Lords Sitting of 22 January 1986

Preamble
The House met at half-past two of the clock: The CHAIRMAN OF COMMITTEES on the Woolsack.
Prayers—Read by the Lord Bishop of Derby.

Inflation: Price Indices
Lord Hatch of Lusby: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what have been the comparative rates of inflation over the past 10 years for families on the lowest and highest incomes.
Lord Brabazon of Tara: My Lords, official price indices for these groups are not available.
Lord Hatch of Lusby: My Lords, I know that the Minister has consulted, as I have, the article in Fiscal Studies of last November. We were talking about it yesterday. Do the Government agree with the general findings of that article and the analysis of the retail price indices that the burden of inflation on the goods generally bought by the poorer section of the community is heavier than that on those bought by the top decile of our earners?
Lord Brabazon of Tara: My Lords, I have indeed seen the IFS study; not the full study, but a résumé of it. The Government are guided in these matters by the independent Retail Prices Index Advisory Committee, which is a body independent of the Government. That committee has said in the past that no indices for any other special social or income groups should be published. However, I have no doubt that the study has been noted by the committee. As to whether the burden of inflation is greater on the lower decile of income earners, I must point out that the study showed in fact that the difference was very small—only in the region of about one-third of 1 per cent. a year.
Lord Harmar-Nicholls: My Lords, may I ask my noble friend how you can possibly split the nation into segments when talking about whether inflation is good or bad? Inflation is either good for the nation or bad for the nation. If it is bad for the nation, it is bad for all segments in it. To try, for any reason, to suggest—
Noble Lords: Question!
Lord Harmar-Nicholls:—that one segment is against another, is against the best interests of the nation.
Lord Brabazon of Tara: My Lords, I quite agree with my noble friend that inflation is bad for the nation. Whether it impinges more heavily on one group or another is, as I have said, very marginal, and it has been the recommendation of the prices index advisory committee that we should only publish the main RPI
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index in addition to the RPI index that we publish for pensioners.
Lord Bruce of Donington: My Lords, is the noble Lord aware that he has already admitted to the House that he has studied the results put out by the Institute of Fiscal Studies on this matter? Will he therefore not agree that the burden of inflation on the lower income groups in the United Kingdom has been significantly greater than that upon the higher income groups? Will he say, when he considers that the difference is only marginal, how small it is, and that even small differences make a very great difference indeed to the poorer sections of our community?
Lord Brabazon of Tara: My Lords, no, I would not agree that the burden of inflation has been significantly greater. I have already given the figure quoted in the study, and that works out at one-third of 1 per cent. per year. I do not consider that to be very much.
Lord Boyd-Carpenter: My Lords, if the noble Lord, Lord Bruce of Donington, is right, does not that confirm the wisdom of Her Majety's Government in giving first place to combating inflation?
Lord Brabazon of Tara: My Lords, my noble friend is absolutley right. I would go on to say that regarding the up-rating of pensions, in the past year alone pensions have risen by 2 per cent. more than inflation.
Lord Paget of Northampton: My Lords, is this not really a matter which is more affected by differences in diet than differences in income?
Lord Brabazon of Tara: My Lords, the noble Lord is quite right. The main differences are for those people who smoke heavily and drink heavily.
Lord Hatch of Lusby: My Lords, the noble Lord the Minister is apparently trying to minimise the difference in the effect of RPI on different sections of the community. Is he aware that according to this study, when the Government claim that the state old-age pension has been increased by 23 per cent., the real figure, if this is weighted by the impact of inflation on pensioners, is 18 per cent? Does this not display a disparity that is a serious social menace? Is he further aware that in this analysis it is proposed in a quite friendly way that the Government might very well monitor the effect of inflation on different sections of the community when determining their social security and pension rates?
Lord Brabazon of Tara: My Lords, I think that I have already answered the second part of the question. I have said that the matter is one for the independent advisory committee and they will no doubt have noted this study. If they make any recommendations to the Government as a result of that we shall of course take them into account. With regard to the increase in pensions—I do not have at hand the figures which the noble Lord, Lord Hatch, has quoted—I quote my own figures of a 2 per cent. real increase in the past 12 months. That is based on the retail price index specifically for pensioners. As I said earlier, an index for pensioners is calculated.
Lord Diamond: My Lords, does not the pensioners index indicate that there is quite a difference in the effect of inflation on those pensioners who are also by definition within the lowest decile of the figures? Is it not the case that not only does the rate of inflation add a burden onto the lowest income earners or income recipients but also that by the very nature of their reduced means they are not able to avail themselves of the best possible purchasing power as those at the top decile do?
Lord Brabazon of Tara: My Lords, the pensioners' index at the moment is running slightly lower than the ordinary RPI. Whether they can or cannot avail themselves of some of the benefits of the higher decile of earnings is not really a matter in the calculation of the index.

Smoking and Children: Deterrence
2.45. p.m.
Baroness Lane-Fox: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what initiatives are being taken to dissuade children from starting to smoke.
Baroness Hooper: My Lords, this a priority area for the Government. The Health Education Council recently began a major new initiative directed at all secondary schools. The Government are funding a £1 million pilot advertising campaign to influence teenagers against the habit, and additional measures are under consideration and review.
Baroness Lane-Fox: My Lords, in thanking my noble friend for her enlightening reply, may I ask whether teachers and youth leaders are made aware of the effect of their example to children on smoking, as well as the example of parents who must also realise the close connection between pocket money and early smoking, since this is said to account for £70 million to £90 million worth of cigarette smoking?
Baroness Hooper: My Lords, yes, the latter figure that my noble friend quotes of between £70 million and £90 million being spent by children on smoking is a very disturbing one. The Government are focusing very much on that area. That is why the Health Education Council's special project, the Family Smoking Education Project, represents the major effort. The project is aimed especially at 11 to 14-year-olds, and material, including a special teachers' guide and a leaflet for parents, tells about what they can do to deter their children from smoking. These are being distributed free to all secondary schools.
Lord Shinwell: My Lords, may I ask the noble Baroness whether it would be appropriate to define what is meant by the term "smoke"? We are told to believe—but I cannot endorse the belief—that pipe smoking is less dangerous than cigarette smoking, and that cigar smoking is even worse; but naturally cigar
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smoking is not so common because of the cost. But much also depends on the kind of tobacco that is smoked. If it is good tobacco in one's pipe, that can constitute no danger to the individual concerned. What has happened at the present time is that parents who have the responsibility do not care two hoots about what their children do. The man takes a cigarette out of his pocket or he gets one from his wife; she has one in her mouth also. They smoke cigarettes. What do you expect the child to do? It follows the parents; it is a natural thing. That is the kind of thing which should be curtailed to a large extent; and it can be done by defining the word "smoke". What does it mean? Why destroy the smoking of a pipe? Very often that is an enjoyment, provided that one gets the right pipe and the right brand of tobacco.
Baroness Hooper: My Lords, from all accounts the noble Lord is himself a great expert in this area—and I feel sure that his experience extends for much longer than my own.
In attempting to define "smoke" or "smoking" I feel that I must confine myself to the question raised by my noble friend Lady Lane-Fox in relation to tobacco smoking. Figures suggest that cigarette smoking is more harmful than pipe smoking. Nevertheless, I think that our aim is to discourage children from starting the habit of any form of tobacco smoking.
The Earl of Lauderdale: My Lords, could my noble friend say whether the literature on this subject includes advice to people as to how to give up smoking? Might it contain a reference to the hideous experience of smoking herbal tobacco, which kills the habit stone dead very quickly?
Baroness Hooper: My Lords, the Health Education Council's various projects contain advice on many methods of giving up the habit of smoking. In this Question we are directing our attention to preventing children from starting smoking, but no doubt herbal remedies might well be considered in part of the literature issued by the Government.
Lord Ennals: My Lords, bearing in mind the department's own statement that cigarette smoking—I think not pipe smoking—among children is increasing at the present time, and bearing in mind another DHSS survey which showed that in Northern Ireland some 65 per cent. of the 11 to 15 year-olds thought that they had seen cigarette advertising on television, is it not clear that sports sponsorship by tobacco companies has become a very powerful weapon used by the cigarette manufacturers to get at young people, the main participants in sport? Is it not time that the Government intervened to stop this damaging and needless encouragement to children to take up this deadly habit?
Baroness Hooper: My Lords, I believe that the noble Lord is referring to research conducted by Dr. Ledwith of Manchester University into this area which suggested that televised sponsored events are regarded by children as advertising. Both advertising and sports sponsorship are already strictly controlled by means of voluntary agreements with the tobacco industry, and

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in essence they seek to ensure that children are not encouraged to smoke as a result of advertising and sponsorship.
Lord Renton: My Lords, is my noble friend aware that retail tobacconists have an important part to play here and could often dissuade children from buying cigarettes, even when they pretend that they are buying them for their parents?
Baroness Hooper: My Lords, my noble friend is correct. In recent years a number of measures have been taken to discourage illegal sales to children, including the issue of guidelines to retailers. Fines for this offence have also been increased, and we are considering what further measures might be taken.
Baroness Masham of Ilion: My Lords, is the Minister aware that the highest number of smokers seems to be in the young female group? Will she consider some initiatives being taken by the Government—for instance, holding essay competitions in schools on the dangers of smoking, with the winners perhaps having a holiday of their choice, such as a ski-ing holiday? Would that not mean more to them than just reading in school an advertisement which they sometimes challenge? They may challenge society, such as parents and teachers, and do the opposite. Is the noble Baroness aware that many children progress from smoking cigarettes to taking other drugs, such as heroin and cocaine?
Baroness Hooper: My Lords, yes, this is a difficult area, and that is why current initiatives to prevent smoking include the "My Body" project to improve knowledge of the effect of smoking on health, and the "Pace-setters Don't Smoke" campaign, which involves sporting and other personalities who are likely to appeal to youth and to set them an example.
Lord Mellish: My Lords, will the noble Baroness recognise that in a democracy there is a limit as to how far one can go in stopping something from happening? We can do all we can through education, and I believe that that is being done; but there is a limit to what we can do. Perhaps I may point out, in relation to my noble friend Lord Shinwell rising and intervening in this matter, that he is over 100 years old and has been smoking all his life, which proves that some of these research wallahs are absolute idiots.
Baroness Hooper: My Lords, it is true that we need not be totally despondent about this matter. After all, the figures on which we are basing all this detail were provided for the first time on a national basis only in 1982. The survey was repeated in 1984, and it is on these fairly short-term figures that we are basing our analysis. Therefore, we shall try not to despair.

International Terrorism and Economic Sanctions
2.54 p.m.
Lord Chalfont: 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 outline their policy towards the imposition of economic sanctions on states which are known to harbour or sponsor international terrorists.
The Minister of State, Foreign and Commonwealth Office (Baroness Young): My Lords, our experience is that economic sanctions are not effective. We do not consider them the right response to states that are alleged to be harbouring or sponsoring international terrorists.
Lord Chalfont: My Lords, I thank the noble Baroness the Minister for that reply. Given the constant increase in the rate of terrorism and the effects of it, will she not agree that it will be very little use defending ourselves against acts of terrorism unless we do something about those nations which sponsor and harbour international terrorists, and which are proved to have done so? This is not a question of alleged sponsors; this has been demonstrated and it has been proved that they are sponsors. If the noble Baroness thinks that economic sanctions are not effective—and I have seen no clear evidence of that in other contexts—what measures does she suggest that we should bring to bear on states which sponsor international terrorism in order to prevent them from doing so?
Baroness Young: My Lords, I should like to make it quite clear that we have condemned all acts of terrorism from whatever quarter and will continue to work with other like-minded countries to bring both political and diplomatic pressure to bear on states which support terrorists. As the noble Lord will be aware, we have tightened security, and there are now armed police at Heathrow, which I think indicates the seriousness with which we view the problem. We also encourage a full exchange of information and intelligence with others on terrorist activities, and we also monitor the movement and actions of would-be terrorists and those who support them.
Lord Cledwyn of Penhros: My Lords, with regard to the position in South Africa, and following the decision taken at the Commonwealth Conference in the Bahamas, can the noble Baroness say whether Her Majesty's Government have now reached a conclusion as to the action they will take if all the Commonwealth partners decide to take economic sanctions against South Africa?
Baroness Young: My Lords, I think that at this stage that is a hypothetical question. The Government's position on the question of sanctions against South Africa is well known.
Lord Orr-Ewing: My Lords, in the face of the first supplementary question by the noble Lord, Lord Chalfont, will my noble friend not consider whether we should be doing something more positive to discourage not only those who harbour but those who actually train terrorists and who proudly boast that they are doing exactly that? If we cannot bring about effective general sanctions, can we not bring oil sanctions to bear particularly on countries like Libya?

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Would not that be particularly appropriate at the present time when the oil supplies for the whole world are pretty buoyant and therefore there is no abject need to crawl to Libya and buy their supplies of oil?
Baroness Young: My Lords, to answer my noble friend, we have taken a number of actions against Libya. Following the shooting of the policewoman in St. James's Square in 1984, we broke off diplomatic relations; we prohibited the export of defence equipment; we denied ECGD cover for medium and long-term credit and we imposed severe restrictions on Libyan immigration into Britain.
I should also like to make it clear that we shall continue to work actively with the United States and other like-minded countries to bring pressure to bear on those countries which support terrorism. My right honourable and learned friend the Foreign and Commonwealth Secretary has made that clear, as I did when I was in Washington 10 days ago.
Lord Glenamara: My Lords, would the noble Baroness care to express a view on the effectiveness of the recent economic sanctions imposed by South Africa on Lesotho?
Baroness Young: My Lords, I think that that question is quite wide of the Question on the Order Paper.
Lord Grimond: My Lords, does not the attitude of the Americans themselves show that this is not a very easy question, and would it not greatly help in the laudable aim of containing terrorism if the Americans would cease to harbour IRA terrorists and would take steps to prevent the raising of large sums of money in America for the support of the IRA?
Baroness Young: My Lords, I think we all agree that this is a very serious matter indeed, but I must make plain that the opposition of the United States Administration to the PIRA is well known and it is not policy to harbour IRA terrorists. Indeed, a supplementary extradition treaty has been concluded with the United States Administration which, if approved by the Senate, will prevent fugitive terrorists from avoiding extradition by claiming that their alleged offences were political.
Lord Molloy: My Lords, is the noble Baroness aware of the grave consternation expressed in British newspapers and in newspapers of the United States of America about the behavour of the CIA (which is an official part of American policy) in Nicaragua and other parts of southern America, which is also a form of terrorism? Should we not make representations about that as well as making representations about what has been happening to our people in this country as a result of IRA activities?
Baroness Young: My Lords, I think that the noble Lord's question is quite wide of the orginal Question on the Order Paper, but let me make it quite plain that the United States Administration have not asked us to join with them in imposing sanctions on Nicaragua.
Lord Elystan-Morgan: My Lords, will the noble Baroness not agree that in the long term there is a very strong case for a deep concept of collective security in this realm, in that any act of terrorism should be seen as an attack not just upon the victim country but upon all the law-abiding and peace-abiding countries of the world?
Baroness Young: My Lords, I accept what lies behind the noble Lord's question, as I entirely accept the concern expressed in the orginal Question by the noble Lord, Lord Chalfont. Indeed, the Foreign Ministers of the European Community will be meeting next week, and one of the subjects on their agenda will be terrorism, and it underlines our belief that is must be tackled by like-minded states working together.
Lord Hatch of Lusby: My Lords, does the noble Baroness agree that the actions of the South African Government in invading and killing nationals of the neighbouring states of South Africa, including those within the Commonwealth, is indeed international terrorism? If so, will her Government impose the same kind of sanctions on the South African Government that she has listed to the House this afternoon have been imposed on the government of Libya?
Baroness Young: My Lords, the noble Lord, Lord Hatch, is well aware of the steps that Her Majesty's Government have taken towards South Africa and the agreements that we have reached with our Community partners and indeed with our colleagues in the Commonwealth. We still believe that sanctions in that situation would be counter-productive, and we prefer positive measures such as the Commonwealth Eminent Persons' Group.
Lord Chalfont: My Lords, I wonder whether it would be in order to return to the Question on the Order Paper? Would the Minister agree that the danger of further massive acts of terrorism, possibly directed against the people of this country, is very real? The trend shows that this is likely to recur and become more severe in nature. In the light of that, will the Minister assure us that the Government will keep an open mind about any kind of riposte which is made against states which sponsor, harbour and train terrorists, and that they will not be too rigid in their attitude towards economic sanctions?
Baroness Young: My Lords, I should like to make it clear that wherever there is evidence of support for terrorists by a foreign government we do not hesitate to make clear our condemnation and take the necessary steps to deter and, if possible, stop such support. I have already indicated the firm measures that we took after the shooting in St. James's Square, and we believe that it is quite unacceptable for other countries to export violence to the United Kingdom or to other countries.

Nuclear Test Ban Treaty Proposal
3.3 p.m.
Lord Brockway: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what were the votes at the First Committee of the United Nations on resolutions (1) recommending urgent consideration of the conversions of the Partial Nuclear Test Ban Treaty into a comprehensive nuclear test ban treaty, and (2) and (3) deciding to include in the agenda of the 41st session of the General Assembly an item for the cessation of all nuclear tests; and which nations voted against in each case.
Baroness Young: My Lords, the First Committee of the 40th United Nations General Assembly considered one resolution recommending consideration of the conversion of the Partial Test Ban Treaty into a comprehensive test ban. It was adopted by 108 votes to three, with 26 abstentions. There were three further resolutions calling for a comprehensive test ban and for the inclusion on the agenda of the 41st General Assembly of an item on the need for the cessation of tests. Of these, one put forward by Australia and New Zealand was adopted by 103 votes to three, with 32 abstentions; one proposed by Hungary was adopted by 107 votes to three, with 26 abstentions; and that sponsored by Mexico was accepted by 111 votes to two, with 25 abstentions.
In all cases the United Kingdom and the USA opposed the resolutions. France voted against all but the last resolution in the First Committee. In plenary, France joined the United Kingdom and USA in voting against that resolution.
Lord Brockway: My Lords, I thank the Minister for that full reply. May I ask her whether she does not agree that the overwhelming vote of over 100 against three indicates the strength of world opinion in favour of ending all nuclear weapons tests? May I ask her whether the attitude of the United States, Great Britain and France does not provide some basis for the feeling which the Prime Minister found at the Commonwealth Conference that the Western nuclear powers are preventing an advance to peace? Lastly, may I ask the noble Baroness whether the British Government will use their influence in the summit talks between the United States of America and the Soviet Union at last to get the abolition of all nuclear weapon tests?
Baroness Young: My Lords, I should like to make the position of our Government quite clear. We voted against the resolutions tabled because they did not meet our criteria. The Government continue to believe that outstanding problems of verification must be solved before negotiations can be started on a comprehensive test ban. Nor indeed would I accept that the record of the Western powers is in any way preventing the peace process. On the contrary, the peace process is more likely to be taken forward if we start our negotiations from a position of strength.
Lord Mayhew: My Lords, while I appreciate the difficulty of her position, may I ask whether the noble Baroness is aware that it is now clear to everybody that the reason why the American and British Governments refuse to negotiate about a comprehen-
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sive test ban treaty is not the problem of verification but the fact that they wish to have more tests, that that is perfectly plain to everyone and that the two Governments would do much better to come clean and admit it?
Baroness Young: My Lords, I am not prepared to accept that statement made by the noble Lord, Lord Mayhew, which he has of course made on a number of previous occasions. We have made our position quite plain on this matter. As I have already indicated in the answer that I gave to the supplementary question of the noble Lord, Lord Brockway, we are committed to seeking progress towards a comprehensive test ban treaty, and our own nuclear tests are conducted to maintain the effectiveness of our nuclear capabilities.
Lord Mackie of Benshie: My Lords, does the noble Baroness maintain that verification is not possible in view of the scientific evidence—
Several Noble Lords: Order!
Lord Jenkins of Putney: My Lords, it is my turn. Is the noble Baroness not aware that the position now is that the nuclear nations of the West are against the rest of the world? Is this not an unhappy situation, and will she not do something about it?
Baroness Young: My Lords, I am not prepared to accept that the United Kingdom is isolated. We voted in these debates with the United States and with France, and most of our NATO partners abstained.
Lord Mackie of Benshie: My Lords, would the noble Baroness maintain her position that verification is why the United States and Britain are against it, when in fact the evidence is clearly that with the new scientific methods they can verify whether nuclear tests have taken place anywhere in the world?
Baroness Young: My Lords, I am not quite sure to which scientific evidence the noble Lord is referring. If he is referring to the Norwegian seismic array experiment, we hope of course that this experiment will provide a solution to some of the outstanding technical problems. But claims for the efficiency of high frequency seismic stations can be exaggerated, and we do not have much data on them. Nor are there any reliable discriminants applicable to high frequency signals.
Lord Molloy: My Lords, I believe that verification always has been a difficult stumbling block. However, there has now been a positive contribution from Mr. Gorbachev that he recognises the problems of verification, and he is asking for full consultation and examination of the proposals that he has adumbrated, which are lengthy and complicated but which he believes will satisfy all the major powers involved with any form of nuclear weapons, testing them, or even developing them in future. Therefore, ought not the Government to take notice of this, and perhaps ask the United States to call a conference with the Soviet Union on this whole subject of verification and testing?
Baroness Young: My Lords, we have received the latest proposals sent by Mr. Gorbachev in his message to my right honourable friend the Prime Minister. Many elements are a repetition of existing Soviet ideas, but the proposals are wide ranging; they contain new elements and they will require full and careful study.
On the noble Lord's other point, about our voting in the United Nations, perhaps I could say that we are not in the business in the United Nations of supporting declaratory and unbalanced resolutions which do not further the cause of balanced, practical and verifiable arms control and disarmament.
Lord Chalfont: My Lords, does the Minister agree that there are two nations which possess nuclear weapons which do not take part in any of the discussions on nuclear arms control and would be unlikely to take any notice of a comprehensive test ban anyway?
Secondly, would the Minister not agree that seismic detection is still not sophisticated enough to distinguish in all cases between nuclear explosions and natural seismic events, and that this is a much more complicated subject than some people would like to suggest that it is?
Finally, does she not agree that the whole problem of verification would be solved if the Soviet Union would accept verification on site, as Western nations have been prepared to do for 25 years?
Baroness Young: My Lords, I thank the noble Lord, Lord Chalfont, for his questions. It is true that there are other nations who would be involved in a comprehensive test ban treaty, and we agree that the scientific evidence available is not sufficiently advanced to be sure that we can rely on getting the verification that we require for a test ban treaty. I further agree that the United States proposed an exchange of test site observers and in July invited Soviet observers to visit a United States test site. This would go to the heart of the key issue, which is verification on the ground. It is a matter for regret that the Soviet response has so far been dismissive.
Lord Denham: My Lords, we have now been 35 minutes on these four Questions, and nine minutes on this Question. I think the House may feel that it would be better to go on to the next business.

Business
3.12 p.m.
Lord Denham: My Lords, with the leave of the House, I should like to say a word about the two short debates standing in the names of the noble Lords, Lord Irving of Dartford and Lord Gallacher. The mover of each debate is, by custom, allowed 15 minutes and the Minister should rise to reply not less than 20 minutes before the scheduled end of the debate.
In the case of the debate in the name of the noble Lord, Lord Irving of Dartford, this means that all other speeches should be limited to a maximum of 10 minutes and in that of the noble Lord, Lord Gallacher,
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to 12 minutes. If any noble Lord should speak at greater length it would be at the expense of subsequent speakers in the debate.

Schools and their Problems
3.13 p.m.
Lord Irving of Dartford Lord Irving of Dartford rose to call attention to the problems facing the nation's schools; and to move for Papers.
The noble Lord said: My Lords, in May last year Mr. John Clare, the BBC's education correspondent, wrote an article which was published in The Listener entitled "Turmoil in Education". It is this turmoil, its causes, its consequences and its remedies which I should like to discuss this afternoon. Mr. Clare summed it up very neatly and effectively when he said: said:
"Britain's schools have never been more embattled. Since the beginning of the year, millions of pupils have had their education disrupted by teachers in an entirely just but hopeless claim. The disruption, unprecedented in scale, coincides with a drive by the most innovative Secretary of State for a generation to push through an elaborate plan to boost school standards".
There can be no doubt about the concern felt throughout the country about this damaging dispute or the earnest wish of parents, teachers and all others that it be drawn to an early conclusion. The question is, how?
Referring to Sir Keith's plans, Mr.Clare said:
"It is a plan that depends absolutely on the goodwill and commitment of teachers. Such things have never been in shorter supply, nor has teacher morale ever been lower".
In case anyone thinks Mr. Clare to be exaggerating, let me tell the House what Dr. Harry Judge, the director of the Department of Educational Studies at Oxford since 1973, said in an article in The Times Educational Supplement in September:
"The morale and confidence of the education service are now at a desperately low point. Unless and until the fact of crisis is acknowledged, and its nature agreed upon, nothing can be improved. The present mood is without precedent, certainly within the working life of the older among us, and arguably at any time over the past century".
Those are strong words.
A similar view was expressed in an article by Mr. Bernard Barker, headmaster of Stanground School, Peterborough, published in The Times Educational Supplement in November when he said:
"Trust has been destroyed over a 2 year period so that there is no chance of negotiations leading to a just and lasting settlement. Without trust it is impossible to achieve a changed pay and promotion structure, earnestly desired by the teachers themselves".
Without agreeing with everything that the teachers have said and done, I believe that the Secretary of State, Sir Keith Joseph, has to accept a large share of the blame for this sorry state of affairs. As Mr. Barker concluded:
"What kind of psychology is it that expects the profession to accept radical changes in conditions and methods in return for a rise slightly below the cost of living?"
Pay is clearly at the heart of the problem. What is the "just claim" referred to by Mr. Clare? It is that teachers' salaries are now worth only two-thirds of what they were 10 years ago. This is not propaganda: it is a fact established by the Burnham pay data

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working party early last year. It is also true that over the same period they have fallen behind every remotely comparable group of employees. The problem is that teachers are unwilling to accept the promise of jam tomorrow in the form of what many feel could be an improved package of professional reforms, in the face of the dramatic and real erosion of their pay which has taken place since the Houghton Committee reported 10 years ago. Pay has declined when demands on teachers have increased.
The Burnham pay data working party last year selected eight occupations for comparison. In 1974 the weekly difference between teachers and the average of the eight was 82p. By 1984 teachers' pay had gone up by £129 a week, but the average for the others had gone up by £172.50. In other words, the difference had gone from 82p to £43.50 a week. Whereas the total for all teachers was £188.63, including heads and deputy heads, for gasfitters it was £182.50, crane drivers £193.20, seagoing deckhands £187 and printing machine minders £190.
More than a quarter of a million or 61 per cent. of the 414,000 primary and secondary schoolteachers in England and Wales are stuck in the two lower pay scales and can only earn a maximum of £9,597 a year. To restore the purchasing power of teachers' pay they need an average of over £1,750 a year. Is it surprising that teachers are filled with anger and frustration? Whatever Sir Keith Joseph says, it is clear that we undervalue and underpay our teachers in terms of both comparable jobs and what is paid in other countries. The teachers are not asking for the immediate restoration of this loss, but that the loss will be made good in a planned way over a period of time. The failure in this respect will, in my view, involve a price, but I shall talk about that later.
Sir Keith has claimed over and over that he is willing to provide an extra £1½ billion over the next four years. But, such is the distrust of Sir Keith, the unions do not believe that this really means £1½ billion; but that what it means is £450 million, which is only allowing the local education authorities to raise their expenditure to £200 million a year out of which only 47 per cent., the rate support grant element, will be paid directly by the Government.
The plain truth in this respect, which is mentioned in an article in The Guardian today, is that no one knows exactly what will be spent on school education in the current financial year, or in the next year for that matter. The system of local government finance is so complex that estimates cannot be made, even by the DES. The 1984–85 document on Government expenditure plans, for example, reflects not what will actually be spent on education in schools, but is:
"the Government's view of the appropriate distribution of local authority expenditure on education".
The main long standing problem is that individual local authorities do not necessarily spend the amount that has been assessed as their need: some spend more and some spend less. With their pay eroded by 33 per cent. teachers are affronted by the fact that they are having to fight for a bare 6·9 per cent. when senior civil servants received 12·2 per cent., the judiciary 15·3 per cent., senior military officers 17·6 per cent., admirals 31·9 per cent. and the head of the Civil Service 46·3
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per cent., without any proof that they were having difficulty in actually filling any of those appointments.
I think that parents now are taking a hand and demanding a proper professional salary for teachers. A Gallup poll in July showed that the majority of the public were in favour of the teachers' demand in this respect. Before I am interrupted by someone telling me that the National Confederation of Parent Teacher Associations has changed its mind, I ought to say that in my view this is an indication of the turmoil going on in many parents' minds about the damage being done. But most parents believe that pressuring teachers to go back without a just settlement would not provide the peace required to get the kind of calm, relaxed consideration of the improvements that Sir Keith and others, including the teachers themselves, would like to see.
Nor will the Government's hard line of taking them to court or stopping pay work either. Indeed, the difference between the unions is not all that remarkable. The NUT and the NAS/UWT are both in favour of strikes. It is a question of tactics. And the NAS/UWT general secretary has said that when this income pay award is over—and he means when this year's settlement is over—they will start the next campaign for pay increases immediately. I think that the dispute must be brought to an end before further damage is done.
I have tried to demonstrate the impossibility because of the anger and frustration of teachers in getting a settlement of making progress in respect of re-structuring, appraisal and curricular reform on terms set out by the Government. To achieve these things will require the co-operation of teachers. Even if some unions did seek to go ahead I believe that it would be very difficult to get all the LEAs to act together. The dispute, apart from the other damage that it is doing, is already affecting recruitment into the profession. It is clear in my view that the only way to resolve the strike is for teachers to accept an interim settlement in return for an independent inquiry which will take into account both the erosion of teachers pay and the new duties and standards that Sir Keith wants to apply. In this way, teachers would secure a real assessment of their worth in the context of these responsibilities. I believe that an independent inquiry does not just have the support of the official Opposition; it has the support of many Members on the Conservative side in another place, and indeed also of The Times in its leader of 4th January.
Although pay is the main point of controversy, there was crisis in our schools before the pay dispute. In a paper, The Next Ten Years, Public Expenditure and Taxation into the 1990s, the Government argue that education expenditure in real terms has increased by I per cent. since 1978–79. With a school population fall of 12 per cent., LEAs, according to the Government, should be in clover. Of course, the LEAs claim that falling rolls do not provide such economy, that the same number of courses offered to fewer pupils when funds are allocated per capita is more expensive and where staff numbers have been reduced there have been redundancy and compensation payments.
Now, Sir Keith's own inspectorate have stepped in and added their weight. They say in their report, The State of Schools in England and Wales:

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"The present picture is of an under-resourced service with poor maintenance and buildings, inadequate provision of basic equipment, and materials. Teachers are struggling to cope in schools in which resource provision is well below standard".
But of course the parents themselves are taking a hand. The National Confederation of Parent Teacher Associations has just produced its own report with contributions from a large number of secondary and primary schools throughout the country in 83 areas. They conclude:
"Classes are increasing in size while the curriculum is narrowing and staff are under more and more stress".
They say:
"Parental funding is forming a sharply increasing part of school funding leading to disadvantage for pupils from less affluent areas".
Deteriorating buildings are reported in 58 per cent. of primary schools and 72 per cent. of secondary schools. The confederation urge that funding be increased to deal with what they have indicated as the specific deterioration that they have outlined. They also call on the Prime Minister, Ministers and Members of Parliament to get out and see the problems for themselves.
Funding from parental sources is estimated to be £40 million a year. When Sir Keith was presented with this, he said, "Of course, if that is the way that parents want to spend their money, they are perfectly entitled to do so". The generosity and money-raising activities by parent teacher associations have been features of our educational system for generations but this is the first time in history that many schools have had to rely on parents to supply the basic tools of education. The fact is that in poor areas the pupils will not be able to get the same help as children in middle-class areas.
Sir Keith was invited to go to Sheffield because the Sheffield committee believed that they wanted £8 million to bring their schools up to standard for the next 10 years. He had the good grace to say that they had rubbed his nose in some pretty depressing, leaking and obsolete buildings. Sir Keith was reported as saying "Of course, you can survive crummy schools. I myself had some expensive and prolonged education in some crummy physical conditions". The chairman of the Sheffield Education Committee replied, however, that "crummy" was an understatement of the conditions. But perhaps Sir Keith ought not to have been surprised when Mr. Brewer added:
"Many kids in Sheffield go to crummy schools; their home environment is crummy. Their prospects for the future are crummy and they can't go back to a rich and privileged environment as Sir Keith could".
When the NEDC looked at public sector investment early this year, it concluded that the present practice of school building maintenance "flies in the face of good management". Finally, there is a substantial minority of schools, mainly older ones, with extensive and often severe deficiencies in amenities by today's standards. Despite what Sir Keith had to say, I do not believe that Harrow or any of the schools that Sir Keith attended was ever like this.
The bill to bring all schools up to standard was in 1977, the last time the DES surveyed this, £1.5 billion. In my view, it must be at least £3 billion now. But the question is this. Does the shortage of books or deteriorating buildings affect the real quality of education?
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Professor Brian Cox, Professor of English at Manchester University, in an article in the Sunday Times only last month said:
"According to the Bullock Report, approximately 1 million adults in England and Wales have a reading age of nine, although to read the simplest newspaper requires a reading age of 13."
He said that the problems highlighted in this respect show the immense folly of the present Government in allowing spending on school and public libraries to fall dramatically.
As to buildings, clearly if a school has no technology workshop or computer facilities then the education is limited, but arguably not reduced in quality. But so far as the general state of dilapidations in schools is concerned, the HMI report was unambiguous:
"In some schools the conditions in which teaching takes place adversely affect the quality of pupils' work".
Sue Nicholas of the National Association of Head Teachers, said:
"There is no doubt that dilapidation is both dangerous and disruptive. Broken windows, damaged playgrounds, broken locks are a danger to pupils and teachers. The security of the school is often affected and vandalism is encouraged."
Head teachers report that vandalism gets worse as buildings deteriorate. It appears that children's reactions in terms of poor decoration is this: if no one else wants to take care of it, why should we?
Of course there are other problems, some of them even more potentially dangerous for the future. Mr. Kenneth Reid, Reader in Education at the Glamorgan Institute of Education, has recently published a book, Truancy and School Absenteeism. He says that there are worrying signs that absenteeism in our schools is increasing and that its nature is changing. Overall, one in 10 secondary school pupils fail to attend school daily and the rate is worse in some regions. Truants used to be regarded as isolated cases from unfavourable deprived backgrounds. Recent evidence shows that group truancy is, however, more common. Rather than staying home and whiling away the time in monotonous inactivity, some absentees deliberately (to use Mr. Reid's word) "mitch" together in groups. They then participate in organised, often deviant, activities which pose an increasing threat to society. There seems little doubt that the rise in group truancy is related to the increase in juvenile crime, especially shoplifting and vandalism. Police experiments with truancy patrols in both the United States and Britain regularly produce substantial decreases in juvenile crime.
The tendency for truants to form menacing groups in major conurbations and unemployment black spots is of particular significance. It is probable that truants have played a part in every city and inter-racial conflict, in drug trafficking and in vandalism. Schools in Britain are beginning to lose credibility among a large section of lower and middle ability pupils. Mr. Reid says that teachers are finding it harder to motivate disillusioned youngsters who, with the decline of unskilled employment opportunities, face a hard struggle throughout their lives. The teaching profession is not the only victim of low morale. Adolescents are losing their youthful optimism. Hope, says Mr. Reid, is being replaced by fear, worry, envy, bitterness and a sense of despair. It is in this atmosphere that highly-charged groups will take their own form of collective action.
All the matters I have discussed today are related. There are very severe and disturbing social consequences for all of us if we fail to invest adequately in our school system. Sir Keith has asked where the money is to come from. My answer to Sir Keith is that the cost of not finding the money could be infinitely greater, as the results could only be measured in the irreparable damage to the quality of life for all of us. We cannot afford to fail, but the time is getting very late.
Viscount Massereene and Ferrard: My Lords, before the noble Lord sits down, may I ask him one question? With regard to teachers' pay, has he taken into consideration the very long holidays that teachers enjoy?
Lord Irving of Dartford: My Lords, it is quite clear that the noble Viscount has never worked in a school. In many schools most teachers are engaged in many activities in the evenings and in the summer recess; and schools would not be as good as they have been in the past if it had not been for that devotion. My Lords, I beg to move for Papers.
3.32 p.m.
Lord Ritchie of Dundee: My Lords, I should like first to acknowledge our gratitude to the noble Lord, Lord Irving of Dartford, for having inaugurated this very important debate on the subject of schools. He has painted a sympathetic picture of the teachers' situation and a dark picture of the situation in our schools. I thought I was going to do the same, but I found when I began to ask some questions of certain teachers that I had some encouraging replies from them; so I hope to cheer you up a little, my Lords.
I think it would be true to say that there is no section of society on whom the pressure of the social upheavals of the last decade has borne more heavily than our teachers. The problems of racism, sexism, multi-racial culture, language differences, the new technology, unemployment, social deprivation and single parenthood have all affected our schools vitally, crucially and traumatically. At the same time, schools have had to face cuts in resources; and teachers, who hear the burden, as the noble Lord, Lord Irving, has said, have been undervalued and, I would add, also threatened. I think they have minded being told that they are not good enough just as much as they have minded being underpaid.
The problems facing our schools are indeed so many and so great that one does not know where to begin thinking about them or talking about them. I thought I would confine myself to saying a little about two London schools whose head teachers I happen to know. The popular image of an inner city school is of the "blackboard jungle" variety: vandalism, anarchy in the classroom, the victimisation of some children by others, stealing, smoking, drugs—you name it. I suppose that in the background of my mind that is what I expected to be recounting to your Lordships today, but when I began to ask questions of my two head teachers a very different picture began to emerge and I realised that I should be talking less about the problems than about the solutions that those two teachers in particular have been finding.
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My first school is a primary school in Deptford. To tell your Lordships a little bit about the problems, and adding to what the noble Lord, Lord Irving, has said, seven years ago there were 700 children in that school, all white. Now there are 200. Two-thirds of those children come from minority ethnic groups. Thirteen languages are spoken. I will not tell your Lordships what they are; you can use your imagination. The school is expected not only to teach English to those children, whose English is in some cases very inadequate, but also to maintain their own mother tongues. The school has to absorb children with special education needs, in accordance with the Warnock recommendations and the 1981 Act.
This particular school has in the nursery section a child with cystic fibrosis; there is another case of Down's syndrome. A third child who has now reached the age of 10 has such a low IQ all round that it is impossible to integrate her into any class, but her mother refuses to allow her to be sent to a special school. Fifty per cent. of the children come from one-parent families and 40 per cent. of the parents are unemployed. The head teacher, who is actually a friend and an ex-pupil of mine, has parents begging him to keep the children from 8 a.m. until 8 p.m. so that they can earn enough money to make both ends meet. I must tell you here of a remark made by an eight-year-old girl. She is not in fact from this school, but I am telling you of this remark because it is indicative. She said, "I'm not going to do any work. It's not worth it if you are going to be unemployed at the end". This from an eight-year-old, my Lords!
There is always this shortage of resources. I am digressing briefly here to add to what the noble Lord, Lord Irving, was saying about parental help. In another school the parents have had to repaint the building themselves. The LEA supplied the paint but it did not supply the labour. The parents in this school are themselves buying some of the ancillary help. They have even been considering paying the salary of an additional teacher. The school I am briefly digressing about is in a well-to-do commuter area. You cannot imagine things of this sort being done in an inner city area, where parents are so much less likely to have either the ability or the willingness to make contributions of this sort.
To return to my London primary school, I must tell you that, despite all these problems, this school is a showpiece and visitors come in numbers from this country and from abroad to see how the challenge of a multi-racial culture has been responded to. The showpiece in the school is called a resource centre for multi-ethnic artifacts or, to put it into plain English, an exhibition of works of art from all the children's mother countries.
The other school I want to tell your Lordships about is a girls' comprehensive in the same area of South London. It numbers 800 girls, with 100 in the sixth form. A sixth-form consortium exists with three neighbouring schools—one boys' school and two others; I am not quite sure what they are—offering altogether 25 A-level courses between them. A wide variety of subjects is offered throughout the school, including four languages (apart from English)—French, German, Italian and Russian—for 11-year-olds up to 18- or 19-year-olds.

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That school also has to absorb children with special educational needs. The school has a team which offers not only specialist teaching, often in a one-to-one situation, but also pastoral care for these children. A number of children with special educational needs enter at sixth-form level, having had to leave some other school at the end of their fifth year. I believe they make remarkable progress. So that is another example of the successful implementation of the Warnock recommendation about the integration into mainstream education of children who have special educational needs.
This school has 23 per cent. black Africans, 15 Tamil refugees, five Boat people and many other ethnic minorities, with 27 languages spoken in all. Yet I can vouch for the fact that there are no racist feelings in this school. To me, it was a most interesting example of how ideas are conveyed to children by adults. Ideas are infectious and they travel with the speed of light. If you convey to children the idea that there is something wrong with another child whose skin is a different colour, they will pick it up instantly. But, if you convey no such idea, they remain completely innocent of it. I have seen this happening in this school.
The teaching of English to the ethnic minorities, which is a theoretical obligation, is of course a problem, and how they manage to solve it I do not know. But I was delighted to learn that one sixth-form girl, who is a Jamaican, has the specific task of teaching conversational English to some of the first-year girls. She is not the only one. There are several members of the sixth form who are given the task of talking to some of the younger girls in order to improve their oral English. This same Jamaican girl is a fully fledged member of the governing body, attending all meetings. She is the elected representative of the sixth form and has to submit a report on sixth-form activities to the governing body.
The girls of this school are very active in community work. They look after the old people of their neighbourhood; they organise a party for them every Christmas; they wheel them there in their wheelchairs; they give them presents; they provide all the fare for the party and they provide a pantomine—not, alas, this year, because of the teachers' dispute. All this makes one feel that, although the problems in our schools are great, the ability to overcome them if you have the right teachers may be greater. But this can be achieved only by teachers—not ultimately the buildings, resources, curricula, schemes, directives or Acts of Parliament, but the teachers. And they must be accorded their true worth in money terms and in recognition, in appreciation and in honour.
3.43 p.m.
Baroness Cox: My Lords, we must all be grateful to the noble Lord, Lord Irving, for giving us this opportunity to discuss the problems facing our nation's schools. My contribution will focus on two kinds of problems which are not caused by cuts or by the dispute over salaries. The first is a result of policy, and the second of the political attitudes and commitments of some teachers.
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My first concern is the effect of the massive switch to comprehensive schools, which now contain about 90 per cent. of our secondary school pupils. Let me hasten to say that I am not prejudiced against comprehensive schools. I know that there are many very good comprehensives, and my own three children all went to a comprehensive school in the London Borough of Brent. But there is a growing body of evidence which shows that a comprehensive system leads to lower overall levels of achievement than a system with different kinds of schools for pupils of different aptitudes and enthusiasms. It is morally incumbent on us to take this evidence seriously. It was a socialist, writing on the development of comprehensive schooling, who said that it is an
"experiment with the life chances of millions of children".
I agree. But the essence of an experiment is to see if it works; if it does not, then one must think again. Not to do so is evidence of dogmatism.
Time permits mention of only two examples of such evidence. The first comes from the DES itself. Statistical Bulletin 13/84 shows that pupils from a selective system of grammar and secondary modern schools achieve significantly better exam results than those from comprehensives. Of course, there is more to education than exams, but exams matter—as passports for pupils to their careers, and as an external independent assessment of the quality of teaching. So consistent under-achievement in examinations should be taken seriously if we care about pupils' welfare, especially as it is pupils from working-class homes who seem to be being most adversely affected. For example, there has been a disturbing decline in the proportion of these pupils going on to higher education.
The second example of evidence refers to the comparison of examination results between England and Northern Ireland. This shows that as England's schools became comprehensive, proportions of pupils achieving GCE 0 and A-levels began to level out, despite DES predictions that they would rise. In Ulster, however, despite all the troubles, the proportions continued to rise steadily, so now there is a massive gap between England and Northern Ireland, with Ulster's selective system out-performing England's comprehensive system. There, 50 per cent. more leave school with one or more A-levels and 40 per cent. more with at least five O-levels. Of course there may be other factors at work, but these have not been identified.
I am not suggesting putting the clock back to our former system of selective schools, although I should like an assurance from my noble friend the Minister that the Government will think very carefully before closing any more good grammar and secondary modern schools, especially as it is not only grammar school pupils who benefit from a selective system; secondary modern pupils often do better than their counterparts in comprehensives.
But we must also be prepared to think about improvements to the present comprehensive system, especially in the inner city areas. One way forward might be to consider a solution adopted in the United States. I refer to magnet schools, which provide high quality education around a particular theme. We could surely consider developing specialist

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comprehensives offering first-rate facilities in subject areas such as maths, science and computing, languages, technical subjects, music, art and drama—even PE. Such schools could have a more flexible age of transfer than grammar schools and accept pupils on the basis of enthusiasm as well as ability. They would help to solve problems of shortages of specialist teachers and declining sixth forms, and would also develop as centres of excellence in the state system in inner city areas where positive initiatives are so desperately needed, as the noble Lord, Lord Irving, rightly pointed out.
I now turn to my second concern: the politicisation of education. As there is to be a debate on this subject on 5th February, I will merely touch on it briefly today. But it seemed wrong to have today's debate on the problems facing our nation's schools without any reference to some of the disturbing developments associated with the politicisation of teaching and the attitudes and behaviour of some teachers. I must stress that I refer only to some teachers. I recognise that there are many dedicated and conscientious teachers to whom my comments will not apply and who are worthy of our complete admiration.
It used to be a cherished principle that we kept partisan and party politics out of the classroom, but in recent years there has been a sea change. New subjects like "peace studies" or "world studies" are highly political. They are characteristically anti-Government. anti-NATO, anti-Western and often stridently anti-American. One book called Pieces for Peace, funded by the ILEA and the GLC's Women's Collective, shows two pictures on the front: one of a demonstration of solidarity with SWAPO; the other with placards saying "US murderers get out of Grenada". Its recommended reading is typical of peace studies material in its anti-Western bias and its complete lack of reference to Soviet military and political strategy or the realities of life on the other side of the Iron Curtain. The effect of this is to undermine our younger generation's political will for defence, because they are led to believe that we have nothing worth defending and that there is nothing to deter.
Other developments, which are highly politicised and appear designed to destabilise our society, take place under the rubric of so-called anti-racism or anti-sexism. One example must suffice. A book by the Institute of Race Relations, which is funded by the GLC, called How Racism Came To Britain was written for children aged 10 years and upwards. Cartoons allege the iniquities of Britain's racism, which is illustrated, to give one example, by a caricature of our legal system which shows a judge proclaiming:
"I s'pose you're innocent until proved guilty … As long as you're white, that is! If you are white and wear a blue uniform however, well, then as we all know … you're innocent even when proven guilty! Got it?".
That quotation illustrates another disturbing development: the growth of anti-police propaganda. The GLC has produced posters, booklets and a video for schools and youth clubs, showing our police as racist, incompetent and callous. The video, which cost £35,000 in this time of scarce resources, finishes with a reggae singer in a night club urging "Communities must rebel". The first of the credits in the video is the
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Communist Party newspaper, the Morning Star. At present we do not know how much of this material reaches the classroom. It is highly probable that some does, because, for example, the anti-police video is prepared for schools; and the teachers' group All London Teachers Against Racism and Fascism recommend in glowing terms that hook How Racism Came to Britain.
This raises the issue of the political commitments and concerns of some teachers. The Times Educational Supplement recently exposed the extent to which far Left teachers have a grip on teaching in ILEA. The Inner London Teachers' Association has about 13,500 members—over half the capital's teachers. It is dominated by the Socialist Teachers' Alliance, which includes Trotskyists, Anarchists and Communists. In a leader article, The Times Educational Supplement points out that ILEA has been ineffective in curbing their militant activities. I quote:
"By condoning breaches of the rules by teachers striking in sympathy with the miners and health service workers—and freezing disciplinary procedures against them as a supposed gesture of goodwill—ILEA attempted to keep credit with the Left".
As I draw to a conclusion perhaps I may mention just one other indication that many teachers seem more concerned with political than professional issues. That can be seen from the list of motions put forward for the annual conference of the largest of the teachers' unions—the 216,000 strong National Union of Teachers. These motions include a national boycott on exams, a partial ban on homework, indefinite strikes in schools in marginal Tory constituencies, support for pro-Soviet and anti-American positions and for more peace studies. For example, Hull welcomes Soviet peace initiatives but condemns the United States, while Coventry wants to affiliate to CND and urges the widest possible dissemination of peace studies.
I leave further discussion for 5th February. But I hope I have indicated that there are serious problems facing our nation's schools which reflect changes in the attitudes and political commitments of many teachers and local education authorities. The noble Lord, Lord Houghton of Sowerby, in his commendable report some years ago, made an important link between salary increases and professional standards, a link which some teachers appear to have forgotten.
I conclude by suggesting that there is no greater problem facing our nation's schools than that of encouraging those teachers who put politics before professionalism to reverse their priorities and commit themselves first and foremost to the wellbeing of the pupils for whom they are professionally responsible. Until and unless they do this, no increase in resources or salaries will give our nation's schoolchildren the education which they deserve and which it is in our nation's interest for them to receive.
3.54 p.m.
The Lord Bishop of Derby: My Lords, my remarks this afternoon do not arise out of any party political standpoint nor out of any narrow interest in Church schools but because of visits to schools of various kinds and discussion with teachers in different situations.

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There remains a heavy irony in the fact that the Government White Paper, published when the present Prime Minister was Secretary of State for Education and Science, was entitled, Framework for Expansion. It heralded a long-drawn-out period of cutback and contraction. One hopes fervently that the same sort of fate will not overtake the latest White Paper on education, Better Schools, though the signs over the past year since its publication have not been very encouraging. At the moment, maintained schools are certainly worse places to be in than at the time when the White Paper was being prepared. This is partly due to the general social environment which creates unusual pressures on teachers, examples of which we have heard already, but also to the teachers' own feeling of neglect by authority.
The intentions of Better Schools were undoubtedly good, and the intentions behind subsequent Government action have presumably been equally good. It is the present effects of that action which create deep concern. The White Paper was right to claim that,
"there is widespread acceptance of the need to improve the standards achieved by pupils",
and that the necessary improvement involved action in the four areas of curriculum, examinations, teaching and school government. The paper was also right to close with the reminder that,
"in these initiatives, as elsewhere, the Government cannot act alone. Their success depends on the ready co-operation and mutual support of all the partners in education and of the customers of the schools".
These partners were identified as being:
"the local education authorities (LEAs), the churches and other voluntary bodies, governing bodies, and teachers".
It is therefore tragic that the current dispute has brought the Government into direct conflict with both the LEAs (as employers) and, of course, the teachers. This has more than cancelled out the benefits of the progress made in the other areas, such as the technical and vocational education initiative, the introduction of the GCSE, the larger role given to parents and teachers on governing bodies and the highlighting of the needs of the bottom 40 per cent. among the pupils. These are all real advances, with potentially high benefits, but despite these our schools will not be better schools if the Government do not recognise that improved performance requires better provision of resources.
Sir Keith Joseph is now saying that the teachers have won their argument that the profession is currently underpaid, though he adds the rider that the current members of the profession need to show themselves to be worthy of a professional's level of remuneration. What also needs to be guaranteed by the Government is that if they are prepared to increase the teachers' salaries this will not be at the cost of depriving the educational system in other ways. The figures of the Department of Education and Science show that expenditure on buildings has fallen from a 6 per cent. share in the overall educational budget in 1979–80 to a 4 per cent. share in 1983–84. The results are there for all to see, in poorly maintained buildings on which even greater expense will be needed in years to come in
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order to make up for the underexpenditure of the past few years. This is not good housekeeping.
The blame for it cannot be laid at the door of the local education authorities and the Churches, who between them own and are responsible for the maintenance of the buildings. Spending limits are laid down centrally. It is only fair to recognise the importance of the Government's policy of reducing public expenditure and the force of their belief that this will contribute to the ultimate improvement of the country's economic position. But one does not improve any system's effectiveness (nor its efficiency) by underinvesting in it. It is not only a question of needing to put even more money into the system at a later date, to compensate for neglect. It is a question of the real danger of the system collapsing completely within itself. When a system is starved of resources it needs remarkably high morale on the part of those who run it to defend it against such a collapse.
Over the past 12 months or so, the morale of all the partners in the educational system, but particularly that of the teachers and of the local authorities, has plummeted, and continues to plummet. Unfortunately, the teachers themselves have not succeeded in producing understanding of the causes of their unease: the strain of disorder and violence and the lack of hope for the future of so many of their pupils. The nation as a whole has been unappreciative of the problems and largely unwilling to grasp the realities of the situation.
The present industrial dispute is part of a vicious circle in which the Government must carry their share of the blame. At the North of England education conference earlier this month, Professor John Tomlinson, previously chief education officer for the Cheshire local authority, argued that,
"national policy has undermined the self-esteem of those expected to carry out many of the key tasks".
He pointed out that, on the one hand,
"the teachers have been subjected to accusations of having 'failed the nation' and that, as part of the public service, they are nonproductive and parasitic",
while, on the other hand, their employers have been
"subject to the tightest of controls, which have wrested from them their capacity to pay what they may deem necessary and therefore their credibility in the eyes of those they are supposed to manage".
Like the buildings, but even more significantly, the damage done to morale will take a long time to put right. Barry Taylor, the chief education officer of Somerset, wrote only last week in The Times Educational Supplement, that any settlement of the dispute this year will be only "an armed truce".
In such a situation, the Church is deeply concerned about the future. It is concerned in general terms because here would appear to be yet another situation in which groups within society are being set at odds with one another. Any government must see as one of their functions the need to hold society together—not to force it into a complex of warring factions. Certainly the Christian gospel must urge people to seek reconciliation one with another, to pursue the ways not only of justice but also of peace.
The Church must urge such reconciliation, not as a distant observer of the scene but as an active participator in it. Many of the teachers in the nation's schools are members of the Christian church. So are

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many of the administrators in both local and national government. So, most significantly, are many of the parents whose children's future lives are being put in jeopardy as the dispute drags on.
The Churches are also involved institutionally through the many governing bodies of aided schools, as employers and direct partners of the local authorities in the running of those schools. It was mainly in that capacity that last July the General Synod,
"reaffirmed the Church of England's concern for the well being of the whole of the maintained system of education in this country and its expectation that it will continue to play a significant role as a national partner within that system".
We therefore look to the Government to make a similar reaffirmation.
To quote again from Professor Tomlinson's address to the North of England education conference, delivered less than three weeks ago,
"The public education system is at a turning point. Either we confirm that it is one important means by which the public good is engendered or we grant it only the status the market allows. Either it is a force for coherence and community as well as for individual fulfilment, or it is the route by which the less advantaged are inducted—no doubt largely against their will—into a divided society".
The more advantaged pupils are those whose parents are able to afford the independent sector of educational provision. Yet in this situation of crisis—this moment of crucial decisions—the Government, as Professor Tomlinson notes, appear ambivalent. Their talk of,
"releasing the spirit of enterprise and the opening of opportunity to all for a greater say in their own lives,"
is contradicted by actions that restrict the opportunities available to the majority by eroding the effectiveness of the system that provides for their needs.
Even more significantly, the danger of allowing market forces free rein in the realm of education arises from the renunciation that that implies of a clear sense of responsibility on the part of the Government for maintaining the national education system as
"a force for coherence and community"
engendering the public good. That is the unifying vision we hope that the Government will hold before the nation. It must be supported by their partners; the LEAs, the Churches, the teachers, the parents and governors. Only that vision will produce "better schools". A system in which the morale of those who run it is at an appallingly low ebb is unable to produce "coherence and community". By contrast, a clear commitment to that vision on the part of those who have the chief leadership would be a vital first step to the restoration of morale.
4.6 p.m.
Lord Parry: My Lords, I too am grateful to my noble friend Lord Irving of Dartford for introducing this debate at this time. He and I belong to a movement whose pioneers used to say that one must educate, educate, educate before one can legislate, legislate, legislate. It is in that mood that I wish to address the House this afternoon. I am equally grateful that the contribution of the right reverend Prelate came between mine and that of the noble Baroness.
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Lady Cox, and the great bay of approval for her tallyho gallop and Red hunting through the schools of this country that marred what was otherwise a contribution to this debate that I deeply respected.
There is no evidence from what we have heard so far, and from the reaction to it in this House, that we have reached a point of crisis in education in Great Britain today unlike any other that we have known in this country since the introduction of general education. Those of your Lordships who have shared in the past 10 or 11 years with me in this House will know that my credentials for speaking in this debate are that for 32 years I served in the classrooms and staff rooms of Great Britain. When I came here 11 years ago, I was one of only three serving teachers in this House. It is therefore essential for me to repeat again today that every report on British education that has been published during my lifetime of service to education has always pointed out that the single most important influence in the education of children—my Lords, your children and grandchildren and mine—is the attitude of the parent to the school in which their child is educated.
The second most important element is obviously the teacher, who becomes the parent when the parent inevitably has to surrender care of his child to people more competent in certain abilities to teach that child than the parent admits to being. So if the parents are worried about the future of British education, and if the teachers in the classrooms, regardless of their politics, are in conflict with the Government of the day, as they have over the past 15 years been in conflict with successive governments, then we must take far greater interest in this debate than the House appears to be taking, judging by the Benches this afternoon and by the reaction to what has been said.
When one begins to set up the comprehensive schools that are now a major part of our public education service, and when one analyses their performance, one must analyse also their composition. I wonder what is the relative composition of the schools in Northern Ireland with their success and that of the comprehensive schools of Great Britain, because the third element affecting the education of the child is the size of the class in which that child is educated. While I have taken a fairly ambivalent attitude to comprehensivisation I have always been bitterly opposed to centralisation which I consider to be the real enemy of the age.
The noble Baroness knows—and she and I can talk about this at leisure—that when our schools went comprehensive they did so not for the educational and social reasons that were argued for comprehend-sivisation in the first place but because it was discovered by the Treasury along the way that you can put more heads under one centralised school for a smaller expenditure of money than if you keep them in the diverse grammar schools and the small schools in which once we were educated.
As a teacher I happen to believe that if a school gets above 800 pupils in a rural district it is out Of keeping with that rural district; but if a school gets above 1,000 in a city the teachers do not have a chance of knowing one another let alone knowing their children and their problems. Therefore, do not let us detract from the purpose of this debate by galloping our prejudices

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when we should be seeking to isolate the principles upon which all education is founded. It was Ralph Waldo Emerson who said that education is two people sitting on a log. I believe that prejudice will come into even that situation. It is in that kind of situation that you can best have two minds size up one another. But what are the chances of someone who gets 35 minutes of time and 42 people's share of the time of a young teacher in West Wales, or Northern Ireland or in Central London? My own daughter has just left school and is teaching in a special centre for the multiple handicapped and socially deprived. She has a privilege that I did not have when I was teaching either at primary or at secondary level in the public system in Great Britain. I was never in a class in the whole of my education that was fewer than 35 in number. When I was at college the group in which I was taught was sometimes 95 and always 75 in number.
What parents who send their children to public schools—the great public education system which is private—are trying to achieve is a better relationship than that when they commit what they have to spare to the education of their children. I am proud, as I stand here as a Welshman in the Welsh education service with leaders of the education services of Wales around, that when the people of my country have been asked to choose they have always chosen—as have the people of Ireland, England and Scotland—to spend more of their resources on education than on other things. I am proud that the University of Wales was founded on the pennies of the miners who paid from their wage packets to educate not their own children but others. They made that voluntay contribution.
Facing us in Great Britain today, then, is the disillusion of the parents with the system and with some of the schools that we have set up. We are faced with the disillusion of the teachers and, added to that, the disillusion of the pupils themselves. Remember that Hegel, who set running many of the philosophies upon which are based the systems which many noble Lords bitterly oppose—and so do I—said:
"All down the pages of history the society begins to collapse when disillusionment finds its place in the heart of the people who live in it."
The foundation myth of our society is that the grocer can take his daughter to his local school knowing, as now we know, that even his daughter might become the Prime Minister of Great Britain; that an industrial chemist can get his son to stand outside No. 10 Downing Street and, as now we know, he can emerge as the Prime Minister of Great Britain, properly educated. I do not know that the grocer at the corner of the street is there any longer in our society; but, I wonder, whether such a shopkeeper could be so confident now that the education achievable in the towns of Great Britain is one that will prepare someone, somewhere, to become the Prime Minster of this country in due course. I do now know.
However, I know that Hegel said that disillusion leads inevitably to decadence, that decadence leads to disintegration, that disintegration leads to the collapse of the existing order and out of the collapse of that society there comes the emergence of a new faith which is almost always the antithesis of the faith that it replaces. If we care about democracy, as I know we
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do, and if we care about education, and I am certain that we do, do not let us follow this into the blind alleys of prejudice, but let us isolate the real causes.
If the education of Northern Ireland is beginning to perk up, let us analyse the fact that Northen Ireland has had invested in it of late an incredible share of the British budget. I know that there are things in Northern Ireland that they would never have had if they were not balancing in some way the appalling difficulties under which they have had to live; and I would vote for that. But when we apply the results, do not let us forget that if one-quarter of the money that ran in blood and down the drains and gutters of Belfast had been applied to improving the educational system—and we can all agree with this—then we, too, would be able to provide results in ratios of teachers to children.
May I, in the last minute I have available to speak today, point out that all of our schools, whatever they were, have always had within them bands of underprivileged. Their very plight has attracted the best teachers. The most handicapped have attracted the best teacher ratios, and at every level—and indeed in every form—there have been those who have missed out because they started as under-assessed, and their contribution and their ability to contribute had not been properly accounted. I always used to worry about the fact that when I was teaching in a secondary modern school and they decided to go in for competitive examinations, they gave me a smaller class than the rest. That was introducing a new band of privilege and a new band of under-privileged among the generally able people.
I want to end by saying this. There is also one terrible thing which is happening in the schools. I am 60 years of age—I do not know the age of the Secretary of State for Education—and went into teaching in 1945, straight out of college at 19 years of age. I had to go back to university in order to requalify myself later. But every one of my generation has taken early retirement and has gone. We are leaving the staff rooms of Great Britain to those who are in the menopause; 52 years of age and no one older. What about that band of people from 52 years of age to 65 who were once the strength of the great schools of Britain? What about those men and women who were sufficiently encouraged in their career prospects and opportunities and in their love of their job to stay on until they were 65? All right, we have cut their retirement age to 60 and offered them a handshake; but what kind of handshake is it, I wonder.
I understand that there is now even a proposition that we might try to get them out for less money, four years earlier, and have them leave the schools at the age of 48. I would not want my children, or my grandchildren if I have any, to go into a school in which there is a narrow age band of disillusioned people who believe they are not now assessed by society to be as important as once they believed themselves to be. They are in crowded conditions knowing that in this debate this afternoon the emphasis fell upon those who happened to be communists. There are communists in every aspect of society because they choose to believe that and because democracy gives them the right to believe it. There are people who are

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conservatives and others who are socialists but when talking about teachers let us talk about education.
5.19 p.m.
Baroness Faithfull: My Lords, I, too, wish to add my thanks to the noble Lord, Lord Irving of Dartford, for initiating this debate.
I seek to speak this afternoon on the serious problem of truancy and, arising out of the subject, the relationship of education to the other professions; in particular, to the social services and the health service. I contend that truants from schools are often the most vulnerable in our society. There is, as many of your Lordships will know, a draft circular issued by the Secretary of State for Education and Science headed, School Attendance and Education Welfare Services. In the light of the serious truancy problem throughout the country, this draft circular, which proves that the problem is recognised by the Secretary of State, must receive a warm welcome. We applaud the philosophy of the circular, which is to help children achieve their education potential.
Having said that, one is bound to ask whether the methods by which this is to be achieved, as laid out in the circular, are wise methods or whether they are not out of line with the many reports on education that this country has received: the Plowden Report, the Ralphs Report, the Seebohm Report and, more lately, the House of Commons Social Services Committee of Inquiry. This subject is touched on in paragraph 59.
It is interesting that the circular is headed: "Education Welfare," whereas the two biggest associations in the education welfare field are the Association of Chief Education Social Workers and the National Association of Social Workers in Education. May I ask my noble friend the Minister what is meant by "early resort to court action", which is advised in this circular? Under the Education Act 1944, parents can be taken to court for their children's non-attendance at school, and I think that the circular enjoins education welfare officers to take swift action. But is this always the right way to act? Magistrates find such cases frustrating, because under this section of the Act the only course open to magistrates is to fine the parents, and very often those parents have low incomes and are also drawing supplementary benefit. Equally, of course, a child can be taken to court for non-attendance at school and a care order can be made, but this is drastic action.
Turning to the circular, may I ask my noble friend the Minister why the circular is so narrow in laying down the duties of the education welfare officers? Is not the circular going backwards and forming a body of people called the "school board men and the attendance officers"? If education welfare officers are to confine their duties to just this narrow issue of truancy dealt with in this way, what is to happen, for instance, to the children who want to work and must receive permission? What is to happen to the children who are in the entertainment field and must be looked after? What is to happen to handicapped children, for whom the education welfare officers have to make provision if they cannot remain in their schools, as I, and I understand the noble Lord, Lord Ritchie, hope that they can. What is to happen to the children of the
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travelling families for whom the education welfare officers often make such good arrangements?
It seems to me that children who truant fall into three categories. First, there is the child who fails to fit into a particular school, and the failure of a school to meet the needs of a particular child; secondly, there is the child who suffers from a lack of control on the part of parents, who do not co-operate with the school. Thirdly—and I suggest that this is the biggest and most important segment—there are those children who are faced with family problems arising from social conditions, emotional and psychological problems or ill-health within the family.
I have been a civil servant in two government departments and I maintain that in these particular areas of the child at home, the child in society and the child at school, there must be co-operation between the different Ministries. With humility and a certain amount of diffidence, I suggest that perhaps there is not always understanding between the Department of Education and Science, the Department of Health and Social Security and often the Home Office. If there is not co-operation at Ministry level, there will riot be co-operation and understanding at local level between the directors of social services, education officers and the community doctors of the health service. If there is not co-operation there, there will not be co-operation between the teachers in the classroom, the social workers on the ground and the health visitors, who are most important, in the health centre and the health service.
I come back to the circular. If the vulnerable children who are today truanting in our country are not helped by all these services, we shall get nowhere. I ask my noble friend the Minister whether he will ask his right honourable friend the Secretary of State to consider a joint circular coming from all three departments, so that there can be co-operation between all the departments to deal with the truanting children of our country. "No man is an island unto himself", and never was that statement more true than in this sector.
4.26 p.m.
Lord Taylor of Blackburn: My Lords, I too am grateful to my noble friend Lord Irving of Dartford for initiating this short debate on the problems facing the nation's schools. I come from a region which in the past could boast of its schools, its standards and the progress which had been made in all the different branches of education. The North-West in general, and Lancashire in particular, were the forerunners of the industrial revolution which gave so much to make Britain great. Side by side with all the achievements in industry went the development of our education and schools, which took the form of a partnership between government, the local authority and the Churches. The North-West is perhaps different from many other regions in the country because around 50 per cent. of the schools are Church schools of one kind or another: aided, voluntary aided or controlled.
This relationship between Church and state, both locally and nationally, has worked well but the rapid growth of the population in the middle of the last century has meant that we have inherited many old and dilapidated schools which should have been

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demolished and replaced years ago; but because of the lack of finance, and in some cases the reluctance of national government, this has not been done. We are now facing extremely high maintenance bills which are proving too large for the local authority to ask its ratepayers to support.
Lancashire Education Authority has recently produced a booklet on the problems it is facing in school maintenance and replacement. I shall gladly pass on copies of this booklet to your Lordships if required. I should also like the noble Lord the Minister and the representatives of the department to avail themselves of this very useful document concerning the state of the schools in Lancashire.
For over 30 years I have been privileged to serve on education committees, both locally and nationally. Like other speakers before me this afternoon, I too have never known so much despondency and so much lack of enthusiasm in all spheres. I look back at the statistics in Lancashire and I know that we were proud of the fact that in the days before the reorganisation of local government, the shire counties, the county boroughs, were in the top 10 of the league table in every field, including student ratios, books, capitation allowances and maintenance. We were willing in those days, and are still willing today, given the resources, to participate in pilot schemes of one sort of another. Our teachers and our administrators did, and still do, a first-class job in spite of the difficulties. But many of them feel very depressed with the way in which central Government are failing to listen to, or to understand, the pleas.
We feel that we are being forgotten. The days of our prosperity have gone. The days of our giving so much to the nation have been forgotten. We have been sent perhaps to a geriatric ward, but we shall still go forward. I used the illustration some time ago in your Lordships' House, in trying to make the point that education has been neglected in so many ways, that once we looked upon education as being the major jewel in the crown of this country. I went on to say that it had now got down to the form of a cheap diamond in a small engagement ring.
It must be recognised that we have to get our priorities right by setting the right standards in schools in all spheres—from the building to teachers and to salaries. Education is very much like a running stream. It is constantly moving, flowing from the hills to the rivers and to the seas—from the village school, to the town comprehensive, to the city college and to the university. Unfortunately, at this time there seems to be a dam being built to stop the flow of progress. But the dam must burst. I hope that this short debate will assist this to happen soon and that it will make the Government aware of the many problems that we have to face.
Let us go forward. Let us try to make sure that we use everything that we possibly can to help our children. We have so much to invest in our children. It used to be said that every pound invested in education produced two pounds. Investment in education has so many repercussions. The benefits can be so advantageous to the country. Unfortunately, our investment now is nil. I despair therefore of what
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awaits future generations. They will not have the advantages that so many of us have had in the past. I plead with the Government to take notice of what is being said by all sections of the community.
4.33 p.m.
Baroness Phillips: My Lords, I should like to thank my noble friend for taking the opportunity to raise this important question. There is perhaps not much more that I need to say following the eloquence of the right reverend Prelate, my noble friend, and so many contributors to the debate. I am, however, an ex-teacher, the mother of a teacher, and the mother-in-law of a teacher. I have always been greatly concerned with the teaching profession and latterly, especially, with the Church schools.
In the last few months, I have attended the last occasion on which a school would convene together. I hasten to say that these were all Church schools. It was a very sad occasion. One knows that when a hospital closes or a school closes, it never re-opens again in the form that prevailed before it closed. So it was a very sad occasion. I suppose that it would be easy to say that each of these schools has had a very bad record. But that would be totally untrue. The teachers were dedicated.
I welcome this opportunity to say something in favour of teachers. Teachers are expected to pick up every evil in our society. I blame the parents. I lay the blame very stongly at the door of parents. Even this afternoon we have heard the noble Baroness suggest that it was the fact that teachers smoked that caused children to smoke. Even when I was teaching, one was not allowed to smoke except in the staff room. I cannot think that the rule has been changed very much.
A picture is conjured up of people sloping about the school corridors, smoking, drinking and taking drugs and, in the meantime, implanting propaganda in the children. Nothing could be further from the truth. The teachers are struggling in appalling premises. Their dedication has to be seen to be believed. If animals were housed in the same conditions, there would be numerous pressure groups telling us that it was a disgrace and that it should be dealt with tomorrow. What we offer our children is something that all of us should feel thoroughly ashamed of. Teachers have to cope not only with teaching but with every kind of social work. My little daughter-in-law said to me the other day: "I don't mind doing this, but I didn't train to be a social worker. I trained to be a teacher, but I have to spend so much time picking up from the children problems that should never have been brought to school". They are, however, brought to school because, willy-nilly, there is nowhere else to take them.
We have falling rolls. We have, in other words, fewer children in the schools. I recall that when I was teaching there was always held out the great carrot that one day we would actually have small classes where, as has been rightly pointed out, one can do justice to the children. I remember having 44 children in a class for a 30-minute period. That was less than a minute per child. And it included giving out the pencils and the books and taking them back again. We never had a one-to-one situation. There were all levels of intelligence. To me, it is remarkable that our schools

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should have turned out the quality of people that they have in past years. I do not share the surprise that there are not more of them.
Because of falling rolls, there are school closures and amalgamations. This means fewer opportunities for promotion. And teachers now are wandering around lost, and looking for work. Many ex-head teachers are being maintained on relatively high salaries with nothing to go to. What a colossal waste of talent, energy and everything else! I am sorry that things must always be brought back and placed before the Government. However, if you are the Government, you must accept responsibility for education and for many other things. Rate-capping and similar measures are having their effect on schools. The moment that there are cutbacks, people cut back on what they think is irrelevant. I saw the other day one of my grandson's books from which he was supposed to learn Greek. It was appalling. It was practically unreadable. And he shared it with three other boys. Yet this is 1986. Dickens could have written up with every truth what is going on in our schools.
There is an increasing proportion of very difficult and disturbed children. Teachers are blamed for what they are supposed to be doing, or not doing, in the schools. They are never praised for their handling of this increasing proportion of very difficult children and what they do to contain disruptive pupils. Very few sanctions remain to enable them to deal with these children. Teachers are constantly assaulted; other children are assaulted. One judge, I recall, actually told a teacher that she must expect to be assaulted six times in her working life. That is another, typical example of some of the foolishness shown by these judges to whom we have given a pay award.
Extra demands are being made all the time by the Department of Education and Science and local education authorities. There is increased interference. No profession has been interfered with to a greater extent by people who do not know the job than the teaching profession.
Baroness Faithfull: My Lords, would the noble Baroness not say the same about social workers?
Baroness Phillips: My Lords, yes, I would. I give the noble Baroness that one, particularly as I am very fond of her. It is so easy to solve a problem round a table or in this Chamber. It is only by standing at the sharp end of the job that you know what you have to contend with.
Finally, we have the suggestion from the Department of Education and from the Secretary of State that there must be assessment of teachers. I notice that they did not want the cameras in the other place—they did not want to be assessed on their performance. But they are very happy to assess the teachers. How can one assess a teacher? I taught dull and backward children—as they were then called—for two years. At the end of that period very few of them could read. They did not have the necessary grey matter in the first place. I do not know what I did for them; I hope that I made life a little fuller and happier. I suspect that it would be very difficult to assess, but I know—with all the conviction that one has when blowing one's own trumpet—that I was a good
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teacher. However, I would challenge Sir Keith to come and say how he will assess a teacher. It is virtually impossible to do. It is like talking about prevention; one never knows what one prevents.
At the moment we are having new courses introduced into schools. One has the gorgeous name of the Sixteen-Plus Certificate in Pre-vocational Education. We are hearing new words every day. I was intrigued by the one we had in Question Time. What was it—"demile"?
A noble Lord: My Lords, it was "decile".
Baroness Phillips: My Lords, "decile" is not a new word. I taught English but I have to look up words every day.
This system has been introduced without any proper financing or back up. It has been thrust once again on the teachers. Morale is at an all-time low. Let the Government make no mistake about that. This is a traditionally moderate group of people. We are not talking about some "hotheads", despite what the noble Baroness said. I am happy to tell her that that is quite unique in the London schools. One will always have a few, I am afraid, who will do such things. I say that because I go to a large number of London schools. The moderate groups are taking industrial action. I am sure that the Government will be pleased to know that they have taken up all the legislation which the Government have imposed on ballots, and each time they have a ballot within the union they get a higher vote still to have industrial action. And these are moderate people.
The authorities are obsessed with change; our society is obsessed with change. When they want to carry out a reform for financial reasons they all say that it is being done for educational reasons. I make no apology for quoting again what the famous Roman said. He died in AD 65 so he cannot contradict me. He said that they were always training but they were always being reorganised. He said:
"I was to learn that we tend to meet every new situation by reorganising and a wonderful method it can be for creating the illusion of progress whilst promoting confusion, inefficiency and demoralisation".
Once again nothing has changed very much. The Romans had an expression for nearly everything.
It is not without significance that The Times Educational Supplement—not, I hasten to say, anything from ILEA or from the Communist Party—has a headline in this edition saying, "Pay Deadlock Triggers Independence Boom". The independent schools are booming. Parents are trying to get their children into these schools. Why?—because they are so concerned, because they are not happy with what is happening in the schools; they feel impotent and are not sure how to deal with it. But perhaps that is what the Government want. The Government like market forces. They like to bring in contract labour; they like to have private health schemes encouraged; they like to have private education encouraged.
I would not say that this has been a conscious move. But I make an appeal. We must first have some kind of action in this deadlock on pay. I would emphasise that when one talks to teachers it is not the actual cash

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terms about which they worry; it is their status in the eyes of their pupils and in the eyes of society. This is what always concerns people. I do not believe that strikes emanate half so often from the question of pay, as we are led to believe. They emanate from people's feelings of frustration that they are not accepted for their worth in society.
I am very grateful to my noble friend for introducing this debate. I hope that we shall get something from it. May I leave with the Government a plea that this is desperately urgent and needs a solution.
4.46 p.m.
Baroness Carnegy of Lour: My Lords, I agree absolutely with the noble Baroness, Lady Phillips. The evidence is that the current preoccupation of teachers is not just with salaries and the funding of schools but also with what they see as a very real lack of appreciation by the public at the present time of their work, its difficulty, and its importance to the nation.
I myself have a good deal of sympathy with this. I am a farmer and most of us farmers also feel at the moment that our contribution to the common weal is being somewhat unfairly denigrated. I also have sympathy with teachers who resent the constant oversimplification of the issues and the mindless unresearched criticism by people who seldom enter a school. I agree with them that the public has not fully grasped the enormous changes which are taking place in the demands made upon teachers and the increased and changed workload that those changes represent.
That having been said, I have very little sympathy with the way that teachers are seeking to remedy the situation. It has always seemed likely to prove counterproductive in the short term. Now it is looking massively counterproductive, I believe, in the longer term as well.
After 15 years on a local authority education committee in Scotland I hope that I shall be forgiven if I speak of Scotland; and in particular of my own local authority of Tayside. Our teachers' unions freely admit that their action at the moment is designed to cause the maximum disruption at schools, the maximum impoverishment of children's education, the maximum hold-up of plans for the future which teachers can achieve without themselves breaking the law, breaking their contract or causing authorities to break the law, and at minimum cost to themselves.
Everybody knows in Scotland—and teachers know best of all—that among the most crucial aspects of a child's preparation for the modern world are the following: close and frequent contact between teachers and parents—as the noble Lord, Lord Parry, has so eloquently reminded us; close contact between schools and local industry; widespread supervision and influence by teachers—necessary to maintain good behaviour—and the implementation of a well-worked out curriculum and examination system to make school more relevant to the needs of young people in the world of work and life in general. New and agreed plans of this kind should now be well under way in Scotland.
Everybody knows that new methods of teaching using the new technology are very important, that
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extra-curricular activities of many kinds are crucial, and that to achieve a high professional standard teachers need considerable in-service training and need to spend a considerable amount of time in reading, planning and preparation. Yet these are the many aspects of their work to which teachers in Scotland have found it necessary to call a halt. And at what cost to themselves!
In Tayside in 1984–1985 out of a total of £45 million which would have been paid in teachers' salaries the teachers lost only £175,000, or 0.39 per cent. Up to December in the current year they lost £341,000. The sacrifice has not so far in the main been financial. It has been a sacrifice by teachers of modern participative management of schools, because, increasingly, the unions have been consulted about decisions within schools and their withdrawal is spoiling the whole management system. It has been a sacrifice of the present pupils' life chances and of parents' understanding of and faith in their schools, and it is increasingly a sacrifice of the life chances of the schoolchildren of the future.
The only schools in Scotland where the new curriculum and exams are being fully implemented and where teachers are fully involved in school decisions are in the private sector. I must tell the noble Baroness, Lady Phillips, that, although the private sector in Scotland is fairly small, I think that is why parents are taking their children away from the state system and putting them into the private sector. The teachers there accepted an increase in pay of 4 to 5 per cent. on account and have been working normally throughout the strike.
However, what matters is not yesterday but today and tomorrow. What must happen? I speak again of Scotland and, although the Scottish press is full of news on the subject today, I think that I am still up to date. We have a new Secretary of State. It seems that this should be regarded as a time for new initiatives.
First, it appears to me that the Government, the local authorities and the profession should now combine in a great drive right across the country to explain clearly and simply to parents and the public just what is planned for the education of our children and what the benefits will be; how the plans for the 10 to 14-year-olds will work; how the new courses and exam system for 14 to 16-year-olds, which should now be under way, will work; how the modular courses of the 16-plus will work; and how these will dovetail with the youth training scheme, with community education, with further education and training and with higher education. The public needs to understand these matters if the political will to implement them is to be found.
Secondly, a package must be negotiated and agreed forthwith with the teachers whereby it is acknowledged that teachers now have a different workload from that which prevailed even five years ago, different demands upon their time and energy, and that they require a new professionalism for which as yet few have been properly trained. It has to be acknowledged that co-operation with parents, co-operation with local industry and extra-curricular activities are no longer frills to be undertaken voluntarily by teachers as the spirit moves them, but are an essential part of the job. Agreement that these matters should be acknowledged should not be difficult as there already exists a

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survey on teachers' normal duties today which was produced by the joint negotiating committee and agreed by both sides.
The package must include a modern-style flexible definition of teachers' duties. It must include a commitment to re-examine the existing criteria in Scotland for staffing levels in schools, because these are probably no longer the most satisfactory or cost-effective way of deploying staff. Reflecting all this, the package must include new promotion and salary structures—structures which will allow skill and commitment to be rewarded, the best teachers to achieve promotion without having to leave the classroom and take to administration, and pay levels which compare favourably with other professionals in the local government service.
Funding such a package cannot be easy for the local ratepayers because teachers' salaries are such a large part of the total expenditure. In Tayside, which has a net budget of over £100 million, 51 per cent. of that budget is spent on education and 46 per cent. of the education budget goes on school staff costs. The teachers continue to say that in Scotland they want an independent pay review. But it must surely be a properly negotiated, agreed and realistic package. Human nature being what it is, if the money comes first it could take long enough for the rest of the urgently needed changes to happen. We have previous experience of Houghton and Clegg, when very large pay rises were awarded, the cost of which was the straw that broke the back of local government funding in 1979, and out-of-date practices continued virtually as before.
The skeleton round which such a package could be constructed is already on the table. It was put there by the local authority employment side of the joint negotiation committee last August, and the Secretary of State for Scotland has indicated that £10 million of new taxpayers' money could be available over four years to aid implementation. It seems to me that it is of the greatest importance to the life chances of our young people and to the career prospects of teachers—indeed, to the very continuance of the state education system as we know it in Scotland—that a campaign to help people understand what is proposed should be implemented, that an up-to-date package should be agreed forthwith and that we should be able thereafter to get the most important of all our services on the move again.
4.56 p.m.
Lord Stewart of Fulham: My Lords, we are all indebted to my noble friend Lord Irving of Dartford for initiating this debate on the problems of the nation's schools. There cannot be any doubt that of those problems at present the most pressing is the dispute with teachers and the fact that teachers are taking industrial action, with the inevitable damage that follows from that to the children and the education system as a whole.
I agree with my noble friend Lord Irving that what is needed is, first, an interim award of some kind. With that the Government must make it clear that it is their intention within a reasonable time to enable the teachers to recover the ground that they have lost since
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the Houghton award of about a decade ago. If the Government can create that situation, I think we may have the degree of trust which will make it possible to go on and bring in the other items: the nature of teachers' duties and the delicate question of the appraisal of teachers. The profession has not shown itself unwilling to discuss appraisal, but it will not agree either to that or to arguments about what teachers' duties should be unless the Government first make clear their attitude on the question of pay.
With the question of pay goes the question of the respect in which teachers are held. It is a fact that their salaries have been allowed to drop in comparison with almost everybody else's, which gives the real gravamen to their charge that the Government are neglecting them and treating them unfairly. I am sorry that the noble Lord who referred to teachers' holidays is no longer present; it is a rather ancient argument, and anyone who has done teaching for a little while will possibly understand why teachers need rather longer holidays than people who pursue other professions. However, in any case this reproach could have been thrown at teachers a decade, two decades, or half a century ago. It is not a reason why their salaries should have been allowed to slide back during the last decade in the way that they have.
The noble Lord, Lord Ritchie of Dundee, gave striking examples of the excellent work done by teachers in the most difficult material conditions. It is of course true that of all the things that affect the quality of education it is the human factors—the attitude of the parents towards their children's education and the gifts of the teacher—that matter most. However, sometimes that is used as an argument for excusing governments which do not spend enough on the material surroundings of the school—the buildings and the equipment. One must remember that children are not fools. If they observe that when a public house gets dilapidated beyond a certain point steps are promptly taken to improve it, but that nothing like that happens with schools, they will come to the conclusion that what their elders are always telling them about the importance of education is so much humbug.
We cannot expect teachers, however devoted, to go on giving of their very best in desperately unsuitable surroundings, with no prospect of having them put right. What we have noticed—and this was brought out most strikingly in the powerful speech of the right reverend Prelate the Bishop of Derby—is the way the Government have neglected the material surroundings of education; that work has had to be done in surroundings which made it clear that the community as a whole did not put a great value on education.
If we are to solve the problems of the nation's schools the Government will have to spend more money both on teachers' salaries and on educational provision of all kinds. I am afraid that this is a topic to which I refer whatever subject I start with. I usually end up by saying that the Government must be prepared to realise that they must raise the necessary taxation to meet necessary public services, whether those are defence, education, social services, or what you will.
We do not get inflation by increasing public expenditure; we get inflation if we increase public

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expenditure and have not the nerve to raise the necessary taxation to meet it. That has been the danger into which governments have constantly fallen. We had better stop talking about the possibilities of tax cuts until we have met some of the most pressing needs of the country, and a proper provision of the material surroundings of the education system is one of those essential things.
If we could do that, I hope that we could then avoid being led away from this essential problem of, are we, as a nation, ready to spend more on education? I believe that the number of people in the country at all levels of income who are prepared to see more money spent even out of their own pockets in order to have decent public services is steadily increasing. If the Government imagine that the country is full of people quite prepared to vote "Yes" for tax cuts, without bothering about what happens on any of the important public services, they are mistaken. At any rate, I hope they are.
We must keep in mind the need to spend more on education, on teachers and on buildings, and not be led off into the agreeable irrelevancies to which the noble Baroness, Lady Cox, tried to shift the debate. I hope that we are not going to have the comprehensive issue brought up again and be invited to try again with something like the 11 plus. That is to say, to commit ourselves to the notion that we can decide a child's capacities at the age of 11, and do so by—
Baroness Cox: My Lords, if the noble Lord had perhaps been able to hear what I said he would have heard that I had no intention of suggesting putting the clock back. I was arguing for a way of looking forward which avoided precisely that problem.
Lord Stewart of Fulham: My Lords, the trouble was that the noble Baroness objected to comprehensive education. That must have meant that she was in favour of some form of selective education.
Baroness Cox: My Lords, I am sorry, but, just for the record, I was arguing for something called magnet schools, or specialist comprehensives, which combine the best of both worlds.
Lord Stewart of Fulham: My Lords, I think that the noble Baroness is trying to have it both ways. She is trying to arrange some means of selecting children for one school rather than another. We have tried that. It produced the most remarkable nonsense. If anyone wants to study it they should read the reports of the Conservative women's conference in the 1950s, which displayed most devastatingly the muddles into which one got if one tried to proceed on any kind of selective system of education.
I have no doubt that there are some silly pamphlets written about political education. I must say that I was staggered when I heard the noble Baroness say that it has always been a cherished principle of ours that there should never be party politics in education. I can remember when I was in an infants school run by the London Country Council, as it then was, under Conservative control. We always had a special lesson about Disraeli on Primrose Day. It does not always
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seem to produce the effects that were hoped, and I do not think they do it now because I doubt whether anyone remembers which day is Primrose Day.
This is an abuse which can always occur, but I do not believe that it is a serious matter. If it were we should hear a great deal more about it from parents in London. If the Government imagine that parents in London are bitterly dissatisfied with the education they get from ILEA at the present time, then they are out of touch with what parents really feel. Let us not be led away from the real and pressing necessity to have a better educational system. Better and more satisfied teachers, better buildings and equipment for them to work in, and let us not be led astray by these comparative irrelevancies.
I wanted to add something about the nature of the buildings and equipment that schools have. It is staggering that we are now reading the extent to which parents are contributing to those things, buildings and equipment, which ought to be an esential part of the nation's own provision. We had produced from the Front Bench the other day statistics to show how increasingly prosperous this country is getting—apart from the number of people who have the misfortune to be unemployed. If we are getting so much more prosperous, why are we constantly being told that we cannot afford certain essential improvements in the public services? We must get back to the plain fact that we are not spending enough on education, that we had better get down to spending more; then we may get a little nearer to solving the problems to which my noble friend has helped to draw our attention this afternoon.
5.7 p.m.
Lord McIntosh of Haringey: My Lords, my noble friend Lord Irving has richly deserved the thanks that have been showered on him by all speakers for his foresight in introducing this Motion today. In addition to the thanks he must have the satisfaction of knowing that he has drawn into the debate a number of people with excellent personal understanding of the issues. If ever there were a subject before this House on which the emphasis must be on people—on what happens in the classroom—rather than on institutions, education in our schools is that subject.
We have been well served by the expert and wise words of many noble Lords this afternoon. I am particularly grateful to those who have referred to particular parts of the country and their problems and opportunities. The noble Lord, Lord Ritchie, referred to schools in London; my noble friend Lord Parry, to Wales; the noble Baroness, Lady Carnegy, to Scotland; my noble friend Lord Taylor spoke about the North-West. All of these have been real and valuable contributions.
There have been many other worthwhile things said to which a minute or two ought to be devoted. The noble Lord, Lord Ritchie, drew two relevant conclusions from his, if I may so as a survey researcher, rather small sample of schools. The two points that he was making which were particularly valuable were, first, that one element of the discouragement, disappointment and sometimes despair in our schools is the knowledge, both among teachers and pupils, that a high proportion of those leaving school

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are not going to find jobs. This must inevitably have a deadening and discouraging effect on the schools; the effect, in particular, of truancy which was referred to by a number of noble Lords.
He also made the point that the fact that a school is multiracial is not a disadvantage. On the contrary it is a real advantage. One of the most remarkable changes in our society in the last 30 years, one which has been almost entirely a beneficial change, has been the opportunity of our people to mix with those of other races.
One must be grateful to the noble Baroness, Lady Cox, for giving us a trailer for the debate which she will introduce on 5th February. At least she has given us an opportunity to sharpen our weapons, of which I assure her there are plenty, by exposing her arguments in advance. My noble friends Lord Parry and Lord Stewart, who both went a good way to answering the issue (particularly the recollection by my noble friend Lord Stewart of his own indoctrination) must strike a spark in many people's memories. I remember vividly being taught in economics that the climax of the organisation of human kind was the capitalist system. There was in the penultimate lecture a small piece on the economics of socialism in which it was pointed out how wicked and reactionary and incapable of achievement socialist economics would be—
Lord Boyd-Carpenter: Hear, hear, my Lords!
Lord McIntosh of Haringey: My Lords, that, I am sure, is acceptable to the noble Lord, Lord Boyd-Carpenter; but if he had heard his noble friend he might not be so keen on generalised accusations about indoctrination.
I was also interested in the comments made by the noble Baroness about the achievement of comprehensive schools. It is incumbent on us all to find an opportunity to debate this issue at greater length. I shall seek to do so. My recollection from the statistics of school leavers issued by the Department of Education and Science—I have only the 1982 edition to hand—is that the number of school leavers who had no qualifications at all declined from 20 per cent. of all school leavers in 1984 to 10 per cent. in 1982. There may be other figures than those which have been quoted by the noble Baroness, and the debate which might take place on this matter might be less one-sided than we are led to believe from the figures we have heard so far.
The right reverend Prelate made some extremely valuable points about the partnership, which is an essential part of our educational system, among the parents, the teachers, the governors and the community at large. It is one of the worst aspects of the current pay dispute that that partnership has been put at risk and that contact between teachers and the other partners in the education system has been cut off so brutally.
I thought that the noble Baroness, Lady Carnegy, made particularly relevant comments about the curriculum and the relationship between education and training. I know she referred particularly to Scotland, but the problem of the gap between school and work, or school and life after school if there is no
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work, requires much greater attention than it has been given. There are people in the education and training worlds who are anxious to see that gap reduced or broken.
I feel that we should be considering more deeply not just a two-year youth training scheme after pupils leave school, but some greater integration of training with education, probably from an earlier age of 14 to 19 years, with spells of work experience intermingled with spells of education, out of which the results could be not only examination results, which should always be available, but also the credits to which the noble Baroness referred.
I have said that it is people not institutions who matter in our schools, but speaking from this Dispatch Box I have an obligation to speak to some extent about institutions and about the balance sheets. There are things that I have to say about public expenditure on education, the relationship between governments and local education authorities and, finally, about the pay dispute. The figures for public expenditure on education are contained in this year's public expenditure White Paper, and very discouraging reading they make for everybody concerned with education and for the improvement of it. The plans going up to 1988–89 (I realise that these are planning totals and planning totals are not adhered to in practice, but they are the only things that we have to go on) envisage a cut in real terms in education expenditure of approximately 10 per cent. by 1988–89. The total public expenditure on education is proposed to go below the total of 10 per cent. of all public expenditure for the first time in many years. Expenditure on education was higher than expenditure on defence for many years until recently. By 1988–89, if the plans in the White Paper are achieved, expenditure on education will be only 80 per cent. of that planned for defence. If we consider this in terms of the shortfall from the real level of expenditure the situation is equally grave. By 1988–89 expenditure on the under-fives will have declined in real terms by 8·7 per cent., expenditure on primary schools by 7·3 per cent., expenditure on secondary schools by 10·2 per cent.
If the noble Earl thinks that he can say that the Government are behaving fairly and proposing to behave fairly by our schools in the light of those projections by his own Government, he is either much cleverer than I am in the interpretation of statistics or he is keeping the compartments in his mind very successfully apart.
The second issue which has to be raised is that of government intervention in the spending of resources for education. The noble Earl chided me last night for suggesting that the Government might impose minimum standards on midday supervision in schools, but we see a report in The Guardian today that the Government will be proposing in their Green Paper on the rates extending specific grants into new areas and particularly into education. The figure under discussion under the Education (Amendment) Bill instead of being 1 per cent. of total expenditure, 10 to 15 per cent. of educational spending or £1 billion to £1½ billion of the £10 billion total would be directly applied in specific grants by the Government as opposed to the block grant system which now obtains.

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The timing is such that the noble Earl has a golden opportunitiy categorically to deny those allegations which are presumably based on leaks, although I do not know from which department. He has the opportunity to say that these allegations are totally untrue and that the Green Paper will not contain any such proposals. If he fails to do that the House and the nation will draw their own conclusions on that matter.
Finally, there is the question of the pay dispute. It behoves all of us, while negotiations at ACAS are still going on, to be extremeley cautious in what we say, because nothing we say ought to put at risk the possibility of agreement between, unfortunately, the two groups of teachers and the local authorities. But the fundamental problem which cannot be solved either by the local authority employers or by the teachers' unions is that, whatever the opposite of tertius gaudens is, the absent partner in these negotiations (the partner who is determined to remain absent and who has played no significant or helpful part at any stage in this dispute) is the Government. It is the Government which control the expenditure of local authorities either, in some places, by rate-capping or by the penalties which they impose for under-spending. It is the Government which deny the local authorities the resources to reach a meaningful agreement with the teachers; it is the Government which have consistently made it impossible for agreement to be reached at a much earlier and much less damaging stage. I am not simply referring to the extraordinary maladroitness of the announcement of the top people's salary review immediately after the first rapprochement between the employers and the teachers last summer.
The fact is that there is so much wrong with teachers' pay that it cannot be dealt with on a single, 12-months' basis. It will take a much longer time for justice to be done to the teachers and to all of us as parents and members of the community who depend on a loyal and happy teaching service. In the period since 1974, in the period after the Houghton Report, teachers' salaries were roughly comparable to those of accountants, systems programmers and analysts, civil engineers, surveyors, production managers, office managers, local government administrators and so on. At that time, as I say, teachers were within 4 per cent. of the average salaries for those groups of people.
Now, teachers are paid 45 per cent. less than accountants, 51 per cent. less than systems analysts and programmers, 43 per cent. less than chemical scientists, 45 per cent. less than civil engineers, 13 per cent. less than surveyors—and I have not heard about a surveyors' strike yet—and 72 per cent. less than office managers and so on. The situation of teachers perhaps living in the same streets as these people, or living in the same community as these people, is desperate. There cannot be any justification for that continuing decline in relative standards for a group of people who, with very minor exceptions from a small number of people, are generally held to deserve the trust and support of our people.
It must be the case that, whatever happens at ACAS, there should be an independent public inquiry funded by the Government to look not only at this year's
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settlement but at the settlement over a period of years. This inquiry should be in the spirit of the Houghton inquiry and should look again with complete independence at the whole issue of comparabilities.
In the meantime, we must all hope that the ACAS discussions and negotiations meet with success in the very next few days, and that we end up from that at least with a conclusion to the extraordinary difficulties which have faced our schools since 6th February last year, and the Scottish schools for much longer. The debate this afternoon has shown that there are many more long-standing problems which we have to tackle; but they can only be tackled when this immediate problem has been overcome.
5.26 p.m.
The Earl of Swinton: My Lords, the noble Lord, Lord Irving, has given us an opportunity this afternoon for a thoughtful debate about the nation's schools. I could have wished that the terms of his Motion had allowed us to fix our attention as much on the strengths of our schools as on their problems, but perhaps in the present circumstances the emphasis he has chosen is inevitable. Nonetheless, I should like to begin my own remarks with the clear statement that the Government believe that our school system has made notable advances over the past 30 years, and that there is an enormous amount of dedicated, imaginative and well-focused work going on in our schools today. No criticism should be allowed to obscure that fact. In fact, I believe that in some respects standards have improved in recent years.
But I also believe that in some respects they have not, or anyway not fast enough to keep pace with the demands of the modern world. The Government described some of the areas where improvement is particularly needed in the White Paper, Better Schools. I shall not rehearse those comments here. I propose instead to talk mainly about the action being taken by the Government to improve standards in three crucial areas—the curriculum, examinations and teachers—referring as I do so to points made by noble Lords in the course of this debate.
The curriculum is at the heart of what the schools do. The Government have succeeded, I think, in getting very wide agreement with the proposition that for all pupils the curriculum should be broad, balanced, relevant and differentiated. What the education service now has to do is to work out those principles in practice: to ensure that every boy and girl really received a broad education in science; that all study one or more of the humanities to the age of 16; that all continue with a practical subject to the same age; that as many pupils as possible successfully learn a foreign language; that all subjects are taught in a practical and relevant way; that all pupils are able to progress as far and as fast as their abilities will allow. I could go on much longer.
Simply to state some of the requirements is to understand why they present schools with a formidable range of problems. Many schools no doubt are already meeting some of these requirements effectively; but very few can claim that they are doing so in every respect. Yet that has to be our goal. That is why the Government are seeking broad national agreement on the objectives of the curriculum. This

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requires a great deal of the teachers. They may have to rethink the structure of the curriculum as a whole, of option systems, of individual courses. They may have to rethink the ways in which they tackle the job in the classroom. For the upper years of compulsory schooling, the TVEI and other projects are exploring what can be done. HMI papers particularly those in the Curriculum Matters series, and policy statements from the Government, as well as the curriculum policies of each LEA, will help schools to think about the issues involved. And the governing body has an important role in this, too. But in the last resort it is the teacher in the classroom who has to make the necessary changes.
Of course, one of the most significant changes facing teachers throughout most of the United Kingdom is in the field of examinations. My right honourable friend, the Secretary of State for Education and Science announced on 20th June 1984 that the present system of GCE O-levels, CSE and joint 16-plus examinations would be replaced by a new single system of examinations, the GCSE. The first courses start in September 1986 and the first examinations will be held in the summer of 1988. This announcement followed a long period of debate and was widely welcomed both within and outside the educational world.
The timetable for the introduction of the new examination courses is demanding. The main task of preparation naturally falls to teachers. To assist them in that task, the GCSE examining groups, the LEAs, and the Secondary Examination Council, which is providing preparatory teachers' guides and videos, have collaborated in a special programme of in-service support for all teachers of the GCSE. The Government are contributing substantially towards the cost.
Noble Lords will be aware that some teachers' associations have instructed their members not to cooperate with the introduction of the GCSE as part of the action resulting from the present dispute. Specifically, they have asked their members not to turn up to the preparatory seminars organised under the training programme. I hope that teachers will think seriously before taking this course. These important reforms brought by the GCSE have long been advocated by many teachers and their associations. Many teachers have worked long and hard in the development of the new courses. By taking such action, teachers will only be making it more difficult for themselves to implement the new examinations, examinations which are desired as much by them as by the Government.
All preparations for the introduction of the new examinations are well on course. I am glad to be able to say that there have been no reports of significant disruption of these preparations so far; but of course the majority of teachers are only just beginning to become directly involved in the training programme. My right honourable friend takes the reported threats of non-co-operation with the GCSE seriously and will wish to monitor the position closely. However, the Government believe that the new examinations can be brought in according to the timetable which my right honourable friend set in June 1984. I hope that teachers will think seriously before taking any action
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which will damage their pupils' educational experiences and chances of examination success.
So far I have been speaking about the academic side of the work of our schools. But the Government, and society as a whole, look to schools to promote high standards not only of achievement but also of behaviour. A school's ethos can be a powerful determinant—though it is far from being the only one—of young people's attitudes and sense of responsiblity towards others. One aspect of that ethos is the way in which discipline is exercised. The Government's views on discipline in schools have been clearly set out in Better Schools. Schools need discipline for their own immediate purposes, so that they can get on with their main task of educating children, but they also recognise that the task itself extends to fostering the high standards of personal conduct which society expects from its adults. Most schools do in fact impose and maintain good discipline, not only by means of rewards and punishments, but through the examples teachers set through their every day relationships with pupils and parents and through curriculum subjects such as moral and social education. At the same time, I know that there is widespread anxiety about the minority of schools where standards are unacceptable, and we have called on them and the local education authorities concerned to tackle their problems urgently.
My noble friend Lady Faithfull raised the question of truancy. Prolonged absence from school without an acceptable reason is a matter for concern, whatever the reason and whether or not parents condone it. Unless firm action is taken, and taken promptly, it is likely to continue and become chronic and thus seriously affect a child's education and future prospects. This requires close co-operation between the schools and the education and welfare services in identifying absentees, discovering the underlying reason behind the absenteeism and finding and applying the appropriate solution. Then it means making it clear to the parents and pupils what will happen if the absenteeism continues. Finally, if all else fails, it means ensuring that the offence (because it is an offence) is brought promptly to the attention of the courts. The thrust of the circular is to concentrate the efforts of the education and welfare service on its primary task of ensuring attendance and to ask local education authorities to ensure that the service is effectively organised to do so.
My noble friend asked me a number of questions, but in view of the fact that time is running out I really think that I shall have to write to her about them. For the same reason, I shall not go into any of the points raised by my noble friend Lady Cox. She has given fair warning and she will have a chance to debate the subject further on 5th February. Perhaps I should say, on the specific question she asked about my right honourable friend thinking carefully before he closes any more grammar schools, that he considers very carefully all proposals brought before him by local education authorities for school reorganisations.
Her Majesty's inspectors of schools will be carrying out a review of good practice in schools as regards relationships, behaviour, attitudes to work and discipline, and this should provide valuable guidance

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for schools on these important aspects of their work. A report will be published by the end of the year. But schools cannot do everything on their own, and I was very grateful for the remarks made by the noble Baroness, Lady Phillips, and the noble Lord, Lord Parry. I know that the noble Baroness is not very good about staying, but I thought that she might perhaps have stayed for the end of this debate since it is a short debate. However, I am sure she has a very good excuse.
We look to parents during the pre-school years to equip their children with at least a basic idea of right and wrong and of how to behave considerately towards others. But we must also look to parents, once their children have started school, to support and complement what the schools do, and we are encouraging parent outreach schemes which help the parents understand how their role as educators fits in with classroom education. A survey of parent outreach schemes is therefore being commissioned by the Department of Education and Science to provide information on the critical factors that bear on parental involvement and on the types of scheme which could be encouraged on a wide scale. Finally, to reflect the fact that schools are rooted in the community at large, we are proposing to broaden the membership of governing bodies of county, controlled and maintained special schools, and we shall expect governing bodies, with head teachers, to take responsibility for promoting a suitable ethos in their school.
Perhaps I may say a little more about this. For a school to be successful in all its tasks, it needs to have an identity and clear sense of purpose of its own. At present, too few maintained schools have these attributes in sufficient degree. The Government see the governing body of each school as the focus for the necessary developments on this front. As announced in the gracious Speech, a Bill will shortly be introduced for the reconstitution of school governing bodies in England and Wales. Parents and the wider community served by the school would, as indicated in the White Paper Better Schools, have stronger voices and no one interest would be predominant.
The Government recognise the problems of education in the inner cities and are tackling them across a broad front. Inner city schools will benefit from our national initiatives to improve the quality of schools throughout the country. Furthermore, a great deal of money is already being directed towards the special needs of inner city schools. These needs are under continuous review—a process which, naturally, continues in the light of recent events.
The special needs of ethnic minorities are also being tackled, and I was very interested to hear what was said on this subject by the noble Lord, Lord Ritchie of Dundee. Financial assistance is available to local education authorities through the Home Office, under Section 11 of the Local Government Act 1966, to provide additional staff in support of the educational needs of commonwealth immigrants. Educational expenditure of about £75 million a year is supported under Section 11. In addition, education support grant is being used to support pilot projects to meet ethnic monority needs, to promote harmony between
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different racial groups and to prepare pupils and students for life in a multi-ethnic society.
Other measures are in hand too. For example, the new criteria for the approval of teacher training courses require students to be prepared for teaching in a multi-ethnic society. The in-service teacher training grants scheme will be extended from 1986–87 to include training to equip serving teachers to respond to ethnic diversity. The department has issued a consultation paper, inviting views on possible reasons for the apparent under-representation of ethnic minorities in the teaching force and of ways of increasing recruitment. Responses are now being considered.
The Government have recognised that their policies for better schools cannot be given proper effect without sufficient, suitable schoolteachers in post. They have consulted their partners about the numbers of schoolteachers required and have acknowledged that some further limited improvement in the overall pupil-teacher ratio for England and Wales may be needed, even though this is now at its best-ever level. The Government have made clear that the extent and pace of this improvement must depend on future public expenditure plans and changes in the cost of employing staff. It is also most important that any improvement should be used in support of the Government's curricular policies, and that this should be coupled with efforts to secure a more efficient deployment of the teaching force across and within individual local authorities. The Government and their partners are now considering the way forward.
A steady improvement has taken place in pupil-teacher ratios over many years. In response to a concern often voiced by parents as well as teachers, this improvement has been commonly used to reduced the size of regular classes. There may still be some classes around the country which are too large to allow adequate attention to individual needs, but on the whole the Government believe that it is now more important to use further improvements in staffing levels to focus on the celivery of the curriculum rather than on a general reduction in class size as a goal in itself. For example—and my noble friend Lady Carnegy of Lour said this—teachers may need more time away from regular classes for in-service training and curriculum review and may benefit from more flexible patterns of teaching, which can be more closely attuned to pupils' abilities and needs.
Improvements of this kind are important if we are to retain and motivate teachers of good quality, and I am glad to say that the profession is continuing to attract large numbers into training, despite the current dispute. Yet there is no denying that supply has become worse in certain subjects where there have always been difficulties because of direct competition for recruits with industry and commerce. I am thinking in particular of mathematics, physics and craft, design and technology. That is why the Government are keen to see a reform of the teachers' pay structure so that local authorities are given greater flexibility to recruit, retain and motivate people of the right quality, including people whose specialist qualifications are in short supply. We also believe that new graduates in maths, physics and CDT may require some extra financial incentive to spend a year on a

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PGCE course rather than accept immediate employment—which is why students on such courses in colleges in England and Wales will now be eligible for tax-free bursaries worth £1,200 a year, alongside mature students on specially-designed CDT training courses.
It is a matter of great concern and regret to the Government that the teachers' dispute should have gone on for so long—for almost 12 months in England and Wales and for nearly 18 months in Scotland. Like the noble Lord, Lord McIntosh, I very much hope that the talks under the auspices of ACAS—which were adjourned yesterday and are reconvening on Friday—will help the two sides to find a satisfactory way of settling this damaging dispute. The Government, like parents, want to see an early end to the disruption of children's education. Let us hope that the unions—all the unions—adopt the same objective. It is impossible to see what useful purpose can be served by intensifying the action directed against children. They have suffered enough.
With this damage being done, it should go without saying that the Government want the earliest possible end to this dispute. Yet it has been suggested that the Government are not doing enough. I really must refute that criticism. Our first concern must be for the children. We must be able to hold out to them the promise of good quality and uninterrupted education. This is why we need not only an early end to the current pay dispute but also a lasting settlement covering teachers' pay, their career and promotion structure, their duties and their conditions of service.
There is at present no formal statement of teachers' duties and responsibilities. That is no longer an acceptable position. When it suits them—during the current dispute, for example—teachers claim that many of the tasks they have regularly carried out in the past are voluntary and cannot be required of them. Examples are taking classes in place of absent colleagues, attending staff meetings and parents' meetings, and taking part in in-service training and other schemes of staff development. In times of dispute, some teachers—and I fully accept that this applies only to a minority—refuse to carry out some or all of such tasks and thus severely disrupt children's education at little or no cost to themselves, because employing authorities hesitate to impose penalties in the absence of any formal statement of teachers' duties.
Lord Parry: My Lords, will the noble Earl give way?
The Earl of Swinton: My Lords, I will not, I am afraid. I am very short of time. I have quite a lot to say and I think I am entitled to my 20 minutes. It has become essential to establish such a formal statement so that both teachers and employers know clearly where they stand.
The teachers' pay and career structure does not meet today's needs. Two specific problems are the limited promotion prospects for good teachers now that pupil numbers are declining, and the limited extent to which the pay structure enables employers to offer pay which takes sufficient account of the relative difficulty of filling particular teaching posts with
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appropriately qualified, trained and experienced teachers.
The Government recognise that the amount spent on teachers' pay needs to be increased in real terms if enough teachers are to be recruited, retained and motivated. The Government have offered additional resources, totalling £1,250 million over the four years 1986–87 to 1989–90, above what would normally be provided in the course of annual public expenditure planning and pay negotiations. Quite deliberately and properly, this was not a no-strings pay offer. This substantial additional investment was made conditional on sufficient progress being made towards a clear definition of the range of teachers' duties linked to their contracts of employment, and a pay structure which will offer more promotion opportunities, provide better rewards for leadership responsibilities, and attract skills currently in short supply.
I think that I can very quickly contradict the view held by I believe a lot of noble Lords today, that the blame for all that is wrong in our schools can be laid at the foot of the Government's expenditure policies. The facts simply do not bear this out. The resources which taxpayers and ratepayers put into the education of each child have increased under this Government. Record amounts of money are now being spent on the education of the nation's children. The noble Lord, Lord Taylor of Blackburn, who I think I can say is a friend of mine, though I cannot say my noble friend, said that the expenditure was nil. But 16 per cent. more per pupil in real terms is now being spent than in 1979. I acknowledge that falling pupil numbers have helped. But this still represents an enormous opportunity for good.
There is, as I said earlier, real improvement, too, in overall pupil-teacher ratios. These show that in January 1979 there were 18·9 pupils to every teacher in England. By January 1985 the measure was 17·8 pupils to every teacher—the best ever level. And last week's public expenditure White Paper confirmed the Government's plans for a further modest improvement to 17·7:1 in January 1986. The allocations for education capital expenditure in England in the financial year 1986–87, announced in December 1985, should enable LEAs to meet all basic needs for new school places arising from local population growth, and to carry out in full their plans for cost-effective rationalisation of school accommodation by the removal of surplus places.
I think that my time is running out. In conclusion, I have to acknowledge the considerable but legitimate demands that are placed on the education service by the need to improve standards to match the requirements of the modern world. The Government will continue to do all that they can not only to resolve the current dispute, but also to help the education service make the changes necessary if schools are to equip our young people properly for the world of the 21st century.
5.43 p.m.
Lord Irving of Dartford: My Lords, I hope that this debate has helped to emphasise the seriousness of the situation in our schools. I would just note—
The Deputy Speaker (Lord Aylestone): My Lords, the time allotted to this debate has elapsed. Does the noble Lord wish to withdraw the Motion?
Lord Irving of Dartford: My Lords, I beg leave to withdraw the Motion.
Motion for Papers, by leave, withdrawn.

Monopolies and Mergers Policy
5.44 p.m.
Lord Gallacher Lord Gallacher rose to call attention to the case for a coherent policy on monopolies and mergers which safeguards the interests of consumers, shareholders and workers; and to move for Papers.
The noble Lord said: My Lords, it would be unrealistic not to acknowledge that the background to this Motion has been heavily influenced by recent contested and rival bids for companies of such size and standing as to occasion concern and queries as to the ground rules; for example, which bids are referred to the Monopolies and Mergers Commission and which are not. In addition, it may be asked whether the Monopolies and Mergers Commission, as now constituted, has the capacity to cope with inquiries of such magnitude within the time scale normally allowed for references. We may also ask: who is bidding for what and why? Is it expansion, diversification, acquisition of assets cheaply?
What are the intentions if the bids are successful? Is an established firm to be split up and sold off? What will be the competition situation after the bid, as well as the track record of bidders in general and in the particular business for which a bid has been made? In these days, we also have the phenomenon of David seeking to buy out Goliath, and in that context I think people are asking: what is being used to finance such bids? Is it all own resources or is finance being jointly provided? If it is being jointly provided, who are the joint providers and why? Finally, there is the technical but important question of what will be the debt ratio if such bids are successful?
The legal basis for all this can be quickly filled in. The Fair Trading Act 1973 restyled the Monopolies and Mergers Commission and established the Office of Fair Trading, giving its Director General duties and powers as regards monopolies and mergers. The Competition Act 1980, one of the first legislative measures of this Government, abolished the Price Commission and the Act was said to be based on legislation in the United States of America. It gave reference powers to the Monopolies and Mergers Commission on anti-competitive practices and questions of efficiency, costs, service and possible abuse of monopolies in the public sector.
In addition, the Restrictive Trade Practices Act 1976 consolidated legislation relating to the supply of goods or services in the United Kingdom or part of the United Kingdom. More recently, the Telecommunications Act 1984 provides for references by the Director General of Telecommunications to the Monopolies and Mergers Commission covering possible monopoly situations in connection with British Telecom and possible anti-competitive
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practices. The Office of Fair Trading, itself a creation of the Fair Trading Act, has responsibility for consumer affairs, monopolies and mergers, restraints of trade and anti-competitive practices. The Office of Fair Trading is a Government department, so relations between it and the Department of Trade and Industry are crucial, yet in the opinion of many people are somewhat vague. Lastly, there is the Treaty of Rome which has various clauses dealing with competition, supported by directives and regulations, as well as decisions by the court, together with a competition directorate as part of the Commission's staff.
Sparing use has been made of monopolies and mergers references under the Fair Trading Act 1973. Taking the six years 1980–85, there have been 12 monthly references and 40 merger references. Even less use has been made of the Competition Act during the same period. Of anti-competitive references, there have been five only and, even allowing for undertakings to desist, obviating the necessity for a reference, this seems a very small number. But of Section 11 references under the Competition Act—that is, of public bodies—there have been 20 out of a fairly limited total of statutory public monopolies.
Reports by the Monopolies and Mergers Commission on public bodies have not been unduly critical and are little different from what any firm of management consultants would find in any large organisation not previously investigated. I find it ironic that the solution to statutory public monopolies is the establishment of statutory private monopolies and even with the protection of Oftel, and similar proposals for British Gas users, the fundamental problem remains; that is, that it is the duty of any company to maximise profits to its shareholders and yet, if it is a monopoly at the same time, there is to be a restraint imposed upon it as regards abuse of market power.
Price restraints, as devised for Telecom and as proposed for British Gas, are not in my opinion the answer. If the assets are sold in the first place to the public on privatisation at a low price to ensure a political success for privatisation as such, then the subsequent public company can comply with retail price index restraints and still either overcharge or at least be arbitrary in prices, either to ward off future competition or as between different categories of user. In this connection, noble Lords will be aware that the Director General of Oftel is already making noises about British Telecom as regards its pricing policy between commercial and private subscribers.
Consumers are not over-consulted in monopoly and merger situations. Consumer bodies are more concerned with complaints than with the ownership of assets. Yet, for example, consumers may be disadvantaged in areas where market dominance is just short of a national or local monopoly, defined as 25 per cent. of the supply of goods or services. The two examples that come to mind are retail food chains and breweries. The Monopolies and Mergers Commission and more recently the Office of Fair Trading gave large retail food operators clearance over the way in which the discounts they obtained from suppliers, and which were unrelated to quantities, were reflected in their retail price structures.
The Monopolies and Mergers Commission found no market detriment in the position at the time of investigation although they recognised the power which large retailers had over manufacturers and dominance over smaller competitors. The Monopolies and Mergers Commission warned against further concentrations of power in food retailing by way of more takeovers. Yet they ignored growth by way of undue success in gaining planning consents from local authorities, which is now the growth route of large food retailers which favour out of town locations. The Department of the Environment is not willing to look at this because of the sovereignty of local authorities in planning matters and the ultimate judicial role of the Secretary of State for the Environment in planning appeals.
Brewing mergers can also reduce both consumer choice and competition by means of acquisition which gives regional dominance via tied houses and the planning machine. The rationalisation of breweries creates redundancy. The European Economic Commission is interested in competitive aspects of this part because of restrictions on consumer choice. What consideration might be given to strengthen the position of the consumer? Where consumer interest in quasi or fully monopoly situations continues, the Monopolies and Mergers Commission should consider attaching conditions before granting consent for bids to go ahead and should also recommend the continuance of ongoing surveillance of the merger by the Office of Fair Trading, possibly by way of a revival of the Consumer Protection Advisory Committee, which was first established under the Fair Trading Act and subsequently disappeared.
I turn now to the concern of shareholders. I am particularly interested in those people who are indirect shareholders—those who hold life assurance policies or are interested in pension fund investments. The duties on trustees under the Trustee Investments Act 1961 as regards investment are minimal, while the reasons for decisions on mergers and takeovers by those who act for policyholders and pension funds are totally unknown. What criteria do they use before the acceptance of a bid? To whom to trustees turn for advice? Upon what basis is such advice given? Does the attraction of an untaxed capital gain and its beneficial result on superannuation fund valuations take precedence over the long-term interests of the company involved? Is consideration given to the possible effects on employees of the firm for which the bid is made? Transparency in such affairs is of vital importance. Pension fund finance is crucial to capital investment, as the Wilson Committee on Financial Institutions revealed. Improvements in the participation basis for the joint operation of pension funds is overdue and must include some say as regards investment policy.
Do shareholders generally rely on views given by company advisers in contested mergers and takeovers? If so, the role of these advisers (mainly merchant banks) needs clarification. In such contests nowadays advice of the most partisan kind is backed by heavy advertising. Should one not look for greater neutrality and objectivity among those entitled to call themselves bankers? Is national advertising of blatantly knocking copy, conducted for reward, the best basis for reasoned
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judgment by shareholders? Is the Takeover Panel, as now operated, strong enough to control the situation at present? Of 139 bids launched last year, there were only nine cases where the defending company successfully maintained its independence. This was good for business for merchant banks, especially those acting for bidders.
I turn now to the position of workers. They are the least protected of all in merger situations, whether or not the mergers are opposed. Yet jobs and/or promotion prospects may be on the line depending on the intentions and attitude of the successful bidder. The possibility of redundancy in the private sector is a grim one in today's economic climate involving also a diminution of pension rights. The continuity of legal obligations to workers on change of company ownership arose from our membership of the EC, yet Her Majesty's Government have consistently opposed EC proposals for worker information and participation, whatever form these proposals took. Our Community partners are surprised by this, as they are by the confrontation in United Kingdom industrial relations.
Her Majesty's Government place reliance on voluntary participation and information agreements between management and workers. This reliance is plainly not successful in the United Kingdom despite the modest provisions included in company law obliging firms with more than 200 workers to report to shareholders annually on labour relations. Even this had to be won from Her Majesty's Government by amendments in Parliament and falls well short of standard practice in other member states of the EC. The attitude of the CBI in all this is mysterious. The CBI favours participation with the TUC in the National Economic Development Council yet it appears timid in extending this to member firms. Employee shareholders have increased in number in recent years but not, as yet, in influence. Do trustees acting for employee shareholders consult them when deciding whether or not to accept bids? How is this process of consultation carried out? With regard to management buy-outs, and in particular their effect on non-participating workers, we have as yet a totally unknown quantity. The whole area of the effect of mergers on workers needs examination, and especially the consequences for employment.
What conclusions can we draw from this brief summary of the present situation? The basis on which references of mergers are made to the Monopolies and Mergers Commission, or not made, by the Secretary of State for Trade and Industry needs greater clarity. So, too, does the relationship in this and kindred matters between the Office of Fair Trading and the Department of Trade and Industry. The proven inability of companies to resist bids should either cause greater use to be made of references to the Monopolies and Mergers Commission or control of the role of merchant banks in such contests.
The Monopolies and Mergers Commission should be enjoined to report specifically on possible effects on consumers and workers when allowing bids and, if deemed necessary, to recommend specific safeguards for both categories and follow-ups for these. Information to workers about company policy, including investment, should be ongoing and in accordance with

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our EC partners. This year's review of competition policy promised by the Secretary of State for Trade and Industry should not be internal but wide ranging, with major bodies representing consumers, shareholders, employers, pension funds and workers, plus the Monopolies and Mergers Commission and the Office of Fair Trading, being invited to contribute so that direct interest and practical experience can be given full weight.
These are matters of great moment perhaps not appreciated by the man in the street. It is my hope that in moving this Motion today a heightened appreciation will come to him. My Lords, I beg to move for Papers.
5.58 p.m.
Earl Ferrers: My Lords, the House will be grateful to the noble Lord, Lord Gallacher, for introducing this Motion at a most opportune time and for the way in which he opened the debate. The questions of public and private monopoly are being discussed at the moment and there are the prospects of takeovers. They are all very much matters of importance at the moment. I have never quite understood how it is that when takeovers are in the air they become infectious. One company starts to take over another company, despite the fact that hundreds and sometimes thousands of millions of pounds are involved. But that seems to be the pattern at present.
I wish to make only one point in what is a very large, specialised and technical subject, in which I do not pretend to have any great expertise. Takeovers are not of themselves wrong. They sometimes strengthen businesses; they sometimes create opportunities; they sometimes save businesses. As a result, people sometimes make money and at other times they lose money. Sometimes jobs are created and sometimes jobs are lost. One thing is certain; it is that takeovers wake everyone up, although they frequently create uncertainty and apprehension in so doing.
Takeovers are and should be an inevitable and respectable part of the industrial and financial scene, provided that the rules are fair and right. If a company can afford to buy another company then, subject to various criteria, that is not wrong. Often the company may have to borrow money to achieve a takeover, and that is not wrong. But there is a new practice coming onto the scene that is undesirable, and it is one to which the noble Lord, Lord Gallacher, referred. That practice is when one company wishes to buy another company, borrows all the money to do so from a bank or from a number of banks, and then uses the company that is the subject of the bid as collateral with the banks for the money which the company has borrowed. This can only mean that the company that has been purchased then has to be broken up in order to pay off the banks. I believe that practice is quite wrong.
As an example of that practice I cite the current proposed takeover by an Australian company of Allied-Lyons. The bidder is Elders/IXL, 51 per cent. of which is owned by two people who live in Monaco. The bid is backed by a number of foreign banks; an
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American bank, a Hong Kong bank, an Austrian bank and a French bank. They have all gathered together as a consortium and have agreed to put up the money to enable an Australian company to bid for Allied-Lyons.
What is the collateral for that vast borrowing? It is Allied-Lyons when purchased. That company is valued at some £2,000 million. It has substantial interests overseas and employs 70,000 people. If the bid is successful, then it will have to be broken up in order to pay off the banks. Indeed, the prospective purchasers are engaging in the unseemly task of travelling round the world offering for sale parts of a company that they do not even own in order to establish how they can best raise the capital to pay off their borrowings, should those borrowings materialise and their bid be successful. That is a pretty disagreeable sight. It is highly speculative. I believe that it is asset-stripping of the worst kind.
Such a takeover is undertaken without any consideration of whether it is in the British national interests, in the company's interests, or in the employees' interests. It is done, as the Americans would say, just in order to make a fast buck. There is nothing at present in the rules to stop that practice. I ask the Government this question: should there not be? Other countries have protection in order to defend themselves against such (as one might call it) extraterritorial marauding.
In the case that I have chosen, the company that is the subject of the bid, which is over four times the size of the prospective purchaser, cannot make a counter-bid because Australian law prevents that. But our laws do not. It is true that we have the Office of Fair Trading and the Monopolies and Mergers Commission, to which this particular bid has been referred; and it is being regarded as a test case. If that takeover is permitted, the green light will be given for other takeovers to go ahead on a similar basis of wholly borrowed money. I ask my noble friend on the Front Bench to say, when he comes to reply, whether he considers that such is sufficient protection to afford companies, and whether it is sufficient protection to allow the Monopolies and Mergers Commission and the Office of Fair Trading to be the sole arbiters. Is that protection sufficient even though it permits the offers to be made and permits people to try to see if they can get away with such a takeover?
I would not dissent from the Government's general philosophy of allowing market forces to operate, but the game must be fair and the rules must be clear. One cannot permit outside speculators to come and play skittles with our companies and so enable others to break up at a stroke, and for their own personal benefit, companies that have been built up over the years by sound and prudent management, and by so doing put at risk the employment of those involved in the company.
I hope that my noble friend will be able to give the assurance, so far as he can—and I realise that there may be difficulties for him—that the Government are seized of the highly damaging nature of that kind of takeover and will be taking active steps to see whether it is possible to prevent that form of financial business taking place in the future.
6.6 p.m.
Lord Grimond: My Lords, like the noble Earl I am very conscious of the timeliness of this Motion, which has been so ably moved by the noble Lord, Lord Gallacher. His Motion asks for a coherent policy on both monopolies and mergers, and it goes on to ask for safeguards for three classes of people: consumers, shareholders, and workers. To my mind, the best protection for the consumer is competition, and there is no real substitute for that. If monopoly is inevitable then in my view the least bad method of dealing with it is to make the monopoly directly responsible to a Minister of the Crown and through him to Parliament. That is my view on monopolies.
When it comes to mergers, the matter is much more difficult. In regard to small shareholders, in many cases mergers have proved very much to their advantage. In fact, were it not for takeover bids it is rather difficult to see what sanction small shareholders would have against self-satisfied or complacent boards that ignore their interests. They have very little say in appointing directors and certainly no say in sacking them. If the Financial Times figures for January 1985 are still relevant, the small investors in the Stock Exchange have done pretty badly over the past 20 years.
I myself am a small shareholder in the Distillers Company. I am very conscious of the fact that I owe Mr. Gulliver a luncheon—and a very good luncheon at that. Up until now, the Distillers' directors have shown remarkable complacency, if not incompetence. They have been content to put up their own salaries, but their dividends have hardly kept pace with what one would expect of an extremely good property. Never before has a kick in the pants had such direct and galvanising results. Now the newspapers are full of advertisements from the Distillers Company saying what wonderful things it is going to do or even has done. To my mind, those advertisements are faintly ludicrous—apart from being rather expensive, which I imagine is also down to the shareholders. So although shareholders may suffer from some takeovers and mergers, on the whole they have probably gained.
I am not so sure about consumers or workers. Consumers have certainly not gained where takeovers and mergers have led to monopolies or semi-monopolies, but in many cases they have improved the competence of the companies and their output. In that respect consumers have gained, and it may well be that in many cases mergers have been to the advantage of the workers. However, it must be remembered that although there was a fashion for conglomerates—and the noble Earl mentioned how these things tend to come in cycles and fashions—for some 20 or 30 years, some of those conglomerates have not proved so very successful. In fact, some of them have now been broken up or are subject to takeover bids.
Most of what I say applies to the past. Even in the past there is one section of the community which is not mentioned in the noble Lord's Motion: I refer to the public at large. The effect of mergers, certainly on Scotland and the North of England, has been to remove head offices and decision-making in many industries to London. This has drained Scotland and other parts of the kingdom of their best brains and of all that makes a viable community with effective control over its own economic decisions.
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That is a very important aspect and it is one of the aspects which to my mind has led to the demand for Scottish self-government. But now the position seems to be changing, and it is changing for the worse. So far as I can see, the main power in investment now lies in the pension funds. Their interests do not always seem to be the same as the long-term interests of the companies which they now virtually control. Recent mergers appear to have been carried out, or suggested, purely for financial reasons, manipulation and gain, and not always in the best interests of the workers or indeed the consumers.
Furthermore, the noble Lord mentioned this habit—if that is the right word—of making bids on borrowed money. I wholly agree that this must be a very dangerous development. I trust that he will get an answer from the Government to the questions he put on this subject. It also seems to me that we shall need to take certain other measures first to broaden the powers of the various commissions—the Monopolies and Mergers Commission, the Office of Fair Trading, and so on—so that they can take into account the results for the community, for the workers and for the consumers. Here I very much agree with what the noble Lord, Lord Gallacher, suggested.
Secondly, I think we must now recognise the rights and interests of the workers in the conduct of their companies. It is no good any longer pretending that companies belong solely to the shareholders. As I have pointed out, even that is something of a farce. They now belong to directors and, at second hand, to the pension funds, and so forth. In Germany, the workers, through the workers consultation law and the co-determination law, have absolute rights to be consulted on decisions such as those which arise when mergers are carried out. No one can pretend that German industry is inefficient. I believe there are now some troubles arising in Germany between the trades unions and management, but on the whole the German laws have been a success.
We need somehow to recognise that the workers have rights stemming from either property in the company or possibly from some form of certificate, as suggested by Professor Meade, which will allow them to have their say and influence in cases where the company is to be taken over. It is unrealistic to suppose that workers have no long-term interest in their companies. They probably now have greater long-term interests than either pension funds or other institutional investors. Therefore, I hope that as a result of this debate the Government will not only look into the question of the bids made based on credit which is then secured upon assets which at the time of the bid they do not hold, but will also consider the position of the various bodies which can deal with monopolies and mergers and, in particular, with the rights of workers who, by their livelihood, make the greatest contribution to their companies.
6.14 p.m.
The Earl of Halsbury: My Lords, I too express my gratitude to the noble Lord, Lord Gallacher, for giving me an opportunity to ventilate some of the matters that are on my mind at the moment. I shall not talk about the Distillers/Guinness merger, because I am a shareholder in both companies. I shall have something

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to say about the General Electric/Plessey proposed merger, and I am shareholder in neither. What I want to talk about are the questions which I feel the Monopolies and Mergers Commission should ask itself in addition to questions about malpractices, and so on. I shall not repeat what the noble Earl said about that. Manageability and structure is what interests me. Is the result going to be more or less manageable than the components were beforehand? Will it result in a structure directed towards, rather than away from, whatever consensus ideal the Monopolies Commission can identify?
May I say something first about manageability and unmanageability? Horizontality is always manageable, however large an organisation may be, if everybody is doing the same thing and all are trained in the same way—possibly a divisional structure. Let us suppose a departmental manager goes soft on you and exhibits inefficiency. It is easy to promote an assistant manager from department A to department B, because they are both trained in the same way. There are plenty of examples. In the high street one sees Marks and Spencer, Woolworth, and British Home Stores, which are all horizontal organisations, each one doing its own thing. There are chains of breweries throughout the country and there are distilleries. Some of these have grown by accretion and merger and others simply by expansion. Marks and Spencer has grown by expansion. The House of Fraser has grown by accretion.
To do anything well in this world you must concentrate on one thing and try to do it well. The cobbler should stick to his last, and so must the butcher, the baker and the candlestick-maker stick to theirs. But when it comes to candles as opposed to candlesticks, there is more than one way of looking at it. In my view, the specialist must take the broadest possible view of his specialisation and follow where it leads. One is not just a candlemaker but an illuminant manufacturer. If you think of yourself as an illuminant manufacturer, that generalised view of your own speciality will lead you from candles to gas mantles and electric lamp bulbs. If you fail to take the broad view and take the narrow view, it will lead to a dead end. That is what happened to Prices Patent Candle Company, which said that people will always want candles. So they do. I have in my home a box of 10 candles which I purchased 20 years ago in case of blackouts, and I have used one of them in 20 years.
Verticality tends to be unmanageable. The Kynoch dream of autarky and self-sufficiency never can be realised. Kynoch made sporting cartridges for shot-guns. What are they made of? They are made of cardboard. To make cardboard you must have a forest, a pulp mill and a board mill. Next, they contain lead shot, so you must have a lead mine, a lead smelter and a shot tower. Then of course there must be a propellant and a detonator, so you must have an explosives factory. Finally, the cartridge case is sealed off with a brass cap, so you must have a copper mine, a zinc mine, a smelter, a rolling mill and forming machinery. Kynoch tried to do it, but it is impossible to keep all those things permanently in balance, on the one hand, or efficiently trade off surpluses or buy in shortfalls, on the other. The dream was shattered when
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Kynoch died. No one could run that business and it disappeared. Management succession in a vertical organisation is extremely difficult. You cannot bring an efficient assistant manager from a rolling mill and put him into a pulp mill. He does not have the experience of the work, and so on. Conglomerates based on finance are in very much the same position. There are the usual difficulties of management succession.
I now come to structure, and I should like to illustrate this with the structure of the chemical industry, which is a three-component structure. First, there are the operators—people like ICI, Monsanto, Du Pont, and so on. There are the components and plant suppliers—pressure vessels, pipes, plates, and so on. In between are the architects and engineers—the turnkey contractors who design the details of the plant specified by the chemical manufacturer. If their design is accepted they take a turnkey contract and place it with whatever components supplier they think will be in the best interests of their client, to whom they stand in a fiduciary arrangement. When they have erected the whole thing they turn the key in the front door, present it to the client and say, "Enter into your property. Here is my bill for my fees".
Now that is a three-component structure which is well understood. It is traditional, it has been tested in time, it has not been interfered with and of course the conditions are very simple. The architects must not own and control the equipment suppliers and the operators must not own and control the architects, or the fiduciary relation between them is destroyed. Of course, they can have their own in-house engineering facility, which is another matter, for building pilot plants and testing new processes being developed and so on. The architects—in this country for example, Davy International, Simon-Carves, Humphreys and Glasgow, and in the United States the Kellogg Corporation and McKee—all operate independently.
We tried to bring this structure into existence for nuclear power engineering and five consortia came into being. The first of them was a consortium, financed by boilermakers, turbo-generator manufacturers and civil engineers, which had an extremely able managing director who was deeply grounded in the kind of architectural engineering of the chemical industry. He was Sel Ghalib, a British subject, albeit born a Cypriot-Turk, and a graduate of the university in this country. Needless to say his mother tongue was English. Consortia two, three and four followed.
The first one was brought into being by the genius of the noble Lord, Lord McAlpine, who I am sorry is not in his place, and Sir Claude Gibb of Parsons, who, alas, died; and then there were a group of North-East Coast heavy engineers and boilermakers who financed the first of these consortia. The managing director was given absolute freedom to place orders for his client who was of course in those days the predecessor of the Central Electricity Generating Board and not necessarily with the shareholders. Others came into being.
The second one eventually merged with the first and that was based simply on personal friendship between the late Lord Chandos, and the noble Lord, Lord McAlpine. That was at a time when there were great

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difficulties in getting enough orders. Things were not going as fast as had been hoped. The whole thing was shattered, so to speak, when General Electric proceeded to merge with English Electric and AEI, because it cut right across the whole structure. Number five went out of existence and numbers three and four merged. Finally, the Government took a shareholding in the lot, and it now stands as the National Nuclear Corporation and endeavours to conform to the model about which I have been talking. I do not really know whether it does so successfully. With the wisdom of hindsight, I believe that the merger of the turbo generators in consortia two, three and four confused rather than helped the sorting-out operation.
Left to themselves, I think that consortia numbers one and two would have survived and numbers three and four would have been knocked out, leaving one strong consortium with power to place contracts, not with its shareholders but with the industry as a whole. The principal difficulty from the start, of course, has been in having a monopoly customer which has wild fluctuations in its notions of its future needs.
Now I turn to the Plessey/GEC merger. I am not a shareholder in either company and not emotionally involved with any of the personnel involved. My question merely is this: should the MMC guide the parties to a three-component structure in the telecommunications field? This is a good question. Should we have a three-component structure as in the chemical industry, with component manufacturers in one big group, systems engineers in a second big group dealing with the customers, who would be BT of course, and similar organisations overseas, and then the various products that appear in the High Street. These are good questions, and I am not here to answer them; I am here to ask them.
It is for the MMC to provide the answer. I hope that their terms of reference permit them to answer it. I hope that their terms of reference permit me to give evidence to them in more detail than I can hope to do in addressing your Lordships' House this evening, and thereby guide the parties to a solution and what I believe would be a great contribution to British communications engineering, in the hands of the noble Lord, Lord Weinstock, who has done so much to reconstruct British electrical engineering and give it a new impetus.
6.25 p.m.
Lord Mottistone: My Lords, I, too, should like very much to thank the noble Lord, Lord Gallacher, for introducing this most interesting and timely debate. I must apologise to your Lordships, and in particular to the noble Lord, Lord Gallacher, and to my noble friend on the Front Bench who will wind up, because I have a long-standing engagement and may have to go a little early—but as we are getting on so fast, perhaps it will not be necessary.
My noble friend Lord Ferrers covered much of the ground that I was intending to cover, but as he did it so much better than I could have done, I do not grudge it him. My speech therefore will be relatively short and more in the nature of underpinning one or two points which he did not make but which I think are worth making.
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He talked specifically about the Allied-Lyons and Elders saga. I should like to talk rather more generally about the threats from what I call "overseas predators" to the food and drink processing companies generally. For some reason there are several of them which seem to be rather more under threat from this sort of attack than are other types of company. I think it is understandable, but particularly unfortunate because food and drink manufacturers have been among the most successful of British companies during the past 40 years, both at modernising themselves and in providing their customers with wholesome but inexpensive products of great variety to suit all tastes.
Some three and a half years ago, in negotiating to obtain a substantial tariff reduction for biscuits and chocolates in Japan, I was able to point out that food and drink processing as a whole was the second largest British manufacturing industry and needed to be treated on a par with major Japanese manufacturing industries and not, as they were tending to treat it, as a mere offshoot of agriculture, which was the way they treated their own food manufacturers who have not developed so well or so fast. One of the things which has happened since World War II, is that most of the bigger companies in these industries have rationalised themselves as fully as they could before attaining a monopoly position in their own United Kingdom market, and this is important in view of the threats that they are facing from overseas.
My noble friend Lord Ferrers has spoken about the Elders situation and he pointed out how the raising of money in the form of loans from international banks had landed Elders in the position that, if they were to win the bid, having been allowed to do so, they would then have to use the money that they had obtained from selling off parts of Allied-Lyons in order to repay their bank loans. If such a disposal of the assets of Allied-Lyons were to take effect, there remains the fact that I have just referred to, that many of the larger food and drink manufacturing companies, who would have been the ones who would be able to pay for the Allied-Lyons assets, have reached the limit of their share of the market.
Accordingly, it is almost certain that many of the Allied-Lyons businesses would be unsellable and therefore would have to be shut down, with the consequences about which my noble friend has told us, and with disastrous results for all the individuals whose safeguarding is the subject of this debate. It would mean customers losing choice, shareholders losing money and workers losing jobs.
It seems to me therefore—and here I thoroughly endorse what my noble friend has said—that if our highly efficient and profitable food and drink manufacturing companies are themselves to be safeguarded, then we must introduce overseas investment restraints similar to those in Australia. I understand that Germany and Japan also have such safeguards and that the United States has this subject under consideration at the present time. Therefore it would not be an unreasonable or exceptional restraint on trade if we were to introduce such safeguards here. Indeed, the extra safety from foreign predators might well improve trade, by freeing United Kingdom companies to concentrate more on their main business of selling at home and abroad.

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The Government, I hope, will not say that there is a safeguard in the shape of being able to refer the matter to the Monopolies and Mergers Commission, which they have, in fact, done in this case. That has all sorts of side-effects that are not beneficial. The fact that the matter might be referred is no deterrent to the overseas predator, whereas if there was a strict limit on the amount of shares that he could hold in a particular British company, without seeking approval, he would not start the action in the first place. But directly he starts the action and, furthermore, when it gets referred to the Monopolies and Mergers Commission, a large amount of the more important effort in the company is diverted into preparing the necessary reports for this event and for fighting off the attack when it comes in the first instance.
There is a great deal of wastage of effort, particularly of very senior staff of the company, which prevents them from getting on with their main business of selling their product at home and overseas. It is therefore very important, I suggest, that we should have some means of protecting our companies, of all kinds, from this sort of attack which, as my noble friend Lord Ferrers explained so ably, is particularly unpleasant and undesirable and which, indeed, is not conducive to good trading. For that is what the matter is all about. I hope that my noble friend on the Front Bench will be able to say something, if only that he will make sure that the Secretary of State takes particular note of this and gets on with it as fast as he possibly can before any more trouble occurs.
6.32 p.m.
Lord Hatch of Lusby: My Lords, the noble Earl, Lord Ferrers, put his finger right on the spot of this debate when he said that it was timely. It could hardly be more timely when we see the whole relationship between Government and industry in this country as a complete shambles. It is, in these circumstances, that one welcomes the Motion put forward by my noble friend Lord Gallacher. Just last week this Government fell from farce into panic. After weeks of unseemly public wrangling between Ministers, the curtain was suddenly and brusquely torn away from the window of the Cabinet room. And by whom? By one of the mistress of Number 10's own retainers.
When that window had been bared and members of all parties, the public and the international media were able to see what was going on inside the room, they were appalled—and rightly appalled. They were appalled because they saw that the gulf between the Government's public pronouncements and their actions when facing the real world could hardly have been wider.
There was also a certain amount of irony in the fact that, after a period in which there must have been more breaches of the Official Secrets Act than in any similar period in our history, the Secretary of State who resigned was the very Secretary of State who had been instrumental in the prosecution of civil servants when they were accused (one was acquitted) of breaching that same Act. The end of that was the sordid sight which some of us saw a week ago, of a Secretary of State sitting on the Front Bench in another place, next to the Prime Minister, misleading the House, as he
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himself had to admit later the same day, with the knowledge of the Prime Minister, and the Prime Minister sitting silent beside him.
What is the meaning of what we see behind this now clear window? Surely, it is that, when the Government talk in public for public consumption and electoral consumption about their belief in market forces, in rolling back the state and in leaving it to the shareholders, there is a stark contrast between their rhetoric and dogma and the actions and intervention, as they have been seen to intervene, in the activities of great companies in this country.
What this leads us to conclude, referring directly to the words of the Motion, is that the Government have no coherent policy so far as industry is concerned and no agreed policy, as has now become evident, on how they interpret the national interest. This whole sorry and sordid episode in the government of this country, which is by no means at an end as those who have been over the other side this afternoon have witnessed, began from the difficulties of the helicopter company, Westland, in Yeovil.
Let me go back to a few weeks before those difficulties became apparent. At that time the Secretary of State for Foreign and Commonwealth Affairs was saying at the EUREKA meetings in Paris and Hanover that only European co-operation in high technology could preserve the high technology of this country and of other European countries against the pressure exerted by the great weight of the United States and Japan. No doubt he had in mind the computer industry and the number of software houses in this country that had been absorbed by the great American conglomerates on the other side of the Atlantic. That was the declared policy of the Government at that time.
What happened when Westland turned to the Government? As in the original case of the computer companies, the Government turned their back and were not interested in saving the Westland company. Indeed, if the Government had pursued their consistent policy and observed market forces, we know that Westland would have gone into receivership. That would have been the effect of the market forces. But, in the meantime, there comes, first, the proposal from the United States. It is known as the Sikorsky proposal. But anyone who knows what Sikorsky is knows that Sikorsky is just a small dot in the great empire of United Technologies. United Technologies, perhaps significantly, are involved in President Reagan's Star Wars organisation of the future. So this was an interest from one of the great American combines.
Later, a European consortium was set up or was organised, so we had two alternatives. What then happened? First, it is now clear—it has been very clearly established in the other place just this afternoon—that the Secretary of State for Trade and Industry was originally a supporter of the European consortium. That is now documented. He changed his mind. He has a perfect right to do so, but I wonder why. He appears to me to have changed his mind because of some arm-twisting that was clearly related to the sale of the British Aerospace Airbus—the European consortium's airbus—in the United States. He was supported by the Prime Minister. Why? We

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know—and I think noble Lords opposite would agree on this—that the Prime Minister has always been instinctively hostile to Europe, and instinctively sympathetic and friendly to association with the United States. Nevertheless, the Secretary of State changed his mind.
On the other hand, the Secretary of State for Defence, in the same Cabinet made no bones about his open and public support for the European consortium. In the speech which some of us heard him make last week there was a suggestion that one of the main reasons for his support of the European consortium was his fear that, if Europe did not hold to the line that had been laid down by the Secretary of State for Foreign Affairs, Sir Geoffrey Howe, a year ago, this country would lose its high technology capability between now and the end of the century. If that is the main reason, I say that it is an honourable one. He may not have acted at all consistently so far as official secrets are concerned. Nevertheless, if that is his argument—as it appeared to be last week—then I would say that that is a perfectly honourable stand to take.
What happens now? This Government who are pledged to market forces, to rolling back the state, to non-intervention, to allowing industry and business to get on with its own affairs untouched by Government, now start to do—what? They put pressure to bear on one of our great industries, British Aerospace, which only a few months ago they sold from public ownership into private ownership.
Whatever the interpretation of the notorious meeting which took place between the Secretary of State and Sir Raymond Lygo, it was quite clear that the Secretary of State was making his position and that of his department very plain to British Aerospace. We now know that he also did so to GEC. Are these market forces? Is this rolling back the state? Is this keeping the Government out of industrial affairs? No. When it comes to what the Government interpret as their own interest they can intervene much more roughly and brusquely than any Labour Government have ever done. We therefore get this whole sorry story of the public wrangle, of the leaked letters, of the minutes that were not minutes and how and when they were written. Is this the way to run a government and the relations between that government and industry in this country? Then, at the end, the meeting of the Westland shareholders was postponed from Tuesday to Friday. Why was that postponed?—because the Connaught Rooms are not big enough. They will only hold 1,800 people. The meeting was moved to the Albert Hall, which will hold four to five thousand people. How many turn up?-450. When they turn up, are they given the choice between the American and the European alternatives? Are these the circumstances in which the shareholders are to make their decision? They have never been given this choice. They were given one choice only to vote on, with no alternative other than to turn it down. I do not see this as fitting in with the claim of the Government that it must be the shareholders who determine the matter. Surely this is not the way for government to conduct its relations with the organisation and development of industry in this country.
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This Government do not know whether they believe in market forces or in intervention. When they talk about the shareholders they like to think of the shareholders as lots of little people around the country—widows and so on. What we saw last week was the casino economy. It was the kind of British equivalent of a combination of Dynasty and Dallas. Do noble Lords ever go and hear what is said in the public houses in mining villages, in the textile or steel areas on nights when the television has been showing the way blocks of shares are being bought and sold for the purpose only of gaining power for the future over the industry of this country?
Lord Taylor of Gryfe: My Lords, I am sorry to interrupt the noble Lord, Lord Hatch of Lusby, but I understood that there was a certain discipline about timekeeping in a short debate and that those of us who were proposing to speak in this debate were allocated 12 minutes. The noble Lord has spoken for 14 minutes. This may affect subsequent speakers. I do not know who is responsible in this House for these matters, but I raise this as a point of order.
The Earl of Hals bury: My Lords, may I follow what has been said by remarking that, when the noble Lord, Lord Hatch of Lusby, rose to speak, on the 12 minutes apiece allocation of time we had 16 minutes in hand. Is the noble Lord, Lord Hatch of Lusby, going to hog the whole of that 16 minutes for himself, or will he give a fair share of it to the noble Lords, Lord BruceGardyne, Lord Vinson, Lord Taylor of Gryfe, Lord Williams and Lord Gallacher, for winding up?
Lord Hatch of Lusby: My Lords, I am perfectly happy to divide the extra time gained because of the shorter speeches earlier between all the subsequent speakers. In any case those two interventions have now taken an extra minute which could have been used for speeches.
The conclusion of the whole description of the events of the last few weeks which I have made illustrates the stark fact that this Government have neither an agreed policy on national interest nor any industrial policy whatever. The people of this country are being offered neither security nor the prospect of a prosperous economic future.
Two days ago the leader of my party, Mr. Kinnock, made his first contribution to the development of a party policy regarding the relations between Government and industry—the relations between government, shareholders, workers and management. I suggest that that is a coherent policy. I ask the Minister who is to wind up tonight to tell this House what the Government mean by market forces, when they believe in relying on market forces and when they believe in interfering with those market forces. We are entitled to know where the Government stand according to their own words, and their own words in relation to the disastrous events of the past three weeks.
6.49 p.m.
Lord Bruce-Gardyne: My Lords, I hope that the noble Lord who has just sat down, and indeed your Lordships, will forgive me if, after that interesting

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diversion, I revert briefly to the subject of the debate before us this evening.
I should like to join with other noble Lords who have congratulated the noble Lord, Lord Gallacher, on introducing such a remarkably timely subject for our discussion tonight and, if I may say so for my part, for introducing it with comments with which many of us would have found it difficult to find much to disagree.
I have to begin with a confession because I have to admit to being what my noble friend Lord Stockton apparently describes as a devotee of this new doctrine of liberalism. By that I mean that in general, although I think that the markets make very foolish mistakes, they do not make nearly as large mistakes as the politicians. However, I have also always believed that if we are to have an effective open market, effective and coherent policies for mergers and monopolies are not just in contra-distinction to the requirements of an effective open market; they are actually fundamental to it.
I listened with great interest to the historical analysis which the noble Lord, Lord Gallacher, gave us at the beginning of this debate. As he said, it seems that there have been several phases in merger policy. There was a period in the 1960s when biggest was best and we had the Industrial Reorganisation Corporation putting together anything that moved, with somewhat disastrous results. We then went through a phase in the 1970s when small suddenly became beautiful, and references were made to the Monopolies and Mergers Commission on the ground of sheer size. I think that it has to be conceded that some of the judgments which the commission produced struck some of us as being a little weird.
Then in 1981 my right honourable friend the present chairman of the Conservative Party, who was then Secretary of State for Trade and Industry, somewhat switched track, because he suggested that the primary reason for reference to the Monopolies Commission would be the issue of market share resulting from a merger. On the whole that was a change which was much welcomed in the City and extensively welcomed in Fleet Street. One pretty soon saw why—because the floodgates certainly opened; and we now rapidly find that we are living in an environment where we have bids of £1 billion almost once a week. It must be said that the pickings are very remarkable.
The other day I read that in the present interesting contest, to which reference has already been made, between Guinness and Distillers, if Guinness wins its bid for Distillers, the distinguished merchant banking house of Morgan Grenfell, with which the noble Lord, Lord Taylor of Gryfe, is connected, stands to benefit to the tune of £20 million, and if Guinness should not be lucky, the distinguished merchant banking house stands to benefit to the tune of £14 million. Apparently the brokers to Guinness stand to gain £4 million if Guinness is successful and £2 million if it is not. What precisely is being done by all these great people to warrant these spectacular fees I am less than wholly clear.
I must also say—and I agree with some of the other comments that have been made—that in relation to
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these full page advertisements which are doing marvels for the advertising revenues of the City pages, in which I am much interested, and which are badly needed, one sometimes wonders about this business of legal, honest, decent and truthful. Are they really all those things? Sometimes one has had grounds to wonder.
I share the concerns which have been expressed tonight, and I share them for several reasons, some of which have been referred to, one or two of which perhaps have not. In the first place, it seems to me to be indisputable that the emergence of a condition where the management of any public company, however large, knows that it is liable to be the object of a predator concentrates the minds of the board of management on very short-term objectives. The noble Lord, Lord Grimond, said that the shareholders have done pretty well out of the wave of takeovers, and I would not altogether dispute that. However, whether United Kingdom PLC has done pretty well is I think more doubtful.
The fact is that if a large public company today which has £10 million to invest invests it in a new home-grown product with great market potential, it takes that cost directly on the bottom line and the predators are encouraged. If instead it goes out and buys another company with that £10 million, its assets base has expanded and it may reasonably hope to reach a size where the predator cannot swallow it. I am not at all clear that that necessarily produces the best environment in which management can function.
I very much agree with the remarks of my noble friends Lord Ferrers and Lord Mottistone about some of the rather remarkable leverage bids that we have begun to see in this country, following the pattern of the United States. For my part, I would not go so far as they would seem to suggest (particularly my noble friend Lord Mottistone) in effectively barring external bids for British industry. We are no mean slouches at making bids overseas ourselves. Some perhaps are regretted at leisure; but, nevertheless, we do it a good deal.
However, I think that there are genuine grounds for anxiety about the financing of some of those bids. One sometimes wonders whether the leverage bids of the 1980s will not be the equivalent of the sovereign borrowing of the later 1970s and the property markets of the early 1970s. Bankers sometimes seem to find rather weird ways to make a turn in the market place, and I think that that is an aspect which we need to watch closely.
I also agree with what my noble friends Lord Ferrers and Lord Mottistone said about the way in which we do not always face an evenhanded situation here. There have been references to the fact that Allied could not bid for Elders, though Elders could bid for Allied. It is equally true that Allianz could bid for Eagle Star, but Eagle Star could not bid for Allianz. I must suggest that that is hardly a very appropriate area for the Monopolies Commission to become involved in. These are political considerations. I would suggest—and it is the one concrete suggestion that I want to make tonight—that it is rather odd that the Government have a power of override when the commission recommends that a bid should be blocked, but no power of override when the commission recommends that a bid should go

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through. I believe that the override should work both ways because I think that such political considerations as to whether it is appropriate that a German insurance company can bid for a British insurance company but not the other way round are matters essentially for Government consideration.
Finally, I want to make what I suppose I admit is a good deal more sweeping suggestion on the remit of the Monopolies Commission itself. I suggest that we should look carefully at the case for switching the whole onus of proof. At present the prey in a takeover situation has the obligation to demonstrate that his acquisition by the predator would not be in the public interest. I think that we have swung the balance too far in that direction. I believe it would be desirable that we should think hard about the case for switching over and putting the onus of proof on the predator to show that there will be material benefit to the public interest by his acquisition of his prey.
I readily accept that this would be a much more fundamental barrier to many acquisitions, and I readily accept that it might make it easier for some sleepy managements to sleep more peacefully in their beds. However, I have a nasty suspicion—and I detect that it is widely shared round your Lordships' House tonight—that if we go on in the way that we are going with the cumulative spread of bigger and bigger bids, we are liable to find that it might end in tears.
6.59 p.m.
Lord Vinson: My Lords, we are indeed grateful to the noble Lord, Lord Gallacher, for introducing this Motion, because the structure of industry affects the lives of every one of us. I have a particular interest in that for a number of years I have been both chairman and president of the Industrial Participation Association, a body which for the past 100 years has been striving to create a sense of common purpose at work. I am deeply perturbed by the current wave of merger mania, because I think it does nothing in the long run for industrial relations and precious little for industry.
There is an argument which says that we should leave everything to free markets, and for most of my life I have been a dedicated marketeer. But markets need a framework, and they need regulation. Indeed, there is no shortage of that both through company law and the application of patents, and a dozen other ways. I am not suggesting tonight that any one of us in this debate partly on monopolies has a monopoly of wisdom, but I feel that the law desperately needs to be strengthened to stop what is happening at the moment, which is personal megalgmania masquerading as corporate efficiency.
I do not think that this is just a legal question. It is a deeply philosophical question. It is a question about our free society. I happen to believe that the basis of our free society in the Western world is diffused economic power, disseminated economic power giving multiple patronage and the maximum sources of initiative, inventiveness and enterprise. If we as a society, in the name of leaving things free to the market, concentrate that power quite unnecessarily, we do so to our long-term peril.
I am not suggesting that all takeovers are bad. Neither are all takeovers good. But the record of
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massive conglomerate amalgamation is extremely poor. As one dinosaur gorges on another, eventually there is nothing left to gorge on and even dinosaurs die off finally; and we are seeing plenty of examples of that. We see too; as has been well mentioned tonight, that the whole business of business is turned upside down. We see short-term profit maximisation at the expense of long-term product development, and it is ultimately on product development that we all depend.
What is the solution? The law should be framed so that there is an automatic presumption against size and the aggregation of power. It is a happy coincidence to follow the noble Lord, Lord Bruce-Gardyne, and I wholly support his suggestion that there should be automatic referral of bids over a certain size, and the onus of proof that an amalgamation would be desirable should be put on the bidder. Noble Lords may have noticed that in this last fortnight Canada has begun to introduce a new trust law which will automatically refer all bids over £250 million. Others in other countries are thinking along the same lines.
This is just a brief contribution to say that in our society we desperately need to spread ownership to maintain a free society. We must introduce legislation to prevent the unnecessary aggregation of power. I hope that the Government will bear in mind the great unanimity that there appears to be in this Chamber tonight that something needs to be done.
7.3 p.m.
Lord Taylor of Gryfe: My Lords, I thank the noble Lord, Lord Bruce-Gardyne, for his kindly references to the distinguished merchant bank with which I am associated. May I assure him and the House that I am not speaking on behalf of that bank, which is heavily engaged in a number of merger activities at the moment? Neither do I propose to explain, or justify, the fees that have been quoted. This can be done very well, but perhaps not in this forum.
Perhaps my experience in this field may contribute something to the subject which was so well introduced by the noble Lord, Lord Gallacher. We are living in a period of feverish takeover activity, and it is right that we should sit back and assess the impact of all these mergers and acquisitions on the structure of our economy, their effect on consumers, and their impact on employees. Perhaps I may say from these Benches that we are committed to an effective competition policy. We are opposed to mergers for mergers' sake, or for greed, or for aggrandisement, but we support those mergers which contribute to increased efficiency and innovation. We believe that monopolies are bad, whether they are state monopolies promoted by the Labour Party or private monopolies resulting from the privatisation exercises of the present Government as seen in the examples of Telecom and gas.
Having stated these objectives, we now discuss the appropriate machinery for achieving this kind of policy. Like the noble Lord, Lord Bruce-Gardyne, and the noble Lord, Lord Gallacher, I too dipped into the experience of the 1960s in this regard. Unfortunately, studies of the impact of mergers have not been brought up to date. The latest document I could find was Command Paper 7198, dated 1978. It revealed the interesting situation that while the share of the 100

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large manufacturing enterprises in the United Kingdom net output of the total manufacturing business in the United Kingdom was 27 per cent. in 1953, in 1972 it had gone to 41 per cent. and represented 36 per cent. of the total employment in manufacturing industry.
The concentration in the manufacturing industry was much greater in the United Kingdom than in Japan and in Germany, but it did not have the results anticipated. The great merger mania of the time did not result in a greater proportion of our domestic market being captured by the newly-merged companies. Indeed, the opposite took place. The return on net assets following these exercises was not any greater than before. Indeed, more than 50 per cent. of all the newly-merged companies showed a reduced return on net assets compared with before.
This would suggest that there is no automatic advantage from greater mergers. But we are living in different circumstances today, and I am not sure that the experience of the 1960s—the great period of Jim Slater, the hero of free enterprise; the classic asset stripper—is the same kind of situation as exists at the present time. I believe that the pressure of possible takeover is a continual stimulus to performance and to management.
If your company is lazy, if your company does not perform well, it immediately becomes vulnerable. May I quote one or two cases which come readily to mind. The Dixons' takeover of Currys results have just been published; the results of Woolworth, which has been resurrected as a result of a takeover situation, and the BTR takeover of Dunlop are evidences of the injection of new management, new direction and rationalisation which have improved the performance of these companies to the advantage, I suspect, of consumers and shareholders.
It is interesting that the debate tonight was introduced by the noble Lord, Lord Gallacher, whose association all his life has been with the Co-operative movement. I am sure that the noble Lord, Lord Gallacher, would be the first to say that the mergers which have taken place in that organisation have been necessary, and have been compelled upon the Cooperative movement by the economic circumstances of the time. We are living in an environment where there is an inevitable need to create bigger organisations in some industries. There is a pressure to achieve greater efficiency. Some might say, "What about the employees in the event of these mergers?" I can only say that if any industry is suffering from bad management and overmanning the future of the employees is less secure in these situations than when they are taken over by efficient and well-organised management.
It is also suggested that the vulnerability of some companies inhibits long-term investment because the evidences of long-term investment are not immediately reflected in the balance sheet. I would say to these companies if they are afraid of this that they have a greater responsibility to communicate their plans and their strategy to the shareholders. American companies are much more responsible in this regard. They tell shareholders what is happening.
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We cannot argue simply that mergers as such are bad. Many mergers have great advantages. It can be a different situation from the asset-stripping of the 1960s. Let us be clear about the advantages of the United Kingdom competition policy. It is not a bad system, although some helpful criticisms have been offered in this debate which might improve it. It has flexibility. The phrase "coherent policy" is introduced in the Motion before us. "Coherent" suggests consistency in policy. However, all of these takeovers and mergers are entirely different. They are in different industries; they are made up of different groups with different interests. It would be a retrograde step to try to impose some kind of consistent uniform policy on all these various exercises.
The British policy has evolved over the years since 1948 and it has been a bipartisan policy. Apart from the fact that the questions arising out of references to the Monopolies and Mergers Commission arrive ultimately on the desk of the Minister, the Office of Fair Trading and the Monopolies and Mergers Commission have lifted this debate out of politics and have examined these matters quite objectively. There is flexibility in the British system. It has been extended over the years not only to bring in manufactured products but to include services and the professions.
This is good. It can cope with changing circumstances: for example, the impact of international competition. There is a proposal in the United States that United States companies should be exempt from their legislation if they are subject to foreign competition. But our system in the United Kingdom takes care of such changing circumstances and the international situation in which we operate. It can also deal with public interest issues such as the implications of the leverage buyout of the Elders Allied-Lyons bid, which has been referred to the Monopolies and Mergers Commission. These developments are worrying the Americans today because of the extent of the leverage buyouts in their country.
There are substantial advantages in the British system. There may be some criticisms about the inconsistency in the decisions of the Monopolies and Mergers Commission. This is inevitable, because these matters are widely debated and dressed up by the financial journalists. They become matters of winners and losers and inevitable public comment. However, as it exists the system works and the Monopolies and Mergers Commission and its procedures are reasonably well understood. However, it makes some decisions which baffle me. I could not recognise any monopoly situation in the recent bid for Sothebys, for example, and it is extremely difficult sometimes to understand decisions of that type where no monopoly arises.
When we are considering alternatives to the British system, I refer your Lordships to an article in the Financial Times this week by Sir Gordon White, who has some experience in handling these matters on behalf of the Hanson Trust in the United States. He said that takeover patterns in the United States are a form of street fighting; private detectives and smear campaigns are all part of the game. Private lives, business ethics, litigation lasting five months are not necessarily in the interests of shareholders. They have

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devised a new language with scorched-earth policies; poison pills and golden parachutes are all part of the game. A United States company can dismember itself or gear itself up to the eyeballs in debt without consulting the shareholders. In Britain, the moment a tender is out the clock stops. The only method of fighting someone off is to argue on the basis of the value of the company.
Sir Gordon, with his experience in the United States on a recent takeover, acting on behalf of the Hanson group, described how he had to present 3,000 pages of deposition, 2,500 pages of courtroom testimony and 140 exhibits. I do not believe that we should get too legalistic in the application of our monopolies and mergers policy; otherwise we may easily find outselves in the kind of difficulties Sir Gordon has described. This has been a useful debate. Helpful suggestions have been made. I look forward to the Minister's reply.
7.17 p.m.
Lord Williams of Elvel: My Lords, I, too, am particularly grateful to my noble friend Lord Gallacher for tabling this Motion for short debate. It has been welcome to see how on all sides of the House he has had support for some of his propositions and, indeed, what degree of unanimity there is on all sides of the House about what needs to be done. Debates on competition policy are few and far between, partly because the subject matter tends to be rather dry and technical, and partly because the issues of controversy that exist do not necessarily cause great political collisions and therefore are not an object of political controversy, but they are, none the less, controversial.
As many noble Lords have said, we are in a period when controversy is very much in vogue because we are, as we are told, in the days of the mega-bid. Indeed, I think it is because we have had this tremendous wave of mergers and bids in the last few months that it is apposite that this Motion has come before us today. It is opportune to reflect, as my noble friend Lord Gallacher has, on whether the institutions and the legislation that we have and the conduct of those institutions are adequate to keep pace with the fast development in the market. For this reason I suppose I must welcome the announcement from the Government that they are to make a review of competition policy this year. I am afraid it is a rather grudging welcome and I hope the Minister will not object to this, as the Government have been singularly dilatory in acting on the previous review, to which I am glad to hear the noble Lord, Lord Taylor of Gryfe, drew attention. That review was conducted in 1978 by a committee of officials under the chairmanship of Mr. Hans Liesner, the results of which were set out in two Green Papers: one in 1978, on monopolies and mergers policy, and the second in 1979, on restrictive practices policy.
The review conducted by the Liesner Committee was extensive and extremely thorough. A number of recommendations were made. These were supported by detailed argument and analysis; yet apart from the Competition Act 1980, which, the noble Lord will forgive me, was a rather half-hearted measure and dealt only with a small part of the problem, and apart from a few bland ministerial statements about competition policy, nothing much has happened
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except—this is an important exception to which I shall return—the privatisation of one major natural monopoly, with another on its way.
I am not aware that the Liesner analysis, to which the noble Lord, Lord Taylor, referred, has radically changed anything in any manner. No new evidence has emerged, so far as I am aware, to invalidate the conclusions that that committee came to. For instance, there is no new evidence to invalidate the conclusion that at least half the mergers by large, quoted companies are unprofitable; that the main reason for merger—and here I refer to a remark by the noble Lord, Lord Bruce-Gardyne—was to increase market share; that the defence of an existing position was the second main reason, and in the minds of managers, at any rate—and I quote from the Green Paper—
"Consideration of market power rather than economies of scale at the level of the firm were the main motive for a merger. The evidence"—
said the Liesner Committee—
"is more consistent with the assumption of growth maximisation than profit maximisation".
I think that this is a point which the noble Lord, Lord Vinson, made very convincingly when he spoke.
Indeed, if anything, these conclusions have been strengthened by the current merger wave. The noble Lord, Lord Grimond, mentioned the Distillers/Guinness merger. Was it deep conviction that led the Distillers' board suddenly to welcome a merger approach from Guinness; or is it that they did not fancy Mr. Gulliver? Was the proposed merger between the Imperial Group and United Biscuits the result of a rationally-conducted, economic and industrial exercise; or was it just cobbled together because both companies felt that they were vulnerable and they rather liked each other's conversation at lunch?
This analysis has not changed; nothing has changed. The Liesner analysis has not changed, the policy has not changed. Now it is regarded as something of a lottery whether there is a reference to the Monopolies and Mergers Commission or not. I think the market is confused, industry is confused, the City is confused. It really is time that we moved on; and for that reason I gave the grudging welcome that I did to the Government's review.
We in the Labour Party, in fact, see no fundamental reason for a review at all. On the contrary, we see every merit in acting on the recommendations of the Liesner Committee and then allowing a period of time to elapse for a further review of the new arrangements when they are put in place. Perhaps I may take up some of your Lordships' time to set out my party's current view of the direction of policy that we should be taking. I will deal with monopolies and mergers first and then turn to anti-competitive practices; and finally return, if I may, to the matter of competition institutions and, more particularly, the recent and current creations.
Our point of departure is the Green Paper of 1978. There is one suggestion that we should like to see put into effect immediately. At present, the Director-General of Fair Trading has the statutory duty to find out about all mergers that fall within his remit. This works well in the case of companies making a bid on

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the open market because they normally make their bids conditional upon there being no reference to the Monopolies and Mergers Commission. In the case of unlisted companies, it does not work so well. We should like to see introduced a provision for the pre-notification of mergers in the category in which the director-general is concerned. The Hart-Scott-Rodino legislation in the United States would be a good model to study. In our case, the director-general would be notified, would have a period of time—let us say, 30 days—to decide whether to recommend a reference to the Secretary of State; and the Secretary of State in the same period of time would make his decision about whether there would be a reference or not.
This procedure would not only help companies proposing mergers since at the moment there is no time limit on the director-general; but it would put a time limit on the reference procedure. It would make sure that no private company slips through the net, as is possible at the moment; and, above all, it would provide a very clear cooling-off period of 30 days during which the two parties concerned would know they were blocked and could think again about whether they really wanted to do the deal in the first place.
This period of 30 days which a statutory pre-notification would provide is all the more important when we come to the next proposal that I should like implemented. We follow the Liesner Committee in shifting from the present policy—the policy which noble Lords have summed up, quite rightly, as being the onus of proof on the authorities to show that a particular merger is not in the public interest and which, in fact, tends to operate in favour of mergers rather than against them—to a neutral stance as recommended by the Liesner Committee. We would not like to go as far as the noble Lords, Lord BruceGardyne and Lord Vinson, who, I think, both would like to see the onus of proof placed fairly and squarely on the merger proposal, which is the applicant company.
We believe that it would be perfectly possible, within the present institutional framework, to adopt a neutral policy by means, first of all, of a ministerial statement setting out to the director-general and the Mergers and Monopolies Commission that that is what we feel; but, secondly, and probably more importantly, by amendment of Section 84 of the Fair Trading Act 1973 to take into account—and I use the Liesner Committee's words—
"the desirability of minimising the detriments of reduced competition and increased concentration".
In one respect, however, we should like to go further than the Liesner Committee and identify three categories of merger which would provoke an automatic reference to the commission and on which guidelines issued to the commission would state that the onus of proof would be firmly on the company proposing the merger. They would have to persuade the commission that after all the proposed merger was in the public interest. Unless the company could persuade the commission of this, then the commission would take the view, and recommend so to the Secretary of State, that the merger should not take place.
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The three categories that I have in mind are these. First, a merger where there is a significant defence interest. I do not need to refer to the speech of my noble friend Lord Hatch of Lusby when I can say that this is a rather topical point at the moment and it seems to us essential that defence interests should have special treatment. Secondly—and I come to what the noble Earl, Lord Ferrers, has said, as also the noble Lord, Lord Mottistone, and the noble Earl, Lord Halsbury, who drew our attention to it, and, too, the noble Lord, Lord Bruce-Gardyne—I refer to mergers constructed in ways which clearly make them largely financial transactions rather than proper commercial or industrial transactions. Clearly, there is a definitional problem here but, basically, I think we are getting at the point to which the noble Earl, Lord Ferrers, referred, that, with purely financial transactions of this nature, we really ought to have a presumption against them that they are against the public interest.
And, thirdly, since it is going to be the main policy of the Labour Party to achieve a substantial reduction in unemployment, we would like to oppose mergers whose likely outcome would be a significant reduction in employment. This is going to be extremely important, and I come back to what my noble friend Lord Gallacher said about a coherent policy which includes the workers.
I accept that there will be definitional problems in setting up these categories which have to be solved eventually. The Director-General of Fair Trading will have to be given clear guidelines; for it will be he who will take a view on whether a proposed merger falls into one or more of these categories. But I am not going to tackle those definitional problems now.
Our third proposal on monopolies and merger policy again goes further than the 1978 Green Paper. It concerns the follow-up procedures when a merger is allowed through. In our view, the commission should be allowed to recommend, and the Secretary of State to impose, a reporting procedure even when a merged company is allowed through and there is no blockage from the Secretary of State. Even under those circumstances, the commission should be allowed to recommend a reporting procedure by which, from time to time and as appropriate, the newly-merged company will report to the Monopolies and Mergers Commission and describe what has happened since the merger.
Lord Bruce-Gardyne: My Lords, I apologise for interrupting the noble Lord. Surely, in fact, the Monopolies Commission has the power to do precisely that, and has done it on several occasions in recent years; but it cannot be said that it has worked very successfully.
Lord Williams of Elvel: My Lords, I am grateful to the noble Lord for his intervention. It is true that the Monopolies and Mergers Commission can recommend to the Secretary of State and the Secretary of State can make an order on companies where the Monopolies and Mergers Commission find something wrong. It is extremely rare in my experience: in fact I cannot cite any cases when the Monopolies and Mergers Commission have cleared a merger and, even

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so, the Secretary of State makes an order for a follow-up reporting procedure. I may be wrong and I would certainly welcome any advice, but I think I am right in saying that once a merger is cleared it is cleared for good.
If the Monopolies and Mergers Commission have these powers they can do something which, I am bound to say—If I may digress for a moment—that when I was in the Price Commission I longed to do, because this really comes back to what the noble Lord was saying. When Tate and Lyle took over Manbré and Garton, in a very famous merger in the 1970s, they put in their offer document that, as a result of the merger, there would be a decrease in unit costs, general benefits all round, no price increase, increases in profits, and so on. Much to our astonishment, six months later what should happen but a pre-notification of a sugar price increase from Tate and Lyle.
What I badly wanted to do, as chairman of the Price Commission which received this pre-notification, was to look at the framework of the merger that Tate and Lyle had put before the Government—because it was not referred to the Monopolies and Mergers Commission—and look at the figures the chairman of the company had put in the offer document to shareholders. I wanted to ask: were these figures genuine? If they were, were they right? If they were right, clearly there should be no price increase. If they were wrong, what was the explanation? That was something, unfortunately, we failed to do because it came very early in our career and we had not really set ourselves up to take this particular form of action.
It has always been in my mind that when a company makes a submission to the Monopolies and Mergers Commission it does so as a "still photograph" at a particular point in time. All its objectives may be perfectly praiseworthy and all its figures perfectly proper. The proof of the pudding comes in the eating; and it is only six, nine, 12, 18 months later that you see whether the merger has been a success or whether it has been one of the 50 per cent. which has been rather a failure—or indeed, whether a company has moved its headquarters down from Scotland to London, in response to the noble Lord, Lord Grimond's point.
These three proposals, in our view, would make for a sensible and coherent merger policy—one which catered for proper commercial and industrial reconstruction, and yet was much tougher on the kind of mid-winter madness which seems to grip the City from time to time, frequently (as perhaps at present) in the closing stages of a bull market. Nevertheless, they do not form a complete policy because there will always he uncompetitive practices by companies who have been able to establish a dominating position in the market.
I should like now to turn to these and tell your Lordships as briefly as I can what we have in mind here. Again, our starting point is the Liesner Committee, in this case the 1979 Green Paper on restrictive practices. Their recommendation was that power should be taken to prohibit certain practices. They mention tie-in sales and full-line forcing—rather complicated expressions. But essentially they were saying that certain uncompetitive practices are capable of definition legally, like resale price
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maintenance, and can be legislated against. We believe that power should be taken by the Government and that the practices, in so far as they can be defined in what makes legal sense, should be defined by Secretary-of-State order rather than by recourse to primary legislation each time, as in the case of the resale price maintenance legislation.
However, again we would go rather further than the 1979 Green Paper, and we would wish to see provision made for standing references to the Monopolies and Mergers Commission on certain prima facie uncompetitive practices which cannot be defined precisely in terms of legislation but can be properly interpreted by the courts, and where there are certain grey areas which are uncompetitive prima facie, and need looking at on a continuing basis. The particular type of practice I have in mind, which has caused many problems over the years and has been studied by all sorts of bodies such as the Food Manufacturers' Federation, the Monopolies and Mergers Commission and so on, is the question of discounts forced by big retailers on food manufacturers. That was dealt with by the Robinson-Patman Act in the United States.
Legislation in this case is not a sensible way of dealing with it, in my view. We want to have a procedure for the Monopolies and Mergers Commission to continue monitoring these kinds of practices if we are going to be able to say at any given time that the balance in this particular grey area has moved against one particular type of business and in favour of a monopolistic enterprise.
As a corollary of that, we would say we think that the Monopolies and Mergers Commission should use the powers that it has to impose price pre-notification on monopolistic and oligopolistic suppliers where a reference—either a one-off or a standing reference such as I have described—has shown up a potential or actual case of monopoly pricing.
This brings me to the question of institutions. The question was raised by the noble Lord, Lord Campbell of Alloway, not very long ago at Question Time, and the thrust of his Question was really quite simple: is there not a profusion of institutions in this field of competition? We had the Office of Fair Trading, the Monopolies and Mergers Commission, the Restrictive Practices Court, the High Court (in certain cases), the Treaty of Rome and GD4 in the European Commission and the European Court. Now we have Oftel; we are about to get Ofgas and presumably Ofwater (if the water authorities are privatised)—and also Ofair, in the form of the Civil Aviation Authority (if the British Airports Authority is privatised as well). Who knows?—in the future we might be getting Ofelectricity and Ofanything else that the Government decide to privatise.
I was given to understand, when the Conservatives came to power in 1979, that their ambition was to cut down on the number of institutions—"quangos" they were called at the time. As I remember, they were very keen on abolishing them and in fact an honourable gentleman in another place kept a score of quangos abolished, rather in the same way as certain noble Lords opposite no doubt keep a tally of the birds they shoot in an autumn afternoon—another brace gone here; another one gone there.

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We now seem to have a complete reversal of this policy and quangos of this kind are being created every time there is a privatised monopoly: here, newly-forged is a new competition institution. It will astonish your Lordships to know—and I have put down a Question for Written Answer to confirm the figures—that Oftel which started off with 50 people, has now grown to 80 people and is about to grow to 100 people. If you have 100 people in Oftel, 100 people in Ofgas and in Ofwater and so on, you really are creating a new model army which we could do without.
So the proper object of a review, if that is what the Government are contemplating, is to look at these institutions and ask: is there not really a case for merging these institutions into the net we have got? There are, after all, three quite separate types of functions. There is the granting of licences, which is the proper function of Government; there is the question of trading practices, which is a proper function of the Director-General of Fair Trading; there is the question of pricing, which is the proper function of the Monopolies and Mergers Commission.
I have taken up far too much of your Lordships' time and I must come to a close, but there are two general points that I would like to make. The Government have decided upon a review. So be it. We will return to what it says and react accordingly when the review is out. What I have said today is based, and can only be based, on the position that we have at the moment. Nevertheless, we on our side maintain as a matter of principle that we need a tougher policy on monopolies and mergers. To illustrate this, I cannot do better than to quote from the public interest provisions of the Monopolies and Restrictive Practices (Inquiry and Control) Act 1948, which was introduced and put on the statute book by a Labour Government. The Act instructs the commission that,
"all matters which appear in the particular circumstances to be relevant shall be taken into account and, amongst other things, regard shall be had to the need, consistently with the general economic position of the United Kingdom, to achieve:

(a) the production, treatment and distribution by the most efficient and economical means of goods of such types and qualities, and in such volume and such prices as will best meet the requirements of home and overseas markets;

(b) the organisation of industry and trade in such a way that their efficiency is progressively increased and new enterprise is encouraged;

(c) the fullest use and best distribution of men, materials and industrial capacity in the United Kingdom; and

(d) the development of technical improvements and the expansion of existing markets and the opening up of new markets."

That was our position in 1948, and that is our position today.
7.40 p.m.
Lord Brabazon of Tara: My Lords, we are all grateful to the noble Lord, Lord Gallacher, for having raised this important matter in debate today, and I am most grateful to be given the opportunity to discuss a subject which is so central to the Government's policies—that of competition. At the basis of our policy on monopolies and mergers is the conviction that free competition in the market place is the most effective way to keep prices down, to satisfy the consumer and to promote efficiency in production and
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distribution. We know, however, that the market does not always function perfectly. Distortions may be created when extensive market power is concentrated in the hands of a small number of companies. We have essentially two weapons at our disposal in attacking these distortions.
First, we can act—where they exist—against the monopolistic practices of companies already in a dominant position in the market, and against the anticompetitive practices of companies who seek to reduce or eliminate competition, and thereby to dominate the market. Our legal weapons in this sphere are the monopoly provisions of the Fair Trading Act 1973, and the anti-competitive practices provisions of the Competition Act 1980. Both of these provide both the scope for an in-depth investigation of such practices by the Monopolies and Mergers Commission and the basis for action to remedy such practices if they are found to operate against the public interest.
Secondly, we can intervene—in cases of particular economic significance—to control the structure or size of firms which threaten to dominate a market or markets through acquisition. Our weapon here is the mergers provisions of the Fair Trading Act. I should like to use this opportunity to discuss this aspect of policy more thoroughly. In particular, I wish to consider suggestions that our policy on mergers has no consistency or coherence, or that it is ill-equipped to deal with recent developments in the market. Such allegations have no basis in fact.
I should like to begin by reminding this House that a review of policy towards mergers was conducted by the Department of Trade and Industry as recently as 1983–84. It resulted in the Statement by my right honourable friend, the then Secretary of State for Trade and Industry on mergers policy in July 1984. I should like to remind noble Lords of what my right honourable friend said on that occasion. He said:
"I regard mergers policy as an important part of the Government's general policy of promoting competition within the economy in the interests of the customer and of efficiency and hence of growth and jobs. Accordingly my policy has been and will continue to be to make references [to the Monopolies and Mergers Commission] primarily on competition grounds. In evaluating the competitive situation in individual cases I shall have regard to the international context: to the extent of competition in the home market from non-United Kingdom sources, and to the competitive position of United Kingdom companies in overseas markets."—[Official Report, Commons, 5/7/84; col 213]
I hope to illustrate in what I have to say today that both the policy and the institutional framework within which Government decisions about mergers are taken are as well-adapted and relevant to the current situation as they were when my right honourable friend the then Secretary of State made that statement some 18 months ago.
We are undoubtedly experiencing a peak of merger activity at the present time. Some have even gone so far as to describe the country as in the throes of an attack of "merger mania". Cries such as this are easily aroused. However, I would be the last to deny that the increase in merger activity since the middle of 1983 has been substantial. Whereas the total assets of companies acquired in 1983 were some £2.3 billion, this had increased to £5.5 billion in 1984 and to £6.1 billion in the first three quarters of 1985 alone. A feature of this particular wave of mergers is the size of

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some of the bids involved—the so-called "megamergers"—which would affect the deployment of millions of pounds' worth of assets and have an impact on large numbers of employees. Acquisitions valued at over £25 million accounted for 73 per cent. of total expenditure on acquisitions in 1984. Another feature which some commentators have addressed is the advent—which has been particularly marked in the USA—of the so-called "leveraged takeover", or the takeover financed largely by debt, to which the noble Lord, Lord Gallacher, referred as David taking over Goliath. I shall return to this a little later.
We must, however, keep this activity in perspective. History has shown that merger activity tends to be cyclical. There was a mergers boom as recently as 1972—which, incidentally, has not yet been matched by the current peak, either in terms of the number of takeovers, or the volume of assets which have changed hands. There were over twice as many company takeovers in 1972 as in 1984; and the volume of assets of companies acquired in 1972 was almost double that of companies acquired in 1984 (using constant prices). And there are undoubtedly some specific once-and-for-all features of the present situation. The statistics include the many current acquisitions of stakes in our brokers, jobbers and financial services institutions in preparation for the Big Bang in the City. Such acquisitions—given the large asset base of many of these institutions—tend to inflate the figures disproportionately.
It is our belief that—despite the heightened level of merger activity which we are undoubtedly experiencing currently—our present policy provides a framework which is flexible and capable of adaptation to all the different types of case which may arise. At the same time, it provides a degree of predictability and consistency in the treatment of mergers which is—I believe—welcomed both by the City and industry in general.
Perhaps I should not set the policy in its institutional and legislative context. Our procedures for examining mergers operate with a light touch. My right honourable friend's intention—in announcing in July, 1984, that the assets test for mergers qualifying for investigation under the Fair Trading Act 1973 was being raised to £30 million—was to ensure that only mergers of considerable economic significance came within the scope of the legislation. In 1984, only five of the 259 mergers qualifying for investigation under the assets and market share tests were preferred to the Monopolies and Mergers Commission for further investigation. In 1985, the figure was five out of 191. Moreover, it is only in the case of an adverse public interest finding by the MMC that Ministers are able to take steps to prevent or impose conditions on a merger; or for that matter to break a monopoly, where that is the subject of the reference.
Another aspect of our arrangements in this country which confers particular strength and adaptability is the three-tier procedure, involving two organisations independent of government: the Office of Fair Training and the Monopolies and Mergers Commission. The Director General of Fair Trading has a statutory duty to keep himself informed about merger situations and to advise the Secretary of State
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on whether a reference to the MMC would be appropriate in a particular case. But the decision on a merger reference is made by the Secretary of State and not by the director general. In the case of a monopoly reference of course the director general is also empowered to make reference and it is normally he who makes them. In the case of merger references, it is the practice to state publicly if the Secretary of State goes against the director general's advice. Finally, there is the involvement of the MMC in those cases which are considered to raise potential public interest issues. The MMC is a body with a wide spectrum of skills and experience: and in assessing the input of a merger proposal on the public interest, they have a far-ranging statutory duty to take into account all matters which they consider to be relevant in the circumstances.
Let us turn now from the procedures and institutions to the way these operate in practice. In July, 1984, my right honourable friend the then Secretary of State for Trade and Industry announced that references to the MMC would continue to be made primarily on grounds of competition. This policy has been endorsed and restated recently by my honourable friend the Parliamentary Under-Secretary of State for Corporate and Consumer Affairs in his speech on 29th October last to the conference on International Mergers and Acquisitions.
As its basis is our belief that market forces and competition are generally the most efficient means of allocating resources, stimulating growth in the economy and hence creating viable jobs. We believe that decisions about the future of a commercial enterprise are in general best taken by the shareholders themselves. And we must remember that by no means every takeover bid succeeds, although in some instances the mere threat of a takeover can be a stimulus to better performance by the target company, a point which several noble Lords have mentioned. What we do not believe is that mergers policy should second guess the market or protect target companies against unwanted bids.
However, in stating that reference decisions would be made primarily on competition grounds, my right honourable friend did not say that factors others than competition would never be taken as grounds for a reference. We look at each case on its merits and from all angles. In advising the Secretary of State, the director general considers all the relevant aspects of a bid, all the arguments put forward by the parties to a merger proposal. And—as I remarked earlier—the MMC is not merely able, but is required to take account of all the relevant issues in assessing the public interest impact of a merger. A recent example of a case where my right honourable friend the Secretary of State for Trade and Industry decided to make a reference on grounds other than those of competition is the Elders IXL bid for Allied-Lyons, where he announced that the financing of the bid raised issues which deserved further investigation by the commission. And there will doubtless be other cases, with their own particular features, which will be referred to the MMC in the future. We believe that each case must be examined on its merits in the light of the specific circumstances.
Lord Williams of Elvel: My Lords, I am sorry to interrupt the noble Lord. Will he kindly tell us whether the director general looked at the Westland case, which after all fell within his remit as a partial merger? Did he make any recommendations to the Secretary of State on that subject? If so, what did the Secretary of State do with those recommendations?
Lord Brabazon of Tara: Certainly, my Lords. I have a note on the Westland situation and I shall reply to the noble Lord before I come to the end of my speech.
Any attempt to impose rigid general rules would quickly run up against a special case which the rules did not fit. The flexibility of our policy is one of its greatest strengths. I think the noble Lord, Lord Taylor of Gryfe, supported us on that.
I can indeed sympathise with my noble friend Lord Ferrers and other noble Lords with their concern about the appearance of so-called leveraged takeovers financed largely by debt. These are not as yet a common feature of the scene here in the United Kingdom but I am aware that the new financing devices used in the United States have been hitting the headlines recently. The appearance of such new financing techniques does not in our view undermine the validity of our procedures for examining mergers. Because they are considered by the Office of Fair Trading and by my right honourable friend the Secretary of State for Trade and Industry on a case by case basis, this allows the specific features of a bid to be fully evaluated in assessing whether it should be referred to the Monopolies and Mergers Commission for further investigation.
The MMC can look at all aspects of a merger referred to it which they consider to be relevant, including reciprocal arrangements for takeover bids in the bidder's country of origin if they consider these to be relevant. It will of course be for the MMC to consider whether reciprocity is a relevant factor in the Elders bid for Allied-Lyons. That is so far as I can go on that subject at this stage.
In our view therefore the Government's policy of making references primarily on competition grounds has admirably stood the test of experience. We are conscious that merger activity is at a high level: indeed, this was already the case when my right honourable friend's 1984 Statement was made. The approach we have adopted—and will continue to adopt—has regard to industry's wish for stability and predictability, while at the same time being both practical and flexible.
Noble Lords have raised a number of specific points. The noble Earl, Lord Halsbury, asked me whether he could give evidence to the MMC in the case of the GEC/Plessey merger. I am sure that the commission would be happy to receive any representations which the noble Earl might wish to make to them.
The noble Lord, Lord Williams of Elvel, has just asked me about the position regarding Westland minority shareholdings. It has been announced that my right honourable friend the Secretary of State for Trade and Industry has decided, in accordance with the recommendations of the Director General of Fair Trading, that neither the proposed acquisition of shares by UTC Fiat recommended by the board of Westland nor the consortium proposals by five British,
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French, Italian and German firms would be referred to the Monopolies and Mergers Commission under the provisions of the fair trading Act. If any other proposals were to emerge these would be considered in the normal way by the Director General of Fair Trading who would subsequently advise the Secretary of State for Trade and Industry on whether a reference to the MMC was appropriate.
In conclusion, the noble Lord, Lord Gallacher, and other noble Lords have expressed interest in the review of competition policy which has been announced by my honourable friend the Parliamentary Under-Secretary of State for Corporate and Consumer Affairs. Final decisions have not yet been made on the scope of the review which is to begin this year, but I can assure noble Lords that my right honourable friend will take careful note of today's most interesting and useful debate when deciding on the scope of the review. I also listened carefully to the speech of the noble Lord, Lord Williams of Elvel, about Labour Party policy in this matter. The Government have been accused twice in recent months of reacting too hastily to statements such as that, and I do not intend to fall into that trap this evening. However, I can assure the noble Lord that my colleagues will read what he has said with great interest.
Mergers policy, as an important part of the Government's general policy of promoting competition within the economy, will naturally be considered in the context of this review. But we do not consider that the current high level of merger activity alters radically the issues which the review will need to consider. Overall, we believe that the policy towards references which we have been pursuing and will continue to pursue has stood up very well to the demands which have been placed upon it.
7.57 p.m.
Lord Gallacher: My Lords, I should like first of all to thank all those speakers who have taken part in what I think has been a useful debate and one which I hope we shall be able to study in Hansard so that some of the more detailed points can be absorbed at leisure. I am particularly grateful to my noble friend Lord Williams of Elvel for putting my "rude mechanicals" in the framework of Labour Party policy and Labour Party aspirations. I am sure that he will be as disappointed as I am that the Minister rejected his blandishments to take them over here and now. Nevertheless, we had an assurance from the Minister that in the review of competition policy which is now in hand consideration will be given to some of the submissions made by us and other speakers in the debate.
I should also like to say to the Minister that his case was factually explicit and courteously delivered. In so far as he sought to console me, my only reflection was that, if there is so much coherence attached to the ministerial statements of 1983–84, why indeed was there so much concern behind him in the debate this evening? Having said that, I beg leave to withdraw the Motion in order that we should not be detained from the Unstarred Question on telephone bingo.
Motion for Papers, by leave, withdrawn.

Telephone Bingo
7.59 p.m.
Lord Allen of Abbeydale Lord Allen of Abbeydale rose to ask Her Majesty's Government whether they have received the advice of the Gaming Board on "telephone bingo" and whether they are now prepared to express a view about the desirability of this experiment by British Telecom.
The noble Lord said: My Lords, lurking behind this somewhat deceptively simple Question are some troublesome social issues. I make no apology for asking your Lordships to spend just a little time considering them. I am most grateful to the other noble Lords who have agreed to take part in this short discussion. Perhaps I can say a special word of welcome to the noble Viscount, Lord Davidson, on this exploration of one of the multifarious functions of the Home Office.
Licensed bingo has been losing in attendances for some years for many reasons, including the risk of being mugged on the way home and the disappearance of public transport. Even so there are something like 5 million regular players and every day more than 300,000 people attend licensed bingo clubs. Although bingo is a form of gambling, and although a housewife can lose more than she can reasonably afford, nevertheless it provides something of a social service and offers to a large number of people living in pretty humble and often lonely surroundings the chance of meeting other people, entertainment, refreshment, light and heat.
Bingo is surely in a quite different category from casino gaming—which, oddly enough, we shall be discussing in your Lordships' House tomorrow. But, just like casinos, licensed bingo is very closely controlled under the Gaming Act 1968. For example, it is subject to restrictions on licensing and certification, opening hours, admission to take part in the gaming, and on advertising.
The 1968 Act recognised the existence as well of bingo in members' clubs and miners' welfare institutes. In recent years we have also seen the growth of so-called newspaper bingo quite outside the 1968 Act. That is a form of bingo with what might be charitably described as managed prizes, far greater in amount than anything that the bingo industry itself has ever contemplated and with no restrictions whatsoever on advertising. The organisers have hoped to stay within the law by arranging that there is no requirement to buy a newspaper to enter, but the normal expectation is that one will do so.
We now have an experiment by British Telecom for telephone bingo, which I shall describe in a moment. This is an example of straightforward gambling. There is no question of one enjoying any side benefit—for example, in the way of a newspaper to read. Nor is that the end of it. Various types of bingo are already being used by a number of commercial companies to promote their businesses. We know that the technology now exists to play a game of participative bingo by way of one's own TV set and that proposals for just such a game are now being hawked around by the promoters. I do not know what view the IBA is likely to take if such a proposal goes to it, but what with the prospect of satellite TV and all the rest of it,
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the pressure for some form of TV gambling is only too likely to increase.
The British Telecom experiment is only one example. I am bound to ask whether the Government are content just to sit back as the scope for gambling grows ever wider and wider, or whether they consider that the time is coming where the line should be drawn somewhere. If they do not, then how do they justify retaining strict statutory limitations on the one form of activity that offers a real social contribution in addition to the opportunity for modest gambling?
As this Question concerns British Telecom bingo, I had better talk about that form of bingo in a little more detail. A 12-week experiment in the Midlands has just finished. The idea was that if it succeeded the arrangements should be spread across the whole country. I am glad to be able to say that British Telecom have told me this week that they have decided to abandon the whole attempt as from Sunday last. They tell me that that decision was taken on commercial grounds. Satisfactory though that conclusion is to me, it does not dispose of the questions to which that experiment has given rise and about which I am speaking this evening.
Another experiment in Southampton on rather different lines ran, I believe, into troubles of its own, but under the Midlands scheme cards with numbers printed on them were distributed to households in the area. Anyone who wanted to take part could then ring up a British Telecom number to check off the bingo numbers given for that day against those on the card. At the end of the week, a score of 15 entitled the holder to claim a substantial prize for a full house—a phrase no doubt familiar to your Lordships.
The claim could be made on a Freefone number, but all the calls in the week were ordinary telephone calls that had to be paid for. In the fond belief that all of that could be kept within the law, the week's numbers were announced on a local radio station on the Sunday evening an hour or two before the final claim had to be made, so that in theory at any rate one could enter without spending anything.
On 12th November, as reported at col. 137 of Hansard, I asked whether the Government thought that that experiment was in accordance with the public interest. The noble Lord, Lord Glenarthur, who replied on that occasion, is not present in your Lordships' House this evening. When I told him that I might have to make some remarks that could be construed as being mildly critical, he assured me that that was a prospect he could face with equanimity. In any event, the noble Lord made no attempt to answer my original Question. He simply replied that the decision was a matter for the commercial judgment of British Telecom.
That hardly came as a blinding revelation. What I had actually asked was whether the Government held any views about that decision. So I tried again. I asked:
"Is it not deplorable that this great undertaking … should go in for action which may not be strictly illegal—although I would not be too sure about that—but is certainly plainly contrary to the spirit of the Gaming Act 1968?".—[col. 138.]
I also mentioned:
"With newspaper bingo you at least get something to read for your money".

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To that supplementary question the noble Lord, Lord Glenarthur, replied:
"I do not think that the noble Lord is necessarily right. He referred to newspaper bingo, and as with telephone bingo it is not essential to make a payment to take part, and the courts have not found newspaper bingo illegal".
The noble Lord did agree in subsequent correspondence that he had not attempted to say either that the courts had held newspaper bingo to be legal. The fact is that this issue has never been directly tested in the courts on a specifically argued case.
Anyway. I was talking about telephone bingo. Although I am no lawyer, I am sure that I am not alone in believing that there is, to put it at its lowest, an argument that that particular activity in all probability strayed onto the wrong side of the law. Whatever the legal position, the arguments of policy remain. In those exchanges on 12th November, the noble Lord, Lord Glenarthur, stated that,
"The gaming board will be discussing telephone bingo shortly".
The board has a statutory duty to watch the development of all forms of gaming and I hope that the noble Viscount, when he comes to reply, will feel able to tell the House what views the board expressed. Telephone bingo as such is evidently finished, but there will undoubtedly be other experiments and the views of the board will be of lasting interest.
There is one other quite separate point. When we were devoting so much time in this House to the privatisation of British Telecom I cannot recall that we ever had any explanation that one of the consequences might be that this great corporation would feel free to do its bit to try to turn us into a nation of gamblers without apparent regard to the social considerations involved—any more than we were told about another of its rather bizarre experiments whereby one could telephone the topless page 3 model of the day and chat to her about her love of animals or about swimming pools!
However, with my eye on the clock I realise I have said enough, but I should like to end by summarising the questions which emerge from what I have been saying. First, what advice have the Government had from the Gaming Board? Did the Government or the board make representations to British Telecom? Are the Government now prepared to express in public a view about the policy implications of this apparently unsuccessful experiment?
Secondly, have the Government received advice about the actual legality of the experiment, and do they have views which they are prepared to disclose about the legality of other comparable activities? Thirdly, do the Government contemplate trying to draw the line somewhere to stop this spread of gambling opportunities? If not, and if there is to be a free-for-all for newspapers, TV promoters, and whoever else climbs on to the bandwagon, do they contemplate relaxing the very tight restrictions on licensed bingo, which is the one form of bingo with a social benefit? If not, why not?
Finally, are the Government content, now this great public enterprise is privatised, to wash their hands of it altogether and to refrain from commenting on its activities, however socially undesirable they may be? I
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think that I was not overstating the case at the beginning of my speech when I said that there were social issues of some consequence here.
8.12 p.m.
Lord Harmar-Nicholls: My Lords, I declare an interest, having been chairman of a quite significant leisure company which had bingo as one of its products. I have continued that interest, particularly in relation to the legislation affecting bingo. I look upon this contact as a slight advantage when such matters are being discussed as it enables me to know first-hand how genuine are the protests and criticisms from the operators' side.
The noble Lord, Lord Allen of Abbeydale, is similarly placed with regard to having some knowledge of the real make-up of this subject, but he comes from the controllers' side; so we have the operators with the day-to-day knowledge of how it affects the actual operation and we have the controlling side with the special knowledge of how it affects the nation and the general way that it fits in. But tonight from both sides of the coin we bring identical messages.
What is this message that we both bring? It is that the bona fide bingo establishments have proved that properly run it is a harmless pastime which provides a real social service to the lonely and the aged; and now that the bona fide clubs have established that status there is a risk that outside organisations such as newspapers, television, and cable companies, as the noble Lord said, will produce pseudo games and call them bingo purely for their own sales purposes. I do not object to that, but I agree with the noble Lord, Lord Allen, that it is someone's responsibility to see that the way they do it is within the law as it now stands.
They are likely to be a great problem to what I call the bona fide operators, because they are free from any of the legislative constraints which the bona fide clubs must have. If they are allowed to develop without those constraints they will submerge and, I suggest to my noble friend who is to reply, it may well be that they will annihilate the genuine article which has passed the test of coming within the law as set out in the 1968 Act and the way it has been operated.
I do not think that there can be any doubt about that and I should like my noble friend, when replying, to bear in mind this fact: that since the newspapers' pseudo bingo started about three years ago the genuine article has seen the number of clubs reduced from 1,400 to 1,200; that is, a reduction of about 14 per cent. Admissions to the various clubs over that period have fallen by 20 per cent. I do not for one moment suggest that that very clear indication that the clubs have been proved to be both desirable and helpful in a social service way was totally due to the newspapers, but I am saying that this quite significant fall has been during the period when the pseudo bingo newspaper efforts have been in operation.
A part of the message that I think we both bring is that elementary fairness insists that both the bona fide and the new participants should be under the same legal constraints. To leave it that one is free and the other is in a straitjacket of restraint simply is not fair. I do not believe that Parliament would be doing its

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duty by leaving the legislation with that sort of advantage being given, particularly when it could result in the bona fide games being pushed out of existence. Therefore, the Government must either do that or—and I emphasise this, because it is within the power of the Government to do so—the original bingo halls which have pioneered both the popularity and the status of the game should be freed from the straitjacket of not being permitted to advertise and other such constraints that are put upon them under the 1968 Act. All operators of either genuine bingo or pseudo bingo should compete on the same terms.
I believe that that is, briefly, the message that the noble Lord, Lord Allen, and I both bring in this Unstarred Question tonight. I want to emphasise to my noble friend who is to reply that this Unstarred Question is very significant. It is significant, in my view, because of the standing and experience of the noble Lord who introduced it. I do not believe that we ought to ignore the significance of the noble Lord's tabling of this Unstarred Question and the message that he gave.
I attach a lot of importance to that, because those who understand the significance of Unstarred Questions know that usually they are taken as a way of putting on record some point of view, often without there being much hope of it ever being carried forward, or of it incurring subsequent legislation. This Unstarred Question is different. It emphasises an unfairness brought about because of legislation in one part of industry and it must be dealt with. I have declared my interest and how I have been chairman of a company which has bingo as one of its products. If I or anyone connected with the industry had asked this Question, it would have had just the same basis in terms of the truthfulness of the message; but in its acceptance by everybody it might have been suspect, genuine though the message seemed, as to how much self-interest was involved in it.
When such a matter is raised by the noble Lord, Lord Allen of Abbeydale, who has spent almost a lifetime from 1934 as one of our senior civil servants with the responsibility of important offices of state (the Home Office, the Ministry of Housing, the Treasury itself) and who was ultimately made chairman of the Gaming Board, that adds special significance to this Unstarred Question and the noble Lord who is asking it tonight. In his capacity as chairman of the Gaming Board, the noble Lord had access to the inspectors' reports. He saw the reports which had to be given to him under the Act and he had the services of a virtual army of people to investigate the situation and see whether the law was being properly upheld. He comes here with a knowledge which is almost unequalled by anyone else who is likely to take part in this debate. His main strength is his very career. He himself shows that he is being objective. There is no quesion at all of any self-interest in the message that he brings to us.
I suggest therefore that the Government, through my noble friend, would be very well advised not to treat this as just another Unstarred Question, where members are letting off steam in the hope that it may do some good somewhere. It is the beginning of a genuine attempt to right an unfairness. It is an unfairness which has been recognised everywhere. Indeed, there are not only the arguments which have
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been put by the noble Lord and myself from our respective positions on both sides of this industry, but there is also the report of the Royal Commission in 1978, which admitted that bingo clubs, as they were operated under the present Act, were serving a social purpose, and they ought to be relieved of some of the constraints which would make it impossible for them to continue to exist.
I hope that my noble friend and other noble Lords who are taking part in this debate tonight will put this Question out of the realm of the normal Unstarred Question, where it is just a matter of putting a point of view on the record. It discloses an unfairness which it is possible for the Government to put right, and they ought to put it right. It is a message which comes from people placed, as I am, who have seen it in day-to-day operation, and it has been seen from the point of view of the noble Lord who has been one of the pioneers of the legislation which has brought this about.
I hope that the message which the noble Lords will give will be either that they will ensure that the unfair competition and freedom from constraints that certain groups possess will be changed, and the situation will be legally adhered to, or that they will remove the unnecessary constraints on those who already operate and who have proved how genuine and desirable they are, so that they can carry on and carry out what was intended when the 1968 Gaming Act brought bingo under the aegis of the law.
8.25 p.m.
Lord Bancroft: My Lords, with the demise of telephone bingo, I rise, not for the first time, in the presence of a shot fox; but the existence of the corpse in no way invalidates the single point that I want to make, nor the very important points and questions which have been raised by the two noble Lords who have spoken before me. I am afraid I cannot match their eloquence but, like the noble Lord, Lord Harmar-Nicholls, I must declare a modest interest. Among other activities, I am a director of the Bass group of companies and also a director of two of their wholly-owned subsidiaries, one of which, Coral Social Clubs, is a leading operator of bingo clubs.
My brief intervention is not primarily designed to complain about competition from newspaper bingo, or the now defunct telephone bingo which I believe is called "Ringo"; but like other noble Lords I cannot help but ruminate on the political and economic philosophers who set the mountains of privatisation in labour. Did they envisage the production by British Telecom of such a rum and doubtfully legitimate mouse as "Ringo"? I think its only qualification for being remembered is that it makes a good alliterative chum for Roland Rat. I am glad that British Telecom has put it out of its misery.
Despite the paucity of Peers present here tonight, I want to re-emphasise the points that have been made about the vast number of people whom bingo touches. In their singularly scholarly study called Women, Leisure and Bingo, Dixey and Talbot found that for many of our fellow countrymen and even more of our fellow countrywomen, bingo is one of the very few acceptable sources of entertainment outside the home. Specifically, they found:
"Women, more than men, and the older age groups rather than

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the younger, regard bingo as their main entertainment outside the home. There is little variation by region".
Adding flesh to the figures that we have already been given, in 1984 an average of 340,000 people a day played bingo and a total of 124 million people participated during that year. I repeat therefore that we are concerned with a lot of people, and since the duty collected from the clubs amounted to £49 million, we are talking about quite a lot of money too.
I repeat that my main and indeed my only point is one made by both the noble Lords, Lord Harmar-Nicholls and Lord Allen of Abbeydale, and also in a singularly wise speech by the successor of Lord Allen as chairman of the Gaming Board, Sir Anthony Rawlinson. It concerns the restrictions placed on bingo clubs as compared with bingo promotions in newspapers and elsewhere. Referring to the 1968 Gaming Act, which, as has been remarked, in many ways treats bingo played in clubs as if it were hard gaming played in casinos (which it certainly is not) Sir Anthony is reported as saying:
"Were the legislation being rewritten in respect of advertising restrictions, I think a case could be made for distinguishing licensed bingo premises from licensed casino premises".
He added that:
"With an eye to the future it would be useful if bingo operators were to come forward with coherent and specific proposals for reforming Section 42 in a way which they would regard as sensible".
I say both "hurrah" and "amen" to that.
All research and experience has shown that it is the social facilities of the bingo clubs which form a large part of their attraction to their patrons, who are mainly women with very few other places to go and socialise. It is therefore difficult—I echo points already made—to justify placing quite ferocious restrictions on advertising on those bingo promotions that serve a useful social purpose and none at all on those that are solely gaming. The ferocity of the restrictions is real. Any noble Lord who wishes to glance at Section 42, subsections (1), (6) and (8), for example, will understand what I mean. Other businesses can freely use the bingo industry's product to stimulate their own enterprises without any restraints or any of the costs, such as the duty, that are attached to licensed clubs. Sooner or later, as the noble Lord, Lord Allen said, a line needs to be drawn to stop the indiscriminate spread of gambling.
In the interests of fairer competition and the fairer interplay of market forces—this should appeal to the Government—I hope very much that the noble Viscount who will be responding for the Government will undertake that sympathetic—I repeat, sympathetic—consideration will be given to legislation that removes some of the restrictions on the clubs, in particular their freedom to advertise. I conclude by thanking my noble friend Lord Allen of Abbeydale for introducing the debate with all the authority that the noble Lord, Lord Harmar-Nicholls, has described.
8.31 p.m.
Baroness Ewart-Biggs: My Lords, I should like to add my voice in welcoming this Unstarred Question, presented by the noble Lord, Lord Allen, with great clarity and great feeling and also, I believe, with great
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conviction. The noble Lord says that it is now certain that this particular experiment has come to an end. Indeed, even I had heard this on the grapevine. It would therefore seem that those of us who are contributing to the debate are left with examining whether such an experiment was, in the first place, desirable, in view of other experiments that might be set up to follow in its place. The noble Lord, Lord Harmar-Nicholls, spoke with great force about the unfairness of the law as it affects part of the leisure industry with which he is concerned. What the noble Lord said bore great conviction. The noble Lord also spoke of the great contribution that bingo halls make to the public enjoyment generally.
I was glad that the noble Lord, Lord Bancroft, made clear that the bingo hall is a place that older women feel they are able to enter alone. There are still in this extremely male dominated society in which we live many places that the older woman certainly would feel uncomfortable entering alone. There can be no doubt that she needs as much, if not more than most (because she is confined a great deal to the home), some place for social entertaining. These are strong arguments in favour of all the support that can possibly be given to the traditional bingo hall as we have known it.
As the noble Lord, Lord Bancroft, said—and it is my view, too—there seems little doubt about there being something very disturbing about a big undertaking such as British Telecom producing this so-called service, as they described it, immediately after privatisation—a service that could be described by many as somewhat distasteful. It can also be said that there was certainly no mention of the possibility of introducing such an experiment when the Telecommunications Bill was going through this House. Speaking for myself, I viewed the experiment in two lights—first, as to where it stood in the law, about which we still do not know, although perhaps the Minister will tell us, and, secondly, whether it was a practice of benefit to people generally and one about which we all felt good.
I understand that the concerns of the Bingo Association of Great Britain were mainly commercial. The association feared particularly that telephone bingo could lead to television bingo, so keeping people indoors and away from the bingo halls and the social setting that they offer. However, with a new link-up jackpot of £50,000 starting next week, the Bingo Association would seem to have acquired a fairly convincing safeguard against this happening. It is something that they have produced themselves. Furthermore, I understand that Screensport, a cable television company who have been operating a TV bingo game nationally for 80,000 subscribers, with a weekly £1,000 prize, are about to drop it after four months' trial although it was legally cleared. This seems to me, therefore, to be another experiment that has failed. Again, this draws attention to the fact that such experiments are not perhaps desirable at all.
However, the Bingo Association still voices fears about the likely method of a typical TV bingo operation and the product sponsorship that would naturally occur. It is a chilling thought that the selling of game cards at supermarkets and the presentation of nightly numbers between commercial breaks would

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inevitably involve advertising bias. It would, of course, be a powerfully effective method of retaining an audience throughout the evening to hear successive numbers being read out. So, although, as the noble Lord, Lord Bancroft, says, we are talking about a corpse, one can nevertheless put one's views. Those are the practical and commercial aspects of the experiment put on by telecommunications.
I believe, however, that one should perhaps consider one further matter—namely, whether this practice did seem morally justifiable. Although the noble Lord, Lord Allen, did not use the word "morally", this did, I believe, run very much through his excellent speech. It is important to consider whether this practice would have been compatible or incompatible with other forms of gambling. One can only draw on one's own attitude. For my part, I must admit that I view telephone bingo with a great deal of distaste. Although I should not allow my general aversion to structured gambling to pervade my argument—or at least I should try not to—my reason for opposing it is that one of the few justifications for gambling is that it is part of a social gathering. On the racecourse, it brings racegoers together. Even the casino, amusement arcades and, mainly, the traditional bingo hall achieve the same purpose. The thought of such a practice as telephone bingo conjures up a picture of such heartbreaking loneliness of the solitary person with his telephone that it seems to me highly distasteful. Although recognising that my children will immediately say that I am sounding self-righteous and glib, I would say that I find it morally repugnant.
I should like to conclude by asking two questions of the Minister. I am sure that he will answer both of them. The noble Lord, Lord Allen, has mentioned his own Question of 12th November when he asked the Minister whether this practice was not contrary to the spirit of the 1968 Gaming Act. I hope very much that the Minister will answer that Question this evening. I hope, secondly, that he will assure the House that, considering the ease with which British Telecom started up telephone bingo, an equivalent game could not be broadcast on network television until a thoroughgoing inquiry had been carried out into the likely effects on the public and on individuals and families generally.
I should like to reiterate what the noble Lord, Lord Harmar-Nicholls, said. This Unstarred Question, put down by the noble Lord, Lord Allen, really does present a very clear principle and a clear fear about how such a scheme as this, although it is now finished, could lead to others. I think that there is very great agreement between the speakers on the three Benches who have spoken this evening that they would find a continuation of such a practice very undesirable indeed.
8.41 p.m.
Viscount Davidson: My Lords, the House will be grateful to the noble Lord, Lord Allen of Abbeydale, for asking this Unstarred Question on telephone bingo. I am particularly grateful to have been given the opportunity to set out the Government's views on this telephone game which—as the noble Lord, Lord Bancroft, has told us—has been given the rather catchy name of "Ringo".
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I am particularly conscious of the vast experience of the noble Lord, Lord Allen of Abbeydale, which is so well detailed by my noble friend Lord Harmar-Nicholls. I am also conscious of my equal lack of experience at the other end of the scale. I can therefore assure noble Lords that I take this Unstarred Question extremely seriously. I only hope that I can allay some of the fears and concerns which have been expressed and reassure those who have spoken as to the Government's views and intentions. I shall also do my best to try to answer the various points which have been raised.
As the noble Lord, Lord Allen, has said, it appears that British Telecom, after running the game on an experimental basis over three months, have decided not to continue with it. That deals with the immediate point of his Question. But as he and other noble Lords have said, there are a number of wider issues upon which I should like to take this opportunity of expressing the Government's views.
First let me deal with the concern which has been expressed about the proliferation of gambling in the form of "Ringo" and the other sorts of sales promotion with which we are familiar, such as newspaper bingo. The Government's view is that the present law on activities like this—which are a sort of lottery—is substantially right in distinguishing between cases where a person has to pay to take part and cases where he does not. If a person has to pay to enter a lottery then it is subject to the controls in the gambling legislation. The underlying reasoning is that if a person has to pay there is a risk that he will get himself into financial trouble, there is scope for cheating the public out of their money and it can serve as a magnet for attracting criminals into the activity.
If a person does not have to pay then the controls on lotteries do not apply. It is not part of our aim to prevent the sort of sales promotion with which we are all familiar, in which people are given a free chance in a draw. "Ringo" and newspaper bingo go further because, although it is not essential to make a telephone call or to buy a newspaper to take part, the intention is to encourage people to do that. These sorts of activity press the distinction in the law to its limits, and in our view "Ringo" is on the borderline of what is acceptable under the present law and what is not. However, it would be for the courts to decide if it were over the line, not for the Home Office.
I think that I have said enough to indicate the difficulties which would arise if the Government were to try to reformulate the law to bring sales promotions like newspaper bingo within the controls on gambling. There would be problems of choice and definition. We are not convinced that the end result would be better than the present law and we have no plans to make any change in this area.
Noble Lords who have spoken have rightly drawn attention to the controls which apply to bingo. The Government recognise the social value of bingo and that recognition lay behind the Government's support for the Bill last session which relaxed the law to allow a national bingo game offering prizes of up to £50,000. The industry has set a lot of store by the new game and it is hoped that it will be in operation by the summer. We know the industry would like to see the controls on advertising relaxed, but it has been the policy of

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successive governments to maintain these controls to avoid the stimulation of gambling. The advertising of newspaper bingo and other sales promotions, does not pose quite the same problems because it is possible to play without having to pay. I understand the resentment felt by the bingo industry but I cannot at this stage offer any hope of a relaxation on advertising.
The noble Lord, Lord Bancroft, hoped that I could be sympathetic on this point. All I can say is that if the bingo industry comes forward with coherent proposals on advertising, then of course the board and the Home Office will consider them. But it needs to be said that, as the noble Lord, Lord Allen, said, licensed bingo is gambling and, as I would repeat, we must avoid the stimulation of gambling.
I am aware that bingo attendances have been falling since at least the early 'seventies and are continuing to fall. My noble friend Lord Harmar-Nicholls has given us statistics to prove it. But we are not aware that there is evidence that this decline can be directly attributed to the introduction of newspaper bingo and other similar games. I appreciate that my noble friend Lord Harmar-Nicholls may have reached a different conclusion on this point. In that case I would suggest that this could be an area for further research and I would certainly be willing to consider representations from the industry as to what extent, if any, the attendance at bingo clubs has been affected by these promotions. As I have already said, the new law on multiple bingo shows that the Government are not unsympathetic to the bingo industry.
My Lords, I have been asked about the Government's attitude to industries like British Telecom which have been privatised. It has been suggested that "Ringo" demonstrates the need for the Government to retain some controls over them. It has always been this Government's policy to give the nationalised industries the maximum possible freedom to reach their own decisions on commercial and operational matters. If that was appropriate then, it is all the more so now that British Telecom is in the private sector. The operations of British Telecom, like those of any large organisation, are rightly of interest to a wide range of people, but the Government mean what they said in the prospectus for the offer for sale of British Telecom. We said that we did not intend to use our shareholding to intervene in the commercial decisions of the company. As a private sector company British Telecom must be free to exercise their own commercial judgment, subject always of course to their acting within the law. They have exercised their commercial judgment in deciding not to continue with "Ringo".
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Finally, the noble Lord, Lord Allen, inquired about the Gaming Board's attitude to "Ringo". It has not been customary to disclose the board's advice. Suffice it to say that the board and the Government are at one in finding "Ringo" to be on the borderline of what is permissible under the present law. We and the Gaming Board therefore welcome the decision by British Telecom not to introduce it.
The noble Baroness, Lady Ewart-Biggs, asked me a question about bingo on television. I understand that this would be a matter for the IBA. That is all I can say at this moment.
I am aware that my reply tonight may not wholly satisfy noble Lords. However, I hope that at any rate tonight's discussion will have taken this matter one stage further towards a solution. I should again like to thank the noble Lord, Lord Allen of Abbeydale, for initiating this Unstarred Question.
Lord Allen of Abbeydale: My Lords, before the noble Viscount sits down, may I ask about his reference to the IBA. As I explained, there is a game of participative bingo being hawked around. Is the noble Viscount saying that this is to be left entirely to the IBA, without any hint of what the Government might think?
Viscount Davidson: My Lords, I cannot give the noble Lord an answer at this moment; but I shall write to him on the subject and perhaps we may have a correspondence about it.
Baroness Ewart-Biggs: Would the noble Viscount forward a copy of that letter to me, too?
Viscount Davidson: My Lords, most certainly.

Poole Borough Council Bill [H.L.]
The Commons amendments considered and agreed to.

Agricultural Holdings Bill [H.L.]
Reported from the Joint Committee without amendment, and recommitted to a Committee of the Whole House.
House adjourned at eleven minutes before nine o'clock.