Lords Sitting of 25 April 1986

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

Beef Products: EC Intervention Stocks
The Earl of Kinnoull: My Lords, I beg leave to ask the first Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government how many months' supply of beef products are currently held in store by the EC Intervention Board, at what annual cost; and what supply would they consider it prudent to store in a properly managed policy, at what annual cost.
The Earl of Swinton: My Lords, at 31st March 1986 about 39 days', or one and a quarter months', supply of beef was stored in intervention stocks throughout the European Community. Of the total amount of 603,660 tonnes, just over 79,000 tonnes were stored in the United Kingdom. The cost of intervention storage varies depending on the amount in store at any particular time. In 1985, the cost to the Community budget of storing intervention beef amounted to 326.3 million European currency units or about £192 million. In the Government's view, a properly managed policy, with less reliance on intervention to support the beef market, should encourage consumption and discourage the accumulation of costly surpluses.
The Earl of Kinnoull: My Lords, I thank my noble friend for that very full reply which I shall examine with great care. Can he confirm that one of the factors contributing to this oversupply was the sudden policy of milk quotas last year which forced a lot of dairy cows on to the beef market? Can he also say how long good quality beef remains in good condition in cold storage before it starts to deteriorate?
The Earl of Swinton: Yes, my Lords, my noble friend is right that that is one reason for the current large surplus. There are others, such as over-production. Beef is bound to deteriorate. It depends on how long it is stored, but it certainly goes off in time.
Lord Sainsbury: My Lords, does not beef once frozen almost automatically lose a large proportion of its value compared with the fresh product?
The Earl of Swinton: Yes, my Lords, the noble Lord is entirely right, and he has more experience on that than most people in this House.
Lord Cledwyn of Penrhos: My Lords, the noble Earl the Minister has indicated what the policy ought to be. Can he confirm to the House that this precise problem is being discussed in the meeting of Community
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agriculture Ministers which is going on at the present time? Can he tell the House whether the meeting has come to an end and when we may expect a Statement?
The Earl of Swinton: My Lords, we consider that intervention is a wasteful and relative inefficient way of supporting the beef sector, and so in principle we support the Commission's basic approach of shifting the emphasis of producer support away from intervention more directly to the producer. We shall, however, need to look carefully at the Commission's alternative proposals, which would not as they stand provide adequate support for our beef producers. I am afraid that I do not know whether the meeting has finished or when we shall be reporting, but I shall let the Leader of the Opposition know that.
The Earl of Kinnoull: My Lords, will my noble friend reply to my first supplementary question about the length of time beef can remain in cold storage before deteriorating? Can he confirm the National Farmers' Union figure of about 18 months?
The Earl of Swinton: My Lords, I shall have to write to my noble friend with that answer.
Lord Bruce of Donington: My Lords, following the figures that the noble Earl was kind enough to give to the House, can he confirm that the burden borne by the British taxpayer in respect of this intervention stock is between £40 million and £42 million per annum?
The Earl of Swinton: My Lords, I do not know the exact cost but it is certainly high.

London Airports: Rail Fares Policy
11.10 a.m.
The Earl of Kinnoull: My Lords, I beg leave to ask the second Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they consider the policy for London airports should include comparable rail fares from the centre of London.
The Parliamentary Under-Secretary of State, Department of Transport (The Earl of Caithness): My Lords, rail fares for services to airports, as to any other destination, are a matter for the operators concerned.
The Earl of Kinnoull: My Lords, I anticipated that Answer. Perhaps I may ask my noble friend whether, when one is talking of a London airports policy, it is really justifiable that the rail fare to Heathrow—the Underground rail fare—should be one-third of that from Victoria to Gatwick. Can he tell the House what percentage of rail passengers currently use the Gatwick service, which I say straightaway is very efficient?
The Earl of Caithness: My Lords, as my noble friend will be aware, there are two different operators. London Regional Transport operates the Underground service to Heathrow and British Rail operates the service to Gatwick. Therefore it is not surprising that one has a slightly different price structure, together with the fact that they are at different mileage points from the centre of London. I am grateful to my noble friend for his reference to the success of the Gatwick British Rail link. I used it recently and I found it very efficient. I do not have the precise figures, but I understand that about 40 per cent. of the passengers use this mode of transport.
Lord Boyd-Carpenter: My Lords, is my noble friend aware that the fares to Gatwick are higher than fares to further down the line and that the sensible passenger can save money by booking to a further point and getting off at Gatwick?
The Earl of Caithness: My Lords, that is the case, as I understand it, but I am advised—in fact, I have found out myself—that it is possible to do that with other destinations by using saver fares and other such benefits offered by British Rail.
Baroness Gardner of Parkes: My Lords, is it not a fact that a similar position exists with regard to the fares to Heathrow? Those fares are also specially geared at a price quite different from normal. The fare as far as Hatton Cross is lower and is designed to be used by residents of London, but the minute you go past Hatton Cross as far as Heathrow the fare is specially geared to be an airport fare for overseas visitors. Could it not be said that that is a principle similar to that in respect of Gatwick and that there is a special fare attached to airport travel at the present time?
The Earl of Caithness: My Lords, I do not believe that the point made by my noble friend Lord Boyd-Carpenter is special to Gatwick. Indeed, I have had experience of being able to buy a ticket to a destination further down the line than the stop to which I wanted to go, for considerably less money.
Lord Underhill: My Lords, the noble Earl said that it was a matter for the operators concerned. Surely we are not being asked to believe that the Government have no direct discussions with the operators on matters of this kind, particularly in respect of the British Rail service to Gatwick.
The Earl of Caithness: My Lords, I confirm that it is the responsibility of the operators, but as the noble Lord will be aware my right honourable friend the Secretary of State set out guidelines for both LRT and British Rail.
Baroness Gardner of Parkes: My Lords, does my noble friend the Minister not agree that most members of the public would prefer the Government not to interfere in any way if it means an increase in the fare to Heathrow rather than the fare to Gatwick decreasing?
The Earl of Caithness: My Lords, I can only concur with my noble friend.
Lord Sefton of Garston: My Lords, does the Minister not agree that there is a large body of opinion in the country that says that we already give too many concessions to London airports and to airports in the South, as opposed to those made to airports in the North?
The Earl of Caithness: My Lords, the subject of airports in the North was discussed fairly fully last Monday, on the Second Reading of the Airports Bill. With due respect to the noble Lord, it is not entirely relevant to the Question on the Order Paper.
Lord Beloff: My Lords, is my noble friend the Minister aware that many of us who travel in the superannuated cattle trucks that Southern Region provides on its main lines look with envy upon the comfortable and usually half-empty trains to Gatwick? Can there not be some redistribution of comfort?
The Earl of Caithness: My Lords, I am sure that the managers responsible at British Rail will note my noble friend's point.
Baroness Burton of Coventry: My Lords, perhaps the noble Earl can find out the answer to this question, because probably he does not know it. While the rail line from Gatwick to Victoria is excellent, one of the problems has been that there are no porters at Victoria Station. I am aware that one can get trolleys there, but it is not easy. Nor is it easy for elderly passengers. I understand that, in the past, British Rail has not had the finances to take on porters. Will the Minister be kind enough to inquire whether or not that position has improved?
The Earl of Caithness: My Lords, if my memory serves me aright, I had the help of a porter quite recently at Victoria; but I shall check on the situation.

Nuclear Waste: NIREX Investigation
11.15 a.m.
The Lord Bishop of Lincoln: 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 why they are proposing to allow NIREX to investigate near-surface depository sites in Fulbeck, Elstow, Bradwell and South Killinghome in view of the widespread concern this is causing in these ares, and in view of the alternative disposal methods used elsewhere in Europe.
The Minister of State, Department of the Environment (Lord Elton): My Lords, because that is a proven way of disposing safely of materials that must be disposed of.
The Lord Bishop of Lincoln: My Lords, while thanking the Minister for that Answer, may I ask him this: is it not contrary to the report of the environment Select Committee of the House of Commons? Does the Minister not believe that the questions raised by that report should be addressed and answered before further exploration of any sites takes place; not least, the questions raised about the handling of the public, experience of which we in Lincolnshire have not felt at all happy about?
Lord Elton: My Lords, I understand that the issue is a sensitive one, but the criticisms of the Select Committee were directed mainly at intermediate and high-level radiation from waste. We are talking now about the low-level end of the spectrum.
Baroness David: My Lords, will the Minister say whether there have been any responses made to the Special Development Order that the House was told was being laid at the time when a Statement was made on 25th February? The requisite six weeks are now up and we wonder what those consultations and representations have brought forward.
Lord Elton: My Lords, I regret that I am not aware of the response to which the noble Baroness has referred. I will write to her.
Lord Belhaven and Stenton: My Lords, will my noble friend tell the House, what is NIREX?
Lord Elton: My Lords, I find myself unaccustomedly lost for words. I now recall that it is the Nuclear Industry Radiological Executive.
The Lord Bishop of Lincoln: My Lords, while accepting what was said by the noble Lord the Minister about the report dealing considerably and largely with high-level radioactive material, may I ask whether or not he is aware that it also devotes a lot of its work to low-level and intermediate material being deposited? It is very critical of the way in which we do that at this moment in this country. That situation causes very great anxiety to those of us in South Humberside and Lincolnshire, in respect of the possibility of the same methods being used in that area.
Lord Elton: My Lords, I take note of the criticisms of the Select Committee, and so do Her Majesty's Government. When I repeated the original announcement in this House—and I do not doubt that the right reverend Prelate has read the Statement that I made then and the exchanges that followed—I described the extremely elaborate system that is proposed. I remind the right reverend Prelate that all that is in question now is a Special Development Order allowing a survey to be made of four possible sites, to see whether they would be suitable for the disposal of such material. There will be ample time for further disussion of the detail of the method of disposal during the period of that survey. Given the need to dispose of that material and the relatively small difficulty of securing safety as compared with other radiological materials, it would not be right to postpone the search and the survey until after we had agreed upon the detail.
Lord Newall: My Lords, is my noble friend aware that the duty of NIREX is to find the best possible option? In a recent best possible option study by the Department of the Environment, it came out quite clearly that using bore holes offshore is a much better option than burying the waste on land.
Lord Elton: My Lords, here we are again looking at the higher radiation end of the spectrum. Certainly we have not abandoned consideration of sub-seabed disposal, but we must be aware of international opinion on the subject.
Baroness David: My Lords, may I ask the Minister whether the plan to build environmental impact assessment into the planning system, which was announced, I think, by the Minister of State this week, will have any effect on the eventual choice of site?
Lord Elton: My Lords, regardless of new procedures, we have always had careful assessments made of the environmental impact in this important matter.

US Nuclear Weapons: UK Operational Control
11.20 a.m.
Lord Jenkins of Putney: 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 they will now establish operational control over American nuclear weapons based in this country.
The Minister of State for Defence Support (Lord Trefgarne): My Lords, Her Majesty's Government are satisfied with the existing understandings governing the use of US nuclear weapons based in the United Kingdom. These provide that no nuclear weapon would be fired or launched from British territory without the agreement of the British Prime Minister. Those arrangements have been reviewed and found satisfactory by successive governments of both parties.
Lord Jenkins of Putney: My Lords, is the Minister aware that although what he says may be the case, the American Government have made clear that the Prime Minister has no veto over the firing of American nuclear missiles which are based on our soil? In those circumstances, without agreement within the parties on whether there is or is not a veto in the event of a dispute, the assurances that the Minister and the Prime Minister give to the British people are entirely worthless. Furthermore, is the Minister aware that without operational control, in a crisis political control is quite useless? Without operational control any assurance which is given on this point is shown to be entirely valueless.
Lord Trefgarne: My Lords, as far as nuclear weapons are concerned I am afraid that the noble Lord is mistaken. The position is as I have described it.
Lord Jenkins of Putney: My Lords, if the noble Lord does not believe that, let me quote chapter and verse from what Mr. McNamara, the Defence Secretary, said. He said that there is no veto—
Noble Lords: Order! Question.
Lord Jenkins of Putney: My Lords, is the Minister aware that it has been said by successive American Secretaries of State for Defence that as far as they are concerned there will be discussion and there will be consultation but that the final decision rests in the hands of the firing authority, which is the United States?
Lord Trefgarne: No, my Lords, the position is as I have said on a number of occasions. No nuclear weapon will ever be fired or launched from British territory without the agreement of the British Prime Minister.
Lord Cledwyn of Penrhos: My Lords, I am grateful to the noble Lord for repeating that statement, which has been made on several previous occasions by him, by his colleagues in another place, and, indeed, by Ministers in a previous government of another complexion. Having said that, I ask the Minister whether he also agrees that there is an area of uncertainty that is causing a certain amount of public disquiet.
Does he further agree that the basic document describing the nature and range of operational control was the Attlee-Truman document, confirmed by the Churchill-Truman Agreement? They are over 35 years' old and there is a need now for a clear definition of operational control and what precisely it means. Will the noble Lord convey to his right honourable friend the desirability of a government Statement or White Paper which makes the situation absolutely clear beyond peradventure?
Lord Trefgarne: My Lords, I am afraid I do not share the doubts of the noble Lord. The arrangements to which I have referred are reviewed each time a new President or Prime Minister comes into office. They have consistently been found satisfactory, including, if I may so so, on the occasion that Prime Ministers from the Labour Party came into office.
Lord Mayhew: My Lords, is the noble Lord aware that both the questions and the answers are familiar over many years and on all sides of the House? Will he say why there is objection to publishing the original document? I refer to the correspondence between President Truman and Mr. Attlee. Surely we are entitled to see the original undertakings?
A noble Lord: Why not, my Lords?
Lord Trefgarne: My Lords, I am afraid that the noble Lord is not entitled to see them. They are highly classified.
Lord Jenkins of Putney: My Lords, will the Minister at least ask the American Government, in view of public disquiet, to issue a firm assurance on the lines
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that he has himself uttered? I think that if he does that he will get a negative answer, and that is why he will not ask for it.
Lord Trefgarne: My Lords, there is no need for the Government to put that question to the American Administration as the noble Lord suggests because the Americans, too, have confirmed the understanding to which I have referred.
Lord Soames: My Lords, does my noble friend agree that in view of the close association of the noble Lord, Lord Jenkins, with CND it is natural for him to try to add to public disquiet, such as it is?
Lord Trefgarne: My Lords, it is not for me to impugn the motives of the noble Lord opposite, but the answers to the questions he has put to me are the ones I have given.

Housing (Scotland) Bill
Lord Skelmersdale: My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That it be an Instruction to the Committee of the Whole House to whom the Bill has been committed that they consider the Bill in the following order:
Clauses 1 to 11,
Schedule 1,
Clauses 12 to 23,
Schedules 2 and 3,
Clause 24.—(Lord Skelmersdale.)
On Question, Motion agreed to.

Dockyard Services Bill
11.25 a.m.
Lord Trefgarne: My Lords, I rise to move that this Bill be now read a second time.
Many studies of the organisation of the dockyards have been undertaken over the last 15 or more years under successive administrations. There have been almost as many different recommendations as there have been studies, but all have agreed on the nature of the problems facing the dockyards. If they have differed on other matters they have been as one in agreeing that fundamental change in the way the dockyards are run is necessary if their long-term future is to be secure. Even the trade unions have accepted the need for improvement.
But, like the seasons, the reports have come and gone and for one reason or another, government after government have failed to make the sort of fundamental change which those who have studied the dockyards over the years have come to recognise as essential. No one advocates change for change's sake. What we are debating is too important for that. I am as aware as any of your Lordships of the proud history of the dockyards and the service they have given this

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country over the last 400 years. Certainly no one will ever forget the splendid efforts which the dockyards made during the difficult times of the Falklands crisis in 1982.
The question, however, is not whether the dockyards have performed well, but rather whether they could do better and by performing better whether they could provide a more secure future for themselves, an even better service for the Royal Navy and release resources to be spent elsewhere. The Government are firmly of the opinion that these goals can be realised and the Bill which we have introduced is designed with that purpose in mind.
Changes in three areas are essential for the most efficient operation of the dockyards. First, local managers must be given more authority to manage; secondly, the dockyards, as suppliers, must be clearly separated from the Fleet, as customer, and, thirdly, accounting procedures reflecting normal commercial practice must be introduced. After a period of consultation, we announced our intention to proceed with what had been our preferred option, the introduction of commercial management, but with the assets remaining in the ownership of the Government.
The option at one end of the scale of a dockyard trading fund within the Civil Service would not provide a commercially disciplined environment; nor would it go far enough in freeing management and workforce from the inevitable restrictions and interference of government. The two dockyards at Rosyth and Devonport currently have an annual trading turnover of £400 million. By any reckoning that is an enormous industrial undertaking and, quite simply, such a system does not lend itself to working within restrictions which the Civil Service machine necessarily imposes.
At the other end of the scale was the idea of full privatisation. I can say that there was no support from any quarter during the consultation phase for full privatisation. It was, and remains, the Government's strongly held view that, in the special circumstances of the dockyards, it would be inadvisable to go for an outright sale.
Commercial management, on the other hand, has many advantages. It would free local management from Civil Service constraints. It would enable a proper separation of the Royal Navy, as the customer, from the dockyards, as suppliers. It would allow a fully commercial approach to be introduced in the dockyards. It would provide the spur to ever greater efficiency by the prospect of periodic competition for the contracts. Commercial management would also mean that the strategic defence assets—the dockyard land, buildings and plant—will remain in government ownership, and the Government would be able to regain control of the dockyards if it proved necessary to do so.
The Dockyard Services Bill provides for the Secretary of State to introduce commercial management at the two dockyards, or to operate the dockyards himself, as government-owned plcs. We have long made it clear that if there were insufficient interest from companies in managing the dockyards, or if their responses to our invitation to tender were
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unacceptable for any reason, the Government s fall-back position was the formation of government-owned plcs.
It might be for the convenience of your Lordships if I were to outline the progress made so far. In doing so—and at risk of stating the obvious—I should emphasise that no commitment has been made; nor will any be made until the Bill (as I would hope) has been agreed by your Lordships and has been given Royal Assent.
The tender documents were issued by my department on the 3rd April to those companies which had submitted an adequate response to a pre-qualification exercise. Those companies which have been invited to tender for the contract in respect of Devonport Dockyard are Devonport Dockyard Limited, which is the company formed by the local management to consider bidding for the contract, and a consortium of Trafalgar House, Plessey and A and P Appledore. For Rosyth Dockyard, the companies are a consortium of Babcock Power and Thorn EMI; a consortium of Balfour Beatty and the Weir Group; and two companies which are considering bids on their own, Northern Engineering Industries and the Press Offshore Group.
So far as timescale is concerned, responses to the invitation to tender have been invited by the 1st August. Our aim is to consider the responses and then select the successful bidders in November. The contracts for the initial period of seven years would be signed in November and the contractors would work alongside the current management before assuming responsibility for operating the dockyards from the vesting day of 6th April 1987. That is the outline programme.
A copy of the invitation to tender was placed in the Library of your Lordships' House on 8th April, and a copy of the draft contract was placed there on 23rd April. The invitation to tender is complete, with the exception of the annex, which refers to the programme of work on which the companies are asked to bid. As your Lordships will appreciate, the refit programme is necessarily classified, but contractors have been informed of the core programme of work for each dockyard which will be equivalent to about 70 per cent, of the total refit programme. The remainder of the programme—the unallocated programme, which we plan to increase in size over the years—will be available for competitive bidding from the dockyards and commercial ship repair yards. Our intention, is that work entering the dockyards should increasingly be negotiated on a fixed price basis.
Also, while the dockyards have been within the Ministry of Defence, they have been largely unable to seek business outside. When commercially managed they will be free to compete in other markets. The many centres of excellence in the dockyards place them in a commanding position to secure commercial work. As your Lordships will know, the dockyard at Gibraltar has been successful in securing such work, and I see no reason why the dockyards at Devonport and Rosyth should not also do so.
I have already explained the benefits which we expect to result from the introduction of a commercial approach to the management of the dockyards. Those

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who stand in the way of fundamental change on the lines we propose ignore the obvious advantages to be gained from a competitive approach to this work. Instead, our opponents argue that commercial management will not result in savings to the taxpayer. I have to say that I think these people are wrong. Our latest estimate for savings to the taxpayer, to which the Committee of Public Accounts in another place have referred in their latest report, published yesterday, is that they will amount to some £21 million a year over the first ten years, during which time, for the purposes of accounting, the £70 million setting-up costs will be amortised. Thereafter the savings are expected to be some £28 million a year.
A saving to the taxpayer of £210 million over the first ten years and greater amounts thereafter is, we believe, a saving well worth making. If we can make savings of that order—and I believe that these are worst case figures—while offering the Royal Navy a better deal in terms of greater cost-effectiveness and more timely completion of refits, we would be failing in our duty not to press ahead with our plans.
Before I refer to the individual provisions in the Bill, which have now undergone some 80 hours of consideration in another place, there are two important areas on which I believe your Lordships would wish me to touch. Both concern our national security interests. The first is the question of foreign control of the dockyards, and the second concerns questions of nuclear safety under commercial management.
The foreign control safeguards will effectively be in three places. There will be safeguards in the articles of association of the dockyard company which my right honourable friend forms at each dockyard, in the contract which my right honourable friend will enter into with the successful bidder to manage either dockyard, and under the Government's normal security rules relating to any company which contracts for classified defence work. Each dockyard company will have a share capital of 50,001 £1 shares, and all but one share will be transferred on vesting day to whichever company has successfully tendered to manage the dockyard. The managing company will own all those shares for the entire period of the contract. The remaining share will be held by the Secretary of State and it will have special rights attached to it. One such right will be that no change can be made to the articles of the company or to its memorandum without the Secretary of State's specific approval.
We have made it clear that we could not accept that the dockyards should be run by foreign companies. Under the contract with the managing company my department will be able to satisfy itself that the level of foreign shareholding in that company—and hence the level of foreign influence over the dockyard company—remains well below the level of control. We propose to set the "trigger point" level at 30 per cent. If the foreign shareholding in the managing company exceeds this level, the Secretary of State will have power under the contract to act where the circumstances are contrary to the essential interests of security, and those interests require such action to be taken. In such a situation the Secretary of State will be able to terminate the contract. Several other courses
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would be open to him, but it would not be sensible to say that a 29 per cent, foreign shareholding is acceptable but a 31 per cent, share is not. We could all think of cases where even a tiny foreign shareholding would be quite unacceptable and of other cases where a foreign shareholding above 30 per cent, would be acceptable. Protection of security will, therefore, at all times be the paramount consideration.
Finally on the subject of foreign control, I should remind your Lordships that the managing company will be a list "X" company. This means that in order to undertake classified work the particular company has to satisfy the stringent government security requirements (physical as well as personnel) which have existed under successive Administrations.
As regards nuclear safety after commercial management has been introduced, the dockyard companies will be required to operate under a nuclear site licence. That will not be optional; it is a requirement imposed on the company under the Nuclear Installations Act 1965. My department has been working closely with the Nuclear Installations Inspectorate of the Health and Safety Executive, to whom the companies will be responsible for ensuring that the requirements in connection with radiation protection for the dockyard employees are fully met under the terms of existing legislation. Safety has been among our highest priorities, and the safety of the workforce will be as high a priority in the future as it is now.
The heart of this Bill lies in Clause 1, under which the Secretary of State is enabled to form a Companies Act company at each of the dockyards into which the workforce to which the arrangements apply would be transferred on vesting day. I need hardly emphasise the importance we attach to the dockyard workforce. I readily acknowledge that it has been their skills and their dedication which has over the years provided the vital support to the fleet. It is no criticism of the employees to say that, while the Civil Service machinery serves this country well in many ways, it is not, as I have said, best suited to an industrial undertaking, and particularly not one of the size and complexity of the dockyards.
The Government are very conscious of the implications for personnel of our proposals, and it is against that background that we have addressed the personnel issues contained in this Bill. It has always been our intention that the Transfer of Undertakings (Protection of Employment) Regulations 1981 should apply in this case, and Clause 1 (4) makes the position clear. Essentially, the regulations safeguard employees' rights when a business is transferred to a new owner, and, with the exception of some factors resulting specifically from Crown service, their terms and conditions of employment—for example, pay, hours, leave, and allowances—will be the same as those applying in the Civil Service immediately before the transfer.
But there will be no break in employment. So, at the time of this transfer, employees are not in any sense redundant, and are not therefore entitled to redundancy compensation. Clause 1(5) and 1(6) addresses this point. I must emphasise, however, that these subsections do not in any sense affect the right to redundancy compensation of civil servants transfer-

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ring to the new companies if they were to be made redundant by their new employer at some time after vesting day.
As regards pensions, because the dockyard employees will no longer be civil servants, staff transferring to the new companies will not be able to remain members of the Principal Civil Service Pension Scheme, and the transfer regulations specifically do not apply to pensions. It is, however, the Government's intention to set up pension schemes, one at each dockyard, which transferred staff will join and which will, as far as possible, replicate the provisions of the PCSPS in terms of rules and benefits, including index-linking. Staff will be able, if they wish, to leave their accrued pension entitlements in the Civil Service scheme, or to transfer them into the dockyard companies' pension schemes. For those employees who opt for the second course, the Government will make transfer payments into the company schemes in respect of the accrued benefits. Pension schemes will also be set up for staff joining the dockyard companies after vesting day.
It is also our intention that, even though the means of payment will have to be different, the current Civil Service levels of redundancy compensation will transfer. So, too, will reckonable service for the purposes of redundancy. This means that, should an employee be made redundant by the new company, the calculation of redundancy compensation will be made on the total of service under the Crown as well as with the dockyard company. There are some areas which will need further discussion with the trade unions and the Inland Revenue, and we have recently issued a consultative document dealing with pensions and redundancy which we hope will form the basis of those discussions. A copy of this document, likewise, is in the Library.
Thus the workforce at the two dockyards will transfer to the new companies without a break in their employment, and on broadly the same terms and conditions as in the Civil Service. It is the Government's firm view that, in this way, the interests of the employees are well served, and the new companies set up on a basis that should significantly contribute to the successful operation of the dockyards in the private sector.
The Bill provides in Clause 2(1) for the MoD police who are to be retained in the dockyards after vesting day to have the same full constabulary powers as they have now. The MoD police will continue to provide the protective security of the perimeter and control the gates of the dockyard. They will continue to carry out patrols, and will have access to all premises within the dockyards, including any buildings occupied solely by the contractors. The MoD police will remain under the exclusive control of the Ministry of Defence and not the contractor, and he will not be able to replace the police in the duties I have described. The dockyard land and buildings will remain Crown property, and the MoD police will remain to protect it.
The Bill also ensures that the Secretary of State will be able to make or change bylaws throughout the dockyard after vesting day, just as he can now, and existing bylaws will continue in force. It also provides
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that dockyard land should continue to be exempt from the payment of general rates. Clause 2(2) ensures that the contractor will not obtain security of tenure under the Landlord and Tenant Act 1954. Under the Government's proposals, the contract with each successful contractor will run for a fixed term of seven years. Were the contractor to acquire security of tenure of land in the dockyard, it would conflict with the Government's intention that fixed-term contracts should provide the competitive spur to greater efficiency and cost-effectiveness.
Finally, I come to Clause 3 which provides that the Secretary of State shall pay out of money provided by Parliament any expenses he incurs in connection with either the formation of a dockyard company at each dockyard or the operation of such a company as a Government-owned plc. The second part of Clause 3 enables the Secretary of State to meet expenses incurred in assuming responsibility for liabilities of a dockyard company.
The Government remain convinced that the introduction of commercial management under fixed-term contracts, with the assets of the dockyards remaining firmly in Government hands, will provide the spur to efficiency and savings which competition and renewable contracts will bring. It will ensure that the operational requirements of the fleet are met, and will continue to be met, and that strategic interests are safe-guarded.
I commend the Bill to your Lordships, and I beg to move that it now be read a second time.
Moved, That the Bill be now read a second time.—(Lord Trefgarne.)
11.46 a.m.
Lord Graham of Edmonton: My Lords, we are all grateful to the Minister for his careful explanation of the Bill. I am grateful to him also for the supplementary information that he has sent to me from time to time during the passage of the Bill. But there, I am afraid, we shall have to part company. I have to tell him that we shall find little to agree upon either in the general debate on Second Reading or at the subsequent Committee and Report stages of the Bill.
The House is particularly fortunate in that it will have today the benefit of the observations of noble Lords on all sides of the House who bring to the debate their unique experience. The noble Lords, Lord Lewin and Lord Hill-Norton, have unrivalled, practical and successful experience. I shall listen with great care and respect (as, I venture to say, will others outside the House) to whatever they have to say. The noble Baroness, Lady Vickers, will virtually be speaking for Devonport. And, clearly, whatever she has to say will add a particular value to our deliberations. My noble friend, Lord Mulley, can speak from his ministerial experiences as a former Secretary of State for Defence. And the noble Lord, Lord Mayhew, can contribute directly from his experience as a former distinguished Minister for the Navy. We cannot but profit from speeches based on such a unique and unrivalled background.
I wish to call as my first witness the Public Accounts Committee. The committee has strongly criticised the

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Government's proposals. It was particularly sceptical of the validity of MoD costings.
"Misgivings about the thoroughness and accuracy of the Ministry costings"
is how it was put. In an earlier report, the committee said,
"In view of our doubts about the costings of both the Government's preferred long term option and of the interim measures, we do not consider that the MoD have yet provided enough evidence to enable Parliament to assess the financial aspects of the options. We recommend that Parliament should be given some indication of the expected net savings from the different options when it is asked to consider the Government's proposals for the future and that the information would be more reliably based than that given to us".
Despite that censure, no further helpful figures have come forward until now, when we have the benefit of the 21st report of the Public Accounts Committee, to which I shall be referring later. There will always be a variety of sensitive areas in any proposed legislation that command the attention of the critic and upon which his attention will focus and to which answers need to be found. This is done against a background of the imperative for the legislation. So it is in this situation. We are talking about the future of the Royal dockyards. The basis for the Bill is to introduce private management into the dockyards while the Government retain ownership of the fixed assets—private management under fixed-term contract. It is said that these provide the greatest incentives to improving efficiency and reducing operating costs. Thus, when we concentrate on this Bill in this House, we have the benefit of reviewing what has gone on in another place, and what did not go on there. Alas, my Lords!—I have to say, not much.
When we engage the Minister as to how we shall try to improve this Bill we are faced with this bleak prospect. Despite the opportunities given to the Government to reflect on what has happened on costs it is now clear that, far from relieving the strain on the defence budget, commercial management would result in significant extra costs to the MoD. Since the Bill left another place, we have had the benefit of a sight of the Twenty-first Report of the House of Commons Committee of Public Accounts. As it always does, it carries the authority of a high-powered committee with great experience composed of Members from all sides of the House. It would not be proper or prudent to refer to its evidence and conclusions at length. But the PAC committee, put bluntly, spells out the spoiling tactics of the MoD and the highly unsatisfactory basis on which the Minister wishes to proceed.
Let me enlighten the House by referring to one or two of the points which have been raised. In page xii on costings they say this:
"We note MoD's assurance that their costings are as reliable as they can possibly make them but they are still based on many assumptions, there are considerable uncertainties and they are almost certain to be revised again before contracts are placed for commercial management".
That is not a very helpful basis upon which we can be satisfied.
With regard to parliamentary control the report says this:
"We note MoD's reasons for proposing that the C&AG should not have access to the contractor's accounts and costings records but
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remain convinced that such access is essential to provide Parliament with an independent assessment of the success or otherwise of commercial management in securing value for money".
The report then continues:
"We recommend therefore that the Dockyard Services Bill should be amended to make provision for such access".
I ask the Minister, when he winds up, to give the House some indication—it may perhaps be too early—of the reaction of the Government to that very firm recommendation.
The Minister then sought to assure the House in a speech that the costings would turn out all right. I refer to page 2 in the evidence that was submitted to that committee by the Comptroller and Auditor General. This is what he says:
"MoD calculations have not yet included costs which might arise from the following, to the extent that they would only be incurred by commercial management:—

(a) costs of activities which might be created in or transferred to other areas of MoD such as the accounting and stores organisations and Fleet Maintenance Bases;

(b) costs of setting-up and operating a system of configuration control to ensure the existence of up-to-date drawings of the equipment state of ships;

(c) the possible effect on the UK contribution to the European Community in respect of VAT as a result of transferring dockyard activities to the private sector: I understand this might be about £2 million per annum".

So the Minister ought not to be complacent that he satisfies anyone, let alone this House, that there is a clearly undisputed cost benefit to the taxpayer in carrying out the policies which have been indicated.
I am grateful to the Minister for the care that he took in spelling out the foreign ownership aspect. But I want to tell him that there is great unease at the possibility that an undue amount of the ownership of the shares can fall into foreign hands. With regard to strategic interests, Britain's essential defence requirement will be damaged and the ability of the dockyards to maintain the fighting effectiveness of the fleet, in my view, will be impaired.
The Minister took care, and I am grateful, to deal with the aspect of nuclear safety. This is very important. But I wonder whether the Minister can tell the House more concerning the incredible news given to the committee in another place that the managing director of Rosyth dockyard has disclosed that Balfour Beatty—a company to which the Minister referred, one of the companies tendering for the contract—had asked for some basic nuclear training in order to help prepare the tenders where nuclear refitting is concerned. The managing director had said that advice had been given that they should take a two-week course, after which, of course, they would have the lives of millions of people in their hands. The people of Dunfermline and Rosyth, of Plymouth and Devon, I believe deserve better information and security than that. People outside this House will be asking continually: why, why, why? Improve, alter, or make more efficient, but why disturb the existing situation?
We are concerned with Britain's defence interests. The House of Commons Defence Committee have served Parliament and people well. In 1984–85 it said as far as extra costs are concerned,

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"There has been a coyness about the unwillingness of the MoD to come clean and publish some real financial figures to justify this leap in the dark".
The Minister has said something about redundancy payments. He will understand that I shall be taking advice and guidance from those outside the House who will from time to time, and particularly during the Committee stage, advise me that those arrangements will be satisfactory to them. It was the House of Commons Defence Committee who said:
"We were told that the Navy board had considered the national security implications of the preferred option, and was satisfied that there were no dangers. On the other hand, we were also told that the option did involve 'an additional risk' arising from possible disruption during a transition period, over and above that which has always been present from industrial disputes. However confident the Ministry is that"—
and this is the House of Commons Defence Committee speaking—
"'appropriate steps' can be taken to secure the nation's deterrent, the mere existence of additional risks must be regarded as worrying".
When the Ministry of Defence replied to those comments this is what was said:
"Our misgivings about the Government's intentions have not been allayed by the evidence we have been given, orally and in writing, since the last report".
I simply want to say to the Government that, however justified they feel that they have got it right, there is no authoritative source that I have heard so far, inside or outside this House, which is satisfied with the Government's attitudes to these matters.
Cost savings have been put forward as the purpose of this Bill. I suggest that as with transport, telecommunications, gas, airports as with ordnance factories—outrageously in my view—these proposals are justified by but two criteria. They take off the national payroll thousands of public servants and thus fulfil the Government imperative of cutting the Civil Service; and they provide the opportunity for private profit to be made out of public need and the defence of the realm. All other considerations are but dogma. We are also entitled to be deeply worried about the aspects of nuclear safety. That is something to which we shall return time and time again.
Let me review very briefly the options which the Government had before them. As the Minister said quite rightly, there is nothing that is original or has not been fairly thoroughly examined over the past few years. But in 1980 the then Navy Minister chaired a committee which looked at agency management and concluded:
"The disadvantages are that the management would have little incentive to make itself more efficient while the usual justification for an agent is that he has the resources and skills of the parent company to fall back on. In the case of the dockyards the reverse is more likely to apply. We do not therefore favour this option."
That is a quote from the Navy Minister who chaired a committee under this Government in 1980.
The Mallabar Committee of 1971 had this to say:
"The agency factory arrangement has, we know, been used fairly extensively in times of war emergency. But those of us who have had direct experience of its working are satisfied that this is the way to get the worst of both the commercial and the Government dockyard worlds. We would certainly not recommend it for the dockyards".
That is a quotation from a very respectable source.
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I want to turn very briefly to some of the local worries. It was the Member for one of the Plymouth seats, Miss Janet Fookes who said on 2nd December (at col. 45 of the Official Report, in another place):
"I accept along with other individuals, organisations and Select Committees, the need for some change in the organisation of the dockyards. In saying that I am paying no disrespect to the workforce, which can only be as good as those who lead it and the system under which"—
Lord Trefgarne: My Lords, I hope that the noble Lord will forgive me for intervening, but I understand that he is not in order to quote a Back-Bencher in another place.
Lord Graham of Edmonton: My Lords, even someone as authoritative as the Member I was quoting? I simply want to say that the Member representing the area of direct concern in Plymouth has certainly indicated to the other place, and I simply report to this House, that the workforce in Plymouth have done nothing to earn the enormous burdens and traumas which are being vested upon them at this particular time.
Already 2,000 jobs have been lost in the Plymouth area and in Rosyth as a result of changes which have been made. When we refer to Rosyth we are talking about no mean business; we are talking about a national asset of great pride and achievement, and the Government think so too. In recent years some £200 millions have been invested in that naval base. The major projects have included a new access road, new facilities for HM ships' companies, new police buildings, new stores and improved nuclear refuelling facilities.
It is planned to spend £200 million over the next 10 years. There are 8,500 direct plus 2,000 indirect jobs involved at Rosyth. There are 650 craft apprentices under four years' training. It has a health and safety record which is impressive by any yardstick. It has a disputes record which many large industrial companies would envy. That is what at present is in a high state of uncertainty and tension as a result of the actions of the Minister and the Government.
The trade unions representing the workforce in the dockyards have responded positively to all reviews and suggestions for change. That is not to say that the trade unions accept the criticisms of the dockyards made by the Government. I shall be arguing their case more specifically at the Committee stage, but they have said that one way to improve the customer-supplier relationship with the Navy, to give managers more authority to manage and to improve accounting procedures would be the creation of a trading fund. The Speed Committee advocated a dockyard trading fund as a total operating regime rather than a mere accounting change, and the trade unions support that.
The noble Lord the Minister will not need reminding that when we debated the ordnance factory legislation we had some anxious moments on assurances to, among others, members of the Defence Police Federation. I am grateful to the Minister for what I believe he did earlier, which was to repeat assurances that were given by his honourable ministerial friend, Mr. John Lee, that there would literally be no change in the status and operating

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methods of the police. When the noble Lord replies, I should be grateful if he would confirm that he has reiterated the assurances that were given earlier.
If the Minister will not listen to some unbiased and independent observers, perhaps he would care to listen to the views of a former Director of Dockyard Procurement and Support, Rear-Admiral Philip Marrack. He was responsible for production, programming and capital investment in the Royal Dockyards, including the contract procurement of warship refits. In a paper commenting on the Government's proposals he said:
"Strategic Defence installations of this nature must remain in Government hands, and the UK Government seems to accept this, but they are proposing to inject a contractual block between the Navy and its heavy repair force."
He goes on to say
"All that a contractual negotiation will achieve is a lot of delay and an increase in the Navy's cost by the Contractors' profit with inflated claims for so-called extras".
This Bill is one of the most ill-prepared, poorly researched and irresponsible Bills, which even this Government have introduced over the past six years. Franchising and agency arrangements may be all right for fast foods and hamburger joints or for soft furnishings, but surely such a complex, sensitive and crucially strategic arm of national defence deserves better than a franchising arrangement. This Bill is an irrelevance at the present time. It seeks to shatter the traditions and the achievements of generations of dedicated men and women who proved as recently as the Falklands crisis that they have the flexibility, the skills and the national interests to do all that this Bill wants them to do. All this Bill wants in the national interests is an offer by a government which believe in co-operation with the workforce of a service to the Fleet at all times and in all circumstances.
During the Committee stage we shall seek to stimulate the interest and experience in defence matters which exists on all sides of this House so that we not only save the jobs of thousands of fine workers, but we save the Government from their own stupidity.
12.6 p.m.
Lord Mayhew: My Lords, the noble Lord spoke at some length about the Government's high regard for the workforce and their sensitivity to their interests. However, one would not have gathered that from the Bill, the simple purpose of which is to enable the Government to get rid of the workforce without delay, against the wishes of the workforce. The employees wish to remain servants of the Crown; they prefer to work for the Queen than for the chairman of Trafalgar House, or whatever company, and who will blame them for having that preference? However, the Government say "No", and have produced a Bill to that effect.
I find the actual wording of the Bill peculiar. It calls for:
"the transfer by the Secretary of State of persons employed in the dockyards from Crown employment to a company, which would become their employer".
It is a transfer against the will of the workforce, provided that the price is right. It is a strange concept. To me it seems autocratic, although it may not seem
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so to everyone. It seems a strange purpose for a Bill. The noble Lord, Lord Trefgarne, listed the reasons why the Government wished to do this. I suggest that there is another reason, which perhaps for reasons of delicacy the noble Lord did not mention, although the noble Lord, Lord Graham, touched on it. A major reason is that they wish to change the status of the workforce in such a way that Ministers can claim to have cut the Civil Service. That is the real reason. I was a Defence Minister in the Wilson Government, and we did the same, although our motivation was slightly different. We would hive off branches of the defence services, the defence forces, in order to show our political activists that we were cutting defence expenditure. The Government are doing exactly the same thing in order to show their political activists that they are cutting the Civil Service. Not only is this a major reason for the Bill, but it is the only aim in the Bill which stands any chance of being achieved.
The noble Lord, Lord Trefgarne, spoke about saving money; but, as the noble Lord, Lord Graham, pointed out, we have the 21st Report of the Public Accounts Committee. In his speech the noble Lord, claimed that, from evidence to the Public Accounts Committee, £21 million a year would be saved. However, a careful reading of this report shows the opposite. It shows in polite language that the Public Accounts Committee is saying that it does not believe the Government. It does not believe the £21 million. The noble Lord, Lord Graham of Edmonton, quoted to this effect. I could give many more quotations from this report. Of course, the costings which the Government give and which the noble Lord gave are totally inadequate to enable us to judge whether or not this £21 million means anything. We would need far more figures, far more facts, many more estimates, before we could accept this, especially in the light of the conclusion of the Public Accounts Committee.
Turning to the other reason—efficiency—there is a mass of evidence of impartial investigation now by the Mallabar Committee and by the Select Committee on Defence in the other place, which contradicts the Government's claim on efficiency. I was rather struck by a remark by the Minister of State for Defence Procurement in the other place on the Second Reading of the Bill. He referred to the refitting of Polaris at Rosyth. I had some personal responsibility in the old days for this kind of thing and I was struck when he said, "We have no complaint about the quality of that work; the quality is extremely high. But that is not the only work carried out at Rosyth".
It is surely interesting that the Government should be wholly satisfied with the refitting of the Polaris submarines at Rosyth. What is it that they do there that they do not do elsewhere? There is no competition, after all (is there?) in refitting Polaris submarines. Thatcherism has not yet got down to a free market for Polaris. There is no competition. The management system is the same. Why is it then that great results are achieved here which are not achieved in other parts of the dockyard? Possibly the noble Lord can enlighten us on this because it is done by Crown servants in the same way as in other parts of Rosyth and Devonport; and yet the Government are wholly satisfied with it.

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I think it is true that the Government believe they will gain in efficiency because the commercial interests of the contractors are bound to coincide with the defence needs of the nation. That is it. It is a theory. It is a doctrine: what is good for Trafalgar House is good for the United Kingdom. This is, I suppose, why it is a Conservative Government, because that is the basic ideology of the Conservative Party.
Suppose the contractors find that they can make more money by spinning out the work, by taking short-term views, by giving one contract priority over another, by cutting down unused capacity in ways that seriously undermine the readiness and operational efficiency of the fleet. It is pure dogmatism, pure ideology, to suppose that there is an automatic corresponding of interest between the financial interests of the contractors and the needs of the nation. Once this Bill is passed and the new system comes in, the navy will not be able to tell the contractors what to do. It cannot tell them to do this or to do that to its ships in this or that order of priority. It cannot do that at all. If it wants something done it must tempt the contractor, it must bribe the contractor, and if it wants something done urgently it must bribe the contractor outrageously because the strength of the position in which the contractor stands is perfectly plain to anyone who has studied this at all. In practice, nine times out often the contractor will be in a monopoly position because the delays and difficulties of taking the job elsewhere will be prohibitive. This will crop up again and again. As I say, the navy can only get its way by tempting the contractors on a basis of commercial profit.
As the noble Lord, Lord Graham of Edmonton, indicated, there are a number of alternative ways of going about this: reforming the existing set-up, having a trading fund or a publicly-owned company. All have advantages and also some disadvantages. We shall no doubt be discussing those a great deal at Committee stage and they have already been exhaustively discussed in the other place. The one point they all have in common, in my judgment, is that they are better than the scheme the Government are now putting before this House.
Nobody really supports this Bill. The Public Accounts Committee does not; the Select Committee on Defence does not; the workforce certainly does not; Rosyth does not; Plymouth does not. We shall hear from the navy later in the debate. The Labour Party, the Liberal Party and the Social Democratic Party united against it. The Minister gave an excellent explanation of the Bill. I do not think he gave the impression of being swept forward by a sense of burning mission in support of the Bill; not at all. I doubt very much whether there is any passionate support for the Bill on the other side of the House.
I urge the Government that the new report of the Public Accounts Committee could give them pause. There is no need to rush into implementing this Bill. It is a bad Bill and we shall have to improve it as best we can during the Committee stage.
12.16 p.m.
Lord Lewin: My Lords, I must first declare an interest in the matter that is before us. I am a part-time
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chairman of a shipyard on the east coast which employs between 400 and 500 people. We are building a small auxiliary for the Royal Navy—a coastal survey vessel. From time to time we tender to the Ministry of Defence for the refit and repair of very small and minor ships and craft—landing craft, auxiliaries and that kind of thing. The business is very marginal to our affairs. I have another interest, and that is the efficiency and wellbeing of the Royal Navy. One may say that those two interests could be in conflict. From my first interest, I might wish that the dockyards should be inefficient so that we could pick up some of their business. I must assure your Lordships that it is the second interest that is paramount in my concern and in fact I see no conflict.
The noble Lord, Lord Graham of Edmonton, was kind enough to refer to my experience and I shall, if I may, speak from my experience. Looking round your Lordships' House, I can see that only my noble and gallant friend Lord Hill-Norton would perhaps argue with me on which of us has the greater experience of ship refits in dockyards, by they royal or commercial. So long as there have been ships, the navy has had a love-hate relationship with the dockyards. The enthusiastic captain and his ship's company take their beautiful craft into the dockyard. They see her torn to pieces before their eyes and get dirtier and dirtier. They see the pieces of the jigsaw put back again. They see time running out. The completion far too often is hurried and far too often equally is late. They then take the ship out again and spend the next three months bringing it back to its former state of efficiency and beauty.
That is not to say that the dockyards cannot do a good job. Of course they can. I have the greatest respect for the skill and craftsmanship of the dockyard "matey"—and I use that term as a term of affection. I have fondest memories of taking "Hermes" out of Devonport dockyard after a two-year modernisation while she was still in dockyard hands and dockyard control to carry out engine trials. All the machinery, the main auxiliary, was manned by the dockyard. My small ship's company was responsible only for navigational safety and communications. After that two-year refit everything worked magnificently. One of my most treasured ship's company photographs is of myself surrounded by a dockyard matey ship's company of 500 people. I hope that some of them treasure the photograph as much as I do. The modernisation, I may say, finished a month late.
I agree with the noble Lord the Minister that it is not the skill and dedication of the workforce that is at fault, but it is the nature of the management. The dockyards, too, have always had this ability to rise to an emergency. The case of the Falklands has been mentioned, and indeed the dockyards did well. But I would not overstate that case.
The commercial shipyard did equally as well in their modifications in very short time to merchant ships, as did the naval support organisations of stores and transport and armament supply, and of the work that was done in the dockyards a proportion—perhaps quite a significant proportion—was in fact carried out by workers from contractors who supply the weapons systems, the sensors and the warning systems. The dockyards can do a good job. It is the management

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that is at fault. I am sorry to say that eager ships' captains would often put efficiency first, and are not too concerned about price. It is only later in their careers that they realise the effect of poor timekeeping and high cost on the navy as a whole and the total disposition of resources.
The long-standing dissatisfaction with the performance of both timekeeping and cost is reflected by the frequency of reviews in the dockyard organisation and performance, which the noble Lord the Minister has already mentioned. He mentioned 15 years. May I speak again from my personal experience of 25 years of dockyard reviews, which seem to me to have occurred at intervals of at least two to three years. Since each one takes something like a year to 18 months to conclude, and then the reports have to be studied and considered, this in fact means that the dockyards have been under almost continuous review for, in my personal experience, the past 25 years.
As a junior captain on the naval staff I sat on the Jarratt Committee (an internal committee) which was set up to reconcile how a projected dockyard overload could be tailored to the dockyard capacity. The committee sat for about 18 months. About half-way through our terms of reference were changed to see how dockyard capacity could be tailored to what was now a projected dockyard underload. Some other policy decisions had changed the nature of the load in that time. Fortunately by that time I was back at sea.
In the late 1960s, as Assistant Chief of Naval Staff, I was responsible for a study to decide what dockyard capacity the navy needed for a fleet that was going to be without carriers, the decision to dispense with the carriers having been taken. My recommendation was that we should close Chatham because its capacity would certainly not be needed. Ministers seemed to agree with this, but my naval superiors did not, and Chatham did not close. They were right, because in the ensuing years the dockyard productivity slumped to such a great extent that Chatham was in fact required. I believe that there is perhaps another Parkinson's law, which says that dockyard productivity automatically adjusts to match the load.
We went on through other more prestigious studies which have already been mentioned—Norfolk, Mallabar. In the early 1970s a quango was set up called the Royal Dockyard Policy Board. On it were put eminent accountants, industrial relations consultants, trade unionists. It was chaired by the navy Minister. As the Vice-Chief of Naval Staff I represented the customer. I can remember vividly taking these eminent gentlemen through the entrails of a nuclear submarine deep in refit in Rosyth dockyard, and it brought home to them the complexities of refitting a modern warship. Some time after I was lucky enough to be the First Sea Lord. The problems we suffered in the dockyards at that time—I am talking of 1978 and 1979—were one of my major headaches.
At that time it was my practice to write a newsletter to all officers in command, from the admiral commanding the fleet to the junior lieutenant who commanded a small patrol vessel, to let them know what was happening in Whitehall. I should like, with your Lordships' permission, to read what I said about
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the dockyards in two of those newsletters. The first was written in February 1978. I said:
"We have been taking a special look at the dockyards and the problems therein which have plagued us for years (centuries?). The management have the difficult problem of contending with a workforce whose pay and conditions of service are largely outside their control. Somehow we have to win the dockyards to our side, with a stronger sense of loyalty and motivation. The Chief of Fleet Support"—
who was at that time that excellent officer, Admiral Eberle—
"has been working on a new charter for the Royal Naval Dockyards which will recognise their special needs, provide a sense of stability and a new direction for the future. We shall not achieve any dramatic overnight improvement. It will be a long haul and we shall need both political and trade union help."
I went on:
"A complication has been the proposal, pressed on us politically for some years now, to run the dockyards on a trading fund principle. The unavoidable monopoly nature of the customer"—
the fleet—
"[to] the supplier"—
the dockyard relationship—
"coupled with the complexity of modern warship repair … just does not make sense, and we hope shortly to put the idea to bed."
We seem to have at least succeeded in doing that.
Fifteen months later I wrote another newsletter. In the intervening period things had not gone well. I said:
"The summer of 1978 saw the damaging industrial civil servants' pay dispute and its consequences, up with which you all had to put. The frustrating events at the Clyde submarine base, where naval ratings were used to load "Revenge" with replacement missiles, and at other naval bases and establishments are well known to you all. There was disruption of ships' programmes and aggravation and inconvenience for ships' companies both ashore and afloat. Now we are left with a large backlog of dockyard work, which means that we shall certainly have to cancel the second major refits of the Batch 2 Leanders, "and there may be more of the same medicine to come. Meanwhile the morale and motivation throughout the whole of what I look upon as the civilian part of the navy, because without them we cannot operate, remains at low ebb. This is our greatest present concern, for so far no adequate remedial steps have been taken."
I went on later in the same letter:
"To make up some of the dockyard capacity lost during last year's industrial dispute, equivalent to 10 Leander normal refits, we have had to put more refits out to contract with commercial ship repairers. This has meant further unwelcome turbulence for the ships' companies of some ships, but it has shown the dockyards that they do not have the monopoly that they thought they had. They have seen the ships emerge from successful periods in commercial yards where traditional trade demarcations have given way to a refreshing flexibility. If we can achieve a similar approach in our own yards we shall be able to increase our productive capacity to an extent that will allow us to undertake all but the marginal load in house."
Further down I say:
"I have re-read what I said to you 15 months ago about the dockyards. Then the mesage was the need to win the dockyards to our side, with a stronger sense of loyalty and motivation. Sadly, we have slipped back, and our task is now harder and will take longer, but the aim remains the same."
Again our hopes were not realised, and the situation has not improved since that time.
The Navy Minister, Mr. Speed, who has already been referred to, picked up the pieces of the trouble we were in in 1979 and did yet a further study in 1981. By that time I was no longer directly responsible for naval matters, but I understand that he put forward some sound proposals, but they were completely overtaken by the review of our capability undertaken by

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Secretary of State, John Nott, which made fundamental changes in the shape and size of the navy, removed half-life modernisations from the dockyard programme, and swept away all the basic assumptions which under the Speed review had been carried out.
So there came yet another study, this time by Mr. Peter Levene. This produced a proposal to put management out to commercial tender. This is not a new proposal. It has been looked at before, but never before has it been seen to be politically expedient. I rather suspect that the germ of the idea on this occasion came not from Mr. Levene but from some naval officer with deep experience of dockyard affairs.
I hope that I have not wearied your Lordships with this retrospective. I wanted to show that the dockyard problem is not new and it is very difficult. Indeed, if Lords Anson and St. Vincent, First Lords in their time, who wrestled with dockyard inefficiency with some success, were here today they would find the scene disturbingly familiar. Will these proposals work? In my view they have at the least a very good chance, because they tackle two of the most intractable aspects of dockyard management: the ability of the local management to manage, which as long as the dockyard management and workforce remain within the national Civil Service is impossible, and the ability to escape from the straitjacket of restrictive practices.
The performance of recently privatised ship repair yards and the greatly increased flexibility which it has been possible introduce in Portsmouth, where the dockyard has been subsumed into a maintenance base, give me great cause for optimism. Of course, I have some concerns. Cost has been mentioned. It is difficult without full access to all the facts and all the calculations to make a realistic assessment of costs and whether we shall save money or break even.
It is also very difficult to foresee the future and what may happen to upset any calculation of cost which may be made now. Even if we manage just to break even—I believe there is a very good chance of that—and achieve greater efficiency, we have succeeded. If we could cut normal refits by 25 per cent.—I see no reason why we should not with better management—time is money and we have made a considerable saving by increasing the operational availability of the fleet.
I have another concern. I understand that a new naval organisation under the Director General of Ship Repair has been set up. This organisation will represent the customer. It will specify the work package to commercial management, negotiate the contract and oversee the work. The place of this organisation in the future is crucial. I urge the noble Lord to ensure that it is given the necessary staff, adequate in size and with experience and capability.
The assets are to remain in the possession of the Government. I am concerned that these considerable assets, worth a great deal of money, will be properly maintained, updated and improved and the right level of capital investment to provide for the future is put in. I hope that the noble Lord will reassure us on what arrangement will be made for this.
I was concerned about security, but I was glad to hear that the Ministry of Defence Police responsibility
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will remain unchanged. I share your Lordships concern on nuclear safety. The present organisation for nuclear safety, which is largely naval, has an excellent record and is tried and tested. I hope it will be possible to retain this and to build on it.
My final concern, which I know all your Lordships share, is for the people. They have given us long, loyal and dedicated service. They must now have considerable anxieties about their future. They must be fairly treated. I hope that great priority will be given to their treatment and to proper arrangements for redundancy and retention of pension entitlement, which should be fully explained to the workforce as early as it is practical to do so. If it is not, we are heading for trouble.
I support this Bill. I believe that it has a very good chance of breaking us out of this long concern with the performance of the dockyards. We cannot go on tinkering and altering here and there. We have to do something radical. This in my belief has a good chance of producing the best long-term structure to meet the needs of a modern fleet. I understand that it is backed by the naval members of the Navy Board and I have great respect for their judgment.
12.35 p.m.
Lord Beloff: My Lords, in view of our pleasant ceremony last Wednesday, it may be thought indelicate to refer to the defeat of the Spanish Armada. Nevertheless, that is a reminder of the long history of the importance attached to the backup for the Fleet and particularly to the role played in this by the West Country.
It is not surprising that this debate has attracted a number of speakers, including the noble and gallant Lord who has just addressed us and his former naval colleague, the noble and gallant Lord, Lord Hill-Norton, who will address us later. The words that have just been spoken in support of the Bill by the noble and gallant Lord, Lord Lewin, should convince those who do not bring to this political prejudice that it represents a possible, and perhaps the best possible, solution to a problem the history of whose innate difficulty we have heard recited.
However, I think that the noble Lord the Minister and his colleagues may have more work to do to convince everyone concerned of the desirability of the Bill, partly because, although Napoleon said that it was desirable that a constitution should be brief and obscure, I am not quite sure that that also applies to Bills. This Bill is both brief and obscure, and, indeed can be understood only in the light of the explanations that have been given to us today by the noble Lord the Minister and in other papers and documents circulated on the Bill's behalf.
There are two questions and two only that I should like to ask. One was touched upon by the noble and gallant Lord, Lord Lewin, in relation to assets. One of the difficulties that must have been in the Government's mind was the handling of something which is not a totally independent company in the sense that it does not own the means of production, and the desirability of giving it managerial flexibility. Since managerial flexibility (freedom from Civil Service rules, if one wishes to put it that way) would in

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normal situations include decisions about purchases, new equipment, updating equipment and renovation of equipment, it is not clear on the face of the Bill exactly how this responsiblity is to be shared and whether the new management, even though it will be given the kind of freedom in relation to the workforce which is emphasised, understandably, in the Government's presentation, also applies to the acquisition of relevant assets and to whom these assets when acquired should belong.
If the Civil Service routine about purchases is not also removed there will still be a considerable degree of overhead control and that in itself is bound to be expensive. The House is entitled to somewhat more detailed explanation on this aspect of the proposed running of these companies than is apparent in the Bill.
The second issue on which I think one needs a little further conviction—because, after all it is making a considerable change which will affect both the Fleet and, as has been pointed out, the workforce and, indeed, all the inhabitants of the two towns which are principally involved—is whether the Government really believe in this Bill. I will support them with enthusiasm if I feel that that enthusiasm exists. It may be a curious question but there is in the third clause of the Bill a reference, to which the noble Lord the Minister referred, to the Secretary of State taking over the liabilities which the company might have incurred if he were to bring it back into public ownership.
Although the noble Lord the Minister did not enlarge on this, in other documents it has been suggested by the Government that they might require to do this—I think the phrase used is—"in times of tension or war." War, we hope, is not something for which they need to provide at any rate in the near future. Tension, however, I should have thought, is something that is always with us. I cannot see any prospect on the international horizon of a disappearance of tension. Therefore, one has to ask oneself why it is, if the Government are unconvinced that this new arrangement would work in a situation of tension, that they are keen to bring it about.
This may be a misunderstanding. It may be that what they had in mind was something quite different but it seems to me that, apart from circumstances of major war when a great many things have to be altered in relation to defence matters, the system under which one is working should be something in which one has total confidence that, whatever the pressures may be, it will respond. I should like to hear from the Minister, as I imagine would other noble Lords, that the Government are of the opinion that the proposed organisation would respond to the needs of the Fleet. Those needs after all, have brought us here this afternoon.
12.43 p.m.
Lord Denning: My Lords, I should like to say a few words, first because of the close association of my family with the Royal Navy, with my elder brother in the first world war; my younger brother in the second world war, and my nephew in the Falklands, therefore, we are very interested in what happens to the Royal Navy. I am interested also in a close association with
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the City of Plymouth of which I was the Recorder in 1944. That is my interest. Then, when I come to read this Bill, I am aghast at the powers given to the Secretary of State to upset all that we have known of the maintenance and control of our Royal dockyards. The Minister, Lord Trefgarne, was good enough to say, "The ownership of the land will still remain in the Crown." What about the leases of the land, the fixed equipment, on which we spent millions and millions? That can be let out. The clause says it. What rent will the Government charge? It cost hundreds of millions of pounds to put it there. Will this commercial concern pay a fair and reasonable rent for it or not?
Also, the moveable equipment. That, I suppose, will be let out or even sold or whatever it may be. What is to be done about that? Even more important, what about the new capital cost, whether in new docks, new sheds or whatever it may be or modern devices? Is the company going to provide the capital for that? Surely, the Government would have to do it. Those are the questions in relation to this Bill which it seems to me those promoting it have not considered. That is in regard to the actual use of the property of the Crown in the Royal dockyards which have been the property of the Crown all these years and still remains the property of the Crown, but let out. That is about the land, the equipment, of our Royal dockyards.
What about the workforce? Through traditions coming down for centuries, the essential ancillary to the Fleet is the repair of its ships, keeping them in fighting order. And in the workforce the tradition has come down for centuries? What is to happen to them? Under this Bill they are to be transferred automatically, without any consent of their own, from the Crown to a company of which they know nothing. It is a fundamental principle of our law going back to a case called Doncaster Colliery v. Nokes in 1940. No man is bound to his employer to have him change without consent. That was a case where there had been an amalgamation of two companies. It was said in law the servant was bound to obey and to be employed by the new amalgamation company. The House of Lords said, "No. No man is bound to change his employer without his consent."
What is to happen to this Bill? All those dockyard mateys—and I, too, can use a Naval phrase—will be automatically transferred from the Crown, loyal servants of the Crown as they be, to a private contractor, with no more of the safeguards that they had had before, and contrary to the general principle. That regulation, which is referred to in paragraph 2 of the protection of employment regulations, deals only with transfers between two ordinary commercial concerns. Interestingly enough, there is a special exception for seamen on a British ship that if the ship is sold to another concern, a foreigner, the seamen is not bound to serve that foreigner. That is an exception to that transfer of employment. That is a seaman on a British ship.
What about a dockyard worker in the Royal dockyards? I should like to say that the principle of law still applies. He is not to be forced to take a new employer without his consent. There it is. This Bill overrides the dockyard workers in this. My noble and gallant friend Lord Lewin has said, "Of course, there must be change. The whole thing at the moment is

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inefficient; it is all governed by the Civil Service, red tape and the like. The work does not get done; it is not done properly; it is not done economically." I can see that. That is all quite right.
But what is the right solution? Is to form the company the right solution? The Bill tells us nothing about it. Although some reassurances were given by my noble friend the Minister, nobody knows anything about this company. So far as concerns the Bill, it is an unnamed, unknown, uncapitalised company. We do not know anything about the shareholders or anything like that. It is all in the Secretary of State's control. The Bill does not give Parliament any control. We are told that about 30 per cent. of the shareholders are British and all that sort of thing. Have your Lordships heard about nominees? Many shares are held by nominees and foreigners and the like. The formation of a company to run our vital dockyard services is a matter of special importance: its constitution, its charter, its formation, its shareholders and the like. Surely, it is a matter in which Parliament should have a say, and it should not be left entirely to the Secretary of State.
We were told that 1 per cent. was to be for the Government and that provisions in the articles of association and the like will give some overall control. But such matters ought not to be left to the Secretary of State. Parliament itself ought to have a say in the constitution, shareholding and management of a company such as this, which is to play a vitally important part in our defences.
I would just say this. Commercial management is not the sole criterion. National security must be remembered. Also, when emergencies arise, whether in the Falklands war or in the other wars we have had, all these services must be called upon at once. Like a fire brigade, they cannot be run commercially. They must be sitting in the rest room, or wherever it is, for six months but then a great fire comes and there is an emergency. That is why our forces in the dockyards are so important. They must be ready at once to step in when an emergency arises.
I would suggest to your Lordships that this Bill needs most careful consideration as it passes through the House to see that national security is defended to the uttermost and that our workforce is well and fairly treated. Subject to that I say let the Bill have a Second Reading and let us amend it a great deal in Committee.
12.52 p.m.
Baroness Vickers: My Lords, I am very pleased to have the opportunity of taking part in this debate, and I should like to start by thanking the noble and gallant Lord, Lord Lewin, for thinking about people, because a great deal of this Bill concerns people in the future.
Before I put forward my views on the Bill, I should like just to say something about Devonport. In 1689 the main threat to Britain came from the Dutch and the French. That was the time when the dockyard began to expand. With all the previous wars, the two world wars and the Falklands within living memory, I think that the dockyard, as the noble and learned Lord who has just spoken has said, has done a wonderful job. Devonport was second only to Coventry in being bombed by the Germans in World War II and people
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were so keen to do their work at that time that the workers went out and camped at night on Dartmoor so that they could get to work next day when perhaps their houses were being bombed in the city of Plymouth.
Since 1691 the yard has expanded and now encompasses more than 300 acres, with a waterfront which is more than three miles long. In considering the changes which are about to take place, I should like to pay tribute to those who have served and are currently serving in the yard. There is hardly a family in Plymouth which has not had members either working in the yard or serving in the Royal Navy.
Hereditary peers are naturally proud of the service of their ancestors, and I should therefore like to put on record my appreciation and the appreciation of the whole nation for the services rendered by those who have been serving in the yard for generations. I wish all who will continue to serve their country at Devonport and who will be the forerunners in the new technologies which will produce the safeguards for generations to come the very best in their endeavours.
I should like now to turn to the Bill which, as the Minister has said, seeks to introduce a system of management by contractor of Rosyth and Devonport dockyards. The most encouraging aspect of this plan is that it has shown the determination of the Government to do something in regard to the manner in which the dockyards are run. I know that I speak for everyone who is seriously concerned about the future of Devonport dockyard when I say that change is essential for the future of the dockyards. In that I agree with the noble and gallant Lord, Lord Lewin.
I understand that both the management and the workforce are agreed about that point, and indeed I believe that the change will allow the dockyard to realise its full potential. The point with which I take issue concerns the style and the pace of change. Certain moves have recently been taken to improve the effectiveness of the dockyard, and it is important to note that they were taken jointly by the management and the workforce. Already notional attendance has shown a reduction; the refit of HMS "Superb" was completed on time and below estimate; and the comparator exercise COMPLEX showed that the dockyards stand favourable comparison with private yards.
If I may, I should now like to outline what I believe to be the major disadvantages of the management contractors scheme. Most importantly, a company which is awarded a contract to run the dockyards for a period as short as seven years is taking on an impossible task. That worries me. It will be impossible for both the contractor and for the dockyard. To take a dockyard as large and as complicated as Devonport and try to franchise its management, with a change every seven years, can be nothing more than an experiment. The management contractor will not manage in the best interests of the dockyard or the Fleet: he will manage in such a way that only his own short-term interests will benefit. His lack of motivation to manage for the long term will create enormous problems, especially at the end of the contract period. Evaluation of and dealing with such complicated work on such an enormous scale requires far sighted management and long-term plans.

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Secondly, this scheme will introduce a system of split control which will entail an enormous and costly organisation (mentioned by the noble and gallant Lord, Lord Lewin) called the Directorate-General of Ship Refitting trying to control the two dockyards at Devonport and Rosyth from its headquarters at Bath. I suggest that it will be impossible to monitor the contractor at such a distance and it will also create a variety of administrative problems. These will enable the contractor to blame the arrangements for any shortfall in his performance.
I know that I am not alone in my fears for this scheme. Plymouth City Council commissioned a survey to look at the many possible options for the future of the dockyards. The survey was made by Peat Marwick Management Consultants, which viewed the Government's scheme as an experiment. Reports by the Defence Select Committee and the Public Accounts Committee in the other place have also cast serious doubts on these proposals.
I agree with many of the conclusions of these reports and should like to read some brief passages from them to illustrate my doubts. The Defence Select Committee accepted the criticism which was made by the majority of the witnesses, who claimed that the time allowed for consultation was too short and that the MoD's handling of the consultation process had been inept and insensitive. In paragraph 34, the Defence Select Committee stated:
"The MoD have supplied no precise information on how security would be organised".
We have heard a little more about that today. In paragraphs 40–43, it is said in the report:
"The Secretary of State said, 'the proposal is based on American experience' and cited examples of 'large organisations involved in defence being managed under this system.' It seems clear that this would be a misleading assumption. It is difficult to avoid the conclusion that the various government statements citing foreign experience as a precedent for agency management and a guarantee of the respectability of the concept, were not based on any kind of systematic investigation".
The Public Accounts Committee said of the scheme:
"We note that the savings may be as little as I per cent.",
and that these were
"within the normal margin of error for such calculations".
More recently, the head of the MoD Privatisation Planning Team announced that the scheme would cost some £70 million. That is almost as much as the project was intended to save in its first three and a half years. Surely the time has come to look again at an alternative future for the dockyards. A training fund is the scheme which has been recommended by successive dockyard reviews, including Mallabar and Speed. That would allow for the introduction of commercial accounting, make a clear separation between customer and supplier, make possible substantial gains in efficiency, encourage an element of competition and safeguard strategic interests.
Running the dockyard as a Companies Act company (a plc) was recommended by Peat Marwick. That, I know, is regarded by the Government as an alternative solution should there be no suitable bidder for the contract. I understand that the Government have commissioned Coopers and Lybrand to study the fall back option. That would guarantee strategic
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interests, allow the company commercial freedom and permit employees to take shares in their own future.
I should be grateful if the Minister could also clarify a point about apprenticeships. I hope that he will confirm—I have had information from a different source—that incoming management contractors at the two dockyards will be bound by law to continue apprentice training. Furthermore, I hope that he will be able to confirm that existing pension arrangements will be safeguarded.
To conclude, I should like to say what I believe would present the best possible option for Devonport, Plymouth and the nation. The present management of Devonport dockyard has shown its faith in the future by making a bid for the dockyard. I should like to see it taking control of the yard but not on a contract as short as seven years. It would then be able to continue to improve the manner in which the dockyards are run and to do so with an assured future for all concerned. The question of foreign control has already been mentioned. We should like to avoid the risk of foreign control and we think that management control would be the best way of doing that. It would make certain that a sense of continuity is allowed to prevail as improvements are made. I do not expect the noble Lord to answer today if he genuinely considers all the points that I have put forward, but I urge the Government to think again.
1.2 p.m.
Lord Hill-Norton: My Lords, like my noble and gallant friend Lord Lewin, I must start by declaring two personal interests in the Bill. First, I am retained as an occasional consultant to A & P Appledore, which is a member of one of the consortia seeking the management contract of Devonport dockyard, although I doubt whether it will entirely welcome what I am about to say.
Secondly, I am, as your Lordships will know, still on the active list of the Royal Navy. It will not therefore come as a surprise that my primary and overriding concern and interest in the Bill is whether it will provide the best available solution to the timely, economical and proper upkeep of the sea-going fleet, both in peace and in times of war.
I have been greatly struck by the failure to lay adequate stress on that truly vital matter in nearly all the speeches made about the Bill in another place, in most of the published literature and even in the speeches of the noble Lord the Minister and some other noble Lords this morning. It is not easy to read into the language of the Bill that that is the consideration uppermost in the Government's mind, as it most certainly should be.
Everyone connected with the dockyards, however loosely, over the years—I have an intimate first-hand knowledge of them going back more than 50 years—is agreed that change, and drastic change at that, is essential. At Devonport that is true of local industry, local Members of Parliament, the trades unions, the city council, and, above all, of the Royal Navy. Moreover, it is clear enough that both management and the workforce must by now be prepared for change so as to meet what I have called the overriding interest, by realising the latent potential of those great enterprises and by maximising their effectiveness.

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What I regard as the most important issue before your Lordships today is the solution that should be adopted to achieve those aims. I have serious doubts about whether the solution preferred by the Government is the best, if it is, as the noble Lord the Minister has said, straight commercial management, although the Bill does not expressly say so.
There have been a great many attempts, to which many noble Lords and the noble Baroness have referred this morning, to change the present system. Four major initiatives, which I think have also been described this morning, have been taken within the past 15 years. Although all those have failed for different reasons, the problems shown up and the criticisms made of the present arrangements have been common to all of them. They amount to the plain fact that today, and for the past 50 years or more, the dockyards have been inefficient and extremely costly. The primary reason for that state of affairs has been the inability, under the system which has been operating all that time, for management to manage, a point to which many noble Lords have referred this morning, and for the customer, to whom noble Lords have not referred, which is the Royal Navy, to obtain value for money.
The primary reason for that is because the whole workforce is made up of civil servants. Ministers have clearly accepted that analysis, even if they appear to be more interested in apparent tidiness, commercial considerations and market forces than they are in finding a solution which will best serve the navy, so be it.
In the Defence Open Government Document 85/01 the Government explained all those matters clearly. They set out what they believed to be the options for putting that right. I agree with that analysis although I do not think, as I have just said, that they have selected the option which will best meet the Fleet's requirements. I am not alone in that view. As the noble Lord, Lord Graham, and others have said, the Public Accounts Committee was extremely critical of ministerial claims of likely financial savings. The noble Lord the Minister has told us about them and other noble Lords have referred to them. We may save £21 million a year during the first seven years while the start-up costs of £70 million are amortised. It would rise thereafter to £28 million a year.
Those are useful, although they are not large sums, in the context of a defence budget off £18,000 million. There are those certainly in the trade unions who say that the start-up costs will be much higher. I have no view on that. I have no way of forming a view on that. I believe what I am told by the Minister.
If those other people are right and the start-up costs are much higher, the possible savings will be much smaller and might even disappear altogether. What I find deeply disappointing is that Defence Ministers have allowed themselves to be bounced by the Treasury so that, whatever savings come to hand, they will not benefit the defence budget. Indeed, the reverse is true. As the noble Lord, Lord Graham, has said, if those proposals are implemented as they stand, and the figures that we have been given are right, the defence budget will lose £21 million a year and later
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more. Even after all my years in Whitehall I can still hardly believe it.
The Select Committee on Defence was much more critical than the PAC in several respects, in particular over the consultation process, which it described as much too short, and ineptly and insensitively handled. From what I know of it, I would agree. What concerns me more than that is the view of that committee, which I share, that the preferred option is a high-risk one. I am sure your Lordships will agree with me that it would be most unwise to take high risks over what is the most important element of our defence policy, the Royal Navy.
What are these risks to which the Select Committee, and I, refer? Briefly stated, they lie in the possible change of management too frequently, to which the noble Baroness, Lady Vickers, has just referred, and thus an understandable tendency to have no long-term corporate plan, a weak investment in capital facilities, a confused and possible hostile workforce and a desire to maximise short-term commercial gains. These factors may, and could well, lead to the separation of decisions on investment from those on the day-to-day commercial management of operations. That is a recipe for trouble. The worst trouble to which it could lead would be the lack of adequate capacity in both human and material resources to cope with emergencies, the so called "strategic-surge", which has always happened in the past and is absolutely bound to happen in the future. Success in an enterprise of this nature can come only from management, workforce and the customer having a primary and shared concern in the long-term future. I do not think that this will necessarily flow from the sort of commercial management deal which Ministers have in mind. If it does not, then the Royal Navy will be at risk; and I am bound to find that unacceptable, and so should the Government.
Given the essential requirement of the ability of management to manage, to which I and other noble Lords have referred, and the need to take the whole workforce out of the Civil Service (but not for the reasons rather unworthily suggested by the noble Lord, Lord Mayhew)—without which there is no hope for improvement—it seems to me that the option of a government-owned Companies Act company which the Minister described as a fall-back position is much to be preferred. It seems to me to be much less risky.
There are, and are bound to be, some risks. It is a solution which the Government have used successfully before; for example, in the Royal Ordnance factories. The Government would retain, as they clearly must, overall control. Considerable commercial freedom would become available. Employee participation is likely to improve motivation and moral. There should not be any risk to public expenditure totals. Investment and operation would march hand in hand. I have a strong feeling that the navy would be perfectly happy with such a solution.
Like my noble and gallant friend Lord Lewin, I support the Bill. I do so for the reasons which he gave, but I commend most warmly to the Government the particular solution I have just described. It is certainly allowed for by the Bill before us, and I hope that, amid his very many deeply grave preoccupations, the new

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Secretary of State will carefully reconsider his position in the light of what I and other noble Lords have said in the debate this morning, with the fighting efficiency of the Fleet where it ought to be—at the very top of his priorities.
1.15 p.m.
Lord Ashbourne: My Lords, I was encouraged to speak in this debate by the final paragraph of the Report of the Select Committee on Defence in another place, printed on 27th November 1985, the paragraph read as follows:
"We urge the Government to approach the debates on the Dockyard Services Bill with an open mind and a readiness to draw fully upon the opinions expressed from all quarters, in the best interests of the fighting efficiency of the fleet and of the defence and security of the nation"
I should like to say how much I agree with this paragraph and I hope very much that the Government will adopt an open mind when considering these important matters.
I am going to be as brief as I can be, but this is a complex subject and it is not easy to condense into a few minutes. I shall therefore address three specific problems which I hope will throw some light on the matter. First, what is wrong with the dockyards now, and why is some change in management practices needed? Secondly, how could this change best be done? Thirdly, to what extent would commercial management cure the problems?
The Defence Open Government Document talks of imposing commercial discipline on the navy by introducing a customer/supplier relationship. In several places it refers to introducing competition internally between the dockyards, and also between the dockyards and commercial firms outside. The document further implies that a customer/supplier relationship would make the navy more cost conscious and more thrifty in its demands on the dockyards. All these concepts indicate that the authors do not fully understand the nature of the essential relationship between the navy and its heavy repair force—the way refit work packages develop and are decided, and the impossibility of introducing real competition without making a complete nonsense of dockyard programming.
In most countries having sizeable navies, the naval repair yards are either part of the navy itself or of the country's Defence Ministry organisation—and for a number of sound reasons. The noble Lord, Lord Graham, has already quoted Admiral Marrack who said that stategic defence installations of this nature must remain in government hands. The Government seem to accept this but are proposing to inject a contractural block between the navy and its heavy repair force. The dockyards have to work as an intergral part of the fleet's upkeep organisation. This means that the civilian repair force needs to work almost as directly under the control of the navy's technical authorities as do its uniformed maintainers. The dockyards must be totally responsive to the needs of the fleet.
Under present arrangements this is the case, and when the need arises the Ministry of Defence can tell the dockyards what to do and where to put their
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priorities. But as the Ministry of Defence has often found to its cost, with the new construction shipyards it cannot tell commercial contractors what to do, as the noble Lord, Lord Mayhew, has already pointed out. It can only ask, and if it is to the contractor's advantage to ignore the needs of the navy—for example, by diverting resources to another customers' work, or applying different priorities—he may well do so. It is very difficult to impose penalty clauses in contracts, particularly on monopoly suppliers like naval dockyards; and if commercial contractors were running the yard there could be no certainty that our ships would be refitted or repaired to meet the operational needs of the fleet to anywhere near the extent that they are now.
There is also a powerful reason why most navies prefer to own their dockyards rather than use commercial contractors. It is virtually impossible to produce any form of contract for a major warship refit that will give the customer real prospects of firm financial control. That is due to the size, complexity and uncertainty of the task. At the tendering stage, warship refit work packages can only be partial statements of the work that will be required. The congested interior of a modern warship means that much essential refit work only becomes known after the ship is dismantled in mid-refit, and the consequent extras as to a contract specification give a contractor carte blanche for heavy dislocation and delay charges, which a customer cannot normally refute. Fixed-price contracts are therefore virtually unworkable, although I was interested to learn from the Minister's opening speech that it is the preferred solution.
The alternative is the cost-plus contract, which is more practical but which literally rewards inefficiency. By cost plus I mean that the contractor charges the navy for the cost of the work plus his profit margin of, say 10 per cent. Contracting for warship refits is very expensive in administrative effort—specification, estimating, contract negotiation and overseeing. It is a recipe for spawning bureaucracy.
The talk of competition in the Open Government Document is largely window dressing, because major warships need costly facilities and teams of dedicated people with specialist experience. Each dockyard is therefore specialised for particular ship classes, and the yards could not sensibly compete except for the simpler jobs. The handful of commercial repair yards are all very small and they are not properly equipped for major warship refit work. The element of real competition possible is therefore small. But much more fundamental is the need to plan the main structure of a large warship repair yard programme well in advance. Without such planning, manpower and resources cannot be matched to the ship workload. Competition would, if it were possible, produce a random load unmatched to resources, and the inefficiency that that would create would be vastly greater than anything we have previously seen.
So much for the background philosophy. Now to the first question: what is wrong with the dockyards today? Before discussing that, it is worth reminding ourselves that dockyard managers at all levels are on average as good as their counterparts to be found in outside industry, and they are probably rather better than the majority of managers in the commercial

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shipyards. In the fields of technical innovation, project management, planning and production control, the Royal Dockyards are streets ahead.
There are major deficiencies in the dockyards that need correction. The most obvious weakness is the excessively complex trade structure of their workforce, based on a dozen or so craft unions with strictly-enforced demarcation. While there have been improvements over recent years, the demarcation and balance of trade problems still delay progress and reduce productivity. A more broadly-based trained and flexibly-used workforce could certainly do more work, and there are some who conclude from that that the dockyards are over-manned.
But perhaps the most damaging deficiency in the dockyard organisation is the fact that the dockyard management is allowed no control over the size of its workforce and little effective control over its shape. Complements, wages structures, conditions of service and recruiting policy are either directly or indirectly dictated by a branch of the Treasury, which recently took over that role from the Civil Service Department. The Treasury takes those decisions for the whole of the Civil Service on a countrywide basis, and there is no means by which the Ministry of Defence can shield the dockyards' production workforce from Treasury-imposed cuts in Civil Service numbers, or from imposed constraints on wage rates or recruiting.
That can often mean that when the navy's ship workload is increasing, the dockyard workforce will be declining—causing overloading, delays in refit completions, and increased costs; that when key dockyard manpower is being lost to other industries, the dockyards will not be permitted to increase wage rates or recruit leading to an imbalance of trades and ineffective use of manpower. Without the authority and ability to match its production manpower to its load, the dockyards' management cannot man effectively or conduct its work efficiently.
The main source of inefficiency in the dockyards would be removed if the dead hand of the Treasury could be withdrawn from dockyard personnel management. And given proper freedom to recruit as necessary and negotiate with unions, it seems reasonable to expect that dockyard management could unscramble the workforce trade demarcation problems and agree on broader training for improved flexibility. All that is required is for the Treasury to be told to stop interfering with the dockyards' personnel management, and to delegate that task to the senior dockyard management in the Ministry of Defence, who understand exactly what needs to be done and are fully capable of doing it.
If that would violate too many tenets of Civil Service uniformity—and I am aware that probably it would—then it should not be too difficult to restructure the dockyard service as a separate civilian auxiliary force of the Royal Navy within the public service. It would be largely unchanged initially, but would have the freedom to mould its conditions of service to suit the needs of the naval repair yards.
In a curious roundabout sort of way, I seem to have answered my second question: if some change in management practices is needed, then how can that best be done? The best way to achieve the necessary
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changes with minimum disruption is to leave the dockyards as they are, within the Ministry of Defence, and for the Treasury to delegate its personnel management to the senior management within the dockyard department. The departmental Vote system would ensure that that delegation would involve no loss of financial control. Restructuring the dockyard service as a civilian auxiliary force of the navy would be a viable alternative.
On to the third question: would the introduction of commercial management achieve the required changes? It would clearly be one way of formally decoupling the Treasury from the management of dockyard personnel, but a simple delegation of authority on the Treasury's part would be far less disruptive and much less costly for the navy. Whether commercial management would obtain the required flexibility from the workforce is more doubtful It is difficult to see any suitable commercial firms that have a surplus of able managers who would even begin to understand the unique problems of the dockyards.
The achievements of our larger commercial shipbuilders in that field have not been impressive. Therefore, I doubt very much whether commercial management would provide the whole answer to the dockyard's problems. Commercial management in itself would not even bring improved efficiency. It would have to function without the spur of competition because the dockyards cannot avoid remaining monopoly suppliers. Indeed, commercial managers in a dockyard would have every incentive to overestimate and overcharge, so that the navy would get less work for more money.
To sum up, if the efficiency of the dockyards is to be improved, the yards must generate greater flexibility in their workforce, and dockyard managers must be allowed reasonable freedom to manage their people and match dockyard complements to the load. Any increase in productivity needs to be ploughed back into better upkeep of the fleet.
Without being privy to any inside knowledge, it seems likely that the Government have looked at the productivity of the Royal Dockyards on the basis of the return on capital employed. I would respectfully make this suggestion. I see that the Chief of Fleet Support is sitting below the Bar and so I hope that he is pricking up his ears: he is, and that is good.
Lord Trefgarne: Order!
Lord Ashbourne: My Lords, I beg your Lordships' pardon. I respectfully suggest that return on capital employed is a very poor criterion for evaluating the efficiency of the dockyards. One can no more quantify in financial terms the improved military capability that one has put into a well-refitted ship than one can attribute a financial return to one's stock of submarine torpedoes. The real return from the cost of conferring an improved military capability may be vast or it may be nothing, depending on what calls are made on it in the future.
I must apologise for speaking at length but, as I said at the start of my speech, this is a complex subject and the overriding criteria should be that the navy gets the best possible value for money from its dockyards.

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From what I have said I hope it can be seen that I take a pretty jaundiced view of the Government's proposals, and I trust that the Government will keep an open mind when considering amendments to this Bill.
1.30 p.m.
Lord Mulley: My Lords, the noble Lord has no reason to apologise for the length of his speech because I thought it was quite excellent and I agree with a great deal of it. Indeed, I hope that when we deal with the detail of the Bill the Minister of State will have the open mind that the Government were recommended to have by the Select Committees. Unfortunately, it would seem that his colleagues in another place approached this subject with a closed mind. Although we enjoyed very much the persuasive speech of the noble Lord, I am afraid I fundamentally disagree with the solution proposed by him and the Government; although, I think with everyone else, I am bound to accept that there is need for change.
We are, of course, all familiar with the many inquiries and efforts that have been made over the years to obtain a different system. The Minister spoke of reports going back 15 years. The noble and gallant Lord, Lord Lewin, spoke of 25 years. Not that it gives me any expert knowledge, and I certainly do not claim to have even a tittle of the experience and information that the noble and gallant Lords, Lord Lewin and Lord Hill-Norton, have—though, interestingly enough, they came to different conclusions—it so happens that the first parliamentary inquiry in which I was involved 35 years ago in another place, by what was then called the Select Committee on Estimates, was on the dockyards. I well remember going to Devonport and the Admiral Superintendent gave us such an excellent lunch that he had rather an easy run when it came to taking the formal evidence afterwards.
However, I agree with the Minister that the basic problem is that the organisation of supply for the navy is not best done through the normal Civil Service machinery. Over and above that, I think not only in this field but in many others the dead hand of the Treasury is largely responsible. I recall over 20 years ago, in another defence context, being concerned (at what I suspect was a very low level in the Treasury) with a tender for six married quarters which was rejected on the ground that they were a few hundred cubic feet too large by the standards that the Treasury thought appropriate for officers of the rank concerned. Although the scheme had the approval both of the senior military people and the Ministry of Defence, it was rejected. This was over 20 years ago, before we had chronic inflation. In the period we were redesigning the scheme to meet Treasury requirements the tenders we subsequently received were substantially higher for the much lower standard of building which the Treasury had insisted upon.
Although there has been some relaxation in Treasury control over defence, it has been very little. Our system, despite computers, and so on, is still subject to the criticism that Mr. Gladstone made all those years ago. He said that we keep our national accounts on a penny notebook system. The only difference is that I do not know where one can now buy
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a notebook for a penny. We just put income on the one side and expenditure on the other. There is no distinction between capital, revenue, expenditures and so forth. There is also the cut-off at the end of each financial year. Nowadays the actual Votes are changed many times during the financial year so there is no certainty or possibility of planning even for 12 months, let alone on a much longer basis. That is the real problem behind the dockyards.
May I say to the noble and gallant Lords who have naval interests that the navy is not entirely without blame? Repair and supply organisations in any field are extremely difficult to run. I do not know of anyone who would not have found occasion to be dissatisfied, whether concerning their television, domestic appliances or car, about the amount of time taken and the service they receive. May I also say to the noble and gallant Lord, Lord Lewin, that if, after two years, he got "Hermes" back just one month late, that was not too bad an achievement? He will recall that when he and I were working together on some of these matters we put out some conventional submarine refits to commercial yards. The cost was twice that for other submarines which were being refitted in Royal Dockyards at the same time.
I would not pretend for one moment that the dockyards are or ever have been perfect. But the allegations and complaints tend to be exaggerated. Navy personnel, like other individuals, when they want something repaired want it done yesterday. It is a real problem and can be exaggerated. However it is accepted that change is necessary. Where I disagree is with what is proposed. Two or three years ago it would have been unthinkable that the proposal now before the House could have been brought forward. It was very much the philosophy of the then Secretary of State, Mr. Heseltine, and I believe it has very few friends. Perhaps significantly, although he is a busy man, Mr. Heseltine having ceased responsibility for the Bill after introducing it, was not able to vote for it on Third Reading; and nor were any of the other former Secretaries of State present at Third Reading in another place. Indeed, nor was the last Royal Navy Minister, Mr. Speed, who I know takes a very great interest in all matters connected with the dockyards.
This proposal is conceivable only by a Government who, after all these years, have considered the Royal Ordnance Factories with a view to privatising them, and are now buying an aircraft from Brazil for the Royal Air Force. As I understand it, they are now putting out, almost on a month to month basis, worldwide tenders for small arms for our defence forces. I cannot think of any other nation that is not concerned to have direct control of supplies which are essential to its national defence. Moreover, this comes from a Government who criticised me and my Labour colleagues for having sold defence short when we were responsible for it. Frankly, I find it exceedingly surprising that, as has been said, the Government are prepared to take these risks with national defence which is embodied in one aspect of the Bill we are now considering.
I hope that the Government will come a little cleaner about the actual costs involved. Unless one is directly involved, one must accept the figures that are given. However, the initial set-up cost of £70 million

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seems, from other figures I have seen, to be extremely low. I have seen figures of over £400 million. Perhaps the Minister can tell us whether allowance is made in that £70 million for the pension fund that may be necessary, for redundancy payments and for similar matters. Indeed, I have seen estimates of over £400 million and that the annual extra cost could amount to £50 million more, without the savings that the Minister suggested.
As the noble Lord, Lord Ashbourne, said, I think we need to indicate the problems which come from the nature of the service that the dockyards provide. They are not providing equipment in most cases; they are providing a service. It is rather like the garage that services one's car. If you have faith in your garage, as I hope most noble Lords will have, when your car goes in for service and the garage rings up and tells you that while examining the car it has found that it needs to have the brakes relined or requires this, that or the other to be done to it, it is more sensible to have those repairs done then.
But in case you feel that you may be overcharged by the garage, before you take the car there you can employ—no doubt at a fee—an independent engineer to examine your car and bring you a list of all the things which need to be done to it. If you wanted an estimate beforehand, I am sure that the garage would add a little on to the figure for the unknown contingencies which may arise and items which may take a little longer to put right than it thought.
My experience is that on a fixed contract of that kind one is liable to be taken to the cleaners. In the complicated innards of any modern warship or submarine, many possible defects, as the noble Lord, Lord Ashbourne, has explained, may not be found until the ship or the submarine has virtually been taken apart. If an independent body is to be employed to go through it and draw up the list of specifications, it will be very costly.
But apart from that, I should have thought that it would be bound to miss some things and, as one is always told when building a house or something of that sort, "For goodness sake, don't have any extras, because when you have extras that is when the contractor takes you to the cleaners". I cannot believe that you can put out a complicated machine like a warship to a commercial contractor with such a tight specification of the price of everything and not be completely in his hands. I think that that is the basic problem to which we must address ourselves in this House.
I do not want to talk for too long, but in passing let me say that I was interested in what the Minister said and fully agree with him. It would not only be undesirable but unthinkable that there should be foreign ownership indirectly through these contracts of basic essential defence support. The Minister talked about a special share, but there is nothing about this in the Bill. It only says that a company "may" be set up to deal with these matters. Surely a matter of national importance ought to be in the legislation. Can we have an assurance today that he will introduce a clause of a character to make it unmistakable that the proper and ultimate decision will rest with Her Majesty's Government?
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Finally, perhaps I may talk a little about nuclear matters. Like the noble and gallant Lord, Lord Lewin, I was involved in the problems that arose in the dockyards concerning the refitting and recommissioning of the Polaris submarines. I believe that we are the only country with nuclear capability of this sort which has a civil capability to do this. I am certain that in the United States and France it is carried out by military personnel. I am not familiar with how it is done in the Soviet Union, but it certainly could not go out to a commercial contractor. I shudder to think of people being let loose on Polaris submarines having had the fortnight's training to which my noble friend Lord Graham referred, which is apparently all that one of the contractors feels is necessary.
Lord Graham of Edmonton: My Lords, it was not a contractor. My understanding is that it was the managing director of Rosyth who gave the advice.
Lord Mulley: My Lords, perhaps that little difficulty can be ironed out by the Minister, because I am sure that the nation will want to know about it. It the Government's plans for Trident persist, the refuting and recommissioning of Polaris will be an enormous problem, and there is also the nuclear safety problem. I am far from satisfied that the proper arrangements will be made, and this applies to both dockyards.
These are extremely serious matters and I join with those who have already spoken—though they have been rather critical—in appreciating the enormous dedication that dockyard personnel have given to the nation over the years, and, as the noble Lord, Lord Mayhew, made quite clear, their desire and willingness to continue performing this job.
I had to deal with some negotiations in that connection and I entirely accept that it is not satisfactory that they should be subjected to the same Civil Service payscales as are applied to this grade of craftsmen performing all kinds of different work, such as, perhaps, mending things in the Palace of Westminster. Looking after a nuclear submarine is a completely different job and there should be a completely different pay structure.
The idea of having an auxiliary force may be one way of doing it. I agree strongly with the noble Lord, Lord Hill-Norton, who has vast experience, that we should let management manage. I think that a trading fund would be a possibility, though I did establish that for the Royal Ordnance Factories; and God knows why the present Government sought to privatise them, because I thought that they were doing extremely well and were very answerable to Parliament and under the scrutiny of the Public Accounts Committee.
It might be possible, but the best thing, as has been suggested, may be to have an independent management but one which was directly controlled by the Ministry of Defence, in the same way as the PSA is answerable to Parliament through the Department of the Environment or the jobcentres depend on the Department of Employment. That is possible if one wants to hive the dockyards off and count the personnel not as civil servants, which I believe is probably the exercise that is involved. Certainly, the management has to be given more responsibility.

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On that basis I think that maybe we could achieve the objectives which I know the navy and many others would like to achieve, but I doubt it. It is quite possible—and I hope that the noble Lord, Lord Hill-Norton, will come forward with some proposals—to bring into force his ideas (which I certainly support) in a Bill with such a vague and long title as to make arrangements for management of the dockyards, but that would completely destroy both the Bill and the Government's present intentions. I hope that the noble Lord will persist in that endeavour. I assure him that many of us would be very happy to support him.
We look forward to having at least an assurance today from the Minister, who after all has the title of Minister of State for Defence Support, and in my view this is an essential element of defence support—that he will keep an open mind on many of the matters which have been discussed today.
1.48 p.m.
The Earl of Selkirk: My Lords, may I intervene for one moment? The noble Lord, Lord Mulley, said that he had been engaged in examining the dockyards 35 years ago. I was looking at them about 30 years ago, when I had the honour of being associated with the Royal Navy, and when we were engaged in a penetrating study in depth of the whole of the dockyards. Everything was to be turned upside down, though we could not do anything until the plan had been put in. I have subsequently found, from inquiries that I made, that the plan did not succeed. This was endorsed by the noble and gallant Lord, Lord Lewin, who said that there had been a series of subsequent plans, none of which had really worked. One is left with the impression that some drastic change really must be made.
I recall a conversation that I had with the head of the boilermakers' union, who was a splendid man. His name escapes me but I remember that he grew apples and lived in Newcastle. He was a delightful person to talk to. He had started work in the Royal Dockyards and then had gone over to what he called the private dockyards, which he called "my dockyards". I am afraid that I must tell your Lordships that he spoke with contempt of the way business was conducted at the Royal Dockyards. He left me in no doubt that in his view, for what it was worth, the standards of competence—and I think he meant management—were very much higher in the private dockyards.
We have heard an extremely interesting speech from my noble friend Lord Ashbourne. But his arguments must, I feel, have been examined by the series of committees that have considered this matter, to my knowledge, over 25 years and maybe much longer. The point that he makes, as everyone makes, concerns the Treasury. The Treasury is spending goodness knows how many billion pounds. It is a terrible responsibility for those people. What the noble Lord is really saying is that the Treasury indicates remote control. That is the objectionable feature. The Treasury is not directly responsible for what is happening. Frankly, what the Government are suggesting is exactly that. They are proposing people on the spot and wholly responsible.
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I am not underestimating what was stated by my noble friend Lady Vickers and by the noble and learned Lord, Lord Denning. This is a terribly delicate change. Like them, I am deeply concerned about the personnel. Take, for instance, a place like Rosyth. There, one has a small community almost wholly dependent on the dockyard. The Government have a great obligation to see that they continue to be properly employed.
Those employed at Rosyth are a magnificent body of men, carrying out a splendid job in a dockyard where there has been a great deal of modernisation. They are engaged largely in nuclear work and they are carrying it out, I understand, at a high level. One must not therefore underestimate the delicacy of the job. It is not only a matter of ensuring that the Act of Parliament is correctly worded but also of seeing that a man of outstanding ability is appointed to be in charge on the spot. A man of such calibre to be responsible for management and for overseeing the very delicate and difficult job of transfer will, I hope, be a priority of the Government.
1.51 p.m.
Lord Trefgarne: My Lords, during the debate your Lordships have rightly referred to the long and proud history of service that the Royal dockyards have for centuries given to the Royal Navy. There has also been mention of the high standards of workmanship in the dockyards and of the loyalty of the dockyard workforce. I echo those sentiments. However, as I said in my opening remarks, what we have to consider now is the future. It is our aim that when the dockyards have settled down under a system of commercial management they may be able to look forward to a secure future.
There has been a degree of agreement, I believe, that the Government are right in aiming to make changes in the three areas that I mentioned earlier—that local managers should be given more authority to manage; that the dockyards, as suppliers, should be clearly separated from the Fleet, as customer; and that accounting procedures reflecting normal commercial practice should be introduced. That much is, I believe, seen as a welcome and overdue way forward, and those changes are a fundamental part of the Government's plans to secure the future of the dockyards.
But another vital component in our plans is the need to inject into the dockyards—I can do no better than to use the words of the Select Committee in another place
"an entrepreneurial dynamism and a spirit of competition".
Important though that is, the Government have always had uppermost in their mind not only the need for better use of resources and more value for money but also, as was very much in the mind of the noble and gallant Lord, Lord Hill-Norton, the need to ensure that the operational requirements of the fleet are met and will continue to be met and that strategic interests are safeguarded.
I turn briefly to some of the points made during the discussion. I daresay that a number will be raised during later stages of the Bill. I shall therefore not deal with all the points that have been raised today in as full detail as they may later deserve. The noble Lords,

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Lord Graham and Lord Mayhew, referred to the cost of implementing our policy and to the likely savings. Both noble Lords referred in particular to the latest report of the Public Accounts Committee and suggested that it was critical of our proposals. The Government will, of course, be responding formally to that report in the normal way, and your Lordships would not expect me to do so today. All that I would say in respect of costs and savings is that the committee, to which much of the information was made available, has not suggested that savings will not be made. We remain satisfied that our estimate for savings is soundly based.
The noble Lord, Lord Graham, referred to some possible additional costs. There may be further costs, but equally we expect that there will be some reductions in other areas. On VAT, for example, to which the noble Lord referred, ship work which is the major part of docking and works is zero rated. I would not therefore expect any VAT charge to have anything other than a minimal effect. As regards access by the Comptroller and Auditor-General to the accounts of dockyard companies, to which the noble Lord also referred, our position has been that the dockyard companies should be in no different position from any other contractor engaged in vital defence work. But we shall, of course, consider carefully what the Public Accounts Committee has said.
The noble Lord, Lord Graham, asked me to confirm that the future status of the MoD police will remain unchanged. I am happy to give that assurance. The noble Lord, Lord Mayhew, said that the sole purpose of the Bill was to reduce Civil Service numbers. I was interested to hear how the Government of which the noble Lord was, for a while, a distinguished member reduced Civil Service numbers in the defence area. I have to say that if that was our sole aim, as he would suggest, we should not have to introduce commercial management to achieve it.
The noble Lord, Lord Graham, said that this House and others outside it, would do well to listen to the words of the noble and gallant Lord, Lord Lewin. I was happy to hear the noble and gallant Lord say that he supported the Bill as, indeed, for that matter did the noble and gallant Lord, Lord Hill-Norton. The noble and gallant Lord, Lord Lewin, spoke from a position of great experience of troubles in the dockyards over many years. The noble and gallant Lord was right to say that if we are to improve efficiency, then local management must be allowed to manage and that, in the present context of the dockyards, this would be impossible within the Civil Service.
My noble friend Lord Beloff asked about the acquisition of assets. The Ministry of Defence will remain responsible for major capital investment because timescale is measured in years and will span two or even more contract periods. Contractors will be able to make investments in the dockyards on the basis of their own investment appraisals and any residual value at the end of the contract will be paid by the next contractor.
My noble friend also questioned the Government's enthusiasm for the Bill. The Bill gives power to incur expenditure if the company is taken back into
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Government hands or remains in Government hands. We regard the first alternative as a fallback for use in time of tension or war but only if needed. Defence contractors—this is very important—have met the nation's needs in tension and war. I see no reason why a commercially managed dockyard should not do the same. But we would have been remiss in our duty if we did not retain a fallback power for use in extremis.
The second, retention of the company in Government hands, is also a fallback position only to be used if acceptable or advantageous bids are not received. The Government are enthusiastic about these proposals. We are firmly committed to making a success of commercial management.
I note the considerable links that the noble and learned Lord, Lord Denning, and his family enjoy with the Royal Navy. The noble and learned Lord asked about the level of rent for use of dockyard assets. Fair rental payment will be made for use of dockyard assets, first to ensure an adequate return to the Exchequer but also to ensure fair competition with commercial yards.
My noble friend Lady Vickers asked about apprentices. I can assure the House that the tender and contract both call for apprentice training to continue for dockyard and MoD employment. My noble friend asked me too about pensions. I am happy to assure my noble friend that existing benefits will be protected.
The noble and gallant Lord, Lord Hill-Norton, I think accepts that a major change is needed in the style of dockyard management. But the noble and gallant Lord sees merit in a government-owned plc as a way of avoiding conflict between short-term and long-term interests. I accept that we need to ensure that the risks involved do not damage national security. I see no conflict between short-and long-term interests. The companies interested in bidding are not, I believe, taking a short-term view. They are looking to a substantial long-term addition to their business. But under our plans they will have to fight for this and demonstrate that they should be allowed a second contract by good performance and competitive proposals.
Emergency capacity is not gained by having people and assets waiting idle. It comes from an efficient dockyard, from alteration to priorities at the time, from overtime and shift working, and from greater flexibility.
A number of noble Lords have referred to the customer organisation. I agree that this body will have a crucial role. The Directorate General of Ship Refitting, under a serving rear admiral in the first instance, will build up over the next few months, and will be responsible for acting, as the customer agent for the Royal Navy in securing the refitting and third and fourth-line repair of the operational fleet and of all support vessels in defence service. He will deal with the commercially managed dockyards and with the rest of the private sector as a sharp, commercially-minded customer, seeking value for money and an efficient turnround of ships in refit. To this end he will plan the refitting requirement, draw up specifications of work to be done, secure the finances necessary to carry out the approved programme, and negotiate the contracts for the work to be done.

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The Government's proposal to introduce commercial management to the dockyards offers, I believe, the best prospect of improved efficiency, achieves a full separation of customer and supplier, maximises competition, places the operation of the dockyards firmly in the private sector, retains in Government ownership the strategic assets of the dockyards themselves, and ensures that the interests of national security remain paramount. The decision to proceed with the introduction of commercial management to the dockyards has indeed been endorsed by the Admiralty and Navy Boards. Our policy, therefore, reflects the professional judgment of the most senior officers in the Royal Navy.
For years it has been proposed under successive administrations that there must be changes in the way the dockyards are operated. For years attempts to introduce change have come to nothing. For years there has been uncertainty over the future. Now we have the opportunity to end uncertainty. Now is the time to plan for the future.
The dockyards stand at the crossroads. A unique opportunity lies in our grasp. The Government firmly believe that the Dockyard Services Bill is essential if we are to secure the long-term future of the dockyards, and I commend the Bill to your Lordships.
On Question, Bill read a second time, and committed to a Committee of the Whole House.

Housing (Multiple Occupation) Bill [H.L.]
2.4 p.m.
Baroness Vickers: My Lords, I beg to move that this Bill be now read a second time.
I am glad to have the opportunity at last of bringing this little Bill before your Lordships. I think that it is very important and should give a much better standard of living to many people.
I am grateful also to the many organisations which have given me support and assistance in my endeavours to improve the protection afforded to the people who live in shared houses, bedsits, hostels and bed and breakfast accommodation. I should particularly like to thank the HMO Campaign Group, Shelter, the Institution of Environmental Health Officers, the Fire Brigade and many other voluntary organisations. I should like to say too that I have received letters from both the right reverend Prelates the Bishops of Southwark and Birmingham regretting that they cannot be here, as they would both like to have taken part in this debate.
It is a matter of great regret to me that the Government do not appear to share my concern, nor the belief that action is urgently needed, despite all the evidence which was put before the House many times, and by myself six years ago in this House. I therefore feel that their attitude to this Bill appears to be a reluctance to act.
It is clear from the reports of the results of the first part of the research commissioned by the Department of the Environment—which has recently been published—that there are a large number of houses in multiple occupation which are lacking adequate means of escape in case of fire, which are overcrowded,
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which lack adequate amenities for the number of people occupying them, and, very importantly, which are badly managed. This Bill seeks to ensure that local authorities do more to rectify this appalling situation. It is estimated that there are over 330,000 of these HMO houses in England and Wales and that 53 per cent. are unsatisfactory. However, the Department of the Environment's figures as reported at the IEHO Conference (which was held in April, and which I attended) in the April edition of Environmental Health are subject to some error, as many local authorities do not know just how many such houses exist within their districts.
It is argued that powers are available to local authorities to ensure safe living conditions. What is evident is that these powers are not being used. It is the intention that this Bill will make both local councils and the Government face up to the problem. If the local authorities did not use the legislation before expenditure controls became so tight, it is no good now arguing that they cannot deal with HMOs because of lack of resources.
Indeed, from the information I have received about the Greater London HMO survey, carried out with the same method as the DoE's National Physical and Social Survey, it is not unreasonable for the environmental health officer to inspect 20 HMOs in a three-week period. On that basis I would calculate that in a 4 5-week working year it would need approximately 600 EHOs to inspect the estimated number of unsatisfactory houses in multiple occupation. That figure represents just 10 per cent. of the membership of the organisation. They are often assisted by technical assistants.
It is therefore arguable whether my proposals are unrealistic so far as resources are concerned, and they will give the much needed impetus to improving living conditions for those most at risk from their housing conditions. It must be remembered that there cannot be a once-and-for-all attack on the problem, but there must be continuous programmes of inspection. Some HMOs require more frequent inspection than others—that is, accommodation at higher risk from fire.
Briefly, I should like to turn to the Bill. Clause 1 of the Bill clarifies and makes more specific the general duty upon local housing authorities to inspect their districts from time to time. It is clear from the data obtained by the DoE that many authorities are not complying with the existing duty, and it is unlikely that the Secretary of State will direct authorities to obtain the relevant information so far as HMOs are concerned. Certainly that power has not been exercised in the 17 years that it has existed, which is a very long time.
This clause will require local housing authorities to inspect their district within 18 months of the Bill becoming law and every three years thereafter. This is not an unreasonable requirement; but what is most important is that they prepare and make available for public scrutiny a programme or strategy for dealing with the conditions found as part of the inspection. As the Institution of Environmental Health Officers has said in its report on the legislation published in April 1985, too few local authorities have any comprehensive policy for dealing with the conditions found in

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HMOs. This clause will go a long way to overcoming this criticism, and also give landlords and tenants information as to what will be done to improve these houses.
Clause 2 imposes clear duties on local housing authorities to deal with certain conditions which may be found on inspection. Clause 2(a) will make it a duty to require the execution of works to render premises fit for the number of occupants, for example, by providing an adequate number of toilets, baths or other amenities, where the power to make a direction order limiting the number of occupiers is not used under Section 354 of the principal Act. According to DoE figures, 28 per cent, of HMOs require additional amenities, and in 1983–84 only 16 notices were served per 1,000 unsatisfactory HMOs, which I think noble Lords will agree is rather shocking.
Clause 2(b) removes the discretion to serve an overcrowding notice where there is overcrowding or over-occupation of the sleeping accommodation within HMOs. According to DoE figures, again 16 per cent. of HMOs are overcrowded or over-occupied, and yet in 1983–84 only six notices were served per 1,000 unsatisfactory HMOs.
Clause 2(c) again removes the discretion to deal with inadequate means of escape in case of fire—the most important consideration when dealing with the safety of occupiers of these houses. Clause 2(c) makes it a duty upon local housing authorities to require adequate means of escape in all cases where there is no such provision, not just the largest houses as at present (over 500 square metres floor area and over three storeys in height). It may be interesting to note that there is no provision at all for any houses of two storeys or less. It is estimated that 38 per cent. of HMOs require means of escape from fire. These figures indicate that the discretion of local housing authorities has not been used positively and it is therefore necessary to make it a clear duty to act.
Clause 2(d) repeals Section 365(2) of the principal Act which provides for the Secretary of State to specify by order the type of HMO where there is a duty on local authorities to require adequate means of escape. This section would be made redundant.
It is a matter of fact that houses in multiple occupation require good management, and yet it is estimated that 23 per cent. have unsatisfactory management, possibly because the managers or owners are ill-equipped to cope with the problems associated with a multi-occupied house.
Clause 2(e) makes it a duty for the local housing authority to make a management order applying the management code to all houses where there are unsatisfactory standards of management. There are currently about 78,000 such houses and yet very few management orders are made in any year. The truth is that the management code, as set out in regulations, should apply to all HMOs without the need to make a management order, just as the food hygiene regulations apply to all food premises. However, this clause moves some way towards improving the present unsatisfactory situation even if it is still not the ideal.
Clause 3 is analogous to Section 99 of the Public Health Act 1936, and enables any person living in a
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house in multiple occupation which is in such a condition as to be prejudicial to health, safety or welfare of the inhabitants to make representation to a justice of the peace—and this can be done at any time—who may then, if satisfied having heard the evidence, make such order or serve such notices as are appropriate to deal with the conditions. He can do both. The clause avoids the need to seek judicial review where a local authority has failed to carry out its statutory duty. Indeed, the justice of the peace may even make a control order, if the conditions warrant it, thereby requiring the local authority to take over the management of the worst HMOs.
It is quite clear from speaking to tenants' representatives and professional officers that much needs to be done to improve HMO legislation. This Bill is one small step, as I hope your Lordships will agree, and provides the Government with an opportunity to help the most vulnerable members of society. Much public money is being wasted by accommodating people in unsatisfactory hostels and hotels because there are not enough decent houses for them in the right location. This Bill, if given a Second Reading, will at least require local authorities to ensure that unscrupulous landlords do not exploit the housing shortage which makes the life of the tenants so impossible. I beg to move.
Moved, That the Bill be now read a second time.—(Baroness Vickers.)
2.16 p.m.
The Lord Bishop of Lincoln: My Lords, I should like to support the noble Baroness in bringing this Bill before us and to identify myself with the sense of urgency with which she has spoken and the sense of urgency with which the matters in the Bill need to be dealt with.
The Churches in this country have always shown a very urgent concern for the issues represented by this Bill. In 1980 the Bishop of London, the Archbishop of Westminster and the President of the Free Church Federal Council all made a common statement to support the Private Member's Bill that was going through another place at the hands of the now Lord Dean of Beswick. Later in that year, 1980, with other Members of your Lordships' House, they succeeded in pressing the Government to bring in a limited duty on local authorities to require means of fire escape in large properties.
The latest expression of the Churches' concern about this whole matter comes in various parts of the recent report of the Archbishops' Commission on Urban Priority Areas called Faith in the City. The human concern, let alone the Christian concern, which lies behind this Bill is not surprising. We now have the initial findings of the survey of the Department of the Environment on the situation and we can now see that the number of people involved is far higher than was previously estimated: something like 334,000 HMOs involving 3 million people; and rather more than half of those, as the noble Baroness has said, are substandard. Their figures show that 38 per cent. need fire safety precautions; 32 per cent. need major repairs; 28 per cent. need proper amenities; 23 per cent. are considered badly managed, and 16 per

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cent. are overcrowded. Those are very high percentages and something like 100 people die every year in fires in HMOs. These circumstances often bear particularly heavily on the ethnic minorities. There is one borough in London where 90 per cent. of the people in HMOs are of ethnic origins.
As the noble Baroness has said, the government policy has been to say that the local authorities have powers, that they should use them and that it should be left to them. The evidence is, as she has also said, that the local authorities are not using their powers. Therefore, I very much support the Bill's proposals to exchange powers for duties so that local authorities have to act. For every 1,000 substandard properties in 1983 and 1984, the local authorities only served—nationally—28 notices with regard to fire safety, 60 notices with regard to amenities, and six with regard to overcrowding. Those are not very happy figures.
Any complacency that local authorities will act because of these circumstances affecting the quality of life of hundreds of thousands of people in this country needs to be set against the tempo at which local authorities actually take action. It has been calculated that over a million people would be waiting at this present tempo for remedial action—36 years for fire safety to be dealt with, 62 years for amenities to be improved and 167 years for overcrowding to be remedied. That is the current tempo of local authority action.
Another example of the lack of urgency is the handling by the Home Office of its draft code on means of escape from fire. As the noble Baroness said, two-storey hostels or houses are not included because local authorities have not found it necessary to control such premises, yet it is primarily in these premises that safety is most lacking. We get tragic situations such as the one in Clanricarde Gardens in Notting Hill where eight people were burnt and 100 people rendered homeless.
Again the Department of the Environment is issuing a circular to all local authorities with the 1985 Act, reminding them of their powers, but the DoE survey shows that many local authorities do not know exactly where their powers need exercising. While the survey shows 334,000 HMOs in England and Wales, the precise information provided by local authorities to the Department of the Environment related to only 3,000; less than 1 per cent. This gives great force to the duty laid down in the Bill for inspection of properties within 18 months of the Bill coming into force, and thereafter every three years.
Finally, I should like to affirm and welcome in the Bill the provision for the rights of residents in houses of multiple occupation to go to the magistrates' court and make complaints, and for the courts to have the power to order local authorities to serve the relevant notices. For all those reasons and many others which the noble Baroness has mentioned in her review of the Bill, I hope that it will receive the favour of your Lordships' House because it so greatly affects the welfare and quality of life of some of the most vulnerable people in our society who are least able to fend for themselves.
2.22 p.m.
Lord Beaumont of Whitley: My Lords, I must apologise if any noble Lord has been taken aback by the change in the order of speaking. It seemed only right and proper that a Prelate should take precedence over a mere parish priest. I did my best to inform the necessary authorities but I am not sure that the messages got through.
It is right and proper that the Church should be speaking up on this occasion. It has already been mentioned that the Bishop of Southwark, my own diocesan, the Bishop of Birmingham, the chairman of the Board of Social Responsibility of the Church of England, regret that they cannot be here, but they have been good enough to let me know one or two of the things that they were going to say. The Church has something important to say in this field. It has an important witness to make. When I say "witness", I do not mean in the theological sense of the term, although I think it is important that the Church should speak up on these matters. I am also talking about the evidence of the Church.
Here the Church has quite a lot to say, because it is a sad fact that these days our society seems to be getting more and more divided. The number of institutions and individuals from the educated and middle classes who can give evidence at first hand of the effects of poverty is shrinking. That is not because, as most of us who were concerned about this problem in the 1960s thought, poverty is declining. When I initiated a debate in your Lordships' House in that decade I was sometimes less than politely told that I was exaggerating. Today no one would say that.
Yet, although there is general agreement on the existence of poverty, slums and appalling housing conditions, the conscience of "comfortable Britain", as the Bishop of Liverpool has termed it, is not as concerned as it once was. This can be put down in no small degree to the increasing segregation of society. In spite of the growing complexity of communications, the south of England is less aware of what is happening in the north, and the people of Kew, where I come from, are less aware of what is happening in Tower Hamlets. It is for this reason that the testimony of the Church is important, because not only does the Church of England, as a national Church, minister to the whole country, but its clergy, unlike a growing number of police, social workers and teachers—I am casting no aspersions on them—still live among their people and do not commute into the slums from the suburbs day by day. Therefore they are better witnesses of what is going on.
To turn to the particular interests of the Bill, the evidence we have from those living on the ground is horrifying. There are completely authenticated stories of hotels in the Southwark diocese and of HMOs with maximum allowed numbers of 113 holding 280 people. The extent of the work that is required by the notices served by the local authorities, when they get round to it, to bring the buildings up to even minimum legal standards, illustrates the conditions that the racketeers (for that they frequently are) are prepared to allow until they are caught. They are caught, very often, only when somebody dies.

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Incidentally it is a terrible thought that the only hotels and HMOs in Streatham, for example—thanks to the ill-considered board and lodging regulations that we have discussed once or twice in your Lordships' House, and according to at least one reputable agency—which now fall into the cost bracket which is allowed for these people are hotels of the kind which are lacking the amenities we are talking about and are lacking the necessary safety precautions.
It is important that this Bill, or something like it, should come on to the statute book. If there are to be any changes they should be changes to make it stronger. This is your Lordships' opportunity to give this Bill a Second Reading and then to consider it carefully in Committee to see whether more should be done and whether it should be strengthened, because it would be over-optimistic to think that this Bill could pass into law immediately. But if we can stimulate the Government to take it up themselves, or can get it into such a condition that it could rapidly be passed through Parliament in another Session, we shall have done something worth while.
One of the matters to which the House may wish to turn its attention in Committee, the Bishop of Birmingham has suggested to me, is the definition of a house in multiple occupation. The definition in the 1985 Act is officially described as "wide-ranging". It is far too wide-ranging, and the Association of Environmental Health Officers has suggested a much sharper definition. There are probably other amendments that we should take on board. It is sad today that we are not only without those two Bishops, though the contribution we had from the right reverend Prelate the Bishop of Lincoln made up for that to a large extent, but we also do not have the noble Lord, Lord Banks, who I understand would have liked to have spoken but who has unfortunately been prevented from doing so. We could have done with his very great knowledge of the whole of the social security field on which this Bill borders.
Will all that is being suggested cost money? Yes, of course, it will. But before that is made an excuse for doing nothing, may I remind your Lordships that doing nothing will cost even more. Recently, the City of Birmingham, in introducing its housing strategy, declared that disrepair in the private sector is now reaching such a level that unless major injections of capital are made an irreversible spiral towards long-term slum clearance will follow. We all know how much that costs and we all know how much are the social costs of wholesale slum clearances; and that, of course, is without counting the far more important cost, in terms of the quality of human lives, of what we are doing at the moment. It is only natural that our imaginations and those of the public should be caught by the fire hazards. The thought of people burning to death is not a pretty one; but the thought of individuals and families living in these surroundings is sometimes even worse.
I have just one excerpt to read from the many individual cases that I have. This comes from Newcastle.
"When I arrived at Hotel 'A' in early November, I was five months' pregnant. I was given a room in the attic. The state of the room was appalling. The skylight window was leaking, and when it rained the water dropped on to the floor. There was no heating.
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There was one blanket on the bed so I had to sleep with my clothes on. I had to wait a week until I was given another blanket. My friend had to give me one of her blankets because it was so cold. Two blankets still wouldn't keep me warm.
"After complaining about the cold, I was told by the landlady that there was no reason for heating as heat rises and the heat from the rooms below would be enough to heat the attic.
"I was visited by the doctor and he informed the landlady I would have to be moved into another room because if I had stayed in the room any longer it would have been dangerous owing to my condition. It was then I got another room".
That is just one example. I have long been a proponent of the idea that if possible central government should not take on responsibilities which local authorities can perform. There are always exceptions to that rule, and it seems to me that this is one of them. The whole question of houses in multiple occupation has become a national scandal, and it is time that the state stepped in. The Government really must act, and, if they do not, then the legislature must act on its own. I congratulate the noble Baroness on putting forward this Bill, and I beg your Lordships not to rest until it, or at least something like it, is on the statute book.
2.35 p.m.
Lord Donaldson of Kingsbridge: My Lords, I apologise for speaking without my name being on the list. I wish I had known before half-past twelve today that my noble colleague Lord Crawshaw was delayed by family illness and could not give the support which this party and the Liberal Party—the Alliance Party, in fact—most strongly feel. I wish to stress this, because we are used to these views being put forward by the noble Lord, Lord Beaumont, but as he has chosen a different seat he can no longer speak for us.
My appearance, as your Lordships will realise, is almost entirely cosmetic, just to emphasise that we on these Benches do support this matter. Since half-past twelve I have not picked up enough to be able to say anything which is very useful, except one thing that I have developed while listening to the excellent exposition that we have had so far.
This is a fairly simple, limited problem which anybody with any courage at all—I was going to say "anybody with the courage of a woodlouse", but that is not quite right—could deal with. It is perfectly simple. If this Bill is passed there will be an absolute obligation on local authorities to do what they have to do—as the right reverend Prelate says, in some cases 176 years later. It is simply a question of each authority having an additional inspector—perhaps in some cases two and in other cases three—to inspect these places and see that the law is carried out when the law is made. This, with unemployment as it is, is a job for the Manpower Services Commission. The Government tomorrow, without any legislation whatever, could authorise the employment of something perhaps under 100 altogether or at any rate under 300 newly-employed characters, properly trained (the universities are turning them out by the dozen) to go out and deal with this matter at least on the basis of one to two years running.
If that can be done I am sure the thing would work. I will not say any more because it is superficial to come in late without having studied the problem; but I have studied property quite a lot in my life and I am

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perfectly clear that this is a prime instance of the weak being allowed to go to the wall and nobody bothering about it. I wish to congratulate the noble Baroness and if the Government will not accept this Bill, or something like it, we will all come back and make them.
2.37 p.m.
Lord Dean of Beswick: My Lords, let me join with the previous speaker in congratulating the noble Baroness, Lady Vickers, on behalf of myself and my party, on bringing forward this Bill. My one regret is that the Bill had to have a Second Reading on a Friday afternoon. I am sure, because of the all-party support this terrible problem has received, that if the debate had taken place at a more reasonable time on some evening during the week there would have been a much more extensive list of speakers. A number of speakers who were down to speak when the debate was previously due to be held have conveyed to me that they are desperately sorry that they are not able to come. They have asked me to convey their apologies. Among them are the noble Baronesses, Lady Denington and Lady Ewart-Biggs. I have no doubt that there are other Peers who cannot be present who will feel the same.
Having said that, I do not intend to go too much into statistics because that part of the case was adequately covered by the noble Baroness, Lady Vickers, and by the right reverend Prelate the Bishop of Lincoln, who caused me to feel some gratification when he referred to the fact that six years ago I was involved, with all-party support, in another place in an attempt to deal with this appalling situation. I will not go too deeply into what the present Bill is about. However, as the noble Lord, Lord Donaldson, said, this is a simple Bill. What it seeks to do is to make mandatory duties on local authorities which are at present optional and which are unfortunately not being carried out.
The noble Lord, Lord Beaumont of Whitley, referred to the question of death by fire. I want to give just one statistic that I do not think has been given so far which will indicate the appalling seriousness of the carnage of death caused by this kind of thing not being put right. In 1982 figures were issued which showed that between 1978 and 1982—four years—over 550 people were incinerated in this type of accommodation. That, I submit, by any dimension is a national scandal we ought to do our best to eradicate.
I want to go back for a few moments, to when I had the luck to draw a high spot in the ballot for Private Members' Bills in another place. The Bill I initiated was serviced by various voluntary housing organisations such as CHAR, and Shelter. The Institution of Environmental Health Officers submitted evidence, as it has recently done, on this difficult subject. I commend the association for that. Under the procedures of another place, my Bill was unfortunately talked out. Shortly after that, a housing Bill started on its passage through the other place. I was the Opposition Whip in the Standing Committee.
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The problem and dimension of some of the horrors that were taking place were drawn to our attention by an incident that occurred at a women's home in Kilburn, London. I have a letter from the mother of a girl who died in a fire there. In Committee, I had the poignant duty of reading the letter of the mother of an 18-year-old girl, who had done well in her education and was planning to get married two years later, but who had opted to do voluntary work in society (as many young people do, although they do not get credit for it). The girl left her home in Abbotsbury in Dorset and within 12 hours of leaving she and nine other women were dead as a result of a horrendous fire which, as your Lordships may remember, took place in Kilburn.
That shows the sort of thing that is happening. An incident may go out of the news, but the people who have lost dear sons and daughters do not forget. I frequently receive unsolicited letters from that woman. She wants to know what we are doing to prevent someone else suffering the same trauma and loss. I shall read a letter that I received from her only about two weeks ago. It says:
"Dear Lord Dean, This is the piece that I put in the local paper, the Dorset Evening Echo, this year:
'In Memoriam' Eilidh.—Six years since your death at 18, on March 18,1980. Still no legal requirement for fire precautions in voluntary hostels, like the one [where] you went to work on March 17, 1980. You would by now have been Auntie of little Elin, daughter of Adam and Hild, born in Iceland, November 26, 1985—Love and sadness from your mother Elsa.'
I don't normally go in for the more sentimental variety of these inserts! But I suddenly felt like saying something. Has any headway been made yet? Best wishes, Elsa Boadella.".
When I read that mother's original letter in Committee, I think that it played a part in moving the Government at that time. They introduced some measures, which at the time I referred to as hesitant and tenuous steps along the road of putting the matter right.
Without being too critical, I must say that there were pressures on the Government from organisations involved in the problem, including a number of housing associations. As the right reverend Prelate the Bishop of Lincoln said, the Government were pressurised. At the time I was delighted to receive the fullest support from the Church body—I am sorry that I cannot remember its official name—which includes the most reverend Primate the Archbishop of Canterbury, the Catholic Cardinal, Cardinal Basil Hume, and representatives from the free churches and the Salvation Army. It culminated in a Sunday afternoon rally in Trafalgar Square. It was one of the more objective rallies that have taken place. Tremendous support was received on that occasion. I believe that it moved the Government.
This Bill does not attempt to score party points. There is wide support for it among many of the Government's supporters, one of whom, the distinguished noble Baroness, Lady Vickers, has moved the Second Reading. I ask the Government through the Minister whether, as the initial measures brought in are not dealing with the situation, they will undertake to give this Bill a chance to proceed so that your Lordships can debate it and put forward various points of view. There could be nothing more insulting than to allow this Bill, with its widespread support

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from all sections of the community, including the Churches, to be shunted sideways as something undesirable. The cases I have given of appalling loss of life will be repeated if something is not done. There will be that repetition and there will be other fires. I know that because of cuts in public expenditure local authorities have a difficult problem to deal with. Nevertheless, I believe that the nettle has to be grasped. I do not believe that we can afford to say in another four years' time that more than another 500 people have died in fires in this type of accommodation.
I have been delighted to be able to join noble Lords from all sections of the House in support of this Bill. I wish the noble Baroness, Lady Vickers, success with it, and my party will do its best, as will other parties, to assist its passage through the House so that when it becomes an Act these people are better catered for than they are today.
2.46 p.m.
Lord Skelmersdale: My Lords, the House will be doubly grateful to my noble friend Lady Vickers. First, she agreed through the usual channels to postpone this debate from a very late hour on Tuesday 8th April until today; and secondly, she has today successfully drawn our attention once more to the problems of houses in multiple occupation. She has for many years, as your Lordships will readily recall, been a positive virago on the subject of environmental health. My noble friend has explained what is meant by the term "houses in multiple occupation" or HMO, and has drawn attention to the people who live in these properties and the conditions which, sadly, they can experience. I agree generally with what has been said here and I do not propose to go over the same ground.
Inevitably attention is being focused in this debate on unsatisfactory HMOs. Undoubtedly the conditions which can be found in bed and breakfast accommodation and some other HMOs are totally inadequate and unacceptable. Indeed, I am on record as describing them as nothing less than a scandal. But we need to keep matters in perspective. Recent press reports remind me that only bad news sells newspapers. We should, however, keep a sense of balance and not lose sight of the fact that properly-run HMOs provide a valuable service in the housing market. The conditions which exist in many HMOs are entirely satisfactory and owners of those properties are to be congratulated on the important contribution they are making to this country's housing stock.
The Government are aware of the representations for further legislation in this field but we took the view that before we could consider these fully it would be necessary to obtain precise information about the nature and extent of the problems associated with HMOs. It was for that reason that my department has undertaken major research on the subject. I shall be happy to write to any noble Lord who would like details of the research but I think there are a few points which I should emphasise now.
The research falls into two parts, of which the first was a postal survey of all local authorities in England
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and Wales. This was referred to by my noble friend Lady Vickers. The results were announced on 20th February at the seminar run by the Institution of Environmental Health Officers and show, among other things, that there are about 334,000 shared houses which could be classified as HMOs and that about 2 million people live in those houses. The other half of the work comprises a physical and social survey of a nationally representative sample of 550 HMOs. The contract for this work is not due for completion before the summer and the Government wish to see all the results before considering the need for further legislative measures. To act in advance of the physical and social survey would invalidate the information that it will provide. In the meantime—probably next month—the department will be issuing a circular to local housing authorities that will offer guidance on HMO powers and duties as consolidated in the Housing Act 1985.
From the attention given to HMOs in recent years one might be forgiven for thinking that unsatisfactory properties lacking in fire safety and basic amenities, poorly managed and overcrowded, are a product of life in Britain since the general election of 1979. That is palpable nonsense. That sorry state of affairs has a much longer history. So too do local authorities' considerable wideranging and mostly discretionary powers for dealing with the matter.
Much of the legislation goes back to the 1960s, though, as I shall describe later, there have been some significant advances since 1979. I shall not weary your Lordships with a catalogue of the powers available to local authorities (I can write to any noble Lord who wants details) but it is sufficient to say that any local authority that is determined to secure improved conditions in HMOs can do so under existing legislation; and many do.
I must go some way to disabuse the right reverend Prelate and the noble Lord, Lord Dean of Beswick. The postal survey that I mentioned has revealed that in 1983–84, 3,853 fire notices were issued; 6,594 closing orders were made; 897 over-crowding notices were issued; and 3,866 management orders were enforced. That does not show me that, at this point, local authorities are not using the powers that Parliament has conferred upon them. The Government believe that discretionary powers are the most appropriate because each authority is best placed to know the needs of its own area and to assess priorities for the use of available resources.
Lord Donaldson of Kingsbridge: My Lords, perhaps the Minister will allow me to ask him a question on that point. Does he seriously think that the Government believe that discretionary powers about enforcing fire precautions are better than compulsory powers? I cannot believe that I correctly heard the Minister.
Lord Skelmersdale: My Lords, if the noble Lord will follow through with my speech just a little further, he will find that I shall meet his point exactly.
Lord Donaldson of Kingsbridge: My Lords, the Minister is giving a misleading impression.
Lord Skelmersdale: My Lords, I suggest that a speech ought to be taken as a whole and not in little bits. How easy it is for an Opposition to find fault with a government—any government—in the exercise of their duties. Ah!—what it is to have instant "forgettery". The Labour Party when in government took no steps whatsoever to change those powers into duties. My noble friend, on the other hand, is prodding us to do just that.
Lord Dean of Beswick: My Lords—
Lord Skelmersdale: My Lords, in a minute. As the noble Lord, Lord Dean, has said, there is one area where this Government have acted, and I believe rightly so. In recent years there has been much concern about fire safety in HMOs. The risk of being a casualty in a fire in an HMO is about five times greater than the risk in a single-dwelling occupied dwelling. Indeed, I was deeply affected yesterday when I went round a house in multiple occupation where two people died, and one was rescued unconscious, in a fire on Boxing Day last year. That made me realise why the Government have concentrated their actions on HMOs in the area of protection from fire.
Local authorities' extensive statutory powers governing means of escape from fire in HMOs were strengthened by Schedule 24 to the Housing Act 1980 (now Sections 365, 366 and 368 of the Housing Act 1985). That provides a local authority with three options where an HMO is found to have inadequate means of escape. It may serve a notice that requires the provision of the necessary facilities; it may ensure that part of the house is not used for human habitation; or it may opt for a combination of the first two solutions.
Lord Donaldson of Kingsbridge: My Lords, I must ask the Minister to make clear whether that is an option. If it is an option, then it does not have to be taken, does it?
Lord Skelmersdale: My Lords, it is a duty.
Lord Dean of Beswick: My Lords, I am sorry that the Minister appears to have turned this issue into one of political argument. I made it quite clear when I introduced my Bill, which was the first Bill introduced in either House on this particular subject, that it was an all-party Bill. At no time did I or my party claim it as our sole entity. It is a little naughty of the Minister to start implying now that certain parties have only just woken up to this matter and that it has been a Back-Bencher from his own party who has brought it forward.
Lord Skelmersdale: My Lords, I think the noble Lord, Lord Dean, has misunderstood what I said. As the noble Lord, Lord Donaldson, will understand very well, I was talking about conversion of powers into duties. We are discussing what governments have done, unprodded—the noble Lord did some prodding and so did my noble friend—over the past few years.
Lord Dean of Beswick: My Lords, I should hate to prolong the debate, but the Government had to be prodded by myself and other people to take the steps that they have done. They did not take them voluntarily. This Bill would not be here today if the Government had done the job that they should have done when they were asked to do it six years ago.
Lord Skelmersdale: My Lords, I honestly do not think that it helps the House to prolong this argument further.
Under powers included in the 1980 Act we made an order which came into operation in December 1981 and which places a duty, not a power—the point that the noble Lord, Lord Donaldson, was questioning—on local authorities to require adequate means of escape in the largest HMOs. This duty in no way diminishes the importance of inspecting HMOs which do not fall within the scope of the order but ensures that action is taken where the potential risk is greatest.
In this connection, I can tell the right reverend Prelate that the Home Office guide to fire safety in houses of multiple occupation is at present the subject of consultation with interested organisations, including CHAR. The Home Office will give further consideration to the scope of the guide in the light of comments received.
Since the Housing Act 1980 it has also been possible to make special grants for means of escape from fire in HMOs. Grants are generally discretionary, but following the 1980 Act the local authority can be under an obligation to give grant for eligible works which have been the subject of a statutory notice under Section 366 of the 1985 Act requiring means of escape, or under Section 352 requiring the provision of standard amenities.
This is not of course a general housing debate but I think that I should point out to the noble Lord, Lord Beaumont of Whitley, that the Government have swung their efforts quite considerably into the inner-cities, where most HMOs are. The House will have noticed that this was not much appreciated in another place by those representing shire counties.
I now come to the provisions of the Bill. Clause 1 would, if implemented, determine the frequency with which each local housing authority carried out inspections of HMOs in its area. Section 605 of the 1985 Act already provides a duty to inspect housing conditions and hence a means of acquiring knowledge of HMOs. Each authority is best placed to know how frequently conditions can change in the area. It is not clear to me how Clause 1 will be enforced; nor is it clear whether there is to be a time limit for the production of the authority's written statement, and if so, what that limit might be. It is possible that identification of individual properties in the written statement could be construed as defamatory of the landlords involved. The Bill makes no provision for such documents to be privileged; unlike, for example, Section 100H of the Local Government Act 1972 as amended.
Clause 2 would, if enacted, place a considerable financial burden on local authorities by converting

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certain discretionary powers into duties. I note that my noble friend did not offer an estimate of the cost when she spoke earlier. I trust that she will be able to do so in her concluding remarks. Clearly the House cannot disregard the resource implications.
The Bill makes no attempt to establish priorities. Many people, including the Government, are concerned about fires in HMOs. That is why we introduced a duty, now in subsection (2) of Section 365 of the 1985 Act, on local authorities to secure adequate means of escape from fire. The Government considered extending the scope of the present duty but took the view that it would be inappropriate to place a further burden on local authorities at present. An authority which is concerned about a particular HMO can use its discretionary powers to require adequate means of escape from fire. Although Clause 2 would impose a duty on local authorities, I should remind your Lordships that the existence of a duty in a particular case would depend on the local authority's opinion as to the adequacy or otherwise of the conditions encountered in the HMO in question. I think it would be difficult for someone to bring proceedings against an authority for failure to exercise its duty.
The powers in Section 352 to require the provision of specified basic amenities such as lighting, ventilation and drainage in sufficient quantity for the people accommodated in an HMO are undoubtedly an important part of the local authority's weaponry, but I find it difficult to believe that authorities should give the same priority to this work as to means of escape from fire.
Before turning to Clause 3, may I just note in passing that if Clause 2(b) is to be implemented—placing a duty on local authorities to take action under Section 358 on overcrowding—it would seem that Section 354 might equally be repealed. Section 354 enables an authority to reduce the number of people accommodated as a means of dealing with a situation where there are insufficient basic amenities.
Clause 3 appears to be based on Section 99 of the Public Health Act 1936 which enables an individual person to make a complaint about a statutory nuisance. The clause is, in the Government's view, out of place in housing legislation because local authorities do not make complaints or need to invoke outside assistance in order to carry out their functions in relation to HMOs. They take action where they consider it appropriate. If Clause 3 became law, it would be very difficult for local authorities to control their expenditure and deploy their resources to the best effect. There are no circumstances in which magistrates' courts have powers under the 1985 Act merely because a property is in multiple occupation. Whether premises are prejudicial to the health, safety or welfare of occupiers would doubtless be the subject of different conclusions by different benches of magistrates. The proposed power of magistrates to direct the authority to remedy the conditions is very vague. Is it limited to the measures contained in the present Bill or does it extend to other legislation on HMOs; and, if so, which?
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My noble friend Lady Vickers has done the House a great service today in drawing our attention to houses in multiple occupation. She had been most ably aided and abetted by the Institution of Environmental Health Officers, which she has served so well for many years. That organisation is a major influence in efforts to improve HMO stock, and it would be true to say that without its help our investigation into the state of the HMO stock would not be nearly so advanced as it is.
So where does that leave this Bill? The Government are of course traditionally but not invariably neutral in regard to Private Member's Bills. I must in all fairness say that its prospects are not good, for the reasons I have sought to explain, but the Government will not hinder its progress through this House. The House will note that over the years Conservative Governments have not been negligent in imposing duties on local authorities when this has been proved to be necessary, and so far as HMOs are concerned I have illustrated some this afternoon. We shall look forward to examining the results of our survey later in the year.
3.2 p.m.
Baroness Vickers: My Lords, I thank the noble Lord the Minister for his reply, but I do not thank him for calling me a virago, because I do not think that I am. It think it is a very unfortunate expression. Also, I do not think it would have been necessary to have this Bill if the local authorities had been doing a good job. The environmental health officers and others tried to press them to do it, and they just would not; otherwise, we would not have over 1.25 million houses in this condition.
I thank the right reverend Prelate the Bishop for what he has said and also for mentioning the Bishops of Southwark and Birmingham. Certainly I shall be writing to the right reverend Prelate the Bishop of Birmingham to thank him for his suggestions. I should also like to thank the noble Lord, Lord Beaumont, who so very adequately put his points of view forward, and for coming in rather at the last minute. I am most grateful to him. He has great experience, and this is what we need. Also I am delighted that the noble Lord, Lord Donaldson, came, because he always has real compassion in his heart for many people and many things and he knows the conditions of so many of these people.
Now why would the Government have commissioned a survey which has now been reported to them (I have a copy of the report) to show the necessity of the need for action? When I was at the last conference of the environmental health officers they were feeling very desperate—and I think I can use that word quite appropriately—at the lack of chance they had of having any action taken. It is not so much a question of money. There are a great many people who could do a great deal more work. The local authorities, I understand, do not undertake their share.
As many noble Lords who would have liked to be present and who formerly served in another place know, an important part of the work of a Member of Parliament is the "surgery" where people come to talk about their difficulties. It is amazing what a Member of Parliament can do to bring these problems to the

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attention of a local authority. I believe that health officers would be happy if they could receive the same attention. The Minister would not need to say anything about this Bill if he or his department took action in response to the pressure of the noble Lord, Lord Dean of Beswick, whose work in the past I well recall. I am calling today for action.
Sir George Young, the Minister, has said:
"I realise that local authorities would like more resources—that is human nature—but I cannot accept the lame excuse that simply because an authority has not been granted the HIP funds it requested that it must necessarily abandon all hope of dealing with HMOs, and in doing so abandon the modest hopes of people living in those houses".
The Minister has 4,000 of these houses in his constituency. Surely he must have knowledge through being a Member of Parliament of what is going on in his constituency. It is not just a question of the inner cities. I regret to say that Plymouth has 5,000 and that even Torbay has a great number. I have here a whole list. There is universal sorrow and anger among people in regard to the conditions in which they have to live. I hope that in moving that the Bill has a Second Reading I have the support of everyone here. I hope, too, that if we are not lucky here we shall have another go.
On Question, Bill read a second time, and committed to a Committee of the Whole House.
House adjourned at seven minutes past three o'clock.