Lords Sitting of 13 April 1988

Preamble
The House met at half-past two of the clock: The LORD CHANCELLOR On the Woolsack.
Prayers—Read by the Lord Bishop of St. Albans.
Lord Vernon Lord Vernon—Took the Oath.

Health Promotion and Disease Prevention
Lord Molloy Lord Molloy asked Her Majesty's Government:
What action is planned to modernise preventive and curative medicine and staff training within the National Health Service.
The Parliamentary Under-Secretary of State, Department of Health and Social Security (Lord Skelmersdale): My Lords, our recently published White Paper, Promoting Better Health, proposed new approaches to health promotion and disease prevention. The modernisation of curative medicine is continuous and many conditions can now be cured or greatly alleviated which were untreatable in the recent past. We are continuously seeking to ensure that staff are trained to meet the changing needs of the service.
Lord Molloy: My Lords, I am grateful to the Minister for that reply, which implies that the Government realise that these days science and technology play an ever-increasing part in National Health Service work. Is the Minister aware that in some fields there is apprehension that we are falling behind in the research that is required, in the production of new forms of scanners and screening equipment, and the training of those who have to operate them? Will the Government look at that extremely important question?
Lord Skelmersdale: My Lords, I have no doubt that the Government will be looking at that extremely important question because a report has recently been published by your Lordships' Select Committee on Science and Technology covering exactly that subject. The Government welcome that report as an important contribution to the discussion about the future of medical research. However, it is addressed to the Government as a whole and it will take some time for a government response to appear to it.
Baroness Gardner of Parkes: My Lords, is the Minister aware that the dental profession is very pleased with the new video on preventive dentistry. That of course forms part of the NHS services. Are the Government giving any thought to providing facilities? The very people who most need updating in their profession are those least likely to have a machine on which to view the new video.
Lord Skelmersdale: My Lords, I welcome my noble friend's remarks about the video. I am not sure that
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it was intended that the video should be available in the surgery. Many people in the country now have video machines attached to their private televisions and it was for that purpose that the video was intended.
Lord Ennals: My Lords, may I say how pleased I was to hear the Minister's welcome for the Select Committee report on medical research, which I thought was rather critical of the Government? In connection with preventive medicine, will the Minister say what support Her Majesty's Government gave to the first ever world non-smoking day last week? That was sponsored by the World Health Organisation. Will he say what further action the Government propose to take on smoking in the workplace in the light of the very recent report presenting new and powerful evidence of the dangers even to non-smokers of being in smoke-filled rooms?
Lord Skelmersdale: My Lords, we did not give direct financial support to the world non-smoking day last week. However, I can confirm that we shall be considering how, following the conclusions of the Independent Scientific Committee on Smoking and Health, we can best communicate the message that breathing other people's tobacco smoke is harmful.
Lord Mellish: My Lords, the Minister has already said that an inquiry is taking place in his department about the future of the NHS. Can I take it for granted that the Select Committee report will be among the items to be considered? Can the Minister say when the inquiry being conducted within his department is likely to be concluded, and whether the results will be published?
Lord Skelmersdale: My Lords, the noble Lord, Lord Mellish, can ask, but I am afraid that I am not in a position to give him an answer as to when the inquiry will be completed or whether its results will be published. I expect that the Select Committee report will be considered on its own merits outside the inquiry.
Lord Campbell of Alloway: My Lords, can the Minister confirm what is being done about the aspect of the Question of the noble Lord, Lord Molloy, concerning staff training?
Lord Skelmersdale: My Lords, training is being provided in change management and also in the updating of staff training, particularly for nurses. We appreciate that we have not yet responded to the Royal College of Nurses' Project 2000 paper; but a response is fairly imminent and I hope that it will be made before too long.
Lord Molloy: My Lords, will the Minister not agree with the view of the BMA, the Royal College and COHSE that new, modern medical machinery will inevitably be introduced which will have to be operated by a combination of specialists, doctors and nurses? The noble Lord, Lord Campbell of Alloway, referred to the latter part of my Question. I asked whether the Government would take that aspect into consideration so that when the new medical

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machinery is introduced for use on the wards nurses will understand it and know how to operate it in conjunction with the specialists and the doctors.
Lord Skelmersdale: Yes, indeed, my Lords. The professional industrial and commercial updating project which is being developed by the NHS training authority in association with professional and statutory bodies will offer multi-disciplinary continuing education and training opportunities for nurses and professions allied to medicine with exactly that aim in view.

Foreign Exchange Markets: Intervention
2.43 p.m.
Lord Bruce-Gardyne Lord Bruce-Gardyne asked Her Majesty's Government:
Whether they will in future publish an annual account of the profit or loss to public funds incurred through intervention in the foreign exchange markets during the previous 12 months.
The Parliamentary Under-Secretary of State, Department of Transport (Lord Brabazon of Tara): My Lords, no government have published accounts of the exchange equalisation account. The information is market sensitive.
Lord Bruce-Gardyne: My Lords, I am grateful to my noble friend for that somewhat disappointing reply. He says "no government", but is it not the case that the Government of the Federal Republic of Germany do it regularly? Would he care to comment on what seems a well authenticated estimate that last year alone the loss on intervention may have been in the region of £3 billion? Surely, a retrospective view of the cost of intervention over the previous year is not so much market sensitive as perhaps sensitive to the deduction that the Prime Minister may indeed have been right to point out that bucking the market is a bit of a mug's game.
Lord Brabazon of Tara: My Lords, I appreciate that the Bundesbank publishes figures for intervention in Germany, but in the United Kingdom successive governments have found that exchange market intervention tends to be more effective the less that is revealed in public about its precise details. The article, which of course I have read, suggesting that intervention might have cost the taxpayer £3 billion during 1987 contained one particularly fatal flaw, in that it did not take account of our substantial dollar liabilities as well as our assets. While our assets may be lower in sterling terms as a result of the dollar's fall, our liabilities are smaller too.
Lord Barnett: My Lords, does the Minister recall that on Monday he told your Lordships' House—no doubt the House was pleased to hear it—that the Chancellor had intervened by reducing interest rates to maintain the sterling exchange rate at a sustainable level? Do his answers mean that the Government, or, rather, the Chancellor, still proposes to intervene in that way and that he now considers that sterling is at a sustainable rate?
Lord Brabazon of Tara: My Lords, it is not our practice to comment on market tactics.
Lord Harmar-Nicholls: My Lords, can my noble friend tell me what good it would do to publish these figures at the end of the year when it is too late to do anything about them, whether what has been done is for good or for ill? The only people who understand these matters will carry on making guesses about what is being done and its results whatever figures are published 12 months after the event.
Lord Brabazon of Tara: My Lords, publication, even 12 months later, could give the market an indication of our tactics. That is why we do not believe that it is a good idea to publish even at that stage.
Lord Jenkins of Hillhead: My Lords, as we were assured by the Minister on Monday that there was no difference within the Government on exchange rate policy, as the Prime Minister has stated that it is ineffective and wrong to resist market forces in this field, and as the Chancellor of the Exchequer is in Washington trying to resist those market forces with the other members of the Group of Seven, can the noble Lord tell us on what basis the Government do intervene in exchange rate markets—the foundation of this Question—to what purpose and for what objectives?
Lord Brabazon of Tara: My Lords, intervention is a weapon that can be used to attempt to bring some stabilisation to exchange rates. As I have said, it is not our practice to comment about when we are, or are not, doing it.
Lord Bruce of Donington: My Lords, in reply to the Question addressed to him by his noble friend Lord Bruce-Gardyne, which related to the publication of an annual account of profit or loss, why did the Minister not say that the Government are afraid to publish a profit and loss account in relation to any of their activities at all and that they prefer to deal on a cash basis? If they created the dangerous precedent of publishing a profit and loss account, would it not reveal to the general public the colossal loss of public money that has been incurred by the wholesale privatisation at low prices of assets that belong to the public?
Lord Brabazon of Tara: My Lords, I think we are straying a little way from the Question on the Order Paper, which concerns the exchange equalisation account. However, the Government do publish a Budget every year.
Lord Boyd-Carpenter: My Lords, is it not a fact that all governments have followed the policy in this respect which my noble friend has outlined as the policy of the present Government? Are not the Government to be congratulated on the fact that the results have been very successful?
Lord Brabazon of Tara: My Lords, I am grateful to my noble friend for his question. The Government have been successful. The level of our reserves at the

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end of March of this year, recently revalued, is 47·5 billion dollars.
Lord O'Brien of Lothbury: My Lords, is the Minister aware that at least one Member of your Lordships' House not on the Conservative Benches strongly supports the attitude of HMG in relation to the publication of details of the exchange equalisation account and hopes that they will maintain that stance despite the opinions expressed by former Ministers in the Treasury?
Lord Brabazon of Tara: My Lords, I am very grateful to the noble Lord, Lord O'Brien, who has his great experience at the Bank of England to back up his judgment.
Lord Taylor of Gryfe: My Lords, I accept the Minister's reference to the secrecy of that information. Can he tell us whether any calculations are made in the department on what the cost is compared with what the cost might have been if we had joined the European monetary system?
Lord Brabazon of Tara: My Lords, that is a hypothetical question. To produce figures for what might have happened had we done something would be beyond anybody's ability.
Lord Bruce-Gardyne: My Lords, with all possible deference and respect to the noble Lord, Lord O'Brien, perhaps I may dare to ask my noble friend to explain this. How can the publication of accounts relating to a previous year possibly be market sensitive?
Lord Brabazon of Tara: My Lords, as I attempted to say earlier, intervention is an ongoing matter. One can only tell whether it has been profitable or not when the details have been completely unwound. That does not usually happen at any particular point in time. As I said earlier, to produce the figures even after a 12-month period could give a clue as to how the operations take place.

Long-term Unemployment
2.52 p.m.
Lord Dormand of Easington Lord Dormand of Easington asked Her Majesty's Government:
What was the number of long-term unemployed at May 1979, May 1987 and at the latest available date.
The Secretary of State for Trade and Industry (Lord Young of Graffham): My Lords, unemployment figures are analysed by duration quarterly, and are not available for May. In April 1979 the number of unemployed registrants in the United Kingdom who had been unemployed for one year or more was 366,700. The numbers of unemployed claimants who had been unemployed for one year or more on 9th April 1987 and 14th January 1988—which is the latest available date—were 1,295,100 and 1,100,600 respectively. Long-term unemployment has fallen by a record 234,000 over the last 12 months.
Lord Dormand of Easington: My Lords, is the Minister aware that those disgraceful figures that the Secretary of State has just announced are the most serious condemnation of the Government's economic policies? Does he recall that one of his noble colleagues sitting on the Bench with him in a recent answer to a question concerning long-term unemployment said that it took a little while for government programmes to take effect. Those were his words. As the Government have now had absolute power for almost nine years, and as the figures that the Secretary of State has just given are six times the number of those in 1979, when the Government assumed office, will he give an estimate of when we are likely to return to the long-term unemployed figures of 1979?
Lord Young of Graffham: My Lords, I am grateful to the noble Lord, although I fail to share his acceptance that a reduction of long-term unemployment by nearly a quarter of a million in the last 12 months should be thought in any way disgraceful. Nor do I live in such an insulated world as the noble Lord, Lord Dormand of Easington, who has not noticed what has happened throughout Europe during the course of this decade. He also fails today to notice the fact that unemployment is rising in every country in Europe while it is falling sharply here. We are no island. We live in the real world. We have to deal with conditions as they are—and this Government certainly are dealing with those conditions.
Lord Elliott of Morpeth: My Lords, is my noble friend aware that the generally most splendid figures that he has quoted include the information that, in the northern region—which has certainly known its unemployment problems—the number of those unemployed for six months or more has fallen by 23,000 within the last 12 months, and that every single economic indicator in the region suggests that the fall will continue?
Lord Young of Graffham: My Lords, the really satisfying statistics over the last 12 months show that the North-East and the North-West are leading the return to normality; and that unemployment is falling fastest in those regions.
Lord Mason of Barnsley: My Lords, is the Secretary of State aware that in Yorkshire and Humberside in 1979 there were 88,000 long-term unemployed? Today there are 111,000—an increase of 26 per cent. In the Barnsley Travel to Work Area in 1979 there were 4,000. Today the figure is 6,700—an increase of 63 per cent. While he and the Government may boast about declining unemployment generally, they certainly have not tackled the long-term unemployment problem. In the areas that I have mentioned it is on the increase, not the decrease. There are coalfield communities that have suffered at the hands of this Government. Can the Minister state specifically what he will do about it?
Lord Young of Graffham: My Lords, once again I fear that I have to disagree with the noble Lord. I

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have little doubt that the coalfields have suffered, but I doubt greatly whether they have suffered at the hands of this Government rather than those of some trade union leaders.
Lord Orr-Ewing: My Lords, will my noble friend say how the unemployed figures compare with our neighbours in western Europe with regard to young people? Are they now getting jobs as a result of government measures in recent times?
Lord Young of Graffham: My Lords, all of us in your Lordships' House regret unemployment. But I think that no one would disagree with me when I say that we regret it most among the young. It is satisfactory at least that the number of unemployed aged under 18 fell by 26 per cent. in the last year. Indeed, it is now less than half of what it used to be at the time when we first launched the youth training scheme.
Lord Molloy: My Lords, is the noble Lord aware that there is great bitterness among young unemployed in Great Britain? To use their term, they say that the Government are fiddling the figures. They say that they are put under undue threats of many kinds. Their lives are being made unhappy not only through the distress of unemployment but by the activities of the Government and those people who support the Government in places that we used to call the employment exchanges. This is not encouraging the youth of our country to want to return to work in order to make their contribution to an honest country with an upright government.
Lord Young of Graffham: My Lords, the noble Lord has spent more time with his colleagues than with young people. The young people with whom I speak up and down the land do not accuse this Government of fiddling the figures. The young people to whom I speak appreciate and accept the fact that we have introduced the best training scheme for young people. That is something which noble Lords opposite, when they had the opportunity, hesitated to do and turned away from.
Lord Northfield: My Lords, will the noble Lord give us any up-to-date figures about the progress of the Jobclub scheme and the Restart scheme? Have they peaked in success? Is their effect continuing or have we had the best from those schemes? They have done a good deal to bring down the level of the long-term unemployed.
Lord Young of Graffham: My Lords, I am grateful to the noble Lord. It is perhaps another question, but my information is that the Jobclubs continue to show the productivity that they have shown in the past in getting those who are out of work back into employment. I have not seen the latest figures from Restart. I shall write to the noble Lord and put a copy in the Library.
Lord Dean of Beswick: My Lords, is the Minister aware that any reduction in the very high figures that he has announced is welcome? However, can he
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indicate whether he expects the drop in the long-term unemployed to continue at the rate of the past 12 months? As a north countryman, I welcome the fact that the North-West and North-East come out better on the figures that he has produced. However, is it not also a fact that those areas still have the highest percentage of long-term unemployed, certainly in England? Ought they not to be considered for further government measures in order to reduce the appalling figures in those two areas?
Lord Young of Graffham: My Lords, forecasting the rate of unemployment was a temptation that I was able to resist in the days when it was going up and also when it started to fall. I do not think it would be profitable to give further forecasts, save one; and that is that the Government will not relax their efforts to ensure that they provide as much help as they can to those who have been out of work for a long time as well as to those newly unemployed. I very much hope that we shall continue to see past progress maintained in the future. But more than that I fear at this moment I cannot say.
Lord Dormand of Easington: My Lords, I was saddened that the Secretary of State should suggest that I do not live in the real world. I say to him with great respect—
Noble Lords: Question!
Lord Dormand of Easington: Is the noble Lord aware that, as someone who has lived in the North of England for most of his life, perhaps I am more in the real world than he is? Will he now attempt to answer the question? I accept the figures he has given, but, the Government having had nine years of absolute power, can we have an estimate of when we shall get back to the situation in 1979?
Lord Young of Graffham: My Lords, I hope we shall never get back to 1979 in terms of productivity, labour relations, output and all the other matters which at that time gave us a worldwide reputation for the British disease. When I go to the North-East and see the new factories that have been set up, when I see the Metrocentre in Newcastle and all the new vigour and vitality of the North-East, I would not exchange that for 1979 for anything.
Lord Glenamara: My Lords, will the noble Lord bear in mind what I told him last week, that we greatly welcome these reductions in unemployment? But will he also tell his noble friend Lord Elliott that unemployment in the North-East of England is by far the highest in mainland Britain? Unemployment among males is a sheer affront to society. It is an absolute disgrace, so please will he not be too satisfied and smug about unemployment in the North-East?
Lord Young of Graffham: My Lords, I wish to assure all in your Lordships' House that I have never been smug about unemployment. Far from it. But I refute the allegations about the economy and in particular about the way unemployment is going in our country.

Regional Grants: EC Criteria
3.3 p.m.
Lord Campbell of Croy Lord Campbell of Croy asked Her Majesty's Government:
Whether they are satisfied with the criteria being considered by the EC Commission for designating areas as eligible for regional grants.
Lord Young of Graffham: My Lords, the criteria proposed by the Commission on 23rd March are neither entirely clear nor apparently fully satisfactory. Negotiations continue. The criteria have to be adopted by the Council unanimously.
Lord Campbell of Croy: My Lords, I am grateful to my noble friend for his reply and I wish him strength in the negotiations. Is it true that the Highlands and Islands of Scotland would not qualify, while more prosperous and central areas would qualify under an indicator which measures GDP per head, to which clearly far too much weight is being attached?
Lord Young of Graffham: My Lords, I am happy to assure my noble friend that I agree it is important beyond all doubt that the Highlands and Islands should continue to qualify for the regional fund. Indeed the Government have emphasised this in Brussels and I know the case has also recently been very ably put there by the representatives of the region.
The Highlands and Islands have by any European standards exceptional claims on Community assistance, notably in view of their location and the sparseness of population. I am confident that in the end these claims will be duly recognised, and in any event the criteria are to be adopted by a unanimous decision of the Council.
Lord Williams of Elvel: My Lords, can the noble Lord tell us what the Government's current attitude is towards the Community's structural fund? Do they now accept the Commission proposal to double the structural fund which they blocked before? If not, what proposals do the Government themselves have?
Lord Young of Graffham: My Lords, if the noble Lord would care to put down a Question on that matter I should be very happy to deal with it. We are at this time dealing with the criteria, which are a different matter.
Lord Mottistone: My Lords, if the Highlands and Islands of Scotland are to receive regional aid from Europe, should the same not apply to the Isle of Wight?
Lord Young of Graffham: My Lords, every time my friend stands I immediately think southwards, but in this case I suspect the answer must regretfully be no.
Lord Taylor of Gryfe: My Lords, will the Minister confirm that the Highland region has received £100 million in regional aid in the last 10 years? It would be quite disastrous for the region if we were to lose that opportunity of further European aid. Will he
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also confirm that other local authorities which are benefiting similarly in Scotland are alarmed at the prospect of that aid being withdrawn? Since it requires the unanimous decision of the Commission, will he confirm also that his Government will be opposed to the proposals in their present form?
Lord Young of Graffham: My Lords, I am happy to reassure the noble Lord in the terms that I have just assured the House that we believe that it is important that the Highlands and Islands should continue to qualify for the regional fund. I believe that the Highlands and Islands have by European standards exceptional claims for Community assistance and we shall continue to make that point.
Lord Cledwyn of Penrhos: My Lords, we do not dissent from what the noble Lord said about the claims of the Highlands and Islands. No doubt they are very good indeed, but does he not agree that the problems of the Highlands and Islands are nowhere as profound as in certain areas of Wales, particularly North Wales and in the North-East, which has just been referred to by my noble friend Lord Glenamara? Will he say that he will fight as hard for the rights and claims of the uplands of Wales, of the North-East and of Merseyside as he obviously will for the Highlands and Islands? Will he furthermore reply to the perfectly proper question of my noble friend Lord Williams of Elvel?
Lord Young of Graffham: My Lords, we accept that it is also important both for rural Wales and the assisted areas in Devon and Cornwall that they should continue to qualify for the regional fund. We are pressing their cases in Brussels as well. But, with the greatest respect, I believe that the structural fund is another matter and I shall be very happy to deal with it or to write to the noble Lord.
Lord Campbell of Croy: My Lords however academically attractive these proposed criteria may be—I was giving the Highlands and Islands as an example—will they not make absolute nonsense of the whole regional aid system if they are continued in their present form?
Lord Young of Graffham: My Lords, we are at the beginning of a process of negotiation and I am sure that this is a matter which will become clearer in the fullness of time—at least I sincerely hope so.
Lord Glenamara: My Lords, would the Minister care to comment on the proposal by Mr. Michael Heseltine, who was giving a full length personal party political broadcast on Monday of this week, for an English development board on the lines of the Scottish and Welsh development boards?
Lord Young of Graffham: My Lords, I am aware of the interesting suggestions that have been made. I have great confidence in the work done by English Estates in the North-East and the North-West and I see no further reason for us to expand on that.
Lord Hailsham of Saint Marylebone: My Lords, without in any way deprecating the feelings about

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particular areas of the mainland, will my noble friend bear in mind that there is also Northern Ireland, which has a very high rate?
Lord Young of Graffham: Yes, my Lords. Before we make a territorial tour of the entire nation may I also lay the claims of West Sussex very firmly before your Lordships' House?

Business
3.8 p.m.
Viscount Davidson: My Lords, I should like to say a word about the arrangements for this afternoon's two short debates standing in the names of the noble Lord, Lord Dean of Beswick, and the noble Lord, Lord Carter. On the principle that the mover is allowed approximately 15 minutes and that the Minister should rise to reply not less than 20 minutes before the scheduled end of the debate, in the case of the short debate in the name of the noble Lord, Lord Dean of Beswick, the number of speakers is such that it is not necessary to propose a formal time limit, but I am sure that noble Lords will agree that it would conform with the spirit of these short debates if they would keep their speeches within the 15 minutes which apply to the mover of the Motion. In the case of the short debate in the name of the noble Lord, Lord Carter, it means that all other speeches should be limited to a maximum of 5 minutes. If any noble Lord should speak at greater length he would do so at the expense of subsequent speakers in the debate.

Local Authority Property: Management
3.9 p.m.
Lord Dean of Beswick Lord Dean of Beswick rose to call attention to the report Local Authority Property—A Management Overview issued by the Audit Commission; and to move for Papers.
The noble Lord said: My Lords, it is rather strange that a matter which is so important to our standing in public life seems to have attracted so little attention in your Lordships' House. I am more than surprised that, with the wealth of talent—I am not saying this in a sarcastic manner—on the Government Back-Benches related to local government and the building industry, not one Back-Bencher on the other side has seen fit to participate in the debate. It is with a certain amount of sadness that I make those remarks.
Why have I chosen such a subject for debate? The report covers all the property, other than housing, under the control of the management of local councils. On a number of occasions over the past two years your Lordships' House has thoroughly debated and ventilated the question of the housing stock in the public sector and the dangerous deterioration in standards because of lack of maintenance, and so forth. There is no point in dwelling on that matter; nor is it specifically a part of the report.
The valuation that has been put on the properties gives a small indication of the subject which we are debating. The report quantifies in a global sum the valuation of the properties at £100 billion. It is for
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that reason that I am saddened that the report has not been received by some of the Government Back-Benchers who must have views on the subject.
I should like to list some of the properties in local government which make up such a substantial figure. The report lists them as follows: 22,000 primary schools; 4,500 secondary schools; 550 polytechnics and colleges of further/higher education; 3,500 libraries; 20 airports; 200 crematoria; 3,500 police operational buildings; 17,500 police houses; 1,500 fire stations; 3,500 offices; 4,500 social service homes; 1,000 day centres; 500 adult training centres; 1,500 swimming pools and leisure centres; 155,000 small holdings; and 100,000 urban parks and open spaces. The report goes on to state that a county council could be deemed to have a number of properties valued at £449 million, and that the average metropolitan district council could have a number of properties valued at £244 million. There would be a variation but the report draws a norm across all the counties. Therefore one can understand that these assets are most valuable. In terms of our infrastructure they play a vital part in the way in which we as a nation conduct ourselves and in reaching the standards that we wish to attain in giving service to our people.
I sought the advice of various people and bodies which deal with the problem. In order to bring some rationale into my speech, I first sought the advice of the Institute of Maintenance and Building Management. The body comprises the local authority managers of direct works departments and it is at the sharp end of any operation dealing with such properties, whether or not they go to the private sector in the future. That body has been dealing with the problem over a number of years.
I have also cast my mind back to the NEDC report published in 1985 which dealt with the subject of investment in the public sector built infrastructure. All the reports reach the same conclusion. It is that there is an acceleration in the deterioration of the properties which is most dangerous if not dealt with. I shall not enter into any detail as regards the educational establishments which make up the biggest single unit in the report. I believe that my noble friend Lord Peston will go down that road with a far wider expertise on the subject.
The NEDC report of 1985 stated:
"As a result of the large post-war school building programmes, less than 10 per cent. of secondary and 20 per cent. of primary schools today consist entirely of pre-1945 accommodation. However, the age of the stock is not an indication of its structural condition and the more recently erected stock is already of some concern to LEAs. Even where older schools are structurally sound, they may have inadequate lighting, heating, plumbing and wiring systems and lack the space or facility requirements of modern teaching".
Another part of the report states that some children are being taught in schools which, by most standards, would be considered to be structurally dangerous if they are not considered to be so already. During the 20-year period from 1950 to 1970 the school building programme suffered in the same way as did the house building programme. The systems and designs then used on buildings should not have been foisted on the public sector. Successive governments of all colours were warned that they were investing in trouble. No notice was taken but the warning is now catching up with us.
The report talks in terms of "sitting on a time bomb". That phrase appears in the report; it is not my phrase. We as a nation are sitting on a time bomb if we do not deal with the problem and make resources available for local authorities. It is for local authorities to decide how to tackle the problem, whether it is done through their own departments or put out to tender as instructed in the recent Local Government Bill. A start must be made because if we do not now start to defuse the time bomb, I suspect that it will become so large that it will be undefusable. The sums of money which will be required when it must be tackled not from choice but from necessity will be of such proportions that they will be frightening to behold.
A calculation was made in, I believe, 1969 to base maintenance figures on 1.8 per cent. of valuations. As I understand the matter, they were not real valuations but were paper valuations. I believe that anyone involved in building will know that the only way in which a true valuation can be obtained is by having a property thoroughly surveyed by a professional. The necessary repairs can then be quantified and a realistic financial figure can be put to the client or the local authority.
It is said that the annual sum spent on the maintenance of such buildings must rise immediately to 40 per cent. That is a tremendous amount. It has been put forward by professional bodies which have no particular axe to grind other than to tell us what we ought to be doing. I have sought the advice of the private sector but unfortunately—it may be because Easter has intervened—I have not received replies. I know that in producing this report the local government Audit Commission has done the nation a favour. This is one of a number of reports it produces periodically. It has produced one on housing, another on educational buildings. Those reports illustrate what we should be doing as a nation to deal with this situation.
One matter worries me. I ask the Government to look earnestly at the question of providing increased public expenditure in this particular sphere. It would be a first-class investment. There would be no wasted money and employment opportunities would be created. I wonder whether the Government might start to look again at the amount of capital assets raised by local authorities to which they are allowed only limited access for specific reasons. Perhaps they should be allowed some of that money for this specific purpose. That is the financial argument.
There is another argument. To try to see the rationale of this matter I contacted three London boroughs. I do not want anyone to think that I went into the centre of London. The boroughs were outer London boroughs, at least one of them Conservative controlled. Their building departments—historically, the foremost trainers of trade apprentices going into the industries—say that despite all the government training schemes for apprentices in the building industry and despite a new intake of people every year, the number of skilled building operatives is falling dramatically. If we allow this situation to develop further, even if the resources are made available we may well be faced with a situation where there will not be sufficient resources in terms of skilled labour to deal with the situation.
I should have liked to say much more. However, in the spirit of normal conduct in this House, I shall have to leave the subject shortly. I said that I would not speak about housing. But only this morning I received from those who produced the report a document called Audit Commission Management Papers: The Competitive Council. Under the heading, "People no longer accept that the council knows best," the document states:
"Things have changed. There may still be major gaps between needs and services, but councils' customers are more demanding and less grateful. They are also better informed, and better able to articulate their demands. People no longer accept that the council knows best. Scarcely a week passes without some major criticism of council services, criticisms which (unlike those of the NHS) focus more on quality than on quantity. Council flats built to meet the quantitative targets of the 1960s are no longer regarded as habitable, and are being expensively demolished".
That is the subject on which I wish to conclude. His Royal Highness the Prince of Wales, on a number of occasions recently, has expressed misgivings about what is taking place in the housing sphere. When one refers to these particular types of flats, that is what His Royal Highness is talking about. The sad fact is that some flats built less than 20 years ago are now having to be written off with full loan charges still having to be met by existing council house tenants who have no choice in the matter.
I, along with other people involved in public sector housing have drawn attention to this problem for years. No one has listened or bothered about it. I am glad that the Prince of Wales has seen fit to stand and be counted and to give an honest non-political opinion. It saddened me watching "Panorama" on Monday night that a prominent member of the Conservative Party questioned the right of the Prince of Wales to criticise actions that might be deemed criticism of the Government. The last politician I recall who tried to stop everyone, whoever they were, criticising him triggered off a world war with the result that 60 million people died. I hope that ex-Ministers or Ministers of Her Majesty's Government will be big enough and have broad enough backs to accept criticism from whoever it comes and will not regard it as a personal insult against their integrity. I beg to move for Papers.
3.26 p.m.
Lord Ezra: My Lords, I should like to congratulate the noble Lord, Lord Dean of Beswick, on giving us the opportunity today to debate this very important report. Had it not been for his initiative, I believe that we would have passed over without comment a report which raises very important issues. As he has rightly told the House, this concerns £100 billion of the assets of the country. If we were not concerned with the way in which those assets were being maintained and refurbished, I think we should be failing in our duty as a responsible House of Parliament.
I am also glad that the noble Lord paid tribute to the work of the Audit Commission. I regard it as one of the most valuable institutions in this country at the present time. It has produced a number of reports of a compelling nature which have gone into subjects of great importance on the basis of very careful analysis. It has presented those reports in a simple and clear manner which all can understand.

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Therefore, the issue before us today in debating this report is to find out from the Government what their attitude towards the report is to be. I very much hope that it will not be just another document which will find its way into the overflowing pending tray and that it will be taken seriously. As the report suggests, there is action to be taken by the Government and there is action to be taken by local authorities to ensure that this vast national asset should be properly cared for. Therefore, both directly and indirectly, by stimulating local government I believe that the Government have a role to play in their response to this report.
Some of the problems to which attention is drawn require a little thought. The noble Lord, Lord Dean, has already referred to what is described as the "maintenance time bomb". All of us who live in homes of our own, whether rented or owned, realise that maintenance in time is very sensible. If one has a leaking roof, one allows it to continue to leak and eventually one is forced to deal with it, then the cost will be several times greater than if one had dealt with it earlier. Therefore, it does not require a great deal of imagination to know that on the question of maintenance the answer is to deal with the problems of deterioration early.
However, unfortunately with regard to our public buildings, according to this report and indeed previous reports such as the NEDC report to which the noble Lord referred, we as a nation have not pursued a policy which we as individuals pursue. I believe that we must grapple with this problem of the "maintenance time bomb" so that we do not leave some future generation to deal with a problem on a scale which would be far greater than if we were to tackle it now. Therefore, we should hear about how this build-up of maintenance work is to be tackled either by direct action by the Government or indirectly by their stimulating local authorities to take the necessary action.
Then there is the question of the disposal of surplus property. There is a large amount of surplus property and there are varying ways in which this is dealt with. There is no doubt that local authorities vary in their skill and in the level of interest which they take in these matters. But they operate within an environment set by central government. This environment is not necessarily conducive to stimulating effective property disposal. The fact is that the proceeds from the sales of property are limited in the extent to which the local authority concerned can make use of them. I believe that this is something that needs to be reviewed.
I quote from the audit report. It says that not only is there a limitation in the disposal of funds—and I am referring to page 21, paragraph 43 of the first volume—but that,
"There should also be greater recognition of the need to raise capital in order to undertake investment schemes which in the long run will save both revenue and capital resources (particularly in relation to energy saving)".
The report states that this could be done by stimulating—it does not need extra revenue or resources to be made available—local authorities to dispose sensibly of surplus properties and to be able to use the proceeds thereof for the purpose of new capital expenditure wherever it might be required.
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If I may refer to my personal experience, when I was at the Coal Board there was a large amount of surplus property in the coal industry at any one time. I felt very keenly that we should not immobilise the land and the buildings which were no longer required for operational purposes. I set up a separate company whose task it was to dispose of these surplus properties and also to assure the board that everything that was surplus to requirements got into its hands. We laid down very specific operational requirements for all our properties, and this worked very well because, as its objective, the company had to market the properties that were surplus to the best advantage.
However, there was one disincentive in doing all this. We raised several million pounds a year by these sales but by the extent to which we raised this capital, our capital allocation was reduced. I did not regard that as a very great incentive. Had I been in private business I would have had that extra capital to invest—in the case of the coal industry in very desirable mining projects which we were unable to handle because of that limitation. Nevertheless, that is what we did.
There is another problem which local authorities have to face these days and that is the mass of new legislation to which this report refers. There are the problems that will be created by competitive tendering, however desirable that may be. That subject needs a new approach. There is the matter of increased financial delegation and the possible opting out of schools. All these issues will put an additional strain on local authorities. It means that they will have to be organised in order to take these problems on board. Local authorities should be very carefully oriented in the way of being able to deal effectively with their property problems in order to be able to release them to deal with these other developments.
Above all, the report is very valuable in drawing our attention to the changing social scene against which the local authorities now have to operate. We have major demographic trends in this country which mean that the balance of providing services for the young is shifting to providing more services for the elderly. This is going to mean a major adaptation. Here again it is a question of priorities; it is a question of local government being free to deal with the new social priorities. Instead of having a problem running their existing buildings and being unable to do so due to undue capital restriction, they should be able to carry on with a proper property management system. Furthermore, in the treatment of the mentally handicapped, for example, the trend is away from residential to community care. This matter is also going to raise problems.
I believe that this report is extremely valuable in drawing our attention not only to the deficiencies in the present system in relation to the management of public buildings, but it enables us to study this problem against the changing social framework. We need to achieve what in the report is described as an "active property management system", which requires effort both on the part of central government to set the right framework and to provide the right incentives and on the part of local authorities. Some of the latter, as the audit report clearly demonstrates,

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are more effective, so their example should stimulate others. In order to do that we need a combined effort and then I believe that local authorities can spend more of their time coping with the social change which is occurring around them.
One of the areas in which considerable savings can be made is in the energy sector. The Audit Commission produced a very valuable report in November 1985 on this specific subject. It drew attention to a number of possibilities which, if pursued, could lead to savings of up to 17 per cent. on the expenditure of energy, which at the time amounted to nearly £1 billion a year. Specifically, what it said was that expenditure on energy efficiency measures needed to be doubled from the then level of £40 million to £80 million. In the context of the present debate, therefore, I believe it is not unreasonable to ask what action has been taken on the basis of the recommendations made by the Audit Commission in its energy report of November 1985 relating to public buildings. Have the suggested measures been taken and have the savings been generated?
Finally, in my opinion the Audit Commission comes to some very good conclusions. They are conclusions which will enable us as a nation which owns these assets to be more secure in the knowledge that they are being better handled. The commission makes four recommendations. First, it recommends that there should be a clear strategy within each local authority for dealing with its property portfolio. The Audit Commission makes the very good point that although properties are owned and operated for different purposes—such as schools, public libraries and so on—there should be no barriers against running a property portfolio as a whole. There should be no possessiveness on the part of any particular department in a local authority. That has been one of the problems. That is what a clear strategy would involve.
This recommendation is at the level of the councils themselves. Below council level, at official level, there is a need to make sure that there is a professional operation of the property portfolio. The officers who operate the portfolio should have a clear knowledge and understanding of the job that they have to do and they should tackle it in the spirit of the strategy laid down.
Those are two tasks for local authorities, but there is also a task for central government. The task for central government is to set the scene right. The system of capital controls, according to the audit report, is too restrictive. Not only is it too restrictive but it is uncertain. The number of changes that have been made year by year have created an atmosphere of uncertainty in the vital area of how much capital from realised sales can be reinvested in essential tasks. This uncertainty should be removed. If we want local authorities to develop an effective continuing strategy they should be able to do so within a continuing strategy applied by government. The two must go together. There should also be on the part of government a greater recognition of the need to undertake capital investment schemes so that
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we can build for the future. Such schemes would pay off in the long-term.
The Treasury, as the body which cares for our interests in financial terms and does valuable work, is nevertheless restrictive in some of its approaches. I am personally involved with one local authority which has set up a combined operation with the private sector. It has asked me to be the independent chairman of the operation, which happens to be an energy saving scheme. We have devised ways to save a great deal of money on energy and have worked out methods of raising the capital efficiently from external sources. However, we have recently been advised that, even though we are a joint company, any capital that is raised will come off the local authority's capital allocation. I do not believe that that is the right spirit in which we should be doing these things. For goodness sake, if it is right to save energy, if it is right to introduce the private sector and have joint arrangements, which I fully support, I do not believe that the restrictions of the Treasury should apply willy-nilly. I quote that as an example of the ways in which the Government should create the right framework.
I should like to end on a positive note. This is one of the most important reports in relation to the assets of the country to be produced in recent times. It has made a number of valuable suggestions both in relation to local authorities and central government. These recommendations are based on careful analysis, the details of which are set out in the second volume of the report. Therefore I very much hope that when he comes to reply the Minister will say that the Government take this extremely seriously and that they are proposing to introduce a number of measures to carry out the recommendations.
3.42 p.m.
Lord Peston: My Lords, I should like to congratulate my noble friend Lord Dean of Beswick on introducing this important debate. The report by the Audit Commission Local Authority Property—A Management Overview is interesting, and, as the noble Lord, Lord Ezra, said, rather important. I hope that the Government will take it seriously. It is a great pity that more noble Lords have not seen fit to take part in the debate in order to elucidate many aspects of this subject. I hope that the Audit Commission will not regard this as lack of encouragement in terms of its extremely good work.
The problem before us is a general public sector problem; it is not just a matter for local authorities. It is not a problem unique to the present Government. However, in so far as the present Government are the government we have, it is to them that we must address our criticisms and our demands for action. The problem goes back a long way. It is connected with the general question of gross domestic fixed capital formation or investment in the public sector and with the fact that when governments are under pressure they find it easier to cut investment rather than other forms of expenditure. In that way those whose investment is cut find it much easier to do away with things like maintenance and to forget about proper economic decision-making for property, because the chickens

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will not come home to roost until some time in the future. Therefore, cuts are made in those areas and not in others.
The problem of public sector management here seems to lead to a series of irrationalities. We have major national assets—a figure of £100 billion has been referred to in respect of local authority property—but we do not manage those assets as well as they could be managed. We do not have the appropriate incentives for people to manage them.
From the general macro-economic point of view, the failure to do the thing properly is a further disappointment because it would make good sense for the Government to intervene in such an area. The improvement and construction of buildings provide employment which one thinks is a good thing. And that employment, apart from being intrinsically good in itself, contains a much lower import content than many of the other things we might be doing. Therefore, we do not produce the balance of payments pressures that might result if we raised public expenditure elsewhere.
I should like to turn to the specific problem of education. I hope that noble Lords will bear with me if I speak not merely about local authority buildings, such as schools, colleges and so on, but also about central government and the universities, because exactly the same problem arises for buildings in universities as in the schools. I refer to the lack of maintenance and deterioration. One does not have to look simply at the figures of fixed investment in real terms to know how that that has been unduly low in gross terms and therefore how lower still is the net figure. One does not have to look simply at the figures to see the nature of the problem. One has merely to walk around our public buildings, particularly the universities.
The university to which I have belonged all my life, London University, is full of buildings that are not terribly clean and not in a very good state of repair. Roofs leak. As the noble Lord, Lord Ezra said, it is easier to leave the roof leaking for a while because that does not cost anything other than inconvenience. Eventually, one ends up with a major bill. But if the pressure is on to economise, that is the easiest area in which to do so. This is a pity not only in economic terms. It is a pity that the public sector should become shabby and that our image to the world should appear so unattractive because we do not manage our properties appropriately.
I have spoken about colleges and universities but the key area that I should like to emphasise is that of schools and polytechnics. I do not say that this is the result solely of the present Government's failures. It goes back a long time. Nonetheless that does not mean that the time is now not right to change. Research has shown that many school buildings are physically dangerous. Happily, no damage has so far occurred to the young people in those buildings; but we should not take the risk. More to the point, there is evidence in the metropolitan districts that the poor quality of some school buildings is such that it has an adverse effect on the quality of education provided in
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them. Far too many buildings are not good enough for education purposes.
We hear of teachers and education generally being criticised—and there may be some grounds for that—but in many metropolitan areas teachers are working and students are being asked to learn in appalling physical conditions. It is not surprising that sometimes the performance in those places is a good deal worse than we should like.
I should add en passant that we have a further problem with such buildings—the problem of vandalism. I find that problem very difficult to understand; it is not something for which I have an easy remedy. However, to the extent that buildings are vandalised, the cost of maintaining and keeping them in a reasonable condition will rise to an even higher level. That is not just a matter which concerns schools in the primary and secondary sense. Evidence shows in the case of local authorities that the accommodation available for adult and youth education is also unsatisfactory as the property similarly deteriorates. So action must be taken.
If we think of further and higher education in the public sector, the problem also exists there. It all stems from the ease—I cannot emphasise this too strongly—with which one avoids meeting the maintenance requirement because one has so many other pressures on one's resources. As I have said, it is far too easy not to clean a building and make it good when there are so many other calls on available funds.
As I understand it, some authorities—this factor is more worrying still—have simply given up proper rational maintenance schedules. They operate on an ad hoc basis. Should something go wrong and they can patch it up, because there are funds available, they do so. If they cannot, they do not do so. That is not a sensible way to manage public sector assets. It is certainly not a way to manage them with a view to gaining a proper economic return from them for the benefit of the nation.
I do not say that all such problems arise from lack of funds. There is a genuine need to improve the quality of management. I accept that a type of expertise is required which may not often be available in all local authorities. And we should take seriously the issue of providing a proper back-up in that regard. However, I emphasise that a large part of the problem concerns the availability of funds. That will not go away. The noble Lord, Lord Ezra, was right. The schools that are deteriorating now must eventually be put right as must the colleges. If we do not put them right now with a proper schedule of maintenance, we will incur enormously increased bills in the future.
As regards education, we are told—I accept that the Minister may not want to deal with this topic in his reply—that under the new education Bill, if it becomes law, some schools will opt out. The interesting question is: what will happen to the maintenance of the fabric there? Who will be responsible for that? Will schools which decide to opt out do so with proper funds to improve the physical condition of such buildings? The point could be made that prospective opting-out schools have not yet

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realised they will have to cope with such problems. I hate to introduce a slightly political point here, but it may well be that once they realise the existence of the problem they may decide that opting out is not exactly the most attractive proposition.
I have concentrated on education, and that comprises the bulk of what I want to say. However, I cannot resist drawing to the attention of the House something which perhaps many noble Lords have already seen in local newspapers. In today's press there appears a report on the state of our hospitals and the question of their maintanence. There again we see the same problem: buildings often old, but not always old, suffering from a maintenance backlog involving ever increasing sums of money to bring them back into proper operational condition.
I conclude by agreeing with the sentiments expressed by the noble Lords, Lord Dean of Beswick and Lord Ezra, that this is an example where good management is the sensible way to improve the situation. We can provide the right incentives to do so. It is perhaps an example of how we could spend a little money—not a vast amount—and get a very good return for that money. I commend the report and the suggestions put to the Minister which I hope will reach his colleagues in government.
3.55 p.m.
Baroness Fisher of Rednal: My Lords, I should also like to thank my noble friend Lord Dean of Beswick for giving us the opportunity to discuss this report. We are all well aware of his great knowledge on local government matters and also his very personal interest in the happenings in local government.
The report is one from the Audit Commission; it is not an auditors' report as such but I think it should be considered as though it were. I say that because if we are looking at the words, it is described as "A Management Overview". However, if we look at the dictionary definition of the word "overview", it means a general survey. Perhaps therefore if we are looking at an auditors' report produced by auditors, the general survey should, as other noble Lords have said, require not only action by local government but also by national government.
The commission keeps a neutral position on property management when it recommends neither the "keep all" or "sell all" attitudes. That is an opinion which I especially welcome and which I think that local authorities will also welcome. Local authorities like to feel that they determine their own objectives. I know that the latter becomes more and more difficult for local authorities with the extension of government intervention—what we call centralism—and also with the restraints on local government spending which are imposed by the Government. As other noble Lords have said, the financial restrictions which local government are up against are a formidable obstacle that all local authorities have to face, whether on property development or on any other service that they provide.
The report states:
"If there is no rationale for retention, the property concerned should be sold".
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I contend that in the urban areas and the large cities it would be a much wiser property management policy for the local authority to demolish and to use the site, whether it be a school or a police station for the purposes for which it needs it most at the time. We must recognise that in the large cities, in large urban areas, the majority of the land is completely built up. If local authorities must provide, as the noble Lord Lord Ezra, said, care in the community, and if we are to provide more facilities for the elderly to be rehoused, we must realise that many of the old schools which the noble Lord, Lord Peston, mentioned are in areas where the children have left.
Therefore it is perhaps important that we look at those sites for future local government use and not place them on the open market whereby they will be lost for ever. I say that it is important for local authorities not always to seek to make a quick buck by selling their holdings. It is of course something that private enterprise never does, but it is always advocated that local authorities should do so.
That which was once acknowledged as a consensus between local authorities and government is of course now a rarity; it is most unusual for us to have a consensus. However, I hope that the Secretary of State will show a greater degree of co-operation when appeals on land or property usage are made to him.
Only recently an appeal was lodged with him concerning a site that had been cleared. It was intended that the local authority should use it for light engineering factory units in an inner city area where one is accustomed to engineering and factory units. The local authority lost that appeal to the Secretary of State and now another food supermarket is to be put in its place. The whole area is covered with shops selling food and suchlike. But, nevertheless, we are to have yet another food supermarket. I should add that small shopkeepers selling confectionery and bread, and the local authority, raised great opposition to the proposal.
There is another example which I would ask the Secretary of State to consider more seriously. It concerns preservation orders that are plonked on buildings. We know that to do that one does not have to know anything about the inside of a property. Someone goes around, looks at the outside and says, "Oh, that is old, preserve it". We saw a case of that in the Sunday newspapers this week. A preservation order was put upon a house which was built only seven years ago. It had been built out of odd pieces. The man had gone around all the junk yards where they were selling old furniture and beams. Someone from the department went round and said, "Preservation order". A fortnight later the man wrote and said that the house was only five years old. We are asking for efficiency from local authorities; we sometimes wonder whether the Government see themselves as acting efficiently.
A preservation order was made on two schools which I know well and which were built in 1858. They were condemned a long time ago as unfit for children to be educated in. They had been closed for about 15 years. Unfortunately the vandals had not got around to that area and smashed them all up. Someone went

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round and said, "Ah, an architectural monument", or something like that. The local authority was told to preserve them and keep them in a good condition. It did not have enough money to maintain the schools that children were attending, never mind those which had been empty for 20 years. The local authority has done the maintenance. The buildings look very pretty. They are three-storey buildings. There are about 20 windows about 4 foot by 5 foot along the front. There is lovely corregated iron in each of the window spaces so that the vandals do not damage them. That is the only way the local authority can preserve the property. They have no money to do anything else. The buildings are a worse eyesore than they were before.
Demands on local authority services are changing dramatically. As the report points out, financial resources, both capital and revenue, are under much more pressure. Other noble Lords have spoken about the deteriorating condition of much local authority property. Local councillors see it every day. Their officers see it every day. That is not all, the ratepayers—the general public—see it every day. They ask why all the property is allowed to deteriorate. They say, "Isn't it a shame that all this is being spoilt". We must remind ourselves again—I think that I am the fourth Peer to mention this—that the report says that there is a maintenance bombshell which should not be underrated. All of us who have read the report have that printed across our foreheads, as one might say.
There is a further property management anxiety with which local authorities have to contend. We recognise that the large cities are in the front line of the battle against many social problems. They have problems of unemployment, bad housing, homelessness and of course the high level of reported crime. The report mentions vandalism, which is an important aspect of the matter when we are looking at property maintenance. It is a serious problem in some areas. As a local magistrate, the problem is brought to my attention. It is not just the graffiti and other painting and daubing that goes on. Some of this vandalism is serious crime; for example, the arson of school buildings. It is difficult to operate property development and maintenance in areas of high vandalism.
We talk about alternative uses. I love these gay brochures that everyone brings out for us. I always think that they are also reasonably priced. As the noble Lord, Lord Ezra, reminisced, perhaps noble Lords will be patient with me while I reminisce and say that there is nothing new. I looked at the pretty pictures in the book which show how something was converted into a library and how something else was converted into a library. There is nothing new about conversions. In 1966, when I was chairman of the housing committee in Birmingham there was the beginning of what we call the battered-wife problem. It was difficult for us to provide battered wives with a refuge from their husbands. I can vividly remember that we converted a redundant Victorian red-brick police station. We made it into a refuge for battered wives. It proved to be a successful refuge. There was some sleeping accommodation because in those days
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police officers had to sleep on the premises. That was a conversion which was carried out before we had audits and management surveys.
Perhaps I may reminisce further. There is a beautiful open space around Birmingham called the Lickey Hills. It is a public open space which was generously provided by the Cadbury family. Before the advent of the motor car it was used a great deal by day-trippers going from the centre of Birmingham on trams and buses. A large refreshment room was built there. In 1963 that large refreshment room was not being used to any great extent and it was transferred to the Association of Boys' Clubs, which used it as a weekend camping facility for boys from the city.
Noble Lords will be pleased to know that I am drawing to a close. I shall read from page 5 of the management over-view. Paragraph 8 states that changes can be achieved by local authorities but that there may have to be a major change in attitude. It states:
"To some extent, however, local authorities' progress is determined by the willingness of central government to create an environment which facilitates active property management. That environment has been uncertain and, in some respect, hostile to portfolio restructuring for some years".
As the report says, property management by local authorities must take place in a different way from that of the private sector. The report gives good advice as well as reporting the good practice that is already observed.
I close by asking the Minister whether he will tell us when the consultation paper on possible changes to the capital control system announced by the Department of the Environment will be issued. May I also ask him whether we can expect, arising from the Audit Commission's report which we are discussing, any government consideration of further financial incentives being offered to local authorities?
4.10 p.m.
Lord Graham of Edmonton: My Lords, it is a real pleasure to speak in this debate, the opportunity for which has been very kindly presented through the initiatives of my noble friend Lord Dean of Beswick. I congratulate him not only on his choice of topic but also on the breadth of the manner in which he introduced a very serious subject. All the speeches which I have heard since that of my noble friend have added not, I hope, to the problems of the Minister but to the worth of the debate for the Minister and his colleagues when they consider what can best be done next.
Knowing the Minister, I am satisfied that he will be well aware not only of the problems but also of a number of solutions. I want him to accept that I understand his difficulty in moving from an appreciation of the problems and solutions to delivering the goods. I am sure that he has appreciated that no one is using this debate as a stick to beat either the Minister or the Government mercilessly on the matter. Nevertheless, it is a useful opportunity for Members—I was going to say all round the House but I had better amend that—on this side of the House to say to the Minister that there are a number of aspects on which he and his

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colleagues will be sovereign. They are not merely the provision of cash but urging changes in attitudes. I want to hear the Minister tell us not only that he appreciates the problems but that he has the germs of a strategy to deal with them.
I am well aware that the report is welcome, timely and reminds a number of people—and I am only one of those who have already spoken who have local government experience and who can appreciate it—that through no fault of theirs but by a change in style we are now moving in local government into a new era. It is an era when the adaptation and adoption of techniques and devices which have been used by industry and commerce for many years are seen to be appropriate to the good management of local authority assets.
I congratulate the Audit Commission on the fairness and fullness of its report. I shall be wanting to use some of the matters which it mentioned for the points which I want to make. For instance, I hope that the Minister will accept that many of the criticisms which can be levelled at local authorities and their inability or ineffectiveness in dealing with some of the problems in property are due not only to a lack of resources. They are in a state of panic and under pressure from the Government for financial imperatives, not just this year but over many past years.
The report talks on page 3, paragraph 7 in terms of the demographic changes shifting the balance of the make-up of the community from the need at one time for services for children and young people to those for retired people. There is a growing trend towards community rather than residential care for mentally handicapped people. That was a point which the noble Lord, Lord Ezra, used in illustrating the change. I think it is in order to point out to the Government that it is all very well saying to local authorities, "We want you now to take care in your community of the mentally disturbed people who previously might very well have resided in Friern Barnet Mental Hospital. We are now going to release them into the community. Good luck, we wish you well". They do not say, "In order to do that properly what you need is resources and assistance".
The Minister will be aware that what we get is the sad situation where a local authority like the London Borough of Enfield will be under stress to do all sorts of things. It finds that the solution is to put increasing numbers of people who need special care on the 17th floor of a tower block. Then instead of having adequate day centres they are wandering the streets and byways of the Edmonton market and other places.
I think the Minister would do me and the House a useful service if he could say, "Yes, we want to see changes. Yes, we want the release of redundant assets and a better use of community assets but we also realise that local authorities are the prime agents of the central government and certainly the prime source of assistance for many people in the community. We recognise that they have problems as well". Talking in terms of the problems of a local authority the report says on page 5:
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"The deteriorating condition of much local authority property is causing concern. An analysis of the school building profile since the War suggests that there is a worse problem round the corner".
Other colleagues have gone on to say that this is a time bomb. I want to hear the Minister say not only that he agrees with the report and that it is a time bomb but that he has some ideas about how to defuse the time bomb. They may very well be along the lines of consultation and discussion with the local authorities. I do not want the Minister to tell me that one of the ways to deal with a problem is to sell or get rid of some assets and to use the capital. The Minister will know that to get rid of an asset at a certain time because you have to is dangerous. First, it may not be the right time to get rid of it and, secondly, with the overall stategy it may not be the right thing to do.
I served on a committee in another place on the Local Government, Planning and Land Act 1980 which brought in the regime which was designed to get rid of the assets in new towns. We know that every year the commission and other people are given a target by the Treasury: "We want the assets which are owned by the community in land and buildings transferred into cash, £100 million this year", or "£150 million", whether or not it is the right time to sell it. I know the argument is that they are not under an absolute imperative but are under an imperative to get rid of assets for a certain amount of cash in order simply to relieve the Treasury of the need to assist.
I know what will happen, for instance, with the London Residuary Body and ILEA. Let me give your Lordships another illustration. In my area of Edmonton there is a magnificent playing field owned by ILEA. It is a community asset used by many organisations and authorities. I can well imagine that the powers-that-be, whoever they are when it is all resolved, will be under pressure to get cash for that.
Perhaps I may raise the issue of allotments and allotment land. Of course time moves on and the allotments which at one time were desperately needed and well-used are no longer necessary. Over a period of time fashion changes. But the answer is not simply to sell the land to the highest bidder, build houses and move on. The idea is to have a strategy. If you are going to be forced to sell the land for a social purpose, which is that there is no longer a need for allotments, that is one thing.
The Minister can tell us just how little pressure he is putting on local authorities to change their property portfolio for the sole purpose of reducing their call upon central government for grant aid etc. In my view, there is a growing need by local authorities to find means of raising capital from selling their assets. Those of us with a little experience in business know first of all that it is no good selling assets simply as a means of keeping off the evil day. One must have a strategy. I hope that the Minister can help the House in that respect and I shall certainly listen to him.
We are looking at some of the solutions, and my noble friend Lady Fisher of Rednal was spot on when she chose the global phrase "the environment imposed by central government on local authorities". That is what I have been talking about for the past five minutes. It is the mood, the atmosphere and the ambience in which local government is seen by

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central government to be their trusted ally in serving the needs of our people. The Minister might say that all is sweetness and light, that most local authorities are happy to be driven, as I believe they are far too often, into doing the kind of things which the report mentions.
I want to spend a little time on the report prepared in 1987 by Her Majesty's Inspectors on the state of schools, which is the prime burden of our debate today. It is very worrying. I shall not use any more pejorative a phrase than that it is very worrying and very depressing. Whether or not it is due to malicious intent or accident, there are children who are getting the worst opportunity to flower, to grow and to take advantage of their intellect by comparison with others simply because the state of the buildings in which they are being educated deserves attention.
I do not make a political point. If the Minister acknowledges that that is the position and has something helpful to say, I shall appreciate it. What we are told—not by a politician but by Her Majesty's Inspectors—is that many buildings are in an unsatisfactory state. That position has been reported for years and in one-fifth of all classes seen in schools the accommodation is judged to be having adverse effects on the quality of work, usually because of its unsuitability for specialist use or its poor condition. There is a backlog of repairs and maintenance and intervals in the redecoration programmes leave a great deal to be desired. There is widespread concern about the state of furniture, some of which has reached the end of its useful life but whose replacement is put off for another year. Painting is done less frequently outside and there is an attitude of waiting until something has to be done.
One of the most shocking and sad things is the state of the libraries of our authorities. Libraries are not school buildings but are part and parcel of a good environment for our children. Yet what the HMIs are saying is that the most severe weaknesses, which were often long-standing, were in library support. In most authorities there was an absence or shortage of qualified librarians. This is not germane to the topic that we are discussing, but it very much affects the quality of life which is enjoyed or suffered by the children. The Minister will be well aware of statistics of that kind.
What is most depressing is that the position is getting worse. For instance, the Minister's own inspectors or ministerial colleagues told him that, so far as the repair of schools is concerned, in 1984 57 per cent. of schools inspected were less than satisfactory, and that by 1986 that figure had grown to 62 per cent. As regards the state of furniture in schools, 41 per cent. were less than satisfactory in 1984 but two years later 48 per cent. were less than satisfactory. As regards maintenance, which is a theme started by the noble Lord, Lord Ezra, and my noble friend Lord Dean, at what stage are we begging for trouble if we do not maintain schools? In 1984, 65 per cent. were less than satisfactory, while in 1986 70 per cent. were less than satisfactory.
As regards capitation allowances, which in this context we understand relate to pupils in nursery schools, there was a disparity between schools in a
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range of £12 to £27. In other words, the amount of money available to be enjoyed, used or worked with varied between £12 and £27 in nursery schools. As regards pupils of 16 and over, the spread was from £34 to £58.
I appreciate that there is a limit on time and I have taken what I think is a fair and reasonable amount of time. I just say honestly to the Minister that those who are taking part in this debate genuinely want him to succeed—which I am sure is what he wishes—in solving some of the problems, and we all want to see an understanding by him and his colleagues of the enormous problems faced by local authorities. They need his assistance and we very much hope that he can be helpful to them.
4.26 p.m.
Lord McIntosh of Haringey: My Lords, I join heartily in the thanks which have been expressed by other noble Lords to my noble friend Lord Dean, and indeed thank all my noble friends, including the noble Lord, Lord Ezra, whom I should like to call my noble friend, who have taken part in the debate this afternoon. I too regret that it has not seemed possible for any noble Lord on the Government Back-Benches to put his name down to speak. Surely the department or Conservative Central Office could have issued a brief to encourage them. Even if there are not so many noble Lords on the Government Benches who are expert in local government, there are others who could mug up a brief.
I must at the outset declare not an interest but some of my murky past in local government so far as property is concerned. In the early 1960s, in the first days of the London Borough of Haringey, I was chairman of the development control sub-committee and my friend the chairman of the planning committee and I used to maintain in the borough planning office a map of the borough. At the very outset we marked on it clearly in red that part of the area of the borough which was under local authority control, and marked in rather less clear red—perhaps more stripey— that part which was under central government control or under the control of other public authorities.
We made it our business in the first two years of the borough to acquire everything we could lay our hands on, whether it was additional housing, whole housing estates, individual houses, factory premises which were surplus to requirements or light industry premises which were surplus to requirements. For example, we were able to fulfil an election pledge that no family should be separated by reason of homelessness—something which it would by very difficult for any local authority to achieve today.
We did so without the Conservative opposition ever realising that we were doing it without the benefit of any budget for capital expenditure. Indeed it took them two years before they woke up to the fact that we had an open-ended commitment to spending capital on acquiring property, and two years before they asked the officers to ensure that we had a proper capital budget—something which we had for ourselves but which we had not been particularly inclined to disclose to the opposition until they found it in their hearts to ask us.

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I do not regret any of that. I think that both for the uses to which we put these properties at the time, and the advantage it has been to the borough since then, a policy of aggressive and effective portfolio management of property by a local authority is a good way for a council to be occupying its time and to be occupying ratepayers' money. I believe that they got a very good buy from the properties which we acquired at that time and which are still fulfilling useful social and economic purposes in the borough. Without them it would have been impossible to have anything like the housing programme that we had, much of which has resulted in contented owner-occupation, thanks to the Government's policies, and without them it would certainly have been impossible for the borough to have its very extensive and widely acclaimed policies of employment generation in the 1970s and the 1980s.
If that is a declaration of interest so be it. I join with my noble friend Lord Dean of Beswick in agreeing that this is a very important matter and something which deserved better attention from the Government Benches than it has received. It deserves more attention because the report which we are discussing today is a particularly good one. Indeed one comes to expect that of the Audit Commission, which has had a reputation in the four years since it started of being conspicuously impartial. When I say impartial I mean that it has embarrassed government and local authorities alike without fear or favour.
It is true that this is not the first report of its kind. The AMA 10 years ago published a report on the development of publicly-owned land which covered many of the same points that are to be found in the present report. As the noble Lord, Lord Ezra, said the NEDC has published a report on this matter and it is not one which has been wholly out of the public prints over the past 10 or 20 years.
But this report raises a number of specific issues which deserve attention and clear and helpful answers from the Government. The report refers to the problem of surplus, unused and underused land and property. It is true that a number of years ago when the Land Registry was less comprehensive than it is today a number of us thought that the very existence of a land registry would help us to identify unused or underused land and property and to do something about it. The report expresses the view, with which I agree, that that has not proved to be the case as the Land Registry has extended. I think that it is now up to the Government to find some way of bringing to the attention of all concerned where there is underused or unused property and by using the carrot and not the stick to encourage local authorities to make better use of such property.
The report refers to the commission's previous comments on the education issue. A number of my noble friends have made very cogent points about the decay in the maintenance of our educational property stock. Those are extremely valid points and they deserve close attention by the Government.
But the Government are not only not helping but are making things worse. The very proposals of
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opting out and the proposals for the decentralisation of control of property which were contained in the Education Act 1986 make it more difficult for an education authority to exercise effective control over its educational property portfolio. The same is true of the competitive tendering procedures. They may or may not result in the end in a better standard of maintenance per pound spent but they will certainly not create an atmosphere of certainty and security in which an education authority can plan the maintenance of its property. I shall not go into that argument, however.
The report refers to the problem of controls on the use of capital. We understand that a consultation paper is due from the Government about how that is to be implemented, and we understand that there are to be changes which are due to be implemented along with the poll tax in 1990 if that tax meets with the approval of your Lordships later this summer.
The House would welcome further news from the Minister on what prospects there are of a more defined policy on the Government's part. The noble Lord, Lord Ezra, and other of my noble friends referred to the use of capital receipts. It is no incentive whatsoever for a local authority to do some of the sensible things which are described in the report if every penny that it saves is then taken off its capital allocation. There is no incentive, whether it is the National Coal Board or a local authority which is being treated in this way. The Government will have to find some way of providing an incentive for local authorities to make changes in the effective use of their capital property assets.
It would not be right for me to continue without referring with approval to the fact that the report makes very strong recommendations not just for central government but for local authorities themselves and about the obligations on members and on officers to have a strategy of their own for the maintenance, control and utilisation of their property portfolio. In my view the report refers rightly to the need to have a committee whose chairman is of equal standing to the chairmen of other major committees and whose prime responsibility is the control of the property portfolio, and to have a proper officer backup to that committee to enable it to play its part in the operations of the council. I believe that the local authority associations have already endorsed those recommendations and I endorse them today.
But behind all this lies a fundamental issue of the relationship between central and local government. What the Government are saying, and certainly what the Audit Commission is saying, is that local authorities should adopt a businesslike attitude to the management of their property portfolio. That is a view with which I heartily concur. But at the same time the history of the intervention by central government in the affairs of local authorities over the past nine years has been one which virtually makes that impossible. Every way we turn we find that central government are interfering in more and more detail in the way in which local authorities plan their business, in the way in which their financial support from central government is provided and in the decisions they make about the disposal and use of their own property.

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The noble Lord, Lord Ezra, referred to the lack of incentives for a more effective use of the capital from property disposals. The same is true of maintenance. The very detailed control of local authority revenue expenditure which is contained in the rate-capping system imposed by this Government, in the closer control of revenue expenditure and in the controls on contributions from central government which have been imposed by this Government have meant that local authorities are no longer able to exercise sound business estate management judgment on the control of their own properties. The result, as my noble friends have made clear, is that the physical condition of local authority properties, whether they be schools, libraries, public buildings or indeed roads, has been deteriorating over the life of this Government. That is a disgrace not only for local authorities but for central government who set the financial climate in which local government works.
When there is a similar decline in the quality of road surfaces on our trunk roads and our major roads in this country, the Automobile Association, the Royal Automobile Club, the Road Haulage Association and all the other strong pressure groups raise their very powerful voices in support of greater public expenditure on the maintenance of the roads. But when there is the same decline in the quality of the environment in our public housing, our schools, our libraries and our public buildings there is nothing like the same pressure, because the people who use those public buildings do not have the same political clout—certainly with this Government—as do the commercial interests and the road haulage interests. It is for that reason that there has been this significant decline, for which my noble friend Lord Graham of Edmonton gave chapter and verse, in the quality of the environment of local authority property.
The truth of the matter is that central government speak with two voices when they are talking to local government about these matters. On the one hand they say, "Be businesslike. Find better ways of saving money and we can justify the cuts that we have imposed on rate support grants and on other grants for local need". On the other hand the Government interfere and take things away. The Chancellor sees the opportunity for windfall profits, and every incentive that there is for local authorities to adopt the very sensible recommendations of the Audit Commission is weakened by the way in which central government act in practice. It is not a matter of winning the hearts and minds of central government. They speak the right words. What we want now is that they should perform the right actions.
4.40 p.m.
The Minister of State, Department of the Environment (The Earl of Caithness): My Lords, I am grateful to the noble Lord, Lord Dean of Beswick, for raising this important debate today. Although we have been small in number, I believe that the debate has been high in quality and I am grateful to the three Members on the Opposition Front Bench for taking part. It gives me an opportunity on behalf of the Government to tell your Lordships that we wholeheartedly welcome the Audit Commission's report and are grateful to it for its work.
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The scale of local authority property holdings is immense. The noble Lord, Lord Dean of Beswick, mentioned that there were 155,000 smallholdings and 100,000 urban parks. Perhaps it would be appropriate for me to point out that those figures are hectares.
The Audit Commission estimates that the replacement cost of local authority property—excluding housing—would be in excess of £100 billion. No one knows the true figure. That of course is part of the problem. Too many local authorities do not know what they own, let alone how much it is worth or why they own it. Without that information, opportunities for improved management and use of resources will be lost.
There is also a huge annual bill to meet running costs—energy, cleaning, maintenance, and so on. It is estimated at £4 billion. To put that figure in context, between 15 per cent. to 20 per cent. of expenditure on services such as education and libraries can be consumed by the running costs of property. I therefore agree with the noble Lords, Lord Dean of Beswick and Lord Ezra, about the importance of proper maintenance. I do not agree, however, that this is necessarily a matter of increasing public expenditure. The Government's plans for the current year, 1988–89, include provision of £6 billion for gross capital expenditure by local authorities in England and Wales. That represents an increase in real terms over the corresponding figures for the previous year. I know that the noble Lord, Lord Graham of Edmonton, will agree with me that that is a real sign of help.
The report sets out a detailed strategy for local authorities to follow. Now it is up to them to respond. I believe that most local authorities regard the report as helpful. Some were no doubt the models for the report's recommendations. Those authorities, I am sure, will have an important role to play in disseminating information about good practice to the majority of councils who will be eager to improve their own performance. Perhaps there will be a small number who will ignore the report. I hope that will not be so. Regrettably, we are aware of authorities where senior management is depleted and demoralised by the political posturing of members, and the chances of the Audit Commission's message being heard is slim.
The way the commission works in preparing special value-for-money reports is to set up a small team of experts drawn from the commission's own staff, the district audit service, local authorities and private consultancy. In parallel with the production of this published report, the team will have prepared an audit guide. Those two documents will be used by auditors in the next audit round as a basis for establishing local projects with individual authorities which aim to agree appropriate action in each area. Progress on implementing the recommendations of those local value-for-money projects is monitored closely by auditors in subsequent audit rounds. Some authorities may already have made a start in applying the lessons presented in the commission's report in less formal ways than through specific projects agreed in detail with their auditor.

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The report recommends a number of specific measures, and it may be helpful to your Lordships if I describe them briefly. Councils are recommended to establish local authority property management committees. It is important that property is seen in an authority-wide context. The opportunities for rationalising and making better use of property will frequently be missed if authorities rely solely on single-service committees. The report also recommends that authorities should establish an appropriate management structure in support of the property committee. The right approach to these organisational issues will vary from one authority to another. The crucial points are that the information on such things as ownership, utilisation, value and running costs should be available to managers, and that their role in seeking to make the most effective use of the authority's property assets should be clearly defined.
The Audit Commission stressed the importance of councils compiling complete asset registers. That may seem a rather obvious point but I hope that it horrifies your Lordships as it horrifies me, particularly as a former practising surveyor, that many local authorities do not have a clear idea of what they own.
Lord McIntosh of Haringey: My Lords, is the noble Earl recommending that every local authority should have a red map?
The Earl of Caithness: My Lords, the use of the red map would be to dispose of the surplus properties, which is an item that I shall come to in a minute.
Other public bodies are no doubt in the same position. It is long overdue that they get their act together. The experience of the residuary bodies appointed to wind up the affairs of the GLC and the former metropolitan county councils is most instructive. The residuary bodies needed to know what property the abolished councils owned so that they could pass over the deeds of properties that vested in successors at abolition. They needed to assess all the properties they had inherited to establish whether they too should be transferred to successors, or whether they should be sold as surplus. This has been a huge task for all residuary bodies, but more for some than for others.
The noble Lord, Lord Peston, talked about maintenance schedules. I agree with him on that and on the need for them. However, first of all one must know what one owns. The West Yorkshire County Council was an example of an authority whose knowledge of its property holdings was negligible—and here I am being generous. On taking over in April 1986, the West Yorkshire Residuary Body found a vast quantity of property deeds sitting in the basement of County Hall, but no comprehensible record of what they contained. It has taken a team of seven to eight staff nearly two years to sort through the records. They have had to examine 25,000 sets of deeds in order to produce a computerised record of the former council's holdings.
Lord Dean of Beswick: My Lords, I regret having to ask the Minister to give way for a moment, but are we debating this report or a report on the residuary bodies? There are a lot of other things that I should like to say about the activities of the residuary bodies. They are supposed to be accountable to somebody, but nobody can find out who they are accountable to. Some of them are doing some very strange things which I could have introduced into the debate. However, I restricted myself to the report named on the Order Paper. I am sorry to say that the Minister does not appear to be doing that. This question of the residuary bodies is an extraneous matter.
The Earl of Caithness: My Lords, I am talking entirely within the context of the debate which the noble Lord, Lord Dean of Beswick, so ably introduced. I was talking about complete asset registers and giving an example of what happened when there was not one.
Baroness Fisher of Rednal: My Lords, the local authorities which the Minister mentioned are not there any more. The Government have decided that we should not have metropolitan counties. We were talking about local authorities. The Audit Commission is reporting on local authorities and not metropolitan counties.
The Earl of Caithness: My Lords, I am also talking about local authorities. I am giving an example of what happened following the abolition of a former body in April 1986 and the trouble that has been involved in sorting out and compiling a complete property register. I regard it as highly relevant to the debate.
While that work was indeed strenuous, perhaps one could liken it to a labour of Hercules because the residuary body has already made substantial progress in rationalising its property inheritance. I mention a labour of Hercules because if Augeas had been the chair of a Left-wing Labour municipality he would not even have known he owned the Augean stables. In the first two years of its life the West Yorkshire Residuary Body has sold surplus property worth £8·3 million for the benefit of West Yorkshire ratepayers.
I have no doubt that some other authorities' property records are as chaotic as West Yorkshire's were. Of course there are some costs involved in compiling a register, but once the work is done the continuing costs will be small. However, the potential benefits from being able to manage property effectively will far outweigh the costs of setting up proper systems. Any public body should be ashamed to confess that it does not know what it owns.
Service departments need to understand the costs attributable to the properties they manage. It is all too easy to assume that a certain level of cost is inevitable. Those responsible for property need to be alive to the opportunities for saving costs. It is particulary important to look for examples of properties sited in expensive areas which could just as efficiently be located elsewhere. Similarly, if properties are under-used it represents a waste of resources. The Audit Commission quoted examples

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of what can be done, and I should like to refer your Lordships to a small number of these. One council had a library housed in an old, inadequate prefab and a redundant school. The school was converted into a new library, and the surplus playing fields were sold for sheltered housing development. The old prefab was pulled down and replaced by a car park. This example was described in the report as part of a self-financing corporate property review.
Another council decided that it needed to rationalise its administrative offices, which were spread across its area, often in old and unsuitable buildings. A teachers' training centre on the edge of the town centre became surplus and was closed. The centre was adapted for offices and a new council chamber was added. Seven of the old administrative buildings were sold. In this way, two-thirds of the cost of converting the training centre was recouped.
One council found that its plant nursery was losing £40,000 a year and so it decided to close it. This entailed relocating a depot and temporary offices on the same site. The council also had to buy plants from a private supplier when required. The depot and staff were relocated to other sites and the site was sold, with planning permission, for £1·4 million. A significant aspect of that example is that the annual revenue equivalent of this capital receipt—that is £140,000—was credited against the leisure committee's revenue cuts target. Although, as I have said, it is important for property to be considered as a council-wide asset, it is also worth while to give individual committees incentives in appropriate cases to release assets for disposal.
The key to achieving effective property management is for local authorities to undertake regular reviews of their property holdings and to be continuously looking for opportunities for rationalisation.
Although the report is mainly for local authority action, as has been pointed out it included two recommendations directed at central government. One was raised in detail by the noble Lord, Lord Dean of Beswick, and concerns capital controls. The report noted that the Government intend to introduce a new capital controls system at the same time as the community charge. The commission recommended that the new system should include greater incentives to local authorities to realise surplus assets. It inferred that the rules limiting the rate at which capital receipts can be spent on new capital expenditure were too tight, and was critical of reductions in the prescribed proportion of receipts that authorities can spend in any year, which, it said, created uncertainty for local government. The Government have recognised the faults of the present capital control system for some time, but I do not accept that a disincentive effect on sales is one of them. On the contrary, there has been a steadily rising trend of surplus property sales over the past few years and the Government are keen to see this continued.
I can tell the House that, in formulating our proposals for a new control system, which we hope to issue soon, we shall want to ensure that a proper incentive to dispose of surplus assets is maintained. But we shall also want to ensure that the distribution
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of spending power between authorities adequately reflects need and is not dominated by the distribution of capital receipts.
The noble Lord, Lord McIntosh of Haringey, mentioned that the report also referred to the land register system and recommended that central government should place more emphasis on "carrots" rather than "sticks". My right honourable friend the Secretary of State has already announced that he intends that local authorities should publish information about the unused and underused land that they own. Those who adopt the Audit Commission's recommendations will have no difficulty with that. In the end, I hope it will be possible for local authorities to publish information about all their land and property assets.
I have already referred to the West Yorkshire Residuary Body and to the value of property that they have sold. The experience of other residuary bodies as regards surplus property has been similar. In the first two years of their existence, residuary bodies have been able to realise £250 million from property sales. These sales directly benefit the ratepayers of the abolished councils' areas. But more than that, surplus land is being brought back into productive use. This remarkable achievement relates to the surplus holdings—perhaps I should say hoardings—of only seven councils. I wonder what could be achieved if all councils adopted the energetic and determined approach to property that has been shown by the residuary bodies.
The noble Lord, Lord Ezra, mentioned the need for local authorities to undertake energy saving projects, and of course I agree with him. It is for local authorities, using the freedom available to them in determining their priorities, to find room for such projects within the considerable resources available to them for capital expenditure. Of course they could find room for more projects by managing their property more efficiently, as the Audit Commission report recommends.
The noble Lord, Lord Peston, said that successive governments had looked to capital expenditure cuts as the easy short-term solution to spending problems. That has indeed been the case, but I remind noble Lords that in the public expenditure White Paper published in January, this Government have made an extra provision of £1.5 billion for public capital spending in 1988–89 and 1989–90.
The noble Baroness, Lady Fisher of Rednal, had great fun expressing what I thought was a slightly cavalier attitude to our heritage. She alleged that a preservation order had been made by the department on a cottage that was built five years ago. The truth is that we accepted a recommendation from our advisers—the Historic Buildings and Monuments Commission—to list the cottage, not to preserve it. It was included in a list of a number of properties that we received as part of a re-survey of that particular area.
Unlike the noble Lord, Lord McIntosh of Haringey, I am firmly of the opinion that local authorities own too much property and that a great deal of it should be sold. That, of course, is not the only message in the Audit Commission's report. The

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report is a wide-ranging and authoritative account of what can be done to improve local authorities' performance in this area. It deserves full-hearted commitment from members and officers alike to secure the implementation of its recommendations. As the report says:
"Few authorities have got it right. But those which have can point to real and demonstrable benefits, not only in terms of valuable capital receipts and reduced running costs, but also in the improved quality of services they deliver."
My Lords, I commend this report to the House.
4.57 p.m.
Lord Dean of Beswick: My Lords, when I opened this debate I explained that I had brought this subject before your Lordships' house in order to bring this issue before the nation as a whole. The exercise has been very worth while.
I should like to express my appreciation to the members who have spoken from both the Front and Back Benches on this side of the House, but sadly I cannot congratulate anybody other than the Minister from the other side. I say that with some regret because normally I would be in full sympathy with the Minister's attempts to answer the debate. However, I think that he spent far too much time talking about the role of the residuary bodies, which is a completely separate subject, and ignored points that were raised in the debate.
He made special reference to West Yorkshire and properties that the residuary body had sold off, observing how much benefit there had been to the ratepayers of that area. I happen to be a ratepayer of West Yorkshire. I am not yet aware that this process has been of any benefit to me, because I do not know where the money has gone.
If one must talk about residuary bodies, I believe that they are a weapon forged by the Government to take the place of democratic councils which have been disbanded. If the Government are so convinced that they are right, perhaps they will make some time available for us to debate the role of the residuary bodies. I have in mind the situation in Manchester and what will happen to the ratepayers in that city in respect of one particular project. The chairman of the residuary body was appointed by the previous Secretary of State for the Environment, Mr. Baker, to safeguard the interests of the ratepayers, who look like being faced with a substantial deficit which they will have to meet. Money will have to come from the ratepayers of Manchester and the other 10 districts in order to buttress up something which they inherited but did not want.
There are two sides of the story to be told. As the Minister has brought up the subject of the residuary bodies, I shall take the first opportunity to use the facilities that are available to noble Lords in this House to debate what the residuary bodies have been doing and where the money has gone.
I am sorry that he was not able to find time to reply to the part of my speech which is of deep concern to everybody. It is the diminishing building force that we have in this country. I am not a critic of the Government's training schemes, but, even allowing
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for those, we are facing a situation where a large project will have to be undertaken with a substantially and continually reduced skilled labour force. Perhaps the Minister would like to consider that matter and discuss it on a future occasion.
I thank everyone who has taken part in the debate. I give my special thanks to Mr. Howard Davies and the Audit Commission for producing this report. It has not been widely publicised but it is certainly very important when one is talking about our infrastructure as a nation. I beg leave to withdraw the Motion.
Motion for Papers, by leave, withdrawn.

Forestry
5 p.m.
Lord Carter Lord Carter rose to call attention to the importance of forestry to the United Kingdom; and to move for Papers.
The noble Lord said: My Lords, I begin by thanking the large number of noble Lords who have put their names down to speak in this debate, emphasising that forestry is now a vital part of rural policy. Over the last two years the national forestry policy has received a great deal of attention. We have had the report from the National Farmers' Union on farming trees; the report from the CLA about forestry and the landowner; the excellent report from the Select Committee of this House on the EC forestry policy; and about a year ago we had the Government's ALURE package with its initial proposals for a farm woodland scheme. We have now had the Farm Land and Rural Development Act to give statutory effect to the farm woodland scheme and in the last month we have had the Budget proposals on forestry and now we have the new woodland grant scheme.
Noble Lords will also remember the debate that we had in this House on the report of the Nature Conservancy Council, which seemed to be largely concerned with the afforestation problems of the flow country. Your Lordships may like to know that that is the last time I shall mention the words "flow country".
This is a carefully worded Motion intended to draw attention to forestry in all its aspects and to emphasise its importance to the UK economy. Forestry, like farming, is both a production industry and an environmental feature. On reading the various reports that I have mentioned, the reader is entitled to ask: what are the objectives of our forestry policy? There seems to be no clear definition of objectives with a statement of their relative importance. Is it the production of timber? Is it the provision of jobs in rural areas? Is it to provide an alternative use for agricultural land? Is it to enhance the landscape and the wildlife habitat; or is it—as some would say with a heroic sweep—all four?
Having now considered the combination of the proposals in the Budget, the farm woodland scheme and the woodland grant scheme, it is still no easier to decide on the objectives of our forestry policy. When considering the vicissitudes of government forestry policy in recent years, I have a strong suspicion that

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that well-known government servant, Mr. Push Me/Pull You, has been hard at work in the drafting of policy.
What is the perspective in which we should consider our national forestry policy? The world forestry picture is staggering in its majesty and insecurity. Four million square miles of tropical rain forest will be destroyed completely, at the present rate of destruction, in 40 years. Of the world's total forested area, there are some 50 million acres which are felled annually for agriculture, fuel and logging. Ten times the total area of the UK forest disappears every year. In passing, we note that the October hurricane was equivalent to the annual UK harvest of timber in one day.
It is estimated that some 40,000 different species of plant life world-wide could be extinct in the next 60 years. We should relate this impending ecological disaster to our annual import requirement of £5 billion of wood and wood products. We import some 90 per cent. of our requirements—the highest in Europe.
It seems to me extraordinary that all the reports which deal with the balance of payments aspects of our forestry policy completely miss the point about this world ecological problem.
The National Audit Office report on the policy and objectives of the Forestry Commission and the report of the Countryside Commission on forestry and the countryside completely ignored the effect on world timber production of the massive reliance that we have on imports of timber. The point is often made that only some 10 per cent. of our land area is afforested. As we know, it is one of the lowest proportions in Europe. I do not find this a compelling argument on its own. I am not a geographer, but this may have as much to do with topography as with economics. However, it emphasises the extraordinary and vulnerable position that we face, with a world shortage of softwoods forecast, and with 80 per cent. of our timber requirements being softwoods.
I mentioned earlier the employment aspect of forestry and the creation of rural jobs. It is estimated that some 40,000 jobs are provided directly in forestry. It has been said that forestry as an enterprise is capable of providing some six to seven times as many jobs as, say, sheep farming in the uplands. The CLA has said that there is potential for a further 16,000 jobs in the proper management of existing woodlands and a potential gain of 80,000 to 160,000 jobs downstream in the new pulp, paper and board mills which would be required to handle increased production. One-third of the UK's newsprint production, and almost half of our particle board requirement, is now provided from home resources. There has been investment of £600 million downstream in the last five years, with a further £400 million planned by 1995.
On the employment aspect, we should remember the essentially rural nature of forestry jobs. It is said that some 70 per cent. to 80 per cent. of forestry employment is within a 20-mile radius of the employee's home. One of the forestry companies has 250 employees in 35 parishes locally and a further 50 from outside the immediate area. There are many
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statistics that one can quote regarding our forestry industry. However, we have a picture of a growing and thriving industry that now seems to be thrown into turmoil by the proposals in the Budget on the taxation of forestry.
Here I have to admit to something of a dilemma. Not only the Labour Party but many environmental interests were in favour of closing the so-called tax loophole on forestry. We have had what one might describe as the Wogan effect on taxation policy. But it seems that the result of the Budget proposals is that we now face dire forecasts of a sharp decline in new planting, a decline in the standard of management of existing timber, substantial job losses, both direct and downstream, and destruction of the nursery stocks which will be no longer required. The forestry nurseries are mostly small businesses.
It is claimed that this position results from a loss of tax incentives that the National Audit Office calculates had an annual cost of only £10 million. I believe that we are entitled to put a simple question to the Minister. New planting was estimated to be worth some £28 million per annum before the Budget. Is he prepared to give the Government's estimate now of the annual value of new planting when the changes in the Budget come fully into effect after 1993?
There is also in the new woodland grant scheme a further anomaly. It seems that entrants to the farm woodland scheme will be penalised for planting conifers, either pure or in a mixture, relative to those who plant outside the farm woodland scheme. There are substantial differences in grant rates depending on the proportion of conifers and broadleaves and whether the planting takes place on improved arable land or grassland. We should ask the Minister to explain the rationale behind this apparent anomaly. What is the purpose of it?
I referred earlier to forestry as an alternative use of agricultural land. It is quite clear that forestry is the major alternative user of farmland. There are no new crops in the pipeline that have the potential to use agricultural land in the way that forestry does. But there seems to be some confusion about this if one considers successively the ALURE proposals, the objectives of the farm woodland scheme and now the woodland grant scheme. Indeed, in the original ALURE proposals on page 1, it was stated that the objective of the farm woodland scheme was to provide an alternative use for agricultural land to reduce arable production, but by page 2 it was said that the majority of the planting of farm woodlands would be on marginal land.
Do the Government accept the role of farm woodlands as a major alternative to agricultural production? As farmers we shall have to consider the Government's response alongside the set-aside proposals which we are now eagerly awaiting. As a farmer I shall have to weigh up the pros and cons of putting land aside under timber for 20 to 40 years, or for five years under set-aside with the chance of quickly returning to mainstream agricultural production. It will indeed be a very nice judgment. One will have to study the set-aside proposals extremely carefully against those in the farm woodland scheme and I suspect that some pretty

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sophisticated calculations will be required. I shall be interested in the Minister's views on that problem which will face farmers.
I said earlier that the Labour Party was opposed to the so-called tax loophole in forestry. It would be fair to say that the "Labour Listens" campaign does not include a visit to the forests and woodlands as part of its itinerary. But in considering the policy of the Labour Party towards forestry it is worth pointing out that before the last election, Mr. Brynmor John, the Opposition spokesman on agriculture and rural affairs in another place formed a study group of which I was a member. We produced a substantial discussion document on the future of rural policy. We proposed that a further 2½ million acres of forestry should be planted over the next 20 years at an annual planting rate of 25,000 acres per annum divided equally between the uplands and the lowlands. We also proposed the concept of a partnership between the Government and the landowner or farmer to increase the area under timber with the community having some share in the final proceeds in return for providing an annual income to the landowner or the farmer.
There is one other proposal in the Brynmor John document of which I was reminded forcefully when preparing for the debate and considering the number of government departments involved in forestry policy. I refer to the call made on a number of occasions for a single department of rural affairs. It was well put in the Daily Telegraph of 2nd April which argued for a countryside ministry embracing agriculture and the rural environment or, as we put it in our discussion document, a single department responsible for agriculture, forestry, fisheries and the protection of the rural environment both economically and ecologically.
I am aware that a large number of noble Lords wish to speak so I do not intend to take my full time. In considering the economics of forestry ownership. I am irresistibly reminded of the character described by R. S. Surtees as "a gentleman having no annual income—paid quarterly". Forestry as we know is a very long-term business. If we are to have the forestry industry that the nation requires for both the strategic and the economic reasons that I have described there must be stability of policy with fully understood and guaranteed incentives so that the forester can plan and can plant with confidence. I beg to move for Papers.
5.15 p.m.
Lord Gibson-Watt: My Lords, I know the House will be grateful to the noble Lord, Lord Carter, for introducing this debate and for the excellent speech he has made, particularly relating to the employment aspects of forestry. I am a practical working forester and owner of woodlands. I was for 10 years a forestry commissioner. I am chairman of Timber Growers United Kingdom which represents all private forestry.
Anyone who is a taxpayer will applaud the Chancellor's Budget and its long-term objectives. What it does, as the noble Lord, Lord Carter, has
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said, is to pose considerable problems for the private forester—not just investment companies and their clients but traditional forestry owners, not all of them rich by present-day standards.
Under successive governments, both Conservative and Labour, the system of Schedule D/B has been recognised as the best system for what is a long term, or very long term, industry. That is to go. And to replace it, we have considerably increased planting grants. It remains to be seen whether these grants will retain confidence in the industry. I sincerely hope they will. But the Government will need to consider inheritance tax on woods and some sort of maintenance grant, which used to apply, if their target of 33,000 hectares is to be met and if woods are to be properly looked after.
After the Budget, reassurances came from the Secretaries of State for Scotland and Wales. The Secretary of State for Wales made a very good speech at the Economic Forestry Group lunch on 16th March. But as chairman of Timber Growers and spokesman for all private forestry in the United Kingdom—Scotland, Wales and England—I can say that it would help us very much if we knew the score and what was actually happening with the Government in relation to discussions on forestry in England.
Before the Budget, I and the others in our organisation informed all the Ministers responsible of all the possible damage that could be done to this rather young and fragile industry which saves so much in imports, provides over 40,000 jobs and, at a time of agricultural changes, seems to be the best alternative use of land in so many areas.
If the Government consider that the Schedule D/B system is too open-ended, so be it. That has been the Treasury view for many years. As I said earlier, these increased grants, large as they are, may not be adequate. The Government need to think further and to talk to those who know about the economics of private forestry. So far these consultations have not taken place. The system of allowing losses on Schedule D forestry against other income made it possible for the traditional owner occupiers and landowners to put their losses on forestry against farm profits, in effect treating both as one and the same business. The losses not only applied to planting, fencing, clearing and pest destruction—which one can call establishment—but also to maintenance, the clearing of rides, brashing and sometimes the pruning of trees and first thinnings. Normally first thinnings and, in the case of hardwoods, even the second thinnings, are done at a considerable loss. So it is not just a case of establishment; it is the continual management of the woods and the payment of skilled foresters that count.
If the Government now consider that the present system is unacceptable they have a responsibility to find alternative policies which will meet their 33,000 hectare target for private planting but will also find grant for the maintenance of woods; otherwise, they will be badly cared for.
Answer me this, my Lords. From where will the new investment for added forestry come? It will not

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be from the traditional owners, believe me. It is not simply about areas suitable for conifers that I speak but about the largely hardwood areas of the south and east where in October 15 million trees were destroyed. Timber Growers and the timber trade were glad to join the Forestry Commission on a working party which made recommendations to the Government. I am referring to what occurred in October of last year; six months ago. Some quite modest recommendations have been made in order to help the distressed woodland owners. The Government have done precisely nothing.
In northern France a transport subsidy was announced. In Britain there has been silence—a brooding silence equalled only by Shylock when asked for money. Ministers need to maintain confidence in the forestry industry. It is a small and growing industry; both the softwood and the hardwood parts. I ask them to discuss with us the way ahead because forestry can continue to play a significant part in the national economy.
5.21 p.m.
Baroness Robson of Kiddington: My Lords, I should like to thank the noble Lord, Lord Carter, for introducing the debate. I agree with him that we accept the fact that the tax incentive to investors in afforestation had to be examined. As the noble Lord, Lord Gibson-Watt, has said, it is sad that the change also hits the traditional woodland owner. I should like to speak on their behalf and to deal with only two of the Government's aims for woodlands. They are to encourage timber production and to provide jobs in and increase the economic potential of rural areas. They are two aims with which we all agree, as do all the environmental lobbies including the Countryside Commission, the CPRE, the Country Landowners' Association and the Royal Society for the Protection of Birds.
One must ask oneself whether the woodland grant scheme will achieve those ends. The increase in the grant for planting—from £240 to £615 for conifers and from £470 to £975 per hectare for broadleaf—may at first seem generous. The grant is payable in three instalments: 70 per cent. on planting; 20 per cent. after five years; and 10 per cent. after a further five years.
Anyone who is involved in forestry—and I must declare an interest as I own a certain amount of forestry—knows that expenditure is heavy in the first 20 years in relation to conifers and even uplands. It is much greater on fertile lowlands and even greater on broadleaf plantations. The Timber Growers' Association estimates that the planting grants will cover only 55 per cent. of the cost of planting. It has carried out studies where it claims that, as regards upland conifer planting, the owner is short by approximately 55 per cent. of the cost. In respect of lowland planting of 20 acres of conifers the cost to him will be £12,000. In respect of broadleaved trees, over 10 years 50 per cent. must be paid by the owner; that is roughly £1,000 per hectare. That expenditure does not stop after 10 years.
Few traditional woodland owners can afford such an investment over the period of a number of years
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before the afforestation comes to harvest time. Unless woodlands are properly managed, once planted the chance of producing quality timber will be severely damaged. It is also worth mentioning that the encouragement to grow mixed woodlands, which as environmentalists we all wish to see, increases the cost of management even more.
We regret that the annual grant introduced for the farm woodland scheme has not been made available to ancient woodlands and new plantations. Perhaps the most disturbing issue of all is the danger to employment in rural areas under the new grant scheme. To provide jobs in rural areas the presently proposed grant system is in our view likely to diminish rather than increase the number of men employed in woodlands. Employment opportunities are greatest where there is an area of forest covering a range of age classes giving permanent employment. However, those are limited in scope because afforestation on such a scale is not always acceptable to other interests within the rural area.
The new grants do not encourage long-term employment in rural areas. A traditional woodland owner, given 70 per cent. of his grant, is unlikely to use local labour. I believe that he is likely to bring in a contractor with gang labour to carry out planting. He is then unlikely to be able to afford to employ forestry workers on a permanent basis to look after his woodlands. That creates not only a danger to employment in rural areas but an enormous danger of not producing the kind of timber that we hope to produce. I sincerely ask the Government to look at the question of allowing management costs for woodland owners because without that our timber industry will suffer.
5.27 p.m.
The Duke of Somerset: My Lords, as a woodland owner I also think it right not only to thank the noble Lord, Lord Carter, for initiating this important debate but also the Government for giving us so many proposals for the future of the industry, even though everybody does not recognise forestry as an industry.
While not wishing to hark back too much to the good old days of Schedule B, I think that it would be fair to point out that the old taxation system was designed to bring in outside capital to build up a forest industry. In that it has been successful. Therefore, to vilify those who responded to that invitation is most unfair, especially in view of the misinformed media campaign. We do not need to be reminded of our 90 per cent. imports at a cost of £5 billion per annum to justify the old approach.
However, as we are embarking on a new system I should like to examine whether it will work economically as well as environmentally. Few farmers or landowners will embark on a planting programme without an economic end in sight, be it saleable logs or sporting coverts, however attractive other matters may be. Therefore one must consider whether the new rates of planting grant will allow this industry to continue to sustain rural life and employment.

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It was an interesting exercise to work out the cost of a typical hardwood planting, as I did on an area of 1.9 hectares in Devon. It is worth running through the figures quickly in order to illustrate the costs. They are the plants at 15p each; shelters at 50p each; stakes at 26p each; labour at 41p; chemical weeding at 8.8p; fencing and gates at 52p per tree. That totals £4,086 on this area. After deducting the new grant of £2,612 one is left with a minus figure of £1,474. This now has to be found out of other taxed income. In that, we have not even touched on the cost of professional advice or annual weeding.
The compounded cost of establishing such hardwoods net of the planting grant shows a very large negative figure indeed. By way of contrast, douglas fir on the same site on a yield class of 24 is yielding £24,000 a hectare at 55 years. Furthermore, although forestry is now tax neutral, a plantation is still liable to capital or inheritance tax for its life of 150 to 200 years. To be really gloomy, I could also point out that without a properly organised grey squirrel control programme, including educating some of our woodland visitors, quality establishment is going to be most unlikely.
Another worry is the eventual value of old hardwoods retained beyond their normal span for amenity purposes. They become degraded and saleable only in the diminishing mining market. Some hardwood mills are already closing due to lack of quality material. Therefore, although I do not wish to discourage hardwood planting, as I love them, one should realise the cost and point out that it is only for the public-spirited philanthropist and those able to look beyond economic considerations. Perhaps I may suggest what is needed to achieve this planting and to obtain environmental diversification: it is commercial management, meaning sustained maintenance and perhaps help with cleaning the uneconomic first thinnings and high pruning to achieve quality.
Therefore, as I have perhaps shown, it is coniferous planting that will have to sustain the infrastructure of the industry, the new pulp mills and rural employment which will take up these planting grants. Let us hope they emerge to maintain the 33,000 hectares per annum target, especially as the more attractive farm wood scheme is restricted to 12,000 hectares.
The traditional woodland estate will find it difficult to keep on staff, but I welcome the reduction in top rate tax as one good incentive. Finally, it is a pity, as we have already heard, that there was no consultation with the industry over the sudden changes. After all, the TGUK was set up in 1956 specifically to advise governments on new measures.
5.32 p.m.
Viscount Mersey: My Lords, I rise to thank two people: the first is the noble Lord, Lord Carter, for initiating this debate; and the second is Sir John Hawkins, who planted many a fine wood of oak, ash and beech where my family lives in Sussex. He planted in the 1820s, and never lived to see his trees reach maturity. Such is the nature of traditional forestry: an act of patriotism, and act of altruism. For
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it is my family who benefits from Hawkins' oaks. it is we who enjoy them and thus I pay him this tribute 160 years after he planted. As we benefit, so we have a duty to continue planting for the benefit of those who will live in Sussex in 2100 AD.
Thus it was that when I inherited the woodland in 1973 I embarked on a heavy planting programme. The Hawkins trees were stag headed, going back, dying. They needed replacing. I must confess that I thought too that I was pursuing a sound financial policy. With all expenditure allowable under Schedule D and all income virtually pocket money under Schedule B, I reckoned that forestry was both patriotic and profitable. A wise old man from the Forestry Commission, a Mr. Cameron, came to look at my work and said merely, "I suppose you realise that all private foresters are mad". But I dismissed this as senile dementia. In later years, though, I would remember that remark.
All went well in 1973. We had good planting grants on about 50 acres. In 1974 we planted another 50 acres. In 1975 all 100 acres of infant woodland were destroyed by rabbits, hares and deer. The 1976 replant looked better, but then came the great drought, and this killed all our young trees and worse, the seedlings we bought from the nurseries in 1977 and 1978 had also been affected by drought and they died too. And so we beat up and beat up, all of course without grant. In 1980 we decided to fence. That costs five times as much as planting, and there is no grant. But by 1980 I was quite committed to continuing because to see seven years' labour simply wasted by throwing in the sponge was to me unpalatable, and after 1980 things got better. Our trees are thriving.
This story has a depressing start, but now there is a light at the end of the tunnel, becoming ever brighter. I tell it to show what a very small element of forestry costs is in the original planting. There are three big expenses in forestry: beating up, weeding and fencing. That is the traditional forestry that I know.
I learn with some surprise that there are people who go into forestry in order to make a quick buck, or perhaps a quick million bucks. It is, I suppose, possible to buy cheap land in Scotland, use government money to plant it and then sell out quick at a profit before all the hideous and costly complications of forestry set in. What I do not know is who buys these young plantations, for somewhere along the line the crunch will come and the crop will go wrong. The owner will then lose money.
Recent happenings in the flow country remind me not so much of forestry as of pyramid selling. It is all right for the first man in on the scheme but further down the pyramid there will be many a sucker. There will be men who buy 20 year-old plantations, for instance, only to find the whole lot demolished by hurricane Charlie. I have read of such speculators, yet I have never actually met a forester who has made money. Quite the reverse in fact. The foresters I know are spurred on by two motives: first, patriotism; and, secondly, a reluctance to see the whole of their original outlay wiped out by neglecting their plantations.

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We now face an agricultural slump and I certainly welcome government encouragement for alternative use of farm land, including forestry. However, at the same time as government have recognised the need for diversification, they have found out about the speculators: the pyramid sellers. Therefore, they seek to take forestry out of the taxation system altogether. As has been said by many other noble Lords, this will be quite disastrous for the typical and traditional forester.
It reminds me of the video nasties Bill. People abused the system. There were appalling videos. We had to legislate. But there were only six video nasties as against 36,000 perfectly decent videos. In catching the six we caught the other 36,000 as well. Is it beyond the wit of government to distinguish between the speculator and the traditionalist?
Would my noble friend convey my remarks to my right honourable friend the Chancellor of the Exchequer with a view to discussing possible amendments in the Finance Bill? Would he not give the ordinary traditional forester the same incentive to plan a fine countryside in 2100 AD as my generous predecessor Sir John Hawkins planned for us 150 years ago? There is many a peril in forestry. Sir John Hawkins' fine crop of mature trees blew down on October 16th last year, as did many other woodlands in South-East England. That is an additional reason for our right honourable friend to consider the forestry implications of the Finance Bill with the greatest care.
5.39 p.m.
Lord Taylor of Gryfe: My Lords, by the end of this debate I hope the Minister will understand the very deep concern in this House about the new policy. The fact that the Government are departing from what has been a reasonably successful policy in the past creates a good deal of apprehension to all of us who wish to see an expanding forestry industry.
Perhaps I can congratulate the Government on fielding the noble Lord, Lord Sanderson, to answer for them on this matter. Not very long ago I read that it was the Department of the Environment which made announcements about large-scale conifer planting, which was likely to end in England. I believe that either the Department of the Environment or the Treasury should be answering here for the policy that has now been evolved by the Government. The noble Lord understands forestry because he lives among it on the borders of Scotland. Perhaps he will convey to the Government our serious concern and the recognition that they have few friends in the new policy that is being developed.
All that can be done today in five minutes is to put some questions to the Minister. In reply to a Question from me two weeks ago he confirmed that the target remains at 33,000 hectares. Last year was a good year for forestry in that 24,000 hectares were planted. With the diminishing encouragement for new plantations which is involved in the new policy, how does the Minister hope to achieve the target of 33,000 hectares that the Government have repeatedly assured us is their objective?
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Perhaps I may make a suggestion. In 1980 the Forestry Commission planted 15,800 hectares; the private sector planted 8,600 hectares. Last year the Forestry Commission planted only 5,300 hectares and planting by the private sector had increased to 19,400 hectares, making a total of 24,000 hectares. I am not against private sector planting but perhaps the Government can tell us whether, if the new policy results in a decline in private planting, they will compensate for that by expanding the Forestry Commission in order to ensure continuity in the supplies of timber, which is so important to downstream investment and which has been very encouraging in the past few years.
Import saving has been mentioned. A saving of £5 billion in the balance of payments is not negligible. For every £100 of home produced sitka spruce that is delivered to the pulp mills, £500 is saved in imports. If one imports pulp from Sweden or any other country, it costs £500 to import the equivalent of £100-worth of home produced timber. Economically there is a tremendously strong case for developing our own domestic supply.
In the time at my disposal I should like to make one further point. One of the great encouragements in forestry in the past few years which filled me with great pleasure when I was chairman of the commission was the opening up of the countryside to recreation. It is terribly important in the large conurbations of Glasgow, Liverpool, Manchester and so on that people should have access to the countryside. The Forestry Commission developed access policies for its forests and the private sector also developed such policies. Access will now cease because private sector forestry is now looking seriously at its costs. The great recreational potential for forestry will be diminished by the proposals that the Government have now produced. I suggest that this matter should be looked at seriously.
Last year there were over 20 million day visitors to the Forestry Commission estates. The private sector can also quote similar figures. Those figures will be diminished in the future. Redundancies are now being discussed in the large estates containing the traditional forests in Scotland where there is no possibility of alternative rural employment. Villages and remote communities will be destroyed. I appeal to the Minister to convey that very deep concern to his colleagues, and perhaps some amendment of the Finance Bill may be possible.
5.44 p.m.
Lord Buxton of Alsa: My Lords, I am very grateful to the noble Lord, Lord Carter, for giving us the opportunity to discuss such an important subject. Like him, I shall not dwell this afternoon on the subject of the flow country. However, while I have the opportunity I should like to say that I am 100 per cent. in favour of forestry. Last year I planted three new broadleaved woods, and I shall be doing more. It is outrageous that people like myself and the Nature Conservancy Council, and any others who are deeply concerned about the destruction of one of Europe's ecological gems, should be vilified and thought to be anti-forestry. It is a ludicrous suggestion and I should like to leave it at that.

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I entirely support the Government's requirement placed upon the Forestry Commission and other departments for a reasonable balance between forestry and conservation. It would help everybody concerned—I put this to my noble friend Lord Sanderson for future consideration—if we understood what is meant by "reasonable balance". I have no idea what it means because I do not know who sets the balance and who decides. Presumably, "reasonable balance" means something which other bodies and people do not find unreasonable. Therefore the more information we have on that question the better. I am a member of the Nature Conservancy Council and I know that it also is not clear as to what is meant by "reasonable balance".
Perhaps I may say very briefly under headings or in the form of questions that after the past few months with everything that has happened and the changes that have taken place almost weekly about planting, especially in the North of Scotland, one is left with the inescapable impression that the Government are split down the middle on policy at the Border between Scotland and England. The Secretary of State for the Environment and the Minister at MAFF stated in clear terms:
"Approval should not normally be given in the uplands of England for new planting which consists predominantly of conifers".
Had that situation applied to Great Britain we would all have sat back and breathed a sigh of relief, but that is not so. In fact, it appears that the Secretary of State for Scotland has implied the exact opposite, or something very dissimilar. He promises that further planting licences will be issued. That is another example of where there is confusion and I should be grateful if my noble friend would take it into account.
I am not an expert in this field, although I love planting, but I have read all the statements and communications about planting, quotas, hectares, acres and all the rest of it. Frankly, as a businessman with 50 years' experience, I cannot understand it all and I find it hopelessly confusing. Perhaps I may return to the figures. A figure of 33,000 hectares is intelligible but how is it arrived at? What does it relate to and who thought of it? What are the arguments in favour of it? How much of the area is in the lowlands and how much in the uplands? For example, how much is to be in the North of Scotland?
The most obvious question which occurred to me and which I have never heard answered is: how long is the figure of 33,000 hectares supposed to continue? Is it to go on until we have planted up to the last sand dune going into the sea? I do not know and I do not believe even the Government know when that point would be reached because I have not worked out how many plots of 33,000 hectares there are available in Great Britain. We should know at least on a five-year or ten-year basis what is intended.
In this regard, surely the amount of timber to be produced in the future is what matters. This question relates directly to what the noble Lord, Lord Taylor, has just been talking about. Surely the Secretary of State should be calculating how much timber is wanted (not the actual acreage to be planted) because the quality of the land is far more important than the
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planting area. I believe that we need more information about the volume of timber that is wanted, where it can best be obtained, and also where is the best quality and volume.
Finally, I am concerned at everything that has been said about the potential for employment of future generations in the North of Scotland; namely, in Sutherland and Caithness. I do not believe that this problem is yet understood by the Government. I have seen the growth of leisure and tourism in areas as far apart as the Antarctic, the Galapagos Islands and China. There is a hunger for open, unspoilt natural countryside and it is increasing all the time because of the new era of education and all that our children and grandchildren are learning about nature. If we allow that wonderful area, a jewel of Europe, to be eliminated through planting in the wrong places—not through planting itself—we will have done a grave disservice to the flow country and our descendants.
5.50 p.m.
Viscount Ingleby: My Lords, I am fortunate enough to look after several hundred acres of woodland on the slopes of the North Yorkshire moors. Some are large coniferous woods. Some are small mixed woods. There is one superb natural woodland, of oak and ash, rowan, thorn and alder, which has not been much disturbed for hundreds of years. I regard myself not as the owner. Those trees were there long before I was ever thought of, and by the grace of God, I hope that some of them at any rate will be there for a great many more years to come.
As far as is practicable I should like everyone to be able to enjoy the woods. However, there are problems if the public are admitted to them. There is the greater risk of fire. There is the risk to nesting birds, especially game birds. There is a problem if dogs are not kept under control. Horses can bring their own special problems too. There is also the problem of litter. In short, if the woods are to be opened to the public there is a need for some kind of watchdog or warden. There may be a need, too, for considerable extra expenditure—for hardening roads to make them suitable for horses. Are the Government prepared to offer any extra help to those woodland owners who would like to manage some of their woods for the benefit of all?
5.52 p.m.
Lord Chelwood: My Lords, this debate, opened so well by the noble Lord, Lord Carter, is very timely. I should like to start by making three brief post-hurricane points. First, I understand that the Government are carrying out a sample air survey to try to decide how many trees were lost. The 15 million figure applies only to trees that were blown down flat. However, at least as many trees were so badly damaged that they will have to be felled or are so badly leaning that they will have to be felled. I suggest therefore that the real figure must be about 30 million.
Secondly, when referring to the storm that occurred in October, can we stop describing it as a "wind blow", a term which is not in the large Oxford

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English Dictionary, although the term "wind-blown" does apply to blowing into a breathalyser? Thirdly, five minutes ago I was handed a reply to a Written Question. I am glad to see that the Government are considering whether grant-aid for clearance to help woodland owners would be justified. I hope that we shall have a statement on that quite soon.
Through the failure of successive governments to pursue clear strategies, described so well by the noble Lord, Lord Carter, as a "pushmi-pullyu" policy, and through their failure to provide sufficient incentives, the British forestry industry is about half the size that it ought to be in the national interest. I greatly fear that taking commercial woodlands out of the income tax system will prove to be a serious blunder. It amounts to a unilateral breaking of an undertaking to woodland owners. It is a breaking of a contract—certainly morally and perhaps even judicially. Furthermore, it is retrospective although the cut-off does not come for five years. Both those aspects are absolutely wrong and unacceptable.
In essence, my reasons for using such strong words are these. First, the capital cost of the woodland grants scheme will be very large indeed, yet it provides, as my noble friend Lord Gibson-Watt said, nothing for maintenance. Weeding, brashing, thinning, controlling vermin, countering disease and many other activities amount to a regular annual drain on the owners of commercial woodlands. No account appears to have been taken of that. The drain goes on for at least 25 years and up to 50 years for hardwood. Therefore, those who are thinking of planting now will look with a leery eye at the costs; and I am afraid that they will be likely to plant on the cheapest land available, thus defeating the Government's intentions of taking improved grass land or good arable land out of production. I just do not think that this will work. That points at once to the fact that conifers are much more likely to be planted than hardwoods, bearing in mind that conifers produce at least two and a half crops in 100 years in comparison with hardwoods, which take 100 years to produce a crop.
In clobbering, which I think is the right word, two pop stars and a number of institutions which have planted trees on a large and insensitive scale, and by lending too much weight to the views of the conservation bodies—although I have been closely involved with them and I am only too well aware of the environmental impact of forestry—the Government have, unintentionally, I suppose, clobbered the owners of commercial woodlands both large and small. As for the farm woodlands scheme, it will be extremely expensive. It is complicated and bureaucratic. I hope and pray that it works but I very much doubt it.
What is the answer? We should go back to putting woodlands into the income tax system. It was cheap at the price and good value for money. This should be coupled with generous planting grants. Commercial woodlands should be removed altogether from inheritance tax. There is a strong case for that and I hope that the Government will give it careful consideration. That is all I have to say but I seek a positive assurance that in the national interest there will be an urgent and radical review of forestry.
5.57 p.m.
Earl Waldegrave: My Lords, I am so personally convinced of the importance of forestry that I was somewhat astonished to see that so many noble Lords from all sides of the House feel it necessary to draw attention to that importance. The speeches we have heard so far show that something is wrong with forestry at the present time.
I have had long experience both in public and private forestry. I inherited a small estate some 58 years ago, when the Forestry Commission was only 12½ years old and I was 25. The very first thing I did then was to let a rabbit warren to the Forestry Commission for 2/6d—12½p—an acre. My son, who now owns the estate, still gets his 2/6d. However, as there is no halfpenny now, I expect that he gets 12p if I know the Treasury. I have seen the difficulties, practically and on the spot, of both the small man and the big man, and they are considerable. Unless there is a financial climate that makes forestry possible for the public sector—the Forestry Commission—and the private sector—the landlord and the private grower of timber and not necessarily the new syndicates—there will be the most awful disasters.
My rabbit warren has not grown good trees but it is now one of the most sought-after recreational estates in that part of Somerset. The Forestry Commission, in collaboration with the nature conservancy people, is using it as an amenity forest, as it was planted on an old lead mine and the trees have not grown very well.
There is always a difficulty in growing trees and you never know what it will be. However, there is also always a use for the land afterwards. That is my experience. My great grandfather planted oak because he was an admiral and thought that we would run out of shipbuilding material. Well of course we have not used his oak for shipbuilding, but we have found other uses for it. He and my uncle, whom I succeeded, planted a lot of pit wood because they were interested in the north Somerset coalfields—long since closed down. However, we have found that, unlike the coalfields, newspapers do not seem to get smaller and smaller; in fact you now buy them by the kilogramme on Sundays. Newspapers need pulp and our pit wood will now go into such pulp. So it is true to say that something always turns up to help the situation.
However, I must watch the wretched clock and not reminisce too much. The planting that I tried to do on a private scale when I owned the estate was of mixed plantations. I included naturally regenerated sycamore because it is such a useful agricultural country tree; it makes draining boards, wagon bottoms and stair-treads; it never splinters. Of course we also grew oak because that was the great building material in the pre-concrete and steel days, and we grew beech because it is such a beautiful tree. At that time grey squirrels had not yet been heard of, but they have since murdered all the beech. Furthermore, whenever we plant more beech trees in those little paper tubes, the roe deer eat the tops off when the tube is pushed over by the tourists.

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So there are always difficulties, but we hope that there will always be—I am sure there will—long-term uses for the natural product. Forestry is a sensible and natural land use. It must be said that we have far too little in this country and we need more. Hardwoods take at least 100 years to mature—150 years is even better—and softwoods up to 50 years. Many problems are of course unforeseeable. For example, who would have thought of elm disease, the pine beauty moth, the grey squirrel or the roe deer? We had never seen such things in Somerset in those days. However, even though we may not use the timber as we thought we would when we planted (for pit wood or to build battleships), we can generally find, and so far usually have, very good alternative uses, whether for recreation or for making pulp for the Sunday newspapers.
Finally, I should like to say that I am distressed to see the way that certain sections of the press are inveighing against the Forestry Commission. My small public experience in forestry was, first, 30 years ago in the Ministry of Agriculture, when I was the Minister partly responsible for forestry. After that, I was involved in the Forestry Commission in the mid-1960s, where for a very short time I was chairman. I am proud to say that I have never worked with such dedicated countrymen as I did when I worked with the Forestry Commission. Therefore, to say that such people are an uncivilised lot of commercial Philistines could not be further from the truth. I remember that Dame Sylvia Crow, the great landscape architect, came to help us when I was in the commission. I do not like to say that she fell into the open arms of our staff, but she was utterly welcome and did a frightfully good job. That shows that the commission is a good and humane body which should not be vilified. We were always under the strongest pressure to complete our programme and to "plant up", otherwise we were in trouble. Naturally, we tried to plant up but now we are told that we are a lot of barbarian Philistines who have spoilt the countryside.
I hope that we can—as in Sweden—continue to have a private forestry sector and a public forestry sector which will continue to have a close and co-operative relationship in this essential and important industry. However, that hope is absolutely dependent upon the Government creating a financial environment that will enable it to flourish.
6.07 p.m.
Baroness White: My Lords, four voices from Wales are due to be heard in the debate, of which mine is one. The noble Lord, Lord Gibson-Watt, with his important national responsibilities, understandably used a fairly broad brush. However, I wish to concentrate especially on the Welsh scene.
Mr. Ridley's otherwise very welcome announcement on the protection of certain upland areas in England from excessive conifer plantations inevitably suggests greater pressure on Wales and Scotland if the Government's forestry target is to be met. Mr. Rifkind's response in Scotland has not been
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entirely reassuring. The Secretary of State for Wales may have spoken most eloquently at the economic forestry luncheon, but that occasion was a month ago and before the grant terms were generally known. Similarly, nothing of consequence has since been heard from the Welsh Office. A rather bland Written Answer in the other place on 22nd March carries, I am afraid, rather little conviction. This week I have been in touch with the two statutory bodies responsible for environmental standards in the Welsh countryside; namely, the Nature Conservancy Council and the Countryside Commission. I can only say that those organisations at the present time are confused and somewhat bemused as to what our situation in Wales is likely to be under the new forestry tax/grant regime. Neither organisation has so far had any firm guidance from the Welsh Office.
At present, conifer forests in Wales occupy, I am advised, 8.4 per cent. of the total land area. That figure represents over five times our area of heather moorland and three times the remaining area of broadleaved woodland. The policy of bringing forestry down the hill on to more productive land is likely to reduce losses of nature conservation interest. However, it is not yet known how successful the policy will be in Wales. Land prices would be a key factor and may prove to be the joker in the pack.
The woodland grant scheme, as previous speakers have already indicated, does not include measures to bring neglected established broadleaved woodland back into effective management. Much of the broadleaved woodland in Wales lacks such management and is declining with potentially significant losses to nature conservation and amenity.
I am aware that our Coed Cymru—related to the Countryside Commission, and in touch with other statutory bodies—is working hard to promote the management of existing woods. However, the recognition of the problems in the grant system would bring valuable benefits to the Welsh countryside. In the meantime, the Nature Conservancy Council has made it clear to me that it does not wish to see further large-scale losses through afforestation of our semi-natural vegetation and associated bird and animal communities.
I could go on into yet further detail but I recognise that there are many speakers who still wish to speak. Therefore all I shall say in conclusion is that it is quite clear to me from recent consultations that there is a need for the Welsh Office especially to take the initiative by having broader discussions—early and realistic practical discussions—on the need for a revised land use policy for the rural areas in the Principality.
6.10 p.m.
Lord Rees: My Lords, I should like to add my thanks to the noble Lord, Lord Carter, for initiating this debate which gives us our first opportunity to debate the budgetary proposals and the measures which accompanied them. I am ready immediately to declare my personal interest as a woodland owner on a modest scale—I hope that this will not disturb the noble Baroness, Lady White—in the Principality and also as chairman of a forestry management company

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which, I hasten to add, is not engaged in either Caithness or Sutherland.
The Budget and the accompanying proposals were clearly designed to initiate profound changes in forestry. We are all anxious and entitled to know how the Government see those changes. My heart goes out to my noble friend Lord Sanderson who will be winding up the debate. I go further and say, like many other noble Lords, without I hope too much acerbity, that it is a pity that those questions could not have been the subject of public consultation before the Budget. I am not impressed by arguments about Budget secrecy, because the measures are not exclusively budgetary. Even if they were, there are plenty of good precedents for prior consultation and debate.
There are three issues as I see the broader question. How much afforestation does the country require? Where should it take place? What species, or what mixture of species, for planting should be encouraged? On the first issue, we have been assured, as other noble Lords have pointed out, that the Government are sticking to a target of 33,000 hectares per annum, and 12,000 hectares per annum under the farm woodland scheme. Voices are already saying, "Too much". It must be emphasised that the United Kingdom has the least forest cover of any country in Western Europe, with the possible exception of Southern Ireland and the Netherlands. We have a land and climate admirably adapted for growing trees. Our imports amount to a gross figure of £6 billion—the figure of £5 billion quoted by other noble Lords is the net figure—and there are not limitless supplies of timber in the world. We have also developed over the past decade—on the assurances I suspect of a stable regime—a wood-processing industry which needs sufficent supplies close to hand.
As to new planting, the emphasis of the Budget and statements made afterwards, is that, normally, coniferous planting will be permitted—just—in the uplands of Wales and Scotland but not in the uplands of England. I find that decision extraordinary and capricious. While some agricultural land will be taken out of farming, it is unlikely that that land will be in other than small pockets, and planting will no doubt make an aesthetic and ecological contribution. I hope that it will, but for economic purposes—forestry must be regarded as an economic activity—larger blocks will be required, and therefore we shall need to look to the hills of Scotland, Wales and England, which in any event, historically, before goats, sheep and charcoal burners got to work, were mostly covered in wood.
As to the species, there has been too much uninformed criticism of conifers. Much of that is based on a vision of stark rectangles, usually of one species—the sitka spruce—and often at an early stage in growth. I believe that we have learnt from the mistakes of the past. Again, it must he emphasised that the range of trees to be planted must be conditioned by altitude, rainfall and type of soil as well as likely yield.
I turn now to the fiscal changes likely to be initiated by the Budget. Apparently it will be permissible to
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obtain tax relief for investment in industry and business, not only under the normal provisions of Schedule D but also under the business expansion scheme. On the other hand, that relief will be denied to forestry. That is extraordinary discrimination. If forestry if to be taken out of income tax, logically it should be taken out of capital gains tax and inheritance tax, as other noble Lords have emphasised. Again, I ask—I hope that the noble Lord who will wind up the debate can answer this point—is that right and fair? Why should capital allowances on expenditure incurred before 15th March this year be phased out after five years without balancing charges or allowances? Again, why should relief on interest on moneys borrowed or rent on land leased before 15th March be disallowed? That point was made with great emphasis by the noble Lord, Lord Chelwood, and I find myself in sympathy with it. People are entitled to order their affairs and make long-term plans on the basis of the earlier regime.
As regards the new grant regime, I recognise that it is intended to be slightly more generous than tax relief at the top rate of 40 per cent. But the expenses of creating, maintaining and managing woods go beyond 10 years, or even beyond five years. What about, as other noble Lords have emphasised, the cost of fencing, road making and repairs, thinning and management? It is not just a question of compressing those costs into the first five years.
At the moment, we must suspend judgment on the proposals. The acid test will be whether the Government's planting targets are achieved. It may be that in the first year or two of the transitional period they will be. People already involved in a planting programme will continue for a while. After that, there must be considerable doubt. If the targets are not achieved, I hope that the Government will candidly recognise the flaws in their present measures and reconsider them—next time in consultation with those who have some experience of an important national activity.
6.17 p.m.
Lord Burton: My Lords, I, too, should like to thank the noble Lord, Lord Carter. We must be realistic. Forestry in this country is not an economic proposition, but, having said that, there are many good reasons for growing trees. If one looks at the National Audit Office report on the Forestry Commission of December 1986, one sees that the commission was expecting a meagre return of 2·25 per cent. on all its new planting. That was on a heavily discounted capital input. If the real economics of forestry are considered, all costs—the value of the land, fencing, ploughing, planting, cleaning, vermin control, management and so forth—should all be given at least a notional compound interest rate.
By first thinning, one is faced with an enormous bill. For a short time I tried to run some of my forestry expenditure on a bank overdraft. Finances got totally out of control. I can honestly say that I have lost more money on forestry than on any other project.
The noble Lord, Lord Rees, referred to our climate being admirable for growing trees. But forestry has to

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compete in world prices. Conditions are different. For instance, in South Africa seedling plants have to be in the nursery for only six months instead of at least two years here. Fencing or plant protection costs are minimal in South Africa and the final crop is ready for felling after 25 years. Here, growth takes over 50 years. So one receives a return on one's money in South Africa very much more quickly, with consequent substantial reduction in one's compound interest rate.
Extraction costs in South Africa are minimal as the ground is dry and hard and mostly fairly flat. As a result, peeled logs are being sold and delivered into the pulp mill in Durban at about one-third of the price we get for unpeeled logs here. In Canada, the Scandinavian countries and Russia, the ground freezes hard in winter making extraction vastly easier than here. Furthermore, most of those countries are not subject to the windblow hazard that occurs here.
It is therefore unreasonable to expect forestry in this country to compete on the world market financially. The practices of five or six forestry companies in playing the tax situation as they did—and some of them totally ignored public opinion—was bound to cause trouble. It was not surprising that the Chancellor decided on the changes now coming into force. However, I feel that he did not appreciate the full implications. It is a pity that he could not simply have plugged the tax loopholes which allowed the forestry companies to act as they did. I am sure that fewer people would have lost sleep over that.
Now, the whole forestry industry in the country has been put in jeopardy—and not only the forestry industry. This is the final blow to our rural economy. Farming has already been put in an extremely difficult financial position with every prospect of things getting worse. Now the one major alternative has been dealt a death blow.
We recently felled a fine old Scots fir plantation. The proceeds from the timber have in no way covered the costs of re-establishment. That shows the economics of forestry. Yet we would not have received a felling licence unless we had undertaken to replant. This was tolerable as long as we could recover much of the cost from tax. But now this is to be denied. It will not even pay to fell standard timber as one will have to spend a greater sum on reestablishing one's woods.
After the wholesale devastation of our estate woods to provide timber for the country in two world wars, we dedicated our woodlands and set about re-establishing them. Part of this dedication scheme was a maintenance grant. Now the Government want the scheme wound up. I require a small area for a gravel quarry. I offered to replace the area lost to the scheme with land from elsewhere. But this is no longer permitted. I would have to give up the whole scheme and lose £2,000 a year of my maintenance grant. If the land changes hands the dedication scheme is terminated and the maintenance grant along with it. If I want to take advantage of the new grants, such as the hardwood grant, I shall lose my maintenance grant. How can one manage woods in the long term if this is how one is treated by the Government?
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I feel very aggrieved over the Government's forestry policy—if they have one. I do not believe it is wilful. I believe that we are controlled by urban dwellers who do not understand the problems and are susceptible to pressures from so-called conservationists. The result will be no commercial woods nor amenity woods. What a sad state of affairs! Rural employment is bound to suffer.
This morning one of my foresters gave in his notice. He will not be replaced. His house will be turned into a holiday cottage. It is not economic to employ him. There is one possible solution although it is one which does not appeal to me. There could be a tariff on cheap imported timber, thereby pushing up the price of our home-produced timber.
To answer the noble Lord, Lord Buxton of Alsa, I gather that the Forestry Commission is now using a satellite to decide what land is, and is not, reasonable to plant. I hope the noble Lord will be happier.
6.24 p.m.
The Earl of Perth: My Lords, there is one good feature in the Government's policy on forestry. It is that they have reaffirmed that they want to plant, as a target, 33,000 hectares a year. But to achieve this they have made some fundamental changes in fiscal arrangements, which, as I have listened to all noble Lords today, fill us with fear and gloom. None of us knows for certain what is going to happen.
I have one request to make of the Government: that in the coming years they give us the most detailed figures possible of what is happening in the world of forestry; how much is planted; whether it is new planting or replanting; what varieties are being planted; whether it is conifers, hardwoods or a mixture; and where they are being planted—whether it is in England or Scotland or Wales. I feel that only in this way can we make a judgment on what is going to happen in an industry which is of great importance to the country from every angle.
If these figures are given in the way in which I hope they will be—and I think it is extremely important to get them well set out—then if by 1993 our worst fears are realised, or perhaps even before 1993, we can hope that changes will be made to enable the Government to achieve the target which they are sticking to at the present time.
6.25 p.m.
Viscount Mountgarret: My Lords, I too should like to join in thanking the noble Lord, Lord Carter, for giving us a chance to debate this very important subject which is so dear to many of your Lordships' hearts. It is clear that on all sides there is deep concern at the Government's outline proposals for a substantial change in the forestry arrangements in this country.
There is one point on which in a way I must disagree with my noble friend Lord Rees. He said to the Government, "I hope that you may realise that these proposals which you are suggesting may prove to be ineffective and that the next time round you will consult". We do not want a next time round. There is time to consult now, time to make alternative provisions, perhaps in the Finance Bill. I hope very

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much that what we say today will be taken on board by the Government.
The late Sir Compton Mackenzie, in his enormous autobiography Ten Octaves, made a splendid remark which I have always remembered. In admiring the beauties of the Scottish hillside and the upland of the Cheviots and Lammermuirs, he said, "Spinach? Yes, I like spinach very much, but in the right place". It is in the wrong place in those areas where it is planted in no way in relation to nature at all, in large rectangular blocks, by people who might be called fly-by-night planters.
While effectively shooting the large-scale forestry investor in the foot, my right honourable friend the Chancellor has, in his Finance Bill, effectively shot or is about to shoot the traditional estate owner and forestry grower in the head. I entirely applaud the underlying intention of the Government. But unfortunately, as with so many things in life, when the government of whatever party try to get rid of something of which most of us basically do not approve, they tend to have the unfortunate habit of throwing the baby out with the bath water. I therefore ask: is there not some way in which the Government could deal with the objective which they are trying to achieve—in other words, the reduction of the abuse of tax benefits and advantages to the mega wealthy and at the same time not have a dramatic effect on the traditional timber grower and estate owner in this country?
Much has been said on how we wish to try to manage our woodlands from all points of view, mainly on the very lines outlined in the four points which the noble Lord, Lord Carter, made with reference to the new woodland grants scheme. But if we go down the route which is being outlined in the Finance Bill, there is no hope of achieving any of those four objectives, let alone the fifth, of providing an alternative to agricultural production and assisting in the reduction of agricultural surpluses. There will be absolutely no incentive and no benefit. No estate owner could conceivable afford this.
There are other matters outside pure commercial forestry, growing of woodlands, which give me a great deal of concern. There are two areas principally. One is the maintenance and looking after of hedgerow timber which forms an integral part of the amenities of our countryside. Hedgerow timber in no way brings in any form of meaningful income to any estate. We all know what the dead elms have done. We have had to set to work to clear those away. Then there are many estates which for many good reasons have fir trees which are over-mature and are dying back. They need cleaning up, felling and replanting.
I myself try to plant at home something like 500 hedgerow trees a year for several reasons, not only for the amenity of the countryside but also because hedgerow timber prevents excessive soil erosion and gives good shelter to livestock in what we hope are good summers. Unless this is done we are going to have a very strange countryside in the year 2100 AD. But no private owner will spend money out of his net income to do this sort of thing. It is purely amenity
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and there is no pecuniary benefit whatever. I hope that at least the treatment of hedgerow timber can be dealt with in a different way from the overall forestry plan.
Some of us suffer from tree preservation orders and there again one has difficulty in trying to maintain on a continuing basis the features of the woods subject to those orders. One tries to underplant so that there is something to come on when the bigger trees are felled. Again, there is no pecuniary interest there.
I conclude—I do not want to go as far as my noble friend Lord Chelwood in what he would require of the Government—by asking very sincerely whether it might be possible, by scrapping the Schedule B arrangements, for established woods that are in existence today to retain the benefit of tax advantages—that is, the Schedule D arrangements—or at least for hedgerow timber areas under one acre and woods subject to TPOs to be under the equivalent of Schedule D. Finally, please consult before you do anything.
6.32 p.m.
Lord Middleton: My Lords, as a taxpayer I understand the Chancellor's case for taking forestry out of the income tax system. As a timber grower, I believe that the case has been so well put by other noble Lords that I can merely echo them in saying to the Government that if they wish to keep the private sector viable, let alone expanding at the rate envisaged in their statements of last year, they should not remove one form of subsidy without very careful consideration as to what to put in its place.
The new woodland grant scheme has been devised in a great hurry, without, as has been said so many times tonight, proper consultation. This new scheme has rightly been criticised by my noble friend Lord Gibson-Watt and by many others, in that planting grants alone do not encourage long-term management and maintenance. I myself have to manage woodlands in low ground England, mostly hardwoods already planted, and because of wartime fellings they are in the five to 50 years' age group. It is this kind of forestry that will be severely handicapped by the new measures.
Like my noble friend Lord Buxton, I am a member of the Nature Conservancy Council, so I suppose I am what he described as a so-called conservationist as well as being a forester. The NCC, in its 1986 publication Nature Conservation and Afforestation, welcomed the expansion of forestry provided the trees were planted in the right places. The House of Lords EC Select Committee, of which I am also a member, in its report last year, to which the noble Lord, Lord Carter, referred, said very much the same thing.
My noble friend Lord Buxton has reminded us that in 1985 the Government placed a statutory duty on the Forestry Commission to seek to achieve a reasonable balance between the needs of forestry and the environment. Here lies the difficulty. We must steer a very careful course. The Nature Conservancy Council document to which I referred sets out the scientific case for care in the selection of land to be planted while recognising the need for more trees. It is because sufficient care in siting new plantations has

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not been exercised that public opinion has reacted sharply to environmental matters and has been led to overlook the national need for more trees. Hence the need for a reasonable balance. As my noble friend Lord Chelwood said, it is partly to pacify this growing public unease that we have had this sudden lurch by the Government in the past few weeks.
However, it is an ill wind that blows no good. A change from fiscal support to grant support could make it easier to strike a balance if a recommendation by the House of Lords Select Committee were to be accepted. We saw merit in a suggestion by the Scottish Countryside Commission that there should be a planting licensing scheme administered by the Forestry Commission, which would consult with the local authorities and with other bodies such as the Nature Conservancy Council on proposals for new planting. If a planting scheme were not compatible with the interests of conservation the licence would be withheld, which would mean no planting grant. If the tax concession is to be abolished, that would be a very strong constraint against extending the forests into environmentally sensitive areas. If because of conflicting advice the Forestry Commission were to run into difficulty in identifying areas that should not be planted, the Government would have to decide.
If the Government really are serious about encouraging forestry in the UK—and last year we were led to believe that that was the case—two things are essential. First, we must have a sensible system such as a licensing scheme for selecting land that should or should not be planted, remembering that trees and conservation are not necessarily mutually exclusive. However, in the rare cases where they are, it will be the duty of the Nature Conservancy Council to present the scientific case for conservation in its usual impartial and disciplined manner.
Secondly, we must have, as so many noble Lords have said tonight, a long-term commitment by government after full consultation to back their scheme for expansion with adequate support properly targeted, so that the woodland cover of lowland Britain can be maintained free of the kind of shadow which has hung over it since 15th March this year.
I beg the Government now to consider very carefully whether the woodland grant scheme—welcome though it is in principle—is adequately designed to achieve their forestry programme which clearly is broadly supported on all sides of this House.
6.37 p.m.
Lord Moran: My Lords, listening to this debate I do not think I am alone in feeling some slight bewilderment about what the Government's policy on forestry now is. I hope that the Minister will with his customary lucidity make it all clear.
After the Chancellor's announcement on 15th March the Minister of State at the Ministry of Agriculture, Fisheries and Food said that the changes he had introduced,
"bring to an end arrangements that were seen by a great many of us as unjustified and unacceptable"
It must surely be a gain that some major investment
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decisions on foresty will no longer be taken simply on the advice of an accountant for tax avoidance reasons. But the interim tax arrangements are to continue until 1993. Large areas have, I think, been approved for planting but are not yet planted. I hope that the Government can ensure that in the next five years there will be a minimum of abuse.
The day after the Chancellor's announcement we had a joint statement from the Secretary of State for the Environment and the Minister of Agriculture laying down that in England the uplands and ancient woodlands should be conserved, that new plantings of conifers should not be approved on the uplands and that afforestation should take place mainly on arable land and improved grassland no longer needed for food production. I thought myself that this was an admirable announcement. The Countryside Commission described it as,
"one of the most significant conservation measures of recent years".
But no similar statement has, I think, yet been made by either the Secretary of State for Wales—and, like the noble Baroness, Lady White, and the noble Lord, Lord Rees, I find this a cause for puzzlement and anxiety—or by the Secretary of State for Scotland. If the Government are sticking to their planting target of 33,000 hectares a year, do they therefore propose that the planting of conifers in the uplands should take place entirely in Wales and Scotland? If so, in Wales at any rate, where there are now only half a million hectares of rough grazing left as against 1 million in England and heather moorland now accounts for only 1 per cent. of the land area, the outlook is disturbing.
The remaining areas of open hill with their merlins and other birds will be under severe threat. Given the now well-established link between conifer plantations and acidification, which I think no one has so far mentioned, the streams, rivers and lakes of upland Wales will be in danger of losing their fish, birds and other forms of life. That is a danger that we really must try to avoid.
Grants are a complicated business. Like my noble friend the Duke of Somerset, I worked out the cost of planting a small area of land with hardwoods and found that despite the grants it would involve me in a continuing loss. The woodland grants scheme announced on 23rd March has increased planting grants by a flat rate of £375 per hectare. That erodes the differential grant between broadleaves and conifers. I regret that. Like the noble Lord, Lord Carter, I do not altogether understand how the new scheme relates to the farm woodlands scheme and I shall be interested to hear what the Minister has to say on that.
Forests like the Forest of Dean, Ashdown Forest and the New Forest are among our greatest treasures. We need more of them. I still think that the most sensible pronouncement that I have read recently on forestry policy was the report of the Countryside Commission entitled Forestry in the Countryside, which argued for a forestry policy based on multiple objectives: timber production, an alternative to agricultural use, rural employment, public enjoyment, increasing the natural beauty of the countryside and creating wildlife habitats. It

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suggested, too, urban fringe forests and a new Midlands forest. It looks to me as though the Chancellor, the Secretary of State for the Environment and the Minister of Agriculture may have read this report while the Secretaries of State for Wales and Scotland may not.
It is sad that commercial forestry has got itself so bad a name. The planting of the flow country was, I think, a bridge too far. Fountain Forestry and the Forestry Commission have a lot to answer for. But we must now look to the future. The Forestry Commission will now be solely responsible for dispersing massive grants. It is an enormous responsibility. The grants are up to two and a half times as great as before. The Forestry Commission should, I believe, be at least two and a half times as careful as before to ensure that the right kind of forestry is promoted in the right places, with environmental benefits, not environmental damage.
6.42 p.m.
Lord Dulverton: My Lords, this is a subject which, as some of your Lordships may know, is very close to my heart. However, I shall try to restrict myself very severely in this debate at this time of night when so many noble Lords are due to speak.
I wish to start by congratulating the noble Lord, Lord Carter, not only on introducing this debate but on the very able grasp which he has of a subject which I understand is fairly new to him. I congratulate him on his great lucidity and I thank him.
So many noble Lords have mentioned thoughts and words with which I thoroughly agree. Just one or two have not done so. I am afraid that one of them is my noble friend Lord Buxton of Alsa, who started off by saying that he thought forestry was a jolly good thing but then quite clearly revealed as he continued that he did not think that conifer forestry was at all a good thing as regards conservation. Distinguished as my noble friend is in the world of conservation, I cannot quite agree with all that he said.
Lord Buxton of Alsa: My Lords, I shall not extend the debate but I wish to say that I was referring only to the flow country.
Lord Dulverton: My Lords, I too claim interest as a conservationist. That is a ghastly word which has been coined so recently. I have among other things received an international award in that sphere of interest. I am in the World Wildlife Fund and other such bodies. I shall not mention them all, but I just put in that thought because I want to use it to preface some of my other remarks.
I declare another interest in my close association with Timber Growers United Kingdom. I was the chairman of its predecessor and I still maintain close relationships with Timber Growers, which I think is doing a good job. In view of that, I deplore the fact of our Government's sudden volte face when decades of effort by foresters have attracted £600 million worth of capital investment in highly modernised timber mills based on our forestry efforts in the past 50 years.
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I believe that the Government have killed all prospect of achieving their target of forestry expansion which was so recently proclaimed by them—33,000 hectares per year—because despite the increased planting grants they evidently do not know that the outgoings in the aftercare of woods continue for about 30 years after the planting of conifers. In so doing the Government have killed off the prospect of further timber mills with all the employment that they bring, and are even in danger of starving existing ones. Yet if they kept the incentive of Schedule D—I say incentive, not dodge—the private plantations would be as from now contributing 60 per cent. from the pockets of their private owners towards their establishment.
I have always deplored certain examples of insensitive plantings which ignore other land uses and interests. But there are so many examples of good integration. I invite any Member of your Lordships' House or indeed anybody else to come and have a look at just one of them with which I have been involved near Fort William. That was established on a fairly unproductive sheep walk which employed three men. For 30 years we have been planting trees, hopefully in a visually attractive pattern, and with the interests of wildlife in mind. We have off a proportion of the ground kept the sheep farming enterprise going and are producing more and better lambs than the whole place produced 30 years ago. We have increased regular employment on the place from about two and a half men to 22 men, with housing to accommodate them. That number will rise. The figure of 5,000 tonnes of thinnings, giving downstream employment, will rise greatly as the years go by.
The estate is still heavily dependent on endowment income. I am sorry that my noble friend Lord Buxton, who said that he would send one of his television people up there to have a look at it, has not yet managed to find time to do so. We can weather the storm, and we have been doing so for many years, but more recent foresters have been betrayed and possible future investors in forestry expansion have been put off. They will probably invest their money overseas.
I have one final point to make in order not to exceed my five minutes. I commend the thought given to us by my noble friend Lord Middleton about forestry planting licensing by the Forestry Commission. I think that that is a splendid idea and it should be carefully considered.
6.48 p.m.
Viscount Brookeborough: My Lords, I very much support the sentiments and feelings expressed so far in support of our forestry. If we look back in time we see that by the Middle Ages much of the UK forests had been cut down. It was only then realised that there was just enough forest left to supply local needs. For a period there was a sustained management programme but this was largely abandoned with the discovery of coal as an alternative fuel and the acquisition of colonies which provided a cheap and seemingly inexhaustible supply of timber.
Although some individuals continued to carry out forestry management, it was not until 1919 that the

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Forestry Commission was founded. However, taking the long-term nature of forestry, we cannot deny that there has never been a stable long-term policy in the United Kingdom or indeed in the world as a whole. If there was any stability in the United Kingdom, it was destroyed in the last Budget.
We have now arrived at a point where the United Kingdom is only 10 per cent. self-sufficient in timber. Temperate regions like our own contain all the largest net importing nations, and we are second only to Japan in this respect. That might not be too serious if our deficit could be made up from neighbouring countries. However, that cannot be so as the next highest importers are those very neighbours—Italy, West Germany, France and the Netherlands. Thus the European Community is only about 50 per cent. self-sufficient and is itself the largest net importing area in the world.
It is important to note at this stage that, regardless of how much forestry we have available, in temperate regions most countries would still require to import about 15 or 20 per cent. of more specialised timber grown in tropical regions.
Although the area of temperate forest has more or less stabilised, deforestation of tropical forest is proceeding at an alarming rate. A figure of about 15 million hectares a year is believed by Jean-Paul Lanly to be a fair estimate. Although much of that deforestation is carried out in order to further agricultural interests, the net results have been poor and have led to a serious loss of soil fertility and to erosion, often within three or four years. It has even caused the total collapse of some civilisations such as the Mayans in Guatemala and the megalithic culture in Easter Island. Recently there was a documentary on television about the Panama Canal. The considered opinion was put forward that due to continued deforestation in the area it would not be long before the natural supply of water became insufficient for the canal to operate as at present.
Forecasts are that worldwide timber consumption will rise sharply. Yet there is already an acute shortage of fuel wood in the tropics which poses urgent human problems. Nigeria has already become a net importer having been a massive exporter until recently. The Ivory Coast is about to become an importer as well. The problem is that only a negligible proportion of tropical areas is under any kind of management and much of it ends up as degraded land. It is estimated that the sustainable production from 200 million additional hectares is needed to cover anticipated deficits of fuel and industrial wood by the year 2000.
So we can see that the forestry policy in the United Kindom and indeed worldwide is not just a question of economics: it is becoming a combination of economics, morality and sheer necessity. Economically, it is important to cut down on agricultural surpluses and use more of the land for planting, and much of the funds presently used for subsidies and storage should be diverted to planting. Morally, deforestation in the tropics is becoming indefensible and the destruction of the community life in those areas verges on being criminal. Out of necessity we must produce more timber ourselves
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before imports from the tropics are a thing of the past.
Your Lordships may be relieved that I have not talked a great deal about Northern Ireland. Northern Ireland is not in the tropics; however, it is part of the United Kingdom and therefore the sentiments expressed for United Kingdom forestry apply equally to Northern Ireland.
6.54 p.m.
Lady Saltoun of Abernethy: My Lords, this afternoon I shall join the noble Lords, Lord Rees and Lord Dulverton, in taking up the cudgels in defence of the much maligned conifer, which is under heavy attack both from conservationists and, regrettably, from some Members of your Lordships' House who talk as if they were some kind of silvicultural vermin.
The noble Viscount, Lord Brookeborough, mentioned the world shortage of timber and the increase in demand. There are now four major papermills in this country, of which two, Thames Board in Cumbria and Shotton Paper on Deeside, are largely dependent on spruce, small roundwood and chips. A further mill, Caledonian Paper, will come into production at Irvine in 1989 and will also be dependent on spruce. The Highland Forest Products plant at Dalcross which makes oriented strand board, depends on supplies of scots pine. Cement Bonded Particleboard Ltd. at Caerphilly makes a new wood panel product which can replace asbestos, and it too depends on spruce roundwood.
Those plants can use only spruce or pine, as the case may be. It is no good saying to them, "Sorry we have no softwoods this year but we can offer you some nice oak", because they cannot use it. They must have an assured and increasing supply of softwoods. Of those, spruce is especially versatile and at different stages in its growing cycle can be used as the basic raw material for pulp and panel mills and sawmills.
I hope that I have now said enough to make it clear that to maintain the way of life to which we are accustomed in this country we need a constant and even increasing supply of conifers, just as we need agricultural products to feed ourselves. But no sensible person complains that fields of potatoes, turnips, rape and barley are ugly and tells us to grow roses instead because they will look nicer.
In North-East Aberdeenshire, where I live and where I have a small interest to declare, sitka spruce is one of the few trees and about the only commercially viable one which can be grown successfully. Without it the countryside would be bleak indeed, especially in winter when its dark green provides welcome colour as well as much needed shelter for man, bird and beast.
In Upper Deeside, which I also know well, pine and larch perform the same office at an altitude where no hardwoods except the ubiquitous birch and the odd rowan and gean will survive. But I defy anyone to see the pale green of the flushing larch in spring against the dark green of the pine and not think it lovely, or in autumn not to delight in the gold of the larch and the birch with the occasional scarlet of gean leaves and rowan berries against the dark green of the pine and a background of snow on the hilltops.

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I am not in any way trying to decry the beauties of hardwoods. I believe that the ideal is a mixture of both, even in national parks, where soil and climate permit. Conifers are not just spruce and pine. There is the lovely feathery tzuga heteropkyllia (or western hemlock) and the majestic wellingtonia, the douglas fir and the silver fir, to mention but four, and of course larch. However, we must always take into consideration the necessity for a crop. To the countryman there is a pleasure in the sight of a well-grown crop be it sitka, barley, pine or potatoes which is unknown to the town-dwelling armchair conservationist whose views are called public opinion and who nonetheless uses paper and timber products with the best of us.
I appeal to the Government to stand firm, to stand up to the anti-conifer lobby and to protect our conifer crops because we need them.
6.58 p.m.
Lord Wise: My Lords, many of the excellent speeches which we have heard this evening have been devoted to the problems of large-scale forestry enterprises. I want to address my very brief remarks to the difficulties facing owners of some of the smaller acreages of mixed hardwood woodlands which were devastated by the October hurricane.
There are many farmers with perhaps 20, 30 or 40 acres of mixed woodland which are now in an appalling state. The problem lies in the fact that the cost of clearance is generally infinitely greater than the proceeds obtainable from the sale of any timber which might be salvaged. Many owners just do not have the necessary financial resources to meet that cost.
A contractor coming into a 20 or 30-acre woodland to carry out clearance work, bringing his heavy equipment and his labour force with him, is not prepared to clear an acre or so and then move everything out again. It is totally uneconomic for him to do so. He has to do the whole job and obviously wants to be paid for it as the work proceeds.
I was encouraged by the remarks of my noble friend Lord Chelwood regarding the Government's answer to his Written Question. Surely it would be a good thing if a reasonable clearing grant could be given to the owners of such woodlands, even if it had to be as a part alternative to a planting grant. This land cannot be replanted until it is cleared. Without some financial assistance much of that will never be done, resulting in all the ensuing adverse environmental consequences. Once the land is cleared it could then be replanted in stages, perhaps an acre or so at a time, whenever money is available. That would be to the benefit of all.
There is no longer any scenic beauty about these devastated woodlands. They are now just an awful blot on the landscape—trees leaning over and trees that are just broken, jagged stumps. It is impossible to walk through the woodlands, and they have very little value in terms of conservation, amenity or even future timber supplies. There does not seem to be much point in giving grant aid in order to plant other land alongside while leaving these woodlands as they are.
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My noble friend must be aware of the difficulties that face these people. I ask him to urge the Government to give, if they will, further thought to the question of grant aid for clearing even, as I said, if it is as an alternative to a planting grant. That must make good sense.
7.1 p.m.
Lord John-Mackie: My Lords, I too should like to congratulate my noble friend Lord Carter and thank him for introducing this very important debate, the importance of which has been shown by the number of speakers and the extraordinary wealth of points that have been made. There is very little left for me to say. Any thunder that I may have had has been stolen already. In fact, I should like to say that I am rather sorry for the noble Lord, Lord Sanderson. If ever a Government Minister got a bellyful, he has had it tonight. I shall try to be as brief as possible in order to give him a little more time to reply to all the points that have been raised.
I was intrigued and somewhat depressed to hear the pessimism about conifer planting expressed by the noble Viscount, Lord Mersey. I think he is wrong. I certainly hope so. As has been said, the target for the Government's planting policy is to have an extra 4 million acres of forest in this country in the next 50 years. If they were to adopt the 120,000 acres a year suggested by my noble friend Lord Carter, they would achieve that target in 33 years. It represents about 81,000 acres a year.
The noble Lord, Lord Buxton, was a little vague about the acreage of forests in this country and where it was located. Perhaps I can enlighten him a little. In round figures there are 60 million acres in the country, of which 10 million acres are covered by cement and tar; 30 million acres are arable, ploughable land and 20 million acres are hilltops, moorland and such. At present there are roughly 3½ million acres of conifers on moorland and highland. If we plant double that figure, roughly three-quarters of the planting will be conifers and one-quarter hardwoods. If we double that, there will still be roughly 10 million acres of open land for ramblers and others to walk on. The extent of that land is so great that it makes me mad when people do not appreciate the amount of land that is left for people who want to climb hills and walk over the land; and, for that matter, there is enough for the noble Lord to shoot his grouse as well as for everything else.
As we know and has been pointed out, the Government are nowhere near reaching their target. My noble friend Lord Taylor made the point that one of the reasons for that was the curtailment of the Forestry Commission's planting programme. I hope that it will be corrected. The Government have been given plenty of advice tonight on how to obtain their target one way or another.
The noble Lord, Lord Moran, mentioned that there are three statutory bodies dealing with the environment: the Nature Conservancy Council, the Countryside Commission for Scotland and the Countryside Commission itself in England and Wales. I understand that the national parks come under the Countryside Commission. Those bodies all know the Government's target and have basically

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accepted it. As the noble Lord said, each of them has produced a brochure about its ideas on forestry. I have them here with me.
Like the noble Lord, I think that the brochure of the Countryside Commission is very good. The one from the Scottish Countryside Commission goes further than the other two. I make no bones about it: the Nature Conservancy Council produced a very long, detailed and well-documented report but, if I may say so, it blotted its copybook later on over the flow country. The main theme concerns fitting forestry into the environment. That is fine but it must be done through co-operation and with a good deal of give and take, which has not happened in the past. I have spoken to Mr. Wilkinson, who is the chairman of the Nature Conservancy Council, and to Sir Derek Barber, the chairman of the Countryside Commission, and I know the third chairman of the Countryside Commission for Scotland. They all agree. So let us get on with the job, remembering that three-quarters if not more of this forestry will be commercial and that too heavy an environmental restriction could do a lot of harm. I emphasise that point because it is very important.
We must have understanding so that our debt to the forest can continue. I should like to read from Our Debt to the Forest:
"Trees are surely among the best chosen gifts of nature to man. From rain and from the scorching sun they afford shelter whilst from the pressure of the blast they protect our homes and gardens. They provide the match-stick from which we procure a light and the log which blazes in our grate. They give us the door by which we enter our dwelling, the beam and rafter that support our roof, the floor on which we tread. For our meals they give us the table, for our rest the bed; for our household and farm tools the handle, for our travel the boat; for our evening smoke the pipe, for our worship the church pew. At life's beginning they present us with the cradle, at our journey's end the coffin. Music is in their leaves, nourishment in their fruits; and, whether in vast forests"—
I repeat, whether in vast forests—
"in woodlands, in stately avenues, in parks, in gardens, or standing in solitary grace, they furnish a third part of the whole world's beauty".
Need I say more?
7.7 p.m.
The Minister of State, Scottish Office (Lord Sanderson of Bowden): My Lords, first of all perhaps I may say how grateful I am to the noble Lord, Lord Carter, for initiating this debate. I believe that he put down a marker to have a debate on forestry before the Budget and obviously he had second sight, knowing that this was going to be a very interesting debate when it came along.
We are fortunate in having a great deal of expertise among noble Lords on the subject of forestry, which has provided us with a very stimulating debate. Very strong feelings have been expressed. I should also like to offer my congratulations to all noble Lords for being short and succinct in their speeches; perhaps "short and sweet" are not the apposite words to use. I may not be able to cover all the points that have been raised. I shall study any that I do not manage to cover and I hope to write to noble Lords accordingly.
In view of the major changes announced in the recent Budget regarding the Government's support arrangements for forestry, perhaps at the outset I
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may assure the House that the Government have in no way drawn back from their support for the British forestry industry. It is our wish to see a continued expansion of forestry in this country in ways which are acceptable in environmental and land use terms.
The Government's aim of 33,000 hectares of new planting a year has not altered. As my right honourable friend the Secretary of State for Scotland said on 16th March in another place:
"Forestry has an important role to play in the well-being of this country. The industry has the support of this Government and has an assured future".
The noble Lord, Lord Carter, referred to the world timber production situation, and I noted carefully his remarks. Indeed, I can confirm that the figures mentioned about timber imports to the United Kingdom in 1986 were of the order of £4·9 billion net. This contrasts with the value of whisky exports of £1·1 billion and the value of our car exports of £1·4 billion in the same year. I think these figures underpin the importance that the Government must attach to investment in the United Kingdom timber industry.
I can understand, although I do not share, the deep concern of some noble Lords that the removal of the special tax reliefs for forestry may have a detrimental effect on future investment in the industry. The noble Lord, Lord Taylor of Gryfe, was very clear in his view about this. I acknowledge that the tax arrangements were of very long standing. Indeed, there is little doubt that they were instrumental in encouraging a great deal of the post-war investment in forestry. However, we are satisfied that the replacement of those arrangements with a more straightforward system of grants will provide a sound and viable future for forestry investment.
I have to challenge the noble Lord, Lord Carter, when he talks about confusion in the mind of the Government. It was not so long ago—on 17th February, in this House—that his colleague the noble Lord, Lord McIntosh of Haringey, talked about the tax situation being grotesque and absurd. It has changed—and I hope that the noble Lord notes that.
In addition, the major reduction in the top rates of tax from 60 per cent. to 40 per cent. would undoubtedly by itself have brought about a changed outlook for some forestry investors. However, we have not simply increased the grant aid as a form of quid pro quo. We have gone further and introduced a totally new scheme to be administered by the Forestry Commission and to be known as the woodland grant scheme, which we are sure will appeal to a much wider range of potential planters.
The noble Lord, Lord Taylor of Gryfe, was interesting on this point. He asked me to say who these people would be. I think that those who are tax exempt at the present time might be interested in forestry. It will depend very much on the yield that they receive from their forestry investment. The noble Lord, Lord Carter, knows only too well, that the farming industry has welcomed the changes.
I hope that the carers for the countryside—as, indeed, farmers are—will look very favourably and carefully at the incentives given by the new grant arrangements. The farming industry could very well have a vital role to play in whether this policy is successful or not. We have also taken the opportunity

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to widen the scope of the objectives to encourage the multi-purpose role of forestry and in particular to incorporate new provisions to conserve the environment.
The aims of the scheme also include a recognition of forestry's crucial role as a provider of jobs in rural areas. Several noble Lords have mentioned this. Indeed, with my responsibilities for the Highlands and Islands, which include fragile areas depending very largely on a multifarious collection of industries, forestry is very important. There is also a potential for alternative uses for agricultural land. Many people interested in the subject have asked the Government to encourage planting "down the hill". To promote this, a supplement of £200 per hectare for planting existing arable or improved grassland of less than 10 years of age has been incorporated into the scheme.
The noble Lady, Lady Saltoun, mentioned the question of timber production and its importance to the country. As well as increasing timber production, which must be an objective of every scheme that the Forestry Commission authorises, although it need not he the principal one, we shall be encouraging the planting of woodlands which enhance the landscape, conserve wildlife, and in the longer term offer opportunities for public recreation. The noble Lord, Lord Taylor of Gryfe, was gloomy on this issue. I look forward to discussing his views on this matter in this Chamber. I feel, as he does, that public recreation in the future is very important in the public and private sector in forestry areas.
The needs of the wood processing industries mean that conifers will continue to comprise a major part of new planting, depending on the individual circumstances. This was mentioned by the noble Duke, the Duke of Somerset, and by the noble Lady, Lady Saltoun. Much has been written and spoken about conifer planting in the United Kingdom. I can do no better than to quote the kinsman of the noble Lord, Lord John-Mackie, the noble Lord, Lord Mackie of Benshie, when he said in this House on 17th February at cols. 723–24:
"I think that an awful lot of nonsense has been talked about forestry and the terrible green blankets that cover the hills and ruin everything … a conifer forest interspersed with larch can look absolutely beautiful. Anybody who takes a run down Deeside in the autumn can see the staggering beauty of conifers properly planted and inter-laced with larches and the appropriate proportion of broadleaved trees. It is not true to say that they ruin the countryside, but … they need planning".
Yes, this Government must safeguard the countryside. There must be suitable environmental safeguards so as to protect the natural beauty and wildlife of the countryside. The rates of grant include a substantial differential in favour of broadleaves that will mean that broadleaved trees, which were already forming a significant component of new planting, will feature more strongly now than in the past. Particular encouragement will be given to the planting of broadleaves in mixed plantations as a result of our decision to provide the same rate of grant for such planting as for pure broadleaves.
The noble Lord, Lord Carter, points to the fact that we have not increased the planting grant for conifers in the proposed farm woodland scheme. I
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may put it another way round. What the Government have done with the farm woodland scheme— which is designed to encourage planting on better land—is to weight the scheme more heavily in favour of broadleaves with a view to broadleaves accounting for at least one-third of all planting in the farm woodland scheme. Of course, conifer planting under the scheme will attract annual payment for 20 years and I am sure that farmers will make their decisions based on their own judgment as to which scheme is best for their own circumstances.
The noble Lord, Lord Carter, said there would be need for a very sophisticated examination of what it was best to do in set-aside, or whatever. I wish him well when he comes to make his decision. I hope that the decision on the farm woodland scheme will be welcomed generally.
The remit of the Forestry Commission includes a requirement to seek to achieve a reasonable balance between the needs of forestry and those of the environment. The noble Lord, Lord Buxton, asked what balance means. It means what is says. The Forestry Commission has added to its environmental expertise in recent years. I have seen the work of the commission's wildlife and conservation officers supported by an in-house research branch. This includes six landscape architects, a conservation consultant and a consultant landscape architect. I hope that its work in this area will receive the publicity that it deserves in the future.
I was very pleased to hear the noble Earl, Lord Waldegrave, pay a compliment to the commission. It published guidelines for the management of broadleaved woodland in 1985 and has now incorporated similar guidelines in the new scheme to apply to the management of all types of woodland. This, together with the strengthening of the commission's scrutiny and consultation arrangements which will arise as a result of the switch to a grants-only system of support, should ensure that the right type of forestry takes place in the right places. This is a matter to which the noble Lord, Lord Moran, referred.
Perhaps I may deal with particular points. The noble Lord, Lord Carter, raised this question, and the noble Lord, Lord Buxton, is included in the answer that I give on the forestry's purpose. It is a multi-purpose. It is for timber production, to create employment in rural areas, to provide an alternative to agricultural production, to enhance the landscape, to create new wildlife habitats and to provide recreation. This answers the point of the noble Lord, Lord Buxton. We believe that there is scope for 33,000 hectares a year planting. The last review was in 1980, before the 1987 update. With the significant changes that have taken place of late in the Budget this matter will be kept under constant review.
The noble Lord, Lord Gibson-Watt, and many others asked about inheritance tax. Noble Lords know that this is a question that I shall be only too pleased to draw to the attention of my right honourable friend the Chancellor of the Exchequer. While dealing with matters relating to tax, I shall look very carefully at what my noble friend Lord Rees has said on the various detailed points and also

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draw them to the attention of my right honourable friend.
However, the noble Lord, Lord Gibson-Watt, asked one very important question: do the Government listen? It would be quite wrong to accuse forestry Ministers of failing to listen to the industry. It is true to say that some commentators have of late gone overboard in their efforts, saying among other things that conifer planting seems strongly against the national interest and they talk of philistine attitudes. These are harsh words and I am delighted to think that the industry as a whole is getting its act together under the FJCGB. There must be overall understanding by the general public of the case for forestry. The industry can now do this knowing that its hands are no longer tied behind its back by the tax system. I emphasise, however, that the Government are determined to heed the environmental considerations. I am sure that application procedures for planting grants will thus gain in effectiveness so that the correct balance can be struck.
Many noble Lords on all sides of the House spoke about management grants. I understand what they were saying, although on occasion I thought that the words went a little further than I would perhaps have expected. A number of noble Lords are concerned about the effects that the withdrawal of Schedule D relief may have on the ability of private woodland owners, especially those with broadleaved woodland, to meet the cost of management. I remind the House that planting grants have been substantially increased under the new woodland grants scheme. They will be paid in three instalments over a period of 10 years which will cover the time when the bulk of the expenditure on the woodland will be incurred subject to satisfactory maintenance.
It also needs to be borne in mind that while the special tax for woodland owners has been withdrawn, they will benefit significantly from the lowering of tax rates, especially at the top end. They will benefit too from the fact that any income received from timber during the maintenance period will now be tax free. However, I have listened very carefully to what has been said. This is a subject that I am quite prepared to discuss with colleagues after this debate.
I move on to storm damage, which was referred to by my noble friend Lord Gibson-Watt and also by the noble Lords, Lord Wise and Lord Chelwood. I understand the concern of woodland owners affected by the storm to get on as quickly as possible with the difficult task of clearing up devastation in their woods and restoring them to their former state through replanting. The Government are giving careful consideration to the recommendations made by the forest Windblow Action Committee that additional financial assistance should be provided for this work. Clearly I cannot anticipate the outcome tonight, but we shall announce our decisions as soon as we can.
My noble friends Lord Gibson-Watt and Lord Rees asked about the position in England. I believe the reference was to a statement made by my right honourable friend the Secretary of State for the Environment in another place on 16th March concerning the avoidance of large-scale conifer
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planting in English uplands. Indeed, it was also mentioned, I believe, by the noble Lord, Lord Rees, who also asked who was responsible for forestry in England.
The responsibility for forestry in England rests with the Minister of Agriculture. The situation in England, however, is very special in that the amount of unimproved land in the uplands is relatively small. Very little large-scale conifer planting has taken place in the uplands of England and the new policy will not have a significant effect on the Great Britain planting figures. In any event, we expect to see more planting taking place in the English lowlands. But the situation is quite different in Scotland and Wales. In those two countries there is much hill land where planting is likely to be acceptable with safeguards which will produce valuable raw material for industry and will create jobs. We know only too well, as a result of the massive investment in Shotton and the proposed investment which will open next year in Irvine in Scotland, what this means to the economies of those two countries.
Brief reference was made by the noble Lord, Lord Buxton, to the flow country. Indeed, I am glad that the whole debate was not dominated by that issue. In the light of the interim view by my right honourable friend the Secretary of State for Scotland on 23rd January that he saw scope for forestry and nature conservation to coexist in Caithness and Sutherland, with planting taking place in those areas of lower conservation value, I understand that the Nature Conservancy Council has been drawing up a programme of SSSI notifications which will shortly be put to the Highland Regional Council's working party. We expect to have a report from the working party in the not too distant future. The Highland Regional Council has told me that it will define the term "flow country" on that occasion.
The noble Baroness, Lady White, and the noble Lord, Lord Moran, asked about the situation in Wales. Although my territorial remit does not extend to the Principality, I can say that there is much hill land in Wales where planting is likely to be acceptable with appropriate safeguards. My right honourable friend the Secretary of State for Wales has already made it clear that cases will be considered on their merits and the existing consultation arrangements—the effectiveness of which will be enhanced by the proposed new grants regime—will continue to balance environmental and forestry planting objectives in the upland areas of Wales.
Various other points were made by the noble Baroness, Lady Robson, about the farm woodlands scheme. As time is moving on, I should prefer to write to her and also to the noble Lord, Lord Moran, about the woodlands grants scheme and its relationship to the farm woodlands scheme.
However, I conclude by saying that those of us who are involved with the forestry industry are only too well aware that the wood processing industry has been transformed in recent years and the Government have no intention of seeing it turned back. All investment decisions in the pulp and paper industries are based on resources which have secured availability in the long term. This is something of which the Government are well aware.

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The new measures we have introduced will not herald any fundamental change in the Government's support for the industry, but will ensure that it is better able to fulfil its role in a way which is better compatible with the multi-purpose benefits which it is in a unique position to provide. I hope the whole industry will react positively to the changes made and that it will intensify its efforts to present the importance of the industry to the general public—I have said it once and I will say it again—so as to ensure that its role is better understood and appreciated, and that downstream activities are encouraged by the positive attitude of the Government to the industry.
Lord Carter: My Lords, I express my gratitude to all noble Lords who have taken part in what has been an excellent debate, both wide-ranging in scope and
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well informed in content, with speakers from all parts of the House united in supporting the potential of our forestry industry and using the opportunity to bring home to the Government the problems which we see facing the industry.
I am also extremely grateful to the Minister for the courteous way in which he has replied to the debate. I am sure he will report the views expressed to all his colleagues in the Government who share with him responsibility for forestry policy and to his right honourable friend the Chancellor of the Exchequer.
It remains for me only to beg leave to withdraw the Motion.
Motion for Papers, by leave, withdrawn.
House adjourned at twenty-nine minutes past seven o'clock.