Lords Sitting of 10 November 1988

Preamble
The House met at three of the clock (Prayers having been read earlier at the Judicial Sitting by the Lord Bishop of Carlisle): The LORD CHANCELLOR on the Woolsack.
The Duke of Saint Albans—Sat first in Parliament after the death of his father.
The Earl of Strathmore and Kinghorne—Sat first in Parliament after the death of his father.

Child Safety: EC Campaign
Baroness Burton of Coventry Baroness Burton of Coventry asked Her Majesty's Government:
What progress has been made in the child safety campaign due to be introduced in September or October as announced by the European Commission (HL Deb., 16th June, col. 370).
Lord Strathclyde: My Lords, the launch date for the European child safety campaign has been postponed. The Commission has experienced difficulties in finalising its contribution to the campaign. Until these problems are overcome it will not be possible to give a revised date for the launch.
Baroness Burton of Coventry: My Lords, that is a most disappointing Answer, which I expected but for which the Government are not to blame. As the Minister will be aware from his brief, we have now been on this matter for some two and a half years. As the Commission has fallen down so badly on what it said it would do, can the Government do anything both to spur indignation and stir up initiative among the organisations concerned in this country? Would it be possible to get on with our plans? Will the Government support such an endeavour?
Lord Strathclyde: My Lords, I am grateful to the noble Baroness for that question. She is quite right in saying that the Government are not to blame in this matter, and we continue to work with child safety organisations such as the Child Action Prevention Trust and RoSPA in this most important and vulnerable area. From the Government's point of view, there is no question of delay leading to a standstill on child safety. Other initiatives are going ahead continually such as the recently launched toy safety campaign and the publication of the Keep Them Safe and Keep Your Baby Safe booklets.
Lord Brougham and Vaux: My Lords, is my noble friend aware that there is great disappointment that the Commission cannot launch a scheme? May I suggest to my noble friend that he contacts the Commission to suggest that it contacts RoSPA, which I am sure would be only too pleased to help put such a scheme on the road?
Lord Strathclyde: My Lords, the Government are always pleased to pass on the messages of the noble Lord, Lord Brougham and Vaux. RoSPA is a highly respected organisation and I shall pass on his comments, as well as those of the noble Baroness, Lady Burton, to the Commission.
Baroness Ewart-Biggs: My Lords, in view of the importance of a campaign which aims to reduce the number of accidents to children in the EC by 10 to 20 per cent. by 1995, does the Minister know what reasons the Commission give for the delay and the specific actions that the Government have taken to encourage the EC to launch the campaign?
Lord Strathclyde: My Lords, the Government were informed by the Commission earlier this year that it would launch its campaign in September or October this year. Since then things have gone badly wrong for the Commission and the major projects that were to be its responsibility have all come up against severe problems. This has led to the delay that I have mentioned. The campaign was to be divided into three parts: the building of a giant house involving an imaginative display of safety hazards, the production of a logo and the establishment of a computer database system. None of these has gone ahead because of various legal technicalities and disagreements with other member states. Specifically, as I mentioned in a previous answer, the Government are not letting that delay their campaign for child safety, which, as the noble Baroness knows, is extremely important. The Government are very much aware of the problems.

European Single Market: Preparation
3.5 p.m.
Lord Rodney Lord Rodney asked Her Majesty's Government:
What is their assessment of British industry's awareness of the programme to complete the European single market by 1992, and what steps are they taking to encourage this in preparation.
Lord Strathclyde: My Lords, nine out of 10 firms in this country are aware of the significance of the single market challenge. Now they have to examine the implications for their business and consider what action to take accordingly. The Department of Trade and Industry's Europe Open for Business Campaign aims to encourage firms throughout the country to prepare for the single market. Preparing for the market is above all a task for business. This is why I have welcomed the CBI's Initiative 1992, which provides clear evidence that British business is ready to seize the new opportunities.
Lord Rodney: My Lords, I should like to thank my noble friend for that encouraging reply. I believe Her Majesy's Government should be congratulated on the efforts they have made to make British industry aware of the challenges that will arise in 1992. But does he agree that there is a considerable difference between being aware and taking the necessary steps to meet this challenge? Will he say whether Her

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Majesty's Government have further plans to monitor British industry to ensure that it takes the necessary steps to meet the challenge? Are there any sections of British industry that particularly need to be followed up, like the smaller companies?
Lord Strathclyde: My Lords, although I said that nine out of 10 firms in the country were aware of the campaign, so far only one firm in three has taken steps actively to prepare for the single market. This shows that a great deal of work needs to be done, which will be done by the Government, trade associations, professional advisers and others to stimulate a response. The specific areas that need to be encouraged arc marketing, sales and distribution, training, recruitment and language skills.
Lord Taylor of Blackburn: My Lords, how does the Minister arrive at the figure of one firm in three? How does he know that people are not doing a great deal on their own without approaching the department?
Lord Strathclyde: My Lords, I am sure that the noble Lord is quite right. There are many people doing things on their own, and this is something which the Government seek to encourage. The one in three figure has been derived from those people to whom we talk in the department and I assume that it is correct.
Lord Williams of Elvel: My Lords, does the noble Lord agree that it is not just a question of firms being alerted to the possibilities and problems of the 1992 arrangements, but also of employees? What arrangements have the Government made with the Trades Union Congress to make sure that through the trade union movement employees are so alerted?
Lord Strathclyde: My Lords, I am sure that the Trades Union Congress is well aware of 1992 and is making its own decisions on how to inform its members. However, the Commission also has views about employees and, while the Government are happy to develop measures to combat unemployment and to use structural funds to help the labour market to work better, we tend to oppose the idea of mandatory worker participation in companies.
Lord Jenkins of Hillhead: My Lords, following my noble friend's question—
Noble Lords: Oh!
Lord Jenkins of Hillhead:—can the Minister assure us that the Government, and in particular the Prime Minister, welcomed the appearance of Monsieur Jacques Delors at the Trades Union Congress, the terms in which he spoke and the reception which he received?
Lord Strathclyde: My Lords, my right honourable friend the Prime Minister has not told me her response.
Lord Harmar-Nicholls: My Lords, is my noble friend aware that the speech made by Jacques Delors at the Trades Union Congress bore no relation to 1992 separately? We can and should support the 1992 initiative but that should not interfere with the independent sovereignty of the 12 countries which make up the Community and that should always be borne in mind.
Lord Strathclyde: My Lords, my noble friend is right. I commend to the House as necessary reading the Prime Minister's Bruges speech.
Lord Taylor of Blackburn: My Lords, is the Minister aware that many firms are making private arrangements for 1992 and that they are concerned that they are not receiving answers from this and foreign governments to questions about tariffs?
Lord Strathclyde: My Lords, the Government are aware that there are problems. We are trying to solve them as quickly as possible.
Lord Williams of Elvel: My Lords, is the Minister saying that the Government have had no contact with the TUC in regard to this matter? Although the Prime Minister may not tell him all her thoughts on various matters, is the Minister satisfied that the Secretary of State for Trade and Industry is telling him all his thoughts?
Lord Strathclyde: My Lords, I am not aware whether there has been contact between the Department of Trade and Industry and the TUC. I shall be pleased to inquire and let the noble Lord know.
Lord Diamond: My Lords, does the Minister agree that there would be more enthusiasm in the approach of industry in preparing for 1992 if there was more enthusiasm in the approach from on high?
Lord Strathclyde: My Lords, if by the phrase "on high" the noble Lord means the Government, my reply is that the Government have made their position clear. They are most keen in their approach to 1992 and they are doing a great deal to make people aware of the challenges.
Lord Chalfont: My Lords, is the Minister aware that the efforts of the Government, especially the Department of Trade and Industry, to raise the level of awareness of business and industry in this country are much admired and appreciated? Nevertheless, can he assure the House that the Government will try to ensure that our eyes are not taken off the ball of the single European market in 1992 by irrelevant arguments about European federalism?
Lord Strathclyde: My Lords, I could not agree more with the noble Lord.
Lord Lucas of Chilworth: My Lords, does my noble friend agree that the two videos and the literature made available by his department to trade associations, chambers of commerce and so forth are most instructive and illuminating? Does he also agree

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that they point in the right direction those who do not know the direction in which to go and that they therefore answer some of the questions which the noble Lord opposite believes to be left unanswered?
Lord Strathclyde: My Lords, I am grateful for my noble friend's interjection.

University Funding: VAT on Gifts
3.14 p.m.
Lord Nugent of Guildford Lord Nugent of Guildford asked Her Majesty's Government:
Whether they will increase their subvention to the Universities Funding Council to compensate for the loss of revenue which universities will suffer as a result of the decision by Customs and Excise to charge VAT on gifts by private companies to universities.
Viscount Davidson: My Lords, I am glad to have this opportunity to clear up a general misunderstanding. There is no VAT on unconditional gifts of money to universities. Nor does the mere acknowledgment of such support attract VAT. However, VAT is chargeable where payment is conditional upon a university's supplying clearly identifiable benefits in return, such as advertising or publicity. This has always been the position and each case is considered on its particular facts.
Lord Nugent of Guildford: My Lords, I thank my noble friend for that helpful Answer. Is he aware that recent press reports state that the Customs and Excise are applying a more stringent test to gifts made by donor companies to universities and colleges? Can he confirm that the Customs and Excise has not changed the basis of the test and is applying a common-sense policy to such very desirable gifts?
Viscount Davidson: My Lords, I am aware of the press reports which are based on a misunderstanding. In order to avoid any further misunderstanding in this area I should like to point out that today the Customs and Excise is issuing a press release on the subject.
The Earl of Halsbury: My Lords, the Minister's Answer avoided a grey area. Normally VAT is charged by seller to buyer and the seller must then account for it to the Government, less any VAT he has paid. Where a university accepts an industrial contract for research would it include that in its bill to the commercial customer and then account for it to the revenue authorities? That appears to be a grey area which has not been covered by the noble Viscount's Answer.
Viscount Davidson: My Lords, to the extent that tax is incurred which can be directly attributed to its taxable activities, the university will be able to deduct input tax under the normal rules. In that respect the university will be in the same position as any other taxpayer. However, I remind your Lordships that
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most universities are registered for VAT because they make taxable supplies, such as holiday lettings and accommodation, sports facilities, concerts and bar sales. Therefore there will be no charge made on them.
Lord Peston: My Lords, I thank the noble Viscount for a reassuring Answer. The statement to be made by the Customs and Excise will reassure universities. However, the Question referred specifically to gifts; it did not refer to other activities in which universities might engage for business enterprises. Is one correct in understanding that gifts will not be subject to VAT?
Viscount Davidson: My Lords, providing that no other benefits are supplied in return, such as advertising or the making available of the university facilities to the company, VAT does not apply. Companies which are charged VAT are able to recover it from Customs and Excise through the VAT credit mechanism. Most financial support is outside the scope of VAT. The Government have no wish to impose unnecessary tax on a means of helping universities. However, the VAT EC law must be observed.
Baroness David: My Lords, the Minister's Answer was reassuring. Does it apply also to individual colleges which may have appeals for endowments and so forth?
Viscount Davidson: My Lords, the Committee of Directors of Polytechnics and the Standing Conference of College Principals have recently proposed that after 1st April 1989, when they leave local authority control, they should enjoy the same VAT exception as universities. Discussions with Customs and Excise officials are continuing and I am sure that my right honourable friend the Chancellor of the Exchequer will consider the case carefully.
Baroness David: My Lords, I thank the Minister for his reply but perhaps I did not make myself clear. I was referring not to polytechnics and colleges in the public sector but to colleges in the university sector which may have their own appeals. Does the situation apply to them?
Viscount Davidson: My Lords, I am afraid that I do not have an answer to that question but I shall write to the noble Baroness.

Whisky Exports: Japanese Tax
3.18 p.m.
Lord Campbell of Croy Lord Campbell of Croy asked Her Majesty's Government:
What progress has been made in removing discrimination against whisky produced in Scotland in the Japanese tax regime.
Lord Strathclyde: My Lords, earlier this year, the Japanese authorities announced their intention to introduce, from April 1989, a single rate of tax for all

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whiskies, at a level 45 per cent. below that currently applying to whisky produced in Scotland. We very much welcome Japan's proposals which, when implemented, will greatly improve the ability of' such whisky to compete in the Japanese market on fair and equal terms.
Lord Campbell of Croy: My Lords, I am grateful to my noble friend for that Answer; it indicates expectation of a great improvement next year. Will my noble friend accept qualified congratulations on what has been achieved so far? The process takes a long time but have the remedies available through GATT been fully pursued and carried out?
Lord Strathclyde: My Lords, I am grateful to my noble friend Lord Campbell of Croy for his congratulations, which I naturally accept. Having said that, it was not all my own work. As the noble Lord no doubt knows, it was the European Commission which took Japan to GATT and that has led on to the success of these proposals. We hope that it will take place in April next year.
Lord Morris: My Lords, is it right to assume that the new rules apply also to whiskey from Northern Ireland and, indeed, from the Principality?
Lord Strathclyde: My Lords, that is correct.
Lord Rugby: My Lords, is there any saki produced in Scotland and can that be exported to Japan?
Lord Strathclyde: My Lords, I think that will be up to manufacturers to decide.
Lord Williams of Elvel: My Lords, can the noble Lord tell us what is the definition of whisky for these purposes?
Lord Strathclyde: My Lords, I understand that the definition of whisky which we are using is that which is currently agreed by the Government; that is, over 40 per cent. proof.

Business
3.21 p.m.
Lord Denham: My Lords, it may be for the convenience of the House to know that, subject to the progress of business, it is expected that Parliament will be prorogued by Royal Commission next Tuesday, November 15th. The House will sit at 9.30 in the morning and, save for Royal Assent, no other business will be transacted.
With the leave of the House, it has been agreed through the usual channels that I shall arrange for a statement that will be made in another place this afternoon on the report of the inquiry into the King's Cross underground fire to be printed in the Official Report. As soon as the statement has been concluded in another place I shall arrange for a copy to be placed in the Library of the House.
Lord Underhill: My Lords, I am sure that the House will agree that that statement on the King's Cross incident is of such great importance that it merits far more consideration than would have been possible in a 20-minute exchange of questions and answers in your Lordships' House. We are given to understand that the report will cover 91 days of public inquiry and we are informed in the press that it will contain something like 151 recommendations. Although the Government Chief Whip can make no guarantees, perhaps I may ask for an early debate on the report to be arranged through the usual channels.
Noble Lords: Hear, hear.
Lord Tordoff: My Lords, perhaps I may endorse those remarks while thanking the Chief Whip. This is clearly a most important report which should not be trivialised by spending just a few minutes on it this afternoon. This is a serious matter. I believe that noble Lords on all sides wish to study the report and I support the view that we should have a debate at the earliest moment. I hope that that can be arranged through the usual channels.
Lord Denham: My Lords, I am most grateful to the noble Lords, Lord Underhill and Lord Tordoff. Of course this is an important report. It would be very difficult indeed, in reading the statement, to achieve very much in the period which is allowed for questions and answers in the normal way. Although, as the noble Lord, Lord Underhill, said, I cannot promise anything, I can certainly undertake to consult through the usual channels as to whether and when a debate should be arranged.
Lord Hailsham of Saint Marylebone: My Lords, can we assume that the report will be available this afternoon in the Printed Paper Office?
Lord Denham: My Lords, yes, I think we can assume that.
Lord Boyd-Carpenter: My Lords, will my noble friend bear in mind that there is a very considerable wish in all quarters of the House that this very important matter, vital to all those who move about in London, should be debated very early in the new Session?
Lord Denham: My Lords, I shall certainly bear in mind the added weight that my noble friend has put to that request.

King's Cross Fire: Fennell Report
Following is the statement by the Secretary of State for Transport (the right honourable Paul Channon) referred to:
"With permission, Mr. Speaker, I should like to make a further statement about the disastrous fire at King's Cross underground station on 18th November 1987. I am publishing today as a Command Paper the report by M r. Desmond Fennell QC on his investigation under the

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Reguation of Railway Act 1889 into the causes and circumstances of this terrible disaster.
"The House will join me in renewing on this occasion our expressions of condolence to the bereaved and sympathy and best wishes to the injured. The House will also join in paying tribute to the many people in the emergency services, the staff of London Underground, the public and the doctors and nurses who showed courage and dedication and gave help in this disaster. I repeat in particular Mr. Fennell's words that a large number of members of the London fire brigade behaved with conspicuous courage and devotion to duty. He particularly mentions Station Officer Townsley, who died a hero's death, and also the great courage shown by Police Constable Hanson of the British Transport police, which must have enabled many people to escape with their lives.
"Mr. Fennell has concluded that the fire was started by a discarded match falling into accumulated grease and debris on the track of the escalator and that it accelerated up the trench of the escalator until it burst into the booking hall, causing the deaths of 31 people.
"Mr. Fennell has made 157 recommendations. He regards 33 of these as most important, and a further 59 as important. Action is of course already under way on many of them. Many of the recommendations require specific action by London Underground Ltd. to prevent a recurrence. They do, of course, include the most urgent removal of wooden panelling from escalators. I have asked London Regional Transport to have all these recommendations dealt with promptly. Considerable amounts will have to be spent. The plans announced by my right honourable friend the Chancellor of the Exchequer on 1st November already provide in full for all the proposals already put to me for spending on underground safety totalling £266 million over the next three years.
"The investigation has shown major shortcomings, requiring a new approach to safety management and fire prevention in the underground and specific safety audits by London Regional Transport. I am calling on both bodies urgently to put into effect new arrangements recommended by Mr. Fennell.
"An enhanced approach is also required from the Railway Inspectorate and I have discussed Mr. Fennell's recommendations with the chairman of the Health and Safety Commission. I have every reason to expect that the present recruiting campaign will bring the inspectorate fully up to complement by the end of January. It will need to be further strengthened for the tasks that Mr. Fennell identifies, including the use of the powers of the Health and Safety at Work, etc. Act 1974 to enforce measures needed for the safety of passengers on the underground and, I must add, on other railways. The chief inspecting officer of
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railways is now organising a special investigation of London Underground with support from the Health and Safety Executive. It will examine the safety management systems and monitor the implementation of planned safety measures, and will be completed in March.
"The lessons of this report go wider than London Underground and London Regional Transport. I have today written to the chairman of the British Railways Board inviting the board to consider the lessons of Mr. Fennell's report for the management and audit of safety. Letters are also being sent to the chairmen of the passenger transport authorities in Tyne and Wear and in Strathclyde.
"My right honourable friend the Home Secretary will shortly bring forward regulations under Section 12 of the Fire Precautions Act 1971 to require specific measures at underground stations. This is the speediest means to introduce enforceable standards without uncertainty. The railway operators and fire authorities will be consulted on them. My right honourable friend is commissioning special studies of the best methods to control spread of smoke. These present difficult technical problems.
"There are also lessons for the emergency services. Copies of the report are being sent to the London Fire Brigade and London Ambulance Service. I shall be considering its implications for the British Transport Police, and my right honourable friends concerned will be considering its implications for the emergency services for which they have responsibilities.
"I have to deal with two particular matters. As regards the costs of representation at the investigation, after taking into account the special circumstances of this case, I am accepting in full Mr. Fennell's recommendations.
"Secondly, the position of individuals. Following the fire, Sir Keith Bright offered to resign as chairman and chief executive of London Regional Transport. I asked him to stay during a difficult period, and he did. He has asked me again to accept his resignation, and I have now done so. Dr. Tony Ridley is a member of the board of London Regional Transport, and the chairman and chief executive of London Underground Ltd. He also has given me his resignation, which I have accepted. I shall make fresh appointments in due course, and meanwhile Sir Neil Shields, who is a member of the board of London Regional Transport, has at my request agreed to take on the chairmanship.
"I conclude by expressing to Mr. Fennell and his assessors my warm thanks for a very full and thorough investigation. We must all ensure that the lessons of this tragedy are fully learnt and fully applied. The Government will play their full part to ensure that they are followed up as quickly and as vigorously as possible."

North Killingholme Cargo Terminal Bill
The Chairman of Committees (Lord Aberdare): My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That this House do concur with the orders made by the Commons set out in their message of yesterday. (The Chairman of Committees.)
On Question, Motion agreed to, and it was ordered that a Message be sent to the Commons to acquaint them therewith.

Rate Support Grants Bill
3.27 p.m.
Lord Hesketh: My Lords, I beg to move that the Bill be now read a second time.
This Bill deals with modifications to the arrangements by which grant entitlements for local authorities are to be calculated for the remaining years of the present rate support grant system. It has been certified in another place as a Money Bill. It nevertheless requires your Lordships' consent, and the House will therefore wish me to explain both the reasons for it and the way in which it will work.
The Bill was announced by my right honourable friend the Secretary of State for the Environment and my right honourable friend the Minister of State for Wales in statements about local government finance made on 7th July which were repeated in this House. The Opposition spokesman in the other place recognised that:
"the Secretary of State's scheme…would not have worked if it had not been a secret".
The primary purpose of this Bill is to provide the basis for an orderly closedown to the present RSG system, and thereby pave the way for an orderly transition from the existing system of grants to local authorities to the new community charge system which will operate from April 1990. In the present system grant depends on an authority's need to spend and on its actual spending. In the new system an authority's grant entitlement will depend only on its need to spend. This will be an important simplification. It will enable the grant arrangements to he simpler and, I hope, more comprehensible both to authorities and to Parliament.
The move to this new system does, however, mean that there is a need to make sensible transitional arrangements to bring the existing system to an orderly close. This is what this Bill does.
There are two fundamental reasons for legislating in the way proposed in this Bill. First, in the present system, local authorities do not know their grant entitlements for a year with certainty until many years after the financial year has been concluded. We have not yet, for example, finished with 1985–86. There is clearly a need to be finished with the old system before the new community charge system comes into effect. I think it is generally recognised that something would need to be done along the lines
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of this Bill in order to achieve this. Although there may be differing views about the best way to achieve this, I hope there will be agreement about the underlying principle. This legislation will allow us to make all the final adjustments to grant under the old system before the end of 1989–90.
Secondly, the Bill also removes the risk that some less than scrupulous authorities might seek to obtain an unjustified grant gain in remaining years of the present system. At present, any device which reduces an authority's total expenditure up to 1989–90, even at the expense of higher expenditure later, will produce a once and for all grant benefit at the expense of the Exchequer. Some authorities are known to have been considering the use of various creative accounting mechanisms in order to exploit the present system.
Let me explain why. In the present system, grant entitlements depend on total expenditure, which is a technical, accounting concept. The figure for total expenditure for any year may be higher or lower than what might be called its "real" expenditure on services, depending on the accounting manoeuvres which an authority might engage in. In the normal course of events, this does not matter greatly, because eventually any artificial devices have to be paid for. A gain in grant in one year is counteracted by a reduction in some later year.
Your Lordships will appreciate, however, that a reduction in expenditure in 1989–90, or in one of the other years for which grant adjustments are still possible, will result in a grant advantage without any offset in later years under the new system when grant no longer depends on spending. In short, it would be a one-way bet at the expense of the Exchequer. I understand that a number of City institutions were offering authorities arrangements designed to produce precisely this effect. They would have enabled some authorities to transfer the burden for their services away from their ratepayers and onto the national taxpayer. This would clearly run counter to the Government's objectives as regards encouraging local accountability. If local authorities want to enter into complex financial deals, that is a matter for them, but there is no reason why the national taxpayer should be expected to pay a grant bonus as a result.
To bring the old system to a close and to remove the incentive for further creative accounting, the Bill provides that any authority's grant for the remaining years of the present system—that is, 1985–86 to 1989–90—should be based on information with the department at the time the new arrangements were announced on 7th July.
Clauses 1 and 2 deal with grant calculations for the years 1985–86 to 1988–89 in England and 1986–87 to 1988–89 in Wales. They provide that instead of using final outturn spending information we should instead use an expenditure figure—termed the relevant amount—which is derived from the rules set out in Schedule 1. The principles by which this relevant amount will be calculated are applicable to all local authorities. We believe they are fair. They produce clear, unambiguous figures which are accepted by local authorities. A clear line must be drawn under

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the old system; and we believe the information we held on 7th July makes that an appropriate date.
Clause 3 deals with 1989–90. Each year the RSG settlement makes an assumption about authorities' spending in the next financial year. Such an assumption is necessary in order to calculate authorities' initial grant entitlement. Clause 3 and Schedule 2 set out the rules for determining authorities' total expenditure in 1989–90 against which grant will be paid. Next year grant payments will be based on authorities' budgets for 1988–89 projected forward. This is the normal way in which the expenditure projection is made. What will be different is that grant entitlements will not subsequently be revised in the light of what authorities actually spend. This is important because it will give authorities certainty about their grant entitlement before the start of the financial year.
This forward projection will be subject to special adjustments: first, to take account of the transfer of higher education establishments which from April next year will no longer be the responsibility of local authorities but of the new Polytechnics and Colleges Fund Council; and, secondly, for community charge preparation costs for which extra provision is made available.
To assist local authorities in preparing for the introduction of the new system my right honourable friend the Secretary of State has announced that next year's settlement will include £110 million for the extra costs authorities will incur on preparing for the community charge. Half of this expenditure will be met by a new specific grant (£55 million) which will be payable next year to all charging authorities. The remainder will be supported by block grant in the usual way. Capital allocations for 1989–90 will include a specific allocation of £135 million in addition to £25 million already announced for this year. There will therefore be no excuse for authorities which do not make adequate and timely arrangements for the community charge.
Clause 4 will enable consultation on next year's settlement to begin before Royal Assent. This will enable authorities to have details of their grant entitlements for next year in good time for their budget-making.
During the debate on this Bill in another place, alternative rules were suggested to those set out in Schedule 1. They were debated at considerable length. But I have to say that these alternatives would fail to meet our objectives in this Bill. They would not enable us to bring about an early close down of the present RSG system because they would require the collection of new informaton from authorities which had been certified by the auditor. Authorities whose total expenditure would be higher under the alternative rules would of course lose grant. Such authorities would be in no hurry to provide further information to the department. There would be a real risk that the system could not be closed down until after 1990.
The alternative rules would also present considerable operational difficulties. They are most unlikely to produce a single unambiguous figure for total expenditure for each authority for each year.
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There would be major difficulties of interpretation. We have considered very carefully the alternatives that have been put forward by local government, but I have to tell your Lordships that none commends itself.
This Bill will enable us to meet our three main objectives. First, it will close down the present RSG system in an orderly manner. Without it we would need to continue with supplementary reports under the present legislation until 1992 or 1993. Secondly, it will break the link between expenditure and grant in the present system and thereby provide for a smooth transition to the new system in which grant will be fixed. It will provide authorities with certainty about their grant entitlements for 1989–90 and for earlier years. Thirdly, without it there is a considerable risk that some less than scrupulous authorities would use creative accounting in the remaining years of the present RSG system to manipulate their expenditure and so extract additional grant from the national taxpayer. This Bill therefore provides important protection for the Exchequer. Without it hundreds of millions of pounds would have been at risk.
Your Lordships, and local government, should not judge this Bill solely in terms of its effects on grant for this year and last. They should also take into account next year's settlement. For 1989–90 we have proposed aggregate Exchequer grant of £13,575 million. That is a generous amount. It is a substantial increase of £1·1 billion—about 9 per cent.—on grant payments this year. As a result of this Bill the full £13,575 million will be paid to authorities. I therefore commend the Bill to your Lordships.
Moved, That the Bill be now read a second time.—(Lord Hesketh.)
3.35 p.m.
Lord McIntosh of Haringey: My Lords, I do not in any way wish to go against constitutional proprieties which restrict the powers of this House in relation to Bills which have been certified in another place as money Bills, but that does not mean we have to like this Bill. Certainly it does not mean that we have to let such a Bill go through without at least discussing the issues raised.
It is particularly objectionable that a Bill of this kind should be introduced during the spill-over period at this stage in the Session. We have looked at precedents for Bills being introduced at this time. There are precedents but they do not in any way justify the introduction of such a controversial measure at this late stage in the life of a Session.
The precedents of which I am aware are the Cinematograph Films Act 1975, which was supported by the then Conservative Opposition and which was not a party political matter, and the Imprisonment (Temporary Provisions) Act 1980, which was subject to some attempts at amendment in Committee in another place but was not opposed here at Second Reading by the Labour Opposition and was not a party political matter.
This Bill is a party political matter. It is yet another attack on local government. Whatever the noble Lord says about the administrative nicety of closing down the accounts on the old system of local

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authority finance before we start on the new one only makes me even more suspicious. It strikes me that this is a civil servant's Bill, an official's Bill, and that the Government have jumped on the political bandwagon because they see it as an opportunity to impose further financial penalties on local authorities.
There is no doubt that the effect of this Bill, particularly for last year and the current year, will be to impose financial penalties on local authorities as a whole. It will also have the effect of course of bringing windfall profits for the accounting periods back to 1985–86 to a large number of local authorities and unexpected losses to local authorities. In a moment I shall come to creative accounting, which forms so much of the justification for this Bill.
We have in this Bill an early end to the resource equalisation system which has been the basis of local authority expenditure for many years. The Government, having succeeded in persuading Parliament that it would be right to have a completely new system, the poll tax, are now in effect retrospectively taking advantage of the fact that the old system has to be phased out. That is being done substantially to the financial detriment of local authorities. The calculations which we can make based on returns to the Treasury by the local authority associations are that the grant holdback— in other words, the loss to local authorities under this system—in 1987–88 is about £265 million and that the grant hold-back for 1988–89 is about £511 million.
My honourable friend John Cunningham, MP, obtained from the Secretary of State, in answer to a Written Question at the end of October, a complete list of how individual local authorities are affected by this loss of £511 million. It is not what one might expect. It is not that Labour authorities alone will lose and Conservative authorities gain relatively. The losses are very heavy for many of the shire counties. I am somewhat surprised that noble Lords who commonly speak with a knowledge of the affairs, for example, of Kent County Council are not present. Kent County Council is losing well over £10 million as a result of this taking away of £511 million grant which would otherwise have been allocated under the old system.
In effect we are having retrospective legislation. We are changing the rules of the old system in order to close it down, and changing the rules involves taking away money. Our objections would be less strong, though they would still exist, if the result was neutral and if the effect was that some local authorities gained and others lost. The fact that local authorities as a whole will lose and that the Treasury will gain £.75 billion simply is not acceptable. It is certainly not acceptable in a Bill introduced at the very end of October and at the very end of the Session. There is no good reason whatever why this legislation should not have been introduced early in the new Session. There was no such action taken at the end of the last Session though Scotland was going into the poll tax regime a year earlier. Why should this legislation be introduced now? It is simply not acceptable.
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A large part of the noble Lord's speech was taken up with claims of creative accounting that we have heard so often. I believe he described it as a one-way bet at the expense of the Exchequer. I believe I have made it clear that this is a one-way bet at the expense of local authorities and that the Exchequer will gain. The noble Lord is quite wrong about the claim of creative accounting in any event. These are simply accusations about City institutions being prepared to lend. The evidence produced to the department is very well known to it. Moreover, it was rehearsed at some length when the Bill was debated in another place. The reason for these measures is not creative accounting; there are many local authorities, by no means all of them Labour, that will lose very badly as a result of this Bill because they have been prudent in their expenditure rather than the reverse.
They will lose because though they may expect savings they do not include their savings in their claims to the department until they are absolutely sure that they will materialise. That is sensible and prudent accounting and made possible by the existing system which provides that the final settlement is based upon actual expenditure as finally agreed. In practice there are many authorities that will lose very badly as a result of the Bill—authorities that have not in any way been creative, but authorities that have been prudent. As an example let us consider the Conservative London Borough of Merton. The final accounts incorporate the expenditure reductions of £15 million for which no additional grant will be forthcoming.
Perhaps I may also give further examples as regards superannuation funds. Any noble Lords who have involvement with them as I have in private industry, will be aware that superannuation funds are not funds that are changed and valued in each year on the year. It takes a long time to make a final evaluation of superannuation funds. As regards the West Midlands' superannuation fund, which represents the West Midlands metropolitan districts, there will be a block grant loss of about £25 million as a result of the revaluation of the superannuation fund. No action by them is required: it is the professionals who do the revaluation. They have been prudent in not taking those reductions in expenditure into account in their accounts and because they did not get the figures to the Secretary of State by the right time they will lose £25 million.
The same situation is true of the London borough of Lewisham which will lose £3 million for exactly the same reason. The borough of Wolverhampton will lose £2 million of additional grant because it has made expenditure reductions in the years 1987–89 which could not be reported to the Secretary of State by 6th July. The borough of Dudley has made economies of £5 million and it was expecting to receive an increased grant of £3 million, but it will no longer receive it.
Police and fire authorities—not just local authorities—that have made reductions in expenditure as they have been urged to do are not receiving the benefit of those reductions. In other words, and to put it more crudely, they are being penalised for over-spending which they have not undertaken. They are losing out in every possible

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way. I do not believe that it will be in the tradition of the Government party normally and publicly to penalise police authorities, but that is what it is doing over and over again.
If the Government were to argue that the main cause and justification for these measures was creative accounting, they could have paid attention to the amendments that were put down by my honourable and right honourable friends in another place. Those amendments did not in any way seek to condone creative accounting; they sought to take account of the realities of local authority budgeting and auditing procedures. The amendments said, first, that where an authority had, by 7th July, already approved its accounts for 1987–88 that expenditure information should be taken into account in determining grant entitlement. Local authorities had approved their accounts and they could not change them any more. There was no scope for creative accounting but the accounts were not with the Secretary of State by 7th July and therefore many of these bodies will lose out.
The second amendment stated: that where an authority had not approved its accounts by 7th July grant entitlement should be based on final expenditure as certified by the authority's auditor. Again, there was no scope for creative accounting but there was scope for a realistic assessment of the likely actual expenditure of the local authority by professionals and not by politicians.
The third amendment stated that where an authority had not approved its final accounts, but had by 7th July formally taken decisions which would affect the final reported total expenditure, those decisions should be allowed in determining total expenditure for grant purposes. Again, decisions had already been taken before the statement was made by the Secretary of State on 7th July. There was no possibility of subsequent creative accounting, but there was the possibility of the recognition of the true position of the authority under the existing rules as far as it was aware.
The Government's response was not to agree to these amendments. They could not shelter behind the creative accountancy argument because that argument is irrelevant to these amendments. The Government just ignored them and gave no adequate replies, it must be said, in another place to the arguments and they were simply rejected by the Minister.
This is a classic case of shifting the goalposts while the game is still in progress. It would not be so serious if it were not so much more than a game. A great deal of money is involved. The Treasury is taking a windfall profit by changing the rules in the middle and we are expected to acquiesce in these measures. Constitutionally we have to do so, but we do so with a heavy heart.
3.48 p.m.
Lord Callaghan of Cardiff: My Lords, I confess that I have never understood the fiendish complexities of the rate support grant. I am filled with admiration for those like my noble friend Lord McIntosh who are able to give us such a powerful
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speech as he has done this afternoon. I want to approach the subject in a much simpler way by putting to your Lordships what I have been asked to say by the City of Cardiff as regards the impact of the Bill—a Bill which my noble friend certainly convinces me should not have been put forward at this stage and there certainly should have been more consultation than there has been.
The Bill's impact on the City of Cardiff is to involve the ratepayers improperly in an extra bill of some £2,300,000 because Ministers have failed to keep their word. That is a harsh thing to say but I intend to prove it and I shall do so quite shortly. I will trouble the House with a series of dates. On 19th March 1987 a report was placed by Ministers before another place which said that the grant paid to a local authority by the Government in respect of the year 1987–8 will depend on what the authority actually spends. The grant was to depend not on the budget that the local authority prepared or on the estimates as they seemed to be working out during the year; it was to depend on what the authority actually spent. If that is not a firm undertaking I have never heard one. It is that undertaking that Ministers break in this Bill.
In the light of that statement the city of Cardiff set about making reductions in its budget in order to keep within the Government's guidelines. It published estimates which showed that it intended to reduce its expenditure. The financial year began a month after the statement in April 1987. Events proceeded with Cardiff city council, and the county as well, working at these reductions, which clearly could not be achieved by a stroke of the pen. They have to be achieved by cutting services over a period, by making people redundant and by inviting people to take early retirement. All these sums accumulate during the year.
In February of this year the Secretary of State for Wales asked local authorities how they were getting on. He said that the year would shortly be coming to an end and though he could not expect an exact figure because part of the year was still to come, he would like an estimate. That is a free paraphrase. His exact words were:
"It is recognised that in compiling figures there may be a need to balance speed of reporting against the time required to refine the estimates".
He went on:
"I would be grateful to receive the best estimates that can be made in the time available as an informed approximation".
In other words, the Secretary of State was saying, "I know that you cannot tell me before the end of the financial year the exact outcome on which I shall be paying you a block grant, but give me the best idea you can so that I have some figures to go on". That was the position in February 1988.
The council complied. However, our treasurer—and normally this would be a compliment—is a cautious and prudent man, as all treasurers should be. There were some savings he had not achieved which he hoped to achieve before the end of the financial year. They had not fructified by February although he expected them to do so by the end of the financial year in April. They were not in his hand so

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he did not include them in his estimate when he returned the ministry's form to the Welsh Office. Indeed, when he wrote to the Welsh Office and enclosed the form he said that his figures were,
"no more than a prudent estimate".
I emphasise again that during the whole of this period services were being cut and therefore savings were being garnered in the whole time. Staff were being made redundant and people were taking early retirement. These were not creative accounting measures. They were measures of real substance which affected both men and services in the city of Cardiff.
The estimate was made in February. The financial accounts for the year ending April finally closed in June. That is when the treasurer was able to set out the position. He was able to report to the finance committee of the city council that he had done better than he had estimated in the previous February. In other words, his prudence was justified. The city treasurer was delighted. He made his formal report to the finance committee on 16th June. Note the date. The accounts had closed. The council had kept within the Government's guidelines. It had done better than the situation set out in all the figures it had given to the Government when asked for them. He was able to add the good news that, on the basis of the undertaking laid before the House of Commons by Ministers, the city of Cardiff would be entitled to an extra £2,300,000 because its grant would depend on "what the authority actually spends". Those are the words.
So far so good. On 29th June another important date—around about a fortnight after he had reported to the finance committee (all was well and the accounts were closed) the Secretary of State for Wales asked the council for its final figures, something it had been expecting. The form was headed "Block Grant Claim Form". Nothing could be clearer than that. It was not asking for an estimate, as the previous form had done. It was asking for a form to be duly certified and signed by the financial officers of the city council. They did so. The Secretary of State asked, "Please return this form to me by 1st August". All this was in accordance with normal practice. The council had complied in every respect with the Government's wishes. It had reduced its expenditure. It had given the Secretary of State the approximate estimates he had asked for of what it hoped it could do. It actually improved on the estimate in the final result. The council was soon disillusioned if it thought that the block grant claim formon which it sent in its figures would be accepted.
Only eight days after he had sent the council this form—this is a very material point—a Statement was made in another place, on 7th July saying that the grant would be based not on actual expenditure, which had been the basis on which the whole thing had been worked out during the previous 15 or 16 months, but on,
"information which was with the department by midnight last night".
That is to say, the information that had been contained in the estimates made before the year was ended.
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No one can tell me that on the 29th June when the form was issued, asking for it to be returned by 1st August, Ministers were not already pretty well making up their minds that they were about to change the basis. Every fair-minded person who studies this matter will regard Ministers as having grossly misled Cardiff city council and all the other city councils and county councils which were taking Ministers at their words. The form was sent out on 29th June, asking for it to be returned by 1st August. On 7th July the rules were changed. If the form was in by 5th July the council was all right. As my noble friend Lord Cledwyn of Penrhos knows, if only the form had said midday on the day we would have whipped round from the city treasurer's office to the Welsh Office—it is only five minutes walk—and would have had the form in.
It is not right that these financial matters should depend upon a lottery of this kind. If we in this House had the power, I would undoubtedly ask your Lordships to send the Bill back in order for it to be looked at again. What has happened is grossly unfair. When the city fathers heard this they were dumbfounded. Indeed, it is an understatement to say that they were dumbfounded. They were incredulous. They went to the Welsh Office and said, "You can't mean it". When it was confirmed, this incredulity turned to anger—anger on all sides and among all parties. I speak for them all this afternoon. They felt, and I agree with them, that the Minister has cheated. Remember the dates: 29th June, 7th July and 31st August. Ministers have behaved in a most shabby manner over this matter.
I have one other point. The district auditor had already received the accounts before the Minister's announcement. There could have been no question of fiddling them afterwards with so me creative accounting—the phrase my noble friend used—in order to adjust them and get them right. The district auditor had those accounts which had been finally cleared in every way. The Minister had not asked for them to be delivered to him until 31st August. I do not know what your Lordships make of this behaviour. I have a strong feeling that you will agree with the city of Cardiff that the Government's good faith is in question and that Ministers have gone back on their word and on the understandings on which they based this matter for a very long time. The council feels that it has behaved responsibly, that it has co-operated in every degree with the Government's policy, unpalatable though it was, that it has been misled and that its financial relations with the Welsh Office have been harmed as a result. Above all, it is the view of the city of Cardiff, the capital city of Wales, that this shabby behaviour is damaging to the integrity of public administration.
I ask Ministers to take serious note of these people who did all that they could. It was the Conservative council which first cut; it was the Labour council after an election which carried it on and indeed made further reductions. Both sides are united on this issue.
I wrote to the Secretary of State, Mr. Peter Walker, and received a letter in return. I did not believe it myself when I read it, but I wrote to him and asked him to look into the matter because I thought at the time that perhaps Cardiff was alone and that

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something had gone wrong; I did not realise that this was a general affair that affected all of the cities. I hope that my noble friends will not mind me spending so much time on this because I think that it is a clear illustration of what has apparently happened in so many local authorities up and down the country. The letter said:
"I fully appreciate the concerns which you have expressed. It remains a fundamental principle"—
that is his defence, and as noble Lords can see from the letter it is not much of a defence—
"of the Bill that closedown of the existing rate support grant system should be based on simple rules equally applicable to all authorities".
All right—administrative convenience. If it does not mean that, then I do not know what else it means. I must tell the right honourable gentleman that there is another fundamental principle in my book, and I think in the book of many noble Lords on both sides of the House; that is, when Ministers have given their word, they should stick to it.
I do not overblame Mr. Walker. I do not think that he is the real villain of the piece. Indeed, he has built up quite a good reputation for himself in Wales since he was sent there as a viceroy and I can tell him that his exile there has certainly not done him any harm. No, as I say, I do not blame him. The voice may be the voice of Jacob; but the hand is the hand of Esau. I think that Mr. Ridley is the villain of this piece and Mr. Walker is just being dragged, humbled and chained at the wheels of his chariot.
I am sorry to have taken so much time but I feel that this is a most important and serious matter in which local authorities up and down the country have been mulcted by something which is very difficult to understand. It has taken me a long time in which to master all these details and if the example I gave is repeated throughout other local authorities, I can only say that the Bill should not have been passed and I very much regret that it has been.
Lord Rippon of Hexham: My Lords, before the noble Lord sits down perhaps I may put something to him. I should like to assure him that I am certain there are many noble Lords on this side of the House who, having listened to what he has said, will accept that the good faith of the Government is clearly in question and that a question has been raised as to the integrity of public administration.
May I also say to him that many people in local government who are most concerned about the relationship at present between central and local government will be very disturbed by what he has said.
Lord Callaghan of Cardiff: My Lords, I am much obliged to the noble Lord for what he has said. I believe that this is a matter where party differences should be put to one side. As I said, in my city there are no party differences over the matter. Putting party differences to one side, there should be a certain relationship between the actions of Government, their word and what happens afterwards.
I understand—no doubt the Minister will be able to comment on this—that as a result of the Bill Ministers will have no discretion to put the matter
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right; when the Bill becomes law nothing can be done. Indeed, we cannot send it back.
I have no doubt that every fair-minded person will agree that the Government should find some way to recompense the cities and the counties for what they have been unfairly mulcted of and that there should be some specific provision made to ensure that the Government do not gain this windfall which has been not only unfairly, but also unjustly, garnered by them.
4.3 p.m.
Lord Hesketh: My Lords, we have had a more than interesting debate this afternoon on the Bill. However, before I comment on the various points made by your Lordships, perhaps it would be helpful if I were to reiterate the three key objectives of the Bill. First, it will enable the present rate support grants system to be closed down in an orderly manner—without it we should be still calculating grant entitlements, under the present system, well into the 1990s. Secondly, the Bill will provide local authorities with certainty about their grant entitlement for 1989–90, and for earlier years. Thirdly, it will remove the incentive for authorities to indulge in creative accounting. I know that the noble Lord, Lord McIntosh, was rather dismissive about that, but I shall return to the matter later.
Perhaps I may now try to answer some of the questions raised by the noble Lords, Lord McIntosh and Lord Callaghan. I should like to take the opportunity to thank the noble Lord, Lord Callaghan, for writing to me before the debate, for which I am extremely grateful.
The noble Lord, Lord McIntosh, was unhappy with the timing of the Bill. I can only say that the Government decided to close down in July and announced that decision immediately. They could not have given a warning because, as the Opposition noted in another place, it would have entitled authorities to indulge in creative accounting. If the Bill had been delayed until the next Session, local authorities would not have known their position for grant for 1989–90. Further, the rate support grants settlement, which is usually presented before Christmas, would have either been delayed until the Spring or would have had to come forward under considerable uncertainty while the Bill was before Parliament.
The noble Lord, Lord McIntosh, drew our attention to the £500 million. This year local authorities have overspent the provision available by about £1.2 billion, as a consequence of which they had forgone around £500 million in grant. I find it difficult to accept, as some have argued, that local authorities might reasonably have been expected during the course of this year to reduce their budgeted expenditure by £1.2 billion and so take up the additional grant which was on offer.
Lord McIntosh of Haringey: My Lords, I am most grateful to the noble Lord for giving way. However, when he said that authorities have "overspent", what he means is that their budget and their provisional estimates involve overspending; he does not mean

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what over-spending has meant in every previous year when it has been the final accounts which have mattered so far as grant is concerned.
Lord Hesketh: My Lords, such a reduction is purely hypothetical and would have been unprecedented in local government finance.
Lord McIntosh of Haringey: My Lords, how can it be said to be "hypothetical" when it has taken place every year in which the system has been enforced? It is not hypothetical; it is real money.
Lord Hesketh: My Lords, I feel that we shall have to agree to differ on that point. The noble Lord, Lord McIntosh, drew your Lordships' attention to superannuation. It has been suggested that those authorities which did not reflect their reduced employers' superannuation contributions in the expenditure information returned to the department should now be allowed to make that adjustment and thereby gain grant advantage. But local authorities are requested to revalue their superannuation funds every five years.
Because of the buoyant state of their funds some authorities obtained interim revaluations. They did so on the basis of actuarial advice and, in good faith, made reductions in their contributions. The department has subsequently advised that reductions in superannuation contributions between the five-yearly revaluations were ultra vires. We could not therefore allow interim revaluations to continue and so had to call a halt. It would have been quite wrong to penalise those authorities which had made the interim reductions. They have gained accidentally because of a combination of circumstances.
The noble Lord, Lord McIntosh was dismissive of creative accounting. We could go into the matter at some length but I feel that I should just draw his attention to the fact that no one, even today, is entirely clear about who owns Camden's lamp-posts, let alone its library books or its municipal art collection, although we know that a French bank is reported to have bought its parking meters. It is the book-keeping transactions or financial deals which are unrelated to true spending and which alter the level of reported total expenditure but which gain government grant that we seek to prevent in our proposals.
The noble Lord, Lord McIntosh, was also unhappy about what he described as the "moving of the goal-posts".
Lord McIntosh of Haringey: My Lords, I am sorry to interrupt the noble Lord yet again, but he seems to be going on to another part of his speech without actually dealing with the real issue concerning creative accountancy. The point I was making—which he has not answered, and which Ministers in another place did not answer—is this. What is wrong with the amendments put down by the Opposition in another place which did not involve treating one local authority differently from another; which did not involve creative accounting but which provided for recompense for those authorities which
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had been prudent and not reflected their reductions in expenditure until they were sure of it. I gave three examples of those amendments which, as I said, were not answered in another place. Will the Minister answer those charges now, before he moves on to another issue?
Lord Hesketh: My Lords, the noble Lord, Lord McIntosh, is, I believe, referring to what I described in my speech as the alternative rules. I felt that I covered that point in my speech but I shall repeat the basis. The alternative rules would require the submission of new information and that would not enable us therefore to bring an early close to the present rate support grant system. Authorities with increased spending would be reluctant to submit further information because by doing so they would make themselves worse off. The alternative rules are complicated; they do not produce clear, unambiguous figures for each authority, and they would present considerable operational difficulties. I feel that these alternative rules will be a recipe for confusion. I hope that I have answered the question which the noble Lord felt had not been answered.
Lord Callaghan of Cardiff: My Lords, if the noble Lord will permit me to intervene, I fear that I do not know what the alternative rules are. I wish to suggest yet another way out if these are not the alternative rules. When a local authority has closed its accounts, and has even sent them to the district auditor but because of the requirements of Ministers up to 7th July it had not forwarded them to the ministry, why should that authority not be recompensed? Why should not the Government accept that? Ministers will need no more information. The information is there, has been there and was there at the time. The fact was merely that it had not been received by the Ministers who had asked for it by a later date. What is wrong with a simple solution of that sort? We know that there are councils in that position. Why can the Government not play fair?
Lord Hesketh: My Lords, in a second I am hoping very much to come to the points which the noble Lord raised earlier. I shall go on to the points concerning Cardiff. Perhaps I may once again say how grateful I was for the letter that I received from the noble Lord. Of course there will be disappointment on the part of authorities such as Cardiff. I fully understand their position. On the other hand, other authorities have benefited, although they have naturally been rather more reticent in announcing this. One of the key objectives of the closedown proposals was to arrive at a set of simple rules equally applicable to all authorities. I regard a clean break on 6th July, with no exceptions, as the mot equitable and straightforward way of achieving that objective.
My right honourable friend the Secretary of State for Wales informed all Welsh councils on 15th September of the total expenditure figures which he proposes to determine under the provisions of the Bill. Nevertheless, I assure noble Lords that in calculating grant entitlement he will take account of all the information which is admissible under the

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rules in the Bill. If an authority can demonstrate that the figure given to it on 15th September is not the relevant amount, under the rules and legislation my right honourable friend will be able to make a determination accordingly.
Lord Callaghan of Cardiff: My Lords, if the noble Lord will allow me, that does not mean a thing.
Lord Hesketh: My Lords, I hope that that answers the noble Lord's question.
Lord Callaghan of Cardiff: My Lords, I am sorry. With respect, it does nothing of the sort. The rules contained in the Bill are precisely those under which the city of Cardiff loses £2·3 million. The legal experts in Cardiff have examined this, everybody has looked at it and that is the maximum amount to which they are entitled. I say this to the noble Lord in great friendship: all he is offering me is soft soap; there is nothing in it.
Lord Rippon of Hexham: My Lords, to use the noble Lord's phrase, the feeling is not one of disappointment but of outrage. A very clear, specific and so far unchallenged attack has been made upon the good faith of the Government by the noble Lord, Lord Callaghan, speaking with all the authority and dignity of a former Prime Minister. If I may say so, he has put his case very fairly. I believe that the Government must answer it properly.
Lord Hesketh: My Lords, I can only add that at closedown on 7th July no authority had made even its unaudited outturn expenditure return to the department. Even if we had waited until 1st August 1988, there would still have been fewer than 40 such returns with the department. One of them was audited. I feel that I cannot go further than what I have said this afternoon. I commend the Bill to the House.
Lord McIntosh of Haringey: My Lords, before the Motion is formally decided, a very serious charge, which has been supported on both sides of the House, has been made, by my noble friend Lord Callaghan, backed up by the noble Lord, Lord Rippon. We appreciate the constitutional position of a money Bill, but I ask the Minister in all seriousness whether he would not be well advised not to press the Second Reading today but to put it off until Monday. Then he could go back to his right honourable friend the Secretary of State and put to him the matters which have been raised this afternoon, not so much from the Opposition Front Bench but from Privy Council Benches. The noble Lord would not risk losing the Bill: we shall not break the constitutional rules. Would he not be well advised to give the Bill three more days?
Lord Diamond: My Lords, before the Motion is formally dealt with, perhaps I may raise a point. I hope that the Minister realises the only reason why there have been two speeches against the proposals in this Bill. All those who have been concerned, as I was privileged to be concerned, when the noble Lord, Lord Callaghan, was Chancellor of the
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Exchequer—and one must not forget that he speaks in a dual capacity with all his experience—and those on these Benches regret very much that the Government have been guilty of creative legislation.
Lord Hesketh: My Lords, I commend the Bill to your Lordships.
On Question, Bill read a second time; Committee negatived.
Then, Standing Order No. 44 having been suspended (pursuant to Resolution of 7th November), Bill read a third time, and passed.

European Communities (Finance) Bill
4.17 p.m.
The Parliamentary Under-Secretary of State, Department of Transport (Lord Brabazon of Tara): My Lords, I beg to move that the Bill be now read a second time.
This Bill is very short. It also appears at first glance, with its Eurospeak of "own resources" and "undertaking(s) … confirmed … within the Council", to be fairly technical in nature. Nevertheless it sets the seal as far as the United Kingdom is concerned on a major review of the European Community's finances and policies.
I should like to start by outlining what that review involved and what its outcome was. Having outlined the context, I shall then explain what the Bill itself does. Finally, if your Lordships wish to raise specific queries, I shall be happy to try to answer them at the end of today's debate.
The future financing review, as it has come to be known, started in February of last year with the publication by the European Commission of a wide-ranging package of proposals. Those proposals contained both good and bad features as far as the United Kingdom was concerned. On the plus side they included measures to keep spending within agreed limits and in particular to tighten up control of the common agricultural policy. But the Commission was also looking for an increase of almost 50 per cent. in the ceiling of contributions to the Community budget, a large cut in the abatement of the UK's contributions which had been agreed at Fontainebleau in 1984 and a tax on oils and fats. The proposals also involved changes in the way budget contributions are calculated and a large increase in the Community's structural funds.
We made clear in the negotiations that followed: first, that any further increase in resources must be accompanied by effective and legally binding controls on spending; secondly, that agricultural surpluses must be reduced; thirdly, that the Fontainebleau abatement must not be diluted; fourthly, that there should be no oils and fats tax; and finally, that all the issues at stake had to be settled together. We could not agree to some parts of the proposals and leave the rest till later.
Not all member states shared these aims. Few were as committed as we were at the outset, for example, to bringing agricultural and other expenditure under

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tighter control; some took the view that the Fontainebleuau abatement should be phased out.
I might add in passing that when we debated the Commission's proposals here almost exactly a year ago, following a report by the committee chaired so ably by the noble Lord, Lord Kearton, we were urged in some quarters to modify our objectives and to be more flexible in the interests of obtaining a satisfactory settlement. Well of course some flexibility is always needed in negotiations of this sort, but so is firmness. And I am pleased to say that by combining flexibility and firmness we achieved in the end all of the main objectives which I have just outlined.
That result was eventually achieved, after long negotiations, at the Brussels European Council in February of this year. After further discussions, a series of legal measures was agreed by the Council by June of this year to give effect to that agreement. The agreement was a wide-ranging one and it needs to be seen as a whole. I should therefore like, if I may, to give a few words of explanation about the main elements in that package.
The key area is of course reform of the CAP—control of agricultural spending and reduction in agricultural surpluses. The February package includes five major improvements. First, the guideline limit for agricultural spending is now legally binding. It will grow at no more than 74 per cent. of the rate of growth of Community GNP. which is likely to mean a real growth of around 2 per cent. a year, compared with real growth of 10 per cent. a year between 1984 and 1987.
Secondly, the loophole whereby the guideline could be exceeded in so called "exceptional circumstances" has been closed. In its place there is a monetary reserve of up to 1 billion ecu to cover extra costs if the dollar depreciates substantially. This money will only he called up if needed. And the reserve will work both ways so that provision for agriculture will be reduced if the dollar appreciates. The reserve is not expected to be used in 1988 and on current estimates we would expect reduced spending in 1989.
Thirdly, the Commission is monitoring spending each month for each main agricultural regime. When there is a risk of overspending, the Commission and, where necessary, the Council will take the requisite action.
Fourthly, automatic stabilisers have been introduced to control expenditure on all the main products. The stabilisers generally take the form of automatic price cuts if production exceeds agreed maximum quantities.
Finally, new stocks are from now on being depreciated systematically in the year of purchase, with special funds set aside to pay for the disposal of existing stocks. This should produce a normal stock situation by 1992.
Control of other expenditure was part of the package. It was agreed that there would be a series of legally binding sub-ceilings or annual limits on resources which would constrain the totality of spending. And an interinstitutional agreement was
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reached between the Commission, the Council and the European Parliament under which all three institutions bound themselves to respect ceilings on each major area of Community spending up until 1992.
Budget management is another area where we pressed successfully for improvements to the previous arrangements. For example, provision for expenditure should now generally be weeded out of the budget, if it is not used, rather than being carried over automatically from one year to the next.
The package also involved changes to the regional, social and agricultural guidance funds—the structural funds. There will be an 80 per cent. increase in the funds between 1987 and I 992— a significant increase, albeit less rapid than that originally proposed by the Commission. And the funds will be better targeted. Although a large part of the funds will rightly be concentrated on the poorest regions. the UK can expect to continue to be a major beneficiary from the main fields of structural fund activity, to the tune of over —750 million a year.
I turn now to the area of own resources or contributions to the Community budget. The most important changes made by the European Council were as follows: first, an increase in the limit on own resources. This will be set at 1.2 per cent. of the Community's gross national product, with as I have already mentioned—annual sub-ceilings rising from 1.15 per cent. in 1988 to 1.2 per cent. in 1992. The increase in the ceiling represents an overall increase in resources available to the Community of some 25 per cent. This compares with an increase proposed by the Commission approaching 50 per cent. We now have a ceiling that will last until 1992 at least.
Secondly, a change in the basis for calculating member states' contributions of own resources. In particular, the base in each member state on which its contributions of VAT own resources are calculated will be "capped" at, or deemed not to exceed, 55 per cent. of its GNP—thus reducing the VAT contributions of some member states, including the UK. And there will be a new "fourth" resource based directly on shares in Community GNP. These changes are a welcome improvement from the point of view of the Community as a whole, as they will relate contributions to the budget more closely to national prosperity.
Thirdly, the Fontainebleau abatement system will be retained intact. Technically, it will be modified to bring it into line with the new structure of own resources. Thus our abatement will be reduced to the extent that we benefit from the capping of our VAT base and the introduction of GNP contributions. The overall effect, however, is that we shall be no better or worse off than we would have been with the continuation of the original Fontainebleau abatement system and old-style VAT financing (though with an increase in the VAT ceiling).
The last major element in the package was an intergovernmental agreement, or IGA for short, to provide extra funds for the 1988 budget. Noble Lords may ask why such extra money is needed The answer is that the February European Council agreement

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covered the Community's revenue, expenditure policies and budgetary controls for the years 1988 to 1992. The 1988 budget therefore needed to be settled in a way consistent with that agreement. But it was known that the various national procedures for approving the new own resources arrangements could take some time to complete. The governments of the member states—as opposed to the Council of Ministers—therefore entered into an inter-governmental agreement to provide the sums needed to balance the year's budget until such time as the new rules on own resources would legally come into force.
The IGA amounts to some 7 billion ecu, of which around 1 billion ecu relates to the monetary reserve for agriculture which in practice we do not now expect to be needed this year. The UK's share of the IGA, excluding any contributions to the monetary reserve, is likely to be around £610 to £620 million. Our net contribution will, of course, be lower than this because of the extra receipts we shall obtain, as well as higher abatement of our contributions in 1989.
I have described the main elements of the whole package agreed by the European Council in February because that package needs to be seen as a whole; it stands or falls as a whole, and the Bill is therefore in a sense seeking Parliament's endorsement of the whole package. I should now like to explain more specifically why the Bill is necessary and what the main elements in it seek to achieve.
I have already mentioned that legal measures to implement the European Council's conclusions were agreed by June of this year. Most of the measures came into force once the Council of Ministers had adopted them. But the position is rather different for the Council decision on the own resources system which provides for the increase in the own resources ceiling, the restructuring of own resources contributions and the preservation intact of the Fontainebleau abatement system. Under the Treaty of Rome, the new own resources decision requires not only the unanimous agreement of the Council, but approval by member states:
"in accordance with their respective constitutional requirements".
The first thing that this Bill does therefore is to seek Parliament's approval for that decision, which we have published as a Command paper.
Technically, the Bill aims to do this in very much the same way as approval was obtained for the current own resources decision in 1985. It would add the new decision to the list of treaties in the 1972 European Communities Act. This would have the effect of allowing payments under the new decision to be charged directly on the Consolidated Fund. as payments under the current decision are.
The second main element of the Bill is to seek Parliamentary approval for payments under the IGA—also published as a Command paper—by adding that IGA to the list of treaties in the 1972 Act. Again, the legislative procedure is similar to that used in 1985 to obtain approval for an IGA to help finance that year's budget.
I began these remarks by commenting that this Bill appears at first sight to be rather technical. In some
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senses it is, but I hope I have said enough to show that it is also an important measure both for this country and for the European Community as a whole. if passed, the Bill would give approval to a new decision on own resources which brings the structure of contributions more into line with member states' ability to pay and which preserves intact our Fontainebleau abatement. The Fontainebleau system has worked well up to now, producing abatements of around £4·5 billion by the end of the year. The Bill will also enable payments to be made under the IGA which ended the uncertainty over the 1988 budget and allows the reforms agreed in February to be put into effect from this year. Finally, it will implicitly set the seal of approval on the whole range of measures agreed at the February European Council, including the much needed introduction of legally-binding controls on CAP spending. As such, I commend the Bill to your Lordships and trust that you will give it a Second Reading. I beg to move.
Moved, That the Bill be now read a second time.—(Lord Brabazon of Tara.)
4.30 p.m.
Lord Bruce of Donington: My Lords, the House will be grateful to the noble Lord for having explained his Bill. I should like to say at the outset how much we appreciated the introduction of the Bill in another place by the Foreign Secretary, who said:
"I reject the argument that it is wrong for us ever to shift our views for the sake of a common position. If 12 nations are to make the most of their separate resources and talents, each must be ready to join in the search for agreement. But equally, I reject the argument that it is somehow bad form within the Community to fight for what we think right".—[Official Report, Commons, II/7/88; col. 43].
We on this side of the House accept those words of the Foreign Secretary as representing the way in which we also would wish to address the Bill that we have before us this afternoon. The Bill is a Money Bill because, presumably, it deals with money. I cannot say that I accept the reasons that have so far been advanced for the Bill to be treated as a Money Bill, but it has been so certified by the Speaker in another place. All I wish to do about that aspect of the matter is to reserve the Opposition's position as to the true definition of Money Bills that come before this place from time to time.
As the noble Lord correctly pointed out, the Bill seeks to amend the European Communities Act 1972 in the same way as the European Communities (Finance) Act 1985 amended the Act of 1972 immediately following the Fontainebleau Agreement. Our understanding of the position at that time—and we ventured to articulate that understanding—led us to question whether the binding budgetary procedures, the new strict financial controls that were to emerge as a result of Fontainebleau, would be effective. It is because of the inadequacies of Fontainebleau that this Bill is before us this afternoon, particularly in so far as it deals with the 1988 budget and the overspending in the two previous years, contrary to the undertakings given at Fontainebleau.
We are talking about very serious matters involving the expenditure of considerable sums of taxpayers' money. I shall return to the term "taxpayers' money" with some emphasis a little later

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on in the remarks that I shall address to the House. It is quite clear that the Bill does far more than, as the noble Lord indicated, merely to make up the shortcomings of Fontainebleau. It sets out expenditure for the four years to 1992.
In another place there is a well-known procedure of reviewing, arguing about, assessing the merits of and determining priorities for various items of government expenditure. That is done by presenting the Estimates to Parliament and by going through the Votes. As the noble Lord must know, much argument and disputation occurs when that happens in another place. There is normally a further round of such debates on individual Estimates when Supplementary Estimates are presented in the spring.
Here we have a situation in which the right of Parliament to discuss the merits and importance of the expenditure of very large sums of money on an annual basis is denied it. The Bill prevents Parliament from discussing those very large sums of money. Later on I shall give precise particulars of those sums as supplied by the Chancellor of the Exchequer.
An endeavour was made in another place to allow the somewhat abstruse provisions of the decision of the Council of Ministers to be incorporated as a schedule to the Bill. That was an innocent enough request. It was perfectly in order. This country's fortunes, to the tune of quite a few billion pounds over the next four years, are to be determined by the provisions of a decision. We requested in another place that that should be incorporated as Schedule 1 to the Bill. Even that request was denied.
If noble Lords will turn to Article 3 of the decision they will find a complete justification for the statement I have just made. The net contribution of the United Kingdom to the European Community is laid down in Article 3. Noble Lords will also find at col. 43 of the Commons Hansard of 24th October particulars of the intergovernmental agreement and the calculated contribution of the United Kingdom towards the deficiencies that have emerged in European budgets by virtue of the Fontainebleau Agreement having been ineffective.
Note 2 to the inter-governmental agreement states:
"The amounts paid by each Member State constitute non-repayable advances".
I shall invite the noble Lord to explain the term "non-repayable advances". If one advances someone some money one expects it to be repaid; otherwise it is not an advance. The term "non-repayable advance" seems to be one of those remarkable examples of European jargon which in these particular circumstances stems from the fact that under the Treaty of Rome the Commission is not allowed to borrow money. Therefore it has to be a non-repayable advance. I hope that the noble Lord will be able to elucidate that point a little further.
What are we committed to in financial terms as a result of those abstruse calculations the basic essence of which has already been given by the noble Lord most lucidly in the early part of his remarks? I shall tell the House just what it will cost the United Kingdom in terms of taxpayers' money over the next three years. They are not fanciful estimates pulled out
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of my imagination, fertile though it is, some tell me. They are firm statements by the Chancellor which were annexed to his recent Autumn Statement.
The figures that I give to the House are net contributions by the United Kingdom after taking account of all receipts, including the abatements by which the noble Lord sets so much store. He mentioned that the abatements had saved the United Kingdom £4,000 million over the past few years, but I think that it would have been franker for him at the same time to say that even after taking into account those abatements and every other receipt, it has cost the United Kingdom £8,000 million over the past seven or eight years.
I turn to the contribution which the Chancellor of the Exchequer thinks will result from the application of the Bill that is before us and the decision of the Council which it purports to implement. In the year 1989–90 the net contribution by the United Kingdom to the European Communities will amount to £1,970 million; in 1990–91 it will be £1,950 million—20 million less—and in 1991–92 it will be £1,580 million. I shall deal with the implications of those figures a little later, but they represent the net contribution to the European Communities from United Kingdom taxpayers' money. One is surely entitled to ask why it should be necessary for the United Kingdom to make those sums of taxpayers' money payable to the European Communities.
Over the past few days we have heard a lot about taxpayers' money. This House was discussing taxpayers' money in excelsis when, by a sudden influx of a great number of colleagues whom we had not seen for a long time, your Lordships succeeded in overturning a former decision of the House in order to make some charges for spectacles and dental treatment. That was deemed to be a vital matter of government expenditure that struck right at the roots of the stability of the United Kingdom's financial system.
We have had plenty of other instances. Every time some relief is sought, albeit for the humbler sections of our society—for example, in respect of homelessness, additions to the National Health Service and a whole series of matters—we are told that it is a matter of scarce resources that must be husbanded. That has been reflected, for example, in decisions to cut the number of coastguards around the United Kingdom, or the number of Customs and Excise officials, whose numbers go up and down like a yo-yo according to the will of the Prime Minister, and indeed in other matters. As your Lordships will recall, in the course of a very moving speech made by a noble Lord opposite whose name escapes me for the moment, even in order to safeguard our coastline on the eastern coast a grant of £5 million was refused.
Yet we are invited to pass this precommitment as a Money Bill without any further question. Perhaps we ought to bear in mind the words of the noble Lord, Lord Thorneycroft, who addressed this House a couple of nights ago on the vital nature of conserving taxpayers' money. He said:
"It is not right to say that £120 million is chicken-feed. I once resigned high office for half that figure". [Official Report, 8/11/88; col. 561.]

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What will he say about £1,970 million! If £120 million precipitated his resignation, I imagine that a sum of £1,970 million would give him apoplexy. The whole thing is quite ridiculous.
In addition to the question of the general scarcity of taxpayers' money for all projects which the Government do not like because they hate the welfare state and dislike providing money for those who are in much reduced circumstances, there is value for money to be considered. I am sure your Lordships will agree immediately that £1,970 million or thereabouts—because I can give or take £20 million or so—is not insignificant expenditure. Surely any prudent government want to seek value for money. We have been told so many times.
There has been local government legislation whereby local authorities have had to put services out to tender in order to be quite sure that the country gets real value for money. Detailed investigations are made into the question and working parties are set up to see whether value for money is being obtained. I want the noble Lord to apply his mind to consider what value we derive from the EC. For that matter, it concerns any noble Lord who has any sense of fairness as distinct from a rather ethereal belief in the star of the EC, with which as an organisation we are not concerned.
I can immediately think of one response to that question; namely, "Ah, but look how much of our trade is with the EC. It is so important that we should remain in such close association with the EC. Look at the benefits we get by reason of most of our trade being done with the EC". That could be so, but if subscriptions will be based on the degree of trade that one country does with another, someone from the EC ought to be paying an astronomical sum to the United Kingdom for the exports it sends here, which are our imports. Far from the United Kingdom being dependent on the EC for trade, the EC is dependent on us. At the present time our trade deficit with the EC is running at the rate of over £10 billion a year. Are we then to pay another subscription of nearly £2 billion to safeguard our right to import in vast quantities from the EC? No—that horse will not ride.
Let us look at this matter from another angle—from the point of view of cost-effectiveness. Those words come very easily from the party opposite when anything in the social field or even economic or environmental matters are under discussion. Is the expenditure of this money—taxpayers' money—cost-effective? To that of course we cannot get any reply from the Government because they have not even studied the matter. They do not even know whether it is cost-effective or not. They do not even pay attention in detail to the reports that come from the Court of Auditors year by year. They spend about half an hour looking at them; that is all. If they do not know what the cost-effectiveness is, I can tell your Lordships that the people of the United Kingdom know what the cost is to them.
During the Recess a report was produced by the National Consumer Council. It was conveniently done in the Recess when Parliament was not sitting and it largely passed its notice, but happily not that
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of the press at large. With an amazing degree of agreement the press of this country from the Right—to wit, the Sun newspaper—to the Guardian, the Independent, The Times they all denounced the common agricultural policy by virtue of which every household in the United Kingdom pays between £11 and £12 a week extra in food costs.
Lord Harris of Greenwich: My Lords, may I ask the noble Lord a question? I am following his remarks with close attention and I wonder why, if our membership of the Community is quite as damaging as he suggests, the Labour Party has decided to abandon its policy of withdrawing from the Community.
Lord Bruce of Donington: My Lords, I am grateful to the noble Lord. I have not sought in any way to damage the European Community. I am asking the Government to answer perfectly simple questions. I have made no denunciation of the EC. Indeed, so far as concerns certain of the expenditure in which the United Kingdom is involved, I applaud it, as I do, for example, the EC expenditure on research to which we contribute, and in particular the fusion project called JET at Culham, about which incidentally the Government now have cold feet and have abandoned their enthusiasm.
To return to where I was before the noble Lord intervened, between £10 and £12 a week extra for a family of four is being paid as a result of the common agricultural policy. That is the people's answer, and certainly the answer of the press to this proposition. It may well be said that under the new agreement—which they did not want to put in as a schedule to the Bill—the common agricultural policy will gradually whittle away. Not a bit of it.
If the noble Lord looks at his own explanatory memorandum of the 1988 and 1989 budget he will find that expenditure there on the EAGGF is still running at over £19 million in 1988. There is no real change. It is indeed implicit in the figures that the Chancellor set out in his Autumn Statement that the common agricultural policy will continue.
The noble Lord may say that Her Majesty's Government are quite determined that the common agricultural policy shall be kept under rigid control. They said so at the time of Fontainebleau. It has not happened. But let us say that the Government—and there have been certain restive opinions in the higher quarters of government about the EC over the past fortnight or so—decided that they wanted to modify the EC common agricultural policy. Under the Treaty they could not do so. The Council of Ministers cannot originate proposals. Proposals can only be originated by the Commission. If the Commission does not make a proposal for the reform of the agricultural policy the Council cannot even consider it.
The only powers that the Council has under the Treaty—and they appear in Article 145—are in fact by unanimous agreement to amend the Treaty itself. Does anybody think for one moment that the Commission, as at present constituted, based upon the Continent and fundamentally part of Brussels, will produce a proposal to the Council for the reform

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of the common agricultural policy? I had the honour to represent this House there from 1975 to 1979. The reform of the common agricultural policy has been a cry by every political party in the European Parliament, and still is. What chances are there of reform?
Under the Bill the Government have regrettably boxed themselves in. They have committed us to billions of pounds of expenditure out of taxpayers' money, and they themselves are powerless to avoid the consequences of the agricultural policy both in terms of prices to the consumer and in terms of the tax that the ordinary British taxpayer—and not only payers of income tax but indirect taxation as well—is called upon to bear.
In the normal way if this were not a Money Bill and I still have my reservations about that—we should not have the slightest hesitation in advising the House to send it back to another place. I am afraid that we cannot do that, but on behalf of my colleagues on these Benches I enter a protest at a Bill of this kind being initiated by any British Government that have the interests of the whole nation at heart.
4.57 p.m.
Lord Bonham-Carter: My Lords, I am pleased to have the opportunity to follow the noble Lord who has just spoken to us for some time. I learned an interesting fact from his speech. In the light of his response to the intervention of my noble friend, I gather that we must regard that speech as in favour of the EC. I gather that we must take that speech as being a testament of faith by the Labour Party in the European Community. I also learned that government money was taxpayers' money. It would be serious if government money was something else.
I shall come to the CAP a little later in the few remarks that I propose to make, but I should remind the noble Lord, Lord Bruce of Donington, that the deficiencies of the CAP, about which we whinge so much in this country, are largely due to the fact that when the common agricultural policy was developed we were not there. If you do not join a club at the beginning you will find that other people will make rules in your absence.
However, the real gravamen of the noble Lord's speech was a question and not an answer. The question was: what value do you get out of the EC? My view of that should emerge in the course of my remarks, but what was noticeable in the noble Lord's speech was that he did not indicate any alternative to the EC that would give us better value. There was not the glimmer of a constructive proposal in any single sentence that he uttered.
I am surprised that a member of the Labour Party should not see some value in the structural fund devoted to the poorer regions of Europe. It is surely something from which we in this country can benefit, and from which the other poorer regions of the Community can benefit.
Lord Molloy: My Lords, would the noble Lord give way? Why does the noble Lord think that it is
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amazing to want to get rid of this crass burden of the common agricultural policy? This is agreed by all people from the City down to the smallest businessman. Why must we not dare to criticise it or want to get rid of it until we have some alternative? It is like advising someone who has cancer to make sure that they get some other terrible illness before the cancer is treated.
Lord Bonham-Carter: My Lords, I do not regard the European Community to be like cancer! I do not object to the noble Lord saying that he would like to reform the common agricultural policy. What I object to is the tenor of totally negative criticism of the EC and all its works.
I and my colleagues on these Benches welcome the Bill as a further step in the integration of Europe. We welcome it for the following reasons. It increases the resources at the disposal of the EC—I am sure that in this respect I have the support of noble Lords on the Labour Benches; it sets an absolute limit on agricultural expenditure in 1988; it arranges that the sums agreed by the 1GA are fixed as a proportion of GNP, which we have advocated for many years; and it doubles the funds available for the structural fund. All that involves some sacrifice of sovereignty. I do not think that one can have one without the other. They are all steps in the right direction and each step is one that we support.
What is more difficult to follow, and what I should like to know, is why there has been such a fuss about these matters; and why a package presented in Copenhagen at the end of last year and rejected out of hand by the Prime Minister was accepted about three months later in much the same form in Brussels. What lies at the back of the Prime Minister's tactics and her attitude to the single European market? It appears to be a continuing reluctance—one which the noble Lord, Lord Bruce of Donington, would share—to accept the nature of the European Community and the way in which it will develop. It is that which lies behind the Bruges speech and the views that she expressed to the Italian Prime Minister when she met him in Italy.
Indeed, when I read through the Bruges speech it reminded me very strongly of a speech made almost 30 years ago by Reginald Maudling on the breakdown of the free trade area negotiations. His response to the suggestion, made from the Liberal Benches at the time, that we should join the European Community used almost precisely the same arguments as those deployed by the Prime Minister. There was only one that she did not use that he used—the Commonwealth which was then a very controversial matter.
Mr. Maudling said in that speech that if we joined the EC it would mean interference with our economic and social policies and involve a loss of sovereignty. He said that to sign the Treaty of Rome would be to accept as the ultimate goal political federation in Europe, including ourselves. Indeed, the Bruges speech was a marvellous free trade area oration. But, as Mr. Maudling 30 years ago recognised, the European Community is not simply a free trade area. Since than we have signed the Treaty of Rome. It is

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central to the Treaty of Rome that it demands a sacrifice of sovereignty. It made this demand—this is perhaps one of the things that we have got out of the European Community that we must bear in mind—because the European Community was never simply a free trade area; it was inspired by political purposes. The chief political purpose that inspired it was to prevent the outbreak of another European civil war. The chief political objective was to amalgamate the countries of Western Europe in a unity that could never be un-scrambled. The technique was to do this by what Mr. Monnet termed "functional means". That is one of the advantages that we can say we have got out of it.
It also recognised that in the 20th century a middle sized nation state can protect neither itself nor its interests by itself. For example, this country needs, requires and has been provided with a much larger trading area within the EC. When one considers nuclear power, pollution of the environment or satellite television one finds in every case that the opportunities that those technologies offer and the dangers that they present cannot be effectively dealt with within the framework of a middle sized nation state. This means that if one is to deal with these things, take these opportunities and avoid these dangers one has to accept an abrogation of sovereignty.
Refusal to recognise this has already led recently to a refusal to join the EMS and to the dismissal of the idea of a central bank, a common currency and so on.
Lord Bruce of Donington: My Lords, is the noble Lord aware that the United Kingdom was a founder member of the EMS? It merely has not joined the ERM part of it.
Lord Bonham-Carter: My Lords, that was the germane point!
I regard the consequence of those failures as likely to be serious. Most people who think that we should have joined the European Community are of the view that we should have done better if we had joined it earlier and had been in the Messina conversations; they think that we should have done better if we had tried to join the European Coal and Steel Community and Euratom had applied to join the EC in 1958–59.
It is commonly said that we missed the bus. The fact of the matter is that "missing the bus" is not merely a phrase; it actually means that the people who catch the bus get there before you. If you catch a later bus, you will find that they have arranged the picnic and you will have no control over what you eat. I hope that we will not repeat that mistake. I repeat, one of the consequences of missing the bus in the early days was that the common agricultural policy was formed in our absence. Had we been there it would have taken a very different shape and complexion. We cannot afford to do that again in my view. If we refuse to associate ourselves with the EMS, the formation of a central bank and a common currency, we shall find that the others go ahead leaving us outside.
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Sir Geoffrey Howe, talking on this Bill in another place, spoke of a free market in financial services. He said:
"It will be a major boon to the City of London". [Official Report, Commons, 11/7188; col. 44.]
If we refuse to participate in setting up a central bank I imagine that it will go to Frankfurt, and the City of London as the third centre of finance in the world will be in jeopardy.
Noble Lords must recognise that we are living in a tri-polar world. We cannot get out of that. Whether one considers defence and foreign policy or commerce and economics, we are in a tri-polar world. In defence it is the United States, the USSR and Europe; in finance and economics it is the United States, Japan and Europe. British influence can best be exercised and British interests best preserved in our view by working within the European Community rather than behaving like a grumbling fringe member.
One area that has not been mentioned I am surprised that the noble Lord, Lord Bruce of Donington, did not raise it—in which British influence should be exercised in the Commission's affairs is in connection with Commission bureaucracy, so often attacked not so much because of its size, but there seems to be an absence of democratic control over the Commission. The only way that can be dealt with is by a serious attempt to reform both the procedures of the Council of Ministers and of the European Parliament. Does the noble Lord wish to intervene?
Lord Bruce of Donington: My Lords, no.
Lord Bonham-Carter: The noble Lord was looking interested, my Lords.
Lord Bruce of Donington: My Lords, I am most grateful to the noble Lord for having given way, merely on the basis of an expression on my face. That is extremely charming of him. Would he consider that any amendments to the powers of the Commission require an amendment to the Treaty of Rome? That requires unanimous consent of all the members of the Community. Does the noble Lord envisage that the Commission will bring forward proposals to the Council for limiting its own powers?
Lord Bonham-Carter: My Lords, I was envisaging that the Single European Act would be followed by further extensions in the powers of the European Parliament. I see no reason whatsoever why that should not occur. I was also envisaging that the activities of the Council of Ministers should be public and not private. That seems to me an essential element in the democratisation of the EC. But the present proposals which M. Delors has floated seem to me to be entirely in accordance with the original purposes of M. Monnet, that is of creating a community and not a federation (as is sometimes said) by functional means. That is to say it would be achieved by developing economic and financial cooperation which in turn will then be matched by political development.

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It is my view that the Bill is a step in that direction. I hope that it will be followed by other legislation along the lines which I have suggested so that the political developments which are essential should be allowed to go forward with the support and not the hindrance of this country.
5.12 p.m.
Lord Jay: My Lords, the Minister naturally put the best face he could on the package which is now before us. I should like briefly to consider some of its longer term implications. What the Bill does is to increase by 25 per cent. the level of taxation which the EC imposes on its own people—a lasting increase, according to the Explanatory Memorandum—of from £200 million to £300 million in the contribution from the UK taxpayer and a special levy, according to the Bill, of £765 million, although I think the Minister said £600 million this year from the United Kingdom, disguised, as my noble friend said, as a non-repayable advance authorised by the subterfuge of an intergovernment agreement outside the machinery of the EC.
I can congratulate the Government on one matter and that is that at least this time they have embodied the latter in a Bill and have not tried, as they did earlier, to slip it through by an order pretending that it constitutes a treaty. We have heard much about creative accountancy this afternoon; but I think that was an example of creative legislation. However, that has been improved.
The Government's surrender last February to this further huge increase in EC budget expenditure represents, I fear, the end of the last hope that the common agricultural policy—despite the minor easements which have been made—would ever be basically reformed or its main economic damages curtailed. After all, 72 per cent. of this huge spending is still swallowed up by the CAP. The CAP alone costs an astonishing £18 billion a year. The noble Lord, Lord Bonham-Carter, went into some past history and I recall that once we were told that at the time of the 1975 referendum, that spending on the CAP would be limited to the level of 1 per cent. of VAT revenue. Then we were assured in the next stage that the absolute limit would be 1.4 per cent. of VAT revenue. In fact the only real hope of ever putting an effective ceiling on EC extravagance was to have stuck to that 1.4 per cent. limit.
But the Prime Minister's capitulation last February—I know it was in the middle of the night and I do not believe that that is an adequate excuse—has destroyed that hope and we are now faced with this huge increase in the annual payment made by the UK taxpayer to Brussels.
The CAP as practised by the professed free traders in Brussels, who talk a great deal about competition, is the most extremely damaging form of protectionism yet known. Not merely are the food supplies imported into this country for the UK consumer heavily, indeed penally, taxed, but many essential food imports from outside the EC are directly prohibited, which hitherto was an almost unknown form of protectionism. As a result we are
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all now paying far more than the world price for our food. The Commission is so ashamed of the gap between EC and world food prices that it has now ceased to publish the exact statistics. But the figures it produced earlier showed that EC food prices are usually and in most cases at least double world food prices.
In recent years, with a few gaps up and down as the dollar rose or fell, EC cereal and meat prices have on average been 100 per cent. above world prices. Dairy products have been 300 per cent. higher. If the Minister has the up-to-date figures I shall be delighted to hear them. We now have the authoritative estimate not merely of the National Consumer Council, but also of our own British Treasury in a document, rather oddly called the Treasury Economic Progress Report, which tells us that every UK consumer is now paying about £3 a week more for food and a family £10 or £12 a week more than they would have paid outside the EC.
This heavy burden, which is a tax though a hidden one, on our economy takes the form partly of a loss in real living standards—particularly of those worst off who are most affected by food prices—and partly of a rise in pay rates and so in the labour costs of all UK producers. Higher food prices of' course mean higher pay rates.
The study quoted in this Treasury document also estimates that about half a million of the rise in UK unemployment since 1970 is due to this rise in our production costs. That is the study's estimate and not mine. That rise is also one major cause of the extraordinary swing into deficit of our trade with the EC which in the case of manufactured goods has reached a level of £12 billion or £15 billion a year and is, incidentally, the whole cause of our present overall balance of payments deficit. With the non-EC world we have a large trade surplus.
As one would expect from these food price figures there was a sharp drop in consumption per head of the main foodstuffs by the British consumer in the first ten years after the introduction of the CAP. These figures come from the National Food Survey. That amounted to a drop of between 10 per cent. to 30 per cent., in the consumption of many foods such as milk, meat, butter, eggs and some others, and a fall in living standards.
It is often said that there are surpluses of those food commodities. But there are not surpluses at all in the sense of producing more of the food which is needed or wanted by the public. The trouble is that the prices are much too high for the consumer to pay. If CAP prices were allowed to fall to world prices, the surplus would soon disappear. Indeed, one can produce surpluses of anything by charging two or three times the market price. One would then be recommended to stop producing the goods in order to avoid the surpluses.
Before the United Kingdom joined the EC we paid farmers a moderate deficiency payment to keep food prices down. The noble Lord, Lord Bonham-Carter, did not refer to that item of past history. Now, as a result of the increases, the United Kingdom taxpayer will be paying approximately £1 billion per year in order to keep prices up, so damaging our industrial

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costs and indirectly our balance of payments. How better the extra sums whether £200 million, £300 million or £765 million—might have been spent on other things, as my noble friend suggested, such as child benefit, housing, education or whatever.
We cannot oppose the Bill and now that we have accepted an even heavier load on our future balance of payments we must fear and expect that the burden will be permanent and will grow heavier year by year as the EC's huge spending on the CAP continues to increase. Although there is said to be a limit, it is one which increases all the time.
The load on our balance of payments is threefold. There is the excess price of food imports over and above what they would otherwise be, the higher cost of producing our exports and the Budget payment across the exchanges. That threefold load is certain to be one main element in the ever-increasing deficit in the balance of payments which this country will almost certainly face in the 1990s as our oil revenues fade away. In my view it will be our main national problem during that decade.
5.23 p.m.
Lord Stoddart of Swindon: My Lords, it is difficult not to contrast the relaxed way in which the noble Lord, Lord Brabazon, put forward the Bill today with the spirited opposition to the perpetuation of this House's decision to exempt people from charges for dental and eye examinations. It is difficult to reconcile the Government's attitude. At one fell swoop, and without much opposition, the Bill proposes to increase the amount of money available to the EC by £775 million beyond the enormous amount they already spend. That is five times as much as the cost of continuing with free dental and eye examinations for the population as a whole and 30 times as much as the cost of granting that benefit to pensioners. The Government voted against that proposal in the same way as they voted against the general proposition.
The noble Lord, Lord Bonham-Carter, believes that it is a good deal. It is clear that my noble friend Lord Bruce does not believe that it is a good deal; the House will he aware that I do not believe that it is a good deal. We are not the only ones to think so, because The Times published a leading article headed "A bad deal". This is the last time that I shall quote from a publication. The first paragraph of the article stated:
"It is hard to accept the Prime Minister's assertion that the EEC Deal she struck in Brussels was not a fudge. She came closer to the mark when she said, 'It was not too had'. It is nearer still the truth to call it 'a had deal'.".
It is not only the Labour Party which believes that it is a bad deal. It is not only my noble friends who believe that it is a bad deal.The Times, which is not usually friendly towards the Labour Party, particularly recently, also believes that it is a bad deal. Of course it is a bad deal like so many of the others which have been struck by this and previous governments. It imposes on the British taxpayer depredations over and above those which have already been imposed.
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My noble friend gave the figure for this year. After rebate it will be £1,690 million. He was right to ask what benefits we receive from that payment. It will be an ongoing payment; the figures will continue each year. The total amount of expenditure which has been taken outside the purview of Parliament is much more than that; it is more than £5,000 million per year. That is the extent to which Parliament is losing control of much of the expenditure.
The Government believe and say that they want value for money and that they wish to target resources. Are we receiving value for money from the EC? Anyone who studies the matter and who thinks about it knows perfectly well that we are not receiving value for money. Is it the right targeting of expenditure to subsidise those countries in Europe which do not need it? For years we have been making a net contribution to the French. That is hardly targeting, bearing in mind that their gross national product is higher than ours.
The noble Lord, Lord Bonham-Carter, accused us of whingeing about the CAP. Until now I had believed that we were all against the CAP. I have heard Members from all sides of the House and in another place condemning the CAP out of hand. It is an absurd method of dealing with an agricultural policy. Apparently the noble Lord, Lord Bonham-Carter, has been converted in its favour and we shall take note of that.
Lord Bonham-Carter: My Lords, if the noble Lord reads Hansard he will not find that I am converted to the CAP. I said that the form which it took was largely due to the fact that we were not there at the time.
Lord Stoddart of Swindon: My Lords, I am sorry if I misunderstood the noble Lord. I undertood him to say that we were whingeing about the CAP. If one whinges about something one is opposed to it; if one accuses others of whingeing about it, presumably one is for it. However, I accept his explanation.
However, the fact is that we receive nothing from the CAP. My noble friends Lord Bruce and Lord Jay have already told the House that housewives are paying an additional £13.50 per week in food costs because we are members of the EC. We have also been told that we are running an overseas trade deficit in manufactured goods of anything between £11 billion and £13 billion per year. In fact the total deficit since we joined the Common Market is running at £50,000 million. If we did not have North Sea oil we should now not only be bankrupt through being a member of the EC but we should be living at a standard equivalent to a third world country. That is the extent of the "benefits" that we are receiving from the EC.
We were told that we must join this great trading bloc because it would help us. However, if you are running a deficit of £13,000 million per year and you are going to do that every year, that is the road to ruin and not to riches, believe me. However, we were also told—and we heard some of the arguments again this afternoon from the noble Lord, Lord BonhamCarter—that when we joined we would receive these

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great benefits of additional wages, additional employment and so on which have not come to fruition.
However, even I, who have been opposed to our membership of the Common Market since it was promoted or projected, believed that the farming community would thrive under it. Is it thriving? Of course not. Farmers are now going out of business every week. Those who are not going out of business are being told that they must no longer farm and must take their land out of production; they are being paid for that out of the money which we are voting this afternoon.
Therefore, let us see where the benefit is. We have asked for a balance sheet to be produced of the benefits that we receive from the Common Market and the detriments. Nobody has yet been able to produce the benefits; I can produce the detriments. I have been doing that today. However, nobody has ever been able to say what are the benefits except in abstruse terms which ordinary people do not understand.
The Prime Minister has made a number of interesting speeches lately. Indeed, she has realised and recognised, perhaps not in time, where we are going. She is beginning to understand that M. Jacques Delors is not a joke and that this latter-day Napoleon is serious about his intentions to ensure that 80 per cent. of decisions, not only fiscal but also economical and social, are being taken in Europe. Let us make no mistake about that. If that comes about—and the noble Lord, Lord Bonham-Carter, wants that to come about as he showed in his speech—this Parliament, this House but more seriously another place, will lose 80 per cent. of its sovereignty. Is that what your Lordships wish? I think not.
I must praise the Prime Minister for having the guts—because it needed guts—to make the statement which she did at Bruges, because she knew that to some degree she had to go back on previous statements which she had made in support for the single European Act which was forced though this Parliament. It took a lot of courage to do that. That is why I believe she should be given a fair hearing, and, where necessary to ensure the continued sovereignty of the Queen in this Parliament, she should be given support.
There are forces afoot. A Member of this House, namely the noble Lord, Lord Cockfield, believes that M. Delors is right. We shall have to see exactly who wins in the long term. I hope that we shall have more debates about the Common Market. I wish that we had the same sort of system as the other place, because they have a six-monthly progress report on developments in the EC. The more we understand the Community, the more wary we shall be of what we do within it.
As I said at the outset, I believe that this is a bad Bill. It contributes to bad Bills and bad measures which we have had in the past. In conclusion, I hope that the noble Lord will be able to reply to this question. It has been said that the arrangements made at Fontainebleau for our rebate will end in
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1992. If that is so and new rebate arrangements cannot be agreed, the amount of money which we shall be paying over will he quite astronomical. I hope that the Minister will be able to assure me and assure the House that the Fontainebleau agreements will not be overturned and that our rebates will continue, because to some degree that will mitigate and minimise the amount of money we pay over to an avaricious EC and the Commission which controls it.
5.35 p.m.
Lord Brabazon of Tara: My Lords, there is no doubt that we have had an interesting debate this afternoon. That comes as no surprise to me having taken part in last year's debate on the financing of the Community. Noble Lords have referred to a number of aspects of this Bill, some of which I also touched upon in my opening remarks. However. I should like to try to answer some of the points raised this afternoon.
Perhaps I could first deal with the question of the noble Lord, Lord Bruce of Donington, as to why this is a money Bill. The Parliament Act defines a money Bill as a public Bill which in the opinion of the Speaker contains only provisions dealing with all or any of a number of financial matters including taxation and the imposition of charges on the Consolidated Fund. As the explanatory and financial memorandum to this Bill makes clear, it allows payments to be charged directly on the Consolidated Fund and therefore falls clearly within the definition of a money Bill.
Some noble Lords asked, most notably the noble Lord, Lord Bruce of Donington, whether or not the budget is now on a sound financial footing or why the new spending controls should be any more effective than those agreed after Fontainebleau in 1984. Those are fair questions although I suspect that some noble Lords may have intended them to be rhetorical ones. There are a number of good reasons why the new arrangements are an improvement on their predecessors. Many of the concerns expressed have understandably focused on agricultural spending. The noble Lords, Lord Jay and Lord Bruce, referred to the high cost of food prices under the CAP. It was precisely because of the problems associated with the CAP that in the recent negotiations the Government successfully pressed for control of CAP spending and a reduction of surpluses.
First, there is the guideline limit on agricultural expenditure. Yes, there was a guideline before, but previously it was set out in informal Council conclusions. Now it is embodied in a legally-binding Council decision and it will in future grow at 74 per cent. of the rate of growth of Community GNP, compared to a rate of growth equal to the rate of growth of available own resources under the old system. Moreover, the 1984 arrangements allowed the guideline limit to be exceeded in the event of exceptional circumstances. The monetary reserve which replaces this provision is more limited and specific in its scope.
So much for setting the guideline limits. But how can we ensure that the guideline limit is adhered to? The Council's decision on budget discipline provides

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not only that the Commission's price proposals should be consistent with the guideline but also that spending will be managed on a sector by sector basis to ensure that the limit will not be breached. Moreover, automatic stabiliser mechanisms have been built into the regulations on each of the main commodity regimes. These are generally designed to trigger price cuts whenever production exceeds maximum agreed quantities. These arrangements are now in force and have helped to ensure that spending on individual commodities has not exceeded budget provision.
A further improvement is in the handling of agricultural stocks. A new regulation has been introduced to provide for systematic depreciation of new stocks bought into intervention and specific sums have been set aside outside the guideline limit to provide for the costs of depreciation and disposal of existing stocks which had not been fully depreciated in the past.
For all these reasons, the Government are confident that the new arrangements will be significantly more effective in controlling agricultural expenditure than those agreed in 1984. In fairness, I should also point out that the economic conjuncture now is quite different from what it was four years ago. Because of higher world prices and lower than expected harvests, spending on agriculture this year is in fact now expected to be some 1 billion ecus below the budget provision for 1988. Indeed, world prices and other factors have also led the Commission to reduce its proposals for agricultural budget provision for next year by over 1.3 billion ecus. So the outlook for respecting the guideline limit on agricultural spending is for a number of reasons more favourable than in recent years.
The noble Lord, Lord Bruce of Donington, suggested that the Commission would never propose a reform of the CAP. However, he appears to have ignored the fact that the fundamental reform of the CAP, including the introduction of legally binding budget disciplines and automatic stabilisers agreed at Brussels in February, were based on Commission proposals. The Commission knew very well that the United Kingdom would not agree to extra resources for the Community if budget discipline was not tightened and the CAP was not reformed. I think that answers the point raised by the noble Lord.
As I mentioned earlier, a number of measures have been agreed which will also help to control other areas of Community spending. The sub-ceilings on own resources will limit the total revenue available and the financial perspectives agreed between the Commission, the Council and the European Parliament will act as ceilings on each main block of spending in the budget. Taken together I believe that these measures represent a significant improvement on the arrangements for controlling expenditure which it proved possible to negotiate in 1984.
A number of noble Lords referred to the speech of my right honourable friend the Prime Minister at Bruges. I am sure she will be pleased to receive support for her speech from the noble Lord, Lord Stoddart of Swindon. The noble Lord, Lord Bonham-Carter, also referred to that speech. I agreed
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with most of what he said, particularly the fact that we should have joined the Common Market earlier. However, that is past history and I was only in short trousers in 1959.
The noble Lord suggested that my right honourable friend's speech threw into question the whole basis of the February European Council Agreement—or at any rate the Government's attitude to that agreement. I cannot accept that argument because it is not borne out by what my right honourable friend actually said. Perhaps I may quote a few of her remarks. She said:
"If we cannot reform those Community policies which are patently wrong or ineffective … then we shall not get the public support for the Community's future development, and that is why the achievements of the European Council in Brussels last February are so important.
"It was not right that half the total Community budget was being spent on storing and disposing of surplus food. Now, those stocks are being sharply reduced.
"It was absolutely right to decide that agriculture's share of the budget should be cut in order to free resources for other policies such as helping the less well-off regions and helping training for jobs".
Those are points which I should have thought would find acceptance with noble Lords opposite. My right honourable friend continued:
"It was right, too, to introduce tighter budgetary discipline … to bring the Community spending under better control".
Thus, far from there being any inconsistency between what my right honourable friend said in Bruges and the European Council package, she went out of her way at Bruges to commend the main elements of that package. I trust that noble Lords who share the views set out in that speech will accordingly support this Bill which endorses the European Council agreement.
Noble Lords opposite have complained about the cost to the United Kingdom of being a member of this club. if I may say so, the noble Lord, Lord Bonham-Carter, answered those arguments particularly well. A number of noble Lords made a comparison with the figure for next year which the noble Lord, Lord Bruce of Donington, revealed to us as £1,970 million as if that were something new. It is not. It was published in the Autumn Statement.
Perhaps I should make one comparison. The noble Lord compared it with the costs of dental inspections, or whatever. I point out that the same Autumn Statement announced that we are to spend an extra £2 billion on the National Health Service next year—not a total of £2 billion, but an extra £2 billion, which is even more than the cost of the Common Market to us.
The noble Lords, Lord Bruce of Donington, Lord Stoddart of Swindon and Lord Jay, referred to the trade deficit. It is true that we have a trade deficit with the rest of the Community. However, that is a challenge we are facing. We are committed to maximising the potential of the EC market of 320 million people through completion of the Single Market in 1992.
Lord Stoddart of Swindon: My Lords, I thank the noble Lord for giving way. Of course I understand that we should face up to this challenge. However, is the Minister aware that we have been facing up to it

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since 1973? During that period a surplus in 1973 has been converted increasingly, virtually year by year, into this enormous deficit. In other words, the deficit has been increasing every year and not reducing as one would have expected.
Lord Brabazon of Tara: My Lords, as I said, we are committed to maximising the potential in 1992 through the completion of the single Market.
I should point out that our exports of manufactures to the EC last year showed a growth of 18 per cent. compared with an import growth of only 13 per cent., so we are moving in the right direction. We have a deficit with the EC because it is a major source of manufactured goods and most non-EC countries have traditionally been producers of raw materials. Almost half our exports of manufactures go to the Community and it would be hard to replace even part of that market.
The noble Lord, Lord Bruce of Donington, asserted—unfairly, I would say that we spend only half an hour or so on the Court of Auditors report. In fact it was at this Government's instigation that the report is now discussed each year in the Economic and Finance Council. The report is also the subject of an annual debate in another place. That reflects the fact that the Government take cost-effectiveness extremely seriously.
The noble Lord, Lord Bruce of Donington, also queried the definition of a non-repayable advance. The fact that our contribution to the IGA has been called an advance does not mean that it is a loan in the normal sense of the word. It is simply a payment which temporarily takes the place of the contributions which we would otherwise have made had our new own resources decision entered into force.
Lord Jay: My Lords, in that case, why could it not just be called a payment and not a non-repayable advance?
Lord Brabazon of Tara: My Lords, perhaps the noble Lord makes a good point. At the end of the day it obviously appears to amount to the same thing. There is another point of detail raised by the noble Lord, Lord Bruce. He asked why the own resources decision in the IGA could not be printed as a schedule to the Bill. I do not believe that there is any need for it to be so because both have been published as Command Papers; they are freely available to anyone who wishes to see them. Perhaps I should not say "freely available" but they are available.
Lord Bruce of Donington: My Lords, how much?
Lord Brabazon of Tara: My Lords, if the noble Lord queries it, the decision on own resources is priced at £1·60 net and the undertaking at a modest 50 pence. Of course the noble Lord would not have to pay that if he wanted a copy.
I turn to the remarks of the noble Lord, Lord Bonham-Carter. As regards our membership of the exchange rate mechanism of the EMS and his
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comments on the possibility of a European central bank, the Government remain fully committed to playing a full part in Europe. We are ready to join the exchange rate mechanism when the time is right. As regards the question of the European central bank, the Prime Minister explained the position at Bruges. The key issue is not whether there should be a European central bank. The immediate and practical requirements are to implement the Community's commitment to free movement of capital; to establish a genuinely free market in financial services—in banking, insurance and investment; and to make greater use of the ecu.
Finally, the noble Lord, Lord Stoddart of Swindon, asked me whether the Fontainebleau abatement refund would end in 1992. It is not time-limited and it cannot be changed except by unanimous agreement with member states. The noble Lord quoted from The Times saying that we had got a bad deal in February. Perhaps I may quote from two other French newspapers. First, Liberation said:
"The British Prime Minister can boast of having preserved her cheque … and above all of having won the point that she was refused at Fontainebleau: the checking of the inflationary spiral of agricultural subsidies.
Le Figaro said:
"It is likely that in the plane on the way back to London the British delegation was exchanging knowing smiles and satisfied handshakes."
Those newspapers in that country knew that we had got a good deal.
I trust that I have answered the questions raised by noble Lords. In conclusion, I wish to summarise one or two of the points I made earlier. The Bill explicitly seeks Parliament's approval, first, for a new own resources decision that among other things preserves our Fontainbleau abatement which, as I have said, has been worth some £4½ billion over the past four years. Secondly, the payments under an IGA have put this year's Community budget onto a sound financial footing. Moreover, the Bill implicitly seeks endorsement of the package of measures agreed at the February European Council including the new legally-binding measures to keep within spending limits. That package needs to be seen as a whole. In the Government's view the package is good both for the United Kingdom and for the Community as a whole. I trust that your Lordships will share that view and that your Lordships will accordingly grant this Bill a second reading.
On Question, Bill read a second time; Committee negatived.
Then, Standing Order No. 44 having been suspended (pursuant to Resolution of 7th November), Bill read a third time, and passed.

Criminal Evidence (Northern Ireland) Order 1988
5.54 p.m.
The Parliamentary Under-Secretary of State, Northern Ireland Office (Lord Lyell)The Parliamentary Under-Secretary of State, Northern Ireland Office (Lord Lyell) rose to move, That the draft order laid before the House on 20th October be approved.
The noble Lord said: My Lords, the issue before us this evening which is at the heart of the subject of this draft order is one which has over many years raised deep emotions and led to strong arguments within the legal profession. This evening I shall try, with the assistance of all of your Lordships who will be contributing to this debate, as well as my noble and learned friend, to put the issue into perspective as well as to explain the reasons the Government believe that it is right to move now to allow courts and juries in Northern Ireland in certain carefully defined circumstances to draw such inferences as would be proper from an accused's silence under police questioning or in court.
Over a considerable period of time the Government have viewed with growing concern the way in which hardened, professional criminals in Northern Ireland, including terrorists and racketeers, have sheltered behind the protection provided for them by the law of evidence in criminal cases. This prevents inferences to be drawn from the fact that, when confronted with an accusation of complicity in serious crime, such lawbreakers choose to remain silent often in circumstances where innocent persons might reasonably have been expected to protest their innocence and draw attention to facts which would establish it.
Last year my right honourable friend put in hand within his department a confidential review of the law of evidence in Northern Ireland and the way it was being abused to thwart justice. The evidence of the need for change was and is impressive. The police and the prosecuting authorities confirmed that very many people whom they have good reason to believe are implicated in serious crimes have easy access to high-quality legal advice, are adept at resisting police questioning and have the protection of their own silence reinforced by the silence of witnesses brought about through fear. As my right honourable friend disclosed in another place on Tuesday of this week, the Royal Ulster Constabulary tell us that just under half of all those detained for questioning in connection with serious crimes in Northern Ireland refuse to answer any substantive questions at all.
The Government reviewed the arguments for and against change set out by a number of respected bodies and distinguished legal figures. Central to the Government's concerns were the powerful arguments in favour of change deployed by the Criminal Law Revision Committee in its eleventh report published in 1972. That was a very distinguished committee indeed, which as your Lordships will be aware, was chaired by the noble and learned Lord, Lord Edmund-Davies, and included among others Lord Justice Lawton, the late Professor Rupert Cross and Professor Glanville Williams. Its fundamental precept was that since the object of a criminal trial should be to find out if an accused is guilty, ideally all evidence should be admissible which is relevant. Thus its recommendations were aimed at reducing the gap between the amount of relevant evidence which could be given and the amount which is in fact given. These included provisions to abolish certain privileges of refusing to answer questions and provisions to discourage an accused from refraining from giving
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evidence if, a prima facie case has been made out against him.
It is the Government's view that the CLRC's arguments and recommendations have much greater force and are even more relevant today than they were in 1972. The Government, on the other hand, are not persuaded by the arguments against change which a majority of the Royal Commission on Criminal Procedure deployed in its report in 1981. Its conclusion that only a very small proportion of suspects remained silent in the face of police questioning was based on a fairly limited research confined to just four police stations and that conclusion is certainly not the case now so far as concerns organised serious crime in Northern Ireland let alone England or Wales.
During its review of these matters the Government were made aware of the law on evidence in the Republic of Ireland, where Sections 18 and 19 of the Irish Criminal Justice Act 1984 permit the courts to draw adverse inferences in certain specified circumstances from the fact that an accused had remained silent when questioned by the police. Whether or not those provisions have subsequently been applied is a matter for the Irish courts, but the important and more relevant fact for the Government was that the Irish Parliament had recognised the need for change in the law of evidence in 1984 and provisions permitting the courts, where they so choose, to draw inferences in certain circumstances are now on the Irish statute book.
The Government concluded their review by deciding to propose to Parliament measures adopting two provisions recommended by the CLRC and two provisions having the same effect as those in the Irish legislation. Those having the same effect as the CLRC recommendations are Articles 3 and 4 in the draft order which I shall shortly describe in more detail, and those having the same effect as Sections 18 and 19 of the Irish Criminal Justice Act 1984 are Articles 5 and 6 qualified by Article 2(4) and 2(5). Article 1 brings Articles 2 and 4 into operation on the seventh day after the order is made. The other provisions, which deal with silence in the face of police questioning, do not come into operation until the expiration of one month from the day on which the order is made. This delay is to ensure that police instructions—including a new form of caution to which I shall return later—can be implemented so that suspects will be properly warned of the implications of their failure to explain material facts when questioned.
Article 2 explains the interpretation of expressions used in the order and sets out savings concerning the operation of other statutory provisions and the powers of the courts. I draw your Lordships' attention to the importance of Article 2(4) and (5) which have the effect of making clear on the face of the draft order that no one can be convicted under any of these provisions solely on inferences drawn from his silence.
Article 3 has the same effect as draft clause 1 of the CLRC's recommendations dealing with what we call the ambush defence. It provides that a court or jury may draw such inferences as are proper from the fact that an accused relied in his defence on some fact

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which he failed to mention to the police when questioned or charged. This failure may be treated as corroboration of the evidence against him.
Article 4, which has the same effect as draft Clause 5 of the CLRC's recommendations, provides that if at the trial of the accused the court considers that there is a case for him to answer, then subject to certain exceptions the court must at the appropriate time call on him to give evidence; and that if he then refuses to do so, or if he refuses without good cause to answer any question, the court or jury may draw such inferences from the refusal as appear proper, and may also treat such a refusal as corroboration of any evidence against the accused.
Article 5, which qualified by Article 2(4) and (5) has the same effect as Section 18 of the Irish Criminal Justice Act 1984, provides that a court or jury may draw such inferences as appear proper where an accused fails to account to a constable for some specified fact such as a mark on his person or clothing or the condition of his clothing or footwear. There is a safeguard that such inferences can be drawn only if the accused was told in ordinary language by the arresting constable what the effect of failure or refusal might be.
Finally, Article 6, which again qualified as in Article 5 has the same effect as Section 19 of the Irish legislation, makes similar provisions to the previous article about the inferences that may be drawn from a failure or refusal by an accused when arrested by a constable to account for his presence at a particular place at or about the time the offence was committed.
Those noble Lords who have seen draft Clause 5 in the CLRC's report and who have compared it with Article 4 in the draft order will have noted that the draftsman who drafted the order has chosen at Article 4(1)(a) a more general formulation than that adopted by the CLRC. It ensures that the article will not apply in those cases where the accused's guilt is not in issue. But as the remaining provisions of Article 4 indicate, it does not displace the normal position that the accused may submit that there is no case to answer, and no question of his giving evidence arises at that stage of the proceedings.
Against the background of a sustained and systematic attack on the rule of law and on our democratic institutions, the Government decided after careful consideration that they must act promptly to restore the balance of justice in Northern Ireland. On an issue which has been debated exhaustively over the past 16 years and on which the legal profession will remain deeply divided, the Government decided that further formal consultation would not produce a consensus for change and proceeded forthwith to lay this draft order for approval by Parliament. My right honourable friend the Home Secretary also announced on 20th October his intention to bring forward legislation on this subject for England and Wales at the earliest opportunity.
The Government recognise the limitations of the Order in Council procedure, but in this case it is the appropriate instrument since much of the general criminal law in Northern Ireland is in legislation distinct from that of England and Wales and is
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defined as a reserved matter in Schedule 3 to the Northern Ireland Constitution Act 1973. Therefore this procedure applies in the absence of devolution. In recognition of the dissatisfaction with this procedure expressed by some honourable Members in another place, my right honourable friend offered to sit down with the elected representatives of Northern Ireland and others to see how the handling of Northern Ireland legislation can be improved until acceptable proposals for devolution are forthcoming from the representatives of both sides of the community in Northern Ireland. But for the present this is the procedure provided for in statute.
The Government are aware that effective safeguards are necessary to protect the rights of persons detained in custody and to prevent the abuse of police powers. For those arrested under the terrorism provisions in Northern Ireland such safegaurds are already in place in the provisions of Part II of the Northern Ireland (Emergency Provisions) Act 1987. The police are obliged to tell a person of his right to have someone informed that he has been detained and where he is being held and of his right to consult a solicitor. In certain circumstances—which are understandable in some cases of terrorism—and only on the authority of a senior officer, access to a solicitor can be delayed for up to 48 hours but must then be granted. I hope that your Lordships will understand that provision. However, for the general criminal law, similar safeguards which are already available in England and Wales will be provided for in the draft Police and Criminal Evidence (Northern Ireland) Order, a proposal for which has been out for consultation during the autumn.
The draft codes of practice associated with the draft order will provide that a policeman will be obliged to inform a person of his rights while detained for questioning. If the draft order we are debating this evening is approved by Parliament, the codes will also contain a new form of caution or warning which the police must follow when questioning suspects.
As your Lordships will know, in England and Wales the form of caution to be administered by the police before questioning or charging a suspect was a matter for the judges until, under the Police and Criminal Evidence Act 1984, it was provided for in a code of practice. Pending parliamentary approval of the forthcoming Police and Criminal Evidence Order for Northern Ireland, the Judges' Rules still apply there; and at the request of the Government the Lord Chief Justice and the judiciary of Northern Ireland are currently considering the appropriate procedures, including cautions, that would have to be followed by the police when questioning suspects if Parliament approves this draft order. Those recommended procedures would either be issued shortly to the RUC as an amended version of the present Judges' Rules or an administrative guidance.
I ask those noble Lords, or people anywhere, who say that these proposals remove a cornerstone of our traditional liberties to retain a sense of proportion. The measures we propose this evening do not reverse the burden of proof. The burden of establishing the guilt of the accused beyond reasonable doubt on the

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evidence presented remains, and will always remain, on the prosecution. The right of a suspect to remain silent will not be removed. The proposals do no more than allow such inferences as are proper to be drawn from an accused's silence in the face of other substantive evidence linking him to an offence. As the CLRC said:
"Failure to give evidence may be of little or no significance if there is no case against an accused or a weak one. But the stronger the case is, the more significant will be his failure to give evidence".
The Government recognise that these measures on their own are not a solution to the problem posed by organised serious crime in Northern Ireland. But there is no doubt that they will assist the police and the prosecuting authorities in the fight against such crime by planting in the minds of law-breakers doubts as to whether their silence will protect them from justice in the future.
In asking your Lordships to approve the draft order before us this evening, I should like to conclude by commending the words used by the Lord Chief Justice, Lord Lane, in the Court of Appeal in England earlier this year when commenting on the use of what we call the ambush defence. He said:
"The balance of fairness between prosecution and defence cannot be maintained unless proper comment is permitted on the defendant's silence in such circumstances. It is high time that such comment should be permitted".
That is as much as I wish to quote from the Lord Chief Justice's comments in regard to that case in the Court of Appeal earlier this year. I believe that that is a suitable conclusion to my remarks in setting forward the proposals in the order which is before the House tonight. I commend it to your Lordships.
Moved, That the draft order laid before the House on 20th October be approved.—(Lord LyeII.)
6.12 p.m.
Lord Prys-Davies: My Lords, I thank the noble Lord, Lord Lyell, for his full explanation of the terms of this important but difficult order. Perhaps I may say at the outset that we readily recognise the great difficulties facing the Government and their Ministers in Northern Ireland and the difficulties which face the police in the Province. We understand their sense of frustration as the emergency in the Province appears to be unending in the foreseeable future, or at all.
However, we regret that the Government have been manoeuvred into introducing this order which weakens and dilutes the right of a suspected person to remain silent. That is a right which has been a significant principle of English criminal law for about 300 years. We are not saying that the right is being removed; we are saying that it is weakened by the order.
In fairness, the Minister has acknowledged in his opening speech that the Government are aware of the unease which exists about the order—at least, I believe that there is that acknowledgment in his remarks. I should like to think that the fact that the noble and learned Lord, Lord Hailsham, is taking part in the debate this evening is some evidence—indeed, I am sure it is—that he is aware, and perhaps more than aware, of the importance of the order.
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I should also like to say that we are concerned about the fact that the order has been introduced on 24 hours' notice. I believe that that concern is shared by many Members of your Lordships' House. Those who were present in the House last week will recall how my noble friend Lord Blease protested that the housing order was introduced at short notice. One begins to wonder whether these two orders represent the beginning of a period of almost unannounced legislation for the Province.
As this order erodes and weakens an important traditional principle of law, surely the House should have had ample opportunity to know that it was on its way to the Chamber. Therefore can the Minister explain to the House where the fault lies for this state of affairs?
I should like to mention many grounds of concern about the order—I put it no higher than that. I have listened carefully to the Minister, but he really has not explained why it is necessary to change the law in Northern Ireland before the Home Office has received the report of the working group of officials which was set up earlier this year by that department. It was set up to consider all relevant aspects of change in the law which is being made by the order which is before us this evening. I ask: why the haste? Why the hurry?
On 18th May last the Home Secretary said that more careful work had to be undertaken before the Government could bring forward with confidence—I underline the words "with confidence"—a specific proposal for legislation in this area. Therefore as England and Wales are not to be burdened with speedy legislation in this difficult area, and possibly imperfect legislation, why is it necessary that legislation on such an important subject should be home and dry in Northern Ireland before the working group reports in a few months' time? It is not the case that the report of the working group is not expected for two or three years; it is expected early in the new year.
The Government have said, and indeed I think the Minister did also this evening, that the change must be introduced now in Northern Ireland. That is an assertion which we follow. However, can we have the Government's explanation for the hurry, bearing in mind that the working party will be reporting in a few months' time? Before I leave this issue, I should like to press the Minister for one assurance. If in the light of the working party's report, when it is produced, it is considered that some, or even all, of the provisions to be found in the order are ill-defined, or otherwise defective, can we have the Minister's firm assurance that the Government will promptly introduce amending legislation to put the order into proper shape or, if need be, to repeal it so that the law in Northern Ireland would mirror the provisions in England and Wales?
Again, notwithstanding what the noble Lord, Lord Lyell, has said, it is very much to be regretted that the changes are being made by the procedure of an Order in Council, rather than by primary legislation. Even if we accept that there may be justification for modifying the principle of the right to remain silent—at least in respect of some offences—even if

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we make that concession, then the House should have the opportunity of testing the legislation. There is really only one way of doing so and that is in Committee. One wants an opportunity to test the meaning of words and phrases and to test whether the provisions of some of the articles have been too widely drawn.
The order is concerned not just with the inferences to be drawn from the accused's silence in the courtroom after he has received legal advice, or in the police station; it reaches further back. It reaches a suspect's failure to answer a constable's questions in the street.
I should like to refer briefly to Article 3(1). Has not the net been cast too widely? It appears to me, and I am no expert on the criminal law, to have been widely drawn. Such inferences as appear proper may be drawn against an accused if he:
"at any time before he was charged with the offence, on being questioned by a constable trying to discover whether or by whom an offence has been committed, failed to mention any fact relied on in his defence in those proceedings"'.
As I read the article, the provisions will apply even before the police have evidence that an offence has been committed by anyone. If a constable sees smoke, he will assume that there is a fire. It may be a non-existent fire. Is that fair?
Again, it will be lawful to draw inferences against the accused for a failure to mention any fact relied on in his defence even if the fact is peripheral and almost inconsequential. Is not that going too far? As I have said, to a layman it appears that Article 3(1) has been widely drawn. It is not immediately apparent why it is necessary to introduce Articles 5 and 6. The Minister has told us that they are similar to two clauses to be found in the Republic's criminal law. Is it not true that the clauses in the Irish Criminal Justice Act have not been invoked by the courts?
There is one point on the substance of the order upon which I should be grateful for clarification. How will the order affect the position of a person who, for a reason best known to himself or herself, tells the constable in the street or in the police station that he or she wants to consult a solicitor before answering the constable's question? Even innocent persons are worried about their protection in certain circumstances. People may fear that a constable is going over the top and they therefore will not answer a question until they have received a solicitor's advice. Could an adverse inference be drawn if as I walk along one of the streets of Belfast I refuse to answer a constable's question until I have consulted a solicitor and I give him that explanation for my silence? It is not clear how that position lines up with the provisions of the order.
I understand that it is the Government's case that the proposed derogation from the traditional safeguard of the criminal law will lead to more convictions and help to reduce serious crime, in particular, acts of violence committed by the Provisional IRA and the Loyalist paramilitaries. I accept that it may well lead to the conviction of some guilty persons who now go free; but some innocent people may be convicted.
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I am not sure that the order will be as powerful a weapon against the hardened terrorist as the Government believe. I have been told by a friend who practises at the criminal Bar that henceforth, whatever may have been the position in the past, a hardened criminal will have worked out his alibi beforehand; and the person who may well be at risk is the young innocent alleged offender. Might not the order be counter-productive? Will it not (or may it not?) create or deepen the sense of grievance felt by some Nationalist communities in the Province? Will it not be a ready target for the Provisional IRA? Will it not represent it to be an oppressive measure to attract sympathy and support at home and abroad? If that were to happen, will the Minister explain what then will have been achieved by the order?
We on these Benches are unable to support the order because so many questions remain unanswered and we have reservations; but in accordance with the convention, we shall not seek to divide the House.
6.26 p.m.
Lord Hylton: My Lords, I am sure that Members in all parts of the House are grateful to the Minister for explaining the contents of the order. I hope that I manage somehow to retain my sense of perspective and proportion. I endorse the opening remarks of the noble Lord, Lord Prys-Davies, who said that we all understand and have sympathy for the Government in the current difficulties that they have over law enforcement in Northern Ireland.
Having said that, I regret the fact that the order breaches a convention that has held for many generations. Parliament is being treated with something verging on contempt. The order was published on 20th October in its final, unamendable, form. Parts of it will become effective one week and other parts one month after it is made. When it passed through the other place, it received a mere two-and-three-quarter hours of debate. Consideration in your Lordships' House has been brought forward by four days. I regret that no one commented upon or objected when that was announced. Why is there all the rush? Why is the measure suddenly necessary after the emergency has continued in Northern Ireland for some 18 years and we have had nine-and-a-half years of Conservative government?
If the order is aimed at terrorism and racketeering by hardened criminals, why does it include all offences from petty shoplifting and traffic offences right the way on upwards? I have to ask again: why was there no consultation period although in the case of the housing order which was mentioned earlier there was a normal and lengthy consultation period? Surely in this case it would have been right to seek the considered opinion of the legal professions in Northern Ireland on the text. Why was the Standing Advisory Commission on Human Rights not consulted in advance?
The Minister mentioned the legal position in the Republic of Ireland. Why does the order go further than that on two major counts? I should perhaps explain that the Irish legislation creates presumptions only where suspects refuse to explain stains or

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substances on their clothes or their whereabouts at particular times. It has in any case been said that the Irish law of 1984 has seldom been invoked against terrorists and racketeers. Mr. Mallon, the honourable Member for Newry and Armagh, even declared in the debate in the other place that this legislation had never been invoked by an Irish court and no one contradicted him. I challenge the Government to do so now if they wish.
This order applies to the potentially innocent as well as to the potentially guilty. It so happens that I have visited men in prison both in England and Northern Ireland who considered themselves innocent of crimes for which they were convicted. They believed, sometimes after many years in prison, that they were the victims of miscarriages of justice. This order increases that risk and therefore should have been presented as a Bill so that it could have been properly scrutinised, clause by clause and line by line, in both Houses.
We are told that there will have to be a Bill for England and Wales. Why therefore is Northern Ireland treated in this unfortunate way? As an Englishman I object to the measure being used as a paving stone to diminish my long established liberty. Will the Government give an undertaking that the Bill for England and Wales will also cover Northern Ireland and thereby replace this order, if it should be approved? What I ask now is somewhat parallel to the assurance that was asked for by the noble Lord, Lord Prys-Davies.
The order might be acceptable if certain conditions obtained but, alas, I do not think that they do. In 1981 the Royal Commission on Criminal Procedure in England drew attention to the lack of supervision and control over police interrogation. In Northern Ireland the Bennett Committee recommended measures in 1977 to prevent brutal and degrading treatment for suspects under arrest and in custody. If since then Her Majesty's Government had totally stamped out such maltreatment, this order might be acceptable. However, alas, police surgeons and even the High Court in Northern Ireland have this year recognised that such is not yet the case. If suspects were always questioned in the presence of a magistrate, as I understand is the practice in Scotland and France, in short, if we had in Northern Ireland a proper inquisitorial system, we could perhaps agree the order. Again, if suspects had an automatic right to legal advice before or during questioning, the order might be acceptable. In fact we know that for scheduled offences in Northern Ireland access to a solicitor may be refused for 48 hours. The Committee on the Administration of Justice has produced figures showing that in 40 per cent. of such cases access was delayed.
We also know that in Northern Ireland there is no system of duty solicitors available throughout the 24 hours as exists in England. Neither are there lay visitors at police stations to oversee the well-being of arrested persons. Will Her Majesty's Government extend these provisions to Northern Ireland?
It is a long-established fact of life that there are no simple solutions to be had in Northern Ireland. There
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is little prospect of a military or police victory. There is therefore little chance of overcoming terrorism through the administration of justice. Yet in spite of this, the Government come forward with a trio of measures: this order, the denial of radio and TV appearances for certain parties and organisations and the proposed declaration at elections concerning the use of violence. At least in the last instance there has been a long consultation period. Otherwise I have to say with regret that these are cosmetic moves which may achieve little.
Her Majesty's Government would do better to devote their considerable energies to gathering usable information, to stopping rackets where they can and to making economic and social improvements, especially fair employment. What is needed above all and at all levels is confidence-building. That is why I welcome the recent White Paper on integrated education and the proposed extension of police and public liaison committees. I have given reasons why this order should be rejected. I only regret that the conventions of your Lordships' House apparently prevent us dividing upon it.
6.35 p.m.
Lord Colnbrook: My Lords, the noble Lord, Lord Hylton, and the noble Lord, Lord Prys-Davies, before him referred to the method of legislating for Northern Ireland. They spoke about the differences between the law in Great Britain and Northern Ireland and the Republic and referred to the problems which they acknowledge exist in Northern Ireland. Perhaps I could say that I agree with them both about the method of legislating. It is not satisfactory, as we all recognise. That is why I was particularly pleased when my right honourable friend the Secretary of State in another place two days ago made the firm offer of discussions, primarily no doubt with representatives of Northern Ireland but also with anybody who would care to join in, about seeking an improvement. I think this is a wise move on his part and I hope very much that the offer will be taken up. We all wish to see an improved method of providing law in Northern Ireland.
On comparisons of the law, as your Lordships know, I am no lawyer so I shall not make any comment on that but leave it to my noble and learned friend in front of me who will no doubt do so. Perhaps I may claim to speak with some knowledge of the great problems in Northern Ireland facing my right honourable friend the Secretary of State, my noble friend the Minister, the Royal Ulster Constabulary and everybody who lives in the Province. Their problems are very different from those in Great Britain.
In Great Britain, for example, persons accused of crimes, generally speaking, are accused singly or possibly in small groups. As a rule I think it is true that the crimes they commit are committed for personal reasons—personal gain, revenge or whatever it may be. In Northern Ireland what is being attempted by the terrorists and persons accused of offences of a terrorist nature is the overthrow by force of the Government, of the whole machinery of Government at all levels and its replacement by themselves, not only in Northern Ireland but in the

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Republic of Ireland also. Their spokesman, Mr. Adams, made a great speech nine years ago, of which I have a copy. In it he declared that the aim of his organisation was the overthrow of both governments by force.
These people are prepared to use any means to achieve their aims. They are all unfortunately only too familiar with the desperately long list of atrocities committed week after week in Northern Ireland—the murders, the bombings, the shootings, the maimings of people, many of them wholly innocent and totally unconnected with the government which the terrorists seek to overthrow. Only this morning we read in the newspapers of the most recent bombing of a housing estate in Londonderry yesterday full of women and little children. It is very easy for us who live our lives in Great Britain to imagine that the maintenance of law, order and peace is much the same in Belfast as it is in Birmingham. However it is not. It is very different and it requires us to think very carefully about how best to handle it.
What is proposed here, it seems to me, is not in the least draconian hut, on the contrary, very modest. It is in line with common sense. I am not a judge; I am not even a magistrate. I have never sat on a jury but I think anyone charged with the duty of deciding the guilt or innocence of an accused person is bound to take into account everything connected with the case. That includes the words spoken or written in evidence of course. But when a witness's evidence is tested by examination and cross-examination the demeanour of the witness and the way in which he or she answers the questions or does not answer the questions are relevant.
At present, in theory, as I understand it, the judge, the magistrate or the jury are not entitled to take into consideration the fact that the accused will not answer questions. If he refuses to answer questions in court, they are bound to notice that because they were there and they saw it. For the life of me, I cannot see why they should not take that into account. Of course it can never be conclusive—indeed, the order specifically states that it cannot be conclusive—but it is one pointer that contributes to the whole picture they are considering.
I make one final point. It is quite clear that the terrorist organisations regard this facet of our law as being of the greatest value in helping their members who have committed horrific crimes to escape the consequences.
I, and I expect many other noble Lords, have seen the printed instructions, not to innocent people but to people who are setting out to shoot someone or to plant a bomb. Those instructions state what those people should do if and when they are caught. The instructions are headed:
"Whatever you say, say nothing".
The instructions contain detailed advice about how terrorists should conduct themselves when questioned. They know, and continually stress, that the refusal to answer questions is of enormous help to them because the courts can take no notice of it.
Those charged with the duty of preserving peace and quiet in Northern Ireland have a difficult enough
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task. This proposal will not end the troubles, but it will help, as my noble friend the Minister said, by sowing doubts in the minds of some terrorists as regards whether their silence will protect them. If that means that next week even one person is alive who would otherwise have been shot or blown to pieces, this must be something we all desire. I urge your Lordships to support this order.
6.42 p.m.
Lord Moran: My Lords, I wish to say a few brief words about two aspects of this matter: first, the way in which this legislation is being introduced for Northern Ireland; and, secondly, the substance of the order. On the first point, two days ago there were widespread protests in another place, from many parts of that House, about the introduction of this change by Order in Council rather than by a Bill. I think those protests were justified, despite the technical reasons which the Minister mentioned in his speech. I was very interested to hear what the noble Lord, Lord Colnbrook, who speaks with great authority on these matters, has just had to say on this.
I have only sat for four years in this House, but I have been impressed by the effectiveness of the legislative process in Parliament. During the debate two days ago on the introduction of charges for eye tests, the noble Lord the Leader of the House and others pointed out that Lords' amendments are often accepted. It has been my experience that the Government do listen to constructive criticisms, that sensible amendments, supported by cogent arguments, are often accepted in substance and that Bills are improved. Why then should we reserve the privilege of using their system for England and Wales and deny it to Northern Ireland?
For by adopting this procedure, the Government are denying us the opportunity of proposing any amendments. There will be no Committee stage and no Report stage. We are treating Northern Ireland in a way which we do not treat England and Wales—like a remote colony instead of what it is, part of the United Kingdom. That is surely wrong.
Moreover, in this case the change is not to be restricted to Northern Ireland. In winding up the debate in another place the Solicitor-General said:
"This Order is part of a reaction to serious crime generally… in England and Wales and Northern Ireland."—[Official Report, Commons, 8/11/88; col. 219.]
So, why could there not be a normal Bill covering all three parts of the United Kingdom?
I cannot help thinking that the Government are proceeding in this way because they cling to what I believe is the mirage of devolution, whereas the logical, sensible thing to do would be to treat Northern Ireland as Wales is treated—as a full part of the United Kingdom entitled to the same rights as any other part. Those rights should not exclude the ability to vote for the major national political parties.
I too, however, was encouraged to see that in response to this criticism the Secretary of State for Northern Ireland said that he would be willing to sit down with Members of another place,
"and discuss the ways in which we proceed with legislation".—[Official Report, Commons, 8/11/88; col. 182.]

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If that happens may I ask the Minister for an assurance that the needs of this House will be considered also, and that we too may have an opportunity of joining in the discussion.
I now turn to the question of the substance of the order. Here I fully support the Government. To me as a layman the case appears to be clear enough. It is surely based, as the noble Lord, Lord Colnbrook, said, on common sense. Those of us who served in the last war were advised, if captured, to give our names and numbers but nothing else whatever. Terrorists and criminals are now adopting the same tactic and if, as the Minister tells us, nearly half those questioned about serious crimes in Northern Ireland choose to say nothing, surely something needs to be done.
A court must be able to draw an appropriate inference, being guided on that by the judge. A case still, as I understand it, needs to be proved beyond reasonable doubt, and Article (4) makes it clear that silence by itself will not be enough to convict. I am impressed by the remarks of the Lord Chief Justice that were quoted by the Minister. The balance does surely need to be corrected, so that guilty persons cannot escape by ingenuity. I think therefore that the Government are entirely right to introduce this change.
6.46 p.m.
Lord Hailsham of Saint Marylebone: My Lords, I was very touched when the noble Lord, Lord Prys-Davies, made his reference to me at the outset of his remarks. I do not know whether or to what extent he will approve of what I have to say, but I shall preface my remarks by saying that I believe as strongly as ever in the importance both of the burden of proof and of the standard of proof. I echo exactly what the noble Lord, Lord Moran, has just said. That is to say that a case must be proved beyond reasonable doubt against any accused, whatever he is accused of; whether it is going against traffic lights or murdering Lord Hailsham of Saint Marylebone. The case must be proved beyond reasonable doubt.
But having said that, I must add that the creaking ox wagon with its artificial and specialised rules of evidence and procedure which constitutes English criminal law—I say English criminal law because I am not a Scots lawyer—is something which should have advanced rather more rapidly since Jeremy Bentham than it has been able to do. The Northern Ireland system of criminal law basically corresponds to the English model.
The chief enemies of advance have, I am sorry to say, been very largely members of my own profession. My mind goes back to the terrible debate in which almost every speech which has been made this evening could have been made. That debate concerned majority verdicts in juries. I had promises from eight or nine—I forget the exact number—members of my own profession on my own side of the House. We were then in Opposition in another place. Those members told me that they would back what the then Home Secretary, Roy Jenkins, was saying. He is now the noble Lord, Lord Jenkins of Hillhead.
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I told Roy Jenkins that I would back him to the end. I did, but every one of those who had promised me support ratted. I told them when they ratted that the first verdict would be a verdict of acquittal. Not only was the first verdict a verdict of acquittal, but in the case of Peter Haines he would have had to stand his trial a second time if it had not been for a majority verdict.
The truth about this ghastly business is that there are two theories of English criminal law. That was dinned into me by my father after he had been Attorney-General. One of the theories is what I might call the foxhunting theory. According to that theory, it does not matter what one does to the criminal provided he is properly hunted by 12 selected hounds presided over by a huntsman in a pink coat blowing a horn of a particular make. The criminal must not be chopped in cover. As long as the thing goes according to Cocker, or whatever the right term is, and Facey Rumford is in charge of his hounds it does not matter what one does to the criminal.
I take a totally different view. I take the Jeremy Bentham view of the criminal law. The purpose of criminal law anywhere is to convict the guilty and to acquit the innocent. I wish I could drum it into the heads of my colleagues in the legal profession that by ensuring the acquittal of a large number of guilty people one does not necessarily secure the acquittal of one innocent man by any rational system. I can name instances where time and again the artificiality of English criminal law and procedure has led to convictions of admittedly innocent people—for example, the case of Doherty, of Adolf Beck, and the case of Virag.
The essence of the matter is rationality. The two doctrines of English criminal law were well summed up in the battle between Blackstone and Jeremy Bentham. The Blackstonians were foxhunters to a man and Jeremy Bentham was the rationalist. I declare myself, for this purpose only, a Benthamite.
This is a very modest little measure, which I should have liked to have seen a great deal simpler. I should have liked to have seen it applied to the United Kingdom as a whole, but I exclude Scotland because I do not understand Scottish procedure. I should have liked to have seen it applied both to Northern Ireland and to England and Wales, and it ought to have been introduced about 25 or 30 years ago.
Why do I say that? First, my noble kinsman on the Cross Benches and the noble Lord, Lord Prys-Davies, thought that there was some sort of immemorial right—which is called the right of silence—which was being taken away by this measure. I must correct that impression. We are dealing with three related areas of English criminal law. The first is the treatment of a person under interrogation; the second is the admissibility of confessions; and the third is the right of the accused to give evidence.
In the sense of the last of those rights there has never been a right of silence. I shall tell your Lordships why. Until 1898—which is only about eight years before I was born—the accused was not allowed to give evidence. He was prohibited from doing so. I have no doubt that a great deal of injustice

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in the name of what is called fair play—which means foxhunting—resulted from his not being allowed to give evidence.
The rules introduced in the Act of 1898—which as I say is more or less my own lifespan plus eight years—still stand on the statute book. The rules provide that the prosecution may not comment upon the failure of the accused to give evidence, except…—and then follows a series of fox hunting rules. The judge may do so, and does so even now—and Lord Lane did so in the case which my noble friend on the Front Bench quoted. But the theory of the right of silence does not exist as regards the judge except in so far as it has been elaborated by the extraordinary complexity of the English legal mind.
In 1932, when I was a young man at the Bar before that right had been fully elaborated, there was a judge called Mr. Justice Swift. He was an amusing man with a strong Lancashire accent. If the accused did not give evidence he would say to the jury "You know, members of the jury, there's one man in this court who knows what 'appened. I don't know what 'appened, you don't know what 'appened. But there's one man who does know what 'appened. 'E 'asn't told us. I wonder why". That is what happened when I was a young man at the Bar. Of course he would not get by the Court of Appeal Criminal Division today with a summing-up like that.
Let us get down to brass tacks and say boldly and brutally, with the Edmund-Davies committee, that everything ought to be admissible which is capable of being logically probative and relevant with very few exceptions indeed. Among those things which ought to be admissible are silences and observations of any kind made in circumstances which are relevant to the issues of the trial.
Perhaps I may give some examples. I quite agree with my noble kinsman that there is no difference between terrorist offences and ordinary offences in this respect. Suppose a man is accused of incest with his daughter. The little girl is brought in and the outraged mother points to the man and says, "This is what she says you have done to her". If he tells lies, that can be given in evidence; he has chosen to break his silence. If he blushes, that can be given in evidence. If he shifts uneasily from foot to foot, hangs his head and turns away from his little daughter, that can be given in evidence and inferences can be drawn, and rightly. In those circumstances we trust the jury to come to the true conclusion. But if he says nothing, stands at attention and looks at the ceiling his silence cannot be used in evidence.
Suppose a man is found standing over the victim, who happens to be his worst enemy, with a smoking gun in his hand and a dead body in a geat pool of blood in front of him. That would ordinarily be considered a compelling case to allow a jury to convict. However, there may be an innocent explanation. It may be that he was trying to stop the man from committing suicide and took the gun away from him but it went off in the struggle. It may be that he was defending himself because he came in when the man was plotting some outrageous offence, he tried to take the gun away, succeeded and shot the
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man in self-defence. But it would be rather odd, would it not, if he did not say so when asked? It would be odd if he remained silent and said, "Prove your case against me", with the gun smoking and the pool of blood on the floor.
What do we mean when we talk about this centuries old right? The truth is that it was called a thieves' charter by Jeremy Bentham, and Jeremy Bentham was right. My noble kinsman has a perfectly good point when he asks the Government why the order should apply only to Northern Ireland. The truth is that it ought to have been introduced 25 years ago for everybody.There are only two good reasons for treating Northern Ireland separately. One is that which my noble friend on the Front Bench gave; namely, the difference in law—which is not entirely homogenised by the order—between us and the Republic of Ireland. The order brings the law on the north of the Border more or less in line with that of the Republic. That cannot be a bad thing when there is a land frontier.
As my noble friend behind me said it is true that there is a difference between Northern Ireland and England. The terrorist organisations have coached their members, who are organised not only in a conspiracy to murder but also in a conspiracy to commit high treason, in the best way to defeat the police. I believe therefore that there is a case, although it is not the case that I should have liked to have been making, for selecting Northern Ireland for this order on those two grounds.
I hope very much that the Home Secretary will shortly bring in a Bill which will enable us to examine the whole subject of the so-called right of silence in the light of logic and common sense. It ought to have been done long ago and I hope that he does it very soon. Then we can examine any differences between this rather more complicated order that I should like and the law as the Home Secretary introduces it and homogenise the two. In the meantime and on the merits of this case, we ought to do it and do it at once.
7 p.m.
Viscount Brookeborough: My Lords, it is a great honour but yet a daunting and almost impossible task to follow my noble and learned friend Lord Hailsham. There can be nothing left for me to say on the legal side. Thank goodness! I should like to say something about the practical problems as they occur in Northern Ireland. First, in general I should like to welcome this order and I thank my noble friend Lord Lyell for explaining it so clearly to a layman such as I am. I am sure it will help to improve the very difficult situation in Northern Ireland at present.
I realise that it is a basic principle of the British legal system that a suspect should have the right to refuse to answer questions or give an explanation for his or her behaviour. However, that principle has been systematically and with premeditation exploited to the limit by the terrorists in the Province. In support of that statement I should like to quote an extract from the 1987 report of the Chief Constable. At page 14 it states:
"Terrorists are well schooled in methods designed to impede investigation into their acts of violent criminality. They are educated to a high degree in the working of the legal system and use this

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knowledge to their advantage. Training in interrogation resistance, with lectures and practical demonstrations, is standard procedure to all so-called volunteers [of the terrorist organisation)".
Noble Lords may well expect the Chief Constable of the RUC to say that in support of the argument for an order such as this one. However, I now quote from a proponent on the other side—An Phoblacht/Republican News of 7th July 1988. The headline reads:
"Interrogation—Whatever you say say nothing".
The article continues:
"Interrogation is like walking a dangerous tightrope; the only safety net one has is to maintain absolute silence from the moment of arrest until the moment of release.
The most important right you have is the right of silence. It is the only guarantee you have of being released without charge".
That is the teaching and it indicates the value of this criminal evidence order to our security forces which are defending democracy in the Province.
Perhaps I may now offer your Lordships a couple of examples out of many hundreds of cases in which suspects have exercised their rights to remain silent. Those examples make that right sound ridiculous. In a sectarian attack, a man was beaten to death by four others in a bar. Police arrived quickly on the scene and found bloodstains on two of the group. A witness confirmed that all four men had attacked the man, but the witness withdrew his statements because of threats. The suspects did not speak to the police, and on withdrawal of the evidence by the witness they were released without charge. In the second example, acting on information police approached a block of high-rise flats in order to carry out a search of a specific flat. A few yards from the flat in question they met five well-known terrorists coming from the direction of its open door. They stopped the men to question them. At that time a radio transmission was received from police on the ground that three firearms had been thrown from the window of the flat in question. The terrorists refused to speak when arrested and as none of them was a resident in that block of flats, charges did not succeed. Those examples show the ridiculous situation which at present exists in Northern Ireland.
Noble Lords may find it surprising that a suspect can sustain his silence during a period of seven days of interview. He may sit with his head between his knees or stare at the ceiling. Suspects have lain down under the interview table. The interviewer has then had to lie down beside him in order to conduct the interview. To attempt to move him or her onto a chair would constitute assault, and one remembers that there is closed-circuit TV in use. There was one occasion on which a suspect said only one thing in seven days—a few words; enough to ask for a glass of water.
I should like to return for a moment to the basic rights that people have under British law. What basic right did the terrorists give to the innocent people who were murdered and injured in Enniskillen on Remembrance Sunday last year? I knew many of them and their families and I am very glad that this year soldiers from the Fourth (County Fermanagh) Battalion of the Ulster Defence Regiment will be taking part in the Festival of Remembrance at the Royal Albert Hall. All of them, men and women,
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were present that day and for their actions after the explosion some of them received awards which varied from a Mention in Dispatches to an MBE. We are grateful to the people who saved the lives of so many who were injured on that day.
On that same day the terrorists had planted a second bomb, which failed to go off, at a second remembrance parade in Tullyhomman, only 20 miles from Enniskillen. What basic right did the terrorists give to the girl Gilliam Latimer who was on a school bus which was blown up Lisnaskea?
If those events seem far removed from this House, perhaps your Lordships will turn your thoughts to the soldiers and relatives of those soldiers in the 1st Battalion Light Infantry, who were murdered in Omagh when in a bus on their way back from leave. Those were soldiers of the Crown and, more than that, most of them came from England.
I put to your Lordships' House that had this order been in place during the past year or, as some previous speakers have suggested, for many years previously, the terrorists might never have carried out such murderous deeds for fear of conviction. In conclusion, I give my earnest support to this order.
7.7 p.m
Lord Harris of Greenwich: My Lords, I should like by way of preface to make two remarks. First I think that tonight we have had a typically engaging and robust speech, which we all enjoyed, from the noble and learned Lord, Lord Hailsham. It was a formidable piece of advocacy. I agreed with a great deal of what he said, although not in all respects. I shall come to those points in a moment.
By way of introduction, I should say I agreed with the remarks made by the noble Lord, Lord PrysDavies, at the beginning of his speech. I think that it is extremely unfortunate that we have had such very short notice of this debate and that we are having it in a Chamber which, admittedly, is rather fuller than I thought it might be at the end of a Session. Secondly, I must say that I do not like the Irish argument, if I may so describe it; namely, that if something is done in the Irish Republic, it follows that it is perfectly right, sensible and desirable to do the same thing in the United Kingdom. That was the argument used for the broadcasting ban, which I thought was a foolish decision, and everything that has happened since then has demonstrated how ill judged it was. We have also heard that argument repeated tonight.
Of course I understand that in debates within the island of Ireland it is a persuasive argument to say that we have done no more in the North than they already have in the Republic. And I also see that the argument could be put in the United States when we are under criticism. Nevertheless, I believe that these substantial powers which we are now debating, have to be justified in their own right.
I must make my position quite clear. I am sure that the majority of my noble friends oppose the ending of the so-called right of silence in criminal trials in the United Kingdom. No doubt some would do so more emphatically than others. But I have little doubt that a decisive majority would be against it.

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However, I must confess that I am a heretic on this matter, as indeed was the noble and learned Lord, Lord Hailsham, on the issue of majority verdicts when he disagreed with the majority of his own party when he was Home Affairs spokesman of the Conservative Party in the House of Commons. I supported the view, when a Home Office Minister, that the prosecution and the judge should have the fight to comment on the decision of an accused person to remain silent when questioned by the police. Of course I certainly believed that such a change in our law should be most carefully considered to ensure that the accused had proper rights. I think it correct to say that with everything that has happened since then I have not changed my position in any way. I find it disagreeable in the extreme to take one view when one is a Minister and immediately one is in opposition to take suddenly exactly the contrary view.
Having said that, I must make it clear that if there was a vote tonight I would without question vote against the Government so far as this order is concerned. I should like to explain why that is so. First of' all, I think we all recognise—as I am sure, if I may say so, does the noble and learned Lord—the significance of the decision that we are being invited to take this evening. It represents a major change in our system of criminal justice in this country. It flies directly in the face of a majority recommendation of a Royal Commission and, as we all know, it is highly controversial, as the noble and learned Lord said, among members of his profession and no doubt among the wider public.
In such a situation—and in this I agree with what the noble Lord, Lord Moran, said—I believe that Parliament has a clear obligation to examine the issue in detail; to have a Bill which would have a Committee and Report stage in both Houses of Parliament, with the opportunity of having amendments tabled and, if necessary, voted upon. However, what have we been presented with tonight? We have not been presented with that. We have had an order debated in the last day or so in the House of Commons for a period of two hours and 47 minutes. In that debate virtually every speaker complained in the strongest terms about the way in which this matter had been handled by the Government, including a significant number of members of the Conservative Party—not wets, if I may say so, but some of the drier Members of the House of Commons.
The debate in the House of Commons, as unhappily is often the case with Northern Ireland orders, took place with little more than a score or so of MPs in the Chamber. A few moments later the Division Bells rang and, with the Government having the majority they have in the House of Commons, they of course got their way.
In this House tonight we have a Chamber that could hardly be described as packed. We are having this debate, as has been pointed out by a number of speakers, in a situation in which our conventions dictate that we do not vote against a government order of this kind. In short, that solitary two and
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three-quarter hours debate in the Commons is the only challenge that it has been possible to make to the Government's proposals. I believe that that is a deplorable abuse of the procedures of Parliament. It comes dangerously close to legislating by decree. I say this as someone who has had experience of dealing with highly controversial criminal justice matters both when personal assistant to my noble friend Lord Jenkins of Hillhead and a Home Office Minister for live years.
A few moments ago the noble and learned Lord reminded us of the issue of majority verdicts. If I may say so with both respect and affection for the noble and learned Lord, he was not a popular man among some of his parliamentary colleagues at that time, and that no doubt understates the case. He indicated to the Home Secretary that he would support him through thick and thin, and he certainly did so. He was opposed by the two former Law Officers on the committee and by a formidable number of his parliamentary colleagues when the Bi11 reached the Floor of the House of Commons for Report stage.
We were at that time opposed by the Criminal Bar Association and by a substantial number of national newspapers, including The Times, which indicated that by introducing majority verdicts we would be destroying fundamental civil liberties in our country. But the point of all this is that we had that debate in the House of Commons, we had the Standing Committee, we had the debate on Report, we had the debate on Third Reading and it was debated in this House as well. What I find objectionable about this procedure tonight is that we are having to take it or leave it, and so far as this House is concerned and its conventions we just have to leave it. I do not like that approach, and I think we are involved in making a serious error of judgment so far as this is concerned. And I repeat, I have made my view on the principle of the matter already wholly clear.
Why are we prepared to do it in this way? Of course a critic will say—and I do not associate myself with this view—"Well, it is only Northern Ireland, and so therefore it doesn't really count". That is a dangerous view, and I am afraid that we give some support to that view by behaving as we are in the process of doing. It may be said, "Well, here is a matter of great urgency. It involves terrorists". But with great respect I have heard former Ministers in the Northern Ireland Office and senior officers in the Royal Ulster Constabulary make their views known on this matter for the last five, six or seven years. Therefore the suggestion that we must legislate within a week, two weeks or three weeks in such a situation is frankly preposterous.
If full, normal parliamentary procedures had been involved a Bill giving the Government powers so far as Northern Ireland is concerned would probably have been on the statute book by Easter. At least I believe that in those circumstances there would have been a chance that it would have been rather better thought through than is the position we are facing this evening. For instance, I think it was the noble Lord, Lord Prys-Davies, who asked about the precise meaning of paragraph 3(1)(a) when he mentioned this use of the language,
"any fact relied on in his defence in those proceedings".

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He pointed out that in these circumstances negative inferences could be drawn from a defendant's refusal to make a statement to the police.
Then there is the expression "any fact". I wonder how much time a Standing Committee of the House of Commons would devote to an issue of that sort. There is a whole series of references in this order which one would want to have thoroughly debated, but of course we cannot debate these issues because we are precluded from doing so by the procedure under which we are operating.
There is also the question of the Home Office working party. What will happen if that working party makes recommendations significantly at variance with the contents of this order, as I suppose is likely? I hope I am going to get a direct answer from the noble Lord on this: are we then to have a second Northern Ireland order which might establish greater opportunities for a defendant than is the position under this order? What then about the people who have been convicted as a result of this order? Are they to have the opportunity of having their cases reconsidered? There are formidable problems associated with this approach.
Then there is another matter. What about the police disciplinary procedures affecting the Royal Ulster Constabulary? Are they to be changed? There has been criticism—in my view foolish criticism—that the current police disciplinary arrangements in the United Kingdom should be changed in such a way that policemen should be obliged to answer questions when their conduct is being investigated by their own officers. It seemed to me when such a proposal was made that it was monstrous; how could such an approach be perfectly all right so far as the police were concerned but wholly unacceptable for everybody else? But if we are changing our criminal procedures in Northern Ireland, I should be grateful if the noble Lord would tell us the implications for the police.
Then there is the question of the mentally handicapped. That is dealt with in part in the order. The noble Lord will be reminded no doubt of the case of Maxwell Confait, which led to a major judicial inquiry into exactly this question, the position of mentally handicapped defendants. There are clearly substantial implications so far as this matter is concerned. I shall be grateful to hear what the Government propose to do about this.
One could go on giving further illustrations of what will arise as a result of enacting this major change in the law by means of an order. However, I wish to come to a point that was touched on by the noble Lord, Lord Hylton. The whole discussion this evening has been about terrorists in Northern Ireland, but there is no reference to terrorists in the order. We are talking about all criminal defendants in Northern Ireland. We are talking about the frightened housewife who, as she goes out of Marks and Spencer in Belfast. is stopped in the street and accused of shoplifting. We are talking about a situation in which a man gets drunk and is involved in a charge of ABH or something of that kind.
The point has been made about a duty solicitor scheme in Northern Ireland. What is the answer to
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that? We have duty solicitor schemes in Great Britain. What do the Government propose to do in this regard? It would be a very serious matter to introduce a change of this sort without having an effective duty solicitor scheme in operation in Northern Ireland.
Let me ask another question. This is not about terrorist cases, where as we know from what was said by the Solicitor-General last night that the interviews will not be tape recorded for reasons that we all understand, but about all ordinary criminal cases where interviews will be tape recorded. The absolute silence of an accused person is fairly rare in England and Wales. What normally occurs in such a situation if an accused person is determined to be as difficult as possible is a tape recording that will contain periods of silence, expletives, comment on matters that may be entirely immaterial and the answers to some questions and not to others. What precisely will happen in Northern Ireland in such circumstances? I speak here about non-terrorist cases where tape recordings will be used. Is it intended that the full tape will be played in court or will some passages be edited? If so, who will have the responsibility? That is one of the questions that the current Home Office working party will no doubt be looking at.
We are of course legislating in advance of a consideration by that committee of these issues. They seem to me to be important matters. As the Government are asking us to grant them the powers tonight, I hope that we shall get answers to some of these questions tonight.
I return to the question of the caution, an issue that was raised, as the Minister will recall, 48 hours or so ago in another place. We were told by the Solicitor-General—the Minister has repeated it tonight—that the matter is now being considered by the Lord Chief Justice of Northern Ireland, in whom I think we all have immense confidence. Is it not strange, however, that we are being invited to support the order without knowing the terms of that caution? Of course the terms are of decisive importance. We are all familiar with the contents of the present caution in criminal proceedings. The contrast with the new one will be pretty striking.
Let me give an example. A colleague of mine, Mr. Barrie Irving, director of the Police Foundation, has worked out a possible caution that I suppose could be applied in non-terrorist cases in Northern Ireland. It would run something like this:
"You do not have to say anything in answer to the questions I am going to ask you, but all of our conversation will be tape recorded and the recording may be used as evidence in court. If you do not answer my questions this will also be recorded and you may have to explain your silence now in court".
That is just one shot at it. Other forms of words will no doubt be suggested by others. It may well be that the Lord Chief Justice of Northern Ireland already has a proposal in his mind. That form of words indicates the decisive change in our system of criminal procedures in Northern Ireland under the order.
As to the principle of the matter, as I have indicated, I do not share the view that a withdrawal of the right to silence is the end of civil liberties as we know them—I have expressed that view with some

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emphasis—but I believe that it is a profound error to rush major changes in criminal procedure virtually undebated through Parliament. That is what we are talking about tonight. There has been no line-by-line consideration of this proposal. I think that that is a grievous error. I believe that the Government will come to regret it.
7.26 p.m.
Lord Fitt: My Lords, 1 associate myself immediately with the concluding remarks of the noble Lord, Lord Harris of Greenwich, in his criticism of the way in which the order was introduced.
I believe that a major change is taking place in relation to our legal constitution. Representing Northern Ireland for a number of years as I have and living in Northern Ireland as I do I have always felt, in the on-going tragedy of Northern Ireland as it existed over the past 20 years and in the continuing escalation of the number of deaths and injuries, that security and the problems that arise with it should be non-partisan. The luxury of Opposition politicians and Opposition parties should not be engaged in for the sake of opposition. Both a Labour Government when in office and the Conservative Government now in office have found themselves in great difficulty in trying to grapple with the murderous onslaught being waged in Northern Ireland.
When the restrictions on television were announced only a fortnight ago, I was able to predict what the objections will be to any security initiative being promulgated under this Government. I sat at the other end of this building the other day when this order was being debated. It was with a feeling of sickening despair that I heard again the series of arguments rehearsed that said that the Government should do nothing. I have heard this repeatedly. I take serious objection to it.
The debate that took place in another place was too short and limited. I need quote only some of the sentiments expressed in the course of the debate to illustrate how my argument is reinforced. First, the Opposition spokesman said that the Opposition would support the Government in their introduction of security initiatives that they thought would be effective. That leaves the Opposition in the position to determine what initiatives they think will be effective. Obviously they think that this one will not be effective.
The argument one hears rehearsed over and again is that the introduction of this order, which affects the right of silence, will not go down very well in America. One spokesman said:
"At the moment when the American people are exercising their democratic rights, the Government are adopting measures that inspire a great deal of hostility towards Britain in the United States and throughout the world".—(Official Report, Commons, 8/11/88; col. 193.]
Is that correct? Are the American people so hostile to this Government and to the British people in their attempt to find some way to lessen the increasing toll of murder in Northern Ireland? I can remember the American people only a few years ago being faced with terrorist attacks on their citizens, wherever the
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attacks might have taken place. The overwhelming majority of the American people supported a bombing raid on Libya. The President of the United States at that time had overwhelming support from a whole broad section of the American people in that retaliatory attack against the Libyans. I did not support it, but I say that to indicate that the whole of America and the so far unnamed other people might take offence and be hostile to Britain because of the introduction of the order.
The noble Lord, Lord Colnbrook, in his remarks telescoped exactly what my feelings are and have been. If the introduction of this order will prevent one murder or one maiming in Northern Ireland, I am inclined to support it. Another speaker in another place, and indeed in the Prayer as we read it today, said that this will diminish any support that there is for the police forces from the minority population in Northern Ireland. Indeed it was said in the House this evening that the introduction of the order will alienate sections of the nationalist population. Why should it? Why should any section of the nationalist population be alienated by an order which is attempting to stop murder and mayhem on the streets of Northern Ireland?
The order is not aimed at the nationalist community. It is aimed at criminals arid terrorists in both communities. There may be people in the Royalist section in the community who are hostile to the order; but anyone who is antagonistic towards the Government because of the introduction of the order is already firmly in that camp at the moment. Nothing will change that. That section of the nationalist community which will be hostile to the order is already part of the Sinn Fein constituency. They are the people who give protection to murderers. They are the people who give succour and solace to people who are engaged in murder. The same or perhaps a smaller element exists in the loyalist community so we shall not be very worried about the objections those people may have against us.
I should like to see the day come when it will be unnecessary to tamper with longstanding bulwarks of our judicial system that have proved to be so effective over many years. Another speaker said in the course of a debate in another place that bringing in legislation such as this will not stop the violence. We have to increase support for the RUC and the security forces and make it possible to do away with this type of legislation. I fully subscribe to that, but it will be a very long haul politically before we can bring about total support. We may never reach that stage of total support for the security forces in Northern Ireland. That again is the gospel which says, "Do nothing".
I listened to a Labour Member on television when he was objecting to the introduction of the restrictions. He was asked by an interviewer in the television studio on breakfast time TV what he would do in these circumstances. He was asked what would he his answer to terrorists having ready access to television and the media. He said: "It is just to go down into the trenches and face a long hard slog". What does that mean? It means absolutely nothing. It is pure, absolute rhetoric.

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I believe that this Government—and I hope sometime that there will be a Labour Government—are entitled to the support of the Opposition, whoever that opposition may be, in their attempts to bring the tragedies in Northern Ireland to an end. This carping criticism that I have witnessed over this past year is a betrayal of the people in Northern Ireland who are hoping that this Government, or whatever government are in power, will take whatever steps they can to bring the tragedy to an end.
7.35 p.m.
Lord Lyell: My Lords, this evening we have heard some notable comments and speeches. The House and the Government will be immensely grateful for all the comments that have been made in studying this complicated and to me difficult order, although it has been described in different ways by my noble and learned friend who (I think I have quoted him correctly) said that it was a modest measure. That was not necessarily the view taken by the noble Lord, Lord Harris; but all the arguments we have heard have been highlighted and rehearsed, and your Lordships who are involved in legal affairs and criminal evidence debates in this House as well as another place will be very familiar with them.
It has been a constant thread throughout the debate this evening that the objective of the trial process is that justice is to be done. The innocent should go free; but the guilty should be convicted. The arguments for and against change, certainly in carefully defined circumstances such as those contained in the order, have until recently failed to take account of the opportunities that these rules of evidence provide for the hardened professional criminal—including but not totally concerned with the terrorist—to thwart justice. The Government have a duty, and this has been accepted by everybody in your Lordships' House, to see that the rules designed for the protection of the innocent are not simply exploited as a shield for the guilty. It has become the growing practice of the professional criminal in England and Wales as well as the hardened terrorists and the racketeers in Northern Ireland when questioned in connection with a suspected offence simply to say nothing. Yet however reasonable the question, however much common sense might tell the jurymen or the court that an innocent person might have sought to give a reply or offer an explanation, no inference whatever may be drawn from the failure to do so. We believe that that is no longer right and that it ought to be corrected.
At the outset I stress the provisions in the order and what the order does not do. The order does not shift the burden of proof from the prosecution to the defence. Secondly, it does not render the refusal of the defendant to answer questions at any stage a criminal offence. In no circumstances—
Lord Harris of Greenwich: My Lords, is the noble Lord aware—
Lord Lyell: My Lords, will the noble Lord just have patience? I shall be coming to all the points that he raised.
Lord Harris of Greenwich: My Lords, will the noble Lord—
Lord Lyell: My Lords, I ask the noble Lord to have patience until I finish this paragraph. He spoke for a considerable time and I hope that he will give me the courtesy for another few seconds while he thinks of another point.
Thirdly, in no circumstances can anyone be convicted on the basis of his silence alone. The order makes this specifically clear, although it would be clear in law, even if it were not so expressed. That was a constant thread of my remarks earlier this evening. It was a constant thread in the remarks made by my right honourable friend in another place as well as by my honourable and learned kinsman the Solicitor-General in another place. I yield briefly to the noble Lord.
Lord Harris of Greenwich: My Lords, is the noble Lord aware that nobody has challenged him on any of these points during the whole of the debate this evening?
Lord Lyell: Not specifically, my Lords, but possibly when all of us read in the morning the comments that have been made, and some of the very tactful points made by the noble Lord, Lord Harris, we may have our own opinions. I shall come to the points that have been raised by the noble Lord. Indeed the thrust of what I said at the outset is true. They have been challenged all round and in another place and it is right that I should make the points.
The noble Lord, Lord Prys-Davies, asked why the law is being changed in Northern Ireland in a separate way and ahead of whatever my right honourable friend the Home Secretary may propose for England and Wales. The matter also interested the noble Lord, Lord Hylton. We are dealing with two jurisdictions so that much of the general criminal law of Northern Ireland is, in legislation, distinct from the law of England and Wales. The review of the law of criminal evidence in Northern Ireland began last year, well before the establishment of the working party referred to by several noble Lords. The review body concluded that the Government should move quickly to amend the law for Northern Ireland in the light of the grave challenge from continuing terrorist violence and other serious crimes, particularly racketeering.
The noble Lord, Lord Prys-Davies, also asked about the provisions in a draft order and asked whether they might be amended. That matter also concerned the noble Lord, Lord Harris. We must all wait to see what is proposed by my right honourable friend the Home Secretary as a result of the work of the review body which he set up. Both noble Lords will know that an official from the Northern Ireland Office is a member of the working party on the right to silence. In strict legislative terms there would be no difficulty in eventually bringing the law on criminal evidence in Northern Ireland into line with that in England and Wales.
The noble Lord, Lord Prys-Davies, raised the interesting spectre of himself being stopped in the

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street and questioned by a constable. I assure him that any inference which the court may be entitled to draw from the silence of the noble Lord, even though he may have explained the reason for it, would depend upon the questions. I am sure that the noble Lord is aware that in Section 18 of the Northern Ireland (Emergency Provisions) Act 1978 certain obligations are placed upon any person who is stopped and questioned by a constable or member of Her Majesty's Forces on duty. It will also depend upon whether the court was satisfied that that person—and I cast no aspersions upon the noble Lord—had been properly warned by a constable or a member of Her Majesty's Forces, in uniform and on duty, of the implications of his silence.
The noble Lords, Lord Prys-Davies and Lord Harris, raised the fact that only short notice had been given of the debate on the order this evening. I regret the lack of notice and offer my apologies and those of the Government to your Lordships for the breach of courtesy. It was forced upon the business managers in your Lordships' House by the timetable required for bringing the provision into effect.
The noble Lord, Lord Prys-Davies, referred to Article 3(1) of the order which is particularly wide. The inference that is mentioned in Article 3, as well as in Articles 4 and 5, can be a proper one only in the case and as considered by the court. The less cogent the circumstances of the accused's silence, the less the court will be inclined to draw any inference from the silence. That will go a long way towards explaining the Government's considerations on the persons who may be detained for questioning after what was thought to be a shopping excursion, or a crime of that order.
The noble Lord, Lord Hylton, raised two points. The first was the question of consultation. The issue has been debated exhaustively over the past 16 years and the legal profession remain deeply divided. However, the Government decided that further formal consultation would not produce a consensus for change and proceeded forthwith with the draft order.
The noble Lords, Lord Hylton and Lord Harris, raised the question of confining the order to serious crime. If the inferences which we find in the order are there to be drawn I believe that any legislator, and any judge and jury in any court, will agree that they should be drawn. It will be evident to noble Lords that a court may view silence on the part of a low-level petty criminal as a different matter from silence on the part of a person accused on substantial grounds of serious crime. Those two factors weigh heavily.
The noble Lord, Lord Hylton, raised a problem in respect of the safeguards for persons detained for questioning in police custody in Northern Ireland. I should like to stress the reasons why we believe there are sufficient safeguards. In respect of any person arrested under the terrorism provisions, Section 15, paragraphs 1 and 2, of the Northern Ireland (Emergency Provisions) Act 1987 obliged the police to inform the suspect of his right to inform someone that he has been arrested and where he is being
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detained and also to inform him of his right to consult a solicitor in private.
The draft Police and Crinminal Evidence Order and its associated codes of practice, which will shortly be laid before Parliament, will propose important safeguards for suspects held in custody under the general criminal law. The police will be obliged to inform the suspect of his right to consult a solicitor. Suspects who arc detained for more than six hours will normally be taken to police stations specifically designated for that purpose. They will come under the protection of uniformed custody officers whose primary function will be to ensure that the suspects' rights are safeguarded. The maximum period of detention without a court appearance will be reduced from 48 hours to 36 hours. Within that period the need for continued detention must be periodically reviewed by supervising officers.
The noble Lord, Lord Moran, asked whether your Lordships could be consulted when discussing better ways of handling legislation in Northern Ireland. The matter was also raised by the noble Lord, Lord Harris. We should welcome constructive suggestions from your Lordships and I shall raise the point with my right honourable friend the Secretary of State.
The noble Lord, Lord Harris, raised a number of issues. The first major issue related to the virtue of Articles 5 and 6 which he considered to be dealing with the Irish Criminal Justice Act. It is not merely that the provisions which we have in Articles 5 and 6 of the order before the House deal with Irish Criminal Justice. I am sure that our friends and colleagues in Northern Ireland appreciate the fact that Articles 5 and 6 enable a person to be charged on the basis of silence and other evidence. The last three words are most important; other evidence must also be present. If in committal proceedings the accused stays silent those measures can assist the magistrate in concluding that the case should be sent for trial. Articles 5 and 6 assist in bringing a case to court where Articles 3 and 4 would not do so. Eventually the decision will be made by the court.
The noble Lord, Lord Harris, asked about police disciplinary procedures. At present, the Government have no plans to propose changes in the disciplinary procedures for the Royal Ulster Constabulary. If police officers face criminal charges the provisions, if approved, will apply. However, once again I shall draw the specific attention of my right honourable friend the Secretary of State to the point raised by the noble Lord, Lord Harris.
The noble Lord asked about the right of silence in police disciplinary proceedings. As always, police discipline charges have to be proved beyond reasonable doubt. The law of evidence is broadly followed but the principle here is that the proceedings must be fair to the officer. There would be nothing unfair in the future as regards disciplinary procedures if comment can be made and inferences drawn on the same lines as we have in the draft order before us this evening.
The noble Lord had one query about tape recordings in non-terrorist cases. We intend that the codes of practice under the proposed Police and Criminal Evidence (Northern Ireland) Order will

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include the detailed provisions on the tape recording of interviews and, so far as possible, will be fully in line with the code of practice on tape recordings which applies even now in England and Wales. I understand that the code for England and Wales provides for the making of an interview record which will be compiled in writing and will accurately report what has been said at the interview. A written record is provided to the defence and, if agreed, is entered in evidence. However, if nothing is said then there will be no record.
I should like to thank my noble friend Lord Colnbrook, who has very great experience of the enormous responsibilities of acting as Secretary of State in Northern Ireland. I shall read carefully his comments on the legislative procedures in Northern Ireland, his forthright comments on the order that we have this evening as well as what he believes are the inferences which will be drawn in Northern Ireland.
As regards my noble and learned friend, his remarks and his speech this evening take me back 11 years when I was on the other side of the House and my noble and learned friend allowed me to open the case for the Opposition in the Unfair Contract Terms Bill. I was in the middle of very erudite lawyers, and my noble and learned friend has lost nothing of his skill, ability and fire since then. We are very grateful that he has come here this evening to support the order. I believe that many of his comments will bear further reading. I particularly enjoyed his comments on the coaching of suspected terrorists. I have the manual referred to by my noble and learned friend before me.
I should like to thank my noble friend Lord Brookeborough for drawing to our attention the report of the Chief Constable of the Royal Ulster Constabulary as well as drawing to our attention the appalling pressures which apply to every member of the security forces in Northern Ireland—not just the brave soldiers and lady soldiers of the Ulster Defence Regiment but every single member of the security forces in the Army, the Royal Navy, and the Royal Air Force as well as in the Royal Ulster Constabulary.
I also thank the noble Lord, Lord Fitt, for his forthright comments at the end of the debate. All of us will read what he said and I should like to pay my tribute to the tremendous courage shown over many years in Northern Ireland by the noble Lord.
Noble Lords: Hear, hear!
Lord Lyell: My Lords, I thank him for his remarks this evening. We are more than grateful for his support for what the Government are trying to do for everybody in Northern Ireland.
I should like to conclude by saying that the Government believe that the majority of reasonable and decent people here and in Northern Ireland will welcome the measures which I have set out in the order as evidence of our firm resolve to bring the perpetrators of evil to justice.
On Question, Motion agreed to.

Food Protection (Emergency Prohibitions) Amendment No. 4 Order 1988
7.55 p.m.
The Earl of Dundee The Earl of Dundee rose to move, That the order laid before the House on 31st October be approved. [36th Report from the Joint Committee].
The noble Earl said: My Lords, the background to this order needs little introducion to your Lordships. The Government's measures to control movement and slaughter of sheep from the restricted areas affected by the Chernobyl radioactivity by means of monitoring and marking sheep with green, blue and apricot paint used in rotation have been the subject of previous debates.
I shall accordingly confine my remarks to an exposition of the changes made by the order. First, sheep marked with apricot paint are no longer subject to the slaughter restrictions. Comprehensive monitoring of those sheep, all of which were in unrestricted areas, has shown that the levels of radioactivity in their bodies are now acceptable.
Secondly, it is time to change the colour used to mark the sheep coming forward for monitoring under the mark and release scheme. The colour to be used to denote contaminated sheep coming from a restricted area is now blue which replaces green. Sheep marked with either of those colours remain subject to the movement and slaughter restrictions and no such sheep may be slaughtered unless it successfully passes a remonitoring test for radioactivity and is identified with a special ear tag which shows that it has passed the test.
Thirdly, marking with red paint is introduced in Scotland. Red paint is being and will be applied to sheep, mainly breeding sheep, going from a restricted area and liable to return there, most commonly after wintering. That is designed to meet the criticism made by the agricultural committee in another place that the procedures in Scotland were inherently less rigorous than those being applied in England and Wales.
The order also makes clear that sheep which have passed the monitoring test and leave a restricted area unmarked are not subject to the slaughter control and that only unmarked sheep and red-marked sheep may be brought into a restricted area. Of course, sheep marked apricot and blue cannot be brought back into a restricted area. Breeding sheep, by definition, are not intended for slaughter and entry into the food chain. Those animals can go into a restricted as well as a non-restricted farm for breeding purposes without posing any threat to health. Once back in the restricted area, the mark and release strictures on movement and slaughter would again apply.
We thank the farmers in the restricted areas and their union for their co-operation and help in the exercise of our control measures. Perhaps I may assure your Lordships that those necessary controls on the movement and slaughter of sheep from the restricted areas will continue for as long as necessary to protect the public. Therefore, I commend the order to the House and I beg to move.
Moved, That the draft order laid before the House on 31st October be approved. [36th Report from the Joint Committee]—(The Earl of Dundee.)
8 p.m.
Lord Carter: My Lords, I am sure the House will be grateful to the Minister for the way in which he has explained this rather complicated order which concerns the paint used for the sheep. I should like to refer to the report of the Select Committee in another place which stated:
"We received conflicting evidence about the paint used to implement the Mark and Release arrangements. 'The worst paint I had ever used in my life,' said one farmer. 'It had no tar in it and was too watery'.".
The report goes on:
"We believe that teething problems were inevitable in an exercise of this kind and that the type of paint used has not incurred sufficient criticism to be an object of major concern. In view of the importance to the Mark and Release arrangements of having reliable paint, however, we believe that MAFF should conduct further research into this matter, with a view to building up emergency stocks of tried-and-tested paints for use on different species in similar situations".
I should like to ask if that has been done.
The Minister also referred to the criticism of the procedures in the DAFS where the report pointed out that the procedures were inherently less rigorous in Scotland than for England and Wales and they should be brought into line in the interests of consistency. As I understand it, that has now been done.
I should finally like to quote from that excellent report prepared by the Select Committee in another place. There has been considerable concern about radiation and about the possibility of contaminated animals entering the food chain. The report concluded:
"We believe that the Government should examine how the facts about radiation can be most clearly explained, and misconceived or exaggerated fears laid to rest".
From this side of the House we hope that the Minister will be able to reassure us that the Government have taken on board the helpful suggestions set out in the Select Committee's report.
The Earl of Dundee: My Lords, I am grateful to the noble Lord for his welcome for this measure. As regards his last point, I confirm that the observations in the Select Committee's report are being taken on board.
The noble Lord referred to the inadequacy of the paint. The problem is that the paint had to be used promptly and it was the best that was available. However, I can assure the noble Lord that MAFF is now looking into the position.
On Question, Motion agreed to.

Farm Diversification Grant (Variation) Scheme 1988
The Earl of Dundee The Earl of Dundee rose to move, That the scheme laid before the House on 16th August be approved. [35th Report from the Joint Committee.]
The noble Earl said: My Lords, first I must apologise for the fact that we are having to consider these small restrictions on eligibility for farm diversification grants on set-aside land separately from the main regulations on set-aside. It would of course have been more convenient to consider the two at the same time. Unfortunately, this was not possible because of the well-established legal principle that one order cannot refer to the provisions of another which has not yet been made. In other words, while the set-aside regulations were still awaiting parliamentary approval, we could not bring before you another order referring to the set-aside regulations as if they were in force.
That said, the order before us today makes a very small change to the farm diversification grant scheme. I need not detain us for long. The main lines of the set-aside scheme are, I am sure, familiar to us all. Today I will briefly mention only those aspects of it which are relevant to the order before us. Under set-aside, farmers who enter the scheme—and of course it is voluntary—agree to take at least 20 per cent. of the land they use for growing arable crops out of agricultural production for five years. The scheme allows them to use the land which they set aside in three ways. They can leave it fallow. They can convert it to farm woodland or they can put it to a permitted non-agricultural use. It is on this third possibility that we need to concentrate in considering the order before us.
We have deliberately defined the permitted nonagricultural uses of set-aside land very widely. All of those activities which can qualify for grant under the farm diversification grant scheme are included. Only mineral extraction, industrial processors, housing and hotels, offices and retail developments are specifically excluded. Given that the farmer is likely to make some income from the non-agricultural use of set-aside land, annual payments have been fixed at the level of £130 per hectare in less favoured areas and £150 per hectare elsewhere. This compares with payments of £180 and £200 for permanent fallow from which the farmers will derive no direct income.
As I have mentioned, not only are we now offering annual payments for land set aside for non-agricultural uses but we also have in place a farm diversification grant scheme which offers modest grants to assist capital investments on farms needed to set up non-agricultural businesses. Clearly we have had to think very carefully about the relationship between those two schemes and whether, in particular, farmers should be able to benefit from both of them at the same time. I do not, I am sure, need to remind the House that it is a well-established principle that farmers (and indeed everybody else) should not receive government payments from more than one source for exactly the same thing.
In considering this we have come to the conclusion that the objectives of the two schemes are both complementary and different. The set-aside scheme essentially compensates producers for the short-term withdrawal of their land from cereals production. The farm diversification grant scheme, on the other hand, encourages the establishment of new on-farm businesses by grant-aiding capital facilities with a long life.
If we take as an example a farmer who decides to use his set-aside land to put up a farm shop and install a car park next to it, it is clear that he is unlikely to put that land back into agricultural production at the end of his set-aside agreement. He has thus not only met the objectives of the set-aside scheme in that his land has come out of cereals for five years, but he has also met the rather different objective of the diversification scheme in that he has successfully established a long-term non-agricultural business on his farm. We therefore see no reason to deprive him of eligibility for the modest FDGS grants which are available to help him make those long-term investments in what I might describe as hard facilities.
There is, however, a small category of work which is eligible for grant under the diversification scheme but which does not produce changes which would be difficult to reverse in the short term. I am thinking here of grants which help in the preparation of farmland for conversion to a sports pitch or recreational area. Those include field drainage, land levelling and grading, reseeding and regeneration and the laying of turf and other surfaces. Another category which can attract grant is the clearing and landscaping of land in preparation for a nature trail.
Those are activities which, although they would make it easier to install a football pitch or set up a nature trail, would certainly not prevent the land going back into agricultural use at the end of the five year set-aside agreement. Indeed, they might even have the effect of enhancing the agricultural potential of that land. In those circumstances we concluded that it would not be right to offer a grant towards the capital works at the same time as the set-aside payment was available.
To make the position clear, a small amendment to the farm diversification grant scheme is required. That is the origin of the order now before us. I must apologise if my explanation of it has seemed a little technical and complicated. Matching together the fine detail of our various schemes is inevitably a complex matter. Therefore, I commend the order to your Lordships. I beg to move.
Moved. That the scheme laid before the House on 16th August be approved [35th Report from the Joint Committee]—(The Earl of Dundee.)
Lord John-Mackie: My Lords, I thank the noble Earl for explaining this order. As he said, it is a simple measure, but it required some explanation, which he did very well. I see no need to say anything other than that I cannot imagine anyone who has put down a golf course ploughing it up after five years. Apart from that, I am content.
On Question, Motion agreed to.

Agricultural Research and Development: Funding
8.7 p.m.
Lord Carter Lord Carter rose to ask Her Majesty's Government on what basis government-funded agricultural research and development in excess of £30 million has been identified as near market to be funded by the
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agricultural industry and how they propose that the necessary funds should be raised.
The noble Lord said: My Lords, almost exactly one year ago, on 4th November, I tabled an Unstarred Question asking the Government to outline their future policy on agricultural research and development. I asked whether the Government planned to reduce staff in the agricultural research and development sector.
I do not propose to go through the whole debate we had then, but it may assist your Lordships if I remind you of what the Minister said on that occasion. The noble Baroness, Lady Trumpington, said:
"I said that there is no specific plan to reduce the number of staff engaged in R&D or advisory work … I repeat that the emphasis is on the balance of funding as between the public and private sectors and the priorities that we should adopt".—(Official Report, 4/11/87; col. 1072.)
That policy has now evolved in at least one respect. We have the Barnes review on agricultural research and development. However, it is still evolving in another respect. We have the Packer review of ADAS. Is that review completed and when will the outcome be announced? There is of course a strong R&D component in ADAS.
Having considered the Barnes review, I have no reason to change the view that I expressed in this House on previous occasions when I compared the review with that undertaken by the Government in the National Health Service—conducted behind closed doors at breakneck speed and designed to produce the answers that the Treasury and the Cabinet Office want. If I intended to be very rude—and I will not—I would describe it as a combination of knee-jerk and ideological spasms. It is no way to organise and review a major scientific effort.
We should set the debate in a wider concept and refer to the science and public expenditure survey of last year from the advisory board. Referring to the health of the science base, it said:
"The science base exists to serve national needs: it is the essential seed-bed for future marketable technologies and trained scientific manpower.
These needs have become more pressing in recent years, and the pressures are continuing to grow, in large part from industry. We welcome this; the nation's future economic success hinges on it. International competition has increased, both in scientific research and in commercial exploitation. We must invest in the science base at a level which will help UK industry to meet this challenge, and which will keep our best scientists in the UK. Society's more widely based aspirations as articulated in the Government's policies, for example, better health, and a cleaner environment at reasonable cost depend in the short and longer term upon research undertaken by the science base."
We have to remember that all this follows the 20 per cent. cuts in R&D implemented between 1985 and 1987. The same report on science and public expenditure that was before Barnes says:
"The AFRC envisages that some 20 existing research programmes will need to be significantly reduced and in some cases competely eliminated … New urgently needed research to develop farm forestry, and on materials science in food biotechnology and processing, will remain unstarted. The planned further increase in research grants to universities will not be possible".
This was before Barnes. The National Environment Research Council remarked:
"The volume reduction implicit in current planning figures will, however, prevent redeployment to high-quality new research programmes on agriculture and the environment".
It must be said that R&D in agriculture has been very good value for the taxpayer and the consumer when one considers the 80 per cent. increase in agricultural productivity compared with the 20 per cent. increase in the economy as a whole. I believe that the Government have given themselves a considerable problem with the definition of near market research and the attempt to squeeze projects into the near market definition. Perhaps the most cynical definition of near market that I have seen was given to me by a research director who described near market as intended to measure the length of the piece of string that the Treasury and the Cabinet Office allow MAFF.
Perhaps I may show briefly what are the practical difficulties from the coal face, as it were, from letters that I have received from directors of two research institutes. One letter states:
"In many respects, the work identified as near market has been identified in what appears to be an arbitrary manner, and in present discussions with representatives of the agricultural industry, they often fail to recognise where the claimed benefit lies. For example, fundamental research on the computer modelling of agricultural systems is said to be near market, perhaps because it is confused with commercial management packages.
Even if the near market concept is accepted, there remains a degree of naivity about implementation. The underlying assumption that you can withdraw 50 per cent. or even 10 per cent. of the funding for a commissioned programme unit and still expect the remainder to be viable does not bear close examination. Any part of a programme demands the presence of all the relevant facilities to function and the maintenance of the infrastructure draws on overheads from the full income. Belatedly, MAFF seem to be recognising this, but are now making ominous noises about restructuring the remaining programmes to ensure more efficient use of funding. The combined effect of the above make forward management of research look like a form of Russian roulette".
If it is hard enough now to define near market research, what will happen in the future? The second letter states:
"Regardless of the merits of the near market concept as a means of determining the broad balance of R&D funding between government and industry, it will generate debilitating uncertainty if applied on an ongoing project-by-project basis henceforth. For instance, MAFF has observed that the near market part of a project may fluctuate considerably from one year to the next. Additionally, research of great fundamental importance may have a substantial near market component. If the latter is of lesser interest and fails to attract industry support it may nevertheless call into question the viability of the former".
I had a very interesting letter from a farmer who is himself the chairman of an experimental husbandry farm. In it he said, as regards a meeting he attended:
"A point I raised that I felt was not dealt with properly was that it had been comparatively easy for Chris Barnes to have done his current exercise. All he had to do was to go through the list of projects and to decide within his interpretation of near market where cuts could he made on work already in progress. What I think will be much more difficult is how to allocate funds in future. For every project that gets taken up by the industry, there are a good many that may have looked originally to be runners but for one reason or another fall by the wayside. What I want to know is who will decide at quite an early stage which will be the runners. Also at what stage, when and by whom will the decision by made that they are to be defined as near market?
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I feel that those are a series of vital question; that need to he answered. The future competitiveness of UK agriculture will rely on the answers to those questions just as much as who is paying. I have always felt that negative answers were equally important as the goers. What worries me is that if commercially-financed work comes up with negative results, we will probably be none the wiser. This is already happening with silage additives. Several have evidently been shown to he a waste of time and are still being promoted and sold".
I ask who in future will decide on the boundary between the basic work, the strategic work, the work for the public good and the near market research. This is a very hazy and constantly moving line. When one goes through the list of projects that are supposed to be near market, some of them beggar belief. I shall not attempt to read them all. Some of them optimise fertiliser inputs in cereal production to minimise the risk of pollution. There is work on the pesticides, herbicides and the residues, all of which have a very strong consumer interest. All these have been listed as near market.
In the context of the work which involves pollution I remind the Minister of a remark made by the Prime Minister during her speech at the Royal Society. She said:
"we are left with pollution from nitrates and an enormous increase in methane which is causing problems".
I am sure that the Minister will tell us about the meeting she has had with sector groups. I have done a little research on the experience of the people who have been to the meetings, some of which were called at less than 48 hours' notice; some with less than a week's notice. Some were called in August when people were on holiday or on their combine harvesters. Information was requested but it was not forthcoming. The interested parties wished to know how the products were identified and costed, when they began and who authorised them.
One director of a farm co-operative who went to such a meeting said that if he had to ask his board of directors for support there was no way that that request could be formulated on the information provided. When it came to discussions on how to raise the money, the discussion just fell to bits. One of the most serious aspects of the whole matter is the question of job losses of trained and scientific manpower. Again in the Prime Minister's famous speech to the Royal Society she said:
"Everyone here, and no one more than myself, will support Whitehead's statement that a nation which does not value trained intelligence is doomed".
How does this attitude square with the projected job losses? I am sure that the Minister will be familiar with the figures. From the AFRC there will be 740 job losses; from MAFF itself there will be 625 and from Scotland and the colleges and research institutes, 147. That is a total of 1,512 over and above the job losses resulting from the cuts between 1985 and 1987. Does the Minister agree that if the required £30 million is not forthcoming, job losses on this scale will result? Only yesterday I was told that the top man in this country and perhaps in the world on the storage of fruit was on an aeroplane going to America where he has taken up a job because of the uncertainty in this sector at the moment. I am told that many more research workers are considering such a move.
We have the danger of trained and high-quality scientific manpower being lost not because of the quality of their work but because of the particular way in which their projects happen to be funded. I mentioned earlier the R&D component of ADAS. I have seen one forecast which suggests a loss of five experimental horticultural stations, four experimental husbandry farms and one R&D unit, with a total loss of 540 staff. There is another aspect which suggests that ADAS may lose £11 million of funding for near market work. I ask the Minister whether she can tell the House when the industry will know the Government's plans for the future of ADAS, particularly its R&D component, and how this relates to the Barnes review.
There seems to be no guidance from the Government on the crucial question of the funding of near market research. How is the money to be raised? In answers last week to the Select Committee on Science and Technology, the Minister, Mr. MacGregor, raised doubts about the raising of levies from the food industry. This seemed to leave the door open for levy funding from the agriculture industry. The noble Baroness will be aware that mechanisms exist to collect levies on virtually all produce.
Is she also aware that in the case of industrial funding other countries give substantial tax breaks for investment in research and development? In Australia there is a tax break of 150 per cent.; in the United States it is 100 per cent. There is an average of 50 per cent. to 100 per cent. in many other countries. France funds R&D largely by statutory levies and direct expenditure by government. The French equivalent of the AFRC is 90 per cent. funded by government. In Germany it is done by a combination of federal and local taxes. It is fair to say that in other countries in Europe the funding is on a 50/50 basis between industry and government. With all the importance of 1992, we should not be put at a competitive disadvantage. Compulsory levies are the fairest way to raise the money required, despite the present parlous state of farm incomes.
I ask the Minister to consider the objectivity of research funded by private industry and its credibility in the eyes of the public. This is not to impugn the integrity of the researchers, but will the public believe in research funded by those with an interest in the outcome of the work? An extremely important point was put to me only last week by the research director of one of the largest multinationals in the food industry. He said that if industry is asked to fund part of the work that is now done in the public sector, the total and the quantum of the research will not be increased. He will be given a fixed budget by his board of directors. If he has to use part of that to fund research in the public sector, he will be saving jobs in the public sector but losing jobs in his own company. However, the total amount he has to spend will not be increased.
We are told that the Government intend to save £30 million. They intend also to put back into strategic research, as they define it, some £7 million. What will happen to the remaining £23 million? Will it be fed back upstream into the total civil research and development budget which can then be bid for by
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the agriculture R&D sector, or will it disappear into the Treasury? If the latter is the case, it is a scandal.
The presented funding from industry and agriculture seems to be of the order of £7 million to £9 million. It appears that the Government wish the industry to increase this by threefold or fourfold in only three years. I ask the Minister to understand that the Government must give the industry longer to work out how to raise the money and to set up the mechanisms to do so. The timescale is crucial. Many of the research directors wish to be given a timescale of five years rather than three years. Once the figure in each sector has been agreed they would hope to fund the money by one-fifth each year. That is not feasible on a three-year timescale.
There is another reason for lengthening the timescale. The industry is now confused. We had cuts from 1985 to 1987. We are still awaiting the outcome of the Packer review of ADAS. There is a proposal, which I support from the Science and Technology Committee of this House to merge the AFRC with NERC, and now we have the Barnes review. The Government must be prepared to give the industry time to digest all this.
This exercise shows the need for a body to promote a long-term strategic view of agricultural R&D. This would be similar to the ACOST procedure in the rest of civil research. We need a review of the whole of the commissioning procedure for R&D and some proper and carefully considered proposals for industry funding. Above all, we need openness. This must not be conducted behind closed doors and at a breakneck pace. We are dealing with the long-term future of a great industry and a magnificently successful research and development effort. The whole effort involves 1,512 of our best scientists. They must be given some security and long-term basis for their work. If the noble Baroness were a bright young graduate in the biological sciences, would she go into United Kingdom agricultural R&D, or would she look abroad or at some other industrial sector?
I shall conclude with the words which I used to conclude a debate last year. I said:
"Lastly, I hope that the Minister will undertake to ensure that both Parliament and the industry will have the chance to discuss the proposals and that they will not be presented with a fait accompli".—[0fficial Report: 4/11/87; col. 1057.]
8.26 p.m.
Lord Graham of Edmonton: My Lords, I am indebted to my noble friend Lord Carter for asking for the debate and also to the Minister who was most anxious to be here to respond. I am grateful to her. We all understand that she has had to undergo some problems of a personal nature over the past few months. My heart, and I am sure the hearts of her many friends in the House, goes out to her at this time.
The debate takes place against the background of the Question which I asked on this issue when the House resumed in October. Therefore, we are in the process of building on knowledge. I have two interests to declare. First, I am proud to be the president of the Institute of Meat. That gives me a general interest in this matter. Secondly, I play a

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prominent part in the affairs of the Co-operative movement, a consumer movement with 8 million or 9 million members. While I would not be so presumptuous as to speak on behalf of the consumer, the views of the consumer should be heard in this debate. I wish to assure the Minister that if she is concerned with value for money, cutting out waste and making more effective R&D efforts, she will have no enemies in this House. However, it appears to us that she is being advised to go about it in the wrong way. I cannot believe that this exercise is being handled in the best interests of the industry and in the best interests of relations between industry and the Government.
We want protection for the consumer. We want a responsible industry and a government responsive to the needs of health, safety and security. We shall not get those if the Minister and her colleagues persist in their present handling of these matters. In answer to my Question of 10th October the Minister indicated at col. 582 of the Official Report that there had been "discussions in depth". To me "discussions in depth" means that everybody with a view on the issue is consulted. In a discussion on food I should have thought that the Minister would want to hear views on refrigeration and refrigeration methods. Yet the Institute of Refrigeration wrote to the Minister on 10th October and said that it was deeply concerned about the proposals.
The institute certainly was aghast because at that stage, although it may have been put right since, it was not really party to the various consultations that were going on. I know that whatever list is drawn up there are always some people who will say, "You have left me out". However I hesitate to think that the Minister would agree that a proper body to be left out, when one is talking in terms of food, is the Institute of Refrigeration, because it plays such a massive part in the food industry.
The institute is concerned that decisions have apparently been taken which affect the funding of refrigeration research without any discussion having taken place with it. I think that the Minister is entitled to comment on this, and indeed she is supported tonight by the biggest Box of advisers that I have ever seen. In fact, when they came in I thought that they were a spill-over from some of the debates we have had in the House where people come from long distances in order to help us in our discussions.
The Parliamentary Under-Secretary of State, Ministry of Agriculture, Fisheries and Food (Baroness Trumpington): My Lords, perhaps I may just reply to the noble Lord on this point. He said that we had not consulted everyone. I can assure him that the presence in the Box shows just how many different sectors and organisations we have consulted.
Lord Graham of Edmonton: My Lords, I only hope that we do not get "the frozen mitt" from the people who would like to tell us about refrigeration. I am quite certain that all the ladies and gentlemen that I saw trooping in are well familiar with this place. However I am grateful that they are here, not just to
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assist the Minister but also to assist the House better to understand the background to the matter.
If we have a situation where an important body like the Institute of Refrigeration is able to say well into the consultation process that it has not been consulted, I think that the Minister is entitled to comment. Moreover, I shall read another little bit from the institute's letter which will keep the Box busy:
"It appears from comments in the press that the government considers that research at these Institutes and research stations is carried out for the benefit of food producers and focd processors. This is at best less than half the truth. Major benefits in quality improvement accrue to the consumer from the work of these organisations. Changes in industry practice for the long term benefit of the consumer are often engineered by these Institutes".
So I should like the Minister to tell us about the consultation with those organisations. In another part of the letter the institute says:
"It takes many years to build up effective research teams such as those which exist in Bristol and Aberdeen. These teams can be destroyed and scattered within a few months if morale is allowed to drop beyond the point of no return".
My noble friend Lord Carter gave us a personal illustration of that situation. Further, I know that the Minister in a parliamentary reply said that the reason for the speed is to get the decisions quickly and stop the rumours and the confusion. However, I do not think that at this stage she is helped in that matter.
I look now at the points which especially concern me on this issue. I have asked the people I consulted. "What will be the effect, if we accept the near industry categorisation of some of the things which are being talked about as being near industry if they are withdrawn?" I shall tell the House what I was told, especially in respect of salmonella and the manner in which we all recognise that it is of crucial importance as regards poultry and poultry products.
One of the near industry projects or proposals that is on the table is that relating to the use of specific organisms to inhibit the growth of pathogens, if necessary using genetically-engineered microbes— for example, by lactic acid bacteria in fermented food products—to prevent attachment or carriage of salmonella in poultry. If it is true, as I am told, that this project is scheduled for the chop—I hope that term is acceptable, because I speak on behalf of the meat industry, so I think I may use it—by March of next year, I am aghast and horrified. The Minister will put my mind at rest and, I am sure, millions of other people's if she can tell us that such projects are not due to be terminated as a result of some diktat from the Treasury that money must be saved at all costs.
I turn now to the other aspects which I should like the Minister to comment upon. I should like to know whether she is concerned about taking the many elements in the industry along with her in such matters. Perhaps I may tell her what Mr. Chris French of the National Farmers' Union said in September. He spoke on behalf of 40 national agricultural organisations. They had expressed their united opposition to the Government's plans to cut, they say, more than £32 million, and so on. He said:
"We need time to consult farmers to discover which sectors will he willing to pick up the bill which the Government is leaving, and to examine the whole structure of farm and horticulture R&D in this country. We are at one"—

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that is 40 organisations; not firms or individuals but organisations—
"in deploring both the extent of the cuts proposed and the extraordinary haste with which they are being pressed upon us".
I am sure that the Minister will understand that it could be seen to be procrastination. For instance, the Minister offers a timescale and someone says, "Well, let us have a bit more time". We understand that kind of situation. However, if the Minister wants to keep friends in the industry and wants the industry to help her and her advisers to work out the best means of reducing the amount of public money which is spent, she must answer two questions.
Let us suppose that she tells the industry that it must do something and the answer she receives is, "We are not inclined to do it". In that case I hope that she will reflect upon what she has said. I have with me a letter from her to a parliamentary colleague in which she said:
"If the work is not judged to be important by industry then the Government should not be supporting it".
Therefore let me ask the Minister this. If the industry considers that something as vital as research into salmonella is not important to it, is she really saying, "We shall not be supporting it either"?
My noble friend Lord Carter raised issues about the timescale and the strategy and importance of these matters. I should like the Minister to tell us what she and her friends have in mind if they stick to a view that certain things are near industry and the industry, which is expected to pick up the tab, declines to do so? Where does that leave us as regards public safety?
I can tell the Minister that in conversations which I have had with two very large retailing organisations they have said that they are disinclined to pay directly as an organisation in order to subsidise this kind of research. They fully recognise that ultimately their industry, or their firm, is likely to be the beneficiary. However, there is a point at which there will be a dispute as to whether they are going to pay.
I asked them what they would do if the research establishments came to them and said "We need a subvention". Let us say that it was a £1 or £2 million. They said that they would examine very closely whether they could get the products they wanted from some other place, for instance, another country, which may be a penny or two cheaper.
The Minister knows that in the harsh economic world of 1988–89—never mind about 1992—in the food industry and in many others they are looking at slivers of a penny. I say to the Minister that she and her colleagues are in grave danger in the next few months of earning the reputation of being more concerned about saving public money than ensuring public safety and public health.
The point has been made more than once by my noble friend that we are not just talking in terms of sense and sensibility; we are also talking in terms of jobs. Because I was president of the Institute of Meat I went down to Bristol and watched what they were doing. I have also been to other meetings with the noble Lord, Lord Gallacher. Indeed, I attended a function only last week at the Worshipful Company
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of Butchers where I took the opportunity of discussing with those in the meat industry what their concerns are. Quite frankly, there are many people who fully understand the need for their industry, as well as any other, to be examined critically in order to ensure that they are not wasting public money.
In the exchange a month ago the Minister told me that no decisions had been made. I am glad to see the nod of her head. I hope that before decisions are made she satisfies herself that the proposal is not only viable but practicable and that all the elements of the industry are willing to make it work. If they are unable or unwilling to make it work and the Treasury saves a few pounds, a great many people's future health and happiness will be put at risk and the Minister will have a great deal to answer for.
8.40 p.m.
Viscount Brookeborough: My Lords, I should like to add my sympathy to that expressed by the noble Lord, Lord Graham, to my noble friend. I also thank the noble Lord, Lord Carter, for initiating a debate on this important subject. I very much support his views and those of the noble Lord, Lord Graham, on the definition "near market" and the other reservations they have expressed relating to R&D funding in agriculture. As a landowner and active farmer I must declare an interest. I have also talked to the Ulster Farmers' Union to discover its views on the subject.
I note that we are talking about the whole of the United Kingdom of Great Britain and Northern Ireland. The Barnes report refers also to Northern Ireland. In the rush to implement the reduction in R&D funding the Government seem to have overlooked or ignored the problems in Northern Ireland that will have to be faced. The first is the legislation (the industrial Organisation and Development Act 1947) which enables the collection of levies on industry. However, that legislation applies largely to Great Britain only and not to Northern Ireland. How do the Government intend to get round that point? Will an Order in Council be produced—I remind your Lordships how unpopular they are in the Province—or will primary legislation be prepared? If the latter choice is to be taken up, how will the Government cope with the delay incurred?
Assuming that that hurdle has been overcome, there will then be an additional delay of up to two years before sectoral development councils could be established. If the Great Britain legislation is followed in Northern Ireland, the establishment of such councils would have to be preceded by a poll of producers in the appropriate agricultural sector. In addition, there will be a requirement for detailed and formal consultations about the use of the funds to be raised. In that respect, will my noble friend give an assurance that those consultations will include the Ulster Farmers' Union, the legitimate voice of the industry in Northern Ireland? How will the Government sort out all of that to keep up with their intended timetable? There are more problems to come, unique to Northern Ireland. To save time, I shall not go into detail on each sector of agriculture, but I shall give one example.

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We are the only part of the United Kingdom with a land border with another country (the Republic of Ireland). In the case of livestock, for instance, will there be a levy on the abattoirs and, if so, how will the Government cope with the livestock exported and slaughtered across the border?
In general, the farms are much smaller in Northern Ireland than in Great Britain and, dare one say it, less profitable. Should the measure be introduced in its entirety at short notice and in one go, it will have an unfairly disproportionate effect in the Province.
I should like to turn briefly to an anxiety felt by the industry and those involved in R&D. At present all research and development results are made available throughout the industry in the United Kingdom. However, work carried out in different areas, and specifically from my point of view in Northern Ireland, will surely be, as a result of those who fund it, the property of that area's agricultural industry. Does my noble friend expect that information to be freely available to others in the remainder of the United Kingdom, is it to be sold or will industrial spying have to play a part? As an example, I point out that the Agricultural Research Institute for Northern Ireland, and Dr. Gordon in particular, is a world authority on research into grassland management. Its findings are of great benefit to those farmers involved in grassland production in the remainder of the United Kingdom. I appreciate that Northern Ireland would be in the reverse position in many other agricultural fields. The other areas will no doubt have the same questions to ask about what will happen to the researches that they have funded.
The United Kingdom is working towards the open market in 1992. During the run up we must endeavour to put ourselves and the industry into the most advantageous and competitive position possible. The industry and government were making determined and successful headway in that direction. However, an intention to reduce government funding at such a crucial time seems to be near suicidal. I am sure that the industry would have looked favourably upon a request from government to raise extra funds in addition to those available at present to help put it on an even better footing by 1992 rather than have, as we have at present, a percentage reduction running up to that time.
I realise that in many countries the practice of funding near market R&D by the agricultural industry is well established, but what a time to introduce it here and cause a massive hiccup during our preparations for the open market. In addition, it is being done at ridiculously short notice with little consultation, preparation and planning. Will my noble friend inform the Minister of Agriculture of the strong and informed opinion expressed this evening from both sides of the House and in particular of the problems relating to Northern Ireland?
8.47 p.m.
Lord Butterworth: My Lords, reference has been made this evening to the fact that sub-committee I of the Science and Technology Committee is undertaking an inquiry into the future of agricultural
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and food research, including its links with other biological sciences. The Government's intention to cease funding near market research in those areas in anticipation of industry funding it is of great interest to the committee, and its final report will consider those matters.
I do not wish to anticipate any views which the committee might express in its report, but if I draw attention to some of the views put forward by witnesses in evidence to the inquiry I hope that that might give my noble friend the Minister an opportunity to explain how government policy will be implemented. In particular, we have a considerable interest in the discussions, which have already been referred to this evening, that my noble friend has been holding with sectors of the agricultural industry affected by the change of policy.
The Agricultural and Food Research Council has said that it is:
"adamant that because most AFRC research is basic and strategic rather than at the near market level, little if any cuts should be passed on to AFRC".
As the noble Lord, Lord Carter, said, the AFRC has suffered considerable and severe cuts in the past few years. As a result there have been dramatic staff reductions.
Much of the resulting rationalisation is widely regarded as a good and necessary development, but Professor Stewart, the secretary of the council, has said that a period of stable funding is now essential if strategic planning is to be successfully undertaken. The AFRC will say that the rapid removal of these funds at this stage will make it hard for it to maintain an integrated research and development programme with the right balance between basic and strategic research on the one hand, and applied work on the other.
Professor Stewart has said:
"I cannot believe that a Government which appreciates the importance of the Research Councils will allow the Council's budget to be reduced in this way. If they do it will have a major effect on the totality of the biological sciences base of the country".
I hope therefore that the Minister will he able to inform us this evening what effect the Government's "near-market" policy is likely to have on the income and the work of the AFRC. Are funds saved on near-market research to be redeployed on basic research in the biological sciences?
Other witnesses, including the Institution of Professional Civil Servants and the Home Grown Cereals Authority, have emphasised the damage that could be inflicted on the research base by further cuts in government funding. They suggest that whole areas of research may have to be abandoned and establishments closed. The IPCS also suggest that financial support from industry or individual projects will not provide that continuity that public funding can provide and could make it difficult to attract high quality staff and maintain expensive facilities.
The short timescale over which the 'Government intend to implement the policy has also, as has been mentioned tonight, been strongly criticised as being unrealistic and almost certain to mean that industry is unable to organise a response in sufficient time to prevent some projects from being completely lost.

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The AFRC says that the damage would be reduced if cuts were phased over several years. The council, of course, has a good record in this respect, having quadrupled its income from non-government sources to £14 million—that is to say 12 per cent. of its total income—in the last four years. Again I have to mention that the lack of consultation in formulating the policy has been widely remarked upon.
Other witnesses have suggested that the Government are taking a narrow view in assuming that research which industry will not pay for can reasonably be dispensed with. As has already been mentioned this evening, industry is only likely to take an interest in research which will lead to increased profits, while research for what might be termed public good is likely to be neglected if government funds are not forthcoming. I hope that the Minister will be able to tell us what is the Government's intention for support of research in, for example, areas such as animal health and welfare, the environmental effects of agricultural practices and the reduction in levels of inputs such as agrochemicals.
Finally, the National Farmers' Union explained to us why it is difficult for the industry to make a substantial additional contribution to research. The obvious point was made that agriculture is a diverse and fragmented industry with many small producers and with differing requirements and commitments. Organising a co-ordinated response will therefore be difficult and contain many problems. Farmers and growers have in any case considerably increased their support for research in recent years through, of course, the sector organisations such as the Milk Marketing Board and the Apples and Pears Development Council. In some commodity sectors, the mechanisms have only recently been established. Demands for members to increase their contributions substantially before they have experienced any benefits from their new involvement in funding research can act as a deterrent. The National Farmers' Union also points out that farmers have recently been faced with charges for the advice and other services of ADAS and therefore are already meeting the costs of work formerly financed out of the public purse. As I said at the outset, it would not be proper for me tonight to consider what may well be recommended in the report of the committee. I hope that in replying to the noble Lord, Lord Carter's Question, the Minister will be able to comment on the concerns and difficulties which have been mentioned by our witnesses. She may be able to tell us what progress she has made in her discussions with those sectors of the industry which are now very concerned about this policy.
8.56 p.m.
Lord John-Mackie: My Lords, I wish first and foremost to endorse what noble Lords have said about the attendance of the noble Baroness, Lady Trumpington, here tonight. I thank her for her tremendous courtesy and the attention she has given to what I have said over the many years during which I have faced her across the Dispatch Box. This is my last appearance as Front Bench speaker on
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agriculture and I thank her for her courtesy. I am also grateful to my noble friend Lord Carter for raising this issue.
I do not propose to go into any great detail since the four previous speakers have made a very strong case and I see no reason why I should try to emulate what has already been said. I have no illusions about the Government's intentions. I think my noble friend Lord Graham put the matter properly when he said that it is a case of money saved at all costs. I am a little worried that a tremendous amount of work must have been done, one way and another, in producing all the details that were circulated which I have received on the various cuts and the numbers of people who might or might not be made redundant.
Over a long period in politics and in the Ministry for a while, I have found that once a major survey of one kind or another has been undertaken it is very difficult to stop. I hope that what has been said tonight will have some effect in trying to prevent the cuts or perhaps not so much the cuts as the effort to move the funding of agricultural research and development in the direction which the Government wishes. The loss of about 1,500 personnel which has been emphasised by other people is something which we must watch carefully. As was said, well-educated first-class research workers in all fields are scarce in this country.
It is quite remarkable what research over the past 40 years has done for our industry. I do not wish to take sides, but I always put plant breeding at the top of the list. Many other research institutes with which I have been associated have done a tremendous job for agriculture. The effect of it has been an enormous increase in production to the benefit of the country in so many different ways which have already been emphasised. I wish particularly to mention the matter of raising the £31 million, or so, to replace the Government's funding. It will not be possible to obtain that sum from the industry today. There is no question that most agricultural projects are feeling a financial squeeze. Farmers do not know what is going to happen in the next two years, but they are in no mood to dish out money without a very good reason.
I wish to make the same plea as all the other speakers have made for much more time to carry this out. I have no illusions about what the Government are going to do. They will carry their intention out, but I should like them to take a close look at how this money can be raised in the industry in five years' time. That time span has been mentioned, I believe.
Looking at the scheme simply, if we take 31 million acres of ploughable land, the money comes to £1 an acre. But that would be an unfair levy because a 1,000 acre cereal farm would have to pay far more than a 200 acre dairy farm with 100 cows. I throw the following out as an idea, but it might be possible to impose a fiat rate levy of, say, 50 pence an acre and then place a monetary emphasis on various projects such as dairying, and raise the money that way. It will take time to work such a scheme out, but I do not see any reason why that should not work. Therefore the contribution would become an overall contribution from the industry. If that could be done reasonably quickly, we might be able to carry on with present research.

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I am not suggesting that there should not be changes and that different emphasis should not be placed on certain research projects. I see that the noble Earl, Lord Selborne, is present. I am sure that he would agree with me on this matter. The Agricultural and Food Research Council, of which he is chairman, controls research projects. That body changes, where necessary, the emphasis on research projects. It does that very well indeed. If a research project will result in savings to the industry, or if a project requires more money, the research council will deal with it.
I hope that we shall give the industry time to decide whether it will agree to the scheme. We must not upset the industry.
Some bodies within the industry have been threatened with losing men; some of them have been threatened with closure altogether. That is a tragedy that we should avoid at all costs. I appeal to the Minister to consider that.
I must admit that a difficulty arises as regards overlaps in research. An instance of that is research into the production of milk and everything to do with milk itself. But there is also research carried out into the machinery to provide food for that industry. In that case there is an overlap between arable farming and stock farming. I am not in any way suggesting that there will not be difficulties in following what I am suggesting. But I hope that the Government will give it thought. Whatever the Government decide, I hope that they will give the industry and the research and development institutes time to prepare themselves for this very radical change.
9.4 p.m.
Baroness Trumpington: My Lords, this debate has been characterised by quality, if not quantity. The noble Lord, Lord Carter, and other noble Lords have raised a great many issues this evening. I shall do my best to deal with them as fully as possible in the time available.
I wish to say how grateful I am for the personal note introduced by my noble friend Lord Brookeborough and the noble Lords, Lord Graham of Edmonton and Lord John-Mackie. One of the nice things about this House is that it does not matter whether we are facing each other or whether the enemy is from behind; we are all good friends. I am sure I speak on behalf of all noble Lords here when I say that it is indeed sad that this is the last appearance of the noble Lord, Lord John-Mackie, in the particular place which he has adorned with great distinction over a long period. He has so much experience in the field of agriculture.
However, the fact that the noble Lord is moving his seat back a range or two will not mean, I am sure, that I shall not suffer the slings and arrows of outrageous fortune marked at me with unerring aim by the noble Lord for many years to come. I wish the noble Lord very well in the future on behalf of those present. I am sure that many other noble Lords share that feeling.
I should like to begin by emphasising that, while the Autumn Statement has been made, final decisions on the future level of Government funding have not
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yet been taken. We are consulting the industries concerned in order to establish their willingness to fund near market work which will in future not be funded by the Government. Only when these discussions have been completed next year can further Ministerial decisions be taken on the level of public funding in the longer-term.
Perhaps I may just say here to my noble friend Lord Brookeborough that I am most grateful to him for giving me prior information as to the contents of his speech. I am equally grateful to him for agreeing that I may write to him concerning the specific points he made which affect Northern Ireland.
We are striving to strike the right balance between minimising the period of uncertainty for research staff and maximising the time industry has to decide which R&D to support. Accordingly, on my return from West Africa, I was dismayed to find the Institution of Professional Civil Servants publicising its views on job losses and closures in considerable detail. When no decisions have been reached or can be reached until the position on increased industry funding is known, I think it most unhelpful for the IPCS to claim to have identified definite job losses and site closures. There will need to be rationalisation of facilities as programmes change to take account of the Government's future needs and industry's requirements. But I cannot yet say what the impact will be until our discussions have been concluded.
The review of the agriculture department's research programmes and its commitment to stop funding near market R&D is not a sudden change of course on our part, but rather a development of our initial moves towards greater industry participation which began nearly four years ago. We announced in January 1985 that planned expenditure by the agriculture departments was to be reduced by £20 million over two years to reflect the Government's aim that the industry should make a greater contribution to R&D from which it benefits. We had discussions with agricultural organisations and gave them every encouragement to increase the rate of industry funding, including for example facilitating the establishment of a horticultural development council, as has been mentioned this evening. I recognise the very considerable efforts made since then by producer bodies in raising funds for R&D.
The noble Lord, Lord Carter, will appreciate that no government could, then or now, enter into longterm commitments over future priorities for public expenditure. But it would be equally wrong to suggest that, because industry had demonstrated that it could raise funds, the Government are now seeking to take advantage by cutting back their contribution. My noble friend Lord Butterworth will be aware that the philosophy behind the recent review of funding of R&D is that for work which is close to commercial application industry is in the best position to judge what research should be undertaken. That view is not confined to agriculture alone: it is a policy which runs across all government-funded R&D programmes.
Last year, in the White Paper giving the Government's response to the first report from your Lordships' Select Committee on Science and Technology, we accepted the Committee's view that responsibility for funding applied work of direct

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benefit to industry should rest mainly with industry itself. For work which is close to commercial application, industry is in the best position to judge what research should be undertaken. We also announced in that White Paper that we had begun to undertake a searching review of R&D priorities across the whole field of government, with a view to increasing the contribution of publicly-funded R&D to the efficiency, competitiveness and innovative capacity of the UK economy.
That is the background against which we commissioned the Barnes review. The Government remain committed to supporting basic and strategic research, as well as work of a public-good nature in support of statute or policy in relation to issues such as environmental protection, animal welfare and food safety. But we do not believe that it is right that the taxpayer should be asked to continue supporting work which directly assists the industry at which it is aimed to gain an economic benefit. Only by seeking industry support for such work can we ensure that it is properly targeted to the needs of agriculture, fisheries and food now and in the future. We have also made clear that, if industry does not wish to take on the funding of particular programmes or projects, the Government will not continue to do so.
Lord Graham of Edmonton: My Lords, will the noble Baroness allow me to intervene? I appreciate that she has confirmed what I had said were her views. But will she answer the following question? She is seeking the support of industry to take over some of the funding of R&D and she has just said that if industry decides not to do so the Government will not do it. Is she not saying that in such crucial areas as the illustration that I gave, research into salmonella in poultry, and in areas of public safety, health and hygiene the public health will be at grave risk?
Baroness Trumpington: My Lords, the noble Lord has taken the words right out of my mouth. Much as I respect him, I think that he has got hold of the wrong end of the stick. There is no intention to cut funding for work related to food safety, particularly with regard to salmonella in poultry, which he mentioned. The Government are extremely sensitive to concern about salmonella. That work will not be cut. I hope I make myself clear.
Lord Graham of Edmonton: My Lords—
Baroness Trumpington: My Lords, may I go on? Perhaps then if I have not explained myself sufficiently clearly the noble Lord can come back to me.
For the benefit of the noble Lord, Lord Carter, and the noble Lord, Lord Graham of Edmonton, I should like to repeat that we shall continue to fund work in the public-good category. I am aware that some people are claiming otherwise, but that is a misunderstanding. The Cabinet Officer's annual review of government-funded R&D shows that over the past five years the proportion of MAFF's externally commissioned research in agriculture and food which is carried out for policy and statutory
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purposes has risen from 10 per cent. to 35 per cent. That trend will accelerate over the next three years as we progressively concentrate our resources on public good and strategic research.
It is at best mischievous for the IPCS to claim that our withdrawal from near market R&D will have devastating consequences for animal welfare, public health and the environment. For instance, it is incorrect to claim, as IPCS do, that research into reducing the use of nitrogen is to be cut. The true position is that work aimed at investigating losses of nitrate to ground water is being maintained as well as work on other pathways of loss such as the volatilisation of ammonia which has been implicated as a contributory factor in the formation of acid rain. Nitrogen studies which are aimed at increasing the efficiency of production on the other hand have been identified as near market and accordingly will have their public funding withdrawn within three years.
I do not want to dwell over-long on this topic but I should like to stress that we are maintaining and strengthening our research efforts into such areas of public good as the development of integrated and biological control of outdoor crops; the assessment of the impact of agrochemicals on wildlife habitats; the development of environmentally safe measures for the control of weeds, pests and diseases; the development and evaluation of humane and effective stunning and slaughter place procedures to improve animal welfare; the development of methods to ensure the safety, quality and efficacy of viral and related verterinary products; the development of housing systems for livestock which safeguard the health and welfare of the stock and the farm workers; investigating metabolic disorders in poultry such as lameness, broken bones, broiler sudden death syndrome and digestive heart failure, and of course BSE.
Lord Carter: My Lords, is the example given by the noble Baroness about the application of nitrogen just an illustration of the difficulty of distinguishing between near market and basic research? If work is done on the optimum supply response to nitrogen, one will be told that one's crops will increase if one puts on more nitrogen; and that is near market. If one does work on the leaching of nitrogen, one will be told that if the application of nitrogen is increased, one will increase the loss of nitrates. Just how does one distinguish this work?
Baroness Trumpington: My Lords, I think that it is an extremely complicated matter for me to go into now. Noble Lords will have to look at what I have said, and perhaps if they are not satisfied perhaps they will ask me to write to them and I shall place a copy of the letter in the Library if they so wish.
Lord Graham of Edmonton: My Lords, I am grateful to the noble Baroness. I want to assure her that those who advised me of their interpretation and their conclusions after discussions will not only be grateful for what the Minister has just said, which is on the record, but will feel that they must have attended an attributable briefing at which the tape recorder broke down.
Baroness Trumpington: My Lords, I was not there, either. I must say to the noble Lord that the Government fully accept responsibility in relation to public safety and public health. However, I would remind the noble Lord that industry has responsibility too.
The Barnes review itself examined carefully and thoroughly the research and development programmes and projects funded by the agricultural departments. It identified that work which offered the prospect of commercial exploitation or application within a reasonable timescale, whether as a product, process or system—and thus near to the market and suitable for industry funding. I can assure the noble Lord, Lord Carter, that, in conducting his review, Mr. Barnes held extensive discussions with those responsible for commissioning and undertaking R&D, as well as with industry.
I understand that industry needs time to consider our proposals before it can reach conclusions but I cannot accept your Lordships' criticism of the handling of the consultations. I should like to say to the noble Lord, Lord Graham, that we have in fact consulted the Food Manufacturers' Federation, retailers and food research associations to ensure that all views are in perspective. We are entirely ready to listen to consumers' views. I must tell the noble Lord that we consulted some 80 organisations. We had absolutely no intention to leave out in the cold the refrigeration body; I apologise and will write and contact it if it feels aggrieved.
We have gone to considerable lengths to explain both the rationale for and the detail of our proposals. We have issued a good deal of information at programme unit and project level, and I know that the formal discussions have led to further bilateral contacts between representatives of industry and people from the research establishments involved. We have not acted with undue haste but we have had to bear in mind the uncertainty among the staff affected.
What we have sought to do is to indicate at the earliest possible opportunity the type of work from which funding will be withdrawn and to provide a guide to the value of that work so as to give industry as much time as possible to prepare for the public expenditure reductions on near market R&D. That has unfortunately meant that the discussions have had to be held at a time of year when many farmers were busy harvesting. However, it was of great importance in my view to give the research in question a better chance of continuing without a break by sounding prior warning of the need to increase industry's contribution to its funding.
Speculation on the outcome of the Barnes Review and continuing uncertainty about its impact on individual research establishments is of course unsettling for research staff. My right honourable friend the Minister in another place and I are well aware of this, and yet another of our principal aims in undertaking the speedy consultations with industry was to minimise the length of this uneasy period for research personnel. But equally important, we are conscious of the need to give industry as much time as we possibly can to consider what R&D they wish to fund. I must stress that the effects on research
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establishments of government withdrawing funding from near market research and development cannot be assessed until the extent to which industry will fund its own near market R&D can be estimated with some degree of confidence.
The noble Lord, Lord Carter, asked how we propose that the necessary funds should be raised. This is a matter primarily for industry itself. While there is very good progress by producers in funding R&D, the total expenditure by the farming industry is still under £20 million annually, which is small compared to the public funding of some £170 million. Indeed, total expenditure by the Government on the R&D related to the areas for which agriculture ministers are responsible is in excess of £200 million annually, a substantial sum by anyone's standards. The scale of the problem is very different in food research in that about 80 per cent. of all R&D is already funded by industry, but the same principles apply.
I accept that for farmers and growers to increase their spending on near market R&D the appropriate funding mechanisms will be necessary. This is something we are discussing with industry in the consultations to which I have referred. In practice a number of arrangements already exist together with an opportunity for farmers to comment on whether they want levy funding and on what scale. As your Lordships can imagine, I am thinking of such bodies as the HDC, the Apple and Pear Development Council, the Home-Grown Cereals Authority, and the Meat and Livestock Commission.
These are backed by statute, and functioned in this way only after consultation with the industries concerned whether by poll or other means, and of course a number of other bodies such as the Milk Marketing Board and the Potato Marketing Board also fund R&D. A system of funding already operates across a substantial proportion of agriculture using a variety of mechanisms. In the past two to three years the contribution to R&D that has come through these mechanisms has been increasing and is projected to increase still further. The United Kingdom is not out of line with our major competitors according to the Treasury report on taxes in other member states in 1986.
MAFF and DAFS R&D expenditure has been reduced by £5 million for 1990–91, and by £14 million for 1991–92. Together with the reduction announced last year of £5 million in 1989–90 and £10 million in 1990–91 that produces a cumulative reduction by 1991–92 of £24 million. To relate the PES outcome to the illustrative figures contained in the detail papers which form the basis for our consultations with industry (copies of which can be found in the Library) costs which fall outside the agriculture programme need to be included—for example, superannuation. That produces a reduction by 1991–92 of £30 million at full economic cost.
The noble Lord, Lord Carter, and my noble friend Lord Butterworth will appreciate that the Government have to determine their priorities across the whole field of research and development, civil and defence, in the knowledge that the total funds available are not unlimited. A great deal of attention has been focused on our intention to withdraw

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funding near market R&D because we believe it to be industry's responsibility, not government's. However, less attention has been paid to our intention to increase funding for the science base. The large increases in expenditure on basic science announced in the Autumn Statement are to be funded in part by our withdrawal from the financing of near market R&D.
As can be seen, it is not simply a one-way process. The Government intend to fulfil their responsibilities. We hope that industry will meet its responsibilities.
Lord Carter: My Lords, the Minister said "in part". I asked what would happen to the £23 million that would be saved—£30 million less £7 million—for strategic research.
Baroness Trumpington: My Lords, I hate to correct the noble Lord against myself; but the figure is £5 million, not £7 million.
Lord Carter: My Lords, £2 million and £5 million total £7 million.
Baroness Trumpington: My Lords, it is £5 million, not £7 million as the noble Lord claims. It is what one might call a reverse point scored. That money will go back into general funds to be decided for future use.
Lord Carter: My Lords, research funds or the Treasury?
Baroness Trumpington: My Lords, the Treasury.
Let us return to our onions. The noble Lord asked about the future, in particular how we shall define near market work. For the future the increasing emphasis of our research programmes on public good, and strategic work to meet statutory and policy needs will continue as will research geared to provide the underpinning platform on which industry can build. Exciting new work will be undertaken in areas such as biological control, farm woodlands, land use, the greenhouse effect and air pollution. Money saved
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from elsewhere will be part of that. We intend to give greater emphasis to MAFF-industry programmes in pre-competitive R&D. Advice from the Priorities Board for R&D in agricultural food together with the regular review cycle of the agriculture and fisheries programme provides a strategic view of national research needs of these industries. However, we shall wish to discuss the future strategy for R&D sector by sector with industry so that together public and industry funding can support co-ordinated and integrated programmes.
Funnily enough the subject of horticulture, which is very near and dear to me, did not arise in the debate. I have been speaking for a long time. I should like to make it clear gratuitously that I am aware of the concern expressed by growers over the high proportion of horticultural R&D involved. I understand the worries of horticulturalists, who feel that they have been singled out for special treatment. In fact, the treatment was the same in every sector. It just happens that horticulture uses a great deal of near market research. I pay tribute to its efforts to raise money to pay for R&D. I hope that the future will be secured in the form of the HDC going on and gathering strength.
So many points have been raised that I think I had better write to noble Lords. I accept that there is pressure on farm incomes and that farm businesses are often one or two person business operations. In most cases the near market R&D from which public funding is being withdrawn represents less than one fifth of 1 per cent. of the value of output of the sector concerned. If viewed in isolation the total funding to be withdrawn by government from near market R&D looks large, but in terms of each agricultural sector and of individual contributions from farmers the amount is relatively small—not insignificant but not large either. So each and every farmer must realise that he holds the key to the future of commercial R&D in his own hands.
House adjourned at half-past nine o'clock.