Lords Sitting of 12 October 1988

Preamble
The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Gloucester.

The Blandford Fly
Baroness Sharples Baroness Sharples asked Her Majesty's Government:
What measures they intend to take to eliminate the Blandford Fly.
The Earl of Dundee: My Lords, the Health and Safety Executive has met the North Dorset District Council which is responsible for dealing with the Blandford Fly. Following this the council has applied for approval under the control of pesticides regulations to carry out a small-scale scientific test against the Blandford Fly. The Independent Advisory Committee on Pesticides is expected to consider the application tomorrow and make recommendations to Ministers.
Baroness Sharples: My Lords, I thank my noble friend for that reply. I had hoped to put down the Question in July, so the timing is immaculate. Will my noble friend accept that the only product which can help to cure the very unpleasant sting from the Blandford Fly is called an apis mel or bee sting, a homoeopathic product? Will he perhaps be able to tell the North Dorset District Council—which I believe is not aware of the product—to advise people that should they be stung this is what they should use?
The Earl of Dundee: My Lords, if bad swelling or discomfort persists I believe that the best thing to do is to see a doctor. My noble friend is quite right, however: the herbal remedy to which she referred is known to be most efficacious. The process to which I was interested to hear her allude may sound somewhat paradoxical, but if and when afflicted your Lordships should certainly not be put off by the principle of the remedy just because it appears to cure a fly bite with a bee sting.
Lord Carter: My Lords, is the Minister aware that the Blandford Fly breeds in river beds and that the problem of disappearing rivers in Dorset due to the high levels of abstraction upstream by water authorities which is having a disastrous effect on the ecosystem surrounding the rivers could well be one of the causes of this problem? Is he aware that there is considerable concern that the proposed privatisation of the water industry could mean that such environmental problems are even further neglected?
The Earl of Dundee: I am grateful to the noble Lord. In the handling of this matter it is very much being borne in mind that nothing should be done, even in a limited experiment, which would damage the ecology and environment of the area.
Lord Kinnaird: My Lords, can the Minister please tell us what is the Blandford Fly? Secondly, can he tell us what it does? Thirdly, did it originate in Blandford'?
The Earl of Dundee: My Lords, in answer to my noble friend's second question, it bites. In answer to his third question. he is correct in assuming that it did originate in Blandford. In answer to his first question on the fly's identity and purpose I understand that it has no connection at all with the Duke of Marlborough whose title is also Blandford and thus, so far as I know, it was not used to any extent in the battle of Blenheim.
Lord Campbell of Croy: My Lords, can my noble friend assure us that this fly, which sounds most pernicious, is neither a threatened nor a protected species?
The Earl of Dundee: No, my Lords, the fewer the better.
Baroness Turner of Camden: My Lords, can the Minister comment on the theory that the fly is a mutant arising from heavy use of fertilisers in farming? If that is so, could the chemical companies responsible for the production of fertilisers be approached to assist in research into this problem?
The Earl of Dundee: My Lords, I am grateful to the noble Baroness. I shall pass on her suggestion to my right honourable friend the Minister of Agriculture, Fisheries and Food.

Letter to US Congressmen
2.40 p.m.
Lord Hatch of Lusby Lord Hatch of Lusby asked Her Majesty's Government:
What were the contents of the letter sent to Congressmen by the British Acting Chargé d'Affaires in Washington in August.
The Minister of State for Defence Procurement (Lord Trefgarne): My Lords, the letter dealt with our attitude to aspects of the draft legislation before Congress on sanctions against South Africa. I have arranged for a copy to be placed in the Library.
Lord Hatch of Lusby: My Lords, I thank the Minister for that reply. Can he tell the House now before we have to go to the Library what were the main contents of that letter? Can he also tell the House whether the British Embassy confirmed that a letter had been sent drawing attention of Congressmen to the consequences of the proposed legislation on sanctions, and that one of the items in that letter was a threat that United States oil companies would be frozen out of exploration in the North Sea?
Lord Trefgarne: My Lords, the legislative proposal before Congress at the time was intended to do just that to British firms operating in the United States.

873
Therefore I fancy that noble Lords may think that the response was correct. The difficulty that we had with the proposals before Congress at that time was with the extra-territoriality which they represented, and that is a question on which we have made our views known on a number of occasions in recent years.
Lord Cledwyn of Penrhos: My Lords, this was clearly a letter of some significance. As such letters are sent with the authority of Her Majesty's Government, can the noble Lord say whether the Foreign Secretary or some other Minister saw the letter or a draft before it was dispatched?
Lord Trefgarne: My Lords. I can confirm that the letter concerned represented the view of the British Government.
Lord Cledwyn of Penrhos: My Lords, the noble Lord has answered very quickly and no doubt well; but he has not answered my question. Can he say whether the letter was in fact seen by the Foreign Secretary or one of his assistant Ministers?
Lord Trefgarne: My Lords, I am not certain, off the cuff, who saw the letter; but I can confirm that, as I said, it represented the view of the British Government. Certainly the policy which it represented had been agreed by Ministers.
Lord Cledwyn of Penrhos: My Lords, could letters of this importance be sent out without the authority of Ministers?
Lord Trefgarne: My Lords, the letter was not sent without the necessary authority. As I have said, it represented the agreed policy of Her Majesty's Government.
Lord Hatch of Lusby: My Lords, will the Minister clarify his reply to me? Is he confirming that in this letter there was a threat or an implicit threat that if the legislation were passed through the United States Congress then United States oil companies might be frozen out of exploration in the North Sea? If that is the case, does he not agree that this is an intolerable form of blackmail against the elected representatives of the United States who were doing what they saw as their duty in bringing forward legislation to tighten sanctions against South Africa?
Lord Trefgarne: My Lords, the issue at stake was not the question of sanctions on South Africa but of the right of Congress to pass legislation which has effect outside the territorial United States. That is a matter upon which the British Government have made representations both to the United States Administration and the United States Congress on a number of occasions in recent years because unhappily such proposals have come forward in various measures proposed in the American Congress.
Lord Elwyn-Jones: My Lords, can the noble Lord tell us whether it is established practice for the British Charg½ d'Affaires to communicate by letter to
874
Congressmen? Is there an equivalent procedure applicable to this country and this House?
Lord Trefgarne: My Lords, it is indeed established practice for letters of this kind to be sent. In fact it is the way things are done "on the Hill", as it is called in Washington. Representations are made direct to members of Congress, be they Senators or Members of the House of Representatives. It is sometimes done by officials of the embassy, sometimes by the ambassador himself and sometimes by Ministers themselves in this Administration.
Lord Paget of Northampton: My Lords, does the Minister agree that the truth of the matter is that this was an excellent letter which represented Her Majesty's Government's policy?
Lord Trefgarne: My Lords, as I said in answer to an earlier supplementary question, the letter indeed represented agreed government policy.
Lord Hatch of Lusby: My Lords, the Minister has not answered the question that I put to him; namely, did the letter contain a threat, explicit or implicit, that should this legislation be passed through Congress, United States oil companies might be frozen out of North Sea exploration?
Lord Trefgarne: My Lords, the noble Lord will be able to read the letter when he visits the Library shortly. I shall not therefore weary your Lordships by reading it out in full, but certainly it made reference to the position that would exist were the legislation to be passed.

Nurses' Pay Award: Implementation
2.46 p.m.
Lord Dean of Beswick Lord Dean of Beswick asked Her Majesty's Government:
What instructions, recommendations or points of guidance, if any, they have issued to the chairmen of regional health authorities concerning the implementation of the nurses' pay award.
Lord Hesketh: My Lords, regional health authorities have been issued with a range of guidance covering the implementation of this year's pay award for nurses. Our objective throughout has been to ensure that the new grading structure on which the award is based is implemented properly and in accordance with the spirit and letter of the agreement reached by both sides of the Nursing and Midwifery Staffs Negotiating Council.
Lord Dean of Beswick: My Lords, I am grateful to the noble Lord for that reply, but can he confirm that some weeks ago Mr. Clarke gave regional health authorities the right to offer increased inducements in some areas in order to remedy staff shortages? From past experience is he not aware that such a practice is very dangerous indeed and could tempt one regional authority to poach staff from another? Is he further aware that some years ago, benefiting from earlier

875
experience, local authorities set up their own national body to prevent this sort of thing happening in local government and that it has worked well? May I suggest to the noble Lord that he puts my Question to the Minister, Mr. Clarke, because in my opinion he is setting a very dangerous precedent indeed?
Lord Hesketh: My Lords, I fear that the noble Lord is ignoring a very important fact; namely, that there are a large number of trained nurses and midwives who for one reason or another are not practising their skills in the National Health Service. One reason for that is that in some parts of the country nurses' pay compares favourably with that available in alternative employment; in other areas the comparison is not quite so favourable.
Lord Ennals: My Lords, can the noble Lord say why the Secretary of State for Social Services last night refused to see the leaders of the RCN and other unions that represent the nurses? Why has the Minister said this morning that the time for talking is past? Is it not totally intolerable and irresponsible at this time to treat nurses in such a cavalier manner when feelings are running so high? Is he aware that feelings are running high not only among the nurses but also among the health authorities, many of whom are now obliged to cut back on services to their patients because the Government are not fully funding the award?
Lord Hesketh: My Lords, to answer the noble Lord's last point that is a supposition and not a fact. If I may say so, the simple fact of the matter is that the Minister for Health, to whom the responsibility is directly attributable rather than to the Secretary of State, offered to meet the representatives of the staff negotiating side and that that offer was declined last night.
Lord Ennals: My Lords, the Secretary of State himself is responsible. Simply to say that he has delegated to his Minister an issue that affects nurses right across the country is surely another sign of irresponsibility, is it not? Does the noble Lord agree that it is comparable with the irresponsibility that he showed when for a whole month in the summer he failed to tackle the problem?
Lord Hesketh: My Lords, my right honourable friend the Minister for Health is directly responsible for these negotiations. I should have thought that, as in any branch of management, he would not be considered an unreasonable first base at which to stop before going to the Secretary of State.
Lord Stoddart of Swindon: My Lords, the country wants the nurses to have their pay. Why will Mr. Clarke not allow the issue to go to arbitration as the unions have offered, the results of which they have offered to make binding on themselves?
Lord Hesketh: My Lords, all the negotiations to date have been based on the original position which the Government adopted, which was based on a
876
figure of £803 million for this year. As noble Lords on both sides of the House are aware, we are examining the returns from the regions and will make an announcement as soon as possible. But I am sure that your Lordships' House would not expect me to put forward any suggestion that is based on a hypothetical question.
Lord Grimond: My Lords, I understood from the papers this morning that the Minister responsible whoever he is, has refused to meet the nurses' representatives for further talks. Do I understand from what the noble Lord has said that this is not the case and that the Government are willing to have further talks, with all suggestions open?
Lord Hesketh: My Lords, I am very grateful to the noble Lord, because that is exactly the case. My right honourable friend the Minister for Health has said exactly that, but his offer was declined last night.
The Earl of Halsbury: My Lords, can the noble Lord confirm this simple managerial thesis: one can delegate authority but not responsibility? However much the Secretary of State may have told the Minister of State to get on with the detail, he himself remains answerable in the other place.
Lord Hesketh: My Lords, I am most grateful to the noble Earl for his point. However, if one is to have any form of management and management structure and one has a Minister of State who is responsible for health, it is only fair that one should go through the structure rather than deny its existence.
The Countess of Mar: My Lords, is the noble Lord aware that this problem exists not only in the hospital sector but also in the primary care sector? GPs have agreed a scale with their practice nurses and family practitioners are not agreeing to it. Can he say what instructions have been given to family practitioners about practice nurses?
Lord Hesketh: My Lords, to the best of my knowledge with regard to the position of clinical nurses and hospital sisters within hospitals, two out of three will be on the higher grade; outside primary care the figure will be three out of four.
Lord Ennals: My Lords, is the noble Lord prepared to clarify the confusion that seems to exist? Did he hear the statement, as I did, by the Minister for Health on the radio this morning? Does he have the text before him? Did he or did he not say that the time is past for talking? Did he or did he not mean that?
Lord Hesketh: My Lords, yes, he did, but he was still willing to see the unions. We agreed with them that we would introduce this new range of pay for different responsibilities. One of the great issues of contention is this. Everyone wishes to see implementation of this pay award in the nurses' pay packet before Christmas and we must deliver what we agreed.
Lord Dean of Beswick: My Lords, perhaps I may ask a question regarding the answer to my supplementary question. While I accept what the Minister has said about attracting people into the health service by giving regional authorities the right to offer enhanced salaries in certain areas, is he aware that that is a very dangerous practice in a National Health Service? It may well result in different standards in two health services which are almost next to each other. Those are the dangers that I am highlighting. Will the Government note that these are the same objections that have been raised by the nursing profession?
Lord Hesketh: My Lords, I fully appreciate the point that the noble Lord is making. We must accept that differentials already exist for inner and outer London and the London fringe zone. It is a fact of life in this country today that there are substantial differences in the cost of living in the North, South, East and West, and indeed throughout parts of England. These differences have to be accommodated and understood in all walks of life and in all jobs.

Teaching Force: Turnover
2.55 p.m.
Baroness David Baroness David asked Her Majesty's Government:
Whether they have an explanation of the large drop-out rate from the teaching force, and whether they have any policies for dealing with it.
Viscount Davidson: My Lords, there is no large drop-out rate from the teaching force. The latest complete figures, which relate to 1986, show the wastage rate, including retirements and premature retirements, stable at around 8 per cent., a figure which has held steady for a number of years. Complete data for 1987 are not yet available. In its report of March 1988 the Interim Advisory Committee on Teachers' Pay noted that less than 1 per cent. of teachers left the force for other paid employment.
Baroness David: My Lords, I thank the Minister for that reply but it is nothing to be complacent about. Does he agree with the Interim Advisory Report on Teachers' Pay, from which he has just quoted, which claims that recruitment to the teaching force is becoming more difficult and acute in particular areas, and that five out of 10 teachers who qualify do not take up teaching in the following academic year?
Is the Minister aware that there will be an estimated shortage of 4,000 to 12,000 maths teachers, 2,300 physics teachers and 3,000 linguists by 1995, which is just when the national curriculum is expected to get into full swing? What are the Government going to do about it?
Viscount Davidson: My Lords, we shall have to agree to differ on our figures. There has been no drastic fall off in applications in initial teacher training this year. Overall applications are up on last
878
year. Primary training applications are up nearly 8 per cent., secondary applications are down only 5 per cent., applications for technology, maths and physics are down a little on last year and for chemistry they are down by a quarter. However the actual recruitment figures remain to be seen. The underlying trend, even in the shortage subjects, is still upwards after several years of decline since 1985.
Lord Parry: My Lords, can the House assume that the Minister is familiar with the Welsh education statistics bulletin No. 5—the primary school staffing survey?
Viscount Davidson: My Lords, I am totally unaware of the survey. I have only just started this job. However, I shall look into it.
Lord Parry: My Lords, I am grateful for that honest answer from the Minister. I appreciate what he is saying. However, the House will expect me to explain why I asked the question. I ask a further question of the Minister. Is he aware that the survey shows that of 770 primary schools in Wales almost half have gaps in their curricula because of staff shortages or lack of expertise? Is he further aware that the survey, which has been published in advance of a long awaited survey of English schools and which is to find out the similar patterns that exist, means that 49 per cent. of schools cannot teach as full a range of subjects as they would like? Does he know that in some schools there are problems with more than one subject area? Would he expect that 9 per cent. are unable to offer Welsh? I know that it is embarrassing for noble Lords opposite, but the facts are deadly important for the country.
Viscount Davidson: My Lords, that is very interesting but I do not think it is a question for me. It is a question for the Minister of State for Wales.
Noble Lords: Oh!
Lord Glenamara: My Lords, does the noble Viscount agree that it is meaningless to talk about the supply of teachers alone without considering the school population? Can he tell us what will happen to the pupil-teacher ratio over the next few years?
Viscount Davidson: My Lords, the Government's plans for the pupil-teacher ratio are to make sure that it is maintained at its present record low level of 17 to one. Noble Lords might like to be reminded that in 1979 the pupil-teacher ratio was 18.5:1. The Government have a vigorous action programme in place to boost recruitment to shortage subjects, especially in maths, physics and technology.
Lord Parry: My Lords, respectful as I am of the Welsh Office—and my noble Leader sitting before me was once Secretary of State for Wales—will the noble Viscount accept that it is the responsibility of Her Majesty's Government and the Secretary of State for Education to reply when the education system of this country is under question?
Viscount Davidson: My Lords, as I have said, I am very new to this job. I am sure that the noble Lord is probably right. If he is I apologise.
Lord Ardwick: My Lords, is the noble Lord yet aware of the fact that though one in five of head teacher posts throughout the country were not filled when first advertised, in the ILEA a good half of the posts last year had to be re-advertised? Can he explain the disparity between the two figures?
Viscount Davidson: My Lords, I am afraid I cannot.
Lord Dormand of Easington: My Lords, in view of the increased importance which the Government now place on religious education, will the Minister say what is being done to meet the shortage of specialist teachers in this subject? Will the Government resist the temptation to employ the local parson who may well be a most worthy person but who is unlikely to be a trained teacher and is possibly quite unsuited to this very important task?
Viscount Davidson: My Lords, I had better write to the noble Lord on that point.
Lord Peston: My Lords, is the Minister aware that in the independent schools teachers' pay is rising at approximately twice the rate that it is in maintained schools? Would it not be a good idea if in this case the Government followed the lead of the private sector and paid a proper rate of pay which would both raise the morale of teachers and help to keep them in our schools?
Viscount Davidson: My Lords, the financial constraint of £385 million in this year's remit is £85 million more than last year and on top of an expected increase of about £100 million in the pay bill next year as teachers continue to benefit through incremental progression and the award of allowances from the changes already introduced.
Baroness David: My Lords, I was very remiss when I asked my first supplementary question in not welcoming the noble Viscount to his new job.
Noble Lords: Hear, hear!
Baroness David: I wish him every good fortune in it. We shall have many questions for him.
In response to my first supplementary, he said that there were a great many people applying to enter teacher training. Is he aware however that on the post-graduate certificate of education courses, one in three of those entering to do physics and one in four to do maths do not complete their courses even when they may be receiving £1,300 in bursaries? Thus the situation is far from satisfactory.
Viscount Davidson: My Lords, I am most grateful to the noble Baroness for her kind words. I look forward to our future and, I am sure, friendly encounters over the Dispatch Box.
880
On the question of dropping out, there are those who drop out from courses of initial teacher training and those who complete their training but do not go on to teach. In recent years some 20 per cent. of all students on initial teacher training courses dropped out during their course. Some 20 per cent. of those who complete their teacher training fail to enter teaching in maintained schools within four years of qualification; but this is not a new situation.

Reform of the Structural Funds: ECC Report
3.3 p.m.
Lord Kearton Lord Kearton rose to move, That this House takes note of the report of the European Communities Committee on Reform of the Structural Funds (14th Report, 1987–88, HL Paper 82).
The noble Lord said: My Lords, it is my privilege to introduce the debate on the reform of the structural funds of the European Economic Community. The background is the 14th report of the session from the Select Committee on the European Communities. Sub-committee A of the committee carried out the inquiry. The committee was greatly indebted to the witnesses who gave evidence, both written and verbal, and particularly to the five commissioners in Brussels and other Commission staff who talked to the four members of the sub-committee who visited Brussels in April.
As chairman of the sub-committee, I should like to record with thanks and appreciation the hard work which members of the committee put into the inquiry and especially to mention the support received from the committee clerk, Mr. Sleath, and from the specialist adviser, Dr. Butt Philip from the University of Bath.
Your Lordships will know that the structural funds of the Committee are three in number. The oldest, established by the original EC treaty, is the social fund to support the training and re-training of workers. The second, established in 1964, is the guidance section of the agricultural fund to help finance the modernisation of farming and to provide income support in rural areas. The third, the regional development fund, was set up in 1975 to promote economic activity and infrastructure developments in the poorer areas of the Community. The operations of the European Investment Bank, a separate but parallel institution, are broadly directed to similar aims.
All three funds have grown over the years. In round terms, in 1987 they amounted in total to 7 billion ecus, about £4½billion. The regional development fund represented about half and the social fund rather more than one-third. The rest was taken by the agricultural guidance section. About 16 per cent. of commitments were to the United Kingdom.
The European Investment Bank had, by 1987, reached the same level of disbursements—some 7½billion ecus or £5 billion—largely on infrastructure projects. Here the UK share was about 15 per cent. The Single European Act encompassed reform of the

881
structural funds, especially co-ordination, to further the declared aims of "strengthening economic and social cohesion" and reducing disparities between various regions of the Community.
The poorest states in the Community naturally place great importance on these aims. Their consent to the opening up of the financial markets of the Common Market—a move expected to reap considerable benefits to the richer countries—was linked to the Council of Ministers agreeing to a substantial increase in the budget for the reformed structural funds. In February this year the EC states agreed that the budget should rise from the 7·4 billion ecus in 1988 to 13 billion ecus by 1992 and approximately 15 billion ecus, that is, £10 billion, by 1993. Coupled with the effective freezing of the agricultural budget over the same period, the result will be that by 1993 well over 30 per cent. of the Community budget is associated with the structural funds.
In the past, the funds have operated almost entirely on a project basis although a move to an integrated programme basis has begun to take shape in recent years. In 1987, for example, commitments for programmes took about 20 per cent. of the total. The project basis used to date gives great flexibility, but it means that the Commission's staff is inundated with detail. The number of individual projects has run into tens of thousands. Co-ordination between the different funds has been ad hoc and random. Evaluation of the results of expenditure has not been easy and there has been considerable doubt that the most worthy objectives received preferential treatment.
The Commission's proposals for reform meant that a new directorate was established in Brussels—Directorate No. XXII—with overall responsibility for co-ordination. The executive directorates will remain: DGV for the social fund, VI for the guidance section of the agricultural funds and XVI for the regional development fund. Other directorates which will he involved are DGIV for competition; XVII for energy; XVIII for credit investments and last, but by no means least, Directorate No. XI dealing with the environment. Much greater emphasis will be placed on integrated programmes which should move to taking about 80 per cent. of fund expenditure. It is expected that the assessment of applications will improve, as will monitoring of Community expenditure. The evaluation of results should also be easier.
The framework for the future is that five priority objectives have been set for the funds. The first concerns developing the less developed regions. Up to 75 per cent. of the regional development fund, which will receive the lion's share of the total, would go to the first objective. Northern Ireland is the only part of the United Kingdom included in the list of eligible regions. The second objective is helping regions and smaller areas "seriously affected by industrial decline". This classification includes various parts of the United Kingdom. The third objective is combating long-term unemployment and the fourth combating youth unemployment. The fifth is developing agricultural structures in rural areas.
It is also part of the new guidelines that there should in effect be partnership between Commission, member state and regional authority (which can include local government organisations to arrive at decisions on and implementation of programmes financed in part by the structural funds. The member states and, where feasible, private interests, will be expected to put up parallel financing for agreed programmes.
It must be borne in mind that the existing disparities within the Community are very wide. Much wider, for instance, than in the United States. The reduction of such disparities is a prime objective of Community policy. In my view, it would seem inevitable that the current doubling of the structural funds is but a start in this direction. One has to think only of the United Kingdom estimates of the cost of its inner city regeneration where figures of £20 billion have been mentioned.
Whether the richer nations of the community, which includes the United Kingdom, have fully taken on board the financial implications for them of reducing disparities in the Community is open to question. It would be interesting to have a comment from our own Government on that matter. I should like to take this opportunity to welcome the noble Lord, Lord Strathclyde, to his new post and to congratulate him. I hope that he will give me a positive reply.
The evidence given to the committee strongly suggested that the operations of the regional structural funds to date have been welcomed by many regions in the United Kingdom. The Department of the Environment witnesses remarked rather dismissively that structural fund receipts were but a small part of local authority spending. But their figure of £100 million a year was contradicted by the authorities, whose estimate was considerably larger. And the authorities thought that the catalytic and energising effect of Community involvement was wholly beneficial. The local authorities very much welcomed the proposals from the Commission which gave them direct representation in decision making.
One aspect of Community funds which has been the subject of confusion is the concept of additionality. That is because within the United Kingdom likely receipts have been known in advance by central government. That is because a quota system for regional development grants has been in operation. Those receipts are taken into account when national and local public expenditure is being decided. It was clear to the committee that many, although not all, of the United Kingdom schemes which received regional development fund aid would have gone ahead even without the aid but perhaps with delayed timing. However, some of the social fund and agricultural guidance payments, especially the social fund's backing of small projects, had more connotations of additionality.
The Commission, urged on by the European Parliament, seems likely to pay more attention in future to true additionality in the future allocation and administration of regional development funds. There has been keen competition for social fund grants. They have had to be rationed and scaled

883
down by the Commission. The views of the recipients in the United Kingdom were generally favourable and the flexibility of the Commission was appreciated.
The guidance section of the agricultural support scheme has been in a different category, much of it merely reimbursing member states for payments already made. But there was some additionality of certain policies where payments were made direct to the applicant.
In the United Kingdom the administration of the interchanges with the three structural funds has been a complicated affair. The Departments of Trade and Industry, Environment, Employment, Agriculture, Fisheries and Food are all involved. The committee gained the impresssion that co-ordination between ministries was more highly developed in the regions than in Whitehall. With the increasing importance of structural spending in the future—United Kingdom receipts are thought likely to increase by one-third—there is surely a case for a more positive body in the centre doing more than reacting to local initiatives and, in the case of the Department of Trade and Industry, simply acting as a post box.
It was interesting to note that the Scottish Office, the Welsh Office and the Northern Ireland Office were all more dynamic and more positively orientated and co-ordinated than were the Whitehall ministries. Perhaps the Government would care to outline what changes, if any, they have in mind for better co-ordination in Whitehall.
There was general agreement among the witnesses that the increase in the budget for the structural funds was a welcome development. There was also agreement on all sides, including the Commission, that involving the private sector in future programmes was very desirable. The hope was that many schemes might even arise from private sector initiatives and that the interaction of regions, member governments and Commission in such proposals, satisfing the Commission's aims, could lead to considerable enhancement of total sums available. The example of London Docklands and other dockside regeneration schemes was much in mind.
There was also a general agreement that concentration on the five key areas was the correct approach. There was a more muted acceptance of the shift from projects to integrated programmes. It was pointed out that some small projects had been very successful and the fear was expressed that similar opportunities in the future might be lost. The committee agree that a too rigid approach in the future would be a mistake but it felt that that is unlikely to happen. There is no possibility that a sudden change from one system to another will take place. It is a process which will take years. During the transition the Commission, which is pragmatic, will develop the means of sifting good small projects from the large integrated programme proposals or including them in such programmes.
In the United Kingdom there was considerable concern that only Northern Ireland was included in the list of Objective No. 1 areas where there would be
884
the greatest support. As the evidence was gathered, it was felt by the committee that total omission from the structural funds of such areas as Devon and Cornwall, the Highlands and Islands and Mid-Wales was unlikely. Those areas can be accommodated under other fund objectives.
An organisation which cast doubt on the programme approach was the European Investment Bank. Its own considerable investments have been mainly in large infrastructure projects such as power stations. The European Investment Bank is a commercial organisation operating for the most part like a large traditional investment bank. Although the bank has the Community's political and social aims in mind, that did not alter its view that its own credibility rested on making a financial return on its investments. It looked for projects which could service and amortise the capital they provided. The vetting which the bank gave to projects was intense in order to satisfy themselves of commercial viability. It was proud to build up substantial reserves.
It was clear that the bank operated quite independently of the Commission, although the latter was represented on the board. The bank's chief attraction to the borrower was that its rates could be a little finer than the run of market rates because of the terms on which the bank could borrow. In the past there have been some currency risks which weakened the rate advantage; but current arrangements—lending in a basket of currencies or in the borrower's own currency—have lessened that risk almost to vanishing point.
The bank was not convinced that really underdeveloped areas of the Community had enough viable schemes to absorb substantial loans. The committee was inclined to accept that that was indeed the case. What such areas were looking for was grants. Suggestions were aired by the committee that the structural funds might have a specialist use occasionally to help pay interest on European Bank loans. However, there was no support for that prospect.
I have already mentioned the establishment by the Commission of a new Directorate, No. XXII, to act as general co-ordinator and assessor in the allocation and distribution of the enlarged structural funds. The committee welcomes this development. It was impressed by the clear vision in the directorate as to the ends and means. Providing that the directorate in its early days has the steadfast support of the chairman of the Commission, the committee felt that a modus vivendi could soon be satisfactorily established with the executive directorate involved.
The committee noted the view of the Department of the Environment that a programme approach could allow considerable staff savings in Brussels. In the committee's view that is a misjudgment. The administrative load will be different in kind but in many ways will be more exacting. A high level of assessment skills, negotiating skills and an ability to make a reality of the detailed collaborative arrangements which will be put forward will be needed. Some of the less-developed countries of the Community will require considerable help from the Commission staff to formulate their schemes. The

885
monitoring and evaluation of projects will require commitment of a different order to previous practice. The Commission estimated that it would need 135 additional staff which could include seconded personnel. Use could also be made of national experts and private consultants. The committee felt that the Commission was being realistic in its assessment.
The report contains far more detail than I can cover. Subsequent speakers in the debate will no doubt pick up and develop specific points. The full opinion of the committee is set out in paragraphs 53 to 74 of the report.
In concluding, I should like to stress a few salient points. First, the increased importance given to the structural funds is a vital development for the Community. The United Kingdom will benefit, but a relatively greater benefit should accrue to the poorer countries of the Community. The grants, supplemented in various ways, if spent wisely should be enough to spark a real improvement in the economic prospects of such regions. However, in my view, it is but a beginning.
Secondly, the definition of objectives, the switch to programmes and the co-ordination of the work of the various Brussels directorates is a step forward in the management of the funds. The importance of monitoring and assessment is now fully recognised. Thirdly, the closer involvement of the regions in planning and decision taking is to be welcomed. Fourthly, the drive to attract and encourage private sector investment and to use private sector skills is a very positive development.
Fifthly, the United Kingdom Government should approach the reform with enthusiasm. Values and philosophies in Brussels are becoming closer to the Government's own. Internally, the Government should give a high priority to the departmental coordination which will be necessary for the United Kingdom to make a success of the new opportunities which will be available. Sixthly, the future role of the EIB in relation to the structural funds and Community objectives should be considered and possiby redefined by the commission and the board of the bank.
I commend the report for your Lordships' attention and hope that this House will follow closely the working out of the new arrangement in the years ahead. My Lords, I beg to move.
Moved, That this House takes note of the Report of the European Communities Committee on Reform of the Structural Funds (14th Report, 1987–88, HL Paper 82).—(Lord Kearton.)
3.22 p.m.
Lord Geddes: My Lords, it is both an awesome and at the same time, an easy task to follow the noble Lord, Lord Kearton, who has just put forward this Motion so succinctly. It is awesome because the power of his brain is such that certainly as a member of the committee, I often had the greatest trouble in keeping up with the speed of his thought processes and indeed, the speed of questions to some of the witnesses. It is easy because he has covered the subject so well in such a brief space of time that, with
886
your Lordships' permission, I should like to concentrate on two points, both of which the noble Lord, Lord Kearton, brought out in his summary.
Before doing that, I should like to express my very real appreciation to him for the tremendous skill and wisdom that he showed in chairing the committee and, if I may speak entirely personally, I learned a great deal by sitting at his feet.
The two areas on which I should like to concentrate are the summary conclusion No. 80 which we came to regarding programmes rather than projects. As the noble Lord, Lord Kearton, said, we were generally in favour of that but there are two aspects which concerned me quite considerably; the first, as the noble Lord, Lord Kearton, said, was the fate of small projects. We heard a great deal of evidence to the effect that programmes will be granted priority over individual projects. I, and I think many other members of the committee, felt that it was of very great importance that there should be provisions to ensure that the small worthwhile project does not slip through the net because it does not form part of a large programme.
The answers which we were given in evidence on this point did not reassure. The implication appeared to be that such a project would need to be manoeuvered into a programme in order to receive favourable attention from the Commission. By way of one illustration, one matter of which I am personally aware and very involved in, is the extreme danger of the sea defences on the East Anglian coast, and particularly around Aldeburgh, being breached. The sea wall itself is currently being seriously undermined. That is a project which is estimated to cost about £5 million and which is of tremendous value. That money is difficult to raise nationally. There is a certain amount of ping-pong playing going on on the subject which I shall not go into, but it is a small and very worthwhile project which should fit naturally into a structural fund. The question is: is it too small or can it be fitted into a programme on its own?
The other main area is one mentioned by the noble Lord, Lord Kearton; namely, the real necessity for improved co-ordination. I should particularly like to mention the European Investment Bank. As the noble Lord said, the EIB plays a very significant part in the overall funding, in that in 1986, relative for the actual grants made from the funds, the EIB was responsible for 130 per cent. of that figure. In our conclusion we stated that:
"co-ordination of EIB loans with the Fund grants could only increase the effectiveness of both, but this will require a fundamental reappraisal of the EIB's aims and structure".
We heard evidence from three EIB witnesses. Briefly their evidence made it clear that we are a long way from the Commission's objective of coordinating grants, loans and private sector injections. For one thing, the EIB appears to be against the idea of private sector investment in structural funds programmes.
Secondly, at present the EIB is not concerned in the decision as to whether a programme is suitable for a grant, loan or combination thereof. The structural funds officials in Brussels decide whether to make a

887
grant and the promoter of the programme may then turn to the EIB with an application for the balance. The EIB then looks at the programme using its own criteria; in effect, the procedure of evaluating the whole programme starts again. The point that came through to all members of the committee was that it is a very cumbersome process.
One EIB witness suggested that it would be better if this procedure were reversed so that one first considered what kind of loan finance would be suitable for a programme and then if necessary made up the balance with a grant. That should have the effect of maximising available resources but those ideas are merely being negotiated and there are no fixed proposals to date.
The structural funds provide a wonderful opportunity for real and dramatic improvement in the areas which need it. However, co-ordination and flexibility are the key factors. In relation to coordination, I have already referred to the role of the EIB. As the noble Lord, Lord Kearton, said, Directorate-General XXII has been established to co-ordinate the funds and must be given the power and resources to do so. That was a point that concerned members of the committee. We were not certain that that directorate was in fact going to have sufficient power and resources to put to good effect so large a sum of money as was being envisaged in 1993.
As the noble Lord, Lord Kearton, said, more must be done to attract private investment. It seems clear that there is only too much truth in the statement from one witness who said:
"It is a very exciting possibility which next to nothing has been done about".
Similarly, the concept of additionality needs to be examined. Indeed, it is arguable that the concept of substitution has to date been more relevant. As regards the ERDF, for example, one witness agreed that there had been no additionality from the member states.
It is also vital that flexibility is maintained. Perhaps I may take a specific example. As the noble Lord, Lord Kearton, said, the Commission's proposals for reform include five priority objectives. I do not intend to go through all five but merely Nos. 1 and 5. No. 1 is to develop less developed regions. The definition of areas which will fall into that category has been discussed and, as we have just heard, it will include Northern Ireland but nowhere else in the United Kingdom at the moment. I am aware that my noble friends on the Front Bench are pushing the UK's goals on this, but I urge them to push even more strongly, particularly relative to the Highlands and Islands, Mid-Wales and Devon and Cornwall.
If, however, as I hope will not happen, my noble friends are unsuccessful, then those areas will fall into Objective No. 5, which is to develop agricultural structures and rural areas. The problem then arises that there could be a conflict between the funds and the common agricultural policy. Objective No. 5 may well include stimulation of agricultural production, while the Community is committed to restraint of agricultural expenditure. We need to be sure that the objectives are sufficiently flexible so that in this
888
instance the objective will embrace development of rural communities as a whole and so that categorisation does not exclude worthwhile programmes.
I have just one further point on flexibility, and again I come back to the small project. Witnesses from the United Kingdom local authority associations expressed concern that some local authorities will lose all access to the social fund if small, one-off projects are to be excluded. This would mean the closure of many excellent groups operating in the voluntary sector which have so far been cosponsored by a local authority and Brussels. I strongly endorse the sub-committee's conclusion that programmes should be explicitly requested to consider the inclusion of small schemes and in particular that the ESF should have the ability to support projects which do not fit into a programme.
It is a very exciting prospect that the total size of the funds will double by 1993. But then in almost the next breath we heard that the division between the funds has not yet been determined. I conclude—I hope not on too negative a note—by quoting one witness who seemed to me to sum it up extremely well when he said,
"Everybody is talking about ideas but nobody is talking about practicalities".
3.32 p.m.
Lord Murray of Epping Forest: My Lords, I share with the noble Lord, Lord Geddes, a sense of indebtedness to the noble Lord, Lord Kearton, not only for his clear and comprehensive introduction of the report this afternoon but also for his able and forceful chairmanship, and perhaps not least for the happy phrase which is incorporated in paragraph 74 of the report where it refers to £36 billion in five years being spent through these funds as "no small beer".
We are concerned not only with the quantity of that money but also with the quality of these funds—with their purposes—for these funds reach parts that other Community provisions do not reach. I welcome the fact that, as the noble Lord, Lord Kearton, said, the Government have agreed to the doubling of resources within these funds—whether as a sprat to catch a mackerel or because they have become covert interventionists does not matter very much. The fact is that this doubling of the funds is a practical step towards the creation of a social Europe.
Welcome too is the growing recognition of the irreversibility of our presence in Europe. The recent invitation by the Trades Union Congress to President Delors to address it, while not perhaps occasioning delirium in all quarters, is a sign at least in the Labour and trade union movements that our existence in Europe has become recognised not only as a fact but also as desirable and as a basis' for advance.
The idea of a social Europe has always been at the heart of the treaties. The Community has a record in the field, not ideal but welcome, of directives to strengthen the rights of employees, to improve quality and to advance health and safety despite, I regret to say, the obstruction which has too often come from Her Majesty's Government. It is not

889
perhaps surprising that a Government who at home scorn the notion of a society should in Europe spurn the idea of a Community.
But completing the internal market is not really a matter of eliminating physical and fiscal barriers. It involves providing jobs for men without work and better working and living conditions for the citizens of Europe. A single integrated market will accelerate industrial and social change. It will have far-reaching effects on employment, it will create new social problems and in itself it will tend to increase disparities of opportunity and of income rather than to narrow them.
These challenges require a concerted response to identify the common objectives of the Community and the means of achieving those objectives. I find arid much of the debate between the proponents of a united states of Europe on the one hand and Europe des patries on the other. To me joint action means nations reflecting together to shape their common future and it means the social partners acting together within the EC—governments, employers, trade unions and consumer organisations.
However limited these proposals and their scope, and however reluctant Britain's response so far, this regulation is a recognition of a need for an overall framework of thinking and indeed an overall strategy comprised of three main elements. The first is the reform of the common agricultural policy to put the emphasis, as the noble Lord, Lord Plumb, said, on people rather than on products. The structural funds themselves cannot carry the whole burden of adjustment, as is emphasised in the report, but it is relevant, as the noble Lord, Lord Kearton, pointed out.
The second element of such a strategy leads to an explict common industrial policy of which the regional policy is and should be an important part, with the central objective of faster economic growth and of reducing unemployment. The third element needs to be the development of a common social policy. The aim of creating a social Europe was always implicit, always envisaged by the Treaty of Rome itself, notably by Article 117 and elsewhere. I regret that Her Majesty's Government should have become the odd man out in blocking many social advances and they are in danger of gaining a reputation as the petulant foot stamper of Europe.
The proposal which we are discussing today is very much in line with majority thinking in the European Community. It is exemplified, as has already been said by the establishment of the European Social Fund. Not the least of the achievements of that fund have been in the field of training. By 1986, 2.3 million people had benefited from the training provisions mounted under the social fund, 40 per cent. of them women. It is interesting to note that the UK has been the second largest beneficiary of that assistance, notably in youth training. It is also worth mentioning that we have received £17 million for the training and employment of disabled people. This underlines the point so cogently made by the noble Lord, Lord Geddes. I too understand the logic of the programme approach, not least the fact of many thousands of applications.
890
But the report draws attention, as the noble Lord, Lord Geddes, drew attention, to the committee's reservations in this field and to the advantages of focusing on specific projects. I fear that these proposals could put at risk the contribution to the training of disabled men and women to which the National Council for Voluntary Organisations has recently drawn our attention. We must be careful that we do not throw out the training baby with the administrative bath water.
I agree with the view expressed by the witnesses for Her Majesty's Government that the funds themselves should focus in particular on long-term employment and upon youth training and that limits ought to be set on the use of the funds for general regional development. I agree also that all parts of the Community should continue to have access to the funds. As the noble Lord, Lord Kearton, said, it now appears understandable that attention should have been concentrated on Northern Ireland. But there are many parts of England, Wales and Scotland where the judicious use of the funds can make notable contributions to redevelopment.
As is said in the report, the structural funds are the most important symbol of Community unity. The proposals, inadequate and imperfect as they may be and capable of improvement as they certainly are in the ways indicated by the noble Lords, Lord Kearton and Lord Geddes, nevertheless are at least the visible and outward sign of an inward commitment to the social purposes which have always been at the heart of the European idea.
3.41 p.m.
Lord Banks: My Lords, as the first speaker in the debate who was not a member of the sub-committee, I should like to thank Sub-Committee A for the production of this most useful report. I also thank the noble Lord, Lord Kearton, for the way in which he has presented it to the House.
When we discussed on 9th November 1987 the report produced by the committee on financing the European Community and again, on 3rd February this year when we discussed the Motion moved by my noble friend Lord Ezra calling for more rapid progress towards completion of the internal market, we did not know whether the proposal of the Commission to double the structural funds was to be accepted. We feared that there might be an increase of perhaps 60 per cent. instead of the 100 per cent. which it had suggested. We thought that that was the position of the Government. We know now that it has been agreed to double the funds by 1993.
As the noble Lord, Lord Kearton, explained, there are three funds involved; the social fund, the regional fund and the agricultural guidance fund. The noble Lord pointed out that between them they command about £4½billion a year. Therefore, by the year 1993, at today's prices, there will be about £9 billion to £10 billion available for the structural funds representing an increase from about 18 per cent. to over 30 per cent. of the Community budget.
Before we become too excited about that figure I believe that we have to compare it with some others.

891
For example, it has to be compared with the £40 billion that we spend in this country alone on social security and with the £25 billion for personal allowances in our income tax system which is lost to the Treasury. There has to be comparison with the total of £150 billion that we in this country alone of the 12 spend on our own purposes.
Those figures help us to get the £9 billion to £10 billion into perspective. However, we on these Benches greatly welcome the doubling. We believe it to be necessary, first because disparities between the regions have been increasing and secondly because, as the noble Lord, Lord Murray of Epping Forest, pointed out, it is generally expected that the effect of the completion of the internal market, while bringing many advantages, will at the same time tend to accentuate those disparities.
Although we welcome the doubling we are bound to question whether it will be enough. That is perhaps the most important question that we can ask. After all, the total budget of the Community is only about 1 per cent. of the Community GDP. A balancing and redistributory mechanism is of limited value if its resources are too small to influence economic events. How the fund is operated is important but it is of secondary importance if the total is inadequate. The committee declares:
"The concentrated application of the Funds should now be enough to spark a real and permanent improvement in the economic fortunes of certain regions".
The phrase "of certain regions" makes the declaration seem less significant because we have no idea of the degree of limitation. But the committee is obviously optimistic. We must take heart from that, although the noble Lord, Lord Kearton, described the increase as a start at the beginning of his speech and as a beginning at the end of his remarks. That is, I believe, probably all that it is.
The summary of conclusions that the committee puts forward contains many recommendations. I should like to refer to one or two. The committee says that,
"The Council of Ministers must give priority to considering the use of the Structural Funds".
I certainly agree with that. It means, I believe, a very careful choice of the projects to be followed up; it means close monitoring of the implementation of the projects; it means a thorough assessment after a project is completed to make sure whether the original aim has in fact been achieved and what is the overall effect.
I believe that the programme approach will help in all three of those particular functions. There must also be the closest liaison between the Commission and DGXXII which, it was explained to us, is responsible for co-ordination. It has often been said that the Community has a regional fund but no regional policy. It now seems that the framework for the development of a regional policy is being put into place. However, as we have already heard, some doubt was expressed in evidence to the committee as to whether DGXXII will have sufficient strength and sufficient clout to command the respect of the other departments involved.
892
I ask what is the view of the Government about that and how they feel about the possibility of making real use of this directorate which is to deal with the co-ordination of the whole enterprise. The committee says that there should be a place for small-scale projects particularly in the social fund. That point has been developed by the noble Lords, Lord Geddes and Lord Murray of Epping Forest. This recommendation of the committee will be particularly welcome, as the noble Lord, Lord Murray suggested, to the voluntary organisations. They have gained much help from the social fund. But while welcoming the programme approach they are nevertheless nervous that some of their projects could be elbowed out by larger ones.
Incidentally, the voluntary organisations regret that women, disabled people, refugees and migrants have not been mentioned so far. They believe that the special needs of these people need to be mentioned in the regulations. I ask again what is the view of the Government on that matter. The committee refers to "additionality" and it has been mentioned by all the previous speakers. We have discussed it many times in this House. It certainly seems right that money provided by the European Community should be in addition to the money which the Government would have spent in any case. The committee tells us that additionality occurs only rarely so far as the United Kingdom is concerned. It feels that the problem will be less significant as the programme approach is promoted. I hope that that proves to be correct. It has been frustrating over the years to have the problem of additionality continually raised and to feel that perhaps we are not gaining anything in the long run from this source of funds.
We on these Benches fully endorse the committee's recognition of the key role of the regions, the local authorities and the regional development agencies. I should like to ask the noble Lord who is to reply whether the Government support the view of the committee that there should be some form of regional participation in the new advisory committees.
I should like also to hear the Government's view of the committee's proposal that there should be a fundamental change in the structure and operation of the European Investment Bank. The noble Lord, Lord Geddes, went into this in some detail. Have the Government any suggestions as to what is required to integrate the bank with the funds?
Has any progress been made in the definition of the phrase, "areas of industrial decline"? That is a matter of great importance to the United Kingdom. What will be the overall effect on the United Kingdom? Will the diversion of funds to the under-developed areas be offset by the increase in the total? I believe that the Prime Minister has said that our receipts will increase by about one-third. Is this still the Government's estimate?
Finally, I agree with the committee that the structural funds are a most important symbol of Community unity. I share the hope of the committee that, although they oppose their doubling, the Government will now approach the reform with enthusiasm. Once they are doubled the funds will constitute a significant proportion of the Community

893
budget, beginning to rival the common agricultural policy. And they may well play a tangible and permanent part in improving the economic performance of the less developed areas of the Community. However, if I may return to my first point, a reduction in the regional disparities within the Community must depend on whether, even when doubled, the funds are adequate.
3.53 p.m.
Lord Greenhill of Harrow: My Lords, I want to speak briefly and in very general terms. However, before doing so I should like also to pay tribute to the energetic chairmanship of the noble Lord, Lord Kearton. He put in an enormous amount of work and study from which we all benefited and his zeal seems to be incompatible with his supposed retired status.
We are clearly approaching a critical stage in the development of the European Community. The Council meeting in Hamburg earlier this year set in motion a study whose recommendations for financial development will clearly be the subject of debate for months and probably years to come. There are already renewed signs of a wide divergence of views. The way forward will obviously be the subject of controversy and the pace of progress may be slow and cautious. However, the subject of this report, reform of the structural funds, provides an opportunity for progress which need be neither slow nor unduly cautious.
The objectives of the proposed measures are clear and there is agreement on the five main objectives. The few divergences which exist are clearly not insuperable. What is proposed by the reform is good for the Community. It can also be good for purely British interests. It is to the latter point that I want to draw special attention.
As has been said, the British Government were late converts to the idea of increasing these funds. The basis of their conversion was political rather than economic. Now that the Community has agreed on this plan, we in this country should embrace it with uncharacteristic enthusiasm. We should do so not only in our domestic interests but because, as the report says, it will play, "a tangible and permanent part" in improving the economic performance of the less developed areas of the Community. The effects of this will, if successful, have important political as well as economic consequences. Action is called for from the British Government in four ways.
First, they must ensure that government departments in Whitehall co-ordinate energetically their work not only between themselves but with the regional organisations in this country, which have long shown enterprise in these matters and which will be bidding for a share of the increased funds. It will also be a good opportunity for the DTI to justify its new self-styled name by taking an energetic and enterprising lead. The responsibility in all Whitehall departments should be entrusted to those who understand and share the objectives of these additional funds.
Secondly, the Government must help to alert British businesses, private sector consultants and contractors to the opportunities which the funds will
894
create for them in the under-developed parts of the Community. Countries like Portugal and Greece will need assistance in drawing up their development programmes. British firms can help in this to the benefit of all concerned. My understanding is that countries outside the Community—for example, the Scandinavian countries—will want to seek a share in this work and will be able to do so. We must face keen competition. One hopes that British firms will not need to be prompted, but the DTI, as part of its export drive, should keep a sharp eye out to help and encourage them.
Thirdly, the internal organisation of the Commission for the administration of these funds is not yet agreed. It was certainly not agreed when we visited Brussels. The Government can help in this directly and through our delegation in Brussels. I should like to pay tribute to the delegation's interest and competence in this matter. It is important that the inevitable departmental rivalries within the bureaucracy of the Commission are kept under control and that the whole scheme is supervised by a senior Commission official whose authority is unquestioned and is willingly accepted.
Fourthly, the Commission must avoid inflexibility in the administration of the new funds. We are all a little suspicious of its ambition to extend its authority in these matters. Rigid rules approved by the Community may well exclude deserving areas in this country, especially if these rules are based on questionable statistics. We benefited in the past from the structural funds and we must continue to do under the new regime.
All members of the committee were a little uneasy about the future of the social fund. This was referred to by the noble Lords, Lord Geddes, Lord Murray of Epping Forest and Lord Banks. The fund in its old form has been very helpful to us. When we spoke to the Spanish Commissioner who received us in Brussels he clearly favoured a limited number of large schemes rather than a multitude of small ones. From an administrative point of view it is obviously easier, but I hope that those ideas are not carried too far.
In conclusion I must say, as the report points out, that all this will take time. But here is a Community activity which deserves our support and which will be seen by the general public to be something worth while not only for ourselves but also for our fellow members.
4 p.m.
Lord Butterworth: My Lords, I should like to thank the noble Lord, Lord Kearton, for his guidance and skill in steering this report to its successful conclusion. The report of the committee states that:
"Little thought has been given to the purposes of the funds".
I thought it might be useful this afternoon to try to spend some time on identifying what the purposes are, because unless we understand them it is most difficult to say whether the funds have sufficient money.
The report identifies an important underlying function of the fund as:
"Compensating those Community countries which may have to struggle to meet the competitive challenge of the internal market".

895
I suggest that the purpose of the structural funds may possibly be sought in the aims of the European Community and in one of them especially; namely, economic integration. That factor is identified in the Treaty of Rome and is repeated in the single European Act. Therefore it is neither new nor revolutionary; but it has been accepted from the beginning as part of Community policy.
Why then is economic integration so important? Perhaps I may be allowed to make a short digression in this respect. In his book, The Rise and Fall of the Great Powers, Professor Kennedy, explains how the world economic game shifted after the 1939–45 war. Economic power and prosperity became related not to great powers but to superpowers. First to the United States and Russia, then to Japan and, presumably, before long, to China. Therefore by the year 2000 there will be potentially four superpowers. The relevant question is this: can Europe become so organised that militarily and economically it could achieve a status equivalent to that of a superpower? That does not mean that we must enter into any philosophical argument about sovereignty. Professor Kennedy's point is that a disproportionate share of wealth and economic influence is likely to cohere around the superpowers in the future.
The potential for the EC is impressive. The 12 member populations now total 320 million, which is 50 million more than the USSR and almost half as many again as the population of the USA. Its total GNP is about equal to that of the United States and far larger in its share of world GNP or manufacturing output than that of Russia, Japan or China. Yet Europe's effectiveness and power in the world is less than its total strength suggests that it ought to be. That is largely because its effort is fractured and not sufficiently coherent. Therefore the crucial question is: can Europe get its act together in time and become economically and efficiently integrated to seize the potential economic rewards which crude statistics of population, economic activity and military strength suggest ought to be within its grasp?
How can economic integration succeed and, at the same time, the independence of 12 sovereign states be retained? The Single European Act refers to European unity but states that it should be achieved by:
"The Communities operating in accordance with their own rules and by political co-operation, especially in the sphere of foreign policy".
That clearly implies a relationship between sovereign states; a confederation if you like, rather than a federation. Again, the Single European Act describes the internal market as:
"An area without internal frontiers in which free movement of goods, persons, services and capital is ensured".
That means not only the abolition of frontier control and the free movement of capital, but also the free movement of people and the recognition throughout the EC of professional and other higher and educational qualifications.
Therefore what changes are needed? What contribution will the structural funds make? Many of the changes will need to be worked out gradually and in practice; some of them before, and some of them
896
after the market has come into existence. Clearly the existence of the market in 1992 will be a crucial step towards economic integration. However, in 1992 it will be far from perfect. It has taken the United States 200 years of amending legislation to improve their market. As I have hinted, the USA may not be a precedent for Europe which must develop its own solution.
Perhaps we may for a few moments look at some of the important changes which have been suggested because within those changes the purposes of the structural funds become clearer. For example, when will the time be right for the United Kingdom to join the EMS? It has recently been suggested that it will not be until after the 12 European states have achieved free movement of capital and sustained it for some time. Indeed, will the EMS survive the pressures imposed by free movement of capital and the scrapping of exchange controls?
Again, debate on whether economic integration requires a common currency and a European bank is certain to continue with us for a long time to come. The successful launch by the Bank of England of Treasury bills denominated in ecus is a prime example of the pragmatism required. Nothing that has so far happened has ruled out the ecu being an alternative to national currencies, leaving it therefore to individual choice whether particular arrangements or deals should be settled in a national currency or in ecus.
In my final example I turn to the old concept of harmonisation. Every EC country should be regulated by the same identical rules. That concept is giving way to a new concept of frameworks. The EC will lay down frameworks each dealing with an area where harmonisation is necessary, but leaving it to the discretion of member states to draw up their own rules within those frameworks.
That new concept of frameworks, like the structural funds, is one of the changes introduced well before 1992. Economic integration can only be achieved if the states of the Community have a sufficient will to bring it about. If there is a collective will to establish economic integration, the necessary legal and administrative changes will begin to happen.
Even a community as closely integrated as the United States needed a mechanism to provide additional funding to states which, by reason of some disaster or other major unforeseen event, found themselves economically or financially out of tune as, for instance, Texas when the price of oil dramatically fell. So, in the different and looser community of Europe, the structural funds fulfil a similar and crucial function by giving assistance to those parts of the Community which must struggle if they are to meet the collective and competitive challenge of the internal market.
One of the most important functions of the structural funds will be to generate, in poorer member states, that common will for economic integration which they may find it difficult otherwise to deliver.
The report makes it clear that the doubling of the structural funds by 1992 is not merely a quantitative

897
improvement, although—and I agree with the noble Lord, Lord Banks—the increase serves to emphasise the importance of areas other than the CAP.
The funds will need to be sufficient to enable effective assistance to be given to the less developed areas of the Community and thereby ensure that all EC countries consider it to be worthwhile to be committed to the idea of economic integration. Only by that means will Europe be able to seize the political and economic rewards which crude population, economic and military statistics suggest ought to be within our grasp.
4.12 p.m.
Lord Howie of Troon: My Lords, when a day or two ago I put my name down to speak in the debate I had hoped to follow the noble Baroness, Lady White, and to support some propositions that she intended to make. Unfortunately, I am told that the noble Baroness has been taken ill and is consequently unable to speak today. To all intents and purposes I shall abandon my notes and make her speech for her in absentia. I am sure that noble Lords will join me in hoping that she has a speedy recovery and is shortly to be seen down there on the Front Bench below the Gangway speaking with her normal vigour and charm.
I was not a member of the committee, but as an ordinary Member of the House I read the report with interest and with the admiration which Back-Bench Members always feel for the reports of that committee of the House, which is one of the more important committees in any Parliament in Europe.
I turn to the structural funds. We should begin by endorsing the five main objectives upon which the new system for the structural funds is to be based. The addition of Section 5(b) provides for activities which will create more employment as an alternative to agriculture, which is important in Wales, as the noble Baroness would have said, and which will not he confined to adjustments to the agricultural structures as originally proposed in Section 5(a). That is surely sound sense and practical. A number of smaller areas in Wales and Scotland which have suffered from severe industrial decline will no doubt qualify under Objective 2. On that point, we should take note of the comments made by the noble Lord, Lord Banks, who spoke of the definition under which industrial decline would come. Many areas have of course already benefited from the existing provisions of the European Regional Development Fund to which I shall come later. However, uncertainties remain.
Under the Commission's proposals, firm identification of eligible areas will not take place until next year. Assurances that rural Wales, with the Scottish Highlands and Islands and assisted areas in Devon and Cornwall, will come within the scope of Section 5(b) do not ensure that particular locations will benefit. The noble Baroness tells me that there are anxieties in Clwyd about the Denbigh rural area, and there is possibly room for revision under Objective 2 for small areas in South Glamorgan and Llanelli. In addition to those general uncertainties, there seem to be some proposed restrictions on
898
eligible expenditure which are unhelpful and which should he reconsidered. Expenditure confined to derelict land use, for example, could hinder desirable greenfield development and infrastructure projects which are needed for economic recovery. That proposal should be looked at again.
A major concern is the timetable to which the Select Committee report refers in paragraph 67. As presently proposed, plans under the new scheme have to be submitted to the Commission by 31st March next year. It would be helpful if the Government could clarify their view on that point. Local authorities are much worried at the prospect. Whatever the ultimate deadline is to be, it is surely clear that projects now in the pipeline can be approved under the existing regulations or some transitional arrangements should be made as quickly as possible. Into that category comes the proposal which especially concerns the noble Baroness and upon which I support her entirely; that is, for the restoration of the Montgomery Canal. I am told that the project is due for early consideration by the Secretary of State for Wales under the PRNI scheme.
The noble Baroness is anxious that a favourable decision by the Secretary of State for Wales should not be postponed until the revised arrangements for the structural funds have settled down. That would be unfortunate and unnecessary. The British Waterways Board, which has been working with the local authorities in Mid-Wales, the Tourist Board, the Welsh Development Agency and other bodies, has put a tremendous amount of time, effort and resources into preparing a scheme for the development of the canal.
Last year noble Lords will remember that Royal Assent was given, without opposition, to a private Bill covering the new proposals. Within the past few days the noble Baroness has been assured by the chairman of the British Waterways Board of the board's commitment to the project, which of course includes the desirability of some financial help from the existing arrangements for the European Regional Development Fund. However, the chairman says in his letter that because of the scarce resources of the board it cannot continue to commit them indefinitely to the Montgomery scheme as there are other competing projects. The chairman is saying that in order to ensure that the board's funds continue to be devoted to that canal project, a speedy decision by the Welsh Office is required.
It has to be borne in mind that with the possible exception of the Kennet and Avon Canal, the Montgomery Canal has received more voluntary funds and voluntary work over the years than any other waterway in England or Wales. It crosses the border between those two countries. I am assured that the Department of the Environment and the local authorities are fully in support of this scheme, which would link the Shropshire Union Canal with the Welsh section of the Montgomery Canal.
It has been suggested that there are some doubts in the Welsh Office about the adequacy of the proposed management structure for this project. If this is true the sensible approach would be to look at the Scottish Development Agency work and also at the work the

899
British Waterways Board is now doing on the Forth and Clyde Canal. It is just beginning the restoration of a 12-mile stretch of that canal from Anniesland through the centre of Glasgow and out to Kirkintilloch.
The importance of that project lies in the fact that so far as we are concerned today the project is part funded by the Community. It is a small project compared to the Montgomery Canal project, costing no more than £2·6 million, half of which has been raised locally from Scottish sources, the other half being provided by the Community. The example of the Forth and Clyde Canal should be followed in connection with the Montgomery Canal, and speedily. I end by commending the committee for its work and thanking the noble Lord, Lord Kearton, for allowing us to consider the report today.
Lord Benson: My Lords, I put my name down to speak in this debate, but the ground affecting the structural funds has been so well covered by all the noble Lords who have spoken already that I should only weary the House with repetition. Therefore I hope your Lordships will allow me to refrain from addressing the House further.
4.23 p.m.
Lord Reay: My Lords, I should like to congratulate my noble friend Lord Strathclyde on his appointment and to wish him well as he takes the crease for what I assume must be his first innings for the Government side.
The Single European Act, by virtue of Article 130D, instructed the Commission to submit proposals for amendments to the structure and operating rules of the structural funds so as to improve their efficiency as a means of promoting the adjustment of regions of the Community whose development had lagged behind that of others and for the conversion of declining industrial areas. No mention was made in the Act of increasing the size of the funds. However, the Commission found, not surprisingly perhaps in view of the recent accession of Spain and Portugal, that a doubling of the funds was required by 1992.
The European Council dealt with the proposal as part of the fundamental reform package agreed in Brussels in February of this year, and increased the sum allocated by slightly less than that asked for by the Commission to 13 billion ecus, or approximately just under £9 billion. The accompanying reform proposals are currently on their way through the Council.
The funds are of considerable importance to the United Kingdom and it is plain from reading the evidence given to the select committee that they play a considerable role in furthering the economic development of the largely peripheral areas which benefit, and that they are much appreciated by the recipients. It is regrettable that these beneficial Community policies have not always been given local publicity, although in some places this has improved. I saw recently a large board advertising the munificence of the Community beside a new bridge in
900
the Isle of Lewis. It is written in Gaelic. I do not think one should grudge such occasional good publicity for the Community, particularly in view of the drubbing it has regularly received, often unfairly, over so many past years.
I do not think that this country can expect to remain for much longer a substantial net beneficiary under the regional development fund. That is a penalty the Government will have to pay for economic success. However, there will remain many areas which will continue to deserve to benefit, and hopefully will benefit, under the fund: the whole of Northern Ireland, the Scottish Highlands and Islands, Devon and Cornwall and Mid-Wales, to name but a few.
However, the social fund, as the noble Lord, Lord Murray of Epping Forest, told us, has been a remarkable success story from the British point of view. Devoted primarily to the exceptionally important task of retraining, and not allocated according to national quotas, its chief beneficiary this year will be the United Kingdom, which is a remarkable tribute to the persuasive power and the organising capabilities of the officials of the Department of Employment, who both process applications to the Commission and assume responsibility for stimulating applications from local bodies.
The agricultural guidance fund, the third of these funds, will, unless I am much mistaken, carry the burden of financing the Community share of the promising set-aside agricultural scheme which has been introduced by the Government. So here the guidance fund is a partner in a policy which is strongly supported by the Government.
It requires an effort of memory to recall the fact that the United Kingdom was a "midwife" to the original regional development fund, seeing it as a way of retrieving from the Community part of our excessive net contribution to the common agricultural policy. In fact it never worked satisfactorily to that purpose. As Sir Michael Butler, the United Kingdom Permanent Representative in Brussels from 1978–85, cogently demonstrates in his book Europe: More Than a Continent, the net return to the United Kingdom through the regional fund amounted only to something very small in relation to our net budgetary contribution—when the fund stood at 1 billion ecus, at a rate of about 7 per cent., a net return of 70 million ecus, compared with a total net budgetary contribution of 2 billion ecus.
Eventually of course it was not the regional fund or the so-called renegotiation of our terms of entry in 1974–75 which brought an acceptable solution to Britain's budgetary problem. It was the agreement reached at Fontainebleau on a rebate formula for Britain's budget contribution, later to be confirmed this year in Brussels to last for another four years as part of the package, that finally settled the issue. It was the achievement of the rebate, running at some £1 billion a year, which cleared the way to fuller British participation in the development of the Community and which indeed enabled the Community to continue to make progress at all.

901
And so we began to see the fast progress that we have had during the last few years in the development of the internal market. Meanwhile the political driving force behind the structural funds has shifted south to the Mediterranean countries, in particular Spain and Portugal. The structural funds make more acceptable the dangers and stresses involved in adapting these countries' relatively unsophisticated economies to the single market. In Portugal's case they are accompanied by a special and very substantial industrial investment programme financed from the Community. Perhaps by those two countries also, as once upon a time by us, the structural funds are seen as a means of alleviating the consequences of tough entry conditions.
Anyway, the funds retain their political function of enabling financial transfers to take place from certain member states to certain others, while enabling policies to be pursued which themselves serve to further the aim of integrating the Community. They have a twin cohesive purpose: developing backward areas of the Community while ensuring the cooperation of less well equipped or even aggrieved member states in the further stages of the Community's development.
It is in the nature of a regional policy that if it is successful, eventually it will cease to be necessary. Today the background factors are also helping to make regional subsidies less necessary in the future. Indeed, they will probably be more decisive in this respect than the policy itself. Above all, we need to continue to have peace and the ever rising prosperity which accompanies it. All we can do towards guaranteeing that is to provide an adequate deterrent defence.
Apart from that, the opening up of the Community into a single market, the improvement in communications of all kinds which is a characteristic of our time and which in turn enables firms to locate themselves in more environmentally attractive and therefore less central areas: these are all factors which operate to spread prosperity more evenly throughout the Community. A witness from the Scottish Office even reported to the Committee that the population of the Hebrides was rising—a far remove from the days which many noble Lords will remember when depopulation of the Highlands and Islands was a much remarked and much lamented phenomenon 'within these shores.
Areas seriously affected by industrial decline—the second target priority area for the new funds—have in many cases also seen rejuvenation. Others, no doubt, will follow along the same route, in other member states as well as our own. So I tend to think that reducing the disparities of income throughout the Community may not be quite such a depressingly expensive task as the noble Lord, Lord Kearton, fears.
Of course, there are other areas of policy apart from regional policy on which we could and should focus attention and which have a legitimate claim on Community funds, albeit on a smaller scale. If I were to pick out one, I should say that the Community needs a policy in the field of high technology to ensure that our industry is organised on a large enough scale
902
to compete in world markets with the Americans and the Japanese. We have slipped badly behind in some areas, particularly in information technology. There are too many factors operating to maintain production on a national rather than a European scale, one of which is government patronage. Yet it is essential that Europe should have, somewhere within its frontiers, a centre of manufacture for every sort of advanced product, for reasons of economic as well as of military security. I am sure that a further lead from the top is necessary.
I have no doubt that this Government will continue to play an outstandingly constructive part in the development of the Community as it moves. step by step, towards that ever closer union of which the Treaty of Rome speaks. The task for Britain is to strive its utmost to help make Europe what it should be—free, united, vital, strong, open to the rest of the world—and to prevent it becoming what it should not be—a protected fortress of subsidised inefficiency, over-regulated, stifled by special interests, a fortress in concept but eventually just a prey being prepared for its competitors and enemies. This is not what the Government want; it is not what the treaty envisaged; it is not what Europe needs. One thing is plain, we sink or swim together. As the Prime Minister said in her speech to the College of Europe in Bruges last month,
"Britain does not dream of some cosy, isolated existence on the fringes of the European Community. Our destiny is in Europe, as part of the Community".
The structural funds, in the words of the select committee, are, "a most important symbol of Community unity". They are devoted to causes which serve the cohesion of the Community—a cohesion which it is vital to maintain if the Community is to continue to make progress.
As part of this broader picture, therefore, I welcome the survival of these funds in such good health. I am sure that they will be guaranteed further longevity by the Commission's generally sensible proposals. We are grateful to the select committee for having brought these well presented and well analysed proposals before us today for our attention. I entirely support the conclusions.
4.35 p.m.
Lord Nathan: My Lords, I was not a member of this committee. Having worked closely with the noble Lord, Lord Kearton, over the years in different fields, I can well imagine the vigour with which he chaired it. I have read the report. As one would expect. it is complete and interesting to the last sentence. I am prompted to take part in the debate, not from any expertise in relation to the structural funds, since I have none, but arising from the fact that only last weekend I attended a symposium at which the Commission was strongly represented on the need for strong and successful policies for regional development to complement the achievement of the unified market in 1992.
The increasing tempo of concentration in the industrial and commercial sense by takeover, amalgamation and merger within member states and across their boundaries is obvious. The tendency to

903
geographical concentration of activity at the centre has been evident for years. However, it seems to me that the effect of the combination of these movements, the concentration of economic and industrial power and the concentration of activity at the geographical centre of the Community, is only now being widely appreciated.
Marked discrepancies in economic prosperity between regions within one member state have been experienced over the years almost everywhere. Steps to ameliorate the effects have been taken with varying success. What has never hitherto been attempted is an alignment of economic prosperity across boundaries on the scale now involved in the Community of Twelve. The enormity of the task may perhaps be measured by comparison with the time taken in the United States to achieve similar results there.
It would not be unfair to take the period from the early 1930s and the inception of the Tennessee Valley Authority to the late 1970s to give some idea of this—a period of some 40 years. It is, I suggest, because the position in the Community is more fragile that there is far less time available. The speed of economic change in the shadow of 1992 and the enormous disparities between the economies of the richest and the poorest members make fulfilment of the regional policies a matter of the greatest urgency. Failure could put at risk the cohesion of the Community itself. That is why the structural funds—and I am thinking in particular of the regional fund—are so important arid why the way they are administered is so important too. They can and should be a catalyst in the less developed areas for the creation of infrastructures on which thriving economies can be built. Therefore it is important that their application be sufficiently concentrated to have an impact and not be too thinly spread.
It is intended that the funds under Objective No. 1 in the report shall be applied primarily to regions with a per capita GDP of 75 per cent. or less of the average. The regions covered by this definition are Greece, Portugal, Ireland, Ulster, parts of Spain and southern Italy. The Community has resolved that 60 per cent. of the regional fund shall be applied under this head. With the doubling of the funds it may be that they will have a real impact in these areas, as is certainly intended. Constant vigilance will have to be applied to ensure that in practice they are not too thinly spread.
Then there are the areas of deprivation arising from industrial decline, typified by the inner city problems to which reference has so frequently been made in this debate. I understand that the definition of which inner cities will benefit is still being negotiated. It is the declared policy of the Community that the structural funds shall be applied additionally to domestic funds. And this must surely be so in view of the vast amounts required to achieve the objectives. It is clear that in the prevailing mood one of the principal sources of domestic funds will have to be the private sector in partnership with the public sector because in an era of low taxation there are not the public funds available. The examples of Glasgow and Sheffield in this country show the way.
904
If receipts from the structural fund are to be additional to what is otherwise available, it cannot be acceptable that central fund support for such programmes may be reduced by a similar amount. It is in this context that a statement by the Minister of government policy would be particularly valuable. I understand that at present arrangements are such that any payment out of structural funds or the regional fund to a scheme here will result in a reduction of an equal amount of Treasury support for that scheme. If that is correct, it means in effect that schemes in this country are deprived of benefit from the structural funds. Clarification by the Minister on this very important point would be most helpful.
4.41 p.m.
Lord Bruce of Donington: My Lords, I too should like to express my appreciation of the way in which the noble Lord, Lord Kearton, presented the report and my personal appreciation for the very courteous way in which his enthusiasm for the European concept accommodated my occasional expressions of dissent.
So far as the report itself is concerned, I have initially to express the overall view, which perhaps is not entirely unexpected, that I found the tenor of the opinion of the committee, which I had the honour of attending from time to time, rather more hopeful than appeared justified by the evidence that was tendered to it.
With very few exceptions this afternoon, I have found it difficult to realise why, when we are talking of the European Economic Community, there is so little consciousness of the fact that since 1972, making all statistical adjustments following the accession of Spain and Portugal, unemployment has doubled within the Community. From the contributions that have been made so far there appears to be little awareness of that fact.
The purpose of the structural funds—and there needs to be an explanation of what is meant by "structural" in the context in which we are discussing it—as put out by the Commission in a document last May is to contribute to the strengthening of the Community's economic and social cohesion, and in particular to reduce the gap between its different regions and the backwardness of the least favoured regions. What has happened so far—this may help to explain 'it, as hinted at by the noble Lord, Lord Reay—is that the richer regions have grown progressively richer since the inception of the Community and the poorer regions have become progressively poorer. This is in spite of the benefits, which we will assume for the moment are many, that have followed the 95 per cent. single market unity which has so far been achieved.
The doubling of the structural funds is undoubtedly due partly to the fact that it is generally appreciated that the position will get worse not only as a result of the accession of Spain, Portugal and Greece but also because of the growing disparities within the member states themselves. This is the reason for the doubling of the funds. On present form and with the present trends, which can be statistically

905
determined and statistically examined in the documents, the doubling of the funds will make very little difference to the impact of the money made available on the growing disparity—growing in spite of everything that has been done—between the various regions, and within countries between the rich and the poor and the richer and poorer regions.
The committee arrives at the conclusion that the contribution of £36,300 million over a five-year period is not, in the inimitable words of the noble Lord, Lord Kearton, small beer. As an average over the five years, which may be a convenient point for us to consider for the moment, that would work out at some £7,260 million per annum. In a population of 320 million in Europe, that would work out as a benefit, if the benefit were spread, and I use the spread illustratively, in the form of an increase of
£22 ·70 per annum per head throughout Europe. In order that that can have its reference point—some noble Lords will have read the recent report of the National Consumer Council—it may be taken as a partial credit against the £92 per annum extra that the common agricultural policy is costing every man, woman and child throughout the Community.
Therefore the matter has to be put into perspective. We have to reflect, with those circumstances outlined, whether the whole thing is rather less alcoholic than the noble Lord's term "small beer" would imply.
A question was raised by one noble Lord as to the effect on the United Kingdom. The receipts by the United Kingdom—this is in pounds, not mecus, which are used throughout considerable sections of the report—from the three structural funds in 1987, according to the answer to a parliamentary question, were some £880 million. The Prime Minister has indicated that she thinks we might benefit to the extent of one-third more, which would be another £293 million by 1993. That would make, £1,173 million, representing some 16 to 17 per cent of the total structural funds.
That is confirmed in evidence (by the DTI I believe) quoted on page 71 of the report in answer to a question put by the chairman:
"We shall be eligible to bid for up to 20 per cent. of the doubled Funds. At the moment we get between 16 and 19 per cent. of the existing Fund. If we did quite well under the declining industrial region heading—that is, objective two—which we think we shall do, then the United Kingdom receipts should not be too badly affected."
It does not therefore seem that the United Kingdom is likely to benefit all that much.
That may be a matter of indifference if one considers it from the point of view of the European Economic Community as a whole. However, I have the honour to speak in the British Parliament, and what happens to the United Kingdom is still a matter of concern to the British Parliament. Quite frankly I do not think that the results under the doubled fund so far as concerns the United Kingdom are impressive. That may not matter to some noble Lords; it may matter to others. It certainly is a matter which we should bear in mind.
When considering the benefits we gain from the doubled fund we should also bear in mind the fact that the United Kingdom will still be paying over an extra £1 billion year into the Community budget
906
after all abatements and receipts from the structural fund. That is borne out by the Government's own estimates of expenditure which were made available in January last.
Let us consider the effect on the totality of the problem in the United Kingdom. Many noble Lords have spoken this afternoon about additionality. Additionality is not the exception, it is the rule. In the United Kingdom, although we have received progressively increased receipts from the European Community's Regional Development Fund, the social fund and to a very minor extent from the guidance and guarantee fund—which is not particularly specific to our purposes—we have correspondingly reduced our own domestically-provided regional aid.
If your Lordships will peruse the figures, which in order to save time I do not intend to read, one finds—and it is the same in other member states—that as the receipts have come in from the regional, social and other funds so progressively has domestic government expenditure towards the same objectives decreased. For example, in the year
1982–83 the DTI contributed domestically some £689 million, in 1986–87 the figure was down to £503 million. What is more interesting, in view of the fact that the figures were adumbrated at the time when the structural funds were already under consideration, the DTI projections for 1988–89 are down to £463 million and to £450 million for
1989–90 and £420 million for
1990–91.
If one makes the adjustment for inflation—a matter to which I understand the Treasury now pays increasing attention—one finds that in real terms, taking in conjunction the receipts which the United Kingdom has received from overseas and the domestic expenditure under the DTI vote, regional aid (social aid in the sense in which we understand it here) has declined.
One would not think that from listening to some of the learned remarks in your Lordships' House this afternoon. In so far as concerns the European Social Fund glowing tributes were paid to the aid to training that has been provided by the largesse of the European Community and of the Commission. The Commission after all is a few thousand people in Berlaimont in Brussels—fewer than the total number of employees of Glasgow City Council we were told some time back. Those are the people who have provided the largesse.
It says in paragraph 18 on page 9 of the report:
"The subsidies to training schemes from the ESF contribute to a substantial number of "dead weight" projects, which would have gone ahead anyway."
There has been very little additionality. I could give further quotations and I shall give your Lordships the references in order to save time. Paragraph 17 on page 9 deals with the additionality aspects so far as concerns the European Regional Development Fund and paragraph 19 on the same page gives the position concerning the guidance fund.
So here we are, a nation enduring such financial public expenditure rigours as are apparently necessitating stern action by a new star chamber, paying money out, receiving it back, and spending a

907
bit of our own—all on our own projects. That fact prompted the question during the course of our proceedings from the chairman. He said:
"If that is so, is it not a charade to put money into the centre just for us to get some back, with bureaucracies at both ends to do something that would have gone on anyway?"
The noble Lord, Lord Kearton, put that forward by way of a question. I shall not associate him with holding that opinion, but if I had been answering that question, I should have said, yes, of course it is a charade to pay money out, to have it sorted out over there, to have it back again and add a bit of our own without any general improvement in the total that is paid out for these desirable activities.
That brings us to the question, which has only been touched upon very briefly so far, of the organisation of applications for aid. In the United Kingdom the Department of Trade and Industry is responsible for processing and approving applications made to the funds. For that purpose it liaises with the Department of Energy, the Department of the Environment, the Department of Employment and, inevitably in an agricultural country blessed with the highest protected agricultural mechanism in the world, with the Ministry of Agriculture, Fisheries and Food. So we have the DTI liaising with four departments. That is the mechanism for processing the applications for aid.
What happens when we go across to the other side? As the noble Lord fully explained, we have DG XXII, which is in charge of the co-ordination of all these various policies. I should like to put a question to the Government on this matter, and I should mention that my relationship with the Government on this project is very close and that I am deeply sympathetic to the purposes they may have in mind. What evidence do they have that anybody in DG XXII, or anybody in the Commission, has even the remotest idea of what regional policy is about? Is there anybody in the Commission—and I do not exclude the author of the Cecchini Report, which I trust will form the subject of some debate when we discuss the single European market—who is capable of assessing the regional dimension either in Europe as a whole or any country within it?
What are the academic qualifications to deal with this matter possessed by any member of the Commission? Who among them has studied and understood the works of Brocard, Perroux or Myrdaz on these matters, let alone on a more domestic scale the works of Patrick Geddes and Lewis Mumford, not to mention the late Lord Kaldor? Who has studied the theory? Who knows anything about the effects of income disparities within regions and the other 101 effects of the interplay that takes place between those in the mezzo-economic sector (which is corporate power) as distinct from the macro-economic sector of the Government and the micro-economic area of the individual small firm?
In fact the DTI itself gave evidence that it had very little confidence at all in the ability of the European Commission to plan. Indeed, one of the objectives of official government policy, as stated by Mr. Wells, an
908
assistant secretary at the DTI, at page 115 of the report, is:
"to resist the Commission's current proposals for community support frameworks which is an additional and new layer of bureaucratic planning which in our view would result in the Commission imposing its own preferences on Member States' planning priorities".
Speaking on behalf of the DTI, Mr. Wells gave further evidence before the committee to the effect that:
"I believe it is true that everybody in Brussels would accept that many of the decisions which need to be taken on regional policy cannot be taken from the distance of Brussels".
Let us return to Brussels again. What do we find there? We discover that DG XXII is responsible for both lateral and in some cases horizontal communication with DG XVII (energy), DG III (industrial affairs), DG IV (competition), DG XVI (regional affairs), DG V (employment and social affairs), DG VI (agriculture), DG XVIII (credit and investments), DG XIX (budgets), DG XX (financial control) and DG I (external relations). That is the bureaucracy to which I refer. So the money flows up from the treasuries of the United Kingdon, Germany, France and the other member states to Brussels.
So far as concerns the priorities of the structural funds, initially they are determined by the member states (here by the DTI). They are filtered through to the management committees on which sit either the ambassadors of the respective countries or the representatives. They then go up to DG XXII, which then consults as appropriate with one or other, or indeed many, of the directorates-general to which I referred. Finally the money is paid out. One must consider whether this is an economic way to conduct our affairs.
So far as local authorities, individual districts and regions are concerned anywhere in the Community, or within the United Kingdom (Wales, Scotland and England), there can be no doubt that they understand that money is money anyway and they are very pleased to be able to receive it. Undoubtedly voices will be raised from those bodies and also local voluntary bodies which are currently receiving money from the EC through the circuitous way that I have just described to your Lordships and which fully support the whole idea of the structural funds and its enlargement. After all, they receive money from them. I am instructed that the Commission officials are very agreeable to the members of local authorities who visit them. I hesitate to suggest that they are more agreeable than are our own civil servants, but it would appear that there is strong feeling in favour of dealing with Brussels by local authorities and voluntary associations. Its hands are in any case tied, but once the projects are approved it is able to give every appearance of benevolence.
That is good for the Community's image of course and it is exactly what the whole thing is about. There is an awareness in Europe that in the event the EC is not all that it is cracked up to be. There is a definite desire to make it more popular. Indeed, in the last paragraph of the committee's report, it states:
"In the Committee's view the Structural Funds are a most important symbol of Community unity. With improved publicity, they will play a valuable part in reminding people in all Member States that the CAP is not the only active part of Community policy".

909
Ha, ha! After looking at the report of the national council for social services, you can say that again!
What is the support really about? Is it support for the whole structure and the extent of the finances of the structural funds and the benefits that may flow from them, or when the chips are down is this just one other effort to make the Community more popular and more acceptable at a time when its basic purposes are coming under increasing scrutiny not only from me and from many of those who sit with me but also from the right honourable lady the Prime Minister herself?
Baroness Seear: My Lords, before the noble Lord sits down I should like to ask him, for the sake of my education, whether he is speaking for his party when he expresses those views.
Lord Bruce of Donington: My Lords, so far as I am aware, nothing that I have said this afternoon dissents from the expressed views of my party. I have not in any way advocated withdrawal from the European Community. I am in favour of it working constructively. However, I am still aware, as I hope are many of your Lordships, of the identity of the United Kingdom and I rejoice that I can agree in that respect with the right honourable Lady the Prime Minister.
5.10 p.m.
Lord Strathclyde: My Lords, it is a great pleasure and an honour that on the first occasion that I speak from the Dispatch Box it should be to respond to a debate on a report from one of your Lordships' Select Committees. I know that Select Committees are often overworked and rarely praised. It is therefore a particular joy to be able to say what an interesting and detailed report this is and to thank all noble Lords who played a part in its formulation, especially its chairman, the noble Lord, Lord Kearton.
I have listened with great interest to the debate on your Lordships' report on the reform of the structural funds. Noble Lords have raised many points that I shall try to cover as fully as possible. Perhaps I may start by thanking the noble Lord, Lord Benson, for his brief but extremely honest and welcome words which I very much appreciated.
The Government believe that a strong Europe—in particular one which has a single internal market —needs strong regional economies. This involves, where necessary, a levelling up of economic activity. I was hoping that the noble Lord, Lord Bruce of Donington, would welcome this, but that appears not to be the case. This was why, at the February European Council in Brussels, the Government agreed to double the funds going to the less developed regions of the European Community by 1992. It will be part of an overall doubling of the structural funds by 1993. A large proportion of the funds will therefore go as a matter of top priority to those regions most in need.
We also want to see that the enormous amount of money available achieves the intended objectives. Hence, we fully support the European Commission improving the monitoring and assessment of
910
programmes and expenditure. I agree with the committee that we need to see better value for money, tangible benefits on the ground—for instance, new roads, bridges, railways and port developments in certain areas—better support for innovative business, retraining, re-adaptation and diversification of rural areas. With the current moves towards common agricultural policy reform, we need to help those affected by assisting them to diversify into other areas such as tourism and rural industries.
Perhaps at this point I could talk about additionality, raised in particular by the noble Lord, Lord Nathan. The reform and programme approach should indeed impart additional value, not least by ensuring a greater degree of co-operation at local level and the more co-ordinated deployment of the fund. It is in everyone's interest to work together in obtaining the maximum possible. We must be clear, however, that it is the Government's duty to control the level of government spending. As the noble Lord, Lord Bruce of Donington, knows perfectly well, governments set the total limits. Within them, government and local authorities determine priorities taking account of the merits of the proposals coming forward.
We have naturally not neglected UK interests. We have ensured that Northern Ireland in particular will receive priority treatment as a less developed region. This is a further testimony to the importance accorded to it by the European Community and is to be welcomed.
In the past, the Community, acting in concert with the UK Government, has made a significant contribution—through the general application of the structural funds and through special measures—to tackling the social and economic problems of the Province. Although much of the detail on the scope and operation of the new proposals remains to be settled, Northern Ireland officials have already begun to explore with the Commission how, under the new arrangements, Northern Ireland's priority status can best be utilised.
I can also confirm that at least three other peripheral areas of the United Kingdom, namely, the Highlands and Islands of Scotland, rural Wales and the assisted parts of Devon and Cornwall, will continue to be eligible for regional fund support as "rural areas". The Commission has agreed to this following extensive pressure from United Kingdom Ministers, and we shall obviously continue our efforts.
The noble Lord, Lord Howie of Troon, talked about Wales and also mentioned the noble Baroness, Lady White. We regret her illness and hope that she will join us again soon. We very much recognise her enthusiasm for Wales. My right honourable friend the Secretary of State has already submitted programmes to Brussels for large proportions of the Principality and the possibilities of obtaining coverage for most of the rest under Objectives 2 and 5(b) which are to be pursued with the Commission.
Furthermore, the noble Lord mentioned the Montgomery Canal. I am again aware of the great interest that the noble Baroness, Lady White, has in this project to restore the canal. As I understand it.

911
the proposal involves linked applications from local authorities in Wales and England and Welsh non-departmental public bodies such as the Mid-Wales Development Board. I believe that my right honourable friend the Secretary of State for Wales is considering the merits of the proposal in competition with claims from other local authorities for capital allocations.
The noble Lord, Lord Murray of Epping Forest, also seemed to be concerned that the rest of the United Kingdom would not benefit sufficiently or in a co-ordinated fashion from the funds. Perhaps I may assure your Lordships that we are seeking thorough coverage of Great Britain and declining industrial regions under Objective 2, and coverage of rural areas under Objective 5(b) and that the co-ordination of funds will be as close as is possible in these areas. The most seriously affected parts of our industrial regions, including some inner city areas, will also qualify for the regional fund. I hope that almost all the industrial assisted areas will continue to qualify.
The final decisions on eligibility are due to be taken by the European Commission by early next year or perhaps sooner. I ask your Lordships at this time not to press me for a categoric list of which regions and parts of them are likely to be in or out. We are in close touch with the Commission as I know are representatives of several of the regions themselves. I would add only that we have to bear in mind that in some cases pressure for coverage of one area could result in opening up eligibility under the European Regional Development Fund to large areas in other member states to the detriment of our overall receipts from the fund.
We have secured that in the future social fund spending will be concentrated on young people and the long-term unemployed. This well fits our national priorities. Indeed, this year—and I am sure that the noble Lord, Lord Murray of Epping Forest, will be pleased to hear this—the UK has been told that it will receive over £400 million from the social fund, the largest beneficiary of any European country.
The noble Lord talked about the social dimension of Europe. We believe that the single market should be based upon enterprise and deregulation within the Community if its potential is to be realised.
The smallest of the three funds included in these reforms, is the European Agriculture Guidance and Guarantee Fund (the EAGGF or FEOGA) guidance section which currently spends rather less than £700 million each year. It nevertheless plays an important role in modernising farm infrastructure and in helping to meet agricultural and conservation objectives in the hills and uplands. This is to continue under Objective 5(a) relating to the adjustment of agricultural structures. But a key element in the reform of the structural funds is that spending under the guidance section of FEOGA is to be related more directly to CAP reform.
The noble Lord, Lord Reay, in his excellent speech, mentioned that some of this expenditure would go to set-aside. That is of course correct. Details of how this should be done, and how much change it will mean in particular schemes, have still to
912
be worked out. The Government support the general principle. Reform of the structural funds can give a new impetus to CAP reform by targeting support to particular parts of the farming industry most sensitive to such reform. The FEOGA fund will contribute with the other two funds to the objective, still within the framework of reform of the common agricultural policy, of promoting the development of rural areas. We remain rather unclear as to exactly what is intended by this objective, but noble Lords can rest assured that the Government aim to secure the maximum benefit for the United Kingdom.
Many noble Lords have spoken on the future administration of the funds. Hitherto most funding has gone directly into specific projects, of which, as the House can imagine, there have been many thousands. In future the regional fund will mainly, perhaps to the extent of 75 per cent., be administered through multi-annual integrated programmes. The attraction of these is, first, that they enable the regional fund, the social fund and the agricultural guidance fund, as well as the European Investment Bank, among leading instruments of the European Community, to be brought together in a concerted approach to an area's problems. Secondly, programmes, while consisting of individual projects, should consume fewer administrative resources. That point should particularly please the noble Lord, Lord Bruce, who felt that most of Europe was one massive bureaucracy.
The first British integrated programme for Birmingham has been approved by the Commission. Approval of the full integrated operation for Dyfed, Gwynedd and Powys is still awaited. Thirdly, small projects which might not have been eligible for support before can now be grouped together and funded within a covering programme. The noble Lord, Lord Geddes, feared exclusion of small projects and mentioned the sea defences of Aldeburgh in that context. I have mentioned why programmes will predominate. The Government have not abandoned small projects that cannot be fitted into programmes. We hope that the implementing procedures which are currently being discussed in Brussels will allow some coverage for such projects. The UK is not alone in wanting this. As to Aldeburgh itself, I regret that I can see no possibility of that area qualifying for regional development fund money. Sea defences of course could be assisted by the funds where the area itself is eligible.
There is one aspect that we have not covered so far: the vast commercial opportunities arising for United Kingdom companies particularly in the southern member states as a result of the doubling of their receipts from the structural funds. Having said that we have not covered this, it was mentioned by the noble Lord, Lord Greenhill. The impression that the Government have is that we have not done as well as we should have in the past in making the most of these opportunities. We must not lose out next time round.
A major conference was held in London this summer. It noted the commercial possibilities open to businesses in various member states both from the

913
increased structural funds available and the opening up of public purchasing rules. For example, Portugal aims completely to renew its infrastructure. It has priority areas of construction, both road and rail, pollution control, water treatment, energy and a whole host of other areas in which this country could be involved. In addition Portugal has a separate industrial development programme which should help encourage new technology and innovation, improve basic and further vocational training, finance the enhancement of industrial infrastructure and increase productivity. There is an enormous amount of scope for United Kingdom consultants, industrialists and businesses in exploiting these areas across Europe.
This reform is not just relevant to us in terms of improving regional economies across Europe and meeting UK needs. It also represents a challenge for any UK company that wishes to establish itself in the single market that will emerge by 1992.
Many noble Lords, especially the noble Lord, Lord Geddes, mentioned the European Investment Bank. I have noted the suggestion for co-ordination of loans from the European Investment Bank, and grants from the structural funds will increase their effectiveness. I am sure that this is right in principle and for our part we shall do our best to encourage moves in this direction. The bank has a distinctly separate entity compared with the structural funds and, as the committee said, a fundamental reappraisal of its structure would be required before any formal changes could be made. The bank already maintains close links with the administration of the funds and I am sure that this close co-operation will continue.
Some noble Lords spoke about the effectiveness of DG XXII, particularly the noble Lord, Lord Bruce, who wondered about its members' qualifications. I cannot say exactly what their qualifications are at the moment, but we recognise the role of the directorate and already have close contact with its staff and the members of the Commission who oversee it. I believe what the noble Lord, Lord Bruce, was saying was that they should be more involved in the theory of planning. I believe that in European institutions too much theorising has already gone on and now is the time for real action.
The noble Lord, Lord Kearton, asked particularly about co-ordination in Whitehall. Departments work very closely together, including the territorial departments of the Welsh Office, the Scottish Office and the Northern Ireland Office. They are doing so in the current negotiations and will continue to do so in implementing plans under the new funds. Of course there is always room for improvement and we shall be keeping an eye on this area.
My noble friend Lord Butterworth made a very interesting speech: a learned discourse on economic integration. The question of European integration is one on which many others have spoken in recent weeks, particularly my right honourable friend the Prime Minister. Today let me say simply that levelling up the economic performance of the less advantaged areas of the Community through the structural funds can only be to the collective benefit of the Community.
914
The noble Lord, Lord Reay, also asked a question on European Community policy on high technology. The Community's framework programme on research and development funded from European Community resources, together with member states' national programmes, provides a strong base for research and technology on which to build future industrial success. Also I gladly share the noble Lord's recognition of the use already of the funds in so many United Kingdom areas and of the need to have them used to make the Community a competitive force—not for protection and subsidy but for promoting technological advance in a free market.
I conclude by saying that the structural funds resources, as was mentioned in the report, are not small beer. The increases in the funds offer challenging opportunities for all of us—opportunities for United Kingdom authorities, both national and local, for organising programmes that are effective and worthwhile. Opportunities also will exist for United Kingdom businesses which now have a chance to make contracts and contacts prior to the completion of the single market in 1992.
Finally, I thank all noble Lords who have spoken in this extremely interesting debate. I hope that I have generally satisfied your Lordships in what I have said.
Lord Kearton: My Lords, just to wind up, I express my sincere thanks to all those members of the committee who spoke with such authority, thoughtfulness and eloquence in fleshing the skeletal account I gave of the contents of the report. I should also very much like to thank those Members of the House who were not members of the committee who made such a powerful contribution to the debate.
I respectfully congratulate the Minister both on his style of delivery and on the content of what he said. I believe that all members of the committee will find it most encouraging. We all look forward very much indeed to hearing him again in the future being similarly constructive in the great tasks that face this House and this country. I should like to say to my noble friend Lord Bruce of Donington how much I enjoyed his light-hearted polemic. It enabled us to relax a little in the serious business of considering the report, and I thank him for that.
Finally, I thank the House for giving consideration to the report this afternoon and for taking it so seriously. I am much in its debt.
On Question, Motion agreed to.

Southern Water Authority Bill
5.30 p.m.
Viscount Massereene and Ferrard: My Lords, I beg to move that this Bill be now read a second time. Several noble Lords have been circulated by the Southern Water Authority, the promoters of the Bill, about its objects and explaining it in every detail. There were 14 petitioners but 13 have now withdrawn and I am pleased to say the promoters have received notices to that effect. However, one petitioner, the British Railways Board, is still outstanding. The 13

915
petitioners have reached satisfactory agreements. This will lead to the withdrawal of their petitions and in the light of the agreements my noble friend Lord Cornwallis has been able to withdraw the instruction which he had earlier tabled.
If your Lordships give the Bill a Second Reading today, as I hope that you will, it will be committed to a Select Committee in the normal way. Should that happen, as would appear to be likely, the Bill will become unopposed. It will then be referred to the Unopposed Bill Committee.
I could speak on the Bill for some time but I do not want to detain your Lordships—
A noble Lord: You already have.
Viscount Massereene and Ferrard: I do not know about that, my Lords. As will be apparent, much of the contention has gone out of the matter.
I know the area extremely well. I have just travelled through it by train during one of the worst rain storms I have ever known, and I have been in many tropical downpours. If your Lordships give the Bill a Second Reading I sincerely hope that the Committee will conclude fairly quickly. I employ people who come from Ashford and they have often complained about the flooding in the area over the past four years.
It only remains for me to say that I commend the Bill to your Lordships and I hope that the Committee will solve any problems—I am sure that it will. I beg to move.
Moved, That the Bill be now read a second time.—( Viscount Massereene and Ferrard.)
Lord McIntosh of Haringey: My Lords, I cannot claim to have read the Bill but I have carefully read the statement made on behalf of the promoters in its support. I was concerned when I read the objections which had been raised. I am happy to hear from the noble Viscount that all the objections, except that of the British Railways Board, have now been resolved. I understand from the statement that the board is now moving towards a settlement with the promoters of the Bill. On that basis we have no objection to an unopposed Second Reading and the Bill being referred to a committee as is appropriate.
Lord Boyd-Carpenter: My Lords, the purposes of the Bill, as outlined by my noble friend and set out in the memorandum which has been circulated, are admirable. However, I should like to address one word of warning to the Select Committee to which, if your Lordships so wish, the Bill will be committed.
I have the misfortune to live in an area served by the Southern Water Authority. I must tell your Lordships that that authority has a very low reputation for efficiency. Its accounts department seems to be run like a madhouse and its general administrative standards are very poor. Therefore, it seems to me that one of the matters which your Lordships' committee will wish to look into is not merely the question of whether the objects, intentions
916
and purposes of the Bill are right—and I think that they probably are—but whether the particular water authority, with its poor reputation for efficiency, is capable of implementing them satisfactorily.
I believe that your Lordships' committee may wish to look at that matter with care. On examination it may well believe that the important task laid down by the Bill cannot be undertaken by this authority and that it may be better to wait—and, as I understand it, not for very long—for privatisation and some other body of perhaps higher administrative competence to take it over.
Viscount Massereene and Ferrard: My Lords, in reply to my noble friend I point out that in 1976 the Southern Water Authority was highly efficient as regards the Medway scheme at Leigh in Kent. That concerned flooding and holding back the flood waters in storage areas. I believe that my noble friend has been hard on the Southern Water Authority. It has been very generous with the petitioners but I shall not go into that matter. I think that my noble friend has been hard on the Southern Water Authority because the Medway scheme was very successful.
Lord Boyd-Carpenter: My Lords, with the leave of the House, I am glad to hear that a number of years ago the organisation functioned efficiently and in another part of the country from that in which I live. All I am suggesting to your Lordships—and I hope that my noble friend will not dissent—is that in view of the low reputation for efficiency which it has in some parts of its area, your Lordships' committee will look carefully at its competence to carry out the task. I hope that my noble friend will not feel that that conflicts in any way with what he has said. I believe that it would be unfair to those who live in the authority's area not to warn your Lordships' Select Committee that there may well be a question as to the competence of the authority. The question may well arise as to whether it would be better to leave the whole matter until some other body takes over.
Lord McIntosh of Haringey: My Lords, before the noble Lord sits down, do we understand that he is volunteering his services to the Select Committee? That would seem to be the most appropriate step.
Lord Boyd-Carpenter: My Lords, I would not have the impertinence to offer my services to your Lordships' Select Committee. However, if your Lordships' Select Committee were to summon me, I am always the obedient servant of any of your Lordships' committees.
On Question, Bill read a second time, and committed to a Select Committee.

The European Foundation
5.40 p.m.
Lord Rippon of Hexham Lord Rippon of Hexham rose to ask Her Majesty's Government what action they are taking to persuade the Netherlands to join all the other signatories in ratifying the agreement to establish the European Foundation.
The noble Lord said: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
Your Lordships will no doubt recall that as long ago as 1976 the Tindemans report on European Union proposed the establishment of a European Foundation to promote the concept of a "Citizens' Europe" leading to a better understanding of European Community action and the aims and nature of European integration. However, perhaps I may remind your Lordships briefly of the history of this project since that date.
In February 1977 an all-party Early Day Motion was set down in another place by myself, the then Mr. Cledwyn Hughes, now the noble Lord, Lord Cledwyn of Penrhos, Mr. David Steel, the then Mr. Michael Stewart, now the noble Lord, Lord Stewart of Fulham, Mr. Jeremy Thorpe and Mr. Douglas Hurd. That Motion was signed by 334 Members of Parliament, an absolute majority of all Members, and called upon the Council of Ministers to:
"mark the 20th anniversary of the signing of the Treaty of Rome by launching a European Foundation on the lines recommended by the Tindemans Report to be financed partly by grants from the member states and partly from private funds, with the aim of promoting either directly or through existing bodies any measures which would help towards greater understanding of European aims but placing the emphasis on human contacts such as youth activities, university exchanges and the like".
As a consequence of that, on the initiative of the then British Labour Government, the European Council at its summit meeting in Rome in March 1977 agreed to mark the 20th anniversary of the Treaty of Rome by establishing a European Foundation on those lines.
Subsequently, after a detailed report from the Commission, the Council at Copenhagen in April 1978 laid down the aims, tasks and the seat of the Foundation, which was to be in Paris, and agreed in outline its structure and financing. France generously agreed to provide free of charge a historic building in the Marais district. A formal agreement was necessary—and this is significant—because of the absence in the Treaty of Rome of any provision for cultural or related matters.
The agreement was signed by the Foreign Ministers of all the member states in Brussels in 1982 at the celebrations held in the presence of the King of the Belgians to mark the 25th anniversary of the Treaty of Rome. Articles 2 and 5 of the agreement explain that the Foundation's activities should include promoting information on the efforts to unite Europe, encouraging the study of languages, fostering exchanges, promoting a better understanding of the European cultural heritage and furthering a greater understanding of European integration.
That was to be done in the first place—but again I think this is important—but not exclusively, among the peoples of the Community, and the governing body was to be broadly based including representatives of the Council of Europe as well as of the European Parliament and the voluntary organisations.
Above all, when it came into operation the Foundation was to be primarily supportive of the
918
activities of the many voluntary organisations active in the European field; for example, the European Youth Orchestra. The various organisations would put forward projects which the Foundation could support financially, the funds coming partly from the millions of pounds which governments had committed themselves to provide and partly from private sources.
In the latter regard it may interest your Lordships to know that Sir Geoffrey Howe, the then Chancellor of the Exchequer, wrote a letter to the preparatory committee, which had been established in Paris, dated 27th June 1985 in which he said:
"The United Kingdom revenue authorities have agreed that where private donations are made to the Foundation under covenant we will be able to supplement these donations by a further contribution from the United Kingdom Exchequer in the way possible under United Kingdom law for charitable bodies".
Meanwhile the process of ratification proceeded slowly but steadily. The United Kingdom and Denmark, which incidentally were criticised while the agreement was being drawn up for being dilatory and wanting to spend a lot of time on detailed arrangements and to ensure proper financial control, were the first to ratify. Others followed. In Germany the agreement has had to be ratified by all 11 Landerä and in both language areas in Belgium. All that remains is ratification by the Netherlands Parliament.
Although the Chamber of Representatives has given a positive vote, the Senate has so far refused consent. The reasons for this what is in effect a veto are obscure: there is a mixture of concern that the Foundation is not wholly a Community institution, concern that it might overshadow their private cultural foundation in Amsterdam, plus a certain amount of jealousy that the headquarters are to be in Paris. None of those can be regarded as matters of overriding national importance.
The question is what the Government can do about it. If ratification by the Netherlands cannot be secured, can the Netherlands Government be persuaded to allow the Foundation to be established by some other process? I believe that legal advisers to the French Government have indicated that that might now be done. However, as matters stand at present, years of work have been wasted and the voluntary organisations deprived of much-needed financial support.
I do not believe that anybody doubts the need to strengthen the understanding of, and support for, European policy. Therefore, I must ask the Minister this. What action do the Government now have in mind to promote the objectives which they have so firmly supported over the years? In May of this year the Commission published a document entitled The European Community and Culture which says that we must take a new initiative now that those of 1977 and 1982 have been prevented. Are we to start the whole legal process all over again? The Commission's report refers to the difficulties, the legal uncertainties due to the position under the Treaty of Rome and the scant monetary resources which are available. All those difficulties would be removed if the Netherlands could be persuaded to ratify the 1982 agreement. If not, what ideas do the Government have for

919
removing the difficulties to which the Commission referred in its May report?
Of course the Dutch Senate asserts parliamentary sovereignty; so be it. Other nations may one day do the same, although I should hope for more intelligible and worthy reasons. If that would ever happen, the Dutch parliamentarians will have to sit in their no doubt subsidised glasshouses and not throw stones at anyone else for not being sufficiently enthusiastic Europeans.
I confess that I am dismayed and disillusioned by the behaviour of the Netherlands Senate although not wholly surprised. I cannot forget, although eventually I must have been disposed to forgive, how the Netherlands nearly wrecked Britain's application to join the Community, and almost certainly drove Norway out, because of its greedy demands for fishing rights.
The best that can be said is that the Dutch Senate has taught us a salutary lesson. It has demonstrated in the clearest possible way that the Prime Minister was right when she said in another place on 30th June of this year:
"Many people in the European Community talk in grandiose terms but do not always take the necessary practical steps to get things done".—[Official Report. Commons, 30/6/88; col. 530.]
In the meantime I trust that Her Majesty's Government will confront the narrow nationalistic obstinacy of the Dutch Senate with the wider, grander and more practical vision of Europe shown by the Prime Minister in her wise speech in Bruges.
5.50 p.m.
Lord Nathan: My Lords, I am delighted to take the opportunity afforded by the Question tabled by the noble Lord, Lord Rippon, to consider the European Foundation and perhaps slightly to extend the points that he raised. I regard it, and have done so for many years, as of the very first importance that the European Foundation should become fully operative and in being. I should like to indicate to your Lordships the wider factors which have been in my mind. It is remarkable that members of the European Community have been working ever more closely together in the fields of trade, commerce, industry and so much else. But no suitable institution exists for carrying on, on a Community basis, objects which we in this country call charitable. Indeed, the lack of an institutional basis has given rise to great difficulty in establishing co-ordinational activity in social education and similar fields based upon the voluntary sector.
Many years ago I was concerned with a body whose purpose was the interchange of information over the entire range of social welfare and youth services, the establishment of common training for teachers and youth leaders and similar joint enterprises on a European basis, by which I meant, and mean now, a European basis constituted by the membership of the Council of Europe—that is, some 21 members. The creation of one independently financed foundation or charity, call it what you will, to undertake throughout Europe responsibility in relation to the matters to which I have referred is
920
difficult if it cannot derive funds from donations, large and small, from all the participating countries. Grave problems arise in creating such a body, which will enjoy the benefits of charitable status or its equivalent in all participating countries. It is particularly difficult to find solutions to these problems because each country is jealous of its rights and duties. Fiscal factors relating to charities are so complicated and varied that it is difficult enough to understand them in one country, let alone a large number.
Thus attempts to find an answer by assimilating the laws in all the states concerned have foundered; too much was attempted at one step. Efforts resolve these institutional problems started many years ago and have been the subject of many conferences, some under the aegis of the Council of Europe. Tentative steps have been taken to create institutions for charitable purposes by agreement between governments. I am thinking of the Council of Europe's Youth Foundation and the Foundation Sauve Venise.
But the European Foundation which is so nearly in being is to my mind much more significant. First, it is an institution created by the members of the European Community who are working together closely in so many different fields. Secondly, and related to that aspect, its objects are very wide-ranging. It therefore provides an instrument through which the member states, and even citizens directly, can contribute to charitable activities to be carried out in all parts of the Community and thus provide yet a further unifying influence. The British Government, as I understand it, accept that donations under covenant to the European Foundation will qualify for the same tax treatment as such donations to any charity constituted in this country.
The noble Lord, Lord Rippon, referred to the letter written by Sir Geoffrey Howe, the then Chancellor, which I have seen. I assume that the principles enunciated in it are still applicable in the changed fiscal regime with regard to charities which has been introduced in recent years. Perhaps the Minister could confirm that that is so.
But the most crucial element in any institution created to collect funds for public charitable purposes is public confidence in its integrity. The public must feel secure that the money collected will be safeguarded from misuse and will be applied to the purposes intended. That is why supervision is a most important factor in establishing a European Foundation. It is more important than fiscal privileges, which it seems that it will enjoy. The constitution provides for the security of supervision, so in my view it is well adapted to the purpose and will, I hope, come fully into effect in the manner that the noble Lord, Lord Rippon, mentioned.
But, more than that, the Foundation will provide an example and a precedent for others to be formed devoted perhaps to particular needs. I hope that with time a body of experience will be built up to form the basis of a generalised law of charities or foundations throughout the Community. That would be far more likely to be a fruitful course than an attempt now to

921
harmonise the very different laws in the member states.
For all those reasons I very much hope that the required ratification by the Netherlands will be given and thus enable the European Foundation to play its important role in the Community.
5.56 p.m.
Baroness Ewart-Riggs: My Lords, I too am grateful to the noble Lord, Lord Rippon, for having brought his Unstarred Question before the House so early this evening. I am also grateful to him for explaining the whole background to the the agreement and the steps taken towards its ratification. I should like to stress how pleased I am that it was indeed Tony Crosland as Labour's Foreign Secretary who gave his blessing in 1977 to the establishment of a European Foundation.
I have a very pleasant personal recollection that the Foundation was first proposed in 1976—as the noble Lord, Lord Rippon. Said—in a report on European integration by Mr. Leo Tindemans, the then Belgian Prime Minister. This reminds me of the years I spent in Brussels and in Paris when expectations for the future of the EC were running very high. There were innumerable initiatives to advance integration, and this was certainly one of them. Now, all these years later, I believe it is much to be regretted that this brave idea has still not taken off because the Dutch Senate has refused its consent. I believe it would be a tragedy if all the years of work by the preparatory committee were to go to waste. We, on this side of the House, certainly want to see the Foundation in place and operating to promote greater understanding between the people of the Community through cultural exchanges. youth activities and joint communication projects.
We should also very much welcome—this was mentioned by the noble Lord, Lord Nathan—any support that the Foundation might give to voluntary organisations operating on a European level. We firmly believe that at present the establishment of such a body is very appropriate. Surely, the great economic goals of a united Europe as intended by the creation of a single market by 1992 cannot be achieved in isolation. Alongside, we must surely build a greater social and cultural understanding as an integral part of the process. In this the European Foundation would certainly have a very important role to play.
But such a body if not representative of the Community as a whole is of little value. I believe I heard the noble Lord, Lord Rippon, refer to the possibility of establishing the Foundation by some other process. I hope that this would not mean that it should be done without the consent or co-operation of the Dutch. I see the noble Lord shaking his head; I am grateful to him.
The noble Lord has advanced various reasons for the Dutch behaving very much out of character—in the past they have been very Community minded—and being so narrow-minded as to reject this initiative. As the noble Lord said, the major reasons are that the proposed activity of the Foundation is already covered by the Council of
922
Europe and the European Cultural Foundation, a privately funded organisation, as the noble Lord said, based in Amsterdam, which might suffer as a result of the Foundation's move into areas where the ECF has been involved. They fear that the European Foundation might pile up too great a bureaucratic structure and that in any event there was no commitment in the Treaty of Rome to create such a body. Lastly, they believe that the principles and the objectives of the Foundation are a little backward-looking rather than focused, say, on technology and communication, which the Dutch see as being more important.
Like the noble Lord, Lord Rippon, I shall be interested to hear from the Minister whether he believes that some of these objections by the Dutch can be removed. Despite the objections I firmly believe that as the Foundation has gained favour with all the other member states then the Dutch should bow to majority opinion and ratify. I have no doubt about that.
Although it can be said that the original objectives of the Foundation were perhaps not defined clearly enough, there is no doubt that the EC mechanisms for furthering economic integration are far and away more extensive than the frameworks for developing human and social advance. No kind of balance has really been achieved between these two sides of the Community development. In the light of that there is no doubt that the more frameworks that there are for social and human advance of some kind or other the more hope there will be of getting the balance right.
I believe that now in 1988, after all these years have passed since the birth of the idea, perhaps the original objectives should be given a clearer focus. While it is right that the Foundation should be set up, it is equally right that we ensure that it does something really useful. For example, I believe that it would have an important role in providing a forum for exchanges and contacts on a multilateral basis. I have no doubt that at present a good deal of money goes into bilateral cultural and educational exchanges, but if the Foundation was really to get going there would be so many more opportunities for countries that have regular bilateral contacts to do so under the umbrella of the Foundation.
It is clear that the relationship between the EC group of countries and the EFTA members states is changing. The Foundation could be the instrument for enabling dialogue between the EC and EFTA. The founding fathers of the Community saw the frontiers of the real Western Europe very much wider than they are drawn at present. The Dutch have accused the Foundation of duplicating the work carried out by the Council of Europe. If its objectives became more clearly defined and, if necessary, were adjusted, the work of the Foundation could surely be made complementary to that of the Council of Europe rather than overlapping it. It would be well placed to provide a flexible framework for supporting youth activity, university exchanges and the movement of young people working throughout the EC whose numbers are growing so much. In this way it would widen the frontiers for these contacts.

923
I very much look forward to what the Minister has to say regarding the Government's plans for making the Foundation a reality. I believe that the long interlude between its inception and the present time provoked by the Dutch can be used to good effect. The opportunity which we now have can be used to examine its objectives more carefully in order to ensure that they fit present requirements and the current state of the Community exactly. It is for that reason that we are very grateful to the noble Lord, Lord Rippon, for giving us this opportunity to examine its objectives during this debate.
6.4 p.m.
Lord Trefgarne: My Lords, I begin by adding my thanks to those of other noble Lords and those of the noble Baroness to my noble friend for raising this matter tonight.
My noble friend has described the history of the proposals for the European Foundation, and I am acutely aware of the role that he has played in its preparation and of his continuing interest. Your Lordships will be aware that the Netherlands Government announced in January this year that it had concluded that there was no possibility of ratifying the agreement to establish the European Foundation. The Netherlands Government itself was in favour of the Foundation, but like all member states which had signed the agreement establishing it, it was obliged to obtain ratification from its Parliament. This proved to be unattainable. The First Chamber, or Senate, voted against the agreement on 19th May 1987 and, I understand, by a substantial majority.
My noble friend knows that we fully supported the idea of the European Foundation. Indeed, we were the first to ratify—as long ago as 25th May 1983. We felt it was a positive step in the direction of promoting European consciousness. It would have had the practical advantage of providing a clearing house for ideas for European cultural projects which could then have been referred elsewhere; namely, to the European Cultural Foundation in Amsterdam, among others.
We also welcomed the proposal to involve the private sector in this venture and agreed to provide tax exemption for private donations to the foundation. The noble Lord, Lord Nathan, asked me about that and I will return to it in a moment. We had hoped it might develop into something like the Ford or the Rockefeller Foundations. Certainly we had received sufficient correspondence from members of the public to indicate that there was a demand for this kind of body in developing European cultural contacts. It is surely self-evident that in this type of venture the involvement of the private sector is very much to be encouraged.
But in the absence of ratification by the Dutch Parliament we felt that we could not go ahead because the purpose of the foundation was to foster the European idea and this would have been very difficult to do without the participation of all EC member states. In 1987 the Dutch Government looked again for ways out of the impasse. However,
924
it came to the conclusion that it would be unable to persuade its Parliament. There therefore now appears to be no prospect of the Foundation coming into existence and I have to say to my noble friend that it would be wrong for me to suggest otherwise. Disappointing as that is, we must therefore look to other ways of stimulating interest in the European idea, and there are a number of ways in which this is being done which I wish to refer to.
During the German Presidency of the EC in the first half of this year, cultural Ministers agreed to the establishment of a Cultural Affairs Committee composed of national officials and the Commission. The committee had its first meeting on 13th July. The United Kingdom welcomed this new initiative and is playing a full part in the committee.
The committee did not come into being specifically as a response to the failure of the Community member states to establish the Foundation. But it is a move towards a more positive approach to cultural co-operation within the EC, a role which the Foundation might otherwise have filled. The new committee is charged with scrutinising and overseeing all new proposals for cultural action within the Community framework and reporting back on these to Ministers. Work will concentrate initially on proposals in four priority areas: the audio-visual field, books, training and business sponsorship, as well as follow-up to resolutions previously adopted by Ministers.
The United Kingdom is keen that any proposal for action should be practical, responsive to the needs of those it is intended to benefit, clearly justified and cost effective. A major priority will be to eliminate duplication of work going on elsewhere. Also in the EC we have recently agreed to implement a programme of youth exchanges with our Community partners, to be known as Youth for Europe.
Within the Council of Europe, a varied programme of activities promoting cultural cooperation is organised through the European Cultural Convention, which has been signed by all the 21 member states of the Council as well as by Finland, the Holy See, San Marino and Yugoslavia. These 25 states are represented in the Council for Cultural Co-operation (CDCC), the body which is responsible for drawing up and carrying out the Council of Europe's activities in this field. The CDCC's 1988 programme concentrates broadly on two main lines of action derived from the Council of Europe's current medium-term plan. They are European citizenship and cultural identity and education and culture in the changing society.
The CDCC's current projects in the cultural field include the organisation of European art exhibitions, which I am told are very good, the establishment of European cultural routes, a major study of culture and regional development, work on the promotion of poetry, co-operation between research libraries and the cultural implications of new communication technologies. We are actively involved in a number of these.
Apart from these multilateral activities, we continue to attach great importance to our bilateral cultural relations with European countries. The

925
British Council is represented in almost every European country. In the case of the Netherlands the level of cultural exchange has been particularly high this year and there has been an increase in the British Council allocation. Although the Netherlands may not have ratified the European Foundation, it has certainly been active in promoting with us a series of events to celebrate the William and Mary Tercentenary. Your Lordships will recall the moving ceremony in Westminster Hall in July to celebrate the constitutional aspects of the Terecentenary of the Glorious Revolution and the international significance of the Bill of Rights and 300 years of strong and deepening Anglo-Dutch ties. But there is also a full programme of Anglo-Dutch cultural events, both here and in the Netherlands, which run well into next year.
I am pleased to say that the Foreign and Commonwealth Office has been able to contribute some £ 68,000 towards the costs of the William and Mary Tercentenary Trust, the body responsible for organising the programme in the United Kingdom. There have also of course been contributions from other departments, including incidentally the Ministry of Defence, as well as substantial private sponsorship from firms which have business interests in the Netherlands.
The tercentenary has got off to an excellent start. Many of our Dutch friends were in Westminister Hall in July and there have already been a number of Royal visits in both directions. There is much more to come, and I hope that those present will take the opportunity to visit some of the exhibitions being organised around the country to remind us of the cultural legacy which we owe to the Dutch.
I should like to turn to some of the points that have been raised during the course of the debate. My noble friend Lord Rippon asked whether there is any possibility that the Netherlands Government can be persuaded to find some different way forward in establishing the Foundation. I understand that they have considered various options but have come to the conclusion that none of them would be possible. I think I am right in saying that the document setting up the Foundation requires the unanimous consent of all of those who originally agreed to it.
Lord Rippon of Hexham: My Lords, I think it is a little unwise to refer to it just as a document. It was an agreement in the nature of a treaty. Apart from the Single European Act, it is the only one that has been brought before the Community in all its 30 years.
Lord Trefgarne: My Lords, my noble friend is quite correct to say that this was a formal document at the very least. It is binding therefore upon all those who signed it to ensure that they comply with its terms, which include ratification. It is Dutch ratification that is missing.
The noble Lord, Lord Nathan, referred to the fiscal privileges to which the British Government were able to agree and which were duly communicated to the authorities concerned. I should explain that the fiscal privileges would have come into force when the Foundation itself came into being. As it is not in being at the moment, and now has no prospect of becoming so, the question of fiscal privileges does not arise.
I share my noble friend's disappointment that the European Foundation has not got off the ground as had been hoped. I know that he has travelled to Paris on numerous occasions for meetings of the preparatory committee. I am told that the committee has had 28 meetings, and I dare say that my noble friend has attended all of them. However, I hope that what I have said will go a considerable way towards reassuring him that the Government attach great importance to cultural activities in Europe and that we wish to make full use of the existing fora to maintain our involvement in those activities. We regret that the European Foundation will not, it seems, now come to pass, but we pledge ourselves anew to its purpose and to its aims.

London Regional Transport (Penalty Fares) Bill
Reported from the Unopposed Bill Committee with amendments.
House adjourned at sixteen minutes past six o'clock.