Lords Sitting of 1 November 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 Manchester.

Unemployment: Statistics
Lord Jay Lord Jay asked Her Majesty's Government:
What is the present level of unemployment in the United Kingdom calculated on the statistical basis prevailing in January 1979.
The Minister of State for Defence Procurement (Lord Trefgarne): My Lords, it is not possible to estimate the number of people who would now be registered as unemployed, using the procedures prevailing in 1979, because at that time people had to register at jobcentres or careers offices as well as unemployment benefit offices. However, the January 1979 figures estimated on today's basis was 1·171 million, which compares with 2·267 this September.
Lord Jay: My Lords, if the Government are unable to answer the Question in the simple form in which I asked it, are they qualified to reform our whole education system?
Lord Trefgarne: My Lords, when we came into office in 1979 unemployment was about to lift off like a rocket because many firms, shackled to the trade unions as they were, had far too many people on their books. If they were to become effective and competitive they needed to slim their workforce. That is what they have achieved, given the considerable improvement in productivity and production that we are now seeing.
Lord Hailsham of Saint Marylebone: My Lords, is it not obvious that the Question is, in principle, unanswerable since the statistical basis of 1979 involved procedures which are no longer pursued?
Lord Trefgarne: My Lords, my noble and learned friend is right, as he always is. However, I always try to be as helpful as possible in the answers that I give.
Lord Oram: My Lords, since 1979 have there not been some 25 changes in the way in which unemployment is calculated? Have not most of those changes had the effect of reducing the number of unemployed? Is it not important that we should be able to make a real assessment of employment policies, and to do that to have a frequent and perhaps continuous comparison similar to that asked about by my noble friend Lord Jay?
Lord Trefgarne: My Lords, no, I do not agree with the implications of the question asked by the noble Lord. There have not been 20-odd changes, as he suggested, but six or seven. The purpose of those
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changes has been to make the figures reflect more accurately those who are unemployed and looking for work.
Lord Oram: My Lords, is the Minister aware that two years ago I asked his noble friend Lord Young about the changes, and he gave me a six-page reply of 18 changes that had been made at that time? Two years have passed since then.
Lord Trefgarne: My Lords, that depends on what one calls changes.
Baroness Turner of Camden: My Lords, is the Minister satisfied that the calculation of those out of employment is accurate, since it is based merely on those who claim and who are entitled to receive unemployment benefit, especially in view of the fact that constant changes in entitlement have been made? Would it not be better to have a much more realistic assessment made of those who are available for work but cannot find it?
Lord Trefgarne: My Lords, it is not correct to say that the figures are confined to those who are drawing or who are entitled to draw benefit. The figures include people who have, for example, recently been in receipt of benefit and have perhaps run out of time for one reason or another. It is important that the figures show the numbers of people who are out of work, who are available for work and who are looking for work. We have made the changes to try to reflect those criteria.
Lord Mackie of Benshie: My Lords, does the Minister agree that the large number of people who become unemployed because unemployment lifted off like a rocket, as he said, after the Government came into power was a result of small and growing firms being faced with enormous interest charges; that recession hit those people who were part of the lifeblood of a growing and energetic industry; and that those who survived were mainly the larger firms which were not so competent?
Lord Trefgarne: My Lords, I am afraid that the noble Lord has it back to front. There is now a great growth in the number of small businesses starting up and employing people—that is having a significant and welcome effect on the employment figures—whereas the unemployment problems that arose some years ago were, by and large, the result of larger firms shaking out surplus manpower.
Lord Boyd-Carpenter: My Lords, has my noble friend observed the desperate efforts being made by noble Lords opposite to dispute the fall in unemployment? Can he explain it?
Lord Trefgarne: My Lords, the welcome fact that unemployment has now fallen for the last 24 months consecutively, no less, is a result of the wise and sound policies of this Administration.
Lord Glenamara: My Lords, if the noble Lord can give the 1979 figures on today's basis, why cannot he give today's figures on the 1979 basis? Surely the same arithmetic is involved in reverse.
Lord Trefgarne: My Lords, because it would mean guessing how many of the people in 1979 or, for that matter, in 1988, to be more accurate, would have been involved in procedures that were in place in 1979.
Lord Cledwyn of Penrhos: My Lords, is the noble Lord aware that one thing which has not gone up like a rocket is employment in manufacturing industry? That fell last August below 5 million for the first time in over a century. Does the noble Lord not regard that as significant in a manufacturing country which depends upon exports? What steps do the Government intend to take to put that right?
Lord Trefgarne: My Lords, as the noble Lord says, it is the case that there has been some decrease in the numbers involved in employment in manufacturing industry. The important point is the number of people who are in work of one kind or another. I am not sure which sector of the economy they work in is particularly relevant. The fact of the matter is that as regards the manufacturing economy, total production has increased recently and so has productivity.
Lord Taylor of Gryfe: My Lords, has the Minister any information on the geographical distribution of unemployment? Is the level of unemployment in the north west, north east and Scotland just as great as it was before the general decline in unemployment took place?
Lord Trefgarne: My Lords, that is not correct. Happily unemployment is declining in all the regions of the United Kingdom although, of course, the residual level of unemployment differs from place to place. I was imagining that the noble Lord, Lord Cledwyn, would ask me about the rate of unemployment in, for example, Wales. I am happy to say that the improvement in the unemployment position is as marked there as anywhere.
Lord Dormand of Easington: My Lords, as unemployment fell for the five consecutive months immediately prior to the election of the present Government, on what basis does the Minister say that unemployment was ready to take off when this Government came to power?
Lord Trefgarne: My Lords, as I have just said, when we came to power British industry found itself with far too many people for the scale of business in which it was involved. Furthermore, it was inhibited as to shaking out the excess, not only because of its shackling agreements with the trade unions but also because of the restrictive legislation which was then in force. Happily neither of those situations now prevails. Industry has been able to shake out its excess labour. Sadly, there has been a time when many more people than we should have wished have
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been out of work. That position is now being rectified and British industry is reaping the benefit.
Lord Peston: My Lords, is the noble Lord aware that what has fallen is not unemployment but the Government's doctored unemployment figures? Is he also aware that if he were to compare his own figures for the growth in the labour force with figures for the growth in employment, there is ample evidence that it is most unlikely in recent times that unemployment has fallen? If anything, unemployment is probably starting to rise.
Lord Trefgarne: My Lords, if I may say so to the noble Lord, that is a biased point of view which we have often heard from many so-called pressure groups from the other side of the political spectrum.
Lord Jay: My Lords, despite all these excuses, would it not be much better if the Government honestly published the real figures so that accurate comparisons could be made with the past?
Lord Trefgarne: My Lords, I have done my best to give the noble Lord the figures that he requires. It is important to get the figures which accurately represent the position as I described it a moment or so ago.

Party Conference Security: Costs
2.47 p.m.
Lord Taylor of Blackburn Lord Taylor of Blackburn asked Her Majesty's Government:
Whether they will now reconsider paying the full cost of security at party political conferences from central funds.
The Minister of State, Home Office (Earl Ferrers): My Lords, my right honourable friend the Home Secretary has concluded that he would not be justified in departing from the normal police funding arrangements by giving additional funding to meet the increased costs of policing party conferences. The Government contribute to all police expenditure, both directly through police grant, which is now at 51 per cent., and indirectly through block grant.
Lord Taylor of Blackburn: My Lords, I thank the Minister for that reply. However, even taking into account the 51 per cent. plus the rate support grant which, in the case of the conference this year would come to roughly £90,000, that leaves £600,000 for the authority to find. Is the Minister aware that that £600,000 would represent somewhere in, the region of 30 constables, full-time, 45 police vehicles, etc.? Will the Minister be prepared to meet a delegation from the two authorities that hold political conferences so that they can discuss this fully?
Earl Ferrers: My Lords, I became a little lost with the noble Lord's mathematics. I was not quite certain to which party conference he was referring. There were two; one was at Blackpool and one at Brighton
Noble Lords: Six!
Earl Ferrers: My Lords, there were one or two others as well. On the assumption that the noble Lord, Lord Taylor of Blackburn, was referring to Blackpool, I must tell him that the additional policing costs incurred by the Lancashire police have been estimated at about £61,000. The Government will contribute in all 74.8 per cent. of that.
Lord Taylor of Blackburn: My Lords, may I ask that the Minister will ask his right honourable friend or himself to meet a delegation from Lancashire.
Earl Ferrers: My Lords, I shall ask myself that question, if I may. The answer to the noble Lord is that of course I shall be delighted to meet him and the delegation if he would like to come.
Lord Oram: My Lords, is it not important to distinguish between a conference of the party that is in government and a conference of a party from the Opposition? In Brighton, for instance, where I am a ratepayer, it is estimated that the Conservative Party conference cost in extra policing £1·4 million, whereas in the previous year the Labour Party conference was only £23,000. Is not that an enormous difference and does it not make out the case for paying some of the cost of conferences when a government party is in the chair?
Earl Ferrers: My Lords, what determines the cost is the assessed level of threat. Obviously the chances are that the assessment of threat to the party which happens to be occupying the office of government is likely to be greater. I do not think it would be correct to depart from the normal principle which we have, which is that central government pay 51 per cent., block grant is based on the local authority's needs and the ratepayers pay a contribution. The structure is designed to cover all needs, whether they are local or national. Almost every force can claim that some of its requirements have a national characteristic as well as a local one.
Lord Harmar-Nicholls: My Lords, bearing in mind what happened at Brighton in a previous year, was it the party or was it the police who decided what constituted adequate security, irrespective of cost?
Earl Ferrers: My Lords, it is the responsibility of the police to determine the level of security and take appropriate actions to ensure that as far as possible that security is maintained.
Lord Mishcon: My Lords, does the noble Earl feel that his right honourable friend has acted upon principles either of logic or justice in the decision he seems to have made? is it not right that, whereas there are many examples of national impingement upon conferences, we are dealing with the defence of democracy in regard to party conferences, of whatever colour they may be? Is it not right, therefore, that if we are defending a national tradition, which is the whole basis of our constitution and rights, the nation should pay and not ratepayers, however small the percentage?
Earl Ferrers: My Lords, the noble Lord is of course entirely correct, as he usually is, in saying that it is the defence of democracy which is at stake. He is absolutely right about that. My right honourable friend's decision can be supported both on the grounds of logic and of justice. All forces have to meet requirements of a national as well as of a local significance. Frequently when they have calls upon them of a national nature they ask for government funding, but the whole principle upon which police funding is considered is that it operates on a national and on a local basis. It is right that in those circumstances ratepayers should have a part to play in the expenses incurred. There have been only a few occasions when special payments have been made. Those payments were made when quite exceptional circumstances occurred which were generally of an unforeseen nature.
Viscount Hanworth: My Lords, does the noble Earl agree that in both these large conferences the local people gained considerable benefit? Hotels, other establishments and people in the locality gained. Does he further agree that the costs that are put forward are probably not quite true, because although extra police may have to be brought in from elsewhere, that represents to a great extent redeployment for a short period of existing forces?
Earl Ferrers: My Lords, I am grateful to the noble Viscount for bringing out that point. I was also delighted to hear that he thought there were only two conferences this year. He is quite right that conferences bring a certain amount of trade and other benefits to a locality. That is one of the offsetting advantages of having a conference.
Lord Taylor of Blackburn: My Lords, is the Minister aware that that was all right in the days when county boroughs had their own police forces? However, these days the charge is spread throughout the full county. The benefits of having a conference in Blackpool certainly do not help the people in Blackburn, the area of Lancashire in which I live.
Earl Ferrers: My Lords, I can only say that that is bad luck.

Sunday Trading
2.55 p.m.
Lord Campbell of Croy Lord Campbell of Croy asked Her Majesty's Government:
What consultations they are carrying out on possible changes in the law in England and Wales on Sunday trading.
Earl Ferrers: My Lords, Home Office Ministers have met representatives or groups with widely different views on 18 occasions since 1st January 1988 to discuss Sunday trading. Consultations are continuing.
Lord Campbell of Croy: My Lords, I thank my noble friend for that reply. Does he agree that change

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is needed because the law is not being observed, is difficult to enforce and is falling into disrepute, while in Scotland the law for many years has given complete discretion to shops to open, if they wish to, without damage to the Christian sabbath or to keeping Sunday special? Indeed, statistics show that a larger proportion of the population in Scotland goes to church on Sunday than in England.
Earl Ferrers: My Lords, I have a great deal of sympathy with my noble friend. The Government favour complete deregulation. I am aware of the points which he makes about Scotland, but the fact of the matter is that it is necessary to get these proposals through Parliament. The last time the Government did that, another place decided not to accept them. Until those of my noble friend's disposition can persuade a sufficient number of people of a different way of thinking in another place to vote for such proposals, it is difficult to see how any great change can come about.
The Lord Bishop of Manchester: My Lords, is the Minister aware that there are quite different interpretations of the figures on Scottish churchgoing as just given to us by the noble Lord, Lord Campbell of Croy? Moreover, very many people in this country believe that there is a halfway house between the chaotic situation of Sunday laws as we have them at present and the complete deregulation now being advocated in some quarters.
Earl Ferrers: My Lords, I knew that we would run into this trouble with this kind of Question. The views of the right reverend Prelate accentuate the problem which faces not only the Government but also Parliament. People have different views on the interpretation of Sundays, as they have different views on the interpretation of statistics. I can only hope that somehow, at some time, we shall be able to resolve the problem.
Lord Graham of Edmonton: My Lords, will the Minister undertake to give serious consideration to the REST proposals from the Keep Sunday Special Campaign? When he and his colleagues have come to a conclusion, which I sincerely hope will not be complete deregulation, will it be their intention to issue their views in the form of a White Paper so that they can be considered, rather than simply to slip them through in one line in a future Queen's Speech?
Earl Ferrers: My Lords, I doubt whether at the moment a White Paper or a Green Paper is needed. The main object at the moment is to get people to crystallise their views. Until that happens the Government will not be able to put forward any proposals.
Lord Boyd-Carpenter: My Lords, did my noble friend notice that the right reverend Prelate stated that the present situation of the law on Sunday trading was chaotic? In the light of that, is it not for the Government to give a lead to remedy a situation which puts the prosecuting authorities throughout the country in enormous difficulty?
Earl Ferrers: My Lords, I noticed what the right reverend Prelate said. In answer to my noble friend I am bound to say that the Government in fact gave a lead but Parliament rejected that lead. I accept that it is very difficult to know what one is allowed to do or not allowed to do. It is not for me to interpret the law. However, I did a little homework to find out the position on Sunday trading. As I understand it, one can sell on Sunday a pornographic magazine but not a Bible, unless the Bible happens to be sold at a designated airport or at a railway station. One can sell fried fish and chips at a restaurant but not at a fish and chip shop, where however one can sell any meal apart from fried fish and chips. One can sell tinned or untinned clotted cream and untinned unclotted cream, but not tinned unclotted cream.
Lord Hailsham of Saint Marylebone: My Lords, is the view of the right reverend Prelate that there is a halfway house between sense and nonsense due to simple faith or honest doubt?
Earl Ferrers: My Lords, far be it from me to suggest what the right reverend Prelate has in mind. However, I have no doubt that over matters which deeply concern the right reverend Prelate he will have no difficulty in going the right course.
Viscount Montgomery of Alamein: My Lords, is my noble friend aware that the fact that shops may be allowed to open on Sundays does not mean that they will all be open? Does he agree that the question of choice, which is so rightly favoured by this Government, should apply both to traders and consumers alike?
Earl Ferrers: My Lords, my noble friend Lord Montgomery is entirely correct. If there were permission to open all day on Sunday it does not mean that all shops would be open all day on Sunday, or even at any time on Sunday. On the other hand, if consumers have the right to choose it may also be thought that some people who work in shops should have the right not to work on Sunday. Once again, one enters the dilemma.
Lord Mishcon: My Lords, when the noble Earl mentioned that various parties were being consulted with regard to a change in Sunday trading laws, did he include in that number the interests of employees and trade unions who might be involved? If he did not, will he do so?
Earl Ferrers: My Lords, so far as I know, we have not had any, direct consultations with unions. If I am wrong on that point, I shall inform the noble Lord. Obviously consideration of their interests is a matter which will be taken into account very seriously in any proposals.
Lord Mellish: My Lords, the Minister quoted a great number of anomalies in the existing laws. Will he include in that list the fact that the Catholic Church relies on Sunday trading for sales of its rosaries and Bibles?
Earl Ferrers: My Lords, I think that that issue is—if I may say so—a bit "hot". I would rather not reply to that question.
Lord Lucas of Chilworth: My Lords, against the zealous background for change, would my noble friend agree that small community shops selling essentially food are a benefit to the community generally, and that the community would be greatly disadvantaged were the hours of trading of such shops on Sundays reduced?
Earl Ferrers: My Lords, my noble friend is quite right. Small shops selling food have a very important part to play. I can tell him that he may not be able to buy cat food anywhere on a Sunday, but he can buy fodder for mules at an inn.
Viscount Brentford: My Lords, is my noble friend aware that any of your Lordships will be welcome to a consultation that I am holding here today week? Secondly, is he aware that when I was in Scotland last week I found in talking to many residents that they agreed with the Auld Committee that Scotland is not on a par with England?
Earl Ferrers: My Lords, I am grateful to my noble friend for informing me of that position. I do not think that I shall enter into a discourse with him as to whether his information is right or wrong.

Unqualified Teachers
3.3 p.m.
Lord Dormand of Easington Lord Dormand of Easington asked Her Majesty's Government:
What action they have taken on the proposal to employ unqualified people as teachers.
Viscount Davidson: My Lords, on 24th May my right honourable friend the Secretary of State for Education and Science issued a consultation document proposing the reform of existing routes to qualified teacher status other than by the successful completion of an initial teacher training course in England or Wales. Responses to the consultation document were requested by 14th October. My right honourable friend will now give most careful consideration to those responses.
Lord Dormand of Easington: My Lords, is it not farcical to believe that the in-service training now being proposed can compare with the normal three years full-time training given to teachers? Is the Minister aware that the proposal could cause great damage to thousands of children? After nine years in power, and being aware of the well-known fact that there has been a shortage of teachers in certain subjects, why has something more effective not been done before now?
Viscount Davidson: My Lords, local education authorities currently may employ unqualified teachers who are granted QTS (qualified teacher status) under existing regulations without obligation of on-the-job training. Our proposals would make
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existing routes more rigorous by making training obligatory for those not qualified overseas. I can assure the noble Lord that if a licensed teacher's performance was unsatisfactory, he or she would not be granted qualified teacher status and would not be allowed to remain in teaching.
Lord Glenamara: My Lords, is the Minister aware that my proudest achievement was to end the employment of unqualified teachers in schools and that the Government in this respect, and in most other things, are putting the clock back? Would the noble Lord send his watch to be repaired by an unqualified watch repairer, his car to be repaired by an unqualified mechanic or his television to be repaired by an unqualified television mechanic? Why then must people be required to send their children to be taught in school by unqualified teachers?
Viscount Davidson: My Lords, we are putting the clock forward. Local education authorities and schools will not want to apply for a licence for anyone unless they are satisfied that the candidate has the qualities that are needed, reinforced by on-the-job training, to become a good teacher. Induction arrangements should ensure that unsatisfactory appointees are weeded out.
Lord Morris: My Lords, following on from the previous supplementary question will my noble friend agree that teaching is an art and not a science? Will he also agree that in the experience of most people far and away the best teachers, although very very experienced, have been nowhere near a university let alone a teacher training college?
Viscount Davidson: My Lords, I do not believe that I should enter into a philosophical discussion. We are encouraging local education authorities to look more closely at qualified but out-of-service teachers near their schools who might wish to return to teaching, some on a part-time basis. A surprising number of older people in other careers would like to switch to teaching and we should continue to encourage them to enter initial teacher training.
Lord Parry: My Lords, will the Minister accept that a great many people in the teaching profession who are well qualified are conscious of the fact that their qualifications are dated and that they themselves do not believe that the education system—and there is some qualification of that in recent research—is adequate to the task they are carrying out? Can the noble Lord tell us a little more about two points in his statement? What was the level of response to the request for submissions for which a very short space of time was allowed after the paper was issued? How will the Minister determine whether the qualified people are qualified?
Viscount Davidson: My Lords, I am afraid that the consultation document and licensed teacher proposals have been widely misinterpreted. Of the 230 or so responses received, the vast majority accept the need for some reform of existing non-standard routes to qualified teacher status and broadly

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welcome my right honourable friend's proposal to replace them with some streamlined route.
Lord Peston: My Lords, I welcome the Government's view that one ought to encourage older people back into teaching—or into teaching in the first place. Does the noble Viscount not agree that qualification and training are of fundamental importance? Is the Minister not aware how much of many people's education in certain subjects, of which mathematics is the perfect example—and this will apply to many Members of your Lordships' House—was ruined because they were taught by people who simply did not know how to teach? Does he not agree that that is a very serious matter?
Viscount Davidson: My Lords, I agree that that was the position, but it will not be so in the future.
Lord Parry: My Lords, will the Minister accept that the House cannot accept that kind of casual dismissal?
Lord Paget of Northampton: My Lords, can the noble Viscount tell us whether the masters at our great schools are qualified and who qualifies them? In my day the general impression was that they were appointed by the headmaster and I never heard of any qualification being necessary.
Viscount Davidson: My Lords, I am afraid that I cannot answer that question today.
Lord McNair: My Lords, does the noble Viscount remember that on 19th July a Mrs. Rumbold in another place said that 90 per cent. of the teaching force would continue to come through the normal route, which I believe is described in the consultative document as Route A? Is the figure of 10 per cent. as the number of teachers from another route still roughly correct?
Viscount Davidson: My Lords, the vast majority, well over 90 per cent., of entrants to teaching will continue to be graduates.
Viscount Hanworth: My Lords, will the noble Viscount agree that at universities most undergraduates are taught by unqualified teachers and that very little has been done even to hold seminars in universities to teach how to teach?
Viscount Davidson: No, my Lords, I would not accept that.

Business
3.10 p.m.
Lord Denham: My Lords, at a convenient moment after 3.30 this afternoon my noble friend Lord Young of Graffham will, with the leave of the House, repeat an Autumn Statement which is to be made in another place.

School Boards (Scotland) Bill
Report received.
Clause 2 [Composition of Boards]:
The Lord Chancellor (Lord Mackay of Clashfern): My Lords, before I call Amendment No. 1, I should say that if that amendment is agreed to I cannot call Amendment No. 2.
Lord Mackie of Benshie Lord Mackie of Benshie moved Amendment No. 1:
Page 2, line 8, leave out subsection (2).
The noble Lord said: My Lords, no doubt much to the disgust of the Minister I return to the topic of the composition of school boards. They are bodies that we greatly welcome. However, we feel that the boards must be a partnership and not the dictatorship that they may easily become should the Government's proposals that there must be a majority of parents on the school board be accepted.
Time and again we have produced our arguments. I shall bring them forward once more in order to persuade the Minister to make more of his reply. The teaching profession has a lot to contend with quite apart from doing the job. Teachers' pay rates have fallen behind those of many other sections of the community. I believe that they have been under-rated for many years in the general, national scheme of things. They are of immense importance and we know it.
If one is to introduce school boards to Scotland it must be done with the co-operation of the teaching profession. Teachers welcome the help and cooperation of parents and, if it is properly balanced, the school board must be welcomed by both parents and the teaching profession. I know that there have been a number of attempts in the form of polls to verify the opinions of the general public on this subject. No doubt the Minister will speak on that point but a number of other questions arise. It is not simply a matter of asking: "Do you want a majority of parents on the school board?"
My amendment is a very simple one. It proposes to leave out the whole of the subsection which states that there should be a majority of parents on the school board. I believe that the noble Lord, Lord Carmichael, has tabled a slightly better amendment but its purpose is exactly the same. An experienced parent-teacher organisation has done a lot of work on this subject and has reached the conclusion that one should not have a preponderance of any one group of people on these boards in order that the boards may work properly.
Ours is a very simple position: we do not want an absolute majority to be a statutory requirement. We want the boards to work. We believe that they will work a great deal better if there is equality and no one body has a majority which can be used in an unreasonable manner. I beg to move.
Lord Somers: My Lords, I have been in the teaching profession for some years arid should like to confirm every single word that the noble Lord has said. I sincerely hope that the fable of having parents on school boards in order to run schools properly will

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be seen through. The idea looks very well on paper but in fact parents know very little about what happens in the school. They know what they want for their own well-loved child but they do not know anything about how to give it. I sincerely hope that this amendment will be accepted.
Lord Carmichael of Kelvingrove: My Lords, I am grateful to the noble Lord, Lord Mackie of Benshie, for moving his amendment and for suggesting that on balance the amendment in my name is preferable. I suggest modestly that he is probably correct because my amendment is rather more flexible than his. I hope therefore that on reflection he will agree that if we are to take this issue any further it would be better to approve the amendment in my name.
This matter was discussed at Committee stage and I believe that this amendment is qualitatively slightly different from the earlier one. The general story is the same. In support of the previous amendment it was argued that an overall majority of parents was contrary to the concept of partnership which should underpin the relationship within school boards. Mutual co-operation between parents, staff and co-opted members is best encouraged by the absence of any group with an overall majority.
The whole school board scenario is bound to be experimental. An inexperïenced parental approach to the new powers of the boards should be balanced and checked through the parents having to convince at least one other member of the board. If there were a balance the parents could be in the majority but they would at least need to convince one other voting member of the board of the correctness of their views.
During our earlier discussions I said that it was significant that the Education Reform Act 1988, which covers England and Wales, does not give parents an overall voting majority on school governing boards despite the fact that the system has had a much longer history in England than it has in Scotland. The fact that the Government intend that school boards initially will have an overall parental majority has been accepted, but many people feel that this provision should not be laid down in statute but be capable of change in the light of experience. I believe that we have introduced a little flexibility at this point.
Experience in the operation of school boards may show that if the boards are to operate effectively, there should not be an overall majority of parents in particular schools or certain classes of schools. In such circumstances would it not be better for the Secretary of State to have greater freedom to alter the composition of school boards by changing the regulations specified in subsection (3)?
I should like to draw the attention of the House to a submission made by Mr. Ken Grigor who was a member of the Royal High School Parent-Teachers' Association in Edinburgh. He was there for a long time and was, I believe, chairman for a period. He is convinced that some schools may not be able to establish a board, at least at the beginning, because of the insufficient number of parent volunteers to occupy all the available vacancies. In such circumstances the flexibility that we are suggesting is
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something to which the Minister should be only too pleased to give serious thought. From his very wide experience of a school board and an active parent-teacher association, Mr. Grigor believes that parents themselves do not think that they should have the overall majority on school boards.
I do not think that this is in any way a wrecking amendment. Its aim is to help the Government, make school boards work and give the flexibility which I believe the Government will come to realise in some cases is necessary in view of the very large number of school boards that will be set up and preferable to imposing a rigid pattern on all of them. I hope therefore that the Minister and the House will give serious thought to the ideas that I have put forward.
Baroness Carnegy of Lour: My Lords, both noble Lords have explained that their respective amendments seek to do away with the parental majority on the school boards. I know that both the local authorities in Scotland and the biggest teaching union there, the EIS, are extremely keen to see that majority abolished. As I said in Committee, both those bodies were kind enough to explain to me that they did not believe that parents would be up to having such a majority. They agree with the noble Lord, Lord Carmichael, in that it may not be possible to get enough parents to do the job. They think that, as the noble Lord, Lord Mackie, said, it will destroy the so-called "notion of partnership".
In Committee I said that, based on my experience of school councils in Scotland where parents do not have a majority, I disagreed with the noble Lords very much. When financial delegation comes to the schools and they are operating their own budgets, I believe that the system will prove to be by far the best way of routeing school boards to consider the interests of the pupils of that school and to get away from schools being used not as a partnership—that is not happening at the moment—but as a place where interest groups play a very large part in the discussion of the policy of the school.
Indeed at times schools feel that they are a political battlefield. That may sound an overstatement. However, noble Lords may be aware that on this very day the EIS, their biggest teaching union, has called its members out on a one-day strike throughout Scotland. When it heard about this, the Scottish Parent-Teacher Council issued a statement in which it said:
"The SPTC condemns the proposed strike action by the EIS and calls on the Union not to promote further disruption in Scottish schools, a course of action which will not impress Scottish parents. Parents have a right to expect those who teach their children to behave in a professional fashion and many will question whether strike action by EIS members, in the current situation, is consistent with this high standard".
I have expressed the view to the EIS—I do not expect anyone to lay great store by my opinion; they do not have to—that if schools are to flourish in Scotland, the only way forward is for them to return to being professional associations and to cease carrying out the role of a militant trade union. That is what parents want; and that is what the people of Scotland want.
Lord Mackie of Benshie: My Lords, will the noble Baroness give way? I deplore the EIS going on strike for a day. However, surely she is not suggesting that the rest of the school board, apart from parents, will consist of EIS members. They will be co-opted members and people appointed from the local authority. They will form only a part. Not all teachers are members of the EIS. The EIS, through the teachers, will not have a majority on the school board.
Baroness Carnegy of Lour: My Lords, I thank the noble Lord for what he has said. He is absolutely right.
Perhaps I may briefly sum up my remarks. The atmosphere which will be created in a school board which has a majority of parents upon it will eventually, not necessarily initially, be such that the members of the school board, the staff of the school, everyone in the school and the parents will consider the school and the interests of the pupils. The paramount concern will be the school and not the education system. It is thinking about the education system and the politicising of that issue which is at the root of the trouble today.
I believe that it will help to create an atmosphere which teachers—whether or not they belong to a teachers' union—will appreciate. It will enable them to develop and express the high professionalism to which they aspire. The teachers will find that they are encouraged and expected to be highly professional by parents. They will be greatly appreciated for it. This can happen only if we have the atmosphere within the school boards which the parental majority will create.
This is a Scottish approach to a Scottish problem. As the noble Lord, Lord Mackie, said, we have not had boards before. We can therefore start afresh. I hope very much that your Lordships will not accept this amendment.
Lord Taylor of Gryfe: My Lords, we are at almost the final stages of this interesting and important Bill. From these Benches we very much welcome the basic proposals on the school boards. I regret very much that the Educational Institute of Scotland, which used to be a highly regarded professional organisation, has resorted to strike action. I regard that as totally irresponsible. It does nothing for its cause and creates immense hardship, in particular for single-parent families where mothers have to go out to work while their children are at school. I therefore hope that, in making any further contribution to this discussion on the future of education, the EIS will become less political, more responsible, and indulge in more constructive contributions to education than sloganising about the anglicisation of Scottish education.
Having said that, I must confess that the present confrontation in Scottish education, of which the EIS strike is a reflection, is an unhappy circumstance for the future of Scottish education. Therefore any contribution which we can make to establish a better relationship, to make this system work and to create the kind of partnership that the noble Lords, Lord Mackie of Benshie and Lord Carmichael of Kelvingrove, have sought, is to be welcomed.
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I am conscious that this afternoon we are discussing the structure. However, this interesting experiment of school boards will work not because of the structure but because of the people who will be attracted to service on the school boards and in education. I hope that we can encourage people to approach the educational problems of Scotland without the confrontation that seems to be a feature of discussion on education at the moment.
The amendment of the noble Lord, Lord Carmichael of Kelvingrove, provides a degree of flexibility. It takes the matter out of the area of conflict that we or they must have a majority. That is the basis of conflict and confrontation. It provides a degree of flexibility. I believe that it will help the success of this experiment.
The experience of Jordanhill school in Glasgow at the moment does not encourage us to believe that necessarily a parents' majority in the government of school boards is essentially a remedy for all the difficulties and weaknesses. I want this experiment to work. I believe it is good idea. I want parental involvement in the schools to succeed. But I want it to be built on a basis not of confrontation or conflict but of partnership. It is precisely that objective that the noble Lord, Lord Carmichael, has in mind in the amendment that is now before us.
3.30 p.m.
Lord Addington: My Lords, I find myself agreeing with much of what has already been said. The idea of partnership is what fundamentally lies behind both amendments. The amendment of the noble Lord, Lord Carmichael, seems to encapsulate it rather better than that under my name, on the grounds that it does not state an absolutely fixed position and that the flexibility therefore will enable us to adapt to any future change.
The idea of partnerhip is something that we have hammered away at for a long time. This is conceivably the last attempt to get anything like it into the boards. The idea is to stop there being two confrontational groups. For example, the parents could possibly be a misinformed body. This has been mentioned before. There is a danger of fiscal or possibly religious domination which could lead to biased views on certain subjects within school boards. If the two groups—the professional sector and the parental amateur sector—were evenly balanced that could possibly counteract any of the dangers of either one dominating.
Lord Monkswell: My Lords, one of the problems we are faced with is the concept of conflict between teachers either as a professional body or a body of employees and the community and the parents on the other side. It seems to me that one of the best ways of reducing that conflict is to go along with the amendment and place the teachers, the parents and the community in general as equal partners in a project to determine the school's philosophy and future, because that is what is involved.
The education is of the children, but it is of benefit not only to children but to the wider community. We all suffer if our children are badly educated. That is

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why the three pillars are required. We need the support of the parents of the children involved. We need the support of the profession and we need the money that comes from the community at large to fund the whole project. If any of those groups feels that it is either in a subservient minority or in a position of apparent authority over the other two, we have a recipe for conflict.
It seems to me that we should construct these boards in such a way that one group does not have an absolute majority over the others. We shall then inevitably construct something that has a bedrock for future development and not something which may or could give rise to conflict.
I am sure that however the school boards are made up the vast majority will operate in a practical and sensible manner, but I hope that in the formulation of the boards we do not take any hostages to fortune where one group or another, for example the teachers, can say that it is placed in the position of an employed group rather than people of professional standing who are recognised as such.
The Minister of State, Scottish Office (Lord Sanderson of Bowden): My Lords, I am grateful to all those who have taken part in this very important debate, as I am sure the noble Lord, Lord Mackie of Benshie, realised it would be when he moved his amendment.
I make no apologies for repeating the major points I made during the debate on similar amendments in Committee. We are concerned to guarantee parents a proper say in the education of their children. For too long the parental voice has been muted and constrained within the education system. School councils have, it is generally agreed, been tried, tested and in the end found wanting.
Our concern was to institute a system whereby the views, concerns and interests of parents would, without the slightest doubt, find expression. We have taken care to ensure that boards are integrated into the education system, to ensure that what we believed was a fundamentally unbalanced structure was restructured. Our purpose was to achieve a proper balance of interests. In any restructuring there is liable to be resistance to change. Where entrenched interests exist, there is invariably such resistance. No doubt this is the reason the parental majority has been the subject of repeated attacks from some authorities, particularly from the Educational Institute of Scotland.
In passing, I should say that I am grateful for the remarks of the noble Lords, Lord Taylor of Gryfe and Lord Mackie of Benshie, and my noble friend Lady Carnegy of Lour, in relation to today's action. I believe that action to be ill-conceived, as they do, and very damaging, particularly to the children. Parents, as suggested by my noble friend Lady Carnegy, have expressed their view through the Scottish Parent Teachers Council and they are very unimpressed with today's action. They want the best for their children, and because of today's strike thousands of pupils are having their education disrupted.
I know that there is much talk from the EIS about anglicisation, and so on. Every reform which this
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Government have introduced, from the parents charter to the school boards and testing, has been opposed by the EIS. I realise that that may be its view of how matters should proceed, but what the Government have proposed have broad parallels with education developments in many other countries. The Bill introduces to schools benefits that have been available to most Western world countries for decades.
Therefore, I believe I am right to say that what we are looking for, as the noble Lord, Lord Mackie of Benshie, has so clearly pointed out, is a partnership in education. We are not looking for a dictatorship but for a partnership. We want balance, and to establish that balance of representative views in which parental opinion cannot be denied and is clearly heard we must have the parental majority on the boards. It is fundamental to the Bill and that is why I am glad I have the chance to restate that here. It is a counterweight to the dominance of the authority and the power of the profession. Without the parental majority we genuinely believe that the partnership of purpose we earnestly desire to achieve with the boards would be at risk.
If the Bill is read as a whole, it is obvious that the parental majority cannot be taken as a way parents could somehow exercise an unfettered power, as noble Lords seem to suggest. We come to various points in the Bill which indicate that. We have met the very genuine concerns that boards should be accountable, by making them accountable for their actions not only through the electoral processes that are carefully constructed in Schedule 1, but also through the basic duty on boards to report to parents and to consult them. We did not just rest there, content with those mechanisms of accountability. We have provided for parents to call boards to account for themselves whenever parents decide that is necessary.
I noticed that the noble Lord, Lord Mackie of Benshie, in his usual very fair way, said that teachers have a lot to put up with. I know only too well that that may be true. I also believe that at times parents as well have that to contend with.
I shall answer the point that the noble Lord, Lord Carmichael, made about people standing for office as parents. The Dumfries experience, which may not be representative of the whole of Scotland when the Bill becomes an Act, encourages us. The fact that 25 parents stood for four vacancies in one school is indicative that in some areas there will be ready acceptance that parents are prepared to take their responsibilities most seriously. I cannot accept the amendment.
Lord Mackie of Benshie: My Lords, I listened to the Minister with my usual enormous respect, but I do not think he has made the case. I am not putting the views of the EIS. He seems, like the noble Baroness, Lady Carnegy, to have brought the EIS in as the main exponent of this viewpoint that we are putting forward. But I am putting forward my own views just as sincerely as he is.
It is highly undesirable to give any party an absolute majority by statute on the new school

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boards. The Minister is being extremely cautious about the powers he is to give the boards until he sees how they work. That is very sensible of him. It also might be sensible for him to accept the amendment in the name of the noble Lord, Lord Carmichael of Kelvingrove. The checks and balances built into the Bill are many and this is another which would do good. His approach of trying to achieve a proper balance is correct, and although we differ it is only slightly. I beg leave to withdraw my amendment.
Amendment, by leave, withdrawn.
Lord Carmichael of Kelvingrove Lord Carmichael of Kelvingrove moved Amendment No. 2:
Page 2, line 8, leave out ("a majority of") and insert ("the majority group on").
The noble Lord said: My Lords, my amendment now stands since the noble Lord—
Noble Lords: Order!
Lord Carmichael of Kelvingrove: My Lords, I beg to move Amendment No. 2 formally.
3.41 p.m.
On Question, Whether the said amendment (No. 2) shall be agreed to?
Their Lordships divided: Contents, 92; Not-Contents, 133.

DIVISION NO. 1

CONTENTS

Addington, L.

Hirshfield, L.

Airedale, L.

Hooson, L.

Annan, L.

Hughes, L.

Ardwick, L.

Hunt, L.

Aylestone, L.

Hunter of Newington, L.

Banks, L.

Jay, L.

Blease, L.

Jeger, B.

Bonham-Carter, L.

Jenkins of Putney, L.

Briginshaw, L.

Kagan, L.

Bruce of Donington, L.

Kilbracken, L.

Buckmaster, V.

Kilmarnock, L.

Callaghan of Cardiff, L.

Leatherland, L.

Campbell of Eskan, L.

Llewelyn-Davies of Hastoe, B.

Carmichael of Kelvingrove, L.

Lloyd of Hampstead, L.

Carter, L.

Lockwood, B.

Chitnis, L.

Longford, E.

Cledwyn of Penrhos, L.

McIntosh of Haringey, L.

Cocks of Hartcliffe, L.

Mackie of Benshie, L. [Teller.]

Dacre of Glanton, L.

Manchester, Bp.

David, B.

Mason of Barnsley, L.

Davies of Penrhys, L.

Molloy, L.

Dean of Beswick, L.

Monkswell, L.

Diamond, L.

Mulley, L.

Donaldson of Kingsbridge, L.

Nicol, B.

Dormand of Easington, L.

Oram, L.

Ennals, L.

Paget of Northampton, L.

Ewart-Biggs, B.

Parry, L.

Fisher of Rednal, B.

Peston, L.

Fletcher, L.

Pitt of Hampstead, L.

Gallacher, L.

Ponsonby of Shulbrede, L. [Teller.]

Galpern, L.

Glenamara, L.

Prys-Davies, L.

Graham of Edmonton, L.

Reilly, L.

Grey, E.

Robson of Kiddington, B.

Grimond, L.

Rochester, L.

Hampton, L.

Russell, E.

Hanworth, V.

Sainsbury, L.

Hatch of Lusby, L.

Serota, B.

Hayter, L.

Somers, L.

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Stallard, L.

Underhill, L.

Stedman, B.

Wallace of Coslany, L.

Stoddart of Swindon, L.

Walston, L.

Strabolgi, L.

Whaddon, L.

Taylor of Blackburn, L.

Williams of Elvel, L.

Taylor of Gryfe, L.

Willis, L.

Tordoff, L.

Winstanley, L.

Turner of Camden, B.

NOT-CONTENTS

Airey of Abingdon, B.

Jenkin of Roding, L.

Allerton, L.

Johnston of Rockport, L.

Alport, L.

Kaberry of Adel, L.

Ampthill, L.

Kinloss, Ly.

Arran, E.

Kinnaird, L.

Ashbourne, L.

Lauderdale, E.

Auckland, L.

Lawrence, L.

Barber, L.

Long, V.

Belhaven and Stenton, L.

Lovat, L.

Bellwin, L.

Lucas of Chilworth, L.

Belstead, L.

Luke, L.

Blyth, L.

McFadzean, L.

Bolton, L.

Mackay of Clashfern, L.

Borthwick, L.

Macleod of Borve, B.

Boyd-Carpenter, L.

Manton, L.

Brabazon of Tara, L.

Mar, C.

Brookeborough, V.

Margadale, L.

Brougham and Vaux, L.

Marley, L.

Bruce-Gardyne, L.

Merrivale, L.

Burton, L.

Mersey, V.

Butterworth, L.

Middleton, L.

Cameron of Lochbroom, L.

Montgomery of Alamein, V.

Campbell of Alloway, L.

Morris, L.

Campbell of Croy, L.

Mostyn, L.

Carnegy of Lour, B.

Mottistone, L.

Carnock, L.

Mountgarret, V.

Cathcart, E.

Mowbray and Stourton, L.

Cayzer, L.

Munster, E.

Coleraine, L.

Napier and Ettrick, L.

Colnbrook, L.

Nelson, E.

Constantine of Stanmore, L.

Norrie, L.

Cottesloe, L.

Northesk, E.

Cox, B.

Nugent of Guildford, L.

Craigavon, V.

O'Brien of Lothbury, L.

Craigton, L.

Orkney, E.

Crickhowell, L.

Orr-Ewing, L.

Cullen of Ashbourne, L.

Oxfuird, V.

Davidson, V. [Teller.]

Pender, L.

De Freyne, L.

Pennock, L.

Denham, L. [Teller]

Peyton of Yeovil, L.

Dundee, E.

Plummer of St. Marylebone, L.

Eccles, V.

Ellenborough, L.

Reay, L.

Elles, B.

Reigate, L.

Elliot of Harwood, B.

Renwick, L.

Erne, E.

Rugby, L.

Erroll of Hale, L.

St. Aldwyn, E.

Faithfull, B.

St. Davids, V.

Fanshawe of Richmond, L.

Saltoun of Abernethy, Ly.

Ferrers, E.

Sanderson of Bowden, L.

Forbes, L.

Selkirk, E.

Fortescue, E.

Shannon, E.

Fraser of Kilmorack, L.

Sharples, B.

Gainford, L.

Skelmersdale, L.

Gardner of Parkes, B.

Slim, V.

Glenarthur, L.

Strange, B.

Goold, L.

Strathcarron, L.

Gridley, L.

Strathclyde, L.

Halg, E.

Strathspey, L.

Hailsham of Saint Marylebone, L.

Terrington, L.

Thomas of Gwydir, L.

Halsbury, E.

Thomas of Swynnerton, L.

Harmar-Nicholls, L.

Trafford, L.

Hesketh, L.

Vaux of Harrowden, L.

Hives, L.

Westbury, L.

Home of the Hirsel, L.

Whitelaw, V.

Hooper, B.

Young of Graffham, L.

Hylton-Foster. B.

Resolved in the negative, and amendment disagreed to accordingly.

Autumn Statement
3.50 p.m.
The Secretary of State for Trade and Industry (Lord Young of Graffbam): My Lords, with the leave of the House, I shall now repeat the Autumn Statement which is now being made in another place by my right honourable friend the Chancellor of the Exchequer. The Statement is as follows:
"Cabinet today agreed the Government's public expenditure plans for the next three years. I am therefore taking the earliest opportunity of informing the House of the contents of the Autumn Statement: that is, the public expenditure plans for the next three years, and the expected outturn for this year; proposals for national insurance contributions for 1989–90; and the forecast of economic prospects for 1989 required by the 1975 Industry Act.
"The main public expenditure figures, together with the full text of the economic forecast, will be available from the Vote Office as soon as I have sat down. They will also appear in the printed Autumn Statement, which will be published next Tuesday.
"I turn first to public expenditure. For the current financial year, 1988–89, the public expenditure planning total now looks likely to amount to some £153½ billion, or some £3¼ billion less than was allowed for in the last public expenditure White Paper. In other words, only around £¼ billion of the £3½ billion reserve provided for is in fact likely to be needed.
"The main reasons for this shortfall are an extra £1 billion in privatisation proceeds, a reduction in social security spending of almost £1 billion as a direct result of the sharper than expected fall in unemployment, and a saving of some £¾ billion, largely due to extra housing receipts under the right-to-buy programme. Taken together with the strong growth in the economy this year, and the containment of debt interest now that the Budget is in surplus, this means that total public spending this year, even excluding privatisation proceeds, will be less than 40 per cent. of national income—the first time this has happened for over 20 years. Not so long ago, the share of national income spent by the state seemed to rise inexorably. Over the past six years, that trend has been decisively reversed.
"Since 1982–83, public expenditure, excluding privatisation proceeds, expressed as a share of national income has fallen by seven percentage points—the largest and longest sustained fall since the wartime economy was unwound. Over the whole decade since this Government first took office, from 1978–79 to 1988–89, public expenditure has grown by under 1½ per cent. a year in real terms. This is exactly half the rate at which it grew over the whole of the immediately preceding decade.
"Looking ahead, Cabinet agreed in July that public spending over the next three years should keep as close as possible to the existing planning totals, and should continue to fall as a share of
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national income. The plans I am about to announce meet both those objectives.
"For 1989–90, the planning total published in the last public expenditure White Paper was £167 billion. It will remain at £167 billion. This important outcome has been made possible, despite the many claims for increased public spending, by a rigorous reassessment of priorities, coupled with the continuation of two of the factors that have contributed to this year's shortfall: benefit savings from lower unemployment and increased receipts from council house sales.
"For 1990–91, however, though these two factors will persist, the planning total has been set at £179½ billion, some £3¼ billion more than the previously published figure. For 1991–92, the planning total has been set at £191½ billion. These totals include the same level of reserves as in last year's plans; that is to say, £3½ billion in the first year, £7 billion in the second year and £10½ billion in the third. They also incorporate an unchanged estimate of privatisation proceeds of £5 billion a year.
"Over the three survey years as a whole, the real growth in spending on programmes will be over 3 per cent. a year. This can be afforded only because of the fall in the burden of debt interest brought about by the dramatic improvement in the Government's finances from Budget deficit to Budget surplus. As a result, overall public spending, excluding privatisation proceeds, will rise by less than 2 per cent. a year, well within the prospective growth of the economy as a whole. In other words, total public spending, excluding privatisation proceeds, will continue to decline as a proportion of national income. But, at the same time, substantial additional funds have been made available for the Government's most important public expenditure priorities. The figures I am about to give all represent increases over the plans in the last public expenditure White Paper.
"First, health. An extra £1¼ billion is being provided for the National Health Service in England in 1989–90, and an extra £1½ billion in the following year. There will be corresponding increases in Scotland, Wales and Northern Ireland. On top of that, health authorities are expected to receive an extra £100 million a year from sales of surplus land. Continuing the rate of cost improvement savings acheived in recent years will produce an extra £150 million in 1989£90 and an extra £300 million the following year. In addition, the Government are accepting the recommendation of the Government Actuary, in a report published today, that NHS employers' superannuation contributions in England and Wales should be reduced, which will save the health service a further £300 million a year.
"In total, the increases for the health service in the UK as a whole will be over £2½ billion in 1989–90 and over £2½ billion in 1990–91. These are by far the largest increases the health service has ever received. Comparing next year with this year, the increase in real resources for the NHS should amount to some 4½ per cent.

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"Secondly, roads. An extra £220 million is being provided next year for building and repairing motorways and trunk roads and for strengthening bridges, with a further £250 million the following year.
"Thirdly, housing. Gross provision for public sector housing investment is being increased by around £440 million in 1989–90 and £340 million the following year. But thanks to the success of the Government's right-to-buy policy, this is more than financed by extra receipts.
"Fourthly, law and order. An extra £290 million has been made available in 1989–90 and £430 million in 1990–91, principally for a further expansion in the prison building programme. This will provide a further 3,000 places by 1991–92. Provision for local authority spending on the police has been increased by £240 million.
"Defence spending is to be increased by £150 million in 1989–90 and £600 million in 1990–91. These significant increases are designed to provide a firm framework for the next three years within which our defence programme can be planned with confidence.
"So far as the massive social security budget is concerned, lower unemployment has saved more than £1½ billion in both 1989–90 and 1990–91. But substantial increases in planned spending on other benefits, particularly for the disabled, mean that the social security programme will be only marginally reduced in 1989–90 compared with previous plans, and some £1.7 billion higher in 1990–91.
"On science and technology, we have altered the balance of public support within an increased total. In particular, provision for spending by the Department of Education and Science has been increased by £120 million a year, with the science budget up by 16 per cent. in 1989-90. This reflects the importance the Government attach to basic and strategic research.
"The new plans imply an overall increase of £2¼ billion in public sector capital spending in 1989–90. This includes extra investment in hospitals, housing, prisons and roads. There is provision for higher investment by the nationalised industries including further anti-pollution investment by the water authorities.
"That the Government have been able to strengthen their priority programmes within an unchanged planning total for 1989–90 is, in large measure, a reflection of the success of their policies. The improved performance of the economy has eased pressures on a number of programmes, giving the Government more scope than ever before to shift resources where their own priorities, rather than circumstances, dictate.
"The details of these and other changes are provided in the material in the Vote Office. More details will be published in the printed Autumn Statement next week.
"I turn next to national insurance contributions. The Government have conducted the usual
98
autumn review of contributions in the light of advice from the Government Actuary on the prospective income and expenditure of the National Insurance Fund, and taking account of the statement on benefits which my right honourable friend the Secretary of State for Social Security made on 27th October. The lower earnings limit will be increased next April to £43 a week. in line with the single person's pension, and the upper earnings limit will be raised to £325 a week. The upper limits for the 5 per cent. and 7 per cent. reduced rate bands will also be increased, to £75 a week and £115 a week respectively. The upper limit for the 9 per cent. rate for employers will be raised to £165 a week.
"Over recent years, we have steadily reduced the Treasury supplement; the taxpayer's contribution to the National Insurance Fund. From 18 per cent. in 1979, it now stands at 5 per cent. My right honourable friend and I now propose to carry this policy to its logical conclusion and to abolish the supplement altogether. The necessary legislation will be introduced early in the new Session. However, because of the healthy state of the National Insurance Fund, this discretion will not require any increase in contribution rates. Thus, the main Class I contribution rates will remain unchanged at 9 per cent. for employees and 10·45 per cent. for employers.
"Finally, I turn to the Industry Act forecast. Growth this year looks to be turning out at 4½, per cent., compared with the 3 per cent. growth I forecast at the time of the Budget. Investment is particularly strong, growing twice as fast as consumption, with manufacturing investment expected to show the biggest rise of all, at 18 per cent. Indeed, it is striking that total investment has grown almost twice as fast as total consumption over the whole of the past five years.
"The continuing vigour of the British economy is testimony to the transformation that has taken place in the supply side of the economy; a transformation which has enabled the seven years to 1988 to record a combination of strong and steady growth unmatched since the war. As a result, unemployment has been falling rapidly. Since the middle of 1986 it has fallen by very nearly 1 million—the largest fall on record. Over the past year, unemployment has fallen faster in the UK than in any other major country.
"Inflation, as measured by the retail prices index, is likely to be a little over 6 per cent. in the fourth quarter of this year. Part of the rise in recorded inflation reflects the impact on mortgage payments of the higher interest rates needed to tighten monetary policy and thus get inflation firmly back on a downward trend. Excluding mortgage interest payments, the retail prices index in the fourth quarter is likely to be around 5 per cent. compared with the 4 per cent. rise in the RPI forecast at the time of the Budget.
"Exports have continued to perform well, with manufactured exports up 7½ per cent. over the past year. Over the past seven years, the UK's share of world trade in manufactured goods has remained

99
steady after decades of decline. However, with investment booming, and consumer spending increasing fast, total imports have grown even faster than exports, rising by 13 per cent. in the year to the third quarter. This has led to a substantially greater current account deficit than I forecast at the time of the Budget. For 1988 as a whole, this now looks like turning out at some £13 billion, equivalent to 2¾ per cent. of GDP.
"The stronger than expected economic growth this year means that total tax revenues are likely to exceed the Budget forecast by £3½ billion. Both income tax and VAT have been particularly buoyant. In the Budget, I set a public sector debt repayment—or—PSDR for 1988–89 of £3 billion, equivalent to around ¾ per cent. of GDP. With higher than expected government revenues and lower than expected public expenditure, this year's PSDR now looks likely to turn out at some £10 billion, equivalent to over 2 per cent. of GDP.
"This will be the second successive year of debt repayment, something that has not been achieved since records began in the early 1950s. Moreover, this year, the Budget would still be in surplus, by some £4 billion, even if there were no privatisation proceeds at all. No other major economy has such sound public finances.
"Looking ahead to 1989, the economy is forecast to grow by a further 3 per cent., with domestic demand also up by 3 per cent. Once again, investment is expected to grow considerably faster than consumption, and once again unemployment is expected to fall.
"The slower growth forecast for 1989 inevitably implies a marked deceleration during the course of the year, particularly so far as domestic demand is concerned. Thus, comparing the second half of next year with the second half of this year, overall growth is forecast at 2½ per cent., and growth in domestic demand at only 1½ per cent. The current account deficit is likely to fall only slightly, to some £11 billion, or 2¼ per cent. of GDP.
"Inflation, while it will inevitably continue to edge up for some months to come, is forecast to peak at some point in the middle of next year before falling back again to 5 per cent. by the fourth quarter.
"In short, after two years of unexpectedly rapid expansion, growth next year is forecast to return to a sustainable level, and one which compares well with the economic performance of the '70s; while inflation will resume its downward path. The public finances are in substantial surplus and will remain so, with public spending on priority programmes continuing to increase, while overall public spending continues to fall as a share of GDP to a level in 1991–92 not seen for a quarter of a century. The prospect that lies before us is yet further testimony to the success of the policies we have been pursuing these past 9½ years and will continue to pursue, and to the economic transformation those policies have wrought."
My Lords, that concludes the Statement.
4.7 p.m.
Lord Bruce of Donington: My Lords, the House is indebted to the noble Lord, Lord Young of Graffham, for repeating the Statement made in another place. I must say that in the 10 years that I have had the honour of being in your Lordships' House I have never heard a more remarkable Statement.
One of the most agreeable characteristics of the noble Viscount, Lord Whitelaw, when he was the Leader of your Lordships' House, was his ability to own up to error. Time and again when your Lordships' House has been in some unfortunate impasse, perhaps some misunderstanding between the Front Benches, the noble Viscount came to the House and said in his most disarming manner, "My Lords, I may have made a mistake. In fact, I very often make mistakes". He always sat down to the plaudits of the House and its general approval of his unfailing honesty of expression in that regard.
The noble Lord, Lord Young of Graffham, if he will forgive me. does not suffer from a surfeit of modesty. The noble Lord was, of course, in part tied by the fact that he was reading a Statement made in another place. Perhaps if it had been left to him he would be making some amends for some of the most incredible forecasts made by the Chancellor at the time of his Budget.
The Statement begins with a long recital of proposal expenditure plans, with which I will deal briefly before I sit down. I refer to an incredible omission that makes the Statement most remarkable. It is the complete lack of any Treasury admission of gross error in the forecast that it made at the time of the Budget. We were then told that the current balance of trade would be in deficit for the year in the sum of £4 billion. Some of us took a sharp intake of breath at that. I can well remember the time when the prospect of a deficit on current account of some £300 million filled people with dismay. Even so £4,000 million was the forecast. We now have a Statement which says quite cheerfully and without explanation: "Oh no, it is not going to be £4 billion. It is going to be £13 billion and £11 billion the following year".
Before any reliance is placed on the forecasts that are made most optimistically in the concluding paragraphs of the Statement, read with such relish by the noble Lord, surely the House is entitled to ask on what basis these current forecasts are made. Using the Treasury model with the information available at that time, it is quite inconceivable that the Chancellor of the Exchequer did not know that the forecast of the current account deficit was at the time of the Budget being grossly understated. It is quite inconceivable.
Many of us have computers: I have one myself. There is a saying, "Rubbish in, rubbish out". Quite clearly, at the time of the Budget the noble Lord or his servants must have caused some rubbish to be put in. Perhaps it was a different statement of the unemployment figures that was fed into the model. These have varied from time to time with no distinction being made between those actually unemployed and those claiming benefit. There have been 21 alterations in the figures. Even with a

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variation of that feed-in, there can be no excuse for a crass error of that kind. As your Lordships will recall, it was made at a time when an unparalleled sum of £2 billion to £3 billion was made available to the top income earners—or top income receivers, I should say—in this country. That probably was the purpose of it.
It will be impossible for your Lordships to overlook the consequences of the Chancellor's forecast of a £13 billion deficit on current account. The endeavour is made to shrug it off as a matter of no consequence. Statements have been made at one time or another that this deficit is easily covered by overseas assets, though one should bear in mind that these have depreciated by some £29 billion since the Stock Exchange crash of October 1987. It presupposes that the owners of those private investments overseas are willing for a charge to he created by the Government in order for them to cover the current account deficit. The noble Lord knows as well as anyone else that these charges are not available.
The question to which the country should address itself, and the question upon which even these expenditure plans announced this afternoon depend, is how long a country can continue to sustain a current account deficit on these lines. I have been waiting for some time and I expect the noble Lord, Lord Aldington, has also, for an apology to be made to him and to his committee for its report having been stigmatised as Marxist. It has proved very much nearer the mark than any forecast that the Chancellor has made. The position remains one of the utmost gravity.
I invite the noble Lord to contemplate what may happen as a result of the American election, whichever candidate is returned, whether it is Mr. Bush or Mr. Dukakis. If the new President of the United States, with his advisers, decides to take the advice offered to him some four monhts ago by the Chancellor of the Exchequer and to reduce the trade deficit, where then will be the prospects of the United Kingdom? The fact of the matter is that this country cannot go on sustaining such deficit.
The noble Lord always has the alibi which has been hinted at again in the Statement this afternoon of overheating: the country is doing so well because the economy is overheating. The imports into this country and the importers' industry are white hot at the present time, with manufactures coming into the country very largely as a result of the Budget earlier in the year. These manufactures are coming in as a result of the concessions to the higher taxpayers. This situation cannot be sustained.
In the meantime the inference is that the overheating, as it is called, applies to the country as a whole. We know perfectly well that it does not. Unemployment in the northern region as a percentage of the workforce (which has recently been enlarged by the noble Lord to include those employed in the Armed Forces) is 12 per cent., whereas in the South-East unemployment is 5·3 per cent. Unemployed claimants per vacancy in the northern region are 14 people unemployed for every
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vacancy. In the South-East the figure is five. The growth in average male earnings in the northern region is 8·6 per cent. and in the South-East it is 11 per cent. These are some of the figures that go to the root of the whole philosophy behind this Statement.
As regards the expenditure plans, we shall have to examine those in detail. I have had them for only 10 minutes or so and I am quite unable to pass any detailed observations. One thing can be said for certain. In the current age it is an idle boast to claim that the reduction of public expenditure is of itself a good thing, particularly at a time when the infrastructure of this country is in such a shocking state. There is much deprivation among our people. I believe that when the House has had an opportunity to digest this Statement and to analyse it further when the details are available from the Vote Office, it will treat it with the contempt that it deserves.
4.15 p.m.
Lord Banks: My Lords, I join in thanking the noble Lord for repeating the Statement made in another place by the Chancellor of the Exchequer. It seems that government policy is based upon a combination of high interest rates and the restraint of public expenditure. As the Statement explains, public expenditure is continuing to decline as a percentage of national income. It is expected to be less than 40 per cent. in the current year. One of the prongs of this two-pronged policy is in the main high interest rates designed to rein in private expenditure.
I believe it is agreed that the effect of these interest rates is long term to some extent. The other prong is designed to rein in public expenditure.
Is this strategy working and will it work in the future? Is this strategy sufficient to cope with a very high deficit in the balance of payments and at the same time with the rising inflation that we have at the moment? I have some doubts about it when I consider other factors that are involved. There is, for example, the impact of interest rates on rises in pay settlements, there is the credit boom and there are the proceeds of the recent tax cuts, all of which tend to increase private expenditure. If one takes all these factors together, they seem to constitute a recipe for private affluence amid public squalor, to quote Galbraith's phrase.
I wonder too whether the pound can sustain for two or three years a balance of payments deficit as high as it is at present. Exchange rates, as we know, are very important. I imagine the noble Lord will agree that we ought to be seeking stability in those. We are not yet a fully fledged member of the European monetary system. I should like to ask again whether we can be given any indication of when that is likely to occur. We understand that it is the Government's policy that it should occur at some time.
Perhaps I may briefly mention three of the individual items of expenditure referred to in the Statement. First, we welcome the additional expenditure on the health service although we doubt very much whether it will be enough to offset the chronic underfunding that we believe the health service has suffered in recent years. Next, there is the

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spending on prisons. We believe that to be essential, and we welcome it. We regret that no intention is expressed to abolish the upper limit in regard to employees' contributions to national insurance. We oppose the abolition of the Treasury supplement because it has always seemed to us that in effect if not technically it makes contributors pay for noncontributory benefit.
Finally, I wish to ask the noble Lord how far public expenditure is to decline as a percentage of national income. The Statement says it is intended that it should continue. Are any reasons advanced for this continued reduction? Is there any long-term strategy behind it?
Lord Young of Graffham: My Lords, I am grateful to the noble Lord, Lord Bruce of Donington, for his remarks on the Statement that I have just repeated to your Lordships' House. Perhaps I may say how much I agree with him on two matters. The first concerns the compliments that he paid to my noble friend Lord Whitelaw. I agree with every word that he said about my noble friend. The second concerns the way in which he said that this was an agreeable Statement. Surely no Statement that has been made to your Lordships' House could be more agreeable than the simple fact that £10 billion will now be paid off the national debt. Public expenditure after 22 years comes below 40 per cent. to 39·75 per cent. and over the next four years will decline gradually to 38·75 per cent.
I hope that the noble Lord, Lord Bruce of Donington, was slightly careless with his choice of words. I am sure he did not really mean to say that my right honourable friend the Chancellor of the Exchequer was aware at the time he made the Budget forecast that there were any figures that would imply other than a forecast of £4 billion on balance of payments. I am sure that he did not. Forecasts are simply forecasts, and circumstances can change very rapidly.
One of the other forecasts for which the noble Lord, Lord Bruce of Donington, failed to blame my right honourable friend the Chancellor of the Exchequer was his original supposition that the economy would grow by 3 per cent., instead of which it grew by 4·5 per cent. It was that excessive growth that was the cause of the difficulties that my right honourable friend recently adjusted.
The noble Lord should reread the Statement. He referred to the fact that the Chancellor somehow had given billions back to people at the time of the last Budget. I ask the noble Lord to look at the figures, which are now available. They will show that, instead of receiving total receipts from taxes of £184.9 billion, we are now estimating that there will be £188.6 billion, so that the Chancellor will take £3.7 billion more from the taxpayer than he estimated at the time of the Budget.
The noble Lord spoke also of a reduction in public expenditure. The figures over the planning period go from £167 billion to £191.5 billion. That is no reduction. Indeed, the noble Lord, Lord Banks—I am grateful for his comments—referred to that ill-used phrase "private affluence and public squalor".
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He was critical of the way in which the Government were not spending money on part of the public sector.
In 1988–89 the health service will receive over £2 billion more and in 1991–92 £1.5 billion more. If one compares next year with this year, the increase in real terms should amount to some 4.5 per cent., the greatest increase ever given. On roads it is £220 million, going to £250 million the following year; on housing it is £340 million, going to £440 million the following year; on law and order it is £290 million, going to £430 million the following year, and on defence it is £150 million. Wherever one looks there is additional expenditure. The great magic of the situation is that the Government have been able to afford extra public expenditure, at the same time reducing it as a percentage of GDP.
The noble Lord, Lord Banks, asked in conclusion how far that process should go. We have yet to get back to those halcyon days when public expenditure was at the point where the noble Lord, Lord Wilson of Rievaulx, took it on in 1964. I for one would like to see it back to that level.
Lord Boyd-Carpenter: My Lords, is my noble friend aware that the noble Lord, Lord Bruce of Donington, was quite right when he said that he had never heard a Statement like this, because he has never heard as good a Statement as this or as encouraging a Statement for the British public as a whole? Is he aware that the Statement makes it clear that Her Majesty's Government, while providing additional funds where they are really needed, have kept an effective grip on public expenditure, a fact that reflects great credit on the Government as a whole and on the Chief Secretary to the Treasury in particular? Is he aware also that many people will be very reassured to see this steady management of public expenditure?
Perhaps my noble friend can add one thing. The Chancellor of the Exchequer recently confirmed, I think, that it remains the policy of the Government to reduce the levels of taxation, particularly direct taxation. In view of the fact that those admirable citizens who have mortgage payments to pay are very much in need of further reductions in their tax demands, can my noble friend indicate without anticipating next year's Budget that it remains the policy of the Government to accept that taxation is still too high and should be reduced by stages?
4.30 p.m.
Lord Young of Graffham: My Lords, I am grateful to my noble friend. I have to confess that my right honourable friend the Chancellor of the Exchequer has not yet confided his Budget secrets to me and nor do I expect him to. However, he has recently confirmed that it remains his intention to reduce personal and direct taxation as and when it is prudent to do so. Inflation must remain the first priority, but happily today we have expenditure totals that enable progress to be made in the reduction of taxation.
Lord Diamond: My Lords, we on these Benches would also like to thank the Secretary of State for repeating the Statement. Its contents are mixed. The

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main conclusions that I draw from it are, first, that the Government have again shown ample evidence of their inability to guide the economy; and, secondly, that we are faced with a potentially dangerous situation, which no Member of your Lordships' House would wish to exaggerate—the forthcoming rise in the balance of payments deficit. It is one which is at least three times as large as was forecast as recently as six months ago. For that to have happened in that short period is, if I may say this to the noble Lord who spoke for the Labour Party, no evidence of a lack of good faith on the part of the Chancellor or any of his advisers. It is far from that. It is direct evidence that the Government are totally out of control of the economy. When they gave the figure of a balance of payments deficit of £4 billion, they sincerely believed that that would turn out to be the case. It would be highly dangerous at budget time to forecast a balance of payments deficit of £12 billion as a result of Budget policies. We know that. We have all been through it. We know the dangers. I repeat, I do not want to exaggerate the dangers.
I read the Statement with a note of caution. I gather that most of the Statement has been written to try to satisfy confidence in the City and abroad. It is addressed to that audience and not, in particular, to members of the other place.
My other reason for saying that the Government are shown to be unable to guide the economy is the well known one of what happened to unemployment. Did Conservative candidates in the 1979 election say on platform after platform, "You vote for me and I guarantee that we will put unemployment to a figure that has never been thought of in this country's history"? I do not believe that they did. It is far fairer to the Government to say that the rise in unemployment was unintentional. The rise in the balance of payments deficit is unintentional. The rise in the other figures shown here is unintentional. The Government are totally out of control.
The public expenditure figures make it clear that everything we have been told about resources not being available for those issues about which your Lordships' House feels keenly and upon which it has made its decisions in Divisions is a lot of twaddle. The figures show it. The Chancellor is saying it. He is saying that for the coming year he has some £3·25 billion in hand above what was provided for and approved by the other place at the time of the Budget. He now proposes to continue the path of reducing public expenditure as a percentage of national income and, as we can read on every line, the Government are patting themselves happily on the back.
Why do a Conservative government wish continually to reduce public expenditure? The answer is as plain as a pikestaff. They have reduced taxation for the well-to do. They have improved my situation every year I have been sitting on these Benches. I have not asked for that. They have done it. They have done it for hundreds of thousands of people much more prosperous than myself. Why have they done that? Because is helps the well-to-do. Public expenditure helps the not so well-to-do. It is biased in favour of
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those at the bottom of the scale. All the social services benefit them. So what do the Government do? They reduce taxation to benefit their well-to-do friends. They say that due to that reduction they have no money to help those at the bottom of the scale. That is what I read into this sorry story.
Lord Young of Graffham: My Lords, I am grateful to the noble Lord, Lord Diamond. It occurs to me that his definition of an economy that is out of control may well he accurate when seen from his Benches. That may well be so, because I am not an authority on what the view is like from the noble Lord's Benches. If one goes around the nation or, even better, overseas, and asks other people whether the economy is one that is out of control, then one will receive a different view. Today when we go overseas we can indeed walk tall, because country after country, government after government and company after company recognise that we have had years of firm public expenditure discipline and we are now reaping the benefit.
The noble Lord was a distinguished Chief Secretary in his day. In that day we saw public expenditure rise as a percentage of GDP from 36 per cent. to 42·5 per cent. Those were the days when far from benefiting more became worse off. One only has to go back to the sorry 1960s and 1970s to realise what our standing in the world was and whether that benefited the less fortunate in our society.
The noble Lord says that now we have this surplus and are paying back the national debt we should afford more money. I say that it is only because we are prudent that we can do both. We can reduce the national debt and substantially increase expenditure. If we were not prudent, we might be back in that sorry time 12 years ago when, in today's figures the Government of the day had to go out and find £44 billion from countries around the world in order to keep afloat. From having to borrow £44 billion to paying back £10 billion, is an enormous difference. Thanks to that, and that only, around the country and in other countries, we are not regarded as out of control.
Lord Peston: My Lords, having listened to my noble friend Lord Bruce and the noble Lord, Lord Diamond, it seem is that the Treasury has a choice. It has to accept that it is either meretricious or incompetent. It is up to it to decide which it would rather be.
It is hard to comment upon the document because, for reasons which seem to be increasingly absurd, we received it late. I can see no national security reason why such a State ent could not be available to your Lordships in the morning so that we could discuss it with full knowledge in the afternoon. I hope that the Secretary of Stat will therefore bear with me if I do not show a full knowledge of it.
I should like to ask the Secretary of State about Table 8 which is important. It is the public expenditure in real terms table. The noble Lord has talked about how bouyant everything is. My reading of the DES figure is that it rises from £17·4 billion to £17·5 billion and then stays constant in real terms.

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That is not my idea of growth. I should like some explanation of that. The health figures are more interesting. I should like an explanation of them, because the 1988–89 outturn is put at £20·5 billion and the 1989–90 outturn is £20·8 billion. That is 0·3 over 20·5 which with my simple ability for doing sums is an increase of approximately 1·5 per cent. That 1·5 per cent. does not seem to me to be a very large real increase. To all people who know about health, 1·5 per cent. will not be a remotely sufficient increase to fund the demands placed on the health service in just that one year. If we then proceed with £21·1 billion and £21·3 billion, we get similar figures of a very low order of magnitude. I find it extraordinarily hard to make the Government's own figures in this document on health correspond at all to the rather optimistic Statement that has just been made. It seems to me that the Government are not finding the real resources to fund the health service in terms of its own stated requirements.
Perhaps I may ask the noble Lord for further clarification. Such real figures are simply the money figures divided by the projected GDP deflator. If the Government are as incompetent on predicting inflation as they have been about everything else, the GDP deflator upturn will be larger as well. In that case, if the Government stick to their proclaimed cash limits, the health service, education and so on will do rather worse.
I apologise to the noble Lord for asking him such detailed questions so rapidly. However, these are the only figures I have and this is the only way in which I can do it. I must ask him whether he can explain how he can say that everything is so good when the actual figures seem to be much less attractive.
Lord Young of Graffham: My Lords, the noble Lord, Lord Peston, will doubtless recall that the number of school leavers will drop substantially over the next few years. I think the number will drop by 30 per cent. by the early 1990s. Therefore the important matter is the expenditure per capita. As we have a declining school population, one would hope that we would spend less money.
Within this budget, the provision for spending by the Department of Education and Science has been increased by £120 million a year, with the science budget up by some 16 per cent. in 1989–90. The Treasury figures are often an arcane art form, if not a science. The survey changes over the period for the National Health Service in England alone show the departmental total going up from £21·7 million in 1988–89 to £23·1 million in 1989–90 and £24·3 million 1990–91. I accept that these figures are different and there is an explanation for them. What I shall do is write to the noble Lord and put a copy of that letter in the Library.
Lord Mason of Barnsley: My Lords, from the Chancellor's point of view I suppose that was a very good Statement that he made to the House. But what of the views of the Secretary of State for Trade and Industry? First, he has admitted that there are bound to be higher interest rates and there is no telling what the limits will be. Secondly, there is bound to be a rise in inflation, I guess beyond mid-1989. Wages and
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salaries are very much outstripping productivity and it looks as though that will continue. Both those factors are bound to have an adverse effect on investment and manufacturing industry, especially the expansion of manufacturing industry as we lead up to 1992.
The Minister knows quite well as regards jobs that there has been an increase in service jobs but not in manufacturing jobs. We are getting plenty of waiters but not many productive workers. When we take into consideration the balance of payments deficit and the frightening figure of £13 billion that we shall face, we wonder how long this can go on. Is this not the weakness of the Government's case? The Secretary of State is responsible for our trade and the expansion of industry, especially manufacturing industry. Is he not disturbed by some of these trends?
4.45 p.m.
Lord Young of Graffham: My Lords, I am grateful to the noble Lord, Lord Mason. I am sure he would be the first to admit that a waiter is a productive worker. I think that the noble Lord did not mean to imply otherwise. He was concentrating on a specific sector of the wealth creation processes of this country; namely, manufacturing industry. Investment is particularly strong. Over the past five years, investment has been growing twice as fast as consumption. However, manufacturing investment is expected to show the biggest rise of all—18 per cent. That is the strength of these figures.
Far from high interest rates affecting investment, it has been shown over the years that it is inflation that affects them. Because manufacturing companies and industrial companies of all sorts do not know the outturn costs of their investments, that slows them down more than anything else.
The noble Lord also mentioned a deficit in the balance of payments. Nobody will underemphasise the importance of that; it is important. However, at the same time I must point out, without making too much of it, that there is a large overseas balancing item in the first half of 1988 which amounts to some £7 billion. That indicates that there were either unrecorded net credits on the current account or unrecorded net capital inflows, or most likely both. To the extent that it reflects unrecorded net credits—that is, net visible exports or invisible ones—the true current account deficit will be lower than the recorded figure.
It is the nature of these figures that they take some time to refine. I am not placing too much emphasis on this. We must see that we get the current account into balance. But we must point out that at a time when our exports continue to go up, month after month after month, when our share of world trade has stabilised after decades of decline, British industry is competitive again. As Secretary of State for Trade and Industry I believe this is a good Statement.
Earl Russell: My Lords, the noble Lord, Lord Young of Graffham, is perhaps aware that one cannot have something for nothing. He may therefore be prepared to consider the possibility that the restraint in public spending on which he has so

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much prided himself has not been achieved without a very heavy price from our public services and those who use them.
I should like the noble Lord to consider a view which is quite widespread among those in receipt of public spending, among whom I must declare an interest. These restraints have been achieved by the use of the terms "level funding" and "real terms" in ways which appear to many to be, in the literal and pre-Churchillian sense of that phrase, terminological inexactitudes. The noble Lord may perhaps be aware that the point has been made that many of our public services have survived up until now only by the process of spending reserves, accumulating debts, asset-stripping and deferred maintenance. This is a policy with a limited life expectancy.
I am not simply offering a plea for higher public spending. I am asking the noble Lord to consider the point of view that the level of our spending is incompatible with the level of our commitments. I should like the noble Lord to consider—if he should be convinced by that view—which of those is going to change. Will he decide that the public spending figure is absolute and that therefore some of our services must go? Or will he decide that spending commitments stand and that therefore this spending figure which he is putting before us is incompatible with our commitments? I think he must do one or the other.
Lord Young of Graffham: My Lords, I am grateful to the noble Earl, Lord Russell. However, I fear that I fail to recognise his description of the public services. When I come to your Lordships' House to repeat a Statement which shows that public expenditure will rise from £167 billion to £191½ billion, I wonder where this cutback in public expenditure is. Is it in the health service? During the lifetime of this Government that has seen expenditure rise from £7 billion to £24 billion. Is it in education? Is it in a whole series of areas? I should be grateful if the noble Earl would identify to me precisely those areas of public expenditure which he believes are in terminal decline because of government spending.
Earl Russell: My Lords, is the noble Lord—
The Lord Privy Seal (Lord Belstead): My Lords, for those of us who have not taken part, this debate is very interesting. If I may say so, the exchanges on each side have been fair and free. My noble friend Lord Young of Graffham does not need anybody to stand between him and those whom he is answering. However, I must remind the House for the second time in two weeks that we have agreed as a House that after a Statement is made—and I know that it was a long one today—a maximum of 20 minutes shall he set aside for the resulting deliberations.
It is a matter for your Lordships' House to decide whether or not we keep to that. I know that the noble Lord, Lord Jay, wishes to contribute. Perhaps I may suggest that we take the noble Lord's intervention and my noble friend's reply and then pass on to the next business.
Lord Jay: My Lords, is the noble Lord aware that at the rate of balance of payments deficit which he announced and forecast today, unless we borrow from overseas our official reserve will last only about three years?
Lord Young of Graffham: My Lords, I should like to see what happens. I could just as well say that on the basis of the present figures, as outlined today, in a matter of 15 years or so there will be no national debt. None of these things proceeds on a straight line. What the Chancellor has said is that he expects the balance of payments figure at £13 billion to be £11 billion the following year. I have little doubt that we shall see it decline, and decline sharply, thereafter.
This is a complex matter. It is complex because no one is totally certain about the method of recording these figures, and it gets confused with capital transfers too. But I hope very much that we shall not find ourselves running out of reserves as we did once upon a time. I hope those days are well and truly behind us.
Lord Molloy: My Lords, I wish to ask the noble Lord the Leader of the House if I may make two very brief points. I have been trying all afternoon to make those points.
Lord Belstead: My Lords, this is a matter for the House. I made a suggestion to your Lordships and I explained why I made that suggestion. May I repeat that I think perhaps the moment has come, with a long day ahead of us, to go on to the next business?

School Boards (Scotland) Bill
4.51 p.m.
Clause 6 [Proceedings]:
Lord Sanderson of Bowden Lord Sanderson of Bowden moved Amendment No. 3:
Page 5, line 8, at end insert—
(", except where the matter which is the subject of the vote relates to the appointment—

(a) of a co-opted member, or

(b) to any particular office or committee,

in which case the decision shall be by lot.").
The noble Lord said: My Lords, in Committee we discussed the issue of whether or not a board chairman should use his casting vote when the subject of the vote relates to the co-option of a person to the board or the appointment of a board member to any particular office, or to the membership of a committee of the board.
Noble Lords opposite, and the noble Lord, Lord Carmichael of Kelvingrove, in particular, felt that, in those circumstances and where there was an equality of votes, the decision should be taken by lot. My noble friend Lord Dundee undertook to consider the arguments put forward by noble Lords. This we have now done.
I read the extracts of the debate from the Official Report with great interest, particularly the points made about seeking to avoid placing the chairman of

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the board in an embarrassing position. I concur with the sentiments expressed then. I have, therefore, brought forward this amendment, which I hope will satisfy the concern of noble Lords. In fact this amendment goes further than the amendment which the noble Lord, Lord Carmichael, tabled in Committee, because it ensures that the wider representation on board committees will not be decided by the chairman's casting vote. Had we accepted the amendment of the noble Lord, the chairman's casting vote would have continued to apply when non-board membership of board committees was in question. I hope with that explanation I have the support of the House. I beg to move.
Lord Carmichael of Kelvingrove: My Lords, I am grateful to the Minister for having taken heed of the debate we had earlier on this matter. I thank him for his flexibility.
On Question, amendment agreed to.
Lord Sanderson of Bowden Lord Sanderson of Bowden moved Amendment No. 4:
Page 5, line 10, leave out ("third") and insert ("half") .
The noble Lord said: My Lords, in Committee we discussed an amendment by the noble Lord, Lord Carmichael, which would have provided that one of the co-opted members of a community school should be drawn from the community user groups. In answer to the points put by the noble Lord I pointed to the provisions of Clauses 6(3) and (10) of the Bill whereby boards can form committees which include non-board members and invite persons to attend board meetings as the best way in which community and specialist interests could be represented to the board. I remain firmly of that view. However, I did recognise during the debate the genuine concern of noble Lords that restricting non-board membership of board committees to one-third could cause practical problems, and I promised to address this point on report.
This amendment addresses those concerns. It increases the limit of non-hoard membership from one-third to one-half. I understand that both Lothian and Dumfries and Galloway Regions, where an experiment has been going on, as noble Lords will know, were very keen to raise the limit. Taken with the provisions of Clause 6(10) the amendment will provide ample opportunity for community and special interest groups to be well represented within the structure of boards whose schools have special interests. I beg to move.
Lord Carmichael of Kelvingrove: My Lords, again I am pleased that the Minister has paid heed to what was said in Committee. We should have liked to go a little further, but we must be grateful for whatever the Minister gives us. I am very pleased to accept his amendment, and I thank him for it.
Baroness Carnegy of Lour: My Lords, I wish to add my thanks to my noble friend for what he has done in this amendment which was put forward, I think, specifically in response to something I said as well as
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in response to the remarks of others. That was the case also with the previous amendment.
On Question, amendment agreed to.
Lord Carmichael of Kelvingrove Lord Carmichael of Kelvingrove moved Amendment No. 5:
Page 5, line 13, at end insert ("Provided that a person who is disqualified under this Act for being elected or co-opted or being a member of a School Board shall be disqualified for being a member of a Committee of that Board.").
The noble Lord said: My Lords, this amendment is essential to prevent a person who is prevented by law from serving as a member of a school board from having direct involvement in a board's decision-making process. As the noble Lord, Lord Sanderson of Bowden, mentioned earlier, that is not to say that a board cannot take the advice of a disqualified person. It can do that under Clause 6(10). It must be acknowledged that such a person may have special knowledge or experience which would be valuable to a board and which a board would not wish to lose.
However, it would be quite wrong of a person, whom the law has determined should not be a member of a board, to be given deliberative or decision-making powers through membership of a board's committees or sub-committees. Therefore, this amendment is necessary to prevent the possibility of circumvention of the legislative intent.
The amendment is really derived from Section 59(1) of the Local Government (Scotland) Act 1973, which makes similar provision for the committees of local authorities. It would obviously be inappropriate for boards to be placed in a different position to that of an education authority in this respect. I beg to move.
Lord Sanderson of Bowden: My Lords, I must thank the noble Lord, Lord Carmichael, for what is clearly intended to be a helpful amendment to correct what he sees as an anomalous position. But I have given thought to the question and do not believe that it would be right to accept his amendment. We are correct to apply general conditions of disqualification for membership of school boards which could have a range of executive functions. But similar provisions are not necessarily appropriate for sub-committees which are to have no substantive decision-making powers; which will have more specific concerns and whose membership can be changed easily by the board if some deficiency is discovered. The important thing will be for a board to select people who are best placed to advise and give views on the particular area being considered by the sub-committee.
I shall give an example which will, I think, help the noble Lord. It may be an extreme example, but nevertheless I shall give it. An undischarged bankrupt may be an inappropriate choice for a finances sub-committee, but if he had a handicapped child he might be a reasonable selection for a subcommittee to discuss special needs provisions within the school.
We have considered the matter carefully, and we think that what is appropriate in the Bill at the moment should stand. I am afraid that 1 shall have to resist this amendment.
The Earl of Selkirk: My Lords, what does my noble friend mean by "disqualified"? There are certain kinds of criminal offences which I should have thought would have been highly inappropriate for someone to have committed who was in this position. I do not know whether or not we are referring to such offences. An offence may not be apparent, but perhaps that does not matter. How far does the word "disqualified" extend in this matter? I should have thought that certain kinds of offence would be highly undesirable. It may be that those offences were unknown. Perhaps the pretensions of those people were not known. Therefore this rule would be no bad thing. It would make certain that such persons could be evicted from their position if their offences became known.
Lord Sanderson of Bowden: My Lords, we are talking about a disqualification as regards subcommittees of school boards. I appreciate what my noble friend is saying about the general disqualification rules, but, as regards sub-committees which do not have a substantive part in the decision making of school boards but report to them, we are anxious that they should not be subjected to the powers which the noble Lord, Lord Carmichael, would seek to impose on that particular body.
Lord Carmichael of Kelvingrove: My Lord, the Minister has not gone as far as we had hoped. However, he has confirmed that the board itself will have the last word in all the decisions which come from the subcommittees, and that is reassuring. I am not sure that his example was perfect. I should have thought that a bankrupt would be a better authority on finance than many people who serve on the boards. However, I take the general drift of his argument. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
5 p.m.
Lord Carmichael of Kelvingrove Lord Carmichael of Kelvingrove moved Amendment No. 6:
Page 5, line 14, leave out subsection (4) and insert—
("(4)(a) A School Board may arrange for the discharge of any of their functions by any of their members or their Clerk.
(b) Where a School Board consider it expedient for the discharge of their functions they may institute, defend or appear in any legal proceedings.
(c) Any legal proceedings against a School Board and any notice or other documents shall be deemed to have been duly served on the Board if served on the Clerk of the Board.").
The noble Lord said: My Lords, Amendment No. 6 is rather complicated but I believe that it is an important amendment. It deals with a complex matter which at present is expressed in the Bill by the power given to the board to delegate to any of its members or its clerk the limited power to execute documents. The matter in question is the ordinary day-to-day administration of the board's affairs and goes well beyond that limited power of execution of documents.
Notwithstanding the explanation given by the Minister in Committee, we feel that the Bill as it presently stands does not adequately cover the needs of efficient administration. Paragraph (a) of the amendment gives the board the power to delegate
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functions to any member or to the clerk. In Committee the noble Lord, Lord Sanderson of Bowden, said (at col. 1065 of Hansard for 18th October) that:
"The Bill already provides in Clause 6(4) for a board to delegate functions to any of its members or to the clerk".
We submit that the present provision is restricted to the execution of documents and that the proposed amendment more accurately deals with the situation.
In paragraph (b) the amendment affords the board a specific power to raise or take part in legal proceedings, but only where it considers it expedient for the discharge of its functions. It has been argued that that provision is unnecessary and that the general powers contained in Clause 8(1) afford adequate provision. However, we believe that both this amendment and Clause 8(1) are quite specifically related to the board's functions and that the powers contained in the amendment do not go beyond the intentions which Clause 8(1) is understood to express.
The question is whether or not the general power is sufficient to afford the board the right to seek remedy or to defend itself in litigation. It would be very useful for anyone to rely upon a general power for the specific purpose of litigation, and such a situation would be quite exceptional in a statutory body.
There is a further point which has to be considered; that is, the relationship between the education authority and the school hoard. Again the noble Lord, Lord Sanderson of Bowden, referred to this in Committee and mentioned the possibility of the authority imposing restrictive conditions in delegation preventing the board from litigating without consultation. He also mentioned the relationships of principal and agent in third-party dealings. The noble Lord suggested that those were examples where the constraints of Clause 8(1) would restrict the freedom of the board to litigate. The amendment as drawn would achieve the same level of control.
Paragraph (c) of the amendment deals with the question of service of writs or notices. The difficulty created by the absence of any statement within the Bill on the mode of service arises because the school board will have no place of business. There will be the possibility of confusion between the school—which is an organ of the education authority—and the hoard. There is the real possibility that unless matters are spelt out the majority of notices destined for school boards will be served upon the headmaster of the school or upon the education authority. In such cases service on the board would not have taken place. Again there is the possibility that service will be on individual members of the board and in that case the law is clear—the service would be ineffective.
In the absence of specific provisions and of a place of business for the school board there does not appear to be authority for the statement that it is an accepted principle that service on the office holder of a statutory body amounts to service on that body. The circumstances are unusual because most other statutory bodies will have a place of business, an official registered business address, from which that principle might ordinarily be deduced.
It would appear that unless specific provision is made as proposed in this amendment there will at best be great confusion or at worst service of the notices and other documents, however effected, could be open to challenge. I know that the situation is rather complicated but I am sure that the Minister will agree that this is an important amendment. If we have done nothing else I believe that I and the people who have advised me have made the Minister aware of a problem which he may require some time to study. I beg to move.
Baroness Carnegy of Lour: My Lords, quite apart from the merits or demerits of the amendment—and I shall be interested to hear what my noble friend has to say—I should like to ask the noble Lord, Lord Carmichael, whether he does not think that paragraph (a) of the amendment clashes with paragraph (c). Paragraph (a) says that the:
"School Board may arrange for the discharge of any of their functions by any of their members or their Clerk."
whereas pargaraph (c) refers to writs being served on the clerk alone. Should the amendment not indicate that paragraph (c) would overrule paragraph (a), or am I wrong?
Lord Carmichael of Kelvingrove: My Lords, the one part of this complicated amendment which I really understand is paragraph (c). That seems to me to give a focus for the board so that the only person on whom a writ could be served is the clerk to the board. Even in the example which I gave of a writ or correspondence being addressed to a school, it would be addressed not to an individual but to the clerk to the board. I thought that that obviated any confusion between the board's power to arrange for the discharge of its functions by anyone other than the clerk except in this rather legalistic matter of the serving of writs, which has been included in paragraph (c).
Lord Sanderson of Bowden: My Lords, this is an important amendment and I feel that the noble Lord, Lord Carmichael, and I have been here before.
First, let me deal with subsection (4)(a). On the face of things it seems sensible to allow boards to delegate actions to members or their clerks. However, as the noble Lord said there is already provision for them to do this in Clause 8(1), which allows boards to act in any way that will facilitate discharge of their functions, provided that they do so in conformity with the rest of the Bill. Subsection (4)(a) has no such proviso and would appear to allow boards to delegate functions (such as their role in appointments procedures, for example) which could never be delegated to individuals.
Turning to subsection (4)(b), as I said in Committee, this would give boards specific power to instigate or take part in legal proceedings. This is unnecessary because, in general terms under Clause 8(1), boards can act in pursuit of their functions and powers. There are other important points to bear in mind. The statutory framework that we have created is one of powers but also one of necessary constraints. Under Clause 8(1) the general powers of a board to act are constrained by other provisions within the
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Bill. The amendment as drafted would give boards an unrestrained right to pursue legal action.
As I have said, this is not true of the Bill as it stands. The checks and balances that we have carefully included in the Bill (to take the examples I gave in Committee) would permit an authority to make a condition of delegation referral to the authority where legal action on the board's part is liable to involve substantial sums; boards are also constrained within a relationship of principal (the authority) and agent (the board) when dealing with third parties. Rightly an authority might become involved in a decision where a board might consider legal action. The devolved perspective of the authority might well be useful in solving matters through settlement rather than hasty legal action.
Finally, turning to paragraph (c), the service of notices on the clerk, the Bill quite deliberately does not provide for this. This is simply because it is unnecessary to do so. I repeat what I said in Committee. It is a recognised legal principle that service of a document on an officer or office-holder of a statutory body counts as satisfactory service of that document on the body concerned. I am sure that the inappropriateness of such a specific provision as is proposed by the amendment is self-evident. We are not talking about an education authority with established offices, as the noble Lord said, or a place of business. We are discussing a school board. In any case, such a provision would be meaningless if a board had no clerk for a period for any reason, such as perhaps if the clerk had died. Further, with reference to the clerk, an authority has several officers. It is sensible therefore for documents to be served on the Director of Education. But, as I said, a board will have only one clerk and if he is not available no document could be served.
The noble Lord, Lord Carmichael, made reference to my remarks in Committee. I was speaking in the context of an amendment which gave powers of execution of documents. The reference to Clause 6(4) is therefore accurate. I believe that the amendment that we are discussing today is more generally phrased and therefore reference to Clause 8(1) is correct.
Lord Carmichael of Kelvingrove: My Lords, I am slightly confused on the last point. I can understand that the office of the clerk might be vacant for whatever reason and that the tightness of the suggestion in subsection (4)(c) might therefore be restrictive. However, is it not the case that service could be made on individual members of the board? In that case I am told that the law is clear and the service would be ineffective. The noble and learned Lord the Lord Advocate is present in the Chamber and I am sure he will clear up that point of law.
Another point that I should like to make—and perhaps it is now contained somewhere in the Bill but I am not aware of it—is that perhaps a letter to the authority addressed to the board would be sufficient. Obviously that would clear up something, although I think it will raise other questions.
Lord Sanderson of Bowden: My Lords, with the leave of the House, I should like to study what the

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noble Lord has said. Perhaps I could contact him before the next stage of the Bill so that we each can understand exactly what the other has in mind. My noble and learned friend the Lord Advocate has listened to this discussion and of course I shall take his advice. With that assurance I hope that the noble Lord will consider withdrawing his amendment.
Lord Carmichael of Kelvingrove: My Lords, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
5.15 p.m.
Lord Carmichael of Kelvingrove Lord Carmichael of Kelvingrove moved Amendment No. 7:
Page 5, line 17, at end insert ("and shall for that purpose make Standing Orders.").
The noble Lord said: My Lords, we have dealt with this point before but I believe that the matter of standing orders is rather important. It seems obvious that if a school board is to operate properly and effectively it will need to have standing orders. There are many procedural matters which must be regulated by standing orders. Moreover, during discussions in Committee a number of matters were mentioned for which local authorities are regulated by statute and Ministers indicated that in relation to school boards such matters should be regulated by standing orders.
The noble Lord, Lord Sanderson, made clear that assistance would be given to the boards in drawing up the first set of standing orders. He indicated that boards would be told that they must have standing orders. It will be a matter for the boards themselves to set and vary them, but it appears to be the intention that hoards should be under a requirement to have them.
Given that the principle in Clause 6(5) as it stands is generally accepted, it gives boards the full and necessary powers to enable them to take whatever advice they wish and to draw and vary their standing orders. It seems that any properly organised board will take that action. However, I am sure that the noble Lord will agree that it requires to be recognised that there is likely to be great variety in the behaviour of individual boards. The possibility exists that a hoard may omit to heed the most strongly emphasised guidance and in those circumstances standing orders may not be made. When a crisis arises the discovery that there are no standing orders may come too late. There may be a feeling that these matters can all be settled by good will but those of us who have spent some time in such meetings know how big a pitfall is that idea.
Within the terms of Clause 6(5) as it stands I believe that the possibility exists that some areas will not bother with standing orders; they will let them slip or the orders will not be adequate. We believe that this matter is too important to be left to chance. For that reason it appears essential that boards should be under a statutory duty to make standing orders. I beg to move.
Lord Sanderson of Bowden: My Lords, as the noble Lord, Lord Carmichael, said, Clause 6(5) already provides for boards to make standing orders. It has always been the Government's intention that they should make them. However, the proposed amendment would go much further. By using the word "shall" it would require all regulation of board proceedings to be by standing orders. There would be no opportunity at all for flexibility in proceedings. For example, unless standing orders specifically provided for it, the chairman would not even be able to vary the order of consideration of agenda items to suit the convenience of the board. The result would be hopeless rigidity or standing orders of monumental complexity and length relative to the size and local nature of the board.
I understand what the noble Lord is driving at. The alternative would be to say that they "may" make standing orders, but that is already the sense of the Bill's provisions. I hope that with that explanation the noble Lord will consider withdrawing his amendment.
Lord Carmichael of Kelvingrove: My Lords, I can see the difficulty. It could be taking a sledgehammer to crack a nut. However, perhaps the Minister could think in terms of at least model guidelines or model standing orders being issued. There will be a number of groups which are inexperienced in these matters and it would be helpful if there were some kind of form or standard.
Lord Sanderson of Bowden: My Lords, with the leave of the House, perhaps I may say that indeed that is the form of guidance that we shall be working on very closely.
Lord Carmichael of Kelvingrove: My Lords, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
The Deputy Speaker (Lord Nugent of Guildford): My Lords, before calling Amendment No. 8 I should explain that it pre-empts Amendment No. 9. Therefore if Amendment No. 8 is agreed, I cannot call Amendment No. 9.
Lord Carmichael of Kelvingrove Lord Carmichael of Kelvingrove moved Amendment No. 8:
Page 5, line 22, leave out subsection (7) and insert.—
("7(a) Every School Board shall keep minutes of their proceedings and any minute of a meeting purporting to be signed by the person presiding thereat shall be received in evidence without further proof.
(b) The minute of the proceeding of a School Board shall be made available for inspection by their education authority on request at any reasonable time.").
The noble Lord said: My Lords, the import of this amendment is that where a minute of a meeting of the board or any of its committees is signed by the person chairing the meeting, that minute shall be accepted as evidence of the proceedings. The provision is derived from Section 43 and Schedule 7, paragraph 7(1) of the Local Government (Scotland) Act 1973.
The provision is of incalculable value in establishing the deliberations and decisions of local

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authorities. If it were not for this provision the minutes would not prove themselves and it would be necessary on any occasion where evidence of the proceedings were required to have corroborated evidence that the minutes were correct. In court proceedings it would be necessary to lead evidence of witnesses who had been present at the meeting if this provision were not made. The Minister may suggest that we are making procedures too formal. However, I believe that this is a provision which should be readily accepted.
Perhaps I may briefly refer to Amendment No. 9 with regard to the education authority. This amendment gives the authorities the right to obtain copies of the minutes if they so wish, for the purpose of enabling them to retain a formal record of the board's proceedings. I find it difficult to understand why the one should exclude the other but perhaps the Minister will explain this to me. I beg to move Amendment No. 8.
Lord Sanderson of Bowden: My Lords, I listened carefully to what the noble Lord said. I also looked at what was said on this matter in Committee. I have no objection to the principle of these amendments although there are some technical and stylistic problems. For example, I take it that the amendment to line 24 was supposed to follow from the existing terms of the Bill. Unfortunately the first amendment removes these words. However, if the noble Lord will consider withdrawing these amendments, I shall certainly consider this and come to an agreed form of words. Perhaps he will discuss the matter with me before the next stage of the Bill. With that assurance, I hope that he will seek at this stage to withdraw his amendment.
Lord Carmichael of Kelvingrove: My Lords, I am only too pleased with these statements from the Minister. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
The Deputy Chairman of Committees: My Lords, since this amendment has been withdrawn, I can put Amendment No. 9 to the House.
[Amendment No. 9 not moved.]
Lord Carmichael of Kelvingrove Lord Carmichael of Kelvingrove moved Amendment No. 10:
Page 5, line 33, leave out ("may, unless he is a member of the Board") and insert ("shall").
The noble Lord said: My Lords, in the course of earlier debates in both Houses the Government have expressed the desire to allow the board maximum flexibility in the appointment of clerks. The various endeavours to narrow the scope of this flexibility have been based on an appreciation of the essential role that the clerk will play in enabling the board to achieve what is expected of it.
We believe that the clerk will be a very important person in the setting up of school boards and should not be appointed lightly. The precise recording of the proceedings and decisions of a statutory body should not be subject to the distraction or possible bias which would exist if the person taking the minutes were a party to the debate. However, at the same time
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a member of a statutory body should be free to engage fully in the deliberations without being distracted by the need to take minutes. Although individual school boards will be small bodies conducting their affairs with a degree of informality and with substantial flexibility, it must be remembered that they are statutory bodies with substantial statutory responsibilities, and their administration should be structured with this in mind.
The provision sounds more rigid and formal than I hope will be the practice. I am sure that with good will it could be done with a great deal of informality. I would even suggest that the better the clerk, the less formal the procedures would need to be. I beg to move.
Lord Sanderson of Bowden: My Lords, the noble Lord said that the amendment is intended to prevent a member of the board acting as a clerk. It would not have that effect. Its effect would simply be to require any clerk to be paid.
There are two points to make here. First, we think that it is quite appropriate for a board member to act as a clerk if the board wishes. In rural areas it may be the only sensible course. Secondly, we think it is quite wrong for a board to vote to pay one of its members. If a member serves as a clerk he may be reimbursed for expenses but he certainly should not be paid.
As presently drafted, Clause 6(9) allows a board flexibility both in the choice of clerk and in the matter of payment. In Committee we discussed the appointment of the clerk and there was widespread agreement that flexibility was the right approach. I recall the words of my noble friend Lady Blatch in commenting on the existing position south of the Border:
"The arrangements for remunerating a clerk vary from no remuneration at all, when it is an entirely voluntary job which is often done very well, to a clerk being paid as an extension of the school secretary".
She went on to say:
"It would be quite wrong to start out with an arrangement that is wholly professional and calls upon only professionals to do the job. The voluntary element is a very important part of this work".—[Official Report, 18/10/88; col. 1074.]
I concur with what she said, at that time.
There is nothing to stop a board and its clerk coming to an agreement about a fee for the clerk's services—provided the clerk is not a board member. I think it is wrong however to require boards to pay their clerks. The voluntary element is very important to the school board system. Members of boards themselves are volunteers. People exist who are prepared to offer their services free of charge, and very good service they often give. I do not think it is therefore right to accept this amendment with the explanation that I have now given.
Lord Carmichael of Kelvingrove: My Lords, I am disappointed. I can understand that in certain circumstances one will be fortunate enough to recruit people who are able competently to carry out this work. However, in many other cases—perhaps the majority—it may not be posssible. Therefore it would be better to appoint a clerk with some more specialised knowledge.

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However, we discussed the matter at considerable length last time. It appears that the Government are unwilling to concede on it. Therefore I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 8 [Exercise of functions of Boards]:
Lord Carmichael of Kelvingrove Lord Carmichael of Kelvingrove moved Amendment No. 11:
Page 6, line 40, leave out ("ensure that") and insert ("act in accordance with").
The noble Lord said: My Lords, at an earlier stage both in the Commons and in your Lordships' House amendments have been proposed to give school hoards the duty placed upon education authorities by Section 1 of the Education Act 1980 to secure adequate and efficient provision of school education. In both Houses Ministers have responded that such an amendment is superfluous and that the duty is contained in Clause 8(5) of the Bill.
The noble Lord, Lord Sanderson of Bowden, said (Official Report, 18th October 1988, col. 1020):
"Under the terms of Clause 8(5) a hoard must act in accordance with its education authority's statutory duties. Indeed Clause 8(5) goes further in requiring boards also to act in accordance with the authority's obligations under the common law".
Clause 8(5) as presently drawn does not specifically impose these duties. It merely requires that the school board shall ensure that the statutory and common law duties of the education authority are complied with. That would indicate that in a delegated matter the board could not take action which would place the education authority in breach of its statutory or common law duties. By so doing the board would itself be in breach of its duty under Clause 8(5). However, the duty as presently expressed, might be considered ambiguous and the provision could be interpreted as imposing a duty on the boards to monitor and possibly even enforce the education authority's discharge of its duties. Leaving that possible ambiguity aside, the amendment is a more precise expression of the Government's intention as stated by the noble Lord, Lord Sanderson, than the previous provision afforded. I beg to move.
5.30 p.m.
Lord Sanderson of Bowden: My Lords, I recognise some of my own words and I thank the noble Lord, Lord Carmichael. We ought to go over this point because it is very important.
As drafted Clause 8(5) requires a school board to ensure that, in the exercise of the functions given to it under the Bill the duties placed on its education authorities either by statute or by common law are complied with. I do not believe that the amendment adds anything to this statutory duty in principle. The amendment is therefore unnecessary.
I made a vigorous defence of Clause 8(5) in the context of school boards being bound by statutory duties upon education authorities. I drew a response from the noble Lord, Lord Carmichael, and perhaps in this case I can quote him:
"I accept that the Minister has covered the situation very well in Clause 8(5)".
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The noble Lord is quite correct. We have indeed covered the situation well, but I should point out some drawbacks which we perceive in the amendment he has proposed.
First, he has omitted to remove the words "is duly complied with" from the end of the subsection. This amendment would therefore leave the provision completely meaningless. Secondly, and more important, his amendment uses terms which are accurate enough for everyday speech but will not do for legislation. In strict terms, boards cannot "act in accordance with" the duties placed on their authorities. They may—as the Bill provides—act so as to ensure compliance with these duties but they could only "act in accordance with" duties placed directly on themselves.
If the noble Lord seeks assurance that the common meaning of his amendment is properly covered by the terms of the Bill as it stands, I am happy to reassure him. But I cannot accept the amendment.
Lord Carmichael of Kelvingrove: My Lords, if my amendment is in any way flawed, I understand perfectly well that the Minister is unable to accept it. Perhaps he would allow me to take it away and consider it again after consultation. In the meantime I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 12 [Relations between Boards and parents]:
Lord Sanderson of Bowden Lord Sanderson of Bowden moved Amendment No. 12:
Page 8, line 6, after ("(a)") insert ("as often as appears to them to be necessary but, in any event—

(i) not more than 12 months after their establishment, and

(ii) at intervals of not more than 12 months alter the first such report,

make a").
The noble Lord said: My Lords, in speaking to Amendment No. 12, I also speak to Amendments Nos. 13 and 14. I undertook in Committee to look again at this clause and to come for ward with a suitable amendment to accommodate your Lordships' wishes. The amendment before you fulfils that commitment, indeed, we have gone further than was proposed in Committee. We have spelled out that boards will have to make a report about their activities at least once within every 12-month period. We have also provided that boards must make their first report to parents within one year of their establishment.
Although we have agreed to provide a minimum requirement for a report once in each year, our intention remains that boards' performance should not gravitate towards that minimum requirement. We shall be issuing guidance which will lay emphasis on the merits of making reports to parents very frequently. In the words of the Bill: "as often as it is necessary". The intention is that boards communicate with parents frequently and as often as issues of substance and of local interest arise. The need is to hold parental interest in board activities; and frequent, meaningful reports will meet that need.
I should like to mention annual meetings. We have provided for boards to report on their activities to parents at least once a year. It might well be that a board would wish to hold a meeting to consider a report on board activities. This would form part of the essential methods of communication between boards and parents. We shall, as I have said, be issuing guidance which highlights the value of close communication between boards and parents and indeed emphasises a board's duty to communicate with parents. However we do not need a fixed annual meeting to achieve this. It is far better to have meetings to discuss specific issues as they surface throughout the year. Efforts to communicate should not polarise around the idea of "the annual meeting". What we need and what we have provided is flexibility of provision to meet flexibility of board action. It would not suit our purpose to restrict that flexibility. Moreover, the provisions of Clause 13—which I drew to your Lordships' attention at Committee stage—remain relevant and important. It is open to parents to demand and secure a meeting with the board at any time. If a board issued a report which parents wished to challenge or question and the board did not propose a meeting to discuss it, then the parents themselves could call for and secure such a meeting. If I were chairman of that board I would arrange the meeting rather fast.
It is worth pointing out to your Lordships that no provision exists in English legislation for parents to demand a meeting with boards of governors. In responding to your Lordships' wishes I have interpreted the wish of the House that we should move in the direction which these amendments seek to do. I beg to move.
Lord Carmichael of Kelvingrove: My Lords, I am grateful to the Minister for taking on board the genuine feeling expressed by various parts of the House on the question of reports and by bringing forward these amendments. I am not sure whether it is quite adequate. The guidelines will need to be specific. In certain cases there will need to be special seminars to keep chairmen in touch with members. A horror we have in mind is that small groups may dictate to a whole area, providing even less responsibility than the locally elected representatives.
However the Minister's intention is obviously excellent. One of the great difficulties we all have is writing down intentions in the words of an Act of Parliament. I am grateful to the Minister for his effort and thank him for it.
Baroness Carnegy of Lour: My Lords, I back up what the noble Lord, Lord Carmichael, has said. The House will be grateful for the amendment because the view was taken on all sides at Committee that communication between the boards and the parents is enormously important. We want an assurance on the face of the Bill that such communications will occur.
As I see it, the amendment will mean that boards will be able to communicate at least once a year and probably more. They will be able to communicate through calling meetings with parents, sending a report by post to every parent or via the pupils. Many
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will do all three. The ability of the boards to call meetings, as my noble friend says under Clause 13, can also be the other way round with the parents calling the meeting. That should suffice, but hints on its importance should be included somewhere in the guidance and would be useful. I am grateful for the amendment.
Lord Mackie of Benshie: My Lords, I too approve of the Minister's amendment.
Lord Kirkhill: My Lords, this is a split of North-East graciousness which is quite remarkable. I have one question for the Minister. What kind of activity does he envisage might occur which would be of such consequence that a board might wish to report to parents?
Lord Sanderson of Bowden: My Lords, under our amendments we require a board to report to parents. I should have thought that such a report should have the basis of any substantive situations which ought to be drawn to the attention of parents. I believe that following from that it would be the board's decision as to whether the importance of what it was reporting required a meeting. It is important that the position should not arise where the minimum requirement is merely that, as I understand has happened in some parts of England and Wales.
I turn to the question of whether special meetings must be called on any point which the board considers it necessary to draw to the attention of parents. For example, any major alterations in the staffing of the school is the kind of issue which could be drawn to the attention of parents. I believe that under such circumstances the board ought to consider calling a parents' meeting.
On Question, amendment agreed to.
Lord Sanderson of Bowden Lord Sanderson of Bowden moved Amendment No. 13:
Page 8, line 8, after ("(b)") insert ("as often as appears to them to he necessary.").
On Question, amendment agreed to.
Lord Sanderson of Bowden Lord Sanderson of Bowden moved Amendment No. 14:
Page 8, leave out line 10.
On Question, amendment agreed to.
Lord Carmichael of Kelvingrove Lord Carmichael of Kelvingrove moved Amendment No. 15:
Page 8, line 10, at end insert—
("(3) Notwithstanding subsection (2) above, a School Board must ascertain the views of parents before either—

(a) reaching a decision on whether to agree to a delegation order under section 15 of this Act at the request of their education authority, or

(b) making a request to their education authority to make a delegation order under section 15 of this Act.").

The noble Lord said: My Lords, the position of the school boards was debated earlier and the amendment attempts to explain our concern to the Government. We believe that school boards must be representative and accountable to their electorate. Those attributes are of particular importance with regard to delegation orders.
As the Bill stands, a school board must consult parents only if it wishes to pursue a request for the delegation of a function where the education authority has refused the request. School boards may take on delegation functions without ascertaining the views of parents where an education authority initiates such a proposal and the school board agrees to it or where the school board requests a delegation of function and the education authority agrees.
In Committee a number of amendments to Schedule 3 were debated. They would have required a school board to ballot parents in all cases where delegated functions were being considered. The noble Earl, Lord Dundee, dismissed the amendments by saying that the effect would be to produce a recipe for democracy run riot. He went on to say:
"The Bill already provides separately for the boards to have a duty to communicate with parents. There is a general duty to this effect in Clause 12. In correspondence with Lothian Parents' Action Group the Scottish Minister responsible for education and health has clearly stated his view that a board which is considering taking on substantial functions would need to let parents know about its proposals as part of its discharge of that duty".—[Official Report 20110188, col. 1293.]
The purpose of the amendment is to ensure that the need to consult parents where delegated functions are sought does not depend only on a general duty but should be clearly stated in the legislation. For example, an education authority may wish to delegate to a school board the provision of footwear and clothing, the hiving off of the provision for school meals or the collection of money for school meals. We believe that local people should have a say in such decisions because, particularly in the case of clothing and footwear, they are better left to the central rather than the local authority. If the matter were dealt with locally the situation would be too well known and there would be no anonymity. It would be better for someone to obtain "necessary clothing", as it used to be called, from a central body rather than going round the corner where everyone would know. I hope that with such an example in mind the Minister will agree that the issue is more complicated than merely democracy run riot, which I have never thought to be bad in any event. I beg to move.
5.45 p.m.
The Earl of Dundee: My Lords, during debate in Committee the noble Lord, Lord Carmichael, moved an amendment to Schedule 3 of the Bill whose cumulative effect would have been to require a ballot of parents on every proposal for delegation to a board. At that time I suggested that the amendments were unnecessary in light of the extensive range of safeguards and provisions we have included in the Bill to ensure that boards are representative and accountable.
The noble Lord, Lord Carmichael, in response acknowledged that his amendments would be taking rather more powers than are required and kindly withdrew his amendment. The amendment before us is his attempt to introduce a less cumbersome procedure. It requires boards to ascertain the views of parents before deciding to take on new functions.
Boards are already under a general duty to ascertain parents' views and to communicate with
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parents. This amendment adds little to that duty except to require a board to go through some unspecified procedure every time a delegation, no matter how small or uncontroversial, is in question.
This amendment introduces a requirement to ascertain views on specific matters. It provides no detailed procedure which boards might undertake to show that they had satisfied this duty. When a procedure was proposed in Committee it proved to be too cumbersome, which the noble Lord, Lord Carmichael acknowledged.
My noble friend Lord Sanderson arid I were glad to be able to accommodate the concerns of the House about the minimum requirement for a board report to parents. I think that we can all agree that this has strengthened the safeguards and provisions on board accountability. We must not move too far and try to cater for every conceivable contingency. I ask the noble Lord to withdraw the amendment.
Lord Carmichael of Kelvingrove: My Lords, I accept that one must not over-restrict the boards with legal necessities, and we have tried to avoid doing so. When looking into the crystal ball of the future one can see many more desirable things. We have chosen to raise with the Government what appear to be obvious areas where danger may arise. However, they feel sufficiently sanguine that they have the matter under control, and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 18 [Financial powers of Boards]:
The Earl of Dundee The Earl of Dundee moved Amendment No. 16:
Page 11, line 42, at end insert—
("(1A) A School Board shall keep proper accounts in relation to any sums received by them under subsection (1) above.").
The noble Earl said: My Lords, in Committee I said that I would consider further the question of whether the Bill should make provision for gifts and funds raised by boards for the benefit of the school to be properly accounted for. Noble Lords on all sides of the House were concerned about the treatment of such gifts and funds. My sole doubt about the efficacy of an amendment to the Bill on this matter centred around the possibility that some boards might conceivably be dissuaded from raising funds by such a formal requirement. However, on balance I am convinced by the arguments that have been put forward.
The amendment provides that funds held by the board under Clause 18 are to be the subject of proper accounting procedures. Boards will of course need advice on these matters and they will be able to seek such advice from their own authority if they so choose. Indeed authorities themselves might wish to offer such advice: they might also offer accounting and auditing services which would be attractive to boards. As drafted however the amendment will allow boards choice in the matter. This is only right.
I trust that this amendment allays the fears that have been expressed on the stewardship of these funds and I commend it to your Lordships. I beg to move.
Lord Carmichael of Kelvingrove: My Lords, I am glad that the Government have paid attention, as I am sure they always do, to what was said in your Lordships' House on the last occasion and have come some way towards meeting our anxieties.
Lord Mackie of Benshie: My Lords, this is a sensible amendment.
On Question, amendment agreed to.
Clause 22 [Interpretation]:
Lord Carmichael of Kelvingrove Lord Carmichael of Kelvingrove moved Amendment No. 17:
Page 14, line 14, at end insert—
(""occasional holidays" means holidays during term-time and does not include days on which a school is closed to pupils for the purpose of in-service training.").
The noble Lord said: My Lords, this was a problem which caused some difficulty at the last stage and concerned occasional holidays. In Clause 14(2) of the Bill school boards are empowered to fix occasional holidays. During the debate on the question of occasional holidays the noble Earl, Lord Dundee, referred to in-service training. As regards Clause 8(5) on the duty of the board he said:
"This would ensure, for example, that authorities could insist on a degree of co-ordination on occasional closures if the authorities themselves were obliged to organise in-service training for teachers to meet national requirements".—[Official Report, 18/10/88; cols. 1104–1105.]
We believe that that reveals a possible ambiguity in the meaning of occasional holidays. It appears that education authorities are of the view that occasional holidays are those holidays left after the term dates have been fixed and which generally are available for allocation to local public holidays. That is quite different from in-service training where the school is closed but the teaching staff is not on holiday. Those days are not viewed as holidays and it is important that the education authorities should be given power to retain control over their arrangements for in-service training.
In circumstances where there is the risk of ambiguity, it is always desirable to place the matter beyond doubt and that is the intention of this amendment, which leaves the education authority capable of the efficient arrangement of its in-service training while affording the boards all the power they require to fix occasional holidays in accordance with the local needs of the different parts of the country. I beg to move.
Baroness Carnegy of Lour: My Lords, I see the point made by the noble Lord but I do not believe that this amendment will meet it. There is a statutory number of attendances which pupils are required to make in the school year, so that an occasional holiday would always be instead of another day. It would not be additional; that is one point.
The wording of the amendment implies that occasional holidays could be in the holidays. Of course, one cannot have a double holiday. Occasional holidays have to be fixed at a time when pupils are not on holiday. If the school is closed to pupils because the teachers are carrying out in-service
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training there is not much point in the pupils being told that they had a holiday, because they are in any event having a holiday. The school is closed to them. I believe that the noble Lord's wording of this amendment is somewhat confusing.
Lord Carmichael of Kelvingrove: My Lords, with the leave of the House perhaps I may try to explain that if occasional holidays also meant that they could be taken when there was in-service training involved, it would mean that in the main teachers would not be able to participate in the reasons for the specific occasional holiday. I am thinking in terms of something like the Lanimer Fair in Lanark, which is an ancient holiday, and there are many other Border holidays where one would not want confusion. I believe that there would be great trouble if the teaching staff of schools were not able to take part in the riding of the marshes. That is what I am trying to achieve; namely, that special local holidays should be quite distinct from in-service training in which teachers are involved.
Following what was gleaned from the remarks of the noble Earl in the last debate, I thought that these words would have cleared any ambiguity but of course I am willing to listen again to the words of the Minister.
The Earl of Dundee: My Lords, we did of course have a most interesting debate during Committee on the question of who should determine occasional holidays. I appreciate the points made then about the need for a measure of co-ordination and the need for boards to observe authorities' statutory obligations to provide in-service training days for teachers. Clause 8(5) does of course oblige boards to act in accordance with their authority's statutory and other legal duties.
The amendment of the noble Lord, Lord Carmichael, attempts to define occasional holidays but its effect goes further than that. What it does is to empower an education authority to decide in all cases when in-service training days should take place. In practice education authorities provide in-service training at two levels—local school level and authority level. It is entirely reasonable that boards should be allowed to determine—subject to consultation with the authority, as the Bill provides—when local in-service training should take place. This will allow them to plan other occasional holidays more efficiently and effectively. For this reason I cannot accept the noble Lord's amendment and I ask him to withdraw it.
Lord Carmichael of Kelvingrove: My Lords, I believe that this could be an omission that could lead to considerable local difficulties. Perhaps some sort of general direction at a later point is needed. I am sorry that the Government did not see fit to consider the matter more fully but I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Schedule 2 [Appointment of headteachers, deputies and assistants]:
The Earl of Dundee The Earl of Dundee moved Amendment No. 18:
Page 16, line 3, after ("post") insert (", other than on an acting basis,").
The noble Earl said: My Lords, during debate in Committee on the appointment procedure for head teachers and senior staff, some doubts were expressed by the noble Lord, Lord Hughes, and my noble friend Lady Carnegy concerning the effect of the schedule when the head teacher was ill. My noble and learned friend the Lord Advocate confirmed that Schedule 2 effectively prevents deputy and assistant head teacher posts being filled on a permanent basis. However, he made it clear that the schedule did not apply to arrangements made to cover posts on an acting basis.
My noble and learned friend thought that there was some doubt in the Committee's mind on this point. Bearing in mind our intention that the Bill should be as clear as possible, the purpose of this amendment is to put beyond doubt that the provisions of Schedule 2 apply to the circumstances where an education authority intend to fill a post of head teacher, deputy head teacher or assistant head teacher other than on an acting basis. I beg to move.
On Question, amendment agreed to.
Lord Sanderson of Bowden Lord Sanderson of Bowden moved Amendment No. 19:
Page 16, line 21, after ("but") insert ("pupils of the school and").
The noble Lord said: My Lords, Amendments Nos. 19 and 21 are grouped with Amendments Nos 20 and 22 in the name of the noble Lord, Lord Carmichael of Kelvingrove. The noble Lord opposite has brought forward an amendment which would exclude pupil members of school boards from participating in the appointment procedures for head teachers and senior staff. For this I thank the noble Lord. However, we have tabled a similar amendment which I am sure the noble Lord will agree fully meets this point. It has always been our intention that pupils should not take part in the selection of the head teacher or senior staff of their school. I am sure your Lordships will agree that this would be taking pupil democracy too far. We intended that boards' standing orders should cover this situation, but, reading your Lordships' views and reflecting on our purpose of making this Bill as clear and as comprehensive as possible, I decided that there should be the express statutory provision to exclude pupils from the appointment procedures. These amendments provide that provision. I beg to move.
6 p.m.
Lord Carmichael of Kelvingrove: My Lords, again I thank the Minister, who has gone a long way in general to meet our queries. There were a couple of points that I had intended to raise but by and large the Minister has satisfied me. I thank him for bringing forward the amendments.
On Question, amendment agreed to.
[Amendment No. 20 not moved.]
Lord Sanderson of Bowden Lord Sanderson of Bowden moved Amendment No. 21:
Page 176, line 16 after ("staff') insert ("or any pupil").
On Question, amendment agreed to.
[Amendment No. 22 not moved.]
Lord Carmichael of Kelvingrove Lord Carmichael of Kelvingrove moved Amendment No. 23:
Page 18, line 14, leave out from ("shall") to ("the") in line 15 and insert ("be competent for an Acting Headteacher or other person nominated by the education authority to exercise").
The noble Lord said: My Lords, there may be occasions when a school will be run by an acting head teacher, perhaps due to the long-term illness of the head teacher. As the Bill is drafted, any senior appointment at that school could not be made and would remain vacant for a long period. Although this would not be a common occurrence, we do not consider that the number of occasions where there is a significant delay would be all that small. It would be noticeable enough to need attention. The noble and learned Lord, Lord Cameron of Lochbroom, suggested at an earlier stage of our proceedings that the problem would be minuscule, but we take issue with that statement.
However, even if that situation were to occur in only a small number of schools, having an absent head teacher and one or more senior posts vacant at the same time must have a damaging effect on the running of any school. In Committee I mentioned examples in the central region where the head teacher had been absent for a significant time. I have examples from other parts of the country—Dumfries and Galloway—but at this stage I shall not bore the House by reciting them.
The noble and learned Lord the Lord Advocate also suggested that a senior vacancy could be filled on a temporary basis until the head teacher returns or is replaced and a properly constituted appointments board could sit. That solution can only be unsatisfactory compared to what we seek to provide in this amendment. For example, adveritising a senior post on a temporary basis would not attract the same range of candidates as would a full-time appointment. Therefore I hope that the Minister will have given serious thought to this matter and will see our amendment as an attempt to solve a problem. The problem may not occur all that frequently, but it can occur far more often than was suggested by the noble and learned Lord. I beg to move.
Baroness Carnegy of Lour: My Lords, I shall listen carefully to what my noble friend says in reply to the amendment. He has done terribly well in sorting out a number of wrinkles in this Bill, but this is one aspect that is still of concern to me.
From a purely practical point of view situations could arise which are difficult to resolve., as the noble Lord, Lord Carmichael, said. Therefore, if the reply from my noble friend is not entirely satisfactory perhaps we may have a little more correspondence on the subject.
Lord Sanderson of Bowden: My Lords, during the Committee stage there was indeed a long discussion

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on what would happen if a senior staff position fell vacant during the extended absence of the head teacher. My noble and learned friend the Lord Advocate explained that there was a mechanism for dealing with such a situation. Both the vacant head teacher and senior staff post would be covered on an acting basis by the authority.
However, there was some doubt and we therefore brought forward our Amendment No. 18 to put the matter beyond all doubt. By filling the vacancy on an acting basis the possibility that the post would lie vacant for any length of time has been avoided. Also avoided is the equally important possibility that the acting head teacher, who will himself he a deputy or assistant head teacher, is not put in the embarrassing and difficult position of a possible conflict of interests.
I understand the difficulties of the situation and therefore it is important that I spell it out. I suspect that the noble Lord's purpose in moving this amendment is to provide a clear mechanism for dealing with extended absences of head teachers. I have already indicated that we have dealt with this and I therefore hope that the noble Lord, in considering what I have said, will agree to withdraw his amendment. The power remains with the authority "on an acting basis". Those are the words I have used, which I think cover what I admit is a tricky situation in dealing with the appointments issue.
Baroness Carnegy of Lour: My Lords, with the leave of the House, may I put this question to my noble friend? Is he saying that the authority tells someone, "You will be the acting head teacher" and that that implies, because of Amendment No. 18, that he has the full responsibilities of a head teacher? Perhaps I have misunderstood the position.
Lord Sanderson of Bowden: My Lords, with the leave of the House, the acting head teacher can do everything in relation to what he must do as an acting head teacher. What he cannot do is become chairman of the committee which deals with such situations. I hope I have made myself clear.
Lord Carmichael of Kelvingrove: My Lords, I have a feeling that we do not yet have this right, but I am sure the Minister will read what has been said. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Schedule 3 [Delegation Orders]:
Lord Carmichael of Kelvingrove Lord Carmichael of Kelvingrove moved Amendment No. 24:
Page 19, line 11, after ("school") insert ("or the most economic, effective and efficient provision of education").
The noble Lord said: My Lords, paragraph 8 of this schedule states that the Secretary of State must only have regard to the good running of the school when considering a request for delegation of a function to a particular school. If the Secretary of State were to accept the views of the education authority and not agree to delegate the function, then
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those considerations must relate only to the school concerned.
Where, for example, a school board wishes the provision of school meals or school cleaning to be delegated, surely value for money is also a relevant factor which the Secretary of State should have regard to. An education authority, in compliance with the provisions of the Local Government Act 1988, may achieve the best value for money by packaging a group of schools in one school meals contract. If an education authority argued against the delegation of school meals provision to an individual school on this basis, it may not be considered germane by the Secretary of State. That would be because it relates to the provision of school meals to more than one school.
Surely it is bad legislative practice to constrain the Secretary of State to having regard to only one matter when reaching a decision in all circumstances, however important that matter might be. The Minister may remember that we had this problem of school grouping at an earlier stage of the Bill when dealing with contracts in general. This is an extremely important specific part of that aspect and I hope the Minister will give it due consideration. I beg to move.
Lord Sanderson of Bowden: My Lords, my noble and learned friend the Lord Advocate carefully explained in Committee the procedure for delegation of functions. I shall not repeat at length the provisions of the schedule; however, the framework of the delegation procedure must be clearly understood. In response to anxieties that boards might seek to take on additional functions against the wishes of local parents, provisions requiring a board to call for a ballot of all parents of pupils at the school before they proceed to appeal have been included in the Bill. Both the authority and the board have an opportunity at this stage to put their case to the parents. If the authority believes that wider considerations of the kind proposed in this amendment are material, it may put them before the parents. Only if a majority of the parents voting in the ballot supports the principle of delegation is the board allowed to make an appeal to the Secretary of State.
Again both the authority and the board have the opportunity to put their considered case to the Secretary of State and that is important. Once again there is nothing in the Bill to prevent an authority drawing attention to wider considerations of the kind envisaged here. The Secretary of State will consider the whole views of the education authority and the school board and unless he is satisfied that the delegation requested would prejudice the good running of the school he will direct the education authority to make a delegation order in the terms he considers appropriate. This is entirely in line with the overall intention of the Bill which is to encourage school boards to take on additional functions when they feel ready to do so with the endorsement of the parents when appropriate.
The effect of the amendment would be to require the Secretary of State to have regard to a very widely drawn and unspecific criterion of effective, economic

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and efficient provision of education when deciding on an appeal. Such criterion might be wholly irrelevant to a specific function in a single school. In any case, it is difficult to see precisely how the Secretary of State's mind could be addressed to such a criterion as the basis for judgment in a single case. Our whole purpose is to encourage and facilitate the delegation of functions to the local level. The whole thrust of our thinking on delegation centres around boards subject to the views of local parents being ready to take on delegated powers. The onus is rightly on the board, not the authority, to judge when that time has come.
There is no question of the Secretary of State's decision being prejudged. On the contrary, he is obliged by the schedule to consider the views of both the board and the authority and to satisfy himself that delegation would not prejudice the good running of the school. In all the consideration will be evenhanded, fair and reasonable. Both the authority's and the board's cases will be heard. The Secretary of State will make his decision on the grounds that really matter, which we believe to be the interests of the school concerned.
The noble Lord, Lord Carmichael, has pinpointed the question of competitive tendering. This subject was raised at the Committee stage and I wish to emphasise a few points on this matter. On the specific anxiety about a possible conflict between the Bill's provisions on delegation of functions and the Local Government Act 1988, I can assure the noble Lord that there is no such conflict. Clause 8(5) of our Bill requires a board to ensure that, in the exercise of the functions given to it, the duties placed on the education authority by statute are complied with. The provisions of the Local Government Act 1988 place duties on authorities with regard to the tendering of services or "defined activities" as they are termed in that Act. Therefore in the terms of Clause 8(5) of our Bill a board would be required to comply with statutory duties placed upon the authority by the Local Government Act 1988. In any case, it is difficult to see how delegation of responsiblities to school level could do other than open up services to a wider range of potential contractors. It is unlikely that such an action could be said to be anti-competitive.
I wish to emphasise a particular example given by the noble Lord. I also looked at the question of school meals. Under the terms of the Local Government Act 1988 authorities are required to test the efficiency of their services by competition. This may involve the authority in entering a contract with a company for the provision of those services. What I believe is concerning the noble Lord is that an authority might be obliged to break such a contract and remove a school from an area that is covered by the contractor's services because the school board had requested delegation of the function concerned.
That would not be possible. Under Clause 8(5) of the Bill, a board is obliged to act so as to ensure compliance with the statutory duties placed upon its authority. Any contract entered into by the authority under the terms of the 1988 Act would attract this protection. In effect it would be unlawful for the delegation to proceed if it would have the effect of
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breaking that contract. Of course this does not mean that the contracted areas could never be delegated. Once a contract has run its course, the board could ask for and get control of a particular function, all other things being equal. It would be unreasonable for the authority to try to use the device of contracting to avoid that.
Similarly, there will be nothing to prevent delegation of the control of a function if that was possible within the terms of the contract. In such a case it would simply be a question of management of part of the contracted area passing from the authority to its agent, the board. I have spelt out this matter at great length because as the noble Lord, Lord Carmichael, said, it is an important area and it is particularly important for the authority to understand what we think about contracts entered into under the Local Government Act 1988. With that explanation, I hope that the noble Lord will withdraw his amendment.
6.15 p.m.
Lord Mackie of Benshie: My Lords, perhaps I may put a further point. Let us suppose that the contract has run out and several local schools have found persons with outstanding cooking ability, whether male or female, and who require little money for the pleasure of providing school meals. Let us suppose this applies to three or four schools in the area. It might make it much less economic for the authority to provide the school meals for the rest of the area. This is a point that needs to be looked at. It might be a sound point for refusing delegation if it is going to put up the price of providing school meals in the rest of the area.
Lord Sanderson of Bowden: My Lords, with the leave of the House, what I have said in my general remarks about this is that all other procedures having been gone through, the matter reaching the desk of the Secretary of State, he has to listen to what the local authority has to say and also to what the school board is proposing. That is why I spelt out the contracting situation. I believe that we are quite a long way from that position, but I understand what the noble Lord is saying. As I understand the position, there is absolutely nothing to prevent an authority putting its position to the Secretary of State before a decision is taken by him.
Lord Carmichael of Kelvingrove: My Lords, I am grateful to the noble Lord, Lord Mackie of Benshie, for raising that point which is but one of the many permutations that may arise on the question of competitive tendering. I can envisage this becoming one of those classic cases which almost everyone in the area will understand, and therefore there will be considerable pressure on the board. It is a matter with which everyone will be able to quickly familiarise themselves. I believe that either the Secretary of State will be extremely busy or there may be quite a difficult situation arising from it. However, we shall read the Minister's words. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Schedule 4 [Minor and Consequential Amendments]:
Lord Sanderson of Bowden Lord Sanderson of Bowden moved Amendment No. 25:
Page 20, line 28, leave out ("Schedule 1 to the Education (Scotland) Act 1981") and insert ("Schedule Al to the Education (Scotland) Act 1980").
The noble Lord said: My Lords, this amendment is a technical one to correct an erroneous reference to Schedule 1 to the Education (Scotland) Act 1981. I beg to move.
Lord Hughes: My Lords—
The Deputy Speaker (Lord Strabolgi): My Lords, I am informed that there is a printing error as regards this amendment as it appears on the Marshalled List. I propose to read it out with the correction if that is acceptable to the noble Lord?
Lord Sanderson of Bowden: Yes.
The Deputy Speaker The Deputy Speaker: The amendment should read:
"Page 20, line 28, leave out ("Schedule 1 to the Education (Scotland) Act 1981") and insert ("Schedule A1 to the Education (Scotland) Act 1980").
Lord Hughes: My Lords, the only reason I stood up was to draw attention to the fact that "21" was wrong and to prove that I had read the amendment.
The Deputy Speaker: I am very grateful to the noble Lord.
On Question, amendment agreed to.

Income Support (General) Amendment No. 4 Regulations 1988
6.19 p.m.
The Countess of Mar The Countess of Mar rose to move, That this House calls upon Her Majesty's Government to revoke the Income Support (General) Amendment No. 4 Regulations 1988, laid before the House on 15th August 1988, and to lay before it in their place regulations which would include additional provision for the needs of disabled people who previously were able to receive additional income support over and above the normal applicable amount for persons in board and lodging accommodation.
The noble Countess said: My Lords, I move the Motion in this form rather than as an humble Address praying that the regulations be annulled. I realise that this statutory instrument contains a large number of regulations which amend the Income Support (General) Regulations with different effective dates, two of which have already passed. Had I prayed that they be annulled and had the Minister accepted my reasons, I understand that the whole instrument would have had to be withdrawn. As it is, I ask that an amendment be made to Regulation No. 27, which is not to be effective until 10th April 1989, to protect a very vulnerable group of claimants.
Anyone who has dealings with disabled people relying on income support might be forgiven for thinking that those who sit round the table in Whitehall start their deliberations with the question "How can we hit the disabled this time?". I prefer to think that they simply omit to take into account the effects that changes in regulations have made upon those who do not fall within the norm. We have already discussed the problems that are arising for respite care. Other difficulties occur on changes of address without any change in care provided, moving to a residential nursing home and the definition of a small residential home. Not enough thought seems to have been given to how these people are to live when their benefit is reduced. There is quite simply nothing else for them to fall back on.
At present nearly three-quarters of local authorities operate approved lodging schemes. Schemes are also run by charities such as Barnardo, Mencap and the Stonham Housing Association and the probation service. A panel of landladies is recruited and approval given for the type of accommodation and degree of care that the landlady will provide. When the lodger is elderly and frail or suffers from disability, he or she can claim up to an additional £17.50 over and above the standard board and lodging allowance for his or her area according to the degree of disability and the type of accommodation and care provided. These homes are not officially registered, but in practice are approved and regularly inspected by social services. The degree of care expected is not as great as that for small residential homes. The landlady might help with shopping, deal with correspondence, provide all meals and cope with the myriad problems that you and I would be able to take in our stride but that for the disabled person seem insuperable.
In the early years of care in the community, it was those with the least handicaps who were discharged from long stay hospitals into this type of accommodation. The objective was that they would eventually learn sufficient social skills to enable them to live independently. Many had become so institutionalised that they would always need some degree of care and support, and they have been unable to move on. Some ex-patients have lived in this type of accommodation for 10 to 15 years. The schemes have been so successful that landladies are now accepting clients with more severe or multiple handicaps and a need for a high level of care. This is the fastest growing sector in community care.
There are no accurate figures of the number of people in receipt of a higher rate of income support for accommodation in approved lodgings. The Department of Health and Social Security estimates that currently there are 7,500 claimants. Last year there were 2,300 new placings. It seems likely that the DHSS estimate is well below the actual figure. When the OPCS report, The provision of care in supported lodgings and unregistered homes, is published, perhaps we shall have an accurate assessment of the numbers involved.
The effects of Regulation No. 27 and the associated Schedule 1 must not be underestimated. Care costs are not rebated under the housing benefit scheme.

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Those who need a high level of care, particularly the frail elderly and those with severe mental or physical disabilities, will lose money. Some will be left without enough to pay for accommodation, let alone their personal needs. Other noble Lords will doubtless give examples in greater detail.
Many clients will have no option but to return to or remain in an institution simply because they cannot afford to remain in the community. Transitional protection will be of little help and in any case will be eroded by inflation. It is also likely to he lost if here is a change of circumstance such as a move to another landlady.
A very serious situation is developing. The whole basis of care in the community is being undermined by the policies of the DHSS. Social service departments arc now finding it impossible to recruit new landladies to their panels. Acute problems have been reported by Bolton, Coventry and Hereford and Worcester, and no doubt other local authorities will encounter difficulties sooner or later. No provision has been made for clients to claim income support to pay for their additional needs. Although social service departments at present top up social security benefits in some exceptional circumstances, their already overstretched budgets will not enable them to do so in all cases. If the Government intend that social service departments should be responsible for the care element of housing costs for the disabled living in approved lodgings, it would be helpful if they would say so now and ensure that local authorities have the funds to carry out their duties effectively. If nothing is done now, the DHSS will have to accept yet another unplanned-for liability because hospital administrators will not be able to discharge patients into the community with a good conscience. The probation service and charities will also have funding problems.
I am sure that the Minister will agree that I am not asking for the moon. The numbers concerned are relatively small. The benefits are already being paid to claimants. Without the change for which I ask, these people, who are terribly disadvantaged as it is, will suffer disproportionately and a coach and horses will be driven through the Government's care in the community policy.
Friends have tried to persuade me not to divide tonight in accordance with the convention of the House, but I understand that there is no such convention. I anxiously await the Minister's reply before I decide. I beg to move.
Moved, That this House calls upon Her Majesty's Government to revoke the Income Support (General) Amendment No. 4 Regulations 1988, laid before the House on 15th August 1988, and to lay before it in their place regulations which would include additional provision for the needs of disabled people who previously were able to receive additional income support over and above the normal applicable amount for persons in board and lodging accommodation.—(The Countess of Mar.)
6.26 p.m.
Lord Banks: My Lords, I wish to speak briefly in support of the case so ably put forward by the noble Countess, Lady Mar. As I understand the position having listened to the noble Countess, disabled persons who receive board and lodging and care in private houses at present can receive an additional income support payment to help cover the cost of care. However, the new regulations provide for the same income support to be paid to all claimants, with help for board and lodging coming from housing benefit. Housing benefit relates only to rent, and makes no payment for care. Those who would have qualified for an extra income support payment for care under the new regulations will not receive any payment for care at all. Transitional protection will be provided for existing claimants. This indicates the Government's awareness that a problem is being created. Existing claimants on transitional protection will therefore gradually lose their payment for care. New claimants will be at a disadvantage from the start. There will be nothing for new claimants in care or for those in supported lodgings from next April.
The Motion calls for the withdraw al of the new regulations and their replacement by regulations that would again provide for additional income support over and above the normal applicable amount for persons in board and lodging. This seems to me to be an urgent necessity. I urge the Government to accept the Motion.
6.28 p.m.
Lady Kinloss: My Lords, my noble friend Lady Mar has highlighted a matter of very grave concern to many people. The change to benefit payments for people living in board and lodgings will leave many disabled and elderly people out of pocket. This will cause severe problems for people living in so-called supported lodgings where the landlord or landlady provides a degree of care. As the noble Countess has said, the DHSS estimates that there are currently 7,500 such claimants. This is a form of care that is expected to grow as care in the community policies take effect.
To leave claimants with little or no money would make a mockery of the Government's care in the community policy. Are the Government aware that homelessness among disabled people is double that of the rest of the population? Disabled people are already forming a large proportion of the homeless in Britain's major cities. The director of Shelter has predicted that the number will double next year. Special attention must therefore be paid to their needs.
How can people with disabilities live in the community if they cannot pay their costs? For example, a 17-year-old severely disabled person in a wheelchair who has recently left a social services home to live with a family would see his or her disposable income drop from £11·50 to £4·45 per week. A 22-year-old who is mentally handicapped but capable of living outside hospital with a high level of support would lose £9·50 per week, leaving him or her with only £5 a week for personal needs. I repeat, how can those people afford to live in the community?

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Under the current arrangements, money for the care element is built into the system, but after April 1989 that element will no longer be available. That is yet another change in the benefit arrangements which will make community care even more difficult. Community care is a welcome policy development for many disabled people who look forward to a more independent life outside institutional care. However, it is a step which should be encouraged only if the financial support available is adequate.
I understand that 50 per cent. of current hostel places will disappear under the Government's benefit changes to be introduced next April, which will surely put more strain upon board and lodging accommodation. The need for supported lodging provision will grow as people are discharged from long-stay hospitals and other institutions. The under-25s will be especially affected as they will receive a lower rate of income support and extra resources will be needed for local authorities' leaving care schemes to operate.
In view of the fact that the Office of Population Censuses and Surveys social services division shows that there are now twice as many disabled people in Great Britain, the Government must act swiftly to change the income support regulations.
6.32 p.m.
Baroness Fisher of Rednal: My Lords, I support the noble Countess, Lady Mar, and want to highlight a charity with which I am involved in the City of Birmingham which feels aggrieved by the regulations. The St. Basil's charitable organisation is one of the foremost agencies working with the young homeless in Birmingham. It has projects on 13 different sites throughout the city. Every year St. Basil's accommodates at least 800 young people in need and at risk in the community. They are all aged between 16 and 25. In addition to the 800 who physically go to St. Basil's, it gives information and advice about homelessness, through its information service, and support to a further 12,000 young people. Many of the young people who go to St. Basil's are unqualified and inexperienced in employment and training terms. Most of them arrive at St. Basil's as a result of problems in the family.
As noble Lords are aware there is an increasing trend of problems with stepfathers and stepmothers. Most of the young people who go to the centres are unqualified and unemployed. Many of them have come through child care through the local authority, foster homes or the probation service. The Home Office gives support to St. Basil's for the work it does for those who go through the probation service.
Most of the young people who go to St. Basil's are inexperienced and heavily traumatised as a result of the events that have made them homeless. They have minimal skills and very little life experience with which to sustain themselves. It is important that we remember that a number of girls with a history of sexual abuse are going to the hostels. That is disturbing for St. Basil's. The stay of the young people is fairly short. It is for a maximum of one year or a minimum of one month. During that time, counselling and help go on.
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I want to emphasise that the young people are placed on government schemes as soon as they are rehabilitated. Immediately the trauma has disappeared they are placed on government schemes. The young people have not deliberately chosen to be unemployed. We could perhaps say that life has become too much for them. St. Basil's is not trying to cosset them. It is implicit in their training that they are placed on government training schemes as soon as possible. St. Basil's does not encourage them to be workshy.
The regulations mean that young people between the ages of 16 and 18 must be in full-time work or education or on YTS. As I have said, many of St. Basil's young people have suffered such appalling handicaps that they are not fit to go on the schemes immediately they arrive. The new regulations threaten to deprive young people of support and rehabilitation. Although I have spoken about St. Basil's because I am especially interested in that charity, there are other charities, in particular, Stonham and NACRO, which are also expressing deep concern and are disturbed about the possibility that they will, like St. Basil's, be financially unable to keep going and help the young people if the regulations come into effect in their present form. I hope that the Minister will take serious note of the efforts made by the noble Countess in bringing this matter before the House.
6.37 p.m.
Baroness Jeger: My Lords, I am sure that we are most grateful to the noble Countess, Lady Mar, for bringing this important matter before the House. The noble Countess is not the only one who is concerned about the change in the situation. RADAR and other respected organisations which specialise in help for the disabled are also concerned.
We realise that the regulations do not come into effect until next April and that they will affect only people in ordinary board and lodging and not those in special residential homes or hostels, which would seem to most of us to be an important part of the transit into ordinary community life for disabled people which the Government supported as a result of the Griffiths Report. We also want to support that trend. I am sure that the whole House wants to see the transition into ordinary life made available to all those who can enjoy life outside institutions and specialised homes.
What worries some of us is that the plan is to separate income support and housing benefit. I hope that the Minister will tell us that we are wrong because there is nothing I enjoy more than having the noble Lord, Lord Skelmersdale, tell me that I am wrong. People who come within the order in future will have to go through the dual argument. One will be about the amount of income support they will obtain from one authority. They will then have to turn to the local authority to ask for housing benefit. I do not often agree with things that are said on the opposite side of the House, but I have also thought-as a former civil servant I can say this-that if we could minimise Civil Service interference and administration costs that would be for the good of everyone.

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To put people who come out of care, mental institutions and prisons through a double hoop before they receive the money they need on which to live is administratively stupid. Has "board and lodging" been sufficiently defined? I know some people in board and lodging who only get breakfast; sometimes breakfast is a gas ring, a tea hag and a kettle. Then they have to go out and buy food, which does not always seem possible if they are losing the income that they need. There is confusion among some of the organisations which are expert in the field as to how the disability allowance will help, with separate claims having been made.
My noble friend Lady Fisher spoke particularly of young people, but this applies equally to elderly disabled people, many of whom I know have been in institutions for very many years. They need a long time for rehabilitation. I know an old gentleman who was let out, if I may use that phrase, of an institution. He did not even know what pennies were. He went inside, as he told me, "before all this nonsense came about". He hardly knew what a belisha beacon was. These are all ordinary things which we take for granted.
During the period of rehabilitation and trying to build a bridge into ordinary community living, it would be unfortunate—and I am sure noble Lords on all sides will agree—if we added to all the anxieties about adjustment, problems of finance and how disabled people are to get the money to buy the necessities of life, such as a new pair of shoes. I would not even mind if it were a bottle of beer. This is something which becomes enormously serious to the people we are trying to help.
There may be ways that the Minister can suggest of helping these people so that they do not actually lose money under the new arrangements. I pay tribute to many of the people I suppose we call landladies when we talk about board and lodging. Many local authorities are trying to build up lists of what we might almost call foster parents who will take on these people in their own homes, especially young people going through the transition from an institution to the community. We should make sure that they have all the help and encouragement they need.
I must ask the Minister why there seems to be a rule that if people in board and lodging change their addresses, the whole process may have to start all over again. There may be some good reason for that, such as registering a new address. However, I think it would be a pity if there were a delay in receiving benefit while the administration drags on its way.
The last question I wish to ask the Minister is whether he is satisfied that in the cases we are talking about tonight the social fund is making the contribution which we hoped it would. We were told that one of the main reasons for setting up the social fund was to provide community care grants which were to be particularly targeted at the disabled. Perhaps he will tell us what the take-up of social fund grants has been for rehabilitation into the community of the disabled. I understand that it has been nowhere near 100 per cent. Perhaps the community care grant
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should be better publicised and the guidelines given to local offices re-examined. With only £60 million granted for the whole year, it should not be difficult for the Government and local officers to find enough people on whom to spend this money. It is important to know the effect of this policy, which was a very important part of the arguments on the setting up of the social fund.
Then there is the complication that sometimes people leave hospital with an invalidity benefit. It may be that when they are settled in the community they end up worse off under the arrangements for income support plus housing benefit than they were with the invalidity pension that they were receiving earlier.
We ask these questions with good will because I am sure that on all sides of the House we wish to ensure that the best is done for people who are trying to make their way back to ordinary life in the community. I know that is the Government's wish, or at least the Griffiths Report seems to suggest it is. I look forward to hearing what the Minister has to tell us tonight.
6.45 p.m.
The Parliamentary Under-Secretary of State, Department of Social Security (Lord Skelmersdale): My Lords, I seem to remember that it was less than a week ago that in answer to a supplementary question on the up-rating Statement from my noble friend Lord Boyd-Carpenter I said that your Lordships regularly target your thoughts on disabled people. Little did I think then that we would be returning so immediately to this group of disadvantaged people.
I was totally unrepentant then as a targeter. I am totally unrepentant now. That is why I welcome the Motion before your Lordships' House which enables us to debate the Income Support (General) Amendment No. 4 Regulations 1988. These regulations were laid before Parliament in a block, as the noble Countess will know, on 15th August, along with the Family Credit (General) Amendment No. 3 Regulations and the Housing Benefit (General) Amendment No. 3 Regulations which contain a range of similar provisions common to all three sets of income-related benefits. The major change in both the income support and housing benefit amendments concerns the transfer of help with accommodation costs for income support recipients in board and lodging accommodation to the housing benefit scheme from April 1989.
The noble Baroness, Lady Jeger, is quite right to point out that there is enormous confusion. It is not easy to define exactly what is meant by "Board and lodging accommodation". That is very much the point behind these regulations. The evidence is that there is very little difference between most lodgings and other types of accommodation. Why then should different rules be applied to paying their benefit? As for those in caring establishments, as I shall be zeroing in on this point a little later in my speech, we shall be providing protection to any who receive less benefit for as long as they remain in supported lodgings.

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Going back to this block of three orders, the remaining provisions are needed to correct minor or technical deficiencies in the original sets of income-related benefit regulations. These changes are generally beneficial, as the noble Countess was good enough to say. I am sure that your Lordships will understand if I do not attempt to describe them in any detail. Instead, like those speakers in the short debate, I shall concentrate on the more substantial changes—those affecting people in board and lodging accommodation.
First, I must disabuse the noble Countess; the objective of Regulation 27 is not to knock the disabled again. I think I have quoted her accurately. On the contrary, my honourable friend the Minister for the Disabled and I take great care not to disadvantage the disadvantaged, whether they be the disabled or those disadvantaged because of any physical or pecuniary problem. However, that is not to say that there should never be any changes. Regulation 27 may be only two lines and one word long but it affects the very people about whom the noble Countess and I are concerned. I shall explain a little later why it does not affect the people with whom the noble Baroness, Lady Fisher of Rednal, was concerned.
I think it would be helpful if I started by giving the House both the historical background and the principle behind the changes. When we refer to people in board and lodging accommodation, we mean those 120,000 who receive income support and live in hotels, guest-houses, lodging houses or similar accommodation, as well as those who live in the caring landlady schemes, as several noble Lords have pointed out. In addition we include people living in accommodation who pay a charge for lodging and at least some cooked or prepared meals. The regulations we are debating tonight do not affect people living in hostels, residential care homes, nursing homes and Part III' accommodation provided by local authorities.
The provision of special higher benefit rates for boarders in the supplementary benefit scheme had a troubled history. Special rates of benefit encouraged claimants to seek this type of accommodation, often at prices which those in work could not afford. Some proprietors of hotels and guest houses were quick to take advantage of the higher rate payable and advertised for Department of Social Security clientele. As a result the number of boarders increased dramatically, with corresponding escalation in public expenditure. Of particular concern were young people trapped in expensive and often inappropriate types of accommodation for long periods, with no incentive to seek employment.
Changes were introduced in 1985 which fixed centrally determined local limits for help with the charges via supplementary benefit. in addition, the length of time young claimants were able to receive help as boarders was limited. These changes were successful in halting the rapid and inappropriate growth in numbers.
However, the fact remained that this group of claimants were like other claimants, yet received
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markedly different rates of benefit. Despite living in similar accommodation and having similar circumstances, the rules for calculating their benefit depended on the fact that their landlord sometimes provided them with a meal. Often this meal was a token offering—such as a loaf of bread each week for breakfast. In a study published in 1985 by the Department of the Environment, standards of amenities in accommodation provided a good example of the similarity of facilities. For instance, 89 per cent. of bedsits had adequate space heating compared to 99 per cent. of board and lodging; and 80 per cent. of bedsits had adequate food preparation facilities compared to 84 per cent. of board and lodging. The only real difference was who helped whom with their accommodation costs—the Department of Social Security in the case of boarders, but everyone else in rented accommodation turned to housing benefit.
In December 1986, as part of the social security review, a consultation document was issued which proposed that for equity of treatment, boarders should be subsumed into the income support scheme which subsequently replaced supplementary benefit in April 1988. This was a simplified system of helping with claimants' day-to-day living expenses and it seemed an ideal opportunity, as part of the streamlining, to abolish the special rates for boarders. Help with accommodation costs would be available from the reformed housing benefit scheme.
But the Government listened to the concerns expressed at that time by the local authority associations. In their response to the consultation document the authorities requested that any change be deferred until April 1989, by which time the new procedures introduced in April 1988 for the reformed housing benefit scheme would have settled down. The Government were mindful of these requests, and decided to carry forward a special scheme for boarders within the new income support scheme until April 1989. The time has now come for a change.
I would say, again in answer to the noble Baroness, Lady Jeger, that we considered the question of preempting decisions on Sir Roy Griffith's report before announcing our decision to transfer help with housing costs for supported lodgers to the housing benefit scheme. The arrangements for the transfer are such that we cannot maintain the status quo for this group, as they are not separately identified within the income support scheme at present. New arrangements within income support for supported lodgers would be difficult to police and would give rise to pressure for similar treatment from other groups of disabled people.
So from April 1989 local authorities will administer housing benefit to boarders on income support for the first time. It is important to remember that dealing with boarders will not be a new experience for them as, I remind the House, they have always helped working boarders. However, I can assure your Lordships that close liaison was maintained with local authorities during the development of the new arrangements.
I now turn to the main concern of the noble Countess. The regulations contain detailed

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provisions for the protection of total benefit levels at the time of change. These concentrate on vulnerable groups, but especically those elderly and disabled people living with landladies who provide a degree of personal care and support in addition to accommodation and board. I note that the noble Countess, Lady Mar, has shown her customary interest in the impact on disabled people, in this instance for those living in board and lodging accommodation with caring landladies. I think it would be be helpful to contrast present benefit arrangements for this group with those we intend to introduce next April.
At present, people living with caring landladies are treated in the same way as anyone else living in lodgings. Charges can be met to the appropriate limit which can be extended by up to £1750 a week to meet, or help to meet, a higher charge where the person is elderly or disabled. I stress that this extension is available only to meet the boarding charge and does not increase the individual boarder's cash-in-hand: this consists of a standard personal allowance of £11.50. The noble Lord, Lord Banks, took that point and I am grateful to him for recognising it.
We consider these existing arrangements are a poor way of targeting resources. For example, there is no test of whether or not care is provided in determining the amount of benefit which can be paid. A fit pensioner living in a commercial hotel can receive exactly the same amount of benefit as a disabled person living with a caring landlady. That cannot be right. Furthermore, none of these people has access to income support premiums which are designed to meet the extra needs of the elderly and the disabled. Again, that is quite wrong; they should be able to have access to those premiums.
By enabling these people to claim normal income support and housing benefit they will become eligible for premiums and the higher income support personal allowances. Overall we estimate that just over half of those living with caring landladies will be better off because of this change. But because the amount of housing benefit which is paid depends on the value of the accommodation and the services provided, not all people in supported lodgings will gain. We are, therefore, providing long-term transitional protection for any people in this vulnerable group who would otherwise lose benefit overall. They will continue to be protected while they remain in this type of supportive environment. I can tell the noble Baroness, Lady Jeger, that they will continue to be protected, even if they move to other supported lodgings in the future. The change will come about only when their circumstances change, not their residence.
The noble Lord, Lord Banks, not for the first time, zeroed in on transitional protection for losers. As I have said, we shall be providing protection for those people in supported lodgings who receive less benefit after next april. They will continue to receive that protection for as long as they remain in that kind of accommodation. The overall effect of the changes for that group as a whole, over half of whom are
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estimated to gain, will be to provide an extra £1 million in benefit for them.
It is true that the long-term protection provided for those in supported lodgings will not be index-linked, and will be eroded by the annual up-rating of age allowances and premiums. The noble Lord will remember that I made the point last Thursday that it is important to get people out of transitional protection as soon as possible, so that they have real increases at the time of up-rating. But I must stress that that is the normal form of transitional protection that we are giving in these board and lodging cases, and that it will give both claimants and scheme organisers time to adjust to the new arrangements. Our aim in providing long-term transitional protection is to protect existing client-carer relationships, and as a result we estimate that £1 million extra in income support will be paid to this group during the first year following the change.
After next April, those who organise supported lodging schemes will be aware of the new benefit arrangements and will be able to advise their clients accordingly, whether the client is from the organisation that the noble Baroness, Lady Fisher of Rednal, described or indeed any other. Many schemes are run by local authorities which are in a better position than local social security offices to ensure value for money in such situations. Research shows that just over half of those local authorities which run schemes already fund them in whole or in part. They will continue to be able to do so after next April. The consideration is entirely as it always has been—in the lap of local authorities.
The noble Countess, Lady Mar, and the noble Lord, Lord Banks, made the point that housing benefit cannot cover care costs, to which I think I must answer that, in general, service charges are only eligible for help through housing benefit where they are compulsory, and for services which are a necessary part of the accommodation.
Charges for personal care are generally excluded, with two exceptions. A charge for general counselling or support provided by the landlord, caretaker, warden or other support staff can be included if they spend most of their time on accommodation-related services. A charge for an alarm system may also be eligible if the system is provided in accommodation which is particularly suitable for elderly, sick or disabled people.
The OPCS report was mentioned by the noble Countess. She asked whether the study will give an estimate of the number of people placed in supported lodgings. The report has already been made available in draft form and was out for discussion with the local authorities which provided most of the information therein. It shows that at any one time about 2,300 people are in local authority approved schemes. I should add that I expect the report to be published in a full and unexpurgated version later this week.
I made the point a little earlier that local authorities, through their social services departments, are far better placed than Department of Social Security offices to decide how care of this kind should be provided. As the noble Countess

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observed, many authorities already fund these costs. I repeat that it is entirely up to them whether they continue to fund them. I also said earlier that we are not talking about hostels. The noble Lady, Lady Kinloss, claimed that 50 per cent. of hostels will close. That will not happen as a result of the regulations we are debating tonight. It is true that the Government announced last week that they would defer proposed changes affecting hostel dwellers until after April 1989. We shall be considering more fully the effects of hostels' finances. The noble Lady will no doubt recall that there is a consultation document on this subject, the consultation period for which has now closed. We shall take full account of the views of everybody who wrote in with comments.
I shall close my remarks by reaffirming that the changes we shall make to the way boarders on income support receive help with accommodation costs can only be seen as progress. It is a substantial step towards making the social security system neutral as to accommodation type. We shall at last have equity of treatment so that the same income support rules will apply to anyone living in rented accommodation—whether it be lodgings, a guest-house, hotel, flat or bedsit. The people who fall into the category covered by the Motion will not lose out in cash terms. Far from it. We estimate that just over half will gain in disposable income, which is exactly what the noble Countess would wish.
I therefore commend the regulations to the House. I would only add that in the social security field we learn by experience. Ever since Beveridge we have learnt by experience. That is why there are so many changes coming before your Lordships every year. We shall watch the operation of the regulations like a hawk to make sure that the people about whom she is concerned, and indeed any others, are not disadvantaged by them.
Baroness Jeger: My Lords, before the noble Lord sits down, will he answer my question? If it was an unfair question, perhaps he will write to me. What proportion of the social fund so far has been made available for community care grants? When the Bill was going through the House we were told that this was to be a major objective of the social fund.
Lord Skelmersdale: Yes, my Lords, the noble Baroness is absolutely right. However, I do not know the up-to-date figures. She was right to say that £60 million was set aside for this year. If one divides that amount by 12, one sees that something of the order of two-thirds has been spent on a month by month basis. If we were an uncaring Government, as the noble Baroness would publicly expect, we would as a result have chopped the £60 million in our plans for 1989–90. We have done nothing of the kind. It is a new scheme which will take time to bed down. She will be delighted to know that £60 million is in the budget for community care grants for next year, as indeed it is for this year.
The Countess of Mar: My Lords, before the noble Lord sits down, perhaps I may ask a question for clarification. He said that people who at present
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receive income support with a higher allowance will qualify for special premiums for income support once they are changed over on to housing benefit. Does that mean that the under-25s, who stand to lose a lot, and the 16 and 17 year-olds, who have a negative income, will be able to claim additional income support to bring their incomes up to a reasonable level?
Lord Skelmersdale: My Lords, what it means is that from April next year those who are eligible for income support on the normal basis of income support will get it. The present income support only arrangements will as a result disappear. The structure will be in place for helping people not only with their board and lodging costs through housing benefit but also in regard to what I call disposable income, after they have become eligible for income support. That must be right.
The Countess of Mar: My Lords, I am grateful to the Minister and also to noble Lords who have taken part in this valuable debate. The noble Lord thought that I thought that he set out to clobber the disabled. I did not, so I should like to disabuse him of that thought. I cannot understand why he found it so difficult to identify the people about whom we are talking tonight. They will all be receiving a higher rate of income support in their housing element and should be easily identified. He spoke about transitional protection. As the noble Lord, Lord Banks, said, this gives no cover to new entrants to the supported landlady scheme. I am still puzzled about what will happen to them.
The Minister said that local authorities were already supporting quite a number of clients in supported lodgings. I feel that he has not grasped the point that local authority social services departments are already strapped for money. It was reported in The Times yesterday that certain authorities—a survey was carried out on London authorities—could not deal with child abuse cases. In one borough some 121 cases were waiting for a case worker. If they cannot afford something of such importance, how will they be able to afford to pay extra money to the disabled for board and lodgings?
I shall not divide the House tonight but I am still very unhappy about what is being done. As the noble Lord said, we must wait to see what happens. It used to be said in the Post Office in relation to union negotiations, "We shall see what happens in the light of working circumstances." I think that we shall have to wait and see, but the noble Lord can expect me to come back again if things do go wrong. I beg leave to withdraw the Motion.
Motion, by leave, withdrawn.

Short Brothers: Privatisation
7.9 p.m.
Baroness Turner of Camden Baroness Turner of Camden rose to ask Her Majesty's Government whether consideration has been given to the effect on employment in Northern Ireland of the decision to privatise Short Brothers.
The noble Baroness said: My Lords, I welcome the opportunity to address the House on the matter of the proposed privatisation of Short Brothers plc in Northern Ireland. In case it may be wondered why I, a Peer living and based in London, should be concerned about the issue, I should perhaps explain my interest. As your Lordships will know, I was until recently assistant general secretary of ASTMS, now the Manufacturing, Science and Finance Union, MSF, following a merger with the technical union, TASS. My union has long had members in Ireland—in the Republic as well as in Northern Ireland.
It is perhaps not fully appreciated in this country that, despite all the very difficult sectarian problems in Northern Ireland, the trade union movement has maintained its unity. The Irish Congress of Trade Unions covers trade unions throughout the whole of Ireland, although there is a Northern Ireland committee. The Irish congress, through its policy of, "A Better Life for All", has been able to maintain that unity through concentrating on those issues such as employment in which all workers, no matter what their religious background or beliefs, have a common interest. The unions are a great force for sense and stability in the Province, which I believe is not always fully appreciated here.
During the Summer Recess I was in Ireland—in Dublin—for the opening of a new union office. I was asked to meet members from Belfast in order to discuss the problems which they saw arising both from the projected privatisation of Short Brothers plc and from the problems facing the Harland and Wolff shipyard. I framed my question around Short's since different issues are involved in the shipyard, to which I shall return at another time. It has relevance here because it raises the whole question of employment in the Province as does the privatisation of Short's.
Your Lordships will be aware of the horrendously high unemployment figures in the Province. They are far, far worse than in this country. Male unemployment stands, I believe, at around 26 per cent. As I understand it, that is due largely to the decline in manufacturing industry employment. The shipyard, for example, has drastically reduced its workforce over the years, as has Short's. It is generally agreed that the high rate of unemployment adds to the problems in Northern Ireland and may very well lie at the heart of the alienation which appears to exist in sections of the population. The hopelessness generated by long-term unemployment provides a fertile breeding ground for violence and inter-community strife. One or two of my noble friends who will speak later in the debate will no doubt deal with some of those matters.
The trade union fears in relation to Short's and the projected privatisation are not—I repeat, not—based on ideological dogma. There are of course many, including myself, who believe that a major enterprise such as Short's, with very considerable importance within the community both from an economic and a social standpoint, ought to be publicly rather than privately owned. However, I am not advancing that general argument tonight although I believe it to be
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a powerful one. The unions are concerned that Short's in private ownership would be extremely vulnerable to decisions by people outside Northern Ireland without any accountability to the Northern Ireland economy and that that would have disastrous effects on the already parlous employment situation. I believe that most privatisations have resulted in a reduction of the workforce concerned. That is not something we should want to see in this case.
It will be said, I am sure, that Short's is facing difficulties and that the way out of those difficulties is through privatisation. In the 1960s Short's invested considerably in research and development for the Belfast freighter. It was anticipated that the Government would place an order for 30 of those aircraft. In fact they cancelled the order after 10 were built. That did not allow Short's to recover its initial investment and that burden has been compounded annually. The current operating loss is in part due to underfunding and cut-backs in Ministry of Defence expenditure. Short's, backed by the unions, has consistently argued for the financial restructuring of the company and for a definite commitment from the Government.
I should say that in addition to seeing the unions I have also met representatives of management. They also are concerned about government intentions. They have argued strongly for recapitalisation. The company has been operating for many years on the basis of borrowings to fund new investments to cover the losses it has made in some years.
It would make good business as well as good political sense for the Government to give the support that both management and unions have been seeking. The company has played and continues to play a major role in the economy. It has an important research and development facility. The worry is that if this company is sold to a foreign predator the R&D facility will be transferred away from Northern Ireland with consequently disastrous effects upon future development there.
Short's is also well known for its training role. It trains the largest number of high skill apprentices in the Province. As we all know, aerospace is a high-tech industry and the importance of Short's to Northern Ireland for the future can therefore hardly be overestimated.
The management and unions are concerned that the Government have not given the firm assurances sought that, even if there is privatisation, the company would not be sold off in bits and pieces but would be maintained as an entity. It is absolutely vital that the entity of the company is maintained. I ask tonight for assurances from the Minister on that point. I gather that some private assurances have been given but I hope that this evening those can be put on record and I look to the noble Lord to do that.
Management and workforce are also concerned about the future of the projected commuter aircraft known as the FJX. I have here some material with which I am sure the Minister is familiar concerning this new and sophisticated aircraft which is designed, as Short's put it, to meet the demands of a new era in regional air travel. The company has undertaken extensive market research involving some 60

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prospective airline customers and has found a projected market of around 1,000 aircraft. To quote from the company's publication:
"Market reaction to the new design has far exceeded expectations and as more and more airlines contribute to the programme, it has become clear that the concept of a completely new design, delivering the advantages of jet operation with turboprop economics, is one which offers tremendous potential through the 1990s and beyond".
It is anticipated that 70 aircraft a year would be built at a unit cost of £10 million, giving a turnover of £700 million. Of course it requires government support, perhaps in partnership with other investors.
I believe that most aircraft manufacture throughout the world is in receipt of visible or invisible government support. That is certainly true of the US where huge government contracts won by Boeing have millions of dollars worth of research and development money built into them. Other governments, like the Dutch, give direct support.
Short's belongs to a very select club indeed. I am told that there are only 20 companies in the whole world—and Short's is one—which can design and build an aircraft themselves right through, as the company put it to me, from a drawing on the back of an envelope to certification. That is too valuable an asset to lose to a foreign multinational company with no commitment to the Province or to have sold off in bits and pieces and thus effectively destroyed.
There is a social as well as an economic aspect to all of this. 1 have referred several times to the sectarian problems in Northern Ireland and to the violence which we all deplore. For many years Short's was seen—as indeed was the Harland and Wolff shipyard—as providing employment for the members of one community only. Management and unions now however are committed to a programme of affirmative action and fair employment. The management tells me that it is proud of its affirmative action programme, although it agrees that it will take time for the full effects to work through.
However in 1979 only 5 per cent. of the workforce was Catholic. Today that proportion has risen to 11 per cent. More significant perhaps is the fact that in the last 10 years the intake of Catholic apprentices has trebled and it is hoped that the effect will be felt throughout the workforce. Out of a total workforce of 7,600, over 800 are Catholics. Although that may not seem a high enough percentage—and indeed management agrees that it is not—it makes Short's the employer of the largest group of Catholics in Northern Ireland. Again there is a fear that privatisation may affect those developments.
I hope therefore that the Minister will be able to respond positively to the points I have made. The management and the workforce need the assurances for which I am asking. The Government should not rush into privatisation on ideological grounds without realising what that would mean to the Province, not only in regard to employment here and now but for the future. I repeat that this is a high-tech operation with a substantial R&D facility, with an importance in the sphere of training that it is difficult to overestimate and with an economic spin-off into the rest of the economy which is very important for
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the economic health of the country. It has excellent industrial relations and projects for the future that deserve our support. I await with interest the Minister's response, as do management, unions and the community as a whole in Northern Ireland.
Finally, before I sit down, I should like to make a brief reference to the report in the newspapers this morning concerning the break-in which took place at Short's, I believe, the previous night. There has been a great deal in the tabloid press of what appear to be scare stories to the effect that a missile was stolen. I have been given to understand this morning from management that the object that was stolen was an entirely non-operational plastic model which is not a threat to anyone. I hope that this evening the Minister will be able to deal with that point when he replies because it is very unfortunate that some of these stories have appeared. I gather that there is no foundation for them.
7.20 p.m.
Lord Bonham-Carter: My Lords, we must all be grateful to the noble Baroness, Lady Turner, for putting this Question to the Minister about the proposed privatisation of Short Brothers. It provides the Government with an opportunity to clarify their intentions in connection with the privatisation of Short Brothers, which of course cannot be kept separate in the minds of any of us from the privatisation of Harland and Wolff and the privatisation of Northern Ireland Electricity.
The fact is that the situation of each of those firms is intrinsically and profoundly different. What is rather worrying is that the Government's policy toward each of them is identical. I start from the simple proposition that nothing happens in Northern Ireland without it having profound political consequences and implications. This evening I do not propose to argue against privatisation as such. In some cases it is very beneficial to the public; in other cases it is less beneficial. In fact I take a rather agnostic view about privatisation as a dogma, a doctrine or a policy.
However, one thing is true of privatisation: as a policy it must take account of the time, the place and the circumstances in which that policy is to be put into practice. It seems to me that to pursue a policy of privatisation, or indeed any other kind of policy, which neglects time, place and circumstance is to commit the ultimate dogmatic fallacy. I was interested to hear that in the previous debate the noble Lord, Lord Skelmersdale, said that it was a practice of the Conservative Party to learn by experience. It is a practice that we should like to see the Government pursue more regularly than they have done in recent years.
If one takes into account the circumstances in Northern Ireland, one must take account of the fact that it is a very special place which exists in very special circumstances and where, it seems to me, the political consequences of any policy and any action should be regarded as more important than the strictly economic consequences. It is a place where wisdom should take priority over dogma. In considering the proposed privatisation of Short

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Brothers those political implications must be looked at very carefully. Of course a great deal depends upon the way in which it is done. I shall return to that point later.
However, it must be borne in mind that the decision to privatise Short Brothers must be perceived by the population which it affects in combination with the privatisation of Harland and Wolff and Northern Ireland Electricity and in conjunction with the excessively and monstrously high unemployment figures to which the noble Baroness has referred. It seems to me—and others will correct me if I am wrong—that it has been perceived in Northern Ireland as likely to increase unemployment, likely to lead to the break-up of Short Brothers, as part of an economic withdrawal of support by Her Majesty's Government for Northern Ireland, as a triumph of ideology over common sense, and, as the noble Baroness said, as likely to increase rather than diminish communal tension. It may make some savings but it seems to me that any savings that it may make will be at large social and political cost. Those are some of the considerations that I think should be taken into account before this decision is implemented.
Therefore it seems to me that the political impact of this policy can only he negative. It can only erode the confidence of the population of Northern Ireland in the good intentions of Her Majesty's Government. The Government will have considerable difficulty in dispelling those perceptions and the conclusions which many people have already drawn.
In answering the Question put to him by the noble Baroness, the noble Lord has an opportunity to do some fence-mending by telling the House frankly, unequivocally and clearly what are the Government's intentions and how they propose to soften the blow which the announcement of this decision has already inflicted. As the noble Baroness said, we are talking potentially of some 7,500 jobs of people directly employed by Short Brothers and probably another 2,000 if indirect employees are taken into account. We are speaking of a company which has a high reputation but which, as the noble Baroness said, has been unduly funded by means of loans. I am told that up to March 1988 there were losses of, say, £45 million, more than 50 per cent. of which, I think I am right in saying, has gone in servicing loans. We are speaking of a company which some people believe can only survive if it is sold as a whole and if it is sold off in parts will not long survive.
In answering the Question which has been put to him the Minister should make clear whether or not it is the Government's intention to keep the company together. Their intentions are obscure and somewhat ambiguous. We have been told that it will be a private undertaking. We do not know what a private undertaking is until it is made public. We do not know what is meant by the words spoken in another place by the Parliamentary Under-Secretary of State on 21st July and recorded in Hansard at col. 1298. We do not know how strongly the Government will fight nor how firm is their intention:
"to transfer the company as a whole to the private sector".
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It is the words "as a whole" which I think most of us on this side of the House regard as important. I hope very much that the noble Lord will be able to give the House an assurance that the Government's intention is firm and that they will not be moved from it.
Nor do we know, as the Parliamentary Under-Secretary of State said in the same debate, what weight the Government will give to what he called:
"the contribution that a continuing viable business could make to the Northern Ireland economy".
If he agrees that its contribution is substantial, if he agrees (and he can hardly deny it) that the Northern Ireland economy is in a very fragile state, and if he agrees that the fragility of the Northern Ireland economy is one of the elements which make it so difficult to achieve communal peace, I hope that he will follow his beliefs and give great weight to the factor which he has mentioned.
I hope that in his Answer to the Question which has been put to him the noble Lord will make it clear that Her Majesty's Government will only transfer Short Brothers to private ownership as a whole. Of course in saying that one raises another question; namely, how can they ensure that the purchaser of Short Brothers will not sell off those parts of it that seem uneconomic. I should be interested to know whether the Government would consider participating in the ownership of Short Brothers. Will they put the discovery of a purchaser who intends to develop the company above doctrinaire considerations? On the precedent of the Rover Group or British Airways, will they recapitalise the company and write off its debt? These are all questions relevant to the decision, none of which has been answered. The noble Lord has a marvellous opportunity tonight—which I am sure that he will take—to put our minds at rest and to reassure the people who have anxieties. I greatly look forward to his answer, which I am sure will be unequivocal and will dispel our doubts and those which other noble Lords no doubt will express to him in the course of this evening. The issue is a genuinely important one. I look forward with slightly dubious confidence to receiving the reassurance that I hope I shall receive.
7.31 p.m.
Lord Dormand of Easington: My Lords, I say at the outset that I am no expert on Northern Ireland or on Short Brothers. However, I feel compelled to make a brief contribution to this debate for a number of important reasons. I repeat what the noble Lord, Lord Bonham-Carter, has said. Any substantial move made in the Province must be looked at in a different context from anything that is undertaken in the rest of the United Kingdom.
I find that there are no fewer than 33 organisations which have been privatised since 1979 or, like the coal industry, are being talked about for privatisation. However, even if the most fervent supporter of privatisation were to say that as a principle it is successful, that would be a criminal misuse of the word. I say what I am sure a number of other noble Lords will say: in some circumstances it is correct and appropriate that it should be done and in others that is not the case. I am on my feet because I think that

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in this case it is higly inappropriate. It is pure ideology. It is doctrinaire in the extreme.
Another reason I have intervened is the comparison of Northern Ireland with my area—if I may so describe it—the northern region. When I was in another place I frequently spoke about the problems of the northern region. Let me remind noble Lords that this debate is about the effect of the privatisation on employment in Northern Ireland. That is what the Motion states. While I hope that I did what I could for the northern region, I always had to say that there was one other part of the United Kingdom which always had a high unemployment rate—Northern Ireland. There has been no sign of it being reduced. The northern region has had its closures of pits, steelworks and shipbuilders. Most noble Lords will know the great problem that exists in Sunderland at the moment, where the Government are proposing to privatise the shipyards. Those matters, and privatisation, have led to massive unemployment. The promises that we receive from the Government about providing alternative employment have proved completely empty. Figures have been proved beyond any doubt to be false.
Government statements on the reduction of unemployment are thoroughly misleading. We had reference to this in the House today at Question Time. I mention the subject in this context because I am very much afraid that the same position may apply when we consider the effect of the possible privatisation of Short Brothers. At Question Time today the Minister admitted that there had been seven changes in the way that unemployment figures are measured. On this side of the House we think that it is more like 19. In fact there was such a discrepancy that I looked at the research that the Library has done. It states:
"There have undoubtedly been a number of changes in the way in which the unemployment series is calculated over the past 9 years"—
that is to say, since the present Government came into power—
"All bar one of these has reduced the numbers in the monthly count. The exact number of changes is a subject of political controversy. The DE state that six changes since 1979 have had a discernible effect on the . . . figures for adult unemloyment' ".
I quote that because I have to say to our friends in Northern Ireland that they will probably have the same criterion applied to any unemployment relating to Short Brothers.
Whenever privatisation is mentioned I consider three aspects. The first is investment policy. With Short Brothers the difficulties are directly related to the historical investment policy of the Government. This has been spelt out in some detail by my noble friend on the Front Bench. I read recently, as did the noble Baroness, of the experience with the Belfast freighter. I believe that the facts are worth repeating. It was expected that the Government would place an order for 30 of these aircraft. I am assured that the figure is correct. However, the Government cancelled the order after only 10 were built. This did not permit Short Brothers to recoup its initial investment and this burden has been compounded annually.
My reading of the situation is that this is a continuing and heavy burden which the company has
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to bear. This is an example of the debts which Short Brothers have to service, and the interest charges are likely to increase every year. Last year Short Brothers made a loss of £46 million but £25 million was simply the repayment of loans. That confirms what the noble Lord, Lord Bonham-Carter, quoted.
There can be little doubt that the solution lies in the recapitalisation of the company. There must be a capital structure which fully recognises present day problems, which includes recognition of the fact that the livelihood of some 7,500 people is dependent on that structure.
Secondly, one must look at future prospects. We know that there are three divisions which make up an integrated production facility: missiles, aerostructures and aircraft manufacture. I confess that when I began to look at this aspect I did so with some trepidation. There has been little publicity—in my view, insufficient publicity—about developments of that kind by the Company. However, I then learnt about Starstreak, the possibility of subcontracts arising from the Boeing AWACS contract and the plans to build the turbo fan commuter aircraft known as the FJX.
I also came to realise the importance that Short Brothers places on research and development. Some noble Lords may be aware that I frequently raise the question of research and development in this House. I do so because in the modern world, and with an economy such as ours, high quality research and development is of supreme importance. I congratulate Short Brothers on what it has done in this field. My noble friend on the Front Bench said that such research and development might be exported if the firm were privatised. That is something that we must all fear. The Government would be foolish in the extreme to ignore the contribution which research and development will make to the future success of Short Brothers.
The third aspect that I examine when privatisation is mentioned is the quality of the workforce. When I was a Member of another place I represented one of the most depressed constituencies in the country. It was one of my continuing tasks to try to persuade companies to come to my area in the North-East of England. In talking to chairmen and executives I was always interested to learn—when I first became a Member of Parliament I found it surprising—that their main inquiry concerned the workforce. The availability of grants, suitable locations and similar matters were important but the most important matter was the quality of the people whom they would have to employ if they were coming to that part of the country.
Whatever else has been said about Short Brothers, there is no question but that the application, the assiduity and the responsible nature of the people employed in the company is one of its great assets. If the Government believe for one moment that privatisation will improve on those virtues, that is possibly the greatest demonstration of their doctrinaire approach to such matters.
It is perhaps not too much to say that the survival of Short's is essential in large part for the survival of the economy of Northern Ireland. All the ingredients

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of success are present. I have talked about investment, about future prospects and about the workforce. Had time permitted, much more could have been said to show conclusively that the move towards privatisation would delay, perhaps even destroy, the progress towards full employment in this part of the United Kingdom. I hope that the Government will have second thoughts about a move which is demonstrably unsuitable in this case.
7.40 p.m.
Lord Dean of Beswick: My Lords, I placed my name against this Unstarred Question in the hope of making a useful contribution. I wish to express my appreciation to my noble friend Lady Turner for giving us the opportunity to do so, but I wish to speak more globally than just on Northern Ireland, though I do not understand the emptiness of the Government Benches when I believe that political manoeuvres are taking place to try to form some kind of political association in Northern Ireland that will give the Government uncommitted force. The total absence of Members on the Government Back-Benches indicates that that is rather an empty prospect.
I believe that, if we take the words "Northern Ireland" out of it, we have heard all this before. Your Lordships' House on a number of occasions has debated the manufacturing industries of the United Kingdom. Northern Ireland is an integral part of that manufacturing base and also of the United Kingdom. Some of our finest engineering products historically—I do not mean going back too far—have been made in that Province, certainly at Harland and Wolff and Short Brothers. The work that Short's Sunderland flying boat did during the last war is legendary in subduing the U-Boat menace and that type of thing. Since then there has been the turbine generating division and manufacturing of turbines at Larne by what was originally the AEI and is now GEC. Northern Ireland has always been noted for making its contribution to our reputation in Great Britain as being able to produce goods in the engineering field with the highest skills and quality that historically could compete with the best.
When we were debating manufacturing industries I used the phrase in your Lordships' House—it was not a phrase that I coined but I found it fitted the argument adequately and other noble Lords have used it—what do we mean by "seed corn"? If the seed corn is not nurtured and raised properly in an industry, we shall be signing the death warrant of any such industry. I have just heard my colleague Lord Dormand speak of the devastation in the North East. I come from an area in Manchester from where I have taken my title, Beswick; that was originally the centre of the largest engineering group in Europe in the old days. It is now an industrial desert. No engineers are being trained there because the factories no longer exist. One could reel off the names one after another. They have gone completely out of existence, wiped off the face of the earth. The social consequences of that are still being felt in the area because nothing has come to take their place.
We spoke in the debate on manufacturing industry some time ago of the appalling damage that has been
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done. Over the short time since I came to your Lordships' House, some five years ago, I have heard a succession of noble Lords from various parts of the House, including Government supporters. Cross-Benchers and my old colleague on the Front Bench, the noble Lord, Lord McCarthy, drawing attention to the fact that lasting damage was being done to our capacity to perform against our competitiors. If one analyses any figures that may be produced, this country has lost a generation of young skilled engineers who should have been trained and been ready to meet the challenges that now arise for them to take on.
We now find in parts of the United Kingdom a dearth of skilled engineers to take up work. The Government were warned at the time that that would happen, but they took no notice. What has been the result of that policy? Anybody in this country who wants to buy modern machine tools has to buy them from our foreign competitiors, because the machine tool industry was completely massacred by what appears to be the Government's short-sighted policy regarding Short Brothers. Everybody knows that any company or factory involved in the aero industry always has to bear a rather unfair burden of the development costs to get a product onto the market. Once again, Short's, like many of our other industries on the mainland, is not involved in fair competition.
My noble friend Lady Turner made the point that the American air industry, which leads in the world, feeds its research department with huge contracts, that it knows it will receive from the American Government via their armed forces. There is a partnership there that gives them a start on everybody else. All that noble Lords on this side are asking is that the Government give some consideration now to allowing Short's to carry on, if it needs public money to support it. What is wrong with that? It is not only Short's that matters in Northern Ireland. I have been given some information which shows that as well as Short's, there is a list of other companies and sub-contractors involved who no doubt train apprentices in smaller numbers. A number of places in Northern Ireland will be badly hit, such as Kilkeel, Ballymena, Lisburn, Londonderry and Craigavon, so we are not talking only about Short's. We are talking about the tentacles going out from Short's to the downstream activities of the smaller companies. They probably involve some family companies which train a small number of boys.
I hope that the Minister will listen carefully to what has been said tonight. 1 know that many of these people are skilled engineers. Once the downward spiral starts as a result of government action it is almost impossible to stop it. We have seen this at work in this country with devastating effect.
For my part my union, the AEU, has played a large part in industry in Northern Ireland along with its colleagues in the Irish equivalent of the TUC. There is no inter-union rivalry on this issue. The opinion is unanimous among unions about what ought to be done: that this company ought to be allowed to continue and the Government should, where necessary, be called upon to give assistance. God

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forbid. Somebody earlier talked about what would happen if the place closed. My noble friend on the Front Bench said that the employment of Catholics had risen to 11 per cent. One can just imagine, in an area of the United Kingdom where the divide is bad, what would happen if somebody had to start producing redundancy figures at Short's with the argument about employment or the percentage or ratio of the sectarian divide. It would be an impossible task and in my opinion to produce that kind of situation would be almost like throwing petrol on a fire that we are already trying to put out.
In my view the Government should take a serious look at what is happening. They should say unequivocally that Short's must carry on. The company is part of our manufacturing base, which is supposed to be stirring and beginning to expand again. It is illogical that a company with a history such as Short's—where the base is expanding and skilled engineers are again in demand—is being taken through the exercise of having its lifeline butchered, as has been happening on the mainland over the last 10 years.
I hope that tonight the Minister will give the House some comfort and say that Short's will be allowed to carry on in the interests of the economy not only of Northern Ireland but of the United Kingdom in general.
7.50 p.m.
Lord Monkswell: My Lords, I thank my noble friend Lady Turner for introducing the subject and I do so for two reasons. I am a member of MSF, and therefore a colleague, and I work in British manufacturing industry. I see that what is projected to happen to Short's is bringing the company into risk. I hope that in speaking for Short's I can speak also for British manufacturing industry.
It is interesting to think that here am I in what some would describe as the prime of my life; yet I am virtually a grey-haired old man. That is what the last 10 years in the British manufacturing industry has done to me. A few years ago I was mistaken for Gerry Adams and I sometimes wonder whether being the leader of a political party may be better for one's hair colour—although at this stage I do not believe that I am a threat to Neil Kinnock.
I should like to speak about nationalisation, the British manufacturing industry and Short's. First we must ask why companies, industries and undertakings were nationalised in the first place. In almost every nationalisation, from the water industry in the last century to Rolls-Royce in the early 1970s, two common threads run through. The first is bad management; the second is under-capitalisation.
Nationalisation and privatisation are held up as ideological watchwords. However, in practice the main reason for nationalisation is to ensure that the undertaking can produce the goods. Two reasons for nationalisation are, first, that the employees see the business as a bad employer and, secondly, that the consumers see it as a bad producer. One can see parallels through the programme of nationalisation over the past 100-odd years.
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It is interesting to look back and see how Short's was nationalised. I have looked at copies of the Commons Hansard published in 1943, when the event took place, and it makes interesting reading. At that time we were at war and it was not good for everything to be publicised, but reading between the lines one can see that two factors were in operation. First, there was a lack of confidence on the part of the Government in the directors of the undertaking. Secondly, the company owed to the bank enormous amounts of money, which, effectively, was an indicator of under-capitalisation. The matter was well aired in Parliament and questions were asked through March, April and June 1943. I shall not quote chapter and verse, but Sir Stafford Cripps gave clear and succinct answers where he could given the limitations of war time. He was sasked whether it was part of his socialist ideology and commitment. The answer was an unequivocal "no".
A month after the new management had been installed output had risen. A year after, production was 69 per cent. higher than in the previous 12 months. Obviously a significant change took place with the nationalisation of Short's and it enabled them to make a significant contribution to our war effort.
I note that in 1976 the Labour Government envisaged a future for Short's as a partner in the British aerospace industry but retaining strong local links in Northern Ireland. However, by 1980 there had been a change of government and they were concerned only with limiting the perceived drain on public funds. It is interesting that in 1980 the Government did not make the same mistake as they made in connection with Rolls-Royce in the early 1970s. They were careful to underline to the financial community the fact that, as a last resort, they would bail out Short's.
Since 1979 Short's has had to live in the climate in which all British manufacturing industry has suffered. It has led to what I would describe as the production of almost "concentration camp victims" rather than to companies becoming leaner and fitter. The devastation of British manufacturing industry is self evident. My company has lost two-thirds of its workforce and an enormous amount of productive capacity.
We are now beginning to pull ahead a little and it may be conceivable that Short's will survive for a short period in a privatised world. However, the company will not survive unless it receives capital restructuring. Even then it will not survive in the long term unless the whole climate of British manufacturing industry changes radically.
Short's is a designer, developer and manufacturer of advanced aerospace technology. It is a significant supplier to the Ministry of Defence and a significant employer in Northern Ireland. However, on one hand it is too large to depend on the leadership and financial supprt of one individual, while on the other hand it is too small to compete with the giants of the aerospace industry such as British Aerospace, Airbus, Boeing or McDonnell. However, it can design, develop and manufacture specialist aircraft for specialist needs. This evening we have heard

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mention of the new aircraft that it has conceived, and such a development is one of the terrific features of Short's. When one looks back through its history to 1901 one can see stage by stage the vaulting ambition of Short's engineers and designers to push back the frontiers of technology. You cannot do that with a piecemeal approach. You have to have a long-term view and a commitment to the future. You have to be able to take risks and you must have the support—dare I say it?—of your bankers. Too often Short's has suffered lack of support from its bankers and customers and—dare I say it?—now it looks like a lack of support from its owners. We are the owners. The British citizens are the owners of Short's. Should we really sell it short? That is a curious phrase.
Perhaps I may come to the last specific questions which I want to ask the Minister, having set the scene. What assurances will there be for suppliers to the Ministry of Defence following any changes which the Government may think about? What assurances for the stability of employment, earnings and high-tech. manufacturing industry can be guaranteed for the company? Has support from the Irish Government and the European Community been considered? The fundamental question is: will financial restructuring take place?
8 p.m.
Lord Blease: My Lords, I wish to join in expressing my warmest thanks to my noble friend Lady Turner for initiating this important debate, and also to say that I welcome the reasoned manner in which she presented the case for Short Brothers. At the same time, I hope that it will not be considered presumptuous of me from these Back-Benches also to thank noble Lords who have already taken part in this debate and those who are to take part. What I have heard have been very reasoned and constructive approaches to the problems of Short's and Harland and Wolff.
I know that this debate is being viewed with serious interest and concern by workers and management of Short Brothers and by others in the Province. Perhaps I may add with emphasis that particular attention will be focused on the tenor of the reply of the noble Lord, Lord Lyell, who is to respond to this debate. He already has a fair number of points to cover. I know that he has a big heart and that he will respond to what has been put before him.
Reference was made by my noble friend on the Front Bench to the role of the trade unions. I should like to add to that by saying that the record of the Northern Ireland Committee of the Irish Congress of Trade Unions is second to none in its genuine efforts to overcome the different problems at workshop level. Those are genuine efforts throughout to promote a situation where there are jobs for all in Northern Ireland, and where there is a better life for all. I am glad that I can underscore what my noble friend has said, having experienced some of that work.
The debate has been directed with forthrightness in expressing the deep apprehension of the Short's workers and management about the manner in which
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this serious and shattering policy decision has been so casually pursued by the Government—almost a cavalier approach in their announcement to turn Short Brothers into the private sector from public ownership. In the 85 years that Short's has been in the aerospace industry, some 40 of those years have been under public ownership. Short's record over those 40 years has been impressive, not only by its contribution to the national interest of the United Kingdom but also by Short's place in the forefront of international aerospace industry. Other noble Lords have referred to that and it is not for me to underline what has been so ably said.
I should like to underscore a point which has already been mentioned: Short's outstanding efforts to support the Royal Air Force in the 1939–45 war is a record in history. Reference could be made to the Short's Skyvan. The Belfast has already been mentioned as a freighter which has been 25 years in existence, and it is still flying throughout the world doing admirable service; and there is the Short 360. Those aeroplanes are being used by companies and national air forces throughout the world. Short's zis not a Province-based project. Their products have a worldwide reputation for achievement and performance.
The Short's market is not flagging. Demand for aeronautical aerospace engineering is an open market. It is a market of growth and potential for profitable production and employment. If Short's workers and management are to take any comfort from the new proposed position of the company, the company must be restructured financially and technologically to maximise its opportunities and needs for the competitive market. That has already been reinforced by other speakers in this debate.
However, in my view there has been no indication from the Government of how the sale of Short Brothers is to be conducted. Is it to be run down or is it to be restructured and capitalised to make it more attractive for an interest in development? Even a common car dealer has a presentation formula for sales, price and development. Surely Short's should be in the game of making a popular demand for their particular company, if that is necessary, if that decision is the one which the Government wish to follow. Surely the Government must deeply involve the chairman, the board and the management of Short's in any assessment of a new potential owner. It should not be left to some government-appointed nominee to decide the future of the company and its employees as well as the public assets.
In their Statement about the privatisation of Short Brothers in another place on 21st July the Government indicated their decision to sell the company. The Statement was based on what I consider to be three factors: concern about profitability; concern about the national interest; and concern about the long-term interests of the employees. That has been spoken about by Ministers. Is it not time that the Government demonstrated some active concern to allay the apprehension of Short employees and to help the morale of all concerned in Northern Ireland?
Is there not urgent need for the Government to clarify publicly the matters on profitability? What is

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the national interest and what do they mean by the long-term interests of the employees and particularly the future which the Government envisage for Short Brothers? What do the Government propose as a constructive method? They must have given some thought as to what the future of the company should be, and let us hear what they have in mind.
Short Brothers is a public company and the Government have much more than mere statutory obligation to the Short's board, the employees and the Northern Ireland community. The Minister has been asked to take on and respond to a number of factors, and I am going to add to that list. I am encouraged to do so by something said by the Northern Ireland Secretary of State on 9th September last year when he paid a day-long visit to the Short's factories. He flew in one of the aeroplanes and met senior management and personnel on the shop floor. After making some very praiseworthy mention of the qualities of production at Short Brothers, he ended by saying:
"I give all the support I can to Shorts in their efforts to secure orders. I have been very impressed by the quality of the work I have seen. I think the spirit here is very good, and that also is important. I believe Shorts is well equipped to meet the challenges of the future".
I put forward a proposal and have been encouraged by what has been said by the Secretary of State, Mr. Tom King. I ask the Minister to use his influence and good offices to invite the Minister, Mr. Peter Viggers, and the Secretary of State, Mr. Tom King, to do what other private and public companies have undertaken in similar transfer of ownership circumstances. I suggest that the Government should urgently convene a conference of representatives of Short Brothers board, the management and representatives of the employees, at which the Minister will have the opportunity to clarify the relevant issues and give the necessary reassurances. I look forward to hearing his response.
8.10 p.m.
Lord Graham of Edmonton: My Lords, I am extremely grateful to my noble friend Lady Turner for giving us the opportunity to debate this situation. Although the peg upon which the debate hangs is the future of Short's, this debate is not about Short's but about Northern Ireland, because Short's figures largely in the economy of Northern Ireland.
The debate is not only about Northern Ireland but about the economy of the United Kingdom; it is not only about the economy of the United Kingdom but about the raison d'être for the Government's transfer from public into other ownership. We do not need to look into a crystal ball, and nor do the people of Northern Ireland, as to what happens when this Government take the step that they are now contemplating for Short's and Northern Ireland.
The Minister in his lonely position, who hitherto has had at least one comrade sitting next to him, has now been completely deserted. There is not one Member apart from the Minister on the Government Benches. That is a fair indication of the attitude that Government supporters—I do not say the Government—take on a debate which is crucial to the future health and welfare of Northern Ireland. I
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certainly hope that those who report these matters in Northern Ireland will take special note of what I consider to be the contempt shown by Government Back-Benchers on this matter. It is a disgrace.
I ask the Minister to take on board my concerns. His ministerial colleague, the noble Lord, Lord Skelmersdale, in an earlier debate said, "At least this Government learn from their experiences". What can the people of Northern Ireland, the workers and the management of Short's, learn from the experiences of other people? The workers and the management are concerned of course at what has happened to other means of employment in Northern Ireland. I refer to ICI, Courtaulds, Rolls-Royce, British Enkalon, Goodyear, Grundig, De Lorean, Learfan, Michelin and Carreras. Those companies are a catalogue of what has happened to industry in Northern Ireland, and it is not a happy one.
We should look, for example, at what has happened over the past few years with the Government's desire to get out of the management of business and leave the business of managing to others. That is an extremely unhappy example. Two points stand out. Those who manage the transfer—that is, the merchant banks and the solicitors—grow very fat from the proceeds and the workforce grows slim. I remind the Minister, if he needs reminding, of what happened when other privatisations have taken place in the past few years. When the British Airports Authority was privatised, more than £20 million was paid out in fees and commission. When British Airways was privatised, £15 million was paid out in commissions. When British Gas was privatised, £79 million was paid out in commissions. For British Petroleum the figure was £16 million; for British Telecom it was £97·5 million; for Cable and Wireless it was more than £20 million; for Enterprise Oil, £9 million, and for Rolls-Royce it was £19 million. Against that background the Minister has to persuade the people of Northern Ireland and the workers and management of Short's that it is good business for them and for Northern Ireland; and he must justify the money that will be paid out.
I ask the Minister further to take on board the recent events in the sphere of privatisation. I live in the district of Enfield and Edmonton and I was proud to represent Edmonton in another place. There is a great stench in that area arising from the Government's privatisation of the ordnance factories. I stood in this Chamber, hour after hour, seeking to get the noble Lord, Lord Trefgarne, to answer some of the points which worried me then; that is, whether the Government were getting the right price. I can tell the Minister that the valuation placed upon the Enfield factory by the Government was £1·5 million. That was for dozens and dozens of acres of land. The value of the two sites at Enfield and Waltham Cross is now estimated to be in excess of £400 million.
The size of the workforce at Enfield was 2,500. They have now gone and the factory has been closed down. When the purchasers and others of the Enfield factories were tackled by a Select Committee regarding their policies, they gave stout assurances

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on what would happen to the work and work prospects. Those assurances have all gone by the board. I repeat. there is a great stench about the care and concern which this Government show after they have got rid of their responsibilities.
The Minister must tell the House—and, more importantly, the people of Northern Ireland—that in changing the ownership of Short's how much care and concern the Government are showing to make sure that the economy of Northern Ireland does not suffer unduly and that the work is replaced by other work. The Minister must show that the Government are more concerned with people than they are with profit, that they are more concerned with the interests of the taxpayer than they are with the interests of the shareholders and that they are more concerned with the economy and welfare of communities in Northern Ireland than they are with getting out of the business of running companies like Short's.
8.18 p.m.
Viscount Chandos: My Lords, with the indulgence of the House and apologies for failing to put down my name in time for inclusion on the list, I should like to intervene briefly on this important Question tabled by the noble Baroness, Lady Turner of Camden.
The rightful concern shown by your Lordships' House this evening about the prospective privatisation of Short Brothers is based on the general and on the particular—the general policy of privatisation and the specific instance of the privatisation of a company in the troubled and economically depressed province of Northern Ireland. As for the general concern, my colleagues and I on the SDP Benches believe that the privatisation of non-monopolistic enterprises can generally be justified at the appropriate time and in a suitable form. The Government's record on choosing the appropriate time, the suitable form and, indeed, the correct objectives for privatisation has been distinctly mixed. In this case, even ignoring the geographical location of the company, the form of privatisation is of vital importance.
Every speaker this evening has stressed the vital necessity for maintaining the company in its present form with its three principal activities undivided. I have no doubt that the privatisation of British Aerospace in 1981, with the Government retaining a shareholding for a time, was the right decision at the right time in the right form; but it was the privatisation of the whole company of civil and military divisions together that took place and which has been subsequently supported by the Government, however grudgingly, through the provision of launch aid for the airbus programme.
British Aerospace would have been gravely damaged by being divided in 1981, particularly if the parts had been sold to companies without the necessary long-term commitment and perspective. In just the same way the ultimate return to profitability and viability of the business of Short Brothers would he threatened if it were sold in separate parts. The management of Short Brothers, recruited by the Government, believes that the company should be kept together not for political or doctrinaire reasons
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but for commercial and industrial ones. The Government may not choose to listen to the Opposition Benches; as the noble Lords, Lord Dean of Beswick and Lord Graham of Edmonton, have said, the Government Back-Benches are sadly silent. The Government should feel obliged to listen to Short's management, which they themselves appointed.
In addition to these industrial arguments there is the overwhelming reinforcement of the economic and social implications for Northern Ireland arising from any weakening of Short's as a stand-alone business. In terms of overall employment and of engineering and other skills, the special circumstances of Northern Ireland can justify a tempering of pure commercial considerations even if these were to point to a dismantling solution. As the commercial considerations in fact point in exactly the same direction as the broader economic and political factors, the noble Lord, Lord Lyell, can have no excuse for not giving your Lordships' House the commitment to maintain the company whole that has been unanimously requested this evening.
The president of Boeing, the most successful aircraft company in the world, described Short's last year as "this great and vigorous company". The Government cannot ignore expert evidence of this kind in determining the future of Short's and they should commit themselves today not to practise vivisection on a great and vigorous part of Northern Ireland life.
8.22 p.m.
Lord Fitt: My Lords, I am quite certain that if the people in Northern Ireland and throughout the Six Counties were to see the Government Benches in this House this evening they would very quickly begin to think of having a devolved government where the real needs of Northern Ireland could be discussed with open and sincere objectives. I sometimes become terribly depressed when we are debating Northern Ireland in this House. I look over at the Government Benches this evening and wonder how many noble Lords would be there if we were discussing rivers or Scottish salmon.
Northern Ireland is one of the most depressed parts of the United Kingdom. As I listen to this debate and take part in it for a few minutes, it takes me back to about 30 years ago, when I first entered political life in Northern Ireland as a Belfast City councillor in the late 1950s. One of the first political campaigns in which I became involved was to join a deputation from Short's to this House to seek financial assistance in order to ensure the continuation of the company. I believe that my noble friend Lord Blease and I travelled on the same plane that morning to attend at Westminster. I have no hesitation in saying that it was the first time I had been on a plane and I was rather apprehensive. Some of the Short's employees who were also on the plane were not averse to using four-letter words. To tell you the truth, the situation scared the life out of me as I was taking part in my first flight.
What has been said this evening by noble Lords on this side of the House I can reinforce, not being a

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member of any particular party, but as one who has a deep and abiding knowledge of what Short's means to the Province of Ulster and the six counties of Northern Ireland. Short's is not an East Belfast firm, though geographically it is situated there, as is Harland and Wolff. Short's draws its workforce from all over Northern Ireland and there are many other places where it has employees. There are employees of Short's in the Isle of Man, Holland, Newtownards, Washington, Sydney (Australia), Hong Kong and throughout the RAF establishments in this country. So it is not an East Belfast industry alone.
I rise this evening to explain another element which I regard as being of tremendous importance in relation to anything that happens at Short's. For many, many years the Catholic elected representatives and the Catholic minority viewed Short's with great hostility, on the ground that the major part of its workforce was drawn from the Unionist and Protestant community. I can recall when many Catholic elected representatives would not have given two damns if Short's had closed down on the ground that "none of our constituents are employed there, so why should we worry about it?" That atmosphere has now changed and I am absolutely delighted to see such a dramatic change take place.
Those who know what has been happening in recent years are aware of Irish-American organisations that have a deep and abiding hostility to Short's and its workforce. They have been doing their damnedest to try to persuade the American elements involved in Short's to withdraw orders, which would lead to the closure of the firm. This campaign has been waged for many years now by hostile Irish-American groups which want to see the end of Short's. How happy they would be if Short's were to be privatised.
I am very glad to say that, within recent years, elected representatives of the minority community and of the party to which I formerly belonged have gone out of their way to visit the United States to tell the American people and those investing money in Short's and creating employment there that they want to keep the company going as an industrial concern. This state of affairs does not arise very often in Northern Ireland. It is only a recent political development. I believe that it augurs well for any industry in Northern Ireland that can have the support of all the representatives of both communities in an attempt to keep an industry going.
My noble friend Lord Graham read out a list of the tragedies of unemployment representing companies that gave great hope when they were introduced into Northern Ireland. Some within a few months, others within a few years, packed their tents and went off into the night. One firm that my noble friend did not mention was Birmingham Sound, which was led by Dr. MacDonald. That firm came into the City of Derry with such great hopes and it created great optimism in the early 1960s. Within a week or a fortnight it was decided that the factory was to close down. It caused great and absolute despair in Derry at that time. I suggest that it played no little part in the further despair which was created in the intervening years and which eventually led to the civil rights demonstrations of the late 1960s.
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The firms mentioned by my noble friend Lord Graham created an atmosphere. In every company both in this part of the United Kingdom and particularly in Northern Ireland privatisation leads immediately to a massive reduction in the workforce. Some people, particularly those of the Conservative and Tory philosophy, will say "That workforce was overmanned in the first place". They will say that these were people in jobs doing nothing and it was private enterprise that brought about the rationalisation of the manning so that the redundancies would have to take place. I do not subscribe to that at all. I believe that the industry, notwithstanding the financial implications and the social consequences, must play a great part in government thinking.
The noble Lord is one of the longest serving Ministers in the Northern Ireland Office. He will be all too aware of the vital importance of Short's and Harland's continuing to be employers in Northern Ireland. The two maintstays of work in Belfast—Short's and Harland's and the shipyard, Harland and Wolff—are now threatened with privatisation. If privatisation of this industry takes place, we all know that it will lead to massive redundancies. I remember making a speech in another place in 1979 before the advent of the Tory Government and complaining bitterly that the unemployment figures in Northern Ireland totalled 65,000. I thought that that was far too high a number of unemployed people. In the nine years that have elapsed since then the figure has reached 124,000—it has doubled since the advent of the Tory Government.
As to privatisation of the industry, there is no way in which one can hive off the missile section so that it would continue as a separate entity in Short's. It may be possible to do that for a few years, but Short's is an entity with three component parts that must be allowed to stay together, and it must be allowed to remain in public hands. Any attempt by someone to take it over would be a pure and simple attempt to operate from a profit motive. In the present situation in Northern Ireland there is much more than the profit motive to be taken into consideration. I ask the Government sincerely to think again before allowing this company to be taken over.
8.33 p.m.
Lord McCarthy: My Lords, I wish to begin by thanking the noble Baroness, Lady Turner of Camden, for initiating the debate. It has been very interesting, if rather unbalanced. As several noble Lords have said, all the contributions have come from this side of the House. We have sympathised with the loneliness of the Minister, not only in terms of speeches but in regard to the Benches behind him. On the other hand, we know that he is used to being the boy on the burning bridge. We know that he has a good heart. We hope that he has a good brief. If he has a good brief, perhaps I may observe that he has no need to be brief. He must feel free to say as much as he wishes and to talk as long as he desires to try to answer some of the very reasonable points made in the debate.

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In a debate in which as far as I can see there have been only two honest to goodness Northern Ireland accents, as the noble Baroness declared her interest, I suppose that I should declare mine. My interest, involvement or concern in Northern Ireland arises directly from 10 years as a director of Harland and Wolff. In that period I grew to be very concerned and involved with the problems of Northern Ireland, particularly the social and economic problems deriving from the highest level of unemployment in the United Kingdom.
That is the central thrust of what the noble Baroness has asked: what are the implications of what the Government are threatening in terms of unemployment in Northern Ireland, and in Belfast in particular? She made three points that were taken up by speakers on this side of the House. In view of the need for the Government to answer those points, I think that I am entitled to reiterate them.
First, there is the need to ensure a future for the FJX and the question of how far this depends upon the kind of government investment and commitment that the aircraft industry is able to command in other countries. Secondly, if the Government go forward and privatise Short's, there is the need to ensure that the owners are British. This is not simply because of the defence involvement but also because of the symbolic nature of Short's, Harland and Wolff and companies of a similar size in Northern Ireland, and the way that it will be interpreted if the company is sold out to some foreign firm for profit to produce a further reduction in the size of the public sector borrowing requirement. Thirdly, there is the need—this was echoed by the noble Lord, Lord Fitt—to maintain the present excellent record of the company in the area of affirmative action. What can the Government do to reassure us on these three central points?
I wish to refer first to those who decided to concentrate on the particular circumstances of Harland and Wolff—I think that that is part of the argument tonight—as against those who have concentrated, as I wish to, on the link between what the Government threaten or propose to do in regard to Short's and the policy of privatisation in general. As several speakers have said, when we wonder what would happen to Short's under privatisation we are entitled to consider what has happened in regard to privatisation in other situations.
Most speakers have concentrated tonight on the special circumstances of Northern Ireland and of the company. The noble Lords, Lord Bonham-Carter and Lord Fitt, emphasised the political and social symbolism of these large companies, the way they will be seen to be linked together, the way it would be felt that, as Short's goes, so Harland and Wolff will go and, as Harland and Wolff goes, so Northern Ireland Electricity will go; and if they all go together and in the same direction, that the Government will be saying something much more profound to Northern Ireland than that they are privatising three relatively small concerns. The Government will be saying that they are withdrawing. That is what they claim to be saying, but it will be seen differently. This is one of the central points made in the debate.
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The noble Lord, Lord Monkswell, stressed that we should look at the frontiers of public and private ownership in Northern Ireland in a non-ideological way and that we should not be committed to the extension of public ownership in Northern Ireland, just as we should not be committed to the reduction of public ownership in Northern Ireland for ideological or political reasons. We should look at the consequences and at what is likely to happen in a concrete situation at a particular point in time. If we do that, the general argument for privatisation or public ownership—we are not arguing that tonight—can be seen to come down strongly in favour of maintaining public ownership of the company.
The noble Lord, Lord Blease, emphasised the admirable production, production development and industrial relations records of the company and the fact that it is in an expanding market. He said that it is in a coming game, and that the gains in that game, which the company is in a good position to glean, should not be sold off cheap and then garnered by private speculators.
The noble Viscount, Lord Chandos, and other speakers made the case, and it is a special case, for Short's. He made the case against what he called vivisection and for the need to keep the three parts of the company together, which was the unanimous view of the company's management and workforce. We want to address those points to the Government and ask the Government and the Minister to think carefully about what they say.
I should like to move to the argument put forward by several other speakers, including the noble Lord, Lord Graham, and the noble Viscount, Lord Chandos, that there is a link between what may be happening in Northern Ireland and previous privatisations. As the noble Lord, Lord Graham, said, we have now had 30-plus privatisations. We are bound to ask the Government whether the worrying features of previous privatisations that we have observed are to be reflected if they persist and privatise Short's.
One of the most pervasive features is that the enterprises are sold for less than their true value. The Institute of Fiscal Studies estimates that so far they have been under-priced by some £3·5 billion; that is to say, the difference between the offer price and the price that the shares fetch on day one. That is roughly twice the normal rate of discount in the private sector. As the noble Lord, Lord Graham, rightly said, in addition to selling the assets at less than their true value there is the cost of the fees for doing that to all those who participate in the sales process, which is again estimated by the Institute of Fiscal Studies, at the present rate, to be something less than £1 billion. First, we ask whether the company is to be sold, if it is to be sold, at less than its true value so that profits can be made in the private sector rather than the public sector. What assurances can the Government give us about the cost of selling the company?
Secondly, as the noble Lord, Lord Dormand of Easington, said, what will be the effect on the labour force? Almost every Opposition speaker has made

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that point. It is not merely a theoretical point. Redundancies have followed every privatisation, from 60 per cent. in British Steel in two years to 30 per cent. in Rolls-Royce. It varies, but it is a constant factor. Substantial redundancy always follows privatisation. Thirdly, and this is a point which has not been addressed by previous speakers, there are always vast handouts to the new management. A tremendous change in differentials and rates of pay invariably follows privatisation. Again, the Income Data Services has calculated that in the first two years of privatisation so far, top managerial boardroom salaries rose by 85 per cent. while the workforce has been subject to mass redundancies and wage increases, if it is lucky, which roughly keep pace with the cost of living. As other speakers have suggested, that has consequences for industrial relations and trade unions. That brings me to the fourth general characteristic of privatisation so far.
As the noble Lord, Lord Blease, said, privatisation has a bad effect upon management/union relations. We have had many examples of companies which have bought previously publicly owned companies. There is the notorious example of Trafalgar House, which bought part of British Shipbuilders and then immediately de-recognised the unions and took the consequences. Hoverspeed has refused to recognise trade unions. British Rail Hotels was sold and de-recognised the Transport and Salaried Staff Association. Cable and Wireless abrogated a longstanding arbitration agreement. In British Telecom there has been hostility and animosity and the forced de-unionisation of top management. That is what has so far happened with privatisations. There have been a lack of consultation, de-unionisation, unilateral action, hostility and deteriorating industrial relations. We have to ask whether that is what the Government plan for Short Brothers if they denationalise the company, or is it to be different?
Is it that the special circumstances which have been stressed by so many speakers have been taken on board by the Government either to the point where they are not going to be dogmatic or ideological, as they have been in the past when every government department must trot along each year with its scalp load of denationalised sectors, and therefore not denationalise at all, or are they going to denationalise with understanding and conditions to prevent many of the features of privatisation? Those are the questions that we put to the Minister tonight.
Before I sit down, I shall mention several specific questions for the Minister to answer. He can take as long as he wishes. What about the future of the FJX? What about protection against being taken over by a foreign firm? Will the Government promise, if they sell the company, to sell it as a whole? Will they help if the company moves into the private sector by funding the debt and by announcing long-term contracts, as they have done in some cases with British Shipbuilders, and by providing the necessary public investment, or does privatisation mean that the company will be on the market for investment? Will the company, as several speakers have said, receive the necessary financial restructuring? Will there will be guarantees about employment? Will
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there be guarantees about consultations? Finally, will there be a conference with the workers, the ministry and the management, as the noble Lord, Lord Blease, suggested, before anything is done? Those are the questions. We await the replies.
8.45 p.m.
The Parliamentary Under-Secretary of State, Northern Ireland Office (Lord Lyell): My Lords, the noble Lord, Lord McCarthy, has wound up what has been a fascinating debate. I shall come to my erstwhile tutor's contribution. I shall not take him, or your Lordships, back 28 years, when the noble Lord instructed me and gave me an even better resumé than he has this evening of political institutions in your Lordships' House, in another place and all round the world.
If I can satisfy the noble Baroness who asked the question so eloquently and well, and her noble friend, as well as the noble Lord, Lord MacCarthy, satisfied me 28 years ago, I shall be happy, and the noble Lord may feel that he has contributed, directly or indirectly, something to the answer I shall give this evening.
The Question asked by the noble Baroness, Lady Turner of Camden, relates to Short's and Northern Ireland. The question revolves around the concept of privatisation and I shall try to answer all the points that have been raised. I can clearly not respond to the invitation of the noble Lord, Lord McCarthy, to take as long as I want tonight. Out of brevity and courtesy I may have to write to one or two of your Lordships about some of the queries.
All kinds of views have been expressed in Northern Ireland. It has been said that privatisation is of itself a recipe for dismantling the publicly owned companies which form an important and most influential part of Northern Ireland's industrial base. It has been suggested here and in Northern Ireland that that policy is being pursued solely for ideological reasons and is not concerned with the wellbeing of the company in question or the workforce, let alone the particular circumstances of the Northern Ireland economy. Perhaps I may rebut that straight away. I think the main thrust of what I have to say was raised by the noble Lord, Lord Dormand of Easington. I congratulate him on dipping his toe into Northern Ireland although, as he and other noble Lords will know, the Question asked tonight by the noble Baroness has wider connotations than Northern Ireland.
The investment policy and the main thrust of the Government's policy of privatisation in Northern Ireland are centred around several items. Privatisation is and will remain a major element in the Government's strategy, to promote efficiency, to increase incentives and above all to widen ownership of the company. Your Lordships have referred a great deal this evening to ownership of the company. There are two shareholders: 90·5 per cent. of the shareholding is owned by the Department of Economic Development in Northern Ireland: 9·5 per cent. is owned by the Department of Trade and Industry. That is technically the ownership of the company.
Noble Lords: Us.
Lord Lyell: My Lords, if the noble Lord will have patience, I shall come to him. He may ask a question at the end. However, that is the ownership of the company, using the word in the technical sense. The noble Lord may shake his head, we may be able to discuss legal points later or perhaps I may do it in writing.
Transferring state businesses into private ownership, not just in the cases that have been mentioned this evening by your Lordships, has increased business efficiency. It allows employees to take a direct stake in the companies in which they work. I have the employees of Short's especially in mind when we raise this point. Privatisation leads to very beneficial changes in attitude. Above all it gives everyone the opportunity to have a real stake in their business.
More than 17 major businesses have been privatised and there have been some very notable successes. We have heard this evening of four companies which were referred to by the noble Lord, Lord McCarthy. However, we did not hear about the National Freight Consortium. Over 80 per cent. of the share capital of that company is owned by the employees and the profits of the company have gone from £4·3 million for the financial year to 1981 to £370 million for the financial year to 1986. The pre-tax profits of Amersham have quadrupled in five years. British Aerospace, which was mentioned by your Lordships, was privatised six years ago. Its pre-tax profits have tripled. So I do not think that the Government need be in any way apologetic about the policy of privatisation.
The real problem in Short's or in any elements of British industry, let alone in Northern Ireland, is not the ownership of shares. This goes for the whole of British industry, including Short's and Harland and Wolff. I was most apprehensive that my former tutor, the noble Lord, Lord McCarthy, was making a slip of the tongue in referring to Harland and Wolff. However, he swiftly brought the relevance of his remarks on Harland and Wolff into line with the Question this evening. The problem with Harland and Wolff, and above all Short's, which is faced by the economy in Northern Ireland is the ability to win orders and succeed in the presence of highly competitive market forces. I think the three examples I have been able to give will go a long way to prove that it is in the private sector that we find the best chance to respond rapidly to market forces in the world as well as to win orders.
Public ownership simply cannot be conducive to the quick response to market forces which is necessary in industry throughout the world today. With public ownership, investment is perennially subject to public accountability and the need to minimise risk. That goes for every single industry, be it in Northern Ireland, Scotland, Wales, England or elsewhere in the world. In the long run the survival of an industry cannot be guaranteed by the state in any way. Survival is dependent upon the ability of the company, its management, workforce and product to respond to markets and the needs of the market.
The main element of the Question asked this evening by the noble Baroness, Lady Turner, has
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been Short's. I have found elements of a common thread in many of the arguments that have been put forward by Members of your Lordships' House. Those elements come from a fascinating document which contains the opinions of a group that calls itself KNIFE. I very much admire its logo but there are a number of inaccuracies in the communication that I have seen. However, I shall spare your Lordships my thoughts on that.
The recent financial progress of Short's has been worrying. It has given the owners and shareholders of the company—that is, the Government—cause for concern. However, I wish to stress that it is the Government's view that the company has a number of strengths. This was raised by everybody who has spoken this evening. First, Short's has a proven record of competing in international markets with a wide spectrum of products. Those noble Lords who fly to and from Northern Ireland, as I am afraid 1 do very frequently, cannot look out of their aeroplane without seeing the engine nacelles of the large aircraft which in most cases have been produced by the Boeing company in Seattle. One finds that they are made by Short's in Belfast. I understand that there are all kinds of elements in the Boeing 737, 747 and the 757 which originate at Short's. We look at other airports in the United Kingdom as well as around the world and find the proven record of Short's with the SD 330 and SD 360 aircraft. Once again I declare an interest since these excellent aircraft fly me on many of my journeys around the United Kingdom as part of my work.
Short's has very great strength in its contacts for what are technically known as—and I do not want to become involved in detail this evening—aero-structures. These contracts have been carried out for a number of the world's leading aircraft and aero-engine manufacturers, including Boeing, Rolls-Royce and the Netherlands company, Fokker. As everybody has stressed and I wish to stress as well, Short's has a skilled workforce with skills in design, development and production. Above all, Short's has a particularly good reputation with customers and competitors. Several noble Lords have mentioned this. My right honourable friend in another place mentioned the Pride in Excellence award. Once again this has been awarded by Boeing to its subcontractors and once again Short's has won it. The award does not go to every single subcontractor: it must be earned, and Short's have earned it more than once—I think three times at least in the last four years.
With all these advantages, the Government believe that the future for a strong, viable business at Short's is best served not by continued dependence on public ownership of the company, as it exists at the moment, but by grasping the opportunities of the private sector. The Government are supported in their views by the board. I shall not quote word for word, but the board put out a press release on the day after the speech of my honourable friend the Parliamentary Under-Secretary of State in another place. That speech has been referred to by your Lordships. The company concluded its comments by stating that it wished to emphasise its commitment and responsibility for the complete enterprise—the employees, the customers and the suppliers, and

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would be seeking to secure a future in the best interests of all. That includes everybody.
The Government are supported in the view that privatisation is the proper channel for the onward progress of the company by the board. The Government believe that the real means of retaining jobs in this sector, as well as in Short's and in Northern Ireland, is to maintain a high level of successful and, above all, profitable business activity. We believe that that is demonstrably more likely in the private sector.
However, I wish to stress that as we move towards privatisation, the Government will continue to provide support for Short's, and, in considering the sale of the company and the method of privatisation, we shall of course give full weight to the importance of the company to the Northern Ireland economy. I say, above all to the noble Viscount, Lord Chandos, and other noble Lords who are interested in the mechanics of the privatisation, that the Government have appointed a merchant bank and other advisers. All of us are currently assessing the position. No firm decisions have yet been taken.
I think that all of your Lordships who are aware, not just of the Northern Ireland economy, not just of Short's and not just of privatisation, would agree that professional and confidential negotiations are the best way forward in this particular process.
The noble Baroness produced a particularly interesting and professionally detailed lovely glossy brochure. Perhaps that is the wrong term to use in your Lordships' House. However, I am delighted that the noble Baroness is observing the excellent product that is detailed in the brochure. The brochure covers everything that could possibly be said about the FJX aircraft and the project.
The support for the FJX project, and indeed the future of that project, will depend entirely upon the attitude towards the project of the future owners of the company. The project, as it is at the moment, would in no way be detrimentally affected by the process of privatisation on which the Government are at present engaged.
The noble Lord, Lord Bonham-Carter, asked me about the privatisation of Short's. He and other noble Lords expressed a fear that the privatisation could lead to the breakup of the company. I stress what my honourable friend has already said, and I repeat once again that we believe that the best avenue for privatisation is to allow the company to be sold as a whole. But neither we nor our advisers nor anyone else can give a firm guarantee that that will be the case. However, we certainly take very seriously everything that has been said by your Lordships this evening. That will, of course, form part of continuing negotiations with our advisers.
I missed one particular point which was raised by the noble Baroness. That concerned the headline in the newspaper regarding the burglary that took place yesterday at Short's. I shall search for that piece of paper as I cannot find it at the moment. However, I cannot say a great deal about that matter because it contains quite a bit of confidential material, but I shall cover that point before I finish tonight. I shall certainly locate that information.
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The noble Lord, Lord Boyd-Carpenter, is notable by his absence and I would not wish to bring him into the discussion. The noble Lord, Lord Bonham-Carter, and others were worried that the Government's process of privatisation would lead to economic withdrawal from Northern Ireland. I have stressed that privatisation is a national policy, and Northern Ireland is very much part of the United Kingdom. We believe that it is right that Northern Ireland should benefit from privatisation. I give your Lordships the commitment of the Government to Northern Ireland and to the economic welfare of the Province. That commitment remains undiminished.
A minor miracle appears to have occurred. I have found my thoughts on the theft of a training missile aiming unit. I must try and get the technical term correct. The unit stolen was an inert training unit—it was not an operational missile launcher, as I believe the noble Baroness mentioned. It was in fact a plastic model.
The armed robbery is being investigated by the Royal Ulster Constabulary, as well as by the company. The Royal Ulster Constabulary is keeping an open mind about who is involved in the theft. However I stress, particularly in view of everything that has been said tonight about defence products from Short's, that Short's has a very good security record. Nevertheless it is urgently reviewing its security. It will consult with the Ministry of Defence security advisers about any changes that may be necessary.
The noble Lord, Lord Dormand of Easington, and one or two other noble Lords raised the question of the latest figures for the financial results of the company. Your Lordships will be aware that the figure of £46 million has been mentioned in your Lordships' House. That is a speculative figure. It would be very unwise for us to mention or go any further in examining, or indeed thinking, that that will be the scale of the end of year results, as when the auditors have made all their adjustments the figures may vary in any particular way.
The noble Lord, Lord Dormand, mentioned AWACS. The AWACS is a variation of the VC137, which is a military version of a Boeing 707. So far as I am aware, Short's is making sundry items for the Boeing company. I cannot say whether Short's is still supplying elements or parts for the AWACS aircraft. As I have stressed to your Lordships, the products of Short's are visible any day and every day at airports throughout the United Kingdom.
The noble Lord, Lord Dean, referred to the seed corn of research and development in Northern Ireland. The Government are committed to the company as it stands but we shall have to see how the privatisation negotiations turn out. This will be an important factor in our discussions with the merchant bank and other advisers. I can give a complete guarantee to the noble Lord, Lord Monkswell, that he bears no resemblance to the gentleman whom he mentioned at the outset of his speech. Indeed, if his hair has gone grey in 10 years, mine has gone a little more grey in four and a half years in Northern Ireland; but not too grey.

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The noble Lord, Lord Monkswell, referred to the undercapitalisation of Short's. The financial results for the financial year 1987 show that the sum of £22 million was added to the preference share capital of the company. That was provided from public funds by the Government. The noble Lord will see that the company has been supported and that capitalisation has been a prime element of the Government's support for Short's over the past five to 10 years.
The noble Lord, Lord Blease, referred to the tenor and tone of any comments that I might make. As always, I am flattered by his kindness and I hope that I shall be able to give him some help this evening. The sale and privatisation is naturally a matter for confidential and professional negotiations. That point will be familiar to many of your Lordships, not least to the noble Viscount who sits on the Social Democrat Benches. The noble Lord went on to refer to the ownership of the company. The company is owned 90 per cent. by the Department of Economic Development in Northern Ireland—in other words, by the Government—and 9.5 per cent. by the Department of Trade and Industry, indeed, by the Government. The company is totally publicly owned. The noble Lord referred to a conference. A meeting took place with my right honourable friend the Secretary of State yesterday but I do not want to add anything further to what was said.
The noble Lord, Lord Dean of Beswick, queried support for United States companies by way of defence contracts. Short's has benefited from Ministry of Defence work. One-third of Short's entire business and turnover comes from the Ministry of Defence. The Starstreak missile which is being developed by Short's has been funded by the Government. A privatised Short's would continue to be eligible to obtain defence orders. I hope that that also covers a point raised by the noble Lord, Lord Monkswell.
I should like to stress once again that my right honourable friend the Secretary of State and my honourable friend Mr. Viggers meet the chairman of Short's and its senior management on a regular basis. The noble Lord, Lord Monkswell, will be aware of the Government's continuing interest in Short's. The noble Lord, Lord Graham of Edmonton, was flattering about the number of supporters among my noble friends. I say to him that size is no necessary guarantee of strength and that I continue to speak for the Government on Northern Ireland, whatever may be the numbers and whatever may be the conditions in the House.
The noble Lord. Lord Graham, was concerned about government policy. Our policy in Northern Ireland concerning any industry or any privatisation is to allow managers to manage the company. The noble Lord made a most interesting reference to the Royal Ordnance Factories in his former constituency. I am afraid that there is no chance of my making any useful contribution on that issue this evening. I enjoyed his contribution to the atmosphere in your Lordships' House. I can assure him that there will be no such atmosphere when we come to the privatisation of Short's.
Noble Lords: So it has been decided.
Lord Lyell: My Lords, I can assure the noble Viscount, Lord Chandos, that we should prefer to sell the company as a whole.
The noble Lord, Lord Fitt, who has much experience of Northern Ireland, made some comments about the presence in your Lordships' House. The noble Lord has experience of all kinds of Northern Ireland assemblies, devolved and in another place. Possibly his remarks may be a trifle double-edged in view of some of the performances in relation to Northern Ireland politics in your Lordships' House. Perhaps I do a disservice to your Lordships' House. Some of the performances in another place as well as in Northern Ireland lead one to wish that more political action in Northern Ireland could be carried on in the atmosphere which we have here this evening.
The noble Lord took issue with my noble friends and the support from the Government Benches this evening. He referred to debates on salmon and other sporting issues in your Lordships' House. I referred to the Good Book and the Gospel of Saint John, Chapter 6, Verse 6. He may ignore the first part but I think that he will find a useful little maxim there which serves me well in Northern Ireland. However, I shall not discuss that in detail this evening.
The noble Lord quoted unemployment figures which are at variance with the figures which were published recently by the Government. The figure is 115,000, which is 19·9 per cent. of the male population and 11·7 per cent. of the female workforce. Those are the official figures which I should like to put on record.
Lord Graham of Edmonton: Disgraceful!
Lord Lyell: My Lords, the noble Lord, Lord McCarthy—I have already taxed your Lordships' time, and probably his, considerably this evening—referred to the FJX project. I hope that I have covered that issue. I am not able to say a great deal about it. The project is admirable. It requires a great deal of work and the timescale goes far beyond the question of privatisation which we are discussing this evening. So far as concerns privatisation of the concept, I would ask the noble Lord and all other noble Lords who are interested in this issue to wait and see. In our confidential and professional negotiations we shall certainly do the best for the company.
The noble Lord asked about affirmative action. I stress that the Catholic percentage of the workforce has doubled since 1979. The latest figure from Short's shows that 10·8 per cent. of the workforce is from the minority community and monitoring of the Catholic percentage of the workforce is continuing. I should like to congratulate the company on that achievement. It is the management of the company which has carried it out. I think that the praise due to the Government in this particular aspect must be limited. The level of appointments of Catholics to the company is regularly at or above 16 per cent.

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The noble Lord asked also about the attitude by the workforce to any new management. I took his remarks down fairly carefully; if I have not taken them down with the accuracy which I would have done 28 years ago I shall write to him in the morning. Any new management of the company, we believe, will be committed to the company and its products and above all to its workforce. There can be no guarantee as to the industrial relations of a privatised company. Noble Lords have referred to the situation in four companies which have been privatised. I shall spare your Lordships any comments about the other 13 companies and how well they have or have not done. However, I do not believe that industrial relations have suffered in companies that have been privatised, and in the vast majority I believe that the industrial relations climate will have improved very considerably.
I should like to conclude by saying that the Government have made clear—and I reiterate it once again tonight—that they will continue to provide support for Short's while we move toward privatisation. In particular, I want to confirm earlier parliamentary statements that those who deal with the company can do so in the knowledge that in the last resort the Government will ensure that creditors have their claims fully met.
In conclusion, Short's has enormous strength. It has proven ability to compete around the world. It has already proved its ability to develop new projects. One looks at the SD 330 and 360, the Tucano, the Blowpipe, the Javelin and the Starstreak. Its aerostructures division contracts with leading aircraft and aeroengine manufacturers throughout the world. The workforce is highly skilled and the company has a sound technology base as well as a very good reputation with both customers and competitors. We believe that privatisation will aid all those objectives.
Baroness Turner of Camden: My Lords, before the Minister sits down, perhaps I may ask him to firm up some remarks that he made during the debate. For example, one of the issues that everyone has stressed during the debate is the necessity to maintain the company as an entity. Is it not possible in the course of the negotiations—which we understand are confidential—for stipulations to be made that the entity of the company should be maintained? Is it not also possible to ensure that the research and development facility which is so important for Northern Ireland stays in Northern Ireland no matter how privatisation proceeds? Is it not possible for that to be part of the negotiations and part of the stance that the Government take in those negotiations?
Lord Lyell: My Lords, certainly I could not give a guarantee, but I am sure that everyone who has the company's wellbeing at heart will note what the noble Baroness has said, and above all will note everything that I have said. However, the negotiations are confidential and I could not give a guarantee this evening as to exactly the final form of those negotiations.

Foreign Marriage (Amendment) Bill [H.L.]
Returned from the Commons agreed to.
House adjourned at twenty-two minutes past nine o'clock.