the past, but the term "privatisation" always gives me a pain in the neck; if only some other word could be found perhaps it would be better. However, I think the policy is correct.
It would be a mistake to think it should be the universal solution to everything, that it should be a dogma that we must return or make into a private company every aspect of life. The modern water industry is certainly an aspect of our economy which I think should not be considered in that context. The modern industry was conceived by the Water Act 1973. A Conservative Government, under the really remarkable vision of my right honourable friend Mr. Peter Walker, created the modern industry. It has the really splendid feature of unified river basin management—single management of the whole water cycle. Both in the interests of safeguarding adequacy and purity of supply and conservation of the water environment this structure of the water industry is recognised as the best in the world and is the envy and admiration of all overseas visitors to this country. All of them suffer in their own countries from fragmentation of functions and all the conflicts and inefficiencies that that entails.
My party, splendid though it is, has never taken credit for creating this excellent structure. There were no fewer than 1,400 separate local sewage authorities, 167 water undertakings based on local authorities, and 29 river authorities. That is nearly 1,600 bodies altogether, many of them highly defective, and they were all brought together into 10 regional water authorities. For 11 years it has worked, and the truly excellent labours of those who work in this industry have gone largely unsung.
My party on the whole was very surprised to find that it had actually nationalised an industry. However, decapitating the industry two years ago by abolishing

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the National Water Council—a very strange reward for good behaviour—is now proving to have been a great handicap. It has deprived the industry of an effectively constituted mouthpiece to express the general view of the regional water authorities that privatisation could be seriously against the public interest.
Under the present structure of management great progress has been made in strengthening the security of supply, which stood up remarkably well in the semi-drought conditions of last summer, and in cleaning up polluted sections of our rivers. The management structure exists to continue these desirable trends; but here I express to my noble friend the caveat that the Department of the Environment's progressively tighter financial squeeze is already showing signs of causing deterioration. Personally I await with anxiety the river pollution survey due this year—due every five years—because I fear that it will show that there is deterioration taking place. This is unavoidable unless there is adequate capital spending year by year.
Against that background of the current working of the water industry, I should like to look at what is proposed in the Government's discussion paper. The privatisation of the 10 regional water authorities complete I do not propose to discuss, because I am sure that nobody will think that that is in any way possible. But the paper sees the privatisation of the operational functions of supply and sewage treatment and disposal as being the easiest to arrange. I would agree with that. Private companies could carry out those functions. The example of the 30 private water companies which operate with complete satisfaction confirms that such a structure would be viable for the whole country—I suppose one for each regional water authority area for supply—and probably a parallel structure of private companies for sewage service could be set up. There would be more practical difficulties, but it would be possible.
That then leaves what the discussion paper calls the environmental regulation and community services to be provided for. Those fall broadly under the heading of river management and include such matters as allocation of different waters among uses which may be incompatible; management of those waters and licensing of users; augmentation of resources by reservoirs or boreholes; and the upgrading of standards and facilities. But at all stages those functions imply a jurisdiction over the use of water, whether for the water authority's own operational purposes, by individual users or for the public good.
The discussion paper asks how that broad complex of regulation and function could be provided for. The answer is that it could not be performed by a private company operating for profit in any circumstances and would certainly have to be performed by a public authority appointed by Her Majesty's Government and accountable to Parliament. One would be needed for each of the existing 10 regions of the water authorities. Also a national co-ordinating authority would be necessary at the centre. The whole of this structure would resemble our old friend the river authority of the past, writ large.
The paper refers to the fisheries function as a complex mixture of regulation and operation—I can confirm that—closely related to river basin
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management. It can never be self-financing, and there are important aspects of conservation. Fisheries therefore would have to be combined in the ambit of the river management authorities.
I shall spare your Lordships a discussion on land drainage for flood and coast protection. Interwoven as it is with the farming world, it is a subject of great complexity. Suffice it to say that it is essentially a non-profit-making affair and is dependent on a system of grants which is now the subject of a Ministry of Agriculture, Fisheries and Food review. My noble friend Lord Belstead will know all about that.
However, I have said enough to indicate the main activities of regional water authorities which it would be possible to operate by private companies—water supply and sewage treatment and disposal. But to provide the necessary safeguards it would be essential to set up a structure of river basin authorities, one for each region, and a national co-ordinating authority at the centre responsible for overall water conservation and supply, for maintenance of river quality objectives, particularly control of discharges, and for ensuring the quality of drinking water, with an adequate research capacity to back it up.
That monitoring authority should also be required to monitor the level of charges levied by the operating companies on their customers so that there is no danger of a monopoly position and exploitation. This regional structure of monitoring and regulating authorities would be expensive and would have to be financed by a levy on the operating companies.
The public health factor deserves a special mention beyond what it is given in the discussion paper. The fact is that completely reliable, pure drinking water does not happen by accident. We are richly blessed in this country that we have it. Almost everywhere else we go in the world except America, we take jolly good care not to drink the tap water. In this country we know that it is safe everywhere. That is especially commendable when there is a substantial element of re-use, as there is, for instance, from the River Thames and from some other rivers, which have to carry the effluence of sewage works and industries throughout the country. Throughout the world every year more tens of millions of people—tens of millions of people!—die of water-borne disease than any other single cause. Those diseases include typhoid, cholera and hepatitis, to name but a few of the worst. Those epidemics were serious here in Britain, even in the lifetime of some of our oldest noble friends such as Lord Shinwell and Lord Brockway.
Today the danger here is increased by the presence of many of our citizens who have families overseas, living in countries where those diseases are endemic and whom they visit for holidays. The danger of virus carriers returning here is obvious.
Protection against those dangers is secured by good management continuously at every point and eternal vigilance at the critical points. I refer to monitoring of effluent discharges, regular monitoring of river samples, laboratory research to monitor changes—changes are happening all the time—and ground-water monitoring, especially for nitrate buildup, which is already disturbingly high in East Anglia particularly. The fact is that environmental factors are

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continuously at work to cause changes in water quality and composition. High-class research must be continuous to keep track of the changes that are taking place and especially the possibility of new viruses.
The existing structure of regional water authorities provides all those safeguards woven into their operations and backed up by the Water Research Centre which they finance. A new privatised water industry would have to reproduce all that as a separate, independent structure, monitoring authorities.
This brief analysis of the prospect of privatising the water industry indicates that it is theoretically possible for private companies to be run for some of the operations, but at the heavy price of breaking up the present admirable structure of unified river basin management. The complex structure of private companies and public monitoring authorities which I have described is unlikely to be operable cheaper than the existing structure because of the large element of duplication. It would probably be more expensive. The Government discussion paper asks all the important questions save one, and that I put to my noble friend: what would be the point of this privatisation?
8.8 p.m.
Lord Energlyn: My Lords, the noble Lord, Lord Nugent, is unquestionably the outstanding authority on the conservation and administration of our water supplies. It is therefore, I think, very fine of him to present this Question in your Lordships' House. Surely the Government will heed what he has said in the past 15 minutes. It was a brilliant survey of the situation. As he says, if one looks at the document it is full of questions but rather thin on answers. The one question that it does not ask is: what is good about this present system?
If one tries to answer that, one is bound to agree with what the noble Lord has so forcefully and so clearly expressed this evening. As he said, where else in the world can one turn on a tap and drink mains water safely? There is nowhere that I know of. Why change the system that makes that remarkable situation a reality? From the time of Elizabeth I this industry has grown because, if I may remind your Lordships, she granted a charter in Hull in order to purify the water to suppress the onset of the plague. The whole attitude to water has grown from those primitive days because people realised how dangerous it was to willy-nilly consume water from any source whatsoever.
Not surprisingly, we were the first people in the world to institute a geological survey of underground water supplies. We were the first people in the world to monitor underground water supplies and to demonstrate the principles of hydrogeology upon which is based our understanding and use of underground supplies. For example, there were events such as those that took place in Trafalgar Square. Originally those fountains were artesian but the chalk waters were overpumped by the hotels, office buildings, and so on, all around them. The water table dropped and the artesian head was destroyed.
Similarly, on the coast, due to the drop in hydrostatic pressure the sea moved into the chalk and
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polluted the underground supply until it is now unusable. Likewise, in the Humber Estuary the same battle has been going on. It would not have been controlled if it had been left entirely to individual undertakers to institute such controls. Wherever in the world you turn you will see that Britain has been taken as an example of how to develop and how to control underground and overground water supplies. As the paper says, and as the noble Lord, Lord Nugent, has pointed out, there are really four types of water. They are: agricultural water, industrial water, domestic water and drinking water. The interesting point is that it is drinking water that dominates the purity of the other three categories. It could be argued that it is not necessary to have this high degree of purity of water for many industrial uses, particularly for cooling purposes; but we have. A bureaucratic approach like this may be to say, "Oh yes, well, we can do something about that", but it is physically impossible to distribute those four types of water independently around the country.
Indeed, as a side shot, what has been the reason behind the growth over the past decade of the consumption of bottled water? It is to try to drink water which has particular drinking properties. It does not contain chlorine, which offends many people, so they prefer to drink non-chlorinated water. But all the time they are drinking safe water. While there is a possible plausible argument for privatising certain aspects of our water supply, I think that on balance the Government have enough troubles on their shoulders and should leave this one alone.
8.13 p.m.
Baroness White: My Lords, I am sure that we are all very deeply indebted to the noble Lord, Lord Nugent, for drawing attention at this early stage to some of the problems which would be associated with any attempt at wholesale privatisation of the water industry in this country.
After the brilliant introduction by the noble Lord, Lord Nugent, I feel that it would perhaps be inappropriate for one to attempt to go into great detail tonight. I say this also partly because, as is known to some of us, the water authorities themselves are holding discussions and have been asked by the Minister concerned to present him in due course with their conclusions. Until we know in greater detail what they are thinking, perhaps it would be impertinent for some of us to intervene too much in detail.
However, having said that, there are certain basic considerations which are obvious to anyone with a reasonable knowledge of the industry, of its structure and of its functions. The noble Lord, Lord Nugent, is the acknowledged expert in this House on this matter; but I think that those of us who are proposing to take part in this debate also have at least a fair degree of familiarity with the industry and some of its major problems.
Unfortunately, such acquaintance seems to have been lacking in whoever drafted the discussion document issued on the 3rd of April and currently in circulation under commendation of the Minister of State at the Department of the Environment, Mr. Ian Gow. One is relieved to learn that at least it is not regarded by Mr. Gow as a formal consultation

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document. If it were, I am afraid it would have to be regarded as totally inadequate.
It so happens that on Monday, Tuesday and Friday of last week, I had the pleasure of being in the company, consecutively, of the leading personalities, as members or officers, of the Water Companies Association, who are this year celebrating their centenary; of the chairmen of the water authorities in England and Wales, and finally of the senior members and executives of our Welsh water authority, which is the one with which I am most familiar.
We did not meet on any of these three occasions primarily to discuss the Unstarred Question of the noble Lord, Lord Nugent, but inevitably it became a major topic of conversation. In these three fora that I have described, there were people of very different points of view as regards the political organisation of our economy. However, on two matters I found absolute unanimity.
I am sorry to say that the first matter was that the discussion document is not really worthy of respect. I found there was very strong feeling about this; that people should not have been asked to base their discussions on a document which failed to show evidence of grasping the very serious fundamental problems which the noble Lord, Lord Nugent has so admirably described tonight. I think one should say that.
Secondly there was complete accord with the opinion that whatever changes, if any, may be in view, we must not destroy the great advance made in the 1973 Water Act, which for the first time brought the management of the total water cycle into integrated control on the basis of the major river catchment areas of this country. This was a tremendous advance. I played a modest part in this House when that legislation was going through. That was what introduced me to the intricacies of the water industry. No one can doubt that this structure is of absolutely basic and fundamental importance to the satisfactory management of our water supply, sewage treatment, and all the other ancillary considerations which apply.
It is accepted by everyone that to break up this system would be a criminal offence, in political terms. I cannot believe that the Government have any such intention. I hope that the Minister will make that perfectly clear tonight in his reply, though one appreciates that at this stage perhaps he will not be able to go into it in very great detail.
If one is going to maintain this system, which has proved to be one of the most successful anywhere in the world, then it inevitably imposes considerable restraints both on the degree and the method of any privatisation which it might be sensible to contemplate. The present Government must surely recognise that the water industry is not a good candidate for wholesale privatisation. I am delighted and extremely grateful to the noble Lord, Lord Nugent, for the way in which he has made this absolutely clear, beyond any peradventure.
It must be recognised that this is so even by those who are strongly in favour of privatisation in most circumstances, just as, equally, it must be acknowledged by those whose obsessions lie at the other end of the spectrum that in a free country, you cannot nationalise everything. Similarly, you really cannot
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privatise everything. Having said that, there are a couple of other points that I would make before turning to the purity of drinking water and the protection of the environment, which I had supposed would be the main subjects of the dissertation of the noble Lord, Lord Nugent.
The first matter is that the impetus of current Government interest in possible privatisation must stem, partly at least, from the recent very well publicised complaints of the chairman of the Thames Water Authority about the restraints on financing his operations. I see that the noble Lord, Lord Skelmersdale, shakes his head. I should be astonished if that had had no influence whatever on Her Majesty's Government. Be that as it may, one must emphasise that Thames is one of the few water authorities, if not the only one, in the country in a position to do all that Mr. Roy Watts would wish to do. There are other authorities, including the one in Wales, that are not so well placed for some of the enterprises that a well-heeled water authority in the South-East of England might wish to undertake. Nevertheless, I believe that the basic grievance and complaint about hindrance on financial grounds is justified. It is not only a matter of cuts. It is a matter of the way in which the financial arrangements are conducted. This has been a matter of concern to me for many years, particularly since my modest previous preoccupation as chairman of the Land Authority for Wales. There I learned something of the way in which Treasury financial constraints impede progress if one is trying to make a public service industry enterprising.
No one at the Treasury under either Labour or Conservative administrations, I am sorry to say, has really faced the problem of how best to finance such organisations so that they are both accountable and enterprising at the same time. The nonsense of end-of-year accounting and the kinds of restraint placed on sensible borrowing for capital works intended to last for decades ahead is so ludicrous that one is ashamed at the failure of successive Governments to deal with it. We cannot go into this subject tonight in any detail. My own view is that it is at the root of some of our major national discontents.
In certain areas, the water industry could provide a good example of genuine public and private partnership. An example to which one obviously turns is the relationship of the water companies. Nowadays, there are not so many of them. But those which have survived have, on the whole, been successful and some even distinctly enterprising and innovative in the technical administration of their organisations. However, they are not ordinary commercial private companies. They are statutory companies. They have to comply with a very detailed system of organisation and responsibility. They can work satisfactorily only within the total framework of the water industry as established by the Act of 1973. It would be an entirely different ball game if one tried to run the whole water industry on the basis of ordinary private commercial companies. The statutory water companies have certain advantages. Many of them are successful and in some respects extremely interesting in the way that they operate. But they are entirely dependent on being part of a total system. Nevertheless, they bring in an element which, I think, is acceptable and can be most valuable.

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Similarly, the water authorities are under encouragement from the Government, as one would expect, to put a good deal of their work in certain directions out to contract. We know that this can have its dangers, but it can also have its advantages. I was interested to learn over the weekend that the Welsh Water Authority, according to the most recent estimate, puts out 87 per cent. of its capital works programme to competitive tender. I do not see that the Government can have any cause for complaint about that. My view is that a new approach to financing and also to co-operation with private enterprise at certain levels would meet many of the aspirations of even the present Administration, without the danger that has been so vividly described by the noble Lord, Lord Nugent, of destroying a system that is of inestimable value to the country as a whole.
If Mr. Gow persists, we shall have to discuss these issues again in very great depth. Meanwhile, it is most appropriate that the noble Lord, Lord Nugent, should point out the problems. I had supposed that he would be going into greater detail on the purity of our water supply and the protection of the environment. I had originally supposed that the water quality issue might be the easier of the two areas to deal with. On reflection, I am not so sure even about that. There are ongoing problems of contamination by farm and industrial wastes as well as the risks arising from our rundown sewerage and water supply infrastructure, to which I would expect the noble Lord, Lord Sherfield, to make some reference.
To deal with this complex of considerations, one cannot rely simply on an external monitoring system without, as the noble Lord, Lord Nugent, said, having a quite unnecessary and unacceptable degree of duplication. To my mind, it simply makes no sense. One of the virtues of the integrated control and management of the system, subject to EC and other conditions, is that it is now, on the whole, working well. It would be an absurd extravagance to split this integrated organisation into two. I just hope that the Government will have the good sense to think again.
Similarly, on the protection of the environment, over the past decade and particularly since we have inplemented the Control of Pollution Act, even if by very slow stages, and also the Wildlife and Countryside Act, which placed obligations on the water authorities towards furthering conservation, there has been a very marked improvement. As someone who has worked for many years with voluntary bodies, I can say that we have been slowly building up a very good relationship, at any rate with the water authorities that I know best. Inland drainage has been the least satisfactory area, but even that is currently under discussion and some improvements may come about. Again, the whole matter is integrated with the total water cycle and river catchment managment. The prospect of an attempt to break this up into commercially viable units, if such could be achieved, which I very much doubt, and subject to the constraints that would be unavoidable, frankly fills me with foreboding. One can only hope that wiser counsels will prevail.
8.29 p.m.
Lord Molson: My Lords, my right honourable friend the Secretary of State for the Environment, at the last Conservative Party conference, declared his political faith in forthright terms. He said that as a lifelong Conservative he considered that the burden of proof in favour of a change was on those who advocated it. If he applies that criterion to the discussion paper on water authority privatisation he will proceed no further in this matter. The only argument I detect in the whole document in favour of privatisation is the statement in paragraph 3:
"Privatisation is a key element in the Government's overall strategy".
I take leave to say again, as I have said before, that the policy of this Government is too much influenced by doctrinaire dogma and too little by the old-fashioned Conservative pragmatic view that if something is working well, leave it alone.
I am no expert on water problems like my noble friend Lord Nugent, who has made so convincing a speech in opening this debate, but it happens that as a Member of Parliament I have had an ordinary politician's working experience. The first painful experience was in 1931, only weeks after I had been elected for Doncaster, when several hundreds of my constitutents were evacuated from their homes owing to an overflow of the River Don. Much has been done since then, by the legislation imposing on water authorities responsibility for land drainage and flood protection, to prevent future disasters of that kind. It would be unwise to change a system which is working well.
From Doncaster I moved to the High Peak where naturally I was concerned because reservoirs in my constituency provided water for Manchester, Stockport, Derby and Sheffield. When my constituency was supplying necessary water for all those great towns it was natural that I should accept three postulates: first, the vital importance of water as a national asset; secondly, the need to co-ordinate all the resources of the large catchment area which was my constituency; and thirdly, the importance of unified management from my moorlands to the urban consumers far away.
Privatisation in any shape that I can understand, and which the discussion paper suggests, negates every one of my three postulates. I should have thought that each was obvious and uncontroversial. Let me pick out one word in the discussion paper as a merit of privatisation—"competition". That is precisely what was fortunately avoided in the High Peak. The thirsty industrial towns in the Midlands did not compete against each other but co-operated—to their advantage and not to the disadvantage of my constituents.
If this were a full-dress debate on a proposal to privatise the water industry I should take almost each question asked in this paper and should give an answer in the negative. Speaking on an Unstarred Parliamentary Question, I shall be brief and make only three additional points. The paper, at paragraph 19, says that there would have to be Government regulation of the private companies' financial arrangements so that they could not,
"exploit a monopoly position to the detriment of its customers".

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So there would be Government regulation in detail of the private companies' finances. That would not reduce bureaucratic control; it would only complicate it. In the same paragraph it is stated that the charges must provide for reasonable dividends to the shareholders. That would mean higher water charges.
The present system by which the Government can give directions to the water authorities is not unreasonable. I have not criticised the system although I did criticise the directive to the Thames Water Authority to increase the water charges beyond what it considered to be justified and necessary.
To provide sufficient financial inducement for private investors to buy the £57 billion assets would involve greatly increased water charges because the return would have to be substantially more than the present yield. The Government admit that, and they say that the yield is too small. That is why they have issued these directives. So it follows quite clearly that the effect of that would be to raise charges. All these principles would involve also, as the paper implies, financial regulation to avoid abuse of the monopoly power. That is in paragraph 24(d).
In addition to these financial regulations there would have to be what is called in the paper a regulatory agency. This, it is suggested, might be a central regulatory body on the model of the Office of the Director General of Telecommunications. It might need, and I quote:
"a network of regional bodies mirroring the operational structure of the industry. It might be an additional responsibility of the Office of Fair Trading"—
and significantly the words are added—
"suitably expanded".
So this would be a new nationwide bureaucracy to supervise the obligations, objectives and operations of the privatised water undertakings.
I was under the impression that it was the intention of this Government to reduce bureaucracy. This paper demonstrates quite conclusively that privatisation of the water authorities would add a new bureaucracy, and perhaps two. There is no evidence that privatisation would increase the efficiency of the service to compensate for these new bureacracies. Indeed, the paper emphasises so strongly all the difficulties inherent in its own suggestions that (I quote from paragraph 22):
"if it is decided in principle to proceed",
it will be only for the doctrinaire reason that,
"privatisation is a key element in the Government's overall strategy".
The Secretary of State claims that as a Conservative he does not seek to make changes for the sake of change nor for the sake of ideological doctrine. If so, and if he carries that out, he will not proceed any further in this matter.
8.40 p.m.
Lord Sherfield: My Lords, I am very glad of the opportunity to join in this debate on the question posed by the noble Lord, Lord Nugent of Guildford. Nobody that I know knows more about the water industry than the noble Lord, though perhaps the noble Baroness, Lady White, is proxime accessit. I feel rather diffident about intervening in the debate. But I
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was the chairman of the sub-committee of your Lordships' Select Committee on Science and Technology which in December 1982 produced a report on the scientific and technological aspects of the water industry, and I have, not unnaturally, continued to take an interest in its progress. I should add that the noble Lord, Lord Nugent, was a co-opted member of the sub-committee and his great experience was of enormous value to us. The Select Committee's Report was debated on 25th April 1983 and the definitive response from the Government to the Committee's recommendations was received on 9th November of the same year. The Select Committee found the Government's response forthcoming and generally satisfactory. But it was concerned with research and development and not with politics or administration.
The water industry had sustained a major reorganisation in 1973. While the Select Committee's inquiry was in progress, the Government announced their intention to abolish the National Water Council. This policy was enshrined in the Water Act of May 1983 which, in addition to the abolitions, streamlined the authorities and entrusted the management of each authority to an executive board of between 12 to 15 persons on average. Following the passing of this Act, the Water Authorities Association was set up to coordinate policy, and consumer consultative councils were established to replace consumer representation on the authorities.
All this took some time and the new arrangements are therefore quite young in age. I, certainly, and probably most of my colleagues on the Select Committee—though of course I cannot speak for them—believe that the water industry, thus twice restructured in a decade, should now be allowed to settle down to a period of stable and steady development, especially in the applications of new technology to its major poblems of leakage control, the renewal of the ageing and rapidly deteriorating water delivery and sewerage systems, and the maintenance of the quality of the water itself. Unfortunately, the Department of the Environment, "like fidgety Phil, couldn't sit still", and in a debate on the water industry in another place on 7th February the Minister raised the issue of privatisation, and so, well before the new management of the water authorities had had time to settle down, threatened to throw the whole organisation back into the melting pot.
Acting with unaccustomed speed, the Department of the Environment has now addressed what is described as a discussion paper to the water authorities. This discussion paper has already been knocked about a bit by previous speakers, but I propose to give it one or two further knocks. It is an unusual document to issue from a Government department. It is uncharacteristically succinct. It starts by stating the benefits of privatisation in general, and in the course of 36 short paragraphs it succeeds in asking 49 questions, some of them rhetorical. Moreover, some of these questions are fired off in salvoes like multiple warheads in a ballistic missile. I give one example. It reads:
"On water conservation it would be desirable to ensure that supply in the longer term is safeguarded and sources used economically. How could this be guaranteed? Would it be necessary to establish a National Water Conservancy of some kind? How would the competing claims of undertakers be resolved?"

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If I were a busy executive of a water authority I should be tempted to answer those questions by simply saying, "How indeed?" But I am sure that the water authorities will be far more polite than I would be.
Seriously, the normal practice would surely be for the department to sit down to think the matter through, and then to send a policy document round for comment and not expect the recipients to do the thinking for the department. This document is just a substitute for thought. It may be due however to the trimming down of the water directorate in the department itself. In our 1982 report we drew attention to the lack of strategic thinking in the department. The situation does not appear to have improved in this respect.
I should like to assure the noble Lord on the Front Bench that I, too, like the noble Lord, Lord Nugent, am a supporter of the principle of privatisation. But in my opinion, as in his, privatisation should be a policy not a dogma. There is an old saying that any stigma is good enough to beat a dogma with, but policy statements deserve and receive reasoned criticism and consideration. At the moment, we do not have a policy statement, only a rather hastily compiled list of questions.
Privatisation, as experience has shown, is not an easy process, but some industries and parts of industries are appropriate candidates, some are less suitable but possible, some may be suited for a trading fund—though the precedent of the Ordnance Survey trading fund in this House is not a very happy one—and some, in our complex modern mixed economy, are not suitable at all. At first sight, the water industry is in the last category. The noble Lord, Lord Nugent, gave some of the reasons with great force and clarity. I venture to add just a couple more. In such major upheavals in an organisation—there are other examples around—there must always be concern about the effect on scientific research and development. This is particularly important in the water industry in which the Water Research Council has established a notable reputation for excellence. Has any thought been given to this aspect of privatisation? In the discussion paper I have found no mention of it. Perhaps the Minister will be able to enlighten the House?
The second point has already been dealt with by the noble Baroness, Lady White. I will simply add that the statutory water companies are mentioned in the department's paper as supplying 25 per cent. of the country's water, but there is no question about the effect on them of the privatisation of the rest of the industry. It is not even clear whether the questionnaire has been sent to them. Possibly, the noble Lord may know the answer to that.
Anyway, my Lords, what is the rush? As I have said, the industry has just been reorganised for the second time in 10 years. The new regime should be given adequate time to find its feet and the department should take adequate time to find some practical solutions to the many difficulties which, to do them justice, they clearly perceive.
It is possible that the noble Lord who is to reply to
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this debate can make a persuasive case for the privatisation of the industry. Indeed, I am sure he will make a fine attempt at it. But I think he will have great difficulty in making a case for the paper which has been sent to the water authorities by his noble friend.
8.50 p.m.
Lord Craigton: My Lords, I am grateful to my noble friend for allowing us to discuss this important subject. Some years ago the Thames Water Authority tried a much-criticised experiment of returning the salmon to the River Thames. It incurred a great deal of expense and much criticism and it was successful. When I take my boat up the Thames, I find that the towpath is perfectly satisfactory, I do not slip into the river; I find that the stiles which are put up blend with the scenery and are perfect; I find good moorings with no charges made—and all this adds to the beauty, the environment and the use of the river. None of those things could be expected of private enterprise because there is no profit in it.
But, as has been said already today, there is another view which is equally valid. We no longer have to prove that denationalisation benefits both the state and the customer. This is an accepted fact; so it must be right to pass the profitable parts of industry, or the parts that can be made profitable, to private enterprise. I expect that, when this is done, if it happens, I shall get a better supply in my own home. I might even be connected with the main drains; and certainly there will be fewer leaking mains. These two facts are not opposing, they are complementary. With great humility and having read with great interest and much value the discussion paper, I have simply come here this evening to suggest what I believe is a possible pattern of control.
There must be a Minister responsible and answerable to Parliament and to the European Community. The non-profitable activities—there are about a dozen of them and they are very important—must remain so far as is practicable exactly as they are. I do not see why the state should go to the trouble and expense of changing the departmental responsibilities that are giving us so much good service now. The Minister must issue operating licences to take over profitable parts of the industry to a strategically and operationally correct number of private undertakings—no more.
The private undertakings will go public, as others have already done, and the essential element of competition—and this is the point raised by my noble friend Lord Molson—will remain in the prestige and the quoted share price. Interests can be met and will be met by the terms of the licence. We have experience in this country of the issue of licences in relation to broadcasting. I see no reason whatever why the private enterprise water authorities should not be licensed.
But I see one difficulty of which no mention has been made today which faces the whole operation. It is this. To put right the infrastructure after decades of neglect needs more capital than can make privatisation a worthwhile investment. That is absolutely certain. The Government now have an opportunity to face up to this matter and to draw a line for each undertaking below which the State will have to pay for putting right past neglect. That is my

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suggestion. I believe it is a workable one. I am grateful to my noble friend Lord Nugent for letting me make this speech.
Lord Energlyn: My Lords, before the noble Lord sits down may I ask him how he would picture the privatisation of the sewage stations? These are the most incredible institutions in this country. If I may make one statement, it is said that what Mogden, of the Thames Water Authority, does today the world will do tomorrow. They are quite fantastic.
Lord Craigton: My Lords, the principle of privatisation is that if the operation is being paid for now and can be run at a profit or if it is not making a profit now and if, run by private enterprise, it can be run at a profit, then for both the user and the taxpayer it will pay to nationalise. If not, it should remain as it is and its influence on the private undertakings should be the subject of a licence.
8.55 p.m.
The Earl of Halsbury: My Lords, I must apologise to those of you who thought, when the noble Lord, Lord Craigton resumed his seat, that you would be finished with the matter and could relax and listen to the Front Bench before going home. Whether I put my name down or only dreamt I did, I do not know; and the Whips' Office have not been able to resolve the question either. It was always my full intention to support my noble friend Lord Nugent of Guildford in this debate. We are all very grateful to him for giving us an opportunity to discuss something so very important as water.
I distrust fashionable phrases, fad phrases, popular phrases, until I find out what they really mean in a given context. Privatisation is just such a one. It is very fashionable nowadays in Government circles, which means (by the natural process of politics) that it is very unfashionable in opposition circles. What does it mean in the context of a public utility? I shall refer to three: gas, water and electricity. In regard to gas, I spent a quarter of my working life as a director of one of our regional boards and my knowledge is based on first-hand experience. So far as electricity is concerned, my long personal friendship with the late Sir Ronald Edwards, chairman of the central electricity authority, gave me the opportunity over many lunches to discuss with him the true problems of running public utilities on a national basis. For water, I turn to my friendship with the noble Lord, Lord Nugent of Guildford, who has taught me a little of what he knows so much of.
What is the object of the exercise? Is it to promote efficiency by allowing customer choice to interact with the price mechanism? If that is what it means, it is a clean impossibility. The connection of a householder to his mains, the connection of an industrial user to his mains, is a major piece of capital investment. It cannot be altered. You cannot run two water mains down one high street and then have men permanently digging up the pavement to connect the customer to one main rather than another because there has been a small shift in the price. No likely price differential could possibly pay for decoupling and recoupling to other mains. And, as I say, think of the confusion on our pavements!
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If privatisation is to promote competition, it cannot be competition of that kind. It must be by some alternative mechanism. You can decouple mains supply and distributional networks. This, to some extent, is what happens in the gas industry as it now is. The gas fields are in the hands of BP, Shell, Esso, Phillips, Conoco, and so on. They act as independent suppliers to British Gas who own the high pressure mains, and then, when they let down the pressure, delegate the local distribution to local executives of the old regional board variety.
In principle, you could do this with the electricity authority. You could decouple the Central Electricty Generating Board, privatise it among a lot of competing customers and then let them sell their output to the grid and the central electricity authority. But that end in view could only be achieved in reality if there was sufficient spare capacity to give the monopoly buyer a real choice of where he was going to buy. In terms of misuse of resources, you would lose on the swings what you gained on the roundabouts, and I see no point in it.
In the case of gas, however, there is a virtual abundance of spare capacity by simply turning on the taps for a time which is long by comparison with the usual terms of pricing contracts. But I doubt whether the housewife would get more joy from this by way of price reductions.
Another comparison and difference is this. Gas and electricity have no natural boundaries. You can transmit or pipe them from anywhere to anywhere else, but the river basin has a natural boundary, delimited by its component watersheds. It therefore must be treated as a natural unit and be the concern of a board set up independently of local government, because the watershed will criss-cross over more than one county. Another difference is that gas and electricity are not recycled. Water is; and therefore it must be purified to requisite health standards. Water can of course be carried across watersheds in aqueducts or similar devices. Therefore if there are a number of catchment areas, what is surplus to one can be distributed in another; and so the terms of inter-trading between independent organisations represent a problem that has to be solved.
Yet as I pursue this matter that elusive thing, the promotion of efficiency, always seems to slip through one's grasp. How can that be resolved? Horizontal organisations, all doing the same sort of job in different places, can be made to adopt uniform accountancy procedures, the management statistics can be compared on the same basis and the most efficient of the local boards used as a stick with which to beat the less efficient. That was how the gas industry worked under Sir Henry Jones when he was chairman of the Gas Council. Only one thing was denied us: the money market. We had no independent borrowing powers, apart from local overdraft facilities. The Treasury insisted on doing the borrowing for us because, as it asserted, it could borrow cheaper than we could. And of course what it lent us went with Treasury control over the investment to which the borrowings were put—control by a body which had no responsibility at all for performance. And where you have Treasury control, there you have the basis for political interference.

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I remember very well how, in the Six-Day War, the oil companies all put up the prices of oil simultaneously and the cement industry raised its prices immediately because of the increased cost of oil. The gas boards were not allowed to do so. So what happened? We simply squandered the accumulated reserves of years by selling gas at a loss, and then had to put up the price of gas in the end. That is what you get out of Treasury control. I often used to argue with chairman after chairman—I had about three of them altogether during my period of service—that what we would give our eyes and ears for would be independent access to the City of London to borrow money on our own terms and theirs, without any control over what we did with it.
So, putting all this together, I would postulate a national body or authority, acting as supervisor for the purpose of supply, storage, recycling and distribution in each river basin, delegated to subordinate boards in each. The authority would be responsible for keeping the subordinate boards on their toes and would borrow what was needed on the market to top up whatever surplus was generated out of its present policies. Of course it would not be fair to ask it to put on to the price the cost of repairing past negligence—the point made by the noble Lord, Lord Craigton, who preceded me. I would certainly agree with that. It is the business of Government to do that. Its terms of reference would be to see that the in-house engineering facilities provided were minimal and the amount of work put out to competitive tender with the engineering industry maximal. I think that point was made by the noble Baroness, Lady White. This is not very unlike what we now have, or could have.
The three kinds of work referred to in the discussion paper—operational activities, environmental operation and regulation and community services—should stick together under one main authority which would probably have separate executives to manage all three of them independently, with a similar structure on the central authority; so that you would have a typical line-and-staff problem to solve. But these things are not insoluble. The problem of writing terms of reference is really the basic issue; the rest is shadow boxing. Privatisation is a nostrum that I simply do not accept as a cure-all for everything; but I believe I am now repeating what has been said by other speakers and I shall resume my seat.
9.5 p.m.
Baroness Nicol: My Lords, it was my intention not to refer tonight to privatisation, but in view of the bait that has been thrown out from so many previous speakers I will make some comment on it. Most speakers—all but one, I think—have agreed that privatisation is not appropriate for this industry. The noble Lord, Lord Craigton, has made an interesting suggestion and I should like to study it a little more before making any comment on it. But even the noble Lord feels that straight privatisation is not a solution. There has to be a fairly complicated superstructure in order to keep it in its right position. We are very grateful indeed to the noble Lord, Lord Nugent, for giving us the opportunity to discuss this, at what I think is an appropriate moment, because I hope that at the end of this there will be a very strong message back
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to the right honourable Minister as to the views of this House.
One thing is clear: you cannot have competition in a monopoly. Privatisation relies on competition for its success, and you cannot have it in a monopoly. You cannot have commercial sanctions against defaulters where the commodity which you are supplying is essential to life and there is no alternative for them. This, I think, is something which is overlooked. In the days before every house had piped water, water was freely available in other ways, either by means of wells in rural areas or communal pipes in urban areas. That situation no longer exists. So is the suggestion that if the charges are such that some people may not be able to pay, they should be cut off? Surely that cannot be so, and perhaps the Minister will tell us what particular solution can be put forward for that.
As the noble Baroness, Lady White, and the noble Earl, Lord Halsbury, have said, the solution to the problem may well lie somewhere in between, but one item which should be taken very seriously is the need for existing water authorities, if they remain, to be allowed to take commercial decisions. I think most of us were horrified earlier this year at the difficulties of the Thames Water Authority in connection with its rates and the fact that it was not allowed to approach the question of its debts and of raising capital in a commercial way. Many of us questioned that at the time and will continue to question it. I think that that is true of other authorities also. However, let me return to the document which gave rise to this discussion and look a little at its status. It is not really, as many speakers have said, a serious consultation document; it is simply a series of questions. In my view, a kite was being flown. I think that that kite is being tugged at pretty fiercely tonight.
The first criticism I would make of it is the very limited circulation, Even in flying a kite, you need to fly it over a wider area. The views which should have been sought should have included those of the local authorities, the Ministry of Agriculture, Fisheries and Food, conservation bodies and consumer organisations. Without their views, any decision or any further action on the lines of this document would be made on insufficient evidence and most of us here would find it completely unconvincing and scarcely worthy of consideration.
There was a Green Paper issued by the Ministry of Agriculture, Fisheries and Food in March this year—that is, only last month. It was called Financing and Administration of Land Drainage, Flood Prevention and Coast Protection in England and Wales. It set out to examine all the possible financial alternatives which are open for these operations. Nowhere that I can find is privatisation mentioned as an alternative. Page 7, paragraph 2.17, reads:
"The Government would welcome the views of interested parties on questions relating to Exchequer grant discussed above"—
I shall not weary your Lordships by reading too much of it, but it goes on—
"(a) Water Authorities"—
and these are the alternatives offered to the water authorities—

"(i) to retain the present system; or

(ii) to move to a single fixed rate or to a system of two or three fixed rates, to be allocated by Ministers; or

(iii) to change over to a block grant system".

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There was no word of privatisation and that was in March this year. We have to ask: does the MAFF know what the DoE is doing, does the DoE know what action the MAFF is taking, or do they just fall out with each other and not discuss these matters at all? I had better return to that and come to all the general privatisation points later because I want to get on to the main questions which were asked tonight.
I now come to two items; one is the purity of water and the other is the need to protect the environment. We have a right to expect that the purity of water supplies will be guaranteed by existing legislation, whatever happens to the rest of the industry. However, the quality of our water is in some areas already suspect, despite the encouraging words of the noble Lord, Lord Nugent; and I believe that we have one of the best water supplies in the world. But there are difficulties arising, as has been said by one or two other speakers, as more chemicals find their way into our water sources and as our sewerage system becomes less efficient through age and dilapidation, so that rivers and estuaries are becoming more polluted.
We are in danger of failing to meet our own required standards, not to mention the new EEC regulations. The need for continuing research, which the noble Lord, Lord Nugent, mentioned in particular, as well as for capital investment in the infrastructure, is essential. It will be interesting to hear what measures are proposed by the Government—and I hope that the Minister has this answer ready—to persuade any potential purchasers of the industry that they should make the enormous investment necessary to maintain and enhance existing standards of water quality.
Turning to the question of environmental protection, it is unlikely that the existing safeguards under Section 22 of the Water Act 1973 or the Countryside Act of 1968 could be transferred to private organisations. They are not the type of responsibility, in their present form, that could be transferred. The Wildlife and Countryside Act might offer some safeguards on SSSIs, but they are not notably successful in other fields and the Government appear to be resisting attempts which are being made from other quarters to strengthen them. We shall come to them also on another evening.
Many of the activities of the water authorities interact with the environment, and their particular responsibilities include the development of water resources, water abstraction, sewage disposal and the treatment of industrial and other wastes. The list is long and probably everyone here knows it better than I do. Some of the duties which need to be undertaken are of a policing nature and I think that the structure suggested by the noble Lord, Lord Craigton, might meet that point, but I need to study it a little more carefully. The existing performance of water authorities has been criticised primarily because of the present limited levels of capital investment. Commentators have questioned whether privatised bodies can attract sufficient additional investment over and above the present levels to make policing of these activities a reality. That is a question which I hope the Minister can answer.
The Select Committee on Science and Technology in its report on the water industry in 1982, which was referred to earlier by the noble Lord on the Cross-
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Benches, made some very strong recommendations. On page 63, paragraph 636, and again in its recommendations—I shall précis them to prevent reading too many—it recorded its concern about the possible destruction of features of scientific interest and advised urgent action. I think some action has been taken, but that was more than two years ago, and much of the work remains to be done. In the event of privatisation what specific provision would be made for this particular safeguard? The Minister must have been expecting to have to answer that question and I hope that he will have a reply ready.
In the Falklands Islands debate earlier today the noble Earl, Lord Onslow, said how important it was to know the conservation implications of your actions before you carry them out. If it is important in the Falkland Islands, my Lords, how much more important it is that we should know the conservation consequences of actions proposed in this overcrowded and already over-polluted island. The present state of the purity of our water supplies and the lack of interest shown by the Government in the care of the environment in relation to water authority functions makes one uneasy about the quality of safeguards which might be built into any privatisation proposals. The noble Lord, Lord Nugent, is right to question this point, and I hope that the message that goes back from this evening's discussion will prevent the Government putting their hand to this particular political plough while they can still not do so without embarrassment. If they proceed any further, they will find that this is something they should not have done.
We share the concern of the noble Lord, Lord Nugent, and the concern expressed by other noble Lords present, and we look forward to some reassurance from the Minister that this is in fact a kite that is being flown and not a serious recipe for action.
9.16 p.m.
Lord Skelmersdale: My Lords, the House will be most grateful to my noble friend Lord Nugent for raising this evening this important and topical subject of the future of the water industry. We know him as a world renowned expert in his subject and a distinguished chairman of the National Water Council. During my time in your Lordships' House I have learnt an enormous amount from him both on Sub-Committee G of your Lordships Select Committee on the European Community and more recently since I have been privileged to speak for the Government on water matters.
Personally I regret that he was unlucky the other day in the ballot for short debates, as there would then have been more Members of the House present to give their views on this issue. However, perhaps I am wrong in this, as I well remember my noble friend asking me a question when I was winding up a debate on the water industry some two years ago, and, having heard my reply, saying in a loud and probably justifiably annoyed voice: "A very bad answer". I trust that neither he nor anyone else will feel moved to voice the same opinion this evening.
You see, my Lords, there is as yet no answer to my noble friend's Question, which asks Her Majesty's Government,

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"what provision they propose to make for maintaining existing safeguards for the purity of water supply and the protection of the environment in the event of privatisation of the water industry".
The reason for this is simple. Contrary to popular belief, which was almost mentioned by the noble Baroness, Lady White, the Government have not decided to privatise the water industry. What we have done, however, is to start on an exercise to discover how we would arrange the affairs of the water industry if we did so decide. To help with this project we have recently published a discussion paper, to which nearly all your Lordships have referred this evening.
My noble friend Lord Molson underrated this document, as I shall explain a little later. For the moment let me say that he has, I feel, misunderstood the use of the word "might" which, as he said, appears several times in that document. Again, the noble Lord, Lord Sherfield, perhaps almost in contradiction of that view, criticised the department for what he feels is a pre-Green Paper. I shall return to this point, too.
Just now I should say that I speak for a Government who believe, in a nutshell, that the state should not run industries, except in very exceptional circumstances. I am on record as defining these as being for purposes of national security, for some defence and wide public consumer purposes and for temporary health care where large numbers of employees are involved. It was, after all, a Conservative Government who nationalised Rolls-Royce.
Since I said this some years ago the Government have come to reassess these ideas. We have come to the conclusion that there is a halfway house, where some functions are provided by the private sector, others by the public sector, within the same industry. It was exactly this realisation that prompted the extremely successful return to the private sector of British Telecom. What we need to discover, and ultimately to decide, is whether, and, if so, how, the water industry should fit into this mood of national realism. As the noble Lord, Lord Energlyn, said, the discussion document is full of questions but not of answers. The noble Lord was quite right; that is fully intentional.
I start from a position where I am convinced that it could be done. I accept without question my noble friend's view that the structure of the industry in this country is the envy of many parts of the world. As has been pointed out so cogently, this envy is caused by the fact that we have water authorities in England and Wales with boundaries related to river basins, so that each authority has responsibility for the whole water cycle within its catchment area.
This reform was brought about by the Water Act 1973. That Act followed the 1971 Report of the Central Water Advisory Committee which argued for strong regional water authorities to ensure proper co-ordination in the planning of river management, water supply, sewerage and sewage disposal, a region for this purpose being defined as:
"a river basin or grouping of river basins which is sufficiently large to be reasonably self-sufficient in water resources".
My noble friend Lord Nugent will remember that phrase well because he was a member of that committee.
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If, as my noble friend said, this has not been credited to a Conservative Government heretofor, I intend to do so right now. My detractors may call me an opportunist; all right—let me be an opportunist now. My noble friend is quite right; the Government of my right honourable friend Mr. Edward Heath and under the then Secretary of State, Mr. Walker, took on board most of the conclusions in the report.
Should privatisation go ahead, it need not threaten this aspect of our present organisation, but we shall have to consider very carefully whether any changes are required. This evening your Lordships have made clear your support for the river basin concept, and I believe that it is supported by the water authority chairmen. I can assure the House that the most careful attention will be paid to this view.
In the main part of my speech, however, I want to look at the discussion paper and how the Government will treat the responses to it. The noble Lord, Lord Energlyn, said that this paper is full of questions but not of answers; I have already made reference to that point. The paper makes reference to the importance of privatisation as a means of freeing enterprises from state control, reducing the size of the public sector, and spreading ownership more widely. It should come as no surprise therefore that we are looking at the possibilities for the water industry.
First, why have we embarked upon this exercise at all? During the debate in another place earlier this year on the Water Authorities (Return on Assets) Orders for 1984 and 1985, concern was voiced in some quarters about the controls exercised over the water industries. The authorities themselves have pressed for greater flexibility in their financing arrangements. This was a point to which the noble Baroness, Lady White, referred.
One chairman at least suggested privatisation as the way forward. It was against this background that my honourable friend the Minister for Housing announced that the Government,
"will be examining the possibility of a measure of privatisation in the industry".—[Official Report, Commons, 7/2/85; col. 1144.]
We are giving high priority to this exercise, bearing in mind that the privatisation of the water authorities, with their total assets valued in excess of £27 billion and a total workforce in excess of 52,000 people, would mean a substantial enlargement of the private sector.
The discussion paper was sent to water authority chairmen on 1st April. A copy was also sent to the chairman of the Water Companies' Association. Equally, it is not a formal consultation document. Its purpose is to identify the many complex issues which need to be addressed and on which the views of those most directly involved—the water authorities and the statutory water companies—will be particularly useful at this early stage.
As well as this, I should say that the discussion paper is not in any sense a confidential or private document. A copy has been placed in the Library of the House; and, in answer to my noble friend Lord Craigton, it is freely available on request from the department. We hope that those people who feel that they will be concerned by its possible implications will read it.

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I have already mentioned the river basin structure alluded to by my noble friend Lord Nugent as a possibility. Equally, the discussion paper recognises other possibilities. I have also referred to the arrangements established in the recent successful privatisation of British Telecom. That company continues to have public service obligations—for example, the provision of the emergency system to contact the fire, police and ambulance services. This is provided for through the mechanism of a licence policed by a regulatory body. An analogous system might well be developed to provide for the public service functions of the water authorities.
Noble Lords also expressed concern that public health, and in particular the quality of drinking water put into the supply, will not receive the attention it deserves under privatisation. Linked with this is the concern about protection of the environment. The need to ensure that standards of water supply are maintained and that the environment continues to be protected is not in dispute. These objectives are enshrined in statute. They have been consistently stated and pursued by all Governments since before the war. A little later they were advanced by my noble friend Lord Nugent himself, as chairman of the Thames Conservancy and of the National Water Council, and particularly in the policy document River Quality: The Next Steps, which set out in 1976 policies which we carried forward, notably through the implementation of the Control of Pollution Act. Specific reference is made in the discussion paper to safeguarding the water environment and the quality of water in supply. But the paper does not, nor did it ever intend to, come up with answers on how this should be done. That is not its purpose. Its purpose is to invite those directly involved to say how they consider these important objectives could best be achieved.
The discussion paper does make specific reference to the safeguarding of the customer's interests and ensuring that the standard of service he receives is maintained. Again, having stated its objective, the paper asks those directly involved how this can best be done. The paper notes that under privatisation the Government will continue to exercise their responsibilities, for example, under the EC drinking water directive, but the paper also recognises that many aspects of standards of service, such as reliability and pressure, which do not constitute a health risk, also need to be maintained and it asks how these can best be ensured. It is also clear that whatever changes may be made there will have to be safegurds to ensure that the monopoly is not abused and that proper standards are kept up.
In the course of this short debate, various points have been raised to which I will, I hope, provide some answers within the remit that I announced in my opening words. For example, the noble Lord, Lord Energlyn, asked my noble friend Lord Graigton, who, incidentally, I thought was perhaps my only pure supporter on this issue, about sewerage. I give him my answer. Sewerage arrangements were reconsidered during the passage of the Water Act 1983 and the Water Authorities Association has recently agreed new model arrangements with the local authority associations. The future of these arrangements will be one issue requiring attention in the event of
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privatisation. This is an area where the principle of unified responsibility for the whole water cycle has particular application.
I also wondered during the course of the debate whether the noble Baroness, Lady White, and her noble friend Baroness Nicol, had read the New Scientist article in its issue of 18th April, which made many of the same points that they did. In any event, I believe that in general the standard of water services in this country is good. There are problems in some areas, but it is easy to exaggerate their severity. Naturally, authorities draw attention to problems in their annual plans. It would be surprising if they did not do so because they are the main source used by them for bullying the Government into providing extra resources. We believe that the level of investment now planned will deal with the various problems which water authorities have at an acceptable rate.
My noble friend Lord Nugent spoke briefly—as indeed did other noble Lords—about water companies. The statutes governing the operation of the companies limit the amount of dividends that the companies can pay and the amounts that can be put to reserve or carried forward from year to year. The future position of water companies will need to be considered if the water authorities are privatised because they are presently agents of the water authorities. The question of economic regulation of the water authorities will also arise because of the natural monopoly position of most water services.
My noble friend Lord Nugent raised a number of other questions. For example, he very naturally—in view of the terms of his Question—raised the subject of conservation. To that I would say that if the river basin principle is maintained, it will be in the interests even of privatised companies to safeguard their water resources. Perhaps this is unfair, but I rather suspect that my noble friend—and I have an even stronger suspicion that this also applies to the noble Baroness, Lady Nicol, and my noble friend Lord Craigton—was thinking of other than conservation from the point of view of water stocks, if I may put it that way. They were talking about conservation as has been defined in the Wildlife and Countryside Act 1981.
In the privatisation of British Telecom an organisation was proposed, ultimately adopted and put on to the statute book. It was OFTEL, the Office of Telecommunications. This office is in the process of making exactly the same reulations for those functions of telecommunication which cannot satisfactorily be undertaken by a private company, or indeed a group of private companies. I cannot see any good reason why, if the privatisation of the water industry goes ahead, such an organisation could not be created.
Another point that was raised this evening was that of EEC legislation. Privatised companies will be bound by EEC legislation, just as private companies are in other industries already, and indeed as are the British Government—a subject about which your Lordships frequently make much complaint. The Government are bound to retain machinery to ensure this.
On land drainage matters, I hope I do not have to remind the House that I also speak for the Ministry of Agriculture, Fisheries and Food. I can tell my noble friend Lord Nugent that the discussion paper notes the difficulties, and the Government as a whole would be

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looking for the best way of maintaining these activities in the event of privatisation. If it is not the best way, your Lordships will be the first people to point that out.
The noble Lord, Lord Sherfield, said that the new arrangements for the water industry were quite young in age. He suggested that the water authorities should settle down after two major changes in a decade to a period of quietude. He went on to criticise at great length the type of discussion paper that this debate is all about. Why should we not have a pre-paper? Why should the Government say, "This is what will be done. How should we do it?". Why should they not say, "We are thinking of this. We should like to hear of any objections to it". It is in no sense meant to be a Green Paper or, incidentally, a pre-Green Paper. It is meant to be judged on its merits.
The noble Baroness, Lady White, said that the paper had previously been written by people who knew nothing about the water industry. Who better to question an industry than people who know little about it? Incidentally, I do not accept criticism in that connection. I believe that those people in the Department of the Environment who wrote it know quite a lot about the water industry, having been in control under my right honourable friend the Secretary of State for a number of years, advising him and conducting negotiations with the water industries.
Baroness White: My Lords, I was echoing very largely the sentiments expressed to me in the various groups that I indicated, where I could find no one with a really good word to say about the discussion paper. They are the people who know. I am an amateur, as is the noble Lord. I was echoing opinions of people who are experts and who know what they are talking about.
Lord Skelmersdale: My Lords, I freely admit to being an amateur. I am even more of an amateur than the noble Baroness has just admitted that she is.
Baroness White: My Lords, I am sure the noble Lord is.
Lord Skelmersdale: Nonetheless, my Lords, the fact that we have a presumption in this country that Government discussion papers are by way of a Green Paper does not automatically mean that all Government discussion has to be promoted by a Green Paper. I fully accept the point made by the noble Baroness and the noble Lord, Lord Sherfield, that this is novel, but that does not necessarily mean that it is bad.
It is always refreshing in your Lordships' House to hear the noble Earl, Lord Halsbury, speak. He spoke about Treasury control of the finances of the gas industry. In effect, he asked whether some sort of refinement of Treasury control for nationalised industries would be possible either alongside or in place of a possible privatisation exercise, which I had the impression he would prefer. I freely admit that that is something that we shall have to consider.
I willingly pay tribute to the report of the Select Committee on Science and Technology, principally on research in the water industry. That committee was
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chaired by the noble Lord, Lord Sherfield. Although it is not directly relevant to the context of the debate, I should tell him that the Government's response included the establishment of a committee to advise them on long-term research requirements. That committee has been established and is working to produce its report. I hope that that will help the noble Lord in his consideration.
Lord Sherfield: My Lords, will the noble Lord give way for a minute? My question was, what is the effect of these proposed arrangements on research and development in the water industry in the future?
Lord Skelmersdale: My Lords, I am very grateful to the noble Lord for that amplification. The answer is that there need not be an effect. As I have been at pains to point out, I fear over far too long now the Government have not yet made up their minds on this issue. They have promoted discussion as to how it might be done if it were done.
The noble Baroness, Lady Nicol, said, among other things, that you cannot have privatisation in a monopoly. I suspect that she is joining the amateurs in discussion of the water industry. I should remind her that the same was said before the appearance of Mercury on the telecommunications scene. The noble Baroness will recognise that the competition was of very recent origin. Even my noble friend Lord Nugent will agree with me that private water supplies and the already private water companies are of many years' standing. Competition already exists on the supply side of the water industry. Why should it not exist also on the other side of the water industry?
Again the noble Baroness asked how we would satisfy potential investors. This is not a question for today but, I suggest, for another day. Today I should have answered the assertions of the noble Baroness about the uncompetitiveness of the water authorities and her fear that they are being unjustly got at by the Government in their recent directions to the water authorities on the matter of finance. I would have done so, but I realise that I have now been speaking for 25 minutes. Therefore I refer the noble Baroness to my remarks in the Official Report of 14th February this year at column 305.
In conclusion, I say this. We have now entered into a public discussion of the privatisation of the water industry. Can it be done at all? How can it be done? To what extent can it be done? I do not know the answers to those questions. What I do know is that the time is right to examine them. This Government are an inquisitive Government, a practical Government, a reforming Government. We should look at all aspects of the public sector to see if things can be done better, both within and without the public sector. Today we are looking at the water industry; tomorrow is for tomorrow.
Today I end as I began. I am grateful to my noble friend Lord Nugent for giving me the opportunity to put the Government's position firmly before this House with the assurance to the House that the Government will treat this debate as a verbal answer to the questions being asked about water industry privatisation.

Betting, Gaming and Lotteries (Amendment) Bill [H.L.]
Returned from the Commons agreed to.
House adjourned at seventeen minutes before ten o'clock.