Lords Sitting of 14 May 1987

Preamble
The House met at three of the clock, (Prayers having been read earlier at the Judicial Sitting by the Lord Bishop of Glouceste):The LORD CHANCELLOR on the Woolsack.

Enfield Small Arms Factory: Future
Lord Graham of Edmonton: 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 make a statement on the future of the Enfield Small Arms factory in the light of current negotiations concerning the ownership of the Royal Ordnance Factories.
The Minister of State for Defence Procurement (Lord Trefgarne): My Lords, the sale of Royal Ordnance to British Aerospace plc was completed on 22nd April. Strictly speaking therefore the future of Enfield is a matter for British Aerospace. However, the company have assured us that it is their intention to develop the business as a whole and run it successfully.
Lord Graham of Edmonton: My Lords, will the Minister tell the House how the Government propose to influence the commercial judgments and decisions of the new owners? Is it not a fact that the workers of the Enfield Small Arms factory have been cast off, abandoned, and sacrificed for party purposes? Is the Minister aware that there are thousands of workers at the Enfield Small Arms factory who helped to save this country in the Falklands war, and in many others, and that they have been abandoned and betrayed by this Government? How does the noble Lord intend to secure the future welfare and well-being of such workers.
Lord Trefgarne: My Lords, if I may say so, I am afraid that the noble Lord is labouring under a very considerable misapprehension. There is certainly no question of the Government seeking to influence the commercial judgment of British Aerospace in its dealings with its new subsidiary, Royal Ordnance, or for that matter in any other way. The future of the factory at Enfield will be secured by it becoming as efficient as possible. As the noble Lord may be aware, we made it clear before we disposed of Royal Ordnance to British Aerospace that for example, the order for the second tranche of the SA.80 weapon was available to the new owners of Enfield if they thought fit, and we are now waiting to hear British Aerospace's decision.
Lord Winstanley: My Lords, can the noble Lord tell the House whether all disputes about pensions and other employment rights regarding former employees of Royal Ordnance factories—and there were some, about which the noble Lord told us—are now settled?
Lord Trefgarne: My Lords, I am not aware of any outstanding details that have not been settled. Of course the sale of Royal Ordnance was a sale of shares, so the whole of the enterprise, including all its existing schemes and liabilities, has passed to the new owners.
Lord Graham of Edmonton: My Lords, will the Minister confirm that, if in the commercial judgment of the new owners it is in the best interests of their shareholders to transfer work, to close down a factory completely, or to put it to other use, that is perfectly within their gift? In that circumstance, has the noble Lord no shame that workers who have served the national interest so well are to be abandoned in that way?
Lord Trefgarne: My Lords, the noble Lord puts an entirely hypothetical question to me. As he is aware, and as I have already said, British Aerospace has made it quite clear that it intends to operate Royal Ordnance as a single entity. There is no question of it chopping up Royal Ordnance bit by bit.
A noble Lord: Wait and see.
Lord Lloyd of Kilgerran: My Lords, I wonder whether the Minister can help me on one matter having regard to his general statement about the rights and liabilities of the firm in reply to my noble friend Lord Winstanley. Can the noble Lord assure the House, having regard to the attitude of the Government towards innovation, that the rights of employees in relation to intellectual property rights have been looked after and preserved?
Lord Trefgarne: My Lords, the resolution of the question of the ownership of the intellectual property rights was one of the more complex matters that had to be agreed with the new owners during the course of the discussions that we had with them. I am happy to say that agreement was reached.
Lord Leatherland: My Lords, as one who had the misfortune to be a machine gunner in the front line on the Somme in the First World War, I should like to pay very great tribute to the Enfield Small Arms factory and its products.
Lord Trefgarne: My Lords, the noble Lord is quite right to point out that the Royal Ordnance factory at Enfield has been manufacturing small arms for a long period of time, and with great success.

Local Authority Borrowing: Repayment
3.5 p.m.
Lord Boyd-Carpenter: 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 have any responsibility for the interest on, or repayment of, loans obtained by local authorities.
Baroness Hooper: No, my Lords. A local authority's debt, both principal and interest and its

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creditworthiness have always been that authority's own responsibility. As my right honourable friend made clear in another place, the Government do not stand behind local authority debt. The great majority of local authorities understand the importance of maintaining their creditworthiness and behave in accordance with the rules of financial good practice.
Lord Boyd-Carpenter: My Lords, I thank my noble friend for that clear and comprehensive reply. Am I right in assuming that it means that those foreign banks who provide loans for British local authorities, for whatever reason, do so on their own assessment of the creditworthiness of the borrower?
Baroness Hooper: My Lords, absolutely so. They took upon themselves the business of lending to these local authorities on normal commercial terms.
Lord Renton: My Lords, can my noble friend give some indication of the extent to which local authorities mortgage their properties as security for these loans and whether any of these properties are at all at risk of passing into the hands of the lenders?
Baroness Hooper: My Lords, I regret that I cannot provide my noble friend with details on the number of such arrangements. In terms of protection for creditors and for anybody else who lends on this basis, of course the normal preference rules apply.
Lord Harvey of Prestbury: My Lords, is my noble friend aware that what she has said could be disastrous for British trade in countries like Switzerland? What can be done about the situation?
Baroness Hooper: My Lords, what can be done, we hope, is to persuade local authorities not to behave in this extravagant and outrageous manner.
Baroness David: My Lords, is the Minister aware that the problems of deferred purchase (which of course is what is being referred to) are not confined to Labour authorities? I have here a list of 84 authorities which went into deferred purchase arrangements between 1974 and 1984, and a great many of them are Conservative councils.
Is the noble Baroness aware of the Harrogate case, where the authority, which was a Tory one, used deferred purchase for the building of a conference centre to the tune of £20 million in 1977, and the Secretary of State bailed out the authority, if I may use that expression, in 1982 by turning the deferred purchase into ordinary loans to the tune of £16 million to be repaid over a conventional period? That is exactly the proposal that the Labour Party has in its plans for the reform of local government.
Baroness Hooper: My Lords, the Government have taken action to deal with a number of devices used by local authorities, including deferred purchase arrangements. The measures we have taken will apply equally to all authorities. Of course I am aware of the case of Harrogate Borough Council. It entered into a deferred purchase arrangement in 1977 to finance the construc-
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tion of a conference centre. This was just the sort of one-off project for which it is reasonable to use deferred purchase, but costs escalated for unforeseen reasons.
The arrangement was terminated in 1982, with the assistance of an approval for additional conventional borrowing by my right honourable friend the then Secretary of State. At a time of substantial capital underspending by local authorities nationally, the approval was given in recognition that the borough council was facing unforeseen financial difficulties as a result of its commitment to the conference centre project. These were, we feel, rather special circumstances.
Baroness Gardner of Parkes: My Lords, can my noble friend tell us where the ratepayers stand in this? Is there any possibility of these debts falling back on them or are they protected under the rate-capping legislation?
Baroness Hooper: My Lords, my understanding of what happens in these situations is that, first, the local authorities must apply to the Public Works Loan Board, and if the board finds that it cannot meet the liability the auditor can institute proceedings surcharging and disqualifying councillors, and the responsibility is that of the councillors themselves.
Lord Molloy: My Lords, can the noble Baroness say whether the Government might consider reconstituting and updating the Public Works Loan Board, which was very effective and might be able to help all local authorities with some of the difficulties which they face?
Baroness Hooper: My Lords, in present circumstances the Public Works Loan Board could not lend to an authority which chose to act illegally or which appeared unable to service and repay debt, even under its lender of last resort facility. We have no present plans to alter this arrangement and I trust that the authorities which are so vigorously mortgaging the future will recognise this fact.
Lord Harmar-Nicholls: My Lords, does not the Minister agree that the Government must find words even more categorical than those which she used today in answering the Question on the Order Paper to make certain that the British Government will not pick up this tab? So long as there is any doubt about the matter, the chances of lenders being misled into lending is a problem for the future.
Baroness Hooper: My Lords, we are well aware that a number of authorities have used creative accounting devices simply to flout the Government's expenditure controls. They have knowingly mortgaged their future at the expense of their ratepayers and have entered into these schemes with their eyes open. We have made it abundantly clear to both them and to the City that we shall not bail them out.
Lord Williams of Elvel: My Lords, will the noble Baroness confirm that if—
Noble Lords: Order!
Lord Diamond: My Lords, I am most grateful to the noble Lord for giving way. When the Government set a precedent by giving assistance to Harrogate, were they careful to make quite clear the fact that that was not creating a precedent?
Baroness Hooper: My Lords, I believe that that has always been the aim of the Government in these circumstances.
Lord Williams of Elvel: My Lords, perhaps I may now ask my question. Will the noble Baroness kindly confirm that, provided local authorities behave legally, the Public Works Loan Board is a lender of last resort? Will she also confirm that the Treasury has a number of outstanding exchange rate guarantees on local authority foreign borrowings and that they will also be met?
Baroness Hooper: My Lords, the Public Works Loan Board will not perform its function only if local authorities are acting illegally. Any arrangements and guarantees into which the Government have entered will be honoured.
Lord Dean of Beswick: My Lords, is the Minister aware that despite the positive arrangement made by the Government to deal with the Harrogate situation, both Her Majesty's Leader of the Opposition—the Leader of the Labour Party, Mr. Neil Kinnock—and the Shadow Secretary of State for the Environment, Mr. John Cunningham, have for some time made clear in quite definitive statements that under no circumstances will a future Labour Government bail out any local authorities, whatever their political colour, which indulge in creative accountancy?
Baroness Hooper: My Lords, I am glad to hear that and I hope that the local authorities will hear it too.

British Airways Fare Proposal
3.14 p.m.
Baroness Burton of Coventry: 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 the British Airways plan for transatlantic passengers, offering a round trip to any of British Airways 45 European destinations free to anyone who bought a British Airways ticket to Heathrow, was formally approved by the Civil Aviation Authority and, if so, what action they have taken to support such approval.
The Parliamentary Under-Secretary of State, Department of Transport (Lord Brabazon of Tara): My Lords, the Civil Aviation Authority formally approved British Airways' fare proposal but the United States Department of Transportation disapproved it. The UK-USA Air Services Agreement requires all tariffs for public transport between the two countries involving the airlines of the two parties to be approved by both sides. Tariff initiatives sometimes
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fail to get approval when one or both governments consider that they do not satisfy the criteria set out in that agreement. United Kingdom and United States government officials tried without success to find a solution to the matter.
Baroness Burton of Coventry: My Lords, I thank the Minister for that comprehensive reply, but is it not correct that Mr. Spicer has stressed the importance of the European market being treated as a single entity? Is it not true that the British Airways' plan, as supported by the CAA, would have been an important step in that direction? Can the Minister say whether the Government or the CAA are contemplating any further action in respect of the matter?
Lord Brabazon of Tara: My Lords, I entirely agree with the remarks of my honourable friend Mr. Spicer as regards the European market. I wholly endorse the view that many European countries remain too protectionist. This matter was between the United States Department of Transportation and our Civil Aviation Authority. I am afraid that the United States Department of Transportation failed to approve the fares.
Lord Underhill: My Lords, if British Airways considers that such an offer is commercially good for it because in effect it reduces fares, does the Minister agree that that is an excellent example for BA to set for reducing fares in Europe?
Lord Brabazon of Tara: My Lords, the offer of British Airways—which was followed by a similar offer from British Caledonian—was for a limited period only. I believe that it was originally planned to last for six weeks; a fairly short period of time in the tourist calendar. It would have been good for their business, and British Airways are looking forward to the time when we reach agreement on European air fares. I am sure that they will be ready to compete when that time comes.
Lord Morris: My Lords, will the Minister say how the United States civil aviation authorities managed to reconcile licensing the United States airlines for cross-state agreements with airlines coming into a United States port of entry, but disagree with British Airways doing precisely the same thing in respect of European airlines?
Lord Brabazon of Tara: My Lords, we vetoed a proposal by the United States airlines as regards transatlantic flights including free internal flights in the United States because the internal market in the United States is entirely closed to our airlines, whereas United States airlines operate in Europe.
Baroness Burton of Coventry: My Lords, can the Minister help a little further? Is he aware that my information is that five European governments, in addition to America, were also attacking the British Airways plan because they were afraid that it would damage their pooling arrangements, which we all should like to see abolished? Will the Minister further agree that so long as European governments support their own national airlines in this matter, we shall

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make no progress on liberalising air fares for the general public?
Lord Brabazon of Tara: My Lords, I certainly agree with the second half of the noble Baroness's question. I hope that over the course of many questions we have made clear that we believe the European market should be opened up. One of the purposes of working towards such a market is to strengthen the European airline industry as a whole in its relations with airlines from outside Europe. Regarding the point about five European governments having disapproved of this proposal, I am afraid that, the Americans having turned it down, that stage was never reached. It would have had to be endorsed by the Europeans, but it never reached that stage.
Baroness Burton of Coventry: My Lords, as regards that last point, I should like to ask the Minister this: because I have information to the contrary that those five governments have done so, if I give him the names outside this Chamber, will he have the matter inquired into and write to me?
Lord Brabazon of Tara: My Lords, I shall certainly do my best to do so. I did not mean to imply that they had not sought to influence the United States Government: that may well have been the case. However, they never reached the stage of having to give formal approval.

HEA: Education Service Representation
3.19 p.m.
Baroness Masham of Ilton: 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 either primary or secondary teachers will be represented in the new Health Education Authority.
Lord Hesketh: My Lords, the regulations setting up the Health Education Authority recognise the essential role of the education service in health education by stipulating that one of the members of the authority must be directly nominated by the Secretary of State for Education and Science. My right honourable friend nominated Mrs. Kate Wood, a former chairman of the Wirral Education Committee with experience as a member of the Schools Curriculum Development Committee.
Baroness Masham of Ilton: My Lords, I thank the Minister for that rather disappointing reply. Is he aware that practising teachers feel left out and saddened by the fact that they are not represented on this new authority?
Lord Hesketh: My Lords, I shall draw the noble Baroness's remarks to the attention of the Minister.
Lord Cledwyn of Penrhos: My Lords, while warmly supporting the noble Baroness's plea, perhaps I may
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turn to another point: namely, the fact that this authority applies to Wales as well as to England. Why have the Government neglected to put a Welsh representative on this authority? I note that Tesco Stores are represented, together with Bowater and no doubt a number of other reputable companies in England. Why is the Welsh nation always neglected by this Government? It has a worse reputation than any authority since Edward I.
Lord Hesketh: My Lords, I shall have to write to the noble Lord.
Lord Kilmarnock: My Lords, can the noble Lord say how the activities of the new Health Education Authority will be affected by the sex education provisions of the recent Education Act, particularly in relation to AIDS? Will the new authority have any funds for this principle and will its writ extend to schools?
Lord Hesketh: My Lords, as regards the authorities responsible for sex education in schools, under the Education Act 1986 from 1st September responsibility for the form and content of sex education in schools will progressively pass to the governing bodies of schools. Under the new arrangements the HEA will be able to offer advice and prepare materials for use in schools, but it will be for individual governing bodies to decide whether and how they are employed. We expect the HEA to maintain close liaison with the Department of Education and Science on these matters.
Baroness Lane-Fox: My Lords, is the Minister aware that those of us who are all too familiar with respiratory and orthopaedic wards know so well that good posture is the defence against very costly ill-health? It would seem that in recent years the teaching of this to children has not been notably successful. As it is one of the most important subjects, and of inestimable value to everyone concerned, one would hope that this would be reflected in the new authority.
Lord Hesketh: My Lords, I believe it is felt that it would be inappropriate for the Health Education Authority itself to include advice about posture. However, I am sure that a very large number of people are involved who are very keen on posture and on physical education. I would remind the noble Baroness that, among others, Mr. Sebastian Coe, is a member of the committee.
Viscount Tonypandy: My Lords, will the noble Lord, in answering the noble Lord, Lord Cledwyn, bear in mind that the Welsh Office has responsibility for health and education in Wales and that it is ordinary common courtesy for consideration to be given to the matters raised by the noble Lord? Secondly, will he bear in mind that it is to the Government's own advantage to have the experience and knowledge of practising teachers on this important body?
Lord Hesketh: My Lords, I very much take the point that the noble Viscount has made to me, and hopefully I shall be able to provide an answer when I write to his noble friend.
Lord Lloyd of Kilgerran: My Lords, with regard to what the noble Lord, Lord Cledwyn, has said about the important matter of Welsh representation on this committee, will he be good enough also to send me a copy of the letter that he has promised to send to the noble Lord, Lord Cledwyn?
Lord Hesketh: My Lords, I shall do so. I shall place a copy of the letter in the Library.
Lord Cledwyn of Penrhos: My Lords, I am grateful for the support which I have received from the noble Viscount and also from the noble Lord on the Liberal Benches. However, will the noble Lord do more than write me a letter on the matter? Will he give the House an assurance that he will discuss this carefully with his right honourable friend as a matter of deep importance, because the Welsh people will be very offended if a constructive reply is not received?
The Lord President of the Council (Viscount Whitelaw): My Lords, it might be appropriate if I replied to the noble Lord the Leader of the Opposition at this moment in this particular Parliament. I think that this is an appropriate time for me to do so. I fully understand the representations he has made on behalf of the Welsh nation and I also understand the representations made by the noble Viscount, Lord Tonypandy, and others about the representation on this Health Education Council. I shall certainly speak personally to the Ministers concerned, as the noble Lord has requested.
Lord Cledwyn of Penrhos: My Lords, I am extremely grateful to the noble Viscount.
Lord Wallace of Coslany: My Lords, is the noble Lord aware that I strongly support the plea made by the noble Baroness, Lady Masham, that teachers' representatives should be on this Health Education Authority? Health education is vitally important when it starts in the primary and secondary schools. We have to get away from the surfeit of sausages, chips and beans which seems to be the staple fare for many young people today.
Lord Hesketh: My Lords, I am very interested in the noble Lord's comments.
Lord Stallard: My Lords, will the noble Lord confirm that those members of the current HEC who are known to be critical of the Government's policy, particularly with reference to the health divide, have not been renominated or re-appointed to the new Health Education Authority? What conditions will be imposed on the new authority regarding future publications?
Lord Hesketh: My Lords, I think that that is a little wide of the Question on the Order Paper.

Business
3.26 p.m.
Lord Denham: My Lords, at a convenient moment after 3.30 this afternoon my noble friend Lord Lucas
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of Chilworth will, with the leave of the House, repeat a Statement which is being made in another place on the Airbus A.330/340: Launch Aid.

Associated British Ports Bill
Read a second time, and committed to a Select Committee.
Masonic Trust for Girls and Boys Bill
Read a second time, and committed to an Unopposed Bill Committee.
Brighton Marine Palace and Pier (Finance, &c.) Bill
Read a third time, and passed.

Private Business
The Chairman of Committees (Lord Aberdare): My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved,

(1) That the promoters of every Private Bill which shall have been introduced into or presented to this House in the present Session of Parliament, shall have leave to introduce or present the same in the next Session of Parliament provided that notice of their intention to do so be lodged in the Private Bill Office not later than Noon on the last sitting day of the present Session; and provided that all fees due by them thereon, up to that period, be paid;

(2) That a list of all such Bills, with a statement of the stages at which they shall have arrived, shall be prepared in the Private Bill Office, and printed;

(3) That every such Bill shall be deposited in the Private Bill Office not later than Three o'clock on or before the third day on which the House shall sit after the next meeting of Parliament for business other than judicial business, with a declaration annexed thereto, signed by the agent, stating that the Bill is the same in every respect as the Bill at the last stage of the proceedings thereon in this House in the present Session;

(4) That the proceedings on any such Bill shall, in the next Session of Parliament, be pro forma only in regard to every stage through which the same shall have passed in the present Session, and that no new fees be charged in regard to such stages;

(5) That the Standing Orders by which the proceedings on Bills are regulated shall not apply to any Private Bill which shall have originated in this House in the present Session, in regard to any of the stages through which the same shall have passed;

(6) That no petitioners shall be heard in the next Session before the Committee on any Bill

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introduced in the present Session unless their petition shall have been presented within the time limited in the present Session;

(7) That an Instruction to a Committee on any Bill in the present Session be an Instruction to the Committee on that Bill in the next Session.—(The Chairman of Committees.)

On Question, Motion agreed to, and it was ordered that a message be sent to the Commons to acquaint them therewith.

Norfolk and Suffolk Broads Bill
Baroness Hooper: My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That if a Norfolk and Suffolk Broads Bill is brought from the House of Commons in the next Session of Parliament—

(a) any notices published and served, and any deposits made, in respect of the Norfolk and Suffolk Broads Bill in this Session shall be held to have been published, served and made for the Bill in the next Session;

(b) the Standing Orders of the House applicable to the Bill so brought, so far as complied with or dispensed with in this Session, shall be held to have been complied with or (as the case may be) dispensed with in the next Session.—(Baroness Hooper.)

On Question, Motion agreed to, and it was ordered that a message be sent to the Commons to acquaint them therewith.

Dartford-Thurrock Crossing Bill
Lord Brabazon of Tara: My Lords, I beg to move the first Motion standing in my name on the Order Paper.
Moved, That if a Dartford-Thurrock Crossing Bill shall be brought from the House of Commons in the next Session of Parliament—

(a) any notices published and served and any deposits made in respect of a Dartford-Thurrock Crossing Bill in this Session shall be held to have been published, served and made for the Bill in the next Session; and

(b) the Standing Orders of the House applicable to the Bill, so far as complied with or dispensed with in this Session, shall be deemed to have been complied with or (as the case may be) dispensed with in the next Session.—(Lord Brabazon of Tara.)

On Question, Motion agreed to, and it was ordered that a message be sent to the Commons to acquaint them therewith.

Channel Tunnel Bill
Lord Brabazon of Tara: My Lords, I beg to move the second Motion standing in my name on the Order Paper.
Moved, That if a Bill in the same terms as those in which the Channel Tunnel Bill stood when it was
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brought to this House from the House of Commons in this Session of Parliament is brought to this House from that House in the next Session—

(a) the Bill shall be deemed to have been read the first and second time and to have been reported from the Select Committee; and

(b) the Standing Orders of the House applicable to the Bill, so far as complied with or dispensed with in this Session or in the Session 1985–86, shall be deemed to have been complied with or (as the case may be) dispensed with.—(Lord Brabazon of Tara.)

On Question, Motion agreed to, and it was ordered that a message be sent to the Commons to acquaint them therewith.

Consolidated Fund (Appropriation) Bill
Brought from the Commons, endorsed with the Certificate of the Speaker that the Bill is a Money Bill, and read a first time.
Then, Standing Order No. 44 having been dispensed with (pursuant to Resolution of 12th May), Bill read a second time; Committee negatived; Bill read a third time, and passed.

Finance Bill
3.30 p.m.
Brought from the Commons, endorsed with the Certificate of the Speaker that the Bill is a Money Bill, and read a first time.
Then, Standing Order No.44 having been dispensed with (pursuant to Resolution of 12th May):
Lord Brabazon of Tara: My Lords, I beg to move that the Bill be now read a second time.
This Bill will implement most of the tax changes announced by my right honourable friend the Chancellor of the Exchequer in his Budget in March. That Budget was set against the background of a flourishing economy and was designed to enable that to continue. What we are experiencing today is not a sudden spurt of growth but the fruit of eight years' prudent management of the nation's finances—prudence which enabled us last year to reduce public sector borrowing as a proportion of national output to a level achieved on only two other occasions since 1950. This reduction in public sector borrowing was achieved at the same time as a significant reduction in taxation and followed the increase in public expenditure announced in the Autumn Statement—a unique hat-trick.
We are now entering our seventh year of steady growth, inflation is at levels we have not seen for almost 20 years and living standards have reached record heights. Unemployment is now firmly on a downward trend, as today's figures confirm, and the size of its fall over the last 12 months has not been matched since 1973. Industry is more profitable than at any time in the last two decades and the number of industrial disputes is around the lowest level for almost half a century; so it comes as no surprise to learn from the latest CBI Quarterly Survey that business optimism is rising rapidly.
But our performance has improved not only when measured against our past record but also when

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measured against that of our international competitors. Since 1980, the UK has grown faster than all the other major EC countries. In 1986 we grew faster than the US and Japan too and the IMF is forecasting that this year we shall once again outpace all the other major industrialised countries. The story on productivity growth in manufacturing industry is similar. In fact on that count since 1980 we have grown faster than any other major industrial country, even the Japanese. The improvement in unemployment took a little longer to achieve but over the last year we have experienced the largest percentage fall of any major industrialised country apart from the United States, while we have created more jobs since the last election than the rest of the EC put together.
Our external position is secure too. Our net overseas assets had risen by the end of last year to around £110 billion, equivalent to 28 per cent. of GDP—the highest level since the war and second only to Japan. These assets now earn us over £4 billion a year in interest, profit and dividends and in 1987 our surplus in invisible exports is likely to be the largest in the world. Despite fears expressed in certain quarters of a looming balance of payments crisis, our visible exports are also performing well. Export volumes (excluding oil and erratics) rose by 11 per cent. over the last year—a faster rate of growth than that of any of the five major industrialised countries.
There is no reason to doubt that this encouraging performance will be sustained. We are forecasting that the economy will grow at 3 per cent. this year and that manufacturing output will grow faster still. This growth will be balanced, with exports, investment and consumer spending all forecast to rise at the same rate. Inflation at the end of this year should be around its current level and the strength of the economy means that there is every chance that unemployment will continue to fall. So that is the favourable economic background against which we can examine this year's Finance Bill.
Because of the shortened timetable, we have thought it right to drop certain measures from the original Bill to allow time for proper consideration. The Government have, however, still thought it right to retain those clauses which confirm measures already in effect or where a change at this stage would give rise to practical problems. Other measures have been included because of their significance. To assist your Lordships, I shall summarise the main provisions retained in the Bill. The clause numbers refer to the Bill as originally printed.
Clauses 1 to 5 enact the excise duty changes. Clauses 11 and 14 give effect to the VAT package which will be of particular help to small businesses. These measures were the subject of wide consultation and were warmly welcomed. Clauses 12, 13, 15, 17 and 18 form a package designed to block a significant VAT loophole.
Clause 20 and Clauses 23 to 29 give effect to the Government's income tax proposals. The increased personal allowances and reduced basic rate of 27p will be reflected in pay packets after 17th May. A married man on average earnings will be £3·87 a week better
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off as a result; a married man on half average earnings will be £1·59 a week better off. The special increase in relief for those aged 80 or over, and in relief for the blind, have also been included as a matter of priority.
Companies have told us how much they welcome the certainty of having the rate of corporation tax set in advance for the financial year. That is why we have included Clause 21. Clause 22 gives effect to the 27p rate of corporation tax for small companies. Clause 37 will put all companies on a nine months' payment basis for corporation tax.
Clause 33 gives eflect to certain useful changes to the rules on tax relief for employee share schemes as they affect employees. The Government attach importance to the encouragement of training, and Clauses 35 and 36 therefore provide the new reliefs for employees seconded to educational bodies and for training not specifically connected to an employee's present job.
Clauses 45 and 46 make useful improvements to the business expansion scheme. Clause 67 will increase the limit for retirement relief from CGT. Clauses 138 to 146 are concerned with stamp duty and stamp duty reserve tax. Though almost wholly technical, these measures have been included because of the impossibility of back-dating stamp duty changes.
Another important feature retained in this Bill is all the reductions proposed for inheritance tax, as well as other useful measures which will help the heritage. These are contained in Clauses 147 and 149 to 151.
The Finance Bill also contains a balanced package of measures affecting the oil industry in Clauses 54 to 56 and 153 to 159. These were carefully designed to give oil companies and the offshore supply industry an opportunity to adjust to the oil price fall and to help mitigate its effect on development and research. Certain of the measures are already in effect.
Finally, we have retained Clause 160, which abolishes the Exchange Control Act. A number of minor but useful measures have also been included which I have not mentioned. There seemed no good reason to lose time by omitting these.
Of the measures which we have thought right to postpone because of lack of time for parliamentary consideration, the most important are the clauses on pensions and profit-related pay. Other measures that we are leaving on one side for now are those affecting dual resident companies, double taxation relief on interest on bank loans and members of Lloyd's syndicates. We also think that the proposals for a new system of assessing and collecting corporation tax—pay and file—need to be properly explained and debated: they are also being left on one side.
However, I should say that it is the Government's intention, if re-elected, to reintroduce all those provisions which have had to be left out of the shortened Finance Bill as early as possible in the next Parliament. For those measures which would have taken effect from Royal Assent to the original Bill, the operative date will be Royal Assent to the new legislation. In other cases it is intended to retain the operative date proposed in the original Bill. I commend this Bill to your Lordships on the basis proposed. I beg to move.
Moved, That the Bill be now read a second time.—(Lord Brabazon of Tara.)

British Aerospace: Launch Aid
3.40 p.m.
The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Lucas of Chilworth): My Lords, it may be for the convenience of your Lordships if, with your Lordships' leave, I now repeat a Statement being made in another place on the subject of launch aid to British Aerospace. The Statement is as follows:
"With permission, Mr. Speaker, I should like to make a statement about the Government's policy on the question of launch aid for British Aerospace's participation in the Airbus A.330/A.340 projects.
"After discussion with British Aerospace, I am glad to tell the House that agreement has been reached that up to £450 million in launch aid will be provided to enable the company to participate in the Airbus A.330 and 340 projects.
"This launch aid will be fully repayable on terms designed to yield an acceptable return in real terms on the Government's investment.
"At this stage our support is conditional upon our partner governments also making the arrangements that are necessary to enable their manufacturers to participate in the projects.
"At a time when the competitive pressures in the world aerospace industry are as strong as ever, I should like to praise the determination of Airbus Industrie and its partners to extend their family of large airliners."
My Lords, that concludes the Statement.
Lord Underhill: My Lords, the House will be grateful to the Minister for repeating the Statement given in another place. I am particularly pleased to note the last few words of the Statement where the Minister praises,
"the determination of Airbus Industrie and its partners to extend their family of large airliners."
So far the programme of Airbus Industrie has been profitable. It has been successful for British Aerospace and successful for British employment. I understand that at its peak the present programme is likely to reach an employment level of 13,000, and if this additional programme goes ahead it will mean 25,000 jobs by the mid-1990s for British Aerospace.
I am a little mystified by the fourth paragraph, which reads:
"our support is conditional upon our partner governments also making the arrangements that are necessary",
because my understanding is that if the partner governments do not make any arrangements Airbus Industrie just will not be able to proceed with its future programme on the A.330 and the A.340.
I should like to ask an important question. Airbus Industrie has its general launch aid costs. British Aerospace asked for £750 million. The Government by this Statement are agreeing up to £450 million. I take it that there is utter and complete agreement with British Aerospace that it can meet its obligations to Airbus Industrie in the general overall launch aid costs, because it is understood that if by any chance Britain should withdraw there will be other
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manufacturers who will wish to come in and take our 20 per cent. Provided that British Aerospace is thoroughly satisfied that it can manage with this aid of up to £450 million and can meet the balance from its own funds, we welcome the Statement.
3.45 p.m.
Lord Diamond: My Lords, we too should like to thank the Minister for making this Statement at this particularly opportune time. It is a further example of how general elections concentrate a government's mind on the employment needs in particular constituencies, and we welcome it accordingly. I too want to be assured as to the position with regard to the manufacturers' requirements. They have said that £750 million is their minimum figure and £450 million is the figure which has been—I hope—agreed upon. We on these Benches have no objection whatever to government expenditure being kept at figures which are acceptable to the Government, if the same purpose can be achieved, and we wish to congratulate the Government rather than criticise them on this reduction in the figure, provided that it is satisfactory on second thoughts to the manufacturers.
We regret also that there has been, in our view, unnecessary delay in reaching this conclusion. That has caused uncertainty all round, and I must say that it must have been damaging to the reputation of this country as a country which can be relied upon as a good partner, an interested partner and an enterprising one.
There are two further points of lesser detail which I should like to put to the Minister. First, could arrangements be made in the future for more accountability with regard to the joint enterprise? It has proved rather difficult to find out what the results have been, and we can see no damage to those concerned in more open disclosure of these figures and in what one would generally call accountability.
As to the Statement itself, could the Minister be a little more explicit on the third paragraph, which says:
"This launch aid will be fully repayable on terms designed to yield an acceptable return"?
That is an extremely vague phrase. We would understand it if the Government felt that they had to rush through a Statement on this the last effective day before the general election in order to get matters clear. But we really think that this should be much more carefully considered, and I hope therefore that the Minister can give me a considered and satisfactory answer on the meaning of those words.
Lord Lucas of Chilworth: My Lords, I am most grateful to the noble Lords, Lord Underhill and Lord Diamond, for their reception of the Statement which I have just repeated. Perhaps I may comment on one or two of the points. Both noble Lords have drawn attention to the importance for the employment market of our joining in this venture. The noble Lord, Lord Underhill, mentioned figures which are a little larger than those I might have given, but certainly when this project goes ahead a number of jobs will be secured and as we move into the 1990s there is a good prospect of more jobs being created.
The noble Lord, Lord Underhill, spoke about our governmental partners' involvement. Perhaps I may

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say this in response to him and indeed in response to the noble Lord, Lord Diamond, who spoke of delay. In fact, we are the first of the partner governments to make a statement of our commitment to the project. So there has been no delay alongside our partner governments in this. I recall answering a Question of the noble Baroness, Lady Burton, in, I think, March or April of this year, and certainly nothing has been lost for Airbus Industrie in the time that these long and very complex negotiations have taken.
In October last year, British Aerospace asked for a sum of money very much in excess of the £450 million which I have announced this afternoon. The programme has indeed changed since October last year. The fortunes of the industry and of British Aerospace itself have changed, and this amount has been agreed between the Government and British Aerospace as being practicable. I should perhaps remind your Lordships that the whole project—that is, the launch aid and the development—will cost some £1,200 million. The company is quite confident of being able to provide from its own resources and resources available to it the balance of those moneys.
I noted carefully what the noble Lord, Lord Diamond, had to say about accountability. I have answered that question on more than one occasion. The noble Lord himself will know that Airbus Industrie is protected under French law from the necessity of publishing accounts. British Aerospace's involvement in the partnership—its 20 per cent. share—is reflected in its own accounts. That is the avenue of accountability.
Launch aid is designed to assist the company, not only in monetary terms but also in establishing the confidence that the Government have in the industry. That enhances the company's ability to raise funds in the City as may be necessary.
Baroness Burton of Coventry: My Lords, I welcome very much the £450 million launch aid, although it is considerably less than the £750 million asked for by British Aerospace. However, in spite of the most helpful letter that the Minister sent me in reply to my query on the delay, and while I am glad that our delay is less than that of other governments, I still feel that there has been a considerable delay in this matter. I am glad that the imminence of the general election has rather hastened a decision on it.
Does the Minister agree that failure to offer the launch aid would have meant the loss of our credibility as a European partner and all chance of participating in large-scale civil aircraft manufacture for the foreseeable future? I, in common with everyone else, I am sure, welcome what the Government have done and hope that it will spur the other governments in Europe to do the same.
Lord Lucas of Chilworth: My Lords, I recognise the interest of the noble Baroness, Lady Burton, in this matter. However, I am rather sorry that she should draw the inference she has with regard to the matter of delay and a general election. That is perhaps a little unworthy since the noble Baroness among many others has consistently urged us to come to an early conclusion on the matter. We have come to the earliest
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conclusion that we could—in fact, in advance of our partners.
The matter has been complex and there have been changes in the project. There has been no real delay that has caused damage, either to the credibility of Her Majesty's Government or indeed to British Aerospace or to Airbus Industrie. As we have not failed to make an offer of lauch aid, I do not feel the necessity (if the noble Baroness will forgive me for saying so) to answer the hypothetical question that she addressed at the end of her remarks.
Lord Bruce-Gardyne: My Lords, in the light of the remarks of the noble Lord, Lord Underhill, can my noble friend confirm that Airbus Industrie has acknowledged that to date it has never made a profit and that there is no conceivable expectation of a profit before the 1990s—if then?
Can my noble friend shed some light on what he means by an acceptable rate of return in real terms? If Her Majesty's Government really believe that the project will be a winner, what is the point of giving British Aerospace a little more than half of what it believes to be the essential initial investment? Is it the assumption that once we are committed to that extent British Aerospace will be able to come back, like Oliver Twist, for a top-up in due course?
Lord Lucas of Chilworth: My Lords, my noble friend Lord Bruce-Gardyne knows very well that according to the criteria that have been established for a number of years under more than one administration launch aid is repayable and is neither a grant nor a subsidy. The intention is that the principal sum advanced shall be repaid in full, together with an adequate return during the programme life of the A.330 and the A.340 by a levy on sales designed to yield a positive rate of return to the Government in real terms.
As the life of a new plane is about 20 years and it is estimated that the plane will come into service in 1991 we are talking about a very long time. When I said a positive rate of return, I meant exactly that—a positive rate of return. It would be imprudent in 1987 to suggest a figure for something that will not mature for 22 years or so.
As regards the profits of Airbus Industrie, I cannot agree that, with the success of the A.320 which will go into service next year, and for which some 442 orders have already been placed, that company will not be in profit and that British Aerospace's share in that profitability will not accrue. We believe that the programme is a good one; otherwise we should not have committed the taxpayer to the launch aid as we have done.
The Earl of Kinnoull: My Lords, I wish to support my noble friend not only by saying that the programme is an important one, but also by saying that it is a very good programme for not merely the British aerospace industry but all the many support companies. What does the project mean for the many sub-contractors who will obtain the benefits of being able to join in the scheme? It is very easy when one looks back at Concorde and all the other projects that have taken place to take a negative view. This project is long term.

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I wish to ask my noble friend a little more about the potential orders for the project. What do they mean and how do they compare with the considerable impact that the European industry has had on American orders? That is a very substantial impact and I should like my noble friend to recall what that means, because this is the movement of a European industry going forward in a civil industry. That takes tremendous courage and it is a watershed for any government to come in and support launch aid for a private company. I congratulate my noble friend.
Lord Lucas of Chilworth: My Lords, I am grateful to my noble friend Lord Kinnoull for his support of the Government's action. The Government are advised that British Aerospace expects to have a 25 per cent. work-share in the new A.330, A.340 programme, as compared with its 20 per cent. partnership in Airbus Industrie. The work-share on the current airbus programme is 25 per cent. in respect of the A.320 and in the 16 to 18 per cent. range in respect of the 300 and the 600. There will therefore be a major British involvement in and contribution to all those programmes. That will, in its turn, have an effect upon the component industry.
Such is the success of the A.320 that a number of US airlines have either placed orders or taken options. We, with British Aerospace, anticipate that the new programme, when it comes into service in 1990, will also enjoy its share of the medium-haul and short-haul markets and, with the A.330, the long-haul market.
Lord Diamond: My Lords, I wish to press the Minister again on one point. Of course we are all in favour of the project and we hope that it will be very successful, both in terms of the profits for those participating in it and because it illustrates what we on these Benches believe is a very good principle and one which should be carried out as often as possible in joint enterprise in European activity. This is a time when the Minister could make his reservations felt. I hope that he has more reservations than he has expressed in replying to my question about accountability.
I hope that he will think that now is a time when he can make representations that, although Airbus Industrie is protected and does not necessarily need to disclose its accounts, profits and returns fully, it could nevertheless willingly do so. There is nothing to compel it to hide under the cover which it has. It would be far better for all concerned if everyone knew what the total results were, both in terms of the present project and as a precedent for future activity.
4 p.m.
Lord Lucas of Chilworth: My Lords, I appreciate what perhaps lies behind the question of the noble Lord, Lord Diamond. I do not think that there is any question here of Airbus Industrie hiding under the cover of anything. The company is established under French law and that law, because of the arrangement of the company, does not require the full disclosure for which the noble Lord is looking.
I can assure the noble Lord that Her Majesty's Government and British Aerospace have access to the figures and all the circumstances in regard to Airbus
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Industrie's activities. I think that the noble Lord may have confidence in both British Aerospace to ensure that its 20 per cent. share is properly looked after and in Her Majesty's Government to ensure that our share is properly taken care of.
Lord Bruce-Gardyne: My Lords, perhaps I may ask my noble friend whether he, together with his right honourable friends the other Ministers in the Department of Trade and Industry, has taken up the suggestion I made to him on the last occasion on which we discussed this matter. I suggested that perhaps, as a gesture of their confidence in this great venture, they might commit some portion of their own personal net wealth to the success of British Aerospace in this respect.
Lord Lucas of Chilworth: My Lords, since I do not have knowledge and do not seek knowledge of the shareholding of my colleagues in my department in any company, anywhere, I do not think I can be of any further help to my noble friend Lord Bruce-Gardyne than I was on the last occasion when he raised the matter.
Baroness Seear: My Lords, would it not be highly improper for them to invest in this venture?
Lord Lucas of Chilworth: My Lords, the proprieties of the shareholdings of Ministers are well known. I believe that I said—I shall check it in Hansard—that I have no knowledge of my colleagues' shareholdings, nor would I seek to have any knowledge of their shareholding anywhere in the stock market.

Finance Bill
4.5 p.m.
Second Reading debate resumed.
Lord Bruce of Donington: My Lords, the House will be grateful to the noble Lord, Lord Brabazon of Tara, for having addressed himself to the Motion on the Order Paper. His contribution fell into two parts. First, he dealt with the fiscal aspects of the Finance Bill, and in the course of that he revealed the limited extent to which its taxation provisions would apply to those whose incomes are rather low. However, he was careful not to mention the massive benefits that are confirmed by the reduction in the rate of taxation to those in the higher income groups who on average benefit some 13 times as much as their less fortunate colleagues. I shall not endeavour to deal any further with the taxation provisions of the Bill and the various other more technical parts of it because most of them have been lost.
However, in the course of his remarks the Minister mentioned expenditure, and because it has long been the claim of the Conservative Party that it is the party of lower taxation, it may perhaps be in order for me to point out that since 1979—at which point government expenditure was some 38 per cent. of the national income—under this Government it has risen to 45 per cent. I do not want to make any further point on that matter, other than what is revealed by the stark statistics themselves. However, it perhaps enables us to place some value on the broader and more general

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statements which are made by Her Majesty's Ministers from time to time and which will doubtless be re-enforced in a more elaborate and colourful form during the electoral struggle with which your Lordships will not be involved but which will doubtless be fought with vigour up and down the country.
I do, however, have to ask the noble Lord about VAT. The Chancellor of the Exchequer and his right honourable friend the Prime Minister have in another place been singularly reticent about the future of VAT. Your Lordships will recall that, in speaking on 12th February, the Chancellor of the Exchequer said:
"I see the extension of the VAT base as an essential part of the budget strategy and a necessary counterpart to the reduction in income tax".
That suggests to me that the Government have it in mind, in very much the same way as the former Chancellor, Sir Geoffrey Howe, when justifying the reversal of the election promises not to double VAT after the election, so very aptly said in his first Budget, and indeed pleaded as justification, that the income tax reliefs had been necessary in order that people could pay the increased VAT. I found that most disarming.
The question that I wish to ask the noble Lord, speaking in the absence of his noble friend, is a simple one. Can the noble Lord give the House an undertaking (on the possible assumption that the present Government are in office after llth June) that VAT will not be increased during the time that elapses before the next normal Budget, which will be in March/April 1988? That would immediately dispense with any misunderstanding about the matter. We of course know that the European Commission has brought a case against Her Majesty's Government—Case No. 416 of 1985—in which it is claiming that a 15 per cent. VAT should be imposed on all new buildings and on newspapers, as well as advancing a whole series of other provisions concerning which Her Majesty's Government have been brought to the European Court.
As your Lordships know, I am not of a suspicious nature. However, I am bound to say that the Government declined to let me, as an interested party, have their pleadings in the case which is being brought against them by the European Commission; they seemed to me to be singularly reticent about that. There is no legal reason why they cannot provide the pleadings. As your Lordships will know, normally in civil cases before the courts the pleadings are made public, the press can discuss them and during the progress of the case the whole of the prosecution and defence cases are revealed and made public. However, for some reason the Government declined to let me have the pleadings. When I wrote to the registrar of the European Court on the subject, the reply was that it cited as its authority a ruling which was concerned purely with the archives, which I thought was somewhat disingenuous. I shall not press the matter until a more convenient stage.
However, I suspect that the Government will very much welcome the increase in VAT. They will not fight very hard to resist such an increase because on the basis of 200,000 houses per annum—which is the low
736
level to which housing has fallen during the past eight years—the increase would mean an extra £900 million revenue to the Exchequer. That figure excludes VAT on factories, warehouses and all the other marvellous wealth producing structures which the noble Lord has invited us to envisage as a result of the prosperity which he alleges is blessing the country at the present time. However, will the noble Lord deny that there is any idea of introducing a 4 per cent. tax on food? Noble Lords will recall that some time ago a Select Committee pointed out for your Lordships' information that this country was unique in having a zero rating on food. A 4 per cent. VAT on food was suggested as a means of standardising the situation. Are we to have any standardisation on the assumption that the party opposite is, through some oversight of the electorate, returned to government on 11th June? These questions should be answered.
In the course of the past six weeks we have observed a remarkable bouleversement in government policy. It reminded me very much of the statement made by the Prime Minister in 1985 attacking Members of her own government. I refer your Lordships to The Times of 9th July 1985. The Prime Minister attacked her colleagues who were seeking to have a mildly progressive policy and accused them of being spineless spenders. Who were the spineless spenders over the past six weeks, miraculously, in view of the forthcoming or anticipated election? Where have all the old concepts gone? Or is it merely a repetition of a matter that your Lordships will remember very well indeed? Immediately prior to the 1983 election, the right honourable gentleman the Member for Henley (who at that time was Minister of the Environment) said to the local authorities: "Spend, spend, spend." So of course they did. Unemployment at that time went down slightly. Will the noble Lord give the House some idea why this death-bed repentance has occurred?
The second part of the noble Lord's speech dealt with the Government's achievements. The noble Lord has proved himself a worthy deputy to the noble Lord, Lord Young of Graffham, in this respect. We regret the absence of the noble Lord, Lord Young, today. I understand that he may have more pressing duties as the public relations officer of his party during the forthcoming campaign. We understand the reason why—if it were not for pressure of work—he modestly refrains from appearing on the Benches today. It is because in spite of the adjustments, seasonal or otherwise, the figure of unemployment is unfortunately above the figure below which the other place will be missing the services of the right honourable gentleman the Member for Chingford. As noble Lords will remember, that honourable gentleman said that if unemployment was not below 3 million at the time of the election he would not be worthy of being elected a Member of Parliament. One can understand the noble Lord's reticence to appear today.
The noble Lord, Lord Brabazon, echoed what the noble Lord, Lord Young of Graffham, has said many times before, that suddenly we are on the threshold of a new heaven and a new earth. Production and productivity are increasing; the balance of payments is in swinging form; the exchange rate is magnificent;

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exports are rising; employment is increasing—though unfortunately not in manufacturing and industry—and everything is lovely. He cited a number of figures. Like the noble Lord, Lord Young of Graffham, he was selective in the figures he quoted and was careful to refer to "after 1980". The intellectual effort to go back to 1979 was evidently too much. The noble Lord referred to the past two or three years—he did not specify which. He referred to specific countries for specific years. I venture to suggest that, although what the noble Lord said was completely truthful, it was not the whole truth and nothing but the truth.
I remember the noble Lord, Lord Young of Graffham (and doubtless he will recall the incident, too) when he boasted to the House that the Government had brought down inflation from 20 per cent. to 5 per cent.—the figure that it was at the time. Such a statement was quite truthful, but not the whole truth. He did not say that inflation was 10·3 per cent. when the Conservatives took office, and that it was not until after they returned to power that the figure increased to over 21 per cent. Therefore, while it was quite truthful for him to say that they reduced the figure to 5 per cent., it was not the whole truth.
Lord Brabazon of Tara: My Lords, will the noble Lord give way? Does it not occur to the noble Lord that perhaps that may have something to do with the legacy that we were left in 1979?
Lord Bruce of Donington: My Lords, I am afraid that the noble Lord must do his homework a little better. I gave the complete reasons for the increase in the rate of inflation in one of the first speeches that I made in your Lordships' House. I gave the precise figures—for example, 4½ per cent. of the increase was due to the fact that the rate of VAT was increased from 8 per cent. to 15 per cent; and the other figures are listed. Even the noble Lord, Lord Cockfield, who, unhappily, departed to warmer and more lucrative climes, was unable to refute the figures that I gave on that occasion. I advise the noble Lord, Lord Brabazon, to refer to the figures, or alternatively to reinforce himself from the usual sources, if one requires mathematical and factual verification.
My noble friends will deal in some detail with various aspects of the Government's so-called achievements. They will consider their impact on the regions and the social services, and a number of other matters in detail, upon which, in the interests of time, I shall not touch. However, I am going to make one of their achievements very clear indeed. What they have done is to achieve the most massive shift of power to the owners of capital that has taken place since World War II.
I venture to remind your Lordships of something of which I am quite sure you must be aware. The role of capital in civilised society is to provide the means of production and then it is for management and workers to produce the goods and services which supply our material needs. For this purpose it does not matter whether capital is in private hands or in public hands. A pound note does not change its look because it is in the hands of a private individual or in the hands of the Government. That is the function of capital.
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The Government have secured a massive shift of power and a massive excess of freedom to the owners of capital. The result has been very simple. The owners of capital have not found themselves subject to any particular social constraint or taken into account any particular social purpose as to where they put their money, whether at home or abroad. With the lifting of exchange controls as one of the first actions that this Government took after they first came into office in 1979, there has been a massive export of capital—£111 billion since they took office.
The noble Lord told us—and I shall most certainly return to it later—that there is a certain return of money to this country (I refer to "this country" geographically) by way of dividends and by way of other services that are provided; but whether they get into the pockets of ordinary people remains very much open to doubt. One thing is certain. Capital, free from its constraints, is invested wherever it is thought necessary in the world, in Europe or in this country, regardless of any kind of expressed or implied social responsibility for the country in which its owners live.
The result has been very simple, and these are the figures that the noble Lord did not mention. The manufacturing output in the United Kingdom still remains 4 per cent. below what it was in 1979 and investment in manufacturing industry is 28 per cent. below what it was in 1979. Consequently there has been a massive increase in unemployment by 2 million, mainly concentrated in the manufacturing industries.
It is said that we have prosperity. It is said that the economy is on the upturn and booming. We have to differentiate. We all have material needs and the Government themselves say that manufacturing industries have declined in other countries and manufacturing industries are of diminishing importance. If that be so, why is it that we are importing, in terms of manufactured goods, £30 billion worth of goods a year with a deficit, for the first time in our history, of some £5.8 billion in our exports of manufactures compared with our imports? Therefore manufactures are of importance in the supply of our material needs.
Yet, in spite of the slightly artificial pre-election euphoria, in which it is suggested that everything is booming, it would be very difficult to find any reputable economist or reputable analyst who saw any future significant expansion of manufacturing industry in this country. That will apply while the financial constraints are free and it is more profitable to indulge in takeovers and mergers—in fact, to do anything rather than perform the correct function of capital, which is to enter the tripartite arrangement to which I have referred; namely, in conjunction with management and workers, to produce the material needs of this country.
Do the Government envisage, in the course of the next few years, our living merely on a diet of computer printouts? That is all that has been produced by the City of London in material terms. That is not going to be very much of a diet for the people of the United Kingdom. The fact is, of course, that this freedom has been used to make money out of money on terms that many may think are scandalous. Salaries are grossly excessive, some representing a 150 per cent. Increase

739
in a year. Salaries of £283,000 per annum are quite common. Your Lordships will see on page 20 of today's Independent newspaper that tables of remuneration are set out. The amount of increases to the lower orders, who are merely costs so far as this Government are concerned, are limited to around about 5½ per cent. per annum.
This, then, is the achievement; to make capital dominant. Moreover, it has enabled capital to take strike action where necessary; to strike, to refuse to invest where social responsibility—if there is such a thing as social responsibility—dictates that it should.
It is not the strike which is marked by the presence of pickets. It is not the strike which is marked by the presence of police. It is the strike which is consummated merely by the pressing of computer buttons which transfer sums of money from one side of the world to the other. This indeed is what has occurred and I well remember, when my party was in government and I was sitting on the Benches opposite, hearing the noble Viscount, Lord Watkinson, threatening at the time that we might have to face a strike of capital; and so indeed we have had selective strikes in that respect.
In this role also the Government have had a part to play, because of course the Government do not govern any more. They are the mere creatures of capital; they have actually increased the power available to capital by the transfer of public assets to the private sector in terms of British Telecom, British Gas, British Aerospace, Rolls-Royce and the transport undertakings—all at prices which, if they were subjected to the Companies Acts in a public company, would make them liable for misfeasance for having flogged off assets below their value.
At the same time they have done their duty in the process. What they have done is to endeavour to make this transfer of power to capital acceptable. They have done that by inducing small savers to transfer from their savings into ordinary shares so that one-fifth of the adult population have converted their savings into shares. Also, they have employed direct bribery to council tenants, with creative accounting invented by the Government, by selling off houses to tenants at half their real price in order to give them the illusion of somehow becoming capitalists themselves. They are the owners of shares instead of having their money in other forms of saving. Not all the people have money. Fifty per cent. of the population own only 6 per cent. of the United Kingdom's net disposable wealth. They are given the illusion of power through share ownership.
The Government have also acted as the tool of capital by weakening the power of the trade unions, by progressively diminishing or abolishing minimum wage standards and by the reduction in local government powers. I was amused at Question Time this afternoon to hear accusations of local government being involved in creative accounting. If anyone has been guilty of creative accounting over the past eight years, it is the Government. They have euphemistically called the proceeds from the sale of assets—in a term completely unknown to the accounting profession—negative expenditure. The realisation of capital assets has enabled them to reduce the public sector borrowing requirement.
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Those are the achievements. The result has been large-scale unemployment through which our people have become imprisoned. Any talk of freedom becomes a complete irony to people who are denied any vista of freedom and who in many cases are denied even the ability to travel outside their own towns. Their lives are caged in by being denied the opportunity to work. There has also been damage to the social services and so forth.
We shall have to make some decisions very quickly. They should of course be made in a general election if people were afforded the opportunity of having the issues placed squarely before them by an unbiased press and media. People will have to make a moral choice. We must make the choice of either running our country with a naked cash nexus, as the Marxists would put it, being the principal propellant for activity, or governing the country in the interest of all its people. Instead of the all pervasive greed, we must substitute enlightened self-interest combined with cooperation and a sense of responsibility.
In place of envy, we should directly pursue competitive excellence. In place of fear, everyone should have the opportunity to work and therefore have the normal vista of freedom which the better off take completely for granted. Instead of despair, those who can work should have a sense of purpose, and for those without wages there should be the prospect of some serenity.
One of the most frightening aspects in the lead up to this election has been the arrogance displayed by the Head of Government. It is true that the right honourable Lady the Prime Minister has not yet completely echoed Hitler's boast of a thousand years of the new Reich. But in true arrogance she has suggested that she should be in power for at any rate a further nine years because she wants to rid the country of Socialism. That, if anything, is arrogance. It is to be hoped that when the time comes they will know how to deal with it.
4.35 p.m.
Baroness Seear: My Lords, we on these Benches hope that the noble Lord, Lord Bruce, will take his message to the hustings over the next three weeks. The Budget is a major instrument of economic policy. As such, it is based on assumptions about the state of the economy and predictions of its future development. I did not agree with a great deal of what the noble Lord said, but I agreed with his reference to the highly selective figures which had been given to create the impression of great success in our economy at present.
I ask the noble Lord, Lord Brabazon, to explain how he relates his figures to those given in the economic indicators in the current edition of the Economist. In case he has not read them, I shall draw his attention and that of your Lordships' House to what it has to say about the position over the past year and the past three months. The figures are for the 13 major industrial countries. I shall give the United Kingdom's ranking in relation to those 13 countries.
Over the past year the increase in industrial production in the United Kingdom has been 2.6 per cent. The United Kingdom did not do badly because it ranked fourth of the 13 countries. Over the past

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three months—of course three months is a short period and there can be many fluctuations and special factors during that time—the figure was 1.3 per cent., and the United Kingdom ranked eighth. Over the past year unemployment averaged 11.6 per cent. and the United Kingdom ranked ninth. Over the past three months, unemployment has indeed fallen to 11 per cent. and the United Kingdom ranked eighth.
Inflation has been the Government's boasted success. We welcome any improvement in inflation, as indeed must everyone who cares about the country's development and people's standard of living. Over the past year the average has been 4.4 per cent. and the United Kingdom was ninth. Over the past three months inflation rose to 4.9 per cent. and the United Kingdom was tenth. Over the past year wages and earnings increased by 7.5 per cent. and the United Kingdom ranked twelfth. In the past three months that figure has increased to 8.5 per cent. and the United Kingdom ranked twelfth.
It is difficult to equate those figures with the rosy picture that the noble Lord, Lord Brabazon, has given. As the noble Lord, Lord Bruce, pointed out, he chose—we all know this is the oldest trick in the statistical book—1980, which was an especially low year. That meant that increases would seem extremely high. If one starts from a low base, it is not difficult to achieve a high percentage increase. Surely 1980 was the year that we would expect to be pretty low. It was one year of Conservative Government following five years of Labour Government. What would one expect from that mixture? One would expect what happened—an all-time low. So much for the figures; so much for the rosy forecast based on those figures.
We do not see the picture as the noble Lord, Lord Brabazon, presented it. We grant that there have been some successes. There has been a reduction in inflation. There has been a slight improvement in growth rates. The picture is better than it was. It certainly does not justify the self-praise and eulogies that have been given to it not only by the noble Lord, Lord Brabazon—he is doing his best this afternoon with a difficult brief—but by his lord and master, the noble Lord, Lord Young of Graffham, to whom many of us have made these same comments in one form or another on a number of occasions.
What we see in the country is a widening of the gap between the poor and the rich with a despairing group of long-term unemployed who have given up hope to a considerable extent. That does not look well against the figures, and it does not bear out the opportunities and air of hope that the noble Lord has tried to convey to us this afternoon.
We see also that in many ways we are not comparing favourably with the countries with which we have to compete. It is not much good looking just at the figures showing what we in this country are doing unless we look at comparable figures for other countries, because we have to compete with them. If we are making progress but they are making faster progress, we are still losing out. That is what is going on in a great many areas at present.
Given our interpretation of the real economic situation, we on these Benches would not have handled the Budget in the way that it has been handled
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by the Chancellor of the Exchequer. We would not have cut 2p off income tax. We do not believe that the problems confronting the country can be dealt with just by throwing money at them. We know that parties and politicians who advocate that are appealing simply to the electorate. That kind of promise cannot be fulfilled except at a price, which the poorest would themselves have to pay.
However, when one has money to dispose of—there cannot be a 2p cut in income tax unless there is money to dispose of—a responsible Government, faced with the situation in this country, have to ask themselves very carefully how that money should be distributed—not, we say, in a 2p cut; not, we say, in maintaining for the higher income groups a level of mortagage interest rates that benefits those who are already best off and, incidentally, that tends to put up the already excessive price of houses.
We would use the money available in a quite different way. We see the problems of the country under three main heads. The need to revive industry must be the first, and with industry in particular but not exclusively we include manufacturing industry. We do not mean just small businesses. Small businesses have their place but they depend to a large extent on larger businesses, larger manufacturing industry, to which they act as sub-contractors and which they service in one way or another. The recovery of industry on a much greater scale than anything done so far is one direction in which the extra money should be aimed.
What is it that we should like to see? We should like to see an increase in research and development expenditure. In your Lordships' House recently we had an outstanding debate on our failure adequately to provide for civilian research. The research money that is being spent, as everyone knows, to an excessive extent, is going into defence and not into commercial research. I point out to your Lordships that our expenditure on commercial research is very much less than expenditure on commercial research in both Japan and the United States. That is a direction in which we would wish to go, linked with—this is of course a part of it—an attempt to revive and encourage research in universities. This we debated last week. How can the Government be so complacent about the longer term development of the country when research is so low and the people carrying out the research are leaving the country, as we all know they are?
Along with that, we would put far more money into the training and retraining of the older population to fill the jobs which are coming on stream but which we shall not be able to fill unless we spend money on proper training to convert people from older skills or give people who have never had it the chance to acquire skills in their more mature life.
We would encourage industry in other ways too. We should like to see a 25 per cent. cut regionally, selectively, in the employer's national insurance contribution. This is one way in which one can help both industry and unemployment. Unemployment is the second target, the second area in which we should like to see expenditure to encourage industry in this and other ways to take on more people. The reduction in national insurance contribution is an obvious start

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in this direction to encourage industry and to help the unemployed, with greater training opportunities for the adult population.
We recognise that the Government have put a good deal of money into the training of younger people, but the training of older people still lags sadly behind. Along with this there should be training and carefully selected job creation in infrastructure, and particularly expenditure on the kind of capital development which will have to be undertaken sooner or later. We have said this very often in your Lordships' House. A little has been done but nothing like enough in the form of road and railway development, and above all perhaps on the maintenance and insulation of housing, which is so badly needed as a way of preventing deterioration in one of the country's most important capital assets.
We would also devote some of the resources that the Government have seen fit in our view to squander on a straight attack on the alleviation of poverty. We know that throughout the country there are a large number of people who because of long-term unemployment are living at a deplorably low standards, while the growth of the ageing population continues apace.
We need to spend more money on the sharp end of the social services. There has been a great deal of talk about community care. Community care is a hollow mockery unless backed by money and by some of those resources that have been used in tax cuts and other ways by the Government to help their own supporters. That money should have gone into expenditure on community care to make it a reality.
That is how we should have liked to see the Budget go. Of course it is not surprising that we do not agree with the Government. We disagree with their analysis and with their objectives. We hope soon to be able to make them change their minds.
4.48 p.m.
Lord Boyd-Carpenter: My Lords, I can agree with one comment of the noble Baroness, Lady Seear; namely, that in our discussions on the condition and working of the economy we are right and sensible to use as a check comparison with conditions in other countries.
One comes straightaway in that matter to the question of unemployment. Unemployment, as the noble Baroness knows, is sadly endemic in practically all the major developed countries of the world and has resulted from many causes—common causes affecting them all in greater or less degree. If one is making a comparison, it is only fair to point out that the creation of new jobs in this country in the last year or two has been a great deal better than in the countries of our neighbours in Europe.
I accept at once, therefore, that one should make these comparisons, although I am afraid that they drive me to a totally different conclusion from that of the noble Baroness. She referred to the reduction in income tax provided in the Bill and said that she and her party would have used the money in a different way. That begs every question, does it not? It begs the question whether available funds should be laid out by the Government in the way that the Government
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think fit, or whether they should be allowed—I am sure that the noble Baroness will like a quotation from Mr. Gladstone—to fructify in the pockets of the people. In other words, will your economy work better if the major control of spending is organised and run by government or, if a very substantial amount of it is done not by government but by individuals, by companies and unofficial bodies?
Perhaps I may take up the comparison with other countries which was made by the noble Baroness. It is the unchallengeable fact that the two economies in the world that are doing best today—those of the United States and Japan—are the economies of countries which spend a smaller proportion of the gross national product with the government and have lower levels of taxation than we have. It is therefore so easy, particularly if one is a kind-hearted person like the noble Baroness, to think of all the good directions in which public money could be spent and no doubt very pleasantly and agreeably so. However, with respect, it is ducking the central question of our discussions: whether one wishes to see the main management of the economy and of spending in the hands of central government or whether one wishes to see it widely dispersed, with the private citizen and private individual having a larger say in the management of those funds and the management of the economy. That is the difference.
I was not surprised to hear that line taken by the noble Lord, Lord Bruce of Donington. This is the traditional, old-fashioned Labour view. I was rather surprised to hear it from the Leader of the Liberal Party. The Liberal Party at one time used to have a certain belief in the beneficial values of private enterprise—a belief which was not very conspicuously brought out by the noble Baroness this afternoon.
The noble Lord, Lord Bruce, had enormous fun, as he thought, with the general question of the use of funds. However, I should like to tell him in all seriousness how much I resented his personal criticism of the Prime Minister, which is wholly uncalled for. Perhaps the noble Lord speaks with a certain expertise on the subject, but to talk about arrogance in criticising the Leader of a party who has a policy in which she believes—a policy which she does not claim for one moment has yet fully come to fruition, and who therefore wants the people of this country to give her the authority to continue, and to carry through the job to the end—indicates a certain deficiency in the English vocabulary of the person who does so.
The noble Lord, Lord Bruce, said a great deal at very considerable length about the general freedom that had been given to capital which he thought was terrible. Who does he think should have that freedom? Is it central government? Apparently he does not know.
Lord Bruce of Donington: My Lords, the noble Lord is very kind. In the course of the remarks that I ventured to address to your Lordships I conveyed that freedom should be accompanied by responsibility and a sense of social responsibility.
Lord Boyd-Carpenter: My Lords, that is the most splendid platitude that I have heard for some time, even from the noble Lord. However, it does not

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answer the question. He knows that perfectly well. He is arguing basically that control of capital and control of investment should be in the hands of government. That is socialism. That is the policy of the Labour Party here and of socialist governments throughout the world. It is not without significance that those socialist governments throughout the world are doing a great deal worse in the present economic situation than the governments of the countries that pursue a more open and freer enterprise policy.
It is not enough just to criticise that freedom has been given to capital. Of course what the noble Lord was getting at—and I think at one point that he said so—was the abolition of exchange controls. That is finally dealt with in Clause 68 of the Bill. It is interesting, however, to see how that has worked in practice. The knowledge that we have no exchange control restrictions in this country has proved an enormous attraction to foreign investors whose investment in this country has greatly increased. They have confidence that if they place their funds here they will not be trapped by some governmental action, that those funds can be placed here to work remuneratively, and that this is a good country, particularly under its present Government, in which to invest.
The noble Lord seemed to think that because exchange control had been abolished there had been a fall off in investment in this country. Of course he is quite wrong. Last year the total investment in this country was £60 billion, the highest level ever recorded. Therefore, to argue that because the Government have abolished exchange control that investment has been restricted does not for a moment hold water. On the contrary, the fact that the Government have directed the British economy into the open area of advanced companies, advanced countries, and advanced economies in which trade is allowed to flourish, in which it is not restricted by government inhibitions or Government prejudices is one of the reasons why investment in this country was at a record level last year. Therefore, with respect, the noble Lord has no basis whatever for attacking the Government on those lines.
Lord Bruce of Donington: My Lords, I am grateful to the noble Lord. For the convenience of the House and the record I should be glad if the noble Lord would confirm that he said that outside investment in this country last year was £50 billion?
Lord Boyd-Carpenter: My Lords, no. I said nothing of the kind. I said that total investment was £60 billion. The noble Lord got the figure wrong. That is total investment in this country.
Lord Bruce of Donington: My Lords, I am obliged.
Lord Boyd-Carpenter: My Lords, a great deal of it was from British funds, and some was from foreign funds. I do not have the breakdown of the figures, nor do I think it material to my argument.
The noble Lord was strangely, and for him unaccustomedly, silent on the major feature of this Finance Bill—that is, the reduction of 2p in the standard rate of income tax. The noble Baroness, Lady Seear, to her credit, referred to it, but the noble Lord
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did not. This is very interesting. The party of the noble Lord, Lord Bruce of Donington, has stated publicly that were it to be elected and come to power it would reverse that. I wonder whether the noble Lord, Lord Bruce of Donington, is prepared to confirm that?
Lord Bruce of Donington: My Lords, yes. The noble Lord may not have been here at the time, or he may have been distracted, but if he reads Hansard tomorrow he will find that I specifically referred to the reduction in the rate of income tax. I am sorry to correct him.
Lord Boyd-Carpenter: My Lords, that was not the question I asked. I asked whether it is the policy of his party to reverse that cut.
Lord Bruce of Donington: My Lords, I have confirmed that.
Lord Boyd-Carpenter: My Lords, it is. The noble Lord seems extraordinarily shy on the subject. In this coming week millions of people, will receive an improvement in their paypacket of just under £4 a week in respect of a man of average earnings with a wife and two children, up to a couple of pounds a week for someone at half average wages. To all those people who will receive this improvement, the Labour Party is saying "As soon as we get to power we will take it away from you". I wonder whether the noble Lord is altogether happy about that. Does he not appreciate the extraordinary value of being able to reduce the burden of direct taxation in this way?
First, it means—I have given some of the figures—that the level of take-home pay for a man on average earnings can be substantially increased without increasing at all the labour costs of the industry in which he works. There has been some comment from those who have been critical of the performance of our economy that in certain industries wage costs have risen a little dangerously; but if you are able to say to people "You need not receive an increase in your nominal wages because you will get more through the reduction of taxation with the state taking less", you are benefiting the natural wishes of those who want naturally, as we all do, an improvement in their position without the inflationary effect of forcing up wages.
This is an enormous practical advantage. There are many others. There is the stimulus that this gives to enterprise, the stimulus to harder work, the knowledge that if someone does overtime he will receive a larger proportion of those overtime earnings to keep and to use.
Taxation in this country is still by world standards high. The proposals in the present Bill do not touch the higher rates and there is a considerable gap now developing between the standard rate and the first of the higher rates. From 27 per cent. to 40 per cent. is an enormous jump, and some time in the future some government may have to tackle that. We are still (the noble Lord himself said so) a highly taxed country. Therefore when a proposal is made for reducing—and reducing on this occasion only the standard rate of income tax—to come forward and say that it will be

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reversed at the first available opportunity is a startling proposition.
I wonder whether the noble Lord does not realise that he is strongly fortifying the feelings of those people who believe that the Labour Party is a party that likes high taxation for its own sake; that feels that people should not be allowed to have a very large proportion of their earnings to spend themselves; that a beneficent and benevolent state should take it from them and spend it on such purposes as that state thinks good. This is where I ask the noble Lord to accept that there is a profound difference between him, his noble friends and his honourable friends in another place and those of us on this side of the House. We accept that the major purposes of the state have to be served, and properly served, but the idea of retaining an unnecessarily high level of taxation for its own sake is abhorrent to us, as I have no doubt it will be abhorrent to a great many people outside when this is fully understood.
There are many other excellent aspects of the Bill. The reduction in the duty on unleaded petrol is an excellent improvement. The only further comment I shall make will be on the main criticism that the noble Lord made. We all of us—it has been said so often but I think it can bear being said again—wish to see not only a continuation of the improvement in our nation's economy, but we wish to see that operating, as I believe it is beginning to operate, on the total figures of unemployment.
But I believe, and I think many of us believe, that that beneficial effect will be achieved not by taking large sums in taxation and expending it through government machinery, but by spreading that wealth as wide as possible so that it stimulates the creation of further wealth and thereby will bring people back not into temporary jobs created by government expenditure but into real and permanent jobs created by companies that are creating wealth. That is the prospect which I believe, in the light of what my noble friend Lord Brabazon said earlier, is close to us if we have the determination to go ahead to get it.
I venture to end on what I hope the noble Lord will not regard as a frivolous note, by saying that when next week the wage packets of those on PAYE appear so much larger than they did last week there will be one or two people who will drink the health of Mr. Lawson.
5.5 p.m.
Lord Peston: My Lords, I start on a slightly personal note. May I say what a pleasure it is for me to follow the noble Lord in this debate? He does not know it, but some 25 years ago I was a very junior economist in the Treasury when he was a very senior Minister. I fancied myself as a forecaster in those days, as I still do, but I should never have forecast that both he and I would sit together in your Lordships' House. I suppose that if I had been able to forecast that I should also have forecast that he and I would sit on opposite sides and disagree in the debate today.
Indeed it is also of interest, following the speech of the noble Lord, Lord Brabazon of Tara, how one can look at the same reality and get a different perception of the events—a point that the noble Baroness, Lady
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Seear, also made. I do not think that happens just because there is a little whiff of politics in the air or even because economists are notoriously disputatious people, although they are and I am one of the worst of the breed. There are genuine differences in the way one views the economy and in what one feels ought to be done. I shall enlarge on those in due course.
I always believe in starting by saying where I agree with the people with whom I shall mostly argue. I certainly agree with one or two aspects of the Government's policy; the emphasis they place—although they are following earlier policies—on intensifying training and in general on investing in human beings, human capital as we call it. That is an extremely sensible policy. Emphasis on improving the workings of the labour market is clearly sensible. The emphasis they place, which again is following earlier administrations, on the need to raise productivity in both the private and public sectors is one that I should place myself.
If we have any future at all it must lie along the productivity route; we all agree on that. I even might say slightly cynically that the Government, at least some of the time, seem to want us to agree with them about public expenditure. It depends on which debate one is taking part in, but in discussing the public services the Government want to convince us that on those occasions public expenditure is a very good thing. However, I should go further. I believe it is worth saying that it is a good thing on a general economics debate. They are the areas of agreement.
However, on one aspect of this I am a trifle puzzled. It has to do with policies with respect to the labour market and all that. I refer in particular to a remark made by the Secretary of State for Employment the other day at Question Time when he was discussing the restart scheme. He linked that programme or scheme to the availability for work criterion. Surely the availability for work criterion is that a worker would be willing to accept a suitable job on more or less the going rate but with the usual conditions.
The point about the restart programme is that it is not linked to a specific job offer. It would be infinitely better if it were. Therefore it seems to me that a failure to co-operate with restart may be regrettable on some grounds, but I am bound to say it is not all that irrational on the part of workers who fully appreciate the depressed state of the labour market. A failure to co-operate with the restart scheme should surely never be grounds for threatening to end benefits. I should like the point made by the Secretary of State on that matter to be clarified.
The real issues here are to look at the Government's record and to note the paradoxes about it—the fact that government expenditure relative to national income is relatively high and the Government cannot make up their mind whether they like that or not. One reason for that is that national income is relatively low. Taxation relative to income is high.
Much more important within the context of some of the Government's beliefs is that we have the highest real interest rates in the world, and that famous indicator of the stance of policy, the money supply, notably sterling M3—although I gather from this morning's papers that it is going to be re-named, but

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I have not caught on to what its new name is going to be—is rising at an extraordinarily high rate. I should like an explanation of why that is no longer as dangerous as we were led to believe for so long. There are certain paradoxical aspects of the Government's record which are worth bearing in mind.
Another aspect of the matter that I draw your Lordships' attention to takes us back a long way. It relates to my opening remarks. People have talked a bit about performance relative to 1979 and other bases. What interests me in assessing the record is, say, performance relative to the 1960s. Many people on that side of your Lordships' House and their colleagues in the other place tell us how terrible the 1960s were. But if you make a proper comparison the position is quite startling.
In fact the rate of rise of gross domestic product per capita in the 1960s was significantly higher than it has been in the last seven or eight years. Even the much vaunted improvement in the rate of manufacturing productivity—and it is to be welcomed—is hardly any larger than it was in the dreadful 1960s. Of course our favourite is the inflation rate. During the period when I was taught economics and in the 1960s we were always arguing that the inflation rate was too high. We have to do something about it. Typically in the 1960s it was 4 per cent. per annum. We are now told that 4 per cent. per annum represents a spectacularly good achievement.
But the major comparison to make is with unemployment. Average unemployment in the 1960s was under half a million. I do not want to bandy words about whether this or that is a better measure of the total amount of unemployment at the present time, but no ones seems to disagree that it is more than 3 million, and that is an enormously large number.
We are not uninterested in these matters on this side of the House. We are interested in fighting inflation. I must tell your Lordships that both in the 1960s and the 1970s when I was a government adviser if I had been told that one of the rules of the game was not to keep unemployment low but that one could let it drift up to 3 million, I should not have found it in the least difficult to devise policies or to suggest initiatives that would have brought the inflation rate down, except that I should have got it down well below 4 per cent. per annum. A government, who having created unemployment of 3 million, cannot get inflation down to zero are about as incompetent as can be.
I view what has happened in the 1980s, if I may use a football analogy, with the notion that our side is not scoring any goals and the other side is, because the other side, so far as the referee is concerned, has changed the offside law and there is no offside for it whereas we are still stuck with the same set of rules. That is not as good an analogy as it sounded when I started off. What I am saying is that the rules seem to have changed if a figure of 3 million unemployed is now acceptable.
I should like to ask the Minister whether that really is the case. One of the things I am fearful about—and I know we always have to be arguing this politically but it is not entirely a political point—is whether noble Lords opposite and their friends in the other House
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have now more or less settled for a number like 3 million unemployed as the way to run the system indefinitely, give or take a hundred thousand.
If they have, then this is an apalling state of affairs in the policies of one of the great parties of our nation. It is not that long, 40 years or so, since the famous unemployment White Paper, when we were committed to full employment. If now the Government either wish to define 3 million as full employment or to say that they no longer regard that as a desirable or attainable objective, that is serious. I should like to know the Minister's view.
The noble Lord, Lord Boyd-Carpenter, referred to the tax cuts and the reluctance, as it were, to acknowledge the reversal of them. I have no reluctance whatsoever. Just before I joined your Lordships' House I spent quiet a bit of my spare time advising Shadow Ministers in the other House. I was absolutely adament that were the Government to decide to cut taxes in the forthcoming Budget it was a matter of honesty to say that were our party to be in power we should reverse those cuts. I say that in terms to the noble Lord.
I go further. One of the things I find most unattractive about the Budget speech and the Finance Bill is that the Government did not index the excise, which in a sense is an implicit tax cut. I would reverse that as well. I am absolutely confident that were the present Government re-elected they would find it necessary to reverse those implicit cuts in the next Budget. They would find it necessary to put at least the correct rate of duty back on alocholic drinks and on cigarettes, and not merely for general economic policy grounds but on broader social policy grounds. If I may reassure at least the noble Lord, Lord Boyd-Carpenter, about my "honesty" I object to both those tax cuts.
I object to the direct tax cuts on economic grounds. On economic theoretic grounds there is no basis whatsoever for the so-called incentive arguments about cuts in direct taxation. This is old doctrine. Lord Robbins, who regretfully is no longer with us but was a Member of this House, was one of the first to demonstrate in the clearest possible terms that there was no theoretical foundation for that view. What is also of great interest, since I believe that the Treasury has commissioned various studies on this subject, is that there is no empirical basis for the view that direct tax cuts are beneficial.
I would agree with the noble Lord if what he then said was that we could also use our judgment. We neither believe the economic theory nor the empirics. But at least one ought to recognise that to take the other view, the view that tax cuts are beneficial, flies in the face of pretty well all that is known on the subject.
The other reason for objecting to the tax cuts is not a wilful desire not to cut taxes or to have higher taxes. It is simply that there is a better way of using the resources. This goes back to my original point that one is debating what you would do with available resources. What my noble friend Lord Bruce and the noble Baroness, Lady Seear, said, and what I say, is that there are at this time in the economy better ways. If we have resources we can use at this time there are better ways in terms of expenditure on education, on health and on urban renewal. There are better ways of using these resources.

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To go back to my search for agreement I believe that the Minister might well say that he thinks that as well, but he is not allowed to say that because he has to defend the position as it is in the Finance Bill.
Lord Brabazon of Tara: My Lords, I do not want to leave the impression that I might agree with the noble Lord. I certainly do not.
Lord Peston: My Lords, I do not mean the Minister himself. What I mean is that I am struck by how other Ministers on his side of the House will often tell us how valuable it is to spend money in those areas. I apologise to him for suggesting that he might think it was a good idea to spend more money on health, education, or any of the matters I mentioned. I strongly apologise, but I have heard some of his colleagues say that.
If you believe in the incentives argument, then the main incentive is one that the noble Baroness, Lady Seear, mentioned, which is cuts in the national insurance contribution of employers. They are a genuine disincentive to taking people into work. Therefore if there are resources available, those are where one ought to place them.
I discover, much to my regret, that I have prepared many more notes than I have time to enlarge on, but there is one final matter I should like to state—a more doctrinaire matter. It is sometimes said that the views of economists like myself are somewhat old-fashioned in that they were valid up to the 1970s but are not so any more. Setting aside the curiosity that members opposite regard the age of a doctrine as a bad characteristic, it is worth noting that the economic views that they appear to hold go back a long way. They were rampant in the 1920s and 1930s when they were held steadfastly in order to justify similar complacency about unemployment then as now. They were then incorrect and were convincingly shown to be so.
Unfortunately, unlike the natural sciences, error in economics can never be finally scotched. It remains and needs to be dealt with in every generation. I must take issue here with my noble friend Lord Bruce of Donington because I believe that he is criticising the Government for changing their economic position and doctrines. My noble friend seemed to imply that they were turning round a little and becoming a little spineless and wet, in the same way as some of us. I am not certain that he was saying that—
Lord Bruce of Donington: My Lords, if the noble Lord will forgive me, I should like to say that I am sorry I refrained from praising them. I certainly intended to do so.
Lord Peston: My Lords, my noble friend takes the words out of my mouth. Having spent a lifetime in teaching I know of the pleasure one has when the light shines in the eyes of the more recalcitrant students because they eventually get the message. The noble Lord, Lord Bruce of Donington, fully appreciates the point that that is the last occasion on which one should criticise or remind them of their past errors. It is precisely the time when one should congratulate them.
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It seems to me that the time has come when not only do we need to change direction but we must intensify the change. Regretfully for Members opposite, but not for Members on this side of the House, that will require certain changes in political events of which we have no part but to which I look forward.
5.22 p.m.
Viscount Chandos: My Lords, I think that I should have enjoyed being a student of the noble Lord, Lord Peston. The opportunity to debate even the truncated Finance Bill which the Government have now proposed is most welcome because the economic policies of the Government, which this Bill symbolises, are the single most important factor in the election campaign now under way. In this area your Lordships' House does not have the same detailed revision role as it has in respect of other legislation. Therefore the removal of the more complex clauses from the Bill may strike a less discordant note with your Lordships than with our colleagues in another place.
All the same, in the Government's unseemly haste to call what the Financial Times today described as "this unnecessary election", a good deal of wheat has been thrown out with the chaff, as your Lordships' House is more acutely aware in connection with other legislation. Measures as important as those covering profit-linked pay do not deserve to be discarded like a used paper handkerchief, however confident the Government may be, in their complacency, that they will be in a position to reintroduce the measures after the election. I am not sure that the country will associate this with good government.
Predictably, the noble Lord, Lord Brabazon of Tara, based his opening speech on the strength of the economy and the evidence that that provided for the success of the Government's eight years of economic policy. Not only are those claims disputable, as other noble Lords have shown, but there is a logical gap in atttributing the improvements that there have been to the Government's premeditated policies. In today's Financial Times the authoritative commentator Samuel Brittan wrote:
"The achievement of a real growth rate above that of other countries is mainly due to last year's successful sterling devaluation".
He went on to say:
"The Thatcher Government did of course let sterling soar in its first two years of office; and nearly all the serious argument about its degree of responsibility for the unemployment explosion goes back to the those years".
The devaluation in the past year may have been successful but it was largely accidental, judging by the Government's stated economic objectives during this period; while the appreciation of sterling from 1979 to 1981, as Mr. Brittan rightly analyses, had a devastating effect on manufacturing industry's competitiveness, which can still be felt six years later. I differ from Mr. Britian in believing that such devastation needed to be precipitated to stimulate the necessary blitz on overmanning and productivity turn around.
It is ironic that today, as the noble Lord, Lord Peston, said, the Bank of England announced its

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intention to provide information on yet two more aggregates of broad money supply with the words:
"Any choice of a dividing line between those financial assets included in, and those excluded from, broad money is to a degree arbitrary, and is likely over time to be invalidated by developments in the financial system'".
I am sure that the victims of the Government's early obsession with monetary targets will find comfort as they wait in the queue for employment, by this change of heart. But a favourable gloss on our economic performance can no doubt be put by the Government for three reasons. First, if sufficient damage can be done in early years, any recovery can be portrayed as a success, as other noble Lords have pointed out. Secondly, as my colleagues in the Alliance and I have always acknowledged, there have been some modest successes. Thirdly, the Conservative Party propaganda machine, recently operating so effortlessly with what should be the non-political government information services, will find imaginative and creative ways of portraying near disaster as heroic triumph.
It is over two years since I suggested to the Government Front Bench that their policies resembled the business activities of the asset strippers of the 1960s, selling national assets to make the books balance, whatever the consequences for the customers and the country, while preparing a false prospectus for the country laced with creative accounting. The noble Lord, Lord Bruce of Donington, has already used that phrase. We are now at a point where that false prospectus is about to be issued once more, and I believe that the vast majority of the country who are older, wiser and, if not all poorer many not much richer, will be very critical readers of that prospectus. Of course since the 1960s asset stripping has been replaced by corporate raiding, but the activity remains essentially the same and the Government's right to be called the raiders of the lost economy remains unchallenged.
Every corporate raider, having acquired its new victim, achieves a miraculous turn around in profitability through spectacular economies achieved by closing down the head office, attacking marketing expenditure, slashing research and development budgets and declaring a pension fund holiday. With their cuts, the only thing that the Government seem to have forgotten to do is to close down the head office.
The Alliance have this week issued their new prospectus, as my noble ally Lady Seear has said. Supported by an independent review of its fiscal viability, it outlines the increase in investment in those areas where the Government have been and are continuing to propose the most harmful cuts. For instance, in the Department of Trade and Industry's budget for assisting industrial research and development, as the noble Baroness, Lady Seear, said, we are proposing an 80 per cent. rise in cash terms after five years and a doubling of support for export promotion in the same period.
In adult and higher education an extra £2·2 billion is projected over the period, and an extra £400 million is projected for the funding of scientific research councils for which the Government are proposing the sharpest cuts in real support. Those are the long-term investments which are needed; not to boost our economic performance this year so that we can boast
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of being top of the league table among European and other developed countries, such as a take-over creditor comparing his growth in short-term profitability with that of his projected victim, but to give us some chance of having a successful and prosperous economy in the decade to come.
As the noble Lord, Lord Bruce of Donington, last month issued his customary dire warnings of retribution for the Alliance's failure to support his unsuccessful amendment to the Banking Bill, with its flawed design to alleviate the serious plight of the developing countries, I should like to draw his attention to the projections in the Alliance prospectus of more than a £4 billion increase in overseas aid in the next five years, to a level by the early 1990s of 0·7 per cent. of gross domestic product, which is the United Nations' target.
I cannot mention the phrase "rates of taxation" without taking up the challenge issued in another place to demonstrate the consistency of the Alliance's policy towards the Government's reduction in the standard rate of income tax, incorporated, by some odd coincidence, within even the truncated Finance Bill. As my noble ally Lady Seear has already said, as have my colleagues in another place, we would not have judged this income tax cut to be the fairest and most prudent way of exploiting the current short-term buoyancy of the economy and hence of the Government's tax receipts. The Government themselves, with their declared objective of lowering the standard rate to 25 pence in the pound, have had to make a judgment of what would be fair and prudent, as well as, I dare say, of what electorally would be most beneficial.
I am sure that many of your Lordships would agree that, by cutting income tax by only half their remaining targeted amount and thereby having a little more room for manoeuvre on public spending and for restraint of the apparent government funding requirement, the Government are trying to have it both ways. It is no less consistent for us in the Alliance to say that, the tax cuts now proposed having been enacted, an immediate reversal might be counterproductive and unhelpful for many taxpayers who in all sincerity would have agreed originally to forgo a tax cut for improvements to education, health and employment but who are now budgeting on the promised change. Families, like companies, cannot be expected to plan their life and prosper in a constantly and unnecessarily changing environment.
For that reason the Alliance would not reverse the tax change on taking office and has drawn up its plans, as outlined in the prospectus published this week, on the basis of the 27p standard rate proposed by the Government. Whatever government hold office after 11th June will thereafter need to review the levels of taxation on an orderly timetable in the light of the progress of the economy and a fair and balanced judgment of priorities in ever-changing circumstances.
The noble Lord, Lord Boyd-Carpenter, supported the principle of international comparisons by citing the strong economic performances of the United States and Japan, with their low levels of taxation. However, if my memory is correct I believe that the top marginal rate of taxation in Japan is 70 per cent.—10 per cent. higher than in this country. That is

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perhaps a salutary illustration that levels of taxation, as the noble Lord, Lord Peston, said, are not the only or even the most important influence on enterprise and economic success. But I am sure the noble Lord, Lord Boyd-Carpenter, may not really have wished to encourage noble Lords on the Labour Front Bench to increase taxation to comparable higher levels.
As your Lordships' House has a heavy programme still before it today, I should like to address only one other subject: the financing of the Alliance's proposed programme of spending. With the necessary increase in public expenditure, combined with the elimination of those cases of privatisation where the interests of the industry, the consumer or taxpayers are damaged, there is an inevitable but modest increase in the future borrowing requirement, but only to a level of under 2 per cent. of gross domestic product. Such a requirement, still of less than £,10 billion, in any of the future five years projected would be financeable through the sale of gilts and other government debt without any necessary increase in interest rates and with less disruption to the financing requirements of manufacturing companies which the Government have created through their excessive and headlong privatisation programme.
I think it was the noble Lord, Lord Brabazon of Tara, who treated with some ridicule my suggestion during the arduous passage of the Gas Bill that the Government's proposed privatisation programme risked squeezing out and disrupting corporate fund raising. I wonder whether the noble Lord might now be able to comment on press reports that in February the Treasury, against the strong advice of the Bank of England, insisted, in order to give the sale of British Airways the fairest of winds, that every sector of the sterling capital markets, even the Euro-sterling bond market, was closed for a week, leading to a period of considerable excess activity subsequently and consequent indigestion.
This Finance Bill represents an inglorious finale to this Government's eight years of economic mismanagement, and I am sure that all noble Lords on this side of the House look forward to the opportunity of the coming general election, however cynically timed, to ensure that these policies are changed.
5.36 p.m.
Lord Strathclyde: My Lords, before I begin, I apologise to the noble Lord, Lord Brabazon of Tara, for not being here when he was speaking. Unfortunately, all the efforts of London Transport could not quite get me here on time.
Unlike the noble Viscount, Lord Chandos, I believe that the Bill shows all the hallmarks of the responsible approach to financial management that this Government have taken since first being elected in 1979. The Chancellor was able to reduce the PSBR and reduce income tax against a background of real economic growth, lower inflation and the start of a sustained fall in unemployment figures. This is a creditable and extraordinary achievement, reached by continued good sense over the years.
Since the Budget, interest rates have fallen considerably in response to the Chancellor's words,
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which will give industry the boost it has wanted and thus lead to the prosperity which is ultimately what we all want. I do not think this situation would have been possible had the policies recommended by noble Lords opposite been followed.
With the election almost on top of us, it is fair to reflect that the only reason the Labour Party feels it can promise so much excessive extra spending is due to this Government's careful stewardship of the country's financial situation over the last eight years. It is inconceivable that the Labour Party in 1979 could have dreamt of carrying out the policies which it now promises so glibly. The reason it could not promise them then is that it did not have the money; but today money saved by this Government goes towards real economic goals of reductions in borrowing and tax. If the criticism and advice expounded by the Opposition were to be taken seriously they would simply send us back down the road to the IMF, where we were a decade ago.
At this point I should like to say a few words about the speech of the noble Lord, Lord Bruce of Donington. It was amazingly full of the most turgid dogma, reminiscent, with respect, of a very bored university lecturer talking to an even more bored bunch of first-year students. The phrase,
"capital controlling the means of production",
slipped so smoothly from his tongue. It sounds so oldfashioned—though I know the noble Lord, Lord Peston, would tell us that it was not oldfashioned—and almost laughable, except that for one moment I felt the noble Lord, Lord Bruce, actually believed what he was saying.
It is not capital that counts. It is people who make economies grow, and it is this Government who put people first. Incidentally, would the noble Lord's party stop all the billions of pounds that have been invested in this country from abroad? Would he suddenly fling the barriers up and throw all that money back to the terrible foreigners to whom it belongs? And what about unemployment? I know the noble Lord, Lord Peston, mentioned this, but surely he realises that we now have over a million more people in employment than before, earning money and paying taxes. That is a real achievement.
However, I am not here to discuss the past record of the Labour Government. It seems unlikely that they will ever be able to put their proposals into effect. I am here to congratulate the Government on their economic direction and in particular on the way in which this Bill has not been used to create an artificial pre-election boom, the consequences of which would have been disastrous. No, the Chancellor has seen that there is no need to bribe the electorate with large-scale cuts in income tax but has offered instead a gentle reduction over the years.
I believe that the most valuable and relevant aspect of this Bill is the reduction in income tax. I know that the noble Lord, Lord Boyd-Carpenter, has already mentioned the point that a reduction of 2p does not sound much, but as an employer as well as an employee I can tell your Lordships that this reduction is extremely important in furthering the principle of allowing people to keep as much as possible of the money they earn.

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There is nothing dishonest or selfish about that principle. It gives incentive and offers reward. I know that the noble Viscount, Lord Chandos, disagrees, but when I was campaigning in Glasgow in the general election of 1979 and again in London in 1983, the message was the same from the young who had just received their first pay packets, from families and from those approaching retirement. They felt that they could spend their money far better and more wisely than any Chancellor could ever do. So I congratulate the Chancellor for listening to the people and for reducing their burden of direct taxation.
Because of that tax cut, a married man on average earnings of £11,600 per annum will need a pay rise of only 2 per cent. this year to keep pace with inflation. That is a real success and one that I hope will continue. If I have any regret it is that there has been no reduction in the higher tax bands, especially since I feel that the jump from 27 per cent. to 40 per cent. is far too great. However, I believe that it is fair and correct that those on lower incomes should be the first to benefit from the nation's economic success.
I welcome this Bill for its positive outlook and beneficial effects. I look forward to a new Finance Bill in the near future in a new Parliament under a new Conservative Government.
5.42 p.m.
Lord Graham of Edmonton: My Lords, better than anything else, the last speech demonstrates the wide gulf in attitudes to the management of the economy and fiscal policy in this country that exists between the Government and the Opposition. It is rather sad that although there are certainly people who benefit from the Budget, we have failed to hear from Members opposite anything about large sections of the community who not only get very little in comparison with others but have been disadvantaged by the way in which the Budget has been drawn up.
Beneath the glitter, the tinsel and the dazzle of 2p off income tax the cold fact remains that a great opportunity has been lost. I do not underrate the remarks of the noble Lord about the usefulness of having 2p off income tax both to individual recipients and businesses, and I honestly believe that everyone including myself can find something kind to say about paying less tax. However, I think that the mood of the country, as it was indicated earlier this year and as I hope it will be reflected in the polls next month, showed that people of this country would be prepared to forgo a reduction in income tax if it would benefit the poorer sections of the community.
Let us look at the Budget and at the additional and ancillary financial measures that form part of the Budget strategy. One sees that the single pensioner can look forward to an increase in his pension of 80p a week. Let us reflect on that—80p a week. A married couple can look forward to receiving an increase of £1.30. If the Government had not decided to change the system that was in existence at the time they took office eight years ago and the option of deciding which of the higher methods were used had been taken, the single old-age pensioner would have received an increase of £7.20 a week and a married couple would have received £11.40 a week.
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I am speaking about little people who are not very articulate. They are affected by the Budget. Instead of offering tax cuts worth £3 billion, which admittedly will benefit a lot of people, the Chancellor and the Government could have used the money differently. They could have used the money to build 90,000 new houses. Anyone who has been a constituency MP, as many Members on both sides of the House have been, will realise that the housing problem is one of the most agonising problems to solve. However, that was the Government's choice. I believe that most of the people who will now enjoy a reduction of 2p in income tax, when faced with that kind of choice would have wanted to assist housing.
Yet even if we do not consider 90,000 new houses, let us consider the 250,000 houses that could be repaired for that sum. This country has housing stock in very poor condition. The money could have been used to produce over 1½ million nursery school places. One cannot say that the Government must do one thing or the other but I think that there are higher social priorities than cuts in income tax. The money could have provided day centres for 2½ million old people or offered additional treatment in our hospitals for 3 million people, or the Government could have increased the old-age pension by £6 a week. I do not deny that the government of the day are entitled to decide how to spend the taxpayers' money. Every government can do that, However, I think that the Government's priorities are wrong.
So far as jobs are concerned. all the measures of tax reduction are estimated to generate 80,000 jobs, but if the money had been used to target job creation 300,000 jobs would have been created. I repeat that a great opportunity has been lost.
I should like to illustrate the enormous differences in incomes that the Government have not only sanctioned but encouraged. Reference has already been made to an article in the Independent newspaper today. On page 20 there is this statement:
"While the average director had a salary increase of 11 per cent. last year, the top 10 per cent. of directors received a rise of 18 per cent. And what might be called the 'A Team' of British managers, the top 10 per cent. of directors in large companies—those with a turnover of more than £500 million—saw their base salaries increase by a remarkable 45 per cent.".
The figures are given in percentages, but what do they actually mean? We are talking about the top 10 per cent. of chief executives earning salaries of £263,000 a year. They earn more in a week than many people are expected to survive on for a year. Directors earn £124,000 a year.
Let me contrast those figures with another piece of government legislation that affects our kind of people. When changes in the statutory sick pay arrangements came into effect in April, which was the same time as the Budget, the Government who provided in the economy for the kind of salaries that I have just mentioned deliberately changed the rules. Prior to that time if one earned £74·50 per week or more—as little as that—statutory sick pay was £46·75. If one earned between £55·50 and £74·49, the sick pay was £39·20. If earnings ranged between £38 and £55 per week—wages as low as that—sick pay was £31. Instead of there being three bands of benefit the Government decided to reduce the number to two. At present if one

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earns £76·50 or more one receives £47·20; earning between £39 and £76 means receiving £32·85.
What on earth is the noble Lord talking about? There is a whole section of people who would have come in the middle band when it was a three-tier system, who earned between £57 and £76·50 a week—as low as that—who will now in fact, because there are only two bands, lose £6·50 a week in benefit. We are talking about people who when in work are earning less than £80 a week and who when they are sick will get less than £40 per week. There are thousands of low paid workers, particularly shopworkers, and the Union of Shop, Distributive, and Allied Workers has drawn this to my attention.
Is it not obscene and despicable that a Government who are proud of many things, not least the fact that they have distributed largesse of £3 billion, take action which results in people who are already living at a low level getting £6 a week less while they are sick? I think that noble Lords ought to reflect. I believe that they will be as angry as I am about the matter, if not ashamed.
Let me conclude by saying how grateful is the friendly societies movement for an action by the Government which has benefited them. Clause 30 is enormously beneficial to that movement. I have declared my interest before and the noble Lord, Lord Lucas, who presided over the passage of the Financial Services Bill, was always kind when I mentioned the interests of the friendly societies.
It is worth putting this on the record very briefly. In the Finance Act 1984, the tax exempt sum assured limit was reduced from £2,000 to £750 because at that time there were a great many new friendly societies which were acting in what I am sure the Minister and I would have said was an unpublic way of attracting business. That not only put out of business a great many people who did not deserve to be in business, but it also punished the traditional friendly societies—the small, long-time serving friendly societies.
This was pointed out to the Chancellor, and Mr. Ian Stewart in another place said, "Fair enough. If there is some damage to them, let us have a discussion". Discussions have taken place over a period of time. What the friendly societies wanted was something that would put them back to where they were, and I am told by them that they are highly delighted with the changes which have been made.
Changing the limits from a sum assured base to a premium base allows policies of the type offered by traditional friendly societies, which have a relatively high emphasis on life cover per £1 premium, to be for realistic sums assured. So I should be grateful if the Minister would take back to his colleagues the thanks not only of the Ancient Order of Foresters, which has an interest in this, but of the whole movement, because in this one measure the Government have done a great deal to promote thrift and help continue in existence the friendly societies which serve the nation well. To show that I am a fair-minded man in these matters, I shall certainly look forward to the Minister's comments on the latter part of my speech much more than on the first part.
5.53 p.m.
Lord Ezra: My Lords, noble Lords who have intervened in this debate so far have taken a broad view of the economic and financial policies of the Government and have expressed their views according to their particular party affiliations. This is absolutely right and proper, particularly in this context of an approaching election. But I feel at this stage that it might be helpful if I were to concentrate on a particular aspect of policy, because I have no doubt that my noble friend Lord Diamond, who will be summing up for the Alliance, will be taking a broad sweep of the economic and financial policies of the nation.
I should like to start with the reference by the noble Lord, Lord Brabazon, to the Government's achievement in the reduction in the public sector borrowing requirement. There is no doubt that it has been reduced very substantially. But what he perhaps failed to mention for lack of time was that there were two exceptional items which contributed to that reduction; namely, the fiscal benefit of North Sea oil and gas and the massive sale of public assets. Both of these are extraordinary items which are likely in time to diminish in their effectiveness.
I should like to restrict my comments to the privatisation of public assets, because I feel that that has been a most important part of the Government's economic and financial policy. It is a policy which they made clear they would seek to continue if they were returned to office. But at this stage it is not inappropriate to make some comments on what has happened so far and on what would be the implications if this policy were to be pursued in the future.
When you look back on the Government's privatisation programme, you can see that it divides fairly neatly into two parts. The first part roughly corresponds with the Government's first period in office from 1979 to 1983, and a whole series of enterprises, which were either actually or potentially in a competitive situation, were then sold off into the private sector. I think many would agree that on the whole that was no bad thing. Certainly the Government's manifesto for 1979 was fairly restricted in its intent on privatisation. It referred to the privatisation of aerospace and shipbuilding, which, in the latter case, has not been completed yet, of buses and of national freight. It said that in regard to those industries which remain in public ownership the Government would try to see that they were enabled to run their businesses with the minimum of interference possible.
However, in due course the Government's policy perceptibly changed, and that occurred in their current period in office, when they moved from the privatisation of smaller enterprises in a competitive situation to the privatisation of large-scale public utilities. That raised a whole new series of problems and, as it looks as if the Government, if returned again to power, would proceed in that direction and would seek possibly to privatise the water supply industry, the electricity industry, the Post Office and perhaps others, it is appropriate that we should ponder a bit about the implications of transfering large-scale monopolies in the form of public utilities from the public to the private sector.

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It is notable that in the Government's manifesto for 1983 they said that,
"merely to replace state monopolies by private ones would be to waste an historic opportunity. So we will take steps to ensure that these new firms do not exploit their powerful positions to the detriment of consumers or their competitors".
Mr. John Moore, who was then Financial Secretary to the Treasury and who seems to have been the philosopher on privatisation, added to that to the effect that,
"we are not so naive as to think that an unrestrained monopoly in the private sector would be less inclined to exploit its position than the monopolies in the public sector".
So we have in those two statements acceptance, apparently, by government that monopolies are not a particularly desirable state of affairs, and that whether they are in the public or the private sector they are likely to use their monopoly position to their own advantage and to the disadvantage of others, unless restrained in some way.
Later on, Mr. John Moore said that the Government had concluded that,
"regulated private ownership of natural monopolies is preferable to nationalisation".
This was just a statement without any corroborative evidence produced; indeed, none could be produced because this is a totally new concept. However, it raises two questions which were referred to repeatedly during the course of the debates on the Telecommunications Bill and the Gas Bill. The first question is: why was there not some restructuring to introduce a competitive situation in these two enterprises before they were privatised? The second question is: if they were to be privatised as they stood was the regulatory framework adequate? Those two questions are very relevant to future possible developments.
There are many conceivable ways in which big public utilities could be restructured, if that was thought to be desirable. They could be divided on a regional basis. They could be divided as between their common carrier capacity—most of them are common carriers, whether they be water, gas, electricity, the postal services or British Telecom—or they could have a degree of sub-contracting or franchising introduced into their systems.
In fact, none of those options appear to have been examined. The two public utilities which have been sold off so far were sold off exactly as they stood. We should be well advised to question the application of that policy should a future effort be made to privatise further public utilities.
Having sold them off as they stood, the second question is whether the regulatory mechanism which the Government introduced was adequate. There were many who doubted that during the passage of the two Bills, but the proposals made to that effect from these Benches were rejected by the Government and their supporters. However, I should like to draw the attention of noble Lords to the situation as it now exists of the two public utilities that have been privatised. In the case of British Telecom, which was sold off for a sum in excess of £4 billion, the annual cost of the regulatory authority, which has a staff of about 100, is under £4 million. That is a relatively
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modest body to control such a vast organisation. However, the figures that I have for the annual cost of running the regulatory body for the gas industry—an enterprise which has a turnover of £7 billion and employs more than 100,000 people—shows a sum of £1·2 million and a staff of 15.
On that projection, if the electricity industry were to be privatised as it presently stands, we might be lucky to obtain a regulatory body with a staff of about half a dozen costing a few hundred thousand pounds a year. Therefore it is not unreasonable to ask whether that type of regulatory framework is at all adequate for the massive change in the status of those large organisations.
I believe that that aspect of the Government's policy will need to be carefully reconsidered in the ensuing parliamentary session—whatever government may be in power—to see whether we have found the right way of dealing with those big public utilities.
I am not particularly arguing that the big public utilities should be publicly or privately owned, but there should be adequate safeguards for the various interested parties. I cannot see that the transfer of the two public utilities which have already been moved from the public to the private sector has been of any benefit to the taxpayer. On the contrary, the taxpayer has lost substantially because of the costs of privatisation and because of the relatively low rate at which the shares were sold. The shareholders have certainly gained. Whether or not consumers will gain, time will tell.
This is one of the areas which demands a good deal more consideration and more attention in any future attempts to privatise public utilities than has so far been given to it.
6.4 p.m.
Lord Diamond: My Lords, it is always an enormous pleasure for me to follow my noble friend Lord Ezra, who speaks with such authority on the matters that he is discussing. I found his speech today wholly acceptable. He was talking about the efforts that we all put in to try to provide some measure of competition in the gas industry when it was being privatised, in order to maintain the Government's philosophy that one should not turn a public monopoly into a private monopoly. In the time that we all all spent on that, I was not lacking in either industry or patience myself.
When I think of the time that we spent on that and our complete lack of achievement in persuading the Government of the continuing truth of their previous statements as to the foolishness of attempting to run a public monopoly as a private monopoly, I am very saddened. As regards that part of my noble friend's speech, I am more than delighted to be in the position of following him.
There is some usefulness in having a debate of this kind at this point in time. However, as a practical politician, I am bound to say that there is a slight feeling of artificiality about it. We are addressing one another and nobody else. None of what we are saying today will appear on television. None of what we are saying today will appear in the newspapers. They will fill their columns with other things. Of course, all that the Minister said was in preparation for the speeches

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that he will no doubt make in various constituencies when he will describe the Government's policy in a way which some of us would not recognise. I wish him luck.
I wish him particular luck when he goes to the North, the North-East and Scotland and explains to people there how successful the Government have been. I wish him joy. If he gets out of it without any physical damage, he will be very fortunate indeed. He will tell the people in those places that the Government have achieved unparalleled economic progress, unparalleled growth, a fall in the cost of living which has been unparalleled and an improvement in the standard of living which has been unparalleled. If the Minister says those things in those places, the people will naturally laugh at him in the way that they should.
I should like, if I could, to agree with some of the measures in the Finance Bill. There is very little of it left, and in what there is left there is very little to agree with. I do not think that the Government have received sufficient congratulations on the step that they took in the time of the noble Lord, Lord Barber, in establishing free exchanges. That was a very courageous step and it has been beneficial to the country. The Finance Bill contains a useful provision in that it makes it necessary for any future government who wish to change it to first have to prove their case before Parliament.
I am sorry that the provisions—this has been referred to already—for profit related income proposals have been dropped. They would have been very beneficial and I cannot see that there would have been much opposition to them. However, they have been dropped along with many other things.
I wish to tell your Lordships of the way in which I think the people of this country see the achievement of the Government since they came to power. They will give the Government credit for the following records: first and foremost, a record in unemployment which was previously unimaginable. As the noble Lord, Lord Peston, mentioned, in my time in government it was accepted that unemployment rates in excess of 1 million meant that there would be riots on the streets. Here we are, as a result of government propaganda, with 3 million embedded in our thinking as being a tolerable figure for unemployment. That is the first record that the people of this country will recognise.
The second record which they will recognise is a record in the reduction of the size of our manufacturing sector. Thousands of people who had jobs and who no longer have jobs in manufacturing will remember and be aware of that record. Those who are involved in the financial area will be aware of the record of achievement by the Government in real interest rates. I think that record goes back for all time. But certainly even in nominal interest rates the record they have achieved will be remembered.
They have also achieved a record in that the country, for the first time, has been unable to contribute to earning its living through the net export of manufactured goods. For the first time we are in a situation in which we import more manufactured goods than we export.
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There is also a record, which has been expressed in humble language and which I wish to express in a more detailed way, in the change of direction and of increased divisions among our people. Perhaps that is the most serious matter of all. I cannot express, in one sentence, the record on social divisions. But I am able to express in one sentence the record on financial divisions. I am able to demonstrate, on the basis of the Government's own figures, what I have known to be the truth but could not prove by Government figures previously. Drawing on my recollection as the past chairman of the Royal Commission on the distribution of income and wealth, I believe that this is the first time in this century that there has been a movement away from equality. Through the period, there has been a growing together of the levels of income of those at the top and those at the bottom, and of the share of capital of those at the top and those at the bottom.
That is the shape of our society. There can be a difference of views as to the pace at which the richest and the poorest should be seen to become more comparable. There is a possibility of a difference of views about savings and capital. But there has never been a difference of view by any government, Conservative or otherwise, throughout this century, that we ought to drive as far as we reasonably can towards greater equality, until this Government came into office.
As I said, the ordinary person would see that in simple terms of the rich getting richer and the poor getting poorer. I wish to demonstrate that that is not an emotional statement: it is an accurate statement of the facts. Those facts are drawn from Government figures and particularly from the reply I received from the noble Lord, Lord Young of Graffilam, on Monday, 9th March, when I asked for the figures of the Gini coefficients for various years and was given them.
The Gini coefficient is a description, invented by a clever Italian professor, which enables us to have a look, simply and shortly, at the shape of our society in financial terms. A government statement from the Front Bench confirmed that it is the best available description. It is not perfect and I would not claim perfection for it. But it is the best we have. The figures go from 1979 to 1983 and further figures have been published for 1984 and 1985. The figures do not yet exist for 1986. However, common sense tells us that the differentiation has increased rather than reduced in that period. The conclusion for the years from 1979 to 1985 inclusive is that the inequality of original incomes—what people have earned first of all—has increased over all by nearly 10 per cent. It also shows that when a proper measure is taken—that is to say, the measure of post-tax incomes—and making all the necessary adjustments for cash benefits, income tax, indirect taxes and the like, then the inequality of post-tax incomes for families (because that is where the shoe pinches, rather than with the individual) has increased by more than 10 per cent. during that period of this Government's control of finances.
That shows a marked moving away from a trend towards greater equality which was obvious throughout the century. That moving away gives every justification to those who say that under this Government the rich get richer and the poor get

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poorer. It is not surprising, therefore, that people feel that importance should be attached to the figures which have recently been described of an 11 per cent. increase in the remuneration of chief executives who, on average, earned over £200,000 per year last year. Compare that with the kind of increase—less than half—which the Government are offering to those who provide all our essential services in hospitals and elsewhere. It is not surprising that people feel that there is a great drive towards division in this country.
I may say that it is not surprising to me either that the noble Lord, Lord Strathclyde, thought that in those circumstances a reduction in taxation was helpful because it would enable the people who earn more than £200,000 a year to keep more of their income. I was much moved by that argument. I am delighted to see the noble Lord. I had great affection for his late grandfather, as indeed I had for his father. I am delighted to see him among us. But perhaps I do not share his background and his views entirely.
That is the situation that we see, and we feel that this Government must answer for that at the next general election. That is why, if we had time, we would argue this Bill in the greatest possible detail. As we have not, we shall leave it by saying that those are the records of this Government. That is the achievement of the Government, and they ought to be ashamed.
6.18 p.m.
Lord Williams of Elvel: My Lords, I first have to apologise for my noble friend Lord Peston, who has been called away. I think he sent a message to the noble Lord the Minister. He was hoping to stay for the winding-up speeches but unfortunately, as is frequently the case in this House, we went on a bit too long and he was called away on urgent business.
I believe that this is the last debate on economic matters, certainly in this House and possibly in either House of Parliament. That is as it should be because the election is upon us and the general election campaign, in large measure, is going to be dominated by the conduct of the economy by the Government which is presently in power and the plans of the different parties for correcting what they perceive to be the imbalances that a number of noble Lords have referred to this afternoon. I think that it is a measure of the sophistication of your Lordships' House that we can debate these matters in a relatively tolerant and civilised way before the blood and the thunder of the election is upon us.
I should like to pick up three themes which a number of noble Lords have introduced in today's debate on the Bill. They are tests against which the Bill should be judged. First, does the Bill unite the nation? That theme introduced by the noble Baroness, Lady Seear, and taken up by my noble friend Lord Graham; the noble Lord, Lord Diamond, has also referred to it. Secondly, does the Bill aid the transition from a North Sea oil economy to a post-North Sea oil economy? I thought that the noble Lord, Lord Ezra, started along this line before he went on to give what I thought was an excellent exposition of the problems involved in privatisation of the utilities.
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The third test, as has been put forward by several noble Lords, is: does the Bill contribute towards the generally desirable aims of growth and the reduction of unemployment? I think that noble Lords on all sides of the House will agree that both growth and the reduction of unemployment are desirable general aims.
The noble Lord, Lord Diamond, has already commented—and therefore I shall try to be brief—upon the question whether the Bill, and indeed the conduct of government policy since 1979, has united the nation. I agree almost entirely with the remarks of the noble Lord, Lord Diamond. All I can do is expand on the matter of the regional question which the noble Lord touched on, but perhaps did not cover in as much detail as he would have liked.
There is no doubt that there is a North-South divide. However, there is doubt as to exactly where that line between North and South should be drawn. Indeed, a study produced by Lloyds Bank argues that the line should not be drawn from the Severn to the Wash, but from the Wash to the Solent; and that the statistics show that the South-East and East Anglia are the two areas which have benefited most, and still benefit most, and that other areas are well behind.
I should like to quote some figures on the matter. The South-East and East Anglia are the only regions where the gross domestic product per head is above the national average. In all other regions it is below the national average. In Wales, it is 88 per cent. of the national average, whereas in the South-East it is 114 per cent. and in East Anglia it is 101 per cent. That is just one measurement of the unemployment situation.
The regional breakdown shows that the South-East and East Anglia are the only two areas where unemployment is less than 10 per cent. In all other areas it is higher than 10 per cent. For example, Berkshire, which is on the M.4 corridor, has an unemployment rate of 6·7 per cent. whereas Cleveland has an unemployment rate of 21·2 per cent. That is the measure of the regional disparity.
Indeed, the European Commission has pointed out that more than one-third of the poorer regions of the European Economic Community are to be found in the United Kingdom. Personal income tells the same story. Expenditure on housing in the South-East is 50 per cent. more than it is in the North. Average rent, rates and water charges are 20 per cent. higher than they are in the North. Investment in new company formation is much higher in the South-East and East Anglia than it is in the North, Scotland and Wales.
We have to ask the question: what does the Bill do to correct these imbalances? The answer is that it does not do anything. It does not do anything because the Government have never set out to do anything. I believe—and this point was made by the noble Lord, Lord Diamond, with great clarity—that the idea of trying to correct these imbalances went out of the window in 1979. There was a clear change in philosophy; there were imbalances regionally and imbalances between the rich and the poor.
In so far as concerns the balance between rich and poor, I agree with the noble Lord, Lord Boyd-Carpenter. I think that this is an over-taxed country. However, the increase in indirect taxation has been

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absolutely enormous. To return to the 1979 portion of gross domestic product taken by the Government in tax would, by my calculations, require a tax reduction in the region of £12 billion, which again by my calculations is equivalent to 9½p off the standard rate, rather than the 2p as suggested in Clause 20.
The next test is: does the Bill aid the transition to the post-North Sea oil economy? Various noble Lords have referred to the necessity to revive manufacturing industry and to promote research and development, about which the noble Baroness, Lady Seear, spoke at length. I totally agree with what she said and therefore I shall not repeat it. We must improve training and have more productive investment. Above all, we must make sure that manufacturing exports increase and manufacturing imports decline, or relatively decline—in other words, that our manufacturing balance of trade improves. The Government claim that the long-term decline in the United Kingdom's share of world trade in manufactures has been reversed. I wish that that were true.
However, the sad fact is that in making that claim the Government have once again moved the statistical goal posts. This was shown by The Henley Centre study at the end of March of this year. Formerly, DTI figures simply measured the share of exports as a proportion of main manufacturing country exports; those figures were reproduced at Budget time by the Treasury up until 1985. Now, of course, the Treasury produce rather different figures, giving greater weight to our largest export markets, and making an adjustment accordingly. What a surprise, the Treasury figures show a favourable picture, while the DTI figures show a volume share little different from the low point of 1981.
The reason is quite clear—our export markets have been less buoyant than those of our competitors. In value terms, the picture is worse, because over the past few years the devaluation of the pound, to which the noble Viscount, Lord Chandos referred, has been reflected in the revenue received, and that is really what matters. Our share of manufacturing trade has fallen drastically since 1961 and we need to do something about it.
I believe that the analysis made by your Lordships' Select Committee on Overseas Trade, chaired by the noble Lord, Lord Aldington, in a most distinguished manner, has yet to be disproved. That is a point on which we shall continue to insist and we shall be insisting throughout the forthcoming election campaign. In my view the Bill does nothing to help the manufacturing sector get the manufacturing balance of trade back anywhere near where it was in 1979, and anywhere near where it has to be as North Sea oil starts to run down.
The third test is whether the Bill contributes to the generally desirable aims— for example, growth, which we certainly need. Between 1979 and 1985 OECD figures show average OECD growth at 2.2 per cent. per annum and UK growth at 1.3 per cent. per annum. IMF figures for the period between 1979 and 1986 show world growth at 2.6 per cent. per annum, that for industrial countries at 2.3 per cent. per annum, and that for the UK at 1.4 per cent. per annum. As the noble Lord, Lord Brabazon, pointed out, at present
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our growth rate is relatively high, but there are dangers in this. Consumer spending is flat for the first quarter of 1987 compared with the first quarter of 1986.
Consumer spending was, after all, the great motor of growth over the past year or two. The world economic outlook, according to the International Monetary Fund, is deteriorating. The forecasts for 1987 produced by the International Monetary Fund in April 1986 show that for the group of seven countries there would be a growth of 3.3 per cent. When the IMF revised its forecast in April 1987 it said the figure would be only 2.4 per cent. It looks as though we may be coming to the end of what has been a growth cycle, from a low point in 1981 and now moving into somewhat rougher waters.
Nothing in the Bill does anything to promote growth in the United Kingdom and there is no reason why it should because the Government specifically rejected the idea which we used to hold and which my noble friend Lord Peston used to teach; namely, the Keynesian view that governments could actually do something about growth. The Government have specifically rejected that view, so it is no wonder that the Bill contains nothing that will ensure that growth in the United Kingdom is not just a once-for-all affair on the back of a consumer boom and on the devaluation against the Deutschmark to which the noble Viscount, Lord Chandos, referred, but is a solidly based performance over the years. Ultimately we come back to the question: what does this Bill do to reduce unemployment? Here I refer to the point that my noble friend Lord Peston made. It seems to me to be a very fundamental point.
Are we to assume that the Government are telling us that an unemployment level of 3 million is given for economic policy over the next few years, or are we to suppose that the Government do not accept that and that they have some other plan? Do we believe, with the noble Lord, Lord Boyd-Carpenter, that unemployment is endemic—I think that was the expression he used—in the industrial nations? Let us again look at the facts. The OECD standardised cross-country basis for unemployment, October 1986, gives the total for the OECD as 7.7 per cent.; for the US, 6.8 per cent.; West Germany, 8 per cent.; Japan, 2.7 per cent.; France, 10.5 per cent.; UK, 11.4 per cent.
Again we are right down the league to which the noble Baroness, Lady Seear, referred. What can we look for in the Bill to correct that? Every study made, as my noble friend Lord Peston said—unless the Treasury has made some new study of which we know nothing—has shown that direct tax cuts are a dreadfully inefficient way of reducing unemployment. That cannot be said too often. The noble Lord may report to us this afternoon, as a result of some new magical study which theTreasury has done, "Oh no, all that is rubbish and we really do believe, and we have solid empirical evidence to show, that cuts in income tax are the right way to reduce unemployment". Unless he can show that, we are compelled to come to the view that the Government accept that 3 million unemployed is going to be a given in our economic affairs for the next few years.
I believe by these tests of uniting the nation, aiding the transition to a post-North Sea oil economy and contributing to generally desirable aims such as a

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reduction in unemployment, that the Bill before your Lordships' House is a lamentable effort. Yet the underlying economic policy is presumably that which the Conservative Party is putting before the electorate. We all know—the noble Lord, Lord Peston, and the noble Viscount, Lord Chandos, have told us—that the monetary prospectus which was adopted by the Conservatives in 1979 was more or less bogus. They have now given all that up and say that monetary aggregates no longer really matter; you can choose the one you want and you can decide what you want it to be. But just because they got away with one bogus prospectus, there is no reason for them to get away with another.
I accept the view of the noble Lord, Lord Boyd-Carpenter, that there is a political divide between this side of the House and his side. I am quite happy that if this is put to the electorate in honest terms the electorate will be able to make up its mind. If it is put to the electorate in honest terms, we on our side are not in the least worried about the outcome.
6.35 p.m.
Lord Brabazon of Tara: My Lords, we have had an interesting debate this afternoon. I had intended to begin my closing remarks by dealing with any particular queries that noble Lords had on the Bill, but nobody has actually raised any question of detail on the Bill itself. I shall try not to take too long because I appreciate that there is a lot of business to follow, but I shall deal with some of the points that have been raised during the course of the debate. The noble Lord, Lord Diamond, said that he felt that there was a slight feeling of artificiality about this debate. We have even lost the television cameras this evening, so although we have been doing a good deal of electioneering, we may not get any reporting of it, and certainly none of us has a vote to cast when the election does come.
However, the noble Lord, Lord Bruce of Donington, began by querying the fact that although we have reduced taxation it still stands higher now than it did before. We regard real take-home pay as much more important than a percentage of earnings taken in tax. That takes account of both direct tax cuts and indirect tax increases. A two-child family on half average earnings has seen a 17½per cent. real increase since this Government came to power. On average earnings that increase goes up to 21½ per cent. in real terms since this Government came to power. I have to grant that in the period of the last Labour Government there was also an increase in real take-home pay for the two-child family. That was over the five-year period half of 1 per cent.
Lord Graham of Edmonton: My Lords, does that take into account any increase in VAT and other direct taxation?
Lord Brabazon of Tara: I said, "and indirect tax increases", my Lords.
The noble Lord, Lord Bruce of Donington, asked me specifically about the extension of VAT, and I should very much like to answer those points. As far as new construction is concerned, the noble Lord is well aware that that is the subject of a European Court Case
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and the hearing is due in September. The Government have made it quite clear that they are fighting the case vigorously. They will have to consider the terms of the judgment. Zero-rating for newspapers, however, is not part of the court case so it is not under threat. On food, my right honourable friend the Prime Minister repeated on 28th April in another place her 1984 undertaking that an incoming Conservative Government would not put VAT on food. I hope that that gives the noble Lord the reassurance he was looking for. Generally, the Government are committed to prudent reductions in the overall burden of taxation, especially income tax. As the Budget demonstrated, this is being achieved without commensurate increases in indirect tax rates.
The noble Baroness, Lady Seear, criticised us—not for the first time—for having chosen 1980 as a base date for certain figures we gave. So far as manufacturing productivity is concerned, it has grown faster than that of all other major industrial countries since 1979 as well as since 1980. That is in contrast to when we were at the bottom of the league in the 1960s and the 1970s. Total output in the economy has grown faster than in any other major European country since 1980 and that contrasts again with when we were at the bottom of the league in the 1960s and 1970s. Industrial production is at its highest ever levels and manufacturing output is growing faster. It is up by 4 per cent. over the past year and forecast to grow again by 4 per cent. this year.
Inflation is near its lowest level for nearly 20 years and under firm control. It is forecast to be at 4 per cent. at the end of this year and in the middle of 1988. I do not need to reaffirm the Government's determination to keep down inflation and further to reduce it. In fact, zero inflation is our aim.
Baroness Seear: My Lords, does the noble Lord deny the position in the league tables that I quoted from the Economist?
Lord Brabazon of Tara: My Lords, I cannot recall the figures that were quoted from the Economist. I shall look at them. I am telling the noble Baroness how we are doing now in comparison with other countries and how we did in the 1960s and 1970s.
Lord Williams of Elvel: My Lords, would the noble Lord like me to give him the inflation comparisons, because I can do so? They bear out what the noble Baroness said.
Lord Brabazon of Tara: My Lords, in order to get through the business, I shall not accept the noble Lord's offer. I shall look at the figures when they are published in Hansard. We agree that wage settlements are too high. However, the rapid growth of manufacturing productivity means that industry's competitive position has been transformed. United Kingdom unit labour costs are forecast to rise no faster in 1987 than those of our major competitors. Industry's tremendous opportunity is reflected in the optimism contained in the CBI's latest survey. I do not think that noble Lords can quibble about that.
The noble Baroness also talked about training. The Bill contains a specific measure designed to assist

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training. My noble friend Lord Boyd-Carpenter quite rightly took the noble Lord, Lord Bruce of Donington, to task over his remarks about my right honourable friend the Prime Minister. I am grateful to him for having done that.
The noble Lord also talked about the abolition of exchange controls—I am glad that this was endorsed by the noble Lord, Lord Diamond—and how we were finally abolishing them in the Bill. Of course they have not been used in practice since 1979. We are now finally getting rid of them, I hope. From the speech of the noble Lord, Lord Bruce of Donington, I was not sure whether it was Labour Party policy to reintroduce exchange controls. I had it in my mind that the Labour Party had dropped that idea, but perhaps that is no longer the case.
Lord Williams of Elvel: My Lords, may I verify the party's policy? It is clear. It has been set out in the conference document. We do not propose to reintroduce the old form of exchange controls because we think that we have a repatriation policy on portfolio investment which is rather better.
Lord Brabazon of Tara: My Lords, I shall perhaps be forgiven for having thought from the speech of the noble Lord, Lord Bruce of Donington, that he was probably keen on having them back.
My noble friend Lord Boyd-Carpenter asked whether the Labour Party, if elected, would reverse the 2p cut in income tax. Noble Lords opposite confirmed that they would do so. I have to tell my noble friend that I do not think that will be enough. The Labour Party has a public expenditure programme of some £34 billion. That would involve the doubling of income tax or the trebling of VAT. Noble Lords opposite may laugh. I am not saying that they would necessarily bring in the whole of that public expenditure rise at one go, but I suffer the misfortune of living in a London Labour-controlled borough. I have just experienced a 50 per cent. rise in my rates and I am promised a further 50 per cent. rise next year. That probably indicates that the calculations are not too far wrong.
The noble Viscount, Lord Chandos, gave us a good overview of the Alliance's published prospectus as audited—as looked at by Messrs. Coopers and Lybrand. I understand that "audited" is not the correct word to use. I thought that he made rather light of the fact that the proposal included a £4 billion increase in the public sector borrowing requirement. He said that that probably would not have any effect on interest rates or inflation. We have reduced the public sector borrowing requirement by £3 billion. That resulted in two points off the interest rates. I wonder what will happen as a result of a £4 billion increase.
The noble Viscount also said that the top rate of income tax in Japan is higher than it is in the United Kingdom. That is true. I understand, however, that the Japanese plan to bring down their top rate from 70 per cent. to 50 per cent. In any event, that top rate is not reached until income is well over £200,000, and so I do not think that that is an especially good comparison to make.
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I can confirm that my right honourable friend the Chancellor of the Exchequer has said that the Government may need to bring down the top rate of income tax in the next Parliament. I hope that that will encourage my noble friend Lord Strathclyde.
The noble Lords, Lord Graham of Edmonton, Lord Williams of Elvel and others, suggested that tax was a less efficient means of alleviating unemployment than infrastructure spending. Many simulations of economic models show that extra public spending or tax cuts boost demand in the short run but that merely boosting demand ultimately leads to higher prices. The case for tax cuts is based on their longer run effects in improving incentives, rewarding enterprise and reducing distortions. Those effects are not given proper weight in any economic model simulations.
I am grateful to the noble Lord, Lord Graham of Edmonton, for his kind words about what we have been able to do to help genuine friendly societies. I shall certainly draw my honourable friend's attention to his remarks.
The noble Lord, Ezra, in the course of a speech which I imagine he had saved up from yesterday afternoon and in which I could not see any great relevance to the Bill, said that the public sector borrowing requirement had been reduced due only to privatisation proceeds and oil revenues. I am sorry to have to prove him wrong.
Lord Ezra: My Lords, I did not say that, I said that there were two extraordinary items which had helped to reduce the public sector borrowing requirement.
Lord Brabazon of Tara: My Lords, I stand corrected. Even without the privatisation proceeds, the public sector borrowing requirement last year was at its lowest level as a ratio to gross domestic product since 1971. That is also despite the £6.5 billion fall in oil revenues from 1985–86.
The noble Lord, Lord Diamond, talked about the inequality of income distribution. It is true that the inequality has increased, but all those in work, even the lowest paid, those on half average earnings and in the bottom decile, have gained substantially in real terms.
The noble Lord, Lord Williams of Elvel, and other noble. Lords talked about the United Kingdom's share of world trade in manufactured goods. On all measures of world trade, the United Kingdom's performance has improved, or declined more slowly, since 1981 after decades of decline. There has been no previous five-year period in recent history in which United Kingdom manufacturing exporters have been so successful. Manufacturing exports are at record levels at the moment.
Many noble Lords, including the noble Lord, Lord Peston, who is not here, the noble Baroness, Lady Seear, and the noble Lord, Lord Williams of Elvel, talked about full employment. The Government accept that unemployment is too high, but it is already falling steadily. The policies that we have put in place are creating the conditions for a sustained growth in output and employment. We can already see the results. Over 1 million new jobs have been created

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since 1983. With the labour force growth expected to slow down over the next few years, there is a good prospect of further falls in unemployment. We do not see 3 million as a base figure from now onwards.
The noble Lord, Lord Williams, talked about regional variations in unemployment. Although I have said that unemployment is of course too high, it has fallen fastest in some of the regions, such as Wales, over the past 12 months. In the past six months unemployment has fallen in all regions except Scotland where there has been a small increase. Even in Scotland the trend is improving. All regions will benefit from the £4.75 billion spending increases in priority areas announced in the last Autumn Statement.
A number of noble Lords have, not criticised but drawn attention to, the absence of my noble friend Lord Young of Graffham. The noble Lord, Lord Williams, said that this was probably the last debate that we would have in the House on economic matters before the Budget—that is, if I am lucky later this evening. All I can say is that I hope very much that, shortly after 25th June when we debate the Queen's speech, my noble friend Lord Young of Graffham will be standing here to answer the economist part of the debate.
The Bill contains a number of important measures. Chief is the reduction in the basic rate of income tax to 27p. The Government are well on their way to reaching an objective of a basic rate of 25p. It also includes measures to help businesses, particularly small businesses. The main measures in this category are the reduction in the small companies' rate of corporation tax to 27p in line with the income tax cut, and the package of VAT measures, especially optional cash accounting for traders up to £250,000 per year turnover. Business will also be helped by the favourable economic climate.
Your Lordships should not just take my word for it; let us look at the evidence: base rate down 2 per cent. since March, many foreigners now saying that Britain is the place to invest in at present; the CBI quarterly trends survey, one of the most bullish for many years; stock exchange indices within a whisker of all-time highs; we have already said that unemployment has been down for the last nine months in a row; and one million new jobs created since 1983.
This favourable economic climate, which is the product of eight years of prudent management, has enabled the Government to achieve the unique hat trick of lower taxes—down by £2.5 billion—reduced public sector borrowing—down by £3 billion—but increased public expenditure—up by £4.75 billion. The Finance Bill gives effect to the first of these. I commend it to your Lordships' House.
On Question, Bill read a second time; Committee negatived.
Then, Standing Order No. 44 having been dispensed with (pursuant to Resolution of 12th May), Bill read a third time, and passed.

Criminal Justice (Scotland) Bill [H.L.]
6.52 p.m.
The Minister of State, Scottish Office (Lord Glenarthur): My Lords, I beg to move that the Commons amendments be now considered.
Moved, That the Commons amendments be now considered.—(Lord Glenarthur.)
On Question, Motion agreed to.

Criminal Justice (Scotland) Bill [H.L.]

  COMMONS AMENDMENTS
  [References are to Bill 93 as first printed for the Commons]
  1 Clause 2, page 3, line 35, leave out "section 3(5)" and insert "subsection (5) of section 3".
  2 Page 3, line 37, leave out "retransmittal of the case to" and insert "case is transmitted under that subsection by".
  3 Page 3, line 37, after "Court", insert "of Session".
  Lord Glenarthur: My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 1 to 3 en bloc and, with the leave of the House, I shall speak also to Amendment No. 5. These are drafting amendments. I beg to move.
  Moved, That this House do agree with the Commons in the said amendments.—(Lord Glenarthur.)
  Lord Ross of Marnock: My Lords, I have been very carefully through the amendments and all the discussions that took place on them. I know that all Scotland is waiting for the Bill. Far be it for me to hold it up by one minute.
  If we take all the remaining amendments en bloc, I shall be quite happy.
  On Question, Motion agreed to.

  COMMONS AMENDMENT
  4 Clause 3, page 4, line 28, after "accord", insert ", or on the application of the prosecutor or of the person (or on their joint application),".
  Lord Glenarthur: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 4, suggested by the Opposition in another place.
  Moved, That this House do agree with the Commons in the said amendment.—(Lord Glenarthurv.)
  On Question, Motion agreed to.
  Lord Glenarthur: My Lords, if I am allowed so to do, I shall be happy to move Amendments Nos. 5 to 84 en bloc.
  Lord Ross of Marnock: My Lords, I think that we should spend a little time on these—there are a great many. We do not want to cause any trouble to the Government Front Bench by going too quickly. Perhaps there is one amendment on which the Minister would like me to concentrate. I shall be happy to listen to his explanation of one that is not too technical.
  Lord Glenarthur: My Lords, perhaps the best thing that I can do in the circumstances is to suggest that I move Amendments Nos. 5 to 57 en bloc, if that is convenient.
  Lord Ross of Marnock: My Lords, I think that we could take the rest as well. I hope that the Minister will not disappoint me!

  COMMONS AMENDMENTS
  5 Page 4, line 30, leave out "restransmit" and insert "transmit".
  6 Clause 5, page 6, line 23, after "(2)", insert "and (3)".
  7 Clause 11, page 12, line 4, leave out "such".
  8 Page 12, line 24, after "prosecutor;", insert "or, in a case where the order was made by virtue of subsection (2) of section 7 of that Act and the information mentioned in that subsection has not yet been laid, to the person as regards whom the court which made the order was satisfied as is mentioned in subsection (3)(b) of that section;
  ()any reference to realisable property fell to be construed in accordance with section 5 of that Act (references in that section to the defendant, and to the time at which proceedings were instituted against him, being in such case as is mentioned in paragraph (a)above taken to be, respectively, references to the person as regards whom the court which made the order was satisfied as is mentioned in subsection (2) of the said section 7 and to the time immediately before the order was made);".
  9 Page 12, line 27, after "order", insert "or, in relation to that property, under section 12 of this Act".
  10 Clause 16, page 16, line 25, after "shall", insert "first be applied in payment of such expenses as are payable under section [Insolvency practitioners dealing with property subject to restraint order] (2) of this Act and then shall".
  11 Page 16, line 38, at end insert—
  "(aa) if not paid by an administrator under subsection (1) above, shall first be applied in payment of such expenses as are payable under section [Insolvency practitioners dealing with property subject to restraint order] (2) of this Act;".
  12 Page 16, line 39, leave out "paid by an administrator under subsection (1) above" and insert "so paid".
  13 Page 16, line 42, leave out "paragraph" and insert "paragraphs (aa) and".
  14 Clause 26, page 20, line 42, after "loss", insert "or damage".
  15 Page 20, line 44, at end insert ", or by virtue of section 24A of the Drug Trafficking Offences Act 1986 (recognition and enforcement in England and Wales of orders and functions under this Part of this Act)".
  16 Clause 29, page 23, line 19, leave out "varying or revoking a previous Order in Council".
  17 Clause 30, page 23, line 32, leave out second "section" and insert "Act".
  18 Page 23, line 34, at end insert "or under section [Order in Council as regards taking of action in designated country] of this Act".
  19 Page 24, line 43, leave out "for those purposes".
  20 Page 24, line 49. leave out "varying or revoking a previous Order in Council".
  21 Page 24, line 51, at end insert—
  "(10A) An Order in Council under this section may make different provision for different cases or classes of case.".
  22 After Clause 30, insert the following new clause—
  ("Enforcement in England and Wales.
  The following section shall be inserted before section 25 of the Drug Trafficking Offences Act 1986—
  "Recognition and enforcement of orders and functions under Part I of the Criminal justice (Scotland) Act 1987.
  24A.—(1) Her Majesty may by Order in Council make such provision as Her Majesty considers expedient for the purpose—
  (a) of enabling property in England and Wales which is realisable property for the purposes of Part I of the Criminal Justice (Scotland) Act 1987 to be used or realised for the payment of any amount payable under a confiscation order made under that Part of that Act; and
  (b) of securing that, where no confiscation order has been made under that Part of that Act, property in England and Wales which is realisable property for the purposes of that Part
  776
  of that Act is available, in the event that such an order is so made, to be used or realised for the payment of any amount payable under it.
  (2) Without prejudice to the generality of the power conferred by subsection (1) above, an Order in Council under this section may—

  (a) provide that, subject to any specified conditions—

  (i) the functions of a person appointed under section 13 of the Criminal Justice (Scotland) Act 1987; and

  (ii) such descriptions of orders made under or for the purposes of Part I of the Criminal Justice (Scotland) Act 1987 as may be specified;

  shall have effect in the law of England and Wales;

  (b) make provision—

  (i) for the registration in the High Court of such descriptions of orders made under or for the purposes of that Part of that Act as may be specified; and

  (ii) for the High Court to have in relation to the enforcement of orders made under or for the purposes of that Part of that Act which are so registered such powers as may be specified; and

  (c) make provision as to the proof in England and Wales of orders made under or for the purposes of that Part of that Act.

  (3) In subsection (2) above "specified" means specified in an Order in Council under this section.
  (4) An Order in Council under this section may amend or apply, with or without modifications, any enactment.
  (5) An Order in Council under this section may contain such incidental, consequential and transitional provisions as Her Majesty considers expedient.
  (6) An Order in Council under this section shall not be made unless a draft of the Order has been laid before Parliament and approved by resolution of each House of Parliament.".".
  23 After Clause 30, insert the following new clause—
  ("Order in Council as regards taking of action in designated country.
  .—(1) Her Majesty may by Order in Council make such provision in connection with the taking of action in a designated country in consequence of the making of a restraint order or of a confiscation order as appears to Her Majesty to be expedient; and without prejudice to the generality of this subsection such provision may include a direction that in such circumstances as may be specified proceeds arising out of action taken in that country with a view to satisfying a confiscation order which are retained there shall nevertheless be treated as reducing the amount payable under the confiscation order to such extent as may be specified.
  (2) Subsections (9)(a), (10), (10A) and (11) of section 30 of this Act shall apply in respect of Orders in Council under this section as they apply in respect of Orders in Council under that section.".
  24 Clause 31, page 25, line 33, leave out "(a)".
  25 Page 25, line 36, leave out paragraphs (b) and (c).
  26 Clause 32, page 27, line 9, leave out "(a)".
  27 Page 27, line 12, leave out paragraphs (b) and (c).
  28 Clause 33, page 28, leave out lines 12 to 14.
  29 Clause 34, page 29, leave out lines 15 to 17.
  30 Page 29, line 34, leave out "shall be construed in accordance with" and insert "includes a floating charge within the meaning given by".
  31 After Clause 34, insert the following new clause:
  ("Insolvency practioners dealing with property subject to restraint order.
  .—(1) Without prejudice to the generality of any enactment contained in the Insolvency Act 1986 or in the 1985 Act, where—

  (a) any person acting as an insolvency practitioner seizes or disposes of any property in relation to which his functions are, because that property is for the time being subject to a restraint order, not exercisable; and

  (b) at the time of the seizure or disposal he believes, and has reasonble grounds for believing, that he is entitled (whether in pursuance of a court order or otherwise) to seize or dispose of that property,

  he shall not be liable to any person in respect of any loss or damage resulting from the seizure or disposal except in so far as the loss or damage is caused by the insolvency practitioner's negligence; and the insolvency practitioner's negligence; and the insolvency practitioner shall have a lien on the property, or the proceeds of its sale, for such of his expenses as were incurred in connection with the liquidation, sequestration or other proceedings in relation to which the seizure or disposal purported to take place and for so much of his remuneration as may reasonably be assigned for his actings in connection with those proceedings.
  (2) Any person who, acting as an insolvency practitioner, incurs expenses—

  (a) in respect of such property as is mentioned in paragraph (a) of subsection (1) above and in so doing does not know and has no reasonable grounds to believe that the property is for the time being subject to a restraint order; or

  (b) other than in respect of such property as is so mentioned, being expenses which, but for the effect of a restraint order, might have been met by taking possession of and realising the property,

  shall be entitled (whether or not he has seized or disposed of that property so as to have a lien under that subsection) to payment of those expenses under section 16(1) or (3)(aa) of this Act.
  (3) In the foregoing provisions of this section, the expression "acting as an insolvency practitioner" shall be construed in accordance with section 388 (interpretation) of the said Act of 1986 except that for the purposes of such construction the reference in subsection (2)(a) of that section to a permanent or interim trustee in a sequestration shall be taken to include a reference to a trustee in a sequestration and subsection (5) of that section (which provides that nothing in the section is to apply to anything done by the official receiver) shall be disregarded; and the expression shall also comprehend the official receiver acting as receiver or manager of the property.".
  32 Clause 39, page 34, line 19, leave out from beginning to "a" in line 22.
  33 Page 34, line 22, leave out "the investigation" and insert" an investigation into drug trafficking".
  34 Clause 40, page 34, line 40, leave out "or having reasonable grounds to suspect".
  35 Clause 44, page 39, line 11, after "Act", insert "(except where the context otherwise requires)".
  36 Page 39, line 20, at end insert " 'designated country' shall be construed in accordance with section 30(2) of this Act;".
  37 Clause 48, page 45, line 7, at end insert "(other than a constable)".
  38 Page 45, line 13, leave out "or one of his deputes".
  39 Clause 49, page 45, line 18, leave out "to" and insert "and".
  40 Page 45, line 45, at end insert "together with any other persons named in the warrant".
  41 Page 46, line 6, leave out "compliance with" and insert "response to".
  42 Page 46, line 7, leave out "not be used in evidence against him" and insert "only be used in evidence against him in a prosecution for an offence under section 2 of the False Oaths (Scotland) Act 1933.".
  43 Clause 50, page 46, line 34, leave out "or has reasonable grounds to suspect".
  44 Clause 51, page 47, line 22, leave out "of which he has the conduct" and insert "of an offence—

  (a) in respect of which a direction has been given under section 48(1)(a) of this Act; or

  (b) relating to inland revenue,".

  45 Page 47, line 40, after "department", insert "or any Northern Ireland Department".
  46 Page 47, line 41, at end insert "(including the Crown in right of Her Majesty's Government in Northern Ireland)".
  47 Page 47, line 42, leave out "and".
  48 Page 47, line 43, at end insert "; and
  (d) for the purposes of assisting any public or other authority for the time being designated for the purposes of this paragraph by an order made by the Secretary of State to discharge any functions which are specified in the order.".
  49 Page 47, line 47, at end insert "or Part XV of the Companies (Northern Ireland) Order 1986;".
  50 Page 47, line 47, at end insert—
  "(aa) the Accountant in Bankruptcy;".
  51 Page 47, line 48, leave out "the" and insert "an".
  52 Page 47, line 48, at end insert—
  "(ba) and Official Assignee:
  (bb) a person appointed to carry out an investigation under section 55 of the Building Societies Act 1986;
  (bc) a body administering a compensation scheme under section 54 of the Financial Services Act 1986;
  (bd) an inspector appointed under section 94 of that Act;
  (be) a person exercising powers by virtue of section 106 of that Act;
  (bf) an inspector appointed under section 177 of that Act or any corresponding enactment having effect in Northern Ireland;
  (bg) an inspector appointed under section 38 of the Banking Act 1987;
  (bh) a person exercising powers by virtue of section 44(2) of the Insurance Companies Act 1982;.".
  53 Page 48, line 5, leave out "Great Britain" and insert "the United Kingdom".
  54 Page 48, line 6, leave out "paragraph (a),(b) or (c)" and insert "any of the foregoing paragraphs".
  55 Page 48, line 7, leave out "above".
  56 Page 48, line 7, at end insert—
  "(6) An order under subsection (4)(d) above may impose conditions subject to which and otherwise restrict the circumstances in which, information may be disclosed under that paragraph.".
  57 After Clause 51, insert the following new clause:
  "Power to petition for winding-up etc. on information obtainedunder s. 49.
  —The words "or section 49 of the Criminal Justice (Scotland) Act 1987" shall be inserted—

  (a) in section 440 of the Companies Act 1985, after the words "that Act";

  (b) in section 8(1) of the Company Directors Disqualification Act 1986, after the words "the Financial Services Act 1986", in the second place where they occur, and

  (c) in Article 433 of the Companies (Northern Ireland) Order 1986, after the words "that Act".".

  58 Insert the following new clause:
  "Conditional offer of fixed penalty by procurator fiscal.

  (1) Where a procurator fiscal receives a report that a relevant offence offence has been committed he may send to the alleged offender a notice under this section (referred to in this section as a conditional offer); and where he issues a conditional offer the procurator fiscal shall notify the clerk of court specified in it of the issue of the conditional offer and of its terms.

  (2) In this section "a relevant offence" means any offence in respect of which an alleged offender could competently be tried before a district court, but shall not include a fixed penalty offence within the meaning of section 27(5) as extended by section 42(3) of the Transport Act 1982.

  (3) A conditional offer—

  (a) shall give such particulars of the circumstances alleged to constitute the offence to which it relates as are

  779
  necessary for giving reasonable information about the alleged offence;

  (b) shall state—

  (i) The amount of the fixed penalty for that offence;

  (ii) the amount of the instalments by which the penalty may be paid; and

  (iii) the intervals at which such instalments should be paid;

  (c) shall indicate that if, within twenty-eight days of the date on which the conditional offer was issued, or such longer period as may be specified in the conditional offer, the alleged offender accepts the offer by making payment of the fixed penalty or of the first instalment thereof to the clerk of court specified in the conditional offer at the address therein mentioned, any liability to conviction of the offence shall be discharged;

  (d) shall state that proceedings against the alleged offender shall not be commenced in respect of that offence until the end of a period of twenty-eight days from the date on which the conditional offer was issued, or such longer period as may be specified in the conditional offer; and

  (e) shall state that acceptance of the offer in the manner described in paragraph (c) above by the alleged offender shall not be conviction nor be recorded as such.

  (4) Where payment of the fixed penalty or of the first instalment has not been made to the clerk of court, he shall, upon the expiry of the period of twenty-eight days referred to in subsection (3)(c) above or such longer period as may be specified in the conditional offer, notify the procurator fiscal who issued the conditional offer that no payment has been made.

  (5) Proceedings shall not be brought against any person for the offence to which a conditional offer relates until the procurator fiscal receives notification from the clerk of court in accordance with subsection (4) above.

  (6) Where an alleged offender makes payment of the fixed penalty or of the first instalment to the clerk of court specified in the conditional offer no proceedings shall be brought against the alleged offender for the offence.

  (7) The fixed penalty under this section shall be such sum, not exceeding level 1 on the standard scale, as the Secretary of State may, by order made by statutory instrument subject to annulment in pursuance of a resolution of either House of Parliament determine; and an order under this subsection may contain provision as to the payment of the fixed penalty by instalments.

  (8) Subject to subsection (9) below, where an alleged offender accepts a conditional offer by paying the first instalment of the fixed penalty, any amount of the penalty which is outstanding at any time shall be treated as if the penalty were a fine imposed by the court, the clerk of which is specified in the conditional offer.

  (9) In the enforcement of a penalty which is to be treated as a fine in pursuance of subsection (8) above—

  (a) any reference (howsoever expressed) in any enactment (whether passed or made before or after the coming into force of this section) to—

  (i) the imposition of imprisonment or detention in default of payment of a fine shall be construed as a reference to enforcement by means of civil diligence;

  (ii) the finding or order of the court imposing the fine shall be construed as a reference to a certificate given in pursuance of subsection (10) below;

  (iii) the offender shall be construed as a reference to the alleged offender;

  (iv) the conviction of the offender shall be construed as a reference to the acceptance of the conditional offer by the alleged offender;

  (b) the following enactments shall not apply—

  (i) in the 1975 Act—

  section 395(1);

  section 395A(2);

  section 396(l) to (6);

  section 403(6);

  section 406;

  section 407, except subsection (1)(b);

  sections 408 and 409;

  section 411(3); and

  (ii) in the Criminal Justice (Scotland) Act 1980, section 52.

  (10) For the purposes of any proceedings in connection with, or steps taken for, the enforcement of any amount of a
  780
  fixed penalty which is outstanding, a document purporting to be a certificate signed by the clerk of court for the time being responsible for the collection or enforcement of the penalty as to any matter relating to the penalty shall be conclusive of the matter so certified.

  (11) The Secretary of State may, by order made by statutory instrument subject to annulment in pursuance of a resolution of either House of Parliament, make such provision as he considers necessary for the enforcement in England and Wales or Northern Ireland of any penalty (treated, in pursuance of subsection (8) above, as a fine) which is transferred as a fine to a court in England and Wales or, as the case may be, Northern Ireland.".

  59 Clause 53, page 48, line 41, after "section", leave out "2(2)" and insert "2".
  60 Page 48, line 42, after "indictment)", insert—
  "(a) in subsection (2).".
  61 Page 48, line 43, at end insert—
  "(b) after subsection (2) there shall be inserted the following subsections—
  "(3) Subject to subsection (4) below, where under any enactment passed or made before the commencement of section 53 of the Criminal Justice (Scotland) Act 1987 an offence is punishable on conviction on indictment by imprisonment for a term exceeding two years but the enactment either expressly or impliedly restricts the power of the sheriff to impose a sentence of imprisonment for a term exceeding two years, it shall be competent for the sheriff to impose a sentence of imprisonment for a term exceeding two but not exceeding three years.
  (4) Nothing in subsection (3) above shall authorise the imposition by the sheriff of a sentence in excess of the sentence specified by the enactment as the maximum sentence which may be imposed on conviction of the offence.".
  62 Page 48, line 43, at end insert—
  "(1A) In section 104 of the 1975 Act, after subsection (1) there shall be inserted the following new subsection—
  "(1A) Where under any enactment an offence is punishable on conviction on indictment by imprisonment for a term exceeding three years but the enactment either expressly or impliedly restricts the power of the sheriff to impose a sentence of imprisonment for a term exceeding three years, it shall be competent for the sheriff to remit the convicted person to the High Court for sentence under subsection (1) above; and it shall be competent for the High Court to pass any sentence which it could have passed if the person had been convicted before it".".
  63 Clause 54, page 49, line 30, after "Act", insert "subject to subsection (6) below,".
  64 Page 50, line 1, at end insert "and where a child who is released unconditionally is subject to a supervision requirement within the meaning of the 1968 Act, the effect of the supervision requirement shall, in the case of a supervision requirement imposed during the period of detention, commence or, in any other case, resume upon such release.".
  65 After Clause 54, insert the following new clause:
  ("Transcript of police interview sufficient evidence.
  —(1)Subject to subsection (2) below, for the purposes of any criminal proceedings, a document certified by the person who made it as an accurate transcript made for the prosecutor of the contents of a tape (identified by means of a label) purporting to be a recording of an interview between a police officer and an accused person shall be received in evidence and be sufficient evidence of the making of the transcript and of its accuracy.
  (2) Subsection (1) above shall not apply to a transcript—

  (a) unless a copy of it has been served on the accused not less than 14 days before his trial; or

  (b) if the accused, not less than six days before his trial, or by such later time before his trial as the court may in special circumstances allow, has served notice on the prosecutor that the accused challenges the making of the transcript or its accuracy.

  781
  (3) A copy of the transcript or a notice under subsection (2) above may be served personally or sent to the person on whom it is required to be served by registered post or by the recorded delivery service; and a written execution purporting to be signed by the person who served the transcript or notice, together with, where appropriate, a post office receipt for the relative registered or recorded delivery letter shall be sufficient evidence of such service.
  (4) Where subsection (1) above does not apply to a transcript, if the person who made the transcript is called as a witness his evidence shall be sufficient evidence of the making of the transcript and of its accuracy.".
  66 After Clause 54, insert the following new clause:
  "Evidence on commission.
  .—(1) Section 32 of the Criminal Justice (Scotland) Act 1980 (which permits, in certain circumstances, the taking and admission of evidence on commission or by letter of request) shall have effect subject to the amendments specified in subsections (2) and (3) below.
  (2) In paragraph (b) of subsection (1)—

  (a) after the word "who" there shall be inserted "(i)"; and

  (b) at the end of the paragraph there shall be inserted the words "or

  (ii) is not ordinarily resident in, and is, at the time of the trial diet, unlikely to be present in, the United Kingdom, Channel Islands or the Isle of Man."

  (3) In subsection (4) at the end there shall be added the words "; and without prejudice to the generality of the power to make it, such an Act of Adjournal may provide for the appointment of a person before whom evidence may be taken for the purposes of this section.".
  67 After Clause 57, insert the following new clause:
  ("Compensation requirement in probation order.
  .—(1) In each of sections 183 and 384 of the 1975 Act (probation orders) after subsection (5A) there shall (subject to subsection (2) below) be inserted the following subsections—
  "(5B) Without prejudice to the generality of subsection (4) above, where a court is considering making a probation order it may include in the probation order, in addition to any other requirement, a requirement that the offender shall pay compensation either in a lump sum or by instalments for any personal injury, loss or damage caused (whether directly or indirectly) by the acts which constituted the offence; and the following provisions of the Criminal Justice (Scotland) Act 1980 shall apply to such a requirement as if any reference in them to a compensation order included a reference to a requirement to pay compensation under this subsection—

  Section 58(2) and (3);

  section 59 (except the proviso to subsection (1));

  section 60;

  section 62;

  section 64 (except paragraph (a));

  section 67.

  (5C) Where the court imposes a requirement to pay compensation under subsection (5B) above—

  (a) it shall be a condition of a probation order containing such a requirement that payment of the compensation shall be completed not more than eighteen months after the making of the order or not later than two months before the end of the period of probation whichever first occurs;

  (b) the court, on the application of the offender or the officer of the local authority responsible for supervising the offender, may vary the terms of the requirement, including the amount of any instalments, in consequence of any change which may have occurred in the circumstances of the offender; and

  (c) in any proceedings for breach of a probation order where the breach consists only in the failure to comply with a requirement to pay compensation, a document purporting to be a certificate signed by the clerk of the court for the time being having jurisdiction in relation to the order that the compensation or, where payment by instalments has been allowed, any instalment has not been paid shall be sufficient evidence of such breach.".

  782
  (2) In inserting the new subsection (5B)—

  (a) into the said section 183, after the words "subsection (1)" in the reference in that new subsection to section 59 of the Criminal Justice (Scotland) Act 1980 there shall be added the words "and subsection (2)";

  (b) into the said section 384, after the words "subsection (1)" in that reference there shall be added the words "and subsection (3)".

  (3) In subsection (4) of each of the said sections 183 and 384 after the words "subsection (5A)" there shall be inserted the words "or (5B)".
  (4) In subsection (6) of each of the said sections 183 and 384 for the words "or (5A) there shall be substituted the words "(5A), (5B) or (5C)".
  (5) In each of sections 186(2)(a) and 387(2)(a) of the 1975 Act (failure to comply with requirements of a probation order) at the beginning of the paragraph there shall be inserted the words "except in the case of a failure to comply with a requirement to pay compensation and".".
  68 Clause 63, page 55, line 40, after "State" insert ", or by the Lord Advocate,".
  69 Clause 64, page 56, line 9, after "34", insert "[Insolvency practitioner dealing with property subject to restaint order].".
  70 Page 56, line 10, after "44", insert ",[Power to petition for winding up etc. on information obtained under s. 49] (a) and (b)".
  71 Page 56, line 13, leave out "and 54" and insert "54 and [Conditional offer of fixed penalty by procurator fiscal](11)".
  72 Page 56, line 14, leave out first "and".
  73 Page 56, line 14, leave out "section" and insert "sections [Enforcement in England and Wales] and".
  74 Page 56, line 14, leave out "extends" and insert "extend".
  75 Page 56, line 15, at end insert "; and section [Power to petition for winding up etc. on information obtained under s. 49] (c) extends to Northern Ireland only.".
  76 Page 56, line 16, leave out subsection (5)".
  77 Schedule 1, page 58, line 20, at end insert—
  "7A. In each of sections 141(3) and 346(3) (which permit the prosecutor or an accused to call a co-accused as a witness)—

  (a) after the words "guilty to" there shall be inserted the words "or been acquitted of ';

  (b) after the words "whether or not" there shall be inserted the words ", in a case where the co-accused has pleaded guilty to any charge,"; and

  (c) after the word "sentenced)" there shall be inserted the words "or in respect of whom the diet has been deserted".".

  78 Page 58, line 20, at end insert—
  "7B. In section 149(1) (calling additional evidence)—

  (a) for the words "after the close of that party's evidence and" there shall be substituted the words "at any time"; and

  (b) in paragraph (b) for the words "party's evidence was closed" there shall be substituted the words "jury was sworn".".

  79 Page 58, line 21, after "orders)", insert—

  "(a) after the word "offender" where it first occurs there shall be inserted the words "and having obtained a report as to the circumstances and character of the offender"; and

  (b).".

  80 Page 60, line 10, at end insert—
  ("The Contempt of Court Act 1981.
  .—(1) In section 15 (penalties for contempt of court in Scottish proceedings) after subsection (5) there shall be inserted the following subsection—
  "(6) For the purposes of section 60 of the Criminal Justice Act 1967 (release on licence of prisoners serving determinate sentences) a penalty of a period of imprisonment imposed for contempt of court shall be treated as a sentence of imprisonment within the meaning of the Act."

  783
  (2) Section 15, as amended, shall have effect as regards any penalty imposed before as well as after the coming into force of this paragraph.".
  81 Schedule 2, page 61, line 17, at end insert—

  "1972 c. 20.

  The Road Traffic Act 1972.

  In Schedule 4, Part I in the entry relating to section 1, the words "or, in the case of a conviction by a court in Scotland other than the High Court of Justiciary, 2 years.".".

  82 Page 61, line 17, column 3, at beginning insert "In".
  83 Page 61, line 36, at end insert—

  "1976 c. 67.

  The Sexual Offences (Scotland) Act 1976.

  In section 2D(5), in paragraph (a) the words "in the High Court of Justiciary"; and paragraph (b).".

  84 Page 61, line 36, at end insert—

  "1978 c. 49.

  The Community Service by Offenders (Scotland) Act 1978.

  In section 7, paragraph (c).".

  Lord Glenarthur: My Lords, the noble Lord having let me off in that way, I beg to move that the House do agree with the Commons in their Amendments Nos. 5 to 84.
  Moved, That this House do agree with the Commons in the said Amendments.(Lord Glenarthur.)
  On Question, Motion agreed to.

Family Law Reform Bill [H.L.]
6.58 p.m.
The Lord Chancellor (Lord Hailsham of Saint Marylebone): My Lords, I beg to move that the Commons amendments be now considered.
Moved, That the Commons amendments be now considered.—(The Lord Chancellor.)
On Question, Motion agreed to.

Family Law Reform Bill [H.L.]

  COMMONS AMENDMENTS
  [References are to Bill 70 as first printed for the Commons]
  1 Clause 15, page 10, line 11, leave out "of' and insert "or".
  2 Clause 26, page 17, line 41, leave out "(5)" and insert "(4).".
  3 Clause 29, page 19, line 10, leave out "(6)" and insert "(5)".
  4 Schedule 2, page 39, line 29, leave out first "of' and insert "or"
  5 Page 43, line 19, at end insert—
  "(2A) In subsection (3B) for the words "section 9(2)" there shall be substituted the words "section 11 B".".
  6 Page 44, line 38, leave out "2(2)(i), 2(2)(ii) or 2(3)" and insert "2(2) or (3)".
  The Lord Chancellor: My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 1 to 6.
  The amendments are purely technical. They fall into one of two classes. Some correct typographical errors. Others are minor amendments necessitated by
  784
  the passage of other substantive amendments to the Bill. I beg to move.
  Moved, That this House do agree with the Commons in the said amendments.—(The Lord Chancellor.)
  On Question, Motion agreed to.

Consumer Protection Bill [H.L.]
6.59 p.m.
Lord Lucas of Chilworth: My Lords, I beg to move that the Commons amendments be now considered.
Moved, That the Commons amendments be now considered.—(Lord Lucas of Chilworth.)
On Question, Motion agreed to.

COMMONS AMENDMENT
[References are to Bill 119 as printed for the Commons]
1 Clause 4, page 3, line 45, leave out "as to enable the existence of the defects to be discovered" and insert "that a producer of products of the same description as the product in question might be expected to have discovered the defect if it had existed in his products while they were under his control".
Lord Lucas of Chilworth: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 1.
This deals with development risks defence. The matter was debated at some length in your Lordships' House at every stage in the passage of the Bill. It is clear that both the other place and your Lordships' House agreed the need for this defence in the Bill as a part of the overall balance between the needs of industry and those of the consumer. We disagreed, however, over the wording of that defence.
When the Government introduced the Bill into your Lordships' House, it contained the form of words in the Bill before us today. On Report, an amendment moved by the noble Baroness, Lady Burton of Coventry, changed the wording to that in the European directive. This was agreed by the House. That decision was reversed in another place so that the Bill now contains the clearer wording with which it was introduced. No one doubts the importance of this defence in the Bill and for that reason it is equally important that the defence is understood by both producers and users of their products.
I have explained to your Lordships' House at both Committee and Report stages that we have used the words of the European directive where we can and where they are readily understood in the United Kingdom law. For most parts of the directive, and thus the Bill, this has been a satisfactory approach and has caused few problems. It has also confirmed the Government's intention, which has been to implement the European directive—no more and no less. However, where there is doubt or vagueness about the wording—and this is undeniably an example—in the interests of all concerned the Government have redrafted the words of the directive so as to make clear the intentions of the directive.
I do not intend, nor do I think I need, to repeat the arguments which were placed before your Lordships during the earliest stages of the Bill. However, perhaps

785
I may say this. Industry has made it quite clear that without a development risks defence in this Bill the future of this country's research and development leading to new products will be severely hampered. What is important now is how that development risks defence is understood by those who produce the products and by those who will insure the risks of those producers; because at the end of the day it is the insurers of the producers' risks who will provide the ultimate protection for any injured user of the product. It is important therefore that the precise nature of the risk is clarified so that premiums can be quantified.
The Government believe that the words in the directive are not clear. However, the directive's intention is clear. The only plausible interpretation of the directive is that the information that is to be taken into account is information that any reasonable person, looking at the matter in an objective way, would say that a producer of products of that kind should be expected to act upon. It is that meaning that we have conveyed in the draft before your Lordships today.
I do not think that I have to remind noble Lords of how narrow this defence will be for a producer or how difficult it will be for him to prove. The times when a producer will be able to rely on this defence will be very few indeed and will only be in those industries which are operating at the forefront of technological knowledge. However, those are the industries on which everyone in the United Kingdom will depend for their future. It is important that those industries understand just what this defence means and that their insurance companies can correctly assess those risks.
For those reasons I hope that your Lordships will see and accept the necessity for using the words that we have in this Bill. I beg to move.
Lord Williams of Elvel: My Lords, I am grateful to the Minister for explaining the reasons for the Commons Amendment No. 1. I am bound to say that we are somewhat disappointed that the Government did not accept the amendment that was passed on Division in your Lordships' House on Report. I am the more disappointed because in another place when this Bill was discussed the Minister in his Second Reading speech said that he wished to hear the views of both sides of the House before reaching a final decision. That was on 27th April 1987. As I understand those words, they meant that he had something of an open mind.
It appeared subsequently—because 27th April is not long ago—that the government collective mind hardened on the subject, and although there was only one speech on the Second Reading in another place that I can see (which came from Mr. Richard Page), arguing very strenuously in favour of the Government's original wording rather than your Lordships' amendment, nevertheless at Committee stage in another place the Government tabled an amendment seeking to reverse what your Lordships had done.
I should have thought that if the Government felt as strongly as they quite obviously do about the
786
amendment that your Lordships approved they would have made their views known in some way or another. I also believe that, had they felt strongly about it, the Minister in another place on Second Reading would have said, "We intend to reverse this." Although there is nothing unconstitutional about this, it would have been customary. One of the points about the revising nature of your Lordships' House is that we have a chance in normal circumstances when the Commons decide to reverse one of our amendments—in particular an amendment that was carried on a Division—to have a full discussion of what the reasons were.
In the circumstances I can only say that with reluctance, but understanding the timetable that has to go forward because of events that are outside your Lordships' control, we on these Benches will not oppose this amendment.
Baroness Burton of Coventry: My Lords, I regret very much the action of the Government in the matter of this particular amendment. Even more than that I regret the manner in which it has been done. I should like to say straight away that that is not a criticism of the noble Lord, Lord Lucas. I am referring to matters outside this Chamber altogether.
At Report stage on 9th March we had a useful discussion on the amendment put forward by myself and supported by the noble Lord, Lord Morton of Shuna, from the Labour Benches, by the noble Lord, Lord Allen of Abbeydale, from the independent ones, and by the noble and learned Lord, Lord Denning, with his wealth of legal experience.
Apart altogether from this amendment, several noble Lords had suggested in previous discussions on the Bill that we should support the proposition that we keep to the words of the directive. Noble Lords and myself wished to do so on this occasion because it seemed to us that the modification put forward by the Government draftsman had surely softened the demands made upon United Kingdom producers. Instead of having to prove that the state of knowledge was not such as to enable the existence of the defect to be discovered at all, we found that what I would term more wishy-washy concepts were introduced. Clause 4(1)(c) stated:
"might be expected to have discovered the defect if it had existed in his products while they were under his control".
But there was nothing in the directive about that. Our argument was accepted by noble Lords and the amendment was agreed to.
In another place on Second Reading on 27th April the Minister, Mr. Michael Howard, in answer to an interruption from a Conservative Member, said:
"Some have welcomed that amendment, but others have opposed it. I wish to hear the views of both sides of the House before reaching a final decision".—[Official Report, Commons, 27/4/87; col. 53]
Moving on to Standing Committee D, meeting on 5th May, I must confess that I find myself at a loss. At col. 32 of the Official Report for that day the Minister said:
"Government Amendment No. 11 concerns the working of the defence. When the defence was originally introduced in the Bill, it was worded in the same way as that contained in the present amendment. During the Bill's passage through the other place, the words were changed to resemble more nearly the words in the

787
directive. I accept that the words in the Bill now resemble more nearly the words in the directive, but that, I fear, is their only real merit".
We in this House thought that real merit had carried the day. Reverting to Standing Committee D, I can find no evidence that the government amendment was either put or voted on and I am wondering whether the Minister, before he replies, would look at col. 36 of the Official Report of the Standing Committee. Perhaps he could enlighten us on that matter.
As I said at the beginning, I very much regret the refusal to accept the amendment passed by this House and particularly the manner in which it has been done. I want to convey to the House that I feel very strongly about this—not about losing a particular issue because somebody has to win and somebody has to lose—because this issue was not settled by argument. It was not settled by vote, but by arrangement. I think that was quite disgraceful.
Lord Airedale: My Lords, did I hear the Minister say that the Government have redrafted the directive? If he said that, did he strictly mean it? Surely even the English language version of the directive is under the control of the Community. If member states are to be allowed to redraft their language version of a directive, at the end of that road we shall arrive at chaos.
Lord Allen of Abbeydale: My Lords, I too, should like to say how sorry I am that the Government decided to reverse engines and to put back the form of words which had been replaced in this House by an amendment which was voted on after full discussion. I am equally sorry that we have still not heard or read any satisfactory explanation—I say this with no disrespect to the Minister—but I suppose we never shall.
The noble Lord, Lord Williams, referred to a decision of the collective mind of government. But I cannot help wondering at what level of government the issue was put. We shall presumably never know that, either, unless we all survive for another 30 years, which seems a somewhat improbable hypothesis.
The CBI briefing—the CBI was kind enough or perhaps rash enough to send me a copy—argues in effect that the amendment now before us will make it easier for a company to mount the defence of development risks. But as the form of words approved of here (as has been pointed out) followed the wording of the directive, what the CBI must be saying is that the clause with the amendment before us will be more favourable to industry than will the directive itself—the directive which the Bill purports to implement. If that is so, it seems to be a pretty serious state of affairs. I am no lawyer, but without going into a detailed discussion at this stage I feel that the substitution of a subjective for an objective test is doubtfully consistent with the directive. Indeed, the whole sense of the wording of the amendment is that the test is whether a producer might reasonably be expected to have discovered the defect. Indeed, I believe that is the interpretation which the Minister put on it when he was explaining the amendment.
I can just see it being argued that a small producer, for example, could not reasonably be expected to carry
788
out any extensive inquiries; but that is not what the directive provides. I cannot help thinking that the Government may be laying up trouble for themselves in the European Court. We shall see.
Although I go along with the view that the Bill as a whole should be lost, tempting though it is to call a Division when one looks at the serried ranks opposite, I regard the action which has been taken as pretty deplorable. I do not think that the Government will be able to look back with any pride on their surrender to the arguments of industry which seem to me largely misconceived and in defiance of the considered view of this House.
Lord Lucas of Chilworth: My Lords, I appreciate the views that the noble Baroness and the noble Lords have made. The noble Lord, Lord Williams, encapsulated, perhaps for all of us, some of the feelings that some of your Lordships might have had over this matter. However, I say to the noble Baroness, Lady Burton, (who referred to the Standing Committee in another place) that it is not for me to comment about the way another place conducts its business; but the amendment was made and this is shown on the record. No vote was taken. Indeed, no vote was needed, so that in effect no further education is needed.
So far as concerns the comment of the noble Lord, Lord Airedale, I did not mean to say that the text of the directive was redrafted. That, as the noble Lord said, was a Community matter; but member states are all free to implement the directive in their own legislation in their own words. This we have done on a number of occasions. As I sought to underline, here we originally made the change which has been sustained in another place purely for the sake of clarity.
To the noble Lord, Lord Allen of Abbeydale, I say that we do not believe that we are storing up trouble for ourselves within the Community largely because of what I have said in answer to the noble Lord, Lord Airedale. I understand the passionate feeling that the noble Lord has about this matter. I take the opportunity, if it is of some comfort to the noble Lord, to remind your Lordships that the development risks defence will be reviewed 10 years after the date of notification of the product liability directive. That will be in July, 1995, eight years from now. The decision about this defence will be considered again throughout the community after we have had the benefit of eight years' experience of the legislation. I beg to move.
On Question, Motion agreed to.
7.15 p.m.

COMMONS AMENDMENT
2 Clause 9, page 6, line 37, after "tort", insert "or in reparation".
Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendment No. 2. This amendment adapts clause 9(2) for Scotland. I beg to move.
Moved, That this House do agree with the Commons in the said amendment—(Lord Lucas of Chilworth.)
On Question, Motion agreed to.

COMMONS AMENDMENT
3 Clause 25, page 22, line 49, at end insert—
"(1A) A contravention of a code of practice approved under this section shall not of itself give rise to any criminal or civil liability, but in any proceedings against any person for an offence under section 20(1) or (2) above—

(a) any contravention by that person of such a code may be relied on in relation to any matter for the purpose of establishing that that person committed the offence or of negativing any defence; and

(b) compliance by that person with such a code may be relied on in relation to any matter for the purpose of showing that the commission of the offence by that person has not been established or that that person has a defence."

4 Page 23, line 6, leave out "this Part" and insert "subsection (1A) above".
Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendments Nos. 3 and 4 en bloc. The House will recall that when the Bill was passing through your Lordships' House we debated at some length the issue of what kind of legal status the code of practice on price indications should have. As it then stood the Bill provided that compliance with the code should be a complete defence to a charge of giving a misleading price indication. Many of your Lordships took the view that the status proposed by the so-called concordat was preferable. That is, joining the National Consumer Council, the Retail Consortium, the Local Authorities Co-ordinating Body on Trading Standards and the National Federation of Consumer Groups.
In the light of the views expressed by your Lordships I undertook that we would consult further with interested parties on this matter. At that time I made it clear that my honourable friend would bring forward any necessary amendments to reflect the outcome of the consultations in another place since it would not be possible to complete the consultations before the Bill completed its passage through your Lordships' House.
In the event the consultations revealed a consensus in support of the status proposed by the concordat, and my honourable friend the Parliamentary Under-Secretary of State for Consumer Affairs announced the Government's intention to lay amendments to achieve this status during the Bill's Second Reading in another place. These amendments achieve what the concordat sought; that is, contravention of, or compliance with, the code will tend to establish whether or not an offence has been committed but will not be conclusive.
Failure to comply with the code will not be an offence, as I think the amendment makes clear. However, it will be a relevant factor for the court to take into account in determining whether a price indication was misleading. If the court is satisfied that a misleading price indication has indeed been given, then the defences provided by the Bill may arise. The code may, in some circumstances, be relevant to some of these defences, in particular the due diligence defence provided by Clause 39.
In these circumstances the amendment will also enable compliance with, or contravention of, the code to be taken into account by the court in determining whether or not the defence has been established. So a trader who complied with the code would not have a complete defence, but he would be very unlikely to be
790
convicted of an offence. I believe that it will only be in the very unusual circumstance that an enforcement authority will bring a prosecution against a trader who has complied with the code's relevant provisions.
In the light of these considerations I believe that the status given by this amendment would give honest traders almost the degree of confidence that would have followed from the Government's own proposals. However, should, if I may use the expression, rogue traders find any loophole in the code, which can be exploited to give a misleading price indication, the courts will now have the opportunity to convict in appropriate circumstances. There will therefore be real incentives for traders to comply with the code, which I am sure we can all agree is the desirable outcome.
Given the extent of support indicated for this alternative in both Houses and outside Parliament, and the nature of that support, coming as it does from those who will be most closely involved in operating the new legislation, I think that this amendment is the most appropriate way in which to proceed.
Moved, That this House do agree with the Commons in the said Amendments.—(Lord Lucas of Chilworth.)
Lord Williams of Elvel: My Lords, we are grateful to the Minister for explaining the reasons that the Government introduced this amendment in another place and why we are now being asked to consider these Commons amendments. Your Lordships will be aware, as the Minister says, that this was the object of considerable discussion in your Lordships' House at, I think, all stages of the Bill.
I think that on Third Reading of the Bill in this House we moved an amendment in order to allow us proper time to discuss any amendments that the Government might put down in the other place because, as the noble Lord rightly explained, the Government felt that they were unable to reach a decision while the Bill was with your Lordships, and they felt that a proper decision would be taken after consultation and amendments moved in another place.
When they took this decision I think that we on this side—and I hope I can speak for noble Lords on all Benches on this side—felt that our proper course of action was to make sure that we were able, by procedural means, to have a full discussion of what eventually came from the other place.
I understand what the noble Lord is saying: that the Government have decided, after consultation, that the concordat is the right way to go about it, and I shall not quarrel with that. Nevertheless, failing a full discussion, which I was rather expecting had not external events intervened, I should like an assurance from the noble Lord that the code of practice referred to in Commons Amendment No. 3 will not be the code that we saw when we were discussing the matter in your Lordships' House at various stages of the Bill, but that it will be a code which is redrafted in order to achieve, first, clarity, and secondly, consistency with Amendment No. 3 before your Lordships at the moment. If the Minister can give us that assurance, I shall be happy not to oppose this amendment.
Baroness Burton of Coventry: My Lords, the Minister will remember that during our discussions on this point I took strong exception to the fact that this House was not able to discuss the matters which had been referred to the concordat, particularly in view of the fact that I think the Government have twice refused to accept the views put forward by the concordat, which they could have discussed in this House.
As the Bill started in this House, I felt that it was the right of your Lordships, never mind the duty, to be able to discuss these matters relating both to the code of practice and the misleading prices. Although I am glad that apparently the Government have now accepted what the concordat has put forward, I should like to register once more my regret that this Hous was not able to play its full part in the deliberations, which it should have been able to do.
Lord Lucas of Chilworth: My Lords, in acknowledging the noble Baroness's feelings on this matter, I must confess that I find it perhaps more profitable to look forward rather than backwards, accepting what the noble Lord, Lord Williams of Elvel, said, that here we have circumstances which greatly changed what might have been. However, we are in fact faced with that, and I think that the outcome is probably the same as regards the status.
The noble Lord asked a particular question. I assure the noble Lord that the code will be considered again. It will be subject to further consultation procedure as set down in Clause 25. Indeed that is happening now. My feeling is that that which we saw some weeks ago now will be quite radically altered to take account of all the views that have been expressed and the consultations that are going on.
Baroness Burton of Coventry: My Lords, before the Minister sits down perhaps I may ask him a question on the matter of the status of the code of practice. Does the noble Lord think that there will be any opportunity, if we so desired, to discuss this in your Lordships' House—I was going to say in the forthcoming Session, but when we return—so that we really could have the opportunity, which I think was assured us, of a full discussion on what has been agreed?
Lord Lucas of Chilworth: My Lords, if I recall correctly, what was promised was that the discussions that were going to take place as a result of the concordat's proposals—which were put before the Government some six or seven days before that part of the Bill was reached in your Lordships' House—would take some time, and the outcome of those consultations would be reflected in amendments in another place.
That indeed took place. I certainly added that therefore we would have the opportunity of discussing this at a later stage. As the noble Lord, Lord Williams, says, other events have taken place so that we are, in effect, denied the opportunity of discussing the status of the code in relation to this Bill. The code must be approved by order and that could be debated, but the status cannot.
On Question. Motion agreed to.

COMMONS AMENDMENTS
5 Clause 31, page 28, line 27, leave out "forty-eight hours" and insert "two working days.".
6 Page 28, line 30, at end insert—
"(2A) In subsection (1) above the reference to two working days is a reference to a period of forty-eight hours calculated from the time when the goods in question are seized but disregarding so much of any period as falls on a Saturday or Sunday or on Christmas Day, Good Friday or a day which is a bank holiday under the Banking and Financial Dealings Act 1971 in the part of the United Kingdom where the goods are seized.".
7.30 p.m.
Lord Lucas of Chilworth Lord Lucas of Chilworth My Lords, I beg to move that this House do agree with the Commons in their Amendments Nos. 5 and 6. It may be for the convenience of your Lordships if I speak also to their Amendments No. 19 and 20.
This issue was debated extensively during the passage of the Consumer Safety (Amendment) Act last year and also while this Bill was passing through its earlier stages in this House.
We have listened carefully to the discussions on this subject and have given further consideration to the potential difficulties of enforcement. In the light of this, we accept that significant difficulties may arise where the 48-hour period encompasses a weekend or bank holiday. To overcome these difficulties, we propose that the period during which Customs and Excise may detain imported goods should be altered to two working days. This point was forcibly raised by either the noble Lord, Lord Graham of Edmonton, or the noble Baroness, Lady Nicol. This will make no difference in the majority of cases. But it will allow enforcement authorities much greater flexibility in those cases where real difficulties may arise. I hope that the House will agree that this allows an adequate time for the limited purposes of this provision. I beg to move.
Move, That this House do agree with the Commons in the said amendments.—(Lord Lucas of Chilworth.)
Lord Williams of Elvel: My Lords, I am grateful to the Minister. This involves a sensible adjustment of the Government's view, and we welcome it. It will give reassurance to trading standards officers and Customs and Excise officers, and we are pleased about the amendment.
Lord Brougham and Vaux: My Lords, I should like to thank my noble friend and the Government for bringing forward these sensible amendments.
On Question, Motion agreed to.

COMMONS AMENDMENT
7 Clause 45, page 37, line 7, at end insert—
"(5) In Scotland, any reference in this Act to things comprised in land by virtue of being attached to it is a reference to moveables which have become heritable by accession to heritable property.'.
Lord Lucas of Chilworth: My Lords, with the leave of the House, I beg to move that this House do agree with the Commons in their Amendment No. 7. This amendment translates for Scotland references in the Bill to:
"things comprised in land by virtue of being attached to it".
It is a technical amendment. I beg to move.
Moved, That this House do agree with the Commons in the said amendment.—(Lord Lucas of Chilworth.)
On Question, Motion agreed to.

COMMONS AMENDMENTS
8 Clause 46, page 37, line 12, leave out ", or a contract for work and materials,".
9 Page 37, line 13, at end insert—
"() the performance of any contract for work and materials to furnish the goods;".
10 Page 37, line 36, at end insert—
"(2A) Subject to subsection (3) below, the performance of any contract by the erection of any building or structure on any land or by the carrying out of any other building works shall be treated for the purposes of this Act as a supply of goods in so far as, but only in so far as, it involves the provision of any goods to any person by means of their incorporation into the building, structure or works.".
Lord Lucas of Chilworth: My Lords, with the leave of the House, I beg to move that this House do agree with the Commons in their Amendments Nos. 8, 9 and 10 en bloc.
The purpose of this group of amendments is to make it quite clear that a builder will not be liable under the Bill for damage caused by defects in a building he has constructed, but that nevertheless he will be a supplier of the components used to make up that building. It also corrects a minor problem with Clause 46, which suggests that supply might inter alia consist in entering into a contract for work and materials to furnish goods when the actual supply takes place upon the performance of that contract. I beg to move.
Moved, That this House do agree with the Commons in the said amendments.—(Lord Lucas of Chilworth.)
On Question, Motion agreed to.

COMMONS AMENDMENT
11 Page 38, line 15, at end insert—
"(7A) A ship, aircraft or motor vehicle shall not be treated for the purposes of this Act as supplied to any person by reason only that services consisting in the carriage of goods or passengers in that ship, aircraft or vehicle, or in its use for any other purpose, are provided to that person in pursuance of an agreement relating to the use of the ship, aircraft or vehicle for a particular period or for particular voyages, flights or journeys.".
Lord Lucas of Chilworth: My Lords, with the leave of the House, I beg to move that this House do agree with the Commons in their Amendment No. 11.
Noble Lords will be aware that as Clause 46 stands it defines supplying goods to include hiring out or lending goods. The definition of supply is of course important for the purposes of Part I of the Bill, where a person who has not supplied the goods has a defence to liability under Part I, and a supplier can pass back that liability to earlier persons in the chain of distribution.
Your Lordships will also be aware that complicated variations upon the theme of hiring out are common in the transport field. Ships, for example, can be chartered on a demise charter basis, or on a time or voyage charter basis. Aircraft are sometimes hired out,
794
but sometimes their services are made available by what are called wet lease arrangements. In these latter arrangements, and with time and voyage charters for ships, it is the services provided by the aircraft or ship that are truly supplied rather than the ship or aircraft itself, and to this end the ship or aircraft comes complete with its crew.
Accordingly, this amendment makes it clear that such arrangements, where services are provided consisting in the carriage of goods or passengers in ships, aircraft or other vehicles, do not amount to a supply of the ship, aircraft or vehicle concerned. I beg to move.
Moved, That this House do agree with the Commons in the said amendment.—(Lord Lucas of Chilworth.)
Lord Williams of Elvel: My Lords, it is my understanding that there may be an error in the printing of Amendment No. 11. In line 5 of the amendment, the first word "the" should be struck out; and in the last line after the word "or" and in front of the words "particular voyages" the word "for" should have been inserted by the printers. I believe that I am right in that respect, and if I am then we are happy to accept that the printers made an error and we have no problem with this amendment.
Lord Lucas of Chilworth: My Lords, the noble Lord is right and I am grateful to him for pointing out the error.
On Question, Motion agreed to.

COMMONS AMENDMENT
12 Clause 47, page 38, line 16 leave out from "requiring" to end of line 20 and insert "any person to produce any records if he would be entitled to refuse to produce those records in any proceedings in any court on the grounds that they are the subject of legal professional privilege or, in Scotland, that they contain a confidential communication made by or to an advocate or solicitor in that capacity, or as authorising any person to take possession of any records which are in the possession of a person who would be so entitled.".
Lord Lucas of Chilworth: My Lords, with the leave of the House, I beg to move that this House do agree with the Commons in their Amendment No. 12.
The purpose of this amendment is to amend the saving for certain privileges in Clause 47 to a form more consistent with recent legislation. The original drafting was drawn from the Consumer Safety Act 1978. This brings it into line with more current drafting. I beg to move.
Moved, That this House do agree with the Commons in the said amendment.—(Lord Lucas of Chilworth.)
On Question, Motion agreed to.

COMMONS AMENDMENT
13 Clause 50, page 39, line 14, at end insert—
"(2A) The Secretary of State shall not make an order under subsection (2) above bringing into force the repeal of the Trade Descriptions Act 1972, a repeal of any provision of that Act or a repeal of that Act or of any provision of it for any purposes, unless a draft of the order has been laid before, and approved by a resolution of, each House of Parliament.".
Lord Lucas of Chilworth: My Lords, with the leave of the House, I beg to move that this House do agree with the Commons in their Amendment No. 13.
It may help the House if I outline very briefly the background to this amendment. The Trade Descriptions Act 1972 requires imported goods bearing a UK name or mark to be accompanied by an indication of the country of origin. It does not impose general origin marking requirements. It is intended to protect consumers against being misled by goods which are presented in certain potentially misleading ways. The Commission has indicated that it considers the Act to be incompatible with the Treaty of Rome and has taken the first step in infraction proceedings which would lead to a case in the European Court of Justice if we were not to repeal the Act.
On the basis of the court's case law—and in particular its adverse decision against the UK's 1981 origin marking order—the Government considered that there was little prospect of winning such a case and decided, reluctantly to repeal it but at the same time to seek a successor regime which would provide broadly equivalent protection to consumers while being compatible with Community law.
The Government were conscious that Members on all sides of both Houses feel strongly about the issue of origin marking and that many may feel that it would be wrong to settle important changes to the law in this area without an opportunity for fuller debate than the present situation allows. With this in mind, my honourable and learned friend tabled this amendment which provides that the commencement order giving effect to the repeal of the 1972 Act will be subject to the affirmative resolution procedure.
This is somewhat unusual for a commencement order but I think that it meets the situtation in which we find ourselves today. It will relieve the forthcoming Parliament from the burden of repeating the primary legislative process while at the same time ensuring that the implications of repeal can be properly debated before it takes effect and by reference to proposals for successor arrangements.
I think I ought also to inform your Lordships that our latest exchanges with the Commission lead us to believe that it is likely to be possible to introduce a successor regime acceptable in Community law. This would provide a valuable degree of continuing protection to consumers in the form of an obligation to provide an indication of origin in any case where goods are presented in such a way that they can reasonably be expected to create the impression in the mind of the consumer that they were manufactured or produced in a different place from that in which they were in fact manufactured or produced. It would then be the Government's intention to introduce such a regime by order under Section 8 of the Trade Descriptions Act 1968 after the due process of consultation required by that Act. It would also be the Government's intention that the entry into force of such an order would be synchronised with that of the commencement order providing for the repeal of the 1972 Act.
That is a somewhat lengthy explanation but I think it is a point that aroused some concern and I hope that what I have said will satisfy noble Lords, I beg to move.
Moved, That this House do agree with the Commons in the said amendment.—(Lord Lucas of Chilworth.)
Lord Williams of Elvel: My Lords, I am most grateful to the noble Lord for reviewing the situation and bringing us up to date this evening. This was an issue which created considerable feeling, as he rightly pointed out, in your Lordships' House and in another place. We are glad that the Government have been able to concede the point that we would have a further debate on the matter before anything happens. I was most interested to hear what the noble Lord had to say subsequent to that and I hope the Government will be able to find a formula which preserves the spirit of what he said. We are glad to support this amendment.
Lord Brougham and Vaux: My Lords, I, too, would agree with the noble Lord, Lord Williams, that this is a highly desirable and acceptable amendment. As the noble Lord has already said, it is something which we debated at some length in your Lordships' House and I thank the Government for having brought this forward.
On Question, Motion agreed to.

COMMONS AMENDMENTS
14 Schedule 1, page 42, line 40, leave out from "unless" to "and" in line 41 and insert "a relevant claim was made within that period and has not been finally disposed of.".
15 Page 42, line 42, at end insert—
"(1A) If. at the expiration of the period of 10 years mentioned in subsection (1) above, a relevant claim has been made but has not been finally disposed of, the obligation to which the claim relates shall be extinguished when the claim is finally disposed of.".
16 Page 42, line 43, at end insert—
"a claim is finally disposed of when—

(a) a decision disposing of the claim has been made against which no appeal is competent;

(b) an appeal against such a decision is competent with leave, and the time limit for leave has expired and no application has been made or leave has been refused;

(c) leave to appeal against such a decision is granted or is not required, and no appeal is made within the time limit for appeal; or

(d) the claim is abandoned.".

Lord Lucas of Chilworth: My Lords, with the leave of the House, I beg to move that this House do agree with the Commons in their Amendments Nos. 14, 15 and 16 en bloc. Perhaps I should draw your Lordships' attention to a printing error on the Marshalled List in Amendment No. 16. It states
"Page 42, line 43, at end insert".
The last line of paragraph (b) should read:
"and no application has been made or leave refused".
The words "has been" have to be inserted between the word "leave" and the word "refused".
These amendments clarify when the liability to make reparation for a defective product is extinguished in Scotland. They are largely technical, and I beg to move.
Moved, That this House do agree with the Commons in the said amendments.—(Lord Lucas of Chilworth.)
On Question, Motion agreed to.

COMMONS AMENDMENT
17 Page 43, line 31, after "him", insert "in all the circumstances.".
Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendment No. 17. This is a drafting amendment, and I beg to move.
Moved, That this House do agree with the Commons in the said amendment.— (Lord Lucas of Chilworth.)
On Question, Motion agreed to.

COMMONS AMENDMENT
18 Page 45, line 4, leave out "(g)" and insert "(gg)".
Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendment No. 18. I think your Lordships will probably recall that this particular page and line caused some amusement at an earlier stage. It might cause a little further amusement this evening, because all I have to say about the amendment is that it is a drafting amendment. I beg to move.
Moved, That this House do agree with the Commons in the said amendment.—(Lord Lucas of Chilworth.)
Lord Williams of Elvel: My Lords, we are particularly pleased with this amendment and my noble friend Lord Morton of Shuna will be delighted that the Government have accepted what was, I think, his original point.
On Question, Motion agreed to.

COMMONS AMENDMENTS
19 Schedule 3, page 52, line 20, leave out "forty-eight hours" and insert "two working days".
20 Page 52, line 23, at end insert—
"(3) In subsection (1) above the reference to two working days is a reference to a period of forty-eight hours calculated from the time when the goods in question are seized but disregarding so much of any period as falls on a Saturday or Sunday or on Christmas Day, Good Friday or a day which is a bank holiday under the Banking and Financial Dealings Act 1971 in the part of Great Britain where the goods are seized.".
Lord Lucas of Chilworth: My Lords, with the leave of the House, I beg to move that this House do agree with the Commons in their Amendments Nos. 19 and 20. I spoke to these when we were discussing Amendments Nos. 5 and 6 but I regret that again I have to draw your Lordships' attention to a further printing error on the Marshalled List which occurs in Amendment No. 20, "Page 52, line 23". On the last but one line—here we are dealing with working days—the Marshalled List as printed says:
"or a day which is a bank holiday under the Banking Financial Dealings Act 1971".
The word "and" should be added between the words "Banking" and "Financial Dealings". I beg to move.
Moved, That this House do agree with the Commons in the said amendments.—(Lord Lucas of Chilworth.)
Lord Airedale: My Lords, is it not rather a curiosity that in describing two working days, this being a definition, the words are used as they are? Would it not be easier to say that " 'two working days' means so and so" instead of saying,
"the reference to two working days is a reference to",
and so on? However, I do not think it matters all that much at this moment.
On Question, Motion agreed to.

COMMONS AMENDMENT
21 Schedule 4, page 55, line 41, at end insert—
"The Insolvency Act 1986
12. In section 281(5)(a) of the Insolvency Act 1986 (discharge from bankruptcy not to release bankrupt from liaility in respect of personal injuries), for the word 'being' there shall be substituted the words "or to pay damages by virtue of Part I of the Consumer Protection Act 1987, being in either case".".
Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendment No. 21. The purpose of this amendment is to ensure that a discharge from bankruptcy does not release the bankrupt from liability to pay damages under Part I of the Bill. I beg to move.
Moved, That this House do agree with the Commons in the said amendment.—(Lord Lucas of Chilworth.)
On Question, Motion agreed to.

COMMONS AMENDMENT
22 Page 55, line 41, at end insert—
"The Motor Cycle Noise Act 1987
For paragraphs 3 to 5 of the Schedule to the Motor Cycle Noise Act 1987 (enforcement) there shall be substituted the following paragraph—
"3. Part IV of the Consumer Protection Act 1987 (enforcement), except section 31 (power of customs officer to detain goods), shall have effect as if the provisions of this Act were safety provisions within the meaning of that Act; and in Part V of that Act (miscellaneous and supplemental), except in section 49 (Northern Ireland), references to provisions of the said Part IV shall include references to those provisions as applied by this paragraph.".".
Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendment No. 22. This is a technical amendment to replace references in the Motor Cycle Noise Bill with the enforcement provisions of the Consumer Safety Act 1978 by reference to Part IV of this Bill. I beg to move.
Moved, That this House do agree with the Commons in the said amendment.—(Lord Lucas of Chilworth.)
On Question, Motion agreed to.

Local Government Bill
7.48 p.m.
Baroness Hooper: My Lords, on behalf of my noble friend Lord Skelmersdale, I beg to move that the Bill be now read a second time.
This is a short but important Bill containing two provisions. First, it contains provisions to prevent

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authorities using advance and deferred purchase schemes to avoid the Government's capital expenditure controls and store up major financial liabilities for the future. Secondly, it makes minor adjustments to the arrangements for paying block grant relating to expenditure on further education.
Advance and deferred purchase schemes have a long and reasonably respectable history, but recently they have been transmuted by a minority of authorities into creative accounting devices as a means of evading the Government's spending controls on a grand scale. In that guise such devices are just borrowing masquerading as expenditure.
My right honourable friend the Secretary of State announced in another place last July that he would be bringing forward legislation to stop this abuse. These schemes make use of a bank or other intermediary to transfer expenditure artificially from the year when work is done and would normally be paid for in an earlier or later year. The interest is rolled up and the first payments deferred, usually for at least three years.
If indulged in on any scale, as in some authorities, these devices store up massive problems for ratepayers, regardless of future election results. The Audit Commission Report on the management of London's authorities, published earlier this year, identified eight boroughs that have entered deferred purchase arrangements amounting to over £550 million.
The Government deplore the use of any creative accounting device which leaves ratepayers facing huge bills in the future. No doubt some authorities are relying on an incoming Labour Government to bail them out of the financial consequences of using these devices. I feel I must say that I think they will have to wait a long time.
This sort of device has to be curbed. To deal with this problem, Clause 1 and the schedule to the Bill define the time at which an authority will be treated as incurring expenditure against its spending ceiling by reference to the time at which works are carried out, regardless of when payments are actually made. The new provisions apply to all works carried out under arrangements to which an authority became or becomes committed after 22nd July 1986.
Regulation-making powers will enable my right honourable friend to make exemptions from the provisions in the Bill, or to modify them in other ways, if that proves necessary. My right honourable friend promised an exemption to allow authorities to continue to use deferred purchase schemes prudently for their original purpose; that is to say, for an occasional, one-off project, which would be difficult to accommodate within their spending ceiling for a single year.
My honourable friend, the Minister for Local Government announced details of the exemptions during Committee stage in another place. All authorities in England and Wales will be able to use deferred purchase schemes to finance one project each, up to £3 million in cost, beginning in any one period of five consecutive years. We shall make the necessary regulations as soon as possible after Parliament reassembles.
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Also, all authorities will be able to continue to carry out their "building under licence" and "improvement under licence" housing schemes. Without this exemption, a number of housing projects were likely to be prevented or at least delayed in the period before Royal Assent. For this reason, we decided that the exemption should be backdated to 23rd July 1986, the date on which these provisions of the Bill come into effect.
During the Bill's consideration in another place, my honourable friend accepted Opposition amendments to improve the drafting of this part of the Bill. He was also able to agree that my right honourable friend should consult before making any directions about the method of calculating the value of works, should he choose to use his powers in the Bill to make such directions. The Opposition in another place argued that in such a complex and technical area consultation was desirable. We agree with that and the Bill has been amended accordingly.
The remainder of the Bill deals with education pooling. There is a technical amendment to the provision which allows for an adjustment between England and Wales. Then there is a provision to allow my right honourable friend the Secretary of State for Education and Science to recalculate allocations from the advanced further education pool for 1981–82 in the manner originally intended. These provisions are uncontroversial and have the agreement of the local authority associations. Your Lordships asked during the consideration of the Education Act last year that an amendment on these lines be included, and I am happy to be able to bring a suitable provision before your Lordships' House today.
As your Lordships know, the Government have decided in present circumstances not to proceed with the housing provisions which were originally in this Bill in the present Session of Parliament.
However, we intend to reintroduce in the new Parliament provisions which will give local housing authorities an explicit new power to give financial assistance in connection with the provision of privately let housing. We also intend to reintroduce the provisions requiring the Secretary of State's consent for the exercise of this or any other power by local housing authorities or county councils to provide financial assistance or a gratuitous benefit in this connection except in the circumstances originally set out in this Bill. The need for consent will be made retrospective to 6th February 1987, as it was in the present Bill. The new Bill will also, as in this Bill, provide that any transaction entered into after 5th February in contravention of the requirement for the Secretary of State's consent will be void.
Meanwhile, we intend to continue to issue general consents and special consents for individual projects submitted to us where appropriate. These consents will be issued as if the new Bill were in force. We shall ensure that general and special consents already issued continue in force. The Department of the Environment has written to all the authorities affected, drawing their attention to this announcement, in order to prevent any misunderstanding. Indeed, that is why I have explained the intentions of the provisions as clearly as possible now.

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We have also withdrawn for the time being the provisions to improve the operation of the land registers system. Again, we shall return to the matter in the new Parliament.
This is a short Bill, but it contains important provisions to protect the ratepayer. The Opposition in another place expressed the view that it was desirable for this Bill, in its abbreviated form, to reach the statute book before Parliament is dissolved. With that aim, I commend it to your Lordships.
I beg to move.
Moved, That the Bill be now read a second time.—(Baroness Hooper.)
7.55 p.m.
Baroness David: My Lords, I thank the Minister for her explanation of the Bill. It is a very different Bill from the one that was proposed very much earlier in the year when all sorts of privatisation measures, contract compliance and so on were intended. It is also a very different Bill from the one that was introduced in February. I think that it is the forty-third piece of local government legislation in the last eight years and the third this year. But we are agreed that there has been a fairly satisfactory compromise reached.
Of course there was a good deal of feeling about the deferred purchase clause—Clause 1, and Schedule 1 that went with it—but I know that my honourable friends in another place decided that, with the amendments that were agreed at Third Reading, which had been proposed by my honourable friends in Committee and to which the Minister agreed, it was probably sensible to accept Clause 1. Local authorities had been acting as if it were the law, and to remove uncertainty it was thought that it was probably wise to accept it in the circumstances.
We are delighted that the clauses on the housing provisions and on the land registers have been removed. I think that all parties agreed that the pooling matters on education should be agreed. That was a clause that was accepted. With those comments, we shall agree to the passage of this Bill.
Baroness Hooper: My Lords, I am most grateful to the noble Baroness for her comments and support.
On Question, Bill read a second time; Committee negatived.
Then, Standing Order No. 44 having been dispensed with (pursuant to Resolution of 12th May), Bill read a third time, and passed.

Parliamentary and Other Pensions Bill
7.58 p.m.
Brought from the Commons, and read a first time.
Then, Standing Order No. 44 having been dispensed with (pursuant to Resolution of 12th May):
The Minister of State, Ministry of Agriculture, Fisheries and Food (Lord Belstead): My Lords, I beg to move that this Bill be now read a second time.
The last time your Lordships' House debated the Parliamentary pension scheme was in 1984. My noble friend the Leader of the House said then that the
802
provisions of the Bill which was then being considered were of limited direct relevance to Members of your Lordships' House. The same is true of the Bill now before us.
Its main purpose is to enable the complex legislation containing the Parliamentary pension scheme to be set out in regulations instead of in primary legislation. This will have the double advantage of ensuring that the rules of the scheme are easier to follow, since the intention is that they will be made available in consolidated form, and that the procedure for future amendments will be simplified.
The most important point that I need to make this evening is that the Bill does not amend the scheme in any way. In debates in another place suggestions were made for improvements in the scheme but I should like to emphasise that the Government do not see this Bill as an opportunity to make such improvements. It has been the practice in the past for the scheme to be based on recommendations by an independent body, and the Government have agreed to refer the current parliamentary pension arrangements to the top salaries review body. Piecemeal changes to the scheme have in the past inevitably resulted in anomalies, and the TSRB will be asked to look especially at the effects of recent amendments.
Clause 1 of the Bill reproduces the main provisions of the existing legislation. Clause 2 is the central provision of the Bill. It gives a power to the Leader of the House of Commons to make regulations providing for pensions for Members, Ministers and certain other office-holders. The principal matters that may be covered by the regulations are listed in Schedule 1.
The second perhaps most important point about this Bill is that no regulations can be made that adversely affect the accrued pension rights of former Members of Parliament or office-holders no longer in service at the time of the making of the regulations, or their dependants, without their consent. The Leader of the House of Commons is obliged to consult the trustees of the fund and Members' representatives before making any regulations.
During Committee stage in another place, the Government gave an undertaking that there would be a debate on an amendable motion in the House of Commons before regulations under Clause 2 of the Bill are made. The Bill was amended to provide that the trustees may report to the House of Commons on any proposals put forward by the Leader of the House, and this report may be made available for a debate. When the amended regulations subsequently came to both Houses they would then require the negative resolution procedure.
Clause 3 provides for the continuation of the annual Exchequer contribution to the fund, which is based on the recommendation of the Government Actuary. He will continue to report on the fund every three years; but the Bill slightly amends present practice. In future the Government Actuary will be recommending a rate of contribution by the Exchequer for the years following publication of his report rather than the years following the valuation date, which may be some time before the report is published. This will avoid unexpected adjustments to the rate of contribution, which can upset the trustees' investment activities. My

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right honourable friend gave an undertaking in another place that the Government would always allow a debate in another place on the Government Actuary's report.
Clause 4 gives authority for the payment of a pension to the widow of the late Lord Maybray-King, the former Speaker who died last year. When Mr. Speaker King retired in 1971, his pension arrangements were set out in a special Act of Parliament, as was the practice then. This provided for a pension to be paid to his then wife, who was named in the Act, in the event of his death. She died, however, and he remarried, but the Act did not provide a pension for his surviving widow. Clause 4 ensures that Lord Maybray-King's widow is not placed in a worse position than if he had simply remained a Member of Parliament by following established practice in applying the rules of the parliamentary scheme in her case.
This short Bill is, as I hope your Lordships may agree, mainly a technical measure designed to make the present pension arrangements more transparent. Of course it is right that parliamentary pensions should be debated and scrutinised in public. This Bill preserves that principle, but simplifies the procedure for future amendments. My Lords, I beg to move.
Moved, That the Bill be now read a second time.—(Lord Belstead.)
Lord Ponsonby of Shulbrede: My Lords, perhaps I may thank the noble Lord for so concisely explaining the purport of this Bill. I can assure him that the 15 minutes shown on the face of the clock when he sat down was not the length of time for which he spoke. This is really a consolidation measure and, in so far as it is a consolidation measure, I have no comment on it. Inevitably at this time of political conflict the Bill is non-controversial and has not tried to tackle some of the anomalies in the present pension scheme. Obviously, if it had tried to tackle any of those anomalies, it would have become a contentious measure.
Indeed I understand that discussion has gone on for some months, if not longer, to try to resolve some of the issues which are contentious, such as the different treatment of Members retiring immediately before and after their 65th birthday and also the hoary question as to why a retirement age of 60 should not be set universally within the pension scheme. I am sure, however, that noble Lords who were former Members of Parliament will be relieved to know that the Bill in no way affects their accrued pension rights.
With regard to Clause 4, I am sure all noble Lords will agree that it is proper that a pension should be paid to the widow of the former Speaker, Lord Maybray-King, whose pension, if he had retired after the present arrangements had been made, would have been paid to his widow. It is only because the arrangements were made so long ago that it is necessary for these special arrangements to be made at this time. We support the Bill.
Lord Belstead: My Lords, I am grateful to the noble Lord, Lord Ponsonby. The noble Lord has
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indeed interpreted absolutely accurately the effects of Clause 4, which is the clause which directly affects a distinguished former Member of this House. I think there is no more that I ought to say in reply on the Second Reading.
On Question, Bill read a second time: Committee negatived; read a third time, and passed.

Diplomatic and Consular Premises Bill
8.7 p.m.
The Minister of State, Foreign and Commonwealth Office (Baroness Young): My Lords, I beg to move that this Bill be now read a second time. The Bill, which was foreshadowed in the 1985 White Paper on diplomatic immunities and privileges, is about the control of diplomatic and consular premises in this country. I hope that when I have explained its purposes and outlined its contents your Lordships will agree that it is both a useful and a necessary Bill.
At present, there are no legislative powers to prevent diplomatic missions from establishing their premises in any part of the capital, nor are there powers to acquire the title of former diplomatic premises which remain empty for long periods and cause environmental, health, security and other hazards.
The problems which arise from the absence of legislative powers fall broadly into four categories. First, we cannot prevent diplomatic missions setting up their offices in sensitive parts of the capital; for example, near the Palace of Westminster or the Royal palaces. However blameless and friendly the mission, it is a fact of life that today any mission can attract crowds which are noisy or even, regrettably, violent. This would clearly be inappropriate in some parts of London.
Secondly, there is no way of dealing with diplomatic premises which remain empty, sometimes for years, because the government which owns them cannot, or will not, dispose of them. I am thinking particularly of the former Cambodian premises in St. John's Wood which have been occupied since 1976 by squatters. Thirdly, at present we would be unable to remove diplomatic status from premises which were being misused. I have in mind here evidence over a long period of time that a mission was being used, for instance, in support of terrorist activity. Fourthly, at present we are unable to retaliate in kind if an overseas government insists that we move from existing premises or withholds consent for the acquisition of new premises.
The Bill before the House would now provide the powers to meet the needs that I have described. It would enable the Foreign Secretary to require diplomatic missions to obtain his express consent before any office premises acquired by them could be regarded as diplomatic premises and therefore entitled under the Diplomatic Privileges Act to inviolability and rating relief. It provides that such consent could be withdrawn in respect of existing premises in certain circumstances with consequent loss of inviolability and rating relief. It also empowers him to acquire the title of premises formerly used for the purposes of a diplomatic mission which the government concerned

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refuses to dispose of. The Foreign Secretary would then sell the premises and remit the proceeds to the foreign government in question.
Many countries, including the United States, already have in place powers of the kind I have described. The measure would simply bring us into line with them.
In all cases the Foreign Secretary could only give or withdraw consent or acquire the title of any premises if he was satisfied that to do so was permissible under international law. I emphasise that the Government are fully aware of their obligations under the Vienna Convention on Diplomatic Relations and regard the powers in the Bill as fully consistent with them.
I have tried to summarise as clearly and as briefly as possible the main provisions of this short, but important Bill, and I hope that the explanation will have been helpful. I commend the Bill to the House. I beg to move.
Moved, that the Bill be now read a second time.—(Baroness Young.)
8.10 p.m.
Lord Cledwyn of Penrhos: My Lords, we are grateful to the noble Baroness for introducing and explaining the Bill to the House. Although its objectives are simple, the Bill appears to be rather long and complex. That is because of its legal implications and the requirements of international law, in addition to our own statutory obligations.
We cannot always predict when diplomatic relations will be severed, what the total consequences may be, or how long the breach may last. The Bill deals with one of the practical consequences of severance and the Government must, of course, deal with it. Therefore, we support the Bill and will facilitate its passage.
We are no longer in diplomatic contact with a number of countries such as Cambodia, Iran, Libya and Syria. In each case we were fully justified in breaking off relations with them because of their conduct. We also have the obligations of a civilised country to ensure that their property is protected, as we would expect our own properties to be protected elsewhere in similar circumstances.
As the noble Baroness has explained and as the Title of the Bill stipulates, the properties in question are diplomatic and consular premises which, under the law, includes land.
Clause 1(4) is important because it will reassure foreign governments and underline Britain's observance of the Vienna Convention. Clause 1 as a whole contains a number of important practical provisions. For example, Clause 1(7) gives the Secretary of State for Foreign Affairs the sole power to certify as to facts. However, I should think that he will need the assistance of the Secretary of State for the Environment and the Home Secretary on some matters which are enumerated in Clause 1(5).
Clause 2 is, of course, central to the whole Bill because it gives the Foreign Secretary the power to acquire the property and, in due course, to sell it for the best price and thereafter to invest that money and hold it and the interest which accrues for the state which owns the property. However, I assume that the
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Government will also be able to deduct any expenses which have been incurred.
We understand that the Government recognise the comparative difficulties which exist between the treatment of different countries. For example, we have no contact with Cambodia whatever, and, as the noble Baroness said, the Cambodian Embassy has been full of squatters for years. On the other hand, there is still a small skeleton staff in the Syrian Embassy. Those distinctions are recognised in the provisions of Clause 2 and I was interested to note them.
For the purpose of clarification, will the noble Baroness confirm that the squatters in the Cambodian Embassy will be evicted after the Bill becomes law and that the property will be then sold? Will the proceeds then be held sine die by the Government—that is, until in Cambodia some sensible government emerges from the ashes of that unhappy and unfortunate country and normal relations are resumed?
I have one final question to ask on the contents of the embassies. There are instances in which they could be of immense value—perhaps more valuable than the premises themselves if they contain pictures by famous artists and other artefacts. We know what price they fetch these days. Will those be dealt with in the same manner as the properties, or will they be put in storage and held for the state in question?
I know that the countries concerned can rely on the British Government to deal with those matters in an honourable and efficient way. They are fortunate that that is the case. We give the Bill our full support.
8.17 p.m.
Baroness Young: My Lords, I am grateful for the support given by the noble Lord, Lord Cledwyn of Penrhos. As I have said, the Bill is short but useful. The noble Lord asked two questions which I hope I can answer.
The first one concerned the case of the former Cambodian diplomatic premises and whether or not we can deduct expenses. That point is covered in Clause 3 and I can confirm that the expenses of the sale and of the repairs and security can be deducted from the proceeds of the sale.
On the question of the eviction of the squatters, yes, they can be evicted. As regards timing, it is important that that should happen. If the Bill becomes law, we are confident that there will be enough time to acquire the title before the squatters possibly gain a better title through adverse possession.
As regards the contents of the premises, once the premises are vested in the Secretary of State, he will enjoy the normal attributes of ownership of property. Accordingly, it would be a trespass for the former owner of the premises—that is to say the foreign state—to leave furniture in the premises. The Foreign and Commonwealth Office would make every effort to persuade the foreign state to remove the furniture. We believe that in most cases the foreign state would see the good sense in doing that. If the foreign state were to refuse to remove the furniture, the Secretary of State would be entitled to remove it. Moreover, there are various legal provisions—for example, the power of the courts to order a sale of the furniture—which one could consider using against the state.

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I hope that that answers the points that the noble Lord has made, and I am grateful to him for supporting this little Bill.
On Question, Bill read a second time; Committee negatived.
Then, Standing Order No. 44 having been dispensed with (pursuant to Resolution of 12th May), Bill read a third time, and passed.

Sheep and Goats (Removal to Northern Ireland) (Amendment) Regulations 1987
8.20 p.m.
Lord Belstead Lord Belstead rose to move, That the draft regulations laid before the House on 30th March be approved [17th Report from the Joint Committee].
The noble Lord said: My Lords, I beg to move that the draft Sheep and Goats (Removal to Northern Ireland) (Amendment) Regulations 1987 laid before the House on 30th March be approved. I apologise to your Lordships in that there is a typing error in the date on the Order Paper.
There are two main reasons for amending the 1983 regulations. First, to comply with the new Community obligations, the regulations need to be extended to include uncooked lamb products which are now subject to clawback. Community regulations which are directly applicable have made such products liable to a clawback charge when they are exported from Great Britain to other parts of the Community.
Customs and Excise already operate the procedures and have the necessary powers to collect the clawback charge in relation to exports to other member states. However, Customs and Excise have no locus when products are exported from Great Britain to Northern Ireland. Our draft amending regulations therefore make uncooked lamb products subject to the administrative arrangements which already exist to ensure that clawback would be imposed on any sheep or sheep meat exported to Northern Ireland.
Secondly, we see a need to extend the powers of the officers who enforce these regulations in Northern Ireland. The existing powers of the enforcement officers in relation to removals to Northern Ireland include powers of entry where there is a reasonable suspicion that an offence has been committed. But there is no current power of entry for the purpose of actually ascertaining whether an offence has been committed. This means that the controls applicable are weaker than those exercised when sheep or their meat are exported to other member states where Customs and Excise operate comprehensive checks.
The amending regulations therefore seek to deal with this issue by granting powers of entry for the purpose of ascertaining whether the provisions of the principal regulations were or had been complied with. It must also be remembered that the regulations protect producers in Northern Ireland from supplies of sheep and sheep meat at prices which could undermine their market there, so providing them with the same protection as other producers in the Community who do not receive a variable premium. The regulations enable these controls to be exercised in Northern Ireland.
Having said all that, I must make it clear that the clawback arrangements on the Great Britain to Northern Ireland trade have never actually yet been applied. There has been no trade in sheep or sheep meat subject to clawback arrangements. At the outset in 1982 this was because Northern Ireland's special animal health status requirements effectively prevented trade, save for exports of pure-bred breeding animals, which do not fall within the clawback arrangements. But from September 1985, certain health requirements were relaxed in Northern Ireland and so trade in categories subject to clawback has now become at least a possibility. We therefore feel that these regulations are a sensible precaution. I beg to move.
Moved, That the draft regulations laid before the House on 30th March be approved. [17th Report from the Joint Committee.]—(Lord Belstead.)
Lord Carter: My Lords, it is tempting at the time of a general election to make facetious remarks about anything involving sheep and goats. However, I shall avoid that temptation. I am advised that the regulations as amended will be helpful to farmers and ancillary industries in Northern Ireland. Therefore, I am glad to give these regulations our support.
Lord Fitt: My Lords, when I first saw the Order Paper in the early days of this week, and noticed the rather sinister nomenclature of the Sheep and Goats (Removal to Northern Ireland) (Amendment) Regulations 1987, it brought back many unhappy memories. The thought that on the last day and in the dying hours of this Parliament the Government should try to press through such a controversial order is distressing. Why was it so necessary to do that on this day? There will be many people in Northern Ireland who will interpret the nomenclature of these regulations and their effect in an entirely different way from the meaning which is contained in the regulations.
We have heard of exclusion orders under the Prevention of Terrorism Act and of people who will be excluded from coming to Britain from Northern Ireland under an order. It will cause much discontent. I am perforce put into the position of asking whether there are no depths to which the Government will not stoop to gain re-election.
There are many people in Northern Ireland who will question the necessity for these regulations. Not living in Northern Ireland as I do, I have great reservations about the necessity and the urgency of these regulations. When we have heard of removals in previous Acts of Parliament, they required the sanction of the Home Secretary. I do not see that mentioned in these regulations. When we look at the nomenclature of these regulations, it is tantamount, as far as I am concerned, to an exclusion order.
It may be said by the Minister that there is unanimity on both sides of the House in relation to these regulations. But those who are likely to be affected by the regulations have not been asked for their opinion in any way. It is arrogant to take a decision in relation to people who are liable to be affected without having ascertained their opinion.

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Therefore. I do not think that we should rush these regulations through the House. I think that the Minister should be given an opportunity to explain the very serious ramifications of the regulations in relation to Northern Ireland.
Lord Belstead: My Lords, no one can accuse the noble Lord, Lord Fitt, of rushing when he addresses your Lordships' House, although it is always a great pleasure to debate with him. In just a moment, I shall attempt to reply briefly to the points which the noble Lord has made.
Perhaps I may first congratulate the noble Lord, Lord Carter, on what I believe is the first speech he has made from the Opposition Front Bench. I also congratulate the noble Lord on, in a few well-chosen words, supporting the Government on this particular occasion!
Lord Carter: It is the last time!
Lord Belstead: Perhaps I may turn to the speech of the noble Lord, Lord Fitt. Making uncooked lamb products subject to clawback has an element of exclusion. However, it is all in the cause of protecting the sheep meat trade and the producers and consumers of Northern Ireland. I assure the noble Lord of that.
In addition, it gives Customs and Excise in Northern Ireland the responsibility of seeing that the new rules are being complied with by giving them powers of entry to make sure that the regulations are being complied with. They are regulations which I hope that the noble Lord, on reconsideration, may feel it right to support.
On Question, Motion agreed to.

Home-Grown Cereals Authority Levy Scheme (Approval) Order 1987
8.25 p.m.
Lord Belstead Lord Belstead rose to move, That the order laid before the House on 8th April be approved. [18th Report from the Joint Committee. ]
The noble Lord said: My Lords, I beg to move. As your Lordships may be aware, the Home-Grown Cereals Authority was set up in 1965 and given the general duty of improving the marketing of home-grown cereals. Since its establishment, the authority has become a well respected part of the cereals industry, providing the industry with in particular an authoritative market intelligence service. It also funds a limited range of research and development and acts as agent for the Intervention Board for Agricultural Produce for the purchase, storage and sale of intervention grain and rapeseed. These latter activities are fully funded by IBAP, while its market intelligence and research and development activities are financed by an Exchequer contribution of £200,000, representing less than 50 per cent. of annual expenditure, and by a small levy paid by dealers in and processors of home-grown cereals. Last year this levy brought in some £500,000.
In 1985 the Government announced that they would be looking to the agriculture industry generally to fund an increased proportion of agricultural research and development and that continued government funding of Food from Britain would be dependent on matching contributions from the
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industry. At the same time there was considerable discussion within the cereals sector of the possibility of setting up a body to promote the export of British cereals. These various developments led to a round of discussions last year involving most parts of the industry, in which it was agreed that all these activities should be funded through an increased levy which would be split between growers, dealers and processors. It was also agreed that these different sectors of the industry should contribute in varying proportions to the new activities; research and development, Food from Britain and the new Cereals Export Development Committee. For example, growers alone would contribute to Food from Britain, and growers and dealers would contribute the new export committee, while all three sectors—growers, dealers and processors—would contribute to research and development work. So far as the growers were concerned, this agreement was endorsed by a poll of producers. Following that, further consultations ensued with the industry before the order which I am putting before your Lordships was laid.
Under this order, there will be three separate levies: a grower levy, a dealer levy and a processor levy. The dealer and processor levies will be collected separately. The grower levy will only be collected separately if a grower sells his grain into intervention; in other cases it will be included in the dealer levy and the dealer will be entitled to collect a contribution equal to the grower levy from the grower. Splitting the levy into these three separate elements will make it possible to share the cost of the new activities that the HGCA is to finance on the lines agreed by the industry last year. I have already referred to a second change, which is that in future sales into intervention will be subject to levy.
A third change is that the definitions of "dealers" and "processors" have been widened, to give a more comprehensive coverage of those who purchase cereals. In particular, those who process cereals for use in their own enterprises will now be subject to processor levy.
Fourthly, the new scheme covers a wider range of home-grown cereals, adding rye, maize, triticale and mixed corn to the wheat, barley and oats covered by the existing scheme. In general, therefore, the new scheme has a wider coverage than the existing one, and should ensure that the cost of the new activities which the industry has agreed to finance will be shared by all those involved in the industry.
The order we are debating today does not set out the rates for the new levies introduced by this scheme. These will be proposed in a further order which will, if the present order receives the approval of Parliament, be laid before Parliament once the authority has submitted its estimates for the coming financial year.
As I have said, this new scheme is a more comprehensive coverage than the existing one and will affect a greater proportion of those involved in the cereals industry. In view of this, my right shonourable friend has been reviewing the representations of those involved in the industry on the authority. Currently, nine seats on the authority are allocated to representatives of dealers and processors. We have sought nominations for these appointments from the organisations representing the agricultural supply trade, the milling industry and the maltsters.
My right honourable friend has now concluded that it will be appropriate to widen the number of organisations from whom nominations are sought. He has accordingly asked organisations representing the agricultural co-operative sector, the poultry industry and the grain shippers to nominate possible members of the authority. To make this possible, those organisations already providing members of the authority have been asked to accept fewer seats on the authority. The Government are most grateful to them for agreeing to these requests.
This new scheme has widespread support in the cereals industry and demonstrates the confidence that industry has in its future. I commend the order to the House.
Moved, That the order laid before the House on 8th April be approved. [18th Report from the Joint Committee]—(Lord Belstead.)
Lord Carter: My Lords, at the outset I declare an interest as a grower of cereals and rape seed. I believe that I am in the unique position of having taken part in the grower poll. I voted in favour of the levy. Therefore noble Lords will not be surprised to know that I shall be supporting the Motion this evening. It is important, and essential for the operation of the HGCA, that it is in force by 1st August.
I am aware of the discussions which have taken place in the industry. The order has the full support of the industry, particularly in the change of representation of the authority. Therefore from these Benches I support the Motion.
Lord Belstead: My Lords, I am particularly grateful to the noble Lord for two reasons. First, it was good of the noble Lord to say that not only from the point of view of the Opposition Front Bench was he in favour of the levy, but personally he voted in favour, because every vote counted. It was very important, if I may say so, that the poll went the way that it did.
Secondly, I am grateful to the noble Lord for saying that the consultations were thorough. I rather slid over the question of consultations, because I felt that my speaking note was rather long. However, the consultations were very thorough and I am grateful to the noble Lord for underlining that point.
On Question, Motion agreed to.

Lord Chancellor's Salary Order 1987
8.33 p.m.
Lord Brabazon of Tara Lord Brabazon of Tara rose to move, That the draft order laid before the House on 29th April be approved. [20th Report from the Joint Committee.]
The noble Lord said: My Lords, I beg to move that the draft Lord Chancellor's Salary Order 1987, which was laid before the House on 29th April, be approved. This order is now an annual event and derives from the link between the salaries of the Lord Chancellor and the Lord Chief Justice. The Top Salaries Review Body recommended in 1983 that, in recognition of his position as head of the judiciary and his responsibilities as a whole, the Lord Chancellor should be paid more than the Lord Chief Justice. The principle of this recommendation was accepted by the House in 1983 and has since been reaffirmed with the
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successive approvals of the orders in the following years.
An annual order is necessary because the Lord Chief Justice's salary is set annually following recommendations from the Top Salaries Review Body. This year the Top Salaries Review Body recommended a salary of £81,000 per year for the Lord Chief Justice—an increase of 4.7 per cent. The Government accepted this figure but, as for all salaries recommended this year by the Top Salaries Review Body, decided to restrict the increase paid from 1st April to 4·25 per cent. and to pay the balance from 1st October. This meant a salary for the Lord Chief Justice of £80,690 for the period 1st April to 30th September and £81,000 from 1st October.
The Lord Chancellor's salary lead has been established at £2,000. This figure was accepted by the House in 1983 and has remained at that level since then. There is no need to change it, even though its real value has been eroded since it was first established. This lead is there because the Lord Chancellor's position as head of the judiciary makes it appropriate for him to be paid a little more than the Lord Chief Justice. A lead of £2,000 adequately fulfils that requirement.
The order, which is not restrospective, therefore establishes the Lord Chancellor's salary at £82,690 when it comes into force on 19th May until 30th September. From 1st October it is established at £83,000. These levels derive directly from the TSRB report and encapsulate a principle that was established four years ago and has now been accepted by the House on four separate occasions. I hope it will also commend itself to the House this year. I commend the order to the House.
[Moved, That the draft order laid before the House on 29th April be approved. [20th Report from the Joint Committee]—(Lord Brabazon of Tara).
Lord Bruce of Donington: My Lords, we on this side of the House are very happy to concur in the order before your Lordships. We support the maintenance of the differential between the noble and learned Lord the Lord Chancellor and the Speaker of this House and the Lord Chief Justice in regard to their salaries.
The appointment of the noble and learned Lord the Lord Chancellor, and of course of the Speaker of the House, is one that is subject to changes in political climate. In case by the harsh arbitrament of arithmetic the present Lord Chancellor were to be excluded after the election, I think it right if on behalf of the Opposition I express our personal thanks and appreciation of the services of the noble and learned Lord the Lord Chancellor during the time that my colleagues and I have been here. His asides, which are not always sotto voce, have been greatly appreciated. As I have said, in the event of the harsh arbitrament of arithmetic—and who shall question the possibility or probability?—proving adverse to his future occupation of the Woolsack, we wish him well.
Lord Brabazon of Tara: My Lords, I am sure my noble and learned friend the Lord Chancellor will be most grateful for the remarks of the noble Lord, Lord Bruce of Donington. I can give one assurance to the noble Lord, Lord Bruce—that whatever happens my noble and learned friend's pension will also be affected by the order we have before us. I hope that my noble

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and learned friend will be occupying the Woolsack for many years to come. However, even if he does not, his pension is affected by this order and therefore I hope all noble Lords can agree it is a good thing.
On Question, Motion agreed to.

New Valuation Lists Order 1987
8.38 p.m.
Baroness Hooper Baroness Hooper rose to move, That the order laid before the House on 7th April be approved. [18th Report from the Joint Committee].
The noble Baroness said: My Lords, in moving this order I invite your Lordships to bring to an end the valuation lists relating to non-domestic property, which are now 14 years out of date. The result will be a fairer distribution of the business rate burden which is overdue. I commend the order to your Lordships.
Moved, That the order laid before the House on 7th April be approved. [18th Report from the Joint Committee.]—(Baroness Hooper.)
Lord Dean of Beswick: My Lords, first, let me say that it becomes almost a regular confrontation—perhaps not a confrontation—with the noble Baroness, Lady Hooper, and myself facing each other across the Dispatch Box.
I think I am right in saying that this is the final piece of legislation that this Parliament will deal with. I remember being the last Whip to speak in another place at the end of business before the last general election and I did not return on that occasion. I think I shall be doing so on this occasion.
We naturally accept this order, but there may well be difficulties if the Government are returned and they intend to carry out their proposal that the abolition of rates will also be imposed in England and Wales, as it soon will be in Scotland. What we are doing today will be a more permanent feature rather than a gradual elimination.
Having said that, I again thank the noble Baroness for the courteous way in which she has dealt with the order, as she does with all our business, and I resume my seat.
Baroness Hooper: My Lords, I can assure the noble Lord that we always keep an eye on what is going on in Scotland, but I am most grateful to him for his remarks and for his support of this order.
On Question, Motion agreed to.

London Underground (Goodge Street) Bill [H.L.]
Returned from the Commons agreed to.
Abolition of Domestic Rates Etc. (Scotland) Bill
Returned from the Commons with the amendments agreed to.
British Railways (London) Bill [H.L.]
The Queen's Consent was signified and the Bill was reported from the Unopposed Bill Committee with amendments.
Criminal Justice Bill
Returned from the Commons with the amendments agreed to.
Parliamentary and Health Service Commissioners Bill
Returned from the Commons with the amendments agreed to.
Registered Establishments (Scotland) Bill
Returned from the Commons with the amendments agreed to.

Channel Tunnel Bill
A Message was brought from the Commons that they have made the following orders:
That further proceedings on the Bill shall be suspended until the next Session of Parliament;
That if a Bill is presented to this House in the next Session in the same terms as those in which the Channel Tunnel Bill stood at the last stage of its proceeding in this House in this Session—

(a) the Bill shall be deemed to have been read the first, second and third time; and

(b) the Standing Orders and practice of the House applicable to the Bill, so far as complied with or (in the case of the Standing Orders relating to Private Business) dispensed with in this Session or in the Session 1985–86, shall be deemed to have been complied with or (as the case may be) dispensed with in the next Session;

That this Order be a Standing Order of the House.

Dartford-Thurrock Crossing Bill
A Message was brought from the Commons that they have made the following orders:
That further proceedings on the Bill shall be suspended until the next Session of Parliament;
That if a Bill is presented in the next Session which is the same in every respect as the Dartford-Thurrock Crossing Bill when it was presented in this Session—

(a) the Bill shall be ordered to be printed and shall be deemed to have been read the first time; and

(b) the Standing Orders of the House applicable to the Bill, so far as complied with or dispensed with in this Session shall be deemed to have complied with or (as the case may be) dispensed with in the next Session;

That this Order be a Standing order of the House.

Norfolk and Suffolk Broads Bill
A Message was brought from the Commons that they have made the following orders:
That further proceedings on the Bill be suspended until the next Session of Parliament;
That if a Bill is presented in the next Session in the same terms as those in which the Norfolk and

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Suffolk Broads Bill stood when proceedings on it were suspended in this session—

(a) the Bill so presented shall be ordered to be printed and shall be deemed to have been read the first and second time, to have been reported from the Select Committee and a, have been re-committed to a Standing Committee; and

(b)the Standing Orders and practice of the House applicable to that Bill, so far as complied with in this Session, shall be deemed to have been complied with in the next Session;

That this Order be a Standing Order of the House.

Irish Sailors and Soldiers Land Trust Bill [H.L.]
Returned from the Commons agreed to with a privilege amendment; the privilege amendment was considered and agreed to.

Territorial Sea Bill [H.L.]
Returned from the Commons agreed to with a privilege amendment; the privilege amendment was considered and agreed to.
House adjourned at eighteen minutes before nine o'clock.